PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JULY 6, 2001)
$1,299,883,047
CHASE MANHATTAN AUTO OWNER TRUST 2001-B
$1,267,380,000 ASSET BACKED NOTES
$32,503,047 ASSET BACKED CERTIFICATES
CHASE MANHATTAN BANK USA, NATIONAL ASSOCIATION
Seller and Servicer
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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-11 OF THIS PROSPECTUS SUPPLEMENT AND ON PAGE 8 OF THE
PROSPECTUS.
A security is not a deposit and neither the securities nor the underlying motor
vehicle 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.
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THE TRUST WILL ISSUE THE FOLLOWING SECURITIES:
Class A-1 Class A-2 Class A-3 Class A-4
Notes Notes Notes Notes Certificates
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Principal Amount $280,000,000 $300,000,000 $365,000,000 $322,380,000 $32,503,047
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Interest Rate 2.18% 2.44% 3.09% 3.80% 3.75%
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Final Scheduled
Payment Date November 15, 2002 June 15, 2004 November 15, 2005 May 15, 2008 May 15, 2008
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Price to Public 100.000000% 99.996266% 99.982607% 99.979194% 99.998399%
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Underwriting
Discount 0.100% 0.125% 0.175% 0.225% 0.275%
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Proceeds to Seller (1) 99.900000% 99.871266% 99.807607% 99.754194% 99.723399%
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(1) Before deducting expenses payable by the seller estimated to be $910,000.
The total price to public is $1,299,740,765.79.
The total underwriting discount is $2,108,488.38.
The total proceeds to the seller are $1,297,632,277.41
The assets of the trust will be motor vehicle 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 December
17, 2001.
The certificates are subordinated to the notes.
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
JPMORGAN
BEAR, STEARNS & CO. INC.
COUNTRYWIDE SECURITIES CORPORATION
LEHMAN BROTHERS
UTENDAHL CAPITAL PARTNERS, L.P.
Underwriter of the Certificates
JPMORGAN
The date of this prospectus supplement is October 30, 2001.
TABLE OF CONTENTS
SUMMARY OF TERMS ................................... S-4
RISK FACTORS ....................................... S-11
Holders of certificates are subject to
greater credit risks because
distributions in respect of the
certificates are subordinate to
payments on the notes ................. S-11
You may experience prepayments
and losses on your securities
after an event of default under
the indenture ......................... S-11
Only the assets of the trust are
available to pay your
securities ............................ S-11
You may experience a greater risk
of loss on your securities as the
result of recent terrorist attacks ..... S-11
Geographic concentration of motor
vehicle loans may result in
more risk to you ...................... S-12
The absence of an existing market
for the securities may limit
your ability to resell the
securities ............................ S-12
THE TRUST .......................................... S-12
General ................................... S-12
Trust Property ............................ S-13
Capitalization of the Trust ............... S-13
Trustee ................................... S-14
THE MOTOR VEHICLE LOANS ............................ S-14
Eligibility Criteria ...................... S-14
Composition of the Motor Vehicle
Loans .................................. S-14
Delinquency and Loan Loss
Information ........................... S-19
CHASE USA .......................................... S-21
USE OF PROCEEDS .................................... S-22
WEIGHTED AVERAGE LIFE OF THE SECURITIES ............ S-22
Maturity and Prepayment
Considerations ......................... S-22
Illustration of Effect of
Prepayments of Motor Vehicle
Loans on the Life of the
Securities ............................. S-23
THE NOTES .......................................... S-29
General ................................... S-29
Payments of Interest ...................... S-29
Payments of Principal ..................... S-29
Prepayment ................................ S-31
THE CERTIFICATES ................................... S-31
General ................................... S-31
Distributions of Interest ................. S-31
Distributions of Principal ................ S-32
Prepayment ................................ S-33
Restrictions on Foreign Ownership.......... S-33
PAYMENTS AND DISTRIBUTIONS ......................... S-33
Source of Funds ........................... S-33
Priority of Payments and
Distributions ......................... S-34
THE TRANSFER AND SERVICING AGREEMENTS .............. S-35
Trust Accounts ............................ S-35
Servicing Compensation .................... S-35
Servicing Procedures ...................... S-35
Reserve Account ........................... S-36
Administration Agreement .................. S-37
MONEY MARKET ELIGIBILITY ........................... S-37
MATERIAL FEDERAL INCOME TAX
CONSEQUENCES .................................... S-37
Tax Characterization of the Trust ......... S-38
Tax Consequences to Noteholders ........... S-38
Tax Consequences To
Certificateholders .................... S-41
STATE TAX CONSEQUENCES ............................. S-44
EMPLOYEE BENEFIT PLAN CONSIDERATIONS ............... S-44
General ................................... S-44
The Notes ................................. S-45
The Certificates .......................... S-46
Taxation of Tax-Exempt Investors .......... S-48
UNDERWRITING ....................................... S-49
Note Underwriting Agreement ............... S-49
Certificate Underwriting
Agreement ............................. S-49
Proceeds to Chase USA ..................... S-50
General ................................... S-50
LEGAL MATTERS ...................................... S-51
GLOSSARY OF TERMS .................................. S-52
S-2
READING THESE DOCUMENTS
We provide information on the securities in two documents that offer
varying levels of detail:
o the prospectus -- provides general information, some of which may not
apply to the securities.
o this 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 from 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-52 of this prospectus supplement lists
definitions of certain terms used in this prospectus supplement and the
glossary of terms on page 55 in the prospectus lists definitions of certain
terms used in this prospectus supplement and the prospectus.
This prospectus supplement and the attached prospectus may be used by J.P.
Morgan Securities Inc., an affiliate of Chase Manhattan Bank USA, National
Association and subsidiary of J.P. Morgan Chase & Co., in connection with
offers and sales related to market-making transactions in the securities
offered by this prospectus supplement and the attached prospectus. J.P. Morgan
Securities Inc. may act as principal or agent in those 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 attached 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 "Chase USA," "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
Chase Manhattan Auto Owner Trust 2001-B 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:
$280,000,000 Class A-1 2.18% Asset Backed Notes
$300,000,000 Class A-2 2.44% Asset Backed Notes
$365,000,000 Class A-3 3.09% Asset Backed Notes
$322,380,000 Class A-4 3.80% Asset Backed Notes
$32,503,047 3.75% Asset Backed Certificates
SELLER AND SERVICER
Chase Manhattan Bank USA, National Association, a wholly owned subsidiary of
J.P. Morgan Chase & Co.
INDENTURE TRUSTEE
Wells Fargo Bank Minnesota, National Association.
OWNER TRUSTEE
Wilmington Trust Company.
CLOSING DATE
The trust expects to issue the securities on November 6, 2001.
CUTOFF DATE
The seller will transfer the motor vehicle loans to the trust as of November
1, 2001.
STATISTICAL CUTOFF DATE
The seller prepared the statistical information on the motor vehicle loans to
be transferred to the trust as of October 22, 2001.
PROPERTY OF THE TRUST
The property of the trust will include the following:
o the motor vehicle loans,
o all collections on the motor vehicle loans 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 motor vehicle loans or the vehicles financed
by the motor vehicle loans and
o repossessed financed vehicles.
THE MOTOR VEHICLE LOANS
On the closing date, the seller will transfer the motor vehicle loans to the
trust in exchange for the securities. The motor vehicle loans are retail
installment sales contracts and purchase money notes and other notes secured
by new and used automobiles and light-duty trucks.
STATISTICAL INFORMATION
The statistical information in this prospectus supplement on the motor vehicle
loans to be transferred to the trust on the closing date is presented as of
October 22, 2001. Certain motor vehicle loans included in the statistical
information may not be included in the motor vehicle loans transferred to the
trust on the closing date. As a result of this potential variation in the
motor vehicle loans to be
S-4
transferred to the trust and the amortization of the motor vehicle loans
between the statistical cutoff date and the cutoff date, the statistical
distribution of the characteristics of the motor vehicle loans as of the
cutoff date may vary from the statistical distribution of those
characteristics as of October 22, 2001, although that variance will not be
material.
The aggregate principal balance of the motor vehicles loans as of the
statistical cutoff date was $1,328,104,501.37.
The composition of the motor vehicle loans as of the statistical cutoff date
was as follows:
Number of Motor Vehicle
Loans .......................... 71,975
Average Principal Balance ......... $ 18,452.30
Average Original Balance .......... $ 18,669.36
Weighted Average Contract
Rate ........................... 7.718%
Contract Rate (Range) ............. 0.00% to 18.00%
Weighted Average Original
Term ........................... 57.78 months
Original Term (Range) ............. 12 months to
73 months
Weighted Average
Remaining Term ................. 56.94 months
Remaining Term (Range) ............ 10 months to
72 months
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 December
17, 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, 39) 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 "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
S-5
o the amount available to the trust to pay principal on the notes
and
o a targeted amount generally equal to either approximately 95.48%
or 100% of the sum of
o principal amounts collected on the motor vehicle loans
during the prior calendar month and
o the aggregate principal balance of all motor vehicle loans
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-2 notes are
paid in full and approximately 95.48% thereafter unless
o the balance in the reserve account drops below 0.50% of the
aggregate principal balance of the motor vehicle loans 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.
If the full targeted amount of principal payable to the noteholders on any
payment date is not paid, the amount not paid 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 amount of the Class A-1 notes until the Class A-1
notes have been paid in full and then pay the principal of the remaining
classes of notes ratably, based upon the outstanding principal amount of each
such 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 "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 motor vehicle loans.
For a more detailed description of the servicer's option to purchase the motor
vehicle loans, refer to the section of this prospectus supplement entitled
"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 December 17, 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.
S-6
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-2 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 approximately 4.52% of the
sum of
o principal amounts collected on the motor vehicle loans
during the prior calendar month and
o the aggregate principal balance of all motor vehicle loans
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
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 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 motor vehicle loans.
For a more detailed description of the servicer's option to purchase the motor
vehicle loans, refer to the section of this prospectus supplement entitled
"The Certificates--Prepayment."
PRIORITY OF PAYMENTS
From available collections on the motor vehicle loans 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,
S-7
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-2 notes in full, principal
distributable in respect of the certificates, to the holders of
the certificates and
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 motor vehicle loans,
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.
Reserve Account
On the closing date, the trust will deposit an amount equal to 0.75% of the
aggregate principal balance of the motor vehicle loans as of the cutoff date
in the reserve account.
On each payment date, if collections on the motor vehicle loans 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 on
each payment date will be 1.75% (3.50% if a trigger event occurs) of the
outstanding principal balance of the motor vehicle loans. However, the reserve
account balance on each payment date is required to be no less than 0.75% of
the aggregate principal balance of the motor vehicle loans as of the cutoff
date and the aggregate principal balance of the motor vehicle loans.
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 3.50% rather than
1.75%.
If the seller desires to reduce the balance required to be on deposit in the
reserve account to a lesser amount and requests the rating agencies to confirm
that such reduction in the required balance will not adversely affect the
ratings of any of the notes or the certificates and the rating agencies
confirm that the reduction will not adversely affect the ratings of the
securities issued by the trust, the seller will reduce the required balance in
the reserve account to a lesser amount.
On each payment date, the trust will deposit into the reserve account all
collections on the motor vehicle loans 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
"The Transfer and Servicing Agreements--Reserve Account."
S-8
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 motor
vehicle loans at the end of the month before that month (or, in
the case of the first payment date, the aggregate principal
balance of the motor vehicle loans 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 "Material Federal Income 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.
EMPLOYEE BENEFIT PLAN 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 tax 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.
For more information refer to the sections entitled "Employee Benefit Plan
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.
S-9
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 200 White Clay Center Drive, Newark, Delaware
19711. Its telephone number is (302) 575-5000.
S-10
RISK FACTORS
You should consider the following risk factors and the risk factors
described on page 8 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-2 notes in full or any time thereafter
if the balance in the reserve account drops below 0.50% of the aggregate
principal balance of the motor vehicle loans 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 motor vehicle loans 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 motor vehicle loans 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 motor vehicle
loans and the amounts on deposit in the reserve account. You must rely for
repayment of your securities on payments on the motor vehicle loans 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 motor vehicle loans declines. You may suffer a loss if the amount on
deposit in the reserve account is exhausted and payments on the motor vehicle
loans 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.
YOU MAY EXPERIENCE A GREATER RISK OF LOSS ON YOUR SECURITIES AS THE RESULT OF
RECENT TERRORIST ATTACKS.
On September 11, 2001, the United States was subject to multiple
terrorist attacks, resulting in the loss of many lives and massive property
damage and destruction in New York City and Washington D.C. Any effect that
these terrorist attacks and related military action may have on the
performance of the motor vehicle loans is unclear, but there could be an
adverse effect on general economic conditions, consumer confidence and general
market liquidity. You should consider the possible effects of the terrorist
attacks and related military action on the delinquency, default and prepayment
experience of the motor vehicle loans. In addition, under the Soldiers' and
Sailors' Civil Relief Act of 1940, members of the military on active duty,
including reservists, who have entered into
S-11
a motor vehicle loan before entering into military service or, in the case of
reservists, before being placed on active duty, may be entitled to reductions
in interest rates to an annual rate of 6% and a stay of foreclosure and
similar actions. As a result of the terrorist attacks, President Bush, on
September 14, 2001, authorized the placement of 50,000 military reservists on
active duty status. It is possible that the number of reservists placed on
active duty status in the future may increase. Because the Relief Act covers
obligors who enter military service (including reservists who are called to
active duty) after origination of the motor vehicle loan, no information can
be provided as to the number of motor vehicle loans that may be affected. Any
resulting shortfalls in interest or principal payments on the motor vehicle
loans will reduce the amount available to make payments on the notes and the
certificates.
GEOGRAPHIC CONCENTRATION OF MOTOR VEHICLE LOANS 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 motor vehicle
loans may differ from what you expect, and you may experience delays or
reductions in payments on your securities.
The following are the approximate percentages of the aggregate principal
balance of the motor vehicle loans as of the statistical cutoff date of the
motor vehicle loans originated by or through a dealer located in the following
states:
Texas 13.67%
California 13.50%
New York 7.61%
Florida 7.13%
New Jersey 6.54%
Illinois 5.99%
None of the remaining states accounted for more than 5% of the aggregate
principal balance of the motor vehicle loans as of the statistical 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.
THE TRUST
GENERAL
Chase Manhattan Auto Owner Trust 2001-B 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 motor vehicle loans, 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.
S-12
The trust will not acquire any motor vehicle loans 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 by the trust, in an amount
equal to 0.75% of the aggregate principal balance of the motor vehicle loans
as of the cutoff date, 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 motor vehicle loans 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 motor vehicle loans and all
monies received on the motor vehicle loans on and after the cutoff date. The
motor vehicle loans 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 motor vehicle loans or the obligors of the motor
vehicle loans,
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 motor vehicle loans 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 motor vehicle loans, 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 "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 "Material Legal Aspects of the Motor
Vehicle Loans."
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 ......... $ 280,000,000
Class A-2 Notes ......... 300,000,000
Class A-3 Notes ......... 365,000,000
Class A-4 Notes ......... 322,380,000
Certificates ............ 32,503,047
--------------
Total .................. $1,299,883,047
==============
S-13
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 19800-001, telephone (302) 651-1000. The seller and its
affiliates may maintain normal commercial banking relations with the trustee
and its affiliates.
THE MOTOR VEHICLE LOANS
ELIGIBILITY CRITERIA
The trust will own a pool of motor vehicle loans consisting of retail
installment sales contracts, purchase money notes and other notes secured by
new and used automobiles and light-duty trucks. The motor vehicle loans were
selected from the retail installment sales contracts, purchase money notes and
other notes owned by Chase USA that satisfy certain criteria. The motor
vehicle loans were required to satisfy these criteria as of the statistical
cutoff date and will be required to satisfy these criteria as of the cutoff
date.
In addition to the criteria described in the section of the prospectus
entitled "The Motor Vehicle Loans--General" these criteria include the
requirement that each motor vehicle loan:
o has a remaining maturity, as of the applicable cutoff date, of at
least 10 months and not more than 72 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 66 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 not more than 18.00%
per annum,
o has a remaining principal balance, as of the applicable 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 applicable cutoff
date,
o is not originated by or through a dealer located in the State of
Alabama or Maryland,
o is not a motor vehicle loan subject to a debt cancellation policy
issued by Chase USA to the obligor that forgives the principal balance
of the motor vehicle loan to the extent that the insurance proceeds in
the event of a total loss of the financed vehicle are insufficient to
repay the motor vehicle loan in full and
o is a motor vehicle loan originated by a dealer under a dealer
agreement with Chase USA.
COMPOSITION OF THE MOTOR VEHICLE LOANS
The statistical information presented in this prospectus supplement on
the motor vehicle loans to be transferred to the trust on the closing date is
presented as of the statistical cutoff date, which is October 22, 2001.
As of the statistical cutoff date, the motor vehicle loans had an
aggregate principal balance of $1,328,104,501.37. As of the cutoff date, the
motor vehicle loans are expected to have an aggregate principal balance of
approximately $1,299,883,047.
The aggregate principal balance of the motor vehicle loans to be
transferred to the trust as of the cutoff date will be less than the aggregate
principal balance of those motor vehicle loans as of the statistical cutoff
date because of the amortization of those motor vehicle loans between the
statistical cutoff date and the cutoff date. In addition, certain motor
vehicle loans included in the statistical
S-14
information may not be included in the motor vehicle loans transferred to the
trust on the closing date. Motor vehicle loans initially selected for transfer
to the trust will not be included if they do not satisfy the eligibility
criteria as of the cutoff date. Motor vehicle loans may prepay in full between
the statistical cutoff date and the cutoff date. In addition, Chase USA may
delete certain of the motor vehicle loans from the final pool of motor vehicle
loans transferred to the trust. As a result of these changes in the motor
vehicle loans to be transferred to the trust, the statistical distribution of
the characteristics of the motor vehicle loans as of the cutoff date may vary
from the statistical distribution of those characteristics as of October 22,
2001, although that variance will not be material.
As of the statistical cutoff date, approximately 10.98% of the aggregate
principal balance of the motor vehicle loans were originated under programs
with automobile manufacturers under which the manufacturers make upfront
payments to Chase USA in exchange for Chase USA's originating motor vehicle
loans with below-market annual contract rates of interest.
The motor vehicle loans 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 motor
vehicle loans in its portfolio that were originated and posted to its
servicing system since September 4, 2001, which were segregated and held for
sale by Chase USA.
As of the statistical cutoff date, approximately 69.68% of the aggregate
principal balance of the motor vehicle loans were secured by new vehicles and
light-duty trucks, and approximately 30.32% were secured by used vehicles and
light-duty trucks.
The composition of the motor vehicle loans as of the statistical cutoff
date was as follows:
COMPOSITION OF THE MOTOR VEHICLE LOANS
NEW FINANCED USED FINANCED ALL FINANCED
VEHICLES VEHICLES VEHICLES
------------------------- ------------------------- ------------------------
Aggregate Principal Balance ........ $ 925,417,681.91 $ 402,686,819.46 $ 1,328,104,501.37
Number of Receivables .............. 45,672 26,303 71,975
Average Principal Balance .......... $ 20,262.25 $ 15,309.54 $ 18,452.30
Average Original Balance ........... $ 20,508.16 $ 15,476.50 $ 18,669.36
Weighted Average Contract Rate ..... 7.17% 8.97% 7.72%
Contract Rate (Range) .............. 0.00% to 17.90% 0.00% to 18.00% 0.00% to 18.00%
Weighted Average Original Term ..... 58.02 months 57.24 months 57.78 months
Original Term (Range) .............. 12 months to 73 months 12 months to 66 months 12 months to 73 months
Weighted Average Remaining
Term .............................. 57.17 months 56.42 months 56.94 months
Remaining Term (Range) ............. 10 months to 72 months 11 months to 66 months 10 months to 72 months
The distribution by contract rate of the motor vehicle loans, the
geographic distribution of the motor vehicle loans, the distribution by
principal balance of the motor vehicle loans and the distribution by remaining
term to maturity of the motor vehicle loans, in each case as of the
statistical cutoff date, are set forth in the following tables:
S-15
DISTRIBUTION BY CONTRACT RATE OF THE MOTOR VEHICLE LOANS
AS OF THE STATISTICAL CUTOFF DATE
PERCENT OF
AGGREGATE AGGREGATE
NUMBER OF PRINCIPAL PRINCIPAL
CONTRACT RATE RANGE MOTOR VEHICLE LOANS BALANCE BALANCE(1)
------------------- ------------------- ------- ----------
0.00% to 3.99% ........... 4,060 $ 65,683,808.20 4.95%
4.00% to 4.99% ........... 1,250 21,320,473.52 1.61
5.00% to 5.99% ........... 2,901 58,542,398.38 4.41
6.00% to 6.49% ........... 7,401 144,078,716.19 10.85
6.50% to 6.99% ........... 11,201 226,916,467.04 17.09
7.00% to 7.49% ........... 6,940 138,810,884.05 10.45
7.50% to 7.99% ........... 10,875 211,428,075.42 15.92
8.00% to 8.49% ........... 3,693 68,093,674.40 5.13
8.50% to 8.99% ........... 6,774 119,085,044.00 8.97
9.00% to 9.49% ........... 2,136 37,071,167.32 2.79
9.50% to 9.99% ........... 4,637 77,225,125.05 5.81
10.00% to 10.49% ......... 1,807 30,502,695.47 2.30
10.50% to 10.99% ......... 2,738 44,668,761.38 3.36
11.00% to 11.49% ......... 1,208 19,500,260.05 1.47
11.50% to 11.99% ......... 1,231 18,926,922.36 1.43
12.00% to 12.49% ......... 636 10,086,406.08 0.76
12.50% to 12.99% ......... 815 11,813,242.78 0.89
13.00% to 13.49% ......... 320 4,571,754.81 0.34
13.50% to 13.99% ......... 470 6,900,447.59 0.52
14.00% to 14.49% ......... 250 3,661,988.60 0.28
14.50% to 14.99% ......... 187 2,585,101.63 0.19
15.00% to 15.49% ......... 81 1,197,864.80 0.09
15.50% to 15.99% ......... 106 1,574,248.10 0.12
16.00% to 16.49% ......... 78 1,199,756.88 0.09
16.50% to 16.99% ......... 70 1,059,824.86 0.08
17.00% to 17.49% ......... 40 549,182.98 0.04
17.50% to 17.99% ......... 64 977,875.73 0.07
18.00% ................... 6 72,333.70 0.01
------ ------------------ ------
Total: .................. 71,975 $ 1,328,104,501.37 100.00%
====== ================== ======
----------
(1) Percentages may not add to 100.00% due to rounding.
S-16
GEOGRAPHIC DISTRIBUTION OF THE MOTOR VEHICLE LOANS(1)
AS OF THE STATISTICAL CUTOFF DATE
NUMBER OF AGGREGATE PERCENT OF
MOTOR PRINCIPAL AGGREGATE
STATE VEHICLE LOANS BALANCE PRINCIPAL BALANCE(2)
----- ------------- ------- --------------------
Alaska ................. 41 $ 732,896.29 0.06%
Arizona ................ 915 16,668,960.07 1.26
Arkansas ............... 495 8,222,270.63 0.62
California ............. 8,749 179,271,247.26 13.50
Colorado ............... 1,334 24,293,222.81 1.83
Connecticut ............ 2,124 37,641,388.87 2.83
Delaware ............... 453 7,904,060.61 0.60
Florida ................ 5,114 94,646,131.42 7.13
Georgia ................ 1,874 38,355,812.06 2.89
Hawaii ................. 8 111,813.45 0.01
Idaho .................. 99 1,815,949.49 0.14
Illinois ............... 4,326 79,587,404.51 5.99
Indiana ................ 587 10,735,976.91 0.81
Iowa ................... 373 6,094,809.07 0.46
Kansas ................. 514 9,274,882.80 0.70
Kentucky ............... 469 8,092,563.55 0.61
Louisiana .............. 304 5,746,191.34 0.43
Maine .................. 157 2,677,751.87 0.20
Massachusetts .......... 2,840 49,787,401.84 3.75
Michigan ............... 2,078 36,312,945.76 2.73
Minnesota .............. 2,370 40,589,126.07 3.06
Mississippi ............ 35 607,274.20 0.05
Missouri ............... 1,511 27,213,247.78 2.05
Montana ................ 145 2,533,838.75 0.19
Nebraska ............... 327 5,602,683.49 0.42
Nevada ................. 369 7,542,076.72 0.57
New Hampshire .......... 704 11,535,032.76 0.87
New Jersey ............. 4,851 86,819,399.13 6.54
New Mexico ............. 154 2,873,417.74 0.22
New York ............... 5,945 101,002,811.90 7.61
North Carolina ......... 1,397 25,417,872.96 1.91
North Dakota ........... 16 306,222.28 0.02
Ohio ................... 2,838 50,709,947.04 3.82
Oklahoma ............... 717 12,658,863.52 0.95
Oregon ................. 918 16,690,503.49 1.26
Pennsylvania ........... 2,430 41,491,161.67 3.12
Rhode Island ........... 68 1,275,238.79 0.10
South Carolina ......... 215 3,704,184.28 0.28
South Dakota ........... 38 663,888.80 0.05
Tennessee .............. 478 9,145,208.23 0.69
Texas .................. 9,283 181,587,701.43 13.67
Utah ................... 169 3,055,818.21 0.23
Vermont ................ 327 5,445,354.28 0.41
Virginia ............... 1,103 21,174,926.05 1.59
Washington ............. 1,353 27,573,175.75 2.08
West Virginia .......... 139 2,360,515.81 0.18
Wisconsin .............. 1,203 20,228,486.59 1.52
Wyoming ................ 18 322,843.04 0.02
----- ------------------ ------
Total: ................ 71,975 $ 1,328,104,501.37 100.00%
====== ================== ======
----------
(1) Based on the location of the dealer originating the receivable.
(2) Percentages may not add to 100.00% due to rounding.
S-17
DISTRIBUTION BY PRINCIPAL BALANCE OF THE MOTOR VEHICLE LOANS
AS OF THE STATISTICAL CUTOFF DATE
NUMBER OF AGGREGATE PERCENT OF
MOTOR PRINCIPAL AGGREGATE
PRINCIPAL BALANCE ($) VEHICLE LOANS BALANCE PRINCIPAL BALANCE(1)
--------------------- ------------- ------- --------------------
2,000.01 to 5,000.00 ............ 255 $ 1,092,251.45 0.08%
5,000.01 to 10,000.00 ........... 7,117 59,680,661.19 4.49
10,000.01 to 15,000.00 .......... 18,957 241,004,226.88 18.15
15,000.01 to 20,000.00 .......... 20,761 361,874,042.77 27.25
20,000.01 to 25,000.00 .......... 13,381 298,152,615.81 22.45
25,000.01 to 30,000.00 .......... 6,590 179,178,191.88 13.49
30,000.01 to 35,000.00 .......... 2,554 82,268,342.27 6.19
35,000.01 to 40,000.00 .......... 1,108 41,339,342.59 3.11
40,000.01 to 45,000.00 .......... 476 20,058,304.47 1.51
45,000.01 to 50,000.00 .......... 297 14,076,282.24 1.06
50,000.01 to 55,000.00 .......... 175 9,127,337.57 0.69
55,000.01 to 60,000.00 .......... 109 6,285,806.28 0.47
60,000.01 to 65,000.00 .......... 59 3,684,107.82 0.28
65,000.01 to 70,000.00 .......... 46 3,105,345.79 0.23
70,000.01 to 75,000.00 .......... 34 2,455,714.99 0.18
75,000.01 to 80,000.00 .......... 18 1,387,446.32 0.10
80,000.01 to 85,000.00 .......... 15 1,231,617.44 0.09
85,000.01 to 90,000.00 .......... 10 873,152.27 0.07
90,000.01 to 95,000.00 .......... 7 642,928.62 0.05
95,000.01 to 100,000.00 ......... 6 586,782.72 0.04
------ ------------------ ------
Total: ......................... 71,975 $ 1,328,104,501.37 100.00%
====== ================== ======
----------
(1) Percentages may not add to 100.00% due to rounding.
DISTRIBUTION BY REMAINING TERM TO MATURITY OF THE MOTOR VEHICLE LOANS
AS OF THE STATISTICAL CUTOFF DATE
NUMBER OF AGGREGATE PERCENT OF
MOTOR PRINCIPAL AGGREGATE
REMAINING TERM TO MATURITY (IN MONTHS) VEHICLE LOANS BALANCE PRINCIPAL BALANCE(1)
-------------------------------------- ------------- ------- --------------------
1 to 12 ................................ 56 $ 608,188.74 0.05%
13 to 24 ............................... 1,314 18,761,650.33 1.41
25 to 36 ............................... 4,609 63,915,296.01 4.81
37 to 48 ............................... 9,326 139,994,375.66 10.54
49 to 60 ............................... 52,532 1,007,446,498.32 75.86
61 to 72 ............................... 4,138 97,378,492.31 7.33
------ ------------------ ------
Total: ................................ 71,975 $ 1,328,104,501.37 100.00%
====== ================== ======
----------
(1) Percentages may not add to 100.00% due to rounding.
S-18
DELINQUENCY AND LOAN LOSS INFORMATION
The following tables set forth information with respect to delinquencies,
loan losses and recoveries for the CHASE AUTO PORTFOLIO as of the dates and
for the periods indicated. The portions of the CHASE AUTO 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 motor vehicle loans
held by the trust will not include those types of loans. We do not maintain
separate records that distinguish among the delinquency and loan loss
experience for fixed rate motor vehicle loans (such as the motor vehicle loans
included in the trust) and variable rate motor vehicle loans nor do we
maintain records of the delinquency and loan loss experience that excludes
motor vehicle loans with larger final scheduled payments. We believe 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 the CHASE AUTO 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 motor vehicle loans included in the trust will
be similar to the delinquency and loan loss levels set forth below.
S-19
DELINQUENCY EXPERIENCE
AS OF SEPTEMBER 30,
---------------------------------------------------------
2001 2000
---------------------------- ----------------------------
NUMBER NUMBER
DOLLARS OF DOLLARS OF
(000'S) LOANS (000'S) LOANS
---------------- ----------- ---------------- -----------
Outstanding Principal Amount ...... $ 19,954,967 1,448,401 $ 15,525,907 1,241,196
Delinquencies(1)(2)
30-59 Days ....................... $ 263,141 22,924 $ 214,677 18,530
60-89 Days ....................... 78,339 7,218 55,034 5,526
90 Days or More .................. 42,256 4,500 25,482 2,473
Total Deliquencies ................ $ 383,736 34,642 $ 295,193 26,529
Repossession Inventory ............ 30,638 2,096 28,047 1,942
Total Deliquencies &
Repossession Inventory ........... $ 414,374 36,738 $ 323,240 28,471
Delinquencies(1)(2)(3)
30-59 Days ....................... 1.32% 1.38%
60-89 Days ....................... 0.39% 0.35%
90 Days or More .................. 0.21% 0.16%
------------ ------------
Total Delinquencies(3)(4) ......... 1.92% 1.90%
Repossession Inventory(3) ......... 0.15% 0.18%
------------ ------------
Total Delinquencies &
Repossession Inventory(3)(4) ..... 2.08% 2.08%
AS OF DECEMBER 31,
--------------------------------------------------------
2000 1999
---------------------------- ---------------------------
NUMBER NUMBER
DOLLARS OF DOLLARS OF
(000'S) LOANS (000'S) LOANS
---------------- ----------- ---------------- ----------
Outstanding Principal Amount ...... $ 16,304,564 1,289,541 $ 14,454,904 1,178,052
Delinquencies(1)(2)
30-59 Days ....................... $ 241,230 21,844 $ 229,630 16,581
60-89 Days ....................... 67,073 6,627 57,738 4,835
90 Days or More .................. 27,236 3,021 27,286 2,827
Total Deliquencies ................ $ 335,539 31,492 $ 314,654 24,243
Repossession Inventory ............ 26,099 1,783 25,843 1,834
Total Deliquencies &
Repossession Inventory ........... $ 361,638 33,275 $ 340,497 26,077
Delinquencies(1)(2)(3)
30-59 Days ....................... 1.48% 1.59%
60-89 Days ....................... 0.41% 0.40%
90 Days or More .................. 0.17% 0.19%
------------ ------------
Total Delinquencies(3)(4) ......... 2.06% 2.18%
Repossession Inventory(3) ......... 0.16% 0.18%
------------ ------------
Total Delinquencies &
Repossession Inventory(3)(4) ..... 2.22% 2.36%
AS OF DECEMBER 31,
--------------------------------------------------------------------------------
1998 1997 1996
---------------------------- -------------------------- ------------------------
NUMBER NUMBER NUMBER
DOLLARS OF DOLLARS OF DOLLARS OF
(000'S) LOANS (000'S) LOANS (000'S) LOANS
---------------- ----------- ---------------- --------- --------------- --------
Outstanding Principal Amount .......... $ 14,451,927 1,149,636 $ 11,114,504 938,495 $ 9,842,364 832,993
Delinquencies(1)(2)
30-59 Days ........................... $ 215,114 15,909 $ 153,761 12,937 $ 127,722 10,879
60-89 Days ........................... 46,707 4,008 39,329 3,448 31,153 2,739
90 Days or More ...................... 28,329 2,529 24,322 2,190 18,031 1,590
Total Deliquencies .................... $ 290,150 22,446 $ 217,412 18,575 $ 176,906 15,208
Repossession Inventory ................ 26,018 1,690 30,374 1,944 21,755 1,421
Total Deliquencies &
Repossession Inventory ............... $ 316,168 24,136 $ 247,786 20,519 $ 198,661 16,629
Delinquencies(1)(2)(3)
30-59 Days ........................... 1.49% 1.38% 1.30%
60-89 Days ........................... 0.32% 0.35% 0.32%
90 Days or More ...................... 0.20% 0.22% 0.18%
------------ ------------ -----------
Total Delinquencies(3)(4) ............. 2.01% 1.96% 1.80%
Repossession Inventory(3) ............. 0.18% 0.27% 0.22%
------------ ------------ -----------
Total Delinquencies &
Repossession Inventory(3)(4) ......... 2.19% 2.23% 2.02%
----------
(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-20
LOAN LOSS EXPERIENCE
(DOLLARS IN 000'S)
NINE MONTHS ENDED SEPTEMBER 30,(6) YEAR ENDED DECEMBER 31,
----------------------------------- -----------------------------------
2001 2000 2000(7) 1999
---------------- ---------------- ---------------- ----------------
Number of Loans(1) ............................... 1,448,401 1,241,196 1,289,541 1,178,052
Period End Outstanding Principal Amount .......... $ 19,954,967 $ 15,525,907 $ 16,304,564 $ 14,454,904
Average Outstanding Principal Amount(2) .......... $ 17,994,085 $ 14,577,874 $ 14,865,555 $ 14,504,476
Number of Repossessions .......................... 9,051 7,569 10,067 8,684
Number of Gross Charge-Offs ...................... 14,777 9,491 15,439 10,172
Gross Charge-Offs(3) ............................. $ 90,897 $ 64,205 $ 111,094 $ 82,688
Gross Charge-Offs as a % of Period End Outstanding
Principal Amount(3) ............................. 0.61% 0.55% 0.68% 0.57%
Gross Charge-Offs as a % of Average End
Outstanding Principal Amount(3) ................. 0.67% 0.59% 0.75% 0.57%
Recoveries(4) .................................... $ (22,214) $ (14,578) $ (18,827) $ (22,327)
Net Charge-Offs(5) ............................... $ 68,683 $ 49,627 $ 92,267 $ 60,361
Net Charge-Offs as a % of Period End Outstanding
Principal Amount(5) ............................. 0.46% 0.43% 0.57% 0.42%
Net Charge-Offs as a % of Average Outstanding
Principal Amount(5) ............................. 0.51% 0.45% 0.62% 0.42%
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1998 1997 1996
---------------- ---------------- ---------------
Number of Loans(1) ............................... 1,149,636 938,495 832,993
Period End Outstanding Principal Amount .......... $ 14,451,927 $ 11,114,504 $ 9,842,364
Average Outstanding Principal Amount(2) .......... $ 12,782,467 $ 10,630,360 $ 9,153,306
Number of Repossessions .......................... 7,837 5,834 3,719
Number of Gross Charge-Offs ...................... 9,942 7,524 5,076
Gross Charge-Offs(3) ............................. $ 81,652 $ 57,017 $ 29,461
Gross Charge-Offs as a % of Period End Outstanding
Principal Amount(3) ............................. 0.56% 0.51% 0.30%
Gross Charge-Offs as a % of Average End
Outstanding Principal Amount(3) ................. 0.64% 0.54% 0.32%
Recoveries(4) .................................... $ (18,236) $ (10,622) $ (7,554)
Net Charge-Offs(5) ............................... $ 63,416 $ 46,395 $ 21,908
Net Charge-Offs as a % of Period End Outstanding
Principal Amount(5) ............................. 0.44% 0.42% 0.22%
Net Charge-Offs as a % of Average Outstanding
Principal Amount(5) ............................. 0.50% 0.44% 0.24%
----------
(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, 2001 and
September 30, 2000 are annualized.
(7) Included in the Year Ended December 31, 2000, was $22,273 thousand of
net charge-offs relating to the revised Federal Financial Institutions
Examination Council policy which was required to be adopted by Chase USA
by the end of the fourth quarter of 2000 and which established uniform
guidelines for the charge-off of consumer loans to delinquent, bankrupt,
deceased and fraudulent borrowers.
CHASE USA
Information regarding Chase USA is set forth in the section of the
prospectus entitled "Chase USA." At September 30, 2001, Chase USA's total
assets were approximately $48.5 billion, total liabilities were approximately
$44.1 billion and total stockholder's equity was approximately $4.4 billion.
S-21
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
Additional information regarding maturity and prepayment considerations
with respect to the securities is provided in the section of the prospectus
entitled "Weighted Average Life of Securities."
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-2 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 on the Class A-1 notes until the
Class A-1 notes are paid in full and then ratably on all other 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 of the motor vehicle loans. 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 motor vehicle loans 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 motor vehicle
loans 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 motor vehicle
loans 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. Approximately 4.44% of the
aggregate principal balance of the motor vehicle loans as of the statistical
cutoff date were secured by financed vehicles manufactured by Saturn. In the
event the obligor under a motor vehicle loan secured by a Saturn vehicle
returns the related financed vehicle for a refund, such motor vehicle loan
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
S-22
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 MOTOR VEHICLE LOANS ON THE LIFE OF THE
SECURITIES
The following information is given solely to illustrate the effect of
prepayments of the motor vehicle loans 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 motor vehicle loans.
Prepayments on motor vehicle loans 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 motor vehicle loans in a pool of
receivables. ABS further assumes that all the motor vehicle loans are the same
size and amortize at the same rate and that each motor vehicle loan in each
month of its life will either be paid as scheduled or be prepaid in full. For
example, in a pool of motor vehicle loans originally containing 10,000 motor
vehicle loans, a 1% ABS rate means that 100 motor vehicle loans 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 motor vehicle loans, including the motor vehicle loans held by the trust.
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 motor vehicle loans held by the trust. The ABS
Tables assume that:
o the motor vehicle loans prepay in full at the specified constant
percentage of ABS monthly, with no defaults, losses or repurchases,
o each scheduled monthly payment on the motor vehicle loans 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 15th day
of the applicable month),
o no event of default occurs,
o the notes and certificates are issued on November 6, 2001 and
o the servicer does not exercise its option to purchase the motor vehicle
loans.
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 motor vehicle loans have been
aggregated into hypothetical pools with all of the motor vehicle loans 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 statistical cutoff date) will be such that each pool
will be fully amortized by the end of its remaining term to maturity.
S-23
ORIGINAL TERM REMAINING TERM
AGGREGATE CONTRACT TO MATURITY TO MATURITY
POOL PRINCIPAL BALANCE RATE (IN MONTHS) (IN MONTHS)
----------- ------------------- ---------- -------------- ----------------
1 ......... $ 18,958,241.17 4.629% 24 23
2 ......... $ 62,557,132.85 6.418% 36 35
3 ......... $ 137,019,575.95 7.702% 48 47
4 ......... $ 986,038,841.50 7.769% 60 59
5 ......... $ 95,309,255.53 8.680% 71 70
The actual characteristics and performance of the motor vehicle loans
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 motor vehicle
loans will prepay at a constant level of ABS until maturity or that all of the
motor vehicle loans will prepay at the same level of ABS. Moreover, the
diverse terms of motor vehicle loans 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 motor vehicle loans are as
assumed. Any difference between such assumptions and the actual
characteristics and performance of the motor vehicle loans, 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
-----------------------------------------------------------
PAYMENT DATES 0.50% 1.00% 1.30% 1.50% 1.70% 2.00%
----------------------- --------- --------- --------- --------- --------- ---------
Closing Date .......... 100 100 100 100 100 100
December 15, 2001 ..... 91 88 87 86 85 84
January 15, 2002 ...... 81 77 74 72 70 67
February 15, 2002 ..... 72 65 61 58 56 52
March 15, 2002 ........ 63 54 49 45 41 36
April 15, 2002 ........ 54 43 36 32 27 21
May 15, 2002 .......... 44 31 24 19 13 5
June 15, 2002 ......... 35 20 12 6 0 0
July 15, 2002 ......... 26 9 0 0 0 0
August 15, 2002 ....... 17 0 0 0 0 0
September 15, 2002..... 8 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
January 15, 2003 ...... 0 0 0 0 0 0
February 15, 2003 ..... 0 0 0 0 0 0
March 15, 2003 ........ 0 0 0 0 0 0
April 15, 2003 ........ 0 0 0 0 0 0
May 15, 2003 .......... 0 0 0 0 0 0
June 15, 2003 ......... 0 0 0 0 0 0
July 15, 2003 ......... 0 0 0 0 0 0
August 15, 2003 ....... 0 0 0 0 0 0
September 15, 2003..... 0 0 0 0 0 0
October 15, 2003 ...... 0 0 0 0 0 0
Weighted Average
Life (years)(1) ...... 0.52 0.43 0.39 0.37 0.35 0.33
CLASS A-2 NOTES
-----------------------------------------------------------
ASSUMED ABS PERCENTAGE
-----------------------------------------------------------
PAYMENT DATES 0.50% 1.00% 1.30% 1.50% 1.70% 2.00%
----------------------- --------- --------- --------- --------- --------- ---------
Closing Date .......... 100 100 100 100 100 100
December 15, 2001 ..... 100 100 100 100 100 100
January 15, 2002 ...... 100 100 100 100 100 100
February 15, 2002 ..... 100 100 100 100 100 100
March 15, 2002 ........ 100 100 100 100 100 100
April 15, 2002 ........ 100 100 100 100 100 100
May 15, 2002 .......... 100 100 100 100 100 100
June 15, 2002 ......... 100 100 100 100 100 91
July 15, 2002 ......... 100 100 99 93 87 78
August 15, 2002 ....... 100 99 88 81 75 64
September 15, 2002..... 100 89 77 70 62 51
October 15, 2002 ...... 99 79 67 59 50 38
November 15, 2002 ..... 90 69 56 47 39 25
December 15, 2002 ..... 82 59 45 36 27 13
January 15, 2003 ...... 74 50 35 25 16 1
February 15, 2003 ..... 65 40 25 15 4 0
March 15, 2003 ........ 57 31 15 4 0 0
April 15, 2003 ........ 49 21 5 0 0 0
May 15, 2003 .......... 40 12 0 0 0 0
June 15, 2003 ......... 32 3 0 0 0 0
July 15, 2003 ......... 24 0 0 0 0 0
August 15, 2003 ....... 16 0 0 0 0 0
September 15, 2003..... 8 0 0 0 0 0
October 15, 2003 ...... 0 0 0 0 0 0
Weighted Average
Life (years)(1) ...... 1.47 1.23 1.12 1.05 0.99 0.91
----------
(1) The weighted average life of a note is determined by (i) multiplying the
amount of each principal payment of such note by the number of years
from the date of the issuance of 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 MOTOR VEHICLE LOANS WHICH WILL DIFFER FROM THE ACTUAL CHARACTERISTICS
AND PERFORMANCE OF THE MOTOR VEHICLE LOANS) AND SHOULD BE READ IN CONJUNCTION
THEREWITH.
S-24
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
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 ...... 100 100 100 100 100 100 100 100 100 100 100 100
March 15 2002 .......... 100 100 100 100 100 100 100 100 100 100 100 100
April 15, 2002 ......... 100 100 100 100 100 100 100 100 100 100 100 100
May 15, 2002 ........... 100 100 100 100 100 100 100 100 100 100 100 100
June 15, 2002 .......... 100 100 100 100 100 100 100 100 100 100 100 100
July 15, 2002 .......... 100 100 100 100 100 100 100 100 100 100 100 100
August 15, 2002 ........ 100 100 100 100 100 100 100 100 100 100 100 100
September 15, 2002 ..... 100 100 100 100 100 100 100 100 100 100 100 100
October 15, 2002 ....... 100 100 100 100 100 100 100 100 100 100 100 100
November 15, 2002 ...... 100 100 100 100 100 100 100 100 100 100 100 100
December 15, 2002 ...... 100 100 100 100 100 100 100 100 100 100 100 100
January 15 2003 ........ 100 100 100 100 100 100 100 100 100 100 100 100
February 15, 2003 ...... 100 100 100 100 100 91 100 100 100 100 100 100
March 15, 2003 ......... 100 100 100 100 95 82 100 100 100 100 100 100
April 15, 2003 ......... 100 100 100 95 86 73 100 100 100 100 100 100
May 15, 2003 ........... 100 100 96 87 78 65 100 100 100 100 100 100
June 15, 2003 .......... 100 100 89 79 70 56 100 100 100 100 100 100
July 15, 2003 .......... 100 95 81 72 62 48 100 100 100 100 100 100
August 15, 2003 ........ 100 88 74 64 55 40 100 100 100 100 100 100
September 15, 2003 ..... 100 82 67 57 47 32 100 100 100 100 100 100
October 15, 2003 ....... 100 75 60 50 40 24 100 100 100 100 100 100
November 15, 2003 ...... 94 68 53 43 33 17 100 100 100 100 100 100
December 15, 2003 ...... 87 62 47 36 26 10 100 100 100 100 100 100
January 15, 2004 ....... 81 56 40 30 19 3 100 100 100 100 100 100
February 15, 2004 ...... 75 49 34 23 13 0 100 100 100 100 100 96
March 15, 2004 ......... 69 43 27 17 6 0 100 100 100 100 100 89
April 15, 2004 ......... 63 37 21 11 * 0 100 100 100 100 100 82
May 15, 2004 ........... 57 31 15 5 0 0 100 100 100 100 93 75
June 15, 2004 .......... 51 25 10 0 0 0 100 100 100 99 87 69
July 15, 2004 .......... 46 20 4 0 0 0 100 100 100 93 81 63
August 15, 2004 ........ 40 14 0 0 0 0 100 100 98 86 75 57
September 15, 2004 ..... 34 8 0 0 0 0 100 100 92 80 69 51
October 15, 2004 ....... 28 3 0 0 0 0 100 100 86 75 63 46
November 15, 2004 ...... 23 0 0 0 0 0 100 98 81 69 58 41
December 15, 2004 ...... 17 0 0 0 0 0 100 92 75 64 53 36
January 15, 2005 ....... 12 0 0 0 0 0 100 86 70 59 48 31
February 15, 2005 ...... 7 0 0 0 0 0 100 81 65 54 44 27
March 15, 2005 ......... 1 0 0 0 0 0 100 76 60 50 39 23
April 15, 2005 ......... 0 0 0 0 0 0 96 71 55 45 35 20
May 15, 2005 ........... 0 0 0 0 0 0 90 66 51 41 31 16
June 15, 2005 .......... 0 0 0 0 0 0 84 61 46 37 27 13
July 15, 2005 .......... 0 0 0 0 0 0 78 56 42 33 24 10
August 15, 2005 ........ 0 0 0 0 0 0 72 51 38 29 21 8
September 15, 2005 ..... 0 0 0 0 0 0 67 46 34 26 18 5
October 15, 2005 ....... 0 0 0 0 0 0 61 42 30 23 15 3
November 15, 2005 ...... 0 0 0 0 0 0 56 38 27 20 13 2
December 15, 2005 ...... 0 0 0 0 0 0 51 34 24 17 10 0
January 15, 2006 ....... 0 0 0 0 0 0 46 30 21 15 8 0
February 15, 2006 ...... 0 0 0 0 0 0 41 27 18 12 7 0
March 15, 2006 ......... 0 0 0 0 0 0 36 23 16 10 5 0
April 15, 2006 ......... 0 0 0 0 0 0 32 20 13 8 4 0
May 15, 2006 ........... 0 0 0 0 0 0 27 17 11 7 2 0
S-25
CLASS A-3 NOTES
-----------------------------------------------------------
ASSUMED ABS PERCENTAGE(1)
-----------------------------------------------------------
PAYMENT DATES 0.50% 1.00% 1.30% 1.50% 1.70% 2.00%
------------------------ --------- --------- --------- --------- --------- ---------
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
October 15, 2006 ....... 0 0 0 0 0 0
November 15, 2006 ...... 0 0 0 0 0 0
December 15, 2006 ...... 0 0 0 0 0 0
January 15, 2007 ....... 0 0 0 0 0 0
February 15, 2007 ...... 0 0 0 0 0 0
March 15, 2007 ......... 0 0 0 0 0 0
April 15, 2007 ......... 0 0 0 0 0 0
May 15, 2007 ........... 0 0 0 0 0 0
June 15, 2007 .......... 0 0 0 0 0 0
July 15, 2007 .......... 0 0 0 0 0 0
August 15, 2007 ........ 0 0 0 0 0 0
September 15, 2007...... 0 0 0 0 0 0
Weighted Average
Life (years)(2) ....... 2.68 2.32 2.12 2.00 1.88 1.73
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%
------------------------ ------------ ------------ ------------ ------------ ------------ ------------
June 15, 2006 .......... 22 14 8 5 2 0
July 15, 2006 .......... 18 11 6 4 1 0
August 15, 2006 ........ 13 8 5 2 * 0
September 15, 2006 ..... 8 5 3 1 0 0
October 15, 2006 ....... 4 2 1 1 0 0
November 15, 2006 ...... 3 2 1 * 0 0
December 15, 2006 ...... 3 2 1 * 0 0
January 15, 2007 ....... 3 1 1 * 0 0
February 15, 2007 ...... 2 1 1 * 0 0
March 15, 2007 ......... 2 1 * * 0 0
April 15, 2007 ......... 2 1 * * 0 0
May 15, 2007 ........... 1 1 * 0 0 0
June 15, 2007 .......... 1 * * 0 0 0
July 15, 2007 .......... 1 * * 0 0 0
August 15, 2007 ........ * * * 0 0 0
September 15, 2007...... 0 0 0 0 0 0
Weighted Average
Life (years)(2) ....... 4.21 3.91 3.68 3.50 3.30 2.99
Weighted Average
Life to Optional
Clean-Up Call
(years)(2)(3) ......... 4.06 3.71 3.46 3.29 3.12 2.83
Optional Clean-Up
Call Date. ............ 03/15/06 11/15/05 08/15/05 06/15/05 04/15/05 12/15/04
----------
(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 motor vehicle loans
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 MOTOR VEHICLE LOANS WHICH WILL DIFFER FROM THE ACTUAL CHARACTERISTICS
AND PERFORMANCE OF THE MOTOR VEHICLE LOANS) AND SHOULD BE READ IN CONJUNCTION
THEREWITH.
S-26
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
December 15, 2001 .......... 100 100 100 100 100 100
January 15, 2002 ........... 100 100 100 100 100 100
February 15, 2002 .......... 100 100 100 100 100 100
March 15, 2002 ............. 100 100 100 100 100 100
April 15, 2002 ............. 100 100 100 100 100 100
May 15, 2002 ............... 100 100 100 100 100 100
June 15, 2002 .............. 100 100 100 100 100 100
July 15, 2002 .............. 100 100 100 100 100 100
August 15, 2002 ............ 100 100 100 100 100 100
September 15, 2002 ......... 100 100 100 100 100 100
October 15, 2002 ........... 100 100 100 100 100 100
November 15, 2002 .......... 100 100 100 100 100 100
December 15, 2002 .......... 100 100 100 100 100 100
January 15, 2003 ........... 100 100 100 100 100 100
February 15, 2003 .......... 100 100 100 100 100 95
March 15, 2003 ............. 100 100 100 100 97 91
April 15, 2003 ............. 100 100 100 97 93 86
May 15, 2003 ............... 100 100 98 93 88 81
June 15, 2003 .............. 100 100 94 89 84 77
July 15, 2003 .............. 100 98 90 85 80 72
August 15, 2003 ............ 100 94 86 81 76 68
September 15, 2003 ......... 100 90 82 77 72 64
October 15, 2003 ........... 100 87 79 73 68 60
November 15, 2003 .......... 97 83 75 70 64 56
December 15, 2003 .......... 93 80 72 66 61 52
January 15, 2004 ........... 90 76 68 63 57 49
February 15, 2004 .......... 87 73 65 59 54 45
March 15, 2004 ............. 84 70 61 56 50 42
April 15, 2004 ............. 81 67 58 53 47 38
May 15, 2004 ............... 77 63 55 49 44 35
June 15, 2004 .............. 74 60 52 46 41 32
July 15, 2004 .............. 71 57 49 43 38 29
August 15, 2004 ............ 68 54 46 41 35 27
September 15, 2004 ......... 65 51 43 38 32 24
October 15, 2004 ........... 62 48 40 35 30 21
November 15, 2004 .......... 59 46 38 32 27 19
December 15, 2004 .......... 56 43 35 30 25 17
January 15, 2005 ........... 53 41 33 28 23 15
February 15, 2005 .......... 50 38 31 25 20 13
March 15, 2005 ............. 48 36 28 23 18 11
April 15, 2005 ............. 45 33 26 21 16 9
May 15, 2005 ............... 42 31 24 19 15 8
June 15, 2005 .............. 39 28 22 17 13 6
July 15, 2005 .............. 37 26 20 16 11 5
August 15, 2005 ............ 34 24 18 14 10 4
September 15, 2005 ......... 31 22 16 12 8 2
October 15, 2005 ........... 29 20 14 11 7 2
November 15, 2005 .......... 26 18 13 9 6 1
December 15, 2005 .......... 24 16 11 8 5 0
January 15, 2006 ........... 22 14 10 7 4 0
February 15, 2006 .......... 19 13 9 6 3 0
March 15, 2006 ............. 17 11 7 5 2 0
April 15, 2006 ............. 15 9 6 4 2 0
S-27
CERTIFICATES
-----------------------------------------------------------------------------
ASSUMED ABS PERCENTAGE(1)
-----------------------------------------------------------------------------
PAYMENT DATES 0.50% 1.00% 1.30% 1.50% 1.70% 2.00%
------------------------------------------ ------------ ------------ ------------ ------------ ------------ ------------
May 15, 2006 ............................. 13 8 5 3 1 0
June 15, 2006 ............................ 10 6 4 2 1 0
July 15, 2006 ............................ 8 5 3 2 * 0
August 15, 2006 .......................... 6 4 2 1 * 0
September 15, 2006 ....................... 4 2 1 1 0 0
October 15, 2006 ......................... 2 1 1 * 0 0
November 15, 2006 ........................ 2 1 * * 0 0
December 15, 2006 ........................ 1 1 * * 0 0
January 15, 2007 ......................... 1 1 * * 0 0
February 15, 2007 ........................ 1 1 * * 0 0
March 15, 2007 ........................... 1 * * * 0 0
April 15, 2007 ........................... 1 * * * 0 0
May 15, 2007 ............................. 1 * * 0 0 0
June 15, 2007 ............................ * * * 0 0 0
July 15, 2007 ............................ * * * 0 0 0
August 15, 2007 .......................... * * * 0 0 0
September 15, 2007 ....................... 0 0 0 0 0 0
Weighted Average Life (years)(2) ......... 3.40 3.07 2.85 2.70 2.55 2.32
Weighted Average Life to Optional
Clean-Up Call (years)(2)(3) ............. 3.33 2.97 2.75 2.60 2.46 2.25
Optional Clean-Up Call Date .............. 03/15/06 11/15/05 08/15/05 06/15/05 04/15/05 12/15/04
----------
(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 motor vehicle loans
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 MOTOR VEHICLE LOANS WHICH WILL DIFFER FROM THE ACTUAL CHARACTERISTICS
AND PERFORMANCE OF THE MOTOR VEHICLE LOANS) AND SHOULD BE READ IN CONJUNCTION
THEREWITH.
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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, MAC N9311-161, 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 "Certain Information Regarding the Securities" and "The Indenture."
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 December 17, 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 motor vehicle loans 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-2 notes have been paid in full and
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o the NOTE PERCENTAGE of the PRINCIPAL DISTRIBUTION AMOUNT for each
payment date thereafter (or, in the case of the payment date on which
the Class A-2 notes are paid in full, the NOTE PERCENTAGE of the
remaining amount of the PRINCIPAL DISTRIBUTION AMOUNT) until all of the
notes have been paid in full
unless
o the balance in the reserve account on that payment date would drop below
0.50% of the aggregate principal balance of the motor vehicle loans 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 NOTE PERCENTAGE will equal the percentage equivalent of a fraction the
numerator of which is the aggregate principal amount of the Class A-3 notes
and the Class A-4 notes on the date the Class A-2 notes are paid in full and
the denominator of which is the sum of the aggregate principal amount of the
Class A-3 notes and the Class A-4 notes and the CERTIFICATE BALANCE on the
date the Class A-2 notes are paid in full.
The PRINCIPAL DISTRIBUTION AMOUNT for each payment date will generally equal
the sum of
o the principal collections on the motor vehicle loans received during the
prior calendar month and
o the aggregate principal balance of all motor vehicle loans designated as
"defaulted receivables" during that calendar month, net of liquidation
proceeds allocable to principal received during that month in respect of
motor vehicle loans 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 motor vehicle loan 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 motor vehicle loan 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.
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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 Class A-1 notes until the Class A-1 notes are
paid in full and then the other classes of notes ratably, based upon the
outstanding principal amount of each such 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 motor vehicle loans
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 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 motor vehicle loans 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 motor
vehicle loans has declined to 10% or less of the aggregate principal balance
of the motor vehicle loans as of the cutoff date. If the servicer purchases
the motor vehicle loans, 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 motor vehicle loans, refer to the section of the prospectus entitled
"Transfer and Servicing Agreements--Termination."
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 "Certain Information Regarding the
Securities" and "The Transfer and Servicing Agreements." We refer you to those
sections.
DISTRIBUTIONS OF INTEREST
On each payment date, commencing on December 17, 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.
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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 motor vehicle loans 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-2 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 the CERTIFICATE PERCENTAGE of the PRINCIPAL DISTRIBUTION AMOUNT (or, in
the case of the payment date on which the Class A-2 notes are paid in
full, the CERTIFICATE PERCENTAGE of the remaining amount of the
PRINCIPAL DISTRIBUTION AMOUNT)
unless
o the balance in the reserve account on that payment date would drop below
0.50% of the aggregate principal balance of the motor vehicle loans 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 PERCENTAGE will equal 100% minus the NOTE PERCENTAGE.
The CERTIFICATE BALANCE will be reduced on each payment date by
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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 motor vehicle loans 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.
FUNDS AVAILABLE TO DISTRIBUTE PRINCIPAL; SUBORDINATION. The trust will
distribute principal in respect of the certificates on each payment date from
collections on the motor vehicle loans 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 motor vehicle loans 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 motor
vehicle loans has declined to 10% or less of the aggregate principal balance
of the motor vehicle loans as of the cutoff date. If the servicer purchases
the motor vehicle loans, 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 motor vehicle loans, refer to the section of the prospectus entitled
"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 "Material 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 motor vehicle loans during the prior
calendar month, including net recoveries on motor vehicle loans that
were charged off as losses in prior months and
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o proceeds of repurchases of motor vehicle loans by the seller or
purchases of motor vehicle loans 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
motor vehicle loans until the business day prior to each payment date. On that
business day, the servicer will cause all collections on the motor vehicle
loans 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 motor vehicle loans within 48 hours of
receipt, refer to the section of the prospectus entitled "Transfer and
Servicing Agreements--Servicing--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 "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 "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,
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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.
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.
TRUST 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 "Transfer and Servicing
Agreements--Trust 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
motor vehicle loans 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 "Transfer and Servicing
Agreements--Servicing--Servicing Compensation and Expenses."
SERVICING PROCEDURES
The servicer will service the motor vehicle loans and will be obligated
to make reasonable efforts to collect all payments due with respect to the
motor vehicle loans. The servicer will be obligated to
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follow collection and servicing procedures consistent with the procedures it
follows with respect to comparable motor vehicle loans 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 motor vehicle loan, 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 motor vehicle loan or
o extend any motor vehicle loan 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 motor vehicle loan, the servicer will be required to
purchase the affected motor vehicle loan at a price equal to the unpaid
principal balance owed by 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 motor vehicle loan. 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 "Transfer and Servicing
Agreements--Servicing--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 in an amount equal to 0.75% of the aggregate
principal balance of the motor vehicle loans as of the cutoff date, which is
less than the SPECIFIED RESERVE ACCOUNT BALANCE to which the Reserve Account
is required to build. 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
1.75% of the aggregate principal balance of the motor vehicle loans as of the
last day of the second preceding calendar month, but in any event will not be
less than the lesser of
o an amount equal to 0.75% of the aggregate principal balance of the motor
vehicle loans as of the cutoff date and
o the aggregate principal balance of the motor vehicle loans as of the
last day of the second preceding calendar month;
provided, that the SPECIFIED RESERVE ACCOUNT BALANCE will be calculated using
a percentage of 3.50% on any payment date for which the AVERAGE NET LOSS RATIO
exceeds 1.75% or the AVERAGE DELINQUENCY PERCENTAGE exceeds 1.75%. If the
seller desires to reduce the SPECIFIED RESERVE ACCOUNT
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BALANCE to a lesser amount and requests the rating agencies to confirm that
such reduction in the SPECIFIED RESERVE ACCOUNT BALANCE will not adversely
affect the ratings of any of the notes or the certificates and the rating
agencies confirm that the reduction will not adversely affect the ratings of
the securities issued by the trust, the seller will reduce the SPECIFIED
RESERVE ACCOUNT BALANCE to a lesser amount.
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 motor vehicle loans 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 motor vehicle loans may
result from, among other things, losses on the motor vehicle loans or the
failure by the servicer to make any remittance under the sale and servicing
agreement.
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.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of the material U.S. federal income
tax considerations 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 Internal Revenue Code of
1986, as amended, 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 tax
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
S-37
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 Chase USA, 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.
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
tax code. As used herein, a "U.S. noteholder" or "U.S. certificateholder"
means a holder that is for U.S. federal income tax purposes:
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 U.S. federal income
taxation regardless of its source or
o a trust if (a) it is subject to the primary supervision of a court
within the United States and one or more United States persons has the
authority to control all substantial decisions of the trust or (b) it
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 a representation of Chase USA, that the nature of the trust's income
exempts it from the rule that certain publicly traded partnerships are taxable
as corporations.
Chase USA 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 Chase USA, and the notes being
debt of the partnership. However, the proper characterization of the
arrangement involving the trust, the certificateholders, the noteholders and
Chase USA is not clear.
A variety of alternative characterizations are possible under which the
tax consequences would differ. For example, because the certificates have
certain features characteristic of debt, the certificates
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might be considered debt of Chase USA 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 the 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.
federal, state and local 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 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.
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 but
unpaid interest, which will be treated as a payment of interest) 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 Chase USA, (ii) is not a "controlled foreign corporation"
with respect to which the trust or Chase USA is a "related person" within
the meaning of the tax code, (iii) is not a bank whose receipt of interest
on a note is described in Section 881(c)(3)(A) of the tax code and (iv)
satisfies the statement requirement (described generally below) set forth
in Section 871(h) and Section 881(c) of the tax 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 a note, or a financial institution holding the note on behalf of such
owner, must provide, in accordance with specified procedures, the 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 the name and address of the
beneficial owner, and certifies, under penalties of perjury, that the
beneficial owner is not a "U.S. person" (which certification may be made on an
IRS Form W-8BEN or a successor form), or (ii) a beneficial owner holds the
notes through certain foreign intermediaries and satisfies the certification
requirements of applicable U.S. Treasury regulations. Special rules apply to
certain non-U.S. noteholders that are pass-through entities rather than
individuals.
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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 that 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 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 (provided the certification requirements are
satisfied), 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. noteholder. 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.
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",
"foreign personal holding companies" and certain U.S. expatriates, that are
subject to special treatment under the tax 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 payments of principal, interest and
premium, if any, paid on the notes and to the proceeds from the sale of a note
paid to U.S. noteholders, other than certain exempt recipients (such as
corporations). A U.S. backup withholding tax will apply to such payments if
the noteholder 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 section entitled "Non-U.S. Noteholders"
has been received by the entity otherwise required to withhold U.S. taxes and
such entity does not have actual knowledge or reason to know 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, 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.
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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 or reason to
know 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 classes of notes did not represent debt for U.S. federal income
tax purposes, the classes of notes might be treated as equity interests in the
trust. If so treated, the trust might be treated as a publicly traded
partnership taxable as a corporation with potentially adverse tax consequences
to the holders of notes of that class (and the publicly traded partnership
taxable as a corporation would not be able to reduce its taxable income by
deduction for interest expense on notes recharacterized as equity, thus
reducing the amount available to the trust to make payments to noteholders).
Alternatively, the trust might 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" taxable to such entities
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 the
trust expenses. See "Tax Consequences to Certificateholders" below.
TAX CONSEQUENCES TO CERTIFICATEHOLDERS
Treatment of the Trust as a Partnership. As discussed above under the
section entitled "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 the
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 motor vehicle loans (including appropriate adjustments for
market discount, OID and bond premium) and any gain realized upon the
collection or disposition of motor vehicle loans. 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 motor vehicle loans.
The tax items of a partnership are allocable to the partners in
accordance with the tax 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 interest
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 tax 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
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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 motor vehicle loans 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 Chase USA.
All deductions and losses also will be allocated to Chase USA.
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 interest 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 of economic income reported to them by the
trust. See "Allocations between Transferors and Transferees" below.
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 tax 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 motor vehicle loan,
the trust might be required to incur additional expense.
Discount and Premium. Chase USA anticipates that the motor vehicle loans
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 motor vehicle loans may be greater or less than the
remaining principal balance of the motor vehicle loans at the time of
purchase. If so, the motor vehicle loans 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 motor vehicle loans 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 motor vehicle loans or to offset any such
premium against interest income on the motor vehicle loans. 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 tax 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
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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 motor
vehicle loans 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 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 files an
election under Section 754 of the tax 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 tax 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
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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.
Chase USA 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 tax code provides for
administrative examination of a partnership as if the partnership were a
separate and distinct taxpayer. Generally, the statute of limitations for
partnership items does not expire before three years after the date on which
the partnership information return is filed. Any adverse determination
following an audit of the return of the trust by the appropriate taxing
authorities could result in an adjustment of the returns of the
certificateholders, and, under certain circumstances, a certificateholder may
be precluded from separately 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 tax 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 the
highest individual income tax rate (currently 39.1%) for all other non-U.S.
certificateholders. In determining a certificateholder's withholding status,
the 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 U.S. backup
withholding tax if the certificateholder fails to comply with certain
identification procedures or otherwise fails to establish an exemption.
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.
EMPLOYEE BENEFIT PLAN 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,
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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 tax 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 Chase USA 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 Chase USA, the trustee, and others and (ii)
the possibility that certain transactions in which Chase USA, the trustee and
others might seek to engage could constitute "prohibited transactions" under
ERISA and the tax code. If a prohibited transaction occurs for which no
exemption is available, Chase USA, 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
tax 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% of the amount involved. 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 Chase USA 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 "Material Federal Income Tax ConsequencesTax Consequences to Noteholders"
in this prospectus supplement), and (b) should not be deemed to have any
"substantial equity features." Therefore, the motor vehicle loans 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 tax code prohibit PLANS
subject to Title I of ERISA or Section 4975 of the tax code from engaging in
specified transactions involving plan assets
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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
tax code. The acquisition and/or ownership of the notes by a PLAN with respect
to which Chase USA, 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 tax 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, church and non-U.S. PLANS may contain fiduciary and prohibited
transaction requirements similar to those under ERISA and the tax code
discussed above. Accordingly, fiduciaries of such governmental, church 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.
The notes may not be purchased with plan assets of any PLAN if any of
Chase USA, 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 (i) will serve as a primary
basis for investment decisions with respect to such plan assets, and
(ii) will be based on the particular investment needs of such PLAN or
o is an employer maintaining or continuing 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 tax 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 subject to Title I of ERISA and
Section 4975 of the tax code.
Section 406 of ERISA and Section 4975 of the tax 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 tax 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
Chase USA, 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 tax code, unless the certificates are acquired and are held in
accordance with an applicable statutory, regulatory, class or individual
prohibited transaction exemption.
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The DOL has granted to J.P. Morgan Securities Inc. the EXEMPTION, which
exempts from certain of the prohibited transaction rules and the related
excise tax provisions of Section 4975 of the tax 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 motor vehicle loans 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,
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 SEC 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,
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o securities in such other investment pools must have been rated in one of
the three highest rating categories (four, in a transaction 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,
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 SEC 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 tax 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 tax 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 tax code, and is therefore UBTI. Any potential investor
that is exempt from the U.S. federal income tax under Section 501(a) of the
tax 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, church, non-U.S., and other PLANS may contain
fiduciary and prohibited transaction requirements similar to those under ERISA
and/or the tax code. Accordingly, fiduciaries
S-48
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
"Employee Benefit Plan Considerations."
UNDERWRITING
NOTE UNDERWRITING AGREEMENT
Subject to the terms and conditions set forth in an underwriting
agreement with respect to the notes, Chase USA 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
--------------------------------------- -------------------- -------------------- -------------------- -------------------
J.P. Morgan Securities Inc. ........... $ 67,500,000 $ 72,500,000 $ 87,500,000 $ 78,095,000
Bear, Stearns & Co. Inc. .............. $ 67,500,000 $ 72,500,000 $ 87,500,000 $ 78,095,000
Countrywide Securities Corporation..... $ 67,500,000 $ 72,500,000 $ 87,500,000 $ 78,095,000
Lehman Brothers Inc. .................. $ 67,500,000 $ 72,500,000 $ 87,500,000 $ 78,095,000
Utendahl Capital Partners, L.P. ....... $ 10,000,000 $ 10,000,000 $ 15,000,000 $ 10,000,000
------------ ------------ ------------ ------------
Total ............................... $280,000,000 $300,000,000 $365,000,000 $322,380,000
============ ============ ============ ============
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.
Chase USA 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 NOT
AND COMMISSIONS NOT TO EXCEED TO EXCEED
----------------------- --------------------- ----------------
Class A-1 Notes ......... 0.100% 0.060% 0.050%
Class A-2 Notes ......... 0.125% 0.075% 0.065%
Class A-3 Notes ......... 0.175% 0.105% 0.100%
Class A-4 Notes ......... 0.225% 0.135% 0.125%
CERTIFICATE UNDERWRITING AGREEMENT
Subject to the terms and conditions set forth in an underwriting agreement
with respect to the certificates, Chase USA has agreed to sell to J.P. Morgan
Securities Inc., as underwriter of the certificates, and J.P. Morgan Securities
Inc. has agreed to purchase, the entire principal amount of the certificates.
In the underwriting agreement with respect to the certificates, the
underwriter of the certificates has agreed, subject to the terms and
conditions therein, to purchase all of the certificates if any certificates
are purchased.
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Chase USA has been advised by the underwriter of the certificates that it
proposes 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.
The underwriting discounts and commissions, the selling concessions that
the underwriter 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 NOT
AND COMMISSIONS NOT TO EXCEED TO EXCEED
----------------------- --------------------- ----------------
Certificates ......... 0.275% 0.165% 0.155%
PROCEEDS TO CHASE USA
Chase USA will receive the proceeds listed below, after payment of the
underwriting discounts and commissions listed below and estimated expenses of
$910,000:
PROCEEDS TO CHASE USA
AS % OF THE
PROCEEDS TO PRINCIPAL AMOUNT OF UNDERWRITING DISCOUNTS
CHASE USA THE SECURITIES AND COMMISSIONS
-------------------- ---------------------- -----------------------
Class A-1 Notes ......... $ 279,720,000.00 99.900000% $ 280,000.00
Class A-2 Notes ......... $ 299,613,798.00 99.871266% $ 375,000.00
Class A-3 Notes ......... $ 364,297,765.55 99.807607% $ 638,750.00
Class A-4 Notes ......... $ 321,587,570.62 99.754194% $ 725,355.00
Certificates ............ $ 32,413,143.25 99.723399% $ 89,383.38
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 securities or the certificates. The
underwriters for the securities expect to make a
S-50
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.
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 Chase USA and its affiliates.
Chase USA 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 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 J.P.
Morgan Securities Inc. in connection with offers and sales related to
market-making transactions in the securities. J.P. Morgan 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. J.P. Morgan
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. J.P. Morgan 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,
Chase USA 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 Chase USA by Simpson Thacher & Bartlett, New York, New York
and certain other legal matters will be passed upon for Chase USA by Raymond
C. Scott, Esq., an Assistant Vice President and Assistant General Counsel of
Chase Manhattan Automotive Finance Corporation, and for the Underwriters by
Sidley Austin Brown & Wood LLP, New York, New York. From time to time Simpson
Thacher & Bartlett and Sidley Austin Brown & Wood LLP provide legal services
to Chase USA and its affiliates.
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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 motor vehicle loans 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 motor vehicle loans 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 motor vehicle loans previously designated as
"defaulted receivables."
AVAILABLE INTEREST means, for any payment date, the sum of the portion of
collections on the motor vehicle loans received during the related COLLECTION
PERIOD allocated to interest and that portion of the repurchase amounts
received with respect to the motor vehicle loans 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
motor vehicle loans in full on the date as of which such motor vehicle loans
were repurchased or purchased.
AVAILABLE PRINCIPAL means, for any payment date, the sum of the portion
of collections on the motor vehicle loans during the related COLLECTION PERIOD
allocated to the principal balance of the motor vehicle loans and that portion
of the repurchase amounts received with respect to the motor vehicle loans
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 motor vehicle loans in full on the date as of
which such motor vehicle loans 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 $32,503,047 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 motor vehicle loans 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.
CERTIFICATE PERCENTAGE means 100% minus the NOTE PERCENTAGE on the date
the Class A-2 notes are paid in full.
COLLECTION PERIOD means, with respect to the first payment date, the
period from and including the cutoff date to and including November 30, 2001
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 motor vehicle loans which are 60 days or
more delinquent (including motor vehicle loans, 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
S-52
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 motor vehicle loans as of the close of business on
the last day of such COLLECTION PERIOD.
EXEMPTION means the individual administrative exemption granted by the
U.S. Department of Labor to J.P. Morgan Securities Inc.
FOREIGN INVESTOR means any person other than (i) a citizen or resident of
the United States, (ii) a corporation or partnership organized in or under the
laws of the United States or any political subdivision thereof, (iii) an
estate, the income of which is includible in gross income for U.S. federal
income tax purposes 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 tax 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 motor vehicle loan, (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, the ratio expressed as an
annualized percentage of (i) the AGGREGATE NET LOSSES for such payment date,
to (ii) the average of the aggregate principal balance of the motor vehicle
loans on the last day of the second COLLECTION PERIOD preceding the COLLECTION
PERIOD in which such payment date occurs and the aggregate balance of the
motor vehicle loans on the last day of the COLLECTION PERIOD preceding the
COLLECTION PERIOD in which such payment date occurs.
NOTE PERCENTAGE means the percentage equivalent of a fraction the
numerator of which is the aggregate principal amount of the Class A-3 notes
and the Class A-4 notes on the date the Class A-2 notes are paid in full and
the denominator of which is the sum of the aggregate principal amount of the
Class A-3 notes and the Class A-4 notes and the CERTIFICATE BALANCE on the
date the Class A-2 notes are paid in full.
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 motor vehicle loans 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 the affiliates of any of those parties.
SPECIFIED RESERVE ACCOUNT BALANCE means, on any payment date, 1.75% of
the aggregate principal balance of the motor vehicle loans as of the last day
of the second 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)
an amount equal to 0.75% of the aggregate principal balance of the motor
vehicle loans as of the cutoff date and (ii) the aggregate principal balance
of the motor vehicle loans; provided, that the SPECIFIED RESERVE ACCOUNT
BALANCE will be calculated using a percentage of 3.50% on any payment date
(beginning with the February 2002 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 motor vehicle loans) of (i) any motor vehicle loans
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.
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CHASE MANHATTAN AUTO TRUSTS
ASSET BACKED NOTES
ASSET BACKED 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 8 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 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 asset-backed 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 pool of motor vehicle loans secured by new or used automobiles or
light-duty trucks,
-- collections on those motor vehicle loans,
-- security interests in the vehicles financed by those motor vehicle loans
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 motor vehicle loans 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 July 6, 2001.
TABLE OF CONTENTS
READING THIS PROSPECTUS AND THE ATTACHED
PROSPECTUS SUPPLEMENT .......................... 3
WHERE YOU CAN FIND ADDITIONAL INFORMATION .......... 3
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE ...................................... 3
SUMMARY ............................................ 5
RISK FACTORS ....................................... 8
Interests of other persons in the financed
vehicles could reduce the funds
available to make payments on your
securities ................................ 8
Our insolvency could result in
accelerated, delayed or reduced
payments to you ........................... 8
Only the assets of the trust are available
to pay your securities .................... 9
Delays in collecting payments could
occur if we cease to be the servicer ...... 9
Subordination may cause some classes of
securities to bear additional credit risk 9
Prepayments on the motor vehicle loans
may adversely affect the average life
of and rate of return on your securities 10
You may suffer losses on your securities
because Chase USA as servicer will
hold collections and commingle them
with its own funds ........................ 10
Additional motor vehicle loans may have
different characteristics than the initial
pool of motor vehicle loans ............... 11
You may experience a prepayment of
your securities as a result of
pre-funding ............................... 11
You may suffer losses because you have
limited control over the actions of the
trust ..................................... 11
THE TRUSTS ......................................... 11
CHASE USA .......................................... 13
THE MOTOR VEHICLE LOANS ............................ 13
General ...................................... 13
Delinquency and Loan Loss Information ........ 14
Origination and Servicing of Motor
Vehicle Loans ............................. 15
Underwriting of Motor Vehicle Loans .......... 17
Insurance .................................... 18
Collection Procedures ........................ 19
WEIGHTED AVERAGE LIFE OF THE SECURITIES ............ 20
HOW YOU CAN COMPUTE YOUR PORTION OF THE
AMOUNT OUTSTANDING OF YOUR SECURITIES ............ 22
USE OF PROCEEDS .................................... 22
PRINCIPAL DOCUMENTS ................................ 23
PAYMENTS ON THE SECURITIES ......................... 24
CERTAIN INFORMATION REGARDING THE SECURITIES ....... 25
Fixed Rate Securities ........................ 25
Floating Rate Securities ..................... 25
Book-Entry Registration ...................... 26
Definitive Securities ........................ 30
List of Securityholders ...................... 31
Reports to Securityholders ................... 31
THE INDENTURE ...................................... 33
Events of Default ............................ 33
Certain Covenants ............................ 35
Modifications of the Indenture ............... 36
The Indenture Trustee ........................ 37
TRANSFER AND SERVICING AGREEMENTS .................. 37
Sale and Assignment of Motor Vehicle
Loans ..................................... 37
Trust Accounts ............................... 39
Servicing .................................... 41
Distributions ................................ 45
Credit and Cash Flow Enhancement ............. 45
Statements to Trustees and Trust ............. 46
Amendments of Transfer and Servicing
Agreements ................................ 46
Continuing Obligations of Indenture
Trustee ................................... 47
Termination .................................. 47
Administration Agreement ..................... 48
MATERIAL LEGAL ASPECTS OF THE MOTOR VEHICLE
LOANS ............................................ 48
Security Interests in the Motor Vehicle
Loans ..................................... 48
Security Interests in the Financed
Vehicles .................................. 48
Certain Matters Relating to Receivership ..... 50
Consumer Protection Laws ..................... 51
EMPLOYEE BENEFIT PLAN CONSIDERATIONS ............... 52
PLAN OF DISTRIBUTION ............................... 53
RATINGS ............................................ 54
LEGAL MATTERS ...................................... 54
GLOSSARY OF TERMS FOR PROSPECTUS ................... 55
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READING THIS PROSPECTUS AND THE ATTACHED
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 attached 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
attached 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 a glossary of defined terms used in this prospectus on page
55.
You should rely only on the information contained in this prospectus and
the attached 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 attached 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
We have filed a registration statement with the 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 other 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 issued by that trust.
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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 attached
prospectus supplement if:
o you received this prospectus and
o you request 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 documents if those exhibits are
specifically incorporated by reference in those documents. You may also read
and copy these materials at the public reference facilities of the SEC in
Washington, D.C. referred to above.
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SUMMARY
The following summary is a short description o 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 USA is the seller and the servicer of the motor vehicle loans. We are a
wholly-owned subsidiary of J.P. Morgan Chase & Co. Our activities are
predominantly related to consumer lending. Chase USA, The Chase Manhattan Bank
and Morgan Guaranty Trust Company of New York are the principal banking
subsidiaries of J.P. Morgan Chase & Co.
Chase USA, together with its affiliates, is engaged in the automotive financing
and automotive loan servicing business.
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
of fixed and variable rates,
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 motor vehicle
loans of each trust on any payment date when the aggregate principal balance of
the motor vehicle loans sold to the trust has declined to the percentage
specified in the prospectus supplement or less of the initial principal
balance. Upon the purchase of the motor vehicle loans, the securities of that
trust will be prepaid in full.
THE MOTOR VEHICLE LOANS AND OTHER TRUST PROPERTY
The motor vehicle loans included in each trust will be 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 motor vehicle loans on
and after the cutoff date specified in the related prospectus
supplement,
o security interests in the vehicles financed by the motor vehicle
loans and
o any proceeds from claims on various related insurance policies.
You will find a description of the characteristics of the trust's motor vehicle
loans in the prospectus supplement.
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For a more detailed description of the motor vehicle loans, including the
criteria they must meet in order to be included in a trust, and the other
property supporting the securities, refer to the section of this prospectus
entitled "The Motor Vehicle Loans."
OTHER PROPERTY OF THE TRUST
In addition to the motor vehicle loans, 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 motor
vehicle loans,
o an account providing yield enhancement to the motor vehicle loans or
o a reserve account or other account providing credit enhancement.
PURCHASE OF MOTOR VEHICLE LOANS AFTER THE CLOSING DATE
If a trust has not purchased all of its motor vehicle loans at the time you
purchase your securities, it will purchase the remainder of its motor vehicle
loans 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 motor vehicle loans exceeds the principal amount of
all of the trust's securities,
o a letter of credit or other credit or liquidity facility,
o a surety bond,
o a guaranteed investment contract,
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.
For more information about credit enhancement refer to the section of this
prospectus entitled, "Transfer and Servicing Agreements--Credit and Cash Flow
Enhancement."
TRANSFER AND SERVICING OF THE MOTOR VEHICLE LOANS
We will transfer a pool of motor vehicle loans to a trust under an agreement.
We will agree with the trust to be responsible for servicing, managing,
maintaining custody of and making collections on the motor vehicle loans.
For more information about the sale and servicing of the motor vehicle loans
refer to the section of this prospectus entitled "Transfer and Servicing
Agreements--Sale and Assignment of Motor Vehicle Loans."
SERVICING FEES
Each trust will pay the servicer a servicing fee based on the outstanding
balance of the motor vehicle loans. 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 the 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.
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For more information on servicing compensation refer to the section of this
prospectus entitled "Transfer and Servicing Agreements--Servicing --Servicing
Compensation and Payment of Expenses" and the corresponding section in the
attached prospectus supplement.
SERVICER ADVANCES
The servicer may make advances of delinquent payments on the motor vehicle
loans. The related prospectus supplement will describe the terms and conditions
of those advances.
If the servicer makes advances, it 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 tax counsel,
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 tax counsel, 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 tax laws to
your securities refer to the section of the attached prospectus supplement
entitled "Material Federal Income Tax Considerations."
EMPLOYEE BENEFIT PLAN CONSIDERATIONS
If you are investing the assets of an employee benefit plan, arrangement or
account that is subject to ERISA, the tax code or any similar laws or
regulations, or an entity whose underlying assets are considered to include the
assets of any employee benefit plan, arrangement or account, you should
carefully review the matters discussed in the section of this prospectus and in
the section of the attached prospectus supplement entitled "Employee Benefit
Plan Considerations" 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 refer to the
section of this prospectus entitled "Certain Information Regarding the
Securities--Book-Entry Registration" and "--Definitive Securities."
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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 Chase USA, or if the motor vehicle loan was originated by an affiliate
of Chase USA, that affiliate, might fail to perfect its security
interest in the related 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 Chase USA 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 in the financed vehicles to the trust and may not have been
amended to reflect an earlier assignment of a security interest in the
financed vehicles to Chase USA by the affiliate of Chase USA who
originated the related motor vehicle loan,
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 financed vehicles
confiscated by the government.
Chase USA will not be required to repurchase a motor vehicle loan if the
security interest in the related financed vehicle or the motor vehicle loan
becomes impaired after it sold the motor vehicle loan to the trust.
OUR INSOLVENCY COULD RESULT IN ACCELERATED, DELAYED OR REDUCED PAYMENTS TO YOU.
We are chartered as a national banking association and are subject to
regulation and supervision by the Office of the Comptroller of the Currency. If
we become insolvent, are in an unsound condition or engage in violations of our
bylaws or regulations, the Comptroller is authorized to appoint the FDIC, as
conservator or receiver. Under these circumstances, the FDIC could:
o require the trustee to go through an administrative claims procedure to
establish its rights to payments collected on the motor vehicle loans,
o request a stay of proceedings with respect to the trust's claims
against us or
o repudiate without compensation our ongoing obligations under a sale and
servicing agreement or pooling and servicing agreement, such as our
duty to collect payments or otherwise service the motor vehicle loans.
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 "contracts" 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 motor vehicle loans 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
8
not made fraudulently, in contemplation of insolvency, or with the intent to
hinder, delay or defraud the bank or its creditors. We believe the new FDIC
regulation will apply to the transfer of motor vehicle loans to a trust in the
manner contemplated by this prospectus and intend 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 motor vehicle loans to the trust. In that event the
trust could be limited to seeking recovery based upon its security interest in
the motor vehicle loans. 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. These 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 motor
vehicle loans 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 motor vehicle loans, payments of principal and interest on your
securities could be delayed or reduced.
ONLY THE ASSETS OF THE TRUST ARE AVAILABLE TO PAY YOUR SECURITIES.
Neither we nor any of our affiliates are obligated to make any payments in
respect of the securities of a trust or the motor vehicle loans 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 motor vehicle loans 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 the amount is
depleted to cover shortfalls in distributions of principal and interest on your
securities, the trust will depend solely on collections on the motor vehicle
loans 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 motor vehicle
loans decreases.
YOU MAY SUFFER LOSSES UPON A LIQUIDATION OF THEMOTOR VEHICLE LOANS IF THE
PROCEEDS OF THE LIQUIDATION ARE LESS THAN THE AMOUNTS DUE ON THE OUTSTANDING
SECURITIES. Under the circumstances described in this prospectus, the motor
vehicle loans 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
motor vehicle loans 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 WE CEASE TO BE THE SERVICER.
If we were to cease acting as the servicer, the processing of payments on
the motor vehicle loans and information relating to collections could be
delayed, which could delay payments to you. We can be removed as servicer if we
default on our servicing obligations as described in this prospectus. We may
also resign as servicer under the circumstances described in this prospectus.
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:
9
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
the 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 motor vehicle loans
and the resulting cash shortfalls before the more senior classes and
o if the trustee sells the motor vehicle loans 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 MOTOR VEHICLE LOANS MAY ADVERSELY AFFECT THE AVERAGE LIFE OF
AND RATE OF RETURN ON YOUR SECURITIES.
Faster than expected prepayments on the motor vehicle loans 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 motor vehicle loans 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 motor vehicle loan by Chase USA as seller or
servicer resulting from a breach of representation, warranty or
covenant and
o an optional repurchase of a trust's motor vehicle loans by Chase USA as
servicer when their aggregate principal balance is equal to or less
than the percentage of the initial aggregate principal balance
specified in the related prospectus supplement.
A variety of economic, social and other factors will influence the rate of
optional prepayments on the motor vehicle loans 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 that class of notes will occur later than its final
payment date.
In addition, Chase USA as servicer may, on a case-by-case basis, permit
extensions of the due dates of payments on the motor vehicle loans in
accordance with its normal and customary servicing practices and procedures.
Deferral or extensions may increase the weighted average life of the
securities. The servicer will not be permitted to grant an extension or
deferral if as a result the final scheduled payment date on a motor vehicle
loan would fall on or after the final payment date of the related securities
unless the servicer purchases the affected motor vehicle loan.
YOU MAY SUFFER LOSSES ON YOUR SECURITIES BECAUSE CHASE USA AS SERVICER WILL
HOLD COLLECTIONS AND COMMINGLE THEM WITH ITS OWN FUNDS.
Provided that the conditions established by the rating agencies rating the
securities issued by a trust are satisfied, the servicer will generally be
permitted to hold with its own funds collections
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received from obligors on the motor vehicle loans held by that trust until the
day prior to the next date on which distributions are made on the securities
issued by that trust. 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 it is unable for any reason to pay these amounts to the trust on
the payment date, you might incur a loss on your securities.
ADDITIONAL MOTOR VEHICLE LOANS MAY HAVE DIFFERENT CHARACTERISTICS THAN THE
INITIAL POOL OF MOTOR VEHICLE LOANS.
A trust may not have purchased all of its motor vehicle loans at the time
you purchase your securities. It may purchase the remainder of its motor
vehicle loans from Chase USA over a period specified in the related prospectus
supplement. The additional motor vehicle loans will not be required to have any
particular characteristics. The additional motor vehicle loans may be
originated by Chase USA at a later date using criteria different from those
applied to the initial pool of motor vehicle loans and may be of a different
credit quality and seasoning. In addition, following the transfer of the
additional motor vehicle loans to the trust, the characteristics of the pool of
motor vehicle loans held by the trust may vary from those of the initial motor
vehicle loans. As a result the overall credit quality of the motor vehicle loan
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 motor vehicle loans transferred to a
trust during the 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 motor vehicle loans, the amount remaining in that account
at the end of the 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 funding period will depend on Chase USA's ability to generate
a sufficient amount of additional motor vehicle loans during the 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 motor vehicle loans 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 Chase USA as 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.
THE TRUSTS
We will establish a separate trust pursuant to a trust agreement or a
pooling and servicing agreement in connection with the issuance of each series
of asset-backed notes and/or asset-backed certificates.
The property of each trust will include:
o a pool of motor vehicle loans and all payments due or received from the
obligors under those motor vehicle loans on and after the cutoff date
specified in the related prospectus supplement,
o amounts from time to time on deposit in trust accounts established and
maintained pursuant to the related sale and servicing agreement or
pooling and servicing agreement,
o security interests in the vehicles financed by the motor vehicle loans,
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o our rights to proceeds of breach of representation and warranty claims
against the dealers from whom we acquired the motor vehicle loans,
o an assignment of our right to receive proceeds from claims on theft and
physical damage, credit life and credit disability insurance policies
covering the vehicles financed by the motor vehicle loans, or the
obligors under the motor vehicle loans, as the case may be,
o vehicles financed by the motor vehicle loans that have been repossessed
by the servicer on behalf of the trust and
o any and all proceeds of the above property.
If provided in the related prospectus supplement, the property of a trust
may include monies on deposit in a pre-funding account to be used to purchase
additional motor vehicle loans from Chase USA from time to time during the
funding period specified in the prospectus supplement.
If provided in the related prospectus supplement, the trustee of a trust
classified as a grantor trust will have the right to demand payments under a
cash collateral guaranty under the circumstances described in the prospectus
supplement. Each cash collateral guaranty will be secured by a cash collateral
account held in the name of a cash collateral trustee.
If provided in the related prospectus supplement, the property of a trust
not classified as a grantor trust may include a reserve account maintained in
the name of the related indenture trustee, a yield supplement agreement and/or
a yield supplement account or other form of credit enhancement. The property of
a trust classified as a grantor trust may not include a yield supplement
account, but a yield supplement account may be held by another trust or a
trustee for the benefit of the holders of the related securities.
On or before the closing date of a trust, we will transfer a pool of motor
vehicle loans having an aggregate principal balance specified in the related
prospectus supplement to the trust in exchange for the securities issued by
that trust. If provided in the related prospectus supplement, we will convey to
the trust additional motor vehicle loans and the related property having an
aggregate principal balance approximately equal to the amount deposited in the
pre-funding account on the closing date as frequently as daily during the
funding period specified in the prospectus supplement. These motor vehicle
loans will also be assets of the trust.
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 securities issued by the trust is limited solely to the express obligations
of the trustee set forth in the related trust agreement and 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.
A trustee may resign at any time by giving the servicer, in the case of a
grantor trust, or the administrator, in the case of a trust issuing notes,
written notice of its resignation. The servicer or administrator, as the case
may be, will be obligated to appoint a successor trustee. The servicer or
administrator, as applicable, may also remove the trustee if the 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
becomes insolvent. In these 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 servicer or
the administrator, as applicable, will be obligated to indemnify the trustee.
If the servicer or the administrator does not provide indemnification to the
trustee, the trustee may be indemnified from the assets of the related trust.
No indemnification will be permitted to be paid on any payment date until the
holders of the securities issued by the trust and the servicer have been paid
all amounts otherwise due to them on that date and the amount on deposit in any
enhancement account equals its required amount.
The principal offices of each trust and the entity named as trustee of
that trust will be specified in the related prospectus supplement.
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CHASE USA
Chase USA, a wholly-owned subsidiary of JP Morgan Chase & Co., was formed
in 1982 and is headquartered in Newark, 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 200 White Clay
Center Drive, Newark, Delaware 19711, telephone number (302) 575-5000.
On December 31, 2000, J.P. Morgan & Co. Incorporated and The Chase
Manhattan Corporation completed their merger, with the surviving corporation
being named J.P. Morgan Chase & Co. The Chase Manhattan Bank, Chase USA and
Morgan Guaranty Trust Company of New York are the principal banking
subsidiaries of J.P. Morgan Chase & Co.
THE MOTOR VEHICLE LOANS
GENERAL
Chase USA, together with its affiliates, is engaged in the automotive
financing and automotive loan servicing business. Chase USA, The Chase
Manhattan Bank and/or one or more of their affiliates engaged in the automotive
finance business may originate the motor vehicle loans to be transferred to a
trust.
The motor vehicle loans include motor vehicle retail installment sales
contracts relating to new or used automobiles and light-duty trucks purchased
from dealers who regularly originate and sell these contracts to the
originating banks in accordance with approved dealer agreements. The motor
vehicle loans may also include purchase money loans secured by financed
vehicles made by the originating banks directly or pursuant to arrangements
with dealers made pursuant to approved dealer agreements. The motor vehicle
loans to be held by each trust will be selected from the motor vehicle loans
that Chase USA originates itself and from those that Chase USA acquires from
its affiliates. Selection will be based upon several criteria, including,
unless otherwise provided in the related prospectus supplement, that each motor
vehicle loan:
o was acquired from or made through a dealer located in the United States
or made directly by the originating bank without the involvement of a
dealer,
o is secured by a financed vehicle that, as of the cutoff date specified
in the related prospectus supplement, had not been repossessed without
reinstatement,
o has not been identified on our computer files as relating to an obligor
who was in a bankruptcy proceeding as of the cutoff date specified in
the related prospectus supplement,
o if not a FINAL PAYMENT RECEIVABLE, provides for fully amortizing level
scheduled monthly payments, other than the last payment, which may be
different from the level payments, and for accrual of interest at a
fixed rate,
o is an Actuarial Receivable or a Simple Interest 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 described in the related prospectus supplement.
We will not use any selection procedures that we believe to be materially
adverse to you in selecting the motor vehicle loans to be transferred to a
trust.
If we transfer any FINAL PAYMENT RECEIVABLES to a trust, we will transfer
to the trust only the principal and interest payments due prior to the final
scheduled payment and not the final scheduled payment. We will retain the final
scheduled payment. However, in the case of a trust that is not
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classified as a grantor trust, we will have the option to transfer the final
scheduled payments of the FINAL PAYMENT RECEIVABLES to the trust and to cause
that trust to issue certificates representing interests in, or notes secured
by, those final scheduled payments.
All of the motor vehicle loans will be prepayable at any time without
penalty and will contain due-on-sale provisions that require the obligors to
repay the motor vehicle loans when the related financed vehicles are sold. If
an obligor prepays a SIMPLE INTEREST RECEIVABLE in full, the obligor is
required to pay interest only to the date of prepayment. If an obligor prepays
an ACTUARIAL RECEIVABLE in full, with minor variations based upon state law,
the obligor is entitled to a rebate calculated on the basis of a constant
interest rate.
If we repossess and sell the financed vehicle securing a delinquent motor
vehicle loan, we will apply the amounts recovered in accordance with our normal
and customary servicing practices and procedures. We reserve the right to
change our policies with respect to the application of amounts recovered from
motor vehicle loans that we liquidate and financed vehicles that we repossess
and sell.
We will provide information with respect to each pool of motor vehicle
loans transferred to a trust in the related prospectus supplement, including,
to the extent appropriate:
o the composition of the motor vehicle loans,
o the distribution by the annual contract rate of interest and by the
states of origination of those motor vehicle loans,
o the portion of the pool consisting of ACTUARIAL RECEIVABLES, SIMPLE
INTEREST RECEIVABLES and any portions consisting of FINAL PAYMENT
RECEIVABLES and
o the portion of the pool secured by new financed vehicles and the
portion of the pool secured by used financed vehicles.
If a trust includes a pre-funding account, we will be obligated to sell,
subject to availability, and the trust will be obligated to purchase, subject
to the satisfaction of certain conditions, additional motor vehicle loans and
the related property having an aggregate principal balance approximately equal
to the amount deposited in the pre-funding account on the closing date. The
additional motor vehicle loans that we transfer to the trust will be required
to 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. Except for those criteria, there will be no required
characteristics of the additional motor vehicle loans. Therefore, following the
transfer of additional motor vehicle loans to the trust, the overall
characteristics of the pool of motor vehicle loans held by the trust may vary
from those of the initial pool of motor vehicle loans transferred to the trust.
Those additional motor vehicle loans may be originated at a later date using
credit criteria different from those which were applied to the initial pool of
motor vehicle loans and may be of a different credit quality and seasoning. If
a trust includes a pre-funding account, the related prospectus supplement will
also describe the effects the addition of motor vehicle loans may have on the
pool of motor vehicle loans included in the trust. If a trust acquires
additional motor vehicle loans, regular periodic reports regarding those loans
will be included under Item 5 in each current report filed by or on behalf of
the trust on Form 8-K with the SEC pursuant to the Securities Exchange Act of
1934, as amended.
DELINQUENCY AND LOAN LOSS INFORMATION
We will provide information in each prospectus supplement concerning the
delinquencies, loan losses and recoveries for the CHASE AUTO PORTFOLIO as of
the dates and for the periods set forth in the related prospectus supplement.
We cannot assure you that the delinquency and loan loss experience on any pool
of motor vehicle loans transferred to a trust will be comparable to prior
experience or to the information with respect to the CHASE AUTO PORTFOLIO in
the prospectus supplement.
The CHASE AUTO PORTFOLIO has included from time to time motor vehicle
loans that were originated by affiliates of Chase USA or its predecessors using
origination criteria that were different but not materially different from the
then existing underwriting criteria of Chase USA or its
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predecessors. We believe that the delinquency and loan loss experience for any
period presented in a prospectus supplement without the inclusion of those
motor vehicle loans would not be materially different from the delinquency and
loan loss experience that will be set forth in the prospectus supplement.
If specified in the related prospectus supplement, we may transfer to a
trust motor vehicle loans that were made directly to obligors without the
involvement of dealers acting pursuant to dealer agreements with Chase USA or
one of its affiliates. However, the CHASE AUTO PORTFOLIO does not include motor
vehicle loans made directly by Chase USA and its affiliates to obligors without
the involvement of dealers and as a result the delinquency and loan loss
experience of the CHASE AUTO PORTFOLIO included in the related prospectus
supplement will not include the delinquency and loan loss experience for those
motor vehicle loans. We believe that the delinquency and loan loss experience
for those motor vehicle loans will not be materially different from the
delinquency and loan loss experience for the CHASE AUTO PORTFOLIO.
ORIGINATION AND SERVICING OF MOTOR VEHICLE LOANS
Chase USA purchases motor vehicle retail installment sales contracts
relating to new or used automobiles from dealers who regularly originate those
contracts pursuant to the terms of approved dealer agreements. The dealers
assign the contracts to Chase USA pursuant to standard form assignments. Chase
USA also makes purchase money loans secured by financed vehicles directly or
pursuant to arrangements with dealers made pursuant to approved dealer
agreements. Chase USA enters into dealer agreements with dealers based upon a
review of the dealer, including in some cases, a financial review, and a review
of the dealer's reputation and prior experience with the dealer and its key
management. Generally, the dealers selling new financed vehicles are franchised
by the manufacturer of those vehicles.
Chase USA currently makes or purchases motor vehicle loans made indirectly
with the involvement of dealers throughout the United States. Each dealer makes
representations and warranties to Chase USA with respect to the motor vehicle
loans, the obligors on the motor vehicle loans and the security interests in
the related financed vehicles. These representations and warranties typically
include, among others, that:
o to the best of the dealer's knowledge,
o no statements made or furnished 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, 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 Chase USA 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.
Generally, these representations and warranties do not relate to the
creditworthiness of the obligors or the ability to collect payments due on the
motor vehicle loans.
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Upon breach of any representation or warranty made by a dealer, Chase USA
has a right of recourse against that dealer to require it to purchase or
repurchase the related motor vehicle loan. Generally, in determining whether to
exercise any right of recourse, Chase USA considers the prior performance of
the dealer, as well as other business and commercial factors. As servicer Chase
USA will be obligated to enforce its rights under the dealer agreements
relating to the motor vehicle loans transferred to a trust in accordance with
its customary practices. As seller Chase USA will convey the right to any
proceeds received upon enforcement of those rights to the related trust under
the pooling and servicing agreement or sale and servicing agreement, as
applicable. It will make no representations as to the financial condition of
any of the dealers to which it may have recourse. We cannot assure you as to
the ability of any dealer to perform its obligations to Chase USA under a
dealer agreement.
Chase USA and the other originating banks make direct motor vehicle loans
to obligors at their branches or by accepting applications by phone. Since
dealers do not originate these motor vehicle loans under dealer agreements, the
representations and warranties customarily made by the dealers in the dealer
agreements are not made with respect to these motor vehicle loans. However, the
dealers and others selling the financed vehicles to the obligors make 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 of the vehicle 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.
Chase USA and the other originating banks also make motor vehicle loans to
obligors by accepting loan applications via a number of internet sites offering
online shopping and financing. These motor vehicle loans are not made by
dealers acting pursuant to dealer agreements. However, where the financed
vehicle is paid for with a site draft containing a restrictive endorsement, the
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 under a restrictive endorsement 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.
Chase USA, as servicer, directly and through one or more of its
affiliates, will service the motor vehicle loans transferred to each trust
consistent with its servicing policies and practices. Chase USA and its
affiliates perform the following functions on a centralized basis:
o payment of motor vehicle loan proceeds to dealers,
o customer service,
o document files and computerized record keeping,
o vehicle title processing and
o automated collections.
Chase USA and its affiliates perform other servicing functions on a
regionalized basis through several regional dealer service centers. The
servicing functions performed by the dealer service centers include
o aspects of automobile dealer liaison,
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o dealer sales,
o customer service,
o credit underwriting,
o documentation reviews,
o collections and
o other services.
An outside service provider enters credit application data relating to indirect
motor vehicle loans into the servicer's loan origination system.
Chase USA may change its servicing policies and practices over time in
accordance with its business judgment.
UNDERWRITING OF MOTOR VEHICLE LOANS
We evaluate each applicant for a motor vehicle loan individually through
the appropriate dealer service center based on our uniform underwriting
standards. These underwriting standards are intended to assess the applicant's
ability to repay the 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. We consider the
following criteria, among others, in evaluating individual applications:
o the obligor's stability, 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 our direct knowledge 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 on a motor vehicle loan may vary depending on a number
of factors, including the term of the motor vehicle loan 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, we will also
finance credit life, accident and health insurance and service warranties under
a motor vehicle loan. Our general policy has been to reject applications for
motor vehicle loans where the prospective obligor's
debt-service-to-gross-monthly-income ratio exceeds 40%.
We use an empirically based credit scoring process to objectively index
the applicant's creditworthiness. We created this scoring process using
historical information from our database of motor vehicle loans owned or
serviced by us or one of our affiliates Through credit scoring, we evaluate
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. We periodically review and
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update the credit scoring process that we use to ensure its validity. In
addition to our scoring process, we use consumer reporting agency scores to
assist in the underwriting process. In January 1998, we introduced custom
credit scorecards to enhance the underwriting process.
We use an automated approval and declination process for certain
applications based on selection criteria that were statistically derived from
our database of motor vehicle loans owned or serviced by us or one of our
affiliates. A credit analyst reviews applications that are not automatically
approved or denied. Except for the applications that are automatically approved
or denied, our 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. We approve motor vehicle loans
that vary from our standard credit guidelines, both before and after
implementation of the credit scoring process, but approval of those motor
vehicle loans generally requires concurrent approval of a second designated
senior credit analyst or credit manager. Motor vehicle loans that do not comply
with all of our guidelines must have strong compensating factors that indicate
a high ability of the applicant to repay the loan. Generally these motor
vehicle loans are made where the obligor has made a down payment and the amount
financed is lower than the maximum amount permitted by our guidelines.
We perform detailed analysis of our portfolio to evaluate the
effectiveness of our credit guidelines and scoring process. If external
economic factors, credit delinquencies or credit losses change, we adjust the
credit guidelines to maintain a level of asset quality that we deem acceptable.
Each day, the credit manager and credit supervisors of each of our dealer
service centers review a computer selected group of motor vehicle loans to
ensure that credit analysts are following our established policies and
procedures. We randomly review, on a quarterly basis, the quality of the motor
vehicle loans and conduct quality audits to ensure compliance with our
established policies and procedures.
We may change our credit underwriting standards over time in accordance
with our business judgment.
INSURANCE
Each motor vehicle loan requires the obligor to obtain fire, theft and
collision insurance or comprehensive and collision insurance on the financed
vehicle. The dealer agreements include a representation and warranty from the
dealer that each financed vehicle has the required insurance at the time of
origination of the motor vehicle loan. If an obligor fails to maintain the
required insurance, Chase USA has the option to purchase limited collision and
comprehensive insurance, commonly known as "force placed" insurance, to protect
our interests and the interests of the obligor in the financed vehicle, and to
charge the obligor for the cost of that insurance.
We do not currently purchase force placed insurance and no force placed
insurance coverage is currently in effect on any of the 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 trust include any
motor vehicle loans with insurance 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 a trust.
Chase USA, as seller or servicer, does not and will not independently
verify whether obligors obtain or maintain the required insurance either at or
after the origination of a motor vehicle loan. We monitor our loss experience
with respect to financed vehicles that are not properly insured.
We reserve the right to change our policies with respect to insurance on
financed vehicles in accordance with our business judgment.
As a result of a New York law, we do not to obligate the obligors under
motor vehicle loans originated through New York dealers to pay the so-called
"GAP amount" in the event of 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
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o any unpaid monthly payments, unpaid late fees and other unpaid amounts
due prior to the date of the total loss, plus
o 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 will be the cash value 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
required insurance, the vehicle's actual cash value will be 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. We do not and will not maintain third-party
insurance of any kind against this risk. We do not have any data on our
historical loss experience resulting from this risk.
COLLECTION PROCEDURES
Chase USA, as servicer, will perform collection activities with respect to
delinquent motor vehicle loans included in a trust consistent with its
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.
We use an automated collection system to assist us in collection efforts.
The automated collection system provides us with relevant obligor information,
such as current addresses, phone numbers and loan information, records of all
contacts with obligors and, in some cases, automated dialing. The system
records an obligor's promise to pay. The system
o allows supervisor review of collection personnel activity,
o permits supervisors to modify priorities as to which obligors should be
contacted and
o provides extensive reports concerning motor vehicle loan delinquencies.
Under our current practices, we make contact by mail with an obligor whose
motor vehicle loan has become 15 days delinquent and attempt to make contact by
telephone with an obligor whose motor vehicle loan is more than 15 days
delinquent. Generally, we commence repossession procedures when a motor vehicle
loan is delinquent for 90 days. However, if:
o a motor vehicle loan is deemed uncollectible,
o the financed vehicle is deemed by our collection personnel to be in
danger of being damaged, destroyed or made unavailable for repossession
or
o the obligor voluntarily surrenders the financed vehicle,
we may repossess the financed vehicle without regard to length or existence of
a 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 we sell the financed vehicle. Upon repossession of the financed
vehicle, we sell the financed vehicle in an auction or consign the financed
vehicle to a dealer for resale. After the sale of the financed vehicle, we will
pursue any deficiency remaining to the extent we deem practical and to the
extent permitted by law.
Losses may occur in connection with delinquent motor vehicle loans. Losses
can arise in several ways, including
o the inability to locate the financed vehicle or the obligor or
o the discharge of the obligor in a bankruptcy proceeding.
Generally, we recognize losses on motor vehicle loans:
o during the calendar month in which we repossess and sell a financed
vehicle if the repossession and sale 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,
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o DURING THE CALENDAR MONTH IN WHICH MORE THAN 10% OF A SCHEDULED PAYMENT
OF A MOTOR VEHICLE LOAN BECOMES 120 DAYS DELINQUENT IF WE HAVE NOT
REPOSSESSED THE RELATED FINANCED VEHICLE BY THE END OF THAT CALENDAR
MONTH,
o AT ANY EARLIER TIME AS WE DEEM A MOTOR VEHICLE LOAN UNCOLLECTIBLE OR
o AT SUCH OTHER TIME OR IN SUCH A MANNER AS WE BELIEVED OR BELIEVE IS
APPROPRIATE IN ACCORDANCE WITH OUR NORMAL AND CUSTOMARY SERVICING
PRACTICES AND PROCEDURES.
In any event, we recognize a loss on a delinquent motor vehicle loan no later
than the calendar month in which more than 10% of a scheduled payment on the
motor vehicle loan becomes 240 days delinquent.
We may change our loss recognition and collection policies and practices
over time in accordance with our business judgment.
We may, on a case-by-case basis, extend the due dates of payments on motor
vehicle loans in accordance with our normal and customary servicing practices
and procedures. These practices and procedures are described more fully the
attached prospectus supplement.
WEIGHTED AVERAGE LIFE OF THE SECURITIES
The weighted average life of the securities issued by a trust will
generally be influenced by the rate at which the principal balances of the
motor vehicle loans held by the trust are paid. Principal payments come in the
form of scheduled principal payments and prepayments. Prepayments can result
from
o prepayments of motor vehicle loans in full,
o partial prepayments of motor vehicle loans,
o liquidations due to default,
o receipts of proceeds from theft and physical damage, credit life and
credit disability insurance policies covering financed vehicles or
obligors and
o repurchases of motor vehicle loans by the seller or purchases of motor
vehicle loans by the servicer for administrative reasons.
Obligors may prepay motor vehicle loans at any time.
If the property of a trust includes a pre-funding account, the securities
issued by that trust will be subject to partial redemption on or immediately
following the end of the funding period described in the related prospectus
supplement. If a trust includes a cash collateral guaranty, a reserve account
or other credit enhancement, the securities issued by that trust will be
subject to prepayments as a result of demands being made under the cash
collateral guaranty, withdrawals being made from the reserve account or
payments being made under the other enhancement in respect of defaulted motor
vehicle loans.
The rate of prepayments on the motor vehicle loans 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 motor vehicle
loan without our consent. Programs offered by lenders, such as Chase USA and
its affiliates, which solicit or make available credit that may be used by
obligors to prepay motor vehicle loans may also influence the rate of
prepayment on the motor vehicle loans. The credit offered may include home
equity lines of credit, consumer installment credit and credit cards. Chase USA
and its affiliates may in the ordinary course of business offer general or
targeted solicitations for extensions of credit. These solicitations may be
sent to obligors. In addition, each sale and servicing agreement and pooling
and servicing agreement will allow us to refinance an existing motor vehicle
loan for an obligor so long as the proceeds of the refinanced loan are used to
prepay the existing motor vehicle loan in full and the refinanced loan is
evidenced by a new promissory note. Any loan resulting from the refinancing
will not be the property of the related trust.
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Because of the uncertain amount of prepayments on the motor vehicle loans
included in a trust, we cannot assure you of the amount of principal payments
that will be made on the securities issued by that trust on each payment date.
Holders of the securities alone will bear the reinvestment risks resulting from
a faster or slower incidence of prepayments on the motor vehicle loans. A
prospectus supplement may set forth additional information with respect to the
maturity and prepayment considerations applicable to a particular pool of motor
vehicle loans and the related securities.
We maintain records of the historical prepayment experience of portions of
our portfolio of motor vehicle loans. We believe that these records are not
adequate to provide meaningful information with respect to the motor vehicle
loans to be included in any trust. In any event, we cannot give you any
assurance that prepayments on a given pool of motor vehicle loans would conform
to our historical experience. We cannot predict the actual prepayment
experience of any pool of motor vehicle loans.
In addition, as servicer we may grant extensions on payments on the motor
vehicle loans under limited circumstances. The related prospectus supplement
will contain a description of the terms and conditions under which the motor
vehicle loans included in a particular trust may be extended or modified. Any
deferrals or extensions of those motor vehicle loans may increase the weighted
average life of the related securities.
If an obligor under a SIMPLE INTEREST RECEIVABLE, in addition to making
his or her regularly scheduled payment, makes one or more additional scheduled
payments in any COLLECTION PERIOD, we will treat the additional scheduled
payments made in that COLLECTION PERIOD as a principal prepayment and we will
apply it to reduce the principal balance of the related motor vehicle loan in
that COLLECTION PERIOD. As a result of that prepayment, unless otherwise
requested by the obligor, the obligor will not be required to make any
scheduled payment in respect of that motor vehicle loan for the number of due
dates corresponding to the number of additional scheduled payments he made.
During that period interest will continue to accrue on the outstanding
principal balance of the prepaid motor vehicle loan and the obligor's account
will not be considered delinquent. The related prospectus supplement will
describe any obligation of Chase USA as servicer to make ADVANCES in respect of
those unpaid interest payments.
When the obligor resumes his or her required payments, his regularly
scheduled payments may be insufficient to cover the interest that has accrued
since his last payment. Nonetheless the obligor's prepaid motor vehicle loan
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 prepaid motor vehicle loan. Depending on
the principal balance and interest rate of the related motor vehicle loan and
on the number of payments that were prepaid, there may be extended periods of
time during which such a motor vehicle loan is current but not amortizing.
Prepaid SIMPLE INTEREST RECEIVABLES in any trust will affect the weighted
average life of the securities issued by the trusts. The distribution of the
prepaid amount to the holders of the securities on the payment date following
the COLLECTION PERIOD in which the amount was received will generally shorten
the weighted average life of the securities. In addition, to the extent we make
any ADVANCES of interest with respect to a prepaid SIMPLE INTEREST RECEIVABLE
which subsequently goes into default, the loss on that motor vehicle loan may
be larger than would have been the case had the ADVANCES not been made because
the liquidation proceeds from that motor vehicle loan will be applied first to
reimburse us for the ADVANCES.
Our portfolio of motor vehicle loans has historically included motor
vehicle loans that have been prepaid by one or more scheduled monthly payments.
We cannot assure you as to the number of motor vehicle loans that may become
prepaid SIMPLE INTEREST RECEIVABLES or the number or the principal amounts of
the scheduled payments that may be prepaid.
If an obligor under any ACTUARIAL RECEIVABLE, in addition to making his or
her regularly scheduled payment, makes one or more additional scheduled
payments in any COLLECTION PERIOD, we may deposit
21
the additional scheduled payments made in that COLLECTION PERIOD into an
account for the related trust and apply them as described in the related
prospectus supplement. No shortfalls in payment of interest or principal will
result when prepaid amounts on ACTUARIAL RECEIVABLES are deposited into an
account on behalf of the trust.
HOW YOU CAN COMPUTE YOUR PORTION OF THE AMOUNT OUTSTANDING OF YOUR SECURITIES
As servicer we will provide to you in each report which we deliver to you
a factor which you can use to compute your portion of the principal amount
outstanding of your securities.
We will compute a separate factor for each class of notes. The factor for
each class of notes will be an eight-digit decimal which we will calculate
prior to each payment date. The note factor will equal the remaining
outstanding principal balance of that class of notes as of the applicable
payment date, after giving effect to payments to be made on that payment date,
as a fraction of the initial outstanding principal balance of that class of
notes. Your portion of each class of notes will equal the product of
o the original denomination of your note and
o the factor relating to your class of notes.
We will compute a separate factor for each class of certificates. The
factor for each class of certificates will be an eight-digit decimal which we
will calculate prior to each payment date. The certificate factor will equal
the remaining balance of that class of certificates as of the applicable
payment dates, after giving effect to distributions to be made on that payment
date, as a fraction of the initial stated certificate balance of that class of
certificates. Your portion of each class of certificates will equal the product
of
o the original denomination of your certificate and
o the factor relating to your class of certificates.
Each factor will be 1.00000000 as of the cutoff date specified in the
prospectus supplement for that series of securities and will decline to reflect
reductions in the outstanding principal balance of the applicable class of
notes or the reduction of the initial stated certificate balance of the
applicable class of certificates.
As servicer we will provide to you monthly reports concerning:
o payments received on the motor vehicle loans included in the trust,
o the aggregate principal balance of those motor vehicle loans as of the
last day of the preceding COLLECTION PERIOD, calculated as described in
the related prospectus supplement,
o each factor relating to each class of securities issued by the trust
and
o various other items of information that will be specified in the
related prospectus supplement.
In addition, you will be provided information for tax reporting purposes not
later than the latest date permitted by law.
USE OF PROCEEDS
We will apply the net proceeds from the sale of the securities of a trust
as follows:
o if the trust has a pre-funding account, to make a deposit into that
account,
o if the trust has a yield supplement account, to make a deposit into
that account,
o if the trust has a cash collateral account, to make a deposit into that
account,
o if the trust has a reserve account, to make the initial deposit into
that account and
o for any other purposes specified in the related prospectus supplement.
We will add the remaining funds received by us to our general funds.
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PRINCIPAL DOCUMENTS
In general, the operations of a trust will be governed by the following
documents:
IF THE TRUST ISSUES NOTES:
--------------------------------------------------------------------------------------------------------
DOCUMENT PARTIES PRIMARY PURPOSES
--------------------------------------------------------------------------------------------------------
Trust Agreement Trustee and Chase USA, as o creates the trust
depositor o provides for issuance of
certificates and payments to
certificateholders
o establishes the rights and
duties of the trustee
o establishes the rights of
certificateholders
--------------------------------------------------------------------------------------------------------
Indenture Trust, as issuer of the notes, and o provides for issuance of the
Indenture Trustee notes, the terms of the notes
and payments to noteholders
o establishes the rights and
duties of the indenture trustee
o establishes the rights of
noteholders
--------------------------------------------------------------------------------------------------------
Sale and Servicing Agreement Chase USA, as seller and o effects transfer of motor
servicer, and the Trust vehicle loans to the trust
o contains representations and
warranties of Chase USA, as
seller, concerning the motor
vehicle loans
o contains servicing obligations
o provides for compensation of the
servicer
o directs how proceeds of the
motor vehicle loans will be
applied to the expenses of the
trust and payments on the
securities issued by the trust
--------------------------------------------------------------------------------------------------------
23
IF A TRUST IS A GRANTOR TRUST:
--------------------------------------------------------------------------------------------
DOCUMENT PARTIES PRIMARY PURPOSES
--------------------------------------------------------------------------------------------
Pooling and Servicing Trustee and Chase USA, as o creates the trust
Agreement seller and servicer o effects transfer of motor
vehicles loans to the trust
o contains representations and
warranties of Chase USA, as
seller, concerning the motor
vehicle loans
o contains servicing obligations
o provides for compensation of
the servicer
o provides for issuance of
certificates and payments to
certificateholders
o directs how cash flow will be
applied to expenses of the
trust and payments to
certificateholders
o establishes the rights and
duties of the trustee
o establishes rights of
certificateholders
--------------------------------------------------------------------------------------------
Various provisions of these documents are described throughout this
prospectus and will be described in the related prospectus supplement. The
prospectus supplement for a trust will describe any material provisions of the
documents relating to that trust that differ in a material way from the
provisions described in this prospectus.
A form of each of these principal documents has been filed as an exhibit
to the registration statement of which this prospectus forms a part. The
summaries of the principal documents in this prospectus do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all the provisions of those principal documents.
PAYMENTS ON THE SECURITIES
The prospectus supplement relating to the securities issued by a
particular trust will describe
o the timing, amount and priority of payments of principal and interest
on each class of those securities,
o their interest rates or the formula for determining their interest
rates,
o the method of determining the amount of their principal payments,
o the priority of the application of the trust's available funds to its
expenses and payments on its securities and
o the allocation of losses on the motor vehicle loans included in that
trust among the classes of those securities.
The rights of any class of securities to receive payments may be senior or
subordinate to other classes of securities. A security may be entitled to
principal payments with disproportionate, nominal
24
or no interest payments or interest payments with disproportionate, nominal or
no principal payments or residual cash flow remaining after all other classes
have been paid.
Interest rates may be fixed or floating. If a class of securities is
redeemable or subject to prepayment, the prospectus supplement will describe
when the securities may be redeemed or prepaid and at what price, including any
premium payable. The aggregate initial principal amount of the securities
issued by a trust may be greater than, equal to or less than the aggregate
initial principal amount of the motor vehicle loans held by that trust.
Payments of principal and interest on any class of securities will be made
on a pro rata basis among all the securityholders of such class. If the amount
of funds available to make a payment on a class is less than the required
payment, the holders of the securities of that class will receive their pro
rata share of the amount available for the class. A series may provide for a
liquidity facility or similar arrangement that permits one or more classes of
securities to be paid in planned amounts on scheduled payment dates.
One or more classes of notes issued by a trust may have a final scheduled
payment date of less than 397 days from the date of the related prospectus
supplement and that class or those 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 a class of notes on or prior to the related
final payment date will constitute an EVENT OF DEFAULT under the related
indenture.
CERTAIN INFORMATION REGARDING THE SECURITIES
FIXED RATE SECURITIES
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. Interest on each class of fixed rate
securities may be computed on the basis of a 360-day year of twelve 30-day
months or on such other day count basis as is specified in the related
prospectus supplement.
FLOATING RATE SECURITIES
Each class of floating rate securities will bear interest for each
applicable interest accrual period described in the related prospectus
supplement at a rate per annum determined by reference to a base rate, plus or
minus the number of basis points specified in the prospectus supplement, if
any, or multiplied by the percentage specified in the prospectus supplement, if
any or as otherwise specified in the related prospectus supplement. Interest on
each class of floating rate securities will be computed on the day count basis
specified in the related prospectus supplement.
The base rate of interest for any floating rate securities will be based
on the London interbank offered rate, commercial paper rates, federal funds
rates, U.S. government treasury securities rates, negotiable certificates of
deposit rates or another rate set forth in the related prospectus supplement.
A class of floating rate securities may also have either or both of the
following, in each case expressed as a rate per annum:
o a maximum limitation, or ceiling, on the rate at which interest may
accrue during any interest accrual period and
o a minimum limitation, or floor, on the rate at which interest may
accrue during any interest accrual 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.
Each trust issuing floating rate securities may appoint a calculation
agent to calculate interest rates on each class of its floating rate
securities. The related prospectus supplement will identify the
25
calculation agent, if any, for each class of floating rate securities, which
may be either the trustee or the indenture trustee for the trust. All
determinations of interest by the calculation agent will, in the absence of
manifest error, be conclusive for all purposes and binding on the holders of
the floating rate securities of a given class.
BOOK-ENTRY REGISTRATION
Following is a description of the form your securities, whether
certificates or notes, may take. We also describe how your securities may be
transferred and how payments may be made to you.
The information in this section concerning DTC and its book-entry system
has been provided by DTC. We have not independently verified the accuracy of
this information.
Each class of securities issued by a trust may be represented by one or
more global certificates registered in the name of Cede & Co., DTC's nominee.
Accordingly, Cede is expected to be the holder of record of each series of
securities issued in book-entry form. This means that you, as an owner of
securities, will generally not be entitled to DEFINITIVE SECURITIES
representing your interest in the issued securities. You will own securities
through a book-entry record maintained by DTC. Your interests in the global
securities will be represented through financial institutions acting on your
behalf as direct and indirect participants in DTC. You may hold your securities
through DTC in the U.S., CLEARSTREAM or the EUROCLEAR system in Europe or in
any manner described in the related prospectus supplement. CLEARSTREAM and
EUROCLEAR will hold positions on behalf of their customers or participants
through their respective depositaries, which in turn will hold such positions
in accounts as DTC participants.
If a class of securities is issued in book-entry form, all references in
this prospectus and in the related prospectus supplement to actions by holders
of such class of securities refer to actions taken by DTC upon instructions
from its participating organizations and all references in this prospectus and
in the related prospectus supplement to distributions, notices, reports and
statements to holders of such class of securities refer to distributions,
notices, reports and statements to DTC or its nominee, as the case may be, as
the registered holder of such class of securities, for distribution to the
holders of such class of securities in accordance with DTC's procedures.
Conveyance of notices and other communications by DTC to DTC participants, by
DTC participants to indirect participants, and by DTC participants and indirect
participants to securityholders will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time.
Any securities of a given trust owned by Chase USA or any of its
affiliates will be entitled to equal and proportionate benefits under the
applicable indenture, trust agreement or pooling and servicing agreement,
except that, unless Chase USA and its affiliates own the entire class, such
securities will be deemed not to be outstanding for the purpose of determining
whether the requisite percentage of securityholders have given any request,
demand, authorization, direction, notice, consent or other action under those
documents.
The prospectus supplement will specify whether the holders of the notes or
certificates of a trust will hold their respective securities as global
securities in book-entry form under the DTC system. Any purchase that you make
of securities issued in book-entry form under the DTC system must be made by or
through a DTC participant, which will receive a credit for the securities on
DTC's records. Your ownership interest is in turn recorded on the DTC
participants' and indirect participants' records. You will not receive written
confirmation from DTC of your purchase, but you can expect to receive written
confirmation providing details of the transaction, as well as periodic
statements of your holdings, from the DTC participant or indirect participant
through which you entered into the transaction. Transfers of ownership
interests in the securities are accomplished by entries made on the books of
DTC participants acting on behalf of you and other securityholders.
In addition, securityholders will receive all distributions of principal
and interest from the indenture trustee or the applicable trustee through the
participants who in turn will receive them from
26
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 DTC's nominee. DTC will forward such payments to its
participants which thereafter will forward them to indirect participants or
securityholders.
Distributions on securities held through CLEARSTREAM or EUROCLEAR will be
credited to the cash accounts of CLEARSTREAM CUSTOMERS or EUROCLEAR
PARTICIPANTS in accordance with the relevant system's rules and procedures, to
the extent received by its depositary. Such distributions will be subject to
tax reporting in accordance with relevant U.S. tax laws and regulations.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers of securities
among participants on whose behalf it acts and is required to receive and
transmit distributions of principal and interest on the securities it holds.
Participants and indirect participants with whom securityholders have accounts
similarly are required to make book-entry transfers and receive and transmit
payments on behalf of their respective securityholders. Accordingly, although
securityholders will not possess their respective 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, your ability to pledge
securities to persons or entities that do not participate in the DTC system, or
otherwise take actions with respect to such securities, may be limited due to
the lack of a physical certificate for the securities.
You will not be recognized as a securityholder by the trustee or the
indenture trustee. You will be permitted to exercise the rights of a
securityholder only indirectly through DTC and its participants. Neither DTC
nor Cede will consent or vote with respect to the securities issued by a trust.
Under its usual procedures, DTC mails an omnibus proxy to Chase USA as soon as
possible after the record date, which assigns Cede's consenting or voting
rights to those DTC participants to whose accounts the securities are credited
on the relevant record date. CLEARSTREAM and the EUROCLEAR operator, as the
case may be, will take any action permitted to be taken by a securityholder on
behalf of a CLEARSTREAM CUSTOMER or EUROCLEAR PARTICIPANT only in accordance
with its relevant rules and procedures and subject to its depositary's ability
to effect such actions on its behalf through DTC.
Except as required by law, none of the administrator, if any, the
applicable trustee or the applicable indenture trustee, if any, will have any
liability for any aspect of the records relating to payments made on account of
beneficial ownership interests of the securities issued by any trust held by
DTC, CLEARSTREAM or the EUROCLEAR system or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
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.
INITIAL SETTLEMENT OF THE GLOBAL SECURITIES. Investors electing to hold
their global securities through DTC will follow the settlement practices that
apply to U.S. corporate debt obligations. Investor securities custody accounts
will be credited with their holdings against payment in same-day funds on the
settlement date. Investors electing to hold their global securities through
Clearstream or Euroclear accounts will follow the settlement procedures that
apply 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 OF THE GLOBAL SECURITIES. 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.
27
--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 securities are to be transferred from the account of a DTC participant
to the account of a CLEARSTREAM CUSTOMER or a 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, as the case may be, to receive the global securities against
payment. Payment will include interest accrued on the global securities from
and including the last interest payment date to and excluding the settlement
date. Payment will then be made by the respective depositary to the DTC
participant's account against delivery of the global securities. After
settlement has been completed, the global securities will be credited to the
respective clearing system and by the clearing system, in accordance with its
usual procedures, to the CLEARSTREAM CUSTOMER'S or EUROCLEAR PARTICIPANT'S
account. The securities credit will appear the next day (European time) and the
cash debit will be back-valued to, and the interest on the global securities
will accrue from, the value date (which would be the preceding day when
settlement occurred in New York). If settlement is not completed on the
intended value date (that is, 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 this is to
pre-position funds for settlement, either from cash on hand or existing lines
of credit, as they would for any settlement occurring within CLEARSTREAM or
EUROCLEAR. Under this approach, they may take on credit exposure to CLEARSTREAM
or EUROCLEAR until the global securities 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 pre-position funds and allow that credit line to be drawn upon to finance
settlement. Under this procedure, CLEARSTREAM CUSTOMERS or EUROCLEAR
PARTICIPANTS purchasing global securities would incur overdraft charges for one
day, assuming they cleared the overdraft when the global securities were
credited to their accounts. However, interest on the global securities would
accrue from the value date. Therefore, in many cases the investment income on
the global securities earned during that one-day period may substantially
reduce or offset the amount of such overdraft charges, although this result
will depend on each 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 securities 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 securities 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 CUSTOMER 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 securities to the DTC participant's account against
payment. Payment will include interest accrued on the global securities from
and including the last coupon payment date to and excluding the settlement
date. The payment will then be reflected in the account of the 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
28
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 (that is, 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.
Finally, day traders that use CLEARSTREAM or EUROCLEAR and that purchase
global securities 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 is 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 customary
procedures,
o borrowing the global securities in the U.S. from a DTC participant no
later than one day prior to settlement, which would give the global
securities sufficient time to be reflected in their 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.
THE DEPOSITORIES--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 under the provisions of
Section 17A of the Securities Exchange Act of 1934, as amended. DTC was created
to hold securities for its participants and facilitate the clearance and
settlement of securities transactions between participants through electronic
book-entries, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers (who may
include any of the underwriters of securities of issued by a trust), banks,
trust companies and clearing corporations and may include certain other
organizations. Indirect access to the DTC system also is available to others
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a participant, either directly or
indirectly. The rules applicable to DTC and its DTC participants are on file
with the SEC.
--Clearstream. CLEARSTREAM is incorporated under the laws of Luxembourg.
CLEARSTREAM holds securities for 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 U.S. dollars. CLEARSTREAM provides to its 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, as such is subject to regulation by the
Commission de Surveillance du Secteur Financier, which supervises Luxembourg
banks. CLEARSTREAM CUSTOMERS are worldwide financial institutions including
underwriters, securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations and may include the underwriters
of the securities issued by a trust. 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 Euroclear Bank
S.A./N.V. as the operator of the EUROCLEAR system in Brussels to facilitate
settlement of trades between CLEARSTREAM and EUROCLEAR.
29
--Euroclear. The EUROCLEAR system was created in 1968 to hold securities
of 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 34 currencies, including U.S.
dollars. The EUROCLEAR system includes various other services, including
securities lending and borrowing and interfaces with domestic markets in
several countries generally similar to the arrangements for cross-market
transfers with DTC described above. The EUROCLEAR system is operated by
Euroclear Bank S.A./N.V. under contract with the COOPERATIVE. All operations
are conducted by the EUROCLEAR operator, and all EUROCLEAR securities clearance
accounts and EUROCLEAR cash accounts are accounts with the EUROCLEAR operator,
not the COOPERATIVE. The COOPERATIVE establishes policy for the EUROCLEAR
system on behalf of EUROCLEAR PARTICIPANTS. EUROCLEAR PARTICIPANTS include
banks (including central banks), securities brokers and dealers and other
professional financial intermediaries and may include the underwriters of the
securities issued by a trust. Indirect access to the EUROCLEAR system is also
available to other firms that clear through or maintain a custodial
relationship with a EUROCLEAR PARTICIPANT, either directly or indirectly.
Securities clearance accounts and cash accounts with the EUROCLEAR
operator are governed by the terms and conditions governing use of EUROCLEAR
and the related operating procedures of the EUROCLEAR system and applicable
Belgian law. These terms and conditions govern transfers of securities and cash
within the EUROCLEAR system, withdrawal of securities and cash from the
EUROCLEAR system, and receipts of payments with respect to securities in the
EUROCLEAR system. All securities in the EUROCLEAR system are held on a fungible
basis without attribution of specific certificates to specific securities
clearance accounts. The EUROCLEAR operator acts under these terms and
conditions only on behalf of EUROCLEAR PARTICIPANTS and has no record of or
relationship with persons holding through EUROCLEAR PARTICIPANTS.
DTC may discontinue providing its services as securities depository for
the securities issued by a trust at any time by giving reasonable notice to
Chase USA, as servicer, the trustee and, if applicable, the indenture trustee.
If this occurs and a successor securities depository is not obtained,
DEFINITIVE SECURITIES will be printed and delivered. The servicer may decide to
discontinue use of the system of book-entry transfers through DTC or a
successor securities depository. In that event, DEFINITIVE SECURITIES will be
delivered to each securityholder.
Although DTC, CLEARSTREAM and EUROCLEAR have agreed to the foregoing
procedures in order to facilitate transfers of securities among their
participants, they are under no obligation to perform or continue to perform
these procedures and these procedures may be discontinued at any time.
DEFINITIVE SECURITIES
Any notes or certificates initially issued by a trust in book-entry form
will be issued in fully registered, certificated form to the holders of the
notes or the certificates or their respective nominees rather than to DTC or
its nominee, only if:
o Chase USA, as servicer, advises the trustee or indenture trustee, as
applicable, in writing that DTC is no longer willing or able to
properly discharge its responsibilities as depository with respect to
the securities and the servicer is unable to locate a qualified
successor depository,
o Chase USA, as servicer, elects to terminate the book-entry system
through DTC or
o after the occurrence of an EVENT OF DEFAULT or an EVENT OF SERVICING
TERMINATION with respect to the securities issued by a trust, holders
representing at least a majority of the outstanding principal amount of
the notes or certificates issued by that trust advise the indenture
trustee or the trustee, as applicable, through DTC in writing that the
continuation of a book-entry system through DTC with respect to the
notes or certificates, as the case may be, is no longer in the best
interest of the holders of those securities.
30
Upon the occurrence of any event described in the immediately preceding
paragraph, the indenture trustee or the trustee through DTC and its
participants will be required to notify all applicable holders of the
securities of the availability of DEFINITIVE SECURITIES. Upon surrender by DTC
of the definitive certificates representing the securities and receipt of
instructions for re-registration, the trustee or indenture trustee, as
applicable, will re-issue the securities as DEFINITIVE SECURITIES to their
holders.
Distributions of principal of, and interest on, DEFINITIVE SECURITIES will
be made by the related trustee or indenture trustee in accordance with the
procedures set forth in the related indenture, trust agreement or pooling and
servicing agreement, as applicable, directly to the holders in whose names
those DEFINITIVE SECURITIES were registered at the close of business on the
applicable record date specified in the related prospectus supplement. These
distributions will be made by check mailed to the address of the securityholder
as it appears on the register maintained by the trustee or indenture trustee,
as applicable. However, the final payment on any DEFINITIVE SECURITY will be
made only upon presentation and surrender of the DEFINITIVE SECURITY at the
office or agency specified in the notice of final distribution to the
applicable securityholders.
DEFINITIVE SECURITIES will be transferable and exchangeable at the offices
of the related transfer agent and registrar for the securities. No service
charge will be imposed for any registration of transfer or exchange, but the
trustee or indenture trustee, as applicable, may require payment of a sum
sufficient to cover any tax or other governmental charge imposed on the
transfer or exchange.
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 holders of the notes of that series
maintained by the indenture trustee for the purpose of communicating with them
with respect to their rights under the indenture or the notes. The indenture
trustee may elect not to grant the requesting noteholders access to the list of
all 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 SECURITIES have been issued in exchange for the
notes, the only noteholder appearing on the list maintained by the related
indenture trustee will be Cede, as nominee for DTC. Under these circumstances,
any beneficial owner of a note who wishes to communicate with other beneficial
owners of the 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 by such other means as the beneficial owner
may find available.
Three or more holders of certificates of any series or one or more holders
of certificates evidencing not less than 25% of the initial stated certificate
balance of the series may, by written request to the related trustee, obtain
access to the list of all holders of the certificates of the series for the
purpose of communicating with them with respect to their rights under the
related trust agreement or pooling and servicing agreement, as applicable, or
under the certificates. Unless DEFINITIVE SECURITIES have been issued in
exchange for the certificates, the only certificateholder appearing on the list
maintained by the related trustee will be Cede, as nominee for DTC. Under these
circumstances, any beneficial owner of a certificate who wishes to communicate
with other beneficial owners of the 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 by such other
means as the beneficial owner may find available.
REPORTS TO SECURITYHOLDERS
On each payment date, the paying agent, will include with each payment or
distribution to securityholders a statement prepared by Chase USA, as servicer.
Each statement will include, to the extent applicable, the following
information, and any other information specified in the related prospectus
supplement, with respect to the payment date or the period since the previous
payment date, as applicable:
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o the amount of the distribution allocable to principal of each class of
securities and the derivation of the amounts,
o the amount of the distribution allocable to interest on or with respect
to each class of securities,
o the amount of the servicing fee paid to Chase USA, as servicer, and the
amount of any unpaid servicing fee in respect of the related COLLECTION
PERIOD or COLLECTION PERIODS, as the case may be,
o the amount of the administration fee paid to The Chase Manhattan Bank,
as administrator, and the amount of any unpaid administration fees in
respect of the related COLLECTION PERIOD, or COLLECTION PERIODS, as the
case may be,
o the aggregate unreimbursed amount of ADVANCES as of the last day of the
preceding COLLECTION PERIOD and the change in that amount from the
previous COLLECTION PERIOD,
o the aggregate principal balance of the motor vehicle loans as of the
close of business on the last day of the preceding COLLECTION PERIOD,
o the aggregate outstanding principal balance of each class of
securities, in each case after giving effect to all payments reported
under the first bullet above on the payment date,
o the interest rate for the next interest accrual period with respect to
any class of securities with a variable rate,
o the amount of the aggregate losses realized on the motor vehicle loans
for the preceding COLLECTION PERIOD,
o the amount of any shortfalls in payment of principal of or interest on
any class of the securities and the change in those amounts from the
preceding statement,
o the aggregate amount to be paid in respect of motor vehicle loans, if
any, purchased by the servicer or repurchased by the seller in the
preceding COLLECTION PERIOD,
o the balance of the reserve account, if any, or any other enhancement
account, as of the payment date, after giving effect to changes to that
account on that date, the amount required to be on deposit in that
account on that payment date and the components of calculating that
required amount,
o for each payment date during the funding period, if any, specified in
the prospectus supplement, the remaining amount on deposit in the
pre-funding account and available to be used to purchase additional
motor vehicle loans,
o for the first payment date that is on or immediately following the end
of the funding period specified in the prospectus supplement, the
amount remaining on deposit in the pre-funding account that has not
been used and is being passed through as payments of principal on the
securities and
o the balance in any account in which prepayments of scheduled payments
by or on behalf of the obligors on ACTUARIAL RECEIVABLES are deposited.
Each amount set forth in the first four bullets with respect to the
securities of any series will be expressed as a dollar amount per $1,000 of the
initial principal balance of the notes or the initial stated certificate
balance of the certificates, as applicable. The paying agent will deliver these
statements to DTC for further distribution to the securityholders in accordance
with DTC's procedures.
Chase USA, as servicer, will file on behalf of each trust such periodic
reports with respect to each trust with the SEC as is required under the
Securities Exchange Act of 1934.
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
indenture trustee, trustee or paying agent, will
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furnish to each person who at any time during the calendar year has been a
securityholder of that trust and received any payment on those securities, a
statement containing information for the purposes of that securityholder's
preparation of federal income tax returns.
THE INDENTURE
A trust may issue one or more classes of notes. The notes will be issued
under the terms of an indenture between the trust and the indenture trustee
specified in the prospectus supplement, a form of which has been filed as an
exhibit to the registration statement of which this prospectus forms a part.
This summary describes the material provisions of the indenture common to the
notes of each trust that issues notes. The attached prospectus supplement will
give you additional information specific to the notes which you are purchasing.
This summary does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the notes and
the indenture.
EVENTS OF DEFAULT
The EVENTS OF DEFAULT under each indenture will consist of:
o a default for five days, or such longer period as is specified in the
related prospectus supplement, or more in the payment of any interest
on any of the notes issued pursuant to the indenture,
o a default in the payment of the principal of or any installment of the
principal of any note issued pursuant to the indenture when it becomes
due and payable,
o a default in the observance or performance of any other covenant or
agreement of the trust made in the indenture which default materially
and adversely affects the rights of the holders of the notes issued
pursuant to the indenture and which default continues for a period of
30 days after written notice of the default is given to the trust by
the related indenture trustee or to the trust and the indenture trustee
by the holders of at least 25% in principal amount of the CONTROLLING
CLASS of notes, or for such longer period, not to exceed 90 days, as
may be reasonably necessary to remedy the default, provided that the
default is capable of being remedied within 90 days or less, or
o certain events of bankruptcy, insolvency, receivership or liquidation
of the trust.
The amount of principal due and payable to the holders of a class of notes
under the indenture until the final scheduled payment date for that class of
notes will generally be limited to amounts available to pay the principal of
the notes. Therefore 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 that class of notes.
NOTEHOLDER RIGHTS UPON EVENT OF DEFAULT. If an EVENT OF DEFAULT should
occur and be continuing with respect to the notes issued by any trust, the
related indenture trustee or the holders of a majority of the principal amount
of the CONTROLLING CLASS of the notes may declare the principal of the notes to
be immediately due and payable. The holders of a majority of the principal
amount of the CONTROLLING CLASS of the notes may rescind that declaration at
any time before the indenture trustee obtains a judgment or decree for the
payment of money by the trust.
If the notes issued by any trust are declared to be due and payable
following an EVENT OF DEFAULT, the related indenture trustee may:
o institute proceedings to collect amounts due on the notes,
o foreclose on the trust property or
o exercise other remedies as a secured party.
In addition, the indenture trustee may sell the motor vehicle loans held by the
trust if
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o the holders of all the outstanding notes issued by the trust consent to
the sale,
o the proceeds of the sale are sufficient to pay in full the principal
and the accrued interest on all outstanding notes and certificates
issued by the trust at the date of the sale or
o there has been an EVENT OF DEFAULT arising from a failure to pay
principal or interest on any notes and the indenture trustee determines
that the proceeds of the motor vehicle loans would not be sufficient on
an ongoing basis to make all payments on the notes as those payments
would have become due if the obligations had not been declared due and
payable, and the indenture trustee obtains the consent of the holders
of 66b% of the aggregate outstanding principal amount of the
CONTROLLING CLASS of notes.
The indenture trustee may elect to have the trust maintain possession of the
motor vehicle loans and continue to apply collections on those motor vehicle
loans as if the notes had not been declared to be due and payable.
If an EVENT OF DEFAULT occurs and is continuing under an indenture, the
related indenture trustee will be under no obligation to exercise any of the
rights or powers under the indenture at the request or direction of any of the
holders of the notes issued under the indenture if the 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 that
request.
The holders of a majority of the principal amount of the CONTROLLING CLASS
of the notes issued under the indenture will have the right to direct the time,
method and place of conducting any proceeding or any remedy available to the
related indenture trustee.
Prior to the declaration that a series of notes are due and payable
following the occurrence of an EVENT OF DEFAULT, the holders of a majority of
the principal amount of the CONTROLLING CLASS of those notes may waive the
EVENT OF DEFAULT unless the EVENT OF DEFAULT was caused by a default in the
payment of principal or interest or a default in respect of a covenant or
provision of the indenture that cannot be modified without the waiver or
consent of all the holders of the outstanding notes.
No holder of a note will have the right to institute any proceeding with
respect to the related indenture unless:
o the 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 CONTROLLING
CLASS of notes have made a written request to the indenture trustee to
institute a proceeding in its own name as indenture trustee,
o such holder or holders have offered the indenture trustee indemnity
reasonably satisfactory to it against the costs, expenses and
liabilities to be incurred in complying with their request,
o the indenture trustee has, for 60 days after receipt of the notice,
request and offer of indemnity, failed to institute a proceeding and
o no direction inconsistent with the written request has been given to
the indenture trustee during the 60-day period by the holders of a
majority of the principal amount of the CONTROLLING CLASS of notes.
Nonetheless the holder of each note issued by a trust will have the
absolute and unconditional right to receive payment of principal of and
interest on that note and to institute suit for the enforcement of that
payment, which right may not be impaired without the individual holder's
consent.
Each indenture trustee and the related noteholders, by accepting notes,
will covenant that they will not, at any time, institute against the trust
issuing the notes any bankruptcy, reorganization or other proceeding under any
federal or state bankruptcy or similar law.
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Neither the indenture trustee nor the trustee in its individual capacity,
nor any holder of a certificate representing an ownership interest in a trust
nor any of their respective owners, beneficiaries, agents, officers, directors,
employees, affiliates, successors or assigns will be personally liable for the
payment of the principal of or interest on the notes issued by the trust or for
the agreements of the trust contained in the applicable indenture.
CERTAIN COVENANTS
RESTRICTIONS ON MERGER AND CONSOLIDATION. 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 the consolidation or merger is
organized under the laws of the United States, any state or the
District of Columbia,
o the entity expressly assumes the trust's obligation to make due and
punctual payments of principal and interest on the notes issued by the
trust and the performance or observance of every agreement and covenant
of the trust under the indenture,
o no EVENT OF DEFAULT under the indenture has occurred and is continuing
immediately after the merger or consolidation,
o the trust has been advised that the rating of the notes and the
certificates if any issued by the trust then in effect would not be
downgraded or withdrawn by the rating agencies as a result of the
merger or consolidation,
o all action as is necessary to maintain the lien and security interest
created by the indenture has been taken and
o the trust has received an opinion of counsel to the effect that the
consolidation or merger would have no material adverse tax consequence
to the trust or to any holder of a security issued by the trust.
OTHER COVENANTS. Each trust will agree, among other things, not to:
o except as expressly permitted by the applicable RELATED DOCUMENTS,
sell, transfer, exchange or otherwise dispose of any of the assets of
the trust,
o claim any credit on or make any deduction from the principal or
interest payable in respect of the notes issued by the trust, other
than amounts withheld under the tax code or applicable state law,
o assert any claim against any present or former noteholders because of
the payment of taxes levied or assessed upon the 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 the notes under the indenture except as may
be expressly permitted under the indenture,
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 the trust or any part of those assets, or any
interest in those assets or the proceeds of those assets or
o permit any lien of the indenture not to constitute a valid first
priority security interest in the trust, except as a result of any tax,
mechanics' or other like liens.
No trust will be permitted to engage in any activity other than as
described in the section of the related prospectus supplement entitled "The
Trust." No trust will be permitted to incur, assume or guarantee any
indebtedness other than the indebtedness incurred under the notes issued by the
trust and the indenture, the certificates issued by the trust and as a result
of any ADVANCES made to it by the servicer in accordance with the related sale
and servicing agreement.
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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
o its eligibility and qualification to continue as indenture trustee
under the related indenture,
o any amounts advanced by it under the related indenture,
o the amount, interest rate and maturity date of certain indebtedness
owed by the trust to the related indenture trustee in its individual
capacity,
o the property and funds physically held by the indenture trustee in his
capacity as indenture trustee and
o 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
upon the delivery to the related indenture trustee for cancellation of all
notes issued under that indenture, or with certain limitations, upon deposit
with the indenture trustee of funds sufficient for, the payment in full of all
those notes.
MODIFICATIONS OF THE INDENTURE
MODIFICATIONS OF THE INDENTURE WITH NOTEHOLDER CONSENT. Any trust and the
related indenture trustee may, with the consent of the holders of a majority of
the principal amount of the notes of the CONTROLLING CLASS, execute a
supplemental indenture to add provisions to, change in any manner or eliminate
any provisions of, the related indenture, or modify in any manner the rights of
the related holders of the notes. However, no supplemental indenture may effect
any of the following changes without the consent of the holder of each note
affected by that change:
o change the due date of payment of any installment of principal of or
interest on any note,
o reduce the principal amount, the specified interest rate or the
redemption price of any note,
o change any place of payment where, or the coin or currency in which,
any note or any interest on the note is payable,
o impair the right to sue for the enforcement of provisions of the
related indenture regarding payment,
o reduce the percentage of the aggregate amount of the CONTROLLING CLASS
of notes, the consent of the holders of which is required to waive
compliance with certain provisions of the related indenture or of
certain defaults under the indenture and their consequences as provided
for in the indenture,
o modify or alter the provisions of the related indenture regarding the
voting of notes held by Chase USA, the related trust, any other obligor
on the notes or any affiliate of any of Chase USA, the related trust or
such other obligor on the notes,
o reduce the percentage of the aggregate principal amount of the
CONTROLLING CLASS of the notes, the consent of which is required to
direct the related indenture trustee to sell or liquidate the motor
vehicle loans held by the trust after an EVENT OF DEFAULT if the
proceeds of the sale would be insufficient to pay the principal amount
and accrued but unpaid interest on all of the outstanding notes issued
by the trust,
o reduce the percentage of the aggregate amount of the CONTROLLING CLASS
of the notes, the consent of which is required to amend the sections of
the related indenture that specify the applicable percentage of
aggregate principal amount of the notes necessary to amend the
indenture or the RELATED DOCUMENTS,
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o modify any provisions of the indenture in a manner that affects 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 the calculation,
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 the notes or
o except as otherwise permitted or contemplated in the indenture,
terminate the lien of the indenture on any collateral for the notes or
deprive the holder of any note of the security afforded by the lien of
the indenture.
MODIFICATIONS OF THE INDENTURE WITHOUT NOTEHOLDER CONSENT. Any trust and
the related indenture trustee may enter into supplemental indentures, without
obtaining the consent of the holders of the notes issued by that trust, 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 the holders of the notes so long as such
action does not materially and adversely affect the interest of any noteholder.
THE INDENTURE TRUSTEE
The indenture trustee for the notes issued by each trust will be specified
in the related prospectus supplement. The indenture trustee for any series may
resign at any time, in which event The Chase Manhattan Bank, as administrator
of the trust, will be obligated to appoint a successor indenture trustee. The
administrator of the trust may also remove any indenture trustee if the
indenture trustee ceases to be eligible to continue as indenture trustee under
the related indenture or if the indenture trustee becomes insolvent. In those
circumstances, the administrator of the trust will be obligated to appoint a
successor indenture trustee for the related series of notes.
If a trust issues a class of notes that is subordinated to one or more
other classes of notes and an EVENT OF DEFAULT occurs under the related
indenture, the indenture trustee may be deemed to have a conflict of interest
under the Trust Indenture Act of 1939, as amended, and may be required to
resign as trustee for one or more of those classes of notes. In that case, the
indenture will provide for a successor trustee to be appointed for one or more
of those classes of notes and may provide for rights of senior holders of the
notes to consent to or direct actions by the related indenture trustee that are
different from those of subordinated holders of the notes. Any resignation or
removal of the indenture trustee and appointment of a successor indenture
trustee will not become effective until acceptance of the appointment by a
successor indenture trustee.
TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of the documents pursuant to
which Chase USA, as seller, will transfer pools of motor vehicle loans to a
trust and Chase USA, as servicer, will service the motor vehicle loans on
behalf of the trust. In the case of a trust that is not a grantor trust, that
document is the sale and servicing agreement. For a grantor trust, it is the
pooling and servicing agreement. This section also describes certain provisions
of the trust agreement and administration agreement for a trust that is not a
grantor trust. Forms of those documents have been filed as exhibits to the
registration statement of which this prospectus forms a part. This summary
describes the material provisions common to the securities of each trust. The
attached prospectus supplement will give you additional information specific to
the securities which you are purchasing. This summary does not purport to be
complete and is subject to, and qualified in its entirety by reference to, all
the provisions of those documents.
SALE AND ASSIGNMENT OF MOTOR VEHICLE LOANS
SALE AND ASSIGNMENT OF INITIAL MOTOR VEHICLE LOANS. When a trust issues
securities, Chase USA, as seller, will, in exchange for those securities, sell
and assign to the trust under a sale and servicing agreement or a pooling and
servicing agreement, without recourse, its interest in a pool of motor
37
vehicle loans, including its security interests in the related financed
vehicles. Each motor vehicle loan will be identified in a schedule to the
related sale and servicing agreement or pooling and servicing agreement. Chase
USA will then sell the securities offered by this prospectus and the related
prospectus supplement as set forth in the prospectus supplement.
SALE AND ASSIGNMENT OF ADDITIONAL MOTOR VEHICLE LOANS. The prospectus
supplement for the trust will specify whether, and the terms, conditions and
manner under which, Chase USA will sell and assign additional motor vehicle
loans to the trust from time to time during a funding period.
ELIGIBILITY CRITERIA. Each sale and servicing agreement or pooling and
servicing agreement, as applicable, will set forth the criteria that must be
satisfied by each motor vehicle loan as of the applicable cutoff date to be
included in the trust. These criteria will include, the following:
o each motor vehicle loan
o in the case of a motor vehicle loan originated with the involvement
of a dealer acting under a dealer agreement with Chase USA, 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 motor vehicle or
o in the case of a motor vehicle loan originated without the
involvement of a dealer acting under a dealer agreement with Chase
USA, has been originated by Chase USA or another originating bank in
the form of a secured loan for the retail financing of a motor
vehicle, and
o in each case, has been fully and properly executed by the related
parties,
o in the case of a motor vehicle loan in the form of a retail
installment sales contract originated with the involvement of a
dealer acting under a dealer agreement with Chase USA, if Chase USA
purchased the retail installment sales contract from the dealer, the
retail installment sales contract has been validly assigned by that
dealer to Chase USA in accordance with its terms,
o in the case of a motor vehicle loan originated by a originating bank
other than Chase USA, has been purchased from that originating bank
and validly assigned by that originating bank to Chase USA,
o contains customary and enforceable provisions so that the rights and
remedies of the holder thereof will 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 motor vehicle loan and each sale of the related financed vehicle
complied at the time it was originated or made, and complied on and
after the applicable cutoff date in all material respects with
applicable federal, state, and local laws, and related regulations,
including usury laws, and any consumer credit, equal opportunity and
disclosure laws applicable to the motor vehicle loan and the sale,
o each motor vehicle loan 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 the limited exceptions specified in the sale and servicing
agreement or pooling and servicing agreement, as applicable,
immediately prior to its sale and assignment to the trust, each motor
vehicle loan was secured by a validly perfected first priority security
interest in the related financed vehicle in favor of the originating
bank, which security interest is assignable and has been assigned to
the related trust;
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o as of the applicable cutoff date, Chase USA had no knowledge of any
facts which would give rise to any right, assertion or threat of
rescission, setoff, counterclaim or defense with respect to the motor
vehicle loan,
o as of the applicable cutoff date, Chase USA 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
motor vehicle loan,
o except for payment defaults continuing for less than 30 days as of the
applicable cutoff date, Chase USA had no knowledge that a default,
breach, violation or event permitting acceleration under the terms of
the motor vehicle loans exists; Chase USA had 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 the motor vehicle loan exists and Chase USA has not waived any
of the above,
o each motor vehicle loan requires that the related obligor obtain
comprehensive, liability, theft and physical damage insurance covering
the related financed vehicle and
o each motor vehicle loan satisfies the other criteria described in this
prospectus in the section entitled "The Motor Vehicle Loans" and the
criteria for the selection of the motor vehicle loans to be included in
the trust described in the related prospectus supplement.
REPURCHASE OF MOTOR VEHICLE LOANS. As of the last day of the second or,
at the option of the seller, the first COLLECTION PERIOD following the
discovery by or notice to Chase USA, as seller, that a motor vehicle loan did
not meet the criteria described above and that failure materially and adversely
affects the interests of the related trust in the motor vehicle loan, the
seller, unless the failure has been cured, will repurchase the motor vehicle
loan from the trust. The repurchase price will be the REPURCHASE AMOUNT, which
is the unpaid principal balance of that motor vehicle loan plus accrued
interest thereon at the contract rate through the last day of the month of the
repurchase. The seller's repurchase obligation will constitute the sole remedy
available to the securityholders of the related trust for any such uncured
breach.
CUSTODY OF MOTOR VEHICLE LOANS. The trustee pursuant to the pooling and
servicing agreement or the indenture trustee pursuant to the sale and servicing
agreement, as applicable, will appoint Chase USA, as servicer, as the initial
custodian of the motor vehicle loans transferred to the trust in order to
assure uniform quality in servicing the motor vehicle loans and to reduce
administrative costs. The servicer will not stamp or otherwise mark the motor
vehicle loans to reflect the transfer of the motor vehicle loans to the trust.
The servicer will not segregate the motor vehicle loans transferred to the
trust from the other motor vehicle loans that the servicer owns or services.
The servicer will not notify the obligors under the motor vehicle loans of the
transfer of those loans to the trust. However, UCC financing statements
reflecting the sale and assignment of the motor vehicle loans by the seller to
the trust will be filed, and the servicer's accounting records and computer
systems will be marked to reflect the sale and assignment. Because those motor
vehicle loans will remain in the servicer's possession and will not be stamped
or otherwise marked to reflect the assignment to the trust if a subsequent
purchaser were to obtain physical possession of those motor vehicle loans
without knowledge of the assignment, the trust's interest in the motor vehicle
loans could be defeated.
TRUST ACCOUNTS
For each trust, Chase USA, as servicer, will establish and maintain one or
more collection accounts in the name of the indenture trustee on behalf of the
related securityholders or, if the trust does not issue notes, in the name of
the trustee for the related certificateholders. The servicer will deposit all
collections on the motor vehicle loans into the collection account. If the
trust issues notes, the servicer or the indenture trustee may establish and
maintain a distribution account in the name of the indenture trustee on behalf
of the noteholders into which amounts released from the collection account and
any other accounts of the trust for payment to the noteholders will be
deposited and from which distributions of interest and/or principal to the
noteholders will be made. The servicer or
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the trustee may establish and maintain one or more certificate distribution
accounts, in the name of the trustee on behalf of the certificateholders into
which amounts released from the collection account and any other accounts of
the trust for distribution to the certificateholders will be deposited and from
which all distributions to the certificateholders will be made.
Chase USA, as servicer, or the trust may establish and maintain for the
trust an additional 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, the servicer will
deposit prepayments of scheduled payments by or on behalf of obligors on
ACTUARIAL RECEIVABLES. These prepayments do not constitute scheduled payments,
full prepayments, or certain partial prepayments. These prepayments will be
held in this paid-ahead account until the prepaid amounts fall due. Until the
servicer transfers these prepayments from this paid-ahead account to the
collection account, they will not be included in collections and will not be
available for distribution to the securityholders. This paid-ahead account, if
established, will initially be maintained by the related indenture trustee or
trustee. So long as Chase USA is the servicer for the trust, no EVENT OF
SERVICING TERMINATION exists and each other condition to holding these
prepayments as may be required by the related sale and servicing agreement or
pooling and servicing agreement, as applicable, is satisfied, the servicer may
retain these prepayments until the applicable payment date.
Any other accounts to be established with respect to the securities of a
trust, including any pre-funding account, yield supplement account or reserve
account, will be described in the related prospectus supplement.
All of the accounts described in this section are collectively referred to
in this prospectus as the "trust accounts".
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 satisfy criteria established by
the rating agencies rating the securities issued by the trust and are generally
limited to obligations or securities that mature on or before the business day
preceding the next payment date. However, to the extent permitted by the rating
agencies, funds in any reserve account, cash collateral account or yield
supplement account may be invested in PERMITTED INVESTMENTS that will mature
later than the business day preceding the next payment date but not later than
90 days after the date of investment. PERMITTED INVESTMENTS will not be sold to
meet any shortfalls. Thus, the amount of cash available in any reserve account,
cash collateral account or yield supplement account at any time may be less
than the balance in that account. If the amount required to be withdrawn from
any reserve account, cash collateral account or yield supplement account to
cover shortfalls in collections on the related motor vehicle loans exceeds the
amount of cash available in that account, a temporary shortfall in the amounts
distributed to the related noteholders or certificateholders could result,
which could, in turn, increase the average life of the notes or the
certificates of the trust. Net investment earnings on funds deposited in the
trust accounts will either remain on deposit in the applicable trust account or
be paid to the party identified in the related prospectus supplement.
The trust accounts will be required to be maintained as ELIGIBLE DEPOSIT
ACCOUNTS, which are accounts at a depository institution satisfying certain
requirements of the rating agencies rating the securities issued by a trust.
Each trust account will be established initially with the trust department of
The Chase Manhattan Bank. Should The Chase Manhattan Bank or any depositary of
a trust account no longer satisfy the requirements of the rating agencies, the
trust account will be moved to a depositary meeting the rating agencies'
requirements, provided that the trust account may remain at the depositary if
the trustee or indenture trustee receives written confirmation from each rating
agency rating the securities issued by the related trust to the effect that the
ratings of those securities will not be adversely affected.
The Chase Manhattan Bank, in its capacity as the initial paying agent
under each sale and servicing agreement and indenture or pooling and servicing
agreement, as applicable, will have the revocable right to withdraw funds from
the trust accounts for the purpose of making distributions to securityholders
in the manner provided in the applicable agreement.
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SERVICING
SERVICING PROCEDURES. Chase USA will service the motor vehicle loans
transferred to each trust and will be obligated to make reasonable efforts to
collect all payments due with respect to those motor vehicle loans in a manner
consistent with the related sale and servicing agreement or pooling and
servicing agreement and with the terms of the motor vehicle loans. It will be
obligated to follow the collection and servicing procedures that it follows
with respect to comparable new or used motor vehicle loans that it services for
itself and that are consistent with prudent industry standards.
Consistent with its normal procedures, the servicer may, in its
discretion, arrange with the obligor on a motor vehicle loan to defer or modify
the payment schedule. Some of these arrangements may require the servicer to
purchase the receivable while others may result in the servicer's making
ADVANCES with respect to the motor vehicle loan. The pooling and servicing
agreement or sale and servicing agreement will set forth the limitations on the
servicer's ability to make these arrangements. Those limitations will be
described in the related prospectus supplement The servicer may be obligated to
purchase a receivable for the REPURCHASE AMOUNT if, among other things, it
extends the date for final payment by the obligor of such motor vehicle loan
beyond the last day of the COLLECTION PERIOD during which the latest maturing
motor vehicle loan in the trust matures as set forth in the related prospectus
supplement, or changes the contract rate of interest or the total amount or
number of scheduled payments.
If the servicer determines that eventual payment in full of a motor
vehicle loan is unlikely, the servicer will use reasonable efforts, consistent
with its customary servicing procedures, to repossess or otherwise take
possession of the financed vehicle during the calendar month in which more than
10% of any scheduled payment becomes 90 days delinquent. The servicer may,
however, repossess or otherwise take possession of a financed vehicle prior to
the 90 day period if the servicer determines that eventual payment in full of
the amount financed is unlikely, the vehicle is in danger of being damaged,
destroyed or otherwise made unavailable for repossession or the obligor
voluntarily surrenders the financed vehicle. The servicer may also delay
repossession of the financed vehicle if it is unable to locate the vehicle, the
obligor is the subject of a bankruptcy proceeding or the servicer otherwise
defers repossession of the financed vehicle in accordance with its normal and
customary servicing practices and procedures. After repossession of a financed
vehicle, the servicer will, in accordance with its normal and customary
servicing practices and procedures, sell the vehicle in an auction or consign
the vehicle to a dealer for resale as soon as is practicable after
repossession, subject to any applicable laws. The servicer will be obligated to
follow its customary and usual practices and procedures as it shall deem
necessary or advisable in determining when and if to exercise reasonable
efforts to realize upon any recourse to dealers. The servicer will deposit any
proceeds from its realization efforts into the collection account.
The servicer will be obligated to determine that eventual payment in full
of a delinquent motor vehicle loan is unlikely no later than the calendar month
in which more than 10% of a scheduled payment under the motor vehicle loan
becomes 240 days delinquent.
COLLECTIONS. Chase USA, as servicer, will be required to deposit all
payments on the motor vehicle loans held by each trust and all proceeds of
those motor vehicle loans collected during each COLLECTION PERIOD into the
collection account on or before the business day preceding the following
payment date so long as Chase USA or The Chase Manhattan Bank is the servicer
and each other condition to making deposits less frequently than daily is
satisfied as may be confirmed by the rating agencies rating the securities
issued by the trust as set forth in the related prospectus supplement. If those
conditions are not met, the servicer will be required to deposit those amounts
into the collection account on a daily basis within forty-eight hours of
receipt. In addition, the servicer or the seller, as the case may be, will
remit the aggregate REPURCHASE AMOUNTS of any motor vehicle loans to be
purchased from the trust to the collection account on or prior to the business
day preceding the applicable payment date. Pending deposit into the collection
account, the servicer may invest collections at its own risk and for its own
benefit. Those funds will not be segregated from the servicer's own funds. If
the servicer were unable to remit those funds, you might incur a loss. The
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servicer may, to the extent described in the related prospectus supplement and
in order to satisfy the rating agency requirements for monthly deposit of
collections 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 motor vehicle loans.
SERVICING COMPENSATION AND EXPENSES. The servicer will be entitled to
receive a servicing fee for each COLLECTION PERIOD payable on the following
payment date in an amount equal to the sum of:
o the product of one-twelfth of the percentage per annum set forth in the
related prospectus supplement and the aggregate principal balance of
the motor vehicle loans as of the close of business on the last day of
the preceding COLLECTION PERIOD and
o all 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 motor vehicle loans collected
during that COLLECTION PERIOD.
If specified in the related prospectus supplement, the servicer's compensation
may also include net investment earnings on funds deposited in one or more of
the trust accounts.
The servicing fee is intended to compensate the servicer for
o performing the functions of a third-party servicer of motor vehicle
loans as an agent for the trust, including collecting and posting all
payments and responding to inquiries of the obligors under the motor
vehicle loans, investigating delinquencies, reporting tax information
to the obligors and advancing costs of disposition and repossession of
the financed vehicles,
o administering the pool of motor vehicle loans, accounting for
collections and furnishing monthly and annual statements to the related
trustee or indenture trustee, as applicable and
o paying certain taxes, accounting fees, outside auditor fees, the fees
of The Chase Manhattan Bank as the paying agent and the transfer agent
and registrar for the trust, the related trustee and the indenture
trustee, if any, and its counsel, data processing costs and other costs
incurred in connection with administering the pool of motor vehicle
loans.
ADVANCES. If specified in the related prospectus, the servicer may either
be obligated to make or have the discretion to make advances of delinquent
payments owing under the motor vehicle loans in the amounts and under the
circumstances described in the prospectus supplement. If the servicer makes
ADVANCES, it will be entitled to reimbursement for those ADVANCES in the manner
described in the related prospectus supplement. If the servicer makes ADVANCES,
it will deposit the ADVANCES made in respect of the delinquent payments for a
particular COLLECTION PERIOD on the business day preceding the following
payment date.
NET DEPOSITS. As an administrative convenience, so long as Chase USA is
the servicer and is permitted to make monthly deposits of collections on the
motor vehicle loans to the collection account, it will be permitted to deposit
those collections, aggregate ADVANCES and REPURCHASE AMOUNTS for each trust
with respect to a particular COLLECTION PERIOD net of distributions to be made
to Chase USA, as seller or servicer, by the trust with respect to that
COLLECTION PERIOD.
RESIGNATION OF THE SERVICER. Chase USA may not resign as the servicer of
the motor vehicle loans held by any trust under any sale and servicing
agreement or pooling and servicing agreement, except:
o upon a determination that Chase USA's performance of its duties as
servicer is no longer permissible under applicable law or
o if a successor servicer is appointed, upon notification by each rating
agency then rating any of the securities issued by that trust that the
rating assigned to the securities will not be reduced or withdrawn.
Chase USA's resignation will not become effective until the related trustee,
indenture trustee, if any, or a successor servicer has assumed Chase USA's
servicing responsibilities and obligations under the
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sale and servicing agreement or pooling and servicing agreement, as applicable.
The trustee or indenture trustee will not be obligated to act as the successor
servicer unless Chase USA resigns because the performance of its duties as
servicer is no longer permissible under applicable laws.
ASSIGNMENT BY THE SERVICER. Chase USA, as servicer, may not transfer or
assign all, or a portion of, its rights, obligations and duties under any sale
and servicing agreement or pooling and servicing agreement, except in
connection with a merger or consolidation of Chase USA, unless:
o the transfer or assignment will not result in a reduction or withdrawal
by any rating agency then rating any of the securities issued by the
related trust of the rating then assigned to the securities and the
indenture trustee, if any, and the related trustee have consented to
the transfer or assignment or
o consent is obtained from the indenture trustee, if any, the related
trustee and holders of securities evidencing not less than a majority
of the voting interests.
Chase USA cannot effect a transfer or assignment of all of its rights,
obligations and duties as servicer under a sale and servicing agreement or
pooling and servicing agreement until a successor servicer has assumed those
rights, obligations and duties.
If Chase USA, its successor or assign or the trustee is acting as the
servicer, it will be permitted to delegate any of its duties under the related
sale and servicing agreement or pooling and servicing agreement, as applicable,
to a third party, in the ordinary course of its business. The servicer will be
obligated to pay the compensation payable to that third party from its own
funds. None of the related trust, the related trustee (if not the servicer),
the related indenture trustee, if any, or securityholders will be liable for
that third party's compensation. Any delegation of duties by the servicer will
not relieve the servicer of liability and responsibility for the performance of
those duties.
LIABILITIES OF THE SERVICER; INDEMNIFICATION OF THE SERVICER. Each sale
and servicing agreement and pooling and servicing agreement will provide that
neither Chase USA, as servicer, nor any of its directors, officers, employees
and agents will be under any liability to the related trust, the related
trustee, the related indenture trustee, if any, or any securityholders for
taking any action or for refraining from taking any action as servicer pursuant
to that sale and servicing agreement or pooling and servicing agreement, as
applicable. However, neither Chase USA nor any of those other persons 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 under the sale and
servicing agreement or pooling and servicing agreement, as applicable.
Chase USA, as servicer, and its directors, officers, employees and agents
will be 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 the performance of its 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 under those agreements and
o any loss, liability or expense incurred by reason of willful
misconduct, negligence or bad faith in performance of its duties or by
reason of its reckless disregard of obligations and duties under those
agreements.
The trust's obligation to indemnify the servicer will be limited to excess
amounts available on any payment date in the reserve account or other
enhancement account held by the trust or, if the trust has no enhancement
accounts, to amounts available after all payments or deposits required under
the related sale and servicing agreement or pooling and servicing agreement, as
applicable, for the benefit of the servicer or the securityholders have been
made.
In addition, each sale and servicing agreement and pooling and servicing
agreement will provide that Chase USA, as servicer, is under no obligation to
appear in, prosecute or defend any legal action
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that is not incidental to its servicing responsibilities under that agreement
and that, in its opinion, may cause it to incur any expense or liability. The
servicer may, however, undertake any reasonable action that it deems necessary
or desirable in respect of the sale and servicing agreement or pooling and
servicing agreement, as applicable, and the rights and duties of the related
parties and the interests of the related securityholders under those
agreements. In that event, the related trust will be liable for the legal
expenses and costs of the action and the servicer will be entitled to be
reimbursed for those expenses. The trust's obligation to reimburse the servicer
will be limited to excess amounts available on any payment date in the reserve
account or other enhancement account held by the trust or, if the trust has no
enhancement accounts, to amounts available after all payments or deposits
required under the related sale and servicing agreement or pooling and
servicing agreement, as applicable, for the benefit of the servicer or the
securityholders have been made.
EVENTS OF SERVICING TERMINATION. EVENTS OF SERVICING TERMINATION under
each sale and servicing agreement or pooling and servicing agreement, as
applicable, will consist of:
o the servicer's failure to deliver to the related trustee or indenture
trustee, if any:
o the monthly report for any Collection Period or
o for deposit in the collection account or other trust account, any
amounts required to be deposited in those accounts under the terms
of the securities issued by the related trust or the related sale
and servicing agreement or pooling and servicing agreement,
o which failure continues unremedied for five business days after the
servicer's discovery of that failure or the servicer's receipt of
written notice of that failure by the related trustee or indenture
trustee or to the related trustee or indenture trustee and the
servicer by holders of at least 25% of the principal amount of the
notes issued by the trust, or, if the trust did not issue notes or
no notes are outstanding, by holders of at least 25% of the
certificate balance of the certificates issued by the trust,
o the servicer's failure to duly observe or perform in any material
respect any other covenant or agreement 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 will be
made without regard to whether funds are available to the
securityholders pursuant to any related enhancement, and continues
unremedied for 60 days after the date of the servicer's receipt of
written notice of the failure by the related trustee or indenture
trustee or to the related trustee or indenture trustee and the
servicer by holders of at least 25% of the principal amount of the
notes issued by the trust or, if the trust did not issue notes or no
notes are outstanding, by holders of at least 25% of the certificate
balance of the certificates issued by the trust or
o the occurrence of certain insolvency events specified in the
applicable sale and servicing agreement or pooling and servicing
agreement in respect of the servicer.
RIGHTS UPON EVENT OF SERVICING TERMINATION. As long as an EVENT OF
SERVICING TERMINATION under a sale and servicing agreement or pooling and
servicing agreement remains unremedied, the related indenture trustee or the
holders of not less than a majority of the principal amount of the CONTROLLING
CLASS of the notes, and after the notes have been paid in full or if the trust
has not issued notes, the trustee or the holders of not less than a majority of
the certificate balance of the certificates, may terminate all the rights and
obligations of the servicer under the sale and servicing agreement or pooling
and servicing agreement, as the case may be. If the servicer is terminated, the
indenture trustee or trustee or a successor servicer appointed by the indenture
trustee or trustee will succeed to all the responsibilities, duties and
liabilities of the servicer under the sale and servicing agreement or pooling
and servicing agreement and will be entitled to similar compensation
arrangements. In the event that the indenture trustee or trustee is unwilling
or unable to act as servicer, it may appoint, or petition a court of competent
jurisdiction for the appointment of, a successor servicer. The compensation
payable to a successor servicer may not exceed the servicing fee paid to Chase
USA, as servicer under the sale and servicing agreement or pooling and
servicing agreement.
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WAIVER OF PAST EVENTS OF SERVICING TERMINATION. The holders of not less
than a majority of the principal amount of the CONTROLLING CLASS of the notes,
and after the notes have been paid in full or if the trust has not issued
notes, the holders of not less than a majority of the certificate balance of
the certificates, may waive any EVENT OF SERVICING TERMINATION and its
consequences, except an EVENT OF SERVICING TERMINATION consisting of a failure
to make any required deposits to or payments from any of the trust accounts in
accordance with the applicable sale and servicing agreement or pooling and
servicing agreement. In addition, the holders of not less than a majority of
the certificate balance of the certificates may waive a EVENT OF SERVICING
TERMINATION that does not adversely affect the related indenture trustee or
noteholders.
EVIDENCE OF 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 the servicer's compliance during the
preceding twelve months, or, if the first certification, from the applicable
closing date, with certain standards relating to the servicing of the
applicable motor vehicle loans, or as to the effectiveness of its processing
and reporting procedures and other matters.
Each sale and servicing agreement or pooling and servicing agreement, as
applicable, will also provide for delivery to the firm of independent public
accountants referred to in the immediately preceding paragraph, substantially
simultaneously with the delivery of the accountants' statement referred above,
of a certificate signed by an officer of the servicer stating that it has
fulfilled its obligations in all material respects under the sale and servicing
agreement or pooling and servicing agreement, as applicable, throughout the
preceding twelve months, or, if the first certification, from the closing date,
or, in the alternative, if there has been a default in the fulfillment of any
obligation, describing that default.
You may obtain copies of these statements and certifications by a request
in writing addressed to the servicer.
DISTRIBUTIONS
Beginning on the payment date specified in the related prospectus
supplement, distributions of principal and interest, or, where applicable, of
principal or interest only, on each class of securities issued by a trust will
be made by the applicable trustee, the indenture trustee or The Chase Manhattan
Bank as paying agent to the holders of the securities issued by that trust. The
timing, calculation, allocation, order, source, priorities of and requirements
for all payments to each class of securityholders will be set forth in the
related prospectus supplement.
If a trust issues both certificates and notes and the payment dates for
those certificates and notes do not coincide, all distributions, deposits or
other remittances made on one payment date will be treated as having been
distributed, deposited or remitted on the other payment date for the applicable
COLLECTION PERIOD for purposes of determining other amounts required to be
distributed, deposited or otherwise remitted on that second payment date.
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 issued by a trust 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
o subordination of one or more classes of securities,
o a cash collateral guaranty supported by a cash collateral account,
o a reserve account,
o a yield supplement agreement,
o a yield supplement account,
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o over-collateralization,
o letters of credit,
o credit or liquidity facilities,
o surety bonds,
o guaranteed investment contracts,
o swaps, caps or other interest rate protection agreements,
o repurchase obligations,
o other agreements providing third party payments or other support,
o cash deposits in trust accounts or
o other arrangements.
If specified in the related prospectus supplement, credit or cash flow
enhancement for a class of securities issued by a trust may cover one or more
other classes of securities issued by the same trust, and credit or cash flow
enhancement for the securities issued by a trust may cover one or more other
classes of securities issued by another trust.
Credit and cash flow enhancement benefiting the securities issued by a
trust are intended to enhance the likelihood of receipt by the holders of those
securities of the full amount of principal and interest due on the securities
and to decrease the likelihood that those holders will experience losses. The
credit or cash flow enhancement for a class of securities may not provide
protection against all risks of loss and may not guarantee repayment of the
entire principal amount of and interest on those securities. If losses occur
which exceed the amount covered by any credit enhancement or which are not
covered by any credit enhancement, securityholders 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, the holders of the securities of any series will be subject to the
risk that the credit enhancement will be exhausted by the claims of holders of
the securities of other series.
Chase USA, as seller, may replace or reduce the credit enhancement for any
class of securities issued by a trust with another form of credit enhancement
without the consent of the holders of that class of securities, provided the
rating agencies rating those securities confirm in writing that this
substitution or reduction will not result in the reduction, qualification or
withdrawal of the rating of that class of securities or any class of securities
issued by that trust.
STATEMENTS TO TRUSTEES AND TRUST
Prior to each payment date with respect to the securities issued by each
trust, Chase USA, as servicer, will provide to the related trustee and any
indenture trustee a statement setting forth substantially the same information
for that payment date and the related COLLECTION PERIOD as is required to be
provided in the periodic reports provided to the holders of those securities
described in the section of this prospectus entitled "Certain Information
Regarding the Securities--Reports to Securityholders."
AMENDMENTS OF TRANSFER AND SERVICING AGREEMENTS
WITHOUT SECURITYHOLDER CONSENT. The parties to the transfer and servicing
agreements may amend a transfer and servicing agreement without prior notice to
the related securityholders, but with the prior consent of the related trustee
or indenture trustee and prior notice to the rating agencies rating the
securities issued by the related trust, in order to:
o cure any ambiguity, correct or supplement any of its provisions or the
provisions of the related securities, which may be inconsistent with any
other provision of the transfer and servicing agreement,
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o evidence the succession of a successor servicer or seller pursuant to the
transfer and servicing agreement,
o add any other provisions with respect to matters or questions arising
under the transfer and servicing agreement that are not inconsistent with
its provisions, provided that the amendment does not, on the basis of an
officer's certificate and/or opinion of counsel reasonably acceptable to
the trustee and indenture trustee, materially and adversely affect the
interests of the trust or any securityholders or
o effect a transfer or assignment of the servicer's or the trust's rights,
obligations and duties under the transfer and servicing agreement.
WITH SECURITYHOLDER CONSENT. The parties to the transfer and servicing
agreements may amend a transfer and servicing agreement in order to add any
provisions to or change in any manner or eliminate any of the provisions of
that transfer and servicing agreement or to modify in any manner the rights of
the securityholders with the consent of the holders of a majority of the
principal amount of the notes and the holders of certificates evidencing at
least a majority of the certificate balance then outstanding. However, the
parties may not amend a transfer and servicing agreement without the consent of
the holders of all outstanding notes and certificates if the amendment:
o increases or reduces in any manner the amount of, or accelerates or delays
the timing of, collections of payments on the related motor vehicle loans
or distributions that are required to be made for the benefit of the
securityholders or
o reduces the percentage of the notes or certificates issued by a trust that
is required for consent to any such amendment.
CONTINUING OBLIGATIONS OF INDENTURE TRUSTEE
The indenture trustee will agree in the indenture that, upon the payment
in full of all outstanding notes issued under that indenture and the
satisfaction and discharge of that indenture, it will continue to carry out its
obligations under the related sale and servicing agreement as agent for the
trustee of the trust for the benefit of the certificateholders of the trust.
TERMINATION
The obligations of the servicer, the seller, the trustee and any indenture
trustee pursuant to the transfer and servicing agreements with respect to each
trust will terminate upon the earlier of:
o the payment date next succeeding the month that is six months after the
maturity or other liquidation of the last motor vehicle loan held by the
trust and the disposition of any amounts received upon liquidation of any
property remaining in the trust and
o the payment to the holders of the securities issued by the trust of all
amounts required to be paid to them pursuant to the transfer and servicing
agreements.
In order to avoid excessive administrative expense, the servicer may be
permitted to purchase from the trust all the remaining motor vehicle loans as
of the end of any COLLECTION PERIOD if the outstanding aggregate principal
balance of the motor vehicle loans held by the trust at that time is equal to
or less than the percentage specified in the prospectus supplement of the
initial aggregate principal balance of the motor vehicle loans. The purchase
price for the motor vehicle loans will equal the aggregate of the REPURCHASE
AMOUNTS. If the servicer elects to purchase the motor vehicle loans held by a
trust, the trust will concurrently prepay in full any notes issued by the trust
and retire any certificates issued by the trust in the manner described in the
related prospectus supplement.
The trustee and any indenture trustee will give written notice of
termination to each holder of record of securities issued by the trust. The
notice will specify the payment date on which the securityholders may surrender
their securities to the related trustee, indenture trustee or transfer agent
and registrar for final payment. The final distribution to any securityholder
will be made only
47
upon surrender and cancellation of that holder's security at the office or
agency of the related trustee, indenture trustee or transfer agent and
registrar, as specified in the notice of termination.
ADMINISTRATION AGREEMENT
The Chase Manhattan Bank will act as the administrator of any trust that
issues notes. It will agree under an administration agreement with the trust
and the related indenture trustee to provide the notices and to perform other
administrative obligations of the trust under the related indenture. The
administrator will receive a monthly administration fee that will be described
in the related prospectus supplement as compensation for its services and
reimbursement of its related expenses. The administrator may perform its
obligations directly or through one or more of its agents. These agents may
include one or more affiliates of The Chase Manhattan Bank.
MATERIAL LEGAL ASPECTS OF THE MOTOR VEHICLE LOANS
SECURITY INTERESTS IN THE MOTOR VEHICLE LOANS
The motor vehicle loans are "chattel paper" as defined in the UCC in
effect in the State of New York. The sale of chattel paper is treated in a
manner similar to the creation of a security interest in chattel paper under
the UCC. In order to protect a trust's ownership interest in the motor vehicle
loans transferred to it, Chase USA will file UCC-1 financing statements with
the appropriate governmental authorities in the State of Delaware to give
notice of the trust's ownership interest in the motor vehicles loans and their
proceeds.
Under the sale and servicing agreement or pooling and servicing agreement,
as applicable, Chase USA, as seller, will be obligated to maintain the
perfection of the trust's ownership interest in the motor vehicle loans.
However, a purchaser of chattel paper who gives new value and takes possession
of it in the ordinary course of its 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 the
chattel paper by the original secured party if that purchaser acted in good
faith without knowledge that the related chattel paper is subject to a security
interest. Any purchaser would not be deemed to have knowledge of the trust's
ownership interest by virtue of UCC filings and would not learn of the transfer
of the motor vehicle loans to the trust from a review of the documents
evidencing the motor vehicle loans since they will not be marked to show any
sale. The master computer records of all of the motor vehicle loans owned or
serviced by Chase USA and its affiliates will indicate the sale.
SECURITY INTERESTS IN THE FINANCED VEHICLES
INITIAL PERFECTION OF SECURITY INTERESTS. 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 the vehicle, depending
on state law. Incertain states, such as California and Virginia these liens are
noted electronically rather than on paper certificates. Chase USA and the other
originating banks obtain a representation and warranty from each dealer from
whom they purchase a motor vehicle loan under a dealer agreement to the effect
that the originating bank has been designated as the sole lien holder on the
certificate of title for the related financed vehicle. Chase USA and the other
originating banks obtain the same representation and warranty from the obligor
under a motor vehicle loan being originated directly without involvement of a
dealer. If the dealer or obligor fails, due to clerical errors or for any other
reason, to effect notation of the originating bank's interest in the financed
vehicle, the originating bank would not have a perfected first priority
security interest in the financed vehicle. If this were to occur, the
originating bank's only recourse would be against the obligor on an unsecured
basis or against the dealer under the dealer agreement.
TRANSFER OF SECURITY INTERESTS. Pursuant to the terms of each sale and
servicing agreement or pooling and servicing agreement, as applicable, Chase
USA will assign its security interests in the financed vehicles securing the
motor vehicle loans to each trust. If the trust is issuing notes, the trust
48
will grant a security interest in those security interests in the financed
vehicles to the related indenture trustee as security for the notes. Because of
the administrative burden and expense, none of Chase USA, the trustee or the
indenture trustee will amend the certificates of title for the financed
vehicles to identify the trust or any related indenture trustee as the new
secured party. Accordingly, Chase USA or the other originating bank will
continue to be named as the secured party on the certificates of title for the
financed vehicles.
In most states, assignment of a motor vehicle loan together with the
related security interest in the financed vehicle is an effective conveyance of
the security interest in the financed vehicle without amendment of any lien
noted on the certificate of title for the financed vehicle. In that case, the
assignee of the motor vehicle loan succeeds to the originating bank's rights as
a secured party in the financed vehicle as against creditors of the obligor. In
other states, in the absence of an amendment to the lien noted on the
certificate of title for the financed vehicle, Chase USA, the related trust and
any related indenture trustee may not have a perfected security interest in the
financed vehicle. In that event or if the originating bank did not obtain a
perfected first priority security interest in the financed vehicle, the only
recourse of the trust would be against the obligor on an unsecured basis or, if
the originating bank did not obtain a perfected security interest in the
financed vehicle, against Chase USA, as seller, pursuant to its repurchase
obligation. If there are any financed vehicles as to which the originating bank
has failed to obtain a perfected first priority security interest, the security
interest would be subordinate to, among others, holders of perfected security
interests and subsequent purchasers of the financed vehicles would take
possession free and clear of that security interest.
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 for a financed vehicle
will be sufficient to protect the trust's security interest in that financed
vehicle against the rights of subsequent purchasers of the vehicle or
subsequent lenders who take a security interest in the vehicle. There also
exists a risk that by not identifying the trust or any related indenture
trustee as the new secured party on the certificate of title for a financed
vehicle, through fraud or negligence, the security interest of the trust or
indenture trustee could be released.
MAINTENANCE OF PERFECTION OF SECURITY INTERESTS. If the owner of a
financed vehicle moves to a state other than the state in which the financed
vehicle was initially registered, under the laws of most states the perfected
security interest in the financed vehicle will continue for four months after
the relocation and thereafter until the owner re-registers the financed vehicle
in the new state. A majority of states generally require surrender of a
certificate of title to re-register a vehicle. Accordingly, Chase USA or its
affiliate must surrender possession of the certificate of title if it holds it
or, if the financed vehicle was originally registered in a state which the
secured party does not maintain possession of the certificate of title, Chase
USA or its affiliate receives a notice of the surrender of the certificate of
title for re-registration if the security interest in the financed vehicle is
noted on the certificate of title. Accordingly, Chase USA or its affiliate has
the opportunity to re-perfect the security interest in the financed vehicle in
the state of relocation. In states that do not require surrender of a
certificate of title for registration of a motor vehicle, re-registration could
defeat perfection.
In the ordinary course of servicing the motor vehicle loans, Chase USA or
its affiliate takes steps to re-perfect the security interests in the financed
vehicles upon receipt of notice of re-registration or information from the
obligor as to relocation. Similarly, when an obligor sells a financed vehicle,
Chase USA or its affiliate must surrender possession of the certificate of
title or will receive notice as a result of the notation of the originating
bank's lien. Accordingly Chase USA or its affiliate will have an opportunity to
require full payment and discharge of the motor vehicle loan before releasing
the lien. Under each sale and servicing agreement and pooling and servicing
agreement, the servicer will be obligated to take such steps, at the servicer's
expense, as are necessary to maintain perfection of the 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
49
perfected security interest in a financed vehicle. Certain U.S. federal tax
liens may have priority over the lien of a secured party in a financed vehicle.
Chase USA, as seller, will represent in each sale and servicing agreement or
pooling and servicing agreement, as applicable, that as of the applicable
cutoff date, it has no knowledge of any of these types of liens on any financed
vehicles. However, these types of liens could arise at any time during the term
of a motor vehicle loan. No notice will be given to the trustee if any of these
types of liens arise on the financed vehicles after the cutoff date.
ENFORCEMENT OF SECURITY INTERESTS. Chase USA, as servicer, on behalf of
each trust and any indenture trustee, may take action to enforce the security
interest in the financed vehicle securing any motor vehicle loan by
repossessing and selling the financed vehicle. The servicer may contract out to
third party contractors the actual repossession of the financed vehicle. 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", meaning without a breach of the peace, and, in the absence of
voluntary surrender and the ability to repossess without a 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
obligor and commercial reasonableness in the sale. If the servicer repossesses
a financed vehicle and sells it, the trust will have the first claim on the
sale proceeds before the claims of unsecured creditors or the holders of
subsequently perfected security interests or the claim of the obligor.
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 sale of the motor vehicle securing the obligor'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.
Other statutory provisions, including federal and state bankruptcy and
insolvency laws, and general equitable principles may limit or delay the
ability of a lender to repossess and resell collateral or enforce a deficiency
judgment.
CERTAIN MATTERS RELATING TO RECEIVERSHIP
We are chartered as a national banking association and are subject to
regulation and supervision by the Comptroller of the Currency. If we become
insolvent, are in an unsound condition, engage in violations of laws or
regulations or if other similar circumstances occur, the Comptroller is
authorized to appoint the FDIC as conservator or receiver.
As receiver the FDIC could:
o require the trustee of the trust to go through an administrative claims
procedure to establish its right to payments collected on the motor
vehicle loans held by the trust,
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
motor vehicle loans.
If the FDIC were to take any of these actions, payments of principal and
interest on the securities issued by the trust 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 motor vehicle loans to a trust. Under a recently
enacted FDIC regulation, however, the FDIC as conservator or receiver will not
reclaim, recover or re-characterize 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. We believe the new FDIC regulation
will apply to the transfer of motor
50
vehicle loans under a sale and servicing agreement or pooling and servicing
agreement, as applicable, and intend to satisfy 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 motor vehicle loans to the trust. In that event the
trust could be limited to seeking recovery based upon its security interest in
the motor vehicle loans. 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. These 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 motor vehicle loans 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 motor vehicle loans, payments of
principal and interest on the securities issued by the trust could be delayed
or reduced.
In the event that the FDIC refused to recognize the transfer of motor
vehicle loans and repudiated a trust's security interest in the motor vehicle
loans, 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, the
securityholders may not receive the full amount of interest owed 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.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws may impose
requirements applicable to the origination and lending pursuant to the motor
vehicle loans, 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,
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 "holder-in-due-course" 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 under the contract 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 motor vehicle loan, and these
criteria will include, among other things, that each motor vehicle loan
complies with all requirements of law in all material respects. Accordingly, if
an obligor has a claim against a trust for violation of any law and that claim
materially and adversely affects the related securityholders' interest in the
motor vehicle loan, that violation would result in the motor vehicle loan's
failure to satisfy a criterion in the related sale and servicing agreement or
pooling and servicing agreement and would give rise to Chase USA's obligation,
as seller, to repurchase the motor vehicle loan unless the failure is cured.
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EMPLOYEE BENEFIT PLAN CONSIDERATIONS
Before investing in the securities issued by any trust, a PLAN fiduciary
should consider, among other matters:
o ERISA'S fiduciary standards or similar standards under SIMILAR LAWS,
o whether an 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,
o whether those fiduciaries have authority to make an investment in the
securities under the applicable PLAN investment policies and governing
instruments, and
o rules under ERISA and the tax 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, 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 the securities of each
trust will indicate the expected treatment of those securities under the PLAN
ASSETS REGULATION. If the underlying assets of the trust or Chase USA were to
be deemed to be "plan assets" of PLANS under ERISA, this would result, among
other things, in:
o the application of the prudence and other fiduciary responsibility
standards of ERISA to activities engaged in by Chase USA, the trustee and
others and
o the possibility that certain transactions in which Chase USA, the trustee
and others may seek to engage could constitute "prohibited transactions"
under ERISA and the tax code.
If a prohibited transaction occurs for which no exemption is available, Chase
USA, the trustee and any other fiduciary that has engaged in the prohibited
transaction could be required to:
o restore to the PLAN any profit realized on the transaction and
o reimburse the PLAN for any losses suffered by it as a result of the
investment.
In addition, each disqualified person, within the meaning of Section 4975 of
the tax 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, an additional tax of 100% of the amount involved. PLAN fiduciaries who
decide to invest in the securities issued by a trust 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 Chase USA or the trust. With respect to an individual retirement
account, or 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 it tax-exempt status.
Section 406 of ERISA and Section 4975 of the tax code prohibit PLANS
subject to Title I of ERISA or Section 4975 of the tax 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 tax code. The acquisition and/or
ownership of the securities issued by a trust 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 tax
code, unless those
52
securities are acquired and are held in accordance with an applicable
statutory, regulatory, class or individual prohibited transaction exemption. In
this regard, the U.S. Department of Labor has issued prohibited transaction
class exemptions, 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 issued by a trust, particularly if, as described above, the assets
of the trust are considered to be plan assets.
SIMILAR LAWS governing the investment and management of the assets of
governmental, church and non-U.S. plans may contain fiduciary and prohibited
transaction requirements similar to those under ERISA and the tax code.
Accordingly, fiduciaries of governmental PLANS, church PLANS and non-U.S.
PLANS, in consultation with their advisors, should consider the impact on
investments in the securities of any SIMILAR LAWS and the considerations
described above.
PLAN OF DISTRIBUTION
The securities of each trust may be sold to or through underwriters by a
negotiated firm commitment underwriting and public reoffering by the
underwriters or other underwriting arrangement as may be specified in the
related prospectus supplement or may be placed either directly or through
agents. Chase USA intends the securities to be offered through those various
methods from time to time and that offerings may be made concurrently through
more than one of those methods or that an offering of the securities issued by
a trust may be made through a combination of those methods.
Each prospectus supplement will either:
o set forth the price at which each class of securities being offered will
be offered to the public and any concessions that may be offered to
dealers participating in the offering of the securities or
o specify that the securities are to be resold by the underwriters in
negotiated transactions at varying prices to be determined at the time of
the sale.
After the initial public offering of any securities, public offering prices and
concessions may be changed.
Each underwriting agreement will provide that Chase USA will indemnify the
underwriters against certain civil liabilities, including liabilities under the
Securities Act of 1933, as amended, or Chase USA will contribute to payments
the underwriters may be required to make in respect of those liabilities.
Each trust may, from time to time, invest the funds in its trust accounts
in eligible investments acquired from the underwriters or from Chase USA or any
of its affiliates.
Any underwriter will be permitted to engage in the following transactions,
to the extent permitted by Regulation M under the Securities Exchange Act of
1934:
o over-allotment transactions, which involve syndicate sales in excess of
the offering size creating a syndicate short position,
o stabilizing transactions, which permit bids to purchase the offered
securities so long as the stabilizing bids do not exceed a specified
maximum,
o syndicate covering transactions, which involve purchases of the offered
securities in the open market after the distribution has been completed in
order to cover syndicate short positions, and
53
o penalty bids, which permit the underwriters to reclaim a selling
concession from a syndicate member when the offered securities originally
sold by the syndicate member are purchased in a syndicate covering
transaction.
Such over-allotment transactions, stabilizing transactions, syndicate covering
transactions and penalty bids may cause prices of the offered securities to be
higher than they would otherwise be in the absence of such transactions.
Neither Chase USA nor any of the underwriters represent that the underwriters
will engage in any these transactions nor that these transactions, once
commenced, will not be discontinued without notice.
This prospectus and the attached prospectus supplement may be used by J.P.
Morgan Securities Inc., an affiliate of Chase USA and a subsidiary of J.P.
Morgan Chase & Co., in connection with offers and sales related to
market-making transactions in the offered securities. J.P. Morgan Securities
Inc. may act as principal or agent in those transactions. Such sales will be
made at prices related to prevailing market prices at the time of sale.
RATINGS
The securities of each trust 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.
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 motor vehicle loans 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 motor vehicle loans 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 motor vehicle loans, investors in interest-only securities
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.
LEGAL MATTERS
Certain legal matters relating to the issuance of the securities by each
trust will be passed upon for Chase USA by Simpson Thacher & Bartlett, New
York, New York, and other counsel as specified in the related prospectus
supplement. Certain legal matters will be passed upon for the underwriters by
Sidley Austin Brown & Wood LLP, New York, New York. From time to time Simpson
Thacher & Bartlett and Brown & Wood LLP provide legal services to Chase USA and
its affiliates.
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GLOSSARY OF TERMS FOR PROSPECTUS
ACTUARIAL RECEIVABLES provide for amortization of the loan over a series
of fixed level payment monthly installments. Each monthly installment,
including the final payment, 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.
ADMINISTRATION AGREEMENT means, with respect to any trust that issues
notes, an agreement among The Chase Manhattan Bank, as administrator, a trust
and the related indenture trustee, pursuant to which the administrator agrees
to perform certain administrative duties on behalf of the trust.
ADMINISTRATOR means The Chase Manhattan Bank as the administrator of a
trust issuing notes.
ADVANCES are amounts advanced by Chase USA, as servicer, in respect of
delinquent scheduled payments on the motor vehicle loans held by a trust in the
amounts and under the circumstances specified in the related prospectus
supplement.
BOOK-ENTRY SECURITIES are securities that are held in the U.S. through DTC
and in Europe through Clearstream or Euroclear.
CHASE AUTO PORTFOLIO is the portfolio of motor vehicle loans originated by
Chase USA or one of the other originating banks either through or with the
involvement of dealers acting pursuant to dealer agreements and serviced by
Chase USA or one of its affiliates.
CHASE USA means Chase Manhattan Bank USA, National Association.
CLEARSTREAM is Clearstream Banking, societe anonyme, a professional
depository under the laws of Luxembourg.
CLEARSTREAM CUSTOMERS are organizations participating in Clearstream's
book-entry settlement system for trading of securities in Europe.
CLOSING DATE is the date specified in the related prospectus supplement as
the date on which the trust issues its securities.
COLLECTION PERIOD means, with respect to the securities issued by each
trust, the period specified in the related prospectus supplement with respect
to calculating payments and proceeds of the related motor vehicle loans.
CONTROLLING CLASS means, with respect to any trust, the most senior class
of securities issued by that trust as long as those securities are outstanding,
and thereafter, in order of seniority, each other class of securities issue by
that trust described in the prospectus supplement as long as they are
outstanding.
COOPERATIVE means Euroclear Clearance System, S.C., a Belgian cooperative
corporation.
CUTOFF DATE is the date specified in the related prospectus supplement as
the date as of which the motor vehicle loans are being transferred to the
trust.
DEFINITIVE SECURITIES are securities in fully registered, certificated
form.
DTC means The Depository Trust Company and any successor depository
selected by or on behalf of the trust.
ELIGIBLE DEPOSIT ACCOUNT is 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.
ERISA means Employee Retirement Income Security Act of 1974, as amended.
55
EUROCLEAR is the system operated by Morgan Guaranty Trust Company of New
York's Brussels, Belgium office under contract with the Cooperative.
EUROCLEAR PARTICIPANTS are participants in the Euroclear system.
EVENT OF DEFAULT is one of the events under each indenture specified in
the section of this prospectus entitled "The Indenture--Events of Default."
EVENT OF SERVICING TERMINATION is one of the events under each sale and
servicing agreement or pooling and servicing agreement, as applicable,
specified in the section of this prospectus entitled "Transfer and Servicing
Agreements--Servicing--Events of Servicing Termination."
FDIC is the Federal Deposit Insurance Corporation.
FINAL PAYMENT RECEIVABLES are either ACTUARIAL RECEIVABLES or SIMPLE
INTEREST RECEIVABLES that provide for a final scheduled payment which is
greater than the scheduled monthly payments. The obligation to make the final
scheduled payment on a FINAL PAYMENT RECEIVABLE may be satisfied by:
o a cash payment in full of the amount due,
o transferring the financed vehicle to us or
o refinancing the final scheduled payment.
FUNDING PERIOD is the period, if any, after the closing date specified in
the related prospectus supplement during which the seller will sell additional
motor vehicle loans to the trust.
INDENTURE is an agreement between the trust and the applicable indenture
trustee pursuant to which the trust will issue notes.
INDENTURE TRUSTEE means, with respect to any trust that issues notes, the
trustee for the holders of the notes issued by a trust identified in the
related prospectus supplement.
MOTOR VEHICLE LOANS are
o motor vehicle retail installment sales contracts relating to new or
used automobiles and light-duty trucks purchased from dealers who
regularly originate and sell motor vehicle loans to Chase USA or one of
the originating banks or
o purchase money loans secured by new or used automobiles and light-duty
trucks made by Chase USA or one of the originating banks directly or
pursuant to arrangements with dealers in accordance with approved
agreements with the dealers.
ORIGINATING BANK means Chase USA, The Chase Manhattan Bank or any bank
affiliated with either of them engaged in the business of originating motor
vehicle loans.
PAYMENT DATE means the date for the payment or distribution of principal
of and interest on the securities of each trust specified in the related
prospectus supplement.
PERMITTED INVESTMENTS are investments confirmed by the rating agencies
rating the securities issued by a trust as being consistent with the rating of
those securities. These investments may include securities issued by Chase USA
or its affiliates or trusts originated by Chase USA or its affiliates, and may
also include money market mutual funds for which The Chase Manhattan Bank 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.
PLAN ASSETS REGULATION is regulation, 29 C.F.R. Section 2510.3-101, issued
by the U.S. Department of Labor.
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 tax code or provisions under SIMILAR LAWS, and entities
whose underlying assets are considered to include "plan assets" of such plans,
accounts and arrangements.
56
POOLING AND SERVICING AGREEMENT is, with respect to a trust not issuing
notes, an agreement between Chase USA, as seller and servicer, and the
applicable trustee pursuant to which a trust is created, motor vehicle loans
are transferred to the trust, the servicer agrees to service the motor vehicle
loans and certificates are issued.
PRE-FUNDING ACCOUNT is, with respect to a trust that is authorized to
purchase additional receivables during a funding period specified in the
related prospectus supplement, a trust account in which the seller deposits a
sum on the closing date to be used by the trust to pay for additional motor
vehicle loans to be acquired by the trust during the funding period.
PTCE is a Prohibited Transaction Class Exemption under ERISA.
QUALIFIED INSTITUTION is a depository institution, including Chase USA and
The Chase Manhattan Bank, organized under the laws of the United States or any
state or incorporated under the laws of a foreign jurisdiction with a branch or
agency located in the United States or any state 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 rating the securities issued by a trust as being
consistent with the ratings of those securities and the deposits of which are
insured by the FDIC.
QUALIFIED TRUST INSTITUTION is an institution organized under the laws of
the United States or any state 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 the laws of the United States or any state 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 rating the securities issued by a trust as being consistent with
the ratings of those securities.
RELATED DOCUMENTS are, in the case of a trust issuing notes, the related
sale and servicing agreement, indenture, trust agreement, administration
agreement, any agreements relating to the credit enhancement for the securities
issued by that trust and depository agreements with DTC, and, in the case of a
trust not issuing notes, the related pooling and servicing agreement, any
agreements relating to the credit enhancement for the securities issued by that
trust and a depository agreement with DTC.
REPURCHASE AMOUNT of a motor vehicle loan being repurchased by Chase USA,
as seller, or purchased, as servicer, pursuant to the sale and servicing
agreement or pooling and servicing agreement, as applicable, is the sum, as of
the last day of the Collection Period on which such motor vehicle loan is being
repurchased or purchased, of the principal balance of that motor vehicle loan
plus accrued and unpaid interest thereon, calculated in the manner specified in
the related prospectus supplement.
SALE AND SERVICING AGREEMENT is, with respect to a trust that issues
notes, an agreement between Chase USA, as seller and servicer, and the trust
pursuant to which motor vehicle loans are transferred to the trust and the
servicer agrees to service the motor vehicle loans.
SELLER is Chase USA, as the seller of motor vehicle loans to a trust.
SERVICER is Chase USA, as the servicer of the motor vehicle loans
transferred to a trust, pursuant to a sale and servicing agreement or pooling
and servicing agreement, as applicable, and any successor to Chase USA as
servicer under that agreement.
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 tax code.
SIMPLE INTEREST RECEIVABLES provide for the allocation of payments made 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
57
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 under a SIMPLE INTEREST RECEIVABLE pays the fixed monthly installment
in advance of the date on which a payment is due, 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
the due date, the portion of the payment allocable to finance charges for the
period since the last payment will be greater than it would be if the payment
were made on the due date, and the portion of the payment allocable to reduce
the amount financed will be correspondingly smaller. When necessary, an
adjustment is made at the maturity of the loan to the scheduled final payment
to reflect the larger or smaller allocations of payments, as the case may be,
to the amount financed under a SIMPLE INTEREST RECEIVABLE as a result of early
or late payments.
TAX CODE is the Internal Revenue Code of 1986, as amended.
TRUST AGREEMENT is, with respect to a trust issuing notes, a trust
agreement between Chase USA, as depositor, and the trustee pursuant to which
the trust is created and certificates are issued by the trust.
TRUSTEE is the trustee of the trust identified in the related prospectus
supplement.
UCC is the Uniform Commercial Code as in effect in the applicable
jurisdiction from time to time.
58
PROSPECTUS SUPPLEMENT
$1,299,883,047
CHASE MANHATTAN AUTO OWNER TRUST 2001-B
$1,267,380,000 ASSET BACKED NOTES
$32,503,047 ASSET BACKED CERTIFICATES
CHASE MANHATTAN BANK USA, NATIONAL ASSOCIATION
SELLER AND SERVICER
UNDERWRITERS OF THE NOTES
JPMORGAN
BEAR, STEARNS & CO. INC.
COUNTRYWIDE SECURITIES CORPORATION
LEHMAN BROTHERS
UTENDAHL CAPITAL PARTNERS, L.P.
UNDERWRITER OF THE CERTIFICATES
JPMORGAN
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 JANUARY
28, 2002 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT).