PROSPECTUS SUPPLEMENT
(To Prospectus dated January 22, 2002)
$1,368,000,000
Chase Manhattan Auto Owner Trust 2002-B
$1,333,800,000 Asset Backed Notes
$34,200,000 Asset Backed Certificates
Chase Manhattan Bank USA, National Association
Seller And Servicer
The trust will issue the following securities:
Class A-1 Class A-2 Class A-3 Class A-4
Notes Notes Notes Notes Certificates (1)
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Principal Amount $288,000,000 $335,000,000 $365,000,000 $345,800,000 $34,200,000
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Interest Rate 1.9291% 2.70% 3.58% 4.21% 4.24%
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Final Scheduled
Payment Date June 16, 2003 January 18, May 15, 2006 January 15, January 15,
2005 2009 2009
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Price to Public 100.000000% 99.993987% 99.989976% 99.976078% 99.996440%
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Underwriting
Discount 0.100% 0.125% 0.175% 0.225% 0.275%
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Proceeds to Seller (2) 99.900000% 99.868987% 99.814976% 99.751078% 99.721440%
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(1) The trust will also issue Class R certificates to the seller. These Class R
certificates are not being offered for sale by this prospectus supplement.
(2) Before deducting expenses payable by the seller estimated to be $625,000.
The total price to public is $1,367,859,329.05.
The total underwriting discount is $2,217,600.00.
The total proceeds to the seller are $1,365,641,729.05.
The assets of the trust will be motor vehicle loans and related property.
The trust will pay interest and principal on the securities on the 15th day of
each month. The first payment date will be July 15, 2002.
The certificates are subordinated to the notes.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus supplement or the attached prospectus is accurate or
complete. Any representation to the contrary is a criminal offense.
Underwriters of the Notes
JPMorgan
Bear, Stearns & Co. Inc.
Countrywide Securities Corporation
Loop Capital Markets, LLC
Underwriter of the Certificates
JPMorgan
The date of this prospectus supplement is May 30, 2002.
Before you purchase any of these securities, be sure to read this prospectus
supplement and the attached prospectus, especially the risk factors beginning
on page S-10 of this prospectus supplement and on page 5 of the prospectus.
A security is not a deposit and neither the securities nor the underlying
motor vehicle loans are insured or guaranteed by the FDIC or any other
governmental authority.
These securities represent obligations of or interests in the trust only and
are not obligations of or interests in Chase Manhattan Bank USA, National
Association or any of its affiliates.
No one may use this prospectus supplement to offer and sell these securities
unless it is accompanied by the prospectus.
Table of Contents
Summary of Terms ...................................................... S-4
Risk Factors .......................................................... S-10
Holders of certificates are subject to greater
credit risks because distributions in respect of the
certificates are subordinate to payments on the notes ........... S-10
You may experience prepayments and
losses on your securities after an event of default under the
indenture ....................................................... S-10
Only the assets of the trust are
available to pay your securities ................................ S-10
You may experience a greater risk of
loss on your securities as the result of recent terrorist
attacks ......................................................... S-10
Geographic concentration of motor vehicle
loans may result in more risk to you ............................ S-11
The absence of an existing market for the
securities may limit your ability to resell the securities ...... S-11
The Trust ............................................................. S-11
General............................................................ S-11
Trust Property..................................................... S-12
Capitalization of the Trust........................................ S-12
Trustee............................................................ S-12
The Motor Vehicle Loans ............................................... S-13
Eligibility Criteria............................................... S-13
Composition of the Motor Vehicle Loans............................. S-13
Delinquency and Loan Loss Information.............................. S-17
Chase USA ............................................................. S-19
Use of Proceeds ....................................................... S-19
Weighted Average Life of the Securities ............................... S-20
Maturity and Prepayment Considerations............................. S-20
Illustration of Effect of Prepayments
of Motor Vehicle Loans on the Life of the Securities ............ S-20
The Notes ............................................................. S-27
General............................................................ S-27
Payments of Interest............................................... S-27
Payments of Principal.............................................. S-27
Prepayment......................................................... S-29
The Certificates ...................................................... S-29
General............................................................ S-29
Distributions of Interest.......................................... S-29
Distributions of Principal......................................... S-30
Prepayment......................................................... S-31
Restrictions on Foreign Ownership.................................. S-31
Payments and Distributions ............................................ S-31
Source of Funds.................................................... S-31
Priority of Payments and Distributions............................. S-32
The Transfer and Servicing Agreements ................................. S-32
Trust Accounts..................................................... S-33
Servicing Compensation............................................. S-33
Servicing Procedures............................................... S-33
Reserve Account.................................................... S-34
Yield Supplement Account........................................... S-34
Administration Agreement........................................... S-35
Money Market Eligibility .............................................. S-35
Material Federal Income Tax Consequences .............................. S-35
Tax Characterization of the Trust.................................. S-36
Tax Consequences to Noteholders.................................... S-37
Tax Consequences To Certificateholders............................. S-39
State Tax Consequences ................................................ S-42
Employee Benefit Plan Considerations .................................. S-42
General............................................................ S-42
The Notes.......................................................... S-43
The Certificates................................................... S-44
Taxation of Tax-Exempt Investors................................... S-45
Underwriting .......................................................... S-46
Note Underwriting Agreement........................................ S-46
Certificate Underwriting Agreement................................. S-46
Proceeds to Chase USA.............................................. S-47
General............................................................ S-47
Legal Matters ......................................................... S-48
Glossary of Terms ..................................................... S-49
S-2
Reading These Documents
We provide information on the securities in two documents that offer varying
levels of detail:
o the prospectus--provides general information, some of which may not
apply to the securities.
o this prospectus supplement--provides a summary of the specific terms of
the securities.
We suggest you read this prospectus supplement and the prospectus in their
entirety. The prospectus supplement pages begin with "S". If the terms of the
securities described in this prospectus supplement vary from the attached
prospectus, you should rely on the information in this prospectus supplement.
We include cross-references to sections in these documents where you can
find further related discussions. Refer to the table of contents on page S-2
in this document and on page i in the attached prospectus to locate the
referenced sections.
The glossary of terms on page S-48 of this prospectus supplement lists
definitions of certain terms used in this prospectus supplement and the
glossary of terms on page 46 in the prospectus lists definitions of certain
terms used in this prospectus supplement and the prospectus.
This prospectus supplement and the attached prospectus may be used by J.P.
Morgan Securities Inc., an affiliate of Chase Manhattan Bank USA, National
Association and subsidiary of J.P. Morgan Chase & Co., in connection with
offers and sales related to market-making transactions in the securities
offered by this prospectus supplement and the attached prospectus. J.P. Morgan
Securities Inc. may act as principal or agent in those transactions. Such
sales will be made at prices related to prevailing market prices at the time
of sale.
You should rely only on information on the securities provided in this
prospectus supplement and the attached prospectus. We have not authorized
anyone to provide you with different information. The information in this
prospectus supplement or the attached prospectus is accurate only as of the
dates on their respective covers.
In this prospectus supplement, the terms "Chase USA," "we," "us" and "our"
refer to Chase Manhattan Bank USA, National Association.
S-3
Summary of Terms
The following summary is a short description of the main terms of the
securities offered by this prospectus supplement. For that reason, this
summary does not contain all of the information that may be important to you.
To fully understand the terms of the securities offered by this prospectus
supplement, you will need to read both this prospectus supplement and the
attached prospectus in their entirety.
Trust
Chase Manhattan Auto Owner Trust 2002-B is a Delaware statutory business trust
established by the seller pursuant to a trust agreement.
Offered Securities
The following securities are being offered by this prospectus supplement:
$288,000,000 Class A-1 1.9291% Asset Backed Notes
$335,000,000 Class A-2 2.70% Asset Backed Notes
$365,000,000 Class A-3 3.58% Asset Backed Notes
$345,800,000 Class A-4 4.21% Asset Backed Notes
$34,200,000 4.24% Asset Backed Certificates
Seller and Servicer
Chase Manhattan Bank USA, National Association, a wholly owned subsidiary of
J.P. Morgan Chase & Co.
Indenture Trustee
Wells Fargo Bank Minnesota, National Association
Owner Trustee
Wilmington Trust Company
Closing Date
The trust expects to issue the securities on June 6, 2002.
Cutoff Date
The seller will transfer the motor vehicle loans to the trust as of June 1,
2002.
Statistical Cutoff Date
The seller prepared the statistical information on the motor vehicle loans to
be transferred to the trust as of May 24, 2002.
Property of the Trust
The property of the trust will include the following:
o the motor vehicle loans,
o all collections on the motor vehicle loans received on and after the
cutoff date,
o amounts held from time to time in the reserve account, the yield
supplement account and the other bank accounts maintained for the
trust,
o security interests in the financed vehicles,
o rights to proceeds from the exercise of the seller's recourse rights
against dealers,
o rights to proceeds from claims on insurance policies that cover the
obligors of the motor vehicle loans or the vehicles financed by the
motor vehicle loans and
o repossessed financed vehicles.
The Motor Vehicle Loans
On the closing date, the seller will transfer the motor vehicle loans to the
trust in exchange for the securities. The motor vehicle loans are retail
installment sales contracts and purchase money notes and other notes secured
by new and used automobiles and light-duty trucks.
Statistical Information
The statistical information in this prospectus supplement on the motor vehicle
loans to be transferred to the trust on the closing date is presented as of
May 24, 2002. The seller may select additional motor vehicle loans to be
transferred to the trust after the statistical cutoff date. In addition,
certain motor vehicle loans included in the statistical information may not be
included in the motor vehicle loans transferred to the trust on the closing
date. As a result of this potential variation in the motor vehicle loans to be
transferred to the trust and the amortization of the motor vehicle loans
between the statistical cutoff date and the cutoff date, the statistical
distribution of the characteristics of the motor vehicle loans as of the
cutoff date may vary from the statistical distribution of those
characteristics as of May 24, 2002, although that variance will not be
material.
The aggregate principal balance of the motor vehicle loans as of the
statistical cutoff date was $1,385,770,141.13.
S-4
The composition of the motor vehicle loans as of the statistical cutoff date
was as follows:
Number of Motor Vehicle
Loans ..................................................................................................... 71,636
Average Principal Balance .................................................................................. $19,344.61
Average Original Balance ................................................................................... $19,528.48
Weighted Average
Contract Rate ............................................................................................. 7.17%
Contract Rate (Range) ...................................................................................... 0.00% to 18.00%
Weighted Average Original
Term ...................................................................................................... 58.00 months
Original Term (Range) ...................................................................................... 12 months to 72
months
Weighted Average Remaining
Term ...................................................................................................... 57.44 months
Remaining Term (Range) ..................................................................................... 9 months to 72
months
Principal Terms of the Notes
Form
The notes will be issued in book-entry form through DTC, Clearstream and
Euroclear in minimum denominations of $1,000 and integral multiples thereof.
Definitive notes will be issued only under limited circumstances.
Payment Dates
The trust will pay interest and principal on the notes on the 15th day of each
month unless the 15th day is not a business day, in which case the payment
will be made on the following business day. The first payment date is July 15,
2002.
Record Dates
On each payment date, the trust will pay interest and principal to the holders
of the notes as of the related record date. The record date for the notes will
be the day before the payment date. If definitive notes are issued, the record
date will be the last day of the month before the payment date.
Interest Rates
On each payment date, the trust will pay interest on each class of notes at
the rate shown on the cover page of this prospectus supplement.
Interest Accrual
Class A-1 Notes. "Actual/360", accrued from the prior payment date (or the
closing date, in the case of the first payment date) to and excluding the
current payment date.
Class A-2 Notes, Class A-3 Notes and Class A-4 Notes. "30/360", accrued from
the 15th day of the previous month (or the closing date, in the case of the
first payment date) to and excluding the 15th day of the current month.
This means that, if there are no outstanding shortfalls in the payment of
interest, the interest due on each payment date will be the product of:
o the outstanding principal balance,
o the interest rate and
o in the case of the Class A-1 notes:
the actual number of days in the accrual period divided by 360, and
o in the case of the other classes of notes:
30 (or in the case of the first payment date, 39) divided by 360.
Interest on any note that is not paid on a payment date will be due on the
next payment date, together with interest on that amount at the applicable
interest rate, to the extent lawful.
For a more detailed description of the payment of interest on the notes, refer
to the section of this prospectus supplement entitled "The Notes--Payments of
Interest."
Principal Payments
The trust will pay the principal of the notes on each payment date in an
amount equal to the lesser of
o the amount available to the trust to pay principal on the notes and
o a targeted amount generally equal to either approximately 95.41% or
100% of the sum of
o principal amounts collected on the motor vehicle loans during the
prior calendar month and
o the aggregate principal balance of all motor vehicle loans
designated as "defaulted receivables" in that month, net of
liquidation proceeds allocable to principal received in that month.
S-5
The targeted amount will equal 100% of that sum until the Class A-2 notes are
paid in full and approximately 95.41% thereafter unless
o the balance in the reserve account drops below 0.50% of the aggregate
principal balance of the motor vehicle loans as of the cutoff date, in
which case, the targeted amount will equal 100% of that sum until the
notes have been paid in full or the balance in the reserve account
equals or exceeds the required amount
or
o the maturity of the notes has been accelerated following an event of
default, in which case, the targeted amount will equal 100% of that sum
until the notes have been paid in full.
If the full targeted amount of principal payable to the noteholders on any
payment date is not paid, the amount not paid will be included in the amount
of principal payable to the noteholders on the next payment date.
Application of Principal Prior to Acceleration of the Notes. The trust will
pay the principal of the notes of each class sequentially starting with the
earliest maturing class of notes then outstanding until that class is paid in
full.
Application of Principal After Acceleration of the Notes. After an
acceleration of the maturity of the notes following an event of default, the
trust will pay the principal amount of the Class A-1 notes until the Class A-1
notes have been paid in full and then pay the principal of the remaining
classes of notes ratably, based upon the outstanding principal amount of each
such class of notes.
The trust is required to pay the entire outstanding principal amount of each
class of notes, to the extent not previously paid, on the respective final
scheduled payment date shown on the cover page of this prospectus supplement.
For a more detailed description of the payment of principal on the notes,
refer to the section of this prospectus supplement entitled "The Notes--
Payments of Principal."
Prepayment
The trust will prepay the Class A-4 notes in full if the servicer exercises
its option to purchase the motor vehicle loans.
For a more detailed description of the servicer's option to purchase the motor
vehicle loans, refer to the section of this prospectus supplement entitled
"The Notes--Prepayment."
Principal Terms of the Certificates
Form
The certificates will be issued in book-entry form through DTC in minimum
denominations of $1,000 and integral multiples thereof. Definitive
certificates will be issued only under limited circumstances.
Payment Dates
The trust will make distributions of interest and principal in respect of the
certificates on the 15th day of each month unless the 15th day is not a
business day, in which case the distribution will be made on the following
business day. The first payment date is July 15, 2002.
Record Dates
On each payment date, the trust will distribute interest and principal to the
holders of the certificates as of the related record date. The record date for
the certificates will be the day before the payment date. If definitive
certificates are issued, the record date will be the last day of the month
before the payment date.
Pass-Through Rate
On each payment date, the trust will distribute interest in respect of the
certificates at the pass-through rate shown on the cover of this prospectus
supplement.
Interest Accrual
"30/360", accrued from the 15th day of the previous month (or the closing
date, in the case of the first payment date) to and excluding the 15th day of
the current month.
The trust will not make distributions of interest in respect of the
certificates after the acceleration of the maturity of the notes following an
event of default arising from a payment default until the trust pays the notes
in full.
Interest in respect of the certificates that is not paid on a payment date
will be due on the next payment date, together with interest on that amount at
the applicable pass-through rate, to the extent lawful.
S-6
Principal Distributions
On the payment date on which the trust pays the Class A-2 notes in full and on
each payment date thereafter until the notes have been paid in full, the trust
will distribute principal in respect of the certificates in an amount equal to
the lesser of
o the amount available to the trust to make distributions of principal in
respect of the certificates and
o a targeted amount generally equal to approximately 4.59% of the sum of
o principal amounts collected on the motor vehicle loans during the
prior calendar month and
o the aggregate principal balance of all motor vehicle loans
designated as "defaulted receivables" in that month, net of
liquidation proceeds allocable to principal received in that month,
provided that the targeted amount will be zero on any payment date on which
the targeted amount for the notes is equal to 100% of the sum referenced
above. On each payment date after the notes have been paid in full, the
targeted amount will equal 100% of the sum referenced above.
Refer to the section entitled "Principal Terms of the Notes--Principal
Payments" above for a discussion of when the targeted amount for the notes
will be 100%.
If the full targeted amount of principal distributable to the
certificateholders on any payment date is not distributed, the shortfall will
be included in the amount of principal distributable to the certificateholders
on the next payment date.
The trust is required to reduce the outstanding certificate balance to zero no
later than the final scheduled payment date shown on the cover of this
prospectus supplement.
Prepayment
The trust will reduce the outstanding certificate balance to zero if the
servicer exercises its option to purchase the motor vehicle loans.
For a more detailed description of the servicer's option to purchase the motor
vehicle loans, refer to the section of this prospectus supplement entitled
"The Certificates--Prepayment."
Priority of Payments
From available collections on the motor vehicle loans received during the
prior calendar month and any amounts withdrawn from the reserve account and/or
the yield supplement account, the trust will pay the following amounts on each
payment date in the following order or priority:
o the servicing fee payable to the servicer,
o the administration fee payable to the administrator,
o interest payable on the notes, ratably to the holders of each class of
notes,
o interest distributable in respect of the certificates, to the holders
of the certificates; provided that, if the maturity of the notes has
been accelerated following an event of default arising from a payment
default, interest will not be distributed to the holders of the
certificates until the notes are paid in full,
o principal due on the notes, to the holders of the notes in the order
described above,
o after the trust has paid the Class A-2 notes in full, principal
distributable in respect of the certificates, to the holders of the
certificates and
o any remaining amount, to the reserve account.
For a more detailed description of the priority of payments, refer to the
section of this prospectus supplement entitled "Payments and Distributions."
Credit and Yield Enhancement
Losses and other shortfalls of cash flow will be covered by
o excess interest payments on other motor vehicle loans,
o withdrawals from the reserve account,
o withdrawals from the yield supplement account to cover certain interest
shortfalls on the motor vehicle loans and
o allocations of available funds to
o the payment of interest on the notes before the distribution of
interest in respect of the certificates,
o the payment of principal of the notes before the distribution of
principal in respect of the certificates and,
S-7
o after the maturity of the notes has been accelerated following an
event of default arising from a payment default, the payment of
principal of the notes before the distribution of interest in
respect of the certificates.
Reserve Account
On the closing date, the trust will deposit an amount equal to 0.75% of the
aggregate principal balance of the motor vehicle loans as of the cutoff date
in the reserve account.
On each payment date, if collections on the motor vehicle loans and amounts
withdrawn from the yield supplement account are insufficient to pay the
servicing fee, the administration fee and all amounts payable in respect of
the securities, the indenture trustee will withdraw available funds from the
reserve account to pay such amounts.
Generally, the balance required to be on deposit in the reserve account on
each payment date will be 1.75% (3.50% if a trigger event occurs) of the
outstanding principal balance of the motor vehicle loans. However, the reserve
account balance on each payment date is required to be no less than the lesser
of
o 0.75% of the aggregate principal balance of the motor vehicle loans as of
the cutoff date and
o the aggregate principal balance of the motor vehicle loans.
If the average delinquency ratio or the average net loss ratio exceeds its
specified trigger level, then the balance that will be required to be on
deposit in the reserve account will be calculated using 3.50% rather than
1.75%.
If the seller desires to reduce the balance required to be on deposit in the
reserve account to a lesser amount and requests the rating agencies to confirm
that such reduction in the required balance will not adversely affect the
ratings of any of the notes or the certificates and the rating agencies
confirm that the reduction will not adversely affect the ratings of the
securities issued by the trust, the seller will reduce the required balance in
the reserve account to a lesser amount.
On each payment date, the trust will deposit into the reserve account all
collections on the motor vehicle loans remaining after the trust has paid the
servicer, the administrator and amounts due to the noteholders and the
certificateholders as described in this prospectus supplement.
On each payment date, the trust will distribute to the holder of the Class R
certificates funds on deposit in the reserve account in excess of the required
balance. On each payment date, the holder of the Class R certificates will be
entitled to receive all investment earnings on funds on deposit in the reserve
account earned since the prior payment date.
For a more detailed description of the deposits to and withdrawals from the
reserve account, refer to the section of this prospectus supplement entitled
"The Transfer and Servicing Agreements--Reserve Account."
Yield Supplement Account
On the closing date, the trust will deposit $7,017,060.88 in the yield
supplement account. That amount is the amount that is estimated to be required
to be withdrawn from the yield supplement account on payment dates in
accordance with the provisions described in the following paragraph. No
additional deposits will be made to the yield supplement account after the
closing date.
On or before each payment date, the indenture trustee will withdraw from funds
on deposit in the yield supplement account and deposit in the collection
account the aggregate amount by which (1) one month's interest on the
principal balance of each motor vehicle loan (other than a motor vehicle loan
designated as a "defaulted receivable") at the required minimum rate per annum
exceeds (2) one month's interest on the principal balance of that motor
vehicle loan at the annual contract rate of that motor vehicle loan. The
required minimum rate per annum will generally be equal to the sum of the
servicing fee rate of 1.00% per annum and the time weighted average rate per
annum at which interest will accrue on the notes and the certificates,
assuming the motor vehicle loans prepay at an ABS percentage of 1.50%.
For a more detailed description of the withdrawals from the yield supplement
account, refer to the section of this prospectus supplement entitled
"The Transfer and Servicing Agreements--Yield Supplement Account--Withdrawals
from Yield Supplement Account."
Servicing Fee
The trust will pay the servicer a servicing fee on each payment date for the
prior month equal to
S-8
o 1/12 of 1.0% of the aggregate principal balance of the motor vehicle
loans at the end of the month before that month (or, in the case of the
first payment date, the aggregate principal balance of the motor
vehicle loans as of the cutoff date),
o all late fees and other administrative fees and expenses, if any,
collected during that month and
o all investment earnings on funds deposited into the collection account
during that month.
Administration Fee
The trust will pay JPMorgan Chase Bank, as administrator, an administration
fee of $1,000 per month payable on the following payment date.
Tax Status
Simpson Thacher & Bartlett, special counsel to the seller, will deliver its
opinion that for U.S. federal income tax purposes:
o the notes will be characterized as debt and
o the trust will not be characterized as an association (or a publicly
traded partnership) taxable as a corporation.
By purchasing a note, you will agree to treat your note as indebtedness.
By purchasing a certificate, you will agree to treat the trust as a
partnership in which the certificateholders are partners for federal, state
and local income tax purposes.
For a more detailed discussion of tax matters, refer to the sections of this
prospectus supplement entitled "Material Federal Income Tax Consequences."
Tax-Related Investment Restrictions on Certificates
The certificates may not be purchased by persons who are not "U.S. Persons"
for U.S. federal income tax purposes.
Employee Benefit Plan Considerations
The notes are generally eligible for purchase by or on behalf of employee
benefit plans and other similar retirement plans and arrangements that are
subject to ERISA, Section 4975 of the tax code or any similar laws or
regulations, and by entities whose underlying assets are considered to include
the assets of such plans and arrangements, provided certain conditions are
satisfied.
The certificates may also be purchased by or on behalf of such plans,
arrangements and entities if certain conditions are satisfied. However, any
fiduciary of such a plan, arrangement or entity that is considering an
investment in the certificates should consult with counsel concerning the
consequences of such a purchase, including the treatment of income in respect
of the certificates as unrelated business taxable income to a tax-exempt
investor. For more information refer to the sections entitled "Employee
Benefit Plan Considerations" in this prospectus supplement and the prospectus.
Ratings of the Securities
It is a condition to the issuance of the securities that:
o the Class A-1 notes be rated in the highest short-term rating category
by at least two nationally recognized statistical rating organizations,
o the notes of each other class be rated in the highest long-term rating
category by at least two nationally recognized statistical rating
organizations, and
o the certificates be rated at least in the "A" category, or its
equivalent by at least two nationally recognized statistical rating
organizations.
A rating is not a recommendation to purchase, hold or sell the securities,
inasmuch as a rating does not comment as to market price or suitability for a
particular investor. The ratings of the securities address the likelihood of
the payment of principal and interest on the securities according to their
terms. We cannot assure you that any of these ratings will not be lowered or
withdrawn by the related rating agency.
Legal Investment
The Class A-1 notes will be eligible securities for purchase by money market
funds under paragraph (a)(10) of Rule 2a-7 under the Investment Company Act of
1940, as amended.
Investor Information--Mailing Address and Telephone Number
The mailing address of the principal executive offices of Chase Manhattan Bank
USA, National Association is 200 White Clay Center Drive, Newark, Delaware
19711. Its telephone number is (302) 575-5000.
S-9
Risk Factors
You should consider the following risk factors and the risk factors
described on page 5 of the prospectus in deciding whether to purchase any of
the securities.
Holders of certificates are subject to greater credit risks because
distributions in respect of the certificates are subordinate to payments on
the notes.
The certificates bear greater credit risk than the notes because
distributions of principal in respect of the certificates are subordinated to
the payment of principal of the notes and distributions of interest in respect
of the certificates are subordinated to payment of interest on the notes and,
after the acceleration of the maturity of the notes following an event of
default arising from a payment default, no further distributions of principal
or interest in respect of the certificates will be made until the notes are
paid in full.
In addition, the trust will distribute no principal in respect of the
certificates until it pays the Class A-2 notes in full or any time thereafter
if the balance in the reserve account drops below 0.50% of the aggregate
principal balance of the motor vehicle loans as of the cutoff date. Under
those circumstances, the trust will not resume distributions of principal in
respect of the certificates until the trust has paid the notes in full or the
balance in the reserve account equals or exceeds the required amount.
The subordination of the certificates means that the holders of the
certificates are more likely to suffer the consequences of delinquent payments
and defaults on the motor vehicle loans than the holders of the notes.
You may experience prepayments and losses on your securities after an event of
default under the indenture.
An event of default under the indenture may result in losses on your notes
or certificates if the motor vehicle loans are sold and the sale proceeds,
together with any other assets of the trust, are insufficient to pay the
amounts owed on the notes and the certificates. In addition, if you receive
your principal earlier than expected, you may not be able to reinvest the
prepaid amount at a rate of return that is equal to or greater than the rate
of return on your securities.
Only the assets of the trust are available to pay your securities.
The trust will not have any source of funds other than the motor vehicle
loans and the amounts on deposit in the reserve account and the yield
supplement account. You must rely for repayment of your securities on payments
on the motor vehicle loans and available amounts on deposit in the reserve
account and the yield supplement account. Funds on deposit in the reserve
account and the yield supplement account will be limited in amount, and the
amount required to be maintained on deposit in the reserve account and the
yield supplement account will be reduced as the balance of the motor vehicle
loans declines. You may suffer a loss if the amount on deposit in the reserve
account is exhausted and payments on the motor vehicle loans and amounts
withdrawn from the yield supplement account are insufficient to make payments
on the notes and the certificates.
The securities will not be insured or guaranteed by Chase USA or any of its
affiliates and are not obligations of or interests in Chase USA or any of its
affiliates.
You may experience a greater risk of loss on your securities as the result of
recent terrorist attacks.
The effect of the terrorist attacks on the World Trade Center and the
Pentagon on September 11, 2001 and related military action, as well as any
other terrorist attacks, on the performance of the motor vehicle loans is
unclear, but there has been an adverse effect on general economic conditions,
consumer confidence and general market liquidity. You should consider the
possible effects on the delinquency, default and prepayment experience of the
motor vehicle loans. In particular, under the Soldiers' and Sailors' Civil
Relief Act of 1940, members of the military on active duty, including
reservists, who have entered into a motor vehicle loan before entering into
military service or, in the case of reservists, before being placed on active
duty, may be entitled to reductions in interest rates to an annual rate of 6%
and a stay of foreclosure and similar actions. Because the Relief Act covers
obligors who enter military service (including reservists who are called to
active duty) after origination of the motor vehicle loan, no information can
be provided as to the number of motor vehicle loans that may be affected. If an
obligor's obligation to repay a receivable is reduced, adjusted or extended,
the
S-10
servicer will not be required to cover such amounts. Any resulting shortfalls
in interest or principal payments on the motor vehicle loans will reduce the
amount available to make payments on the notes and the certificates.
Geographic concentration of motor vehicle loans may result in more risk to
you.
If adverse events or economic conditions were particularly severe in a
geographic region where there is substantial concentration of obligors, the
amount of delinquent payments and defaulted receivables may increase. As a
result, the overall timing and amount of collections on the motor vehicle
loans may differ from what you expect, and you may experience delays or
reductions in payments on your securities.
The following are the approximate percentages of the aggregate principal
balance of the motor vehicle loans as of the statistical cutoff date of the
motor vehicle loans originated by or through a dealer located in the following
states:
California 13.44%
Texas 12.75%
New York 8.12%
Florida 5.81%
Illinois 5.44%
New Jersey 5.38%
None of the remaining states accounted for more than 5% of the aggregate
principal balance of the motor vehicle loans as of the statistical cutoff
date.
The absence of an existing market for the securities may limit your ability to
resell the securities.
There is currently no existing market for the securities. The underwriters
currently intend to make a market in the securities, but none of them is under
any obligation to do so. We cannot assure you that a secondary market will
develop or, if a secondary market does develop, that it will provide you with
liquidity of investment or that it will continue for the life of the
securities.
The Trust
General
Chase Manhattan Auto Owner Trust 2002-B is a statutory business trust formed
under the laws of the State of Delaware by a trust agreement, as amended and
restated as of the cutoff date, between Chase USA and Wilmington Trust
Company, as trustee.
The trust will not engage in any activity other than:
o acquiring, holding and managing the motor vehicle loans, the other
assets of the trust and proceeds of those assets,
o issuing the notes, the certificates and the Class R certificates,
o making payments on the notes and distributions on the certificates and
the Class R certificates and
o engaging in other activities that are necessary, suitable or convenient
to accomplish any of the purposes listed above or are in any way
connected with these activities.
The trust will not acquire any motor vehicle loans or assets other than the
property described below and will not have any need for additional capital
resources.
The trust will be capitalized by the issuance of the notes, the certificates
and the Class R certificates and a cash capital contribution of $17,277,060.88
by the seller, $10,260,000 of which will be deposited by the trust into the
reserve account and $7,017,060.88 of which will be deposited by the trust into
the yield supplement account. The certificate balance, the reserve account and
the yield supplement account represent the equity in the trust. The trust will
issue the Class R certificates to the seller and the notes and certificates to
the order of the seller in exchange for the seller's cash contribution and the
seller's transfer of the motor vehicle loans and related property.
The trust's principal offices are in Delaware at the address listed below
under "--Trustee."
S-11
Trust Property
The trust property will include a pool of motor vehicle loans and all monies
received on the motor vehicle loans on and after the cutoff date. The motor
vehicle loans are motor vehicle retail installment sales contracts and
purchase money notes and other notes relating to new or used automobiles or
light-duty trucks.
The trust property will also include:
o amounts held from time to time in the reserve account, the yield
supplement account and other accounts maintained for the trust,
o security interests in the financed vehicles,
o rights to proceeds from the exercise of the seller's recourse rights
against dealers,
o rights to proceeds from claims on theft and physical damage, credit
life and credit disability insurance policies covering the vehicles
financed by the motor vehicle loans or the obligors of the motor
vehicle loans,
o repossessed financed vehicles and
o any and all proceeds of the above items.
If the protection provided to the noteholders by the subordination of
distributions to the certificateholders and to the noteholders and the
certificateholders by the reserve account and the yield supplement account is
insufficient, the trust will have to look solely to the obligors on the motor
vehicle loans and the proceeds from the repossession and sale of the financed
vehicles which secure defaulted receivables in order to repay you. In that
event, certain factors, such as the trust's not having a first priority
perfected security interest in some of the financed vehicles, may affect the
trust's ability to realize on the collateral securing the motor vehicle loans,
and thus may reduce the proceeds which the trust can distribute to
securityholders.
For a more detailed description of the subordination of distributions in
respect of the securities, refer to the section of this prospectus supplement
entitled "Payments and Distributions." For a more detailed description of the
risks affecting the trust's ability to realize on the financed vehicles, refer
to the section of the prospectus entitled "Material Legal Aspects of the Motor
Vehicle Loans."
Capitalization of the Trust
The following table illustrates the capitalization of the trust as of the
cutoff date, as if the issuance and sale of the notes and the certificates had
taken place on that date:
Class A-1 Notes ............................................... $ 288,000,000
Class A-2 Notes ............................................... 335,000,000
Class A-3 Notes ............................................... 365,000,000
Class A-4 Notes ............................................... 345,800,000
Certificates .................................................. 34,200,000
--------------
Total ........................................................ $1,368,000,000
==============
The trust will issue the Class R certificates to the seller representing an
ownership interest in the trust. The Class R certificates do not have a
principal balance nor do they accrue interest. The Class R certificates are
not being offered for sale pursuant to this prospectus supplement.
Trustee
Wilmington Trust Company is the trustee under the trust agreement.
Wilmington Trust Company is a Delaware banking corporation and its principal
offices are located at Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19800-0001, telephone (302) 651-1000. The seller and its
affiliates may maintain normal commercial banking relations with the trustee
and its affiliates.
S-12
The Motor Vehicle Loans
Eligibility Criteria
The trust will own a pool of motor vehicle loans consisting of retail
installment sales contracts, purchase money notes and other notes secured by
new and used automobiles and light-duty trucks. The motor vehicle loans were
selected from the retail installment sales contracts, purchase money notes and
other notes owned by Chase USA that satisfy certain criteria. The motor
vehicle loans were required to satisfy these criteria as of the statistical
cutoff date and will be required to satisfy these criteria as of the cutoff
date.
In addition to the criteria described in the section of the prospectus
entitled "The Motor Vehicle Loans--General" these criteria include the
requirement that each motor vehicle loan:
o has a remaining maturity, as of the applicable cutoff date, of at least
9 months and not more than 72 months,
o is secured by a new financed vehicle and had an original maturity of
not less than 12 months and not more than 73 months or is secured by a
used financed vehicle and had an original maturity of not less than 12
months and not more than 67 months,
o is a fully-amortizing fixed rate simple interest contract that provides
for level scheduled monthly payments over its remaining term and has an
annual contract rate of interest of not more than 18.00% per annum,
o has a remaining principal balance, as of the applicable cutoff date, of
not less than $2,000 and not more than $100,000,
o has no payment more than 30 days past due as of the applicable cutoff
date,
o is not originated by or through a dealer located in the State of
Alabama or Maryland,
o is not a motor vehicle loan subject to a debt cancellation policy
issued by Chase USA to the obligor that forgives the principal balance
of the motor vehicle loan to the extent that the insurance proceeds in
the event of a total loss of the financed vehicle are insufficient to
repay the motor vehicle loan in full and
o is a motor vehicle loan originated by a dealer under a dealer agreement
with Chase USA.
Composition of the Motor Vehicle Loans
The statistical information presented in this prospectus supplement on the
motor vehicle loans to be transferred to the trust on the closing date is
presented as of the statistical cutoff date, which is May 24, 2002.
As of the statistical cutoff date, the motor vehicle loans had an aggregate
principal balance of $1,385,770,141.13. As of the cutoff date, the motor
vehicle loans are expected to have an aggregate principal balance of
approximately $1,368,000,000.
The aggregate principal balance of the motor vehicle loans to be transferred
to the trust as of the cutoff date will be less than the aggregate principal
balance of those motor vehicle loans as of the statistical cutoff date because
of the amortization of those motor vehicle loans between the statistical
cutoff date and the cutoff date. In addition, certain motor vehicle loans
included in the statistical information may not be included in the motor
vehicle loans transferred to the trust on the closing date. Motor vehicle
loans initially selected for transfer to the trust will not be included if
they do not satisfy the eligibility criteria as of the cutoff date. Motor
vehicle loans may prepay in full between the statistical cutoff date and the
cutoff date. In addition, Chase USA may delete certain of the motor vehicle
loans from the final pool of motor vehicle loans transferred to the trust and
may select additional motor vehicle loans to be transferred to the trust after
the statistical cutoff date. As a result of these changes in the motor vehicle
loans to be transferred to the trust, the statistical distribution of the
characteristics of the motor vehicle loans as of the cutoff date may vary from
the statistical distribution of those characteristics as of the statistical
cutoff date, although that variance will not be material.
As of the statistical cutoff date, approximately 14.87% of the aggregate
principal balance of the motor vehicle loans were originated under programs
with automobile manufacturers under which the manufacturers
S-13
make upfront payments to Chase USA in exchange for Chase USA's originating
motor vehicle loans with below-market annual contract rates of interest.
The motor vehicle loans were selected from Chase USA's portfolio of retail
installment sales contracts, purchase money notes and other notes secured by
new and used automobile and light-duty trucks that met the above criteria. For
administrative reasons, Chase USA selected only from those motor vehicle loans
in its portfolio that were posted to its servicing system since December 12,
2001, which were segregated and held for sale by Chase USA.
As of the statistical cutoff date, approximately 71.28% of the aggregate
principal balance of the motor vehicle loans were secured by new vehicles and
light-duty trucks, and approximately 28.72% were secured by used vehicles and
light duty trucks.
The composition of the motor vehicle loans as of the statistical cutoff date
was as follows:
Composition of the Motor Vehicle Loans
New Financed Used Financed
Vehicles Vehicles Total
---------------------- ---------------------- ----------------------
Aggregate Principal Balance........................... $987,758,650.96 $398,011,490.17 $1,385,770,141.13
Number of Motor Vehicle Loans......................... 46,342 25,294 71,636
Average Principal Balance............................. $21,314.55 $15,735.41 $19,344.61
Average Original Balance.............................. $21,519.87 $15,880.00 $19,528.48
Weighted Average Contract Rate........................ 6.58% 8.63% 7.17%
Contract Rate (Range)................................. 0.00% to 17.88% 0.00% to 18.00% 0.00% to 18.00%
Weighted Average Original Term........................ 58.30 months 57.26 months 58.00 months
Original Term (Range)................................. 12 months to 72 months 12 months to 66 months 12 months to 72 months
Weighted Average Remaining Term....................... 57.74 months 56.70 months 57.44 months
Remaining Term (Range)................................ 9 months to 72 months 11 months to 66 months 9 months to 72 months
The distribution by contract rate of the motor vehicle loans, the geographic
distribution of the motor vehicle loans, the distribution by principal balance
of the motor vehicle loans and the distribution by remaining term to maturity
of the motor vehicle loans, in each case as of the statistical cutoff date,
are set forth in the following tables.
S-14
Distribution by Contract Rate of the Motor Vehicle Loans
As of the Statistical Cutoff Date
Percent of
Number of Aggregate
Contract Rate Range Motor Vehicle Loans Principal Balance Principal Balance(1)
- --------------------------------------------------- ------------------- ----------------- --------------------
0.00% to 0.99%.................................................. 2,623 $ 48,405,376.28 3.49%
1.00% to 1.99%.................................................. 1,090 18,171,637.30 1.31
2.00% to 2.99%.................................................. 1,457 23,361,541.44 1.69
3.00% to 3.99%.................................................. 1,980 37,934,167.98 2.74
4.00% to 4.99%.................................................. 3,780 76,723,384.93 5.54
5.00% to 5.99%.................................................. 1,941 41,557,922.30 3.00
6.00% to 6.49%.................................................. 7,529 159,874,558.22 11.54
6.50% to 6.99%.................................................. 15,426 330,692,920.32 23.86
7.00% to 7.49%.................................................. 4,848 99,063,655.61 7.15
7.50% to 7.99%.................................................. 9,402 180,492,325.21 13.02
8.00% to 8.49%.................................................. 2,569 47,459,556.84 3.42
8.50% to 8.99%.................................................. 5,474 98,236,738.61 7.09
9.00% to 9.49%.................................................. 1,851 33,001,155.52 2.38
9.50% to 9.99%.................................................. 4,198 71,904,569.63 5.19
10.00% to 10.49%................................................ 1,249 20,644,912.75 1.49
10.50% to 10.99%................................................ 2,106 34,970,914.30 2.52
11.00% to 11.49%................................................ 657 10,517,359.70 0.76
11.50% to 11.99%................................................ 911 14,514,705.69 1.05
12.00% to 12.49%................................................ 433 6,616,247.07 0.48
12.50% to 12.99%................................................ 650 9,266,556.68 0.67
13.00% to 13.49%................................................ 259 4,102,271.29 0.30
13.50% to 13.99%................................................ 384 6,144,606.61 0.44
14.00% to 14.49%................................................ 202 2,991,485.00 0.22
14.50% to 14.99%................................................ 235 3,594,222.85 0.26
15.00% to 15.49%................................................ 90 1,272,565.73 0.09
15.50% to 15.99%................................................ 96 1,366,591.37 0.10
16.00% to 16.49%................................................ 27 412,968.26 0.03
16.50% to 16.99%................................................ 94 1,501,331.05 0.11
17.00% to 17.49%................................................ 26 363,669.77 0.03
17.50% to 17.99%................................................ 43 544,711.48 0.04
18.00%.......................................................... 6 65,511.34 0.00
------ ----------------- ------
Total:......................................................... 71,636 $1,385,770,141.13 100.00%
====== ================= ======
- ---------------
(1) Percentages may not add to 100.00% due to rounding.
S-15
Geographic Distribution of the Motor Vehicle Loans(1)
As of the Statistical Cutoff Date
Percent of
Number of Aggregate
State Motor Vehicle Loans Principal Balance Principal Balance(2)
- ----- ------------------- ----------------- --------------------
Alaska.......................................................... 87 $ 1,663,807.08 0.12%
Arizona......................................................... 1,194 24,076,562.64 1.74
Arkansas........................................................ 619 10,788,894.62 0.78
California...................................................... 8,642 186,250,861.32 13.44
Colorado........................................................ 1,612 31,286,263.66 2.26
Connecticut..................................................... 2,369 42,698,483.20 3.08
Delaware........................................................ 363 7,143,113.26 0.52
Florida......................................................... 4,219 80,575,733.64 5.81
Georgia......................................................... 1,782 37,456,399.25 2.70
Hawaii.......................................................... 3 86,828.74 0.01
Idaho........................................................... 302 6,169,611.32 0.45
Illinois........................................................ 3,941 75,348,979.69 5.44
Indiana......................................................... 676 12,599,998.09 0.91
Iowa............................................................ 437 7,346,941.23 0.53
Kansas.......................................................... 465 8,484,149.54 0.61
Kentucky........................................................ 363 6,396,520.42 0.46
Louisiana....................................................... 163 3,238,959.72 0.23
Maine........................................................... 269 4,882,444.66 0.35
Massachusetts................................................... 2,750 51,511,710.10 3.72
Michigan........................................................ 2,465 43,617,271.28 3.15
Minnesota....................................................... 2,750 49,282,357.80 3.56
Mississippi..................................................... 40 775,338.81 0.06
Missouri........................................................ 1,573 28,443,992.18 2.05
Montana......................................................... 198 3,643,840.94 0.26
Nebraska........................................................ 438 7,602,043.55 0.55
Nevada.......................................................... 658 13,737,501.73 0.99
New Hampshire................................................... 601 9,938,257.90 0.72
New Jersey...................................................... 3,772 74,570,022.98 5.38
New Mexico...................................................... 171 3,056,707.51 0.22
New York........................................................ 6,005 112,585,364.64 8.12
North Carolina.................................................. 1,160 23,355,590.48 1.69
North Dakota.................................................... 14 208,073.71 0.02
Ohio............................................................ 2,213 40,315,753.30 2.91
Oklahoma........................................................ 664 12,521,427.43 0.90
Oregon.......................................................... 680 12,640,415.82 0.91
Pennsylvania.................................................... 2,933 52,882,846.03 3.82
Rhode Island.................................................... 85 2,040,478.89 0.15
South Carolina.................................................. 83 1,549,596.26 0.11
South Dakota.................................................... 56 934,202.46 0.07
Tennessee....................................................... 529 10,630,270.14 0.77
Texas........................................................... 8,641 176,746,213.51 12.75
Utah............................................................ 248 4,579,358.79 0.33
Vermont......................................................... 334 5,953,795.18 0.43
Virginia........................................................ 1,267 25,204,140.75 1.82
Washington...................................................... 1,530 30,622,661.92 2.21
West Virginia................................................... 100 1,811,943.95 0.13
Wisconsin....................................................... 2,141 37,898,131.94 2.73
Wyoming......................................................... 31 616,279.07 0.04
------ ----------------- ------
Total:......................................................... 71,636 $1,385,770,141.13 100.00%
====== ================= ======
- ---------------
(1) Based on the location of the dealer originating the motor vehicle loan.
(2) Percentages may not add to 100.00% due to rounding.
S-16
Distribution by Principal Balance of the Motor Vehicle Loans
As of the Statistical Cutoff Date
Percent of
Number of Aggregate
Principal Balance ($) Motor Vehicle Loans Principal Balance Principal Balance(1)
- --------------------- ------------------- ----------------- --------------------
0.01 to 5,000.00................................................ 102 $ 415,287.04 0.03%
5,000.01 to 10,000.00........................................... 6,529 55,470,145.06 4.00
10,000.01 to 15,000.00.......................................... 17,363 219,909,357.33 15.87
15,000.01 to 20,000.00.......................................... 19,911 348,464,041.34 25.15
20,000.01 to 25,000.00.......................................... 14,184 316,347,485.90 22.83
25,000.01 to 30,000.00.......................................... 7,178 195,177,076.27 14.08
30,000.01 to 35,000.00.......................................... 3,144 101,247,723.76 7.31
35,000.01 to 40,000.00.......................................... 1,439 53,690,564.56 3.87
40,000.01 to 45,000.00.......................................... 632 26,605,245.18 1.92
45,000.01 to 50,000.00.......................................... 366 17,415,223.80 1.26
50,000.01 to 55,000.00.......................................... 205 10,705,897.24 0.77
55,000.01 to 60,000.00.......................................... 170 9,744,096.78 0.70
60,000.01 to 65,000.00.......................................... 104 6,482,915.66 0.47
65,000.01 to 70,000.00.......................................... 87 5,860,387.02 0.42
70,000.01 to 75,000.00.......................................... 61 4,428,681.70 0.32
75,000.01 to 80,000.00.......................................... 40 3,095,036.90 0.22
80,000.01 to 85,000.00.......................................... 51 4,203,156.33 0.30
85,000.01 to 90,000.00.......................................... 21 1,833,883.93 0.13
90,000.01 to 95,000.00.......................................... 25 2,317,859.79 0.17
95,000.01 to 100,000.00......................................... 24 2,356,075.54 0.17
------ ----------------- ------
Total:......................................................... 71,636 $1,385,770,141.13 100.00%
====== ================= ======
Distribution by Remaining Term to Maturity of the Motor Vehicle Loans
As of the Statistical Cutoff Date
Percent of
Number of Aggregate
Remaining Term to Maturity (in months) Motor Vehicle Loans Principal Balance Principal Balance(1)
- -------------------------------------- ------------------- ----------------- --------------------
1 to 12......................................................... 32 $ 537,023.82 0.04%
13 to 24........................................................ 1,450 22,379,205.07 1.61
25 to 36........................................................ 4,575 69,852,379.22 5.04
37 to 48........................................................ 8,451 131,289,768.62 9.47
49 to 60........................................................ 52,042 1,036,475,494.08 74.79
61 to 72........................................................ 5,086 125,236,270.32 9.04
------ ----------------- ------
Total:......................................................... 71,636 $1,385,770,141.13 100.00%
====== ================= ======
- ---------------
(1) Percentages may not add to 100.00% due to rounding.
Delinquency and Loan Loss Information
The following tables set forth information with respect to delinquencies,
loan losses and recoveries for the Chase Auto Portfolio as of the dates and
for the periods indicated. The portions of the Chase Auto Portfolio that
provide for payments based upon a variable rate of interest or that provide
for a final scheduled payment which is greater than the scheduled monthly
payments are included in the following tables, but the motor vehicle loans
held by the trust will not include those types of loans. We do not maintain
separate records that distinguish among the delinquency and loan loss
experience for fixed rate motor vehicle loans (such as the motor vehicle loans
included in the trust) and variable rate motor vehicle loans nor do we
maintain records of the delinquency and loan loss experience that excludes
motor vehicle loans with larger final scheduled payments. We believe that the
delinquency and loan loss experience with respect to the types of motor
vehicle loans included in the trust is not materially different from the
performance of the Chase Auto Portfolio set forth below.
S-17
The data presented in the following tables are for illustrative purposes
only. Delinquency and loan loss experience may be influenced by a variety of
economic, social and other factors. We cannot assure you that the delinquency
and loan loss experience of the motor vehicle loans included in the trust will
be similar to the delinquency and loan loss levels set forth below.
Delinquency Experience
As of March 31, As of December 31,
-------------------------------------------------- -----------------------
2002 2001 2001
----------------------- ----------------------- -----------------------
Dollars Number Dollars Number Dollars Number
(000's) of Loans (000's) of Loans (000's) of Loans
----------- --------- ----------- --------- ----------- ---------
Outstanding Principal Amount ............. $23,398,957 1,684,939 $17,291,755 1,345,331 $21,714,246 1,594,239
Delinquencies(1)(2)
30-59 Days .............................. $ 204,266 16,356 $ 227,747 19,599 $ 291,015 22,079
60-89 Days .............................. 55,570 5,326 54,044 5,015 87,256 7,758
90 Days or More ......................... 33,385 3,865 27,168 2,906 50,033 4,543
Total Delinquencies ...................... $ 293,221 25,547 $ 308,959 27,520 $ 428,304 34,380
Repossession Inventory ................... 34,808 2,323 26,281 1,748 35,005 2,408
Total Delinquencies & Repossession
Inventory ............................... $ 328,029 27,870 $ 335,240 29,268 $ 463,309 36,788
Delinquencies(1)(2)(3)
30-59 ................................... 0.87% 1.32% 1.34%
60-89 ................................... 0.24% 0.31% 0.40%
90 Days or More ......................... 0.14% 0.16% 0.23%
----------- ----------- -----------
Total Delinquencies(3)(4) ................ 1.25% 1.79% 1.97%
Repossession Inventory(3) ................ 0.15% 0.15% 0.16%
----------- ----------- -----------
Total Delinquencies & Repossession
Inventory(3)(4) ......................... 1.40% 1.94% 2.13%
As of December 31,
--------------------------------------------------
2000 1999
----------------------- -----------------------
Dollars Number Dollars Number
(000's) of Loans (000's) of Loans
----------- --------- ----------- ---------
Outstanding Principal Amount ............. $16,304,564 1,289,541 $14,454,904 1,178,052
Delinquencies(1)(2)
30-59 Days .............................. $ 241,230 21,844 $ 229,630 16,581
60-89 Days .............................. 67,073 6,627 57,738 4,835
90 Days or More ......................... 27,236 3,021 27,286 2,827
Total Delinquencies ...................... $ 335,539 31,492 $ 314,654 24,243
Repossession Inventory ................... 26,099 1,783 25,843 1,834
Total Delinquencies & Repossession
Inventory ............................... $ 361,638 33,275 $ 340,497 26,077
Delinquencies(1)(2)(3)
30-59 ................................... 1.48% 1.59%
60-89 ................................... 0.41% 0.40%
90 Days or More ......................... 0.17% 0.19%
----------- -----------
Total Delinquencies(3)(4) ................ 2.06% 2.18%
Repossession Inventory(3) ................ 0.16% 0.18%
----------- -----------
Total Delinquencies & Repossession
Inventory(3)(4) ......................... 2.22% 2.36%
As of December 31,
-------------------------------------------------
1998 1997
----------------------- ----------------------
Dollars Number Dollars Number
(000's) of Loans (000's) of Loans
----------- --------- ----------- --------
Outstanding Principal Amount.............................................. $14,451,927 1,149,636 $11,114,504 938,495
Delinquencies(1)(2)
30-59 Days............................................................... $ 215,114 15,909 $ 153,761 12,937
60-89 Days............................................................... 46,707 4,008 39,329 3,448
90 Days or More.......................................................... 28,329 2,529 24,322 2,190
Total Delinquencies....................................................... $ 290,150 22,446 $ 217,412 18,575
Repossession Inventory.................................................... 26,018 1,690 30,374 1,944
Total Delinquencies & Repossession Inventory.............................. $ 316,168 24,136 $ 247,786 20,519
Delinquencies(1)(2)(3)
30-59 Days............................................................... 1.49% 1.38%
60-89 Days............................................................... 0.32% 0.35%
90 Days or More.......................................................... 0.20% 0.22%
----------- -----------
Total Delinquencies(3)(4)................................................. 2.01% 1.96%
Repossession Inventory(3)................................................. 0.18% 0.27%
----------- -----------
Total Delinquencies & Repossession Inventory(3)(4)........................ 2.19% 2.23%
- ---------------
(1) Delinquencies include principal amounts and interest.
(2) The period of delinquency is based on the number of days payments are
contractually past due.
(3) As a percent of outstanding principal in dollars.
(4) Percentages representing Total Delinquencies and Total Delinquencies &
Repossession Inventory may not equal the sum of their components due to
rounding.
S-18
Loan Loss Experience
(Dollars in 000's)
Three Months Ended
March 31,(6) Year Ended December 31,
------------------------- -------------------------
2002 2001 2001 2000(7)
----------- ----------- ----------- -----------
Number of Loans(1) ....................... 1,684,939 1,345,331 1,594,239 1,289,541
Period End Outstanding Principal Amount .. $23,398,957 $17,291,755 $21,714,246 $16,304,564
Average Outstanding Principal Amount(2) .. $22,346,454 $16,711,087 $18,673,313 $14,865,555
Number of Repossessions .................. 4,088 3,170 12,615 10,067
Number of Gross Charge-Offs .............. 6,805 5,357 20,727 15,439
Gross Charge-Offs(3) ..................... $ 44,460 $ 29,997 $ 137,710 $ 111,094
Gross Charge-Offs as a % of Period End
Outstanding Principal Amount(3) ......... 0.76% 0.69% 0.63% 0.68%
Gross Charge-Offs as a % of Average End
Outstanding Principal Amount(3) ......... 0.80% 0.72% 0.74% 0.75%
Recoveries(4) ............................ $ (11,032) $ (8,391) $ (30,149) $ (18,827)
Net Charge-Offs(5) ....................... $ 33,428 $ 21,606 $ 107,561 $ 92,267
Net Charge-Offs as a % of Period End
Outstanding Principal Amount(5) ......... 0.57% 0.50% 0.50% 0.57%
Net Charge-Offs as a % of Average
Outstanding Principal Amount(5) ......... 0.60% 0.52% 0.58% 0.62%
Year Ended December 31,
----------------------------------------
1999 1998 1997
----------- ----------- -----------
Number of Loans(1) ....................... 1,178,052 1,149,636 938,495
Period End Outstanding Principal Amount .. $14,454,904 $14,451,927 $11,114,504
Average Outstanding Principal Amount(2) .. $14,504,476 $12,782,467 $10,630,360
Number of Repossessions .................. 8,684 7,837 5,834
Number of Gross Charge-Offs .............. 10,172 9,942 7,524
Gross Charge-Offs(3) ..................... $ 82,688 $ 81,652 $ 57,017
Gross Charge-Offs as a % of Period End
Outstanding Principal Amount(3) ......... 0.57% 0.56% 0.51%
Gross Charge-Offs as a % of Average End
Outstanding Principal Amount(3) ......... 0.57% 0.64% 0.54%
Recoveries(4) ............................ $ (22,237) $ (18,236) $ (10,622)
Net Charge-Offs(5) ....................... $ 60,361 $ 63,416 $ 46,395
Net Charge-Offs as a % of Period End
Outstanding Principal Amount(5) ......... 0.42% 0.44% 0.42%
Net Charge-Offs as a % of Average
Outstanding Principal Amount(5) ......... 0.42% 0.50% 0.44%
- ---------------
(1) Number of loans as of period end.
(2) The average for each period presented was computed by taking a simple
average of monthly average outstanding principal amounts for such period.
(3) Amount charged off is remaining principal balance less proceeds from sale
of repossessed vehicles.
(4) Recoveries generally include amounts received with respect to loans
previously charged-off, except for proceeds realized in connection with the
sale of the repossessed vehicles.
(5) Net Charge-Offs mean gross charge-offs minus recoveries of loans previously
charged-off. Net Charge-Offs may not equal the difference of its components
due to rounding.
(6) Percentages for the three-month periods ended March 31, 2002 and March 31,
2001 are annualized.
(7) Included in the Year Ended December 31, 2000, was $22,273 thousand of net
charge-offs relating to the revised Federal Financial Institutions
Examinations Council policy, which was required to be adopted by Chase USA
by the end of the fourth quarter of 2000 and which established uniform
guidelines for the charge-off of consumer loans to delinquent, bankrupt,
deceased and fraudulent borrowers.
Chase USA
Information regarding Chase USA is set forth in the section of the
prospectus entitled "Chase USA." At March 31, 2002, Chase USA's total assets
were approximately $36.2 billion, total liabilities were approximately $32.1
billion and total stockholder's equity was approximately $4.1 billion.
Use of Proceeds
The seller will use the proceeds from the sale of the securities, after
capitalizing the trust by making the initial deposit into the reserve account
and the deposit into the yield supplement account and paying expenses, for
general purposes.
S-19
Weighted Average Life of the Securities
Maturity and Prepayment Considerations
Additional information regarding maturity and prepayment considerations with
respect to the securities is provided in the section of the prospectus
entitled "Weighted Average Life of Securities."
In addition, no principal payments will be made:
o on the Class A-2 notes until the Class A-1 notes have been paid in
full,
o on the Class A-3 notes until the Class A-2 notes have been paid in
full,
o on the Class A-4 notes until the Class A-3 notes have been paid in full
or
o on the certificates until the Class A-2 notes have been paid in full.
However, if the maturity of the notes is accelerated following an event of
default, principal payments will be made on the Class A-1 notes until the
Class A-1 notes are paid in full and then ratably on all other classes of the
notes and no further distributions of principal (or, in the case of an event
of default arising from a payment default, interest) in respect of the
certificates will be made until the notes are paid in full.
The rate of payment of principal of each class of notes and the certificates
will depend on the rate of payment (including prepayments) of the principal of
the motor vehicle loans. A higher than anticipated rate of prepayments will
reduce the outstanding amounts of the securities faster than expected and
reduce the anticipated aggregate interest payments on the securities.
Noteholders and certificateholders alone will bear any reinvestment risks
resulting from a faster or slower incidence of prepayment of motor vehicle
loans as set forth in the priority of distributions in this prospectus
supplement. Such reinvestment risks include the risk that interest rates may
be lower at the time such holders receive payments from the trust than
interest rates would otherwise have been had such prepayments not been made or
had such prepayments been made at a different time.
Noteholders and certificateholders should consider:
o in the case of notes or certificates purchased at a discount, the risk
that a slower than anticipated rate of prepayments of motor vehicle
loans could result in an actual yield that is less than the anticipated
yield and
o in the case of notes or certificates purchased at a premium, the risk
that a faster than anticipated rate of prepayments of motor vehicle
loans could result in an actual yield that is less than the anticipated
yield.
Under a program sponsored by Saturn Corporation and its dealers, a purchaser
of a new Saturn vehicle has the right to return his or her car to the related
dealer for any reason within 30 days of purchase or 1,500 miles of use and
receive a refund of the purchase price. Approximately 5.32% of the aggregate
principal balance of the motor vehicle loans as of the cutoff date were
secured by financed vehicles manufactured by Saturn. In the event the obligor
under a motor vehicle loan secured by a Saturn vehicle returns the related
financed vehicle for a refund, such motor vehicle loan will be prepaid and the
weighted average life of the notes and the certificates may be decreased.
We cannot assure you that your securities will be repaid on the related
final scheduled payment date. We expect that final payment of the notes and
the final distribution in respect of the certificates will occur on or prior
to the respective final scheduled payment date for such securities. However,
we cannot assure you that sufficient funds will be available to pay each class
of notes and the certificates on or prior to the respective final scheduled
payment date for such securities. If sufficient funds are not available, final
payment of the notes and the final distribution in respect of the certificates
could occur later than such dates.
Illustration of Effect of Prepayments of Motor Vehicle Loans on the Life of
the Securities
The following information is given solely to illustrate the effect of
prepayments of the motor vehicle loans on the weighted average life of the
securities under the stated assumptions and is not a prediction of the
prepayment rate that might actually be experienced by the motor vehicle loans.
S-20
Prepayments on motor vehicle loans can be measured relative to a prepayment
standard or model. The model used in this prospectus supplement, the Absolute
Prepayment Model (ABS) represents an assumed rate of prepayment each month
relative to the original number of motor vehicle loans in a pool of
receivables. ABS further assumes that all the motor vehicle loans are the same
size and amortize at the same rate and that each motor vehicle loan in each
month of its life will either be paid as scheduled or be prepaid in full. For
example, in a pool of motor vehicle loans originally containing 10,000 motor
vehicle loans, a 1% ABS rate means that 100 motor vehicle loans prepay each
month. ABS does not purport to be a historical description of prepayment
experience or a prediction of the anticipated rate of prepayment of any pool
of motor vehicle loans, including the motor vehicle loans held by the trust.
The tables (the ABS Tables) captioned "Percent of Initial Note Principal
Amount at Various ABS Percentages" and "Percent of Initial Certificate Balance
at Various ABS Percentages," respectively, have been prepared on the basis of
the characteristics of the motor vehicle loans held by the trust. The ABS
Tables assume that:
o the motor vehicle loans prepay in full at the specified constant
percentage of ABS monthly, with no defaults, losses or repurchases,
o each scheduled monthly payment on the motor vehicle loans is scheduled
to be made and is made on the last day of each month and each month has
30 days,
o payment on the notes and distributions on the certificates are made on
each payment date (and each payment date is assumed to be the 15th day
of the applicable month),
o no event of default occurs,
o the notes and certificates are issued on June 6, 2002, and
o the servicer does not exercise its option to purchase the motor vehicle
loans.
The ABS Tables indicate the projected weighted average life of each class of
notes and the certificates and set forth the percent of the initial principal
amount of each class of notes and the percent of the initial certificate
balance of the certificates that is projected to be outstanding after each of
the payment dates shown at various constant ABS percentages.
The ABS Tables also assume that the motor vehicle loans have been aggregated
into hypothetical pools with all of the motor vehicle loans within each such
pool having the following characteristics and that the level scheduled monthly
payment for each of the pools (which is based on the pool's aggregate
principal balance, weighted average contract rate of interest, weighted
average original term to maturity and weighted average remaining term to
maturity as of the statistical cutoff date) will be such that each pool will
be fully amortized by the end of its remaining term to maturity.
Original Term Remaining Term
Aggregate Contract To Maturity To Maturity
Pool Principal Balance Rate (In Months) (In Months)
- ---------------------------------------------------------------- ----------------- -------- ------------- --------------
1 ............................................................... $ 22,622,367.30 3.273% 24 23
2 ............................................................... $ 68,956,641.46 5.487% 36 35
3 ............................................................... $ 129,606,201.02 7.389% 48 47
4 ............................................................... $1,023,184,461.70 7.222% 60 59
5 ............................................................... $ 123,630,328.52 8.109% 71 70
The actual characteristics and performance of the motor vehicle loans will
differ from the assumptions used in constructing the ABS Tables. The
assumptions used are hypothetical and have been provided only to give a
general sense of how the principal cash flows might behave under varying
prepayment scenarios. For example, it is very unlikely that the motor vehicle
loans will prepay at a constant level of ABS until maturity or that all of the
motor vehicle loans will prepay at the same level of ABS. Moreover, the
diverse terms of motor vehicle loans within each of the hypothetical pools
could produce slower or faster principal distributions than indicated in the
ABS Tables at the various constant percentages of ABS specified, even if the
original and remaining terms to maturity of the motor vehicle loans are as
assumed. Any difference between such assumptions and the actual
characteristics and performance of the motor vehicle loans, or actual
prepayment experience, will affect the percentages of initial amounts
outstanding over time and the weighted average life of each class of notes and
the certificates.
S-21
Percent of Initial Note Principal Amount at Various ABS Percentages
Class A-1 Notes Class A-2 Notes
------------------------------ ------------------------------
Assumed ABS Percentage Assumed ABS Percentage
----------------------------------------------- -----------------------------------------------
Payment Dates 0.50% 1.00% 1.30% 1.50% 1.70% 2.00% 0.50% 1.00% 1.30% 1.50% 1.70% 2.00%
- ------------- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Closing Date......... 100 100 100 100 100 100 100 100 100 100 100 100
July 15, 2002........ 90 88 87 86 85 83 100 100 100 100 100 100
August 15, 2002...... 81 76 73 71 69 67 100 100 100 100 100 100
September 15, 2002... 71 64 60 57 54 50 100 100 100 100 100 100
October 15, 2002..... 62 53 47 43 40 34 100 100 100 100 100 100
November 15, 2002.... 52 41 34 30 25 18 100 100 100 100 100 100
December 15, 2002.... 43 29 21 16 11 3 100 100 100 100 100 100
January 15, 2003..... 33 18 9 3 0 0 100 100 100 100 97 89
February 15, 2003.... 24 7 0 0 0 0 100 100 97 91 85 76
March 15, 2003....... 14 0 0 0 0 0 100 96 87 80 74 64
April 15, 2003....... 5 0 0 0 0 0 100 87 76 69 62 51
May 15, 2003......... 0 0 0 0 0 0 96 77 66 58 51 39
June 15, 2003........ 0 0 0 0 0 0 88 68 56 48 40 27
July 15, 2003........ 0 0 0 0 0 0 80 59 46 37 29 15
August 15, 2003...... 0 0 0 0 0 0 72 50 36 27 18 4
September 15, 2003... 0 0 0 0 0 0 64 41 27 17 7 0
October 15, 2003..... 0 0 0 0 0 0 57 32 17 7 0 0
November 15, 2003.... 0 0 0 0 0 0 49 23 8 0 0 0
December 15, 2003.... 0 0 0 0 0 0 41 14 0 0 0 0
January 15, 2004..... 0 0 0 0 0 0 33 6 0 0 0 0
February 15, 2004.... 0 0 0 0 0 0 25 0 0 0 0 0
March 15, 2004....... 0 0 0 0 0 0 18 0 0 0 0 0
April 15, 2004....... 0 0 0 0 0 0 10 0 0 0 0 0
May 15, 2004......... 0 0 0 0 0 0 2 0 0 0 0 0
June 15, 2004........ 0 0 0 0 0 0 0 0 0 0 0 0
Weighted Average Life
(years) (1)........ 0.50 0.42 0.38 0.36 0.35 0.32 1.47 1.24 1.12 1.05 0.99 0.91
- ---------------
(1) The weighted average life of a note is determined by (i) multiplying the
amount of each principal payment of such note by the number of years from
the date of the issuance of the note to the payment date on which it is
made, (ii) adding the results and (iii) dividing the sum by the initial
principal amount of such note.
The ABS Tables have been prepared based on the assumptions described above
(including the assumptions regarding the characteristics and performance of
the motor vehicle loans which will differ from the actual characteristics and
performance of the motor vehicle loans) and should be read in conjunction
therewith.
S-22
Class A-3 Notes Class A-4 Notes
------------------------------ ----------------------------
Assumed ABS Percentage Assumed ABS Percentage(1)
----------------------------------------------- ---------------------------------------
Payment Dates 0.50% 1.00% 1.30% 1.50% 1.70% 2.00% 0.50% 1.00% 1.30% 1.50%
- ------------- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Closing Date...... 100 100 100 100 100 100 100 100 100 100
July 15, 2002..... 100 100 100 100 100 100 100 100 100 100
August 15, 2002... 100 100 100 100 100 100 100 100 100 100
September 15, 2002 100 100 100 100 100 100 100 100 100 100
October 15, 2002.. 100 100 100 100 100 100 100 100 100 100
November 15, 2002. 100 100 100 100 100 100 100 100 100 100
December 15, 2002. 100 100 100 100 100 100 100 100 100 100
January 15, 2003.. 100 100 100 100 100 100 100 100 100 100
February 15, 2003. 100 100 100 100 100 100 100 100 100 100
March 15, 2003.... 100 100 100 100 100 100 100 100 100 100
April 15, 2003.... 100 100 100 100 100 100 100 100 100 100
May 15, 2003...... 100 100 100 100 100 100 100 100 100 100
June 15, 2003..... 100 100 100 100 100 100 100 100 100 100
July 15, 2003..... 100 100 100 100 100 100 100 100 100 100
August 15, 2003... 100 100 100 100 100 100 100 100 100 100
September 15, 2003 100 100 100 100 100 94 100 100 100 100
October 15, 2003.. 100 100 100 100 97 84 100 100 100 100
November 15, 2003. 100 100 100 98 89 75 100 100 100 100
December 15, 2003. 100 100 99 89 80 66 100 100 100 100
January 15, 2004.. 100 100 91 81 71 57 100 100 100 100
February 15, 2004. 100 98 83 73 63 48 100 100 100 100
March 15, 2004.... 100 90 75 65 55 40 100 100 100 100
April 15, 2004.... 100 83 68 57 47 31 100 100 100 100
May 15, 2004...... 100 76 60 50 39 23 100 100 100 100
June 15, 2004..... 96 69 53 43 32 16 100 100 100 100
July 15, 2004..... 89 63 46 36 25 8 100 100 100 100
August 15, 2004... 83 56 40 29 18 1 100 100 100 100
September 15, 2004 77 50 33 22 11 0 100 100 100 100
October 15, 2004.. 70 43 27 15 4 0 100 100 100 100
November 15, 2004. 64 37 20 9 0 0 100 100 100 100
December 15, 2004. 58 31 14 3 0 0 100 100 100 100
January 15, 2005.. 52 24 8 0 0 0 100 100 100 97
February 15, 2005. 46 18 2 0 0 0 100 100 100 90
March 15, 2005.... 39 12 0 0 0 0 100 100 96 84
April 15, 2005.... 33 7 0 0 0 0 100 100 90 79
May 15, 2005...... 27 1 0 0 0 0 100 100 84 73
June 15, 2005..... 22 0 0 0 0 0 100 95 79 68
July 15, 2005..... 16 0 0 0 0 0 100 90 74 63
August 15, 2005... 11 0 0 0 0 0 100 85 69 58
September 15, 2005 5 0 0 0 0 0 100 79 64 53
October 15, 2005.. 0 0 0 0 0 0 100 74 59 49
November 15, 2005. 0 0 0 0 0 0 94 69 54 44
December 15, 2005. 0 0 0 0 0 0 88 64 50 40
January 15, 2006.. 0 0 0 0 0 0 82 60 46 36
February 15, 2006. 0 0 0 0 0 0 77 55 41 33
March 15, 2006.... 0 0 0 0 0 0 71 50 38 29
April 15, 2006.... 0 0 0 0 0 0 66 46 34 26
May 15, 2006...... 0 0 0 0 0 0 60 41 30 22
June 15, 2006..... 0 0 0 0 0 0 55 38 27 20
July 15, 2006..... 0 0 0 0 0 0 51 34 24 17
August 15, 2006... 0 0 0 0 0 0 46 30 21 15
September 15, 2006 0 0 0 0 0 0 41 27 18 12
October 15, 2006.. 0 0 0 0 0 0 36 23 16 10
November 15, 2006. 0 0 0 0 0 0 32 20 13 8
December 15, 2006. 0 0 0 0 0 0 27 17 11 7
January 15, 2007.. 0 0 0 0 0 0 23 14 9 5
February 15, 2007. 0 0 0 0 0 0 18 11 7 4
March 15, 2007.... 0 0 0 0 0 0 13 8 5 2
April 15, 2007.... 0 0 0 0 0 0 9 5 3 1
May 15, 2007...... 0 0 0 0 0 0 5 3 1 1
Class A-4 Notes
----------------------
Assumed ABS
Percentage(1)
---------------------
Payment Dates 1.70% 2.00%
- ------------- ----- -----
Closing Date...... 100 100
July 15, 2002..... 100 100
August 15, 2002... 100 100
September 15, 2002 100 100
October 15, 2002.. 100 100
November 15, 2002. 100 100
December 15, 2002. 100 100
January 15, 2003.. 100 100
February 15, 2003. 100 100
March 15, 2003.... 100 100
April 15, 2003.... 100 100
May 15, 2003...... 100 100
June 15, 2003..... 100 100
July 15, 2003..... 100 100
August 15, 2003... 100 100
September 15, 2003 100 100
October 15, 2003.. 100 100
November 15, 2003. 100 100
December 15, 2003. 100 100
January 15, 2004.. 100 100
February 15, 2004. 100 100
March 15, 2004.... 100 100
April 15, 2004.... 100 100
May 15, 2004...... 100 100
June 15, 2004..... 100 100
July 15, 2004..... 100 100
August 15, 2004... 100 100
September 15, 2004 100 94
October 15, 2004.. 100 87
November 15, 2004. 98 80
December 15, 2004. 91 74
January 15, 2005.. 85 67
February 15, 2005. 79 61
March 15, 2005.... 73 55
April 15, 2005.... 67 50
May 15, 2005...... 62 45
June 15, 2005..... 57 40
July 15, 2005..... 52 35
August 15, 2005... 47 31
September 15, 2005 43 27
October 15, 2005.. 38 23
November 15, 2005. 34 19
December 15, 2005. 31 16
January 15, 2006.. 27 13
February 15, 2006. 24 10
March 15, 2006.... 20 8
April 15, 2006.... 17 5
May 15, 2006...... 15 3
June 15, 2006..... 12 1
July 15, 2006..... 10 0
August 15, 2006... 8 0
September 15, 2006 7 0
October 15, 2006.. 5 0
November 15, 2006. 4 0
December 15, 2006. 2 0
January 15, 2007.. 2 0
February 15, 2007. 1 0
March 15, 2007.... * 0
April 15, 2007.... 0 0
May 15, 2007...... 0 0
S-23
Class A-3 Notes Class A-4 Notes
------------------------------ -----------------
Assumed ABS Percentage Assumed ABS Percentage(1)
-------------------------------------------------- ----------------------------
Payment dates 0.50% 1.00% 1.30% 1.50% 1.70% 2.00% 0.50% 1.00% 1.30%
- ------------- ----- ----- ----- ----- ----- ----- ----- ----- -----
June 15, 2007 ............................ 0 0 0 0 0 0 4 2 1
July 15, 2007 ............................ 0 0 0 0 0 0 4 2 1
August 15, 2007 .......................... 0 0 0 0 0 0 3 2 1
September 15, 2007 ....................... 0 0 0 0 0 0 3 2 1
October 15, 2007 ......................... 0 0 0 0 0 0 2 1 1
November 15, 2007 ........................ 0 0 0 0 0 0 2 1 *
December 15, 2007 ........................ 0 0 0 0 0 0 2 1 *
January 15, 2008 ......................... 0 0 0 0 0 0 1 1 *
February 15, 2008 ........................ 0 0 0 0 0 0 1 * *
March 15, 2008 ........................... 0 0 0 0 0 0 * * *
April 15, 2008 ........................... 0 0 0 0 0 0 0 0 0
Weighted Average Life (years)(2) ......... 2.68 2.32 2.12 2.00 1.88 1.73 4.21 3.90 3.66
Weighted Average Life to Optional Clean-
Up Call (years)(2)(3) .................... -- -- -- -- -- -- 4.05 3.70 3.45
Optional Clean-Up Call Date .............. -- -- -- -- -- -- 10/15/06 6/15/06 3/15/06
Class A-4 Notes
------------------
Assumed ABS Percentage(1)
-------------------------------
Payment dates 1.50% 1.70% 2.00%
- ------------- ----- ----- -----
June 15, 2007 ............................ 1 0 0
July 15, 2007 ............................ * 0 0
August 15, 2007 .......................... * 0 0
September 15, 2007 ....................... * 0 0
October 15, 2007 ......................... * 0 0
November 15, 2007 ........................ * 0 0
December 15, 2007 ........................ 0 0 0
January 15, 2008 ......................... 0 0 0
February 15, 2008 ........................ 0 0 0
March 15, 2008 ........................... 0 0 0
April 15, 2008 ........................... 0 0 0
Weighted Average Life (years)(2) ......... 3.48 3.28 2.98
Weighted Average Life to Optional Clean-
Up Call (years)(2)(3) .................... 3.27 3.10 2.82
Optional Clean-Up Call Date .............. 1/15/06 11/15/05 7/15/05
- ---------------
(1) An asterisk "*" means a percent of initial note principal balance of more
than zero and less than 0.5%.
(2) The weighted average life of a note is determined by (i) multiplying the
amount of each principal payment of such note by the number of years from
the date of the issuance of the note to the payment date on which it is
made, (ii) adding the results and (iii) dividing the sum by the initial
principal amount of such note.
(3) This calculation assumes the servicer purchases the motor vehicle loans on
the earliest payment date on which it is permitted to do so.
The ABS Tables have been prepared based on the assumptions described above
(including the assumptions regarding the characteristics and performance of
the motor vehicle loans which will differ from the actual characteristics and
performance of the motor vehicle loans) and should be read in conjunction
therewith.
S-24
Percentage of Initial Certificate Balance at Various ABS Percentage
Certificates
Assumed ABS Percentage(1)
-------------------------
-----------------------------------------------
Payment Dates 0.50% 1.00% 1.30% 1.50% 1.70% 2.00%
- ------------- ----- ----- ----- ----- ----- -----
Closing Date ................................................................... 100 100 100 100 100 100
July 15, 2002 .................................................................. 100 100 100 100 100 100
August 15, 2002 ................................................................ 100 100 100 100 100 100
September 15, 2002 ............................................................. 100 100 100 100 100 100
October 15, 2002 ............................................................... 100 100 100 100 100 100
November 15, 2002 .............................................................. 100 100 100 100 100 100
December 15, 2002 .............................................................. 100 100 100 100 100 100
January 15, 2003 ............................................................... 100 100 100 100 100 100
February 15, 2003 .............................................................. 100 100 100 100 100 100
March 15, 2003 ................................................................. 100 100 100 100 100 100
April 15, 2003 ................................................................. 100 100 100 100 100 100
May 15, 2003 ................................................................... 100 100 100 100 100 100
June 15, 2003 .................................................................. 100 100 100 100 100 100
July 15, 2003 .................................................................. 100 100 100 100 100 100
August 15, 2003 ................................................................ 100 100 100 100 100 100
September 15, 2003 ............................................................. 100 100 100 100 100 97
October 15, 2003 ............................................................... 100 100 100 100 99 92
November 15, 2003 .............................................................. 100 100 100 99 94 87
December 15, 2003 .............................................................. 100 100 99 94 90 82
January 15, 2004 ............................................................... 100 100 95 90 85 78
February 15, 2004 .............................................................. 100 99 91 86 81 73
March 15, 2004 ................................................................. 100 95 87 82 77 69
April 15, 2004 ................................................................. 100 91 83 78 73 65
May 15, 2004 ................................................................... 100 88 80 74 69 61
June 15, 2004 .................................................................. 98 84 76 71 65 57
July 15, 2004 .................................................................. 95 81 73 67 61 53
August 15, 2004 ................................................................ 91 77 69 63 58 49
September 15, 2004 ............................................................. 88 74 66 60 54 46
October 15, 2004 ............................................................... 85 71 62 57 51 42
November 15, 2004 .............................................................. 82 68 59 53 48 39
December 15, 2004 .............................................................. 78 64 56 50 44 36
January 15, 2005 ............................................................... 75 61 53 47 41 33
February 15, 2005 .............................................................. 72 58 50 44 38 30
March 15, 2005 ................................................................. 69 55 47 41 35 27
April 15, 2005 ................................................................. 66 52 44 38 33 24
May 15, 2005 ................................................................... 63 49 41 35 30 22
June 15, 2005 .................................................................. 60 46 38 33 28 19
July 15, 2005 .................................................................. 57 44 36 31 25 17
August 15, 2005 ................................................................ 54 41 33 28 23 15
September 15, 2005 ............................................................. 51 39 31 26 21 13
October 15, 2005 ............................................................... 48 36 29 24 19 11
November 15, 2005 .............................................................. 46 34 26 22 17 9
December 15, 2005 .............................................................. 43 31 24 20 15 8
January 15, 2006 ............................................................... 40 29 22 18 13 6
February 15, 2006 .............................................................. 37 27 20 16 11 5
March 15, 2006 ................................................................. 35 24 18 14 10 4
April 15, 2006 ................................................................. 32 22 16 12 9 3
May 15, 2006 ................................................................... 29 20 15 11 7 2
June 15, 2006 .................................................................. 27 18 13 10 6 1
S-25
Certificates
Assumed ABS Percentage(1)
-------------------------
-------------------------------------------------------------
Payment Dates 0.50% 1.00% 1.30% 1.50% 1.70% 2.00%
- ------------- ----- ----- ----- ----- ----- -----
July 15, 2006 .................................................... 25 16 12 8 5 0
August 15, 2006 .................................................. 22 15 10 7 4 0
September 15, 2006 ............................................... 20 13 9 6 3 0
October 15, 2006 ................................................. 18 11 8 5 2 0
November 15, 2006 ................................................ 15 10 6 4 2 0
December 15, 2006 ................................................ 13 8 5 3 1 0
January 15, 2007 ................................................. 11 7 4 2 1 0
February 15, 2007 ................................................ 9 5 3 2 * 0
March 15, 2007 ................................................... 7 4 2 1 * 0
April 15, 2007 ................................................... 4 3 1 1 0 0
May 15, 2007 ..................................................... 2 1 1 * 0 0
June 15, 2007 .................................................... 2 1 1 * 0 0
July 15, 2007 .................................................... 2 1 1 * 0 0
August 15, 2007 .................................................. 2 1 * * 0 0
September 15, 2007 ............................................... 1 1 * * 0 0
October 15, 2007 ................................................. 1 1 * * 0 0
November 15, 2007 ................................................ 1 1 * * 0 0
December 15, 2007 ................................................ 1 * * 0 0 0
January 15, 2008 ................................................. 1 * * 0 0 0
February 15, 2008 ................................................ * * * 0 0 0
March 15, 2008 ................................................... * * * 0 0 0
April 15, 2008 ................................................... 0 0 0 0 0 0
Weighted Average Life (years)(2) ................................. 3.42 3.09 2.87 2.72 2.57 2.34
Weighted Average Life to Optional Clean-Up Call (years)(2)(3) .... 3.35 2.99 2.77 2.62 2.48 2.26
Optional Clean-Up Call Date ...................................... 10/15/06 6/15/06 3/15/06 1/15/06 11/15/05 7/15/05
- ---------------
(1) An asterisk "*" means a percent of initial certificate balance of more than
zero and less than 0.5%.
(2) The weighted average life of a certificate is determined by (i) multiplying
the amount of each principal payment of such certificate by the number of
years from the date of the issuance of such certificate to the payment date
on which it is made, (ii) adding the results and (iii) dividing the sum by
the initial principal balance of such certificate.
(3) This calculation assumes the servicer purchases the motor vehicle loans on
the earliest payment date on which it is permitted to do so.
The ABS Tables have been prepared based on the assumptions described above
(including the assumptions regarding the characteristics and performance of
the motor vehicle loans which will differ from the actual characteristics and
performance of the motor vehicle loans) and should be read in conjunction
therewith.
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The Notes
General
The trust will issue the notes under an indenture between the trust and
Wells Fargo Bank Minnesota, National Association, as indenture trustee. The
corporate trust offices of the indenture trustee are located at Sixth Street
and Marquette Avenue, MAC N9311-161, Minneapolis, Minnesota 55479-0070,
telephone (612) 667-8058. Chase USA and its affiliates may have normal banking
relationships with the indenture trustee and its affiliates.
We will file a copy of the indenture in its execution form with the SEC
after the trust issues the notes. We summarize below some of the most
important terms of the notes. This summary is not a complete description of
all the provisions of the notes and the indenture. The following summary
supplements the description of the general terms and provisions of the notes
of any trust and the related indenture in the sections of the prospectus
entitled "Certain Information Regarding the Securities" and "The Indenture."
We refer you to those sections.
Payments of Interest
Interest on the principal balances of each class of notes will accrue at the
related per annum interest rate shown on the cover page of this prospectus
supplement and will be payable to the noteholders monthly on each payment
date, commencing July 15, 2002.
Calculation of Interest Payable. Interest on the outstanding principal
amount of each class of notes will accrue and shall be calculated as follows:
Actual/360. Interest on the Class A-1 notes will accrue from and including
the prior payment date (or the closing date, in the case of the first payment
date) to but excluding the current payment date and be calculated on the basis
of actual days elapsed and a 360-day year.
30/360. Interest on the Class A-2 notes, Class A-3 notes and Class A-4
notes will accrue from and including the 15th day of the calendar month
preceding the payment date (or the closing date, in the case of the first
payment date) to but excluding the 15th day of the calendar month of that
payment date and be calculated on the basis of a 360-day year of twelve 30-day
months.
Interest on Unpaid Interest. Interest on any note that is not paid on a
payment date will be due on the next payment date, together with interest on
that amount at the applicable interest rate, to the extent lawful.
Priority of Interest Payments. Interest payments on all classes of notes
will have the same priority. If on any payment date the trust has insufficient
funds to make a full payment of interest on the notes, the trust will apply
the funds available to pay interest on the notes ratably, based upon the
aggregate amount of interest payable on each class of notes.
Funds Available to Pay Interest. The trust will pay interest on the notes
on each payment date from collections on the motor vehicle loans received
during the prior calendar month and amounts withdrawn from the yield
supplement account and the reserve account for that payment date less the
portion of those amounts applied to the payment of the servicing fee and the
administration fee.
For a more detailed description of the priority of interest payments on the
notes, refer to the section of this prospectus supplement entitled "Payments
and Distributions."
Payments of Principal
Calculation of Principal Payable. The trust will pay the principal of the
notes on each payment date in an amount generally equal to the lesser of the
amount available to pay the principal of the notes and
o 100% of the Principal Distribution Amount for that payment date until
the Class A-2 notes have been paid in full and
o the Note Percentage of the Principal Distribution Amount for each
payment date thereafter (or, in the case of the payment date on which
the Class A-2 notes are paid in full, the Note Percentage of the
remaining amount of the Principal Distribution Amount) until all of the
notes have been paid in full
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unless
o the balance in the reserve account on that payment date would drop
below 0.50% of the aggregate principal balance of the motor vehicle
loans as of the cutoff date, after giving effect to any withdrawals
from the reserve account on that payment date, in which case, the
targeted amount of principal payable to the noteholders will be 100% of
the Principal Distribution Amount for that payment date and each
payment date thereafter until the notes have been paid in full or the
balance in the reserve account equals or exceeds the required amount
or
o the maturity of the notes has been accelerated after the occurrence of
an event of default, in which case, the targeted amount of principal
payable to the noteholders will be 100% of the Principal Distribution
Amount for each payment date until the notes have been paid in full.
The Note Percentage will equal the percentage equivalent of a fraction the
numerator of which is the aggregate principal amount of the Class A-3 notes
and the Class A-4 notes on the date the Class A-2 notes are paid in full and
the denominator of which is the sum of the aggregate principal amount of the
Class A-3 notes and the Class A-4 notes and the Certificate Balance on the
date the Class A-2 notes are paid in full.
The Principal Distribution Amount for each payment date will generally equal
the sum of
o the principal collections on the motor vehicle loans received during
the prior calendar month and
o the aggregate principal balance of all motor vehicle loans designated
as "defaulted receivables" during that calendar month, net of
liquidation proceeds allocable to principal received during that month
in respect of motor vehicle loans designated as "defaulted receivables"
during prior months.
The precise definition of Principal Distribution Amount is set forth in the
section of this prospectus supplement entitled "Glossary of Terms." We refer
you to that definition.
A motor vehicle loan will be designated as a "defaulted receivable" when the
servicer determines, based on its usual collection practices and procedures,
that eventual payment in full of the motor vehicle loan is unlikely or when at
least 10% of a scheduled payment is 240 or more days delinquent.
The amount of the principal of the notes payable on the final scheduled
payment date for any class of notes will equal the amount needed to repay the
principal amount of that class of notes in full.
If the full targeted amount of principal payable to the noteholders on any
payment date is not paid, the shortfall will be included in the amount of
principal payable to the noteholders on the next payment date.
Priority of Principal Payments Prior to Acceleration of the Notes. The
trust will pay the principal of the notes in the following order of priority:
o the Class A-1 notes until they are paid in full,
o the Class A-2 notes until they are paid in full,
o the Class A-3 notes until they are paid in full and
o the Class A-4 notes until they are paid in full.
Priority of Principal Payments After Acceleration of the Notes. After an
acceleration of the maturity of the notes following an event of default, the
trust will pay the principal of Class A-1 notes until the Class A-1 notes are
paid in full and then the other classes of notes ratably, based upon the
outstanding principal amount of each such class of notes.
Funds Available to Pay Principal. The trust will pay the principal of the
notes on each payment date from collections on the motor vehicle loans
received during the prior calendar month and amounts withdrawn from the
reserve account for that payment date less the portion of those amounts and
amounts withdrawn from the yield supplement account for that payment date
applied to the payment of the servicing fee, the administration fee, interest
on the notes and interest distributions in respect of the certificates. If the
maturity of the notes has been accelerated following an event of default
resulting from a payment default, the trust will not make any distributions in
respect of interest on the certificates until after the notes have been paid
in full.
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For a more detailed description of the priority of principal payments on the
notes, refer to the section of this prospectus supplement entitled "Payments
and Distributions."
The trust's failure to pay principal of the notes of any class on any
payment date will not be an event of default until the final scheduled payment
date for that class of notes.
Notes Might Not Be Paid in Full on Their Final Scheduled Payment Dates. The
principal amount of any class of notes if not previously paid will be due on
the final scheduled payment date relating to that class shown on the cover
page of this prospectus supplement. The actual date on which the outstanding
principal amount of any class of notes is paid may be earlier or later than
the final scheduled payment date for that class of notes based on a variety of
factors, including those described in the sections of this prospectus
supplement and the prospectus entitled "Weighted Average Life of the
Securities."
Prepayment
The servicer may purchase the motor vehicle loans on any payment date after
the Class A-1 notes, the Class A-2 notes and the Class A-3 notes have been
paid in full on which the aggregate principal balance of the motor vehicle
loans has declined to 10% or less of the aggregate principal balance of the
motor vehicle loans as of the cutoff date. If the servicer purchases the motor
vehicle loans, the trust will prepay the Class A-4 notes in full.
For a more detailed description of the right of the servicer to purchase the
motor vehicle loans, refer to the section of the prospectus entitled "The
Transfer and Servicing Agreements--Termination."
The Certificates
General
The trust will issue the certificates under the trust agreement. We will
file a copy of the trust agreement with the SEC after the trust issues the
certificates. We summarize below some of the most important terms of the
certificates. This summary is not a complete description of all the provisions
of the trust agreement and the certificates. The following summary is a
supplement to the description of the general terms and provisions of the
certificates of any given trust and the related trust agreement in the
sections of the prospectus entitled "Certain Information Regarding the
Securities" and "The Transfer and Servicing Agreements." We refer you to those
sections.
Distributions of Interest
On each payment date, commencing on July 15, 2002, the certificateholders
will be entitled to receive the amount of interest that accrues on the
Certificate Balance at the pass-through rate shown on the cover page of this
prospectus supplement.
Calculation of Interest Accrual. Interest in respect of the certificates
will accrue from and including the 15th day of the calendar month preceding
the payment date (or the closing date, in the case of the first payment date)
to but excluding the 15th day of the calendar month of that payment date and
be calculated on the basis of a 360-day year of twelve 30-day months.
Interest on Unpaid Interest. Interest in respect of any certificate that is
not distributed on a payment date will be due on the next payment date,
together with interest on that amount at the pass-through rate, to the extent
lawful.
Funds Available for Interest Distributions; Subordination. The trust will
make interest distributions in respect of the certificates on each payment
date from collections on the motor vehicle loans received during the prior
calendar month and amounts withdrawn from the yield supplement account and the
reserve account for that payment date less the portion of those amounts
applied to the payment of the servicing fee, the administration fee and
interest on the notes. If the maturity of the notes has been accelerated
following an event of default resulting from a payment default, the trust will
not make any distributions in respect of interest on the certificates until
after the notes have been paid in full.
S-29
For a more detailed description of the priority of interest distributions in
respect of the certificates, refer to the section of this prospectus
supplement entitled "Payments and Distributions."
Distributions of Principal
Calculation of Principal Distributable. On the payment date on which the
trust pays the Class A-2 notes in full and on each payment date thereafter
until the notes have been paid in full, the trust will distribute principal in
respect of the certificates in an amount equal to the lesser of
o the amount available to the trust to make distributions of principal in
respect of the certificates and
o the Certificate Percentage of the Principal Distribution Amount (or, in
the case of the payment date on which the Class A-2 notes are paid in
full, the Certificate Percentage of the remaining amount of the
Principal Distribution Amount)
unless
o the balance in the reserve account on that payment date would drop
below 0.50% of the aggregate principal balance of the motor vehicle
loans as of the cutoff date, after giving effect to any withdrawals
from the reserve account on that payment date, in which case, the trust
will not distribute principal in respect of the certificates until the
notes have been paid in full or the balance in the reserve account
equals or exceeds the required amount
or
o the maturity of the notes has been accelerated after the occurrence of
an event of default, in which case, the trust will not distribute
principal in respect of the certificates until the notes have been paid
in full.
On each payment date after the notes have been paid in full, the trust will
distribute principal in respect of the certificates in an amount equal to the
lesser of
o the amount available to the trust to make distributions of principal in
respect of the certificates and
o 100% of the Principal Distribution Amount (or, in the case of the
payment date on which the notes are paid in full, 100% of the remaining
amount of the Principal Distribution Amount).
In addition, the amount of principal distributable in respect of the
certificates on the final scheduled payment date for the certificates will
equal the amount needed to reduce the Certificate Balance to zero.
If the full targeted amount of principal distributable to the
certificateholders on any payment date is not distributed, the shortfall will
be included in the amount of principal distributable to the certificateholders
on the next payment date.
The Certificate Percentage will equal 100% minus the Note Percentage.
The Certificate Balance will be reduced on each payment date by
o distributions in respect of principal to the certificateholders and
o the amount that the sum of the aggregate principal amount of the notes
and the Certificate Balance exceeds the aggregate principal balance of
the motor vehicle loans as of the last day of the prior month,
and increased on any payment date by the amount of principal distributed in
respect of the certificates on that payment date relating to any prior non-
cash reductions.
Funds Available to Distribute Principal; Subordination. The trust will
distribute principal in respect of the certificates on each payment date from
collections on the motor vehicle loans received during the prior calendar
month and amounts withdrawn from the reserve account for that payment date
less the portion of those amounts and amounts withdrawn from the yield
supplement account for that payment date applied to the payment of the
servicing fee, the administration fee, interest on the notes, interest
distributions in respect of the certificates and principal of the notes. If
the maturity of the notes has been accelerated following an event of default,
the trust will not make any distributions of principal in respect of the
certificates until after the notes have been paid in full.
S-30
For a more detailed description of the priority of principal distributions
in respect of the certificates, refer to the section of this prospectus
supplement entitled "Payments and Distributions."
Certificate Balance Might Not Be Reduced to Zero on its Final Scheduled
Payment Date. The trust is required to reduce the Certificate Balance to zero
on the final scheduled payment date of the certificates shown on the cover
page of this prospectus supplement. The actual date on which the
Certificate Balance is reduced to zero may be earlier or later than the final
scheduled payment date for the certificates based on a variety of factors,
including those described in the sections of this prospectus supplement and
the prospectus entitled "Weighted Average Life of the Securities."
Prepayment
The servicer may purchase the motor vehicle loans on any payment date after
the Class A-1 notes, the Class A-2 notes and the Class A-3 notes have been
paid in full on which the aggregate principal balance of the motor vehicle
loans has declined to 10% or less of the aggregate principal balance of the
motor vehicle loans as of the cutoff date. If the servicer purchases the motor
vehicle loans, the trust will distribute to certificateholders an amount equal
to the Certificate Balance together with accrued and unpaid interest at the
pass-through rate.
For a more detailed description of the right of the servicer to purchase the
motor vehicle loans, refer to the section of the prospectus entitled "The
Transfer and Servicing Agreements--Termination."
Restrictions on Foreign Ownership
Purchasers of certificates and their assignees will be deemed to represent
that the beneficial owners of such certificates are not Foreign Investors.
For a more detailed description of the restrictions on foreign ownership of
the certificates, refer to the section of this prospectus supplement entitled
"Material Federal Income Tax Consequences."
Payments and Distributions
Source of Funds
The funds available to the trust to pay expenses and make payments on the
securities on each payment date will equal the sum of the Total Distribution
Amount for that payment date and the funds withdrawn from the yield supplement
account and any funds withdrawn from the reserve account for that payment
date.
The Total Distribution Amount for each payment date will generally consist
of the following:
o collections received on the motor vehicle loans during the prior
calendar month, including net recoveries on motor vehicle loans that
were charged off as losses in prior months and
o proceeds of repurchases of motor vehicle loans by the seller or
purchases of motor vehicle loans by the servicer.
The precise definition of Total Distribution Amount is set forth in the
section of this prospectus supplement entitled "Glossary of Terms." We refer
you to that definition.
In general, the servicer will be permitted to retain collections on the
motor vehicle loans until the business day prior to each payment date. On that
business day, the servicer will cause all collections on the motor vehicle
loans and other amounts constituting the Total Distribution Amount for the
payment date to be deposited in the collection account, together with the
funds required to be withdrawn by the indenture trustee from the yield
supplement account for the payment date and any funds required to be withdrawn
by the indenture trustee from the reserve account for the payment date. For a
description of the circumstances under which the servicer would be required to
deposit collections on the motor vehicle loans within 48 hours of receipt,
refer to the section of the prospectus entitled "The Transfer and Servicing
Agreements--Servicing--Collections."
S-31
Priority of Payments and Distributions
Prior to Acceleration of the Notes following a Payment Default. On each
payment date, the trust will apply the Total Distribution Amount, the funds
withdrawn from the yield supplement account and any funds withdrawn from the
reserve account to make payments and distributions in the following order of
priority:
o to the servicer, the servicing fee for the prior month and all unpaid
servicing fees for prior months,
o to the administrator, the administration fee for the prior month and
all unpaid administration fees for prior months,
o ratably to the holders of each class of notes, interest due on all the
notes on that payment date,
o to the holders of the certificates, interest distributable in respect
of the certificates on that payment date,
o to the noteholders, the amount of the principal of the notes payable on
that payment date as described in the section of this prospectus
supplement entitled "The Notes--Payments of Principal,"
o to the certificateholders, the amount of principal distributable in
respect of the certificates on that payment date as described in the
section of this prospectus supplement entitled "The Certificates--
Distributions of Principal" and
o to the reserve account, any remaining portion of the Total Distribution
Amount.
After Acceleration of the Notes Following a Payment Default. On each
payment date after the maturity of the notes has been accelerated following an
event of default resulting from a payment default, the trust will apply the
Total Distribution Amount, the funds withdrawn from the yield supplement
account and any funds withdrawn from the reserve account to make payments and
distributions in the following order of priority:
o to the servicer, the servicing fee for the prior month and all unpaid
servicing fees for other prior months,
o to the administrator, the administration fee for the prior month and
all unpaid administration fees for other prior months,
o ratably to the holders of each class of notes, interest due on all the
notes on that payment date,
o to the noteholders, the outstanding principal amount of the notes,
o to the holders of the certificates, interest distributable in respect
of the certificates on that payment date,
o to the certificateholders, the Certificate Balance and
o to the reserve account, any remaining portion of the Total Distribution
Amount.
Withdrawals from Yield Supplement Account. On each payment date the
indenture trustee will withdraw from the yield supplement account and deposit
in the collection account the amount described in the section of this
prospectus supplement entitled "The Transfer and Servicing Agreements--Yield
Supplement Account--Withdrawals from Yield Supplement Account."
Withdrawals from Reserve Account. The indenture trustee will withdraw funds
from the reserve account, to the extent that funds are available for
withdrawal, in respect of any payment date for which the sum of the
Total Distribution Amount plus the funds withdrawn from the yield supplement
account on that payment date is insufficient to pay the servicing fee, the
administration fee, principal and interest payable to the noteholders and
principal and interest distributable in respect of the certificates. In no
event will investment earnings on funds on deposit in the reserve account be
available for withdrawal to pay these amounts.
The Transfer and Servicing Agreements
We have summarized below some of the important terms of the sale and
servicing agreement, the trust agreement and the administration agreement. A
form of each of these agreements has been filed as an exhibit to the
registration statement of which the attached prospectus forms a part. We will
file a copy of each of these agreements with the SEC after we issue the
securities. This summary is not a complete description of these agreements.
The following summary supplements the description of the general terms and
provisions of these agreements set forth in the prospectus.
S-32
Trust Accounts
The trust will establish a collection account, a reserve account and a yield
supplement account in the name of the indenture trustee for the benefit of the
noteholders and the certificateholders. The servicer will establish a
distribution account for the noteholders in the name of the indenture trustee
for the benefit of the noteholders. The trustee will establish a distribution
account for the certificateholders in the name of the trustee for the benefit
of the certificateholders. Each of these accounts will be treated as a trust
account as described in the section of the prospectus entitled "The Transfer
and Servicing Agreements--Trust Accounts."
Each of the collection account, the note distribution account and the
certificate distribution account will be initially established in the trust
department of JPMorgan Chase Bank. JPMorgan Chase Bank acting as the paying
agent at the direction of the servicer will have the right to withdraw funds
from those accounts for the purpose of making distributions to
securityholders.
Servicing Compensation
The servicer will be entitled to receive a servicing fee for each month
payable on the following payment date. The servicing fee for each month will
equal the sum of
o the product of 1/12 of 1% and the aggregate principal balance of the
motor vehicle loans as of the last day of the prior month (or, in the
case of the first payment date, as of the cutoff date) and
o any late charges, credit-related extension fees or other administrative
fees or similar charges allowed by applicable law collected by the
servicer during that month.
In addition, the servicer will be entitled to receive investment earnings,
net of losses and investment expenses, on funds deposited in the collection
account.
For a more detailed description of the fees and expenses of the servicer,
refer to the section of the prospectus entitled "The Transfer and Servicing
Agreements--Servicing--Servicing Compensation and Payment of Expenses."
Servicing Procedures
The servicer will service the motor vehicle loans and will be obligated to
make reasonable efforts to collect all payments due with respect to the motor
vehicle loans. The servicer will be obligated to follow collection and
servicing procedures consistent with the procedures it follows with respect to
comparable motor vehicle loans that it services for itself and with prudent
industry standards. In addition, the sale and servicing agreement will provide
that the servicer may not
o change the amount of any motor vehicle loan, other than allowing a
prepayment of a scheduled payment that does not result in a deferral of
any other scheduled payment,
o decrease the contract rate of any motor vehicle loan or
o extend any motor vehicle loan beyond the final scheduled payment date
for the certificates.
If the servicer fails to comply with the terms of the sale and servicing
agreement and such failure materially and adversely affects the interests of
the securityholders in a motor vehicle loan, the servicer will be required to
purchase the affected motor vehicle loan at a price equal to the unpaid
principal balance owed by the obligor plus interest at the contract rate of
interest through the last day of the month of repurchase. The purchase
obligation will constitute the sole remedy available to the securityholders,
the trust or the indenture trustee for any such uncured breach.
Chase USA offers certain obligors or classes of obligors on an annual basis
a one-month noncredit related extension of a regularly scheduled payment
otherwise due under a motor vehicle loan. The sale and servicing agreement
will establish criteria governing those extensions.
For a more detailed description of the servicing procedures, refer to the
section of the prospectus entitled "The Transfer and Servicing Agreements--
Servicing--Servicing Procedures."
S-33
Reserve Account
Funding of Reserve Account. The trust will establish the reserve account in
the name of the indenture trustee for the benefit of the noteholders and
certificateholders. The trust will fund the reserve account on the closing
date by making an initial deposit in an amount equal to 0.75% of the aggregate
principal balance of the motor vehicle loans as of the cutoff date, which is
less than the Specified Reserve Account Balance. The reserve account will
thereafter be funded on each payment date with the portion of the sum of the
Total Distribution Amount plus the funds withdrawn from the yield supplement
account on that payment date remaining after the payment of the servicing fee,
the administration fee, interest and principal payable to the noteholders and
interest and principal distributable in respect of the certificates as
described in the section of this prospectus supplement entitled "Payments and
Distributions."
Withdrawals from Reserve Account. The indenture trustee will withdraw funds
from the reserve account and deposit them into the collection account under
the circumstances described in the section of this prospectus supplement
entitled "Payments and Distributions."
On each payment date, the indenture trustee will withdraw from the reserve
account and pay to the holder of the Class R certificates all investment
earnings on funds on deposit in the reserve account earned since the prior
payment date and any amounts on deposit in the reserve account, after giving
effect to deposits and withdrawals made on that payment date, in excess of the
Specified Reserve Account Balance on that payment date.
The Specified Reserve Account Balance on each payment date will equal 1.75%
of the aggregate principal balance of the motor vehicle loans as of the last
day of the second preceding calendar month, but in any event will not be less
than the lesser of
o an amount equal to 0.75% of the aggregate principal balance of the
motor vehicle loans as of the cutoff date and
o the aggregate principal balance of the motor vehicle loans as of the
last day of the second preceding calendar month;
provided, that the Specified Reserve Account Balance will be calculated using
a percentage of 3.50% on any payment date for which the Average Net Loss Ratio
exceeds 1.75% or the Average Delinquency Percentage exceeds 1.75%. If the
seller desires to reduce the Specified Reserve Account Balance to a lesser
amount and requests the rating agencies to confirm that such reduction in the
Specified Reserve Account Balance will not adversely affect the ratings of any
of the notes or the certificates and the rating agencies confirm that the
reduction will not adversely affect the ratings of the securities issued by
the trust, the seller will reduce the Specified Reserve Account Balance to a
lesser amount.
Funds in the Reserve Account will be Limited. Amounts in the reserve
account are intended to enhance the likelihood of receipt by securityholders
of the full amount of principal and interest payable to them and to decrease
the likelihood that the securityholders will experience losses. However, the
amount in the reserve account is limited and the reserve account could be
depleted. If the amount required to be withdrawn from the reserve account to
cover shortfalls in collections on the motor vehicle loans exceeds the amount
of available cash in the reserve account, noteholders or certificateholders
could incur losses or a temporary shortfall in the amounts distributed to them
could result. Delays in payments could increase the average life of the notes
or the certificates. Shortfalls in collections on the motor vehicle loans may
result from, among other things, losses on the motor vehicle loans or the
failure by the servicer to make any remittance under the sale and servicing
agreement.
Yield Supplement Account
Funding of Yield Supplement Account. The trust will establish the yield
supplement account in the name of the indenture trustee for the benefit of the
noteholders and the certificateholders. The trust will fund the yield
supplement account on the closing date by making a deposit in an amount equal
to $7,017,060.88. No additional deposits will be made to the yield supplement
account after the closing date. The funds on deposit in the yield supplement
account are intended to supplement the interest collections for each calendar
month on those motor vehicle loans that have annual contract rates that are
less than the Required Rate. The Required Rate is
S-34
generally equal to the sum of the servicing fee rate of 1.00% per annum and
the time weighted average rate per annum at which interest will accrue on the
notes and the certificates, assuming the motor vehicle loans prepay at an ABS
percentage of 1.50%. The precise definition of Required Rate is set forth in
the section of this prospectus supplement entitled "Glossary of Terms." We
refer you to that definition.
Withdrawals from Yield Supplement Account. On each payment date, the
indenture trustee will withdraw funds from the yield supplement account and
deposit them into the collection account in an amount equal to the lesser of
the amount on deposit in the yield supplement account and the aggregate amount
by which one month's interest on the principal balance as of the beginning of
business on the first day of the prior calendar month of each motor vehicle
loan (other than a motor vehicle loan designated as a "defaulted receivable")
at the Required Rate, exceeds one month's interest on the principal balance of
that motor vehicle loan at the annual contract rate of that motor vehicle
loan.
On each payment date, the amount required to be on deposit in the yield
supplement account will decline and be equal to the sum of the aggregate
amounts expected to be withdrawn from the yield supplement account on all
future payment dates, calculated as described in the preceding paragraph,
assuming that all scheduled payments on the motor vehicle loans are made when
due, no prepayments are made and amounts on deposit in the yield supplement
account earn interest at a rate per annum equal to 1.25%. If the amount
required to be on deposit in the yield supplement account on any payment date
exceeds the amount on deposit in the yield supplement account, neither the
seller nor the servicer will be obligated to make an additional deposit into
the yield supplement account. On each payment date, the indenture trustee will
withdraw from the yield supplement account and pay to the holder of the Class
R certificates any amounts on deposit in the yield supplement account, after
giving effect to the withdrawal made on that payment date, in excess of the
amount required to be on deposit in the yield supplement account on that
payment date.
Administration Agreement
JPMorgan Chase Bank, as the administrator, will enter into an administration
agreement with the trust and the indenture trustee pursuant to which it will
agree to perform certain administrative functions on behalf of the trust. The
administrator will be entitled to receive an administration fee of $1,000 per
month payable on the following payment date.
Under the administration agreement the administrator may act directly or
through its agents or attorneys pursuant to agreements entered into with any
of them. The administrator will not be liable for the conduct or misconduct of
its agents or attorneys if the administrator selected those agents or
attorneys with due care.
Chase USA will enter into an agreement with the administrator pursuant to
which it will agree to perform certain of the duties of the administrator and
to reimburse and indemnify the administrator for all expenses or liabilities
the administrator may incur as a result of the administrator's entering into
the administration agreement.
Money Market Eligibility
The Class A-1 notes will be eligible securities for purchase by money market
funds under paragraph (a)(10) of Rule 2a-7 under the Investment Company Act of
1940, as amended.
Material Federal Income Tax Consequences
The following is a general summary of the material U.S. federal income tax
considerations that may be relevant to the purchase, ownership and disposition
of the notes and the certificates by an investor who purchases the notes or
the certificates pursuant to their original issuance at their original issue
price. This summary is based upon the Internal Revenue Code of 1986, as
amended, the Treasury regulations promulgated thereunder, administrative
rulings or pronouncements and judicial decisions, all as in effect on the date
hereof and all of which are subject to change, possibly retroactively. The
following discussion does not deal with all aspects of U.S. federal income
taxation, nor does it address U.S. federal income tax consequences that may be
relevant to certain types of investors, such as financial institutions,
insurance companies, dealers in securities or currencies, tax-exempt
organizations, regulated investment companies, real estate investment trusts,
persons who
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hold the notes or certificates as part of a hedging, integrated or conversion
transaction, constructive sale or straddle, traders in securities that have
elected to mark their securities holdings to market or persons whose
functional currency is not the U.S. dollar, who may be subject to special
treatment under the tax code. In addition, the following discussion does not
address the alternative minimum tax consequences of an investment in the notes
or the certificates or the consequences of such an investment under state and
local tax laws or foreign tax laws. Prospective investors should note that no
rulings have been or will be sought from the IRS with respect to any of the
U.S. federal income tax consequences discussed in this prospectus and opinions
of counsel are not binding on the IRS or the courts. Thus, we can give you no
assurance that the IRS will not take positions contrary to those described
below. The opinions of Simpson Thacher & Bartlett, special counsel to Chase
USA, described in this prospectus supplement will be based upon certain
representations and assumptions, including, but not limited to, the assumption
that all relevant parties will comply with the terms of the trust agreement
and related documents.
This summary is intended as an explanatory discussion of the possible
effects of the classification of the trust as a partnership for U.S. federal
income tax purposes for investors generally and related tax matters affecting
investors generally, but does not purport to furnish information in the level
of detail or with the attention to the investor's specific tax circumstances
that would be provided by an investor's own tax advisor. Accordingly,
investors should consult their own tax advisors to determine the federal,
state, local, and other tax consequences that may be relevant to their
purchase, ownership and disposition of the notes or the certificates based
upon their particular facts and circumstances.
If a partnership holds notes or certificates, the tax treatment of a partner
will generally depend upon the status of the partner and the activities of the
partnership. A noteholder or certificateholder that is a partner of a
partnership holding notes or certificates should consult its own tax advisor.
For purposes of the following discussion, except as otherwise provided
herein, the terms "noteholder" and "certificateholder" refer, respectively, to
the beneficial owner of a note or certificate. In addition, the discussion
below assumes that noteholders and certificateholders will hold their notes
and certificates as "capital assets" within the meaning of Section 1221 of the
tax code. As used herein, a "U.S. noteholder" or "U.S. certificateholder"
means a holder that is for U.S. federal income tax purposes:
o a citizen or resident of the United States,
o a corporation or partnership created or organized in or under the laws
of the United States or any political subdivision thereof,
o an estate the income of which is subject to U.S. federal income
taxation regardless of its source or
o a trust if (a) it is subject to the primary supervision of a court
within the United States and one or more United States persons has the
authority to control all substantial decisions of the trust or (b) it
has a valid election in effect under applicable U.S. Treasury
regulations to be treated as a United States person.
A "non-U.S. noteholder" or "non-U.S. certificateholder" is a holder that is
not a U.S. noteholder or U.S. certificateholder.
Tax Characterization of the Trust
In the opinion of Simpson Thacher & Bartlett, the trust will not be
classified as an association (or publicly traded partnership) taxable as a
corporation. This opinion is based on, among other things, certain facts and
assumptions contained in such opinion and counsel's conclusion, based in part
upon a representation of Chase USA, that the nature of the trust's income
exempts it from the rule that certain publicly traded partnerships are taxable
as corporations.
Chase USA and the certificateholders, by their purchase of certificates,
will agree to treat the trust as a partnership for all U.S. tax purposes with
the assets of such partnership being the assets held by the trust (including
the reserve account, the yield supplement account and all investment earnings
thereon), the partners of the partnership being the certificateholders and
Chase USA, and the notes being debt of the partnership. However, the proper
characterization of the arrangement involving the trust, the
certificateholders, the noteholders and Chase USA is not clear.
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A variety of alternative characterizations are possible under which the tax
consequences would differ. For example, because the certificates have certain
features characteristic of debt, the certificates might be considered debt of
Chase USA or the trust. The following discussion assumes that, for U.S.
federal income tax purposes, (i) the trust is properly classified as a
partnership (other than a publicly traded partnership), (ii) the notes will be
treated as debt of this partnership and (iii) the certificates represent
equity interests in the partnership.
Tax Consequences to Noteholders
Treatment of the Notes as Indebtedness. The trust and the noteholders, by
their purchase of the notes, agree to treat the notes as debt for all U.S.
federal, state and local tax purposes. In the opinion of Simpson Thacher &
Bartlett, the notes will be characterized as debt for U.S. federal income tax
purposes. The discussion below assumes this characterization of the notes is
correct.
Interest Income on the Notes. It is anticipated that the notes will be sold
at no more than the statutorily defined de minimis discount (i.e., 1/4% of the
principal amount of a note multiplied by its weighted average to maturity)
from their stated principal amount. In such case, the notes will not be
considered to have been issued with original issue discount, or OID, in excess
of the statutorily defined de minimis amount. The stated interest thereon will
be taxable to a noteholder as ordinary interest income at the time it is
received or accrued in accordance with such noteholder's method of tax
accounting. Under the applicable treasury regulations, a holder of a note
issued with a de minimis amount of OID must include gain attributable to such
oid in income, on a pro rata basis, as principal payments are made on the
note.
Sale or Other Disposition. If a noteholder sells or otherwise disposes of a
note in a taxable transaction, the former noteholder will recognize capital
gain or loss in an amount equal to the difference between the amount realized
on such sale or other disposition (less an amount equal to any accrued but
unpaid interest which will be treated as a payment of interest) and the
noteholder's adjusted tax basis in the note. The long-term capital gains of
individuals generally are eligible for reduced rates of taxation. Capital
losses generally may be used only to offset capital gains.
Non-U.S. Noteholders. Under present U.S. federal income tax law, and
subject to the discussion below concerning backup withholding:
(a) no withholding of U.S. federal income tax will be required with respect
to the payment by the trust of principal or interest on a note owned by a non-
U.S. noteholder, provided that the beneficial owner of the note (i) is not
actually or constructively a "10-percent shareholder" of the trust (including
a holder of 10% or more of the trust's outstanding certificates) or Chase USA,
(ii) is not a "controlled foreign corporation" with respect to which the trust
or Chase USA is a "related person" within the meaning of the tax code, (iii)
is not a bank whose receipt of interest on a note is described in Section
881(c)(3)(A) of the tax code and (iv) satisfies the statement requirement
(described generally below) set forth in Section 871(h) and Section 881(c) of
the tax code and the regulations thereunder; and
(b) no withholding of U.S. federal income tax generally will be required
with respect to any gain realized by a non-U.S. noteholder upon the sale,
exchange or retirement of a note provided that, in the case of any gain
representing accrued interest, the conditions described in (a) above are
satisfied.
To satisfy the requirement referred to in (a)(iv) above, the beneficial
owner of a note, or a financial institution holding the note on behalf of such
owner, must provide, in accordance with specified procedures, the entity that
would otherwise be required to withhold U.S. taxes with a statement to the
effect that the beneficial owner is not a U.S. person. These requirements will
be met if (i) the beneficial owner provides the name and address of the
beneficial owner, and certifies, under penalties of perjury, that the
beneficial owner is not a "U.S. person" (which certification may be made on an
IRS Form W-8BEN or a successor form), or (ii) a beneficial owner holds the
notes through certain foreign intermediaries and satisfies the certification
requirements of applicable U.S. Treasury regulations. Special certification
and other rules apply to certain non-U.S. noteholders that are pass-through
entities rather than individuals.
If a non-U.S. noteholder cannot satisfy the requirements of the "portfolio
interest" exception described in (a) above, payments of premium, if any, and
interest (including OID) made to a non-U.S. noteholder with respect to a note
will be subject to a 30% U.S. withholding tax unless the beneficial owner of
the note provides the U.S. entity otherwise required to withhold U.S. taxes
with a properly executed (i) IRS Form W-8BEN (or
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successor form) claiming an exemption from, or reduction in the rate of,
withholding under the benefit of an applicable tax treaty or (ii) IRS Form W-
8ECI (or successor form) stating that the interest paid on the note is not
subject to U.S. withholding tax because such interest income is effectively
connected with the beneficial owner's conduct of a trade or business in the
United States.
If a non-U.S. noteholder is engaged in a trade or business in the United
States and interest on a note is effectively connected with the conduct of
such trade or business, the non-U.S. noteholder, although exempt from the U.S.
withholding tax discussed above (provided the certification requirements are
satisfied), will be subject to U.S. federal income tax on such interest on a
net income basis in the same manner as if it were a U.S. noteholder. In
addition, if such non-U.S. noteholder is a foreign corporation, it may be
subject to a branch profits tax equal to 30% (or lesser rate under an
applicable tax treaty) of its effectively connected earnings and profits for
the taxable year, subject to adjustments.
Any gain realized by a non-U.S. noteholder upon the sale, exchange or
retirement of a note generally will not be subject to U.S. federal income tax
unless (i) such gain is effectively connected with a trade or business
conducted by the non-U.S. noteholder in the United States or (ii) in the case
of gain recognized by a non-U.S. noteholder who is an individual, such
individual is present in the United States for 183 days or more in the taxable
year of such sale, exchange or retirement, and certain other conditions are
met.
Special rules may apply to certain non-U.S. noteholders, such as "controlled
foreign corporations", "passive foreign investment companies", "foreign
personal holding companies" and certain U.S. expatriates, that are subject to
special treatment under the tax code. Such non-U.S. noteholders should consult
their own tax advisors to determine the U.S. federal, state and local and
other tax consequences that may be relevant to their decision to purchase
notes.
Information Reporting and Backup Withholding. In general, information
reporting requirements will apply to payments of principal, interest and
premium, if any, paid on the notes and to the proceeds from the sale of a note
paid to U.S. noteholders, other than certain exempt recipients (such as
corporations). A U.S. backup withholding tax will apply to such payments if
the noteholder fails to provide a taxpayer identification number or
certification of foreign or other exempt status or fails to report in full
dividend and interest income.
Generally, any payments of interest made by the trust to a non-U.S.
noteholder, and the amount of tax, if any, withheld with respect to such
payments, must be reported annually to the IRS and to the non-U.S. noteholder.
Copies of the information returns reporting such payments and any withholding
may also be made available to the tax authorities in the country in which the
non-U.S. noteholder resides under the provisions of an applicable income tax
treaty.
No backup withholding will be required with respect to payments made by the
trust to a non-U.S. noteholder if a statement described in (a)(iv) above under
the section entitled "Non-U.S. Noteholders" has been received by the entity
otherwise required to withhold U.S. taxes and such entity does not have actual
knowledge or reason to know that the beneficial owner is a U.S. person.
In addition, backup withholding and information reporting will not apply if
payments of proceeds from the sale of a note are paid or collected by a
foreign office of a custodian, nominee or other foreign agent on behalf of the
beneficial owner of such note, or if a foreign office of a broker (as defined
in applicable Treasury regulations) pays the proceeds from the sale of a note
to the owner thereof. If, however, such nominee, custodian, agent or broker
is, for U.S. federal income tax purposes, a U.S. person, a controlled foreign
corporation or a foreign person that derives 50% or more of its gross income
for certain periods from the conduct of a trade or business in the United
States, or, if such nominee, custodian, agent or broker is a foreign
partnership, in which one or more U.S. persons, in the aggregate, own more
than 50% of the income or capital interests in the partnership or if the
partnership is engaged in a trade or business in the United States, such
payments will not be subject to backup withholding but will be subject to
information reporting, unless (i) such custodian, nominee, agent or broker has
documentary evidence in its records that the beneficial owner is not a U.S.
person and certain other conditions are met or (ii) the beneficial owner
otherwise establishes an exemption.
Payments of proceeds from the sale of a note paid to the beneficial owner of
a note by a U.S. office of a custodian, nominee or agent, or the payment by
the U.S. office of a broker of the proceeds from the sale of a note, will be
subject to both backup withholding and information reporting unless the
beneficial owner
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(i) provides the statement referred to in (a)(iv) above and the payor does not
have actual knowledge or reason to know that the beneficial owner is a U.S.
person or (ii) otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules will be allowed as a
refund or a credit against such holder's U.S. federal income tax liability
provided the required information is furnished to the IRS.
Possible Alternative Classification of the Notes. If, contrary to the
opinion of Simpson Thacher & Bartlett, the IRS successfully asserted that one
or more of the classes of notes did not represent debt for U.S. federal income
tax purposes, the classes of notes might be treated as equity interests in the
trust. If so treated, the trust might be treated as a publicly traded
partnership taxable as a corporation with potentially adverse tax consequences
to the holders of notes of that class (and the publicly traded partnership
taxable as a corporation would not be able to reduce its taxable income by
deduction for interest expense on notes recharacterized as equity, and the
resulting tax liability of the trust would thus reduce the amount available to
the trust to make payments to the noteholders and certificateholders).
Alternatively, the trust might be treated as a publicly traded partnership
that would not be taxable as a corporation because it would meet certain
qualifying income tests. Nonetheless, treatment of the notes as equity
interests in such a partnership could have adverse tax consequences to certain
holders. For example, income to certain tax-exempt entities (including pension
funds) would be "unrelated business taxable income" taxable to such entities,
income to non-U.S. holders generally would be subject to U.S. tax and U.S. tax
return filing and withholding requirements and individual holders might be
subject to certain limitations on their ability to deduct their share of the
trust expenses. See "Tax Consequences to Certificateholders" below.
Tax Consequences to Certificateholders
Treatment of the Trust as a Partnership. As discussed above under the
section entitled "Trust Treated as Partnership--Tax Characterization of the
Trust," the following discussion assumes that for U.S. federal income tax
purposes, (i) the trust will be treated as a partnership (other than a
publicly traded partnership), (ii) the notes will be treated as debt of this
partnership and (iii) the certificates represent equity interests in the
partnership.
Partnership Taxation. As a partnership, the trust will not be subject to
U.S. federal income tax. Rather, each certificateholder will be required
separately to take into account such certificateholder's allocable share of
the trust's income, gains, losses, deductions and credits. The trust's income
will consist primarily of interest and late and other administrative fees
earned on the motor vehicle loans (including appropriate adjustments for
market discount, OID and bond premium) and any gain realized upon the
collection or disposition of motor vehicle loans. The trust's deductions will
consist primarily of interest accruing with respect to the notes, servicing
and other fees, and losses or deductions realized upon the collection or
disposition of motor vehicle loans.
The tax items of a partnership are allocable to the partners in accordance
with the tax code, the relevant Treasury regulations promulgated thereunder
and the partnership agreement (here, the trust agreement and related
documents). However, inasmuch as the trust's payment of the interest rate
applicable to the certificates is payable to the certificateholders without
regard to the income of the trust, the trust intends to treat payments of such
amounts to certificateholders as "guaranteed payments" within the meaning of
Section 707(c) of the tax code. Under such treatment payments will be
considered ordinary income to a certificateholder but may not be considered
interest income for U.S. federal income tax purposes.
In the event that such tax treatment is not respected, the trust agreement
provides that the certificateholders will be allocated gross income of the
trust for each calendar month equal to the sum of (i) the amount of interest
that accrues on the certificates for such calendar month, (ii) an amount
equivalent to interest that accrues during such period on amounts previously
due on the certificates but not yet distributed and (iii) any gross income of
the trust attributable to discount on the motor vehicle loans that corresponds
to any excess of the principal amount of the certificates over their initial
issue price. All remaining income of the trust will be allocated to Chase USA.
All deductions and losses also will be allocated to Chase USA.
No assurance can be given that the IRS would not require the trust to
allocate a greater amount of gross or net income to the certificateholders.
Moreover, even under the foregoing method of allocation (and also under the
rules applicable to the tax treatment of guaranteed payments, which is the
trust's primary U.S. federal income tax reporting position),
certificateholders will realize income equal to the entire interest rate on
the
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certificates even though the trust may not have sufficient cash to make
current cash distributions with respect to such income. Thus, cash method
certificateholders will be required effectively to report income from the
certificates on an accrual basis and all certificateholders will be liable for
the U.S. federal income taxes due on their allocable share of the trust's
income even if they have not received any cash distributions from the trust
with respect to such income. In addition, because tax allocations and tax
reporting will be done on a uniform basis for all certificateholders,
certificateholders purchasing certificates at different times and at different
prices may be required to recognize an amount of taxable income that is
greater or less than the amount of economic income reported to them by the
trust. See "Allocations between Transferors and Transferees" below.
A significant portion of the taxable income allocated to a certificateholder
that is a pension, profit sharing or employee benefit plan or other tax-exempt
entity (including an individual retirement account) will constitute "unrelated
business taxable income" generally taxable to such a holder under the tax
code.
The trust intends to make all tax calculations relating to income and
allocations to certificateholders on an aggregate basis. If the IRS were to
require that such calculations be made separately for each motor vehicle loan,
the trust might be required to incur additional expense.
Discount and Premium. Chase USA anticipates that the motor vehicle loans
transferred to the trust will not have been issued with OID. In such case, the
trust should not have to accrue any OID income. However, the purchase price
paid by the trust for the motor vehicle loans may be greater or less than the
remaining principal balance of the motor vehicle loans at the time of
purchase. If so, the motor vehicle loans will have been acquired at a premium
or discount, as the case may be. (As indicated above, the trust will make this
calculation on an aggregate basis, but might be required to recompute it on a
receivable-by-receivable basis.)
If the trust acquires the motor vehicle loans at a market discount or
premium, the trust will elect to include any such discount in income currently
as it accrues over the life of the motor vehicle loans or to offset any such
premium against interest income on the motor vehicle loans. As indicated
above, a portion of such market discount income or premium deduction may be
allocated to certificateholders.
Section 708 Termination. Under Section 708 of the tax code, the trust will
be deemed to terminate for U.S. federal income tax purposes if 50% or more of
the capital and profits interests in the trust are sold or exchanged within a
12-month period. If such a termination occurs, the trust would be considered
to have transferred all of its assets and liabilities to a new trust and then
to have immediately liquidated and distributed the interests in the new trust
to the continuing certificateholders. The trust will not comply with certain
technical requirements that might apply when such a constructive termination
occurs. Consequently, the trust may be subject to certain tax penalties and
may incur additional expenses if it is required to comply with those
requirements.
Disposition of Certificates. Generally, subject to a number of specific
exceptions, a certificateholder will recognize capital gain or loss on a sale
or other taxable disposition of certificates in an amount equal to the
difference between the amount realized by the certificateholder on such sale
or disposition and the certificateholder's tax basis in such certificates. A
certificateholder's tax basis in a certificate generally will equal the
certificateholder's cost therefor increased by the certificateholder's
allocable share of trust income and decreased by any distributions received
with respect to such certificate. In addition, both the tax basis in the
certificates and the amount realized on a sale of a certificate would include
the certificateholder's allocable share of the notes and other liabilities of
the trust. A certificateholder acquiring certificates at different prices will
be required to maintain a single aggregate adjusted tax basis in such
certificates, and, upon sale or other disposition of some of the certificates,
allocate a portion of such aggregate tax basis to the certificates sold
(rather than maintaining a separate tax basis in each certificate for purposes
of computing gain or loss on a sale of that certificate).
Any gain on the sale of a certificate attributable to the
certificateholder's share of unrecognized accrued market discount on the motor
vehicle loans generally would be treated as ordinary income to the
certificateholder and would give rise to special tax reporting requirements.
In order to avoid this tax treatment and the resulting special tax reporting
requirements related thereto, the trust will elect to include market discount
in income as it accrues.
If a certificateholder is required to recognize an aggregate amount of
income over the life of the certificates that exceeds the aggregate cash
distributions with respect thereto, such excess generally will give rise to a
capital loss upon the retirement of the certificates. The deductibility of
capital losses is subject to limitations.
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Allocations Between Transferors and Transferees. In general, the trust's
taxable income and losses will be determined monthly and the tax items for a
particular calendar month will be apportioned among the certificateholders in
proportion to the principal amount of certificates owned by them as of the
close of the last day of such month. As a result, an investor purchasing
certificates may be allocated tax items (which will affect its tax liability
and tax basis) attributable to periods before their purchase.
The use of such a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of the certificateholder's interest), taxable
income or losses of the trust might be reallocated among the
certificateholders. The trustee is authorized to revise the trust's method of
allocation between transferors and transferees to conform to a method
permitted by future regulations.
Section 754 Election. In the event that a certificateholder sells its
certificates at a profit (or loss), the purchasing certificateholder will have
a higher (or lower) tax basis in the certificates than the selling
certificateholder had. The tax basis of the trust's assets will not be
adjusted to reflect that higher (or lower) basis unless the trust files an
election under section 754 of the tax code. In order to avoid the
administrative complexities that would be involved in keeping accurate
accounting records, the trust will not make such an election. As a result,
certificateholders might be allocated a greater or lesser amount of trust
income than would be appropriate based on their own purchase price for
certificates.
Administrative Matters. The trustee will be required to keep complete and
accurate books for the trust. such books will be maintained for financial
reporting and tax purposes on an accrual basis and the fiscal year of the
trust will be the calendar year. The trustee will file or cause to be filed a
partnership information return (IRS Form 1065) with the IRS for each taxable
year of the trust and will report each certificateholder's allocable share of
items of trust income and expense to holders and the IRS on Schedule K-1. The
trustee will provide or cause to be provided the Schedule K-1 information to
nominees that fail to provide the trust with the information statement
described below and such nominees will be required to forward such information
to the beneficial owners of the certificates. Generally, certificateholders
must file tax returns that are consistent with the information return filed by
the trust or be subject to penalties unless the certificateholder notifies the
IRS of all such inconsistencies.
Under Section 6031 of the tax code, any person that holds certificates as a
nominee at any time during a calendar year is required to furnish the trust
with a statement containing certain information on the nominee, the beneficial
owners and the certificates so held. Such information includes (i) the name,
address and taxpayer identification number of the nominee and (ii) as to each
beneficial owner (x) the name, address and taxpayer identification number of
such person, (y) whether such person is a United States person, a tax-exempt
entity or a foreign government, an international organization, or any wholly
owned agency or instrumentality of either of the foregoing and (z) certain
information on certificates that were held, bought or sold on behalf of such
person throughout the year. In addition, brokers and financial institutions
that hold certificates through a nominee are required to furnish directly to
the trust information as to themselves and their ownership of certificates. A
clearing agency registered under Section 17A of the Securities Exchange Act of
1934 is not required to furnish any such information statement to the trust.
The information referred to above for any calendar year must be furnished to
the trust on or before the following January 31. Nominees, brokers and
financial institutions that fail to provide the trust with the information
described above may be subject to penalties.
Chase USA will be designated as the tax matters partner in the trust
agreement and, as such, will be responsible for representing the
certificateholders in any dispute with the IRS. The tax code provides for
administrative examination of a partnership as if the partnership were a
separate and distinct taxpayer. Generally, the statute of limitations for
partnership items does not expire before three years after the date on which
the partnership information return is filed. Any adverse determination
following an audit of the return of the trust by the appropriate taxing
authorities could result in an adjustment of the returns of the
certificateholders, and, under certain circumstances, a certificateholder may
be precluded from separately litigating a proposed adjustment to the items of
the trust. An adjustment could result in an audit of a certificateholder's
U.S. federal income tax returns and, consequently, to adjustments of items not
related to the certificateholder's allocable share of the income and losses of
the trust.
Tax Consequences to Non-U.S. Certificateholders. Under the terms of the
trust agreement, the certificates may not be acquired by or for the account of
an individual or entity that is not a U.S. person as defined in Section
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<page>
7701(a)(30) of the tax code, and any transfer of a certificate to a person
that is not a U.S. person shall be void. Moreover, the trust will withhold on
any amounts allocable or payable to a non-U.S. certificateholder at a rate of
35% for non-U.S. certificateholders that are taxable as corporations and the
highest individual income tax rate for all other non-U.S. certificateholders.
In determining a certificateholder's withholding status, the entity otherwise
required to withhold U.S. taxes may rely on IRS Form W-8BEN, IRS Form W-8ECI,
IRS Form W-9 or a certificateholder's certification of nonforeign status
signed under penalties of perjury.
Backup Withholding. Distributions made on the certificates and proceeds
from the sale of the certificates generally will be subject to U.S. backup
withholding tax if the certificateholder fails to comply with certain
identification procedures or otherwise fails to establish an exemption.
State Tax Consequences
The above discussion does not address the tax treatment of the trust, the
notes, the certificates, noteholders or certificateholders under any state tax
laws. You are urged to consult with your own tax advisors regarding the state
tax treatment of the trust as well as any state tax consequences to you,
particularly in the case of financial institutions, of purchasing, holding and
disposing of your notes or certificates.
Employee Benefit Plan Considerations
General
Before investing in the notes or certificates, fiduciaries of Plans should
consider, among other matters:
o ERISA's fiduciary standards or similar standards under Similar Laws,
o whether such investment in the notes or certificates by the Plan
satisfies the prudence and diversification requirements of ERISA or
applicable standards under Similar Laws, taking into account the
overall investment policy of the Plan, the composition of the Plan's
portfolio and any limitations on the marketability of the notes and
certificates,
o whether such fiduciaries have authority to make such investment in the
notes or certificates under the applicable Plan investment policies and
governing instruments and
o rules under ERISA and the tax code or similar standards under Similar
Laws that prohibit plan fiduciaries from causing a Plan to engage in
certain "prohibited transactions."
Under the Plan Assets Regulation issued by the U.S. Department of Labor, or
the DOL, if a Plan subject to ERISA invests in an "equity interest" of an
entity that is neither a publicly-offered security nor a security issued by an
investment company registered under the Investment Company Act of 1940, the
Plan's assets will include both the equity interest and an undivided interest
in each of the entity's underlying assets, unless it is established that the
entity is an operating company or that equity participation in the entity by
"benefit plan investors" is not significant. An "equity interest" is an
interest in an entity other than an instrument that is treated as indebtedness
under applicable local law and which has no substantial equity features. If
the underlying assets of the trust or Chase USA were deemed to be "plan
assets" of Plans under ERISA, this would result, among other things, in (i)
the application of the prudence and other fiduciary responsibility standards
of ERISA to activities engaged in by Chase USA, the trustee, and others and
(ii) the possibility that certain transactions in which Chase USA, the trustee
and others might seek to engage could constitute "prohibited transactions"
under ERISA and the tax code. If a prohibited transaction occurs for which no
exemption is available, Chase USA, the trustee and any other fiduciary that
has engaged in the prohibited transaction could be required (i) to restore to
the Plan any profit realized on the transaction and (ii) to reimburse the Plan
for any losses suffered by the Plan as a result of the investment. In
addition, each disqualified person (within the meaning of Section 4975 of the
tax code) involved could be subject to an excise tax equal to 15% of the
amount involved in the prohibited transaction for each year the transaction
continues and, unless the transaction is corrected within statutorily required
periods, to an additional tax of 100% of the amount involved. Plan fiduciaries
who decide to invest in the notes or certificates could, under certain
circumstances, be liable for prohibited transactions or other violations as a
result of their investment or as co-fiduciaries for actions taken by or on
behalf of Chase USA or the trust. With respect to an individual retirement
account, or IRA, that invests in the notes or certificates, the
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<page>
occurrence of a prohibited transaction involving the individual who
established the IRA, or his or her beneficiaries, would cause the IRA to lose
its tax-exempt status.
The Notes
Although there can be no assurances, since there is little authority on the
subject, we believe that the notes will not constitute equity interests under
the Plan Assets Regulation because the notes (i) should be treated as
indebtedness under local law and as debt, rather than equity, for tax purposes
(see "Material Federal Income Tax Consequences--Tax Consequences to
Noteholders" in this prospectus supplement), and (ii) should not be deemed to
have any "substantial equity features." Therefore, the motor vehicle loans and
other assets included as assets of the trust should not be deemed to be "plan
assets" of the investing Plans. Those conclusions are based, in part, upon the
traditional debt features of the notes, including the reasonable expectation
of purchasers of notes that the notes (which are highly rated by the rating
agencies) will be repaid when due, as well as the absence of conversion
rights, warrants and other typical equity features. However, we cannot assure
you that the notes would be characterized by the DOL or others as indebtedness
on the date of issuance or at any given time thereafter. Accordingly, before
purchasing the notes, a fiduciary or other Plan investor should itself confirm
that the notes constitute indebtedness, and have no substantial equity
features, for purposes of the Plan Assets Regulation.
Section 406 of ERISA and Section 4975 of the tax code prohibit Plans subject
to Title I of ERISA or Section 4975 of the tax code from engaging in specified
transactions involving plan assets with persons or entities who are "parties
in interest," within the meaning of ERISA, or "disqualified persons," within
the meaning of Section 4975 of the tax code. The acquisition and/or ownership
of the notes by a Plan with respect to which Chase USA, the trustee, the
indenture trustee, the owner of the certificates or others involved with the
notes, or any of their respective affiliates is considered a party in interest
or a disqualified person may constitute or result in a prohibited transaction
under Section 406 of ERISA or Section 4975 of the tax code, unless the notes
are acquired and are held in accordance with an applicable statutory,
regulatory, class or individual prohibited transaction exemption. In this
regard, the DOL has issued prohibited transaction class exemptions, which are
called PTCEs, that may apply to the acquisition and holding of the notes.
These class exemptions include, among others, PTCE 84-14 respecting
transactions effected by independent qualified professional asset managers,
PTCE 90-1 respecting insurance company pooled separate accounts, PTCE 91-38
respecting bank collective investment funds, PTCE 95-60 respecting insurance
company general accounts and PTCE 96-23 respecting transactions effected by
in-house asset managers.
Similar Laws governing the investment and management of the assets of
governmental, church and non-U.S. Plans may contain fiduciary and prohibited
transaction requirements similar to those under ERISA and the tax code
discussed above. Accordingly, fiduciaries of such governmental, church and
non-U.S. Plans, in consultation with their advisors, should consider the
impact of any applicable Similar Laws on investments in the notes and the
considerations described above, if applicable.
The notes may not be purchased with plan assets of any Plan if any of Chase
USA, the indenture trustee, the trustee or any of their respective affiliates:
o has investment or administrative discretion with respect to the plan
assets used to effect such purchase,
o has authority or responsibility to give, or regularly gives, investment
advice with respect to such plan assets, for a fee and pursuant to an
agreement or understanding that such advice (i) will serve as a primary
basis for investment decisions with respect to such plan assets, and
(ii) will be based on the particular investment needs of such Plan or
o is an employer maintaining or contributing to such Plan.
Any fiduciary proposing to invest in the notes for or on behalf of a Plan,
directly or indirectly, should consult with counsel for the Plan and each
fiduciary investing in a note will be deemed to represent that its purchase
and holding of the notes (i) are eligible for exemptive relief under PTCE 84-
14, PTCE 90-1, PTCE 91-38, PTCE 95-60, PTCE 96-23, or, if the Plan is not
subject to ERISA or Section 4975 of the tax code, does not and will not
constitute or result in a non-exempt prohibited transaction, or otherwise
trigger any penalties or liabilities under, or violate in any way, any other
applicable Similar Laws, and (ii) will satisfy the applicable fiduciary
requirements imposed under ERISA and any other applicable Similar Laws.
S-43
The Certificates
The following is a summary of certain considerations associated with an
investment in the certificates by Plans subject to Title I of ERISA and
Section 4975 of the tax code.
Section 406 of ERISA and Section 4975 of the tax code prohibit Plans from
engaging in specified transactions involving plan assets with persons or
entities who are "parties in interest" within the meaning of ERISA, or
"disqualified persons" within the meaning of Section 4975 of the tax code.
Because the certificates will constitute "equity interests" under the Plan
Assets Regulation, and there can be no assurance that any exception under that
regulation will apply, it is likely that an investment by Plans in
certificates will cause the assets of the trust to be "plan assets." The
acquisition and/or ownership of certificates by a Plan with respect to which
Chase USA, the trustee, the indenture trustee, or others involved with the
certificates, or any of their respective affiliates is considered a party in
interest or a disqualified person may constitute or result in a direct or
indirect prohibited transaction under Section 406 of ERISA and/or Section 4975
of the tax code, unless the certificates are acquired and are held in
accordance with an applicable statutory, regulatory, class or individual
prohibited transaction exemption.
The DOL has granted to J.P. Morgan Securities Inc. the Exemption, which
exempts from certain of the prohibited transaction rules and the related
excise tax provisions of Section 4975 of the tax code with respect to the
initial purchase, the holding and the subsequent resale by Plans of
securities, including certificates, issued by certain qualifying issuers
holding investment pools that consist of only certain receivables, loans, and
other obligations, and the related servicing, operation and management of the
issuers, provided the conditions and requirements of the Exemption are
satisfied. The receivables covered by the Exemption include retail installment
sales contracts, purchase money notes and other notes secured by automobiles
and light-duty trucks such as the motor vehicle loans to be held by the trust.
Among the general conditions that must be satisfied for the Exemption to apply
are the following:
o the acquisition of the securities by a Plan is on terms, including the
price for the securities, that are at least as favorable to the Plan as
they would be in an arm's-length transaction with an unrelated party,
o the rights and interests evidenced by the securities acquired by the
Plan are not subordinated to the rights and interests evidenced by
other securities of the issuer unless the investment pool contains
certain types of collateral, such as consumer loans fully secured by
motor vehicles,
o the securities acquired by the Plan have received a rating at the time
of such acquisition that is in one of the three highest generic rating
categories (four, in a transaction in which the investment pool
contains certain types of collateral, such as consumer loans fully
secured by motor vehicles) from either Moody's Investors Service,
Standard & Poor's, a division of The McGraw-Hill Companies, Inc. or
Fitch Ratings,
o the trustee must not be an affiliate of any other member of the
Restricted Group, except that it may be an affiliate of the
underwriters,
o the sum of all payments made to and retained by the underwriters in
connection with the distribution of the securities represents not more
than reasonable compensation for underwriting the securities,
o the sum of all payments made to and retained by the seller pursuant to
the assignment of the loans to the issuer represents not more than the
fair market value of such loans,
o the sum of all payments made to and retained by the servicer and any
other servicer represents not more than reasonable compensation for
such person's services under any servicing agreement,
o the Plan investing in the securities is an "accredited investor" as
defined in Rule 501(a)(1) of Regulation D of the SEC under the
Securities Act of 1933, as amended, and
o for certain types of issuers, the documents establishing the issuer and
governing the transaction must contain certain provisions intended to
protect the assets of the issuer from creditors of the sponsor.
The Exemption defines the term "reasonable compensation" by reference to DOL
Regulation Section 2550.408c-2, which states that whether compensation is
reasonable depends upon the particular facts and circumstances of each case.
Each fiduciary of a Plan considering the purchase of a certificate should
satisfy
S-44
itself that all amounts paid to or retained by the underwriters and the
servicer represent reasonable compensation for purposes of the Exemption if
the Exemption is being relied upon.
Furthermore, in order for its securities to qualify under the Exemption, an
issuer must meet certain requirements, including the following:
o the corpus of the issuer must consist solely of assets of the type that
have been included in other investment pools,
o securities in such other investment pools must have been rated in one
of the three highest rating categories (four, in a transaction which
the investment pool contains certain types of collateral, such as
consumer loans fully secured by motor vehicles) of either Moody's
Investors Service, Standard & Poor's, a division of The McGraw-Hill
Companies, Inc. or Fitch Ratings for at least one year prior to the
Plan's acquisition of the securities and
o securities evidencing interests in such other investment pools must
have been purchased by investors other than Plans for at least one year
prior to any Plan's acquisition of securities.
The Exemption generally does not apply to Plans sponsored by a member of the
Restricted Group. Moreover, the Exemption provides certain Plan fiduciaries
relief from certain self-dealing/conflict of interest prohibited transactions
that may arise when the fiduciary causes a Plan to acquire securities of an
issuer holding obligations on which the fiduciary or its affiliate is obligor
only if, among other requirements:
o in the case of an acquisition in connection with the initial issuance
of securities, at least 50% of each class of securities in which Plans
have invested is acquired by persons independent of the Restricted
Group and at least 50% of the aggregate interest in the issuer is
acquired by persons independent of the Restricted Group,
o such fiduciary or its affiliate is an obligor with respect to 5% or
less of the fair market value of the obligations contained in the
investment pool,
o the Plan's investment in securities of any class does not exceed 25% of
all of the securities of the class outstanding at the time of the
acquisition and
o immediately after the acquisition, no more than 25% of the assets of
any Plan with respect to which such person is a fiduciary is invested
in securities representing an interest in one or more issuers
containing assets sold or serviced by the same entity.
The rating of a security may change. If the rating of a security declines
below the lowest permitted rating, the security will no longer be eligible for
exemptive relief under the Exemption and consequently may not be purchased by
or sold to a Plan (although a Plan that had purchased the security when it had
a permitted rating would not be required by the Exemption to dispose of it).
The Exemption will apply to the acquisition and the holding of the
certificates only if all of the conditions to application of the Exemption are
satisfied. Before purchasing a certificate, a Plan fiduciary should make its
own determination as to the availability of the relief provided by the
Exemption. In particular, a fiduciary of any Plan considering an investment in
the certificates must ascertain that the Plan is an "accredited investor", as
defined in Rule 501(a)(1) of Regulation D of the SEC under the Securities Act
of 1933, as amended, and that, at the time of the acquisition, the
certificates are rated BBB- or higher by Moody's Investors Service, Standard &
Poor's, a division of The McGraw-Hill Companies, Inc. or Fitch Ratings.
Taxation of Tax-Exempt Investors
A Plan that is exempt from the U.S. federal income tax under Section 501(a)
of the tax code is nevertheless subject to federal income taxation to the
extent that its income is "unrelated business taxable income," or UBTI, within
the meaning of Section 512 of the tax code. All or a portion of the income in
respect of certificates and other equity interests of a trust that has issued
debt obligations is "debt-financed income" within the meaning of Section 514
of the tax code, and is therefore UBTI. Any potential investor that is exempt
from the U.S. federal income tax under Section 501(a) of the tax code should
consult with counsel concerning the taxation of an investment in the
certificates.
S-45
Each Plan fiduciary should consult with its legal advisor concerning the
considerations discussed above before making an investment in the
certificates, including the applicability of a PTCE or the Exemption. As
indicated above, Similar Laws governing the investment and management of the
assets of governmental, church, non-U.S. and other Plans may contain fiduciary
and prohibited transaction requirements similar to those under ERISA and/or
the tax code. Accordingly, fiduciaries of such Plans, in consultation with
their advisors, should consider the impact of applicable Similar Laws on an
investment in the certificates and the considerations discussed above, as
applicable. In addition, the general fiduciary requirements which apply to
investments in the notes apply as well to investments in the certificates, and
each purchaser and holder of certificates will be deemed to have represented
and warranted that its purchase and holding of a certificate or any interest
therein satisfies such requirements.
For further information, refer to the section of the prospectus entitled
"Employee Benefit Plan Considerations."
Underwriting
Note Underwriting Agreement
Subject to the terms and conditions set forth in an underwriting agreement
with respect to the notes, Chase USA has agreed to sell to the underwriters
named below, and each of the those underwriters has severally agreed to
purchase, the principal amount of notes of each class set forth opposite its
name below:
Principal Principal Principal Principal
Amount Amount Amount Amount
of Class A-1 of Class A-2 of Class A-3 of Class A-4
Note Underwriters Notes Notes Notes Notes
- ----------------- ------------ ------------ ------------ ------------
J.P. Morgan Securities Inc. ......................................... $ 92,668,000 $108,334,000 $116,668,000 $111,934,000
Bear, Stearns & Co. Inc. ............................................ $ 92,666,000 $108,333,000 $116,666,000 $111,933,000
Countrywide Securities Corporation .................................. $ 92,666,000 $108,333,000 $116,666,000 $111,933,000
Loop Capital Markets, LLC ........................................... $ 10,000,000 $ 10,000,000 $ 15,000,000 $ 10,000,000
------------ ------------ ------------ ------------
Total .............................................................. $288,000,000 $335,000,000 $365,000,000 $345,800,000
============ ============ ============ ============
In the underwriting agreement with respect to the notes, the several
underwriters have agreed, subject to the terms and conditions therein, to
purchase all the notes if any notes are purchased.
Chase USA has been advised by the underwriters that they propose initially
to offer the notes to the public at the prices set forth on the cover page of
this prospectus supplement. After the initial public offering, such public
offering prices may change.
The underwriting discounts and commissions, the selling concessions that the
underwriters of the notes may allow to certain dealers, and the discounts that
such dealers may reallow to certain other dealers, expressed as a percentage
of the aggregate initial principal amount of each class of notes shall be as
follows:
Underwriting Selling
Discount Concessions Reallowance
and Not to Not to
Commissions Exceed Exceed
------------ ----------- -----------
Class A-1 Notes....................................................................... 0.100% 0.060% 0.050%
Class A-2 Notes....................................................................... 0.125% 0.075% 0.065%
Class A-3 Notes....................................................................... 0.175% 0.105% 0.100%
Class A-4 Notes....................................................................... 0.225% 0.135% 0.125%
Certificate Underwriting Agreement
Subject to the terms and conditions set forth in an underwriting agreement
with respect to the certificates, Chase USA has agreed to sell to J.P. Morgan
Securities Inc., as underwriter of the certificates, and J.P. Morgan
Securities Inc. has agreed to purchase, the entire principal amount of the
certificates.
S-46
In the underwriting agreement with respect to the certificates, the
underwriter of the certificates has agreed, subject to the terms and
conditions therein, to purchase all of the certificates if any certificates
are purchased.
Chase USA has been advised by the underwriter of the certificates that it
proposes initially to offer the certificates to the public at the price set
forth on the cover page of this prospectus supplement. After the initial
public offering, such public offering price may change.
The underwriting discounts and commissions, the selling concessions that the
underwriter of the certificates may allow to certain dealers, and the
discounts that such dealers may reallow to certain other dealers, expressed as
a percentage of the initial certificate balance shall be as follows:
Underwriting Selling
Discount Concessions Reallowance
and Not to Not to
Commissions Exceed Exceed
------------ ----------- -----------
Certificates.......................................................................... 0.275% 0.165% 0.155%
Proceeds to Chase USA
Chase USA will receive the proceeds listed below, after payment of the
underwriting discounts and commissions listed below and estimated expenses of
$625,000:
Proceeds to
Chase USA
as % of the Underwriting
principal discounts
Proceeds to amount of and
Chase USA the securities commissions
--------------- -------------- ------------
Class A-1 Notes................................................................ $287,712,000.00 99.900000% $288,000.00
Class A-2 Notes................................................................ $334,561,106.45 99.868987% $418,750.00
Class A-3 Notes................................................................ $364,324,662.40 99.814976% $638,750.00
Class A-4 Notes................................................................ $344,939,227.72 99.751078% $778,050.00
Certificates................................................................... $ 34,104,732.48 99.721440% $ 94,050.00
General
Until the distribution of the notes is completed, rules of the SEC may limit
the ability of the underwriters and certain selling group members to bid for
and purchase the securities. As an exception to these rules, the underwriters
are permitted to engage in certain transactions that stabilize the price of
the securities. Such transactions consist of bids or purchases for the purpose
of pegging, fixing or maintaining the price of the securities.
If the underwriters create a short position in the securities in connection
with this offering (i.e., they sell more securities than the aggregate initial
principal amount set forth on the cover page of this prospectus supplement),
the underwriters may reduce that short position by purchasing securities in
the open market.
The underwriters may also impose a penalty bid on certain underwriters and
selling group members. This means that if the underwriters purchase securities
in the open market to reduce the underwriters' short position or to stabilize
the price of such securities, they may reclaim the amount of the selling
concession from any underwriter or selling group member who sold those
securities as part of the offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases. The imposition of a penalty
bid might also have an effect on the price of a security to the extent that it
were to discourage resales of the security.
Neither the seller nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that any of the
transactions described above might have on the price of the securities. In
addition, neither the seller nor any of the underwriters makes any
representation that the underwriters will engage in such transactions or that
such transactions, if commenced, will not be discontinued without notice.
S-47
The notes and the certificates are new issues of securities and there
currently is no secondary market for the securities or the certificates. The
underwriters for the securities expect to make a market in the securities but
will not be obligated to do so. We cannot assure you that a secondary market
for the securities will develop. If a secondary market for the securities does
develop, it might end at any time or it might not be sufficiently liquid to
enable you to resell any of your notes or certificates.
The indenture trustee may, from time to time, invest the funds in the
collection account and the reserve account in investments acquired from or
issued by the underwriters.
In the ordinary course of business, the underwriters and their affiliates
have engaged and may engage in investment banking and commercial banking
transactions with Chase USA and its affiliates.
Chase USA has agreed to indemnify the underwriters against certain
liabilities, including civil liabilities under the Securities Act of 1933, as
amended, or to contribute to payments which the underwriters may be required
to make in respect thereof.
The closings of the sale of each class of the notes and the certificates are
conditioned on the closing of the sale of each other class of notes and those
certificates.
This prospectus supplement and the attached prospectus may be used by J.P.
Morgan Securities Inc. in connection with offers and sales related to market-
making transactions in the securities. J.P. Morgan Securities Inc. may act as
principal or agent in such transactions. Such sales will be made at prices
related to prevailing market prices at the time of sale. J.P. Morgan
Securities Inc. has no obligation to make a market in the securities and any
such market-making may be discontinued at any time without notice, in its sole
discretion. J.P. Morgan Securities Inc. is among the underwriters
participating in the initial distribution of the securities.
Upon receipt of a request by an investor who has received an electronic
prospectus from an underwriter or a request by such investor's representative
within the period during which there is an obligation to deliver a prospectus,
Chase USA or such underwriter will promptly deliver, without charge, a paper
copy of this prospectus supplement and the prospectus.
Legal Matters
Certain legal matters relating to the issuance of the securities will be
passed upon for Chase USA by Simpson Thacher & Bartlett, New York, New York.
Certain legal matters relating to the issuance of the certificates will be
passed upon for Chase USA by Richards, Layton & Finger, P.A. and certain other
legal matters will be passed upon for Chase USA by Raymond C. Scott, Esq., an
Assistant Vice President and Assistant General Counsel of Chase Manhattan
Automotive Finance Corporation, and for the underwriters by Sidley Austin
Brown & Wood LLP, New York, New York. From time to time Simpson Thacher &
Bartlett, Sidley Austin Brown & Wood LLP and Richards, Layton & Finger, P.A.
provide legal services to Chase USA and its affiliates.
S-48
Glossary of Terms
Additional defined terms used in this prospectus supplement are defined in
the prospectus.
ABS means the Absolute Prepayment Model which we use to measure prepayments
on motor vehicle loans and which we describe under "Weighted Average Life of
the Securities."
ABS Tables means the tables captioned "Percent of Initial Note Principal
Amount at Various ABS Percentages" and "Percent of Initial Certificate Balance
at Various ABS Percentages" included under "Weighted Average Life of the
Securities."
Aggregate Net Losses means, for any payment date, the amount equal to the
aggregate principal balance of all motor vehicle loans that were designated
"defaulted receivables" during the related Collection Period minus the
Liquidation Proceeds allocable to principal collected during such Collection
Period with respect to any motor vehicle loans previously designated as
"defaulted receivables."
Available Interest means, for any payment date, the sum of the portion of
collections on the motor vehicle loans received during the related Collection
Period allocated to interest and that portion of the repurchase amounts
received with respect to the motor vehicle loans repurchased by the seller or
purchased by the servicer during the related Collection Period that would have
been treated as Available Interest if the obligor thereof had prepaid such
motor vehicle loans in full on the date as of which such motor vehicle loans
were repurchased or purchased.
Available Principal means, for any payment date, the sum of the portion of
collections on the motor vehicle loans during the related Collection Period
allocated to the principal balance of the motor vehicle loans and that portion
of the repurchase amounts received with respect to the motor vehicle loans
repurchased by the seller or purchased by the servicer during the related
Collection Period that would have been treated as Available Principal if the
obligor thereof had prepaid such motor vehicle loans in full on the date as of
which such motor vehicle loans were repurchased or purchased.
Average Delinquency Percentage means, for any payment date, the average of
the Delinquency Percentages for such payment date and the preceding two
payment dates.
Average Net Loss Ratio means, for any payment date, the average of the Net
Loss Ratios for such payment date and the preceding two payment dates.
Certificate Balance means $34,200,000 as of the closing date and,
thereafter, will be an amount equal to the initial Certificate Balance,
reduced by all amounts allocable to principal previously distributed to
certificateholders. The Certificate Balance shall also be reduced on any
payment date by the excess, if any, of (i) the sum of the Certificate Balance
and the outstanding principal amount of the notes (in each case after giving
effect to payments and distributions on that payment date), over (ii) the
aggregate principal balance of the motor vehicle loans as of the close of
business on the last day of the preceding Collection Period. Thereafter, the
Certificate Balance will be increased on any payment date to the extent that
any portion of the Total Distribution Amount on such payment date is available
to make distributions of principal shortfalls carried over from prior payment
dates in respect of the certificates.
Certificate Percentage means 100% minus the Note Percentage on the date the
Class A-2 notes are paid in full.
Collection Period means, with respect to the first payment date, the period
from and including the cutoff date to and including June 30, 2002 and, with
respect to each subsequent payment date, the calendar month preceding the
calendar month in which such payment date occurs.
Delinquency Percentage means, for any payment date, the sum of the
outstanding principal balances of all motor vehicle loans which are 60 days or
more delinquent (including motor vehicle loans, which are not designated as
"defaulted receivables," relating to financed vehicles that have been
repossessed), as of the close of business on the last day of the Collection
Period immediately preceding such payment date, determined in accordance with
the servicer's normal practices, such sum expressed as a percentage of the
aggregate principal balance of the motor vehicle loans as of the close of
business on the last day of such Collection Period.
Exemption means the individual administrative exemption granted by the U.S.
Department of Labor to J.P. Morgan Securities Inc.
S-49
Foreign Investor means any person other than (i) a citizen or resident of
the United States, (ii) a corporation or partnership organized in or under the
laws of the United States or any political subdivision thereof, (iii) an
estate, the income of which is includible in gross income for U.S. federal
income tax purposes regardless of its source, or (iv) a trust (a) that is
subject to the supervision of a court within the United States and the control
of one or more United States persons as described in Section 7701(a)(30) of
the tax code or (b) that has a valid election in effect under applicable U.S.
Treasury regulations to be treated as a United States person.
Liquidation Proceeds means with respect to any motor vehicle loan, (i)
insurance proceeds, (ii) the monies collected during a Collection Period from
whatever source on a defaulted receivable and (iii) proceeds of a financed
vehicle sold after repossession, in each case, net of any liquidation expenses
and payments required by law to be remitted to the obligor.
Net Loss Ratio means, for any payment date, the ratio expressed as an
annualized percentage of (i) the Aggregate Net Losses for such payment date,
to (ii) the average of the aggregate principal balance of the motor vehicle
loans on the last day of the second Collection Period preceding the Collection
Period in which such payment date occurs and the aggregate balance of the
motor vehicle loans on the last day of the Collection Period preceding the
Collection Period in which such payment date occurs.
Note Percentage means the percentage equivalent of a fraction the numerator
of which is the aggregate principal amount of the Class A-3 notes and the
Class A-4 notes on the date the Class A-2 notes are paid in full and the
denominator of which is the sum of the aggregate principal amount of the Class
A-3 notes and the Class A-4 notes and the Certificate Balance on the date the
Class A-2 notes are paid in full.
Principal Distribution Amount means, for any payment date, the sum of the
following amounts, without duplication, for such payment date: (i) Available
Principal and (ii) the aggregate principal balance (net of liquidation
proceeds received during the related Collection Period and applied to
principal) of all motor vehicle loans designated as "defaulted receivables" in
that Collection Period.
Required Rate means the sum of (i) the servicing fee rate of 1.00% per annum
and (ii) the percentage equivalent of a fraction, the numerator of which is
equal to the sum of the product for each class of notes and for the
certificates of (x) the fixed rate per annum at which interest will accrue on
that class of notes or at which interest will be passed through on the
certificates, (y) the initial principal amount of that class of notes or the
initial Certificate Balance and (z) the projected weighted average life of
that class of notes or of the certificates set forth in the ABS Tables based
on an ABS percentage of 1.50%, assuming the servicer purchases the motor
vehicle loans on the earliest payment date on which it is permitted to do so,
and the denominator of which is equal to the sum of the product for each class
of notes and for the certificates of (1) the initial principal amount of that
class of notes or the initial Certificate Balance and (2) the projected
weighted average life of that class of notes or of the certificates set forth
in the ABS Tables based on an ABS percentage of 1.50%, assuming the servicer
purchases the motor vehicle loans on the earliest payment date on which it is
permitted to do so.
Restricted Group means, for purposes of the Exemption, the underwriters, the
trustee, the seller, the servicer, any insurer with respect to the loans, and
any obligor with respect to loans included in the investment pool constituting
more than 5% of the aggregate unamortized principal balance of the assets in
the investment pool and the affiliates of any of those parties.
Specified Reserve Account Balance means, on any payment date, 1.75% of the
aggregate principal balance of the motor vehicle loans as of the last day of
the second Collection Period preceding the Collection Period in which such
payment date occurs, but in any event will not be less than the lesser of (i)
an amount equal to 0.75% of the aggregate principal balance of the motor
vehicle loans as of the cutoff date and (ii) the aggregate principal balance
of the motor vehicle loans; provided, that the Specified Reserve Account
Balance will be calculated using a percentage of 3.50% on any payment date
(beginning with the September 2002 payment date) for which the Average Net
Loss Ratio exceeds 1.75% or the Average Delinquency Percentage exceeds 1.75%.
Total Distribution Amount means, for any payment date, the sum of Available
Interest and Available Principal for that payment date. The Total Distribution
Amount for any payment date will exclude all payments and proceeds (including
any liquidation proceeds and any amounts received from dealers with respect to
motor vehicle loans) of (i) any motor vehicle loans repurchased by the seller
or purchased by the servicer, the repurchase amount of which has been included
in the Total Distribution Amount for a prior payment date and (ii) investment
earnings and any late fees.
S-50
CHASE MANHATTAN AUTO TRUSTS
Asset Backed Notes
Asset Backed Certificates
Chase Manhattan Bank USA, National Association
Seller and Servicer
Each trust--
o will issue asset-backed notes and/or asset-backed certificates in one
or more classes, rated in one of the four highest rating categories
by at least one nationally recognized statistical rating organization,
o will own--
-- a pool of motor vehicle loans secured by new or used
automobiles or light-duty trucks,
-- collections on those motor vehicle loans,
-- security interests in the vehicles financed by those motor vehicle
loans and
-- funds in the accounts of the trust and
o may have the benefit of some form of credit or payment enhancement.
The main sources of funds for making payments on a trust's securities will be
collections on its motor vehicle loans and any enhancement that the trust may
have.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus or any related prospectus supplement is accurate or complete.
Any representation to the contrary is a criminal offense.
The date of this prospectus is January 22, 2002
Before you purchase any of these securities, be sure to read the risk factors
beginning on page 5 of this prospectus and the risk factors set forth in the
related prospectus supplement.
A security is not a deposit and neither the securities nor the underlying
motor vehicle loans are insured or guaranteed by the FDIC or any other
governmental authority.
The notes and the certificates will represent obligations of or interests in
the trust only and will not represent obligations of or interests in Chase
Manhattan Bank USA, National Association, or any of its affiliates.
Table of Contents
Reading this Prospectus and the Attached Prospectus Supplement ........... 1
Where You Can Find Additional Information ................................ 1
Incorporation of Certain Documents by Reference .......................... 1
Summary .................................................................. 2
Risk Factors ............................................................. 5
Interests of other persons in the financed vehicles could reduce the
funds available to make payments on your securities ................ 5
Our insolvency could result in accelerated, delayed or reduced
payments to you .................................................... 5
Only the assets of the trust are available to pay your securities ..... 6
Delays in collecting payments could occur if we cease to be the
servicer ........................................................... 6
Subordination may cause some classes of securities to bear additional
credit risk ........................................................ 6
Prepayments on the motor vehicle loans may adversely affect the
average life of and rate of return on your securities .............. 7
You may suffer losses on your securities because Chase USA as servicer
will hold collections and commingle them with its own funds ........ 7
Additional motor vehicle loans may have different characteristics than
the initial pool of motor vehicle loans ............................ 7
You may experience a prepayment of your securities as a result of pre-
funding ............................................................ 7
You may suffer losses because you have limited control over the
actions of the trust ............................................... 8
The Trusts ............................................................... 8
Chase USA ................................................................ 9
The Motor Vehicle Loans .................................................. 9
General ............................................................... 9
Delinquency and Loan Loss Information ................................. 11
Origination and Servicing of Motor
Vehicle Loans ...................................................... 11
Underwriting of Motor Vehicle Loans ................................... 13
Insurance ............................................................. 14
Collection Procedures ................................................. 15
Weighted Average Life of the Securities .................................. 16
How You Can Compute Your Portion of the Amount Outstanding of Your
Securities ............................................................ 17
Use of Proceeds .......................................................... 18
Principal Documents ...................................................... 19
Payments On The Securities ............................................... 20
Certain Information Regarding the Securities ............................. 20
Fixed Rate Securities ................................................. 20
Floating Rate Securities .............................................. 20
Book-Entry Registration ............................................... 21
Definitive Securities ................................................. 25
List of Securityholders ............................................... 25
Reports to Securityholders ............................................ 26
The Indenture ............................................................ 27
Events of Default ..................................................... 27
Certain Covenants ..................................................... 28
Modifications of the Indenture ........................................ 29
The Indenture Trustee ................................................. 30
Transfer and Servicing Agreements ........................................ 30
Sale and Assignment of Motor Vehicle Loans ............................ 31
Trust Accounts ........................................................ 32
Servicing ............................................................. 33
Distributions ......................................................... 37
Credit and Cash Flow Enhancement ...................................... 37
Statements to Trustees and Trust ...................................... 38
Amendments of Transfer and Servicing Agreements ....................... 38
Continuing Obligations of Indenture Trustee ........................... 38
Termination ........................................................... 39
Administration Agreement .............................................. 39
Material Legal Aspects of the Motor
Vehicle Loans ......................................................... 39
Security Interests in the Motor Vehicle Loans ......................... 39
Security Interests in the Financed Vehicles ........................... 40
Certain Matters Relating to Receivership .............................. 41
Consumer Protection Laws .............................................. 42
Employee Benefit Plan Considerations ..................................... 43
Plan of Distribution ..................................................... 44
Ratings .................................................................. 44
Legal Matters ............................................................ 45
Glossary of Terms For Prospectus ......................................... 46
i
Reading this Prospectus and the Attached Prospectus Supplement
We provide information on your securities in two separate documents that
offer varying levels of detail:
o this prospectus provides general information, some of which may not apply
to a particular series of securities, including your securities, and
o the attached prospectus supplement will provide a summary of the specific
terms of your securities.
If the terms of the securities described in this prospectus vary with the
attached prospectus supplement, you should rely on the information in the
prospectus supplement.
We include cross references to sections in these documents where you can
find further related discussions. Refer to the table of contents in the front
of each document to locate the referenced sections.
You will find a glossary of defined terms used in this prospectus on page
46.
You should rely only on the information contained in this prospectus and the
attached prospectus supplement, including any information incorporated by
reference. We have not authorized anyone to provide you with different
information. The information in this prospectus or the attached prospectus
supplement is only accurate as of the dates on their respective covers.
In this prospectus, the terms "Chase USA", "we", "us" and "our" refer to
Chase Manhattan Bank USA, National Association.
Where You Can Find Additional Information
We have filed a registration statement with the SEC, under the Securities
Act of 1933, as amended. This prospectus is part of the registration statement
but the registration statement includes additional information.
You may inspect and copy the registration statement at:
o the public reference facilities maintained by the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549 (telephone: 1-800-732-0330),
o the SEC's regional office at Citicorp Center, 500 West Madison Street,
14th Floor, Chicago Illinois 60661 and
o the SEC's regional office at 233 Broadway, New York, New York 10279.
Also, the SEC maintains a Web site at http://www.sec.gov containing reports,
proxy and information statements and other information regarding registrants
that file electronically with the SEC.
Incorporation of Certain Documents by Reference
The SEC allows us to "incorporate by reference" information we file with it,
which means that we can disclose important information to you by referring you
to other documents. The information incorporated by reference is considered to
be part of this prospectus. Information that we file later with the SEC will
automatically update the information in this prospectus. In all cases, you
should rely on the later information over different information included in
this prospectus or the related prospectus supplement. We incorporate by
reference any future annual, monthly or special SEC reports and proxy
materials filed by or on behalf of a trust until we terminate our offering of
the securities issued by that trust.
Copies of the Documents
You may receive a free copy of any or all of the documents incorporated by
reference in this prospectus or incorporated by reference into the attached
prospectus supplement if:
o you received this prospectus and
o you request copies from our affiliate, JPMorgan Chase Bank, Attention:
Investor Relations, 270 Park Avenue, New York, New York 10017 (telephone:
(212) 270-6000).
This offer only includes the exhibits to documents if those exhibits are
specifically incorporated by reference in those documents. You may also read
and copy these materials at the public reference facilities of the SEC in
Washington, D.C. referred to above.
1
Summary
The following summary is a short description of the main structural features
that a trust's securities may have. For that reason, this summary does not
contain all of the information that may be important to you or that describes
all of the terms of a security. To fully understand the terms of a trust's
securities, you will need to read both this prospectus and the related
prospectus supplement, in their entirety.
The Trusts
We will form a separate trust to issue each series of securities. Each trust
will be created by an agreement between us and a trustee.
The Seller and the Servicer
Chase USA is the seller and the servicer of the motor vehicle loans. We are a
wholly-owned subsidiary of J.P. Morgan Chase & Co. Our activities are
predominantly related to consumer lending. Chase USA and JPMorgan Chase Bank
are the principal banking subsidiaries of J.P. Morgan Chase & Co.
Chase USA, together with its affiliates, is engaged in the automotive
financing and automotive loan servicing business.
Trustee
The prospectus supplement will name the trustee for the trust.
Indenture Trustee
The prospectus supplement will name the indenture trustee.
Securities
Each trust will issue one or more classes of notes and may issue one or more
classes of certificates. You will find the following information about each
class of securities in the related prospectus supplement:
o its principal amount,
o its interest rate, which may be fixed or variable or a combination of
fixed and variable rates,
o the timing, amount and priority or subordination of payments of principal
and interest,
o the method for calculating the amount of principal payments,
o whether or not distributions of principal or interest will be delayed or
not made upon the occurrence of specified events,
o whether payments of principal and interest may or may not be made from
designated portions of the motor vehicle loans,
o its final payment date and
o whether and when it may be redeemed prior to its final payment date.
Some classes of securities may be entitled to:
o principal payments with disproportionate, nominal or no interest payments
or
o interest payments with disproportionate, nominal or no principal
payments.
The prospectus supplement will identify any class of securities issued by a
trust that is not being offered to the public.
Optional Prepayment
Generally, the servicer will have the option to purchase the motor vehicle
loans of each trust on any payment date when the aggregate principal balance
of the motor vehicle loans sold to the trust has declined to the percentage
specified in the prospectus supplement or less of the initial principal
balance. Upon the purchase of the motor vehicle loans, the securities of that
trust will be prepaid in full.
The Motor Vehicle Loans and Other Trust Property
The motor vehicle loans included in each trust will be retail installment sale
contracts and purchase money notes and other notes secured by new and used
automobiles and light-duty trucks and other property, including:
o the rights to receive payments made on the motor vehicle loans on and
after the cutoff date specified in the related prospectus supplement,
o security interests in the vehicles financed by the motor vehicle loans
and
o any proceeds from claims on various related insurance policies.
You will find a description of the characteristics of the trust's motor
vehicle loans in the prospectus supplement.
For a more detailed description of the motor vehicle loans, including the
criteria they must meet in order to be included in a trust, and the other
property supporting the securities, refer to the section of this prospectus
entitled "The Motor Vehicle Loans."
2
Other Property of the Trust
In addition to the motor vehicle loans, each trust will own amounts on deposit
in various trust accounts, which may include:
o an account into which collections are deposited,
o an account to fund post-closing purchases of additional motor vehicle
loans,
o an account providing yield enhancement to the motor vehicle loans,
o one or more reserve accounts or other accounts providing credit
enhancement,
o an account into which deposits are made until applied to the notes on the
dates targeted for payment of principal or
o any other account identified in the prospectus supplement.
Purchase of Motor Vehicle Loans After the Closing Date
If a trust has not purchased all of its motor vehicle loans at the time you
purchase your securities, it will purchase the remainder of its motor vehicle
loans from Chase USA over a period, not to exceed one year, specified in the
prospectus supplement.
Credit or Payment Enhancement
The prospectus supplement will specify the credit or payment enhancement, if
any, for each trust. Credit or payment enhancement may consist of one or more
of the following:
o subordination of one or more classes of securities,
o excess spread, i.e., interest earned on the motor vehicle loans in excess
of the sum of the amount required to be paid on the securities and the
servicing fees and other expenses of the trust,
o one or more reserve accounts,
o a yield supplement agreement, account or other arrangement,
o overcollateralization, i.e., the amount by which the principal amount of
the motor vehicle loans exceeds the principal amount of all of the
trust's securities,
o a letter of credit or other credit or liquidity facility,
o a surety bond,
o a guaranteed investment contract,
o swaps or other interest rate protection agreements,
o repurchase obligations,
o other agreements with respect to third party payments or other support or
o cash deposits or other arrangements.
Limitations or exclusions from coverage could apply to any form of credit or
payment enhancement. The prospectus supplement will describe the credit or
payment enhancement and related limitations and exclusions applicable to
securities issued by a trust. Enhancements cannot guarantee that losses will
not be incurred on the securities.
For more information about credit enhancement refer to the section of this
prospectus entitled, "Transfer and Servicing Agreements -- Credit and Cash
Flow Enhancement."
Transfer and Servicing of the Motor Vehicle Loans
We will transfer a pool of motor vehicle loans to a trust under a sale and
servicing agreement. We will agree with the trust to be responsible for
servicing, managing, maintaining custody of and making collections on the
motor vehicle loans.
For more information about the sale and servicing of the motor vehicle loans
refer to the section of this prospectus entitled "Transfer and Servicing
Agreements -- Sale and Assignment of Motor Vehicle Loans."
Servicing Fees
Each trust will pay the servicer a servicing fee based on the outstanding
balance of the motor vehicle loans. The amount of the servicing fee will be in
the related prospectus supplement. The servicer will also be entitled to
retain as supplemental servicing compensation the fees and charges paid by
obligors. In addition, if set forth in the related prospectus supplement, the
servicer will be entitled to receive investment income on amounts on deposit
in the trust's accounts.
For more information on servicing compensation refer to the section of this
prospectus entitled "Transfer and Servicing Agreements -- Servicing --
Servicing Compensation and Payment of Expenses" and the corresponding section
in the attached prospectus supplement.
Servicer Advances
The servicer may make advances of delinquent payments on the motor vehicle
loans. The related prospectus supplement will describe the terms and
conditions of those advances.
If the servicer makes advances, it will be entitled to reimbursement from
other collections of the trust for
3
advances that are not repaid out of collections of the related delinquent
payments.
Tax Status
Unless the related prospectus supplement specifies that a trust will elect to
be treated as a FASIT for federal income tax purposes, Simpson Thacher &
Bartlett, special tax counsel, will deliver an opinion to the effect that, for
federal income tax purposes:
o any notes issued by the trust will be treated as debt and
o the trust will not be characterized as an association or a publicly
traded partnership taxable as a corporation.
Alternative characterizations of the trust and the certificates issued by the
trust are possible, but would not result in materially adverse tax
consequences to holders of the certificates.
If the related prospectus supplement specifies that a trust will elect to be
treated as a FASIT for federal income tax purposes, Simpson Thacher &
Bartlett, special tax counsel, will deliver an opinion to the effect that the
trust will be treated as a FASIT for federal income tax purposes. An effective
FASIT election will enable a trust to be treated as a pass through entity not
subject to United States federal entity level income tax (except with respect
to certain prohibited transactions) and to issue securities that would be
treated as debt for United States federal income tax purposes. The prospectus
supplement for a trust that elects FASIT treatment will provide additional
information on the FASIT provisions.
The opinions referred to in the preceding two paragraphs will be filed with
the SEC as an exhibit to a current report filed on Form 8-K at the time the
related securities are sold.
For additional information concerning the application of federal tax laws to
your securities refer to the section of the attached prospectus supplement
entitled "Material Federal Income Tax Considerations."
Employee Benefit Plan Considerations
If you are investing the assets of an employee benefit plan, arrangement or
account that is subject to ERISA, the tax code or any similar laws or
regulations, or an entity whose underlying assets are considered to include
the assets of any employee benefit plan, arrangement or account, you should
carefully review the matters discussed in the section of this prospectus and
in the section of the attached prospectus supplement entitled "Employee
Benefit Plan Considerations" before investing in the securities.
Form and Denomination
Your securities may be issued in definitive form or in book-entry form. If
they are issued in book-entry form, you will not receive your securities in
definitive form. You may purchase securities in the denominations set forth in
the prospectus supplement.
For additional information concerning the form of your securities refer to the
section of this prospectus entitled "Certain Information Regarding the
Securities -- Book-Entry Registration" and "--Definitive Securities."
4
Risk Factors
You should consider the following risk factors in deciding whether to
purchase any of the securities.
Interests of other persons in the financed vehicles could reduce the funds
available to make payments on your securities.
If another person acquires a security or other interest in a financed
vehicle that is superior to the trust's security interest in the vehicle, some
or all of the proceeds from the sale of the vehicle may not be available to
make payments on the securities.
The trust's security interest in the financed vehicles could be impaired for
one or more of the following reasons:
o Chase USA, or if the motor vehicle loan was originated by an affiliate of
Chase USA, that affiliate, might fail to perfect its security interest in
the related financed vehicle,
o another person may acquire an interest in a financed vehicle that is
superior to the trust's security interest through fraud, forgery,
negligence or error because neither Chase USA nor the trustee will amend
the certificate of title or ownership to identify the trust as the new
secured party,
o the trust may not have a security interest in the financed vehicles in
certain states because the certificates of title for the financed
vehicles will not be amended to reflect the assignment of a security
interest in the financed vehicles to the trust and may not have been
amended to reflect an earlier assignment of a security interest in the
financed vehicles to Chase USA by the affiliate of Chase USA who
originated the related motor vehicle loan,
o holders of some types of liens, such as tax liens or mechanics liens, may
have priority over the trust's security interest and
o the trust may lose its security interest in financed vehicles confiscated
by the government.
Chase USA will not be required to repurchase a motor vehicle loan if the
security interest in the related financed vehicle or the motor vehicle loan
becomes impaired after it sold the motor vehicle loan to the trust.
Our insolvency could result in accelerated, delayed or reduced payments to
you.
We are chartered as a national banking association and are subject to
regulation and supervision by the Office of the Comptroller of the Currency.
If we become insolvent, are in an unsound condition or engage in violations of
our bylaws or regulations, the Comptroller is authorized to appoint the FDIC,
as conservator or receiver. Under these circumstances, the FDIC could:
o require the trustee to go through an administrative claims procedure to
establish its rights to payments collected on the motor vehicle loans,
o request a stay of proceedings with respect to the trust's claims against
us or
o repudiate without compensation our ongoing obligations under a sale and
servicing agreement, such as our duty to collect payments or otherwise
service the motor vehicle loans.
If the FDIC were to take any of those actions, payments of principal and
interest on your securities could be delayed or reduced.
By statute, the FDIC as conservator or receiver is authorized to repudiate
any "contracts" of Chase USA upon payment of "actual direct compensatory
damages." This authority may be interpreted by the FDIC to permit it to
repudiate the transfer of motor vehicle loans to a trust. Under a recently
enacted FDIC regulation, however, the FDIC as conservator or receiver will not
reclaim, recover or recharacterize a bank's transfer of financial assets if
certain conditions are met, including that the transfer qualifies for sale
accounting treatment, was made for adequate consideration and was not made
fraudulently, in contemplation of insolvency, or with the intent to hinder,
delay or defraud the bank or its creditors. We believe the new FDIC regulation
will apply to the transfer of motor vehicle loans to a trust in the manner
contemplated by this prospectus and intend on satisfying the conditions of the
regulation.
If a condition required under the FDIC regulation, or other statutory or
regulatory requirement applicable to the transaction, were found not to have
been satisfied, the FDIC as conservator or receiver might refuse to recognize
Chase USA's transfer of the motor vehicle loans to the trust. In that event
the trust could be limited to
5
seeking recovery based upon its security interest in the motor vehicle loans.
The FDIC's statutory authority has been interpreted by the FDIC and at least
one court to permit the repudiation of a security interest upon payment of
actual direct compensatory damages measured as of the date of conservatorship
or receivership. These damages do not include lost profits or opportunity, and
no damages would be paid for the period between the date of conservatorship or
receivership and the date of repudiation. The FDIC could delay its decision
whether to recognize Chase USA's transfer of the motor vehicle loans for a
reasonable period following its appointment as conservator or receiver for the
bank. If the FDIC were to refuse to recognize Chase USA's transfer of the
motor vehicle loans, payments of principal and interest on your securities
could be delayed or reduced.
Only the assets of the trust are available to pay your securities.
Neither we nor any of our affiliates are obligated to make any payments in
respect of the securities of a trust or the motor vehicle loans owned by a
trust. Therefore, you must rely solely on the assets of the trust for
repayment of your securities. If these assets are insufficient, you may suffer
losses on your securities.
The assets of a trust will consist solely of its motor vehicle loans and, to
the extent specified in the prospectus supplement, various deposit accounts
and any credit or payment enhancement.
Amounts on deposit in any account providing credit enhancement or other
credit enhancement provided will be limited and subject to depletion. The
amount required to be on deposit in any account providing credit enhancement
or any other credit enhancement will be limited in amount. If the amount is
depleted to cover shortfalls in distributions of principal and interest on
your securities, the trust will depend solely on collections on the motor
vehicle loans and any other credit or payment enhancement to make payments on
your securities. In addition, the minimum required balance in an account
providing credit enhancement may decrease as the outstanding balance of the
motor vehicle loans decreases.
You may suffer losses upon a liquidation of the motor vehicle loans if the
proceeds of the liquidation are less than the amounts due on the outstanding
securities. Under the circumstances described in this prospectus, the motor
vehicle loans of a trust may be sold after the occurrence of an event of
default. The related securityholders will suffer losses if the trust sells the
motor vehicle loans for less than the total amount due on its securities. We
cannot assure you that sufficient funds would be available to repay those
securityholders in full.
Delays in collecting payments could occur if we cease to be the servicer.
If we were to cease acting as the servicer, the processing of payments on
the motor vehicle loans and information relating to collections could be
delayed, which could delay payments to you. We can be removed as servicer if
we default on our servicing obligations as described in this prospectus. We
may also resign as servicer under the circumstances described in this
prospectus.
Subordination may cause some classes of securities to bear additional credit
risk.
The rights of the holders of any class of securities to receive payments of
interest and principal may be subordinated to one or more other classes of
securities or to the rights of other parties such as swap counterparties.
Holders of subordinated classes of securities will bear more credit risk
than senior classes. Subordination may take the following forms:
o interest payments on any date on which interest is due may first be
allocated to the more senior classes or to other parties such as swap
counterparties,
o principal payments on the subordinated classes might not begin until the
principal of the more senior classes is repaid in full,
o principal payments on the more senior classes may be made on a payment
date before interest payments on the subordinated classes are made,
o subordinated classes bear the risk of losses on the motor vehicle loans
and the resulting cash shortfalls before the more senior classes and
o if the trustee sells the motor vehicle loans after an event of default,
the net proceeds of that sale may be allocated first to pay principal and
interest on the more senior classes.
The timing and priority of payment, seniority, allocations of losses and
methods of determining payments on the respective classes of securities of any
trust will be described in the related prospectus supplement.
6
Prepayments on the motor vehicle loans may adversely affect the average life
of and rate of return on your securities.
Faster than expected prepayments on the motor vehicle loans will cause the
trust to make payments on its securities earlier than expected. You may not be
able to reinvest the principal repaid to you at a rate of return that is equal
to or greater than the rate of return on your securities. We cannot predict
the effect of prepayments on the average life of your securities.
All the motor vehicle loans by their terms may be prepaid at any time.
Prepayments include:
o prepayments in whole or in part by the obligor,
o liquidations due to default,
o partial payments with proceeds from physical damage, credit life and
disability insurance policies,
o a required repurchase of a motor vehicle loan by Chase USA as seller or
servicer resulting from a breach of representation, warranty or covenant
and
o an optional repurchase of a trust's motor vehicle loans by Chase USA as
servicer when their aggregate principal balance is equal to or less than
the percentage of the initial aggregate principal balance specified in
the related prospectus supplement.
A variety of economic, social and other factors will influence the rate of
optional prepayments on the motor vehicle loans and the rate of defaults.
The final payment of each class of securities is expected to occur prior to
its final scheduled payment date because of the prepayment and purchase
considerations set forth above. If sufficient funds are not available to pay
any class of notes in full on its final payment date, an event of default will
occur and final payment of that class of notes will occur later than its final
payment date.
In addition, Chase USA as servicer may, on a case-by-case basis, permit
extensions of the due dates of payments on the motor vehicle loans in
accordance with its normal and customary servicing practices and procedures.
Deferral or extensions may increase the weighted average life of the
securities. The servicer will not be permitted to grant an extension or
deferral if as a result the final scheduled payment date on a motor vehicle
loan would fall on or after the final payment date of the related securities
unless the servicer purchases the affected motor vehicle loan.
You may suffer losses on your securities because Chase USA as servicer will
hold collections and commingle them with its own funds.
Provided that the conditions established by the rating agencies rating the
securities issued by a trust are satisfied, the servicer will generally be
permitted to hold with its own funds collections received from obligors on the
motor vehicle loans held by that trust until the day prior to the next date on
which distributions are made on the securities issued by that trust. During
this time, the servicer may invest those amounts at its own risk and for its
own benefit and need not segregate them from its own funds. If it is unable
for any reason to pay these amounts to the trust on the payment date, you
might incur a loss on your securities.
Additional motor vehicle loans may have different characteristics than the
initial pool of motor vehicle loans.
A trust may not have purchased all of its motor vehicle loans at the time
you purchase your securities. It may purchase the remainder of its motor
vehicle loans from Chase USA over a period specified in the related prospectus
supplement. The additional motor vehicle loans will not be required to have
any particular characteristics. The additional motor vehicle loans may be
originated by Chase USA at a later date using criteria different from those
applied to the initial pool of motor vehicle loans and may be of a different
credit quality and seasoning. In addition, following the transfer of the
additional motor vehicle loans to the trust, the characteristics of the pool
of motor vehicle loans held by the trust may vary from those of the initial
motor vehicle loans. As a result the overall credit quality of the motor
vehicle loan pool may decline. Any resulting increase in defaults will result
in an increased rate of prepayments and a greater risk of loss.
You may experience a prepayment of your securities as a result of pre-funding.
If the principal amount of additional motor vehicle loans transferred to a
trust during the funding period, not to exceed one year, specified in the
prospectus supplement is less than the amount set aside in a pre-funding
account on the closing date to purchase additional motor vehicle loans, the
amount remaining in that account at the
7
end of the funding period will be applied to the prepayment of the securities
issued by the trust. The amount remaining in the pre-funding account at the
end of the funding period will depend on Chase USA's ability to generate a
sufficient amount of additional motor vehicle loans during the funding period.
Any premium paid to you with any prepayment may not be sufficient to
compensate you for any difference between the yield on your securities and the
yield at which you may reinvest the prepayment proceeds.
You may suffer losses because you have limited control over the actions of the
trust.
Each trust will pledge its property to the indenture trustee to secure
payment of the notes, including its rights under the sale and servicing
agreement. As a result, the indenture trustee, not the holders of the
certificates issued by the trust, will have the right to take certain actions
in connection with the administration of the trust property, including, under
certain circumstances, selling the motor vehicle loans at the direction of the
noteholders. In addition, the noteholders will have the right to waive the
occurrence of a servicer default and to terminate Chase USA as servicer upon
the occurrence of a servicer default. The holders of the certificates will not
have these rights until the notes have been paid in full.
The Trusts
We will establish a separate trust pursuant to a trust agreement in
connection with the issuance of each series of asset-backed notes and asset-
backed certificates.
Property of Trust
The property of each trust will include:
o a pool of motor vehicle loans and all payments due or received from the
obligors under those motor vehicle loans on and after the cutoff date
specified in the related prospectus supplement,
o amounts from time to time on deposit in trust accounts established and
maintained pursuant to the related sale and servicing agreement,
o security interests in the vehicles financed by the motor vehicle loans,
o our rights to proceeds of breach of representation and warranty claims
against the dealers from whom we acquired the motor vehicle loans,
o an assignment of our right to receive proceeds from claims on theft and
physical damage, credit life and credit disability insurance policies
covering the vehicles financed by the motor vehicle loans, or the
obligors under the motor vehicle loans, as the case may be,
o vehicles financed by the motor vehicle loans that have been repossessed
by the servicer on behalf of the trust,
o certain rights under swap agreements or other interest rate protection
agreements, if any, and
o any and all proceeds of the above property.
If provided in the related prospectus supplement, the property of a trust
may include monies on deposit in a pre-funding account to be used to purchase
additional motor vehicle loans from Chase USA from time to time during the
funding period specified in the prospectus supplement.
If provided in the related prospectus supplement, the property of a trust
may include one or more reserve accounts maintained in the name of the related
indenture trustee, a yield supplement agreement and/or a yield supplement
account or other form of credit enhancement.
On or before the closing date of a trust, we will transfer a pool of motor
vehicle loans having an aggregate principal balance specified in the related
prospectus supplement to the trust in exchange for the securities issued by
that trust. If provided in the related prospectus supplement, we will convey
to the trust additional motor vehicle loans and the related property having an
aggregate principal balance approximately equal to the amount deposited in the
pre-funding account on the closing date as frequently as daily during the
funding period specified in the prospectus supplement. These motor vehicle
loans will also be assets of the trust.
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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 securities issued by the trust is limited solely to the express
obligations of the trustee set forth in the related trust agreement. The
trustee under each trust agreement will perform administrative functions.
A trustee may resign at any time by giving the administrator written notice
of its resignation. The administrator will be obligated to appoint a successor
trustee. The administrator may also remove the trustee if the trustee ceases
to be eligible to continue as trustee under the related trust agreement
becomes legally unable to act or becomes insolvent. In these 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 administrator will be obligated to indemnify the trustee. If the
administrator does not provide indemnification to the trustee, the trustee may
be indemnified from the assets of the related trust. No indemnification will
be permitted to be paid on any payment date until the holders of the
securities issued by the trust and the servicer have been paid all amounts
otherwise due to them on that date and the amount on deposit in any
enhancement account equals its required amount.
The principal offices of each trust and the entity named as trustee of that
trust will be specified in the related prospectus supplement.
Chase USA
Chase USA, a wholly-owned subsidiary of J.P. Morgan Chase & Co., was formed
in 1982 and is headquartered in Newark, Delaware. Chase USA is currently
chartered as a national bank and as such is regulated primarily by the United
States Comptroller of the Currency. Chase USA's activities are predominantly
related to credit card lending and other forms of consumer lending.
The principal executive office of Chase USA is located at 200 White Clay
Center Drive, Newark, Delaware 19711, telephone number (302) 575-5000.
On December 31, 2000, J.P. Morgan & Co. Incorporated and The Chase Manhattan
Corporation completed their merger, with the surviving corporation being named
J.P. Morgan Chase & Co. On November 11, 2001, The Chase Manhattan Bank and
Morgan Guaranty Trust Company of New York completed their merger, with the
surviving bank being named JPMorgan Chase Bank. JPMorgan Chase Bank and Chase
USA are the principal banking subsidiaries of J.P. Morgan Chase & Co.
The Motor Vehicle Loans
General
Chase USA, together with its affiliates, is engaged in the automotive
financing and automotive loan servicing business. Chase USA, JPMorgan Chase
Bank and/or one or more of their affiliates engaged in the automotive finance
business may originate or acquire the motor vehicle loans to be transferred to
a trust.
The motor vehicle loans to be transferred to a trust may include:
o motor vehicle retail installment sales contracts relating to new or used
automobiles and light-duty trucks purchased from dealers who regularly
originate and sell these contracts to the originating banks in accordance
with approved dealer agreements,
o purchase money loans secured by new or used automobiles and light-duty
trucks made by the originating banks directly,
o purchase money loans secured by new or used automobiles and light-duty
trucks made pursuant to arrangements with dealers in accordance with
approved dealer agreements or
o motor vehicle retail installment sales contracts relating to, and
purchase money loans secured by, new or used automobiles and light-duty
trucks purchased by the originating banks from other originators of motor
vehicle loans.
The motor vehicle loans to be held by each trust will be selected from the
motor vehicle loans that Chase USA originates itself and from those that Chase
USA acquires from its affiliates or other originators. Selection will
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be based upon several criteria, including, unless otherwise provided in the
related prospectus supplement, that each motor vehicle loan:
o was either
o acquired from or made through a dealer located in the United States,
o made directly by one of the originating banks in the United States
without the involvement of a dealer or
o acquired from another originator of motor vehicle loans,
o is secured by a financed vehicle that, as of the cutoff date specified in
the related prospectus supplement, had not been repossessed without
reinstatement,
o has not been identified on our computer files as relating to an obligor
who was in a bankruptcy proceeding as of the cutoff date specified in the
related prospectus supplement,
o if not a Final Payment Receivable or a Deferred Payment Receivable,
provides for fully amortizing level scheduled monthly payments, other
than the last payment, which may be different from the level payments,
o is an Actuarial Receivable or a Simple Interest Receivable and
o satisfies the other criteria, if any, set forth in the related sale and
servicing agreement and described in the related prospectus supplement.
We will not use any selection procedures that we believe to be materially
adverse to you in selecting the motor vehicle loans to be transferred to a
trust.
If we transfer any Final Payment Receivables to a trust, we will transfer to
the trust only the principal and interest payments due prior to the final
scheduled payment and not the final scheduled payment. We will retain the
final scheduled payment. However, we will have the option to transfer the
final scheduled payments of the Final Payment Receivables to the trust and to
cause that trust to issue certificates representing interests in, or notes
secured by, those final scheduled payments.
All of the motor vehicle loans will be prepayable at any time without
penalty and will contain due-on-sale provisions that require the obligors to
repay the motor vehicle loans when the related financed vehicles are sold. If
an obligor prepays a Simple Interest Receivable in full, the obligor is
required to pay interest only to the date of prepayment. If an obligor prepays
an Actuarial Receivable in full, with minor variations based upon state law,
the obligor is entitled to a rebate calculated on the basis of a constant
interest rate.
If we repossess and sell the financed vehicle securing a delinquent motor
vehicle loan, we will apply the amounts recovered in accordance with our
normal and customary servicing practices and procedures. We reserve the right
to change our policies with respect to the application of amounts recovered
from motor vehicle loans that we liquidate and financed vehicles that we
repossess and sell.
We will provide information with respect to each pool of motor vehicle loans
transferred to a trust in the related prospectus supplement, including, to the
extent appropriate:
o the composition of the motor vehicle loans,
o the distribution by the annual contract rate of interest and by the
states of origination of those motor vehicle loans,
o the portion of the pool consisting of Actuarial Receivables, Simple
Interest Receivables and any portions consisting of Final Payment
Receivables or Deferred Payment Receivables and
o the portion of the pool secured by new financed vehicles and the portion
of the pool secured by used financed vehicles.
The information in the prospectus supplement with respect to a pool of motor
vehicle loans transferred to a trust may be provided as of a statistical
cutoff date that is earlier than the applicable cutoff date for the trust.
Certain motor vehicle loans included in the statistical information in the
prospectus supplement may not be included in the motor vehicle loans
transferred to the trust on the closing date. In addition, the seller may
select additional motor vehicle loans to be transferred to the trust after
that statistical cutoff date. Any variations in the characteristics of the
motor vehicle loans as of the cutoff date from those characteristics presented
as of the statistical cutoff date in the prospectus supplement will not be
material.
If a trust includes a pre-funding account, we will be obligated to sell,
subject to availability, and the trust will be obligated to purchase, subject
to the satisfaction of certain conditions, additional motor vehicle loans and
the related property having an aggregate principal balance approximately equal
to the amount deposited in the pre-
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funding account on the closing date. The additional motor vehicle loans that
we transfer to the trust will be required to satisfy the eligibility criteria
specified in the related sale and servicing agreement, at the time of its
addition. Except for those criteria, there will be no required characteristics
of the additional motor vehicle loans. Therefore, following the transfer of
additional motor vehicle loans to the trust, the overall characteristics of
the pool of motor vehicle loans held by the trust may vary from those of the
initial pool of motor vehicle loans transferred to the trust. Those additional
motor vehicle loans may be originated at a later date using credit criteria
different from those which were applied to the initial pool of motor vehicle
loans and may be of a different credit quality and seasoning. If a trust
includes a pre-funding account, the related prospectus supplement will also
describe the effects the addition of motor vehicle loans may have on the pool
of motor vehicle loans included in the trust. If a trust acquires additional
motor vehicle loans, regular periodic reports regarding those loans will be
included under Item 5 in each current report filed by or on behalf of the
trust on Form 8-K with the SEC pursuant to the Securities Exchange Act of
1934, as amended.
Delinquency and Loan Loss Information
We will provide information in each prospectus supplement concerning the
delinquencies, loan losses and recoveries for the Chase Auto Portfolio as of
the dates and for the periods set forth in the related prospectus supplement.
We cannot assure you that the delinquency and loan loss experience on any pool
of motor vehicle loans transferred to a trust will be comparable to prior
experience or to the information with respect to the Chase Auto Portfolio in
the prospectus supplement.
The Chase Auto Portfolio has included from time to time motor vehicle loans
that were originated by affiliates of Chase USA or its predecessors using
origination criteria that were different but not materially different from the
then existing underwriting criteria of Chase USA or its predecessors. We
believe that the delinquency and loan loss experience for any period presented
in a prospectus supplement without the inclusion of those motor vehicle loans
would not be materially different from the delinquency and loan loss
experience that will be set forth in the prospectus supplement.
If specified in the related prospectus supplement, we may transfer to a
trust motor vehicle loans that were made directly to obligors without the
involvement of dealers acting pursuant to dealer agreements with Chase USA or
one of its affiliates. However, the Chase Auto Portfolio does not include
motor vehicle loans made directly by Chase USA and its affiliates to obligors
without the involvement of dealers and as a result the delinquency and loan
loss experience of the Chase Auto Portfolio included in the related prospectus
supplement will not include the delinquency and loan loss experience for those
motor vehicle loans. We believe that the delinquency and loan loss experience
for those motor vehicle loans will not be materially different from the
delinquency and loan loss experience for the Chase Auto Portfolio.
If specified in the related prospectus supplement, we may transfer to a
trust motor vehicle loans that were acquired by Chase USA from another
originator of motor vehicle loans. The Chase Auto Portfolio does not include
motor vehicle loans acquired from other originators and as a result the
delinquency and loan loss experience of the Chase Auto Portfolio included in
the related prospectus supplement will not include the delinquency and loan
loss experience for those motor vehicle loans. If we believe that including
motor vehicle loans acquired by Chase USA from other originators in the motor
vehicle loans being transferred to a trust will result in the performance of
those motor vehicle loans being materially different from the delinquency and
loan loss experience for the Chase Auto Portfolio, we will provide additional
information with respect to the motor vehicle loans acquired by Chase USA in
the related prospectus supplement.
Origination and Servicing of Motor Vehicle Loans
Origination. Chase USA purchases motor vehicle retail installment sales
contracts relating to new or used automobiles from dealers who regularly
originate those contracts pursuant to the terms of approved dealer agreements.
The dealers assign the contracts to Chase USA pursuant to standard form
assignments. Chase USA also makes purchase money loans secured by financed
vehicles directly or pursuant to arrangements with dealers made pursuant to
approved dealer agreements. Chase USA enters into dealer agreements with
dealers based upon a review of the dealer, including in some cases, a
financial review, and a review of the dealer's reputation and prior experience
with the dealer and its key management. Generally, the dealers selling new
financed vehicles are franchised by the manufacturer of those vehicles.
Chase USA currently makes or purchases motor vehicle loans made indirectly
with the involvement of dealers throughout the United States. Each dealer
makes representations and warranties to Chase USA with respect to the
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motor vehicle loans, the obligors on the motor vehicle loans and the security
interests in the related financed vehicles. These representations and
warranties typically include, among others, that:
o to the best of the dealer's knowledge,
o no statements made or furnished by the obligor, the dealer or any other
person are untrue or incomplete,
o the obligor has not financed any down payment for the financed vehicle,
o the obligor is a bona fide applicant having legal capacity to contract
for a motor vehicle loan,
o the signature of the obligor on all documents is genuine and
o the amount stated in the motor vehicle loan to be due will in fact be
due and payable at the time or times provided, free of any claims,
defenses, setoffs or counterclaims,
o the dealer had indefeasible title to the financed vehicle immediately
prior to the purchase by the obligor, and had the right and authority to
sell the vehicle to the obligor, free and clear of all liens and
encumbrances,
o the dealer will secure and perfect for Chase USA a security interest in
the financed vehicle, free and clear of any liens or encumbrances and
o the description of the financed vehicle in the motor vehicle loan is true
and complete and the financed vehicle will be or has been duly delivered
to and accepted without revocation by the obligor.
Generally, these representations and warranties do not relate to the
creditworthiness of the obligors or the ability to collect payments due on the
motor vehicle loans.
Upon breach of any representation or warranty made by a dealer, Chase USA
has a right of recourse against that dealer to require it to purchase or
repurchase the related motor vehicle loan. Generally, in determining whether
to exercise any right of recourse, Chase USA considers the prior performance
of the dealer, as well as other business and commercial factors. As servicer
Chase USA will be obligated to enforce its rights under the dealer agreements
relating to the motor vehicle loans transferred to a trust in accordance with
its customary practices. As seller Chase USA will convey the right to any
proceeds received upon enforcement of those rights to the related trust under
the sale and servicing agreement. It will make no representations as to the
financial condition of any of the dealers to which it may have recourse. We
cannot assure you as to the ability of any dealer to perform its obligations
to Chase USA under a dealer agreement.
Motor vehicle loans purchased from dealers may include motor vehicle loans
originated under manufacturer subvention programs. Subvention programs are
marketing tools of automobile manufacturers under which the manufacturers
offer reduced financing rates to retail customers as an incentive to purchase
automobiles. Subvention programs generally require the automobile manufacturer
to pay an amount to compensate Chase USA for offering the incentive interest
rate financing. Subvention compensation payments relating to motor vehicle
loans transferred to a trust will not be property of the trust.
Motor vehicle loans purchased from dealers may include motor vehicle loans
originated under manufacturer programs allowing obligors to defer the initial
scheduled monthly payment under the loan for some period of time. These
programs are typically limited to certain makes and models of vehicles and are
offered only to certain eligible obligors.
Chase USA and the other originating banks make direct motor vehicle loans to
obligors at their branches or by accepting applications by phone. Since
dealers do not originate these motor vehicle loans under dealer agreements,
the representations and warranties customarily made by the dealers in the
dealer agreements are not made with respect to these motor vehicle loans.
However, the dealers and others selling the financed vehicles to the obligors
make more limited representations and warranties regarding the motor vehicle
loans and the related financed vehicles by accepting the proceeds of the motor
vehicle loans under a restrictive endorsement. These representations and
warranties include a representation that the financed vehicle is free and
clear of all liens, security interests and other claims and a warranty that
the dealer, or the obligor, if the seller of the vehicle is not a dealer, will
apply for a certificate of title for the financed vehicle showing only the
obligor as the owner of the financed vehicle and perfect a first priority
security interest in the financed vehicle in favor of the originating bank. If
a motor vehicle loan is made in connection with the refinancing of an existing
loan, no one other than the obligor will make any representations or
warranties with respect to the financed vehicle and the obligor alone will be
responsible for securing and perfecting the originating bank's security
interest in the financed vehicle.
Chase USA and the other originating banks also make motor vehicle loans to
obligors by accepting loan applications via a number of internet sites
offering online shopping and financing. These motor vehicle loans are not made
by dealers acting pursuant to dealer agreements. However, where the financed
vehicle is paid for with a
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site draft containing a restrictive endorsement, the dealer selling the
financed vehicle and the internet provider make the same limited
representations and warranties regarding the motor vehicle loan and the
related financed vehicle that are made by a dealer accepting the proceeds of a
direct motor vehicle loan under a restrictive endorsement described above.
Motor vehicle loans not funded by site drafts containing restrictive
endorsements are funded by the originating bank through the internet provider.
In those cases, the internet provider makes similar limited representations
and warranties regarding the motor vehicle loans and the related financed
vehicles.
Chase USA may from time to time acquire pools of motor vehicle loans from
the originators of those motor vehicle loans. All motor vehicle loans
purchased in a pool and transferred to a trust will be re-underwritten to our
underwriting standards at the time of their acquisition.
Servicing. Chase USA, as servicer, directly and through one or more of its
affiliates, will service the motor vehicle loans transferred to each trust
consistent with its servicing policies and practices. Chase USA and its
affiliates perform the following functions on a centralized basis:
o payment of motor vehicle loan proceeds to dealers,
o customer service,
o document files and computerized record keeping,
o vehicle title processing and
o automated collections.
Chase USA and its affiliates perform other servicing functions on a
regionalized basis through several regional dealer service centers. The
servicing functions performed by the dealer service centers include
o aspects of automobile dealer liaison,
o dealer sales,
o customer service,
o credit underwriting,
o documentation reviews,
o collections and
o other services.
An outside service provider enters credit application data relating to
indirect motor vehicle loans into the servicer's loan origination system.
Chase USA may change its servicing policies and practices over time in
accordance with its business judgment.
Underwriting of Motor Vehicle Loans
We evaluate each applicant for a motor vehicle loan individually through the
appropriate dealer service center based on our uniform underwriting standards.
These underwriting standards are intended to assess the applicant's ability to
repay the motor vehicle loan and the adequacy of the financed vehicle as
collateral, based upon a review of the information contained in a loan
application form that generally lists the applicant's income, deposit
accounts, liabilities, credit history, employment history and a description of
the financed vehicle intended to secure the motor vehicle loan. We consider
the following criteria, among others, in evaluating individual applications:
o the obligor's stability, with specific regard to the obligor's length of
residence in the area and length of employment,
o the obligor's payment history based on our direct knowledge or as
provided by various credit reporting agencies with respect to present and
past debt,
o a debt-service-to-gross-monthly-income ratio test,
o a loan-to-value ratio test taking into account the age, type and market
value of the financed vehicle and
o a credit bureau score.
The amount advanced under any motor vehicle loan generally will not exceed
o for a new financed vehicle, 110% to 125% of the vehicle's invoice price
or
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o for a used financed vehicle, 85% to 120% of the "average trade-in" value
stated in the most recently published National Automobile Dealer's
Association Official Used Car Price Guide for the applicable region,
plus taxes and title and license fees on the financed vehicle. However, the
maximum amount advanced on a motor vehicle loan may vary depending on a number
of factors, including the term of the motor vehicle loan and the model and
year of the financed vehicle. These adjustments are made to insure that the
financed vehicle constitutes adequate collateral to secure the motor vehicle
loan.
In addition, whether a financed vehicle is new or used, we will also finance
credit life, accident and health insurance and service warranties under a
motor vehicle loan. Our general policy has been to reject applications for
motor vehicle loans where the prospective obligor's debt-service-to-gross-
monthly-income ratio exceeds 40%.
We use an empirically based credit scoring process to objectively index the
applicant's creditworthiness. We created this scoring process using historical
information from our database of motor vehicle loans owned or serviced by us
or one of our affiliates. Through credit scoring, we evaluate credit profiles
in order to satisfactorily quantify credit risk. The credit scoring process
entails the use of statistics to correlate common characteristics with credit
risk. We periodically review and update the credit scoring process that we use
to ensure its validity. In addition to our scoring process, we use consumer
reporting agency scores to assist in the underwriting process. In January
1998, we introduced, and in February 2001 we re-developed, custom credit
scorecards to enhance the underwriting process.
We use an automated approval and declination process for certain
applications based on selection criteria that were statistically derived from
our database of motor vehicle loans owned or serviced by us or one of our
affiliates. A credit analyst reviews applications that are not automatically
approved or denied. Except for the applications that are automatically
approved or denied, our scoring process and consumer reporting agency scores
are intended to provide a basis for lending decisions but are not meant to
supersede the judgment of the credit analyst. We approve motor vehicle loans
that vary from our standard credit guidelines, both before and after
implementation of the credit scoring process, but approval of those motor
vehicle loans generally requires concurrent approval of a second designated
senior credit analyst or credit manager. Motor vehicle loans that do not
comply with all of our guidelines must have strong compensating factors that
indicate a high ability of the applicant to repay the loan. Generally these
motor vehicle loans are made where the obligor has made a down payment and the
amount financed is lower than the maximum amount permitted by our guidelines.
We perform detailed analysis of our portfolio to evaluate the effectiveness
of our credit guidelines and scoring process. If external economic factors,
credit delinquencies or credit losses change, we adjust the credit guidelines
to maintain a level of asset quality that we deem acceptable. Each day, the
credit manager and credit supervisors of each of our dealer service centers
review a computer-selected group of motor vehicle loan applications to ensure
that credit analysts are following our established policies and procedures. We
randomly review, on a quarterly basis, the quality of the motor vehicle loans
and conduct quality audits to ensure compliance with our established policies
and procedures.
We may change our credit underwriting standards over time in accordance with
our business judgment.
Insurance
Each motor vehicle loan requires the obligor to obtain fire, theft and
collision insurance or comprehensive and collision insurance on the financed
vehicle. The dealer agreements include a representation and warranty from the
dealer that each financed vehicle has the required insurance at the time of
origination of the motor vehicle loan.
Chase USA, as seller or servicer, does not and will not independently verify
whether obligors obtain or maintain the required insurance either at or after
the origination of a motor vehicle loan. We monitor our loss experience with
respect to financed vehicles that are not properly insured.
We reserve the right to change our policies with respect to insurance on
financed vehicles in accordance with our business judgment.
As a result of a New York law, we do not obligate the obligors under motor
vehicle loans originated through New York dealers to pay the so-called "GAP
amount" in the event of a total loss of the vehicle caused by its theft,
confiscation or physical damage. The "GAP amount" that the obligor will not be
obligated to pay is the difference between the amount owed on the motor
vehicle loan as of the date of the total loss and the sum of
o any unpaid monthly payments, unpaid late fees and other unpaid amounts
due prior to the date of the total loss, plus
o the vehicle's actual cash value as of the date of the total loss.
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If the obligor has maintained the insurance required under the motor vehicle
loan, the vehicle's actual cash value will be the cash value under the
insurance policy, inclusive of the deductible, which the motor vehicle loan
specifies may be no higher than $500. If the obligor has not maintained the
required insurance, the vehicle's actual cash value will be the "average
trade" value of the vehicle in the most recently published National Automobile
Dealer's Association Official Used Car Guide for the applicable region as of
the date of the total loss. We do not and will not maintain third-party
insurance of any kind against this risk. We do not have any data on our
historical loss experience resulting from this risk.
Collection Procedures
Chase USA, as servicer, will perform collection activities with respect to
delinquent motor vehicle loans included in a trust consistent with its
servicing policies and practices. Collection activities include prompt
investigation and evaluation of the causes of any delinquency. An obligor is
deemed current if an amount equal to no more than 10% of a scheduled monthly
payment remains unpaid.
We use an automated collection system to assist us in collection efforts.
The automated collection system provides us with relevant obligor information,
such as current addresses, phone numbers and loan information, records of all
contacts with obligors and, in some cases, automated dialing. The system
records an obligor's promise to pay. The system
o allows supervisor review of collection personnel activity,
o permits supervisors to modify priorities as to which obligors should be
contacted and
o provides extensive reports concerning motor vehicle loan delinquencies.
Under our current practices, we make contact by mail with an obligor whose
motor vehicle loan generally has become 10 days delinquent and attempt to make
contact by telephone with an obligor whose motor vehicle loan is more than 11
days delinquent. Generally, we commence repossession procedures when a motor
vehicle loan is delinquent for 90 days. However, if:
o a motor vehicle loan is deemed uncollectible,
o the financed vehicle is deemed by our collection personnel to be in
danger of being damaged, destroyed or made unavailable for repossession
or
o the obligor voluntarily surrenders the financed vehicle,
we may repossess the financed vehicle without regard to length or existence of
a payment delinquency.
Repossessions are generally conducted by third parties who are engaged in
the business of repossessing vehicles for secured parties. After repossession,
the obligor generally has an additional 10 to 30 days to redeem the financed
vehicle before we sell the financed vehicle. Upon repossession of the financed
vehicle, we generally sell the financed vehicle in an auction. After the sale
of the financed vehicle, we will pursue any deficiency remaining to the extent
we deem practical and to the extent permitted by law.
Losses may occur in connection with delinquent motor vehicle loans. Losses
can arise in several ways, including
o the inability to locate the financed vehicle or the obligor or
o the discharge of the obligor in a bankruptcy proceeding.
Generally, we recognize losses on motor vehicle loans:
o during the calendar month in which we repossess and sell a financed
vehicle if the repossession and sale takes place at or before the
calendar month in which more than 10% of a scheduled payment of the
related motor vehicle loan becomes 120 days delinquent,
o during the calendar month in which more than 10% of a scheduled payment
of a motor vehicle loan becomes 120 days delinquent if we have not
repossessed the related financed vehicle by the end of that calendar
month,
o at any earlier time as we deem a motor vehicle loan uncollectible or
o at such other time or in such a manner as we believed or believe is
appropriate in accordance with our normal and customary servicing
practices and procedures.
In any event, we recognize a loss on a delinquent motor vehicle loan no later
than the calendar month in which more than 10% of a scheduled payment on the
motor vehicle loan becomes 240 days delinquent.
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We may change our loss recognition and collection policies and practices
over time in accordance with our business judgment.
We may, on a case-by-case basis, extend the due dates of payments on motor
vehicle loans in accordance with our normal and customary servicing practices
and procedures. These practices and procedures are described more fully in the
attached prospectus supplement.
Weighted Average Life of the Securities
The weighted average life of the securities issued by a trust will generally
be influenced by the rate at which the principal balances of the motor vehicle
loans held by the trust are paid. Principal payments come in the form of
scheduled principal payments and prepayments. Prepayments can result from
o prepayments of motor vehicle loans in full,
o partial prepayments of motor vehicle loans,
o liquidations due to default,
o receipts of proceeds from theft and physical damage, credit life and
credit disability insurance policies covering financed vehicles or
obligors and
o repurchases of motor vehicle loans by the seller or purchases of motor
vehicle loans by the servicer for administrative reasons.
Obligors may prepay motor vehicle loans at any time.
If the property of a trust includes a pre-funding account, the securities
issued by that trust will be subject to partial redemption on or immediately
following the end of the funding period described in the related prospectus
supplement. If a trust includes a reserve account or other credit enhancement,
the securities issued by that trust will be subject to prepayments as a result
of withdrawals being made from the reserve account or payments being made
under the other enhancement in respect of defaulted motor vehicle loans.
The rate of prepayments on the motor vehicle loans may be influenced by a
variety of economic, social and other factors, including the fact that an
obligor may not sell or transfer the financed vehicle securing a motor vehicle
loan without our consent. Programs offered by lenders, such as Chase USA and
its affiliates, which solicit or make available credit that may be used by
obligors to prepay motor vehicle loans may also influence the rate of
prepayment on the motor vehicle loans. The credit offered may include home
equity lines of credit, consumer installment credit and credit cards. Chase
USA and its affiliates may in the ordinary course of business offer general or
targeted solicitations for extensions of credit. These solicitations may be
sent to obligors. In addition, each sale and servicing agreement will allow us
to refinance an existing motor vehicle loan for an obligor so long as the
proceeds of the refinanced loan are used to prepay the existing motor vehicle
loan in full and the refinanced loan is evidenced by a new promissory note.
Any loan resulting from the refinancing will not be the property of the
related trust.
Because of the uncertain amount of prepayments on the motor vehicle loans
included in a trust, we cannot assure you of the amount of principal payments
that will be made on the securities issued by that trust on each payment date.
Holders of the securities alone will bear the reinvestment risks resulting
from a faster or slower incidence of prepayments on the motor vehicle loans. A
prospectus supplement may set forth additional information with respect to the
maturity and prepayment considerations applicable to a particular pool of
motor vehicle loans and the related securities.
We maintain records of the historical prepayment experience of portions of
our portfolio of motor vehicle loans. We believe that these records are not
adequate to provide meaningful information with respect to the motor vehicle
loans to be included in any trust. In any event, we cannot give you any
assurance that prepayments on a given pool of motor vehicle loans would
conform to our historical experience. We cannot predict the actual prepayment
experience of any pool of motor vehicle loans.
In addition, as servicer we may grant extensions on payments on the motor
vehicle loans under limited circumstances. The related prospectus supplement
will contain a description of the terms and conditions under which the motor
vehicle loans included in a particular trust may be extended or modified. Any
deferrals or extensions of those motor vehicle loans may increase the weighted
average life of the related securities.
If an obligor under a Simple Interest Receivable, in addition to making his
or her regularly scheduled payment, makes one or more additional scheduled
payments in any Collection Period, we will treat the additional
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scheduled payments made in that Collection Period as a principal prepayment
and we will apply it to reduce the principal balance of the related motor
vehicle loan in that Collection Period. As a result of that prepayment, unless
otherwise requested by the obligor, the obligor will not be required to make
any scheduled payment in respect of that motor vehicle loan for the number of
due dates corresponding to the number of additional scheduled payments he
made. During that period interest will continue to accrue on the outstanding
principal balance of the prepaid motor vehicle loan and the obligor's account
will not be considered delinquent. The related prospectus supplement will
describe any obligation of Chase USA as servicer to make Advances in respect
of those unpaid interest payments.
When the obligor resumes his or her required payments, his regularly
scheduled payments may be insufficient to cover the interest that has accrued
since his last payment. Nonetheless the obligor's prepaid motor vehicle loan
would be considered current. This situation will continue until the regularly
scheduled payments are once again sufficient to cover all accrued interest and
to reduce the principal balance of the prepaid motor vehicle loan. Depending
on the principal balance and interest rate of the related motor vehicle loan
and on the number of payments that were prepaid, there may be extended periods
of time during which such a motor vehicle loan is current but not amortizing.
Prepaid Simple Interest Receivables in any trust will affect the weighted
average life of the securities issued by the trust. The distribution of the
prepaid amount to the holders of the securities on the payment date following
the Collection Period in which the amount was received will generally shorten
the weighted average life of the securities. In addition, to the extent we
make any Advances of interest with respect to a prepaid Simple Interest
Receivable which subsequently goes into default, the loss on that motor
vehicle loan may be larger than would have been the case had the Advances not
been made because the liquidation proceeds from that motor vehicle loan will
be applied first to reimburse us for the Advances.
Our portfolio of motor vehicle loans has historically included motor vehicle
loans that have been prepaid by one or more scheduled monthly payments. We
cannot assure you as to the number of motor vehicle loans that may become
prepaid Simple Interest Receivables or the number or the principal amounts of
the scheduled payments that may be prepaid.
If an obligor under any Actuarial Receivable, in addition to making his or
her regularly scheduled payment, makes one or more additional scheduled
payments in any Collection Period, we may deposit the additional scheduled
payments made in that Collection Period into an account for the related trust
and apply them as described in the related prospectus supplement. No
shortfalls in payment of interest or principal will result when prepaid
amounts on Actuarial Receivables are deposited into an account on behalf of
the trust.
How You Can Compute Your Portion of the Amount Outstanding of Your Securities
As servicer we will provide to you in each report which we deliver to you a
factor which you can use to compute your portion of the principal amount
outstanding of your securities.
We will compute a separate factor for each class of notes. The factor for
each class of notes will be an eight-digit decimal which we will calculate
prior to each payment date. The note factor will equal the remaining
outstanding principal balance of that class of notes as of the applicable
payment date, after giving effect to payments to be made on that payment date,
as a fraction of the initial outstanding principal balance of that class of
notes. Your portion of each class of notes will equal the product of
o the original denomination of your note and
o the factor relating to your class of notes.
We will compute a separate factor for each class of certificates. The factor
for each class of certificates will be an eight-digit decimal which we will
calculate prior to each payment date. The certificate factor will equal the
remaining balance of that class of certificates as of the applicable payment
dates, after giving effect to distributions to be made on that payment date,
as a fraction of the initial stated certificate balance of that class of
certificates. Your portion of each class of certificates will equal the
product of
o the original denomination of your certificate and
o the factor relating to your class of certificates.
Each factor will be 1.00000000 as of the cutoff date specified in the
prospectus supplement for that series of securities and will decline to
reflect reductions in the outstanding principal balance of the applicable
class of notes or the reduction of the initial stated certificate balance of
the applicable class of certificates.
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As servicer we will provide to you monthly reports concerning:
o payments received on the motor vehicle loans included in the trust,
o the aggregate principal balance of those motor vehicle loans as of the
last day of the preceding Collection Period, calculated as described in
the related prospectus supplement,
o each factor relating to each class of securities issued by the trust and
o various other items of information that will be specified in the related
prospectus supplement.
In addition, you will be provided information for tax reporting purposes not
later than the latest date permitted by law.
Use of Proceeds
We will apply the net proceeds from the sale of the securities of a trust as
follows:
o if the trust has a pre-funding account, to make a capital contribution to
the trust by making a deposit into that account,
o if the trust has a yield supplement account, to make a capital
contribution to the trust by making a deposit into that account,
o if the trust has a reserve account, to make a capital contribution to the
trust by making the initial deposit into that account and
o for any other purposes specified in the related prospectus supplement.
We will add the remaining funds received by us to our general funds.
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Principal Documents
In general, the operations of a trust will be governed by the following
documents:
Document Parties Primary Purposes
-------- ------- ----------------
- -----------------------------------------------------------------------------------------------------------------------------------
Trust Agreement Trustee and Chase USA, o creates the trust
as depositor o provides for issuance of Class R certificates
and the certificates and payments to
certificateholders and Chase USA as holder
of the Class R certificates
o establishes the rights and duties of the
trustee
o establishes the rights of certificateholders
- -----------------------------------------------------------------------------------------------------------------------------------
Indenture Trust, as issuer of the notes, and Indenture o provides for issuance of the notes, the
Trustee terms of the notes and payments to
noteholders
o establishes the rights and duties of the
indenture trustee
o establishes the rights of noteholders
- -----------------------------------------------------------------------------------------------------------------------------------
Sale and Servicing Agreement Chase USA, as seller and servicer, and the o effects transfer of motor vehicle loans to
Trust the trust
o contains representations and warranties of
Chase USA, as seller, concerning the motor
vehicle loans
o contains servicing obligations
o provides for compensation of the servicer
o directs how proceeds of the motor vehicle
loans will be applied to the expenses of the
trust and payments on the securities issued
by the trust
Various provisions of these documents are described throughout this
prospectus and will be described in the related prospectus supplement. The
prospectus supplement for a trust will describe any material provisions of the
documents relating to that trust that differ in a material way from the
provisions described in this prospectus.
A form of each of these principal documents has been filed as an exhibit to
the registration statement of which this prospectus forms a part. The
summaries of the principal documents in this prospectus do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all the provisions of those principal documents.
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Payments on the Securities
The prospectus supplement relating to the securities issued by a particular
trust will describe
o the timing, amount and priority of payments of principal and interest on
each class of those securities,
o their interest rates or the formula for determining their interest rates,
o the method of determining the amount of their principal payments,
o the priority of the application of the trust's available funds to its
expenses and payments on its securities and
o the allocation of losses on the motor vehicle loans included in that
trust among the classes of those securities.
The rights of any class of securities to receive payments may be senior or
subordinate to other classes of securities. A security may be entitled to
principal payments with disproportionate, nominal or no interest payments or
interest payments with disproportionate, nominal or no principal payments or
residual cash flow remaining after all other classes have been paid. Interest
rates may be fixed or floating.
One or more classes of securities may have fixed principal payment
schedules, including a targeted scheduled payment date on which the securities
are paid in full. The trust issuing these securities may have issued variable
funding securities or have a liquidity facility or similar arrangement that
permits it to make those scheduled payments. If a class of securities is
redeemable or subject to prepayment, the prospectus supplement will describe
when the securities may be redeemed or prepaid and at what price, including
any premium payable. The aggregate initial principal amount of the securities
issued by a trust may be greater than, equal to or less than the aggregate
initial principal amount of the motor vehicle loans held by that trust.
Payments of principal and interest on any class of securities will be made
on a pro rata basis among all the securityholders of such class. If the amount
of funds available to make a payment on a class is less than the required
payment, the holders of the securities of that class will receive their pro
rata share of the amount available for the class.
One or more classes of notes issued by a trust may have a final scheduled
payment date of less than 397 days from the date of the related prospectus
supplement and that class or those classes may have received a short-term
rating by a rating agency that is in one of the two highest short-term rating
categories. The failure to pay a class of notes on or prior to the related
final payment date will constitute an Event of Default under the related
indenture.
Certain Information Regarding the Securities
Fixed Rate Securities
Each class of fixed rate securities will bear interest at the applicable per
annum interest rate or pass-through rate, as the case may be, specified in the
related prospectus supplement. Interest on each class of fixed rate securities
may be computed on the basis of a 360-day year of twelve 30-day months or on
such other day count basis as is specified in the related prospectus
supplement.
Floating Rate Securities
Each class of floating rate securities will bear interest for each
applicable interest accrual period described in the related prospectus
supplement at a rate per annum determined by reference to a base rate, plus or
minus the number of basis points specified in the prospectus supplement, if
any, or multiplied by the percentage specified in the prospectus supplement,
if any or as otherwise specified in the related prospectus supplement.
Interest on each class of floating rate securities will be computed on the day
count basis specified in the related prospectus supplement.
The base rate of interest for any floating rate securities will be based on
the London interbank offered rate, commercial paper rates, federal funds
rates, U.S. government treasury securities rates, negotiable certificates of
deposit rates or another rate set forth in the related prospectus supplement.
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A class of floating rate securities may also have either or both of the
following, in each case expressed as a rate per annum:
o a maximum limitation, or ceiling, on the rate at which interest may
accrue during any interest accrual period and
o a minimum limitation, or floor, on the rate at which interest may accrue
during any interest accrual period.
In addition to any maximum interest rate that may be applicable to any class
of floating rate securities, the interest rate applicable to any class of
floating rate securities will in no event be higher than the maximum rate
permitted by applicable law.
Each trust issuing floating rate securities may appoint a calculation agent
to calculate interest rates on each class of its floating rate securities. The
related prospectus supplement will identify the calculation agent, if any, for
each class of floating rate securities, which may be either the trustee or the
indenture trustee for the trust. All determinations of interest by the
calculation agent will, in the absence of manifest error, be conclusive for
all purposes and binding on the holders of the floating rate securities of a
given class.
Book-Entry Registration
Following is a description of the form your securities, whether certificates
or notes, may take. We also describe how your securities may be transferred
and how payments may be made to you.
The information in this section concerning DTC and its book-entry system has
been provided by DTC. We have not independently verified the accuracy of this
information.
Each class of securities issued by a trust may be represented by one or more
global certificates registered in the name of Cede & Co., DTC's nominee.
Accordingly, Cede is expected to be the holder of record of each series of
securities issued in book-entry form. This means that you, as an owner of
securities, will generally not be entitled to Definitive Securities
representing your interest in the issued securities. You will own securities
through a book-entry record maintained by DTC. Your interests in the global
securities will be represented through financial institutions acting on your
behalf as direct and indirect participants in DTC. You may hold your
securities through DTC in the U.S., Clearstream or the Euroclear system in
Europe or in any manner described in the related prospectus supplement.
Clearstream and Euroclear will hold positions on behalf of their customers or
participants through their respective depositaries, which in turn will hold
such positions in accounts as DTC participants.
If a class of securities is issued in book-entry form, all references in
this prospectus and in the related prospectus supplement to actions by holders
of such class of securities refer to actions taken by DTC upon instructions
from its participating organizations and all references in this prospectus and
in the related prospectus supplement to distributions, notices, reports and
statements to holders of such class of securities refer to distributions,
notices, reports and statements to DTC or its nominee, as the case may be, as
the registered holder of such class of securities, for distribution to the
holders of such class of securities in accordance with DTC's procedures.
Conveyance of notices and other communications by DTC to DTC participants, by
DTC participants to indirect participants, and by DTC participants and
indirect participants to securityholders will be governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
Any securities of a given trust owned by Chase USA or any of its affiliates
will be entitled to equal and proportionate benefits under the applicable
indenture or trust agreement, except that, unless Chase USA and its affiliates
own the entire class, such securities will be deemed not to be outstanding for
the purpose of determining whether the requisite percentage of securityholders
have given any request, demand, authorization, direction, notice, consent or
other action under those documents.
The prospectus supplement will specify whether the holders of the notes or
certificates of a trust will hold their respective securities as global
securities in book-entry form under the DTC system. Any purchase that you make
of securities issued in book-entry form under the DTC system must be made by
or through a DTC participant, which will receive a credit for the securities
on DTC's records. Your ownership interest is in turn recorded on the DTC
participants' and indirect participants' records. You will not receive written
confirmation from DTC of your purchase, but you can expect to receive written
confirmation providing details of the transaction, as well as periodic
statements of your holdings, from the DTC participant or indirect participant
through which you entered into the transaction. Transfers of ownership
interests in the securities are accomplished by entries made on the books of
DTC participants acting on behalf of you and other securityholders.
21
In addition, securityholders will receive all distributions of principal and
interest from the indenture trustee or the applicable trustee through the
participants who in turn will receive them from DTC. Under a book-entry
format, securityholders may experience some delay in their receipt of
payments, since such payments will be forwarded by the applicable trustee to
DTC's nominee. DTC will forward such payments to its participants which
thereafter will forward them to indirect participants or securityholders.
Distributions on securities held through Clearstream or Euroclear will be
credited to the cash accounts of Clearstream Customers or Euroclear
Participants in accordance with the relevant system's rules and procedures, to
the extent received by its depositary. Such distributions will be subject to
tax reporting in accordance with relevant U.S. tax laws and regulations.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers of securities
among participants on whose behalf it acts and is required to receive and
transmit distributions of principal and interest on the securities it holds.
Participants and indirect participants with whom securityholders have accounts
similarly are required to make book-entry transfers and receive and transmit
payments on behalf of their respective securityholders. Accordingly, although
securityholders will not possess their respective securities, the rules
provide a mechanism by which participants will receive payments and will be
able to transfer their interests.
Because DTC can only act on behalf of participants, who in turn act on
behalf of indirect participants and certain banks, your ability to pledge
securities to persons or entities that do not participate in the DTC system,
or otherwise take actions with respect to such securities, may be limited due
to the lack of a physical certificate for the securities.
You will not be recognized as a securityholder by the trustee or the
indenture trustee. You will be permitted to exercise the rights of a
securityholder only indirectly through DTC and its participants. Neither DTC
nor Cede will consent or vote with respect to the securities issued by a
trust. Under its usual procedures, DTC mails an omnibus proxy to Chase USA as
soon as possible after the record date, which assigns Cede's consenting or
voting rights to those DTC participants to whose accounts the securities are
credited on the relevant record date. Clearstream and the Euroclear operator,
as the case may be, will take any action permitted to be taken by a
securityholder on behalf of a Clearstream Customer or Euroclear Participant
only in accordance with its relevant rules and procedures and subject to its
depositary's ability to effect such actions on its behalf through DTC.
Except as required by law, none of the administrator, the applicable trustee
or the applicable indenture trustee will have any liability for any aspect of
the records relating to payments made on account of beneficial ownership
interests of the securities issued by any trust held by DTC, Clearstream or
the Euroclear system or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
The global securities will be tradeable as home market instruments in both
the European and U.S. domestic markets. Initial settlement and all secondary
trades will settle in same-day funds.
Initial Settlement of the Global Securities. Investors electing to hold
their global securities through DTC will follow the settlement practices that
apply to U.S. corporate debt obligations. Investor securities custody accounts
will be credited with their holdings against payment in same-day funds on the
settlement date. Investors electing to hold their global securities through
Clearstream or Euroclear accounts will follow the settlement procedures that
apply to conventional eurobonds, except that there will be no temporary global
security and no "lock-up" or restricted period. Global securities will be
credited to the securities custody accounts on the settlement date against
payment in same-day funds.
Secondary Market Trading of the Global Securities. Since the purchaser
determines the place of delivery, it is important to establish at the time of
the trade where both the purchaser's and seller's accounts are located to
ensure that settlement can be made on the desired value date.
--Trading between DTC participants. Secondary market trading between DTC
participants will be settled using the procedures applicable to U.S. corporate
debt obligations in same-day funds.
--Trading between Clearstream customers and/or Euroclear participants.
Secondary market trading between Clearstream Customers or Euroclear
Participants will be settled using the procedures applicable to conventional
eurobonds in same-day funds.
--Trading between DTC seller and Clearstream or Euroclear purchaser. When
global securities are to be transferred from the account of a DTC participant
to the account of a Clearstream Customer or a Euroclear Participant, the
purchaser will send instructions to Clearstream or Euroclear through a
Clearstream Customer or Euroclear Participant at least one business day prior
to settlement. Clearstream or Euroclear will instruct the
22
respective depositary, as the case may be, to receive the global securities
against payment. Payment will include interest accrued on the global
securities from and including the last interest payment date to and excluding
the settlement date. Payment will then be made by the respective depositary to
the DTC participant's account against delivery of the global securities. After
settlement has been completed, the global securities will be credited to the
respective clearing system and by the clearing system, in accordance with its
usual procedures, to the Clearstream Customer's or Euroclear Participant's
account. The securities credit will appear the next day (European time) and
the cash debit will be back-valued to, and the interest on the global
securities will accrue from, the value date (which would be the preceding day
when settlement occurred in New York). If settlement is not completed on the
intended value date (that is, the trade fails), the Clearstream or Euroclear
cash debit will be valued instead as of the actual settlement date.
Clearstream Customers and Euroclear Participants will need to make available
to the respective clearing systems the funds necessary to process same-day
funds settlement. The most direct means of doing this is to pre-position funds
for settlement, either from cash on hand or existing lines of credit, as they
would for any settlement occurring within Clearstream or Euroclear. Under this
approach, they may take on credit exposure to Clearstream or Euroclear until
the global securities are credited to their accounts one day later.
As an alternative, if Clearstream or Euroclear has extended a line of credit
to them, Clearstream Customers or Euroclear Participants can elect not to pre-
position funds and allow that credit line to be drawn upon to finance
settlement. Under this procedure, Clearstream Customers or Euroclear
Participants purchasing global securities would incur overdraft charges for
one day, assuming they cleared the overdraft when the global securities were
credited to their accounts. However, interest on the global securities would
accrue from the value date. Therefore, in many cases the investment income on
the global securities earned during that one-day period may substantially
reduce or offset the amount of such overdraft charges, although this result
will depend on each Clearstream Customer's or Euroclear Participant's
particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
participants can employ their usual procedures for sending global securities
to the respective depositary for the benefit of Clearstream Customers or
Euroclear Participants. The sale proceeds will be available to the DTC seller
on the settlement date. Thus, to the DTC participant a cross-market
transaction will settle no differently than a trade between two DTC
participants.
--Trading between Clearstream or Euroclear seller and DTC purchaser. Due to
time zone differences in their favor, Clearstream Customers and Euroclear
Participants may employ their customary procedures for transactions in which
global securities are to be transferred by the respective clearing system,
through the respective depositary, to a DTC participant. The seller will send
instructions to Clearstream or Euroclear through a Clearstream Customer or
Euroclear Participant at least one business day prior to settlement. In these
cases, Clearstream or Euroclear will instruct the respective depositary, as
appropriate, to deliver the securities to the DTC participant's account
against payment. Payment will include interest accrued on the global
securities from and including the last coupon payment date to and excluding
the settlement date. The payment will then be reflected in the account of the
Clearstream Customer or Euroclear Participant the following day, and receipt
of the cash proceeds in the Clearstream Customer's or Euroclear Participant's
account would be back-valued to the value date (which would be the preceding
day, when settlement occurred in New York). Should the Clearstream Customer or
Euroclear Participant have a line of credit with its respective clearing
system and elect to be in debit in anticipation of receipt of the sale
proceeds in its account, the back-valuation will extinguish any overdraft
charges incurred over that one-day period. If settlement is not completed on
the intended value date (that is, the trade fails), receipt of the cash
proceeds in the Clearstream Customer's or Euroclear Participant's account
would instead be valued as of the actual settlement date.
Finally, day traders that use Clearstream or Euroclear and that purchase
global securities from DTC participants for delivery to Clearstream Customers
or Euroclear Participants should note that these trades would automatically
fail on the sale side unless affirmative action is taken. At least three
techniques should be readily available to eliminate this potential problem:
o borrowing through Clearstream or Euroclear for one day (until the
purchase side of the day trade is reflected in their Clearstream or
Euroclear accounts) in accordance with the clearing system's customary
procedures,
o borrowing the global securities in the U.S. from a DTC participant no
later than one day prior to settlement, which would give the global
securities sufficient time to be reflected in their Clearstream or
Euroclear account in order to settle the sale side of the trade or
23
o staggering the value dates for the buy and sell sides of the trade so
that the value date for the purchase from the DTC participant is at least
one day prior to the value date for the sale to the Clearstream Customer
or Euroclear Participant.
The Depositories--DTC. DTC is a limited-purpose trust company organized
under the laws of the State of New York, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York Uniform
Commercial Code, and a "clearing agency" registered under the provisions of
Section 17A of the Securities Exchange Act of 1934, as amended. DTC was
created to hold securities for its participants and facilitate the clearance
and settlement of securities transactions between participants through
electronic book-entries, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers (who may
include any of the underwriters of securities issued by a trust), banks, trust
companies and clearing corporations and may include certain other
organizations. Indirect access to the DTC system also is available to others
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a participant, either directly or
indirectly. The rules applicable to DTC and its DTC participants are on file
with the SEC.
--Clearstream. Clearstream is incorporated under the laws of Luxembourg.
Clearstream holds securities for Clearstream Customers and facilitates the
clearance and settlement of securities transactions between Clearstream
Customers through electronic book entry changes in accounts of Clearstream
Customers, thereby eliminating the need for physical movement of certificates.
Transactions may be settled through Clearstream in any of 36 currencies,
including U.S. dollars. Clearstream provides to its customers, among other
things, services for safekeeping, administration, clearance and settlement of
internationally traded securities and securities lending and borrowing.
Clearstream also deals with domestic securities markets in over 30 countries
through established depository and custodial relationships. As a professional
depository, Clearstream is subject to regulation and supervision by the
Commission de Surveillance du Secteur Financier. Clearstream Customers are
worldwide financial institutions including underwriters, securities brokers
and dealers, banks, trust companies, clearing corporations and certain other
organizations and may include the underwriters of the securities issued by a
trust. Clearstream Customers in the U.S. are limited to securities brokers and
dealers and banks. Currently, Clearstream has approximately 2,000 customers
located in over 80 counties, including all major European countries, Canada
and the United States. Indirect access to Clearstream is also available to
other institutions that clear through or maintain a custodial relationship
with an account holder of Clearstream.
Clearstream has established an electronic bridge with Euroclear Bank S.A./
N.V. as the operator of the Euroclear system in Brussels to facilitate
settlement of trades between Clearstream and Euroclear.
--Euroclear. The Euroclear system was created in 1968 to hold securities of
Euroclear Participants and to clear and settle transactions between Euroclear
Participants through simultaneous electronic book-entry delivery against
payment, thereby eliminating the need for physical movement of certificates
and any risk from lack of simultaneous transfers of securities and cash.
Transactions may now be settled in any of 34 currencies, including U.S.
dollars. The Euroclear system includes various other services, including
securities lending and borrowing and interfaces with domestic markets in
several countries generally similar to the arrangements for cross-market
transfers with DTC described above. The Euroclear system is operated by
Euroclear Bank S.A./N.V. 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 Euroclear clearance
system. Euroclear clearance system establishes policy for the Euroclear system
on behalf of Euroclear Participants. Euroclear Participants include banks
(including central banks), securities brokers and dealers and other
professional financial intermediaries and may include the underwriters of the
securities issued by a trust. Indirect access to the Euroclear system is also
available to other firms that clear through or maintain a custodial
relationship with a Euroclear Participant, either directly or indirectly.
Securities clearance accounts and cash accounts with the Euroclear operator
are governed by the terms and conditions governing use of Euroclear and the
related operating procedures of the Euroclear system and applicable Belgian
law. These terms and conditions govern transfers of securities and cash within
the Euroclear system, withdrawal of securities and cash from the Euroclear
system, and receipts of payments with respect to securities in the Euroclear
system. All securities in the Euroclear system are held on a fungible basis
without attribution of specific certificates to specific securities clearance
accounts. The Euroclear operator acts under these terms and conditions only on
behalf of Euroclear Participants and has no record of or relationship with
persons holding through Euroclear Participants.
DTC may discontinue providing its services as securities depository for the
securities issued by a trust at any time by giving reasonable notice to Chase
USA, as servicer, the trustee and, if applicable, the indenture trustee. If
24
this occurs and a successor securities depository is not obtained, Definitive
Securities will be printed and delivered. The servicer may decide to
discontinue use of the system of book-entry transfers through DTC or a
successor securities depository. In that event, Definitive Securities will be
delivered to each securityholder.
Although DTC, Clearstream and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of securities among their
participants, they are under no obligation to perform or continue to perform
these procedures and these procedures may be discontinued at any time.
Definitive Securities
Any notes or certificates initially issued by a trust in book-entry form
will be issued in fully registered, certificated form to the holders of the
notes or the certificates or their respective nominees rather than to DTC or
its nominee, only if:
o Chase USA, as servicer, advises the trustee or indenture trustee, as
applicable, in writing that DTC is no longer willing or able to properly
discharge its responsibilities as depository with respect to the
securities and the servicer is unable to locate a qualified successor
depository,
o Chase USA, as servicer, elects to terminate the book-entry system through
DTC or
o after the occurrence of an Event of Default or an Event of Servicing
Termination with respect to the securities issued by a trust, holders
representing at least a majority of the outstanding principal amount of
the notes or certificates issued by that trust advise the indenture
trustee or the trustee, as applicable, through DTC in writing that the
continuation of a book-entry system through DTC with respect to the notes
or certificates, as the case may be, is no longer in the best interest of
the holders of those securities.
Upon the occurrence of any event described in the immediately preceding
paragraph, the indenture trustee or the trustee through DTC and its
participants will be required to notify all applicable holders of the
securities of the availability of Definitive Securities. Upon surrender by DTC
of the definitive certificates representing the securities and receipt of
instructions for re-registration, the trustee or indenture trustee, as
applicable, will re-issue the securities as Definitive Securities to their
holders.
Distributions of principal of, and interest on, Definitive Securities will
be made by the related trustee or indenture trustee in accordance with the
procedures set forth in the related indenture or trust agreement, as
applicable, directly to the holders in whose names those Definitive Securities
were registered at the close of business on the applicable record date
specified in the related prospectus supplement. These distributions will be
made by check mailed to the address of the securityholder as it appears on the
register maintained by the trustee or indenture trustee, as applicable.
However, the final payment on any Definitive Security will be made only upon
presentation and surrender of the Definitive Security at the office or agency
specified in the notice of final distribution to the applicable
securityholders.
Definitive Securities will be transferable and exchangeable at the offices
of the related transfer agent and registrar for the securities. No service
charge will be imposed for any registration of transfer or exchange, but the
trustee or indenture trustee, as applicable, may require payment of a sum
sufficient to cover any tax or other governmental charge imposed on the
transfer or exchange.
List of Securityholders
Three or more holders of the notes of any series, each of whom has owned a
note for at least six months, may, by written request to the related indenture
trustee, obtain access to the list of all holders of the notes of that series
maintained by the indenture trustee for the purpose of communicating with them
with respect to their rights under the indenture or the notes. The indenture
trustee may elect not to grant the requesting noteholders access to the list
of all noteholders if it agrees to mail the desired communication or proxy, on
behalf and at the expense of the requesting noteholders, to all noteholders of
record. Unless Definitive Securities have been issued in exchange for the
notes, the only noteholder appearing on the list maintained by the related
indenture trustee will be Cede, as nominee for DTC. Under these circumstances,
any beneficial owner of a note who wishes to communicate with other beneficial
owners of the notes will not be able to identify those beneficial owners
through the indenture trustee and instead will have to attempt to identify
them through DTC and its participants or by such other means as the beneficial
owner may find available.
Three or more holders of certificates of any series or one or more holders
of certificates evidencing not less than 25% of the initial stated certificate
balance of the series may, by written request to the related trustee, obtain
access to the list of all holders of the certificates of the series for the
purpose of communicating with them with
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respect to their rights under the related trust agreement or under the
certificates. Unless Definitive Securities have been issued in exchange for
the certificates, the only certificateholder appearing on the list maintained
by the related trustee will be Cede, as nominee for DTC. Under these
circumstances, any beneficial owner of a certificate who wishes to communicate
with other beneficial owners of the certificates will not be able to identify
those beneficial owners through the related trustee and instead will have to
attempt to identify them through DTC and its participants or by such other
means as the beneficial owner may find available.
Reports to Securityholders
On each payment date, the paying agent, will include with each payment or
distribution to securityholders a statement prepared by Chase USA, as
servicer. Each statement will include, to the extent applicable, the following
information, and any other information specified in the related prospectus
supplement, with respect to the payment date or the period since the previous
payment date, as applicable:
o the amount of the distribution allocable to principal of each class of
securities and the derivation of the amounts,
o the amount of the distribution allocable to interest on or with respect
to each class of securities,
o the amount of the servicing fee paid to Chase USA, as servicer, and the
amount of any unpaid servicing fee in respect of the related Collection
Period or Collection Periods, as the case may be,
o the amount of the administration fee paid to JPMorgan Chase Bank, as
administrator, and the amount of any unpaid administration fees in
respect of the related Collection Period, or Collection Periods, as the
case may be,
o the aggregate unreimbursed amount of Advances as of the last day of the
preceding Collection Period and the change in that amount from the
previous Collection Period,
o the aggregate principal balance of the motor vehicle loans as of the
close of business on the last day of the preceding Collection Period,
o the aggregate outstanding principal balance of each class of securities,
in each case after giving effect to all payments reported under the first
bullet above on the payment date,
o the interest rate for the next interest accrual period with respect to
any class of securities with a variable rate,
o the amount of the aggregate losses realized on the motor vehicle loans
for the preceding Collection Period,
o the amount of any shortfalls in payment of principal of or interest on
any class of the securities and the change in those amounts from the
preceding statement,
o the aggregate amount to be paid in respect of motor vehicle loans, if
any, purchased by the servicer or repurchased by the seller in the
preceding Collection Period,
o the balance of the reserve account, if any, or any other enhancement
account, as of the payment date, after giving effect to changes to that
account on that date, the amount required to be on deposit in that
account on that payment date and the components of calculating that
required amount,
o for each payment date during the funding period, if any specified in the
prospectus supplement, the remaining amount on deposit in the pre-funding
account and available to be used to purchase additional motor vehicle
loans,
o for the first payment date that is on or immediately following the end of
the funding period specified in the prospectus supplement, the amount
remaining on deposit in the pre-funding account that has not been used
and is being passed through as payments of principal on the securities
and
o the balance in any account in which prepayments of scheduled payments by
or on behalf of the obligors on Actuarial Receivables are deposited.
Each amount set forth in the first four bullets with respect to the
securities of any series will be expressed as a dollar amount per $1,000 of
the initial principal balance of the notes or the initial stated certificate
balance of the certificates, as applicable. The paying agent will deliver
these statements to DTC for further distribution to the securityholders in
accordance with DTC's procedures.
Chase USA, as servicer, will file on behalf of each trust such periodic
reports with respect to each trust with the SEC as is required under the
Securities Exchange Act of 1934.
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Within the prescribed period of time for tax reporting purposes after the
end of each calendar year during the term of each trust, the applicable
indenture trustee, trustee or paying agent, will furnish to each person who at
any time during the calendar year has been a securityholder of that trust and
received any payment on those securities, a statement containing information
for the purposes of that securityholder's preparation of federal income tax
returns.
The Indenture
Each trust will issue one or more classes of notes. The notes will be issued
under the terms of an indenture between the trust and the indenture trustee
specified in the prospectus supplement, a form of which has been filed as an
exhibit to the registration statement of which this prospectus forms a part.
This summary describes the material provisions of the indenture common to the
notes of each trust. The attached prospectus supplement will give you
additional information specific to the notes which you are purchasing. This
summary does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the notes and the
indenture.
Events of Default
The Events of Default under each indenture will consist of:
o a default for five days, or such longer period as is specified in the
related prospectus supplement, or more in the payment of any interest on
any of the notes issued pursuant to the indenture,
o a default in the payment of the principal of or any installment of the
principal of any note issued pursuant to the indenture when it becomes
due and payable,
o a default in the observance or performance of any other covenant or
agreement of the trust made in the indenture which default materially and
adversely affects the rights of the holders of the notes issued pursuant
to the indenture and which default continues for a period of 30 days
after written notice of the default is given to the trust by the related
indenture trustee or to the trust and the indenture trustee by the
holders of at least 25% in principal amount of the Controlling Class of
notes, or for such longer period, not to exceed 90 days, as may be
reasonably necessary to remedy the default, provided that the default is
capable of being remedied within 90 days or less, or
o certain events of bankruptcy, insolvency, receivership or liquidation of
the trust.
The amount of principal due and payable to the holders of a class of notes
under the indenture until the final scheduled payment date for that class of
notes will generally be limited to amounts available to pay the principal of
the notes. Therefore the failure to pay principal on a class of notes on any
payment date generally will not result in the occurrence of an Event of
Default until the final scheduled payment date for that class of notes.
Noteholder Rights Upon Event of Default. If an Event of Default should occur
and be continuing with respect to the notes issued by any trust, the related
indenture trustee or the holders of a majority of the principal amount of the
Controlling Class of the notes may declare the principal of the notes to be
immediately due and payable. The holders of a majority of the principal amount
of the Controlling Class of the notes may rescind that declaration at any time
before the indenture trustee obtains a judgment or decree for the payment of
money by the trust.
If the notes issued by any trust are declared to be due and payable
following an Event of Default, the related indenture trustee may:
o institute proceedings to collect amounts due on the notes,
o foreclose on the trust property or
o exercise other remedies as a secured party.
In addition, the indenture trustee may sell the motor vehicle loans held by
the trust if
o the holders of all the outstanding notes issued by the trust consent to
the sale,
o the proceeds of the sale are sufficient to pay in full the principal and
the accrued interest on all outstanding notes and certificates issued by
the trust at the date of the sale or
o there has been an Event of Default arising from a failure to pay
principal or interest on any notes and the indenture trustee determines
that the proceeds of the motor vehicle loans would not be sufficient on
an
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ongoing basis to make all payments on the notes as those payments would
have become due if the obligations had not been declared due and payable,
and the indenture trustee obtains the consent of the holders of 66 2/3%
of the aggregate outstanding principal amount of the Controlling Class of
notes.
The indenture trustee may elect to have the trust maintain possession of the
motor vehicle loans and continue to apply collections on those motor vehicle
loans as if the notes had not been declared to be due and payable.
If an Event of Default occurs and is continuing under an indenture, the
related indenture trustee will be under no obligation to exercise any of the
rights or powers under the indenture at the request or direction of any of the
holders of the notes issued under the indenture if the indenture trustee
reasonably believes it will not be adequately indemnified against the costs,
expenses and liabilities which might be incurred by it in complying with that
request.
The holders of a majority of the principal amount of the Controlling Class
of the notes issued under the indenture will have the right to direct the
time, method and place of conducting any proceeding or any remedy available to
the related indenture trustee.
Prior to the declaration that a series of notes are due and payable
following the occurrence of an Event of Default, the holders of a majority of
the principal amount of the Controlling Class of those notes may waive the
Event of Default unless the Event of Default was caused by a default in the
payment of principal or interest or a default in respect of a covenant or
provision of the indenture that cannot be modified without the waiver or
consent of all the holders of the outstanding notes.
No holder of a note will have the right to institute any proceeding with
respect to the related indenture unless:
o the holder has previously given written notice to the related indenture
trustee of a continuing Event of Default,
o the holders of not less than 25% in principal amount of the Controlling
Class of notes have made a written request to the indenture trustee to
institute a proceeding in its own name as indenture trustee,
o such holder or holders have offered the indenture trustee indemnity
reasonably satisfactory to it against the costs, expenses and liabilities
to be incurred in complying with their request,
o the indenture trustee has, for 60 days after receipt of the notice,
request and offer of indemnity, failed to institute a proceeding and
o no direction inconsistent with the written request has been given to the
indenture trustee during the 60-day period by the holders of a majority
of the principal amount of the Controlling Class of notes.
Nonetheless the holder of each note issued by a trust will have the absolute
and unconditional right to receive payment of principal of and interest on
that note and to institute suit for the enforcement of that payment, which
right may not be impaired without the individual holder's consent.
Each indenture trustee and the related noteholders, by accepting notes, will
covenant that they will not, at any time, institute against the trust issuing
the notes any bankruptcy, reorganization or other proceeding under any federal
or state bankruptcy or similar law.
Neither the indenture trustee nor the trustee in its individual capacity,
nor any holder of a certificate representing an ownership interest in a trust
nor any of their respective owners, beneficiaries, agents, officers,
directors, employees, affiliates, successors or assigns will be personally
liable for the payment of the principal of or interest on the notes issued by
the trust or for the agreements of the trust contained in the applicable
indenture.
Certain Covenants
Restrictions on Merger and Consolidation. Each indenture will provide that
the related trust may not consolidate with or merge into any other entity,
unless
o the entity formed by or surviving the consolidation or merger is
organized under the laws of the United States, any state or the District
of Columbia,
o the entity expressly assumes the trust's obligation to make due and
punctual payments of principal and interest on the notes issued by the
trust and the performance or observance of every agreement and covenant
of the trust under the indenture,
o no Event of Default under the indenture has occurred and is continuing
immediately after the merger or consolidation,
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o the trust has been advised that the rating of the notes and the
certificates if any issued by the trust then in effect would not be
downgraded or withdrawn by the rating agencies as a result of the merger
or consolidation,
o all action as is necessary to maintain the lien and security interest
created by the indenture has been taken and
o the trust has received an opinion of counsel to the effect that the
consolidation or merger would have no material adverse tax consequence to
the trust or to any holder of a security issued by the trust.
Other Covenants. Each trust will agree, among other things, not to:
o except as expressly permitted by the applicable Related Documents, sell,
transfer, exchange or otherwise dispose of any of the assets of the
trust,
o claim any credit on or make any deduction from the principal or interest
payable in respect of the notes issued by the trust, other than amounts
withheld under the tax code or applicable state law,
o assert any claim against any present or former noteholders because of the
payment of taxes levied or assessed upon the trust,
o permit the validity or effectiveness of the related indenture to be
impaired or permit any person to be released from any covenants or
obligations with respect to the notes under the indenture except as may
be expressly permitted under the indenture,
o permit any lien, charge, excise, claim, security interest, mortgage or
other encumbrance to be created on or extend to or otherwise arise upon
or burden the assets of the trust or any part of those assets, or any
interest in those assets or the proceeds of those assets or
o permit any lien of the indenture not to constitute a valid first priority
security interest in the trust, except as a result of any tax, mechanics'
or other like liens.
No trust will be permitted to engage in any activity other than as described
in the section of the related prospectus supplement entitled "The Trust." No
trust will be permitted to incur, assume or guarantee any indebtedness other
than the indebtedness incurred under the notes issued by the trust and the
indenture, the certificates issued by the trust and as a result of any
Advances made to it by the servicer in accordance with the related sale and
servicing agreement.
Annual Compliance Statement. Each trust will be required to file annually
with the related indenture trustee a written statement as to the fulfillment
of its obligations under the indenture.
Indenture Trustee's Annual Report. The indenture trustee for each trust will
be required to mail each year to all related noteholders a brief report
relating to
o its eligibility and qualification to continue as indenture trustee under
the related indenture,
o any amounts advanced by it under the related indenture,
o the amount, interest rate and maturity date of certain indebtedness owed
by the trust to the related indenture trustee in its individual capacity,
o the property and funds physically held by the indenture trustee in his
capacity as indenture trustee and
o any action taken by it that materially affects the related notes and that
has not been previously reported.
Satisfaction and Discharge of Indenture. An indenture will be discharged
upon the delivery to the related indenture trustee for cancellation of all
notes issued under that indenture, or with certain limitations, upon deposit
with the indenture trustee of funds sufficient for, the payment in full of all
those notes.
Modifications of the Indenture
Modifications of the Indenture With Noteholder Consent. Any trust and the
related indenture trustee may, with the consent of the holders of a majority
of the principal amount of the notes of the Controlling Class, execute a
supplemental indenture to add provisions to, change in any manner or eliminate
any provisions of, the related indenture, or modify in any manner the rights
of the related holders of the notes. However, no supplemental indenture may
effect any of the following changes without the consent of the holder of each
note affected by that change:
o change the due date of payment of any installment of principal of or
interest on any note,
o reduce the principal amount, the specified interest rate or the
redemption price of any note,
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o change any place of payment where, or the coin or currency in which, any
note or any interest on the note is payable,
o impair the right to sue for the enforcement of provisions of the related
indenture regarding payment,
o reduce the percentage of the aggregate amount of the Controlling Class of
notes, the consent of the holders of which is required to waive
compliance with certain provisions of the related indenture or of certain
defaults under the indenture and their consequences as provided for in
the indenture,
o modify or alter the provisions of the related indenture regarding the
voting of notes held by Chase USA, the related trust, any other obligor
on the notes or any affiliate of any of Chase USA, the related trust or
such other obligor on the notes,
o reduce the percentage of the aggregate principal amount of the
Controlling Class of the notes, the consent of which is required to
direct the related indenture trustee to sell or liquidate the motor
vehicle loans held by the trust after an Event of Default if the proceeds
of the sale would be insufficient to pay the principal amount and accrued
but unpaid interest on all of the outstanding notes issued by the trust,
o reduce the percentage of the aggregate amount of the Controlling Class of
the notes, the consent of which is required to amend the sections of the
related indenture that specify the applicable percentage of aggregate
principal amount of the notes necessary to amend the indenture or the
Related Documents,
o modify any provisions of the indenture in a manner that affects the
calculation of the amount of any payment of interest or principal due on
any note on any payment date, including the calculation of any of the
individual components of the calculation,
o permit the creation of any lien ranking prior to or on a parity with the
lien of the related indenture with respect to any of the collateral for
the notes or
o except as otherwise permitted or contemplated in the indenture, terminate
the lien of the indenture on any collateral for the notes or deprive the
holder of any note of the security afforded by the lien of the indenture.
Modifications of the Indenture Without Noteholder Consent. Any trust and the
related indenture trustee may enter into supplemental indentures, without
obtaining the consent of the holders of the notes issued by that trust, for
the purpose of, among other things, adding any provisions to or changing in
any manner or eliminating any of the provisions of the related indenture or of
modifying in any manner the rights of the holders of the notes so long as such
action does not materially and adversely affect the interest of any
noteholder.
The Indenture Trustee
The indenture trustee for the notes issued by each trust will be specified
in the related prospectus supplement. The indenture trustee for any series may
resign at any time, in which event JPMorgan Chase Bank, as administrator of
the trust, will be obligated to appoint a successor indenture trustee. The
administrator of the trust may also remove any indenture trustee if the
indenture trustee ceases to be eligible to continue as indenture trustee under
the related indenture or if the indenture trustee becomes insolvent. In those
circumstances, the administrator of the trust will be obligated to appoint a
successor indenture trustee for the related series of notes.
If a trust issues a class of notes that is subordinated to one or more other
classes of notes and an Event of Default occurs under the related indenture,
the indenture trustee may be deemed to have a conflict of interest under the
Trust Indenture Act of 1939, as amended, and may be required to resign as
trustee for one or more of those classes of notes. In that case, the indenture
will provide for a successor trustee to be appointed for one or more of those
classes of notes and may provide for rights of senior holders of the notes to
consent to or direct actions by the related indenture trustee that are
different from those of subordinated holders of the notes. Any resignation or
removal of the indenture trustee and appointment of a successor indenture
trustee will not become effective until acceptance of the appointment by a
successor indenture trustee.
Transfer and Servicing Agreements
The following summary describes certain terms of the sale and servicing
agreement pursuant to which Chase USA, as seller, will transfer a pool of
motor vehicle loans to a trust and Chase USA, as servicer, will service the
motor vehicle loans on behalf of the trust. This section also describes
certain provisions of the trust agreement and the administration agreement.
Forms of those documents have been filed as exhibits to the registration
statement of which this prospectus forms a part. This summary describes the
material provisions common to the securities of
30
each trust. The attached prospectus supplement will give you additional
information specific to the securities which you are purchasing. This summary
does not purport to be complete and is subject to, and qualified in its
entirety by reference to, all the provisions of those documents.
Sale and Assignment of Motor Vehicle Loans
Sale and Assignment of Initial Motor Vehicle Loans. When a trust issues
securities, Chase USA, as seller, will, in exchange for those securities, sell
and assign to the trust under a sale and servicing agreement, without
recourse, its interest in a pool of motor vehicle loans, including its
security interests in the related financed vehicles. Each motor vehicle loan
will be identified in a schedule to the related sale and servicing agreement.
Chase USA will then sell the securities offered by this prospectus and the
related prospectus supplement as set forth in the prospectus supplement.
Sale and Assignment of Additional Motor Vehicle Loans. The prospectus
supplement for the trust will specify whether, and the terms, conditions and
manner under which, Chase USA will sell and assign additional motor vehicle
loans to the trust from time to time during a funding period.
Eligibility Criteria. Each sale and servicing agreement, will set forth the
criteria that must be satisfied by each motor vehicle loan as of the
applicable cutoff date to be included in the trust. These criteria will
include, the following:
o each motor vehicle loan
o in the case of a motor vehicle loan originated with the involvement of
a dealer acting under a dealer agreement with Chase USA, has been
originated in the form of a credit sales transaction by a dealer or a
purchase money loan or other note through a dealer located in one of
the states of the United States, including the District of Columbia,
for the retail financing of a motor vehicle or
o in the case of a motor vehicle loan originated by Chase USA or another
originating bank without the involvement of a dealer acting under a
dealer agreement with Chase USA, has been originated by Chase USA or
another originating bank in the United States in the form of a secured
loan for the retail financing of a motor vehicle or
o in the case of a motor vehicle loan originated by another originator
and acquired by Chase USA, has been originated in the form of a credit
sales transaction by an automobile dealer or such originator, or a
purchase money loan or other note by such originator in the United
States for the retail financing of a motor vehicle, and
o in each case, has been fully and properly executed by the related
parties,
o in the case of a motor vehicle loan in the form of a retail installment
sales contract originated with the involvement of a dealer acting under
a dealer agreement with Chase USA, if Chase USA purchased the retail
installment sales contract from the dealer, the retail installment
sales contract has been validly assigned by that dealer to Chase USA in
accordance with its terms,
o in the case of a motor vehicle loan originated by a originating bank
other than Chase USA, has been purchased from that originating bank and
validly assigned by that originating bank to Chase USA,
o in the case of a motor vehicle loan or purchase money loan originated
by another originator and acquired by Chase USA, has been purchased by
Chase USA and validly assigned by such originator to Chase USA,
o contains customary and enforceable provisions so that the rights and
remedies of the holder thereof will be adequate for realization against
the collateral or the benefits of the security,
o other than a Final Payment Receivable or a Deferred Payment Receivable,
provides for fully amortizing level scheduled monthly payments, provided
that the last payment may be different from the level scheduled payment,
and for accrual of interest according to the simple interest or actuarial
method,
o each motor vehicle loan and each sale of the related financed vehicle
complied at the time it was originated or made, and complied on and after
the applicable cutoff date in all material respects with applicable
federal, state, and local laws, and related regulations, including usury
laws, and any consumer credit, equal opportunity and disclosure laws
applicable to the motor vehicle loan and the sale,
o each motor vehicle loan constitutes the legal, valid and binding payment
obligation in writing of the obligor, enforceable by the holder thereof
in all material respects in accordance with its terms, subject, as to
enforcement, to applicable bankruptcy, insolvency, reorganization,
liquidation and other similar laws and equitable principles relating to
or affecting the enforcement of creditors' rights,
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o subject to the limited exceptions specified in the sale and servicing
agreement, immediately prior to its sale and assignment to the trust,
each motor vehicle loan was secured by a validly perfected first priority
security interest in the related financed vehicle in favor of the
originator thereof, which security interest is assignable and has been
assigned to the related trust;
o as of the applicable cutoff date, Chase USA had no knowledge of any facts
which would give rise to any right, assertion or threat of rescission,
setoff, counterclaim or defense with respect to the motor vehicle loan,
o as of the applicable cutoff date, Chase USA had no knowledge of any liens
or claims that have been filed, including liens for work, labor,
materials or unpaid taxes relating to a financed vehicle, that would be
liens prior to, or equal or coordinate with, the lien granted by the
motor vehicle loan,
o except for payment defaults continuing for less than 30 days as of the
applicable cutoff date, Chase USA had no knowledge that a default,
breach, violation or event permitting acceleration under the terms of the
motor vehicle loans exists; Chase USA had no knowledge that a continuing
condition that with notice or lapse of time would constitute a default,
breach, violation or event permitting acceleration under the terms of the
motor vehicle loan exists and Chase USA has not waived any of the above,
o each motor vehicle loan requires that the related obligor obtain
comprehensive, liability, theft and physical damage insurance covering
the related financed vehicle and
o each motor vehicle loan satisfies the other criteria described in this
prospectus in the section entitled "The Motor Vehicle Loans" and the
criteria for the selection of the motor vehicle loans to be included in
the trust described in the related prospectus supplement.
Repurchase of Motor Vehicle Loans. As of the last day of the second or, at
the option of the seller, the first Collection Period following the discovery
by or notice to Chase USA, as seller, that a motor vehicle loan did not meet
the criteria described above and that failure materially and adversely affects
the interests of the related trust in the motor vehicle loan, the seller,
unless the failure has been cured, will repurchase the motor vehicle loan from
the trust. The repurchase price will be the Repurchase Amount, which is the
unpaid principal balance of that motor vehicle loan plus accrued interest
thereon at the contract rate through the last day of the month of the
repurchase. The seller's repurchase obligation will constitute the sole remedy
available to the securityholders of the related trust for any such uncured
breach.
Custody of Motor Vehicle Loans. The indenture trustee pursuant to the sale
and servicing agreement will appoint Chase USA, as servicer, as the initial
custodian of the motor vehicle loans transferred to the trust in order to
assure uniform quality in servicing the motor vehicle loans and to reduce
administrative costs. The servicer will not stamp or otherwise mark the motor
vehicle loans to reflect the transfer of the motor vehicle loans to the trust.
The servicer will not segregate the motor vehicle loans transferred to the
trust from the other motor vehicle loans that the servicer owns or services.
The servicer will not notify the obligors under the motor vehicle loans of the
transfer of those loans to the trust. However, UCC financing statements
reflecting the sale and assignment of the motor vehicle loans by the seller to
the trust will be filed, and the servicer's accounting records and computer
systems will be marked to reflect the sale and assignment. Because those motor
vehicle loans will remain in the servicer's possession and will not be stamped
or otherwise marked to reflect the assignment to the trust if a subsequent
purchaser were to obtain physical possession of those motor vehicle loans
without knowledge of the assignment, the trust's interest in the motor vehicle
loans could be defeated.
Trust Accounts
Each trust will establish and maintain one or more collection accounts in
the name of the indenture trustee on behalf of the related securityholders.
The servicer will deposit all collections on the motor vehicle loans into the
collection account. The servicer may establish and maintain a distribution
account in the name of the indenture trustee on behalf of the noteholders into
which amounts released from the collection account and any other accounts of
the trust for payment to the noteholders will be deposited and from which
distributions of interest and/or principal to the noteholders will be made.
The trustee may establish and maintain one or more certificate distribution
accounts in the name of the trustee on behalf of the certificateholders into
which amounts released from the collection account and any other accounts of
the trust for distribution to the certificateholders will be deposited and
from which all distributions to the certificateholders will be made.
Chase USA, as servicer, may establish and maintain for the trust an
additional account, in the name of the related indenture trustee into which,
to the extent required by the related sale and servicing agreement, the
servicer will deposit prepayments of scheduled payments by or on behalf of
obligors on Actuarial Receivables. These prepayments do not constitute
scheduled payments, full prepayments, or certain partial prepayments. These
32
prepayments will be held in this paid-ahead account until the prepaid amounts
fall due. Until the servicer transfers these prepayments from this paid-ahead
account to the collection account, they will not be included in collections
and will not be available for distribution to the securityholders. So long as
Chase USA is the servicer for the trust, no Event of Servicing Termination
exists and each other condition to holding these prepayments as may be
required by the related sale and servicing agreement, is satisfied, the
servicer may retain these prepayments until the applicable payment date.
Any other accounts to be established with respect to the securities of a
trust, including any pre-funding account, yield supplement account or reserve
account, will be described in the related prospectus supplement.
All of the accounts described in this section are collectively referred to
in this prospectus as the "trust accounts".
Funds in the trust accounts will be invested as provided in the related sale
and servicing agreement in Permitted Investments. Permitted Investments
satisfy criteria established by the rating agencies rating the securities
issued by the trust and are generally limited to obligations or securities
that mature on or before the business day preceding the next payment date.
However, to the extent permitted by the rating agencies, funds in any reserve
account or yield supplement account may be invested in Permitted Investments
that will mature later than the business day preceding the next payment date
but not later than 90 days after the date of investment. Permitted Investments
will not be sold to meet any shortfalls. Thus, the amount of cash available in
any reserve account or yield supplement account at any time may be less than
the balance in that account. If the amount required to be withdrawn from any
reserve account or yield supplement account to cover shortfalls in collections
on the related motor vehicle loans exceeds the amount of cash available in
that account, a temporary shortfall in the amounts distributed to the related
noteholders or certificateholders could result, which could, in turn, increase
the average life of the notes or the certificates of the trust. Net investment
earnings on funds deposited in the trust accounts will either remain on
deposit in the applicable trust account or be paid to the party identified in
the related prospectus supplement.
The trust accounts will be required to be maintained as Eligible Deposit
Accounts, which are accounts at a depository institution satisfying certain
requirements of the rating agencies rating the securities issued by a trust.
Each trust account, other than a reserve account or yield supplement account,
will be established initially with the trust department of JPMorgan Chase
Bank. Should JPMorgan Chase Bank or any depositary of a trust account no
longer satisfy the requirements of the rating agencies, the trust account will
be moved to a depositary meeting the rating agencies' requirements, provided
that the trust account may remain at the depositary if the trustee or
indenture trustee receives written confirmation from each rating agency rating
the securities issued by the related trust to the effect that the ratings of
those securities will not be adversely affected.
JPMorgan Chase Bank, in its capacity as the initial paying agent under each
indenture or trust agreement, as applicable, will have the revocable right to
withdraw funds from the trust accounts for the purpose of making distributions
to securityholders in the manner provided in the applicable agreement.
Servicing
Servicing Procedures. Chase USA will service the motor vehicle loans
transferred to each trust and will be obligated to make reasonable efforts to
collect all payments due with respect to those motor vehicle loans in a manner
consistent with the related sale and servicing agreement and with the terms of
the motor vehicle loans. It will be obligated to follow the collection and
servicing procedures that it follows with respect to comparable new or used
motor vehicle loans that it services for itself and that are consistent with
prudent industry standards.
Consistent with its normal procedures, the servicer may, in its discretion,
arrange with the obligor on a motor vehicle loan to defer or modify the
payment schedule. Some of these arrangements may require the servicer to
purchase the receivable while others may result in the servicer's making
Advances with respect to the motor vehicle loan. The sale and servicing
agreement will set forth the limitations on the servicer's ability to make
these arrangements. Those limitations will be described in the related
prospectus supplement. The servicer may be obligated to purchase a receivable
for the Repurchase Amount if, among other things, it extends the date for
final payment by the obligor of such motor vehicle loan beyond the last day of
the Collection Period during which the latest maturing motor vehicle loan in
the trust matures as set forth in the related prospectus supplement, or
changes the contract rate of interest or the total amount or number of
scheduled payments.
If the servicer determines that eventual payment in full of a motor vehicle
loan is unlikely, the servicer will use reasonable efforts, consistent with
its customary servicing procedures, to repossess or otherwise take possession
of the financed vehicle during the calendar month in which more than 10% of
any scheduled payment becomes 90
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days delinquent. The servicer may, however, repossess or otherwise take
possession of a financed vehicle prior to the 90 day period if the servicer
determines that eventual payment in full of the amount financed is unlikely,
the vehicle is in danger of being damaged, destroyed or otherwise made
unavailable for repossession or the obligor voluntarily surrenders the
financed vehicle. The servicer may also delay repossession of the financed
vehicle if it is unable to locate the vehicle, the obligor is the subject of a
bankruptcy proceeding or the servicer otherwise defers repossession of the
financed vehicle in accordance with its normal and customary servicing
practices and procedures. After repossession of a financed vehicle, the
servicer will, in accordance with its normal and customary servicing practices
and procedures, sell the vehicle in an auction or consign the vehicle to a
dealer for resale as soon as is practicable after repossession, subject to any
applicable laws. The servicer will be obligated to follow its customary and
usual practices and procedures as it shall deem necessary or advisable in
determining when and if to exercise reasonable efforts to realize upon any
recourse to dealers. The servicer will deposit any proceeds from its
realization efforts into the collection account.
The servicer will be obligated to determine that eventual payment in full of
a delinquent motor vehicle loan is unlikely no later than the calendar month
in which more than 10% of a scheduled payment under the motor vehicle loan
becomes 240 days delinquent.
Collections. Chase USA, as servicer, will be required to deposit all
payments on the motor vehicle loans held by each trust and all proceeds of
those motor vehicle loans collected during each Collection Period into the
collection account on or before the business day preceding the following
payment date so long as Chase USA or JPMorgan Chase Bank is the servicer and
each other condition to making deposits less frequently than daily is
satisfied as may be confirmed by the rating agencies rating the securities
issued by the trust as set forth in the related prospectus supplement. If
those conditions are not met, the servicer will be required to deposit those
amounts into the collection account on a daily basis within forty-eight hours
of receipt. In addition, the servicer or the seller, as the case may be, will
remit the aggregate Repurchase Amounts of any motor vehicle loans to be
purchased from the trust to the collection account on or prior to the business
day preceding the applicable payment date. Pending deposit into the collection
account, the servicer may invest collections at its own risk and for its own
benefit. Those funds will not be segregated from the servicer's own funds. If
the servicer were unable to remit those funds, you might incur a loss. The
servicer may, to the extent described in the related prospectus supplement and
in order to satisfy the rating agency requirements for monthly deposit of
collections described above, obtain letters of credit or other security for
the benefit of the related trust to secure timely remittances of collections
on the related motor vehicle loans.
Servicing Compensation and Expenses. The servicer will be entitled to
receive a servicing fee for each Collection Period payable on the following
payment date in an amount equal to the sum of:
o the product of one-twelfth of the percentage per annum set forth in the
related prospectus supplement and the aggregate principal balance of the
motor vehicle loans as of the close of business on the last day of the
preceding Collection Period and
o all late charges, credit-related extension fees, non-credit related
extension fees or other administrative fees or similar charges allowed by
applicable law with respect to the motor vehicle loans collected during
that Collection Period.
If specified in the related prospectus supplement, the servicer's compensation
may also include net investment earnings on funds deposited in one or more of
the trust accounts.
The servicing fee is intended to compensate the servicer for
o performing the functions of a third-party servicer of motor vehicle loans
as an agent for the trust, including collecting and posting all payments
and responding to inquiries of the obligors under the motor vehicle
loans, investigating delinquencies, reporting tax information to the
obligors and advancing costs of disposition and repossession of the
financed vehicles,
o administering the pool of motor vehicle loans, accounting for collections
and furnishing monthly and annual statements to the related trustee or
indenture trustee, as applicable and
o paying certain taxes, accounting fees, outside auditor fees, the fees of
JPMorgan Chase Bank as the paying agent and the transfer agent and
registrar for the trust, the related trustee and the indenture trustee
and its counsel, data processing costs and other costs incurred in
connection with administering the pool of motor vehicle loans.
Advances. If specified in the related prospectus, the servicer may either be
obligated to make or have the discretion to make advances of delinquent
payments owing under the motor vehicle loans in the amounts and under
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the circumstances described in the prospectus supplement. If the servicer
makes Advances, it will be entitled to reimbursement for those Advances in the
manner described in the related prospectus supplement. If the servicer makes
Advances, it will deposit the Advances made in respect of the delinquent
payments for a particular Collection Period on the business day preceding the
following payment date.
Net Deposits. As an administrative convenience, so long as Chase USA is the
servicer and is permitted to make monthly deposits of collections on the motor
vehicle loans to the collection account, it will be permitted to deposit those
collections, aggregate Advances and Repurchase Amounts for each trust with
respect to a particular Collection Period net of distributions to be made to
Chase USA, as servicer, by the trust with respect to that Collection Period.
Resignation of the Servicer. Chase USA may not resign as the servicer of the
motor vehicle loans held by any trust under any sale and servicing agreement,
except:
o upon a determination that Chase USA's performance of its duties as
servicer is no longer permissible under applicable law or
o if a successor servicer is appointed, upon notification by each rating
agency then rating any of the securities issued by that trust that the
rating assigned to the securities will not be reduced or withdrawn.
Chase USA's resignation will not become effective until the related indenture
trustee or a successor servicer has assumed Chase USA's servicing
responsibilities and obligations under the sale and servicing agreement. The
indenture trustee will not be obligated to act as the successor servicer
unless Chase USA resigns because the performance of its duties as servicer is
no longer permissible under applicable laws.
Assignment by the Servicer. Chase USA, as servicer, may not transfer or
assign all, or a portion of, its rights, obligations and duties under any sale
and servicing agreement, except in connection with a merger or consolidation
of Chase USA, unless:
o the transfer or assignment will not result in a reduction or withdrawal
by any rating agency then rating any of the securities issued by the
related trust of the rating then assigned to the securities and the
indenture trustee and the related trustee have consented to the transfer
or assignment or
o consent is obtained from the indenture trustee, the related trustee and
holders of securities evidencing not less than a majority of the voting
interests.
Chase USA cannot effect a transfer or assignment of all of its rights,
obligations and duties as servicer under a sale and servicing agreement until
a successor servicer has assumed those rights, obligations and duties.
If Chase USA, its successor or assign or the indenture trustee is acting as
the servicer, it will be permitted to delegate any of its duties under the
related sale and servicing agreement to a third party, in the ordinary course
of its business. The servicer will be obligated to pay the compensation
payable to that third party from its own funds. None of the related trust, the
related trustee, the related indenture trustee (if not the servicer), or
securityholders will be liable for that third party's compensation. Any
delegation of duties by the servicer will not relieve the servicer of
liability and responsibility for the performance of those duties.
Liabilities of the Servicer; Indemnification of the Servicer. Each sale and
servicing agreement will provide that neither Chase USA, as servicer, nor any
of its directors, officers, employees and agents will be under any liability
to the related trust, the related trustee, the related indenture trustee or
any securityholders for taking any action or for refraining from taking any
action as servicer pursuant to that sale and servicing agreement. However,
neither Chase USA nor any of those other persons will be protected against any
liability that would otherwise be imposed by reason of willful misfeasance,
bad faith or gross negligence in the performance of duties or by reason of
reckless disregard of obligations and duties under the sale and servicing
agreement.
Chase USA, as servicer, and its directors, officers, employees and agents
will be entitled to indemnification by the related trust for, and will be held
harmless against, any loss, liability or expense incurred in connection with
any legal action relating to the performance of its servicing duties under the
related sale and servicing agreement that is not otherwise indemnified, other
than:
o any loss or liability otherwise reimbursable under the sale and servicing
agreement and
o any loss, liability or expense incurred by reason of willful misconduct,
negligence or bad faith in performance of its duties or by reason of its
reckless disregard of obligations and duties under the sale and servicing
agreement.
The trust's obligation to indemnify the servicer will be limited to excess
amounts available on any payment date in the reserve account or other
enhancement account held by the trust or, if the trust has no enhancement
accounts, to
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amounts available after all payments or deposits required under the related
sale and servicing agreement for the benefit of the servicer or the
securityholders have been made.
In addition, each sale and servicing agreement will provide that Chase USA,
as servicer, is under no obligation to appear in, prosecute or defend any
legal action that is not incidental to its servicing responsibilities under
the sale and servicing agreement and that, in its opinion, may cause it to
incur any expense or liability. The servicer may, however, undertake any
reasonable action that it deems necessary or desirable in respect of the sale
and servicing agreement and the rights and duties of the related parties and
the interests of the related securityholders under the sale and servicing
agreement. In that event, the related trust will be liable for the legal
expenses and costs of the action and the servicer will be entitled to be
reimbursed for those expenses. The trust's obligation to reimburse the
servicer will be limited to excess amounts available on any payment date in
the reserve account or other enhancement account held by the trust or, if the
trust has no enhancement accounts, to amounts available after all payments or
deposits required under the related sale and servicing agreement for the
benefit of the servicer or the securityholders have been made.
Events of Servicing Termination. Events of Servicing Termination under each
sale and servicing agreement will consist of:
o the servicer's failure to deliver to the related trustee or indenture
trustee:
o the monthly report for any Collection Period or
o for deposit in the collection account or other trust account, any
amounts required to be deposited in those accounts under the terms of
the securities issued by the related trust or the related sale and
servicing agreement,
o which failure continues unremedied for five business days after the
servicer's discovery of that failure or the servicer's receipt of
written notice of that failure by the related trustee or indenture
trustee or to the related trustee or indenture trustee and the servicer
by holders of at least 25% of the principal amount of the notes issued
by the trust, or, if no notes are outstanding, by holders of at least
25% of the certificate balance of the certificates issued by the trust,
o the servicer's failure to duly observe or perform in any material respect
any other covenant or agreement in the related sale and servicing
agreement or indenture which failure materially and adversely affects the
rights of the related trust or the securityholders, which determination
will be made without regard to whether funds are available to the
securityholders pursuant to any related enhancement, and continues
unremedied for 60 days after the date of the servicer's receipt of
written notice of the failure by the related trustee or indenture trustee
or to the related trustee or indenture trustee and the servicer by
holders of at least 25% of the principal amount of the notes issued by
the trust or, if no notes are outstanding, by holders of at least 25% of
the certificate balance of the certificates issued by the trust or
o the occurrence of certain insolvency events specified in the applicable
sale and servicing agreement in respect of the servicer.
Rights Upon Event of Servicing Termination. As long as an Event of Servicing
Termination under a sale and servicing agreement remains unremedied, the
related indenture trustee or the holders of not less than a majority of the
principal amount of the Controlling Class of the notes, and after the notes
have been paid in full, the trustee or the holders of not less than a majority
of the certificate balance of the certificates, may terminate all the rights
and obligations of the servicer under the sale and servicing agreement. If the
servicer is terminated, the indenture trustee or a successor servicer
appointed by the indenture trustee or trustee will succeed to all the
responsibilities, duties and liabilities of the servicer under the sale and
servicing agreement and will be entitled to similar compensation arrangements.
In the event that the indenture trustee is unwilling or unable to act as
servicer, it may appoint, or petition a court of competent jurisdiction for
the appointment of, a successor servicer. The compensation payable to a
successor servicer may not exceed the servicing fee paid to Chase USA, as
servicer under the sale and servicing agreement.
Waiver of Past Events of Servicing Termination. The holders of not less than
a majority of the principal amount of the Controlling Class of the notes, and
after the notes have been paid in full, the holders of not less than a
majority of the certificate balance of the certificates, may waive any Event
of Servicing Termination and its consequences, except an Event of Servicing
Termination consisting of a failure to make any required deposits to or
payments from any of the trust accounts in accordance with the applicable sale
and servicing agreement. In addition, the holders of not less than a majority
of the certificate balance of the certificates may waive an Event of Servicing
Termination that does not adversely affect the related indenture trustee or
noteholders.
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Evidence of Compliance. Each sale and servicing agreement will provide that
a firm of independent public accountants will annually furnish to the related
trustee and any indenture trustee a statement as to the servicer's compliance
during the preceding twelve months, or, if the first certification, from the
applicable closing date, with certain standards relating to the servicing of
the applicable motor vehicle loans, or as to the effectiveness of its
processing and reporting procedures and other matters.
Each sale and servicing agreement will also provide for delivery to the firm
of independent public accountants referred to in the immediately preceding
paragraph, substantially simultaneously with the delivery of the accountants'
statement referred above, of a certificate signed by an officer of the
servicer stating that it has fulfilled its obligations in all material
respects under the sale and servicing agreement throughout the preceding
twelve months, or, if the first certification, from the closing date, or, in
the alternative, if there has been a default in the fulfillment of any
obligation, describing that default.
You may obtain copies of these statements and certifications by a request in
writing addressed to the servicer.
Distributions
Beginning on the payment date specified in the related prospectus
supplement, distributions of principal and interest, or, where applicable, of
principal or interest only, on each class of securities issued by a trust will
be made by the applicable trustee, the indenture trustee or JPMorgan Chase
Bank as paying agent to the holders of the securities issued by that trust.
The timing, calculation, allocation, order, source, priorities of and
requirements for all payments to each class of securityholders will be set
forth in the related prospectus supplement.
If a trust issues both certificates and notes and the payment dates for
those certificates and notes do not coincide, all distributions, deposits or
other remittances made on one payment date will be treated as having been
distributed, deposited or remitted on the other payment date for the
applicable Collection Period for purposes of determining other amounts
required to be distributed, deposited or otherwise remitted on that second
payment date.
Credit and Cash Flow Enhancement
The amounts and types of credit and cash flow enhancement arrangements, if
any, and the provider thereof, if applicable, with respect to each class of
securities issued by a trust will be set forth in the related prospectus
supplement. If and to the extent provided in the related prospectus
supplement, credit and cash flow enhancement may be in the form of
o subordination of one or more classes of securities,
o excess spread, i.e., interest earned on the motor vehicle loans in excess
of the sum of the amount of interest required to be paid on the
securities and the servicing fees and other expenses of the trust,
o one or more reserve accounts,
o a yield supplement agreement or other arrangement,
o a yield supplement account,
o over-collateralization,
o letters of credit,
o credit or liquidity facilities,
o surety bonds,
o guaranteed investment contracts,
o swaps, caps or other interest rate protection agreements,
o repurchase obligations,
o other agreements providing third party payments or other support,
o cash deposits in trust accounts or
o other arrangements.
If specified in the related prospectus supplement, credit or cash flow
enhancement for a class of securities issued by a trust may cover one or more
other classes of securities issued by the same trust, and credit or cash flow
enhancement for the securities issued by a trust may cover one or more other
classes of securities issued by another trust.
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Credit and cash flow enhancement benefiting the securities issued by a trust
are intended to enhance the likelihood of receipt by the holders of those
securities of the full amount of principal and interest due on the securities
and to decrease the likelihood that those holders will experience losses. The
credit or cash flow enhancement for a class of securities may not provide
protection against all risks of loss and may not guarantee repayment of the
entire principal amount of and interest on those securities. If losses occur
which exceed the amount covered by any credit enhancement or which are not
covered by any credit enhancement, securityholders will bear their allocable
share of deficiencies, as described in the related prospectus supplement. In
addition, if a form of credit enhancement covers more than one series of
securities, the holders of the securities of any series will be subject to the
risk that the credit enhancement will be exhausted by the claims of holders of
the securities of other series.
Chase USA, as seller, may replace or reduce the credit enhancement for any
class of securities issued by a trust with another form of credit enhancement
without the consent of the holders of that class of securities, provided the
rating agencies rating those securities confirm in writing that this
substitution or reduction will not result in the reduction, qualification or
withdrawal of the rating of that class of securities or any class of
securities issued by that trust.
Statements to Trustees and Trust
Prior to each payment date with respect to the securities issued by each
trust, Chase USA, as servicer, will provide to the related trustee and any
indenture trustee a statement setting forth substantially the same information
for that payment date and the related Collection Period as is required to be
provided in the periodic reports provided to the holders of those securities
described in the section of this prospectus entitled "Certain Information
Regarding the Securities--Reports to Securityholders."
Amendments of Transfer and Servicing Agreements
Without Securityholder Consent. The parties to the transfer and servicing
agreements may amend a transfer and servicing agreement without prior notice
to the related securityholders, but with the prior consent of the related
trustee or indenture trustee and prior notice to the rating agencies rating
the securities issued by the related trust, in order to:
o cure any ambiguity, correct or supplement any of its provisions or the
provisions of the related securities, which may be inconsistent with any
other provision of the transfer and servicing agreement,
o evidence the succession of a successor servicer or seller pursuant to the
transfer and servicing agreement,
o add any other provisions with respect to matters or questions arising
under the transfer and servicing agreement that are not inconsistent with
its provisions, provided that the amendment does not, on the basis of an
officer's certificate and/or opinion of counsel reasonably acceptable to
the trustee and indenture trustee, materially and adversely affect the
interests of the trust or any securityholders or
o effect a transfer or assignment of the servicer's or the trust's rights,
obligations and duties under the transfer and servicing agreement.
With Securityholder Consent. The parties to the transfer and servicing
agreements may amend a transfer and servicing agreement in order to add any
provisions to or change in any manner or eliminate any of the provisions of
that transfer and servicing agreement or to modify in any manner the rights of
the securityholders with the consent of the holders of a majority of the
principal amount of the notes and the holders of certificates evidencing at
least a majority of the certificate balance then outstanding. However, the
parties may not amend a transfer and servicing agreement without the consent
of the holders of all outstanding notes and certificates if the amendment:
o increases or reduces in any manner the amount of, or accelerates or
delays the timing of, collections of payments on the related motor
vehicle loans or distributions that are required to be made for the
benefit of the securityholders or
o reduces the percentage of the notes or certificates issued by a trust
that is required for consent to any such amendment.
Continuing Obligations of Indenture Trustee
The indenture trustee will agree in the indenture that, upon the payment in
full of all outstanding notes issued under that indenture and the satisfaction
and discharge of that indenture, it will continue to carry out its obligations
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under the related sale and servicing agreement as agent for the trustee of the
trust for the benefit of the certificateholders of the trust.
Termination
The obligations of the servicer, the seller, the trustee and any indenture
trustee pursuant to the transfer and servicing agreements with respect to each
trust will terminate upon the earlier of:
o the payment date next succeeding the month that is six months after the
maturity or other liquidation of the last motor vehicle loan held by the
trust and the disposition of any amounts received upon liquidation of any
property remaining in the trust and
o the payment to the holders of the securities issued by the trust of all
amounts required to be paid to them pursuant to the transfer and
servicing agreements.
In order to avoid excessive administrative expense, the servicer may be
permitted to purchase from the trust all the remaining motor vehicle loans as
of the end of any Collection Period if the outstanding aggregate principal
balance of the motor vehicle loans held by the trust at that time is equal to
or less than the percentage specified in the prospectus supplement of the
initial aggregate principal balance of the motor vehicle loans. The purchase
price for the motor vehicle loans will equal the aggregate of the Repurchase
Amounts. If the servicer elects to purchase the motor vehicle loans held by a
trust, the trust will concurrently prepay in full any notes issued by the
trust and retire any certificates issued by the trust in the manner described
in the related prospectus supplement.
The trustee and any indenture trustee will give written notice of
termination to each holder of record of securities issued by the trust. The
notice will specify the payment date on which the securityholders may
surrender their securities to the related trustee, indenture trustee or
transfer agent and registrar for final payment. The final distribution to any
securityholder will be made only upon surrender and cancellation of that
holder's security at the office or agency of the related trustee, indenture
trustee or transfer agent and registrar, as specified in the notice of
termination.
Administration Agreement
JPMorgan Chase Bank will act as the administrator of each trust. It will
agree under an administration agreement with the trust and the related
indenture trustee to provide the notices and to perform other administrative
obligations of the trust under the related indenture. The administrator will
receive a monthly administration fee that will be described in the related
prospectus supplement as compensation for its services and reimbursement of
its related expenses. The administrator may perform its obligations directly
or through one or more of its agents. These agents may include one or more
affiliates of JPMorgan Chase Bank.
Material Legal Aspects of the Motor Vehicle Loans
Security Interests in the Motor Vehicle Loans
The motor vehicle loans are "chattel paper" as defined in the UCC in effect
in the State of New York. The sale of chattel paper is treated in a manner
similar to the creation of a security interest in chattel paper under the UCC.
In order to protect a trust's ownership interest in the motor vehicle loans
transferred to it, Chase USA will file UCC-1 financing statements with the
appropriate governmental authorities in the State of Delaware to give notice
of the trust's ownership interest in the motor vehicles loans and their
proceeds.
Under the sale and servicing agreement, Chase USA, as seller, will be
obligated to maintain the perfection of the trust's ownership interest in the
motor vehicle loans. However, a purchaser of chattel paper who gives new value
and takes possession of it in the ordinary course of its business has priority
over a security interest, including an ownership interest, in the chattel
paper that is perfected by filing UCC-1 financing statements, and not by
possession of the chattel paper by the original secured party if that
purchaser acted in good faith without knowledge that the related chattel paper
is subject to a security interest. Any purchaser would not be deemed to have
knowledge of the trust's ownership interest by virtue of UCC filings and would
not learn of the transfer of the motor vehicle loans to the trust from a
review of the documents evidencing the motor vehicle loans since they will not
be marked to show any sale. The master computer records of all of the motor
vehicle loans owned or serviced by Chase USA and its affiliates will indicate
the sale.
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Security Interests in the Financed Vehicles
Initial Perfection of Security Interests. Security interests in vehicles
registered in most states may be perfected by a notation of the secured
party's lien on, or possession of, the certificate of title for the vehicle,
depending on state law. In certain states, such as California and Virginia
these liens are noted electronically rather than on paper certificates. Chase
USA and the other originating banks obtain a representation and warranty from
each dealer from whom they purchase a motor vehicle loan under a dealer
agreement to the effect that the originating bank has been designated as the
sole lien holder on the certificate of title for the related financed vehicle.
Chase USA and the other originating banks obtain the same representation and
warranty from the obligor under a motor vehicle loan being originated directly
without involvement of a dealer. If the dealer or obligor fails, due to
clerical errors or for any other reason, to effect notation of the originating
bank's interest in the financed vehicle, the originating bank would not have a
perfected first priority security interest in the financed vehicle. If this
were to occur, the originating bank's only recourse would be against the
obligor on an unsecured basis or against the dealer under the dealer
agreement.
Transfer of Security Interests. Pursuant to the terms of each sale and
servicing agreement Chase USA will assign its security interests in the
financed vehicles securing the motor vehicle loans to each trust. The trust
will grant a security interest in those security interests in the financed
vehicles to the related indenture trustee as security for the notes. Because
of the administrative burden and expense, none of Chase USA, the trustee or
the indenture trustee will amend the certificates of title for the financed
vehicles to identify the trust or the related indenture trustee as the new
secured party. Accordingly, Chase USA or the other originating bank will
continue to be named as the secured party on the certificates of title for the
financed vehicles.
In most states, assignment of a motor vehicle loan together with the related
security interest in the financed vehicle is an effective conveyance of the
security interest in the financed vehicle without amendment of any lien noted
on the certificate of title for the financed vehicle. In that case, the
assignee of the motor vehicle loan succeeds to the originating bank's rights
as a secured party in the financed vehicle as against creditors of the
obligor. In other states, in the absence of an amendment to the lien noted on
the certificate of title for the financed vehicle, Chase USA, the related
trust and the related indenture trustee may not have a perfected security
interest in the financed vehicle. In that event or if the originating bank did
not obtain a perfected first priority security interest in the financed
vehicle, the only recourse of the trust would be against the obligor on an
unsecured basis or, if the originating bank did not obtain a perfected
security interest in the financed vehicle, against Chase USA, as seller,
pursuant to its repurchase obligation. If there are any financed vehicles as
to which the originating bank has failed to obtain a perfected first priority
security interest, the security interest would be subordinate to, among
others, holders of perfected security interests and subsequent purchasers of
the financed vehicles would take possession free and clear of that security
interest.
Except as described above, in the absence of fraud or forgery by a vehicle
owner or administrative error by state recording officials, the notation of
the lien of the originating bank on the certificate of title for a financed
vehicle will be sufficient to protect the trust's security interest in that
financed vehicle against the rights of subsequent purchasers of the vehicle or
subsequent lenders who take a security interest in the vehicle. There also
exists a risk that by not identifying the trust or the related indenture
trustee as the new secured party on the certificate of title for a financed
vehicle, through fraud or negligence, the security interest of the trust or
indenture trustee could be released.
Maintenance of Perfection of Security Interests. If the owner of a financed
vehicle moves to a state other than the state in which the financed vehicle
was initially registered, under the laws of most states the perfected security
interest in the financed vehicle will continue for four months after the
relocation and thereafter until the owner re-registers the financed vehicle in
the new state. A majority of states generally require surrender of a
certificate of title to re-register a vehicle. Accordingly, Chase USA or its
affiliate must surrender possession of the certificate of title if it holds it
or, if the financed vehicle was originally registered in a state which the
secured party does not maintain possession of the certificate of title, Chase
USA or its affiliate receives a notice of the surrender of the certificate of
title for re-registration if the security interest in the financed vehicle is
noted on the certificate of title. Accordingly, Chase USA or its affiliate has
the opportunity to re-perfect the security interest in the financed vehicle in
the state of relocation. In states that do not require surrender of a
certificate of title for registration of a motor vehicle, re-registration
could defeat perfection.
In the ordinary course of servicing the motor vehicle loans, Chase USA or
its affiliate takes steps to re-perfect the security interests in the financed
vehicles upon receipt of notice of re-registration or information from the
obligor as to relocation. Similarly, when an obligor sells a financed vehicle,
Chase USA or its affiliate must surrender possession of the certificate of
title or will receive notice as a result of the notation of the originating
40
bank's lien. Accordingly Chase USA or its affiliate will have an opportunity
to require full payment and discharge of the motor vehicle loan before
releasing the lien. Under each sale and servicing agreement, the servicer will
be obligated to take such steps, at the servicer's expense, as are necessary
to maintain perfection of the security interests in the financed vehicles.
Under the laws of many states, certain possessory liens for repairs
performed on a motor vehicle and storage, as well as certain rights in favor
of federal and state governmental authorities arising from the use of a motor
vehicle in connection with illegal activities, may take priority even over a
perfected security interest in a financed vehicle. Certain U.S. federal tax
liens may have priority over the lien of a secured party in a financed
vehicle. Chase USA, as seller, will represent in each sale and servicing
agreement that as of the applicable cutoff date, it has no knowledge of any of
these types of liens on any financed vehicles. However, these types of liens
could arise at any time during the term of a motor vehicle loan. No notice
will be given to the trustee if any of these types of liens arise on the
financed vehicles after the cutoff date.
Enforcement of Security Interests. Chase USA, as servicer, on behalf of each
trust and the indenture trustee, may take action to enforce the security
interest in the financed vehicle securing any motor vehicle loan by
repossessing and selling the financed vehicle. The servicer may contract out
to third party contractors the actual repossession of the financed vehicle.
Under the UCC and laws applicable in most states, a creditor can repossess a
motor vehicle securing a loan by voluntary surrender, "self-help" repossession
that is "peaceful", meaning without a breach of the peace, and, in the absence
of voluntary surrender and the ability to repossess without a breach of the
peace, by judicial process. The UCC and consumer protection laws in most
states place restrictions on repossession sales, including requiring prior
notice to the obligor and commercial reasonableness in the sale. If the
servicer repossesses a financed vehicle and sells it, the trust will have the
first claim on the sale proceeds before the claims of unsecured creditors or
the holders of subsequently perfected security interests or the claim of the
obligor.
Under the UCC and laws applicable in most states, a creditor is entitled to
obtain a deficiency judgment from a debtor for any deficiency on repossession
and sale of the motor vehicle securing the obligor's loan. However, some
states impose prohibitions or limitations on deficiency judgments. In general,
a defaulting obligor may not have sufficient assets to make the pursuit of a
deficiency worthwhile.
Other statutory provisions, including federal and state bankruptcy and
insolvency laws, and general equitable principles may limit or delay the
ability of a lender to repossess and resell collateral or enforce a deficiency
judgment.
Certain Matters Relating to Receivership
We are chartered as a national banking association and are subject to
regulation and supervision by the Comptroller of the Currency. If we become
insolvent, are in an unsound condition, engage in violations of laws or
regulations or if other similar circumstances occur, the Comptroller is
authorized to appoint the FDIC as conservator or receiver.
As receiver the FDIC could:
o require the trustee of the trust to go through an administrative claims
procedure to establish its right to payments collected on the motor
vehicle loans held by the trust,
o request a stay of proceedings with respect to the trust's claims against
Chase USA or
o repudiate without compensation Chase USA's ongoing obligations under the
sale and servicing agreement, such as the duty to collect payments or
otherwise service the motor vehicle loans.
If the FDIC were to take any of these actions, payments of principal and
interest on the securities issued by the trust could be delayed or reduced.
By statute, the FDIC as conservator or receiver is authorized to repudiate
any "contract" of Chase USA upon payment of "actual direct compensatory
damages." This authority may be interpreted by the FDIC to permit it to
repudiate the transfer of motor vehicle loans to a trust. Under a recently
enacted FDIC regulation, however, the FDIC as conservator or receiver will not
reclaim, recover or re-characterize a bank's transfer of financial assets if
certain conditions are met, including that the transfer qualifies for sale
accounting treatment, was made for adequate consideration and was not made
fraudulently, in contemplation of insolvency, or with the intent to hinder,
delay or defraud the bank or its creditors. We believe the new FDIC regulation
will apply to the transfer of motor vehicle loans under a sale and servicing
agreement, and intend to satisfy the conditions of the regulation.
If a condition required under the FDIC regulation, or other statutory or
regulatory requirement applicable to the transaction, were found not to have
been satisfied, the FDIC as conservator or receiver might refuse to
41
recognize Chase USA's transfer of the motor vehicle loans to the trust. In
that event the trust could be limited to seeking recovery based upon its
security interest in the motor vehicle loans. The FDIC's statutory authority
has been interpreted by the FDIC and at least one court to permit the
repudiation of a security interest upon payment of actual direct compensatory
damages measured as of the date of conservatorship or receivership. These
damages do not include damages for lost profits or opportunity, and no damages
would be paid for the period between the date of conservatorship or
receivership and the date of repudiation. The FDIC could delay its decision
whether to recognize Chase USA's transfer of the motor vehicle loans for a
reasonable period following its appointment as conservator or receiver for the
bank. If the FDIC were to refuse to recognize Chase USA's transfer of the
motor vehicle loans, payments of principal and interest on the securities
issued by the trust could be delayed or reduced.
In the event that the FDIC refused to recognize the transfer of motor
vehicle loans and repudiated a trust's security interest in the motor vehicle
loans, the amount of compensation that the FDIC would be required to pay would
be limited to "actual direct compensatory damages" determined as of the date
of the FDIC's appointment as receiver. There is no statutory definition of
"actual direct compensatory damages." The staff of the FDIC takes the position
that upon repudiation or disaffirmation, these damages would not include
interest accrued to the date of actual repudiation or disaffirmation. Under
the FDIC interpretation, securityholders would receive interest only through
the date of the appointment of the receiver. Since the FDIC may delay actual
repudiation or disaffirmation for up to 180 days following its appointment as
receiver, the securityholders may not receive the full amount of interest owed
to them under the securities. There is one reported federal district court
decision that construes the term "actual direct compensatory damages." This
1993 court case construed the term, in the context of the repudiation of zero
coupon bonds, to mean the fair market value of those bonds as of the date of
repudiation. Under neither interpretation, however, would securityholders be
compensated for the period between the appointment of the receiver and the
date of repudiation.
Consumer Protection Laws
Numerous federal and state consumer protection laws may impose requirements
applicable to the origination and lending pursuant to the motor vehicle loans,
including the Truth in Lending Act, the Fair Credit Reporting Act, the Equal
Credit Opportunity Act, the Magnuson-Moss Warranty Act and the Federal Trade
Commission Act.
The so-called "holder-in-due-course" rule of the Federal Trade Commission,
other state statutes or the common law in certain states have the effect of
subjecting a seller, and certain related lenders and their assignees, in a
consumer credit transaction and any assignee of the seller, which would
include each trust, to all claims and defenses that the obligor in the
transaction could assert against the seller of the goods. Liability of a
subsequent holder under the "holder-in-due-course" rule is limited to the
amounts paid by the obligor under the contract, and a subsequent holder of the
contract may also be unable to collect any balance remaining due under the
contract from the obligor. The Uniform Consumer Credit Code, applicable in
certain states, contains provisions which generally duplicate this rule.
Each sale and servicing agreement will set forth criteria that must be
satisfied by each motor vehicle loan, and these criteria will include, among
other things, that each motor vehicle loan complies with all requirements of
law in all material respects. Accordingly, if an obligor has a claim against a
trust for violation of any law and that claim materially and adversely affects
the related securityholders' interest in the motor vehicle loan, that
violation would result in the motor vehicle loan's failure to satisfy a
criterion in the related sale and servicing agreement and would give rise to
Chase USA's obligation, as seller, to repurchase the motor vehicle loan unless
the failure is cured.
Under the Soldiers' and Sailors' Civil Relief Act of 1940, members of the
military on active duty, including reservists, who have entered into a motor
vehicle loan before entering into military service or, in the case of
reservists, before being placed on active duty, may be entitled to reductions
in interest rates to an annual rate of 6% and a stay of foreclosure and
similar actions. The Relief Act applies to members of the Army, the Navy, the
Air Force, the Marines, the National Guard, the Reserves (when placed on
active duty), the Coast Guard and officers of the U.S. Public Health Service
assigned to duty with the military. Because the Relief Act covers obligors who
enter military service (including reservists who are called to active duty)
after origination of the motor vehicle loan, no information can be provided as
to the number of motor vehicle loans transferred to a trust that may be
affected. Any resulting shortfalls in interest or principal payments on the
motor vehicle loans will reduce the amount available to make payments on the
securities issued by a trust.
42
Employee Benefit Plan Considerations
Before investing in the securities issued by any trust, a Plan fiduciary
should consider, among other matters:
o ERISA's fiduciary standards or similar standards under Similar Laws,
o whether an investment in the securities by the Plan satisfies the
prudence and diversification requirements of ERISA or applicable
standards under Similar Laws, taking into account the overall investment
policy of the Plan, the composition of the Plan's portfolio and any
limitations on the marketability of the securities,
o whether those fiduciaries have authority to make an investment in the
securities under the applicable Plan investment policies and governing
instruments and
o rules under ERISA and the tax code or similar standards under Similar
Laws that prohibit plan fiduciaries from causing a Plan to engage in
certain "prohibited transactions."
Under the Plan Assets Regulation, if a Plan subject to ERISA invests in an
"equity interest" of an entity that is neither a publicly-offered security nor
a security issued by an investment company registered under the Investment
Company Act of 1940, the Plan's assets will include both the equity interest
and an undivided interest in each of the entity's underlying assets, unless it
is established that the entity is an operating company or that equity
participation in the entity by benefit plan investors is not significant. An
"equity interest" is an interest in an entity other than an instrument that is
treated as indebtedness under applicable local law and which has no
substantial equity features. The prospectus supplement relating to the
securities of each trust will indicate the expected treatment of those
securities under the Plan Assets Regulation. If the underlying assets of the
trust or Chase USA were to be deemed to be "plan assets" of Plans under ERISA,
this would result, among other things, in:
o the application of the prudence and other fiduciary responsibility
standards of ERISA to activities engaged in by Chase USA, the trustee and
others and
o the possibility that certain transactions in which Chase USA, the trustee
and others may seek to engage could constitute "prohibited transactions"
under ERISA and the tax code.
If a prohibited transaction occurs for which no exemption is available, Chase
USA, the trustee and any other fiduciary that has engaged in the prohibited
transaction could be required to:
o restore to the Plan any profit realized on the transaction and
o reimburse the Plan for any losses suffered by it as a result of the
investment.
In addition, each disqualified person, within the meaning of Section 4975 of
the tax code, involved could be subject to an excise tax equal to 15% of the
amount involved in the prohibited transaction for each year the transaction
continues and, unless the transaction is corrected within statutorily required
periods, an additional tax of 100% of the amount involved. Plan fiduciaries
who decide to invest in the securities issued by a trust could, under certain
circumstances, be liable for prohibited transactions or other violations as a
result of their investment or as co-fiduciaries for actions taken by or on
behalf of Chase USA or the trust. With respect to an individual retirement
account, or IRA, that invests in the securities, the occurrence of a
prohibited transaction involving the individual who established the IRA, or
his or her beneficiaries, would cause the IRA to lose it tax-exempt status.
Section 406 of ERISA and Section 4975 of the tax code prohibit Plans subject
to Title I of ERISA or Section 4975 of the tax code from engaging in specified
transactions involving plan assets with persons or entities who are "parties
in interest", within the meaning of ERISA, or "disqualified persons", within
the meaning of Section 4975 of the tax code. The acquisition and/or ownership
of the securities issued by a trust by a Plan, with respect to which the trust
or the holder of the certificates issued by the trust is considered a party in
interest or a disqualified person, may constitute or result in a prohibited
transaction under Section 406 of ERISA or Section 4975 of the tax code, unless
those securities are acquired and are held in accordance with an applicable
statutory, regulatory, class or individual prohibited transaction exemption.
In this regard, the U.S. Department of Labor has issued prohibited transaction
class exemptions, called PTCEs, that may apply to the acquisition and holding
of the securities. These class exemptions include, among others, PTCE 84-14
respecting transactions effected by independent qualified professional asset
managers, PTCE 90-1 respecting insurance company pooled separate accounts,
PTCE 91-38 respecting bank collective investment funds, PTCE 95-60 respecting
insurance company general accounts and PTCE 96-23 respecting transactions
effected by in-house asset managers. However, these exemptions may not apply
to all transactions arising in connection with an investment by Plans in the
securities issued by a trust, particularly if, as described above, the assets
of the trust are considered to be plan assets.
43
Similar Laws governing the investment and management of the assets of
governmental, church and non-U.S. plans may contain fiduciary and prohibited
transaction requirements similar to those under ERISA and the tax code.
Accordingly, fiduciaries of governmental Plans, church plans and non-U.S.
Plans, in consultation with their advisors, should consider the impact on
investments in the securities of any Similar Laws and the considerations
described above.
Plan of Distribution
The securities of each trust may be sold to or through underwriters by a
negotiated firm commitment underwriting and public reoffering by the
underwriters or other underwriting arrangement as may be specified in the
related prospectus supplement or may be placed either directly or through
agents. Chase USA intends the securities to be offered through those various
methods from time to time and that offerings may be made concurrently through
more than one of those methods or that an offering of the securities issued by
a trust may be made through a combination of those methods.
Each prospectus supplement will either:
o set forth the price at which each class of securities being offered will
be offered to the public and any concessions that may be offered to
dealers participating in the offering of the securities or
o specify that the securities are to be resold by the underwriters in
negotiated transactions at varying prices to be determined at the time of
the sale.
After the initial public offering of any securities, public offering prices
and concessions may be changed.
Each underwriting agreement will provide that Chase USA will indemnify the
underwriters against certain civil liabilities, including liabilities under
the Securities Act of 1933, as amended, or Chase USA will contribute to
payments the underwriters may be required to make in respect of those
liabilities.
Each trust may, from time to time, invest the funds in its trust accounts in
eligible investments acquired from the underwriters or from Chase USA or any
of its affiliates.
Any underwriter will be permitted to engage in the following transactions,
to the extent permitted by Regulation M under the Securities Exchange Act of
1934:
o over-allotment transactions, which involve syndicate sales in excess of
the offering size creating a syndicate short position,
o stabilizing transactions, which permit bids to purchase the offered
securities so long as the stabilizing bids do not exceed a specified
maximum,
o syndicate covering transactions, which involve purchases of the offered
securities in the open market after the distribution has been completed
in order to cover syndicate short positions, and
o penalty bids, which permit the underwriters to reclaim a selling
concession from a syndicate member when the offered securities originally
sold by the syndicate member are purchased in a syndicate covering
transaction.
Such over-allotment transactions, stabilizing transactions, syndicate covering
transactions and penalty bids may cause prices of the offered securities to be
higher than they would otherwise be in the absence of such transactions.
Neither Chase USA nor any of the underwriters represent that the underwriters
will engage in any these transactions nor that these transactions, once
commenced, will not be discontinued without notice.
This prospectus and the attached prospectus supplement may be used by J.P.
Morgan Securities Inc., an affiliate of Chase USA and a subsidiary of J.P.
Morgan Chase & Co., in connection with offers and sales related to market-
making transactions in the offered securities. J.P. Morgan Securities Inc. may
act as principal or agent in those transactions. Such sales will be made at
prices related to prevailing market prices at the time of sale.
Ratings
The securities of each trust offered pursuant to this prospectus and a
related prospectus supplement will be rated at its initial issuance in one of
the four highest categories by at least one nationally recognized statistical
rating organization.
44
A securities rating addresses the likelihood of the receipt by the
securityholders of scheduled interest and principal payments. The rating takes
into consideration the characteristics of the motor vehicle loans and the
structural, legal and tax aspects associated with the securities. The ratings
on the securities do not, however, constitute statements regarding the
likelihood or frequency of prepayments on the motor vehicle loans or the
possibility that the securityholders might realize a lower than anticipated
yield or that if there is a rapid rate of principal payments, including
prepayments, on the motor vehicle loans, investors in interest-only securities
could fail to recover their initial investments.
A security rating is not a recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at any time by the assigning
rating agency. No person is obligated to maintain the rating on any security,
and, accordingly, there can be no assurance that the ratings assigned to a
security upon initial issuance will not be lowered or withdrawn by a rating
agency at any time.
Legal Matters
Certain legal matters relating to the issuance of the securities by each
trust will be passed upon for Chase USA by Simpson Thacher & Bartlett, New
York, New York, and other counsel as specified in the related prospectus
supplement. Certain legal matters will be passed upon for the underwriters by
Sidley Austin Brown & Wood LLP, New York, New York. From time to time Simpson
Thacher & Bartlett and Sidley Austin Brown & Wood LLP provide legal services
to Chase USA and its affiliates.
45
Glossary of Terms for Prospectus
Actuarial Receivables provide for amortization of the loan over a series of
fixed level payment monthly installments. Each monthly installment, including
the final payment, consists of an amount of interest equal to
1/12th of the annual contract rate of interest on the loan multiplied by the
unpaid principal balance of the loan, and an amount of principal equal to the
remainder of the monthly payment.
administration agreement means an agreement among JPMorgan Chase Bank, as
administrator, a trust and the related indenture trustee, pursuant to which
the administrator agrees to perform certain administrative duties on behalf of
the trust.
administrator means JPMorgan Chase Bank as the administrator of a trust.
Advances are amounts advanced by Chase USA, as servicer, in respect of
delinquent scheduled payments on the motor vehicle loans held by a trust in
the amounts and under the circumstances specified in the related prospectus
supplement.
Book-Entry Securities are securities that are held in the U.S. through DTC
and in Europe through Clearstream or Euroclear.
Chase Auto Portfolio is the portfolio of motor vehicle loans originated by
Chase USA or one of the other originating banks either through or with the
involvement of dealers acting pursuant to dealer agreements and serviced by
Chase USA or one of its affiliates.
Chase USA means Chase Manhattan Bank USA, National Association.
Clearstream is Clearstream Banking, societe anonyme, a professional
depository under the laws of Luxembourg.
Clearstream Customers are organizations participating in Clearstream's book-
entry settlement system for trading of securities in Europe.
closing date is the date specified in the related prospectus supplement as
the date on which the trust issues its securities.
Collection Period means, with respect to the securities issued by each
trust, the period specified in the related prospectus supplement with respect
to calculating payments and proceeds of the related motor vehicle loans.
Controlling Class means, with respect to any trust, the most senior class of
securities issued by that trust as long as those securities are outstanding,
and thereafter, in order of seniority, each other class of securities issued
by that trust described in the prospectus supplement as long as they are
outstanding.
cutoff date is the date specified in the related prospectus supplement as
the date as of which the motor vehicle loans are being transferred to the
trust.
Deferred Payment Receivables are either Actuarial Receivables or Simple
Interest Receivables that provide for the deferral of the initial scheduled
payment.
Definitive Securities are securities in fully registered, certificated form.
DTC means The Depository Trust Company and any successor depository selected
by or on behalf of the trust.
Eligible Deposit Account is either:
o a separately identifiable deposit account established in the deposit
taking department of a Qualified Institution or
o a segregated identifiable trust account established in the trust
department of a Qualified Trust Institution.
ERISA means Employee Retirement Income Security Act of 1974, as amended.
Euroclear is the system operated by Euroclear Bank S.A./N.V.
Euroclear Participants are participants in the Euroclear system.
Event of Default is one of the events under each indenture specified in the
section of this prospectus entitled "The Indenture--Events of Default."
Event of Servicing Termination is one of the events under each sale and
servicing agreement specified in the section of this prospectus entitled
"Transfer and Servicing Agreements--Servicing--Events of Servicing
Termination."
46
FDIC is the Federal Deposit Insurance Corporation.
Final Payment Receivables are either Actuarial Receivables or Simple
Interest Receivables that provide for a final scheduled payment which is
greater than the scheduled monthly payments. The obligation to make the final
scheduled payment on a Final Payment Receivable may be satisfied by:
o a cash payment in full of the amount due,
o transferring the financed vehicle to us or
o refinancing the final scheduled payment.
funding period is the period, if any, after the closing date specified in
the related prospectus supplement during which the seller will sell additional
motor vehicle loans to the trust.
Indenture is an agreement between the trust and the applicable indenture
trustee pursuant to which the trust will issue notes.
indenture trustee means the trustee for the holders of the notes issued by a
trust identified in the related prospectus supplement.
motor vehicle loans are
o motor vehicle retail installment sales contracts relating to new or used
automobiles and light-duty trucks purchased from dealers who regularly
originate and sell motor vehicle loans to Chase USA or one of the
originating banks,
o purchase money loans secured by new or used automobiles and light-duty
trucks made by Chase USA or one of the originating banks directly or
pursuant to arrangements with dealers in accordance with approved
agreements with the dealers or
o motor vehicle retail installment sales contracts relating to, and
purchase money loans secured by, new or used automobiles and light-duty
trucks purchased by the originating banks from other originators of motor
vehicle loans.
originating bank means Chase USA, JPMorgan Chase Bank or any bank affiliated
with either of them engaged in the business of originating motor vehicle
loans.
payment date means the date for the payment or distribution of principal of
and interest on the securities of each trust specified in the related
prospectus supplement.
Permitted Investments are investments confirmed by the rating agencies
rating the securities issued by a trust as being consistent with the rating of
those securities. These investments may include securities issued by Chase USA
or its affiliates or trusts originated by Chase USA or its affiliates, and may
also include money market mutual funds for which JPMorgan Chase Bank or any of
its affiliates serves as an investment advisor, administrator, shareholder
servicing agent and/or custodian or subcustodian, for which it collects fees
and expenses.
Plan Assets Regulation is regulation, 29 C.F.R. Section 2510.3-101, issued
by the U.S. Department of Labor.
Plans means employee benefit plans that are subject to ERISA, plans,
individual retirement accounts and other arrangements that are subject to
Section 4975 of the tax code or provisions under Similar Laws, and entities
whose underlying assets are considered to include "plan assets" of such plans,
accounts and arrangements.
pre-funding account is, with respect to a trust that is authorized to
purchase additional receivables during a funding period, not to exceed one
year, specified in the related prospectus supplement, a trust account in which
the seller deposits a sum on the closing date to be used by the trust to pay
for additional motor vehicle loans to be acquired by the trust during the
funding period.
PTCE is a Prohibited Transaction Class Exemption under ERISA.
Qualified Institution is a depository institution, including Chase USA and
JPMorgan Chase Bank, organized under the laws of the United States or any
state or incorporated under the laws of a foreign jurisdiction with a branch
or agency located in the United States or any state and subject to supervision
and examination by federal or state banking authorities, having a short-term
certificate of deposit rating and a long-term unsecured debt rating confirmed
by each rating agency rating the securities issued by a trust as being
consistent with the ratings of those securities and the deposits of which are
insured by the FDIC.
Qualified Trust Institution is an institution organized under the laws of
the United States or any state or incorporated under the laws of a foreign
jurisdiction with a branch or agency located in the United States and subject
to supervision and examination by federal or state banking authorities with
the authority to act under the
47
laws of the United States or any state as a trustee or in any other fiduciary
capacity having not less than $1 billion in assets under fiduciary management
and a long-term deposit rating confirmed by each rating agency rating the
securities issued by a trust as being consistent with the ratings of those
securities.
Related Documents are, in respect of each trust, the related sale and
servicing agreement, indenture, trust agreement, administration agreement, any
agreements relating to the credit enhancement for the securities issued by
that trust and depository agreements with DTC.
Repurchase Amount of a motor vehicle loan being repurchased by Chase USA, as
seller, or purchased, as servicer, pursuant to the sale and servicing
agreement, is the sum, as of the last day of the Collection Period on which
such motor vehicle loan is being repurchased or purchased, of the principal
balance of that motor vehicle loan plus accrued and unpaid interest thereon,
calculated in the manner specified in the related prospectus supplement.
sale and servicing agreement is an agreement between Chase USA, as seller
and servicer, and the trust pursuant to which motor vehicle loans are sold to
the trust and the servicer agrees to service the motor vehicle loans.
seller is Chase USA, as the seller of motor vehicle loans to a trust.
servicer is Chase USA, as the servicer of the motor vehicle loans sold to a
trust, pursuant to a sale and servicing agreement and any successor to Chase
USA as servicer under the sale and servicing agreement.
Similar Laws means applicable federal, state, local, non-U.S. or other laws
or regulations that contain a provision or provisions that are similar to the
provisions of Title I of ERISA or Section 4975 of the tax code.
Simple Interest Receivables provide for the allocation of payments made to
principal and interest in accordance with the "simple interest" method. As
payments are received under a Simple Interest Receivable, the finance charges
accrued to date are paid first, the unpaid amount financed, to the extent of
the remaining monthly scheduled payment, is paid second and the remaining
payment is applied to the unpaid late charges. Accordingly, if an obligor
under a Simple Interest Receivable pays the fixed monthly installment in
advance of the date on which a payment is due, the portion of the payment
allocable to finance charges for the period since the preceding payment will
be less than it would be if the payment were made on the due date, and the
portion of the payment allocable to reduce the amount financed will be
correspondingly greater. Conversely, if the obligor pays the fixed monthly
installment after the due date, the portion of the payment allocable to
finance charges for the period since the last payment will be greater than it
would be if the payment were made on the due date, and the portion of the
payment allocable to reduce the amount financed will be correspondingly
smaller. When necessary, an adjustment is made at the maturity of the loan to
the scheduled final payment to reflect the larger or smaller allocations of
payments, as the case may be, to the amount financed under a Simple Interest
Receivable as a result of early or late payments.
tax code is the Internal Revenue Code of 1986, as amended.
trust agreement is a trust agreement between Chase USA, as depositor, and
the trustee pursuant to which the trust is created and certificates are issued
by the trust.
trustee is the trustee of the trust identified in the related prospectus
supplement.
UCC is the Uniform Commercial Code as in effect in the applicable
jurisdiction from time to time.
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Prospectus Supplement
$1,368,000,000
Chase Manhattan Auto Owner Trust 2002-B
$1,333,800,000 Asset Backed Notes
$34,200,000 Asset Backed Certificates
Chase Manhattan Bank USA, National Association
Seller and Servicer
Underwriters of the Notes
JPMorgan
Bear, Stearns & Co. Inc.
Countrywide Securities Corporation
Loop Capital Markets, LLC
Underwriter of the Certificates
JPMorgan
You should rely only on the information provided in the prospectus and this
prospectus supplement. We have not authorized anyone to provide you with other
or different information. You should not assume that the information in the
prospectus or this prospectus supplement is accurate on any date other than
the dates stated on the respective covers.
We are not offering the notes or the certificates in any state where the offer
is not permitted.
Dealers will deliver a prospectus supplement and prospectus when acting as
underwriters of the notes and the certificates and with respect to their
unsold allotments or subscriptions. In addition, all dealers selling the notes
or the certificates will deliver a prospectus supplement and prospectus until
August 28, 2002 (90 days after the date of this prospectus supplement).