Prospectus Supplement
(To Prospectus dated February 11, 1998)
$614,062,000
Case Equipment Loan Trust 1998-A
$ 72,113,000 CLASS A-1 5.545% ASSET BACKED NOTES
$190,750,000 CLASS A-2 5.592% ASSET BACKED NOTES
$145,750,000 CLASS A-3 5.740% ASSET BACKED NOTES
$180,449,000 CLASS A-4 5.830% ASSET BACKED NOTES
$ 25,000,000 CLASS B 5.940% ASSET BACKED NOTES
Case Receivables II Inc.
SELLER
Case Credit Corporation
SERVICER
The Case Equipment Loan Trust 1998-A (the "Trust") will be formed pursuant to a
Trust Agreement, to be dated as of February 1, 1998, between Case Receivables II
Inc. (the "Seller") and The Bank of New York, as Trustee, and will issue the
Class A-1 5.545% Asset Backed Notes (the "A-1 Notes"), the Class A-2 5.592%
Asset Backed Notes (the "A-2 Notes"), the Class A-3 5.740% Asset Backed Notes
(the "A-3 Notes"), the Class A-4 5.830% Asset Backed Notes (the "A-4 Notes";
together with the A-1 Notes, the A-2 Notes and the A-3 Notes, the "Class A
Notes") and the Class B 5.940% Asset Backed Notes (the "Class B Notes"; and
together with the Class A Notes, the "Notes") offered hereby. The Notes will be
issued pursuant to an Indenture, to be dated as of February 1, 1998 (the
"Indenture"),
(CONTINUED ON FOLLOWING PAGE)
Prospective investors should consider the factors set forth under "Risk Factors"
herein on page S-13 and on page 9 of the accompanying Prospectus.
THE NOTES REPRESENT OBLIGATIONS OF THE TRUST ONLY AND DO NOT REPRESENT
OBLIGATIONS OF OR INTERESTS IN THE SELLER, THE SERVICER OR ANY OF THEIR
RESPECTIVE AFFILIATES. NEITHER THE NOTES NOR THE RECEIVABLES ARE INSURED OR
GUARANTEED BY ANY GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------------------------
Price to Underwriting Proceeds to the
Public (1) Discount Seller (1)(2)
- -------------------------------------------------------------------------------------------------
Per A-1 Note 100.000000% 0.095% 99.905000%
- -------------------------------------------------------------------------------------------------
Per A-2 Note 100.000000% 0.150% 99.850000%
- -------------------------------------------------------------------------------------------------
Per A-3 Note 99.981983% 0.230% 99.751983%
- -------------------------------------------------------------------------------------------------
Per A-4 Note 99.983185% 0.250% 99.733185%
- -------------------------------------------------------------------------------------------------
Per Class B Note 99.988067% 0.350% 99.638067%
- -------------------------------------------------------------------------------------------------
Total $614,002,414.47 $1,228,479.85 $612,773,934.62
- -------------------------------------------------------------------------------------------------
(1) Plus accrued interest, if any, from February 23, 1998.
(2) Before deducting expenses, estimated to be $600,000.
The Notes are offered by the Underwriters when, as and if issued and accepted by
the Underwriters and subject to their right to reject orders in whole or in
part. It is expected that delivery of the Notes will be made in book-entry form
only through the Same Day Funds Settlement System of The Depository Trust
Company, Cedel Bank, societe anonyme, and the Euroclear System on or about
February 23, 1998.
Underwriters of the Class A Notes
J.P. Morgan & Co.
BancAmerica Robertson Stephens
Chase Securities Inc.
Credit Suisse First Boston
First Union Capital Markets
UBS Securities
Underwriters of the Class B Notes
J.P. Morgan & Co. Chase Securities Inc.
February 11, 1998
(CONTINUED FROM PRECEDING PAGE)
between the Trust and Harris Trust and Savings Bank, as Indenture Trustee. The
Trust will also issue $10,938,000 5.940% Asset Backed Certificates (the
"Certificates"), but the Certificates are not offered hereby. The assets of the
Trust will include a pool of fixed rate retail installment sale contracts (the
"Receivables"), secured by security interests in the agricultural and
construction equipment financed thereby, and certain monies due or received
thereunder on or after January 31, 1998 and monies on deposit in a trust account
(the "Pre-Funding Account"). Additional fixed rate retail installment contracts
(the "Subsequent Receivables") will be purchased by the Trust from the Seller
from time to time on or before the August 1998 Payment Date with funds on
deposit in the Pre-Funding Account. The Notes will be secured by the assets of
the Trust pursuant to the Indenture.
Interest on the Notes will accrue at the respective fixed per annum interest
rate specified above for each class of Notes (each a "Class"). Interest on the
Notes will be payable on the fifteenth day of each calendar month or, if such
day is not a business day, on the next business day (each, a "Payment Date"),
commencing March 16, 1998. Principal of the Notes will be payable on each
Payment Date to the extent described herein. No principal will be paid on the
A-2 Notes until the A-1 Notes have been paid in full. No principal will be paid
on the A-3 Notes until the A-2 Notes have been paid in full. No principal will
be paid on the A-4 Notes until the A-3 Notes have been paid in full. Principal
on the Class B Notes will be payable concurrently with principal on the Class A
Notes, but will be subordinated in priority to payments due on the Class A Notes
to the extent described herein.
The Certificates will bear interest at the rate per annum specified above,
except that during the Funding Period no interest will accrue on the Pre-Funded
Percentage of the Certificate Balance. Distributions of interest and principal
on the Certificates will be subordinated in priority of payment to interest and
principal on the Notes to the extent described herein.
The final scheduled Payment Date for the A-1 Notes, the A-2 Notes and the A-3
Notes will be the March 1999 Payment Date, the July 2001 Payment Date and the
August 2002 Payment Date, respectively. The final scheduled Payment Date for the
A-4 Notes and the Class B Notes will be the February 2005 Payment Date. However,
payment in full of any Class of the Notes could occur earlier than such date as
described herein. In addition, the A-4 Notes and Class B Notes will be subject
to redemption on any Payment Date after the A-1 Notes, A-2 Notes and A-3 Notes
have been repaid in full and the Servicer exercises its option to purchase the
Receivables when the aggregate principal balance of the Receivables has declined
to 10% or less of the initial aggregate principal balance of the Receivables
purchased by the Trust. Any funds remaining in the Pre-Funding Account at the
end of the Funding Period will be applied towards the mandatory redemption of
(a) the A-1 Notes and (b) if the A-1 Notes are redeemed in full, the A-2 Notes.
In the unlikely event that the A-2 Notes are redeemed in full and there are any
remaining funds in the Pre-Funding Account, such funds will be applied towards
the redemption of the A-3 Notes. In the unlikely event that the A-3 Notes are
redeemed in full and there are any remaining funds in the Pre-Funding Account,
such funds will be applied towards the redemption of the A-4 Notes.
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT THE
OFFERING OF THE NOTES. ADDITIONAL INFORMATION IS CONTAINED IN THE PROSPECTUS,
AND PROSPECTIVE INVESTORS ARE URGED TO READ BOTH THIS PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS IN FULL. SALES OF THE NOTES MAY NOT BE CONSUMMATED UNLESS THE
PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. TO
THE EXTENT ANY STATEMENTS IN THIS PROSPECTUS SUPPLEMENT CONFLICT WITH STATEMENTS
IN THE PROSPECTUS, THE STATEMENTS IN THIS PROSPECTUS SUPPLEMENT SHALL CONTROL.
Upon receipt of a request by an investor, or his or her representative, within
the period during which there is a prospectus delivery obligation, the
Underwriters will transmit or cause to be transmitted promptly, without charge,
a paper copy of this Prospectus Supplement and a Prospectus or this Prospectus
Supplement and a Prospectus encoded in an electronic format.
S-2
Reports to Noteholders
Unless and until Definitive Notes are issued, monthly unaudited reports
containing information concerning the Receivables will be prepared by the
Servicer and sent on behalf of the Trust only to Cede & Co. ("Cede"), as nominee
of The Depository Trust Company ("DTC") and registered holder of the Notes. See
"Certain Information Regarding the Offered Securities-- Book-Entry Registration"
and "--Reports to Offered Securityholders" in the accompanying Prospectus (the
"Prospectus"). Such reports will not constitute financial statements prepared in
accordance with generally accepted accounting principles. The Seller, as
originator of the Trust, will file with the Securities and Exchange Commission
(the "Commission") such periodic reports as are required under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations of the Commission thereunder.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE NOTES. SPECIFICALLY,
THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING, AND MAY BID FOR,
AND PURCHASE, THE NOTES IN THE OPEN MARKET, SEE "UNDERWRITING."
No dealer, salesman or other person has been authorized to give any information
or to make any representations other than those contained or incorporated by
reference in this Prospectus Supplement or the Prospectus and, if given or made,
such information or representations must not be relied upon. This Prospectus
Supplement and the Prospectus do not constitute an offer to sell or a
solicitation of an offer to buy any securities other than the Securities offered
hereby, nor an offer of the Securities in any state or jurisdiction in which, or
to any person to whom, such offer would be unlawful. The delivery of this
Prospectus Supplement or the Prospectus at any time does not imply that
information herein or therein is correct as of any time subsequent to its date.
Until May 12, 1998 (90 days after the date of this Prospectus Supplement), all
dealers effecting transactions in the Notes, whether or not participating in
this distribution, may be required to deliver a Prospectus Supplement and a
Prospectus. This is in addition to the obligation of dealers to deliver a
Prospectus Supplement and a Prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
Table of Contents
Prospectus Supplement
Page
Reports to Noteholders......................... S-3
Summary of Terms............................... S-4
Risk Factors................................... S-13
The Trust...................................... S-16
The Receivables Pool........................... S-17
Weighted Average Life of the Notes............. S-22
Description of the Notes....................... S-26
Description of the Certificates................ S-28
Page
Description of the Transfer and Servicing
Agreements................................... S-28
Legal Investment............................... S-36
ERISA Considerations........................... S-36
Underwriting................................... S-37
Legal Opinions................................. S-39
Index of Terms................................. S-40
Prospectus
Page
Available Information.......................... 2
Incorporation of Certain Documents by
Reference.................................... 2
Summary of Terms............................... 3
Risk Factors................................... 9
The Trusts..................................... 12
The Receivables Pools.......................... 13
Weighted Average Life of the Securities........ 16
Pool Factors and Trading Information........... 17
Use of Proceeds................................ 17
The Seller, Case Credit Corporation and Case
Corporation.................................. 17
Description of the Notes....................... 19
Page
Description of the Certificates................ 23
Certain Information Regarding the Securities... 24
Description of the Transfer and Servicing
Agreements................................... 30
Certain Legal Aspect of the Receivables........ 39
Certain Federal Income Tax Consequences........ 41
Certain State Tax Consequences................. 48
ERISA Considerations........................... 49
Plan of Distribution........................... 50
Legal Opinions................................. 50
Index of Terms................................. 51
Annex I........................................ 54
S-3
Summary of Terms
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE DETAILED
INFORMATION APPEARING ELSEWHERE HEREIN AND IN THE PROSPECTUS. CERTAIN
CAPITALIZED TERMS USED HEREIN ARE DEFINED ELSEWHERE IN THIS PROSPECTUS
SUPPLEMENT ON THE PAGES INDICATED IN THE "INDEX OF TERMS" OR, TO THE EXTENT NOT
DEFINED HEREIN, HAVE THE MEANINGS ASSIGNED TO SUCH TERMS IN THE PROSPECTUS.
Issuer....................... Case Equipment Loan Trust 1998-A (the "Trust" or the
"Issuer"), a Delaware business trust to be formed by the
Seller and the Trustee pursuant to the Trust Agreement, to
be dated as of February 1, 1998 (the "Trust Agreement")
between the Seller and the Trustee, acting thereunder not in
its individual capacity but solely as Trustee.
Seller....................... Case Receivables II Inc. (the "Seller"), a Delaware
corporation and a wholly-owned subsidiary of Case Credit
Corporation.
Servicer..................... Case Credit Corporation, a Delaware corporation (the
"Servicer" or "Case Credit").
Indenture Trustee............ Harris Trust and Savings Bank, as indenture trustee under
the Indenture (the "Indenture Trustee").
Trustee...................... The Bank of New York, as trustee under the Trust Agreement
(the "Trustee").
The Class A Notes............ Class A-1 5.545% Asset Backed Notes (the "A-1 Notes") in the
aggregate principal amount of $72,113,000.
Class A-2 5.592% Asset Backed Notes (the "A-2 Notes") in the
aggregate principal amount of $190,750,000.
Class A-3 5.740% Asset Backed Notes (the "A-3 Notes") in the
aggregate principal amount of $145,750,000.
Class A-4 5.830% Asset Backed Notes (the "A-4 Notes" and
together with the A-1 Notes, the A-2 Notes and the A-3
Notes, the "Class A Notes") in the aggregate principal
amount of $180,449,000.
The Class B Notes............ Class B 5.940% Asset Backed Notes (the "Class B Notes"; and
together with the Class A Notes, the "Notes") in the
aggregate principal amount of $25,000,000. The Class B Notes
will be subordinated to the Class A Notes to the extent
described herein.
The Notes will be issued pursuant to an Indenture, to be
dated as of February 1, 1998 (the "Indenture"), between the
Issuer and the Indenture Trustee and will be secured by the
assets of the Trust pursuant to the Indenture. The aggregate
outstanding principal amount of the Notes from time to time
is referred to herein as the "Note Balance."
The Trust.................... The Trust will be established under the laws of the State of
Delaware by the Trust Agreement. The activities of the Trust
will be limited by the terms of the Trust Agreement to
purchasing, owning and managing the Receivables and other
activities related thereto. The Trust property will include
(i) the Receivables and all monies (including accrued
interest) paid thereunder on or after the applicable Cutoff
Date, (ii) the Certificate Distribution Account, the
Collection Account, the Negative Carry Account, the Note
Distribution Account, the Pre-Funding Account and the Spread
Account, (iii) security interests in the Financed Equipment,
S-4
(iv) the rights to proceeds from certain insurance policies
covering the Financed Equipment or the Obligors, (v) the
interest of the Seller in any proceeds from recourse to
Dealers on Receivables (but excluding any amounts contained
in Dealers' reserve accounts), and (vi) any property
acquired by the Trust that secured a Receivable. In addition
to the Notes, the Trust will also issue 5.940% Asset Backed
Certificates (the "Certificates") in the aggregate principal
amount of $10,938,000. The Seller, the Servicer and/or one
of their affiliates will initially purchase the entire
principal amount of the Certificates. The Certificates
represent fractional undivided interests in the Trust and
will be issued pursuant to the Trust Agreement. The
Certificates are not offered hereby.
The Receivables.............. The Receivables consist of retail installment sale contracts
("Contracts") secured by new or used agricultural or
construction equipment, including rights to receive certain
payments made with respect to such Receivables, and security
interests in the equipment financed thereby (the "Financed
Equipment"), and the proceeds thereof. On February 23, 1998
(the "Closing Date"), the Seller will purchase certain
Contracts (the "Purchased Contracts") from Case Credit
pursuant to a Purchase Agreement, to be dated as of February
1, 1998 (the "Purchase Agreement"), between Case Credit and
the Seller. As of January 31, 1998 (the "Initial Cutoff
Date"), the Seller owned certain Contracts purchased from
Case Credit pursuant to the Liquidity Receivables Purchase
Agreement (the "Owned Contracts," and, together with the
Purchased Contracts, the "Initial Receivables"), which will
be sold to the Trust. As of the Initial Cutoff Date, the
aggregate Contract Value of the Initial Receivables was
approximately $325,333,194. The Seller will sell the Initial
Receivables to the Trust pursuant to a Sale and Servicing
Agreement, to be dated as of February 1, 1998 (the "Sale and
Servicing Agreement"), among the Seller, the Servicer and
the Trust. On and following the Closing Date, pursuant to
the Sale and Servicing Agreement, the Seller will be
obligated, subject only to the availability thereof, to
sell, and the Trust will be obligated to purchase, subject
to the satisfaction of certain conditions set forth therein,
Subsequent Receivables from time to time during the Funding
Period having an aggregate Contract Value of approximately
$299,666,806, such amount being equal to the amount on
deposit in the Pre-Funding Account on the Closing Date (the
"Initial Pre-Funded Amount"). The Seller will designate as a
cutoff date (each, a "Subsequent Cutoff Date") the date as
of which particular Subsequent Receivables are conveyed to
the Trust. It is expected that Subsequent Receivables will
be conveyed to the Trust monthly on dates specified by the
Seller (each date on which Subsequent Receivables are
conveyed being referred to as a "Subsequent Transfer Date")
occurring during the Funding Period. The "Subsequent
Receivables" together with the "Initial Receivables" are
referred to herein as the "Receivables." As used herein, the
"Funding Period" means the period from and including the
Closing Date until the earliest of (a) the Determination
Date on which the amount on deposit in the Pre-Funding
Account (after giving effect to any transfers therefrom in
connection with the transfer of Subsequent Receivables to
the Issuer on or before such Determination Date) is less
than $100,000, (b) the occurrence of an Event of Default
under the Indenture or a Servicer Default under the Sale and
Servicing Agreement, (c) the occurrence of certain events of
insolvency with respect to the Seller or the Servicer and
(d) the close of business on the August 1998 Payment Date.
See "Description of the Transfer and Servicing
Agreement--Sale and Assignment of Initial Receivables and
Subsequent Receivables."
S-5
The Receivables arose and will arise from financing provided
in connection with retail sales by dealers (the "Dealers")
of new or used agricultural and construction equipment and
were purchased by Case Credit pursuant to agreements with
the Dealers or were originated directly by retail outlets
owned by Case Corporation ("Case") and immediately assigned
to Case Credit. The Owned Contracts were sold on a monthly
basis by Case Credit to the Seller pursuant to the Liquidity
Receivables Purchase Agreement. The Initial Receivables have
been selected, and the Subsequent Receivables will be
selected, from the portfolio of Contracts owned by the
Seller based on the criteria specified in the Sale and
Servicing Agreement. See "The Receivables Pool" below and
"The Receivables Pools" in the Prospectus. Each Initial
Receivable is a Precomputed Receivable, including some
Precomputed Simple Rebate Receivables. As of the Initial
Cutoff Date, the weighted average annual percentage rate
(the "APR") of the Initial Receivables was approximately
8.758%, the weighted average remaining maturity (I.E., the
period from but excluding the Initial Cutoff Date to and
including each Initial Receivable's maturity date) of the
Initial Receivables was approximately 50.19 months and the
weighted average original maturity of the Initial
Receivables was approximately 52.79 months. No Initial
Receivable has, and no Subsequent Receivable will have, a
scheduled maturity later than the date that is six months
prior to the Final Scheduled Maturity Date.
Subsequent Receivables may be originated by the Dealers or
by the retail outlets owned by Case at a later date using
credit criteria different from those that were applied to
the Initial Receivables and may be of a different credit
quality and seasoning. In addition, following the transfer
of Subsequent Receivables to the Trust, the characteristics
of the entire pool of Receivables included in the Trust may
vary from those of the Initial Receivables. See "Risk
Factors--The Receivables and the Pre-Funding Account" and
"The Receivables Pool."
The "Pool Balance" at any time represents the sum of the
aggregate Contract Values of the Receivables at the
beginning of a Collection Period, after giving effect to all
payments received from Obligors and Purchase Amounts to be
remitted by the Servicer or the Seller, as the case may be,
with respect to the preceding Collection Period and all
losses realized on Receivables liquidated during such
preceding Collection Period. The "Contract Value" of the
Receivables means generally, with respect to any day
(including the Initial Cutoff Date), the sum of (a) the
present value of the future scheduled payments on the
Receivables discounted monthly at an annual rate equal to
(i) in the case of the Initial Receivables, the Initial
Cutoff Date APR and (ii) in the case of Subsequent
Receivables, the applicable Subsequent Cutoff Date APR plus
(b) the amount of any past due payments. In effect, the
Contract Value of the Receivables is generally equivalent to
the aggregate principal balance of the Receivables. "Col-
lection Period" means, with respect to any Payment Date, the
period from and including the end of the previous Collection
Period (or, if for the first Payment Date, the day after the
Initial Cutoff Date) to but excluding the sixth day of the
calendar month in which the Payment Date occurs.
Terms of the Notes:
A. Interest Payments......... The A-1 Notes will bear interest at the rate of 5.545% per
annum (the "A-1 Note Rate"); the A-2 Notes will bear
interest at the rate of 5.592% per annum (the "A-2 Note
Rate"); the A-3 Notes will bear interest at the rate of
5.740% per annum (the "A-3 Note Rate"); the A-4 Notes will
bear interest at the rate of
S-6
5.830% per annum (the "A-4 Note Rate"); and the Class B
Notes will bear interest at the rate of 5.940% per annum
(the "Class B Rate"). Interest on the A-1 Notes and the A-2
Notes will be calculated in each case on the basis of the
actual number of days in the applicable interest period and
a 360-day year. Interest on the A-3 Notes, the A-4 Notes and
the Class B Notes will be calculated in each case on the
basis of a 360-day year of twelve 30-day months. Interest on
the outstanding principal amount of the Notes will accrue
from the Closing Date, or from the most recent Payment Date
on which interest has been paid, to but excluding the
following Payment Date. Interest on the Class A Notes will
be payable on the fifteenth day of each calendar month or,
if any such date is not a business day, on the next business
day (each, a "Payment Date"), commencing March 16, 1998 to
the holders of record of the A-1 Notes (the "A-1
Noteholders"), the holders of record of the A-2 Notes (the
"A-2 Noteholders"), the holders of record of the A-3 Notes
(the "A-3 Noteholders"), and the holders of record of the
A-4 Notes (the "A-4 Noteholders"; together with the A-1
Noteholders, the A-2 Noteholders and the A-3 Noteholders,
the "Class A Noteholders") as of the fourteenth day of the
calendar month in which such Payment Date will occur or, if
Definitive Notes are issued, the close of business on the
last day of the calendar month preceding the month of such
Payment Date, whether or not such day is a Business Day (the
"Record Date").
Interest on the Class B Notes will not be paid on any
Payment Date until interest payments on the Class A Notes
have been paid in full. Subject to the foregoing, interest
on the Class B Notes will be paid on each Payment Date to
the holders of record of the Class B Notes (the "Class B
Noteholders"; together with the Class A Noteholders, the
"Noteholders") as of the Record Date for such Payment Date.
Interest payments on the Notes will generally be funded from
the Total Distribution Amount remaining after the payment of
the Administration Fee, the Servicing Fee (if neither Case
Credit nor an affiliate of Case Credit is the Servicer) and,
in the case of the Class B Notes, payments of interest on
the Class A Notes, and from amounts on deposit in the Spread
Account. If the amount of interest on the Class A Notes
payable on any Payment Date exceeds the amounts available
from these sources, the A-1 Noteholders, A-2 Noteholders,
A-3 Noteholders and the A-4 Noteholders will receive their
ratable share (based upon the total amount of interest due
to each of them) of the amount available to be distributed
in respect of interest on the Class A Notes.
Interest on the Certificates will only be paid on any
Payment Date generally to the extent of funds available
following payment of the Servicing Fee (if Case Credit or an
affiliate of Case Credit is not the Servicer), the
Administration Fee and distributions in respect of the Notes
from the Collection Account and the Spread Account.
B. Principal Payments........ The principal of the Class A Notes will be payable on each
Payment Date in an amount generally equal to the Class A
Noteholders' Monthly Principal Distributable Amount for such
Payment Date to the extent of funds available therefor as
described herein.
On each Payment Date before the Payment Date on which the
A-1 Notes have been paid in full, principal of the A-1 Notes
will be payable in an amount generally equal to 100% of the
Class A Noteholders' Monthly Principal Distributable Amount.
On each Payment Date on and after the Payment Date on which
the A-1 Notes have been paid in full, principal of the A-2
Notes will be payable,
S-7
until the A-2 Notes have been paid in full, in an amount
generally equal to 100% of the Class A Noteholders' Monthly
Principal Distributable Amount (less any portion of the
Class A Noteholders' Monthly Principal Distributable Amount
applied on such Payment Date to reduce the outstanding
principal amount of the A-1 Notes to zero). On each Payment
Date on and after the Payment Date on which the A-2 Notes
have been paid in full, principal of the A-3 Notes will be
payable, until the A-3 Notes have been paid in full, in an
amount generally equal to 100% of the Class A Noteholders'
Monthly Principal Distributable Amount (less any portion of
the Class A Noteholders' Monthly Principal Distributable
Amount applied on such Payment Date to reduce the
outstanding principal amount of the A-2 Notes to zero). On
each Payment Date on and after the Payment Date on which the
A-3 Notes have been paid in full, principal of the A-4 Notes
will be payable, until the A-4 Notes have been paid in full,
in an amount generally equal to 100% of the Class A
Noteholders' Monthly Principal Distributable Amount (less
any portion of the Class A Noteholders' Monthly Principal
Distributable Amount applied on such Payment Date to reduce
the outstanding principal amount of the A-3 Notes to zero).
The principal of the Class B Notes will be payable on each
Payment Date, to the extent of funds available therefor, in
any amount generally equal to the Class B Noteholders'
Principal Distributable Amount PROVIDED, that no principal
payments will be made with respect to the Class B Notes on
any Payment Date until all amounts payable with respect to
the Class A Notes on that Payment Date have been paid in
full.
No principal will be paid with respect to the Certificates
until the Notes have been paid in full. See "Description of
the Transfer and Servicing Agreements--Distributions."
The outstanding principal amount, if any, of the A-1 Notes,
the A-2 Notes and the A-3 Notes will be payable in full on
the March 1999 Payment Date (the "A-1 Note Final Scheduled
Maturity Date"), the July 2001 Payment Date (the "A-2 Note
Final Scheduled Maturity Date") and the August 2002 Payment
Date (the "A-3 Note Final Scheduled Maturity Date"),
respectively, in each case from funds available therefor.
The outstanding principal amount, if any, of the A-4 Notes
and the Class B Notes will be payable in full on the
February 2005 Payment Date (the "Final Scheduled Maturity
Date"), in each case from funds available therefor. After an
Event of Default and acceleration of the Notes (and, if any
Notes remain outstanding, on and after the Final Scheduled
Maturity Date), principal payments will be made first to the
Class A Noteholders ratably according to the amounts due and
payable on the Class A Notes for principal until paid in
full and then to the Class B Noteholders until the
outstanding principal amount of the Class B Notes has been
paid in full.
Principal payments on the Class A Notes will generally be
derived from the Total Distribution Amount remaining after
the payment of the Administration Fee, the Servicing Fee (if
neither Case Credit nor any of its affiliates is the
Servicer), the Class A Noteholders' Interest Distributable
Amount and the Class B Noteholders' Interest Distributable
Amount and from amounts on deposit in the Spread Account.
Principal payments on the Class B Notes will generally be
derived from the Total Distribution Amount remaining after
the payment of the amounts listed above, as well as
principal payments on the Class A Notes, and from amounts on
S-8
deposit in the Spread Account. See "Description of the
Transfer and Servicing Agreements--Distributions" and
"--Spread Account."
C. Optional Redemption....... The A-4 Notes and the Class B Notes will be prepaid in
whole, but not in part, at the A-4 Redemption Price and the
Class B Redemption Price, respectively, on the Payment Date
after the A-1 Notes, the A-2 Notes and the A-3 Notes have
been paid in full on which the Servicer exercises its option
to purchase the Receivables. The Servicer may purchase the
Receivables from the Trust when the Pool Balance declines to
10% or less of the Initial Pool Balance. The redemption
price for the A-4 Notes (the "A-4 Note Redemption Price")
will equal the unpaid principal balance of the A-4 Notes,
plus accrued and unpaid interest thereon. The redemption
price for the Class B Notes (the "Class B Redemption Price")
will equal the unpaid principal balance of the Class B
Notes, plus accrued and unpaid interest thereon.
The "Initial Pool Balance" will equal the sum of (i) the
Pool Balance as of the Initial Cutoff Date plus (ii) the
aggregate Contract Value of all Subsequent Receivables sold
to the Issuer as of their respective Subsequent Cutoff
Dates.
D. Mandatory Redemption...... On the Payment Date on or immediately following the last day
of the Funding Period, any funds remaining in the
Pre-Funding Account (after giving effect to the purchase of
all Subsequent Receivables, including any such purchase on
such date) will be applied to redeem the A-1 Notes then
outstanding in whole or in part, and if the A-1 Notes are
redeemed in whole, any such funds remaining will be applied
to redeem the A-2 Notes in whole or in part (each, a
"Mandatory Redemption"). The aggregate principal amount of
the A-1 Notes to be redeemed will equal the lesser of (a)
the remaining Pre-Funded Amount and (b) the full outstanding
principal amount of the A-1 Notes. The aggregate principal
amount of the A-2 Notes to be redeemed will equal the lesser
of (a) the remaining Pre-Funded Amount, after giving effect
to the redemption of A-1 Notes in full, and (b) the full
outstanding principal amount of the A-2 Notes.
In the unlikely event that the A-2 Notes are redeemed in
full and there are any remaining funds in the Pre-Funding
Account, such funds will be applied towards the redemption
of the A-3 Notes in whole or in part. In the unlikely event
that the A-3 Notes are redeemed in full and there are any
remaining funds in the Pre-Funding Account, such funds will
be applied towards the redemption of the A-4 Notes in whole
or in part.
Pre-Funding Account.......... On or prior to the Closing Date, the Pre-Funding Account
will be established as a trust account in the name of the
Indenture Trustee. The amount on deposit in the Pre-Funding
Account (the "Pre-Funded Amount") will initially equal the
Initial Pre-Funded Amount of $299,666,806, and, during the
Funding Period, will be reduced by the amount thereof used
to purchase Subsequent Receivables in accordance with the
Sale and Servicing Agreement and the amounts thereof
deposited in the Spread Account in connection with the
purchase of such Subsequent Receivables. The Seller expects
that the Pre-Funded Amount will be reduced to less than
$100,000 by the August 1998 Payment Date. Any Pre-Funded
Amount remaining at the end of the Funding Period will be
payable (a) first, to the A-1 Noteholders, (b) second, to
the A-2 Noteholders, (c) third (in the unlikely event that
the A-2 Notes are repaid in full), to the A-3 Noteholders as
described in "Description of the Notes--Mandatory
Redemption" and (d) fourth (in the unlikely event the A-3
Notes are repaid in full), to the A-4 Noteholders as
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described in "Description of the Notes--Mandatory
Redemption." Prior to being used to purchase Subsequent
Receivables or paid to the Noteholders, the Pre-Funded
Amount will be invested from time to time in Eligible
Investments. See "Description of the Transfer and Servicing
Agreements--Accounts" in the Prospectus.
Negative Carry Account....... In order to maintain the rating of the Notes at their
initial levels, the Servicer will establish and maintain in
the name of the Indenture Trustee an account (the "Negative
Carry Account") as a Trust Account for the benefit of the
Noteholders. The Negative Carry Account will be created with
an initial deposit by the Seller of $4,595,626.41 (the
"Negative Carry Account Initial Deposit"). On each Payment
Date, the Servicer will instruct the Indenture Trustee to
withdraw from the Negative Carry Account and deposit into
the Collection Account an amount equal to the Negative Carry
Amount for such Collection Period. For each Collection
Period, the "Negative Carry Amount" will be calculated by
the Servicer as the difference (if positive) between (i) the
product of (a) the sum of the Class A Noteholders' Interest
Distributable Amount and the Class B Noteholders' Interest
Distributable Amount multiplied by (b) the Pre-Funded
Percentage minus (ii) the investment earnings on the
Pre-Funded Amount. The "Pre-Funded Percentage" for each
Collection Period is the percentage derived from the
fraction the numerator of which is the Pre-Funded Amount and
the denominator of which is the sum of the Pool Balance and
the Pre-Funded Amount, after taking into account all
transfers of Subsequent Receivables during such Collection
Period. Amounts on deposit in the Negative Carry Account in
excess of the Required Negative Carry Account Balance will
be released to the Seller on each Payment Date, and all
amounts remaining on deposit in the Negative Carry Account
on the Payment Date on or immediately following the last day
of the Funding Period (after giving effect to all
withdrawals therefrom on such Payment Date) will be released
to the Seller.
Spread Account............... The Servicer will establish and maintain in the name of the
Indenture Trustee a collateral account (the "Spread
Account") into which funds will be deposited from time to
time as described herein. Funds on deposit in the Spread
Account will be available on each Payment Date to cover
shortfalls in distributions of interest and principal on the
Notes to the extent described herein. Funds on deposit in
the Spread Account will not be used to cover shortfalls in
any distributions on the Certificates. The Spread Account
will be created with an initial deposit by the Seller of
$6,506,664, which equals the Initial Pool Balance multiplied
by 2.00%. On each Subsequent Transfer Date, cash or Eligible
Investments having a value approximately equal to 2.00% of
the aggregate Contract Value of the Subsequent Receivables
conveyed to the Trust on such Subsequent Transfer Date will
be withdrawn from the Pre-Funding Account from amounts
otherwise distributable to the Seller in connection with the
sale of Subsequent Receivables and deposited in the Spread
Account. The amount initially deposited in the Spread
Account by the Seller together with the aggregate amount
transferred from the Pre-Funding Account to the Spread
Account on each Subsequent Transfer Date is referred to as
the "Spread Account Initial Deposit." The Spread Account
Initial Deposit will be augmented on each Payment Date by
the deposit in the Spread Account of amounts remaining after
deposit in the Note Distribution Account and the Certificate
Distribution Account of amounts to be distributed to
Noteholders and holders of the Certificates (the
"Certificateholders") and the payment of the Administration
Fee and the Servicing Fee.
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Amounts in the Spread Account on any Payment Date (after
giving effect to all distributions to be made on such
Payment Date) in excess of the Specified Spread Account
Balance for such Payment Date will be released to the
Seller. The "Specified Spread Account Balance" with respect
to any Payment Date generally will be equal to the lesser of
(a) 2.00% of the Initial Pool Balance and (b) the Note
Balance. The Specified Spread Account Balance may be reduced
or the definition thereof otherwise modified without the
consent of the Noteholders if the Rating Agencies confirm in
writing that such reduction or modification will not result
in a reduction or withdrawal of the rating of the Notes. See
"Description of the Transfer and Servicing
Agreements--Spread Account."
The Certificates............. On the Closing Date, the Trust will issue Certificates in an
aggregate principal amount of $10,938,000. The Seller will
initially purchase the entire principal amount of the
Certificates. The Certificates will bear interest at the
rate of 5.940% per annum, except that during the Funding
Period no interest will accrue on the Pre-Funded Percentage
of the Certificate Balance. Distributions of interest and
principal on the Certificates will be subordinated in
priority of payment to interest and principal due on the
Notes to the extent described herein. See "Description of
the Certificates" in this Prospectus Supplement.
Collection Account; Priority
of Distributions........... The Servicer will establish and maintain in the name of the
Indenture Trustee an account (the "Collection Account") into
which all payments made on or with respect to the
Receivables will be deposited and held until the
distribution thereof to Noteholders and Certificateholders
as described herein. Except under certain conditions
described herein, the Servicer will be required to remit
collections received with respect to the Receivables within
two business days of receipt thereof to the Collection
Account. Pursuant to the Sale and Servicing Agreement, the
Servicer will have the revocable power to instruct the
Indenture Trustee to withdraw funds on deposit in the
Collection Account and to apply such funds on each Payment
Date to the following (in the priority indicated): (i) the
Administration Fee for the prior Collection Period and any
overdue Administration Fees to the Administrator; (ii) the
Class A Noteholders' Interest Distributable Amount into the
Note Distribution Account; (iii) the Class B Noteholders'
Interest Distributable Amount into the Note Distribution
Account; (iv) the A-1 Noteholders' Principal Distributable
Amount into the Note Distribution Account; (v) the A-2
Noteholders' Principal Distributable Amount into the Note
Distribution Account; (vi) the A-3 Noteholders' Principal
Distributable Amount into the Note Distribution Account;
(vii) the A-4 Noteholders' Principal Distributable Amount in
the Note Distribution Account; (viii) the Class B
Noteholders' Principal Distributable Amount into the Note
Distribution Account; (ix) to the Spread Account to the
extent necessary so that the balance on deposit therein will
equal the Specified Spread Account Balance; (x) the
Certificateholders' Interest Distributable Amount into the
Certificate Distribution Account; (xi) the
Certificateholders' Principal Distributable Amount into the
Certificate Distribution Account; (xii) the Servicing Fee
for the prior Collection Period and any overdue Servicing
Fees to the Servicer, except that if Case Credit or an
affiliate of Case Credit is not the Servicer, the amounts
described in this clause will be paid prior to any other
application of funds on deposit in the Collection Account;
and (xiii) the remaining balance, if any, to the Spread
Account. After an Event of Default and acceleration of the
Notes (and, if any Notes remain outstanding, on and after
the Final Scheduled Maturity Date), principal payments will
be made first to Class A Noteholders
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ratably according to the amounts due on the Class A Notes
for principal and then to the Class B Noteholders until the
outstanding principal amount of the Class B Notes has been
paid in full. See "Description of the Transfer and Servicing
Agreements--Distributions."
Tax Status................... In the opinion of Mayer, Brown & Platt ("Federal Tax
Counsel"), for Federal income tax purposes the Notes will be
characterized as debt and the Trust will not be
characterized as an association (or publicly traded
partnership) taxable as a corporation. In the opinion of
Foley & Lardner ("Wisconsin Tax Counsel"), the same
characterizations should apply for Wisconsin income tax
purposes as for Federal income tax purposes. Each
Noteholder, by the acceptance of a Note, will agree to treat
the Notes as indebtedness. See "Certain Federal Income Tax
Consequences" and "Certain State Tax Consequences" in the
Prospectus for additional information concerning the
application of Federal and Wisconsin tax laws to the Trust
and the Notes.
ERISA Considerations......... Subject to the considerations discussed under "ERISA
Considerations," the Notes are eligible for purchase by
employee benefit plans.
Registration of Notes........ The Notes initially will be represented by Securities
registered in the name of Cede, as the nominee of DTC. No
Noteholder will be entitled to receive a Definitive Note,
except under the limited circumstances described herein.
Noteholders may elect to hold their Notes through DTC (in
the United States) or Cedel or Euroclear (in Europe).
Transfers will be made in accordance with the rules and
operating procedures described herein. See "Certain
Information Regarding the Securities--Definitive Securities"
in the Prospectus.
Legal Investment............. The A-1 Notes will be eligible securities for purchase by
money market funds under paragraph (a)(9) of Rule 2a-7 under
the Investment Company Act of 1940, as amended.
Rating of the Notes.......... It is a condition to the issuance of the Notes that the A-1
Notes be rated in the highest short-term rating category,
that the A-2 Notes, the A-3 Notes and the A-4 Notes be rated
in the highest long-term rating category and that the Class
B Notes be rated at least in the "A" category or its
equivalent, in each case by at least two nationally
recognized statistical rating agencies (the "Rating
Agencies"). There can be no assurance that such ratings will
not be lowered or withdrawn by a rating agency if
circumstances so warrant. See "Risk Factors--Ratings of the
Notes."
S-12
Risk Factors
Limited Liquidity
There is currently no secondary market for the Notes. Each Underwriter currently
intends to make a market in the Notes for which it is an Underwriter, but is
under no obligation to do so. There can be no assurance that a secondary market
will develop or, if a secondary market does develop, that it will provide the
Noteholders with liquidity of investment or that it will continue for the life
of the Notes.
The Receivables and the Pre-Funding Account
On the Closing Date, the Seller will transfer to the Trust the approximately
$325,103,002.29 of Initial Receivables (calculated for the Standard Precomputed
Receivables by using a discount rate equal to the APR of each such Standard
Precomputed Receivable and for the Precomputed Simple Rebate Receivables using
the current balance on the Servicer's records; or $325,333,194 calculated for
all of the Initial Receivables using a discount rate equal to the Initial Cutoff
Date APR) and the approximately $299,666,806 Initial Pre-Funded Amount to be
deposited in the Pre-Funding Account. If the principal amount of eligible
Receivables originated by Dealers or by retail outlets owned by Case and
purchased by Case Credit during the Funding Period is less than the Initial
Pre-Funded Amount, the Seller will have insufficient Receivables to sell to the
Trust on the Subsequent Transfer Dates, thereby resulting in a prepayment of
principal to the Noteholders as described below. See "Economic and Other
Factors" and "Trust's Relationship to the Seller, Case Credit Corporation and
Case Corporation" below.
Any conveyance of Subsequent Receivables is subject to the satisfaction, on or
before the related Subsequent Transfer Date, of the following conditions
precedent, among others: (i) each such Subsequent Receivable must satisfy the
eligibility criteria specified in the Sale and Servicing Agreement; (ii) the
Seller shall not have selected such Subsequent Receivables in a manner that it
believes is adverse to the interests of the Noteholders or the
Certificateholders; (iii) as of the related Subsequent Cutoff Date, the
Receivables in the Trust at that time, including the Subsequent Receivables to
be conveyed by the Seller as of such Subsequent Cutoff Date, shall satisfy the
parameters described under "The Receivables Pool" herein and under "The
Receivables Pools" in the Prospectus; (iv) the applicable Spread Account Initial
Deposit for such Subsequent Transfer Date shall have been made; (v) the Seller
shall have executed and delivered to the Trust (with a copy to the Indenture
Trustee) a written assignment conveying such Subsequent Receivables to the Trust
(including a schedule identifying such Subsequent Receivables); (vi) the Seller
shall have delivered certain opinions of counsel to the Trustee, the Indenture
Trustee and the Rating Agencies with respect to the transfer of all such
Subsequent Receivables conveyed during such Collection Period; (vii) the Trust
and the Indenture Trustee shall have received written confirmation from a firm
of certified independent public accountants that, as of the end of the preceding
Collection Period, the Receivables in the Trust at that time, including the
Subsequent Receivables conveyed by the Seller during such Collection Period,
satisfied the parameters described under "The Receivables Pool" herein and under
"The Receivables Pools" in the Prospectus; and (viii) Moody's Investors Service,
Inc. ("Moody's") shall have received written notification from the Seller of the
addition of all such Subsequent Receivables.
To the extent that amounts on deposit in the Pre-Funding Account have not been
fully applied to the conveyance of Subsequent Receivables to the Trust by the
end of the Funding Period, any such amounts remaining will be applied (a) first,
to redeem the A-1 Notes, in whole or in part, (b) second (if the A-1 Notes are
redeemed in whole), to redeem the A-2 Notes, in whole or in part, (c) third (in
the unlikely event that the A-2 Notes are redeemed in whole), to redeem the A-3
Notes, in whole or in part and (d) fourth (in the unlikely event that the A-3
Notes are redeemed in whole), to redeem the A-4 Notes, in whole or in part.
Any such prepayment will shorten the weighted average life of the affected Notes
to an extent that cannot be predicted with assurance, since the amount of such
prepayment cannot be predicted with assurance. Holders of Notes purchased at a
premium should consider the risk that such a prepayment could result in an
actual yield that is less than the anticipated yield.
Each Subsequent Receivable must satisfy the eligibility criteria specified in
the Sale and Servicing Agreement at the time of its addition. However, except
for such criteria, there will be no required characteristics of the Subsequent
Receivables. Subsequent Receivables may be originated by the Dealers or by the
retail outlets owned by Case at a later date using credit criteria different
from those that were applied to the Initial Receivables and may be of a
different credit quality and
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seasoning. In addition, following the transfer of Subsequent Receivables to the
Trust, the characteristics of the entire Receivables Pool, including the
composition of the Receivables, the distribution by APR, equipment type, payment
frequency, average maturity, current Contract Value and geographic distribution,
may vary from those of the Initial Receivables. See "The Receivables Pool."
Since the weighted average life of the Notes will be influenced by the rate at
which the principal balances of the Receivables are paid, some of these
variations will affect the weighted average life of the Notes. See "Weighted
Average Life of the Securities" in the Prospectus. The requirements that no
Receivables have a remaining term in excess of 72 months and that on each
Subsequent Transfer Date the weighted average original term of the Receivables
in the Trust will not be greater than 55 months are intended to minimize the
effect of the addition of Subsequent Receivables on the weighted average life of
the Notes.
Seasonality of Cash Flow
Payments on the Receivables may be made on a monthly, quarterly, semiannual,
annual or an irregular basis. The majority of the Initial Receivables
(representing approximately 66.41% of the aggregate Contract Value of the
Receivables as of the Initial Cutoff Date) are agricultural equipment retail
installment sale contracts and tend to have payment dates that correspond to
periods in which farmers have stronger cash flows. As a result, the amounts of
cash distributed to Noteholders will tend to share in this seasonality, with
higher amounts of principal paid on the Payment Dates occurring in the first and
fourth calendar quarters in each year and relatively lower amounts paid on other
Payment Dates. See "The Receivables Pool."
Economic and Other Factors
The ability of the Dealers and of the retail stores owned by Case to sell
agricultural and construction equipment and thereby generate Subsequent
Receivables is affected by the general level of activity in the agricultural and
construction industries, including the rate of United States farm production and
demand, government subsidies for the agricultural sector, weather conditions,
commodity prices, interest rates, prevailing levels of construction (especially
housing starts), and levels of total industry capacity and equipment inventory.
However, Case and the Seller are unable to determine and have no basis to
predict whether or to what extent these factors will affect the level of sales
of agricultural or construction equipment.
Subordination
Distributions of interest on the Class B Notes will be subordinated in priority
of payment to interest due on the Class A Notes, and distributions of principal
on the Class B Notes will be subordinated in priority of payment to principal
due on the Class A Notes, in each case, to the extent described herein.
Consequently, the Class B Noteholders will not receive any distributions of
interest with respect to a Collection Period until the full amount of interest
on the Class A Notes relating to such Collection Period has been deposited in
the Note Distribution Account. No distributions of principal with respect to the
Class B Notes will be made until funds sufficient to pay the Class A Notes in
full have been deposited in the Note Distribution Account. Distributions of
interest and principal on the Certificates will be subordinated in priority of
payment to interest and principal due on the Notes.
Limited Assets
The Trust does not have, nor is it permitted or expected to have, any
significant assets or sources of funds other than the Receivables, the
Pre-Funding Account, the Negative Carry Account and the Spread Account. Holders
of the Notes must rely for repayment upon payments on the Receivables and, if
and to the extent available, amounts on deposit in the Negative Carry Account
and the Spread Account. Amounts to be deposited in the Spread Account are
limited in amount and will be reduced as the Pool Balance is reduced. If the
Negative Carry Account and the Spread Account are exhausted, the Trust will
depend solely on current distributions on the Receivables to make payments on
the Notes and the Certificates.
Ratings of the Notes
It is a condition to the issuance of the Notes that the A-1 Notes be rated in
the highest short-term investment rating category, that the A-2 Notes, the A-3
Notes and the A-4 Notes be rated in the highest long-term investment rating
category and the Class B Notes be rated at least in the "A" category or its
equivalent, in each case by at least two Rating Agencies. A rating is not a
recommendation to purchase, hold or sell the Notes, inasmuch as such rating does
not comment as to market price or suitability for a particular investor. The
ratings of the Notes address the likelihood of the timely payment of interest on
and
S-14
the ultimate payment of principal of the Notes pursuant to their terms. There
can be no assurance that a rating will remain for any given period of time or
that a rating will not be lowered or withdrawn entirely by a Rating Agency if in
its judgment circumstances in the future so warrant.
Trust's Relationship to the Seller, Case Credit Corporation and Case Corporation
Neither the Seller, Case Credit, Case nor any of their affiliates is generally
obligated to make payments in respect of the Notes or the Receivables. However,
the ability of the Seller to convey Subsequent Receivables on Subsequent
Transfer Dates is completely dependent on the generation of additional
receivables by Case Credit. The ability of Case Credit to generate receivables
in turn depends on the sales of agricultural and construction equipment
manufactured or distributed by Case. If, during the Funding Period, Case were
temporarily or permanently no longer manufacturing or distributing agricultural
or construction equipment, the rate of sales of agricultural and construction
equipment manufactured or distributed by Case would decrease, adversely
affecting the ability of the Seller to sell Subsequent Receivables to the Trust.
The use of incentive programs (e.g., manufacturer's rebate programs), may also
affect retail sales. There can be no assurance, therefore, that Case Credit will
continue to generate receivables at the same rate as in prior years. Moreover,
in connection with the sale of the Receivables by Case Credit to the Seller
pursuant to the Liquidity Receivables Purchase Agreement or the Purchase
Agreement, Case Credit has made or will make representations and warranties with
respect to the characteristics of such Receivables and, in certain
circumstances, Case Credit may be required to repurchase Receivables with
respect to which any such representation or warranty has been breached. See
"Description of the Transfer and Servicing Agreements--Sale and Assignment of
Receivables" and "--Commercial Paper Program" in the Prospectus. In addition,
under certain circumstances, the Servicer may be required to purchase
Receivables. See "Description of the Transfer and Servicing Agreements--
Servicing Procedures" in the Prospectus. Moreover, if Case Credit were to cease
acting as Servicer, delays in processing payments on the Receivables and
information in respect thereof could occur and result in delays in payments to
the Noteholders.
Case is a leading worldwide designer, manufacturer, marketer and distributor of
farm equipment and light-and medium-sized construction equipment, which is sold
worldwide through independent dealers and retail outlets owned by Case and its
affiliates. For the nine months ended September 30, 1997 and the year ended
December 31, 1996, Case reported operating earnings (industrial earnings before
interest, taxes, changes in accounting principles and extraordinary items,
including net income of the finance companies on an equity basis) of $437
million and $579 million, respectively (compared to $416 million for the nine
months ended September 30, 1996 and $509 million for the year ended December 31,
1995), and net income of $280 million and $316 million, respectively (compared
to $214 million for the nine months ended September 30, 1996 and $337 million
for the year ended December 31, 1995) on net sales of $4.1 billion and $5.2
billion, respectively (compared to $3.7 billion for the nine months ended
September 30, 1996 and $4.9 billion for the year ended December 31, 1995). At
September 30, 1997, Case's consolidated equity was $2.1 billion.
Case Credit had consolidated net income of $62 million for the nine months ended
September 30, 1997, $85 million for the year ended December 31, 1996, compared
with net income of $65 million for the nine months ended September 30, 1996 and
$94 million for the year ended December 31, 1995. The $3 million decrease in
year-over-year net income for the periods ending September 30, 1997 and 1996
primarily reflects lower net operating margins and reduced income from
asset-backed securitizations, partially offset by higher earnings as a result of
increased levels of on-balance-sheet receivables. The $9 million decrease for
the years ended December 31, 1996 and 1995 is primarily due to increased
interest expense as a result of maintaining higher average debt levels necessary
to fund the growth in both the finance lease and operating lease equipment
programs. In addition, Case Credit's 1996 net income was lower as a result of
lower interest rate margins on the sale of retail notes under asset-backed
securitization transactions. Revenues for the first nine months of 1997 were
$201 million and for the year ended December 31, 1996 were $244 million,
compared to $186 million for the first nine months of 1996 and $217 million for
the year ended December 31, 1995. At September 30, 1997, total gross receivables
serviced by Case Credit were $4.9 billion, up 20% from September 30, 1996.
For additional information regarding the Seller, Case Credit or Case, see "The
Seller, Case Credit Corporation and Case Corporation" in the Prospectus.
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The Trust
General
Case Equipment Loan Trust 1998-A is a trust formed under the laws of the State
of Delaware pursuant to the Trust Agreement for the transactions described in
this Prospectus Supplement. After its formation, the Trust will not engage in
any activity other than (i) acquiring, holding and managing the Receivables, the
Pre-Funding Account and the other assets of the Trust and proceeds therefrom,
(ii) issuing the Notes and the Certificates, (iii) making payments on the Notes
and the Certificates and (iv) engaging in other activities that are necessary,
suitable or convenient to accomplish the foregoing or are incidental thereto or
connected therewith.
The Trust will initially be capitalized with equity of $10,938,000 excluding
amounts deposited in the Negative Carry Account and the Spread Account,
representing the initial principal balance of the Certificates. Certificates
representing the entire principal balance initially will be sold to the Seller.
The equity of the Trust, together with the proceeds from the initial sale of the
Notes, will be used by the Trust to purchase the Receivables from the Seller
pursuant to the Sale and Servicing Agreement. The Servicer will initially
service the Receivables pursuant to the Sale and Servicing Agreement and will be
compensated for acting as the Servicer. See "Description of the Transfer and
Servicing Agreements--Servicing Compensation and Payment of Expenses." To
facilitate servicing and to minimize administrative burden and expense, the
Servicer will be appointed custodian for the Receivables by the Trustee, but
will not stamp the Receivables to reflect the sale and assignment of the
Receivables to the Trust, or amend or assign the financing statements filed to
perfect the security interest in the Financed Equipment or, where applicable,
the certificates of title of the Financed Equipment. In the absence of
amendments to the financing statements or certificates of title, the Trust may
not have perfected security interests in the Financed Equipment securing the
Receivables originated in some states. See "Certain Legal Aspects of the
Receivables" in the Prospectus.
If the protection provided to the Noteholders by the Negative Carry Account, the
Spread Account and the subordination of the Certificates is insufficient, the
Noteholders must rely solely on payments from the Obligors on the Receivables
and the proceeds from the repossession and sale of Financed Equipment that
secure defaulted Receivables. In such event, certain factors, such as the
Trust's not having first priority perfected security interests in some of the
Financed Equipment, may affect the Trust's ability to realize on the collateral
securing the Receivables, and thus may reduce the proceeds to be distributed to
Noteholders with respect to the Notes. See "Description of the Transfer and
Servicing Agreements-- Distributions," "--Negative Carry Account" and "--Spread
Account" herein and "Certain Legal Aspects of the Receivables" in the
Prospectus.
The Trust's principal offices are in New York, New York, at the address listed
below under "--The Trustee."
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 such date:
Class A-1 5.545% Asset Backed Notes............................................ $72,113,000
Class A-2 5.592% Asset Backed Notes............................................ 190,750,000
Class A-3 5.740% Asset Backed Notes............................................ 145,750,000
Class A-4 5.830% Asset Backed Notes............................................ 180,449,000
Class B 5.940% Asset Backed Notes.............................................. 25,000,000
5.940% Asset Backed Certificates............................................... 10,938,000
-----------
Total $625,000,000
-----------
-----------
The Trustee
The Bank of New York is the Trustee under the Trust Agreement. The Bank of New
York is a Delaware banking corporation and its principal offices are located at
101 Barclay Street, Floor 12E, New York, New York, 10286. In the ordinary course
of its business, the Trustee and its affiliates have engaged and may in the
future engage in commercial banking or financial advisory transactions with Case
Credit and its affiliates. The Bank of New York (Delaware) will act as
co-trustee for the purpose of complying with certain Delaware legal
requirements.
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The Receivables Pool
The pool of Receivables (the "Receivables Pool") will include the Initial
Receivables purchased as of the Initial Cutoff Date and any Subsequent
Receivables purchased as of any applicable Subsequent Cutoff Date (the Initial
Cutoff Date or any Subsequent Cutoff Date being individually referred to herein
as a "Cutoff Date").
The Initial Receivables were selected, and the Subsequent Receivables will be
selected, from the Seller's portfolio using several criteria, some of which are
set forth in the Prospectus under "The Receivables Pools," as well as that each
Receivable (i) is not more than 90 days past due as of the applicable Cutoff
Date, (ii) has an APR that is equal to or greater than 3%, (iii) has a remaining
term to maturity (I.E., the period from but excluding the applicable Cutoff Date
to and including the Receivable's maturity date) of not more than 72 months and
(iv) has a Contract Value as of the applicable Cutoff Date that (when combined
with the Contract Value of any other Receivables with the same or an affiliated
Obligor) does not exceed 1% of the aggregate Contract Value of all the
Receivables. The Receivables will include Contracts with respect to which the
first payment has not been made and interest waiver contracts pursuant to which
interest will not begin to accrue for some designated period of time. As of the
applicable Cutoff Date, no Obligor on any Receivable was or will be noted in the
records of the Servicer as being the subject of a bankruptcy proceeding. No
selection procedures believed by the Seller to be adverse to Noteholders were or
will be used in selecting the Receivables.
According to the eligibility criteria set forth in the Sale and Servicing
Agreement, the obligation of the Trust to purchase the Subsequent Receivables on
a Subsequent Transfer Date will be subject to the Receivables in the Trust,
including the Subsequent Receivables to be conveyed to the Trust on such
Subsequent Transfer Date, meeting the following criteria: (i) the weighted
average original term of the Receivables in the Trust will not be greater than
55 months; and (ii) not more than 45% of the principal balances of the
Receivables in the Trust will represent Contracts for the financing of
construction equipment.
The Initial Receivables will represent approximately 52% of the sum of the
initial Note Balance and the initial Certificate Balance. However, except for
the criteria described in the preceding paragraphs, there will be no required
characteristics of the Subsequent Receivables. Therefore, following the transfer
of Subsequent Receivables to the Trust, the aggregate characteristics of the
entire Receivables Pool, including the composition of the Receivables, the
distribution by APR, equipment type, payment frequency, current Contract Value
and geographic distribution described in the following tables, may vary from
those of the Initial Receivables. Following the end of the Funding Period, the
Seller will file a report on Form 8-K containing information comparable to that
contained in the tables set forth below regarding the aggregate characteristics
of the entire Receivables Pool, after the addition of the Subsequent
Receivables.
The composition, distribution by APR, equipment type, payment frequency, current
Contract Value and geographic distribution, in each case of the Initial
Receivables as of the Initial Cutoff Date, are as set forth in the following
tables. For purposes of the data in the following tables, "Contract Value" (a)
for each Standard Precomputed Receivable has been calculated as the sum of (i)
the present value of the future scheduled payments on such Standard Precomputed
Receivable as of the Initial Cutoff Date discounted monthly at an annual rate
equal to the APR of such Standard Precomputed Receivable plus (ii) the amount of
any past due payments, and (b) for each Precomputed Simple Rebate Receivable has
been deemed to equal the current balance of that Receivable on the Servicer's
records as of the Initial Cutoff Date.
S-17
Composition of the Receivables Pool
as of the Initial Cutoff Date
- ----------------------------------------------------------------------------------------------------
Weighted Weighted Weighted
Average APR of Aggregate Number of Average Average Average
Receivables Contract Value Receivables Remaining Term Original Term Contract Value
- -------------- ----------------- ------------- --------------- -------------- -----------------
8.758% $ 325,103,002.29 7,527 50.19 months 52.79 months $ 43,191.58
Distribution by APR of the Receivables Pool
as of the Initial Cutoff Date
-----------------------------------------------
Percent of
Aggregate
Number of Aggregate Contract
APR Range Receivables Contract Value Value
- ------------------------------------------------------------------- ------------- ----------------- -------------
3.00% to 3.99%................................................... 197 $ 3,211,405.81 0.99%
4.00% to 4.99%................................................... 42 5,023,731.24 1.55
5.00% to 5.99%................................................... 446 9,815,988.35 3.02
6.00% to 6.99%................................................... 320 8,966,273.74 2.76
7.00% to 7.99%................................................... 765 19,138,186.74 5.89
8.00% to 8.99%................................................... 2,331 151,063,818.58 46.46
9.00% to 9.99%................................................... 1,475 75,360,254.02 23.18
10.00% to 10.99%................................................... 1,494 38,279,715.13 11.77
11.00% to 11.99%................................................... 262 8,168,629.97 2.51
12.00% to 12.99%................................................... 93 3,439,056.47 1.06
13.00% to 13.99%................................................... 79 1,849,550.68 0.57
14.00% to 14.99%................................................... 18 428,818.60 0.13
16.00% to 16.99%................................................... 3 92,452.29 0.03
17.00% to 17.99%................................................... 2 265,120.67 0.08
----- ----------------- -------------
Total.......................................................... 7,527 $ 325,103,002.29 100.00%
----- ----------------- -------------
----- ----------------- -------------
Distribution by Equipment Type of the Receivables Pool
as of the Initial Cutoff Date
-----------------------------------------------
Percent of
Aggregate
Number of Aggregate Contract
Type Receivables Contract Value Value
- ------------------------------------------------------------------- ------------- ----------------- -------------
Agricultural
New.............................................................. 2,099 $ 104,488,200.30 32.14%
Used............................................................. 2,902 111,403,293.72 34.27
Construction
New.............................................................. 1,482 71,652,136.72 22.04
Used............................................................. 1,044 37,559,371.55 11.55
----- ----------------- -------------
Total.......................................................... 7,527 $ 325,103,002.29 100.00%
----- ----------------- -------------
----- ----------------- -------------
S-18
Distribution by Payment Frequency of the Receivables Pool
as of the Initial Cutoff Date
-----------------------------------------------
Percent of
Aggregate
Number of Aggregate Contract
Frequency Receivables Contract Value Value
- ------------------------------------------------------------------- ------------- ----------------- -------------
Annual(1).......................................................... 4,048 $ 188,919,100.62 58.11%
Semiannual......................................................... 278 14,588,118.22 4.49
Quarterly.......................................................... 58 1,600,321.82 0.49
Monthly............................................................ 3,143 119,995,461.63 36.91
----- ----------------- -------------
Total.......................................................... 7,527 $ 325,103,002.29 100.00%
----- ----------------- -------------
----- ----------------- -------------
- ------------------------
(1) Approximately 35.93%, 9.08%, 2.11%, 1.84%, 1.14%, 0.67%, 0.92%, 1.56%,
10.05%, 1.60%, 4.56% and 30.52%, of the annual Receivables have scheduled
payments within the Collection Periods relating to the Payment Dates in
January, February, March, April, May, June, July, August, September,
October, November and December, respectively.
Distribution by Current Contract Value of the Receivables Pool
as of the Initial Cutoff Date
-----------------------------------------------
Percent of
Aggregate
Number of Aggregate Contract
Contract Value Range Receivables Contract Value Value
- ------------------------------------------------------------------- ------------- ----------------- -------------
$ 0.00 to $ 4,999.99.......................................... 471 $ 1,653,641.99 0.51%
5,000.00 to 9,999.99.......................................... 925 6,999,243.64 2.15
10,000.00 to 14,999.99.......................................... 868 10,807,361.59 3.32
15,000.00 to 19,999.99.......................................... 742 12,896,064.36 3.97
20,000.00 to 24,999.99.......................................... 480 10,694,980.05 3.29
25,000.00 to 29,999.99.......................................... 412 11,251,297.49 3.46
30,000.00 to 34,999.99.......................................... 364 11,818,545.72 3.64
35,000.00 to 39,999.99.......................................... 355 13,292,514.78 4.09
40,000.00 to 44,999.99.......................................... 299 12,706,828.89 3.91
45,000.00 to 49,999.99.......................................... 257 12,185,844.41 3.75
50,000.00 to 54,999.99.......................................... 285 14,916,804.18 4.59
55,000.00 to 59,999.99.......................................... 229 13,146,850.62 4.04
60,000.00 to 64,999.99.......................................... 196 12,221,692.95 3.76
65,000.00 to 69,999.99.......................................... 158 10,683,255.50 3.29
70,000.00 to 74,999.99.......................................... 166 12,016,871.47 3.70
75,000.00 to 99,999.99.......................................... 625 54,038,211.14 16.62
100,000.00 to 199,999.99........................................ 611 77,924,232.89 23.96
200,000.00 to 299,999.99........................................ 56 13,721,861.87 4.22
300,000.00 to 499,999.99........................................ 23 8,487,982.99 2.61
500,000.00 to 699,999.99........................................ 2 1,056,338.18 0.32
700,000.00 to 899,999.99........................................ 1 703,274.48 0.22
900,000.00 to 1,099,999.00........................................ 2 1,879,303.10 0.58
----- ----------------- ------
Total.......................................................... 7,527 $ 325,103,002.29 100.00%
----- ----------------- ------
----- ----------------- ------
S-19
Geographic Distribution of the Receivables Pool
as of the Initial Cutoff Date
-----------
Percent of
Aggregate
Contract
State(1) Value
- ------------------------------------------- -----------
Alabama.................................... 2.27%
Alaska..................................... 0.33
Arizona.................................... 0.94
Arkansas................................... 2.97
California................................. 2.59
Colorado................................... 2.10
Connecticut................................ 0.33
Delaware................................... 0.48
Florida.................................... 0.96
Georgia.................................... 2.39
Hawaii..................................... 0.04
Idaho...................................... 1.27
Illinois................................... 9.61
Indiana.................................... 3.54
Iowa....................................... 8.42
Kansas..................................... 2.48
Kentucky................................... 2.40
Louisiana.................................. 2.01
Maine...................................... 0.37
Maryland................................... 0.75
Massachusetts.............................. 0.25
Michigan................................... 2.65
Minnesota.................................. 6.17
Mississippi................................ 2.86
Missouri................................... 5.65
Montana.................................... 0.91
-----------
Percent of
Aggregate
Contract
State(1) Value
- ------------------------------------------- -----------
Nebraska................................... 3.76%
Nevada..................................... 0.60
New Hampshire.............................. 0.25
New Jersey................................. 0.67
New Mexico................................. 0.29
New York................................... 1.95
North Carolina............................. 1.87
North Dakota............................... 1.06
Ohio....................................... 3.04
Oklahoma................................... 1.49
Oregon..................................... 1.00
Pennsylvania............................... 1.71
Rhode Island............................... 0.00
South Carolina............................. 1.02
South Dakota............................... 2.34
Tennessee.................................. 2.09
Texas...................................... 5.40
Utah....................................... 0.45
Vermont.................................... 0.16
Virginia................................... 0.99
Washington................................. 2.02
Washington D.C............................. 0.00
West Virginia.............................. 0.24
Wisconsin.................................. 2.27
Wyoming.................................... 0.59
-----------
Total.................................... 100.00%
-----------
-----------
- ------------------------
(1) Based on billing addresses of Obligors.
Delinquencies, Repossessions and Net Losses
Set forth below is certain information concerning Case Credit's experience
pertaining to the entire portfolio of United States retail agricultural and
construction equipment receivables that it services, including receivables
previously sold to trusts under prior asset-backed securitizations and
receivables that remained with Tenneco Credit Corporation as a part of the
Reorganization. In the year 1992, delinquencies, repossessions and net losses on
construction contracts were adversely affected by the economic recession, which
resulted in declines in housing starts and nonresidential construction. However,
beginning in 1993, delinquencies, repossessions and net losses on construction
contracts improved principally as a result of improvements in the economy, and
also as a result of improvements in Case Credit's collection systems.
Delinquencies, repossessions and net losses on agricultural contracts may be
affected by weather conditions such as flood and drought, commodity market
prices and the level of farmers' income. However, delinquencies, repossessions
and net losses on agricultural contracts have remained generally stable during
the years shown below. There can be no assurance that the delinquency,
repossession and net loss experience on the Receivables of the Trust will be
comparable to that set forth below.
S-20
Delinquency Experience(1)
----------------------------------------------------------------------------------------------
At December 31,
----------------------------------------------------------------------------------------------
(Dollars in Millions)
1996 1995 1994 1993
---------------------- ---------------------- ---------------------- ----------------------
Number of Number of Number of Number of
Contracts Amount Contracts Amount Contracts Amount Contracts Amount
----------- --------- ----------- --------- ----------- --------- ----------- ---------
Portfolio.................... 135,211 $ 3,262.4 135,722 $ 3,093.1 128,891 $ 2,641.0 128,562 $ 2,434.0
Period of Delinquency
31-60 days................. 2,031 45.9 1,927 33.5 1,457 18.4 2,033 27.2
60 Days or More.............. 1,778 36.3 1,509 18.5 855 9.4 2,145 22.5
----------- --------- ----------- --------- ----------- --------- ----------- ---------
Total Delinquencies.......... 3,809 $ 82.2 3,436 $ 52.0 2,312 $ 27.8 4,178 $ 49.7
Total Delinquencies as a
Percent of the Portfolio... 2.8% 2.5% 2.5% 1.7% 1.8% 1.0% 3.2% 2.0%
At September 30,
----------------------------------------------
1992 1997 1996
---------------------- ---------------------- ----------------------
Number of Number of Number of
Contracts Amount Contracts Amount Contracts Amount
----------- --------- ----------- --------- ----------- ---------
Portfolio.................... 138,711 $ 2,549.8 142,639 $ 3,462.3 133,781 $ 3,190.8
Period of Delinquency
31-60 days................. 4,877 71.7 2,259 58.6 1,593 33.7
60 Days or More.............. 6,177 78.3 2,818 64.6 1,668 30.0
----------- --------- ----------- --------- ----------- ---------
Total Delinquencies.......... 11,054 $ 150.0 5,077 $ 123.2 3,261 $ 63.7
Total Delinquencies as a
Percent of the Portfolio... 8.0% 5.9% 3.6% 3.6% 2.4% 2.0%
- ----------------------------------------
(1) Except as indicated, all amounts and percentages are based on the gross
amount scheduled to be paid on each retail installment sale contract,
including unearned finance and other charges. The information in the table
includes an immaterial amount of retail installment sale contracts on
equipment other than agricultural and construction equipment and includes
the receivables that remained with Tenneco Credit Corporation and previously
sold contracts that Case Credit continues to service.
Credit Loss/Repossession Experience(1)
-----------------------------------------------------
Year Ended December 31,
-----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
(Dollars in Millions)
Average Gross Portfolio Outstanding During the Period................ $ 3,155.5 $ 2,857.7 $ 2,511.2 $ 2,487.1 $ 2,512.7
Repossessions as a Percent of Average Gross Portfolio Outstanding
(5)................................................................ 1.07% 1.14% 1.33% 1.83% 2.68%
Net Losses as a Percent of Liquidations(2)(3)(4)(5).................. 0.15% 0.22% 0.36% 0.61% 1.23%
Net Losses as a Percent of Average Gross Portfolio
Outstanding(2)(3)(5)............................................... 0.08% 0.11% 0.19% 0.31% 0.67%
Nine Months Ended
September 30,
--------------------
1997 1996
--------- ---------
Average Gross Portfolio Outstanding During the Period................ $ 3,356.2 $ 3,128.8
Repossessions as a Percent of Average Gross Portfolio Outstanding
(5)................................................................ 1.22% 1.17%
Net Losses as a Percent of Liquidations(2)(3)(4)(5).................. 0.31% 0.14%
Net Losses as a Percent of Average Gross Portfolio
Outstanding(2)(3)(5)............................................... 0.17% 0.08%
- ------------------------------
(1) Except as indicated, all amounts and percentages are based on the gross
amount scheduled to be paid on each retail installment sale contract,
including unearned finance and other charges. The information in the table
includes an immaterial amount of retail installment sale contracts on
equipment other than agricultural and construction equipment and includes
the receivables that remained with Tenneco Credit Corporation and previously
sold contracts that Case Credit continues to service.
(2) A portion of the contracts provide for recourse to Dealers. See "The
Receivables Pools--The Retail Equipment Financing Business--Dealer
Agreements" in the Prospectus. Approximately 24%, 27%, 25%, 22%, 22%, 22%
and 27% of the aggregate amounts scheduled to be paid on the contracts
acquired during the nine months ended September 30, 1997 and 1996 and the
nine-month periods ended September 30, 1997 and 1996 and the years ended
December 31, 1996, 1995, 1994, 1993 and 1992, provide for recourse to
Dealers (excluding contracts which provide for recourse to Dealers through
the Dealers' reserve accounts). In the event of defaults by the obligor
under any such contract, the contract is required to be repurchased by the
Dealer for an amount generally equal to all amounts due and unpaid
thereunder. As a result, any losses under any such contract are incurred by
the Dealer and are not included in the net loss figures set forth above.
(3) Net losses are equal to the aggregate of the principal balances of all
contracts (plus accrued but unpaid interest thereon) that are determined to
be uncollectible in the period, less any recoveries on contracts charged off
in the period or any prior periods, excluding any losses resulting from
repossession expenses and excluding any recoveries from Dealers' reserve
accounts.
(4) Liquidations represent a reduction in the outstanding balances of the
contracts as a result of cash payments and charge-offs.
(5) Percentages have been annualized for the nine months ended September 30,
1997 and 1996, and are not necessarily indicative of the experience for the
year.
The net loss figures above reflect the fact that Case Credit had recourse to
Dealers on a portion of the Contracts. See "The Receivables Pools--The Retail
Equipment Financing Business--Dealer Agreements" in the Prospectus. This fact
was taken into consideration in determining the principal balance of the
Certificates and the Specified Spread Account Balance. In the event of a
Dealer's bankruptcy, a bankruptcy trustee, a creditor or the Dealer as debtor in
possession might attempt to characterize recourse sales of Contracts as loans to
the Dealer secured by the Contracts. Such an attempt, if successful, could
result in payment delays or losses on the affected Receivables.
S-21
Weighted Average Life of the Notes
Information regarding certain maturity and prepayment considerations with
respect to the Notes is set forth under "Weighted Average Life of the
Securities" in the Prospectus. As the rate of payment of principal of the Notes
depends primarily on the rate of payment (including prepayments) of the
principal balance of the Receivables, final payment of each Class of Notes could
occur significantly earlier than their respective final scheduled maturity
dates. Noteholders will bear the risk of being able to reinvest principal
payments of the Notes at yields at least equal to the yield on their respective
Notes.
Prepayments on retail installment sale contracts can be measured relative to a
prepayment standard or model. The model used in this Prospectus Supplement is
based on a constant prepayment rate ("CPR"). CPR is determined by the percentage
of principal outstanding at the beginning of a period that prepays during that
period, stated as an annualized rate. The CPR prepayment model, like any
prepayment model, does not purport to be either an historical description of
prepayment experience or a prediction of the anticipated rate of prepayment.
The tables on pages S-23, S-24 and S-25, have been prepared on the basis of
certain assumptions, including that: (a) the Receivables prepay in full at the
specified monthly CPR, with no repurchases, (b) each scheduled payment on the
Receivables is made on the last day of each Collection Period, (c) distributions
are made on each Payment Date in respect of the Notes in accordance with the
description set forth under "Description of the Transfer and Servicing
Agreements-- Distributions," (d) the balance in the Spread Account on any day is
equal to the Specified Spread Account Balance, (e) the Closing Date occurs on
February 23, 1998 and (f) the Servicer exercises its option to purchase the
Receivables on the Payment Date after the Pool Balance declines to 10% of the
Initial Pool Balance. The table indicates the projected weighted average life of
each Class of Notes and sets forth the percent of the initial principal balance
of each class of Notes that is projected to be outstanding after each of the
Payment Dates shown at various CPR percentages.
The table also assumes that the Receivables have been aggregated into four
hypothetical pools with all of the Receivables within each such pool having the
following characteristics:
--------------------------
Aggregate Weighted
Contract Average
Pool Value APR
- ---------------------------------------------------- ------------- -----------
1................................................... $325,333,194.29 8.758%
2................................................... 99,988,935.23 8.758
3................................................... 99,888,935.24 8.758
4................................................... 99,888,935.24 8.758
-------------
$625,000,000.00
-------------
-------------
Hypothetical pool 1 has the same Contract Value and cashflow characteristics as
the Initial Receivables. Hypothetical pools 2, 3 and 4 have Contract Values
equal in the aggregate to the Initial Pre-Funded Amount. The cash flow
characteristics of hypothetical pools 2, 3 and 4 are proportionately identical
to hypothetical pool 1.
The information included in the following tables represents forward-looking
statements and involves risks and uncertainties that could cause actual results
to differ materially from those in the forward-looking statements. The actual
characteristics and performance of the Receivables will differ from the
assumptions used in constructing the tables on pages S-23, S-24 and S-25. 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 highly unlikely that the Receivables will prepay
at a constant CPR until maturity or that all of the Receivables will prepay at
the same CPR. Similarly, the aggregate Contract Value of Subsequent Receivables
may be less than the Pre-Funded Amount. Moreover, the diverse terms of
Receivables within each of the three hypothetical pools could produce slower or
faster principal distributions than indicated in the table at the various CPR
specified. Any difference between such assumptions and the actual
characteristics and performance of the Receivables, or actual prepayment
experience, will affect the percentages of initial balances outstanding over
time and the weighted average lives of the Notes.
S-22
Percent of Initial Principal Amount of the Notes at Various CPR Percentages
------------------------------------------------------------------------
A-1 Notes A-2 Notes
------------------------------------ ---------
0% 0%
Payment Date -- 13% 15% 17% 19% --
- -------------------------------------------------- --- --- --- ---
February 1998..................................... 100 100 100 100 100 100
March 1998........................................ 95 91 90 89 88 100
April 1998........................................ 92 81 79 77 75 100
May 1998.......................................... 88 70 67 63 60 100
June 1998......................................... 84 56 52 47 42 100
July 1998......................................... 79 42 36 30 24 100
August 1998....................................... 73 28 21 14 6 100
September 1998.................................... 62 10 1 0 0 100
October 1998...................................... 54 0 0 100
November 1998..................................... 44 100
December 1998..................................... 13 100
January 1999...................................... 0 89
February 1999..................................... 81
March 1999........................................ 73
April 1999........................................ 67
May 1999.......................................... 64
June 1999......................................... 62
July 1999......................................... 60
August 1999....................................... 58
September 1999.................................... 54
October 1999...................................... 51
November 1999..................................... 47
December 1999..................................... 36
January 2000...................................... 21
February 2000..................................... 10
March 2000........................................ 2
April 2000........................................ 0
Weighted Average Life (years)(1).................. .6 .4 .4 .3 .3 1.6
Payment Date 13% 15% 17% 19%
- -------------------------------------------------- --- --- --- ---
February 1998..................................... 100 100 100 100
March 1998........................................ 100 100 100 100
April 1998........................................ 100 100 100 100
May 1998.......................................... 100 100 100 100
June 1998......................................... 100 100 100 100
July 1998......................................... 100 100 100 100
August 1998....................................... 100 100 100 100
September 1998.................................... 100 100 97 94
October 1998...................................... 98 94 90 87
November 1998..................................... 91 87 83 79
December 1998..................................... 78 74 69 65
January 1999...................................... 62 57 53 48
February 1999..................................... 50 46 41 36
March 1999........................................ 40 35 30 25
April 1999........................................ 33 27 22 17
May 1999.......................................... 28 22 17 12
June 1999......................................... 24 18 13 7
July 1999......................................... 20 14 8 2
August 1999....................................... 16 9 3 0
September 1999.................................... 10 4 0
October 1999...................................... 6 0
November 1999..................................... 1
December 1999..................................... 0
January 2000......................................
February 2000.....................................
March 2000........................................
April 2000........................................
Weighted Average Life (years)(1).................. 1.1 1.1 1.0 1.0
- ------------------------------
(1) The weighted average life of a Note is determined by: (a) multiplying the
amount of each principal payment on the applicable Note by the number of
years from the date of issuance of such Note to the related Payment Date,
(b) adding the results and (c) dividing the sum by the related initial
principal amount of such Note.
This table has been prepared based on the assumptions described on page S-22
(including the assumptions regarding the characteristics and performance of the
Receivables, which will differ from the actual characteristics and performance
thereof) and should be read in conjunction therewith.
S-23
Percent of Initial Principal Amount of the Notes at Various CPR Percentages
------------------------------------------------------------------------
A-3 Notes A-4 Notes
------------------------------------ ---------
0% 0%
Payment Date -- 13% 15% 17% 19% --
- -------------------------------------------------- --- --- --- ---
February 1998..................................... 100 100 100 100 100 100
March 1998........................................ 100 100 100 100 100 100
April 1998........................................ 100 100 100 100 100 100
May 1998.......................................... 100 100 100 100 100 100
June 1998......................................... 100 100 100 100 100 100
July 1998......................................... 100 100 100 100 100 100
August 1998....................................... 100 100 100 100 100 100
September 1998.................................... 100 100 100 100 100 100
October 1998...................................... 100 100 100 100 100 100
November 1998..................................... 100 100 100 100 100 100
December 1998..................................... 100 100 100 100 100 100
January 1999...................................... 100 100 100 100 100 100
February 1999..................................... 100 100 100 100 100 100
March 1999........................................ 100 100 100 100 100 100
April 1999........................................ 100 100 100 100 100 100
May 1999.......................................... 100 100 100 100 100 100
June 1999......................................... 100 100 100 100 100 100
July 1999......................................... 100 100 100 100 100 100
August 1999....................................... 100 100 100 100 96 100
September 1999.................................... 100 100 100 97 89 100
October 1999...................................... 100 100 99 90 82 100
November 1999..................................... 100 100 92 84 75 100
December 1999..................................... 100 87 78 70 61 100
January 2000...................................... 100 69 61 52 44 100
February 2000..................................... 100 56 48 40 32 100
March 2000........................................ 100 45 37 30 22 100
April 2000........................................ 94 37 29 22 14 100
May 2000.......................................... 90 33 25 17 9 100
June 2000......................................... 88 29 21 13 5 100
July 2000......................................... 85 25 16 8 1 100
August 2000....................................... 81 21 12 4 0 100
September 2000.................................... 76 15 7 0 100
October 2000...................................... 72 11 2 100
November 2000..................................... 67 6 0 100
December 2000..................................... 52 0 100
January 2001...................................... 33 100
February 2001..................................... 20 100
March 2001........................................ 9 100
April 2001........................................ 1 100
May 2001.......................................... 0 99
June 2001......................................... 97
July 2001......................................... 95
August 2001....................................... 92
September 2001.................................... 89
October 2001...................................... 86
November 2001..................................... 83
December 2001..................................... 72
January 2002...................................... 59
February 2002..................................... 51
March 2002........................................ 44
April 2002........................................ 39
May 2002.......................................... 38
June 2002......................................... 37
July 2002......................................... 36
August 2002....................................... 35
September 2002.................................... 33
October 2002...................................... 31
November 2002..................................... 29
December 2002..................................... 0
Weighted Average Life (years)(1).................. 2.8 2.2 2.1 2.0 1.9 4.2
Payment Date 13% 15% 17% 19%
- -------------------------------------------------- --- --- --- ---
February 1998..................................... 100 100 100 100
March 1998........................................ 100 100 100 100
April 1998........................................ 100 100 100 100
May 1998.......................................... 100 100 100 100
June 1998......................................... 100 100 100 100
July 1998......................................... 100 100 100 100
August 1998....................................... 100 100 100 100
September 1998.................................... 100 100 100 100
October 1998...................................... 100 100 100 100
November 1998..................................... 100 100 100 100
December 1998..................................... 100 100 100 100
January 1999...................................... 100 100 100 100
February 1999..................................... 100 100 100 100
March 1999........................................ 100 100 100 100
April 1999........................................ 100 100 100 100
May 1999.......................................... 100 100 100 100
June 1999......................................... 100 100 100 100
July 1999......................................... 100 100 100 100
August 1999....................................... 100 100 100 100
September 1999.................................... 100 100 100 100
October 1999...................................... 100 100 100 100
November 1999..................................... 100 100 100 100
December 1999..................................... 100 100 100 100
January 2000...................................... 100 100 100 100
February 2000..................................... 100 100 100 100
March 2000........................................ 100 100 100 100
April 2000........................................ 100 100 100 100
May 2000.......................................... 100 100 100 100
June 2000......................................... 100 100 100 100
July 2000......................................... 100 100 100 100
August 2000....................................... 100 100 100 97
September 2000.................................... 100 100 99 93
October 2000...................................... 100 100 95 89
November 2000..................................... 100 98 91 85
December 2000..................................... 95 89 83 77
January 2001...................................... 83 78 72 67
February 2001..................................... 75 70 65 60
March 2001........................................ 69 64 59 54
April 2001........................................ 64 59 54 50
May 2001.......................................... 61 56 52 48
June 2001......................................... 59 54 50 46
July 2001......................................... 57 53 48 44
August 2001....................................... 55 50 46 42
September 2001.................................... 52 48 43 39
October 2001...................................... 50 45 41 37
November 2001..................................... 47 43 39 35
December 2001..................................... 40 37 33 30
January 2002...................................... 32 29 0 0
February 2002..................................... 0 0
March 2002........................................
April 2002........................................
May 2002..........................................
June 2002.........................................
July 2002.........................................
August 2002.......................................
September 2002....................................
October 2002......................................
November 2002.....................................
December 2002.....................................
Weighted Average Life (years)(1).................. 3.5 3.5 3.4 3.3
- ------------------------------
(1) The weighted average life of a Note is determined by: (a) multiplying the
amount of each principal payment on the applicable Note by the number of
years from the date of issuance of the Note to the related Payment Date, (b)
adding the results and (c) dividing the sum by the related initial principal
amount of the Note.
This table has been prepared based on the assumptions described on page S-22
(including the assumptions regarding the characteristics and performance of the
Receivables, which will differ from the actual characteristics and performance
thereof) and should be read in conjunction therewith.
S-24
Percent of Initial Principal Amount of the Notes at Various CPR Percentages
- ------------------------------------------------------------------------------------------------------------------------------------
Class B Notes
------------------------------------------------
0%
Payment Date -- 13% 15% 17%
- ---------------------------------------------------------------------------------- --- --- ---
February 1998..................................................................... 100 100 100 100
March 1998........................................................................ 100 99 99 99
April 1998........................................................................ 100 98 98 97
May 1998.......................................................................... 100 96 96 96
June 1998......................................................................... 100 95 94 94
July 1998......................................................................... 100 93 92 92
August 1998....................................................................... 100 91 91 90
September 1998.................................................................... 100 89 88 87
October 1998...................................................................... 100 87 86 85
November 1998..................................................................... 100 85 84 83
December 1998..................................................................... 100 81 80 78
January 1999...................................................................... 100 76 74 73
February 1999..................................................................... 82 72 71 69
March 1999........................................................................ 79 69 67 66
April 1999........................................................................ 77 67 65 63
May 1999.......................................................................... 77 65 63 62
June 1999......................................................................... 76 64 62 60
July 1999......................................................................... 75 63 61 59
August 1999....................................................................... 75 61 59 57
September 1999.................................................................... 73 59 57 55
October 1999...................................................................... 72 58 56 54
November 1999..................................................................... 71 56 54 52
December 1999..................................................................... 68 53 51 49
January 2000...................................................................... 63 49 47 45
February 2000..................................................................... 59 46 44 42
March 2000........................................................................ 57 43 41 39
April 2000........................................................................ 55 41 39 37
May 2000.......................................................................... 54 40 38 36
June 2000......................................................................... 53 39 37 35
July 2000......................................................................... 52 38 36 34
August 2000....................................................................... 52 37 35 33
September 2000.................................................................... 50 36 34 32
October 2000...................................................................... 49 34 32 31
November 2000..................................................................... 48 33 31 29
December 2000..................................................................... 45 30 29 27
January 2001...................................................................... 40 27 25 24
February 2001..................................................................... 37 24 23 21
March 2001........................................................................ 34 22 21 19
April 2001........................................................................ 32 21 20 18
May 2001.......................................................................... 31 20 19 17
June 2001......................................................................... 31 20 18 17
July 2001......................................................................... 30 19 18 16
August 2001....................................................................... 30 18 17 16
September 2001.................................................................... 29 18 16 15
October 2001...................................................................... 28 17 15 14
November 2001..................................................................... 27 16 15 13
December 2001..................................................................... 24 14 13 12
January 2002...................................................................... 20 12 11 0
February 2002..................................................................... 17 0 0
March 2002........................................................................ 15
April 2002........................................................................ 14
May 2002.......................................................................... 13
June 2002......................................................................... 13
July 2002......................................................................... 13
August 2002....................................................................... 12
September 2002.................................................................... 12
October 2002...................................................................... 11
November 2002..................................................................... 11
December 2002..................................................................... 0
Weighted Average Life (years)(1).................................................. 2.6 2.1 2.0 1.9
- ----------------------------------------------------------------------------------
Payment Date 19%
- ---------------------------------------------------------------------------------- ---
February 1998..................................................................... 100
March 1998........................................................................ 99
April 1998........................................................................ 97
May 1998.......................................................................... 95
June 1998......................................................................... 93
July 1998......................................................................... 91
August 1998....................................................................... 89
September 1998.................................................................... 86
October 1998...................................................................... 84
November 1998..................................................................... 81
December 1998..................................................................... 77
January 1999...................................................................... 72
February 1999..................................................................... 68
March 1999........................................................................ 64
April 1999........................................................................ 62
May 1999.......................................................................... 60
June 1999......................................................................... 58
July 1999......................................................................... 57
August 1999....................................................................... 55
September 1999.................................................................... 53
October 1999...................................................................... 52
November 1999..................................................................... 50
December 1999..................................................................... 47
January 2000...................................................................... 43
February 2000..................................................................... 40
March 2000........................................................................ 37
April 2000........................................................................ 35
May 2000.......................................................................... 34
June 2000......................................................................... 33
July 2000......................................................................... 32
August 2000....................................................................... 31
September 2000.................................................................... 30
October 2000...................................................................... 29
November 2000..................................................................... 27
December 2000..................................................................... 25
January 2001...................................................................... 22
February 2001..................................................................... 20
March 2001........................................................................ 18
April 2001........................................................................ 17
May 2001.......................................................................... 16
June 2001......................................................................... 16
July 2001......................................................................... 15
August 2001....................................................................... 14
September 2001.................................................................... 14
October 2001...................................................................... 13
November 2001..................................................................... 12
December 2001..................................................................... 11
January 2002...................................................................... 0
February 2002.....................................................................
March 2002........................................................................
April 2002........................................................................
May 2002..........................................................................
June 2002.........................................................................
July 2002.........................................................................
August 2002.......................................................................
September 2002....................................................................
October 2002......................................................................
November 2002.....................................................................
December 2002.....................................................................
Weighted Average Life (years)(1).................................................. 1.9
- ------------------------------
(1) The weighted average life of a Note is determined by: (a) multiplying the
amount of each principal payment on the applicable Note by the number of
years from the date of issuance of the Note to the related Payment Date, (b)
adding the results and (c) dividing the sum by the related initial principal
amount of the Note.
This table has been prepared based on the assumptions described on page S-22
(including the assumptions regarding the characteristics and performance of the
Receivables, which will differ from the actual characteristics and performance
thereof) and should be read in conjunction therewith.
S-25
Description of the Notes
General
The Notes will be issued pursuant to the terms of the Indenture, a form of which
has been filed as an exhibit to the Registration Statement. The following
summarizes the material terms of the Notes and the Indenture. The summary does
not purport to be complete and is qualified in its entirety by reference to the
provisions of the Notes and the Indenture. The following summary supplements,
and to the extent inconsistent therewith replaces, the description of the
general terms and provisions of the notes of any given series and the related
indenture set forth in the Prospectus.
Payments of Interest
The Notes will constitute Fixed Rate Securities, as such term is defined under
"Certain Information Regarding the Securities--Fixed Rate Securities" in the
Prospectus. Interest on the principal balance of the Notes will accrue at the
A-1 Rate, in the case of the A-1 Notes, the A-2 Rate, in the case of the A-2
Notes, the A-3 Rate, in the case of the A-3 Notes, the A-4 Rate, in the case of
the A-4 Notes, and the Class B Rate, in the case of the Class B Notes, and, in
each case, will be payable monthly on each Payment Date, commencing March 16,
1998.
Interest payments on the Notes will be derived from the Total Distribution
Amount remaining after the payment of the Administration Fee, the Servicing Fee
(if neither Case Credit nor any of its affiliates is the Servicer) and, in the
case of the Class B Notes, payments of interest on the Class A Notes, and from
amounts on deposit in the Spread Account. If the amount of interest on the Class
A Notes payable on any Payment Date exceeds the amounts available from these
sources, the A-1 Noteholders, A-2 Noteholders, A-3 Noteholders and A-4
Noteholders will receive their ratable share (based upon the total amount of
interest due to each of them) of the amount available to be distributed in
respect of interest on the Class A Notes. See "Description of the Transfer and
Servicing Agreements--Distributions" and "--Spread Account."
Interest on the Class B Notes will not be paid on any Payment Date until
interest on the Class A Notes has been paid in full.
Interest on the Certificates will only be paid on any Payment Date generally to
the extent of funds available following payment of the Servicing Fee (if Case
Credit or an affiliate of Case Credit is not the Servicer), the Administration
Fee and distributions in respect of the Notes from the Collection Account.
Payments of Principal
Principal payments will be made to the Noteholders on each Payment Date as
follows. Principal payments will be made to the A-1 Noteholders in an amount
generally equal to the Class A Noteholders' Monthly Principal Distributable
Amount until the A-1 Notes have been repaid in full. Commencing on the Payment
Date on which the A-1 Notes are repaid in full, principal payments will be made
to the A-2 Noteholders in an amount generally equal to the Class A Noteholders'
Monthly Principal Distributable Amount (less any amount applied to repay the A-1
Notes) until the A-2 Notes have been repaid in full. Commencing on the Payment
Date on which the A-2 Notes are repaid in full, principal payments will be made
to the A-3 Noteholders in an amount generally equal to the Class A Noteholders'
Monthly Principal Distributable Amount (less any amount applied to repay the A-2
Notes) until the A-3 Notes have been repaid in full. Commencing on the Payment
Date on which the A-3 Notes are repaid in full, principal payments will be made
to the A-4 Noteholders in an amount generally equal to the Class A Noteholders'
Monthly Principal Distributable Amount (less any amount applied to repay the A-3
Notes) until the A-4 Notes have been repaid in full. The principal of the Class
B Notes will be payable on each Payment Date, to the extent of funds available
therefor, in an amount generally equal to the Class B Noteholders' Principal
Distributable Amount PROVIDED, that no principal payments will be made with
respect to the Class B Notes on any Payment Date until all amounts payable with
respect to the Class A Notes on that Payment Date have been paid in full. No
principal distributions will be made with respect to the Certificates until the
Class B Notes have been repaid in full.
Principal payments on the Class A Notes will generally be derived from the Total
Distribution Amount remaining after the payment of the Administration Fee, the
Servicing Fee (if neither Case Credit nor any of its affiliates is the
Servicer), the Class A Noteholders' Interest Distributable Amount and the Class
B Noteholders' Interest Distributable Amount, and from amounts on deposit in the
Spread Account. Principal payments on the Class B Notes will generally be
derived from the Total Distribution Amount remaining after the payment of the
amounts listed above, as well as principal payments on the Class A
S-26
Notes, and from amounts on deposit in the Spread Account. See "Description of
the Transfer and Servicing Agreements-- Distributions" and "--Spread Account."
Mandatory Redemption
On the Payment Date on or immediately following the last day of the Funding
Period, any funds remaining in the Pre-Funding Account (after giving effect to
the purchase of all Subsequent Receivables, including any such purchase on such
date) will be applied to redeem the A-1 Notes then outstanding in whole or in
part, and if the A-1 Notes are redeemed in whole, any such funds remaining will
be applied to redeem the A-2 Notes in whole or in part (each, a "Mandatory
Redemption"). The aggregate principal amount of the A-1 Notes to be redeemed
will equal the lesser of (a) the remaining Pre-Funded Amount and (b) the full
outstanding principal amount of the A-1 Notes. The aggregate principal amount of
the A-2 Notes to be redeemed will equal the lesser of (i) the remaining
Pre-Funded Amount, after giving effect to the redemption of A-1 Notes in full,
and (ii) the full outstanding principal amount of the A-2 Notes. In the unlikely
event that the A-2 Notes are redeemed in full and there are any remaining funds
in the Pre-Funding Account, such funds will be applied towards the redemption of
the A-3 Notes. In the unlikely event that the A-3 Notes are redeemed in full and
there are any remaining funds in the Pre-Funding Account, such funds will be
applied towards redemption of the A-4 Notes.
Optional Redemption
The A-4 Notes and the Class B Notes will be redeemed in whole, but not in part,
at the A-4 Note Redemption Price or the Class B Redemption Price, as applicable,
on any Payment Date, after the date on which the A-1 Notes, the A-2 Notes and
the A-3 Notes have been paid in full, on which the Servicer exercises its option
to purchase the Receivables. The Servicer may purchase the Receivables from the
Trust if the Pool Balance declines to 10% or less of the Initial Pool Balance,
as described in the Prospectus under "Description of the Transfer and Servicing
Agreements-- Termination." The A-4 Note Redemption Price will equal the unpaid
principal amount of the A-4 Notes, plus accrued and unpaid interest thereon. The
Class B Redemption Price will equal the unpaid principal balance of the Class B
Notes, plus accrued and unpaid interest thereon.
Registration of Notes
The Notes initially will be represented by securities registered in the name of
Cede, as nominee of DTC. Unless and until Definitive Securities are issued, all
references herein to actions by Noteholders (or any class thereof) shall refer
to actions taken by DTC upon instructions from DTC Participants and all
references herein to distributions, notices, reports and statements to
Noteholders shall refer to distributions, notices, reports and statements to DTC
or Cede, as the registered holder of the Noteholders, for distribution to
beneficial owners in accordance with DTC procedures. Noteholders may hold their
Notes through DTC (in the United States) or Cedel or Euroclear (in Europe) if
they are participants of such systems, or indirectly through organizations that
are participants in such systems. Cede, as nominee for DTC, will hold the global
Notes. Cedel and Euroclear will hold omnibus positions on behalf of the Cedel
Participants and the Euroclear Participants, respectively, through customers'
securities accounts in Cedel's and Euroclear's names on the books of their
respective Depositaries which in turn will hold such positions in customers'
securities accounts in the Depositaries' names on the books of DTC. See "Certain
Information Regarding the Securities--Book-Entry Registration" and "--Definitive
Securities" in the Prospectus.
The Indenture Trustee
Harris Trust and Savings Bank is the Indenture Trustee under the Indenture.
Harris Trust and Savings Bank is an Illinois banking corporation, and its
corporate trust offices are located at 311 West Monroe Street, Chicago, Illinois
60606. In the ordinary course of its business, the Indenture Trustee and its
affiliates have engaged and may in the future engage in commercial banking or
financial advisory transactions with Case Credit and its affiliates.
Pursuant to the Trust Indenture Act of 1939, as amended, the Indenture Trustee
may be deemed to have a conflict of interest and be required to resign as
trustee for either the Class A Notes or the Class B Notes if a default occurs
under the Indenture. The Indenture will provide for a successor trustee to be
appointed for one or both Classes of Notes in these circumstances, so that there
will be separate trustees for the Class A Notes and the Class B Notes. In these
circumstances, the Class A
S-27
Noteholders and Class B Noteholders will continue to vote as a single group. So
long as any amounts remain unpaid with respect to the Class A Notes, only the
trustee for the Class A Noteholders will have the right to exercise remedies
under the Indenture (but the Class B Noteholders will be entitled to their share
of any proceeds of enforcement, subject to the subordination of the Class B
Notes to the Class A Notes as described herein). Upon repayment of the Class A
Notes in full, all rights to exercise remedies under the Indenture will transfer
to the trustee for the Class B Notes. Any resignation of the original Indenture
Trustee as described above with respect to any class of Notes will become
effective only upon the appointment of a successor trustee for such class of
Notes and such successor's acceptance of such appointment.
Description of the Certificates
The Certificates will be issued pursuant to the Trust Agreement. The Seller will
initially purchase the entire principal amount of the Certificates. The
Certificates will bear interest at the rate of 5.940% per annum, except that
during the Funding Period no interest will accrue on the Pre-Funded Percentage
of the Certificate Balance.
Distributions of interest and principal on the Certificates will be subordinated
in priority of payment to interest and principal due on the Notes to the extent
described herein. Funds on deposit in the Spread Account will not be available
to cover scheduled payments with respect to the Certificates.
Description of the Transfer and Servicing Agreements
The following summarizes the material terms of the Sale and Servicing Agreement,
the Purchase Agreement, the Administration Agreement and the Trust Agreement
(collectively, the "Transfer and Servicing Agreements," forms of which have been
filed as exhibits to the Registration Statement). The summary does not purport
to be complete and is subject to, and qualified in its entirety by reference to,
the provisions of the Transfer and Servicing Agreements. The following summary
supplements, and to the extent inconsistent therewith replaces, the description
of the general terms and provisions of the Transfer and Servicing Agreements set
forth under the heading "Description of the Transfer and Servicing Agreements"
in the Prospectus.
Sale and Assignment of Initial Receivables and Subsequent Receivables
Certain information with respect to the conveyance prior to the Closing Date of
the Owned Contracts from Case Credit to the Seller pursuant to the Liquidity
Receivables Purchase Agreement and on the Closing Date of the Initial
Receivables from the Seller to the Trust pursuant to the Sale and Servicing
Agreement is set forth under "Description of the Transfer and Servicing
Agreements--Sale and Assignment of Receivables" and "--Commercial Paper Program"
in the Prospectus. In addition, during the Funding Period, pursuant to the Sale
and Servicing Agreement, the Seller will be obligated to sell to the Trust
Subsequent Receivables having an aggregate Contract Value of approximately
$299,666,806, such amount being equal to the Initial Pre-Funded Amount.
During the Funding Period, on each Subsequent Transfer Date, subject to the
conditions described below, the Seller will sell and assign to the Trust,
without recourse, the Seller's entire interest in the Subsequent Receivables
designated by the Seller as of the related Subsequent Cutoff Date and identified
in a schedule attached to an assignment relating to such Subsequent Receivables
executed on such date by the Seller. Upon the conveyance of Subsequent
Receivables to the Trust on a Subsequent Transfer Date, (i) the Pool Balance
will increase in an amount equal to the aggregate Contract Value of the
Subsequent Receivables, (ii) an amount equal to 2.00% of the aggregate Contract
Value of the Subsequent Receivables will be withdrawn from the Pre-Funding
Account and deposited in the Spread Account, and (iii) an amount equal to the
excess of the aggregate Contract Value of such Subsequent Receivables over the
amount described in clause (ii) will be withdrawn from the Pre-Funding Account
and paid to the Seller.
Any conveyance of Subsequent Receivables is subject to the satisfaction, on or
before the related Subsequent Transfer Date, of the following conditions
precedent, among others: (i) each such Subsequent Receivable must satisfy the
eligibility criteria specified in the Sale and Servicing Agreement (see "The
Receivables Pool"); (ii) the Seller shall not have selected such Subsequent
Receivables in a manner that it believes is adverse to the interests of the
Noteholders or the Certificateholders; (iii) as of the related Subsequent Cutoff
Date, the Receivables, including any Subsequent Receivables conveyed by the
Seller
S-28
as of such Subsequent Cutoff Date, must satisfy the criteria described under
"The Receivables Pool" herein and "The Receivables Pools" in the Prospectus;
(iv) the applicable Spread Account Initial Deposit for such Subsequent Transfer
Date shall have been made; (v) the Seller shall have executed and delivered to
the Trust (with a copy to the Indenture Trustee) a written assignment conveying
such Subsequent Receivables to the Trust (including a schedule identifying such
Subsequent Receivables); (vi) the Seller shall have delivered certain opinions
of counsel to the Trustee, the Indenture Trustee and the Rating Agencies with
respect to the transfer of all such Subsequent Receivables conveyed during such
Collection Period; (vii) the Trust and the Indenture Trustee shall have received
written confirmation from a firm of certified independent public accountants
that, as of the end of the preceding Collection Period, the Receivables in the
Trust at that time, including the Subsequent Receivables conveyed by the Seller
during each Collection Period, satisfied the parameters described under "The
Receivables Pool" herein and under "The Receivables Pools" in the Prospectus;
and (viii) Moody's shall have received written notification from the Seller of
the addition of all such Subsequent Receivables.
Except for the criteria described in the preceding paragraph, there will be no
required characteristics of the Subsequent Receivables. Therefore, following the
transfer of Subsequent Receivables to the Trust, the aggregate characteristics
of the entire Receivables Pool may vary from those of the Initial Receivables.
See "Risk Factors--The Receivables and the Pre-Funding Account" and "The
Receivables Pool."
Accounts
In addition to the Accounts referred to in the Prospectus under "Description of
the Transfer and Servicing Agreements-- Accounts," the Servicer will establish
and maintain the Pre-Funding Account and the Negative Carry Account, each in the
name of the Indenture Trustee and on behalf of the Noteholders and the
Certificateholders. The Servicer will also establish and maintain the Spread
Account in the name of the Indenture Trustee and on behalf of the Noteholders.
Servicing Compensation and Payment of Expenses
The Servicing Fee Rate with respect to the Servicing Fee to be paid to the
Servicer will be 1.00% per annum of the Pool Balance as of the first day of each
Collection Period. The Servicing Fee (together with any portion of the Servicing
Fee that remains unpaid from prior Payment Dates) will be paid solely to the
extent of the Total Distribution Amount and will be paid after the distribution
of any portion of the Total Distribution Amount to the Noteholders and the
Certificateholders. However, if the Servicer is not Case Credit or an affiliate
of Case Credit, the Servicing Fee will be paid prior to the distribution of any
portion of the Total Distribution Amount to the Noteholders or the
Certificateholders. See "Description of the Transfer and Servicing
Agreements--Servicing Compensation and Payment of Expenses" in the Prospectus.
Distributions
DEPOSITS TO COLLECTION ACCOUNT. By the third business day prior to a Payment
Date (the "Determination Date"), the Servicer will provide the Indenture Trustee
with certain information with respect to the preceding Collection Period,
including the amount of aggregate collections on the Receivables, the aggregate
Purchase Amount of Receivables to be repurchased by the Seller or to be
purchased by the Servicer and the Negative Carry Amount to be withdrawn from the
Negative Carry Account.
On or before the business day preceding each Payment Date, the Servicer will
cause the Total Distribution Amount to be deposited into the Collection Account.
The "Total Distribution Amount" for a Payment Date will be the aggregate
collections on the Receivables (including collections received after the end of
the preceding calendar month on any Subsequent Receivables added to the Trust
after the end of that preceding calendar month and on or prior to that Payment
Date) with respect to the related Collection Period (including any Liquidation
Proceeds, the Purchase Amount of any Receivables repurchased by the Seller or
purchased by the Servicer and Investment Earnings for such Payment Date) plus
the Negative Carry Amount for such Collection Period. "Liquidated Receivables"
means defaulted Receivables in respect of which the Financed Equipment has been
sold or otherwise disposed of and "Liquidation Proceeds" means all proceeds of
the Liquidated Receivables obtained through the sale or other disposition of the
Financed Equipment, net of expenses incurred by the Servicer in connection with
such liquidation and any amounts required by law to be remitted to the Obligor
on such Liquidated Receivables.
S-29
The Total Distribution Amount on any Payment Date will exclude: (i) all payments
and proceeds (including Liquidation Proceeds) of any Receivables the Purchase
Amount of which has been included in the Total Distribution Amount in a prior
Collection Period; (ii) any monies collected with respect to any Liquidated
Receivable (other than from the sale or other disposition of the Financed
Equipment) during any Collection Period after the Collection Period in which
such Receivable became a Liquidated Receivable; or (iii) amounts released from
the Pre-Funding Account.
DEPOSITS TO THE DISTRIBUTION ACCOUNTS. On each Payment Date, the Servicer will
instruct the Indenture Trustee to make the deposits and distributions set forth
below, to the extent of the Total Distribution Amount in the following order of
priority:
(i) to the Administrator, the Administration Fee and all unpaid
Administration Fees from prior Collection Periods;
(ii) to the Note Distribution Account, the Class A Noteholders' Interest
Distributable Amount;
(iii) to the Note Distribution Account, the Class B Noteholders' Interest
Distributable Amount;
(iv) to the Note Distribution Account, the A-1 Noteholders' Principal
Distributable Amount;
(v) to the Note Distribution Account, the A-2 Noteholders' Principal
Distributable Amount;
(vi) to the Note Distribution Account, the A-3 Noteholders' Principal
Distributable Amount;
(vii) to the Note Distribution Account, the A-4 Noteholders' Principal
Distributable Amount;
(viii) to the Note Distribution Account, the Class B Noteholders' Principal
Distributable Amount;
(ix) to the Spread Account to the extent necessary so that the balance on
deposit therein will equal the Specified Spread Account Balance;
(x) to the Certificate Distribution Account, the Certificateholders'
Interest Distributable Amount;
(xi) to the Certificate Distribution Account, the Certificateholders'
Principal Distributable Amount;
(xii) to the Servicer, the Servicing Fee and all unpaid Servicing Fees from
prior Collection Periods; provided that if Case Credit or an affiliate
of Case Credit is not the Servicer, the amounts described in this
clause (x) will be paid prior to any other application of funds on
deposit in the Collection Account; and
(xiii) the remaining balance, if any, to the Spread Account.
After an Event of Default and acceleration of the Notes (and, if any Notes
remain outstanding, on and after the Final Scheduled Maturity Date), principal
payments will be made first to the Class A Noteholders ratably according to the
amounts due and payable on the Class A Notes for principal until paid in full
and then to the Class B Noteholders until the outstanding principal amount of
the Class B Notes has been paid in full.
"A-1 Noteholders' Monthly Principal Distributable Amount" means, with
respect to any Payment Date until the Payment Date on which the outstanding
principal amount of the A-1 Notes has been reduced to zero, 100% of the
Class A Noteholders' Monthly Principal Distributable Amount for such Payment
Date.
"A-1 Noteholders' Principal Carryover Shortfall" means, with respect to any
Payment Date, the excess of the A-1 Noteholders' Principal Distributable
Amount for the preceding Payment Date over the amount that was actually
deposited in the Note Distribution Account in respect of principal of the
A-1 Notes on such preceding Payment Date.
"A-1 Noteholders' Principal Distributable Amount" means, with respect to any
Payment Date, the sum of (i) the A-1 Noteholders' Monthly Principal
Distributable Amount for such Payment Date and (ii) the A-1 Noteholders'
Principal Carryover Shortfall for such Payment Date; PROVIDED, HOWEVER, that
the sum of clauses (i) and (ii) above shall not exceed the outstanding
principal amount of the A-1 Notes, and on the A-1 Note Final Scheduled
Maturity Date, the A-1 Noteholders' Principal Distributable Amount will
include the amount, to the extent of available funds, necessary (after
giving effect to the other amounts to be deposited in the Note Distribution
Account on such Payment Date and allocable to principal) to reduce the
outstanding principal amount of the A-1 Notes to zero.
S-30
"A-2 Noteholders' Monthly Principal Distributable Amount" means, with
respect to each Payment Date on or after the Payment Date on which an amount
sufficient to reduce the outstanding principal amount of the A-1 Notes to
zero has been deposited in the Note Distribution Account, 100% of the Class
A Noteholders' Monthly Principal Distributable Amount (less the portion
thereof, if any, applied to reduce the outstanding principal amount of the
A-1 Notes to zero on such Payment Date).
"A-2 Noteholders' Principal Carryover Shortfall" means, with respect to any
Payment Date, the excess of the A-2 Noteholders' Principal Distributable
Amount for the preceding Payment Date over the amount that was actually
deposited in the Note Distribution Account in respect of principal of the
A-2 Notes on such preceding Payment Date.
"A-2 Noteholders' Principal Distributable Amount" means, with respect to any
Payment Date, the sum of (i) the A-2 Noteholders' Monthly Principal
Distributable Amount for such Payment Date and (ii) the A-2 Noteholders'
Principal Carryover Shortfall for such Payment Date; PROVIDED, HOWEVER,
that, until an amount sufficient to reduce the outstanding principal amount
of the A-1 Notes to zero has been deposited in the Note Distribution
Account, the A-2 Noteholders' Principal Distributable Amount shall be zero;
PROVIDED, FURTHER, that the sum of clauses (i) and (ii) shall not exceed the
outstanding principal amount of the A-2 Notes, and on the A-2 Note Final
Scheduled Maturity Date, the A-2 Noteholders' Principal Distributable Amount
will include the amount, to the extent of available funds, necessary (after
giving effect to the other amounts to be deposited in the Note Distribution
Account on such Payment Date and allocable to principal) to reduce the
outstanding principal amount of the A-2 Notes to zero.
"A-3 Noteholders' Monthly Principal Distributable Amount" means, with
respect to each Payment Date on or after the Payment Date on which an amount
sufficient to reduce the outstanding amount of the A-2 Notes to zero has
been deposited in the Note Distribution Account, 100% of the Class A
Noteholders' Monthly Principal Distributable Amount (less the portion
thereof, if any, applied to reduce the outstanding principal amount of the
A-2 Notes to zero on such Payment Date).
"A-3 Noteholders' Principal Carryover Shortfall" means, with respect to any
Payment Date, the excess of the A-3 Noteholders' Principal Distributable
Amount for the preceding Payment Date over the amount that was actually
deposited in the Note Distribution Account in respect of principal of the
A-3 Notes on such preceding Payment Date.
"A-3 Noteholders' Principal Distributable Amount" means, with respect to any
Payment Date, the sum of (i) the A-3 Noteholders' Monthly Principal
Distributable Amount for such Payment Date and (ii) the A-3 Noteholders'
Principal Carryover Shortfall for such Payment Date; PROVIDED, HOWEVER,
that, until an amount sufficient to reduce the outstanding amount of the A-2
Notes to zero has been deposited in the Note Distribution Account, the A-3
Noteholders' Principal Distributable Amount shall be zero; PROVIDED,
FURTHER, that the sum of clauses (i) and (ii) shall not exceed the
outstanding principal amount of the A-3 Notes, and on the A-3 Note Final
Scheduled Maturity Date, the A-3 Noteholders' Principal Distributable Amount
will include the amount, to the extent of available funds, necessary (after
giving effect to the other amounts to be deposited in the Note Distribution
Account on such Payment Date and allocable to principal) to reduce the
outstanding principal amount of the A-3 Notes to zero.
"A-4 Noteholders' Monthly Principal Distributable Amount" means, with
respect to each Payment Date on or after the Payment Date on which an amount
sufficient to reduce the outstanding amount of the A-3 Notes to zero has
been deposited in the Note Distribution Account, 100% of the Class A
Noteholders' Monthly Principal Distributable Amount (less the portion
thereof, if any, applied to reduce the outstanding principal amount of the
A-3 Notes to zero on such Payment Date).
"A-4 Noteholders' Principal Carryover Shortfall" means, with respect to any
Payment Date, the excess of the A-4 Noteholders' Principal Distributable
Amount for the preceding Payment Date over the amount that was actually
deposited in the Note Distribution Account in respect of principal of the
A-4 Notes on such preceding Payment Date.
"A-4 Noteholders' Principal Distributable Amount" means, with respect to any
Payment Date, the sum of (i) the A-4 Noteholders' Monthly Principal
Distributable Amount for such Payment Date and (ii) the A-4 Noteholders'
Principal Carryover Shortfall for such Payment Date; PROVIDED, HOWEVER,
that, until an amount sufficient to reduce the outstanding amount of the A-3
Notes to zero has been deposited in the Note Distribution Account, the A-4
Noteholders' Principal Distributable Amount shall be zero; PROVIDED,
FURTHER, that the sum of clauses (i) and (ii) shall not exceed the
S-31
outstanding principal amount of the A-4 Notes, and on the Final Scheduled
Maturity Date, the A-4 Noteholders' Principal Distributable Amount will
include the amount, to the extent of available funds, necessary (after
giving effect to the other amounts to be deposited in the Note Distribution
Account on such Payment Date and allocable to principal) to reduce the
outstanding principal amount of the A-4 Notes to zero.
"Certificate Balance" equals, initially, $10,938,000 and, thereafter, equals
such amount reduced by all amounts allocable to principal previously
distributed to Certificateholders.
"Certificateholders' Interest Carryover Shortfall" means, with respect to
any Payment Date (the "current Payment Date"), the excess of the
Certificateholders' Interest Distributable Amount for the preceding Payment
Date over the amount in respect of interest that was actually deposited in
the Certificate Distribution Account on such preceding Payment Date, plus
interest on such excess, to the extent permitted by law, at the Pass-Through
Rate from such preceding Payment Date to but excluding the current Payment
Date.
"Certificateholders' Interest Distributable Amount" means, with respect to
any Payment Date (the "current Payment Date"), the sum of (i) interest
accrued from and including the preceding Payment Date (or, in the case of
the first Payment Date, the Closing Date) to but excluding the current
Payment Date at the Pass-Through Rate on the Certificate Balance on the
preceding Payment Date after giving effect to all changes therein on such
preceding Payment Date (or, in the case of the first Payment Date, on the
Closing Date), except that during the Funding Period no interest will accrue
on the Pre-Funded Percentage of the Certificate Balance plus (ii) the
Certificateholders' Interest Carryover Shortfall for the current Payment
Date.
"Certificateholders' Principal Carryover Shortfall" means, with respect to
any Payment Date, the excess of the Certificateholders' Principal
Distributable Amount for the preceding Payment Date over the amount in
respect of principal that was actually deposited in the Certificate
Distribution Account on such preceding Payment Date.
"Certificateholders' Principal Distributable Amount" means, with respect to
any Payment Date on or after the Payment Date on which an amount sufficient
to reduce the outstanding amount of the Class B Notes to zero has been
deposited in the Note Distribution Account, the sum of (i) 100% of the
Principal Distribution Amount (less the portion thereof, if any, applied to
reduce the outstanding principal amount of the Class B Notes to zero on such
Payment Date), plus (ii) the Certificateholders' Principal Carryover
Shortfall for such Payment Date; PROVIDED, HOWEVER, that, until an amount
sufficient to reduce the outstanding amount of the Class B Notes to zero has
been deposited in the Note Distribution Account, the Certificateholders'
Principal Distributable Amount shall be zero; PROVIDED, FURTHER, that the
Certificateholders' Principal Distributable Amount will not exceed the
Certificate Balance.
"Class A Noteholders' Distributable Amount" means, with respect to any
Payment Date, the sum of (i) the A-1 Noteholders' Principal Distributable
Amount, (ii) the A-2 Noteholders' Principal Distributable Amount, (iii) the
A-3 Noteholders' Principal Distributable Amount, (iv) the A-4 Noteholders'
Principal Distributable Amount and (v) the Class A Noteholders' Interest
Distributable Amount.
"Class A Noteholders' Interest Carryover Shortfall" means, with respect to
any Payment Date (the "current Payment Date"), the excess of the Class A
Noteholders' Interest Distributable Amount for the preceding Payment Date
over the amount in respect of interest on the Class A Notes that was
actually deposited in the Note Distribution Account on such preceding
Payment Date, plus interest on such excess, to the extent permitted by law,
at a rate per annum equal to the interest rate on the applicable Class of
Class A Notes from such preceding Payment Date to but excluding the current
Payment Date.
"Class A Noteholders' Interest Distributable Amount" means, with respect to
any Payment Date (the "current Payment Date"), an amount equal to the sum of
(i) the aggregate amount of interest accrued on the Class A Notes at their
respective interest rates from and including the preceding Payment Date (or,
in the case of the initial Payment Date, from and including the Closing
Date) to but excluding the current Payment Date for the A-1 Notes and the
A-2 Notes (based upon the actual number of days in the Interest Period and a
360-day year) and for the A-3 Notes and the A-4 Notes (based on a 360-day
year of twelve 30-day months) plus (ii) the Class A Noteholders' Interest
Carryover Shortfall for the current Payment Date.
S-32
"Class A Noteholders' Monthly Principal Distributable Amount" means, with
respect to any Payment Date, the Principal Distribution Amount MINUS the
Class B Noteholders' Monthly Principal Distributable Amount.
"Class B Noteholders' Distributable Amount" means, with respect to any
Payment Date, the sum of (i) the Class B Noteholders' Interest Distributable
Amount and (ii) the Class B Noteholders' Principal Distributable Amount.
"Class B Noteholders' Interest Carryover Shortfall" means, with respect to
any Payment Date (the "current Payment Date"), the excess of the Class B
Noteholders' Interest Distributable Amount for the preceding Payment Date
over the amount in respect of interest on the Class B Notes that was
actually deposited in the Note Distribution Account on such preceding
Payment Date, plus interest on such excess, to the extent permitted by law,
at a rate per annum equal to the Class B Rate from such preceding Payment
Date to but excluding the current Payment Date.
"Class B Noteholders' Interest Distributable Amount" means, with respect to
any Payment Date (the "current Payment Date"), an amount equal to the sum of
(i) the aggregate amount of interest accrued on the Class B Notes at the
Class B Rate from and including the preceding Payment Date (or, if later,
the issuance date for the Class B Notes) to but excluding the current
Payment Date plus (ii) the Class B Noteholders' Interest Carryover Shortfall
for the current Payment Date.
"Class B Noteholders' Monthly Principal Distributable Amount" means, with
respect to each Payment Date until the Payment Date on which the outstanding
principal amount of the Class B Notes has been reduced to zero, an amount
equal to the excess, if any, of: (a) the outstanding principal amount of the
Class B Notes on the related Record Date MINUS any Class B Noteholders'
Principal Carryover Shortfall over (b) the Initial Class B Percentage of the
sum of the outstanding Pool Balance and the Pre-Funded Amount as of the
beginning of the current Collection Period; PROVIDED, HOWEVER, that if on
the related Record Date any principal of the A-1 Notes remains outstanding,
then the Class B Noteholders' Monthly Principal Distributable Amount for
such Payment Date shall not exceed an amount equal to the aggregate
unscheduled principal payments on the Receivables received during the
related Collection Period.
"Class B Noteholders' Principal Carryover Shortfall" means, with respect to
any Payment Date, the excess of the Class B Noteholders' Principal
Distributable Amount for the preceding Payment Date over the amount that was
actually deposited in the Note Distribution Account in respect of principal
of the Class B Notes on such preceding Payment Date.
"Class B Noteholders' Principal Distributable Amount" means, with respect to
any Payment Date, the sum of: (a) the Class B Noteholders' Monthly Principal
Distributable Amount for such Payment Date and (b) the Class B Noteholders'
Principal Carryover Shortfall for such Payment Date; PROVIDED, HOWEVER,
that, the sum of clauses (a) and (b) shall not exceed the outstanding
principal amount of the Class B Notes, and on the Final Scheduled Maturity
Date, the Class B Noteholders' Principal Distributable Amount will include
the amount, to the extent of available funds, necessary (after giving effect
to the other amounts to be deposited in the Note Distribution Account on
such Payment Date and allocable to principal) to reduce the outstanding
principal amount of the Class B Notes to zero.
"Initial Class B Percentage" means 4%, which is the percentage equivalent
of: (a) the initial balance of the Class B Notes (I.E., $25,000,000) DIVIDED
BY (b) the Pool Balance as of the Initial Cutoff Date PLUS the Initial
Pre-Funded Amount.
"Initial Cutoff Date APR" means 8.758%, which is the weighted average APR of
the Initial Receivables as of the Initial Cutoff Date.
"Noteholders' Distributable Amount" means, with respect to any Payment Date,
the sum of the Class A Noteholders' Distributable Amount and the Class B
Noteholders' Distributable Amount.
"Principal Distribution Amount" means, with respect to any Payment Date, the
amount (not less than zero) equal to (i) the sum of the Contract Value of
all Receivables and the Pre-Funded Amount as of the beginning of the
immediately preceding Collection Period less (ii) the sum of the Contract
Value of all Receivables and the Pre-Funded Amount as of the beginning of
the current Collection Period.
S-33
"Subsequent Cutoff Date APR" means, with respect to any Subsequent Cutoff
Date, the weighted average APR of the Subsequent Receivables sold as of such
Subsequent Cutoff Date.
On each Payment Date, all amounts on deposit in the Note Distribution Account
will be distributed to the Noteholders.
Negative Carry Account
The Servicer will establish and maintain in the name of the Indenture Trustee
the Negative Carry Account as a Trust Account for the benefit of the
Noteholders. The Negative Carry Account will be created with an initial deposit
by the Seller of $4,595,626.41 (the "Negative Carry Account Initial Deposit"),
which is equal to the Maximum Negative Carry Amount as of the Closing Date. The
"Maximum Negative Carry Amount" is equal to the product of (i) the difference
between (a) the weighted average of the interest rate on each Class of the Notes
minus (b) 2.5%, multiplied by (ii) the Note Percentage of the amount on deposit
in the Pre-Funding Account multiplied by (iii) the fraction of a year
represented by the number of days until the expected end of the Funding Period
(calculated on the basis of a 360-day year of twelve 30-day months). At any
time, the "Note Percentage" means the percentage equivalent of a fraction the
numerator of which is the Note Balance and the denominator of which is the sum
of the Note Balance and Certificate Balance. On each Payment Date, the Servicer
will instruct the Indenture Trustee to withdraw from the Negative Carry Account
and deposit into the Collection Account an amount equal to the Negative Carry
Amount for such Collection Period. For each Collection Period, the "Negative
Carry Amount" will be calculated by the Servicer as the difference (if positive)
between (1) the product of (A) the sum of the Class A Noteholders' Interest
Distributable Amount and the Class B Noteholders' Interest Distributable Amount
multiplied by (B) the Pre-Funded Percentage, as of the immediately prior Payment
Date, or in the case of the first Payment Date, the Closing Date, minus (2) the
investment earnings on the Pre-Funded Amount. The "Pre-Funded Percentage" for
each Collection Period is the percentage derived from the fraction the numerator
of which is the Pre-Funded Amount and the denominator of which is the sum of the
Pool Balance and the Pre-Funded Amount, after taking into account all transfers
of Subsequent Receivables during such Collection Period. The amount required to
be on deposit in the Negative Carry Account (the "Required Negative Carry
Account Balance") as of the beginning of each Collection Period will be equal to
the lesser of (x) the Negative Carry Account Initial Deposit minus all previous
withdrawals from the Negative Carry Account and (y) the Maximum Negative Carry
Amount as of such day. If the amount on deposit in the Negative Carry Account on
any Payment Date (after giving effect to the withdrawal of the Negative Carry
Amount for such Payment Date) is greater than the Required Negative Carry
Account Balance, the excess will be released to the Seller. All amounts
remaining on deposit in the Negative Carry Account on the Payment Date on or
immediately following the last day of the Funding Period (after giving effect to
all withdrawals therefrom on such Payment Date) will be released to the Seller.
Spread Account
The rights of the Certificateholders to receive distributions with respect to
the Receivables will be subordinated to the rights of the Noteholders in the
event of defaults and delinquencies on the Receivables as provided in the Sale
and Servicing Agreement. The rights of the Class B Noteholders to receive
distributions with respect to the Receivables will be subordinated to the rights
of the Class A Noteholders to the extent described herein. The protection
afforded to each Class of Noteholders through subordination will be effected
both by the preferential right of that Class of Noteholders to receive current
distributions with respect to the Receivables to the extent described herein and
by the establishment of the Spread Account. The Spread Account will be created
with the initial deposit by the Seller of $6,506,664, which is equal to the Pool
Balance as of the Initial Cutoff Date multiplied by 2.00%. On each Subsequent
Transfer Date, cash or Eligible Investments having a value approximately equal
to 2.00% of the aggregate Contract Value of the Subsequent Receivables conveyed
to the Trust on such Subsequent Transfer Date will be withdrawn from the
Pre-Funding Account from amounts otherwise distributable to the Seller in
connection with the sale of Subsequent Receivables and deposited in the Spread
Account. The amount initially deposited in the Spread Account by the Seller
together with the aggregate amount transferred from the Pre-Funding Account to
the Spread Account on each Subsequent Transfer Date is referred to as the
"Spread Account Initial Deposit." The Spread Account Initial Deposit will be
augmented on each Payment Date by the deposit in the Spread Account of amounts
remaining after the deposit in the Note Distribution Account of amounts to be
distributed to Noteholders and the payment of the Administration Fee and, in
certain circumstances, the Servicing Fee. Subject to certain limitations,
amounts on deposit in the Spread Account will be released to the Seller to the
extent that the amount on deposit in the Spread Account
S-34
exceeds the Specified Spread Account Balance. The Seller may at any time,
without consent of the Noteholders, sell, transfer, convey or assign in any
manner its rights to and interests in distributions from the Spread Account,
including interest earnings thereon, provided that certain conditions are
satisfied, including that the Rating Agencies confirm in writing that such
action will not result in a reduction or withdrawal of the rating of the Notes.
"Specified Spread Account Balance" means, with respect to any Payment Date,
the lesser of (a) 2.00% of the Initial Pool Balance and (b) the Note
Balance. The Specified Spread Account Balance may be reduced or the
definition thereof otherwise modified without the consent of the Noteholders
if the Rating Agencies confirm in writing that such reduction or
modification will not result in a reduction or withdrawal of the rating of
the Notes.
If the amount on deposit in the Spread Account on any Payment Date (after giving
effect to all deposits or withdrawals therefrom on such Payment Date) is greater
than the Specified Spread Account Balance for such Payment Date, the Servicer
will instruct the Indenture Trustee to distribute the amount of the excess to
the Seller; PROVIDED, HOWEVER, that if, after giving effect to all payments made
on the Notes on such Payment Date, the sum of the Pool Balance plus the
Pre-Funded Amount as of the first day of the Collection Period in which such
Payment Date occurs is less than the sum of the Note Balance and the Certificate
Balance, such excess amount will not be distributed to the Seller and will be
retained in the Spread Account. Upon the Final Scheduled Payment Date or after
payment of all interest and principal of the Notes, the Servicer will instruct
the Indenture Trustee to distribute the Spread Account balance to the Seller.
Upon any distribution to the Seller of amounts from the Spread Account made in
accordance with the Sale and Servicing Agreement, the Noteholders will not have
any rights in, or claims to, such amounts.
Subject to the limitations described in the preceding paragraph, amounts held
from time to time in the Spread Account will continue to be held for the benefit
of Noteholders. Funds will be withdrawn from the Spread Account to the extent
that the Total Distribution Amount (after the payment of the Administration Fee
(and the Servicing Fee if Case Credit or an affiliate of Case Credit is not the
Servicer)) with respect to any Collection Period is less than the Noteholders'
Distributable Amount and will be deposited in the Note Distribution Account and
used to cover shortfalls in the Noteholders' Distributable Amount in the same
order of priority applicable to distributions from the Collection Account. Funds
on deposit in the Spread Account will not be used to cover shortfalls in any
distributions to the Certificateholders.
The Spread Account and the subordination of the Certificates and the Class B
Notes to the Class A Notes are intended to enhance the likelihood of receipt by
Class A Noteholders of the full amount of principal and interest due them and to
decrease the likelihood that the Class A Noteholders will experience losses. In
addition, the Spread Account and the subordination of the Certificates to the
Class B Notes are intended to enhance the likelihood of receipt by Class B
Noteholders of the full amount of principal and interest due them and to
decrease the likelihood that the Class B Noteholders will experience losses.
However, in certain circumstances, the Spread Account could be depleted. If the
amount required to be withdrawn from the Spread Account to cover shortfalls in
collections on the Receivables exceeds the amount of cash in the Spread Account,
Noteholders could incur losses or a temporary shortfall in the amounts
distributed to the Noteholders could result, which could, in turn, increase the
average life of the Notes.
Legal Investment
The A-1 Notes will be eligible for purchase by money market funds under
paragraph (a)(9) of Rule 2a-7 under the Investment Company Act of 1940, as
amended.
ERISA Considerations
The Seller has been advised that, although there is little guidance on the
subject, at the time of their issuance, the Notes should not be treated as
"equity interests" in the Trust under the Plan Asset Regulation. As a result,
the Notes may be purchased by an employee benefit plan or an individual
retirement account (a "Plan") subject to the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), or Section 4975 of the Internal Revenue Code
of 1986, as amended.
However, without regard to whether the Notes are treated as equity interests for
purposes of the Plan Asset Regulation, the acquisition or holding of Notes by or
on behalf of a Plan could be considered to give rise to a "prohibited
transaction" if the Trust, the Servicer or the Trustee is or becomes a "party in
interest" or a "disqualified person" with respect to such Plan.
S-35
Certain exemptions from the prohibited transaction rules could be applicable to
the purchase and holding of Notes by a Plan depending on the type and
circumstances of the plan fiduciary making the decision to acquire such Notes.
Included among these exemptions are: Prohibited Transaction Class Exemption
("PTCE") 75-1, regarding transactions between registered broker-dealers and
plans; PTCE 90-1, regarding investments by insurance company pooled separate
accounts; PTCE 91-38, regarding investments by bank collective investment funds;
PTCE 84-14, regarding transactions effected by "qualified professional asset
managers"; PTCE 95-60, regarding transactions by insurance company general
accounts; and PTCE 96-23, regarding certain transactions determined by in-house
asset managers. By its acquisition of a Note, each purchaser shall be deemed to
represent and warrant that its purchase and holding of the Note will not give
rise to a nonexempt prohibited transaction under ERISA or the Code.
For additional information regarding treatment of the Notes under ERISA, see
"ERISA Considerations" in the Prospectus.
S-36
Underwriting
Class A Notes
Subject to the terms and conditions set forth in an underwriting agreement (the
"Class A Note Underwriting Agreement"), the Seller has agreed to cause the Trust
to sell to each of the Underwriters named below (the "Class A Note
Underwriters"), and each of the Class A Note Underwriters has severally agreed
to purchase, the principal amount of the Class A Notes set forth opposite its
name below:
A-1 Notes
-------------
Principal
Amount
-------------
Class A-1 Note Underwriters
J.P. Morgan Securities Inc.................................................. $12,018,833.35
BancAmerica Robertson Stephens.............................................. 12,018,833.33
Chase Securities Inc........................................................ 12,018,833.33
Credit Suisse First Boston Corporation...................................... 12,018,833.33
First Union Capital Markets, a division of Wheat First Securities, Inc.
("First Union Capital Markets")........................................... 12,018,833.33
UBS Securities LLC.......................................................... 12,018,833.33
-------------
$72,113,000.00
-------------
-------------
A-2 Notes
-------------
Principal
Amount
-------------
Class A-2 Note Underwriters
J.P. Morgan Securities Inc.................................................. $31,791,666.70
BancAmerica Robertson Stephens.............................................. 31,791,666.66
Chase Securities Inc........................................................ 31,791,666.66
Credit Suisse First Boston Corporation...................................... 31,791,666.66
First Union Capital Markets................................................. 31,791,666.66
UBS Securities LLC.......................................................... 31,791,666.66
-------------
$190,750,000.00
-------------
-------------
A-3 Notes
-------------
Principal
Amount
-------------
Class A-3 Note Underwriters
J.P. Morgan Securities Inc.................................................. $24,291,666.70
BancAmerica Robertson Stephens.............................................. 24,291,666.66
Chase Securities Inc........................................................ 24,291,666.66
Credit Suisse First Boston Corporation...................................... 24,291,666.66
First Union Capital Markets................................................. 24,291,666.66
UBS Securities LLC.......................................................... 24,291,666.66
-------------
$145,750,000.00
-------------
-------------
S-37
A-4 Notes
-------------
Principal
Amount
-------------
Class A-4 Note Underwriters
J.P. Morgan Securities Inc.................................................. $30,074,833.35
BancAmerica Robertson Stephens.............................................. 30,074,833.33
Chase Securities Inc........................................................ 30,074,833.33
Credit Suisse First Boston Corporation...................................... 30,074,833.33
First Union Capital Markets................................................. 30,074,833.33
UBS Securities LLC.......................................................... 30,074,833.33
-------------
$180,449,000.00
-------------
-------------
The Seller has been advised by the Class A Note Underwriters that they propose
initially to offer the Class A Notes to the public at the prices set forth
herein, and to certain dealers at such prices less the initial concession not in
excess of 0.055% per A-1 Note, 0.090% per A-2 Note, 0.140% per A-3 Note and
0.150% per A-4 Note. The Class A Note Underwriters may allow and such dealers
may reallow a concession not in excess of 0.040% per A-1 Note, 0.070% per A-2
Note, 0.110% per A-3 Note and 0.110% per A-4 Note to certain other dealers.
After the initial public offering of the Class A Notes, the public offering
prices and such concessions may be changed.
In the ordinary course of their respective businesses, the Class A Note
Underwriters and their respective affiliates have engaged and may in the future
engage in investment banking or commercial banking transactions with Case Credit
and its affiliates.
In connection with the offering, the Class A Note Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the Class
A Notes. Specifically, the Class A Note Underwriters may overallot the offering,
creating a syndicate short position. In addition, the Class A Note Underwriters
may bid for, and purchase, the Class A Notes in the open market to cover
syndicate shorts or to stabilize the price of the Class A Notes. Any of these
activities may stabilize or maintain the market price of the Class A Notes above
independent market levels. The Class A Note Underwriters are not required to
engage in these activities, and if commenced, such activities may be
discontinued at any time.
Class B Notes
Subject to the terms and conditions set forth in an underwriting agreement (the
"Class B Note Underwriting Agreement"), the Seller has agreed to cause the Trust
to sell to each of the Underwriters named below (the "Class B Note
Underwriters"; and together with the Class A Note Underwriters, the
"Underwriters"), and each of the Class B Note Underwriters has severally agreed
to purchase, the principal amount of Class B Notes set forth opposite its name
below:
----------------
Principal
Amount
----------------
Class B Note Underwriters
J.P. Morgan Securities Inc...................................................................... $ 12,500,000.00
Chase Securities Inc............................................................................ 12,500,000.00
$ 25,000,000.00
----------------
----------------
The Seller has been advised by the Class B Note Underwriters that they propose
initially to offer the Class B Notes to the public at the prices set forth
herein, and to certain dealers at such prices less the initial concession not in
excess of 0.210% per Class B Note. The Class B Note Underwriters may allow and
such dealers may reallow a concession not in excess of 0.160% per Class B Note
to certain other dealers. After the initial public offering of the Class B
Notes, the public offering prices and such concessions may be changed.
S-38
In the ordinary course of their respective businesses, the Class B Note
Underwriters and their respective affiliates have engaged and may in the future
engage in investment banking or commercial banking transactions with Case Credit
and its affiliates.
In connection with the offering, the Class B Note Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the Class
B Notes. Specifically, the Class B Note Underwriters may overallot the offering,
creating a syndicate short position. In addition, the Class B Note Underwriters
may bid for, and purchase, the Class B Notes in the open market to cover
syndicate shorts or to stabilize the price of the Class B Notes. Any of these
activities may stabilize or maintain the market price of the Class B Notes above
independent market levels. The Class B Note Underwriters are not required to
engage in these activities, and if commenced, such activities may be
discontinued at any time.
Legal Opinions
Certain legal matters relating to the Notes will be passed upon for the Trust,
the Seller and the Servicer by Richard S. Brennan, General Counsel and Secretary
of Case, and by Mayer, Brown & Platt. Certain legal matters relating to the
Notes will be passed upon for the Underwriters by Cravath, Swaine & Moore.
Certain Federal income tax and other matters will be passed upon for the Trust
by Mayer, Brown & Platt. Certain Wisconsin state tax matters will be passed upon
for the Trust by Foley & Lardner. Mr. Brennan is also a partner at Mayer, Brown
& Platt. Case has been advised by Mr. Brennan that, at February 11, 1998, he
owned 2,000 shares of common stock and options to purchase 3,000 shares of
common stock of Case. Cravath, Swaine & Moore and Foley & Lardner have also
provided legal services to Case, Case Credit and the Seller.
S-39
Index of Terms
Set forth below is a list of the defined terms used in this Prospectus
Supplement and the pages on which the definitions of such terms may be found.
Page
A-1 Note Final Scheduled Maturity Date................................................................... S-8
A-1 Note Rate............................................................................................ S-6
A-1 Noteholders' Monthly Principal Distributable Amount.................................................. S-30
A-1 Noteholders' Principal Carryover Shortfall........................................................... S-30
A-1 Noteholders' Principal Distributable Amount.......................................................... S-30
A-1 Noteholders.......................................................................................... S-7
A-1 Notes................................................................................................ S-1
A-1 Note Final Scheduled Maturity Date................................................................... S-8
A-2 Note Rate............................................................................................ S-6
A-2 Noteholders' Monthly Principal Distributable Amount.................................................. S-30
A-2 Noteholders' Principal Carryover Shortfall........................................................... S-31
A-2 Noteholders' Principal Distributable Amount.......................................................... S-31
A-2 Noteholders.......................................................................................... S-7
A-2 Notes................................................................................................ S-1
A-3 Note Final Scheduled Maturity Date................................................................... S-8
A-3 Note Rate............................................................................................ S-6
A-3 Noteholders' Monthly Principal Distributable Amount.................................................. S-31
A-3 Noteholders' Principal Carryover Shortfall........................................................... S-31
A-3 Noteholders' Principal Distributable Amount.......................................................... S-31
A-3 Noteholders.......................................................................................... S-7
A-3 Notes................................................................................................ S-1
A-4 Note Rate............................................................................................ S-7
A-4 Note Redemption Price................................................................................ S-9
A-4 Noteholders' Monthly Principal Distributable Amount.................................................. S-31
A-4 Noteholders' Principal Carryover Shortfall........................................................... S-31
A-4 Noteholders' Principal Distributable Amount.......................................................... S-31
A-4 Noteholders.......................................................................................... S-7
A-4 Notes................................................................................................ S-1
APR...................................................................................................... S-6
Case..................................................................................................... S-6
Case Credit.............................................................................................. S-4
Cede..................................................................................................... S-3
Certificate Balance...................................................................................... S-32
Certificateholders' Interest Carryover Shortfall......................................................... S-32
Certificateholders' Interest Distributable Amount........................................................ S-32
Certificateholders' Principal Carryover Shortfall........................................................ S-32
Certificateholders' Principal Distributable Amount....................................................... S-32
Certificateholders....................................................................................... S-10
Certificates............................................................................................. S-2
Class.................................................................................................... S-2
Class A Note Underwriters................................................................................ S-37
Class A Noteholders' Distributable Amount................................................................ S-32
Class A Noteholders' Interest Carryover Shortfall........................................................ S-32
Class A Noteholders' Interest Distributable Amount....................................................... S-32
Class A Noteholders' Monthly Principal Distributable Amount.............................................. S-33
S-40
Page
Class A Noteholders...................................................................................... S-7
Class A Notes............................................................................................ S-1
Class B Note Underwriters................................................................................ S-38
Class B Noteholders...................................................................................... S-7
Class B Noteholders' Distributable Amount................................................................ S-33
Class B Noteholders' Interest Carryover Shortfall........................................................ S-33
Class B Noteholders' Interest Distributable Amount....................................................... S-33
Class B Noteholders' Monthly Principal Distributable Amount.............................................. S-33
Class B Noteholders' Principal Carryover Shortfall....................................................... S-33
Class B Noteholders' Principal Distributable Amount...................................................... S-33
Class B Notes............................................................................................ S-1
Class B Rate............................................................................................. S-7
Class B Redemption Price................................................................................. S-9
Closing Date............................................................................................. S-5
Collection Account....................................................................................... S-11
Collection Period........................................................................................ S-6
Commission............................................................................................... S-3
Contract Value........................................................................................... S-6
Contracts................................................................................................ S-5
CPR...................................................................................................... S-22
Cutoff Date.............................................................................................. S-17
Dealers.................................................................................................. S-6
Determination Date....................................................................................... S-29
DTC...................................................................................................... S-3
ERISA.................................................................................................... S-35
Exchange Act............................................................................................. S-3
Federal Tax Counsel...................................................................................... S-12
Final Scheduled Maturity Date............................................................................ S-8
Financed Equipment....................................................................................... S-5
Funding Period........................................................................................... S-5
Indenture................................................................................................ S-1
Indenture Trustee........................................................................................ S-4
Initial Class B Percentage............................................................................... S-33
Initial Cutoff Date...................................................................................... S-5
Initial Cutoff Date APR.................................................................................. S-33
Initial Pool Balance..................................................................................... S-9
Initial Pre-Funded Amount................................................................................ S-5
Initial Receivables...................................................................................... S-5
Issuer................................................................................................... S-4
Liquidated Receivables................................................................................... S-29
Liquidation Proceeds..................................................................................... S-29
Mandatory Redemption..................................................................................... S-9
Maximum Negative Carry Amount............................................................................ S-34
Moody's.................................................................................................. S-13
Negative Carry Account................................................................................... S-10
Negative Carry Account Initial Deposit................................................................... S-10
Negative Carry Amount.................................................................................... S-10
Note Balance............................................................................................. S-4
Note Percentage.......................................................................................... S-34
Noteholders.............................................................................................. S-7
S-41
Page
Noteholders' Distributable Amount........................................................................ S-33
Notes.................................................................................................... S-1
Owned Contracts.......................................................................................... S-5
Payment Date............................................................................................. S-2
Plan..................................................................................................... S-35
Pool Balance............................................................................................. S-6
Pre-Funded Amount........................................................................................ S-9
Pre-Funded Percentage.................................................................................... S-10
Pre-Funding Account...................................................................................... S-2
Principal Distribution Amount............................................................................ S-33
Prospectus............................................................................................... S-3
Purchase Agreement....................................................................................... S-5
Purchased Contracts...................................................................................... S-5
Rating Agencies.......................................................................................... S-12
Receivables.............................................................................................. S-2
Receivables Pool......................................................................................... S-17
Record Date.............................................................................................. S-7
Required Negative Carry Account Balance.................................................................. S-34
Sale and Servicing Agreement............................................................................. S-5
Seller................................................................................................... S-1
Servicer................................................................................................. S-4
Specified Spread Account Balance......................................................................... S-11
Spread Account........................................................................................... S-10
Spread Account Initial Deposit........................................................................... S-34
Subsequent Cutoff Date................................................................................... S-5
Subsequent Cutoff Date APR............................................................................... S-34
Subsequent Receivables................................................................................... S-2
Subsequent Transfer Date................................................................................. S-5
Total Distribution Amount................................................................................ S-29
Transfer and Servicing Agreements........................................................................ S-28
Trust.................................................................................................... S-1
Trust Agreement.......................................................................................... S-4
Trustee.................................................................................................. S-4
Underwriters............................................................................................. S-38
Wisconsin Tax Counsel.................................................................................... S-12
S-42
PROSPECTUS
Case Equipment Loan Trusts
ASSET BACKED NOTES
ASSET BACKED CERTIFICATES
Case Receivables II Inc.
SELLER
Case Credit Corporation
SERVICER
The Asset Backed Notes (the "NOTES") and the Asset Backed Certificates (the
"Certificates" and, together with the Notes, the "SECURITIES") described herein
may be sold from time to time in one or more series, in amounts, at prices and
on terms to be determined at the time of sale and to be set forth in a
supplement to this Prospectus (a "PROSPECTUS SUPPLEMENT"). Each series of
Securities, which will include one or more classes of Notes and one or more
classes of Certificates, will be issued by a trust to be formed with respect to
such series (each, a "TRUST"). Each Trust will be formed pursuant to a Trust
Agreement to be entered into between Case Receivables II Inc., as seller (the
"SELLER"), and the trustee specified in the related Prospectus Supplement (the
"TRUSTEE"). The Notes of each series will be issued and secured pursuant to an
Indenture between the Trust and the indenture trustee specified in the related
Prospectus Supplement (the "INDENTURE TRUSTEE") and will represent indebtedness
of the related Trust. The Certificates of each series will represent fractional
undivided interests in the related Trust. The property of each Trust will
include a pool of retail installment sale contracts secured by new or used
agricultural and construction equipment (the "RECEIVABLES"), certain monies due
or received thereunder on and after the applicable Cutoff Date set forth in the
related Prospectus Supplement, security interests in the equipment financed
thereby and certain other property, all as described herein and in the related
Prospectus Supplement. In addition, if so specified in the related Prospectus
Supplement, the property of the Trust will include monies on deposit in a trust
account (the "PRE-FUNDING ACCOUNT") to be established with the Indenture
Trustee, which will be used to purchase additional retail installment sale
contracts secured by new or used agricultural or construction equipment (the
"SUBSEQUENT RECEIVABLES") from the Seller from time to time during the Funding
Period specified in the related Prospectus Supplement.
Except as otherwise provided in the related Prospectus Supplement, each class of
Securities of any series will represent the right to receive a specified amount
of payments of principal and interest on the related Receivables, at the rates,
on the dates and in the manner described herein and in the related Prospectus
Supplement. The right of each class of Securities to receive payments may be
senior or subordinate to the rights of one or more of the other classes of such
series. Distributions on Certificates of a series may be subordinated in
priority to payments due on the related Notes to the extent described herein and
in the related Prospectus Supplement. A series may include one or more classes
of Notes and Certificates that differ as to the timing and priority of payment,
interest rate or amount of distributions in respect of principal or interest or
both.
Prospective investors should consider the factors set forth under "RISK FACTORS"
herein on page 9 and in the related Prospectus Supplement.
EXCEPT AS OTHERWISE SPECIFIED IN THE RELATED PROSPECTUS SUPPLEMENT, THE NOTES OF
A GIVEN SERIES REPRESENT OBLIGATIONS OF, AND THE CERTIFICATES OF SUCH SERIES
REPRESENT BENEFICIAL INTERESTS IN, THE RELATED TRUST ONLY AND DO NOT REPRESENT
OBLIGATIONS OF OR INTERESTS IN, AND ARE NOT GUARANTEED OR INSURED BY, CASE
RECEIVABLES II INC. OR CASE CREDIT CORPORATION OR ANY OF THEIR RESPECTIVE
AFFILIATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Retain this Prospectus for future reference. This Prospectus may not be used to
consummate sales of Securities offered hereby unless accompanied by a Prospectus
Supplement.
The date of this Prospectus is February 11, 1998
A series may also include one or more classes of Notes or Certificates entitled
to distributions in respect of principal with disproportionate, nominal or no
interest distributions, or to interest distributions with disproportionate,
nominal or no distributions in respect of principal. The rate of payment in
respect of principal of the Notes and distributions in respect of the
Certificate Balance of the Certificates of any class will depend on the priority
of payment of such class and the rate and timing of payments (including
prepayments, defaults, liquidations and repurchases of Receivables) on the
related Receivables. A rate of payment lower or higher than that anticipated may
affect the weighted average life of each class of Securities in the manner
described herein and in the related Prospectus Supplement.
Available Information
The Seller, as originator of each Trust, has filed with the Securities and
Exchange Commission (the "COMMISSION") a Registration Statement (together with
all amendments and exhibits thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), with respect to the
Notes and the Certificates offered pursuant to this Prospectus. For further
information, reference is made to the Registration Statement that may be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549; and at the
Commission's regional offices at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511 and 7 World Trade Center, Suite 1300, New
York, New York 10048. Copies of the Registration Statement may be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Such information may also be
accessed electronically by means of the Commission's home page on the World Wide
Web located at http://www.sec.gov.
Incorporation of Certain Documents By Reference
All documents filed by the Seller, as originator of any Trust, pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), subsequent to the date of this Prospectus and
prior to the termination of the offering of the Securities shall be deemed to be
incorporated by reference in this Prospectus. Any statement contained herein or
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any subsequently filed
document that also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Seller will provide without charge to each person, including any beneficial
owner of Securities, to whom a copy of this Prospectus is delivered, on the
written or oral request of any such person, a copy of any or all of the
documents incorporated herein or in any related Prospectus Supplement by
reference, except the exhibits to such documents (unless such exhibits are
specifically incorporated by reference in such documents). Requests for such
copies should be directed to Case Receivables II Inc., 233 Lake Avenue, Racine,
Wisconsin 53403, Attention: Vice President (Telephone 414-636-6564).
2
Summary of Terms
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE DETAILED
INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS AND BY REFERENCE TO THE
INFORMATION WITH RESPECT TO THE SECURITIES OF ANY SERIES CONTAINED IN THE
RELATED PROSPECTUS SUPPLEMENT TO BE PREPARED AND DELIVERED IN CONNECTION WITH
THE OFFERING OF SUCH SECURITIES. CERTAIN CAPITALIZED TERMS USED IN THIS SUMMARY
ARE DEFINED ELSEWHERE IN THIS PROSPECTUS ON THE PAGES INDICATED IN THE "INDEX OF
TERMS."
Issuer............................ With respect to each series of Securities, the Trust to
be formed pursuant to a trust agreement (as amended and
supplemented from time to time, a "TRUST AGREEMENT")
between the Seller and the Trustee for such Trust (the
"TRUST" or the "ISSUER").
Seller............................ Case Receivables II Inc. (the "SELLER" or "CRC"), a
wholly-owned subsidiary of Case Credit Corporation.
Servicer.......................... Case Credit Corporation, a Delaware corporation (the
"SERVICER"or "CASE CREDIT").
Indenture Trustee................. With respect to each series of Securities, the Indenture
Trustee specified in the related Prospectus Supplement.
Trustee........................... With respect to each series of Securities, the Trustee
specified in the related Prospectus Supplement.
The Notes......................... Each series of Securities will include one or more
classes of Notes, which will be issued pursuant to an
indenture between the related Trust and the Indenture
Trustee (as amended and supplemented from time to time,
an "INDENTURE").
Unless otherwise specified in the related Prospectus
Supplement, Notes will be available for purchase in
denominations of $1,000 and integral multiples of $1 in
excess thereof and will be available in book-entry form
only. Unless otherwise specified in the related
Prospectus Supplement, holders of Notes ("NOTEHOLDERS")
will be able to receive Definitive Notes only in the
limited circumstances described herein or in the related
Prospectus Supplement. See "Certain Information
Regarding the Securities--Definitive Securities."
Unless otherwise specified in the related Prospectus
Supplement, each class of Notes will have a stated
principal amount and will bear interest at a specified
rate or rates (with respect to each class of Notes, the
"INTEREST RATE"). Each class of Notes may have a
different Interest Rate, which may be a fixed, variable
or adjustable Interest Rate, or any combination of the
foregoing. The related Prospectus Supplement will
specify the Interest Rate for each class of Notes, or
the method for determining the Interest Rate.
With respect to a series that includes two or more
classes of Notes, each class may differ as to the timing
and priority of payments, seniority, allocations of
losses, Interest Rate or amount of payments of principal
or interest, or payments of principal or interest in
respect of any such class or classes may or may not be
made upon the occurrence of specified events or on the
basis of collections from designated portions of the
Receivables in the related Trust. In addition, a series
may include one or more classes of Notes ("STRIP NOTES")
entitled to (i) principal payments with
disproportionate, nominal or no interest payments or
(ii) interest payments with disproportionate, nominal or
no principal payments.
3
If the Servicer exercises its option to purchase the
Receivables of a Trust in the manner and on the
respective terms and conditions described under
"Description of the Transfer and Servicing
Agreements--Termination," the outstanding Notes will be
redeemed as set forth in the related Prospectus
Supplement. In addition, if the related Prospectus
Supplement provides that the property of a Trust will
include a Pre-Funding Account, the outstanding Notes may
be subject to partial redemption on or immediately
following the end of the Funding Period (as such term is
defined in the related Prospectus Supplement, the
"FUNDING PERIOD") in an amount and manner specified in
the related Prospectus Supplement. In the event of such
partial redemption, the Noteholders may be entitled to
receive a redemption premium from the Trust, in the
amount and to the extent provided in the related
Prospectus Supplement.
The Certificates.................. Each series of Securities will include one or more
classes of Certificates, which will be issued pursuant
to a Trust Agreement.
Unless otherwise specified in the related Prospectus
Supplement, Certificates will be available for purchase
in denominations of $1,000 and integral multiples of $1
in excess thereof and will be available in book-entry
form only. Unless otherwise specified in the related
Prospectus Supplement, holders of Certificates
("CERTIFICATEHOLDERS" and, together with the
Noteholders, "SECURITYHOLDERS") will be able to receive
Definitive Certificates only in the limited
circumstances described herein or in the related
Prospectus Supplement. See "Certain Information
Regarding the Securities--Definitive Securities."
Unless otherwise specified in the related Prospectus
Supplement, each class of Certificates will have a
stated Certificate Balance specified in the related
Prospectus Supplement (the "CERTIFICATE BALANCE") and
will accrue interest on such Certificate Balance at a
specified rate (with respect to each class of
Certificates, the "PASS-THROUGH RATE"). Each class of
Certificates may have a different Pass-Through Rate,
which may be a fixed, variable or adjustable
Pass-Through Rate, or any combination of the foregoing.
The related Prospectus Supplement will specify the
Pass-Through Rate for each class of Certificates or the
method for determining the Pass-Through Rate.
With respect to a series that includes two or more
classes of Certificates, each class may differ as to
timing and priority of distributions, seniority,
allocations of losses, Pass-Through Rates or amount of
distributions in respect of principal or interest, or
distributions in respect of principal or interest in
respect of any such class or classes may or may not be
made upon the occurrence of specified events or on the
basis of collections from designated portions of the
Receivables in the related Trust. In addition, a series
may include one or more classes of Certificates ("STRIP
CERTIFICATES") entitled to (i) distributions in respect
of principal with disproportionate, nominal or no
interest distributions or (ii) interest distributions
with disproportionate, nominal or no distributions in
respect of principal.
To the extent specified in the related Prospectus
Supplement, distributions in respect of the Certificates
may be subordinated in priority of payment to payments
on the Notes.
If the Servicer exercises its option to purchase the
Receivables of a Trust, in the manner and on the
respective terms and conditions described under
4
"Description of the Transfer and Servicing
Agreements--Termination," Certificateholders will
receive as a prepayment an amount in respect of the
Certificates as specified in the related Prospectus
Supplement. In addition, if the related Prospectus
Supplement provides that the property of a Trust will
include a Pre-Funding Account, Certificateholders may
receive a partial prepayment of principal on or
immediately following the end of the Funding Period in
an amount and manner specified in the related Prospectus
Supplement. In the event of such partial prepayment, the
Certificateholders may be entitled to receive a
prepayment premium from the Trust, in the amount and to
the extent provided in the related Prospectus
Supplement.
The Trust Property................ The property of each Trust will include a pool of retail
installment sale contracts ("CONTRACTS") secured by new
or used agricultural and construction equipment,
including rights to receive certain payments made with
respect to such Contracts, security interests in the
equipment financed thereby (the "FINANCED EQUIPMENT")
and any proceeds from claims on certain related
insurance policies. The property of each Trust will also
include amounts on deposit in certain trust accounts,
including the related Collection Account, any Spread
Account, any Pre-Funding Account and any other account
identified in the applicable Prospectus Supplement, and
the proceeds thereof. On the Closing Date specified in
the related Prospectus Supplement with respect to a
Trust, the Seller will sell Contracts (the "INITIAL
RECEIVABLES") having an aggregate principal balance
specified in the related Prospectus Supplement as of a
date specified therein (the "INITIAL CUTOFF DATE") to
such Trust pursuant to a Sale and Servicing Agreement
among the Seller, the Servicer and the Trust (as amended
and supplemented from time to time, a "SALE AND
SERVICING AGREEMENT").
To the extent provided in the related Prospectus
Supplement, the Seller will be obligated (subject only
to the availability thereof) to sell, and the related
Trust will be obligated to purchase (subject to the
satisfaction of certain conditions described in the
applicable Sale and Servicing Agreement), the Subsequent
Receivables from time to time during the Funding Period
specified in the related Prospectus Supplement having an
aggregate principal balance approximately equal to the
amount on deposit in the Pre-Funding Account (the
"PRE-FUNDED AMOUNT") on such Closing Date, plus any
additional amount specified in the related Prospectus
Supplement.
The Receivables arise from financing provided in
connection with retail sales by dealers (the "DEALERS")
and are purchased by Case Credit pursuant to agreements
with the Dealers or are originated directly by retail
outlets owned by Case Corporation ("CASE") and
immediately assigned to Case Credit. The Receivables are
generally sold on a monthly basis by Case Credit to the
Seller pursuant to the Liquidity Receivables Purchase
Agreement, but may also be sold by Case Credit to the
Seller pursuant to a Purchase Agreement in connection
with the issuance of a series of Securities. The
Receivables sold to a Trust will be selected from the
portfolio of Contracts owned by the Seller based on the
criteria specified in the applicable Sale and Servicing
Agreement and described herein and in the related
Prospectus Supplement.
5
Credit and Cash Flow
Enhancement..................... If and to the extent specified in the related Prospectus
Supplement, credit enhancement with respect to a Trust
or any class or classes of Securities may include any
one or more of the following: subordination of one or
more other classes of Securities, Spread Accounts,
over-collateralization, letters of credit, credit or
liquidity facilities, surety bonds, guaranteed
investment contracts, swaps or other interest rate
protection agreements, repurchase obligations, other
agreements with respect to third party payments or other
support, cash deposits or other arrangements. Unless
otherwise specified in the related Prospectus
Supplement, any form of credit enhancement will have
certain limitations and exclusions from coverage
thereunder, which will be described in the related
Prospectus Supplement, and may be replaced with another
form of credit enhancement provided the Rating Agencies
confirm in writing that such substitution will not
result in a reduction or withdrawal of the rating of any
class of Securities.
Spread Account.................... Unless otherwise specified in the related Prospectus
Supplement, a Spread Account will be created for each
Trust with an initial deposit by the Seller of cash or
certain investments having a value equal to the amount
specified in the related Prospectus Supplement. To the
extent specified in the related Prospectus Supplement,
funds in the Spread Account will thereafter be
supplemented by the deposit of amounts remaining on any
Payment Date after making all other distributions
required on such date and any amounts deposited from
time to time from the Pre-Funding Account in connection
with the purchase of Subsequent Receivables. Amounts in
the Spread Account will be available to cover shortfalls
in amounts due to the holders of those classes of
Securities specified in the related Prospectus
Supplement in the manner and under the circumstances
specified therein. The related Prospectus Supplement
will also specify to whom and the manner and
circumstances under which amounts on deposit in the
Spread Account (after giving effect to all other
required distributions to be made by the applicable
Trust) in excess of the Specified Spread Account Balance
(as defined in the related Prospectus Supplement) will
be distributed.
Transfer and Servicing
Agreements...................... With respect to each Trust, the Seller will sell the
related Receivables to such Trust pursuant to a Sale and
Servicing Agreement. The rights and benefits of such
Trust under the Sale and Servicing Agreement will be
assigned to the Indenture Trustee as collateral for the
Notes of the related series. The Servicer will agree
with such Trust to be responsible for servicing,
managing, maintaining custody of and making collections
on the Receivables. In addition, Case Credit will
undertake certain administrative duties with respect to
such Trust under an Administration Agreement.
Unless otherwise provided in the related Prospectus
Supplement, the Seller will be obligated to repurchase
any Receivable if the interest of the applicable Trust
in such Receivable is materially adversely affected by a
breach of any representation or warranty made by the
Seller with respect to the Receivable that has not been
cured following the discovery by or notice to the Seller
of the breach. Case Credit will, in most cases, be
obligated to repurchase from the Seller any Receivable
that the Seller is obligated to repurchase from the
related Trust.
6
Unless otherwise provided in the related Prospectus
Supplement, the Servicer will be obligated to purchase
any Receivable if, among other things, it extends the
date for final payment by the Obligor of such Receivable
beyond the applicable Final Scheduled Maturity Date (as
defined in the related Prospectus Supplement, the "FINAL
SCHEDULED MATURITY DATE"), decreases the annual
percentage rate ("APR") or a loss is incurred due to its
failure to maintain a perfected security interest in the
related Financed Equipment.
Unless otherwise specified in the related Prospectus
Supplement, the Servicer will be entitled to receive a
fee for servicing the Receivables of each Trust equal to
a specified percentage of the aggregate principal
balance of such Receivables, as set forth in the related
Prospectus Supplement. See "Description of the Transfer
and Servicing Agreements--Servicing Compensation and
Payment of Expenses" herein and in the related
Prospectus Supplement.
Certain Legal Aspects of the
Receivables; Repurchase
Obligations..................... In connection with the sale of Receivables to a Trust,
security interests in the Financed Equipment securing
such Receivables will be assigned by the Seller to such
Trust. A first priority perfected security interest in
the Financed Equipment is obtained by Case Credit when
Case Credit finances the purchase of equipment by a
customer. Case Equipment Loan Trust 1994-B, a Delaware
trust organized by Case Credit, currently has a first
priority security interest in certain of the Receivables
owned by the Seller, but will terminate its security
interest (and make such filings necessary to evidence
such termination) upon the sale of such Receivables to a
Trust by the Seller and the receipt by the Seller of the
proceeds of such sale. Unless otherwise specified in the
related Prospectus Supplement, the Seller will be
obligated to repurchase any Receivable sold to a Trust
as to which a first priority perfected security interest
in the name of Case Credit in the Financed Equipment
securing such Receivable shall not exist as of the date
such Receivable is purchased by such Trust, if such
breach shall materially adversely affect such Receivable
and if such failure or breach shall not have been cured
by the last day of the second (or, if the Seller elects,
the first) month following the discovery by or notice to
the Trustee of such breach. If such Trust does not have
a perfected security interest in an item of Financed
Equipment, its ability to realize on such item in the
event of a default may be adversely affected. To the
extent the security interest is perfected, such Trust
will have a prior claim over subsequent purchasers of
such Financed Equipment and holders of subsequently
perfected security interests. However, as against liens
for repairs of Financed Equipment or for taxes unpaid by
an Obligor under a Receivable, or because of fraud or
negligence, such Trust could lose the priority of its
security interest or its security interest in Financed
Equipment. Neither the Seller nor the Servicer will have
any obligation to repurchase a Receivable as to which
any of the aforementioned occurrences result in a
Trust's losing the priority of its security interest or
its security interest in such Financed Equipment after
the Closing Date. Federal and state consumer protection
laws impose requirements upon creditors in connection
with extensions of credit and collections of retail
installment loans, and certain of these laws make an
assignee of such a loan liable to the obligor thereon
for any violation by the
7
lender. Unless otherwise specified in the related
Prospectus Supplement, the Seller will be obligated to
repurchase any Receivable that fails to comply with such
requirements.
Tax Status........................ Upon the issuance of each series of Securities, except
as otherwise provided in the related Prospectus
Supplement, (a) Federal Tax Counsel to the applicable
Trust will deliver an opinion to the effect that, for
Federal income tax purposes: (i) the Notes of such
series will be characterized as debt and (ii) such Trust
will not be characterized as an association (or a
publicly traded partnership) taxable as a corporation
and (b) Wisconsin Tax Counsel to such Trust will deliver
an opinion to the effect that the same characterizations
would apply for Wisconsin income tax purposes as would
apply for Federal income tax purposes. Each Noteholder,
by the acceptance of a Note of a given series, will
agree to treat such Note as indebtedness. See "Certain
Federal Income Tax Consequences" and "Certain State Tax
Consequences" for additional information concerning the
application of Federal and Wisconsin tax laws.
ERISA Considerations.............. Subject to the considerations discussed under "ERISA
Considerations" herein and in the related Prospectus
Supplement, and unless otherwise specified therein, the
Notes of each series are eligible for purchase by
employee benefit plans.
Unless otherwise specified in the related Prospectus
Supplement, the Certificates of any series may not be
acquired by any employee benefit plan subject to the
Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or by any individual retirement
account. See "ERISA Considerations" herein and in the
related Prospectus Supplement.
8
Risk Factors
Certain Legal Aspects--Security Interests in Financed Equipment
In connection with the sale of Receivables to a Trust, security interests in the
Financed Equipment securing such Receivables will be assigned by the Seller to
such Trust simultaneously with the sale of such Receivables to such Trust. A
first priority perfected security interest in the Financed Equipment is obtained
by Case Credit when Case Credit finances the purchase of equipment by a
customer. Case Equipment Loan Trust 1994-B, a Delaware trust organized by Case
Credit, currently has a first priority security interest in certain of the
Receivables owned by the Seller, but will terminate its security interest (and
make such filings necessary to evidence such termination) upon the sale of such
Receivables to a Trust by the Seller and the receipt by the Seller of the
proceeds of such sale. See "Description of the Transfer and Servicing
Agreements--Commercial Paper Program." Unless otherwise provided in the related
Prospectus Supplement, the Seller will be obligated to repurchase any Receivable
sold to such Trust as to which a perfected security interest in the name of Case
Credit in the Financed Equipment securing such Receivable will not exist as of
the date such Receivable is transferred to such Trust, if such breach will
materially adversely affect the interest of such Trust in such Receivable and if
such failure or breach will not have been cured by the last day of the second
(or, if the Seller elects, the first) month following the discovery by or notice
to the Seller of such breach. If such Trust does not have a perfected security
interest in an item of Financed Equipment, its ability to realize on such
Financed Equipment in the event of a default may be adversely affected. To the
extent the security interest is perfected, such Trust will have a prior claim
over subsequent purchasers of such Financed Equipment and holders of
subsequently perfected security interests. However, as against liens for repairs
of Financed Equipment or for taxes unpaid by an Obligor under a Receivable, or
through fraud or negligence, such Trust could lose the priority of its security
interest or its security interest in such Financed Equipment. Neither the Seller
nor the Servicer will have any obligation to repurchase a Receivable as to which
any of the aforementioned occurrences result in such Trust's losing the priority
of its security interest or its security interest in such Financed Equipment
after the date such security interest was assigned to such Trust. Federal and
state consumer protection laws impose requirements on creditors in connection
with extensions of credit and collections of retail installment loans, and
certain of these laws make an assignee of such a loan (such as such Trust)
liable to the obligor thereon for any violation by the lender. Unless otherwise
specified in the related Prospectus Supplement, the Seller will be obligated to
repurchase any Receivable that fails to comply with such requirements.
Certain Legal Aspects--Bankruptcy Considerations
The Seller will take steps in structuring the transactions contemplated hereby
that are intended to ensure that the voluntary or involuntary application for
relief by Case Credit under the United States Bankruptcy Code or similar
applicable state laws ("INSOLVENCY LAWS") will not result in consolidation of
the assets and liabilities of the Seller with those of Case Credit. These steps
include the creation of the Seller as a separate, limited-purpose subsidiary
pursuant to a certificate of incorporation containing certain limitations
(including restrictions on the nature of the Seller's business and a restriction
on the Seller's ability to commence a voluntary case or proceeding under any
Insolvency Law without the prior unanimous affirmative vote of all its
directors). However, there can be no assurance that the activities of the Seller
would not result in a court concluding that the assets and liabilities of the
Seller should be consolidated with those of Case Credit in a proceeding under
any Insolvency Law.
Case Credit has warranted, in the Liquidity Receivables Purchase Agreement, and
will warrant, in any Purchase Agreement related to a Trust, that the sale of
Receivables by Case Credit to the Seller is a valid sale. See "Description of
the Transfer and Servicing Agreements--Sale and Assignment of Receivables" and
"--Commercial Paper Program." If Case Credit were to become a debtor in a
bankruptcy case and a creditor or trustee-in-bankruptcy of such debtor or such
debtor itself were to take the position that the sale of Receivables to the
Seller should instead be treated as a pledge of such Receivables to secure a
borrowing of such debtor, then delays in payments of collections of Receivables
to the Seller could occur or (should the court rule in favor of any such
trustee, debtor or creditor) reductions in the amount of such payments could
result. If the transfer of Receivables to the Seller pursuant to the Liquidity
Receivables Purchase Agreement or the applicable Purchase Agreement is treated
as a pledge instead of a sale, a tax or government lien on the property of Case
Credit arising before the transfer of a Receivable to the Seller may have
priority over the Seller's interest in such Receivable. If the transactions
contemplated herein and in the Liquidity Receivables Purchase Agreement are
treated as a sale, the Receivables would not
9
be part of Case Credit's bankruptcy estate and would not be available to Case
Credit's creditors, except under certain limited circumstances. In addition,
while Case Credit is the Servicer, cash collections on the Receivables will,
under certain circumstances, be commingled with the funds of Case Credit and, in
the event of the bankruptcy of Case Credit, a Trust may not have a perfected
interest in such collections.
A substantial portion of the Receivables was originated by Dealers and purchased
by Case Credit. See "The Receivables Pools--The Retail Equipment Financing
Business." A significant portion of all the Receivables purchased by Case Credit
from Dealers provide for recourse to the originating Dealer for defaults by the
Obligors. In addition, the Dealers retain the right to repurchase at any time
the Receivables originated by them. In the event of a Dealer's bankruptcy, a
creditor or bankruptcy trustee of the Dealer or the Dealer as a debtor in
possession might attempt to characterize the sales of Receivables to Case Credit
as loans to the Dealer secured by the Receivables; such an attempt, if
successful, could result in payment delays or losses on the affected
Receivables. However, in connection with the sale of the Receivables by Case
Credit to the Seller, Case Credit has warranted, pursuant to the Liquidity
Receivables Purchase Agreement, or will warrant pursuant to the applicable
Purchase Agreement, that at the time of such sale it had good title to the
Receivables.
In a 1993 case decided by the U.S. Court of Appeals for the Tenth Circuit,
OCTAGON GAS SYSTEM, INC. V. RIMMER, the court determined that "accounts," as
defined under the Uniform Commercial Code, would be included in the bankruptcy
estate of a transferor regardless of whether the transfer is treated as a sale
or a secured loan. Although the Receivables are likely to be viewed as "chattel
paper," as defined under the Uniform Commercial Code, rather than as accounts,
the rationale behind the OCTAGON holding is equally applicable to chattel paper.
The circumstances under which the OCTAGON ruling would apply are not fully known
and the extent to which the OCTAGON decision will be followed in other courts or
outside of the Tenth Circuit is not certain. If the holding in the OCTAGON case
were applied in a Case Credit bankruptcy, however, even if the transfer of
Receivables to the Seller pursuant to the Liquidity Receivables Purchase
Agreement or the applicable Purchase Agreement and to the Trust pursuant to the
Sale and Servicing Agreement were treated as a sale, the Receivables would be
part of Case Credit's bankruptcy estate and would be subject to claims of
certain creditors and delays and reductions in payments to the Seller and
Securityholders could result.
Trusts' Relationships to the Seller, Case Credit Corporation and their
Affiliates
The Receivables will be serviced by Case Credit. Case Credit and its
subsidiaries are engaged primarily in the business of financing farm and
construction equipment. None of the Seller or Case Credit or their affiliates is
generally obligated to make any payments in respect of the Notes, the
Certificates or the Receivables of a given Trust. However, if Case Credit were
to cease acting as Servicer, delays in processing payments on the Receivables
and information in respect thereof could occur and result in delays in payments
to the Securityholders. In addition, under certain circumstances, the Servicer
may be required to purchase Receivables.
In connection with the sale of Receivables by Case Credit to the Seller pursuant
to the Liquidity Receivables Purchase Agreement or the applicable Purchase
Agreement, Case Credit has made or will make representations and warranties with
respect to the characteristics of such Receivables and, in certain
circumstances, Case Credit may be required to repurchase Receivables with
respect to which such representations and warranties have been breached. See
"Description of the Transfer and Servicing Agreements--Sale and Assignment of
Receivables" and "--Commercial Paper Program."
The related Prospectus Supplement may set forth certain additional information
regarding the Seller and Case Credit.
Subordination; Limited Assets
To the extent specified in the related Prospectus Supplement, distributions of
interest and principal on the Certificates of a series will be subordinated in
priority of payment to interest and principal due on the Notes of such series.
Moreover, each Trust will not have, nor is it permitted or expected to have, any
significant assets or sources of funds other than the Receivables and, to the
extent provided in the related Prospectus Supplement, a Spread Account and any
other credit enhancement. The Notes of any series will represent obligations
solely of, and the Certificates of such series will represent interests solely
in, the related Trust, and neither the Notes nor the Certificates of any such
series will be insured or guaranteed by the Seller, the Servicer, the applicable
Trustee, the applicable Indenture Trustee or any other person or entity.
Consequently, holders of the Securities of any series must rely for repayment
upon payments on the related Receivables and,
10
if and to the extent available, amounts on deposit in the Pre-Funding Account
(if any), the Spread Account (if any) and any other credit enhancement, all as
specified in the related Prospectus Supplement.
Maturity and Prepayment Considerations
All the Receivables are prepayable at any time. (For this purpose the term
"prepayments" includes prepayments in full, partial prepayments (including those
related to insurance premiums), and liquidations due to default, as well as
receipts of proceeds from physical damage and term life insurance policies and
certain other Receivables repurchased for administrative or other reasons.) Each
prepayment will shorten the average remaining term of the Receivables and the
average life of the Notes and the Certificates. The rate of prepayments on the
Receivables may be influenced by a variety of economic, climatic and other
factors, including the fact that an Obligor generally may not sell or transfer
the Financed Equipment securing a Receivable without the consent of Case Credit.
For example, the majority of the Receivables are agricultural equipment retail
installment sale contracts. The amount of prepayments on that type of receivable
has historically tended to increase during periods in which farmers have strong
cash flows. In addition, under certain circumstances, the Seller will be
obligated to repurchase Receivables pursuant to a Sale and Servicing Agreement,
as a result of breaches of representations and warranties and, under certain
circumstances, the Servicer will be obligated to purchase Receivables pursuant
to such Sale and Servicing Agreement as a result of breaches of certain
covenants. See "Description of the Transfer and Servicing Agreements--Sale and
Assignment of Receivables." On the other hand, the payment schedule under a
Receivable may be extended or revised under certain circumstances. An extension
or revision may lengthen the average remaining term of the Receivables and the
average life of the Notes and the Certificates. See "The Receivables Pools--The
Retail Equipment Financing Business--Extension/Revision Procedures." Any
reinvestment risks resulting from a faster or slower incidence of prepayment of
Receivables held by a given Trust will be borne entirely by the Securityholders
of the related series of Securities. See also "Description of the Transfer and
Servicing Agreements--Termination" regarding the Servicer's option to purchase
the Receivables of a Trust.
Holders of Notes and Certificates should consider, in the case of Securities
purchased at a discount, the risk that a slower than anticipated rate of
principal payments on the Receivables could result in an actual yield that is
less than the anticipated yield and, in the case of Securities purchased at a
premium, the risk that a faster than anticipated rate of principal payments on
the Receivables could result in an actual yield that is less than the
anticipated yield.
Risk of Commingling
With respect to each Trust, the Servicer will deposit all payments on the
related Receivables (from whatever source) and all proceeds of such Receivables
collected during each Collection Period into the Collection Account of such
Trust within two business days of receipt thereof. However, in the event that
Case Credit satisfies certain requirements for monthly or less frequent
remittances and the Rating Agencies (as such term is defined in the related
Prospectus Supplement, the "RATING AGENCIES") affirm their ratings of the
related Securities at the initial level, then for so long as Case Credit is the
Servicer and provided that (i) there exists no Servicer Default and (ii) each
other condition to making such monthly or less frequent deposits as may be
specified by the Rating Agencies and described in the related Prospectus
Supplement is satisfied, the Servicer will not be required to deposit such
amounts into the Collection Account of such Trust until on or before the
business day preceding each Payment Date. The Servicer will deposit the
aggregate Purchase Amount of Receivables purchased by the Servicer into the
applicable Collection Account on or before the business day preceding each
Payment Date. Pending deposit into such Collection Account, collections may be
invested by the Servicer at its own risk and for its own benefit and will not be
segregated from funds of the Servicer. If the Servicer were unable to remit such
funds, the applicable Securityholders might incur a loss. To the extent set
forth in the related Prospectus Supplement, the Servicer may, in order to
satisfy the requirements described above, obtain a letter of credit or other
security for the benefit of the related Trust to secure timely remittances of
collections on the related Receivables and payment of the aggregate Purchase
Amount with respect to Receivables purchased by the Servicer.
Servicer Default
Unless otherwise provided in the related Prospectus Supplement with respect to a
given series of Securities, in the event a Servicer Default occurs, the
Indenture Trustee or Noteholders evidencing 25% or more of the outstanding
principal amount
11
of the Notes with respect to such series, as described under "Description of the
Transfer and Servicing Agreements--Rights upon Servicer Default," may remove the
Servicer without the consent of the Trustee or any of the Certificateholders
with respect to such series. Neither the Trustee nor the Certificateholders with
respect to such series will have the ability to remove the Servicer if a
Servicer Default occurs. In addition, the Noteholders of such series have the
ability, with certain specified exceptions, to waive defaults by the Servicer,
including defaults that could materially adversely affect the Certificateholders
of such series. See "Description of the Transfer and Servicing
Agreements--Waiver of Past Defaults."
Book-Entry Registration
Each class of the Notes and the Certificates of a given series will be initially
represented by one or more certificates registered in the name of Cede & Co.
("CEDE"), or any other nominee for The Depository Trust Company ("DTC") set
forth in the related Prospectus Supplement (Cede, or such other nominee, "DTC'S
NOMINEE"), and will not be registered in the names of the holders of the
Securities of such series or their nominees. Because of this, unless and until
Definitive Securities for such series are issued, holders of such Securities
will not be recognized by the applicable Indenture Trustee or Trustee as
"NOTEHOLDERS," "CERTIFICATEHOLDERS" or "SECURITYHOLDERS," as the case may be (as
such terms are used herein or in the related Indenture and Trust Agreement).
Hence, until Definitive Securities are issued, holders of such Securities will
only be able to exercise the rights of Securityholders indirectly through DTC
and its participating organizations. See "Certain Information Regarding the
Securities--Book-Entry Registration" and "-- Definitive Securities."
The Trusts
With respect to each series of Securities, the Seller will establish a separate
Trust pursuant to the respective Trust Agreement for the transactions described
herein and in the related Prospectus Supplement. The property of each Trust will
include a pool of Contracts (the "RECEIVABLES") between the Dealers and retail
purchasers (the "OBLIGORS") of new and used agricultural and construction
equipment and the obligations of the Obligor thereunder including all moneys
paid thereunder (including any late fees, non-sufficient funds fees and other
administrative fees or similar charges allowable by applicable law with respect
to Receivables) on or after the applicable Cutoff Date (as such term is defined
in the related Prospectus Supplement, a "CUTOFF DATE"). The Receivables were or
will be originated by the Dealers and purchased by Case Credit pursuant to
agreements with Dealers ("DEALER AGREEMENTS") or were originated directly by
retail outlets owned by Case and immediately assigned to Case Credit. Such
Receivables will continue to be serviced by the Servicer and evidence indirect
financing made available by Case Credit to the Obligors. The Receivables either
were sold previously by Case Credit to the Seller on a monthly basis pursuant to
the Liquidity Receivables Purchase Agreement or will be sold by Case Credit to
the Seller on the applicable Closing Date pursuant to a Purchase Agreement
related to the applicable Trust. See "Description of the Transfer and Servicing
Agreements--Sale and Assignment of Receivables" and "-- Commercial Paper
Program." On the applicable Closing Date, after the issuance of the Notes and
the Certificates of a given series, the Seller will sell the Initial Receivables
to the Trust. To the extent so provided in the related Prospectus Supplement,
Subsequent Receivables will be conveyed to the Trust as frequently as daily
during the Funding Period. Any Subsequent Receivables so conveyed will also be
assets of the applicable Trust, subject to the prior rights of the related
Indenture Trustee and the Noteholders therein. The property of each Trust will
also include (i) such amounts as from time to time may be held in separate trust
accounts established and maintained pursuant to the related Sale and Servicing
Agreement and the proceeds of such accounts, as described herein and in the
related Prospectus Supplement; (ii) security interests in the Financed Equipment
and any other interest of the Seller in such Financed Equipment; (iii) the
rights to proceeds from claims on certain physical damage and term life
insurance policies covering the Financed Equipment or the Obligors, as the case
may be; (iv) the interest of the Seller in any proceeds from recourse to Dealers
with respect to Receivables (but excluding any amounts contained in Dealers'
reserve accounts); (v) any property that secures a Receivable and that has been
acquired by the applicable Trust; and (vi) any and all proceeds of the
foregoing. To the extent specified in the related Prospectus Supplement, a
Pre-Funding Account, a Spread Account or other form of credit enhancement may be
a part of the property of any given Trust or may be held by the Trustee or the
Indenture Trustee for the benefit of holders of the related Securities.
Additionally, pursuant to contracts between the Servicer and the Dealers, the
Dealers have an obligation after origination to repurchase Receivables as to
which Dealers have made certain misrepresentations.
12
In connection with an asset-backed commercial paper program established by Case
Credit in August 1994, Case Credit generally sells to the Seller on the 13th day
of each month pursuant to the Liquidity Receivables Purchase Agreement all of
the Receivables meeting certain eligibility requirements that it purchased from
Dealers or retail outlets owned by Case in the preceding calendar month. The
Seller has granted Case Equipment Loan Trust 1994-B a first perfected security
interest in the Receivables purchased. Case Equipment Loan Trust 1994-B has
agreed, pursuant to the Loan and Security Agreement, to release its security
interest in certain Receivables when those Receivables are sold to a Trust and
the Seller receives the proceeds from such sale. See "Description of the
Transfer and Servicing Agreements--Commercial Paper Program."
The Servicer will continue to service the Receivables held by each Trust and
will receive fees for such services. See "Description of the Transfer and
Servicing Agreements--Servicing Compensation and Payment of Expenses" herein and
in the related Prospectus Supplement. To facilitate the servicing of the
Receivables, the Seller and each Trustee will authorize the Servicer to retain
physical possession of the Receivables held by each Trust and other documents
relating thereto as custodian for each such Trust. See "Certain Legal Aspects of
the Receivables" and "Description of the Transfer and Servicing Agreements--Sale
and Assignment of Receivables."
If the protection provided to Noteholders of a given series by the subordination
of the related Certificates and by the Spread Account, if any, or other credit
enhancement for such series or the protection provided to Certificateholders by
such Spread Account or other credit enhancement is insufficient, such
Noteholders or Certificateholders, as the case may be, would have to look
principally to the Obligors on the related Receivables, the proceeds from the
repossession and sale of Financed Equipment that secure defaulted Receivables
and the proceeds from any recourse against Dealers with respect to such
Receivables. In such event, certain factors, such as the applicable Trust's not
having first priority perfected security interests in the Financed Equipment in
all states, may affect the Servicer's ability to repossess and sell the
collateral securing the Receivables, and thus may reduce the proceeds to be
distributed to the holders of the Securities of such series. See "Description of
the Transfer and Servicing Agreements--Distributions" and "--Credit and Cash
Flow Enhancement" and "Certain Legal Aspects of the Receivables."
The principal offices of each Trust and the related Trustee will be specified in
the applicable Prospectus Supplement.
The Trustee
The Trustee for each Trust will be specified in the related Prospectus
Supplement. The Trustee's liability in connection with the issuance and sale of
the related Securities is limited solely to the express obligations of such
Trustee set forth in the related Trust Agreement and Sale and Servicing
Agreement. A Trustee may resign at any time, in which event the Servicer will be
obligated to appoint a successor trustee. The Administrator of a Trust may also
remove the Trustee if the Trustee ceases to be eligible to continue as Trustee
under the related Trust Agreement or if the Trustee becomes insolvent. In such
circumstances, 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 Receivables Pools
General
The Receivables in each Trust consist of Contracts evidencing the credit sale of
new and used agricultural and construction equipment to purchasers. The
Contracts are purchased by Case Credit as described below and are generally sold
on a monthly basis to the Seller pursuant to the Liquidity Receivables Purchase
Agreement, but may also be sold by Case Credit to the Seller pursuant to a
Purchase Agreement in connection with the issuance of a series of Securities.
Case Credit continues to service all Contracts sold to the Seller.
The Receivables to be held by each Trust will be selected from the Seller's
portfolio using several criteria, including that, unless otherwise provided in
the related Prospectus Supplement, each Receivable (i) is secured by new or used
agricultural or construction equipment, (ii) was originated in the United
States, (iii) provides for payments that fully amortize the amount financed over
its original term to maturity, (iv) is a Precomputed Receivable or a Simple
Interest Receivable and (v) satisfies the other criteria, if any, set forth in
the related Prospectus Supplement. No selection procedures believed by the
Seller to be adverse to the Securityholders of any series were or will be used
in selecting the related Receivables.
13
If so specified in the related Prospectus Supplement, the Receivables to be held
by a Trust may include Receivables satisfying the applicable criteria that were
purchased by Case Credit from Tenneco Credit Corporation out of the $1.1 billion
pool of retail receivables retained by Tenneco Credit Corporation in connection
with the Reorganization. Except to the extent otherwise provided in the related
Prospectus Supplement, all discussion in this Prospectus relating to the
Receivables will apply equally to any Receivables purchased by Case Credit from
Tenneco Credit Corporation.
Precomputed Receivables provide for allocation of payments according to the "sum
of periodic balances" or "sum of monthly payments" method, similar to the "Rule
of 78's" ("RULE OF 78'S RECEIVABLES") or are monthly actuarial receivables
("Actuarial Receivables" and, together with Rule of 78's Receivables,
"Precomputed Receivables"). An Actuarial Receivable provides for amortization of
the loan over a series of fixed level payment installments. Each installment,
including the installment representing the final payment on the Receivable,
consists of an amount of interest equal to 1/12 of the APR of the loan
multiplied by the unpaid principal balance of the loan, and an amount of
principal equal to the remainder of the installment. A Rule of 78's Receivable
provides for the payment by the obligor of a specified total amount of payments,
payable in equal installments on each due date, which total represents the
principal amount financed and add-on interest in an amount calculated on the
basis of the stated APR for the term of the receivable. The rate at which such
amount of add-on interest is earned and, correspondingly, the amount of each
fixed monthly payment allocated to reduction of the outstanding principal are
calculated in accordance with the "Rule of 78's."
"SIMPLE INTEREST RECEIVABLES" are receivables that provide for the amortization
of the amount financed under each receivable over a series of fixed level
monthly payments. However, unlike the monthly payment under an Actuarial
Receivable, each monthly payment consists of an installment of interest that is
calculated on the basis of the outstanding principal balance of the receivable
multiplied by the stated APR and further multiplied by the period elapsed (as a
fraction of a calendar year) since the preceding payment of interest was made.
As payments are received under a Simple Interest Receivable, they are applied
first to interest accrued to the date of payment and the balance is applied to
reduce the unpaid principal balance. Accordingly, if an obligor pays a fixed
monthly installment before its scheduled due date, the portion of the payment
allocable to interest for the period since the preceding payment was made will
be less than it would have been had the payment been made as scheduled, and the
portion of the payment applied to reduce the unpaid principal balance will be
correspondingly greater. Conversely, if an obligor pays a fixed monthly
installment after its scheduled due date, the portion of the payment allocable
to interest for the period since the preceding payment was made will be greater
than it would have been had the payment been made as scheduled, and the portion
of the payment applied to reduce the unpaid principal balance will be
correspondingly less. In either case, the obligor pays a fixed monthly
installment until the final scheduled payment date, at which time the amount of
the final installment is increased or decreased as necessary to repay the then
outstanding principal balance.
In the event of the prepayment in full (voluntarily or by acceleration) of a
Rule of 78's Receivable, under the terms of the contract, a "refund" or "rebate"
will be made to the obligor of the portion of the total amount of payments then
due and payable under the Contract allocable to "unearned" add-on interest,
calculated in accordance with a method equivalent to the Rule of 78's. If an
Actuarial Receivable is prepaid in full, with minor variations based upon state
law, the Actuarial Receivable requires that the rebate be calculated on the
basis of a constant interest rate. If a Simple Interest Receivable is prepaid,
rather than receive a rebate, the obligor is required to pay interest only to
the date of prepayment. The amount of a rebate under a Rule of 78's Receivable
generally will be less than the amount of a rebate on an Actuarial Receivable
and generally will be less than the remaining scheduled payments of interest
that would have been due under a Simple Interest Receivable for which all
payments were made on schedule. However, the amount of the rebate for certain
Precomputed Receivables ("PRECOMPUTED SIMPLE REBATE RECEIVABLES") will equal
approximately the remaining scheduled payments of interest that would have been
due under a Simple Interest Receivable for which all payments were made on
schedule. Precomputed Receivables that are not Precomputed Simple Rebate
Receivables are called "STANDARD PRECOMPUTED RECEIVABLES."
Unless otherwise provided in the related Prospectus Supplement, all the
Receivables included in a Trust will be Precomputed Receivables. Information
with respect to each pool of Receivables will be set forth in the related
Prospectus Supplement, including, to the extent appropriate, the composition of
the Receivables, the distribution by APR, type of equipment, payment frequency
and contract value of the Receivables and the geographic distribution of the
Receivables.
14
The Retail Equipment Financing Business
Case Credit purchases Contracts primarily from Dealers. Case Credit also
finances Contracts originated through retail outlets owned by Case that are
immediately thereafter assigned to Case Credit. As of December 31, 1997, there
were approximately 1,000 independently owned Case Dealer outlets in the United
States and approximately 1 retail outlet owned by Case in the United States. The
agricultural equipment financed by Case Credit includes tractors, combines,
cotton pickers and implements and equipment used for hay and forage, soil
conditioning and crop production. The construction equipment financed by Case
Credit includes wheel loaders, skid steer loaders, crawler dozers and loaders,
excavators, rough terrain forklifts, trenchers and loader/backhoes. New
equipment financed by Case Credit is almost exclusively manufactured by Case.
ORIGINATION PROCESS. Each prospective customer is required to complete a credit
application that lists the applicant's liabilities, income, credit and
employment history and other demographic and personal information. Credit
applications, which are obtained by the Dealer, are sent by the Dealer to one of
four regional finance offices maintained by Case Credit. The application is
processed by Case Credit and additional information is obtained in order to
evaluate the prospective customer's creditworthiness. The extent of the
additional information varies based primarily on the amount of financing
requested. In most cases, Case Credit obtains a credit bureau report on the
applicant from an independent credit bureau and credit references provided by
the applicant, typically banks or finance companies or suppliers that have
furnished credit to the applicant, are checked. In certain cases, audited or
certified financial statements of the applicant are obtained. Case Credit also
maintains five-year loan histories on all past and present Case Credit customers
that are reviewed.
Creditworthiness is evaluated based on criteria established by Case Credit's
management. The same credit criteria are applied regardless of which of Case
Credit's regional finance offices reviews the application and regardless of
whether the applicant is purchasing equipment from a Dealer or from a Case
retail outlet.
DEALER AGREEMENTS. At the time Case Credit approves the customer's application
and fully executed copies of all required agreements and instruments are
delivered by the Dealer to Case Credit, the related Contract is sold by the
Dealer to Case Credit pursuant to a Dealer Agreement that Case Credit enters
into with each Dealer. A significant portion of all Contracts purchased by Case
Credit from Dealers provide for recourse to the originating Dealer for defaults
by the obligor under the Contract. A large portion of such Contracts provide for
recourse to the Dealers through a "reserve account" maintained with Case Credit
in which Dealers are required to maintain certain amounts on deposit. The Seller
will assign to the Trusts its rights to recourse against the Dealers except for
the Dealers' reserve accounts and, therefore, any recourse to the Dealers
through the reserve accounts will not be assigned to the Trusts. The level of
recourse to Dealers varies and, depending on the level of recourse, is subject
to certain conditions. An insignificant portion of Contracts are assigned to
Case Credit with no recourse to Dealers in the event of defaults by obligors
under the Contracts. The Trusts will also be assigned rights arising under the
Dealer Agreements as a result of the breach by the Dealer of certain
representations and warranties made therein. Neither the Seller nor the Servicer
makes any representation as to the financial condition of any of the Dealers,
and there can be no assurances as to the ability of any Dealer to perform its
obligations under any Dealer Agreement.
CONTRACT TERMS. Case Credit offers Contracts with a variety of repayment
schedules tailored to the applicant's anticipated cash flows, such as annual,
semi-annual, quarterly and monthly payments. Contracts secured by construction
equipment are normally financed with equal monthly payments. However, a "skip
payment" schedule, under which payments in up to three predetermined consecutive
months are "skipped" to coincide with slow work periods, can be selected by the
obligor at the time the Contract is originated. For example, contractors in
areas with colder winters normally elect to skip payments in January, February
and March, in which case the normal twelve payments are amortized over a
nine-month period.
The maximum amount that Case Credit will finance under a Contract varies based
on the obligor's credit history, the type of equipment financed and whether the
equipment is new or used, the payment schedule and the length of the Contract.
The amount financed is calculated as a percentage of the value of the related
equipment. For new equipment, such value is based on Dealer's cost for the
related equipment plus freight charges. The value of used equipment is based on
the "as-is" value of the related equipment reported in the most recent edition
of the North American Equipment Dealers Association guidebook or other
comparable guidebook. Obligors are required to obtain and maintain physical
damage insurance covering the financed equipment. Dealers are responsible for
verifying insurance coverage on the equipment at the time the Contract is
15
originated. If a Dealer fails to verify insurance coverage and the obligor did
not obtain insurance coverage at the time the Contract was originated, the
Dealer will be responsible for any resulting loss. At the time the Contract is
originated, Case Credit offers customers physical damage insurance and term life
insurance that can be financed under the Contract.
The equipment securing the Contracts depreciates in value over time. However,
Case Credit's practice is to provide for repayment schedules under the Contracts
that will generally result in the outstanding principal balance of the Contract
at any time in the life of the Contract being less than the anticipated value of
the equipment at the time.
EXTENSION/REVISION PROCEDURES. Contracts may be extended or revised when
payment delinquencies result from temporary interruptions in an obligor's cash
flow. An extension provides for one or more payments to be moved to a future
date either within the original maturity of the Contract or beyond the original
maturity. A revision is a restructuring of the entire Contract, normally with
lower payments and a longer term. Case Credit charges obligors an extension fee
that is payable at the time a Contract is extended. The extension fee is
generally equal to interest accrued on the unpaid balance of the Contract during
the period that payments are not required to be made as a result of the
extension.
Delinquencies, Repossessions and Net Losses
Certain information concerning the experience of Case Credit pertaining to
delinquencies, repossessions and net losses with respect to its entire portfolio
of Contracts serviced by Case Credit (including receivables previously sold that
Case Credit continues to service) will be set forth in each Prospectus
Supplement. There can be no assurance that the delinquency, repossession and net
loss experience on any Receivables will be comparable to prior experience or to
such information.
Weighted Average Life of the Securities
The weighted average life of the Notes and the Certificates of any series will
generally be influenced by the rate at which the principal balances of the
related Receivables are paid, which payment may be in the form of scheduled
amortization or prepayments. (For this purpose, the term "PREPAYMENTS" includes
prepayments in full, partial prepayments (including those related to rebates of
insurance premiums), liquidations due to default, and receipts of proceeds from
physical damage and term life insurance policies and certain other Receivables
repurchased by the Seller or the Servicer for administrative reasons.) All of
the Receivables are prepayable at any time without penalty to the Obligor. Each
prepayment will shorten the average remaining term of the Receivables and the
average life of the Securities. The rate of prepayment of Contracts is
influenced by a variety of economic, climatic and other factors. For example,
the large majority of the Receivables are agricultural equipment retail
installment sale contracts. The amount of prepayments on that type of receivable
may tend to increase during periods in which farmers have strong cash flows.
However, Case Credit does not maintain historical prepayment data with respect
to its portfolio of retail installment sale contracts. In addition, under
certain circumstances, the Seller will be obligated to repurchase such
Receivables from the related Trust pursuant to the related Sale and Servicing
Agreement, as a result of breaches of representations and warranties, and the
Servicer will be obligated to purchase Receivables from such Trust pursuant to
such Sale and Servicing Agreement as a result of breaches of certain covenants.
See "Description of the Transfer and Servicing Agreements--Sale and Assignment
of Receivables" and "--Servicing Procedures." See also "Description of the
Transfer and Servicing Agreements--Termination" regarding the Servicer's option
to purchase the Receivables from a given Trust. On the other hand, the payment
schedule under a Contract may be extended or revised by the Servicer under
certain circumstances. An extension or revision may lengthen the average
remaining term of the Receivables and the average life of the Securities. See
"The Receivables Pools--The Retail Equipment Financing Business--
Extension/Revision Procedures."
In light of the above considerations, there can be no assurance as to the amount
of principal payments to be made on the Notes or the Certificates of a given
series on each Payment Date, since such amount will depend, in part, on the
amount of principal collected on the related Receivables during the applicable
Collection Period. Any reinvestment risks resulting from a faster or slower
incidence of prepayment of Receivables will be borne entirely by the Noteholders
and the Certificateholders of a given series. Such reinvestment risks may
include the risk that interest rates are lower at the time Securityholders
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. The related Prospectus Supplement may set forth certain
additional information with respect to the maturity and prepayment
considerations applicable to the particular Receivables and the related series
of Securities.
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Pool Factors and Trading Information
The "NOTE POOL FACTOR" for each class of Notes will be a seven-digit decimal
that the Servicer will compute with respect to such class of Notes indicating
the remaining outstanding principal balance of such class of Notes, as of the
applicable Payment Date (after giving effect to payments to be made on such
Payment Date), as a fraction of the initial outstanding principal balance of
such class of Notes. The "CERTIFICATE POOL FACTOR" for each class of
Certificates will be a seven-digit decimal that the Servicer will compute with
respect to such class of Certificates indicating the remaining Certificate
Balance of such class of Certificates, as of the applicable Payment Date (after
giving effect to distributions to be made on such Payment Date), as a fraction
of the initial Certificate Balance of such class of Certificates. Each Note Pool
Factor and each Certificate Pool Factor will initially be 1.0000000 and
thereafter will decline to reflect reductions in the outstanding principal
balance of the applicable class of Notes, or the reduction of the Certificate
Balance of the applicable class of Certificates, as the case may be. A
Noteholder's portion of the aggregate outstanding principal balance of the
related class of Notes is the product of (i) the original denomination of such
Noteholder's Note and (ii) the applicable Note Pool Factor. A
Certificateholder's portion of the aggregate outstanding Certificate Balance for
the related class of Certificates is the product of (a) the original
denomination of such Certificateholder's Certificate and (b) the applicable
Certificate Pool Factor.
Unless otherwise provided in the related Prospectus Supplement with respect to
each Trust, the Noteholders will receive reports on or about each Payment Date
concerning the Receivables, the Pool Balance (as such term is defined in the
related Prospectus Supplement, the "POOL BALANCE"), each Note Pool Factor and
various other items of information, and the Certificateholders will receive
reports on or about each Payment Date concerning the Receivables, the Pool
Balance, each Certificate Pool Factor and various other items of information. In
addition, Securityholders of record during any calendar year will be furnished
information for tax reporting purposes not later than the latest date permitted
by law. See "Certain Information Regarding the Securities--Reports to
Securityholders."
Use of Proceeds
Unless otherwise provided in the related Prospectus Supplement, the net proceeds
from the sale of the Securities of a given series will be applied by the
applicable Trust (i) to the purchase of the Receivables from the Seller, (ii) to
make the initial deposit into the Spread Account, if any, and (iii) to make the
deposit of the Pre-Funded Amount into the Pre-Funding Account, if any. Unless
otherwise specified in the related Prospectus Supplement, the Seller will use
that portion of such net proceeds paid to it with respect to any such Trust to
repay outstanding indebtedness under the Loan and Security Agreement or to
purchase related Receivables from Case Credit.
The Seller, Case Credit Corporation and Case Corporation
Case Receivables II Inc.
The Seller, a wholly-owned subsidiary of Case Credit, was incorporated in the
State of Delaware on June 15, 1994. The Seller was organized for the limited
purpose of purchasing receivables from Case Credit and transferring such
receivables to third parties and any activities incidental to and necessary or
convenient for the accomplishment of such purposes. The principal executive
offices of the Seller are located at 233 Lake Avenue, Racine, Wisconsin 53403,
and its telephone number is (414) 636-6564.
The Seller has taken steps in structuring the transactions contemplated hereby
and by the related Prospectus Supplement that are intended to ensure that the
voluntary or involuntary application for relief by Case Credit under any
Insolvency Law will not result in consolidation of the assets and liabilities of
the Seller with those of Case Credit. These steps include the creation of the
Seller as a separate, limited-purpose subsidiary pursuant to a certificate of
incorporation containing certain limitations (including restrictions on the
nature of the Seller's business and a restriction on the Seller's ability to
commence a voluntary case or proceeding under any Insolvency Law without the
prior unanimous affirmative vote of all of its directors). However, there can be
no assurance that the activities of the Seller would not result in a court's
concluding that the assets and liabilities of the Seller should be consolidated
with those of Case Credit in a proceeding under any Insolvency Law. See "Risk
Factors--Certain Legal Aspects--Bankruptcy Considerations."
17
In addition, the Indenture Trustee, the Trustee, all Noteholders and all
Certificateholders will covenant that they will not at any time institute
against the Seller any bankruptcy, reorganization or other proceeding under any
Federal or state bankruptcy or similar law.
Case Credit has warranted, in the Liquidity Receivables Purchase Agreement or
will warrant, in the applicable Purchase Agreement, that the sale of the
Receivables to the Seller is a valid sale, and has taken all actions required to
perfect the Seller's ownership interest in such Receivables. Notwithstanding the
foregoing, if Case Credit were to become a debtor in a bankruptcy case and a
creditor or trustee-in-bankruptcy of such debtor or such debtor itself were to
take the position that the sale of Receivables to the Seller should be
recharacterized as a pledge of such Receivables to secure a borrowing of such
debtor, then delays in payments of collections of Receivables to the Seller
could occur or (should the court rule in favor of any such trustee, debtor or
creditor) reductions in the amount of such payments could result. If the
transfer of Receivables to the Seller pursuant to the Liquidity Receivables
Purchase Agreement or the applicable Purchase Agreement is recharacterized as a
pledge, a tax or government lien on the property of Case Credit arising before
the transfer of Receivables to the Seller, may have priority over the Seller's
interest in such Receivables. If the transactions contemplated herein are
treated as a sale, the Receivables would not be part of Case Credit's bankruptcy
estate and would not be available to Case Credit's creditors, except under
certain limited circumstances.
Case Credit Corporation
Case Credit provides and administers financing for the retail purchase of new
and used Case agricultural and construction equipment and other new and used
agricultural and construction equipment. Case offers various retail financing to
end-use customers through Case Credit to facilitate the sale of its products in
the United States. Case Credit's business principally involves purchasing retail
installment sale contracts from Case Dealers. In addition, Case Credit also
offers insurance products to retail customers in an agent capacity, leases Case
equipment to retail customers and provides financing for Case Dealers and Case
rental equipment in the United States.
Case Credit's headquarters are located at 233 Lake Avenue, Racine, Wisconsin
53403, and its telephone number is (414) 636-6011. Case Credit is subject to the
informational requirements of the Exchange Act and in accordance therewith files
reports and other information with the Commission. For further information
regarding Case Credit, reference is made to such reports and other information
that are available as described under "Available Information."
Case Corporation
Case Corporation, a Delaware corporation, is a leading worldwide designer,
manufacturer, marketer and distributor of farm equipment and light- and
medium-sized construction equipment, which are sold worldwide through
independent dealers and retail outlets owned by Case and its affiliates. Case's
business is affected by the general level of activity in the agricultural and
construction industries, including the rate of worldwide agricultural production
and demand and prevailing levels of construction. Crop production and commodity
prices are strongly affected by weather and can fluctuate significantly. Housing
starts and other construction activities are sensitive to interest rates and
government spending. Some of the other significant factors for Case include
general economic conditions, the cyclical nature of the business, foreign
currency movements, access to credit, political uncertainty and civil unrest in
various areas of the world, pricing, product initiatives and other actions taken
by competitors, disruptions in production capacity, excess inventory levels, the
effect of changes in laws and regulations (including government subsidies and
international trade regulations), changes in environmental laws, and employee
relations. The agricultural and construction equipment industries are highly
competitive. Both United States and international manufacturers of agricultural
and construction equipment compete on a worldwide basis in such markets.
Case Corporation and its subsidiaries acquired the farm and construction
equipment business of subsidiaries of Tenneco Inc. on June 23, 1994. The
acquisition of such business is referred to herein as the "Reorganization."
Case's offices are located at 700 State Street, Racine, Wisconsin 53404, and its
telephone number is (414) 636-6011. Case is subject to the informational
requirements of the Exchange Act and in accordance therewith files reports and
other information with the Commission. For further information regarding Case,
reference is made to such reports and other information that are available as
described under "Available Information."
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Description of the Notes
General
With respect to each Trust, one or more classes of Notes of a given series will
be issued pursuant to the terms of an indenture, a form of which has been filed
as an exhibit to the Registration Statement. The following summary does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all the provisions of the Notes and the Indenture.
Unless otherwise specified in the related Prospectus Supplement, each class of
Notes will initially be represented by one or more Notes, in each case
registered in the name of DTC's Nominee (together with any successor depository
selected by the Trust, the "DEPOSITORY") except as set forth below. Unless
otherwise specified in the related Prospectus Supplement, the Notes will be
available for purchase in denominations of $1,000 and integral multiples of $1
in excess thereof in book-entry form only. The Seller has been informed by DTC
that DTC's Nominee will be Cede, unless another nominee is specified in the
related Prospectus Supplement. Accordingly, such nominee is expected to be the
holder of record of the Notes of each class. Unless and until Definitive Notes
are issued under the limited circumstances described herein or in the related
Prospectus Supplement, no Noteholder will be entitled to receive a physical
certificate representing a Note. All references herein and in the related
Prospectus Supplement to actions by Noteholders refer to actions taken by DTC
upon instructions from its participating organizations (the "PARTICIPANTS") and
all references herein and in the related Prospectus Supplement to distributions,
notices, reports and statements to Noteholders refer to distributions, notices,
reports and statements to DTC or its nominee, as the registered holder of the
Notes, as the case may be, for distribution to Noteholders in accordance with
DTC's procedures with respect thereto. See "Certain Information Regarding the
Securities--Book-Entry Registration" and "--Definitive Securities."
Principal and Interest on the Notes
The timing and priority of payment, seniority, allocations of losses, Interest
Rate and amount of or method of determining payments of principal and interest
on each class of Notes of a given series will be described in the related
Prospectus Supplement. The right of holders of any class of Notes to receive
payments of principal and interest may be senior or subordinate to the rights of
holders of any other class or classes of Notes of such series, as described in
the related Prospectus Supplement. Unless otherwise provided in the related
Prospectus Supplement, payments of interest on the Notes of such series will be
made prior to payments of principal thereon. To the extent provided in the
related Prospectus Supplement, a series may include one or more classes of Strip
Notes entitled to (i) principal payments with disproportionate, nominal or no
interest payments or (ii) interest payments with disproportionate, nominal or no
principal payments. Each class of Notes may have a different Interest Rate,
which may be a fixed, variable or adjustable Interest Rate (and that may be zero
for certain classes of Strip Notes), or any combination of the foregoing. The
related Prospectus Supplement will specify the Interest Rate for each class of
Notes of a given series or the method for determining such Interest Rate. See
also "Certain Information Regarding the Securities--Fixed Rate Securities" and
"--Floating Rate Securities." One or more classes of Notes of a series may be
redeemable in whole or in part under the circumstances specified in the related
Prospectus Supplement, including at the end of the Funding Period (if any) or as
a result of the Servicer's exercising its option to purchase the Receivables of
the related Trust.
To the extent specified in any Prospectus Supplement, one or more classes of
Notes of a given series may have fixed principal payment schedules, as set forth
in such Prospectus Supplement; Noteholders of such Notes would be entitled to
receive as payments of principal on any given Payment Date the applicable
amounts set forth on such schedule with respect to such Notes, in the manner and
to the extent set forth in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, payments to
Noteholders of all classes within a series in respect of interest will have the
same priority. Under certain circumstances, the amount available for such
payments could be less than the amount of interest payable on the Notes on any
of the dates specified for payments in the related Prospectus Supplement (each,
a "PAYMENT DATE"), in which case, unless otherwise provided in the related
Prospectus Supplement, each class of Noteholders will receive its ratable share
(based upon the aggregate amount of interest due to such class of Noteholders)
of the aggregate amount available to be distributed in respect of interest on
the Notes of such series. See "Description of the Transfer and Servicing
Agreements--Distributions" and "--Credit and Cash Flow Enhancement."
19
In the case of a series of Notes that includes two or more classes of Notes, the
sequential order and priority of payment in respect of principal and interest,
and any schedule or formula or other provisions applicable to the determination
thereof, of each such class will be set forth in the related Prospectus
Supplement. Payments in respect of principal and interest of any class of Notes
will be made on a pro rata basis among all the Noteholders of such class.
If the Servicer exercises its option to Purchase the Receivables of a Trust in
the manner and on the respective terms and conditions described under
"Description of the Transfer and Servicing Agreements--Termination," the
outstanding Notes will be redeemed as set forth in the related Prospectus
Supplement. In addition, if the related Prospectus Supplement provides that the
property of a Trust will include a Pre-Funding Account, the outstanding Notes
may be subject to partial redemption on or immediately following the end of the
Funding Period in an amount and manner specified in the related Prospectus
Supplement. In the event of such partial redemption, the Noteholders may be
entitled to receive a redemption premium from the Trust, in the amount and to
the extent provided in the related Prospectus Supplement.
The Indenture
MODIFICATION OF INDENTURE. With respect to each Trust, with the consent of the
holders of a majority of the outstanding Notes of the related series, the Trust
and the Indenture Trustee may execute a supplemental indenture to add provisions
to, change in any manner or eliminate any provisions of, the related Indenture,
or modify (except as provided below) in any manner the rights of the related
Noteholders.
Unless otherwise specified in the related Prospectus Supplement with respect to
a series of Notes, without the consent of the holder of each such outstanding
Note affected thereby, however, no supplemental indenture will: (i) change the
due date of any installment of principal of or interest on any such Note or
reduce the principal amount thereof, the interest rate specified thereon or the
redemption price with respect thereto or change any place of payment where or
the coin or currency in which any such Note or any interest thereon is payable;
(ii) impair the right to institute suit for the enforcement of certain
provisions of the related Indenture regarding payment; (iii) reduce the
percentage of the aggregate amount of the outstanding Notes of such series, the
consent of the holders of which is required for any such supplemental indenture
or the consent of the holders of which is required for any waiver of compliance
with certain provisions of the related Indenture or of certain defaults
thereunder and their consequences as provided for in such Indenture; (iv) modify
or alter the provisions of the related Indenture regarding the voting of Notes
held by the applicable Trust, any other obligor on such Notes, the Seller or an
affiliate of any of them; (v) reduce the percentage of the aggregate outstanding
amount of such Notes, the consent of the holders of which is required to direct
the related Indenture Trustee to sell or liquidate the Receivables if the
proceeds of such sale would be insufficient to pay the principal amount and
accrued but unpaid interest on the outstanding Notes of such series; (vi)
decrease the percentage of the aggregate principal amount of such Notes required
to amend the sections of the related Indenture that specify the applicable
percentage of aggregate principal amount of the Notes of such series necessary
to amend such Indenture or certain other related agreements; or (vii) permit the
creation of any lien ranking prior to or on a parity with the lien of the
related Indenture with respect to any of the collateral for such Notes or,
except as otherwise permitted or contemplated in such Indenture, terminate the
lien of such Indenture on any such collateral or deprive the holder of any such
Note of the security afforded by the lien of such Indenture.
Unless otherwise provided in the applicable Prospectus Supplement, a Trust and
the applicable Indenture Trustee may also enter into supplemental indentures,
without obtaining the consent of the Noteholders of the related series, for the
purpose of, among other things, adding any provisions to or changing in any
manner or eliminating any of the provisions of the related Indenture or of
modifying in any manner the rights of such Noteholders; provided that such
action will not materially and adversely affect the interest of any such
Noteholder.
In addition, unless otherwise provided in the applicable Prospectus Supplement,
a Trust and the applicable Indenture Trustee may enter into supplemental
indentures, without obtaining the consent of the Noteholders of the related
series, to substitute credit enhancement for any class of Notes provided the
Rating Agencies confirm in writing that such substitution will not result in the
reduction or withdrawal of the rating for such class of Notes or any other class
of Securities of the related series.
20
EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT. With respect to the Notes of a
given series, unless otherwise specified in the related Prospectus Supplement,
"EVENTS OF DEFAULT" under the related Indenture will consist of: (i) a default
for five days or more in the payment of any interest on any such Note; (ii) a
default in the payment of the principal of or any installment of the principal
of any such Note when the same becomes due and payable; (iii) a default in the
observance or performance of any covenant or agreement of the applicable Trust
made in the related Indenture and the continuation of any such default for a
period of 30 days after notice thereof is given to such Trust by the applicable
Indenture Trustee or to such Trust and such Indenture Trustee by the holders of
at least 25% in principal amount of such Notes then outstanding; (iv) any
representation or warranty made by such Trust in the related Indenture or in any
certificate delivered pursuant thereto or in connection therewith having been
incorrect in a material respect as of the time made, and such breach not having
been cured within 30 days after notice thereof is given to such Trust by the
applicable Indenture Trustee or to such Trust and such Indenture Trustee by the
holders of at least 25% in principal amount of such Notes then outstanding; or
(v) certain events of bankruptcy, insolvency, receivership or liquidation of the
applicable Trust. However, the amount of principal required to be paid to
Noteholders of such series under the related Indenture will generally be limited
to amounts available to be deposited in the applicable Note Distribution
Account. Therefore, unless otherwise specified in the related Prospectus
Supplement, the failure to pay principal on a class of Notes generally will not
result in the occurrence of an Event of Default until the final scheduled
Payment Date for such class of Notes.
If an Event of Default should occur and be continuing with respect to the Notes
of any series, the related Indenture Trustee or holders of a majority in
principal amount of such Notes then outstanding may declare the principal of
such Notes to be immediately due and payable. Unless otherwise specified in the
related Prospectus Supplement, such declaration may, under certain
circumstances, be rescinded by the holders of a majority in principal amount of
such Notes then outstanding.
If the Notes of any series have been declared due and payable following an Event
of Default with respect thereto, the related Indenture Trustee may institute
proceedings to collect amounts due or foreclose on Trust property, exercise
remedies as a secured party, sell the related Receivables or elect to have the
applicable Trust maintain possession of such Receivables and continue to apply
collections on such Receivables as if there had been no declaration of
acceleration. Unless otherwise specified in the related Prospectus Supplement,
however, such Indenture Trustee is prohibited from selling the related
Receivables following an Event of Default, other than a default in the payment
of any principal of or a default for five days or more in the payment of any
interest on any Note of such series, unless (i) the holders of all such
outstanding Notes consent to such sale, (ii) the proceeds of such sale are
sufficient to pay in full the principal of and the accrued interest on such
outstanding Notes at the date of such sale or (iii) such Indenture Trustee
determines that the proceeds of Receivables would not be sufficient on an
ongoing basis to make all payments on such Notes as such payments would have
become due if such obligations had not been declared due and payable, and such
Indenture Trustee obtains the consent of the holders of 66 2/3% of the aggregate
outstanding amount of such Notes.
Subject to the provisions of the applicable Indenture relating to the duties of
the related Indenture Trustee, if an Event of Default occurs and is continuing
with respect to a series of Notes, such Indenture Trustee will be under no
obligation to exercise any of the rights or powers under such Indenture at the
request or direction of any of the holders of such Notes, if such Indenture
Trustee reasonably believes it will not be adequately indemnified against the
costs, expenses and liabilities that might be incurred by it in complying with
such request. Subject to the provisions for indemnification and certain
limitations contained in the related Indenture, the holders of a majority in
principal amount of the outstanding Notes of a given series will have the right
to direct the time, method and place of conducting any proceeding or any remedy
available to the applicable Indenture Trustee, and the holders of a majority in
principal amount of such Notes then outstanding may, in certain cases, waive any
default with respect thereto, except a default in the payment of principal or
interest or a default in respect of a covenant or provision of such Indenture
that cannot be modified without the waiver or consent of all the holders of such
outstanding Notes.
Unless otherwise specified in the related Prospectus Supplement, no holder of a
Note of any series will have the right to institute any proceeding with respect
to the related Indenture, unless (i) such holder previously has given to the
applicable Indenture Trustee written notice of a continuing Event of Default,
(ii) the holders of not less than 25% in principal amount of the outstanding
Notes of such series have made written request to such Indenture Trustee to
institute such proceeding in its own name as Indenture Trustee, (iii) such
holder or holders have offered such Indenture Trustee reasonable indemnity, (iv)
such Indenture Trustee has for 60 days failed to institute such proceeding and
(v) no direction inconsistent with such
21
written request has been given to such Indenture Trustee during such 60-day
period by the holders of a majority in principal amount of such outstanding
Notes.
In addition, each Indenture Trustee and the related Noteholders, by accepting
the related Notes, will covenant that they will not at any time institute
against the applicable Trust any bankruptcy, reorganization or other proceeding
under any Federal or state bankruptcy or similar law.
With respect to any Trust, neither the related Trustee nor the related Indenture
Trustee in its individual capacity, nor any holder of a Certificate representing
an ownership interest in such Trust nor any of their respective owners,
beneficiaries, agents, officers, directors, employees, affiliates, successors or
assigns will, in the absence of an express agreement to the contrary, be
personally liable for the payment of the principal of or interest on the related
Notes or for the agreements of such Trust contained in the applicable Indenture.
CERTAIN COVENANTS. Each Indenture will provide that the related Trust may not
consolidate with or merge into any other entity, unless (i) the entity formed by
or surviving such consolidation or merger is organized under the laws of the
United States or any state, (ii) such entity expressly assumes such Trust's
obligation to make due and punctual payments upon the Notes of the related
series and the performance or observance of every agreement and covenant of such
Trust under the Indenture, (iii) no Event of Default shall have occurred and be
continuing immediately after such merger or consolidation, (iv) such Trust has
been advised that the rating of the Notes or the Certificates of such series
then in effect would not be reduced or withdrawn by the Rating Agencies as a
result of such merger or consolidation and (v) such Trust has received an
opinion of counsel to the effect that such consolidation or merger would have no
material adverse tax consequence to the Trust or to any related Noteholder or
Certificateholder.
Each Trust will not, among other things, (i) except as expressly permitted by
the applicable Indenture, the applicable Transfer and Servicing Agreements or
certain related documents with respect to such Trust (collectively, the "RELATED
DOCUMENTS"), sell, transfer, exchange or otherwise dispose of any of the assets
of such Trust, (ii) claim any credit on or make any deduction from the principal
and interest payable in respect of the Notes of the related series (other than
amounts withheld under the Code or applicable state law) or assert any claim
against any present or former holder of such Notes because of the payment of
taxes levied or assessed upon such Trust, (iii) except as contemplated by the
Related Documents, dissolve or liquidate in whole or in part, (iv) permit the
validity or effectiveness of the related Indenture to be impaired or permit any
person to be released from any covenants or obligations with respect to such
Notes under such Indenture except as may be expressly permitted thereby or (v)
permit any lien, charge, excise, claim, security interest, mortgage or other
encumbrance to be created on or extend to or otherwise arise upon or burden the
assets of such Trust or any part thereof, or any interest therein or the
proceeds thereof.
No Trust may engage in any activity other than as specified under the section of
the related Prospectus Supplement entitled "The Trust." No Trust will incur,
assume or guarantee any indebtedness other than indebtedness incurred pursuant
to the related Notes and the related Indenture or otherwise in accordance with
the Related Documents.
ANNUAL COMPLIANCE STATEMENT. Each Trust will be required to file annually with
the related Indenture Trustee a written statement as to the fulfillment of its
obligations under the Indenture.
INDENTURE TRUSTEE'S ANNUAL REPORT. The Indenture Trustee for each Trust will be
required to mail each year to all related Noteholders a brief report relating to
its eligibility and qualification to continue as Indenture Trustee under the
related Indenture, any amounts advanced by it under the Indenture, the amount,
interest rate and maturity date of certain indebtedness owing by such Trust to
the applicable Indenture Trustee in its individual capacity, the property and
funds physically held by such Indenture Trustee as such and any action taken by
it that materially affects the related Notes and that has not been previously
reported.
SATISFACTION AND DISCHARGE OF INDENTURE. An Indenture will be discharged with
respect to the collateral securing the related Notes upon the delivery to the
related Indenture Trustee for cancellation of all such Notes or, with certain
limitations, upon deposit with such Indenture Trustee of funds sufficient for
the payment in full of all such Notes.
22
The Indenture Trustee
The Indenture Trustee for a series of Notes will be specified in the related
Prospectus Supplement. The Indenture Trustee for any series may resign at any
time, in which event the Trust will be obligated to appoint a successor trustee
for such series. The Trust may also remove any such Indenture Trustee if such
Indenture Trustee ceases to be eligible to continue as such under the related
Indenture or if such Indenture Trustee becomes insolvent. In such circumstances,
the Trust will be obligated to appoint a successor indenture trustee for the
applicable series of Notes. Any resignation or removal of the Indenture Trustee
and appointment of a successor indenture trustee for any series of Notes does
not become effective until acceptance of the appointment by the successor
indenture trustee for such series.
Description of the Certificates
General
With respect to each Trust, one or more classes of Certificates of a given
series will be issued pursuant to the terms of a Trust Agreement, a form of
which has been filed as an exhibit to the Registration Statement of which this
Prospectus forms a part. The following summary does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, all the
provisions of the Certificates and the Trust Agreement.
Unless otherwise specified in the related Prospectus Supplement and except for
the Certificates of a given series purchased by the Seller or any of its
affiliates, each class of Certificates will initially be represented by one or
more Certificates registered in the name of the Depository, except as set forth
below. Unless otherwise specified in the related Prospectus Supplement and
except for the Certificates of a given series purchased by the Seller, the
Certificates will be available for purchase in minimum denominations of $1,000
and integral multiples of $1 in excess thereof in book-entry form only. The
Seller has been informed by DTC that DTC's Nominee will be Cede, unless another
nominee is specified in the related Prospectus Supplement. Accordingly, such
nominee is expected to be the holder of record of the Certificates of any series
that are not purchased by the Seller or any of its affiliates. Unless and until
Definitive Certificates are issued under the limited circumstances described
herein or in the related Prospectus Supplement, no Certificateholder (other than
the Seller) will be entitled to receive a physical certificate representing a
Certificate. All references herein and in the related Prospectus Supplement to
actions by Certificateholders refer to actions taken by DTC upon instructions
from the Participants and all references herein and in the related Prospectus
Supplement to distributions, notices, reports and statements to
Certificateholders refer to distributions, notices, reports and statements to
DTC or its nominee, as the registered holder of the Certificates, as the case
may be, for distribution to Certificateholders in accordance with DTC's
procedures with respect thereto. See "Certain Information Regarding the
Securities--Book Entry Registration" and "--Definitive Securities."
Distributions of Principal and Interest
The timing and priority of distributions, seniority, allocations of losses,
Pass-Through Rate and amount of or method of determining distributions with
respect to principal and interest of each class of Certificates of a given
series will be described in the related Prospectus Supplement. Distributions of
interest on such Certificates will be made on the Payment Dates specified in the
related Prospectus Supplement and will be made prior to distributions with
respect to principal of such Certificates. To the extent provided in the related
Prospectus Supplement, a series may include one or more classes of Strip
Certificates entitled to (i) distributions in respect of principal with
disproportionate, nominal or no interest distributions or (ii) interest
distributions with disproportionate, nominal or no distributions in respect of
principal. Each class of Certificates may have a different Pass-Through Rate,
which may be a fixed, variable or adjustable Pass-Through Rate (and that may be
zero for certain classes of Strip Certificates), or any combination of the
foregoing. The related Prospectus Supplement will specify the Pass-Through Rate
for each class of Certificates of a given series or the method for determining
such Pass-Through Rate. See also "Certain Information Regarding the
Securities--Fixed Rate Securities" and "--Floating Rate Securities." Unless
otherwise provided in the related Prospectus Supplement, distributions in
respect of the Certificates of a given series may be subordinate to payments in
respect of the Notes of such series as more fully described in the related
Prospectus Supplement. Distributions in respect of interest on and principal of
any class of Certificates will be made on a pro rata basis among all the
Certificateholders of such class.
23
In the case of a series of Certificates that includes two or more classes of
Certificates, the timing, sequential order, priority of payment or amount of
distributions in respect of interest and principal, and any schedule or formula
or other provisions applicable to the determination thereof, of each such class
shall be as set forth in the related Prospectus Supplement.
If the Servicer exercises its option to purchase the Receivables of a Trust, in
the manner and on the respective terms and conditions described under
"Description of the Transfer and Servicing Agreements--Termination,"
Certificateholders will receive as prepayment an amount in respect of the
Certificates as specified in the related Prospectus Supplement. In addition, if
the related Prospectus Supplement provides that the property of a Trust will
include a Pre-Funding Account, Certificateholders may receive a partial
prepayment of principal on or immediately following the end of the Funding
Period in an amount and manner specified in the related Prospectus Supplement.
In the event of such partial prepayment, the Certificateholders may be entitled
to receive a prepayment premium from the Trust, in the amount and to the extent
provided in the related Prospectus Supplement.
Certain Information Regarding the Securities
Fixed Rate Securities
Each class of Securities (other than certain classes of Strip Notes or Strip
Certificates) may bear interest at a fixed rate per annum ("FIXED RATE
SECURITIES") or at a variable or adjustable rate per annum ("FLOATING RATE
SECURITIES"), as more fully described below and in the applicable Prospectus
Supplement. Each class of Fixed Rate Securities will bear interest at the
applicable per annum Interest Rate or Pass-Through Rate, as the case may be,
specified in the applicable Prospectus Supplement. Unless otherwise set forth in
the applicable Prospectus Supplement, interest on each class of Fixed Rate
Securities will be computed on the basis of a 360-day year of twelve 30-day
months. See "Description of the Notes-- Principal and Interest on the Notes" and
"Description of the Certificates--Distributions of Principal and Interest."
Floating Rate Securities
Each class of Floating Rate Securities will bear interest for each applicable
Interest Reset Period (as such term is defined in the related Prospectus
Supplement with respect to a class of Floating Rate Securities, "INTEREST RESET
PERIOD") at a rate per annum determined by reference to an interest rate basis
(the "BASE RATE"), plus or minus the Spread, if any, or multiplied by the Spread
Multiplier, if any, in each case as specified in the related Prospectus
Supplement. The "Spread" is the number of basis points (one basis point equals
one one-hundredth of a percentage point) that may be specified in the applicable
Prospectus Supplement as being applicable to such class, and the "SPREAD
MULTIPLIER" is the percentage that may be specified in the applicable Prospectus
Supplement as being applicable to such class.
The applicable Prospectus Supplement will designate a Base Rate for a given
Floating Rate Security based on the London interbank offered rate ("LIBOR"),
commercial paper rates, Federal funds rates, U.S. Government treasury securities
rates, negotiable certificates of deposit rates or another rate as set forth in
such Prospectus Supplement.
As specified in the applicable Prospectus Supplement, Floating Rate Securities
of a given class may also have either or both of the following (in each case
expressed as a rate per annum): (i) a maximum limitation, or ceiling, on the
rate at which interest may accrue during any interest period and (ii) a minimum
limitation, or floor, on the rate at which interest may accrue during any
interest period. In addition to any maximum interest rate that may be applicable
to any class of Floating Rate Securities, the interest rate applicable to any
class of Floating Rate Securities will in no event be higher than the maximum
rate permitted by applicable law, as the same may be modified by United States
law of general application.
Each Trust with respect to which a class of Floating Rate Securities will be
issued will appoint, and enter into agreements with, a calculation agent (each,
a "CALCULATION AGENT") to calculate interest rates on each such class of
Floating Rate Securities issued with respect thereto. The applicable Prospectus
Supplement will set forth the identity of the Calculation Agent for each such
class of Floating Rate Securities of a given series, which may be either the
Trustee or Indenture Trustee with respect to such series. All determinations of
interest by the Calculation Agent shall, in the absence of manifest error, be
conclusive for all purposes and binding on the holders of Floating Rate
Securities of a given class. Unless otherwise specified in the applicable
Prospectus Supplement, all percentages resulting from any calculation of the
rate of interest on a Floating
24
Rate Security will be rounded, if necessary, to the nearest 1/100,000 of 1%
(.0000001), with five one-millionths of a percentage point rounded upward.
Indexed Securities
To the extent so specified in any Prospectus Supplement, any class of Securities
of a given series may consist of Securities ("INDEXED SECURITIES") in which the
principal amount payable at the final scheduled Payment Date for such class (the
"INDEXED PRINCIPAL AMOUNT") is determined by reference to a measure (the
"INDEX") that will be related to (i) the difference in the rate of exchange
between United States dollars and a currency or composite currency (the "INDEXED
CURRENCY") specified in the applicable Prospectus Supplement (such Indexed
Securities, "CURRENCY INDEXED SECURITIES"); (ii) the difference in the price of
a specified commodity (the "INDEXED COMMODITY") on specified dates (such Indexed
Securities, "COMMODITY INDEXED SECURITIES"); (iii) the difference in the level
of a specified stock index (the "STOCK INDEX"), which may be based on U.S. or
foreign stocks on specified dates (such Indexed Securities, "STOCK INDEXED
SECURITIES"); or (iv) such other objective price or economic measures as are
described in the applicable Prospectus Supplement. The manner of determining the
Indexed Principal Amount of an Indexed Security and historical and other
information concerning the Indexed Currency, the Indexed Commodity, the Stock
Index or other price or economic measures used in such determination will be set
forth in the applicable Prospectus Supplement, together with information
concerning tax consequences to the holders of such Indexed Securities.
If the determination of the Indexed Principal Amount of an Indexed Security is
based on an Index calculated or announced by a third party and such third party
either suspends the calculation or announcement of such Index or changes the
basis upon which such Index is calculated (other than changes consistent with
policies in effect at the time such Indexed Security was issued and permitted
changes described in the applicable Prospectus Supplement), then such Index
shall be calculated for purposes of such Indexed Security by an independent
calculation agent named in the applicable Prospectus Supplement on the same
basis, and subject to the same conditions and controls, as applied to the
original third party. If for any reason such Index cannot be calculated on the
same basis and subject to the same conditions and controls as applied to the
original third party, then the Indexed Principal Amount of such Indexed Security
shall be calculated in the manner set forth in the applicable Prospectus
Supplement. Any determination of such independent calculation agent shall, in
the absence of manifest error, be binding on all parties.
Unless otherwise specified in the applicable Prospectus Supplement, interest on
an Indexed Security will be payable based on the amount designated in the
applicable Prospectus Supplement as the "FACE AMOUNT" of such Indexed Security.
The applicable Prospectus Supplement will describe whether the principal amount
of the related Indexed Security, if any, that would be payable upon redemption
or repayment prior to the applicable final scheduled Payment Date will be the
Face Amount of such Indexed Security, the Indexed Principal Amount of such
Indexed Security at the time of redemption or repayment or another amount
described in such Prospectus Supplement.
Book-Entry Registration
If so specified in the related Prospectus Supplement, investors may hold their
Securities through DTC (in the United States) or Cedel or Euroclear (in Europe)
if they are participants of such systems, or indirectly through organizations
that are participants in such systems. Cede, as nominee for DTC, will hold the
global Securities. Cedel and Euroclear will hold omnibus positions on behalf of
the Cedel Participants and the Euroclear Participants, respectively, through
customers' securities accounts in Cedel's and Euroclear's names on the books of
their respective depositaries (collectively, the "DEPOSITARIES") which in turn
will hold such positions in customers' securities accounts in the Depositaries'
names on the books of DTC. See "Certain Information Regarding the
Securities--Book-Entry Registration" and "--Definitive Securities" in the
Prospectus.
DTC is a limited-purpose trust company organized under the New York Banking Law,
a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities for its Participants ("DTC PARTICIPANTS") and facilitates the
clearance and settlement among DTC Participants of securities transactions, such
as transfers and pledges, in deposited securities
25
through electronic book-entry changes in DTC Participants' accounts, thereby
eliminating the need for physical movement of securities certificates. DTC
Participants include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations. Indirect access to the
DTC system is also available to others such as securities brokers and dealers,
banks, and trust companies that clear through or maintain a custodial
relationship with a DTC Participant, either directly or indirectly ("INDIRECT
PARTICIPANTS"). The rules applicable to DTC and DTC Participants are on file
with the Securities and Exchange Commission.
Transfers between DTC Participants will occur in accordance with DTC rules.
Transfers between Cedel Participants and Euroclear Participants will occur in
the ordinary way in accordance with their applicable rules and operating
procedures.
Cross-market transfers between persons holding directly or indirectly through
DTC, on the one hand, and directly or indirectly through Cedel participants or
Euroclear Participants, on the other, will be effected in DTC in accordance with
DTC rules on behalf of the relevant European international clearing system by
its Depositary; however, such cross-market transactions will require delivery of
instructions to the relevant European international clearing system by the
counterparty in such system in accordance with its rules and procedures and
within its established deadlines (European time). The relevant European
international clearing system will, if the transaction meets its settlement
requirements, deliver instructions to its Depositary to take action to effect
final settlement on its behalf by delivering or receiving securities in DTC, and
making or receiving payment in accordance with normal procedures for same-day
funds settlement applicable to DTC. Cedel Participants and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities in Cedel or Euroclear as
a result of a transaction with a DTC Participant will be made during the
subsequent securities settlement processing, dated the business day following
the DTC settlement date, and such credits or any transactions in such securities
settled during such processing will be reported to the relevant Cedel
Participant or Euroclear Participant on such business day. Cash received in
Cedel or Euroclear as a result of sales of securities by or through a Cedel
Participant or a Euroclear Participant to a DTC Participant will be received
with value on the DTC settlement date but will be available in the relevant
Cedel or Euroclear cash account only as of the business day following settlement
in DTC.
Purchases of Securities under the DTC system must be made by or through DTC
Participants, which will receive a credit for the Securities on DTC's records.
The ownership interest of each actual Securityholder is in turn to be recorded
on the DTC Participants' and Indirect Participants' records. Securityholders
will not receive written confirmation from DTC of their purchase, but
Securityholders are expected to receive written confirmations providing details
of the transaction, as well as periodic statements of their holdings, from the
DTC Participant or Indirect Participant through which the Securityholder entered
into the transaction. Transfers of ownership interests in the Securities are to
be accomplished by entries made on the books of DTC Participants acting on
behalf of Securityholders. Securityholders will not receive certificates
representing their ownership interest in Securities, except in the event that
use of the book-entry system for the Securities is discontinued.
To facilitate subsequent transfers, all Securities deposited by DTC Participants
with DTC are registered in the name of DTC's nominee, Cede. The deposit of
Securities with DTC and their registration in the name of Cede effects no change
in beneficial ownership. DTC has no knowledge of the actual Securityholders of
the Securities; DTC's records reflect only the identity of the DTC Participants
to whose accounts such Securities are credited, which may or may not be the
Securityholders. The DTC Participants will remain responsible for keeping
account of their holdings on behalf of their customers.
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.
Neither DTC nor Cede will consent or vote with respect to Securities. Under its
usual procedures, DTC mails an omnibus proxy to the issuer 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 record
date (identified in a listing attached thereto).
Principal and interest payments on the Securities will be made to DTC. DTC's
practice is to credit Participants' accounts on the applicable Distribution Date
in accordance with their respective holdings shown on DTC's records unless DTC
has reason to believe that it will not receive payment on such Distribution
Date. Payments by DTC Participants to
26
Securityholders will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of customers in
bearer form or registered in "street name" and will be the responsibility of
such DTC Participant and not of DTC, the Trustee or the Seller, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of principal and interest to DTC is the responsibility of the Trustee,
disbursement of such payments to DTC Participants shall be the responsibility of
DTC, and disbursement of such payments to Securityholders shall be the
responsibility of DTC Participants and Indirect Participants.
DTC may discontinue providing its services as securities depository with respect
to the Securities at any time by giving reasonable notice to the Seller or the
Trustee. Under such circumstances, in the event that a successor securities
depository is not obtained, Definitive Securities are required to be printed and
delivered. The Seller 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 Securityholders. See "--Definitive
Securities."
The information in this section concerning DTC and DTC's book-entry system has
been obtained from sources that the Seller believes to be reliable, but the
Seller takes no responsibility for the accuracy thereof.
Cedel Bank, societe anonyme ("CEDEL") is incorporated under the laws of
Luxembourg as a professional depository. Cedel holds securities for its
participating organizations ("CEDEL PARTICIPANTS") and facilitates the clearance
and settlement of securities transactions between Cedel Participants through
electronic book-entry changes in accounts of Cedel Participants, thereby
eliminating the need for physical movement of certificates. Transactions may be
settled in Cedel in any of 32 currencies, including United States dollars. Cedel
provides to its Cedel Participants, among other things, services for
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. Cedel interfaces with domestic
markets in several countries. As a professional depository, Cedel is subject to
regulation by the Luxembourg Monetary Institute. Cedel Participants are
recognized financial institutions around the world, including underwriters,
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations and may include the underwriters of any Series
of Securities. Indirect access to Cedel is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Cedel Participant, either directly or indirectly.
The Euroclear System was created in 1968 to hold securities for participants of
the Euroclear System ("EUROCLEAR PARTICIPANTS") and to clear and settle
transactions between Euroclear Participants through simultaneous electronic
book-entry delivery against payment, thereby eliminating the need for physical
movement of certificates and any risk from lack of simultaneous transfers of
securities and cash. Transactions may now be settled in any of 32 currencies,
including United States dollars. The Euroclear System includes various other
services, including securities lending and borrowing and interfaces with
domestic markets in 25 countries generally similar to the arrangements for
cross-market transfers with DTC described above. The Euroclear System is
operated by Morgan Guaranty Trust Company of New York, Brussels, Belgium office
(the "EUROCLEAR OPERATOR" or "EUROCLEAR"), under contract with Euroclear
Clearance System, Societe Cooperative, a Belgian cooperative corporation (the
"COOPERATIVE"). All operations are conducted by the Euroclear Operator, and all
Euroclear securities clearance accounts and Euroclear cash accounts are accounts
with the Euroclear Operator, not the Cooperative. The Cooperative Board
establishes policy for the Euroclear System. Euroclear Participants include
banks (including central banks), securities brokers and dealers and other
professional financial intermediaries and may include the underwriters of any
series of Securities. Indirect access to the Euroclear System is also available
to other firms that maintain a custodial relationship with a Euroclear
Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking corporation
which is a member bank of the Federal Reserve System. As such, it is regulated
and examined by the Board of Governors of the Federal Reserve System and the New
York State Banking Department, as well as the Belgian Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator are
governed by the Terms and Conditions Governing Use of Euroclear and the related
Operating Procedures of the Euroclear System (collectively, the "TERMS AND
CONDITIONS"). The Terms and Conditions govern transfers of securities and cash
within the Euroclear System, withdrawal of securities and cash from the
Euroclear System, and receipts of payments with respect to securities in the
Euroclear System. All securities in the Euroclear System are held on a fungible
basis without attribution of specific certificates to specific
27
securities clearance accounts. The Euroclear Operator acts under the Terms and
Conditions only on behalf of Euroclear Participants and has no record of or
relationship with persons holding through Euroclear Participants.
Distributions with respect to Securities held through Cedel or Euroclear will be
credited to the cash accounts of Cedel Participants or Euroclear Participants in
accordance with the relevant system's rules and procedures, to the extent
received by its Depositary. Such distributions will be subject to tax reporting
in accordance with relevant United States tax laws and regulations. See "U.S.
Federal Income Tax Consequences." Cedel or the Euroclear Operator, as the case
may be, will take any other action permitted to be taken by a Securityholder
under a related Agreement on behalf of a Cedel Participant or Euroclear
Participant only in accordance with its relevant rules and procedures and
subject to its Depositary's ability to effect such actions on its behalf through
DTC.
Although DTC, Cedel and Euroclear have agreed to the foregoing procedures in
order to facilitate transfers of Securities among participants of DTC, Cedel and
Euroclear, they are under no obligation to perform or continue to perform such
procedures and such procedures may be discontinued at any time.
Definitive Securities
Unless otherwise specified in the related Prospectus Supplement, the Notes and
the Certificates of a given series will be issued in fully registered,
certificated form ("DEFINITIVE NOTES" and "DEFINITIVE CERTIFICATES,"
respectively, and collectively referred to herein as "DEFINITIVE SECURITIES") to
Noteholders or Certificateholders or their respective nominees, rather than to
DTC or its nominee, only if (i) the Administrator advises the related Indenture
Trustee or the related Trustee, as applicable (the "APPLICABLE TRUSTEE"), in
writing that DTC is no longer willing or able to discharge properly its
responsibilities as depository with respect to such Securities and the
Administrator is unable to locate a qualified successor, (ii) the Administrator,
at its option, elects to terminate the book-entry system through DTC or (iii)
after the occurrence of an Event of Default or a Servicer Default with respect
to such Securities, Securityholders representing at least a majority of the
outstanding principal amount of the Notes or the Certificates, as the case may
be, of such series advise the Applicable Trustee through DTC in writing that the
continuation of a book-entry system through DTC (or a successor thereto) with
respect to such Notes or Certificates is no longer in the best interest of the
Securityholders of such Securities.
Upon the occurrence of any event described in the immediately preceding
paragraph, the Applicable Trustee will be required to notify all applicable
Securityholders of a given series through Participants of the availability of
Definitive Securities. Upon surrender by DTC of the definitive certificates
representing the corresponding Securities and receipt of instructions for re-
registration, the Applicable Trustee will reissue such Securities as Definitive
Securities to such Securityholders.
Distributions of principal of, and interest on, such Definitive Securities will
thereafter be made by the Applicable Trustee in accordance with the procedures
set forth in the related Indenture or the related Trust Agreement, as
applicable, directly to holders of Definitive Securities in whose names the
Definitive Securities were registered at the close of business on the applicable
Record Date specified for such Securities in the related Prospectus Supplement.
Such distributions will be made by check mailed to the address of such holder as
it appears on the register maintained by the Applicable Trustee. The final
payment on any such Definitive Security, however, will be made only upon
presentation and surrender of such Definitive Security at the office or agency
specified in the notice of final distribution to the applicable Securityholders.
Definitive Securities will be transferable and exchangeable at the offices of
the Applicable Trustee or of a registrar named in a notice delivered to holders
of Definitive Securities. No service charge will be imposed for any registration
of transfer or exchange, but the Applicable Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge imposed in connection
therewith.
List of Securityholders
Unless otherwise specified in the related Prospectus Supplement with respect to
the Notes of any series, three or more holders of the Notes of such series or
one or more holders of such Notes evidencing at least 25% of the aggregate
outstanding principal balance of such Notes may, by written request to the
related Indenture Trustee, obtain access to the list of all Noteholders
maintained by such Indenture Trustee for the purpose of communicating with other
Noteholders with respect to their rights under the related Indenture or under
such Notes. Such Indenture Trustee may elect not to afford the requesting
Noteholders access to the list of Noteholders if it agrees to mail the desired
communication or proxy, on behalf of and at the expense of the requesting
Noteholders, to all Noteholders of such series.
28
Unless otherwise specified in the related Prospectus Supplement with respect to
the Certificates of any series, three or more holders of the Certificates of
such series or one or more holders of such Certificates evidencing at least 25%
of the Certificate Balance of such Certificates may, by written request to the
related Trustee, obtain access to the list of all Certificateholders maintained
by such Trustee for the purpose of communicating with other Certificateholders
with respect to their rights under the related Trust Agreement or under such
Certificates.
Reports to Securityholders
With respect to each series of Securities, on or prior to each Payment Date, the
Servicer will prepare and provide to the related Indenture Trustee a statement
to be delivered to the related Noteholders on such Payment Date and to the
related Trustee a statement to be delivered to the related Certificateholders.
With respect to each series of Securities, each such statement to be delivered
to Noteholders will include (to the extent applicable) the following information
(and any other information so specified in the related Prospectus Supplement) as
to the Notes of such series with respect to such Payment Date or the period
since the previous Payment Date, as applicable, and each such statement to be
delivered to Certificateholders will include (to the extent applicable) the
following information (and any other information so specified in the related
Prospectus Supplement) as to the Certificates of such series with respect to
such Payment Date or the period since the previous Payment Date, as applicable:
(i) the amount of the distribution allocable to principal of each class
of Securities of such series;
(ii) the amount of the distribution allocable to interest on or with
respect to each class of Securities of such series;
(iii) the Pool Balance as of the close of business on the last day of
the preceding Collection Period;
(iv) the aggregate outstanding principal balance and the Note Pool
Factor for each class of such Notes, and the Certificate Balance and the
Certificate Pool Factor for each class of such Certificates, each after
giving effect to all payments reported under clause (i) above on such date;
(v) the amount of the Servicing Fee paid to the Servicer with respect to
the related Collection Period;
(vi) the Interest Rate or Pass-Through Rate for the next period for any
class of Notes or Certificates of such series with variable or adjustable
rates;
(vii) the amount of the Administration Fee paid to the Administrator in
respect of the related Collection Period;
(viii) the amount of the aggregate Realized Losses, if any, for such
Collection Period;
(ix) the aggregate Purchase Amounts for Receivables, if any, that were
repurchased or purchased in such Collection Period;
(x) the balance of the Spread Account (if any) on such Payment Date,
after giving effect to changes therein on such Payment Date;
(xi) for each such date during the Funding Period (if any), the
remaining Pre-Funded Amount; and
(xii) for the first such date that is on or immediately following the end
of the Funding Period (if any), the amount of any remaining Pre-Funded
Amount that has not been used to fund the purchase of Subsequent Receivables
and is being passed through as payments of principal on the Securities of
such series.
Each amount set forth pursuant to subclauses (i), (ii), (v) and (vii) with
respect to the Notes or the Certificates of any series will be expressed as a
dollar amount per $1,000 of the initial principal balance of such Notes or the
initial Certificate Balance of such Certificates, as applicable.
Within the prescribed period of time for tax reporting purposes after the end of
each calendar year during the term of each Trust, the Applicable Trustee will
mail to each person who at any time during such calendar year has been a
Securityholder with respect to such Trust and received any payment thereon, a
statement containing certain information for the purposes of such
Securityholder's preparation of Federal income tax returns. See "Certain Federal
Income Tax Consequences."
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Description of the Transfer and Servicing Agreements
The following summary describes certain terms of (i) each Sale and Servicing
Agreement pursuant to which a Trust will purchase Receivables from the Seller
and the Servicer will agree to service such Receivables; (ii) each Purchase
Agreement pursuant to which the Seller will purchase Receivables from Case
Credit; (iii) each Trust Agreement pursuant to which a Trust will be created and
Certificates will be issued; (iv) each Administration Agreement pursuant to
which Case Credit will undertake certain administrative duties with respect to a
Trust (collectively, the "TRANSFER AND SERVICING AGREEMENTS"); and (v) the
Liquidity Receivables Purchase Agreement pursuant to which the Seller purchases
Receivables from Case Credit and other agreements related to CRC's asset-backed
commercial paper program. Forms of the Transfer and Servicing Agreements and the
Liquidity Receivables Purchase Agreement have been filed as exhibits to the
Registration Statement of which this Prospectus forms a part. This summary does
not purport to be complete and is subject to, and qualified in its entirety by
reference to, the provisions of the definitive agreements.
Sale and Assignment of Receivables
On the Closing Date specified with respect to any given Trust in the related
Prospectus Supplement (the "CLOSING DATE"), if Case Credit is selling
Receivables to the Seller in addition to those previously sold to the Seller
pursuant to the Liquidity Receivables Purchase Agreement, Case Credit will sell
and assign to the Seller, without recourse, its entire interest in the related
Receivables, including security interests in the related Financed Equipment,
pursuant to a Purchase Agreement (as amended and supplemented from time to time,
a "PURCHASE AGREEMENT," which term will also include, as the context requires,
the Liquidity Receivables Purchase Agreement). The Seller will transfer and
assign to the related Trustee, without recourse, its entire interest in such
Receivables and security interests, together with its entire interest in
designated Receivables previously sold to the Seller pursuant to the Liquidity
Receivables Purchase Agreement, pursuant to a Sale and Servicing Agreement. Each
such Receivable will be identified in a schedule delivered pursuant to such Sale
and Servicing Agreement (a "SCHEDULE OF RECEIVABLES"). The related Trustee will,
concurrently with such transfer and assignment, execute and deliver the related
Notes and Certificates. Unless otherwise provided in the related Prospectus
Supplement, the net proceeds received from the sale of the Certificates and the
Notes of a given series will be applied to the purchase of the related Initial
Receivables from the Seller, and, to the extent specified in the related
Prospectus Supplement, to the deposit of the Pre-Funded Amount into the
Pre-Funding Account. The related Prospectus Supplement for a given Trust will
specify whether, and the terms, conditions and manner under which, Subsequent
Receivables will be sold by the Seller to the applicable Trust from time to time
during the Funding Period on each date specified as a transfer date in the
related Prospectus Supplement (each, a "SUBSEQUENT TRANSFER DATE").
In each Purchase Agreement, Case Credit will represent and warrant to the
Seller, among other things, that (i) the information provided with respect to
the related Receivables is correct in all material respects; (ii) the Obligor on
each related Receivable is required to maintain physical damage insurance
covering the Financed Equipment in accordance with Case Credit's normal
requirements; (iii) as of the applicable Closing Date or the applicable
Subsequent Transfer Date, if any, the related Receivables are free and clear of
all security interests, liens, charges and encumbrances and no offset, defenses
or counterclaims have been asserted or threatened; (iv) as of the Closing Date
or the applicable Subsequent Transfer Date, if any, each of such Receivables is
or will be secured by a first priority perfected security interest in the
Financed Equipment in favor of Case Credit; (v) each related Receivable, at the
time it was originated, complied and, as of the Closing Date or the applicable
Subsequent Transfer Date, if any, complies in all material respects with
applicable Federal and state laws, including, without limitation, consumer
credit, truth in lending, equal credit opportunity and disclosure laws; and (vi)
any other representations and warranties that may be set forth in the related
Prospectus Supplement.
Unless otherwise provided in the related Prospectus Supplement, if the Seller
breaches any of its representations or warranties made in the Sale and Servicing
Agreement, and such breach has not been cured by the last day of the second (or,
if the Seller elects, the first) Collection Period following the discovery by or
notice to the Trustee of such breach, the Seller will repurchase from such Trust
any Receivable materially and adversely affected by such breach as of such last
day at a price equal to the Contract Value (as defined in the related Prospectus
Supplement) (the "PURCHASE AMOUNT"). The obligation of the Seller to repurchase
any Receivables with respect to which any such representation or warranty has
been breached is subject to Case Credit's repurchase of such Receivables. The
repurchase obligation constitutes the sole remedy
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available to the Noteholders, the Indenture Trustee, the Certificateholders or
the Trustee in respect of such Trust for any such uncured breach.
Pursuant to each Sale and Servicing Agreement, to assure uniform quality in
servicing the Receivables and to reduce administrative costs, the Seller and
each Trust will designate the Servicer as custodian to maintain possession, as
such Trust's agent, of the Receivables and any other documents relating to the
Receivables. The Servicer's accounting records will reflect the sale and
assignment of the related Receivables to the applicable Trust, and Uniform
Commercial Code ("UCC") financing statements reflecting such sale and assignment
will be filed.
Commercial Paper Program
In connection with an asset-backed commercial paper program established in
August 1994, Case Credit and CRC entered into a Receivables Purchase Agreement
dated as of August 1, 1994 (the "LIQUIDITY RECEIVABLES PURCHASE AGREEMENT").
Case Credit intends generally to sell to CRC on the 15th day of each month all
Receivables meeting certain eligibility requirements that Case Credit purchased
from Dealers or originated directly in the preceding calendar month. Under the
Liquidity Receivables Purchase Agreement, if Case Credit elects to sell any
Receivables to CRC in a month, Case Credit is obligated to sell to CRC all
Receivables originated by Case Credit in the preceding month meeting the
applicable eligibility requirements, unless the aggregate Contract Value (as
defined in the Liquidity Receivables Purchase Agreement) of such Receivables
would exceed the purchase limit under the Liquidity Receivables Purchase
Agreement, in which event Case Credit must use procedures to select the
Receivables to be sold that are not adverse to the interests of CRC.
On each monthly settlement date under the Liquidity Receivables Purchase
Agreement, Case Credit will sell and assign to CRC, without recourse, its entire
interest in designated Receivables, including security interests in the related
Financed Equipment, and CRC will grant to Case Equipment Loan Trust 1994-B a
security interest in its entire interest in such Receivables and certain other
collateral pursuant to the Loan and Security Agreement described below. Each
such Receivable will be identified in a schedule appearing as an exhibit to the
Liquidity Receivables Purchase Agreement.
In the Liquidity Receivables Purchase Agreement, Case Credit will represent and
warrant to CRC on each monthly purchase date as to designated Receivables being
purchased by CRC on such purchase date, among other things, that: (i) each
designated Receivable meets the applicable eligibility requirements; (ii) the
information provided with respect to the designated Receivables is correct in
all material respects; (iii) the Obligor on each designated Receivable is
required to maintain physical damage insurance covering the Financed Equipment
in accordance with Case Credit's normal requirements; (iv) as of the applicable
purchase date, the designated Receivables are free and clear of all security
interests, liens, charges and encumbrances and no offsets, defenses or
counterclaims have been asserted or threatened; (v) as of the purchase date,
each of such Receivables is or will be secured by a first priority perfected
security interest in the Financed Equipment in favor of Case Credit; and (vi)
each designated Receivable, at the time it was originated, complied and, as of
the purchase date, complies in all material respects with applicable Federal and
state laws, including, without limitation, consumer credit, truth in lending,
equal credit opportunity and disclosure laws.
If Case Credit breaches any of its representations or warranties in the
Liquidity Receivables Purchase Agreement, Case Credit will repurchase from CRC
any Receivable materially and adversely affected by such breach at a price equal
to the Contract Value of such Receivable on the settlement date immediately
succeeding the month in which such repurchase obligation arises. The repurchase
obligation constitutes the sole remedy available to CRC for any such breach.
CRC and Case Equipment Loan Trust 1994-B have entered into a Loan and Security
Agreement dated as of August 1, 1994 (the "LOAN AND SECURITY AGREEMENT"),
pursuant to which Case Equipment Loan Trust 1994-B has agreed to make or
increase the principal amount of a loan (the "CRC LOAN") to CRC on a monthly
basis and CRC has agreed to grant to Case Equipment Loan Trust 1994-B a security
interest in CRC's entire interest in all Receivables purchased by CRC pursuant
to the Liquidity Receivables Purchase Agreement and not previously released from
the lien created by the Loan and Security Agreement and certain other collateral
(the "CRC COLLATERAL"). Case Equipment Loan Trust 1994-B will have funds
available to lend to CRC pursuant to the Loan and Security Agreement to the
extent that it is able to issue commercial paper notes or to borrow under a
Liquidity Agreement among Case Equipment Loan Trust 1994-B, certain Lenders and
Chemical Bank, as Administrative Agent.
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The CRC Collateral shall consist primarily of (i) all of the Receivables
acquired by CRC from Case Credit pursuant to the Liquidity Receivables Purchase
Agreement from time to time that have been pledged to Case Equipment Loan Trust
1994-B pursuant to the Loan and Security Agreement and not previously released
from the lien created by the Loan and Security Agreement and certain other
related property, (ii) the security interests in the Financed Equipment granted
by Obligors pursuant to such Receivables, (iii) funds on deposit in the certain
accounts, (iv) all right, title and interest of CRC in and to the Liquidity
Receivables Purchase Agreement and the Servicing Agreement dated as of August 1,
1994, between Case Credit, as Servicer, and CRC, (v) all right, title and
interest of CRC in and to certain interest rate caps required to be maintained
by CRC under the Loan and Security Agreement and (vi) the proceeds of the
foregoing.
Under the Loan and Security Agreement, CRC has the right to have Receivables
released from the lien of the Loan and Security Agreement for the purpose of
transferring such Receivables (or interests in such Receivables) if, among other
requirements, prior to any such transfer, CRC has received written confirmation
from the applicable rating agencies that such transfer and the related
transaction will not result in the withdrawal or downgrade of the current
ratings on the outstanding trust certificates and commercial paper notes issued
by Case Equipment Loan Trust 1994-B and after giving effect to such transfer and
the related transactions, the outstanding principal amount of the CRC Loan will
not exceed the Net Pool Balance (as defined in the Loan and Security Agreement).
In connection with any release of Receivables from the lien of the Loan and
Security Agreement, CRC will be required to deposit into the related collection
account an amount equal to the aggregate Contract Value of such Receivables plus
accrued interest thereon at the applicable APRs to the date of such release.
Accounts
With respect to each Trust, the Servicer will establish and maintain with the
related Indenture Trustee one or more accounts, in the name of the Indenture
Trustee on behalf of the related Noteholders and Certificateholders, into which
all payments made on or with respect to the related Receivables will be
deposited (the "COLLECTION ACCOUNT"). The Servicer will establish and maintain
with such Indenture Trustee an account, in the name of such Indenture Trustee on
behalf of such Noteholders, into which amounts released from the Collection
Account and Spread Account or other credit enhancement for payment to such
Noteholders will be deposited and from which all distributions to such
Noteholders will be made (the "NOTE DISTRIBUTION ACCOUNT"). The Servicer will
establish and maintain with the related Trustee an account, in the name of such
Trustee on behalf of such Certificateholders, into which amounts released from
the Collection Account and Spread Account or other credit enhancement for
distribution to such Certificateholders will be deposited and from which all
distributions to such Certificateholders will be made (the "CERTIFICATE
DISTRIBUTION ACCOUNT"). If so specified in the Prospectus Supplement, the
Servicer may also establish and maintain a Pre-Funding Account, in the name of
the Indenture Trustee on behalf of the Noteholders and the Certificateholders,
which will be used to purchase Subsequent Receivables from the Seller from time
to time during the Funding Period.
Any other accounts to be established with respect to a Trust will be described
in the related Prospectus Supplement.
For any series of Securities, funds in the Collection Account, the Note
Distribution Account, any Pre-Funding Account, the Spread Account and other
accounts identified as such in the related Prospectus Supplement (collectively,
the "TRUST ACCOUNTS") will be invested as provided in the related Sale and
Servicing Agreement in Eligible Investments. "ELIGIBLE INVESTMENTS" are limited
to investments acceptable to the Rating Agencies as being consistent with the
rating of such Securities and include: (a) direct obligations of, and
obligations fully guaranteed as to timely payment by, the United States of
America; (b) demand deposits, time deposits or certificates of deposit of any
depository institution or trust company incorporated under the laws of the
United States of America or any state thereof (or any domestic branch of a
foreign bank) and subject to supervision and examination by Federal or State
banking or depository institution authorities; PROVIDED, HOWEVER, that at the
time of the investment or contractual commitment to invest therein, the
commercial paper or other short-term senior unsecured debt obligations (other
than such obligations the rating of which is based on the credit of a Person
other than such depository institution or trust company) thereof will have a
credit rating from each of the Rating Agencies in the highest investment
category granted thereby; (c) commercial paper having, at the time of the
investment or contractual commitment to invest therein, a rating from each of
the Rating Agencies in the highest investment category granted thereby; (d) to
the extent described below, investments in money market funds having a rating
from each of the
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Rating Agencies in the highest investment category granted thereby (including
funds for which the Indenture Trustee or the Trustee or any of their respective
Affiliates is investment manager or advisor); (e) bankers' acceptances issued by
any depository institution or trust company referred to in clause (b) above; (f)
repurchase obligations with respect to any security that is a direct obligation
of, or fully guaranteed as to timely payment by, the United States of America or
any agency or instrumentality thereof the obligations of which are backed by the
full faith and credit of the United States of America, in either case entered
into with a depository institution or trust company (acting as principal)
described in clause (b); and (g) any other investment permitted by each of the
Rating Agencies as set forth in writing delivered to the Indenture Trustee;
provided that in the case of clauses (d) and (g) such investments will be made
only so long as making such investments will not require the Trust to register
as an investment company, in accordance with the Investment Company Act of 1940,
as amended. During any Funding Period, no investments in money market funds will
be made with funds in any account other than the Collection Account.
Subject to certain conditions, Eligible Investments may include securities
issued by the Seller or its affiliates or trusts originated by the Seller or its
affiliates. Except as described below or in the related Prospectus Supplement,
Eligible Investments are limited to obligations or securities that mature on or
before the business day preceding the date of the next distribution. However, to
the extent permitted by the Rating Agencies, funds in any Spread Account of a
Trust may be invested in securities that will not mature prior to the date of
the next distribution with respect to Notes issued by such Trust and will not be
sold to meet any shortfalls. Thus, the amount of cash in any Spread Account at
any time may be less than the balance of the Spread Account. If the amount
required to be withdrawn from any Spread Account to cover shortfalls in
collections on the related Receivables (as provided in the related Prospectus
Supplement) exceeds the amount of cash in the Spread 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 such series. Except as otherwise specified
in the related Prospectus Supplement, investment earnings on funds deposited in
the Trust Accounts, net of losses and investment expenses (collectively,
"INVESTMENT EARNINGS"), shall be deposited in the applicable Collection Account
on each Payment Date and shall be treated as collections of interest on the
related Receivables.
The Trust Accounts will be maintained as Eligible Deposit Accounts. "ELIGIBLE
DEPOSIT ACCOUNT" means either (a) a segregated account with an Eligible
Institution or any other segregated account the deposit of funds in which has
been approved by the Rating Agencies or (b) a segregated trust account with the
corporate trust department of a depository institution organized under the laws
of the United States of America or any one of the states thereof or the District
of Columbia (or any domestic branch of a foreign bank), having corporate trust
powers and acting as trustee for funds deposited in such account, so long as any
of the securities of such depository institution have a credit rating from each
Rating Agency in one of its generic rating categories that signifies investment
grade. "ELIGIBLE INSTITUTION" means, with respect to a Trust, (a) the corporate
trust department of the related Indenture Trustee or the related Trustee, as
applicable, or (b) a depository institution organized under the laws of the
United States of America or any one of the states thereof or the District of
Columbia (or any domestic branch of a foreign bank) (i) that has either (A) a
long-term unsecured debt rating or certificate of deposit rating acceptable to
the Rating Agencies or (B) a short-term unsecured debt rating or certificate of
deposit rating acceptable to the Rating Agencies and (ii) whose deposits are
insured by the FDIC.
Servicing Procedures
The Servicer will make reasonable efforts to collect all payments due with
respect to the Receivables held by any Trust in a manner consistent with the
related Sale and Servicing Agreement, and will utilize such collection
procedures as it follows with respect to comparable agricultural and
construction equipment retail installment sale contracts it services for itself
or others. Consistent with its normal procedures, the Servicer may, in its
discretion, arrange with the Obligor on a Receivable to extend or modify the
payment schedule, but no such arrangement will extend the final payment date of
any Receivable beyond the Final Scheduled Maturity Date unless the Servicer
purchases the Receivable as described below. Some of such arrangements
(including, without limitation, any extension of the payment schedule beyond the
Final Scheduled Maturity Date) may result in the Servicer purchasing the
Receivable for the Purchase Amount. In the event of a foreclosure with respect
to a Receivable, the Servicer may sell the Financed Equipment securing the
respective Receivable at public or private sale, or take any other action
permitted by applicable law. See "Certain Legal Aspects of the Receivables."
33
Collections
With respect to each Trust, the Servicer will deposit all payments on the
related Receivables (from whatever source) and all proceeds of such Receivables
collected during each collection period specified in the related Prospectus
Supplement (each, a "COLLECTION PERIOD") into the related Collection Account
within two business days after receipt thereof. However, at any time that and
for so long as (i) Case Credit is the Servicer, (ii) there exists no Servicer
Default and (iii) each other condition to making deposits less frequently than
daily as may be specified by the Rating Agencies or set forth in the related
Prospectus Supplement is satisfied, the Servicer will not be required to deposit
such amounts into the Collection Account until on or before the business day
preceding the applicable Payment Date. Pending deposit into the Collection
Account, collections may be invested by the Servicer at its own risk and for its
own benefit and will not be segregated from its own funds. If the Servicer were
unable to remit such funds, Securityholders might incur a loss. To the extent
set forth in the related Prospectus Supplement, the Servicer may, in order to
satisfy the requirements described above, obtain a letter of credit or other
security for the benefit of the related Trust to secure timely remittances of
collections on the related Receivables and payment of the aggregate Purchase
Amount with respect to Receivables purchased by the Servicer.
Servicing Compensation and Payment of Expenses
Unless otherwise specified in the Prospectus Supplement with respect to any
Trust, the Servicer will be entitled to receive the Servicing Fee for each
Collection Period in an amount equal to a specified percentage per annum (as set
forth in the related Prospectus Supplement, the "SERVICING FEE RATE") of the
Pool Balance as of the first day of each month during the related Collection
Period (the "SERVICING FEE"). The Servicing Fee (together with any portion of
the Servicing Fee that remains unpaid from prior Payment Dates) will be paid
solely to the extent of the Total Distribution Amount (as defined in the related
Prospectus Supplement) and, unless otherwise disclosed in the related Prospectus
Supplement, will be paid prior to the distribution of any portion of the Total
Distribution Amount to the Noteholders or the Certificateholders. Under certain
circumstances as described in a related Prospectus Supplement, the Servicing Fee
will not be paid until after the distribution to the Noteholders and the
Certificateholders of their respective portions of the Total Distribution
Amount.
The Servicing Fee will compensate the Servicer for performing the functions of a
third party servicer of agricultural and construction equipment receivables as
an agent for their beneficial owner, including collecting and posting all
payments, responding to inquiries of Obligors on the Receivables, investigating
delinquencies, sending payment coupons to Obligors, reporting tax information to
Obligors, paying costs of collections and disposition of defaults and policing
the collateral. The Servicing Fee also will compensate the Servicer for
administering the Receivables of each Trust, accounting for collections and
furnishing monthly and annual statements to the related Trustee and Indenture
Trustee with respect to distributions and generating Federal income tax
information for such Trust and for the related Noteholders and
Certificateholders. The Servicing Fee also will reimburse the Servicer for
certain taxes, accounting fees, outside auditor fees, data processing costs and
other costs incurred in connection with administering the Receivables of each
Trust.
Distributions
With respect to each series of Securities, 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
such Securities entitled thereto will be made by the applicable Trustee to the
Noteholders and the Certificateholders of such series. The timing, calculation,
allocation, order, source, priorities of and requirements for all payments to
each class of Noteholders and all distributions to each class of
Certificateholders of such series will be set forth in the related Prospectus
Supplement.
With respect to each Trust, on each Payment Date, collections on the related
Receivables will be transferred from the Collection Account to the Note
Distribution Account and the Certificate Distribution Account for distribution
to Noteholders and Certificateholders to the extent provided in the related
Prospectus Supplement. Credit enhancement, such as a Spread Account, will be
available to cover any shortfalls in the amount available for distribution on
such date to the extent specified in the related Prospectus Supplement. As more
fully described in the related Prospectus Supplement, and unless otherwise
specified therein, distributions in respect of principal of a class of
Securities of a given series will be subordinate to distributions in respect of
interest on such class, and distributions in respect of the Certificates of such
series may be subordinate to payments in respect of the Notes of such series.
34
Credit and Cash Flow Enhancement
The amounts and types of credit enhancement arrangements and the provider
thereof, if applicable, with respect to each class of Securities of a given
series, if any, will be set forth in the related Prospectus Supplement. If and
to the extent provided in the related Prospectus Supplement, credit enhancement
may be in the form of subordination of one or more classes of Securities, Spread
Accounts, over-collateralization, letters of credit, credit or liquidity
facilities, surety bonds, guaranteed investment contracts, swaps or other
interest rate protection agreements, repurchase obligations, other agreements
with respect to third party payments or other support, cash deposits or such
other arrangements as may be described in the related Prospectus Supplement or
any combination of two or more of the foregoing. If specified in the applicable
Prospectus Supplement, credit enhancement for a class of Securities may cover
one or more other classes of Securities of the same series, and credit
enhancement for a series of Securities may cover one or more other series of
Securities.
The presence of a Spread Account and other forms of credit enhancement for the
benefit of any class or series of Securities is intended to enhance the
likelihood of receipt by the Securityholders of such class or series of the full
amount of principal and interest due thereon and to decrease the likelihood that
such Securityholders will experience losses. Unless otherwise specified in the
related Prospectus Supplement, the credit enhancement for a class or series of
Securities will not provide protection against all risks of loss and will not
guarantee repayment of the entire principal balance and interest thereon. If
losses occur that exceed the amount covered by any credit enhancement or which
are not covered by any credit enhancement, Securityholders of any class or
series will bear their allocable share of deficiencies, as described in the
related Prospectus Supplement. In addition, if a form of credit enhancement
covers more than one series of Securities, Securityholders of any such series
will be subject to the risk that such credit enhancement will be exhausted by
the claims of Securityholders of other series.
Unless otherwise provided in the related Prospectus Supplement, the Seller may
replace the credit enhancement for any class of Securities with another form of
credit enhancement without the consent of Securityholders provided the Rating
Agencies confirm in writing that substitution will not result in the reduction
or withdrawal of the rating of such class of Securities or any other class of
Securities of the related series.
SPREAD ACCOUNT. If so provided in the related Prospectus Supplement, pursuant
to the related Sale and Servicing Agreement, the Seller will establish for a
series or class of Securities an account, as specified in the related Prospectus
Supplement (the "SPREAD ACCOUNT"), which will be maintained in the name of the
applicable Indenture Trustee. Unless otherwise provided in the related
Prospectus Supplement, the Spread Account will be funded by an initial deposit
by the Seller on the Closing Date in the amount set forth in the related
Prospectus Supplement. As further described in the related Prospectus
Supplement, the amount on deposit in the Spread Account will be increased on
each Payment Date thereafter up to the Specified Spread Account Balance (as
defined in the related Prospectus Supplement) by the deposit therein of the
amount of collections on the related Receivables remaining on each such Payment
Date after the payment of all other required payments and distributions on such
date. The related Prospectus Supplement will describe the circumstances and
manner under which distributions may be made out of the Spread Account, either
to holders of the Securities covered thereby, to the Seller or to any transferee
or assignee of the Seller.
The Seller may at any time, without consent of the Securityholders, sell,
transfer, convey or assign in any manner its rights to and interests in
distributions from the Spread Account, including interest earnings thereon;
PROVIDED that (i) the Rating Agencies confirm in writing that such action will
not result in a reduction or withdrawal of the rating of any class of
Securities, (ii) the Seller provides to the Trustee and the Indenture Trustee a
written opinion from independent counsel to the effect that such action will not
cause the Trust to be treated as an association (or publicly traded partnership)
taxable as a corporation for Federal income tax purposes and (iii) such
transferee or assignee agrees in writing to take positions for tax purposes
consistent with the tax positions agreed to be taken by the Seller.
Net Deposits
As an administrative convenience, unless the Servicer is required to remit
collections daily (see "--Collections" above), the Servicer will be permitted to
make the deposit of collections and Purchase Amounts for any Trust for or with
respect to the related Collection Period net of distributions to be made to the
Servicer for such Trust with respect to such Collection Period.
35
The Servicer, however, will account to the Indenture Trustee, the Trustee, the
Noteholders and the Certificateholders with respect to each Trust as if all
deposits, distributions and transfers were made individually.
Statements to Trustees and Trust
Prior to each Payment Date with respect to each series of Securities, the
Servicer will provide to the applicable Indenture Trustee and the applicable
Trustee as of the close of business on the last day of the preceding Collection
Period a statement setting forth substantially the same information as is
required to be provided in the periodic reports provided to Securityholders of
such series described under "Certain Information Regarding the Securities--
Reports to Securityholders."
Evidence as to Compliance
Each Sale and Servicing Agreement will provide that a firm of independent public
accountants will furnish to the related Trustee and Indenture Trustee annually a
statement as to compliance by the Servicer during the preceding twelve months
(or in the case of the first such certificate, from the applicable Closing Date)
with certain standards relating to the servicing of the applicable Receivables,
the Servicer's accounting records and computer files with respect thereto and
certain other matters.
Each Sale and Servicing Agreement will also provide for delivery to the related
Trust and Indenture Trustee, substantially simultaneously with the delivery of
such accountants' statement referred to above, of a certificate signed by an
officer of the Servicer stating that the Servicer has fulfilled its obligations
under the Sale and Servicing Agreement throughout the preceding twelve months
(or, in the case of the first such certificate, from the Closing Date) or, if
there has been a default in the fulfillment of any such obligation, describing
each such default. The Servicer will agree to give each Indenture Trustee and
each Trustee notice of certain Servicer Defaults under the related Sale and
Servicing Agreement.
Copies of such statements and certificates may be obtained by Securityholders by
written request addressed to the Applicable Trustee.
Certain Matters Regarding the Servicer
Each Sale and Servicing Agreement will provide that Case Credit may not resign
from its obligations and duties as Servicer thereunder, except upon
determination that Case Credit's performance of such duties is no longer
permissible under applicable law. No such resignation will become effective
until the related Indenture Trustee or a successor servicer has assumed Case
Credit's servicing obligations and duties under such Sale and Servicing
Agreement.
Each Sale and Servicing Agreement will further provide that neither the Servicer
nor any of its directors, officers, employees and agents will be under any
liability to the related Trust or the related Noteholders or Certificateholders
for taking any action or for refraining from taking any action pursuant to such
Sale and Servicing Agreement or for errors in judgment; except that neither the
Servicer nor any such person will be protected against any liability that would
otherwise be imposed by reason of willful misfeasance, bad faith or negligence
in the performance of the Servicer's duties thereunder or by reason of reckless
disregard of its obligations and duties thereunder. In addition, each Sale and
Servicing Agreement will provide that the Servicer is under no obligation to
appear in, prosecute or defend any legal action that is not incidental to the
Servicer's servicing responsibilities under such Sale and Servicing Agreement
and that, in its opinion, may cause it to incur any expense or liability.
Under the circumstances specified in each Sale and Servicing Agreement, any
entity into which the Servicer may be merged or consolidated, or any entity
resulting from any merger or consolidation to which the Servicer is a party, or
any entity succeeding to the business of the Servicer or, with respect to its
obligations as Servicer, any corporation 50% or more of the voting stock of
which is owned, directly or indirectly, by Case or Case Credit, which
corporation or other entity in each of the foregoing cases assumes the
obligations of the Servicer, will be the successor of the Servicer under such
Sale and Servicing Agreement.
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Servicer Default
Except as otherwise provided in the related Prospectus Supplement, "SERVICER
DEFAULT" under each Sale and Servicing Agreement will consist of (i) any failure
by the Servicer to deliver to the related Indenture Trustee for deposit in any
of the Trust Accounts or the Certificate Distribution Account any required
payment or to direct such Indenture Trustee to make any required distributions
therefrom, which failure continues unremedied for three business days after
written notice from such Indenture Trustee or the related Trustee is received by
the Servicer or after discovery of such failure by the Servicer; (ii) any
failure by the Servicer or the Seller, as the case may be, duly to observe or
perform in any material respect any other covenant or agreement in such Sale and
Servicing Agreement, which failure materially and adversely affects the rights
of the Noteholders, the Certificateholders of the related series or any other
person (a "SPECIFIED PARTY") identified in the related Prospectus Supplement and
that continues unremedied for 60 days after the giving of written notice of such
failure (A) to the Servicer or the Seller, as the case may be, by such Indenture
Trustee or such Trustee or (B) to the Servicer or the Seller, as the case may
be, and to such Indenture Trustee and such Trustee by holders of Notes or
Certificates of such series, as applicable, evidencing not less than 25% in
principal amount of such outstanding Notes or of such Certificate Balance or by
another Specified Party; and (iii) certain events of insolvency, readjustment of
debt, marshalling of assets and liabilities or similar proceedings with respect
to the Servicer or the Seller and certain actions by the Servicer or the Seller
indicating its insolvency, reorganization pursuant to bankruptcy proceedings or
inability to pay its obligations (each, an "INSOLVENCY EVENT").
Rights Upon Servicer Default
Unless otherwise provided in the related Prospectus Supplement, as long as a
Servicer Default under a Sale and Servicing Agreement remains unremedied, the
related Indenture Trustee or holders of Notes of the related series evidencing
not less than 25% in principal amount of such Notes then outstanding may
terminate all the rights and obligations of the Servicer under such Sale and
Servicing Agreement, whereupon such Indenture Trustee or a successor servicer
appointed by such Indenture Trustee will succeed to all the responsibilities,
duties and liabilities of the Servicer under such Sale and Servicing Agreement
and will be entitled to similar compensation arrangements. If, however, a
bankruptcy trustee or similar official has been appointed for the Servicer, and
no Servicer Default other than such appointment has occurred, such trustee or
official may have the power to prevent such Indenture Trustee or such
Noteholders from effecting a transfer of servicing. In the event that such
Indenture Trustee is unwilling or unable to so act, it may appoint, or petition
a court of competent jurisdiction for the appointment of, a successor with a net
worth of at least $100,000,000 and whose regular business includes the servicing
of equipment receivables. Such Indenture Trustee may make such arrangements for
compensation to be paid, which in no event may be greater than the servicing
compensation to the Servicer under such Sale and Servicing Agreement. Neither
the Trustee nor the Certificateholders have the right to remove the Servicer if
a Servicer Default occurs.
Waiver of Past Defaults
With respect to each Trust, unless otherwise provided in the related Prospectus
Supplement, the holders of Notes evidencing at least a majority in principal
amount of the then outstanding Notes of the related series (or the holders of
the Certificates of such series evidencing at least a majority of the
outstanding Certificate Balance, in the case of any Servicer Default that does
not adversely affect the related Indenture Trustee or such Noteholders) may, on
behalf of all such Noteholders and Certificateholders, waive any default by the
Servicer in the performance of its obligations under the related Sale and
Servicing Agreement and its consequences, except a default in making any
required deposits to or payments from any of the Trust Accounts in accordance
with such Sale and Servicing Agreement. Therefore, the Noteholders have the
ability, as limited above, to waive defaults by the Servicer which could
materially adversely affect the Certificateholders. No such waiver will impair
such Noteholders' or Certificateholders' rights with respect to subsequent
defaults.
Amendment
Unless otherwise provided in the related Prospectus Supplement, each of the
Transfer and Servicing Agreements may be amended by the parties thereto, without
the consent of the related Noteholders or Certificateholders, for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of such Transfer and Servicing Agreements or of modifying in any
manner the rights of such Noteholders or Certificateholders; provided that such
action
37
will not, in the opinion of counsel satisfactory to the related Indenture
Trustee and the related Trustee, materially and adversely affect the interest of
any such Noteholder or Certificateholder. In addition, unless otherwise provided
in the related Prospectus Supplement, the Transfer and Servicing Agreements may
be amended by the parties thereto, without the consent of the related
Noteholders or Certificateholders, to substitute or add credit enhancement for
any class of Securities provided the Rating Agencies confirm in writing that
such substitution or addition will not result in a reduction or withdrawal of
the rating of such class of Securities or any other class of Securities of the
related series. Unless otherwise specified in the related Prospectus Supplement,
the Transfer and Servicing Agreements may also be amended by the Seller, the
Servicer and the related Trustee with the consent of the Indenture Trustee, the
holders of Notes evidencing at least a majority in principal amount of then
outstanding Notes of the related series and the holders of Certificates of such
series evidencing at least a majority of the Certificate Balance, for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of such Transfer and Servicing Agreements or of modifying in
any manner the rights of such Noteholders or Certificateholders; provided,
however, that no such amendment may (i) increase or reduce in any manner the
amount of, or accelerate or delay the timing of, collections of payments on the
related Receivables or distributions that are required to be made for the
benefit of such Noteholders or Certificateholders or (ii) reduce the aforesaid
percentage of the Notes or Certificates of such series that are required to
consent to any such amendment, without the consent of the holders of all the
outstanding Notes or Certificates, as the case may be, of such series.
Payment of Notes
Upon the payment in full of all outstanding Notes of a given series and the
satisfaction and discharge of the related Indenture, the related Trustee will
succeed to all the rights of the Indenture Trustee, and the Certificateholders
of such series will succeed to all the rights of the Noteholders of such series,
under the related Sale and Servicing Agreement, except as otherwise provided
therein.
Termination
With respect to each Trust, the obligations of the Servicer, the Seller, the
related Trustee and the related Indenture Trustee pursuant to the Transfer and
Servicing Agreements will terminate upon (i) the maturity or other liquidation
of the last related Receivables and the disposition of any amounts received upon
liquidation of any such remaining Receivables and (ii) the payment to
Noteholders and Certificateholders of the related series of all amounts required
to be paid to them pursuant to the Transfer and Servicing Agreements.
Unless otherwise provided in the related Prospectus Supplement, in order to
avoid excessive administrative expense, the Servicer will be permitted at its
option to purchase from each Trust, as of the beginning of any applicable
Collection Period if, on the Payment Date in such Collection Period, the then
outstanding Pool Balance with respect to the Receivables held by such Trust is
10% or less of the Initial Pool Balance (as defined in the related Prospectus
Supplement, the "INITIAL POOL BALANCE"), all remaining related Receivables at a
price equal to the aggregate of the Contract Value of the Receivables as of the
end of such Collection Period plus accrued interest at the Cutoff Date APR.
As more fully described in the related Prospectus Supplement, any outstanding
Notes of the related series will be redeemed concurrently with either of the
events specified above and the subsequent distribution to the related
Certificateholders of all amounts required to be distributed to them pursuant to
the applicable Trust Agreement will effect early retirement of the Certificates
of such series.
Administration Agreement
Case Credit, in its capacity as administrator (the "ADMINISTRATOR"), will enter
into an agreement (as amended and supplemented from time to time, an
"ADMINISTRATION AGREEMENT") with each Trust and the related Indenture Trustee
pursuant to which the Administrator will agree, to the extent provided in such
Administration Agreement, to perform on behalf of the Trust certain
administrative obligations required by the related Indenture. Unless otherwise
specified in the related Prospectus Supplement with respect to any Trust, as
compensation for the performance of the Administrator's obligations under the
applicable Administration Agreement and as reimbursement for its expenses
related thereto, the Administrator will be entitled to a quarterly
administration fee in an amount equal to $500, or such other amount as may be
set forth in the related Prospectus Supplement (the "ADMINISTRATION FEE").
38
Certain Legal Aspects of the Receivables
Security Interest in Equipment
In states in which retail installment sale contracts such as the Receivables
evidence the credit sale of agricultural and construction equipment by dealers
to obligors, the contracts also constitute personal property security agreements
and include grants of security interests in the equipment under the applicable
UCC. Perfection of security interests in the equipment is generally governed by
the UCC. However, under the laws of certain states and under certain
circumstances, perfection of security interests in agricultural or construction
equipment may be governed by certificate of title registration laws of the state
in which such equipment is located.
Case Credit generally sells on a monthly basis to the Seller, pursuant to the
Liquidity Receivables Purchase Agreement, all retail installment sales contracts
that Case Credit acquires from dealers or retail outlets owned by Case or its
affiliates and may sell additional such contracts originated or acquired by it
(but not sold to the Seller pursuant to the Liquidity Receivables Purchase
Agreement) to the Seller pursuant to a Purchase Agreement in connection with the
issuance of a series of Securities. All of such contracts acquired by Case
Credit name Case Credit as obligee or assignee and as the secured party. Case
Credit also confirms that all necessary action has been taken under the laws of
the state in which the financed equipment is located to perfect Case Credit's
security interest in the financed equipment. Because Case Credit continues to
service the contracts, the obligors on the contracts are not notified of the
sale from Case Credit to the Seller and will not be notified of the sale from
the Seller to the Trust. No action will be taken (by amendment of the financing
statements or, if applicable, the certificates of title for the financed
equipment or otherwise) to record the transfer of the security interest from the
Seller to the Trust. In connection with the Liquidity Receivables Purchase
Agreement, or any applicable Purchase Agreement, Case Credit has also sold and
assigned or will sell and assign its interests in the Financed Equipment
securing the related Receivables to the Seller. Case Credit has filed and will
file financing statements in Wisconsin reflecting the sale of its interests in
the Receivables to the Seller. See "Description of the Transfer and Servicing
Agreements--Commercial Paper Program."
With respect to each Trust, pursuant to the related Sale and Servicing
Agreement, the Seller will assign its interests in such Financed Equipment to
such Trust. However, because of the administrative burden and expense, none of
the Seller, the Servicer nor the related Trustee will amend or assign any
financing statement or, if applicable, the certificate of title to identify such
Trust as the new secured party on such financing statement or, if applicable,
the certificate of title relating to the Financed Equipment. Also, the Servicer
will continue to hold the Receivables and any certificates of title relating to
the equipment in its possession as custodian for the Seller and such Trust
pursuant to the related Sale and Servicing Agreement. See "Description of the
Transfer and Servicing Agreements--Sale and Assignment of Receivables."
There are certain limited circumstances under the UCC and applicable Federal law
in which prior or subsequent transferees of Receivables held by a Trust could
have an interest in such Receivables with priority over such Trust's interest. A
purchaser of the Receivables who gives new value and takes possession of the
instruments that evidence the Receivables (I.E., the chattel paper) in the
ordinary course of such purchaser's business may, under certain circumstances,
have priority over the interest of the related Trust in the Receivables. In
addition, while Case Credit is the Servicer, cash collections on the Receivables
will, under certain circumstances, be commingled with the funds of Case Credit
and, in the event of the bankruptcy of Case Credit, the related Trust may not
have a perfected interest in such collections.
In most states, an assignment such as that under each Sale and Servicing
Agreement is an effective conveyance of a security interest without amendment or
assignment of any financing statement relating to the equipment or, if
applicable, notation on the related certificate of title, and the assignee
succeeds thereby to the assignor's rights as secured party. However, by not
identifying such Trust as the secured party on the financing statement or
certificate of title, the security interest of such Trust in the vehicle could
be defeated through fraud or negligence. In the absence of error, fraud or
forgery by the equipment owner or the Servicer or administrative error by state
or local agencies, the proper initial filing of the financing statement relating
to the equipment or, if applicable, the notation of the Dealer's lien on the
certificates of title will be sufficient to protect such Trust against the
rights of subsequent purchasers of Financed Equipment or subsequent lenders who
take a security interest in Financed Equipment. If there is any Financed
Equipment as to which the original secured party failed to obtain and assign to
Case Credit a perfected security interest, the security interest of Case Credit
would be subordinate to,
39
among others, subsequent purchasers of the Financed Equipment and holders of
perfected security interests. Such a failure, however, would constitute a breach
of the warranties of Case Credit under the Liquidity Receivables Purchase
Agreement or the applicable Purchase Agreement and would create an obligation of
Case Credit to repurchase the related Receivable from the Seller unless the
breach is cured. See "Description of the Transfer and Servicing Agreements--Sale
and Assignment of Receivables" and "--Commercial Paper Program."
Under the laws of most states, the perfected security interest in movable
property would continue for four months after such property is moved to a state
other than the state in which a financing statement was filed initially to
perfect the security interest in such property, or, if applicable, in which such
property is initially registered. With respect to any equipment that is subject
to certification of title under the laws of the state in which it is located, a
majority of states generally require a surrender of a certificate of title to
re-register the equipment. Accordingly, a secured party must surrender
possession if it holds the certificate of title to the equipment, or, in the
case of equipment registered in a state providing for the notation of a lien on
the certificate of title but not possession by the secured party, the secured
party would receive notice of surrender if the security interest is noted on the
certificate of title. Thus, the secured party would have the opportunity to
re-perfect its security interest in the equipment in the state of relocation. In
states that do not require a certificate of title for registration of equipment,
re-registration could defeat perfection.
Under each Sale and Servicing Agreement, the Servicer is and will be obligated
to take appropriate steps, at the Servicer's expense, to maintain perfection of
security interests in the Financed Equipment and is obligated to purchase the
related Receivable if it fails to do so.
Under the laws of most states, liens for repairs performed on the equipment and
liens for unpaid taxes take priority over even a perfected security interest in
such goods. Under each Sale and Servicing Agreement, the Seller will represent
to the related Trust that, as of the date the related Receivable is sold to such
Trust, each security interest in the Financed Equipment is or will be prior to
all other present liens on and security interests in such Financed Equipment.
However, liens for repairs or taxes could arise at any time during the term of a
Receivable. No notice will be given to the Trustee, the Indenture Trustee, the
Noteholders or the Certificateholders in respect of a given Trust if such a lien
arises.
Repossession
In the event of default by equipment purchasers, the holder of the retail
installment sale contract has all the remedies of a secured party under the UCC,
except where specifically limited by other state laws. Among the UCC remedies,
the secured party has the right to perform self-help repossession unless such
act would constitute a breach of the peace. Self-help is the method employed by
the Servicer in most cases and is accomplished simply by retaking possession of
the financed equipment. In the event of default by the obligor, some
jurisdictions require that the obligor be notified of the default and be given a
time period within which the obligor may cure the default prior to repossession.
Generally, the right of reinstatement may be exercised on a limited number of
occasions in any one-year period. In cases where the obligor objects or raises a
defense to repossession, or if otherwise required by applicable state law, a
court order must be obtained from the appropriate state court, and the equipment
must then be repossessed in accordance with that order.
Notice of Sale; Redemption Rights
The UCC and other state laws require the secured party to provide the obligor
with reasonable notice of the date, time and place of any public sale and/or the
date after which any private sale of the collateral may be held.
The obligor has the right to redeem the collateral prior to actual sale by
paying the secured party the unpaid principal balance of the obligation plus
reasonable expenses for repossessing, holding and preparing the collateral for
disposition and arranging for its sale, plus, in some jurisdictions, reasonable
attorneys' fees, or, in some states, by payment of delinquent installments or
the unpaid balance.
Deficiency Judgments and Excess Proceeds; Other Limitations
The proceeds of resale of the equipment generally will be applied first to the
expenses of resale and repossession and then to the satisfaction of the
indebtedness. While some states impose prohibitions or limitations on deficiency
judgments if the net
40
proceeds from resale do not cover the full amount of the indebtedness, a
deficiency judgment against the debtor can be sought for the shortfall in those
states that do not prohibit or limit such judgments. However, because a
defaulting obligor may have very little capital or sources of income available
following repossession, in many cases it may not be useful to seek a deficiency
judgment. If one is obtained, it may be uncollectible or settled at a
significant discount.
Occasionally, after resale of the equipment and payment of all expenses and all
indebtedness, there is a surplus of funds. In that case, the UCC requires the
creditor to remit the surplus to any holder of a lien with respect to the
equipment or, if no such lienholder exists, to the former owner of the
equipment.
Courts have applied general equitable principles to secured parties pursuing
repossession and litigation involving deficiency balances. These equitable
principles may have the effect of relieving an obligor from some or all of the
legal consequences of a default.
In several cases, obligors have asserted that the self-help remedies of secured
parties under the UCC and related laws violate the due process protections
provided under the 14th Amendment to the Constitution of the United States.
Courts have generally upheld the notice provisions of the UCC and related laws
as reasonable or have found that the repossession and resale by the creditor do
not involve sufficient state action to afford constitutional protection to
borrowers.
In addition to the laws limiting or prohibiting deficiency judgments, numerous
other statutory provisions, including Federal bankruptcy laws and related state
laws, may interfere with or affect the ability of a secured party to realize
upon collateral or to enforce a deficiency judgment. For example, in a Chapter
11, 12 or 13 proceeding under the Federal bankruptcy law, a court may prevent a
creditor from repossessing equipment, and, as part of the rehabilitation plan,
reduce the amount of the secured indebtedness to the market value of the
equipment at the time of bankruptcy (as determined by the court), leaving the
creditor as a general unsecured creditor for the remainder of the indebtedness.
A bankruptcy court may also reduce the monthly payments due under a contract or
change the rate of interest and time of repayment of the indebtedness.
Consumer Protection Laws
Numerous Federal and state consumer protection laws and related regulations
impose substantial requirements upon lenders and servicers involved in consumer
finance. Also, state laws impose finance charge ceilings and other restrictions
on consumer transactions and require contract disclosures in addition to those
required under Federal law. These requirements impose specific statutory
liabilities upon creditors who fail to comply with their provisions. In some
cases, this liability could affect an assignee's ability to enforce consumer
finance contracts. Certain of the Receivables may be deemed to be consumer
finance contracts under applicable Federal or state laws.
Under the Liquidity Receivables Purchase Agreement, Case Credit warrants to the
Seller upon each sale of Receivables that each Receivable sold complies with all
requirements of law in all material respects and will give, under each Purchase
Agreement, a similar warranty. Accordingly, if an Obligor has a claim against
the related Trust for violation of any law and such claim materially and
adversely affects such Trust's interest in a Receivable, such violation would
constitute a breach of the warranties of the Seller under such Sale and
Servicing Agreement and would create an obligation of the Seller to repurchase
the Receivable unless the breach is cured. See "Description of the Transfer and
Servicing Agreements--Sale and Assignment of Receivables."
Certain Federal Income Tax Consequences
The following is a general summary of certain Federal income tax consequences of
the purchase, ownership and disposition of the Notes and the Certificates. The
summary does not purport to deal with Federal income tax consequences applicable
to all categories of holders, some of which may be subject to special rules. For
example, it does not discuss the tax treatment of Noteholders or
Certificateholders that are insurance companies, regulated investment companies
or dealers in securities. This discussion is directed to prospective purchasers
who purchase Notes or Certificates in the initial distribution thereof and who
hold the Notes or Certificates as "capital assets" within the meaning of Section
1221 of the Internal Revenue Code of 1986, as amended (the "CODE"). Prospective
investors are urged to consult their own tax advisors in determining the
Federal, state, local, foreign and any other tax consequences to them of the
purchase, ownership and disposition of the Notes and the Certificates.
41
The following summary is based upon current provisions of the Code, the Treasury
regulations promulgated thereunder, judicial authority, and ruling authority,
all of which are subject to change, which change may be retroactive. Each Trust
will be provided with an opinion of special Federal tax counsel to such Trust
specified in the related Prospectus Supplement ("FEDERAL TAX COUNSEL") regarding
certain Federal income tax matters discussed below. An opinion of Federal Tax
Counsel, however, is not binding on the Internal Revenue Service (the "IRS") or
the courts. Moreover, there are no cases or IRS rulings on similar transactions
involving both debt and equity interests issued by a trust with terms similar to
those of the Notes and the Certificates. As a result, the IRS may disagree with
all or a part of the discussion below. No ruling on any of the issues discussed
below will be sought from the IRS. For purposes of the following summary,
references to the Trust, the Notes, the Certificates and related terms, parties
and documents shall be deemed to refer, unless otherwise specified herein, to
each Trust and the Notes, Certificates and related terms, parties and documents
applicable to such Trust.
Tax Characterization of the Trust
Federal Tax Counsel will deliver its opinion that the Trust will not be an
association (or publicly traded partnership) taxable as a corporation for
Federal income tax purposes. This opinion will be based on the assumption of
compliance by all parties with the terms of the Trust Agreement and related
documents.
If the Trust were taxable as a corporation for Federal income tax purposes, the
Trust would be subject to corporate income tax on its taxable income. The
Trust's taxable income would include all its income on the Receivables, possibly
reduced by its interest expense on the Notes. Any such corporate income tax
could materially reduce cash available to make payments on the Notes and
distributions on the Certificates, and Certificateholders could be liable for
any such tax that is unpaid by the Trust.
Tax Consequences to Holders of the Notes
TREATMENT OF THE NOTES AS INDEBTEDNESS. The Seller will agree, and the
Noteholders will agree by their purchase of Notes, to treat the Notes as debt
for Federal, state and local income and franchise tax purposes. Federal Tax
Counsel will, except as otherwise provided in the related Prospectus Supplement,
advise the Trust that the Notes will be classified as debt for Federal income
tax purposes. The discussion below assumes this characterization of the Notes is
correct.
OID, INDEXED SECURITIES, ETC. The discussion below assumes that all payments on
the Notes are denominated in U.S. dollars, and that the Notes are not Indexed
Securities or Strip Notes. Moreover, the discussion assumes that the interest
formula for the Notes meets the requirements for "qualified stated interest"
under Treasury regulations (the "OID REGULATIONS") relating to original issue
discount ("OID"), and that any OID on the Notes (I.E., any excess of the
principal amount of the Notes over their issue price) is a DE MINIMIS amount
(I.E., less than 1/4% of their principal amount multiplied by the number of full
years included in their term), all within the meaning of the OID Regulations. If
these conditions are not satisfied with respect to any given series of Notes and
as a result the Notes are treated as issued with OID, additional tax
considerations with respect to such Notes will be disclosed in the applicable
Prospectus Supplement.
INTEREST INCOME ON THE NOTES. Based on the above assumptions, except as
discussed below, the Notes will not be considered issued with OID. The stated
interest thereon will be taxable to a Noteholder as ordinary interest income
when received or accrued in accordance with such Noteholder's method of tax
accounting. Under the OID Regulations, a holder of a Note issued with a de
minimis amount of OID must include such OID in income, on a pro rata basis, as
principal payments are made on the Note. It is believed that any prepayment
premium paid as a result of a mandatory redemption will be taxable as contingent
interest when it becomes fixed and unconditionally payable. A purchaser who buys
a Note for more or less than its principal amount will generally be subject,
respectively, to the premium amortization or market discount rules of the Code.
A holder of a Note that has a fixed maturity date of not more than one year from
the issue date of such Note (a "SHORT-TERM NOTE") may be subject to special
rules. Under the OID Regulations, all stated interest will be treated as OID. An
accrual basis holder of a Short-Term Note (and certain cash basis holders,
including regulated investment companies, as set forth in Section 1281 of the
Code) generally would be required to report interest income as OID accrues on a
straight-line basis over the term of each interest period. Other cash basis
holders of a Short-Term Note would, in general, be required to report
42
interest income as interest is paid (or, if earlier, upon the taxable
disposition of the Short-Term Note). However, a cash basis holder of a
Short-Term Note reporting interest income as it is paid may be required to defer
a portion of any interest expense otherwise deductible on indebtedness incurred
to purchase or carry the Short-Term Note until the taxable disposition of the
Short-Term Note. A cash basis taxpayer may elect under Section 1281 of the Code
to accrue interest income on all nongovernment debt obligations with a term of
one year or less, in which case the taxpayer would include OID on the Short-Term
Note in income as it accrues, but would not be subject to the interest expense
deferral rule referred to in the preceding sentence. Certain special rules apply
if a Short-Term Note is purchased for more or less than its principal amount.
SALE OR OTHER DISPOSITION. If a Noteholder sells a Note, the holder will
recognize gain or loss in an amount equal to the difference between the amount
realized on the sale and the holder's adjusted tax basis in the Note. The
adjusted tax basis of a Note to a particular Noteholder will equal the holder's
cost for the Note, increased by any market discount, OID and gain previously
included by such Noteholder in income with respect to the Note and decreased by
the amount of premium (if any) previously amortized and by the amount of
principal payments previously received by such Noteholder with respect to such
Note. Any such gain or loss will be capital gain or loss, except for gain
representing accrued interest and accrued market discount not previously
included in income. Capital losses generally may be used by a corporate taxpayer
only to offset capital gains, and by an individual taxpayer only to the extent
of capital gains plus $3,000 of other income. In the case of an individual
taxpayer, any capital gain on the sale of a Note will be taxed at a maximum rate
of 39.6% if the Note is held for not more than 12 months, at 28% if the Note is
held for more than 12 months, but not more than 18 months, and at 20% if the
Note is held for more than 18 months.
FOREIGN HOLDERS. Interest paid (or accrued) to a Noteholder who is a
nonresident alien, foreign corporation or other non-United States person (a
"foreign person") generally will be considered "portfolio interest," and
generally will not be subject to United States Federal income tax and
withholding tax, if the interest is not effectively connected with the conduct
of a trade or business within the United States by the foreign person and the
foreign person (i) is not actually or constructively a "10 percent shareholder"
of the Trust or the Seller (including a holder of 10% of the outstanding
Certificates) or a "controlled foreign corporation" with respect to which the
Trust or the Seller is a "related person" within the meaning of the Code and
(ii) satisfies the statement requirement set forth in section 871(h) and section
881(c) of the Code and the regulations thereunder. To satisfy this requirement,
the foreign person, or a financial institution holding the Note on behalf of
such foreign person, must provide, in accordance with specified procedures, a
paying agent of the Trust with a statement to the effect that the foreign person
is not a United States person. Currently these requirements will be met if (x)
the foreign person provides his name and address, and certifies, under penalties
of perjury, that he is not a United States person (which certification may be
made on an IRS Form W-8) or (y) a financial institution holding the Note on
behalf of the foreign person certifies, under penalties of perjury, that such
statement has been received by it and furnishes a paying agent with a copy
thereof. Under recently finalized Treasury regulations (the "Final
Regulations"), the statement requirement may also be satisfied with other
documentary evidence with respect to an offshore account or through certain
foreign intermediaries. The Final Regulations will generally be effective for
payments made after December 31, 1998.
If such interest is not "portfolio interest," then it will be subject to a 30%
withholding tax unless the foreign person provides the Trust or its paying
agent, as the case may be, with a properly executed (i) IRS Form 1001 (or
successor form) claiming an exemption from withholding tax or a reduction in
withholding tax under the benefit of a tax treaty or (ii) IRS Form 4224 (or
successor form) stating that interest paid on the Note is not subject to
withholding tax because it is effectively connected with the foreign person's
conduct of a trade or business in the United States. Under the Final
Regulations, a foreign person will generally be required to provide IRS Form W-8
in lieu of IRS Form 1001 and IRS Form 4224, although alternative documentation
may be applicable in certain situations.
If a foreign person is engaged in a trade or business and interest on the Note
is effectively connected with the conduct of such trade or business in the
United States, the foreign person, although exempt from the withholding tax
discussed above, will be subject to United States federal income tax on such
interest on a net income basis in the same manner as if it were a United States
person. In addition, if such foreign person is a foreign corporation, it may be
subject to a branch profits tax equal to 30% (or lower treaty rate) of its
effectively connected earnings and profits for the taxable year, subject to
adjustments.
Any capital gain realized on the sale, redemption, retirement or other taxable
disposition of a Note by a foreign person will be exempt from United States
Federal income and withholding tax; PROVIDED that (i) such gain is not
effectively connected with
43
the conduct of a trade or business in the United States by the foreign person
and (ii) in the case of an individual foreign person, the foreign person is not
present in the United States for 183 days or more in the taxable year.
BACKUP WITHHOLDING. Each holder of a Note (other than an exempt holder such as
a corporation, tax-exempt organization, qualified pension and profit-sharing
trust, individual retirement account or nonresident alien who provides
certification as to status as a nonresident) will be required to provide, under
penalties of perjury, a certificate containing the holder's name, address,
correct Federal taxpayer identification number and a statement that the holder
is not subject to backup withholding. Should a nonexempt Noteholder fail to
provide the required certification, the Trust will be required to withhold 31%
of the amount otherwise payable to the holder, and remit the withheld amount to
the IRS as a credit against the holder's Federal income tax liability. The Final
Regulations make certain modifications to the backup withholding and information
reporting rules. Prospective investors are urged to consult their own tax
advisors regarding the Final Regulations.
POSSIBLE ALTERNATIVE TREATMENTS OF THE NOTES. If, contrary to the opinion of
Federal Tax Counsel, the IRS successfully asserted that one or more of the Notes
did not represent debt for Federal income tax purposes, the Notes might be
treated as equity interests in the Trust. In such a case, the Trust would be
treated as a publicly traded partnership that would not be taxable as a
corporation because it would meet certain qualifying income tests. Nonetheless,
treatment of the Notes as equity interests in such a publicly traded partnership
could have adverse tax consequences to certain holders. For example, income to
foreign holders might be subject to U.S. tax and U.S. tax return filing and
withholding requirements, and individual holders might be subject to certain
limitations on their ability to deduct their share of Trust expenses.
Tax Consequences to Holders of the Certificates
The following discussion only applies to the extent Certificates are offered in
a related Prospectus Supplement. Until that time, because the Certificates will
be held solely by the Seller or one of its affiliates, under current Treasury
regulations, the Trust will be disregarded as an entity separate from its owner
(I.E., the Seller or one of its affiliates) for federal income tax purposes.
TREATMENT OF THE TRUST AS A PARTNERSHIP. The Seller and the Servicer will
agree, and the Certificateholders will agree by their purchase of Certificates,
to treat the Trust as a partnership for purposes of Federal and state income
tax, franchise tax and any other tax measured in whole or in part by income,
with the assets of the partnership being the assets held by the Trust, the
partners of the partnership being the Certificateholders (including the Seller
in its capacity as recipient of distributions from the Spread Account and any
other account specified in the related Prospectus Supplement in which the Seller
has an interest), and the Notes being debt of the partnership. However, the
proper characterization of the arrangement involving the Trust, the
Certificates, the Notes, the Seller and the Servicer is not clear because there
is no authority on transactions closely comparable to that contemplated herein.
A variety of alternative characterizations are possible. For example, because
the Certificates have certain features characteristic of debt, the Certificates
might be considered debt of the Seller or the Trust. Any such characterization
should not result in materially adverse tax consequences to Certificateholders
as compared to the consequences from treatment of the Certificates as equity in
a partnership, described below. The following discussion assumes that the
Certificates represent equity interests in a partnership.
INDEXED SECURITIES, ETC. The following discussion assumes that all payments on
the Certificates are denominated in U.S. dollars, none of the Certificates are
Indexed Securities or Strip Certificates and a series of Securities includes a
single class of Certificates. If these conditions are not satisfied with respect
to any given series of Certificates, additional tax considerations with respect
to such Certificates will be disclosed in the applicable Prospectus Supplement.
PARTNERSHIP TAXATION. As a partnership, the Trust will not be subject to
Federal income tax. Rather, each Certificateholder will be required to
separately take into account such holder's accruals of guaranteed payments from
the Trust and its allocated share of other income, gains, losses, deductions and
credits of the Trust. The Trust's income will consist primarily of interest and
finance charges earned on the Receivables (including appropriate adjustments for
market discount, OID and premium) and any gain upon collection or disposition of
Receivables. The Trust's deductions will consist
44
primarily of interest accruing with respect to the Notes, guaranteed payments on
the Certificates, servicing and other fees, and losses or deductions upon
collection or disposition of Receivables.
Under the Trust Agreement, interest payments on the Certificates at the
Pass-Through Rate (including interest on amounts previously due on the
Certificates but not yet distributed) will be treated as "guaranteed payments"
under Section 707(c) of the Code. Guaranteed payments are payments to partners
for the use of their capital and, in the present circumstances, are treated as
deductible to the Trust and ordinary income to the Certificateholders. The Trust
will have a calendar year tax year and will deduct the guaranteed payments under
the accrual method of accounting. Certificateholders with a calendar year tax
year are required to include the accruals of guaranteed payments in income in
their taxable year that corresponds to the year in which the Trust deducts the
payments, and Certificateholders with a different taxable year are required to
include the payments in income in their taxable year that includes the December
31 of the Trust year in which the Trust deducts the payments. It is possible
that guaranteed payments will not be treated as interest for all purposes of the
Code.
In addition, the Trust Agreement will provide, in general, that the
Certificateholders will be allocated taxable income of the Trust for each
Collection Period equal to the sum of (i) any Trust income attributable to
discount on the Receivables that corresponds to any excess of the principal
amount of the Certificates over their initial issue price; (ii) prepayment
premium, if any, payable to the Certificateholders for such month and (iii) any
other amounts of income payable to the Certificateholders for such month. Such
allocation will be reduced by any amortization by the Trust of premium on
Receivables that corresponds to any excess of the issue price of Certificates
over their principal amount. All remaining items of income, gain, loss and
deduction of the Trust will be allocated to the Seller.
Based on the economic arrangement of the parties, this approach for accruing
guaranteed payments and allocating Trust income should be permissible under
applicable Treasury regulations, although no assurance can be given that the IRS
would not require a greater amount of income to be allocated to
Certificateholders. Moreover, even under the foregoing method of allocation,
Certificateholders may be subject to tax on income equal to the entire
Pass-Through Rate plus the other items described above even though the Trust
might not have sufficient cash to make current cash distributions of such
amount. Thus, cash basis holders will in effect be required to report income
from the Certificates on the accrual basis and Certificateholders may become
liable for taxes on Trust income even if they have not received cash from the
Trust to pay such taxes. In addition, because tax allocations and tax reporting
will be done on a uniform basis for all Certificateholders but
Certificateholders may be purchasing Certificates at different times and at
different prices, Certificateholders may be required to report on their tax
returns taxable income that is greater or less than the amount reported to them
by the Trust.
Most of the guaranteed payments and 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 debt-financed income" generally taxable to such a holder
under the Code.
An individual taxpayer's share of expenses of the Trust (including fees to the
Servicer but not interest expense) would be miscellaneous itemized deductions.
Such deductions might be disallowed to the individual in whole or in part and
might result in such holder being taxed on an amount of income that exceeds the
amount of cash actually distributed to such holder over the life of the Trust.
It is not clear whether these rules would be applicable to a Certificateholder
accruing guaranteed payments.
The Trust intends to make all tax calculations relating to income and
allocations to Certificateholders on an aggregate basis. If the IRS were to
require that such calculations be made separately for each Receivable, the Trust
might be required to incur additional expense but it is believed that there
would not be a material adverse effect on Certificateholders.
DISCOUNT AND PREMIUM. The purchase price paid by the Trust for the Receivables
may be greater or less than the remaining principal balance of the Receivables
at the time of purchase. If so, the Receivables will have been acquired at a
premium or discount, as the case may be. (As indicated above, the Trust will
make this calculation on an aggregate basis, but might be required to recompute
it on a Receivable-by-Receivable basis.)
If the Trust acquires the Receivables at a market discount or premium, the Trust
will elect to include any such discount in income currently as it accrues over
the life of the Receivables or to offset any such premium against interest
income on the Receivables. As indicated above, a portion of such market discount
income or premium deduction may be allocated to Certificateholders.
45
SECTION 708 TERMINATION. Under Section 708 of the Code, the Trust will be
deemed to terminate for Federal income tax purposes if 50% or more of the
capital and profits interests in the Trust are sold or exchanged within a
12-month period. Under current Treasury regulations, if such a termination
occurs, the Trust will be considered to have contributed the assets of the Trust
(the "Old Partnership") to a new partnership (the "New Partnership") in exchange
for interests in the New Partnership. Such interest would be deemed distributed
to the partners of the Old Partnership in liquidation thereof. The Trust will
not comply with certain technical requirements that might apply when such a
constructive termination occurs. As a result, the Trust may be subject to
certain tax penalties and may incur additional expenses if it is required to
comply with those requirements. Furthermore, the Trust might not be able to
comply due to lack of data.
DISPOSITION OF CERTIFICATES. Generally, capital gain or loss will be recognized
on a sale of Certificates in an amount equal to the difference between the
amount realized and the seller's tax basis in the Certificates sold. A
Certificateholder's tax basis in a Certificate will generally equal the holder's
cost increased by the holder's share of Trust income and accruals of guaranteed
payments (includible in income) and decreased by any distributions received with
respect to such Certificate. In addition, both the tax basis in the Certificates
and the amount realized on a sale of a Certificate would include the holder's
share of the Notes and other liabilities of the Trust. A holder acquiring
Certificates at different prices may be required to maintain a single aggregate
adjusted tax basis in such Certificates, and, upon sale or other disposition of
some of the Certificates, allocate a pro rata portion of such aggregate tax
basis to the Certificates sold (rather than maintaining a separate tax basis in
each Certificate for purposes of computing gain or loss on a sale of that
Certificate).
Any gain on the sale of a Certificate attributable to the holder's share of
unrecognized accrued market discount on the Receivables would generally be
treated as ordinary income to the holder and would give rise to special tax
reporting requirements. The Trust does not expect to have any other assets that
would give rise to such special reporting requirements. Thus, to avoid those
special reporting requirements, the Trust will elect to include market discount
in income as it accrues.
If a Certificateholder is required to recognize an aggregate amount of income
(not including income attributable to disallowed itemized deductions described
above) over the life of the Certificates that exceeds the aggregate cash
distributions with respect thereto, such excess will generally give rise to a
capital loss upon the retirement of the Certificates.
ALLOCATIONS BETWEEN TRANSFERORS AND TRANSFEREES. In general, the Trust's
taxable income and losses will be determined monthly and the tax items and
accruals of guaranteed payments for a particular calendar month will be
apportioned among the Certificateholders in proportion to the principal amount
of Certificates owned by them as of the close of the last day of such month. As
a result, a holder purchasing Certificates may be allocated tax items and
accruals of guaranteed payments (which will affect its tax liability and tax
basis) attributable to periods before the actual transaction.
The use of such a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of the partner's interest), taxable income or losses
and accruals of guaranteed payments of the Trust might be reallocated among the
Certificateholders. The Company is authorized to revise the Trust's method of
allocation between transferors and transferees to conform to a method permitted
by future regulations.
SECTION 754 ELECTION. In the event that a Certificateholder sells its
Certificates at a profit (loss), the purchasing Certificateholder will have a
higher (lower) basis in the Certificates than the selling Certificateholder had.
The tax basis of the Trust's assets will not be adjusted to reflect that higher
(or lower) basis unless the Trust were to file an election under Section 754 of
the Code. In order to avoid the administrative complexities that would be
involved in keeping accurate accounting records, as well as potentially onerous
information reporting requirements, the Trust will not make such election. As a
result, Certificateholders might be allocated a greater or lesser amount of
Trust income than would be appropriate based on their own purchase price for
Certificates.
ADMINISTRATIVE MATTERS. The Trustee is required to keep or have kept complete
and accurate books of the Trust. Such books will be maintained for financial
reporting and tax purposes on an accrual basis and the fiscal year of the Trust
will be the calendar year. The Trustee will file a partnership information
return (IRS Form 1065) with the IRS for each taxable year of the Trust and will
report each Certificateholder's accruals of guaranteed payments and allocable
share of items of Trust income and expense to holders and the IRS on Schedule
K-1. The Trust will provide the Schedule K-1 information to nominees that fail
to provide the Trust with the information statement described below and such
nominees will be required to forward such information to the beneficial owners
of the Certificates. Generally, holders must file tax returns that are
46
consistent with the information return filed by the Trust or be subject to
penalties unless the holder notifies the IRS of all such inconsistencies.
Under Section 6031 of the Code, any person that holds Certificates as a nominee
at any time during a calendar year is required to furnish the Trust with a
statement containing certain information on the nominee, the beneficial owners
and the Certificates so held. Such information includes (i) the name, address
and taxpayer identification number of the nominee and (ii) as to each beneficial
owner (x) the name, address and 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 Exchange Act is not required to furnish any such
information statement to the Trust. The information referred to above for any
calendar year must be furnished to the Trust on or before the following January
31. Nominees, brokers and financial institutions that fail to provide the Trust
with the information described above may be subject to penalties.
The Seller will be designated as the tax matters partner in the Trust Agreement
and, as such, will be responsible for representing the Certificateholders in any
dispute with the IRS. The Code provides for administrative examination of a
partnership as if the partnership were a separate and distinct taxpayer.
Generally, the statute of limitations for partnership items does not expire
before three years after the date on which the partnership information return is
filed. Any adverse determination following an audit of the return of the Trust
by the appropriate taxing authorities could result in an adjustment of the
returns of the Certificateholders, and, under certain circumstances, a
Certificateholder may be precluded from separately litigating a proposed
adjustment to the items of the Trust. An adjustment could also result in an
audit of a Certificateholder's returns and adjustments of items not related to
the income and losses of the Trust.
TAX CONSEQUENCES TO FOREIGN CERTIFICATEHOLDERS. It is not clear whether the
Trust would be considered to be engaged in a trade or business in the United
States for purposes of Federal withholding taxes with respect to non-U.S.
persons because there is no clear authority dealing with that issue under facts
substantially similar to those described herein. Although it is not expected
that the Trust would be engaged in a trade or business in the United States for
such purposes, the Trust will withhold as if it were so engaged in order to
protect the Trust from possible adverse consequences of a failure to withhold.
The Trust expects to withhold on the portion of its taxable income that is
allocable to foreign Certificateholders pursuant to Section 1446 of the Code, as
if such income were effectively connected to a U.S. trade or business, at a rate
of 35% for foreign holders that are taxable as corporations and 39.6% for all
other foreign holders. Subsequent adoption of Treasury regulations or the
issuance of other administrative pronouncements may require the Trust to change
its withholding procedures. In determining a holder's nonforeign status, the
Trust may rely on IRS Form W-8, IRS Form W-9 or the holder's certification of
nonforeign status signed under penalties of perjury.
Each foreign holder might be required to file a U.S. individual or corporate
income tax return and pay U.S. income tax on the amount computed therein
(including, in the case of a corporation, the branch profits tax) on its share
of accruals of guaranteed payments and the Trust's income. Each foreign holder
must obtain a taxpayer identification number from the IRS and submit that number
to the Trust on Form W-8 in order to assure appropriate crediting of the taxes
withheld. A foreign holder generally would be entitled to file with the IRS a
claim for refund with respect to taxes withheld by the Trust, taking the
position that no taxes were due because the Trust was not engaged in a U.S.
trade or business. However, the IRS may assert that additional taxes are due,
and no assurance can be given as to the appropriate amount of tax liability.
BACKUP WITHHOLDING. Distributions made on the Certificates and proceeds from
the sale of the Certificates will be subject to a "backup" withholding tax of
31% if, in general, the Certificateholder fails to comply with certain
identification procedures, unless the holder is an exempt recipient under
applicable provisions of the Code. The Final Regulations make certain
modifications to the backup withholding and information reporting rules.
Prospective investors are urged to consult their own tax advisors regarding the
Final Regulations.
47
Certain State Tax Consequences
The following discussion is a summary of the Wisconsin income and franchise tax
consequences arising from the purchase, ownership and disposition of the Notes
and the Certificates. The discussion regarding Certificates only applies to the
extent the Certificates are not held solely by the Seller or one of its
affiliates. This summary is based upon current provisions of the Wisconsin
Statutes, administrative pronouncements thereunder, and judicial authority, all
of which are subject to change. Any such changes could be retroactive. No ruling
on any of the issues discussed below will be sought from the Wisconsin
Department of Revenue.
In the opinion of Foley & Lardner, special Wisconsin tax counsel to the Trust
("WISCONSIN TAX COUNSEL"), if the Notes are treated as indebtedness of the Trust
for Federal income tax purposes, the Notes should be treated as indebtedness of
the Trust for Wisconsin income and franchise tax purposes. Noteholders not
otherwise subject to Wisconsin income or franchise tax jurisdiction should not
be subject to such jurisdiction as a consequence of their purchase, ownership
and disposition of the Notes. However, a Noteholder already subject to Wisconsin
income or franchise tax jurisdiction may be required to take the income with
respect to the Notes into account in determining the Noteholder's liability for
Wisconsin income or franchise tax.
In the opinion of Wisconsin Tax Counsel, if the Trust is classified as a
partnership for Federal income tax purposes (but is not classified as a publicly
traded partnership or, if it is so classified, would not be taxable as a
corporation because it would meet certain qualifying income tests), the Trust
would not be taxable as a corporation for Wisconsin income and franchise tax
purposes. While the matter is not free from doubt, the Trust should not be
subject to Wisconsin income or franchise tax jurisdiction. If the Trust were
subject to Wisconsin income or franchise tax jurisdiction, it would be required
to file Wisconsin partnership information returns similar to the returns it
would be required to file for Federal income tax purposes. Regardless of whether
the Trust is subject to Wisconsin income or franchise tax jurisdiction,
Certificateholders not otherwise subject to Wisconsin income or franchise tax
jurisdiction should not be subject to such jurisdiction as a consequence of
their purchase, ownership and disposition of the Certificates.
If the Trust were taxable as a corporation for Federal tax purposes: (i) while
the matter is not free from doubt, the Trust should not be subject to Wisconsin
income or franchise tax jurisdiction; and (ii) Certificateholders not otherwise
subject to Wisconsin income or franchise tax jurisdiction should not be subject
to such taxation as a consequence of their purchase, ownership and disposition
of the Certificates. If the Trust were classified as an association taxable as a
corporation and the Trust were determined to be subject to Wisconsin income or
franchise tax jurisdiction: (i) the Trust would be liable for Wisconsin income
or franchise taxes with respect to its taxable income attributable to Wisconsin
and any resulting Wisconsin income or franchise taxes paid by the Trust would
reduce the amounts otherwise available for distribution to the
Certificateholders; (ii) distributions to the Certificateholders would not be
subject to withholding for Wisconsin income or franchise taxes; and (iii)
Certificateholders not otherwise subject to Wisconsin income or franchise tax
jurisdiction should not be subject to Wisconsin income or franchise taxes as a
consequence of their purchase, ownership and disposition of the Certificates.
Because each state's income tax laws vary, it is impossible to predict the
income tax consequences to the Securityholders in all the state taxing
jurisdictions in which they are already subject to tax. Securityholders are
urged to consult their own advisors with respect to state income and franchise
taxes.
48
ERISA Considerations
Section 406 of ERISA and Section 4975 of the Code prohibit a pension,
profit-sharing or other employee benefit plan, as well as individual retirement
accounts and certain types of Keogh Plans (each a "BENEFIT PLAN"), from engaging
in certain transactions with persons that are "parties in interest" under ERISA
or "disqualified persons" under the Code with respect to such Benefit Plan. A
violation of these "prohibited transaction" rules may result in an excise tax or
other penalties and liabilities under ERISA and the Code for such persons.
Certain transactions involving the Trust might be deemed to constitute
prohibited transactions under ERISA and the Code with respect to a Benefit Plan
that purchased Notes or Certificates if assets of the Trust were deemed to be
assets of the Benefit Plan. Under a regulation issued by the United States
Department of Labor (the "PLAN ASSETS REGULATION"), the assets of the Trust
would be treated as plan assets of a Benefit Plan for the purposes of ERISA and
the Code only if the Benefit Plan acquired an "equity interest" in the Trust and
none of the exceptions contained in the Plan Assets Regulation was applicable.
An equity interest is defined under the Plan Assets Regulation as an interest
other than an instrument that is treated as indebtedness under applicable local
law and that has no substantial equity features. The likely treatment in this
context of Notes and Certificates of a given series will be discussed in the
related Prospectus Supplement.
Employee benefit plans that are governmental plans (as defined in Section 3(32)
of ERISA) and certain church plans (as defined in Section 3(33) of ERISA) are
not subject to ERISA requirements.
A plan fiduciary considering the purchase of Securities of a given series should
consult its tax and/or legal advisors regarding whether the assets of the
related Trust would be considered plan assets, the possibility of exemptive
relief from the prohibited transaction rules and other issues and their
potential consequences.
49
Plan of Distribution
On the terms and conditions set forth in an underwriting agreement with respect
to the Notes of a given series and an underwriting agreement with respect to the
Certificates of a given series (collectively, the "UNDERWRITING AGREEMENTS"),
the Seller will agree to cause the related Trust to sell to the underwriters
named therein and in the related Prospectus Supplement, and each of such
underwriters will severally agree to purchase, the principal amount of each
class of Notes and Certificates, as the case may be, of the related series set
forth therein and in the related Prospectus Supplement. In each of the
Underwriting Agreements with respect to any given series of Securities, the
several underwriters will agree, subject to the terms and conditions set forth
therein, to purchase all the Notes and Certificates, as the case may be,
described therein that are offered hereby and by the related Prospectus
Supplement if any of such Notes and Certificates, as the case may be, are
purchased.
Each Prospectus Supplement will either (i) set forth the price at which each
class of Notes and Certificates, as the case may be, being offered thereby will
be offered to the public and any concessions that may be offered to certain
dealers participating in the offering of such Notes and Certificates, as the
case may be, or (ii) specify that the related Notes and Certificates, as the
case may be, are to be resold by the underwriters in negotiated transactions at
varying prices to be determined at the time of such sale. After the initial
public offering of any such Notes and Certificates, as the case may be, such
public offering prices and such concessions may be changed.
Each Underwriting Agreement will provide that the Seller and Case Credit will
indemnify the underwriters against certain civil liabilities, including
liabilities under the Securities Act, or contribute to payments the several
underwriters may be required to make in respect thereof.
Each Trust may, from time to time, invest the funds in its Trust Accounts in
Eligible Investments acquired from such underwriters.
Pursuant to each of the Underwriting Agreements with respect to a given series
of Securities, the closing of the sale of any class of Securities subject to
either thereof will be conditioned on the closing of the sale of all other such
classes subject to either thereof. The place and time of delivery for the
Securities in respect of which this Prospectus is delivered will be set forth in
the related Prospectus Supplement.
Legal Opinions
Certain legal matters relating to the Securities of any series will be passed
upon for the related Trust, the Seller and the Servicer by Richard S. Brennan,
General Counsel and Secretary of Case.
50
Index of Terms
Set forth below is a list of the defined terms used in this Prospectus and the
pages on which the definitions of such terms may be found herein.
Page
---
Actuarial Receivables....................................................................................... 14
Administration Agreement.................................................................................... 38
Administration Fee.......................................................................................... 38
Administrator............................................................................................... 38
Applicable Trustee.......................................................................................... 28
APR......................................................................................................... 7
Base Rate................................................................................................... 24
Benefit Plan................................................................................................ 49
Calculation Agent........................................................................................... 24
Case........................................................................................................ 5
Case Credit................................................................................................. 3
Cede........................................................................................................ 12
Cedel....................................................................................................... 27
Cedel Participants.......................................................................................... 27
Certificate Balance......................................................................................... 4
Certificate Distribution Account............................................................................ 32
Certificate Pool Factor..................................................................................... 17
Certificateholders.......................................................................................... 4
Certificates................................................................................................ 1
Closing Date................................................................................................ 30
Code........................................................................................................ 41
Collection Account.......................................................................................... 32
Collection Period........................................................................................... 34
Commission.................................................................................................. 2
Commodity Indexed Securities................................................................................ 25
Contracts................................................................................................... 5
Cooperative................................................................................................. 27
CRC......................................................................................................... 3
CRC Collateral.............................................................................................. 31
CRC Loan.................................................................................................... 31
Currency Indexed Securities................................................................................. 25
Cutoff Date................................................................................................. 12
Dealer Agreements........................................................................................... 12
Dealers..................................................................................................... 5
Definitive Certificates..................................................................................... 28
Definitive Notes............................................................................................ 28
Definitive Securities....................................................................................... 28
Depositaries................................................................................................ 25
Depository.................................................................................................. 19
DTC......................................................................................................... 12
DTC Participants............................................................................................ 25
DTC's Nominee............................................................................................... 12
Eligible Deposit Account.................................................................................... 33
Eligible Institution........................................................................................ 33
Eligible Investments........................................................................................ 32
ERISA....................................................................................................... 8
51
Page
---
Euroclear................................................................................................... 27
Euroclear Operator.......................................................................................... 27
Euroclear Participants...................................................................................... 27
Events of Default........................................................................................... 21
Exchange Act................................................................................................ 2
Face Amount................................................................................................. 25
Federal Tax Counsel......................................................................................... 42
Final Regulations........................................................................................... 43
Final Scheduled Maturity Date............................................................................... 7
Financed Equipment.......................................................................................... 5
Fixed Rate Securities....................................................................................... 24
Floating Rate Securities.................................................................................... 24
Foreign Person.............................................................................................. 43
Funding Period.............................................................................................. 4
Global Securities........................................................................................... 54
Indenture................................................................................................... 3
Indenture Trustee........................................................................................... 1
Index....................................................................................................... 25
Indexed Commodity........................................................................................... 25
Indexed Currency............................................................................................ 25
Indexed Principal Amount.................................................................................... 25
Indexed Securities.......................................................................................... 25
Indirect Participants....................................................................................... 26
Initial Cutoff Date......................................................................................... 5
Initial Pool Balance........................................................................................ 38
Initial Receivables......................................................................................... 5
Insolvency Event............................................................................................ 37
Insolvency Laws............................................................................................. 9
Interest Rate............................................................................................... 3
Interest Reset Period....................................................................................... 24
Investment Earnings......................................................................................... 33
IRS......................................................................................................... 42
Issuer...................................................................................................... 3
LIBOR....................................................................................................... 24
Liquidity Receivables Purchase Agreement.................................................................... 31
Loan and Security Agreement................................................................................. 31
New Partnership............................................................................................. 46
Note Distribution Account................................................................................... 32
Note Pool Factor............................................................................................ 17
Noteholders................................................................................................. 3
Notes....................................................................................................... 1
Obligors.................................................................................................... 12
OID......................................................................................................... 42
OID Regulations............................................................................................. 42
Old Partnership............................................................................................. 46
Participants................................................................................................ 19
Pass-Through Rate........................................................................................... 4
Payment Date................................................................................................ 19
Plan Assets Regulation...................................................................................... 49
Pool Balance................................................................................................ 17
52
Page
---
Pre-Funded Amount........................................................................................... 5
Pre-Funding Account......................................................................................... 1
Precomputed Receivables..................................................................................... 14
Precomputed Simple Rebate Receivables....................................................................... 14
Prospectus Supplement....................................................................................... 1
Purchase Agreement.......................................................................................... 30
Purchase Amount............................................................................................. 30
Rating Agencies............................................................................................. 11
Receivables................................................................................................. 1
Registration Statement...................................................................................... 2
Related Documents........................................................................................... 22
Reorganization.............................................................................................. 18
Rule of 78's Receivables.................................................................................... 14
Sale and Servicing Agreement................................................................................ 5
Schedule of Receivables..................................................................................... 30
Securities.................................................................................................. 1
Securities Act.............................................................................................. 2
Securityholders............................................................................................. 4
Seller...................................................................................................... 1
Servicer.................................................................................................... 3
Servicer Default............................................................................................ 37
Servicing Fee............................................................................................... 34
Servicing Fee Rate.......................................................................................... 34
Short-Term Note............................................................................................. 42
Simple Interest Receivables................................................................................. 14
Specified Party............................................................................................. 37
Spread...................................................................................................... 24
Spread Account.............................................................................................. 35
Spread Multiplier........................................................................................... 24
Standard Precomputed Receivables............................................................................ 14
Stock Index................................................................................................. 26
Stock Indexed Securities.................................................................................... 25
Strip Certificates.......................................................................................... 4
Strip Notes................................................................................................. 3
Subsequent Receivables...................................................................................... 1
Subsequent Transfer Date.................................................................................... 30
Terms and Conditions........................................................................................ 27
Transfer and Servicing Agreements........................................................................... 30
Trust....................................................................................................... 1
Trust Accounts.............................................................................................. 32
Trust Agreement............................................................................................. 3
Trustee..................................................................................................... 1
UCC......................................................................................................... 31
Underwriting Agreements..................................................................................... 50
U.S. Person................................................................................................. 56
Wisconsin Tax Counsel....................................................................................... 48
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ANNEX I
Global Clearance, Settlement and
Tax Documentation Procedures
Except in certain limited circumstances, the globally offered Securities issued
by the Case Equipment Loan Trust 1998-A (the "GLOBAL SECURITIES") will be
available only in book-entry form. Securityholders in the Global Securities may
hold such Global Securities through any of The Depository Trust Company ("DTC"),
Cedel or Euroclear. The Global Securities will be tradeable as home market
instruments in both the European and U.S. domestic markets. Initial settlement
and all secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities through
Cedel and Euroclear will be conducted in the ordinary way in accordance with
their normal rules and operating procedures and in accordance with conventional
eurobond practice (I.E., seven calendar day settlement).
Secondary market trading between investors holding Global Securities through DTC
will be conducted according to the rules and procedures applicable to U.S.
corporate debt obligations.
Secondary cross-market trading between Cedel or Euroclear and DTC Participants
holding Securities will be effected on a delivery-against-payment basis through
the respective Depositaries of Cedel and Euroclear (in such capacity) and as DTC
Participants.
Non-U.S. holders (as described below) of Global Securities will be subject to
U.S. withholding taxes unless such holders meet certain requirements and deliver
appropriate U.S. tax documents to the securities clearing organizations or their
participants.
Initial Settlement
All Global Securities will be held in book-entry form by DTC in the name of Cede
& Co. as nominee of DTC. Securityholders' interests in the Global Securities
will be represented through financial institutions acting on their behalf as
direct and indirect Participants in DTC. As a result, Cedel and Euroclear will
hold positions on behalf of their participants through their respective
Depositaries, which in turn will hold such positions in accounts as DTC
Participants.
Securityholders electing to hold their Global Securities through DTC will follow
the settlement practices applicable to U.S. corporate debt obligations.
Securityholder securities custody accounts will be credited with their holdings
against payment in same-day funds on the settlement date.
Securityholders electing to hold their Global Securities through Cedel or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.
Secondary Market Trading
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
TRADING BETWEEN DTC PARTICIPANTS. Secondary market trading between DTC
Participants will be settled using the procedures applicable to U.S. corporate
debt obligations in same-day funds.
TRADING BETWEEN CEDEL AND/OR EUROCLEAR PARTICIPANTS. Secondary market trading
between Cedel Participants or Euroclear Participants will be settled using the
procedures applicable to conventional eurobonds in same-day funds.
TRADING BETWEEN DTC SELLER AND CEDEL OR EUROCLEAR PURCHASER. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a Cedel Participant or a Euroclear Participant, the purchaser will
send
54
instructions to Cedel or Euroclear through a Cedel Participant or Euroclear
Participant at least one business day prior to settlement. Cedel 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 coupon payment date to and
excluding the settlement date. Payment will then be made by the respective
Depositary to the DTC Participant's account against delivery of the Global
Securities. After settlement has been completed, the Global Securities will be
credited to the respective clearing system and by the clearing system, in
accordance with its usual procedures, to the Cedel Participant's or Euroclear
Participant's account. The Global Securities credit will appear the next day
(European time) and the cash debit will be back-valued to, and the interest on
the Global Securities will accrue from, the value date (which would be the
preceding day when settlement occurred in New York). If settlement is not
completed on the intended value date (I.E., the trade fails), the Cedel or
Euroclear cash debit will be valued instead as of the actual settlement date.
Cedel Participants and Euroclear Participants will need to make available to the
respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to pre-position funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within Cedel or Euroclear. Under this approach,
they may take on credit exposure to Cedel or Euroclear until the Global
Securities are credited to their accounts one day later.
As an alternative, if Cedel or Euroclear has extended a line of credit to them,
Cedel Participants or Euroclear Participants can elect not to pre-position funds
and allow that credit line to be drawn upon the finance settlement. Under this
procedure, Cedel Participants or Euroclear Participants purchasing Global
Securities would incur overdraft charges for one day, assuming they cleared the
overdraft when the Global Securities were credited to their accounts. However,
interest on the Global Securities would accrue from the value date. Therefore,
in many cases the investment income on the Global Securities earned during that
one-day period may substantially reduce or offset the amount of such overdraft
charges, although this result will depend on each Cedel Participant's or
Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities to
the respective Depositary for the benefit of Cedel Participants or Euroclear
Participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC Participant a cross-market transaction will
settle no differently than a trade between two DTC Participants.
TRADING BETWEEN CEDEL OR EUROCLEAR SELLER AND DTC PURCHASER. Due to time zone
differences in their favor, Cedel Participants and Euroclear Participants may
employ their customary procedures for transactions in which Global Securities
are to be transferred by the respective clearing system, through the respective
Depositary, to a DTC Participant. The seller will send instructions to Cedel or
Euroclear through a Cedel Participant or Euroclear Participant at least one
business day prior to settlement. In these cases, Cedel or Euroclear will
instruct the respective Depositary, as appropriate, to deliver the bonds to the
DTC Participant's account against payment. Payment will include interest accrued
on the Global Securities from and including the last coupon payment date to and
excluding the settlement date. The payment will then be reflected in the account
of the Cedel Participant or Euroclear Participant the following day, and receipt
of the cash proceeds in the Cedel Participant's or Euroclear Participant's
account would be back-valued to the value date (which would be the preceding
day, when settlement occurred in New York). Should the Cedel Participant or
Euroclear Participant have a line of credit with its respective clearing system
and elect to be in debit in anticipation of receipt of the sale proceeds in its
account, the back-valuation will extinguish any overdraft charges incurred over
that one-day period. If settlement is not completed on the intended value date
(I.E., the trade fails), receipt of the cash proceeds in the Cedel Participant's
or Euroclear Participant's account would instead be valued as of the actual
settlement date. Finally, day traders that use Cedel or Euroclear and that
purchase Global Securities from DTC Participants for delivery to Cedel
Participants or Euroclear Participants should note that these trades would
automatically fail on the sale side unless affirmative action were taken. At
least three techniques should be readily available to eliminate this potential
problem:
(a) borrowing through Cedel or Euroclear for one day (until the purchase side of
the day trade is reflected in their Cedel or Euroclear accounts) in accordance
with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant no later
than one day prior to settlement, which would give the Global Securities
sufficient time to be reflected in their Cedel or Euroclear account in order to
settle the sale side of the trade; or
55
(c) staggering the value dates for the buy and sell sides of the trade so that
the value date for the purchase from the DTC Participant is at least one day
prior to the value date for the sale to the Cedel Participant or Euroclear
Participant.
Certain U.S. Federal Income Tax Documentation Requirements
A beneficial owner of Global Securities holding securities through Cedel or
Euroclear (or through DTC if the holder has an address outside the U.S.) will be
subject to the 30% U.S. withholding tax that generally applies to payments of
interest (including original issue discount) on registered debt issued by U.S.
Persons, unless (i) each clearing system, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or business
in the chain of intermediaries between such beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements and
(ii) such beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate:
EXEMPTION FOR NON-U.S. PERSONS (FORM W-8). Beneficial owners of Securities that
are non-U.S. Persons can obtain a complete exemption form the withholding tax by
filing a signed Form W-8 (Certificate of Foreign Status). If the information
shown on Form W-8 changes, a new Form W-8 must be filed within 30 days of such
change.
EXEMPTION FOR NON-U.S. PERSONS WITH EFFECTIVELY CONNECTED INCOME (FORM 4224). A
non-U.S. Person, including a non-U.S. corporation or bank with a U.S. branch,
for which the interest income is effectively connected with its conduct of a
trade or business in the United States, can obtain an exemption from the
withholding tax by filing Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States).
EXEMPTION OR REDUCED RATE FOR NON-U.S. PERSONS RESIDENT IN TREATY COUNTRIES
(FORM 1001). Non-U.S. Persons that are beneficial owners of Securities residing
in a country that has a tax treaty with the United States can obtain an
exemption or reduced tax rate (depending on the treaty terms) by filing Form
1001 (Ownership, Exemption or Reduced Rate Certificate). If the treaty provides
only for a reduced rate, withholding tax will be imposed at that rate unless the
filer alternatively files Form W-8. Form 1001 may be filed by the Securityholder
or his agent.
EXEMPTION FOR U.S. PERSONS (FORM W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The beneficial owner of a Global
Security or in the case of a Form 1001 or a Form 4224 filer, his agent, files by
submitting the appropriate form to the person through whom it holds (the
clearing agency, in the case of persons holding directly on the books of the
clearing agency). Form W-8 and Form 1001 are effective for three calendar years
and Form 4224 is effective for one calendar year.
The term "U.S. PERSON" means (i) a citizen or resident of the United States,
(ii) a corporation or partnership organized in or under the laws of the United
States or any political subdivision thereof or (iii) an estate or trust the
income of which is includible in gross income for United States tax purposes,
regardless of its source. This summary does not deal with all aspects of U.S.
Federal income tax withholding that may be relevant to foreign holders of the
Global Securities. Securityholders are advised to consult their own tax advisers
for specific tax advice concerning their holding and disposing of the Global
Securities.
FINAL REGULATIONS. On October 6, 1997, the IRS issued final regulations dealing
with withholding tax on amounts paid to foreign persons and related matters (the
"Final Regulations"). In general, the Final Regulations do not significantly
alter the substantive withholding and information reporting requirements, but
unify current certification procedures and forms and clarify reliance standards.
For example, under the Final Regulations, a foreign person will generally be
required to provide Form W-8 in lieu of Form 1001 and Form 4224, although
alternative documentation may be applicable in certain situations. The Final
Regulations will generally be effective for payments made after December 31,
1998, subject to certain transition rules. Securityholders are urged to consult
their own tax advisers regarding the Final Regulations.
56