As filed with the Securities and Exchange Commission on May 30, 2000
Registration No. 333-______
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
CNH Capital Receivables Inc.
(Exact name of registrant as specified in its charter)
Delaware 6153 39-1995297
(State of Incorporation) (Primary Standard Industrial (I.R.S. Employer
Classification Code Number) Identification No.
100 South Saunders Road
Lake Forest, Illinois 60045
(847)735-9200
(Address, including zip code, and
telephone number, including area
code, of registrant's principal
executive offices)
Roberto Miotto
Senior Vice President,
General Counsel and Secretary
CNH Global N.V.
700 State Street
Racine, Wisconsin 53404
(414) 636-6011
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Robert F. Hugi Jack M. Costello, Jr.
Mayer, Brown & Platt Brown & Wood LLP
190 South LaSalle Street One World Trade Center
Chicago, Illinois 60603-3441 New York, New York 10048
(312) 782-0600 (212) 839-5300
Approximate date of commencement of proposed sale to the public:
From time to time after this Registration Statement becomes effective as
determined by market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following
box.[ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]________
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]________
If delivery of the prospectus is expected to be made pursuant to
Rule 434, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
===============================================================================
Proposed Proposed
Maximum Maximum
Title of Each Class Offering Aggregate
of Securities Amount to be Price Offering Amount of
to be Registered Registered Per Unit(1) Price(1) Registration Fee
-------------------------------------------------------------------------------
Asset Backed Notes.... $500,000 100% $500,000 $132
===============================================================================
Asset Backed
Certificates.......... $500,000 100% $500,000 $132
===============================================================================
(1) Estimated solely for the purpose of calculating the registration fee.
-----------------------
The registrant hereby amends this registration statement on such
date or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that
this registration statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until this registration
statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
<PAGE>
The information in this prospectus is not complete and may be amended. We
may not sell these securities until the registration statement filed with
the Securities and Exchange Commission is effective. This prospectus is not
an offer to sell these securities and is not soliciting an offer to buy
these securities in any state where the offer or sale is not permitted.
PROSPECTUS
CNH Equipment Trusts
Asset Backed Notes
Asset Backed Certificates
CNH Capital Receivables Inc.
Seller
Case Credit Corporation
Originator and Servicer
New Holland Credit Company, LLC
Originator and Sub-Servicer
Consider carefully the risk factors beginning on page 2 in this prospectus
and page S-6 in your prospectus supplement.
Notes in your series represent obligations only of the trust that issues them.
Certificates in your series will represent beneficial interests only in the
trust that issues them. No one else is liable for the payments due on your
securities.
This prospectus may be used to offer and sell any series of securities only if
accompanied by the prospectus supplement for that series.
The Trusts--
o We (CNH Capital Receivables Inc.) will form a new trust to
issue each series of securities offered by this prospectus.
The assets of each trust:
o will be those described below and will primarily be a pool of
receivables of one or more of the following types:
- retail installment sale contracts or loans secured by new
or used agricultural, construction or other equipment,
- leases of similar equipment,
- term loans to equipment dealers secured by rental
equipment, rolling stock or computer systems, and
- unsecured term loans to equipment dealers.
o will also include interests in financed or leased equipment,
proceeds from claims on related insurance policies, and
amounts on deposit in specified bank accounts and may
also include other credit enhancements.
The Securities--
o will be asset-backed securities issued periodically in
designated series of one or more classes.
o if offered by this prospectus, will be rated in one of
the four highest long-term rating categories or the
highest short-term rating category by at least one
nationally recognized rating agency.
Neither the SEC nor any state securities commission has approved these
securities or determined that this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
________________ ____,________
<PAGE>
Important Notice about Information Presented in this
Prospectus and the Accompanying Prospectus Supplement
We tell you about the securities in two separate documents that
progressively provide more detail: (a) this prospectus, which provides
general information, some of which may not apply to a particular series of
securities, including your series; and (b) the accompanying prospectus
supplement, which will describe the specific terms of your series of
securities, including:
o the timing of interest and principal payments;
o the priority of interest and principal payments;
o financial and other information about the receivables;
o information about credit enhancement for each class;
o the ratings of each class; and
o the method for selling the securities.
If the terms of a particular series of securities vary between
this prospectus and the prospectus supplement, you should rely on the
information in the prospectus supplement.
You should rely only on the information provided in this
prospectus and the accompanying prospectus supplement, including the
information incorporated by reference. We have not authorized anyone to
provide you with different information. We are not offering the securities
in any state where the offer is not permitted.
We include cross-references in this prospectus and in the
accompanying prospectus supplement to captions in these materials where you
can find further related discussions. The following Table of Contents and
the Table of Contents included in the accompanying prospectus supplement
provide the pages on which these captions are located.
ii
<PAGE>
TABLE OF CONTENTS
Page
Risk Factors................................................................2
You will bear the reinvestment
risk and other interest rate risk if
receivables are prepaid,
repurchased or extended...............................................2
Our bankruptcy or the bankruptcy
of a credit company may cause
payment delays or losses..............................................3
Bankruptcy of an equipment dealer
or broker may cause payment
delays or losses......................................................4
Possible liability for third party
claims may cause payment
delays or losses......................................................5
Defaults on the receivables may
cause payment delays
or losses............................................................5
Characteristics of the Receivables..........................................6
Selection Criteria.......................................................6
Interest and Amortization
Types.................................................................6
Payment Terms............................................................8
Insurance................................................................8
Extension Procedures.....................................................9
Terms of Leases..........................................................9
Origination of Receivables.................................................10
Credit Approval Process.................................................11
Loan/Lease-to-Value Ratio...............................................12
Dealer Agreements.......................................................13
Delinquencies, Repossessions
and Net Losses.........................................................14
Use of Proceeds............................................................14
Important Parties...........................................................14
CNH Capital Receivables Inc..............................................14
Case Credit Corporation..................................................14
New Holland Credit Company,
LLC...................................................................14
Credit Company Operations................................................15
CNH Global N.V...........................................................15
The Trustee and The Indenture
Trustee...............................................................17
Description of the Notes....................................................17
Page
Principal and Interest on the
Notes................................................................17
The Indenture...........................................................18
Description of the Certificates............................................22
Administrative Information About
the Securities..........................................................22
Denominations...........................................................22
Fixed Rate Securities...................................................22
Floating Rate Securities................................................23
Indexed Securities......................................................23
Book-Entry Registration.................................................24
Definitive Securities...................................................28
List of Securityholders.................................................29
Reports to Securityholders..............................................29
Description of the Transaction
Agreements..............................................................30
Regular Sales of Receivables............................................31
Sales of Receivables in
Connection with the Offering
of Securities by a Trust............................................32
Accounts................................................................33
Servicing Procedures....................................................35
Collections.............................................................35
Servicing Compensation..................................................36
Evidence as to Compliance...............................................36
Appointment of Subservicers................................................36
Resignation, Liability and
Successors of the Servicer...........................................37
Servicer Default........................................................37
Rights Upon Servicer Default............................................38
Waiver of Past Defaults.................................................38
Amendment...............................................................38
Payment of Notes........................................................39
Termination.............................................................39
Administration Agreement................................................39
Credit and Cash Flow Enhancement...........................................40
Legal Aspects of the Receivables...........................................41
ii
<PAGE>
Bankruptcy Considerations
Relating to the Credit
Companies............................................................41
Bankruptcy Considerations
Relating to Dealers..................................................42
Perfection and Priority With
Respect to Receivables...............................................43
Security Interests in Financed
Equipment............................................................43
Security Interests in Leased
Equipment............................................................44
Bankruptcy Considerations
Relating to a Lessee.................................................45
Repossession............................................................46
Notice of Sale; Redemption
Rights...............................................................46
Uniform Commercial Code
Considerations.......................................................47
Vicarious Tort Liability................................................47
Deficiency Judgments and Excess
Proceeds; Other Limitations
....................................................................48
Consumer Protection Laws................................................49
U.S. Federal Income Tax
Consequences............................................................49
Tax Characterization of the
Trust................................................................50
Tax Consequences to Holders of
the Notes............................................................50
Tax Consequences to Holders of
the Certificates.....................................................53
Illinois State Tax Consequences............................................58
Treatment of the Notes..................................................59
Classification of Trust as a
Partnership..........................................................59
Treatment of Nonresident
Certificateholders...................................................59
Risks of Alternative
Characterization.....................................................59
ERISA Considerations.......................................................60
Plan of Distribution.......................................................60
Legal Opinions.............................................................61
Where You Can Find More
Information.............................................................62
Index of Terms.............................................................63
ii
<PAGE>
[GRAPHIC OMITTED]
Summary: Overview of Transactions
Each series of securities will be issued by a separate trust and will
include:
o one or more classes of notes, representing
debt of the trust; and
o one or more classes of certificates, representing
ownership interests in the trust.
Payments on the certificates issued by a trust will be junior in priority
to payments on the related notes. In addition, if a series includes two or
more classes of notes or two or more classes of certificates, each class
may differ as to timing and priority of distributions, seniority,
allocations of losses, interest rates or amount of distributions in respect
of principal or interest. We will disclose the details of these timing,
priority and other matters in a prospectus supplement.
The primary assets of each trust will be a pool of receivables. Each trust
will also include spread accounts or other credit enhancements for the
benefit of some or all of the trust's securities.
We will sell receivables to each trust on the issuance date for that
trust's securities. In addition, to the extent described in the related
prospectus supplement, each trust will have a pre-funding period. In that
case, a portion of the cash raised from the sale of the related securities
will be placed in a pre-funding account. The trust will use that cash to
buy additional receivables from us during a pre-funding period, which will
last not more than six months.
Each trust's receivables will be originated directly or indirectly by one
of our affiliated credit companies: Case Credit Corporation and New Holland
Credit Company, LLC. We will buy those receivables, directly or indirectly,
from the credit companies.
Case Credit will service receivables that are transferred to the trusts
under one of the agreements entered into by each trust, subject to removal
upon specified servicer defaults. Case Credit has entered into a
subservicing agreement with New Holland Credit under which New Holland
Credit has agreed to act as subservicer of receivables that were originated
by it and ultimately transferred to a trust. Case Credit also acts as
administrator for each trust.
1
<PAGE>
Risk Factors
You should consider the following risk factors in deciding whether
to purchase the securities.
You will bear the The principal payment on any series of
reinvestment risk securities on any payment date will depend
and other interest mostly upon the amount of collections
rate risk if received on that trust's receivables during
receivables are the prior calendar month. As a result, the
prepaid, repurchased rate at which payments on the receivables
or extended. are received will affect the rate at which
principal is paid on the related securities.
Each receivable has a fixed payment
schedule, but the actual rate at which
payments are received may vary from that
schedule for a number of reasons.
o Receivables may be voluntarily
prepaid, in full or in part, or
obligors may be required to prepay
receivables as a result of defaults,
casualties to the related equipment,
death of an obligor or other
reasons. Based on its experience
with similar receivables, the
servicer expects that a substantial
portion of the receivables in many
trusts will be repaid prior to their
contractual maturity dates.
Prepayments of agricultural
equipment retail installment sale
contracts or loans, which will make
up a substantial portion of the
receivables in many trusts, have
historically tended to increase
during periods in which farmers have
strong cash flows. However,
prepayment rates may be influenced
by a variety of factors, and we
cannot predict them with any
certainty.
o We or the servicer of the
receivables may be required to
repurchase one or more receivables
from a trust. In that case, the
repurchase price received by the
trust will be treated like a
prepayment of the receivable. This
would happen if we, at the time we
sell receivables to the trust, or a
credit company, at the time it sold
receivables to us, made inaccurate
representations about a receivable
or the servicer violated specified
servicing obligations.
o The servicer may purchase all of a
trust's receivables after they have
paid down to 10% of their aggregate
balance as of the time they were
transferred to the trust. In this
case, the purchase price received by
the trust will be treated like a
prepayment of the remaining
receivables.
2
<PAGE>
Each prepayment, repurchase or purchase
will shorten the average life of the
related securities. On the other hand,
the payment schedule under a receivable
may be extended or revised by the
servicer, which may lengthen the
average life of the related securities.
You will bear any reinvestment risks
resulting from a faster or slower rate
of prepayment, repurchase or extension
of receivables held by your trust. If
you purchase a security at a discount,
you should consider the risk that a
slower than anticipated rate of
principal payments on your security
could result in an actual yield that is
less than the anticipated yield.
Conversely, if you purchase a security
at a premium, you should consider the
risk that a faster than anticipated
rate of principal payments on your
security could result in an actual
yield that is less than the anticipated
yield.
Our bankruptcy or the The credit companies will sell, directly or
bankruptcy of a indirectly, receivables to us, and we will
credit company may in turn sell those receivables to each
cause payment delays trust. We intend to structure these
or losses. transfers in a manner designed to ensure
that they are treated as "true sales,"
rather than secured loans. However, a court
could conclude that we or a credit company
effectively still own the receivables
supporting any series of securities. This
could happen if a court presiding over our
bankruptcy or the bankruptcy of a credit
company were to conclude either that the
transfers referred to above were not "true
sales" or that the bankrupt party and the
owner of the receivables should be treated
as the same person for bankruptcy purposes.
If this were to occur, then you could
experience delays or reductions in
payments as a result of:
o the automatic stay which prevents
secured creditors from exercising
remedies against a debtor in
bankruptcy without permission
from the court and provisions of
the U.S. Bankruptcy Code that
permit substitution of
collateral;
o tax or government liens on a
credit company's or our property
that arose prior to the transfer
of a receivable to the trust
having a right to be paid from
collections before the
collections are used to make
payments on the securities;
3
<PAGE>
o rejection by a credit company or
its bankruptcy trustee of any
lease that was deemed to be a
"true lease," which would result
in the termination of scheduled
payments under that lease; or
o the fact that the trust might not
have a perfected interest in (a) some
equipment subject to certificate of
title statutes or (b) any cash
collections on the receivables held
by the servicer at the time that a
bankruptcy proceeding begins. See
"Description of the Transaction
Agreements--Collections" for a
description of the time the servicer
is allowed to commingle collections
with its funds.
Bankruptcy of an A substantial portion of the receivables
equipment dealer or was originated by equipment dealers or
broker may cause brokers and purchased by the credit
payment delays or companies. A portion of those receivables
losses. provide for recourse to the originating
broker or dealer for defaults by the
obligors. In addition, CNH dealers that
sell receivables to Case Credit and
that have not yet entered into new
dealer agreements as described under
"Origination of Receivables--Dealer
Agreements" retain the right to
repurchase at any time those
receivables.
In the event of a dealer or broker's
bankruptcy, a creditor or bankruptcy
trustee of the dealer or broker or the
dealer or broker itself might assert
that the sales of receivables to a
credit company are loans to the dealer
or broker secured by the receivables.
Such an assertion could result in
payment delays and, if successful,
losses on the affected receivables. In
those circumstances, a dealer or broker
or its bankruptcy trustee might also be
able to reject any leases originated by
the dealer or broker that were deemed
to be "true leases," resulting in the
termination of scheduled payments under
those leases.
4
<PAGE>
Possible liability for The transfers of receivables from the
third party claims credit companies to us and from us to
may cause payment each trust are intended to reduce the
delays or losses. possibility that cash flows from the
receivables will be subject to claims other
than the rights of investors in the
securities issued by the trust and of
the parties to the applicable
transaction agreements. However, to the
extent that a credit company or a
dealer or broker violates federal or
state consumer protection laws
applicable to the receivables, a trust
could be liable to the obligor, as an
assignee of any of the affected
receivables. Under the related
transaction agreements, we must
repurchase any affected receivable from
the trust. However, if we fail for any
reason to perform our repurchase
obligation, you could experience delays
or reductions in payments on your
securities as a result of any
liabilities imposed upon your trust.
Similarly, as to any trust that holds
any equipment subject to leases, state
laws differ as to whether anyone
suffering any injury to person or
property involving leased agricultural,
construction or other equipment may
bring an action upon which relief may
be granted against the owner of the
equipment by virtue of that ownership.
If applicable law permits an action,
and that action is successful, the
related trust and its assets may be
subject to liability to any injured
party. You could experience delays or
reductions in payments on your
securities if liability of this type
were imposed on your trust, and the
coverage provided by any available
insurance is insufficient to cover that
loss.
Defaults on the You will rely primarily upon collections on
receivables may the receivables in your trust for payments
cause payment on your securities. Your securities may
delays or losses. have the benefit of a spread account,
subordination of one or more other classes
of securities and/or one or more other
forms of credit enhancement specified in
the related prospectus supplement. This
credit enhancement will cover losses and
delinquencies on the receivables up to some
level. However, if the level of receivables
losses and delinquencies exceeds the
available credit enhancement, you may
experience delays in payments due to
you or may not ultimately receive all
interest and principal due to you.
5
<PAGE>
Characteristics of the Receivables
We will provide information about each trust's pool of receivables
in the related prospectus supplement. The information will include, to the
extent appropriate, the types and composition of the receivables, the
distribution by interest rate or spread over a designated floating rate,
type of equipment, payment frequency and contract value of the receivables
and the geographic distribution of the receivables.
Selection Criteria
We will select receivables to sell to each trust using several
criteria. These criteria will include that each receivable transferred to a
trust must:
(1) be secured by new or used agricultural, construction
or other equipment, or be leases of such equipment, except that
receivables that are term loans to equipment dealers may be
secured by other collateral or not be secured;
(2) be originated in the United States;
(3) provide for payments that fully amortize the amount
financed over its original term to maturity--which payments may, in
the case of any lease, include a termination value similar to a
final balloon payment payable by either the lessee or the dealer
that originated the lease;
(4) not be a non-performing receivable and not have a
payment that is more than 90 days overdue as of the end of the
month prior to the day it is sold to the trust or other material
default outstanding; and
(5) not have an obligor that is shown in the originating
credit company's records as being the subject of a bankruptcy
proceeding.
Additional criteria for any particular trust's receivables may be
listed in the related prospectus supplement. We will not use selection
procedures that we believe to be adverse to you in selecting the
receivables for your trust.
Each trust's receivables may include receivables with respect to
which the initial payment has not been made. They may also include interest
waiver receivables, under which interest does not begin to accrue for a
designated time period, as well as receivables originated through special
interest rate financing programs.
Interest and Amortization Types
A trust's receivables may include fixed rate receivables and
floating rate receivables, as well as receivables that provide for
different fixed or floating interest rates or different formulae to
calculate the floating interest rate at different times during the life of
the receivable. Receivables that are loans or retail installment contracts
have an explicit interest rate that is usually named in the contract that
evidences the receivable. Other receivables, including leases, may not
disclose an explicit interest rate, but they have an implicit interest rate
that the applicable credit company uses to calculate the periodic rental
payments in a way
6
<PAGE>
similar to the way that it calculates periodic installment payments under a
retail installment contract or retail installment loan.
All of the receivables in each trust will be either precomputed
receivables or simple interest receivables. The difference between these
two types of receivables is the way that each installment payment is
divided between principal and interest.
Under a precomputed receivable, each installment payment is
divided between interest and principal on a predetermined basis, without
regard to the period of time that has elapsed since the prior payment was
made. This allocation is made either on an actuarial basis or according to
a variation on the rule of 78's. (See box.) In contrast, under a simple
interest receivable, each installment payment is divided between interest
and principal based on the actual date on which a payment is received. The
interest component equals the unpaid principal amount financed, multiplied
by the annual interest rate, multiplied by the fraction of a calendar year
that has elapsed since the preceding payment of interest was made.
Under a simple interest receivable, if an obligor pays a fixed
periodic installment before its scheduled due date, the portion of the
payment allocable to interest for the period since the preceding payment
was made will be less than it would have been had the payment been made as
scheduled, and the portion of the payment applied to reduce the unpaid
principal balance will be correspondingly greater. Conversely, if an
obligor pays a fixed periodic installment after its scheduled due date, the
portion of the payment allocable to interest for the period since the
preceding payment was made will be greater than it would have been had the
payment been made as scheduled, and the portion of the payment applied to
reduce the unpaid principal balance will be correspondingly less. The final
installment on a simple interest receivable is increased or decreased as
necessary to adjust for variations in the amounts of prior installments
applied to principal, based upon the date on which they were made.
-------------------------------------------------------------------------------
Under an actuarial receivable, the interest component of each installment
equals the unpaid principal amount financed, multiplied by the annual
interest rate, multiplied by an appropriate fraction. On a receivable that
requires payments every month, the appropriate fraction would be 1/12,
since that is the portion of a year that elapses between the required
payment dates. On a receivable that requires payments every three months,
the appropriate fraction would be 3/12, or 1/4.
-------------------------------------------------------------------------------
Under a rule of 78's receivable, the interest component of each installment
is determined using a method equivalent to the rule of 78's. The rule of
78's is a method of calculating the unearned portion of the precomputed
finance charge on receivables repayable in substantially equal successive
installments of approximately equal intervals over 12 months. The unearned
portion of the precomputed finance charge at any time is equal to that
portion of the finance charge which the sum of the number of months the
obligations are outstanding after the calculation date (counting 1 month as
1, 2 months as 3 (1 + 2), etc., up to 78) bears to 78.
-------------------------------------------------------------------------------
If a precomputed receivable is prepaid in full, the obligor is
entitled to a rebate equal to the portion of the total amount of payments
that is allocable to unearned add-on interest. If a simple interest
receivable is prepaid, rather than receive a rebate, the obligor is
required to pay interest only to the date of
7
<PAGE>
prepayment. The amount of the rebate on a precomputed receivables is
determined based upon whether the receivable is an actuarial receivable or
a rule of 78's receivable and the requirements of the law of the state
where the obligor is located; however, the rebate for certain precomputed
receivables may, in some circumstances, be an amount approximately equal to
the remaining scheduled payments of interest that would have been due under
a simple interest receivable for which all payments were made on schedule.
The amount of the rebate under a rule of 78's receivable generally
will be less than the amount of the rebate on an actuarial receivable for
the same amount and generally will be less than the remaining scheduled
payments of interest that would have been due under a simple interest
receivable for which all payments were made on schedule. These amortization
features and related rebates for precomputed receivables should not result
in shortfalls of principal payments on your securities because the portion
of the interest payments on these receivables that give rise to rebate
requirements are essentially treated as principal paydowns for purposes of
the securities.
Payment Terms
The receivables have a variety of repayment or rental schedules
tailored to the applicant's anticipated cash flows, such as annual,
semi-annual, quarterly, monthly and irregular payment schedules.
Receivables secured by construction equipment are normally financed with
equal monthly payments. However, obligors can select a "skip payment"
schedule, under which payments in up to six predetermined consecutive
months are "skipped" to coincide with slow work periods. For example,
contractors in areas with colder winters normally elect to skip payments in
January, February and March, in which case the normal twelve payments are
amortized over a nine-month period. Obligors can only make this election at
the time the receivable is originated.
Insurance
Obligors are required to obtain and maintain physical damage
insurance with respect to the financed or leased equipment and, in the case
of a lease, liability insurance with respect to the leased equipment.
Dealers that sell receivables to Case Credit and that have not yet
entered into new dealer agreements as described under "Origination of
Receivables--Dealer Agreements" are responsible for verifying physical
damage insurance coverage on the equipment at the time the receivable is
originated. If a dealer fails to verify insurance coverage and the obligor
did not obtain insurance coverage at the time the receivable was
originated, the dealer will be responsible for any resulting loss.
Dealers that sell receivables to New Holland Credit and that have
not yet entered into new dealer agreements as described under "Origination
of Receivables--Dealer Agreements" are not required to verify physical
damage insurance coverage on the equipment. If, however, the obligor does
not have insurance coverage at the time the receivable was originated, New
Holland Credit can require the dealer to repurchase the receivable.
Dealers that sell receivables to the credit companies and that
have entered into new dealer agreements with the credit companies are
responsible for
8
<PAGE>
verifying physical damage insurance coverage on the equipment at the time
the receivable is originated. If a dealer fails to verify insurance
coverage and the obligor did not obtain insurance coverage at the time the
receivable was originated, the dealer is obligated to repurchase the
receivable.
At the time the receivable is originated, both credit companies
allow a customer's physical damage insurance and life insurance to be
financed under the receivable.
Extension Procedures
The servicer may agree to extend a receivable when payment
delinquencies result from temporary interruptions in an obligor's cash
flow. In an extension, the servicer moves one or more payments to a future
date, which may be before or after the original final maturity of the
receivable.
In the case of receivables originated by Case Credit, obligors are
charged an extension fee, which is usually payable at the time a receivable
is extended. This extension fee is generally equal to interest accrued on
the unpaid balance of the receivable during the period that payments are
not required to be made as a result of the extension.
In the case of receivables originated by New Holland Credit,
obligors are generally charged an extension fee to extend a retail
installment contract payable other than monthly, which fee is usually
payable at the time a receivable is extended. The extension fee is based on
the period of the extension.
Any extension fees paid in connection with receivables sold to a
trust will be paid to that trust.
Terms of Leases
The leases transferred to the trusts will call for two kinds of
payments: rental payments that are due periodically during the term of the
lease; and a termination value payment. Under the leases, the lessee's
obligation to make rental payments is absolute and unconditional, without
set-off or counterclaim, and notwithstanding any damages to, or loss of,
the leased equipment or any other event. However, lessees are not required
to make termination value payments. Instead, the lessee has the option to
purchase the leased equipment at the end of the lease term for an amount
equal to the termination value payment.
The termination value payment is in an amount generally equal to
the portion of the original equipment cost that has not been amortized
through the principal component of the periodic rental payments. If a
lessee does not elect to purchase the leased equipment at the end of the
lease term, then, under the leases that are eligible to be transferred to
trusts, the dealer that originated the lease is required to pay the
termination value payment and entitled to obtain the equipment from the
lessee. In no case will a trust or the servicer for any trust, obtain
possession of any leased equipment or be entitled to the proceeds from the
sale of such equipment, other than termination value payments and proceeds
of equipment that is repossessed in a default situation. Consequently, no
securities offered by this prospectus will rely for their payment on the
residual value of leased equipment.
9
<PAGE>
Origination of Receivables
The credit companies originate receivables that may be sold to the
trusts in several ways:
o They purchase retail installment contracts and leases
from dealers in agricultural, construction and other
equipment manufactured or otherwise distributed by CNH
and other equipment not distributed by CNH. As of
December 31, 1999, there were approximately 2,485
independently owned CNH dealer outlets in the United
States.
o They finance retail installment contracts and leases
originated through several retail outlets directly owned
by CNH which are immediately assigned to a credit
company.
o They purchase retail installment contracts, retail
installment loans and leases from other dealers and
through brokers in agricultural, construction and other
equipment.
o They make, or may in the future make, retail installment
loans directly to purchasers of agricultural,
construction and other equipment.
o They make term loans directly to equipment dealers. These
include loans secured by rental equipment, rolling stock
and computer systems and unsecured loans.
The credit companies finance, or may in the future finance, the
following categories of equipment:
-------------------------------------------------------------------------------
Agricultural tractors, combines, cotton pickers, soil management
equipment: equipment, planting and seeding equipment, hay and forage
equipment, crop care equipment (such as
sprayers and irrigation equipment), small
telescopic handlers and other related
equipment
-------------------------------------------------------------------------------
Construction excavators, backhoes, wheel loaders, skid steer loaders,
equipment: tractor loaders, trenchers, horizontal directional drilling
equipment, telescopic handlers, forklifts, compaction
equipment, crawlers, cranes and other related equipment
-------------------------------------------------------------------------------
Other equipment: trucks, commercial vehicles, forestry equipment, mining
equipment, trailers, all-terrain vehicles, snowmobiles,
snow grooming equipment, marine vessels, machine tools,
office equipment and medical equipment; however,
receivables relating to all-terrain vehicles, snowmobiles
and marine vessels will collectively make up less than 10%
of the assets of each trust
-------------------------------------------------------------------------------
10
<PAGE>
Credit Approval Process
Case Credit Corporation. Case Credit requires each prospective
customer to complete a credit application that lists the applicant's
liabilities, income, credit history and other demographic and personal
information. This information is obtained by a dealer or Case Credit, and
in either case is sent to one of four regional finance offices maintained
by Case Credit. The regional finance office then processes this information
and obtains additional information to evaluate the prospective customer's
creditworthiness. The extent of the additional information varies based
primarily on the amount of financing requested. In most cases, Case Credit
obtains a credit bureau report on the applicant from an independent credit
bureau or checks credit references provided by the applicant, typically
banks or finance companies or suppliers that have furnished credit to the
applicant. In some cases, Case Credit obtains audited or certified
financial statements of the applicant.
As part of the credit review process for retail installment
contracts, retail installment loans and leases, Case Credit analyzes data
regarding the applicant and additional information using a credit scoring
model. Case Credit uses a credit scoring model that was developed for Case
Credit by Fair, Isaac and Company, Inc. Case Credit periodically evaluates
credit scoring and may utilize a different credit scoring model for trucks.
The models are based on Case Credit's experience using variables that
historically have been predictive of future loan performance. The credit
score is not determinative. The final credit decision is a subjective
determination based on all of the information gathered. Case Credit also
maintains at least a five-year loan history on all past and present
customers it reviews.
Case Credit evaluates creditworthiness based on criteria
established by its management. It uses the same credit criteria for retail
installment contracts, retail installment loans and leases and similar
credit criteria for dealer loans. It also uses the same credit criteria
regardless of which of its regional finance offices reviews the application
and whether the related receivable will be purchased by Case Credit from a
dealer, assigned by Case Corporation to Case Credit or take the form of a
direct loan by Case Credit to an equipment purchaser.
New Holland Credit Company, LLC. New Holland Credit requires each
prospective customer to complete a credit application that lists
information concerning the applicant, and if applicable, any guarantor.
This information is obtained by a dealer or New Holland Credit, and then
sent to one of four regional offices maintained by New Holland Credit.
Prior to April 2000, this processing was performed in New Holland Credit's
central operations center. This information is then processed and, if
necessary, additional information to evaluate the prospective customer's
creditworthiness is obtained. The extent of the additional information
varies based primarily on the amount of financing requested. In most cases,
New Holland Credit obtains a credit bureau report on the applicant from an
independent credit bureau or checks credit references provided by the
applicant, typically banks or finance companies or suppliers that have
furnished credit to the applicant. In some cases, New Holland Credit
obtains audited or certified financial statements of the applicant.
As part of the credit review process for retail installment
contracts, retail installment loans and leases, New Holland Credit analyzes
data regarding the applicant and additional information using a credit
scoring model. New Holland Credit's credit scoring model was developed for
New Holland Credit by a
11
<PAGE>
corporate predecessor of Expirian in 1997, and New Holland Credit
periodically evaluates the model. The model is based on New Holland
Credit's experience using variables that historically have been predictive
of future performance. The credit score is not determinative. The final
credit decision is a subjective determination based on all of the
information gathered. New Holland Credit also maintains at least a two-year
loan history on all past and present customers it reviews.
New Holland Credit evaluates creditworthiness based on criteria
established by its management. It uses the same credit criteria for all
retail installment contracts, retail installment loans and leases and
similar credit criteria for dealer loans, including any applications which
were processed at regional finance offices prior to June 1999.
Loan/Lease-to-Value Ratio
The maximum amount that either credit company will finance under a
receivable varies based on the obligor's credit history, the type of
equipment financed, whether the equipment is new or used, the payment
schedule and the length of the receivable. The amount financed is
calculated as a percentage of the value of the related equipment. The
credit companies modified these percentages during March 2000. In any case,
these percentages may not exceed the applicable percentage set forth below
unless the exception is specifically approved by an authorized senior
credit manager.
Prior to the modification:
o In the case of receivables originated by Case Credit, 105%;
and
o In the case of receivables originated by New Holland
Credit, 100% if the receivable is a retail installment
contract payable monthly or quarterly, 90% in the case of
any other retail installment contract.
After the modification:
o In the case of retail installment contracts for the purchase
of agricultural equipment, 105%;
o In the case of retail installment contracts for the purchase
of construction equipment, 100%;
o In the case of a lease of new agricultural or construction
equipment, 125%; and
o In the case of a lease of used agricultural or
construction equipment, 120%.
For this purpose, the value of new equipment is based on the
dealer's cost plus, in the case of receivables originated by Case Credit,
freight charges. The value of used equipment is based on the equipment's
"as-is" value reported in the most recent edition of the North American
Equipment Dealers Association guidebook or other comparable guidebook.
12
<PAGE>
Exceptions to the specified percentages set forth above are
unusual. Both credit companies make exceptions only when the senior credit
manager has determined that the obligor will be able to cover the excess on
the basis of the obligor's overall financial condition, as opposed to the
value of the equipment. There is no overall limit on the ratio that may be
approved by a senior credit manager. The limit in each case would be based
upon the senior credit manager's judgement about the obligor's overall
financial condition.
The credit companies continue to operate under their traditional
guidelines and practices for loan/lease to asset value ratios.
Consequently, we do not believe that these ratios should reasonably be
expected to cause any trust to have credit loss and repossession experience
materially different from the historical experience reflected in the
related prospectus supplement.
The maximum amount that a credit company will finance under a
dealer loan is generally based upon an analysis of the dealer's overall
financial condition, in addition to the value of any collateral.
Consequently, there may be no requirements as to the relationship between
the amounts of these types of loans and the value of any collateral.
Any equipment securing a receivable or leased under a receivable
depreciates in value over time. However, the credit companies' practice is
to provide for repayment schedules under the receivables that will
generally result in the outstanding principal balance of a receivable at
any time in its life being less than the anticipated value of the equipment
at the time.
Dealer Agreements
In July 2000, the credit companies began the process of entering
into new dealer agreements with CNH dealers. Regardless of whether a dealer
has entered into a new dealer agreement with the credit companies, some of
the receivables that the credit companies buy from dealers provide for
recourse to the dealer if the obligor defaults on the receivable. A portion
of the receivables that Case Credit purchases from dealers that have not
yet entered into new dealer agreements provide for recourse to the dealer
through a reserve account maintained by the dealer with Case Credit in
which the dealer is required to maintain amounts on deposit. In any case,
the credit companies will assign, directly or indirectly, to us, and we
will assign to the trusts any rights to recourse against dealers, except
for recourse to the dealers' reserve accounts. The level of recourse to
dealers varies, and in many cases a dealer's recourse obligation is
contingent upon the applicable credit company obtaining the related
equipment from the obligor and presenting it to the dealer.
Even when one of the credit companies purchases a receivable
without recourse to the dealer for obligor defaults, the selling dealer
makes limited representations and warranties about the receivables. The
credit companies will assign, directly or indirectly, to us, and we will
assign to the trusts, any rights against dealers arising as a result of a
breach of these representations and warranties.
We make no representation as to the financial condition of any of
the dealers or about their abilities to perform any repurchase obligations
that may arise.
13
<PAGE>
Delinquencies, Repossessions and Net Losses
We provide you with historical information concerning
delinquencies, repossessions and net losses on the entire portfolio of
receivables serviced by the credit companies in the prospectus supplement
for your securities. This information may exclude any category of
receivables not included in your trust.
Use of Proceeds
Each trust will apply the net proceeds from the sale of its
securities to buy receivables from us and to make deposits in various trust
accounts, including any pre-funding account for that trust. We will use
that portion of the net proceeds paid to us to repay outstanding
indebtedness under our financing agreements or to purchase related
receivables from the credit companies.
Important Parties
CNH Capital Receivables Inc.
We will sell receivables to each trust. We are a wholly-owned
subsidiary of Case Credit and were incorporated in the State of Delaware
on, May 19, 2000. We are organized for the limited purpose of buying
receivables, directly or indirectly, from the credit companies,
transferring those receivables to third parties and any related activities.
Our principal executive offices are located at 100 South Saunders Road,
Lake Forest, Illinois 60045, and our telephone number is (847) 735-9200.
You can find more information about our legal separateness from Case
Credit, the restrictions on our activities and possible effects on you if
we were to enter bankruptcy, reorganization or other insolvency proceedings
under "Legal Aspects of the Receivables--Bankruptcy Considerations Relating
to the Credit Companies."
Case Credit Corporation
Case Credit Corporation, a Delaware corporation (often referred to
as "Case Credit"), will act as the servicer of the receivables owned by,
and provide administrative services to, each of the trusts. Case Credit is
an indirect wholly--owned finance subsidiary of Case Corporation, a
Delaware corporation, which is a an indirect wholly owned subsidiary of
CNH.
Case Credit's headquarters are located at 233 Lake Avenue, Racine,
Wisconsin 53403, and its telephone number is (414) 636-6011. Case Credit is
subject to the informational requirements of the Securities Exchange Act.
As required by that act, Case Credit files reports and other information
with the SEC. You can find more information about Case Credit in the
reports and other information that are described under "Where You Can Find
More Information."
New Holland Credit Company, LLC
New Holland Credit Company, LLC, a limited liability company
organized under the laws of the state of Delaware (often referred to as
"New Holland Credit"), has entered into a subservicing agreement with Case
Credit under which it will service receivables that it has originated and
that were ultimately transferred to the trusts. New Holland Credit is an
indirect wholly owned finance subsidiary of CNH.
14
<PAGE>
New Holland Credit was formed on April 25, 1996 for the purpose of
providing wholesale, retail and lease financing services to dealers and
customers in connection with the agricultural and industrial equipment
operations of New Holland North America, Inc. beginning on January 1, 1997.
Prior to January 1, 1997, the operations of New Holland Credit were
performed by Ford New Holland Credit Company, a partnership between Ford
Motor Credit Company and Fiat Finance USA, Inc. Effective January 1, 1997,
Fiatallis North America, Inc., also a wholly owned subsidiary of CNH and
the parent company of New Holland Credit, purchased all of Ford Motor
Credit Company's partnership interest.
New Holland Credit's headquarters are located at 33 South Railroad
Avenue, New Holland, Pennsylvania 17557, and its telephone number is (717)
355-3086.
Credit Company Operations
The credit companies provide and administer financing for the
retail purchase or lease of new and used agricultural, construction, and
other equipment. CNH offers various retail financing options to end-use
customers through the credit companies to facilitate the sale of its
products in North America, Western Europe, Latin America, Australia and
other parts of the world. However, the trusts will include only receivables
of obligors located in the United States.
The credit companies' operations principally involve purchasing
retail installment sale contracts and leases from equipment dealers,
including CNH and non-CNH dealers. In addition, the credit companies
facilitate and finance the sale of insurance products to retail customers,
provide financing for dealers and rental equipment yards, and also provide
other retail financing programs for end-use customers in the North America,
Western Europe, Latin America, Australia and other parts of the world. The
credit companies also provide various financing options to dealers for a
variety of purposes, including inventory, working capital, real estate
acquisitions, construction and remodeling, business acquisitions, dealer
systems and service and maintenance equipment.
The credit companies offer a broad variety of financing options
through dealers to end-use customers for the retail sale of CNH's
agricultural and construction equipment, used equipment accepted by dealers
in trade and equipment of other manufacturers stocked and sold by the CNH
dealer network.
CNH's United States dealers and company-owned dealerships located
in the United States assign and sell rental installment contracts to the
credit companies on a regular basis.
CNH Global N.V.
CNH Global N.V., a corporation (naamloze vennootschap) organized
under the laws of the Kingdom of The Netherlands (often referred to as
"CNH"), was formed on November 12, 1999 in connection with New Holland
N.V.'s acquisition of Case Corporation. In the acquisition, Case
Corporation was merged into a subsidiary of New Holland N.V. with Case
Corporation being the surviving entity. Upon completion of the merger New
Holland N.V.'s name was changed to CNH Global N.V. When we refer to CNH in
this prospectus and any prospectus supplement, we are referring to CNH and
its consolidated subsidiaries.
15
<PAGE>
CNH operates through three business segments--agricultural and
industrial equipment, construction equipment and financial services. CNH is
expected to organize its sales and marketing activities on a geographic
basis, keeping separate the pre-merger brand names, dealer networks and
dealer-and customer-related activities of New Holland N.V. and Case
Corporation. CNH expects to capitalize on the differentiated features of it
equipment products to further enhance its two dealer networks, while
creating additional product choices for customers. By maintaining separate
dealer and distribution networks, CNH intends to take advantage of the
strengths of both of its brands in their respective customer segments and
the traditional brand loyalty of farmers to maintain and enlarge its
customer base. As a result of its consistent distribution approach with
dealers, the general buying experience of CNH's retail customers will
remain largely unaffected by the merger.
On a combined basis, CNH is the world's largest manufacturer of
agricultural equipment and the third largest manufacturer of construction
equipment in terms of 1998 sales. CNH is the largest global manufacturer of
agricultural tractors and combines, and also has leading positions in hay
and forage equipment and speciality harvesting equipment. CNH also has
leading positions in construction equipment, including excavators, dozers,
graders, wheel loaders, loader/backhoes, skid steer loaders and trenchers.
In addition, CNH is one of the world's most geographically diverse
producers and distributors of agricultural and construction equipment. In
the case of agricultural equipment, CNH is a market leader in major regions
around the world, including North America, Western Europe and Latin
America. In the case of construction equipment, CNH also has an established
and growing presence in these regions. CNH has operations in 16 countries
and its products are sold in over 160 countries through an extensive
network of more than 10,000 dealers and distributors worldwide. CNH's
products are currently sold under the following brands: Case, Case IH,
Fiatallis, Fiat-Hitachi, Link-Belt, New Holland, O&K and Steyr.
CNH also manufactures and distributes replacement parts for
various models of its farm and construction equipment, many of which are
proprietary, to support products it has sold. CNH distributes these parts
to dealers and distributors through a network of parts depots throughout
the world.
To facilitate the sale of its products, CNH offers wholesale
financing to dealers and rental equipment yards and, through the credit
companies and their affiliates, offers various types of retail financing to
qualified end-users in North America, Western Europe, Latin America,
Australia and other parts of the world. Wholesale financing consists
primarily of floorplan financing and allows dealers to maintain a
representative inventory of products. Retail financing consists of the
financing of retail installment sale contracts, leases and similar products
for the benefit of end-use customers in conjunction with the purchase of
new and used equipment from CNH dealers and company-owned retail stores and
is intended to be competitive with financing available from third parties.
The address of CNH's registered offices is World Trade Center,
Tower B, 10th Floor, Amsterdam Airport, The Netherlands and its telephone
number when calling from the United States is (011-31-20) 446-0429. CNH's
corporate offices are located at 700 State Street, Racine, Wisconsin 53404,
and its telephone number is (414) 636-6011. CNH is subject to the
informational requirements of
16
<PAGE>
the Securities Exchange Act as a foreign private issuer. As required by
that act, CNH files reports and other information with the SEC. You can
find more information about CNH in the reports and other information that
are described under "Where You Can Find More Information."
The Trustee and The Indenture Trustee
We will identify the trustee for your trust and the indenture
trustee for your notes in your prospectus supplement. The liability of the
indenture trustee and the trustee in connection with the issuance and sale
of the related securities is limited solely to its express obligations
under the related agreements.
A trustee may resign at any time, in which event the servicer must
appoint a successor trustee. The administrator of a trust may also remove
the trustee if the trustee ceases to be eligible to continue as trustee or
if the trustee becomes insolvent. In that case, the administrator must
appoint a successor trustee.
An indenture trustee may resign at any time, and may be removed by
the trustee if the indenture trustee becomes insolvent or ceases to be
eligible to continue as indenture trustee. If an indenture trustee resigns
or is removed, the trust must appoint a successor indenture trustee.
No resignation or removal of a trustee or an indenture trustee, as
the case may be, or appointment of a successor trustee or successor
indenture trustee, as the case may be, will become effective until the
successor trustee or successor indenture trustee has accepted its
appointment.
Description of the Notes
Each trust will issue one or more classes of notes pursuant to an
indenture between the trust and an indenture trustee. We have filed a form
of the indenture to be used as an exhibit to the registration statement of
which this prospectus is a part. In addition to the notes offered by this
prospectus, each trust may issue one or more additional classes of notes
that may be sold in transactions exempt from registration under the
Securities Act or retained by us or our affiliates. Those additional
classes of notes may be issued under the related indenture or under a
separate agreement. We summarize the material terms of the notes and
indentures below. This summary does not include all of the terms of the
notes and the indentures and is qualified by reference to the actual notes
and indentures.
Principal and Interest on the Notes
We will describe the timing and priority of payment, seniority,
redeemability, allocations of losses, interest rate and amount of or method
of determining payments of principal and interest on each class of notes of
a series in the related prospectus supplement. The right of holders of any
class of notes to receive payments of principal and interest may be senior
or subordinate to the rights of holders of any other class or classes of
notes of the same series. Each series may include one or more classes of
notes of a type known as "strip notes." Strip notes are entitled to (a)
principal payments with disproportionate, nominal or no interest payments
or (b) interest payments with disproportionate, nominal or no principal
payments. Each class of notes may have a different interest rate, which may
be a fixed or floating rate and may be zero for strip notes.
17
<PAGE>
The Indenture
Modification of Indenture. The indenture for each trust may be
amended with the consent of the holders of at least a majority of the
outstanding principal amount of notes of the related series, the trust and
the indenture trustee. However, the following changes may not be made to
any indenture without the consent of each affected noteholder:
(1) any change to the due date of any installment of
principal of or interest on any note or any reduction of the
principal amount of any note, the interest rate for any note or
the redemption price for any note, or any change to the place for
or currency of any payment on any note;
(2) any change that impairs the right of a noteholder to
take legal action to enforce payment under the provisions of the
indenture;
(3) any reduction in the percentage of noteholders, by
aggregate principal balance, that is required to consent to any
amendment or to any waiver of defaults or compliance with
provisions of the indenture;
(4) any modification of the provisions of the indenture
regarding the voting of notes held by us, the applicable trust, any
other obligor on the notes, or any of our respective affiliates;
(5) any reduction in the percentage of noteholders, by
aggregate principal balance, that is required to direct the
indenture trustee to sell or liquidate the receivables if the
proceeds of sale would be insufficient to pay the notes in full,
with interest; or
(6) any change that adversely affects the status or
priority of the lien of the indenture on any collateral.
Also, unless otherwise provided in the applicable prospectus
supplement, a trust and the applicable indenture trustee may enter into
supplemental indentures without obtaining the consent of the noteholders of
the related series, for the purpose of:
(a) changing the related indenture or the rights of
noteholders, if the change will not materially and adversely affect
the interests of any noteholder; or
(b) substituting credit enhancement for any class of
notes, if the applicable rating agencies confirm in writing that
the substitution will not result in the reduction or withdrawal of
the rating of those notes or any other class of securities in the
same series.
Events of Default; Rights upon Event of Default. Any one of the
following events will be an event of default for the notes in your series,
unless otherwise specified in your prospectus supplement:
o the trust fails to pay any interest on any note within five
days after its due date;
18
<PAGE>
o the trust fails to pay any installment of the principal of any
note on its due date;
o the trust breaches any of its other covenants in the
indenture for 30 days after notice of the breach is given
to the trust by the indenture trustee or to the trust and
the indenture trustee by the holders of at least 25% of
the outstanding principal amount of the notes in your
series;
o the trust fails to correct a breach of a representation
or warranty it made in the indenture, or in any
certificate delivered in connection with the indenture,
that was incorrect in a material respect at the time it
was made, for 30 days after notice of the breach is given
to the trust by the indenture trustee or to the trust and
the indenture trustee by the holders of at least 25% of
the outstanding principal amount of the notes in your
series; or
o the trust becomes bankrupt or insolvent or is liquidated.
You should note, however, that until the final scheduled maturity
date for any class of notes, the amount of principal due to noteholders in
your series generally will be limited to amounts available for that
purpose. Also, if specified in the applicable prospectus supplement, the
amount of interest due to noteholders of any class may be limited to
amounts available for that purpose. Therefore, the failure to pay principal
or, when applicable, interest on a class of notes generally will not result
in the occurrence of an event of default until the final scheduled payment
date for that class of notes.
If an event of default with respect to the notes of any series
occurs and is not remedied as provided in the applicable indenture, then
the principal of the notes of that series may be declared to be immediately
due and payable by the indenture trustee, holders of a majority in
principal amount of those notes or, if so specified in the applicable
prospectus supplement, holders of a majority in principal amount of one or
more particular classes of those notes. Unless otherwise specified in your
prospectus supplement, that declaration may be rescinded by holders of a
majority of the outstanding principal amount of the notes of that series,
but only after payment of any past due amounts and cure or waiver of all
other events of default. Noteholders' voting rights may vary by class.
If the notes of any series have been declared due and payable
following an event of default, the indenture trustee for that series may
institute proceedings to collect amounts due or foreclose on trust
property, exercise remedies as a secured party, sell the related
receivables or elect to have the applicable trust maintain possession of
those receivables and continue to apply collections on them as if there had
been no declaration of acceleration. Unless otherwise specified in the
related prospectus supplement, however, the indenture trustee is prohibited
from selling the related receivables following an event of default, other
than a default in the payment of any principal of or a default in the
payment of any interest on any note that continues for five days or more,
unless (i) the holders of all the outstanding notes of that series consent
to the sale, (ii) the proceeds of the sale are sufficient to pay in full
the principal of and the accrued interest on those notes at the date of
such sale or (iii) the indenture trustee for that series determines that
the proceeds of receivables would not be sufficient on an ongoing basis to
make all payments on those notes as those payments would have become due if
those
19
<PAGE>
obligations had not been declared due and payable, and the indenture
trustee obtains the consent of the holders of 66 2/3% of the outstanding
principal amount of those notes.
Each indenture will provide that, subject to the duty of the
indenture trustee to act with the required standard of care if an event of
default occurs, the indenture trustee is not required to exercise any of
its rights or powers under the indenture at the request or direction of any
of the noteholders, 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. Subject to
the provision of adequate indemnification of the indenture trustee, the
holders of a majority of the outstanding principal amount of the notes of a
series (or of one or more classes of those notes, if so specified in the
applicable prospectus supplement) will have the right to direct the time,
method and place for any remedy available to the indenture trustee.
Unless otherwise specified in the related prospectus supplement,
no noteholder will have the right to take legal action under the related
indenture, unless:
o the noteholder gives the indenture trustee written notice of a
continuing event of default;
o the holders of at least 25% of the outstanding principal
amount of notes of that series have requested in writing
that the indenture trustee take legal action and offered
reasonable indemnity to the indenture trustee;
o the indenture trustee has not received a direction not to
take legal action from the holders of a majority of the
outstanding principal amount of the notes in that series;
and
o the indenture trustee has failed to take legal action within
60 days.
In addition, each indenture trustee and the noteholders, by
accepting their notes, will covenant that they will not at any time
institute any bankruptcy or insolvency proceeding against their trust.
None of the trustee for any trust, the related indenture trustee
in its individual capacity, any holder of a certificate representing an
ownership interest in a trust or 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 related notes or for the agreements of such
trust contained in the applicable indenture.
Certain Covenants. In its indenture, each trust will agree not to
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 or any state,
o that entity expressly assumes the trust's obligations relating
to the notes,
20
<PAGE>
o immediately after the transaction, no event of default would have
occurred and not have been remedied,
o the trust has been advised that the ratings of the notes
or the certificates of the particular series then in
effect would not be reduced or withdrawn by the
applicable rating agencies as a result of the
transaction, 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
related noteholder or certificateholder.
Each trust will also agree not to take the following actions:
o sell or otherwise dispose of any of its assets, except as
permitted by its transaction documents,
o claim any credit on or make any deduction from the
principal and interest payable in respect of its notes,
other than amounts withheld under the Internal Revenue
Code or applicable state law,
o assert any claim against any present or former holder of those
notes because of the payment of taxes levied or assessed upon
the trust,
o dissolve or liquidate in whole or in part, except as contemplated
by its transaction documents,
o permit the validity or effectiveness of its indenture to
be impaired or permit any person to be released from any
obligations with respect to the notes under its
indenture, except as may be expressly permitted by its
indenture,
o permit any lien, claim or other encumbrance to affect its assets
or any part of the trust, any interest in its assets or the trust
or any related proceeds, or
o incur, assume or guarantee any indebtedness other than
indebtedness incurred pursuant to its notes and its other
transaction documents.
Each trust may engage in only the activities described in the
related prospectus supplement.
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 its indenture.
Indenture Trustee's Annual Report. The indenture trustee for each
trust will be required to mail each year to all of the related noteholders
a brief report relating to its eligibility and qualification to continue as
indenture trustee, any amounts advanced by it under the indenture,
information about indebtedness owing by the trust to the indenture trustee
in its individual capacity, any property and funds physically held by the
indenture trustee as such and any action taken by
21
<PAGE>
it that materially affects the related notes and that has not been previously
reported.
Satisfaction and Discharge of Indenture. An indenture may be
discharged with respect to the collateral securing the related notes upon
the delivery to the related indenture trustee for cancellation of all of
the related notes or upon deposit with the indenture trustee of funds
sufficient for the payment in full of the notes.
Description of the Certificates
Each trust will issue one or more classes of certificates pursuant
to a trust agreement between us and a trustee. We have filed a form of the
trust agreement to be used as an exhibit to the registration statement of
which this prospectus is a part. A trust's certificates may be offered by
this prospectus or may be sold in transactions exempt from registration
under the Securities Act or retained by us or our affiliates. We summarize
the material terms of the certificates below. This summary does not include
all of the terms of the certificates and is qualified by reference to the
actual certificates.
We will describe the timing and priority of payment, seniority,
redeemability, allocations of losses, interest rate and amount of or method
of determining payments of principal and interest on each class of
certificates of a series in the related prospectus supplement.
Certificateholders' rights to receive payments on their certificates will
be junior to the payment rights of noteholders in the same series to the
extent described in the applicable prospectus supplement. In addition, the
right of holders of any class of certificates to receive payments of
principal and interest may be senior or subordinate to the rights of
holders of any other class or classes of certificates of the same series.
Each series may include one or more classes of certificates of a type known
as "strip certificates." Strip certificates are entitled to (a) principal
payments with disproportionate, nominal or no interest payments or (b)
interest payments with disproportionate, nominal or no principal payments.
Each class of certificates may have a different interest rate, which may be
a fixed or floating interest rate and may be zero for strip certificates.
Administrative Information About the Securities
Denominations
We will identify minimum denominations for purchase of securities
in the related prospectus supplement. If we do not specify any
denomination, then the securities will be available for purchase in minimum
denominations of $1,000 and in greater whole-dollar denominations.
Fixed Rate Securities
Each class of securities may bear interest at a fixed or floating
rate per annum. We will identify the applicable interest rate for each
class of fixed rate securities in the applicable prospectus supplement.
Interest on each class of fixed rate securities will be computed on the
basis of a 360-day year of twelve 30-day months, unless we specify a
different computation basis in the applicable prospectus supplement.
22
<PAGE>
Floating Rate Securities
Each class of floating rate securities will bear interest for
interest periods specified in the applicable prospectus supplement at a
rate per annum equal to:
o a specified base interest rate, which will be based upon
the London interbank offered rate (commonly known as
"LIBOR"), commercial paper rates, federal funds rates,
U.S. Government treasury securities rates, negotiable
certificates of deposit rates or another index rate we
specify in the applicable prospectus supplement;
o plus or minus a "spread" of a number of basis points (i.e., one-
hundredths of a percentage point) we will specify in the
applicable prospectus supplement;
o or multiplied by a "spread multiplier," which is a percentage
that we will specify in the applicable prospectus supplement.
In the prospectus supplement for any floating rate securities we
may also specify either or both of the following for any class:
o a maximum, or ceiling, on the rate at which interest may accrue
during any interest period and
o a minimum, or floor, on the rate at which interest may accrue
during any interest period.
In addition to any maximum interest rate specified in the applicable
prospectus supplement, 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 that issues floating rate securities will appoint a
calculation agent to calculate interest rates on each class of its floating
rate securities. The applicable prospectus supplement will identify the
calculation agent for each class of floating rate securities in the offered
series. Determinations of interest by a calculation agent will be binding
on the holders of the related floating rate securities, in the absence of
manifest error. All percentages resulting from any calculation of the rate
of interest on a floating rate security will be rounded, if necessary, to
the nearest 1/100,000 of 1% (.0000001), with five one-millionths of a
percentage point rounded upward, unless we specify a different rounding
rule in the related prospectus supplement.
Indexed Securities
We may also specify in any prospectus supplement that any class of
securities of the related series will be "indexed securities." In that
case, the principal amount payable at the final scheduled payment date for
that class would be determined by reference to an index related to:
o the difference in the rate of exchange between United States
dollars and a currency or composite currency specified in the
prospectus supplement;
23
<PAGE>
o the difference in the price of a specified commodity on specified
dates;
o the difference in the level of a specified stock index, which may
be based on U.S. or foreign stocks on specified dates; or
o another objective price or economic measure described in the
prospectus supplement.
We will disclose the manner of determining the principal amount
payable on any indexed security and historical and other information
concerning the index used in that determination in the applicable
prospectus supplement, together with information concerning tax
consequences to the holders of the indexed securities. This may include
alternate means to calculate an index if a third party that initially
calculates or announces the index ceases to do so or changes the basis upon
which the index is calculated.
Unless we specify otherwise in the applicable prospectus
supplement, interest on an indexed security will be payable based on the
amount designated in the prospectus supplement as the "face amount" of the
indexed security. We will also specify in the applicable prospectus
supplement whether the principal amount of any indexed security that would
be payable upon redemption or repayment prior to the applicable final
scheduled payment date would be its face amount, its principal amount based
on the applicable index at the time of redemption or repayment or some
other amount.
Book-Entry Registration
The Clearing Organizations. We will specify in the related
prospectus supplement whether or not investors may hold their securities in
book-entry form, directly or indirectly, through one of three major
securities clearing organizations:
o in the United States, The Depository Trust Company (commonly
known as "DTC"); or
o in Europe, either Clearstream Banking, societe anonyme
(commonly known as "Clearstream") or Euroclear (also
known as the "Euroclear System").
Each of these entities holds securities for its participating organizations
and facilitates the clearance and settlement of securities transactions
between its participants through electronic book-entry changes in the
participants' accounts. This eliminates the need for physical movement of
certificates representing the securities.
DTC is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New
York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code,
and a "clearing agency" registered pursuant to Section 17A of the
Securities Exchange Act. DTC participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. Indirect access to the DTC system is also available to
others, such as securities brokers and dealers, banks, and trust companies
that clear through or maintain a custodial relationship with a
24
<PAGE>
DTC participant, either directly or indirectly. The rules applicable to DTC
and its participants are on file with the SEC.
Clearstream is a limited liability company organized under the
laws of Luxembourg as a professional depository. It settles transactions in
a number of currencies, including United States dollars. Clearstream
provides its participants, among other things, services for safekeeping,
administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. Clearstream interfaces
with domestic markets in several countries. As a professional depository,
Clearstream is subject to regulation by the Luxembourg Monetary Institute.
Clearstream's participants are recognized financial institutions around the
world, including underwriters, securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations and may
include the underwriters of any series of securities. Indirect access to
Clearstream is also available to others, such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship
with a Clearstream participant, either directly or indirectly.
Euroclear was created in 1968. It settles transactions in a number
of currencies, including United States dollars. Euroclear includes various
other services, including securities lending and borrowing. Euroclear
interfaces with domestic markets in many countries generally similar to the
arrangements for cross-market transfers with DTC described below. Euroclear
is operated by Morgan Guaranty Trust Company of New York, Brussels, Belgium
office, under contract with Euroclear Clearance System, Societe
Cooperative, a Belgian cooperative corporation. All operations are
conducted by Euroclear's operator, and all Euroclear securities clearance
accounts and Euroclear cash accounts are accounts with the Euroclear
operator, not the cooperative. The board of the cooperative establishes
policy for the Euroclear System. Euroclear participants include banks
(including central banks), securities brokers and dealers and other
professional financial intermediaries and may include the underwriters of
any series of securities. Indirect access to Euroclear is also available to
other firms that maintain a custodial relationship with a Euroclear
participant, either directly or indirectly.
The Euroclear operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such,
it is regulated and examined by the Board of Governors of the Federal
Reserve System and the New York State Banking Department, as well as the
Belgian Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear
operator are governed by the Terms and Conditions Governing Use of
Euroclear and the related operating procedures of the Euroclear System.
These Terms and Conditions govern transfers of securities and cash within
Euroclear, withdrawal of securities and cash from Euroclear, and receipts
of payments with respect to securities in Euroclear. All securities in the
Euroclear System are held on a fungible basis without attribution of
specific certificates to specific securities clearance accounts. The
Euroclear operator acts under the Terms and Conditions only on behalf of
Euroclear participants and has no record of or relationship with persons
holding through Euroclear participants.
Book-Entry Clearance Mechanics. If book-entry arrangements are
made, then a nominee for DTC will hold global certificates representing the
securities.
25
<PAGE>
Clearstream and Euroclear will hold omnibus positions on behalf of their
respective participants, through customers' securities accounts in
Clearstream's and Euroclear's names on the books of their respective
depositaries, which in turn will hold positions in customers' securities
accounts in the depositaries' names on the books of DTC.
Transfers between DTC's participants will occur in accordance with
DTC rules. Transfers between Clearstream's participants and Euroclear's
participants will occur in the ordinary way in accordance with their
applicable rules and operating procedures.
Cross-market transfers between persons holding directly or
indirectly through DTC, on the one hand, and directly or indirectly through
Clearstream participants or Euroclear participants, on the other, will be
effected in DTC in accordance with DTC rules on behalf of the relevant
European international clearing system by its depositary. However, such
cross-market transactions will require delivery of instructions to the
relevant European international clearing system by the counterparty in such
system in accordance with its rules and procedures and within its
established deadlines (European time). The relevant European international
clearing system will, if the transaction meets its settlement requirements,
deliver instructions to its depositary to take action to effect final
settlement on its behalf by delivering or receiving securities in DTC, and
making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. Clearstream participants and
Euroclear participants may not deliver instructions directly to
Clearstream's and Euroclear's depositaries.
Because of time-zone differences, credits of securities in
Clearstream or Euroclear as a result of a transaction with a DTC
participant will be made during the subsequent securities settlement
processing, dated the business day following the DTC settlement date.
Credits or other transactions in securities settled during any processing
will be reported to the relevant Clearstream participant or Euroclear
participant on that business day. Cash received in Clearstream or Euroclear
as a result of sales of securities by or through a Clearstream participant
or a Euroclear participant to a DTC participant will be received with value
on the DTC settlement date but will be available in the relevant
Clearstream or Euroclear cash account only as of the business day following
settlement in DTC.
Purchases of securities under the DTC system must be made by or
through DTC participants, which will receive a credit for the securities on
DTC's records. The ownership interest of each actual securityholder is in
turn to be recorded on the DTC participants' and indirect participants'
records.
Securityholders will not receive written confirmation from DTC of
their purchase, but securityholders are expected to receive written
confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the DTC participant or indirect
participant through which the securityholder entered into the transaction.
Transfers of ownership interests in the securities are to be accomplished
by entries made on the books of DTC participants acting on behalf of
securityholders. Securityholders will not receive certificates representing
their ownership interest in securities, unless the book-entry system for
the securities is discontinued. Because of this, unless and until
definitive securities for such series are issued, securityholders will not
be recognized by the applicable indenture trustee or trustee as
"noteholders," "certificateholders" or "securityholders," as the case may
be. Hence, unless and
26
<PAGE>
until definitive securities are issued, securityholders will only be able
to exercise their rights as securityholders indirectly through DTC and its
participating organizations.
To facilitate subsequent transfers, all securities deposited by
DTC participants with DTC are registered in the name of DTC's nominee. The
deposit of securities with DTC and their registration in the name of its
nominee effects no change in beneficial ownership. DTC has no knowledge of
the actual securityholders of the securities. Its records reflect only the
identity of the DTC participants to whose accounts such securities are
credited, which may or may not be the securityholders. The DTC participants
are responsible for keeping account of their holdings on behalf of their
customers.
Notices and other communications conveyed by DTC to DTC
participants, by DTC participants to indirect participants, and by DTC
participants and indirect participants to securityholders are governed by
arrangements among them and any statutory or regulatory requirements that
are in effect from time to time.
Neither DTC nor its nominee will consent or vote with respect to
securities. Under its usual procedures, DTC mails an omnibus proxy to the
issuer as soon as possible after the record date, which assigns its
nominee's consenting or voting rights to those DTC participants to whose
accounts the securities are credited on the record date (identified in a
listing attached thereto).
Principal and interest payments on securities cleared through DTC
will be made to DTC. DTC's practice is to credit participants' accounts on
the applicable payment date in accordance with their respective holdings
shown on DTC's records unless DTC has reason to believe that it will not
receive payment on the payment date. Payments by DTC participants to
securityholders will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name" and will be the
responsibility of the DTC participant and not of DTC, the trustee or us,
subject to any statutory or regulatory requirements that are in effect from
time to time. Payment of principal and interest to DTC is the
responsibility of the trustee, disbursement of those payments to DTC
participants is the responsibility of DTC, and disbursement of the payments
to securityholders is the responsibility of DTC participants and indirect
participants.
Principal and interest payments on securities held through
Clearstream or Euroclear will be credited to the cash accounts of
Clearstream participants or Euroclear participants in accordance with the
relevant system's rules and procedures, to the extent received by its
depositary. Those payments will be subject to tax reporting in accordance
with relevant United States tax laws and regulations, as described below in
"U.S. Federal Income Tax Consequences." Clearstream or the Euroclear
operator, as the case may be, will take any other action permitted to be
taken by a securityholder under a related agreement on behalf of a
Clearstream participant or Euroclear participant only in accordance with
its relevant rules and procedures and subject to its depositary's ability
to effect such actions on its behalf through DTC.
Although DTC, Clearstream and Euroclear have agreed to the
foregoing procedures in order to facilitate transfers of securities among
participants of DTC, Clearstream and Euroclear, they are under no
obligation to perform or continue to perform such procedures and such
procedures may be discontinued at any time.
27
<PAGE>
We obtained the information in this section concerning DTC,
Clearstream and Euroclear and their respective book-entry systems from
sources that we believe to be reliable, but we take no responsibility for
its accuracy.
Definitive Securities
Notes or certificates that are initially cleared through DTC will
be issued in definitive, fully registered, certificated form to investors
or their respective nominees, rather than to DTC or its nominee, only if:
o the administrator for any trust advises the related
indenture trustee or the related trustee, as applicable,
in writing that DTC is no longer willing or able to
discharge properly its responsibilities as depository
with respect to such securities, and the administrator is
unable to locate a qualified successor,
o the administrator, at its option, advises the indenture trustee
in writing that it elects to terminate the book-entry system
through DTC or
o after the occurrence of an event of default or a servicer default
with respect to a series of securities, securityholders
representing at least a majority of the outstanding principal
amount of the notes or the certificates, as the case may be, in
that series advise the applicable trustee through DTC in writing
that the continuation of a book-entry system through DTC (or a
successor thereto) with respect to the notes or certificates is
no longer in the best interest of their holders.
If any of these events occur, the applicable trustee will be
required to notify all holders of the securities in the affected series
through clearing organization participants of the availability of
definitive securities. Upon surrender by DTC of the definitive certificates
representing the corresponding securities and receipt of instructions for
re-registration, the applicable trustee will reissue the securities to the
securityholders as definitive securities.
Principal and interest payments on all definitive securities will
be made by the applicable trustee in accordance with the procedures set
forth in the related indenture or the related trust agreement, as
applicable, directly to holders of definitive securities in whose names the
definitive securities were registered at the close of business on the
applicable record date specified for the securities in the related
prospectus supplement. Those payments will be made by check mailed to the
address of each holder as it appears on the register maintained by the
applicable trustee. The final payment on any definitive security, however,
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 applicable trustee or of a registrar named in a notice
delivered to holders of definitive securities. No service charge will be
imposed for any registration of transfer or exchange, but the applicable
trustee may require payment of a sum sufficient to cover any tax or other
governmental charge imposed in connection with a transfer or exchange.
28
<PAGE>
List of Securityholders
Three or more holders of the notes of any series or one or more
holders of notes evidencing at least 25% of the aggregate outstanding
principal balance of the notes of a series may, by written request to the
related indenture trustee, obtain access to the list of all noteholders
maintained by the indenture trustee for the purpose of communicating with
other noteholders with respect to their rights under the related indenture
or the notes. The indenture trustee may elect not to afford the requesting
noteholders access to the list of noteholders if it agrees to mail the
desired communication or proxy, on behalf of and at the expense of the
requesting noteholders, to all noteholders of their series.
Three or more holders of the certificates of any series or one or
more holders of certificates evidencing at least 25% of the aggregate
outstanding balance of the certificates of a series may, by written request
to the related trustee, obtain access to the list of all certificateholders
maintained by the trustee for the purpose of communicating with other
certificateholders with respect to their rights under the related trust
agreement or the certificates.
Reports to Securityholders
On or prior to each payment date for the securities of a trust,
the servicer for the trust will prepare and provide to the trust's
indenture trustee a statement to be delivered to the related noteholders
and to the trustee a statement to be delivered to the related
certificateholders on the payment date. Each of these statements will
include, to the extent applicable to the particular series or class or
securities, 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:
(1) the amount of any principal payment on each class of
securities;
(2) the amount of any interest payment on each class of
securities;
(3) the aggregate balance of receivables in the trust at
the end of the prior calendar month;
(4) the aggregate outstanding principal balance and the
note pool factor for each class of notes, and the aggregate
outstanding balance and the certificate pool factor for each class
of such certificates, each after giving effect to all payments
reported under clause (1) above;
(5) the amount of the servicing fee paid to the servicer
for the prior calendar month;
(6) the interest rate for the next period for any floating
rate securities;
(7) the amount of the administration fee paid to the
administrator for the prior calendar month;
29
<PAGE>
(8) the amount of the net losses on receivables, if any,
during the prior calendar month;
(9) the aggregate purchase price paid for receivables, if
any, that were purchased or repurchased by us or the servicer during
the prior calendar month;
(10) the balance on deposit in any spread account or the
amount available under any other credit enhancement on the payment
date, after giving effect to any changes on that date;
(11) for each payment date during a pre-funding period, the
remaining balance in the pre-funding account; and
(12) for the first payment date that is on or immediately
following the end of a pre-funding period, the amount of any
remaining balance in the pre-funding account that has not been
used to fund the purchase of receivables and is being paid as
principal on the securities.
Each amount described in subclauses (1), (2), (5) and (7) will be
expressed as a dollar amount per $1,000 of the initial principal balance of
the related notes or certificates.
The note pool factor for each class of notes will be a seven-digit
decimal indicating the remaining outstanding principal balance of such
class of notes, as of each payment date (after giving effect to payments to
be made on such payment date), as a percentage of the initial outstanding
principal balance of such class of notes. Similarly, the certificate pool
factor for each class of certificates will be a seven-digit decimal
indicating the remaining balance of such class of certificates, as of each
payment date (after giving effect to distributions to be made on such
payment date), as a fraction of the initial outstanding balance of such
class of certificates. Each note pool factor and each certificate pool
factor will initially be 1.0000000 and will decline over time to reflect
reductions in the outstanding balance of the applicable class of notes or
certificates.
A noteholder's portion of the aggregate outstanding principal
balance of the related class of notes is the product of (i) the original
denomination of the noteholder's note and (ii) the applicable note pool
factor. A certificateholder's portion of the aggregate outstanding balance
of the related class of certificates is the product of (a) the original
denomination of such certificateholder's certificate and (b) the applicable
certificate pool factor.
Within the prescribed period of time for tax reporting purposes
after the end of each calendar year during the term of each trust, the
applicable trustee will mail to each person who at any time during such
calendar year has been a securityholder with respect to such trust and
received any payment thereon, a statement containing certain information
for the purposes of such securityholder's preparation of Federal income tax
returns.
Description of the Transaction Agreements
We summarize below the material terms of the agreements under
which the credit companies will, directly or indirectly, sell receivables
to us, and we will transfer them to each trust, and under which Case Credit
will agree to service the
30
<PAGE>
trust's receivables and administer the trust. We will disclose any
additional material terms relating to a particular trust's agreements in
the related prospectus supplement. We have filed forms of these agreements
as exhibits to the registration statement of which this prospectus is a
part. The following summary does not include all of the terms of the
agreements and is qualified by reference to the actual agreements.
Regular Sales of Receivables
We buy a significant portion of the receivables that we will sell
to most trusts prior to the closing date for the particular trust. We
finance our purchase of these receivables by borrowing on a secured basis
the funds necessary to purchase, or selling interests in, those
receivables, in either case, under the terms of a financing agreement with
one or more lenders or purchasers. Subject to certain limitations, we
generally buy, directly or indirectly, from one or both of the credit
companies all of the receivables meeting our eligibility requirements that
the applicable credit company originated during a specified period
(generally the preceding calendar month). We expect to sell most of the
receivables that we buy under these financing agreements to a trust that
will issue securities offered under this prospectus. Under each financing
agreement the selling credit company must use procedures to select the
receivables to be sold that are not adverse to our interests.
Under the terms of the financing agreements, we grant to the
purchasers or lenders, as applicable, a security interest in the
receivables we have purchased as described above and that have not been
previously released, along with some other collateral. However, we have the
right to obtain the release of the receivables from the liens granted under
the financing agreements prior to transferring them to a trust that will
issue securities for offer under this prospectus. In connection with these
releases, we are required to deposit into an account established for the
benefit of the applicable purchaser or lender an amount equal to the
aggregate balance of the receivables being released, plus accrued interest
at the applicable interest rates to the release date.
We buy these receivables without recourse to the credit companies
for defaults by the obligors. However, the selling credit company
represents and warrants to us on each purchase date as to the receivables
being sold on that date, among other things, that:
(1) each of the receivables meets our eligibility
requirements;
(2) the information the selling credit company has
provided to us about the receivables is correct in all material respects;
(3) the obligor on each of the receivables is required to
maintain physical damage insurance covering the financed equipment in
accordance with the selling credit company's normal requirements;
(4) as of the purchase date, the receivables are free and
clear of all security interests, liens, charges and encumbrances, and no
offsets, defenses or counterclaims have been asserted or threatened;
31
<PAGE>
(5) as of the purchase date, each of the receivables is
or will be secured by a first priority perfected security interest in the
financed equipment in favor of the applicable credit company; and
(6) each of the receivables complied at the time it was
originated and complies as of the purchase date with applicable Federal and
state laws in all material respects, including consumer credit, truth in
lending, equal credit opportunity and disclosure laws.
If a credit company breaches any of its representations or
warranties concerning the receivables, it must repurchase from us any
receivable materially and adversely affected by the breach at a price equal
to the contract's balance on the settlement date immediately succeeding the
month in which such repurchase obligation arises. This repurchase
obligation is the sole remedy available to us for any such breach.
Sales of Receivables in Connection with the Offering of Securities by a Trust
In addition to the receivables that we buy from the credit
companies on a regular basis as described above, we may also buy
receivables, directly or indirectly, from the credit companies to transfer
to a trust on the closing date for that trust under a purchase agreement
entered into in connection with the offering of securities by a trust. We
buy those receivables on substantially the same terms as under the
financing agreements described above. The receivables we buy under these
purchase agreements are originated directly or indirectly by the credit
companies. The credit companies may also sell receivables to another one of
their subsidiaries, and we may buy the receivables from that subsidiary on
substantially the same terms as our purchases from the credit companies.
We then sell receivables that we have acquired as described above
to one of the trusts, pursuant to a sale and servicing agreement. These
sales are also made without recourse. The related trustee will,
concurrently with this sale, execute and deliver the related notes and
certificates. The trust will apply the net proceeds received from the sale
of its notes and certificates to pay us for the related receivables, and,
to the extent specified in the related prospectus supplement, to make a
deposit in a pre-funding account and initial deposits in other trust
accounts. If there is a pre-funding account, the credit companies will
sell, directly or indirectly, additional receivables to us, and we will in
turn sell them to the trust from time to time during a pre-funding period,
as described further in the related prospectus supplement.
If we breach any of our representations or warranties made in a
sale and servicing agreement, and our breach is not cured by the last day
of the second (or, if we elect, the first) month following the discovery by
or notice to the trustee of the breach, we will repurchase any receivable
materially and adversely affected by our breach as of such last day at a
price equal to the contract value of the receivable, as specified in the
related prospectus supplement. Our obligation to purchase any receivable
with respect to which any representation or warranty has been breached is
subject to the credit company that sold the receivable to us repurchasing
the receivable from us. This repurchase obligation is the only remedy
available to the noteholders, the indenture trustee, the certificateholders
or the trustee for any trust for any uncured breach.
32
<PAGE>
Under each sale and servicing agreement, Case Credit, as servicer,
will continue to service the receivables held by the related trust and will
receive fees for its services. In order to assure uniform quality in
servicing the receivables and to reduce administrative costs, we and each
trust will designate the servicer as custodian to maintain possession, as
the agent for each trust, of the receivables and related documents.
However, notes evidencing any unsecured dealer loans that we sell to a
trust will be delivered to the related indenture trustee. In addition, Case
Credit and New Holland Credit have entered into a subservicing agreement
pursuant to which New Holland Credit has agreed to act as subservicer and
custodian in connection with each receivable originated by New Holland
Credit and transferred to a trust. However, Case Credit, as servicer and
custodian, will remain obligated and liable with respect to all receivables
transferred to the trusts. For a further description of the appointment of
subservicers, including New Holland Credit, by Case Credit, see
"--Appointment of Subservicers."
The obligors on the receivables are not notified that their
receivables have been transferred by the credit companies to us or by us to
the trust. However, each credit company marks its accounting records to
reflect these sales, and Uniform Commercial Code financing statements
reflecting the sales are filed.
Under each sale and servicing agreement, the servicer has an
option to purchase all of the remaining receivables held by the trust after
their aggregate contract values fall below 10% of the sum of the contract
values of all of the trust's receivables, measured for each receivable at
the time of its sale to the trust.
Accounts
The servicer will establish and maintain the following bank
accounts for each trust:
o a collection account, into which all payments made on or with
respect to the related receivables will be deposited;
o a note distribution account, into which amounts available
for payment to the noteholders will be deposited and from
which those payments will be made;
o a certificate distribution account, into which amounts
available for payment to the certificateholders will be
deposited and from which those payments will be made; and
o if so specified in the prospectus supplement, a pre-funding
account.
We will describe any other accounts to be established for a trust
in the related prospectus supplement.
Funds held in a trust's bank accounts will be invested in the
following types of investments:
(a) direct obligations of, or obligations fully guaranteed
as to timely payment by, the United States of America;
33
<PAGE>
(b) demand deposits, time deposits or certificates of
deposit of any domestic depository institution or trust company or
any domestic branch of a foreign bank that is subject to
supervision and examination by federal or state banking or
depository institution authorities, in each case where the issuer
has at the time of the investment or contractual commitment to
invest short-term credit ratings from each of the applicable
rating agencies in its highest investment category;
(c) commercial paper having, at the time of the
investment or contractual commitment to invest, a rating from each
of the applicable rating agencies in its highest investment
category;
(d) investments in money market funds having a rating
from each of the applicable rating agencies in its highest
investment category, including funds for which the indenture
trustee or the trustee or any of their respective affiliates is
investment manager or advisor;
(e) bankers' acceptances issued by any depository
institution or trust company referred to in clause (b) above;
(f) repurchase obligations with respect to any security
that is a direct obligation of, or fully guaranteed as to timely
payment by, the United States of America or any of its agencies or
instrumentalities the obligations of which are backed by the full
faith and credit of the United States of America, in either case
entered into with a depository institution or trust company
(acting as principal) described in clause (b); and
(g) any other investment permitted by each of the applicable
rating agencies as set forth in writing delivered to the indenture
trustee.
Investments described in clauses (d) and (g) will be made only so
long as making such investments will not require the trust to register as
an investment company, in accordance with the Investment Company Act of
1940. During any pre-funding period, no investments in money market funds
will be made with funds in any account other than the collection account.
Also, so long as they meet the criteria listed above, these investments may
include securities issued by us or our affiliates or trusts originated by
us or our affiliates. Except as described below with respect to spread
accounts, the investments made in each trust's bank accounts are limited to
obligations or securities that mature on or before the business day
preceding the next payment date.
In the unlikely event of defaults on investments made in a trust's
bank accounts, investors in the securities could experience losses or
payment delays. Earnings from these investments, net of losses and
investment expenses, will be deposited in the applicable collection account
on each payment date and treated as collections on the related receivables.
Each trust's bank accounts will be maintained in one of the
following forms:
o as segregated accounts with (a) the corporate trust
department of the related indenture trustee or the
related trustee, or (b) a depository institution
organized under the laws of the United States of America,
any state or the District of Columbia (or any domestic
34
<PAGE>
branch of a foreign bank) (1) which has either (A) a
long-term unsecured debt rating or certificate of deposit
rating acceptable to the applicable rating agencies or
(B) a short-term unsecured debt rating or certificate of
deposit rating acceptable to the applicable rating
agencies and (2) whose deposits are insured by the FDIC;
o as segregated trust account with the corporate trust department
of a depository institution organized under the laws of the
United States of America, any state or the District of Columbia
(or any domestic branch of a foreign bank), having corporate
trust powers and acting as trustee for funds deposited in such
account, so long as any of the securities of such depository
institution have a credit rating from each applicable rating
agency in one of its generic rating categories which signifies
investment grade; or
o as any other segregated account the deposit of funds in which has
been approved by the applicable rating agencies.
Servicing Procedures
The servicer will agree to make reasonable efforts to collect all
payments on the receivables held by each trust in a manner consistent with
the related sale and servicing agreement, and to use the collection
procedures it follows with respect to comparable agricultural, construction
and other equipment receivables it services for itself or others. These
procedures may vary in some respects between receivables originated by New
Holland Credit and other receivables. Consistent with its normal
procedures, the servicer may, in its discretion, arrange with the obligor
on a receivable to extend or modify the payment schedule. However, no such
arrangement will be permitted to extend the final payment date of any
receivable beyond the final scheduled maturity date specified for the
related securities in the applicable prospectus supplement unless the
servicer purchases the receivable from the trust for a purchase price equal
to its contract value.
If the servicer forecloses on the collateral for a receivable, the
servicer may sell the collateral at public or private sale, or take any
other action permitted by applicable law. When appropriate, in connection
with its servicing obligations, the servicer may require the applicable
indenture trustee to deliver all or a portion of one or more notes
evidencing unsecured dealer loans. The servicer will return any such notes
to the applicable indenture trustee when the servicer no longer needs it,
unless the related loan has been paid in full.
Collections
The servicer will deposit, or cause to be deposited, all payments
received on a trust's receivables during a calendar month into the related
collection account within two business days after receipt. However, at any
time when (a) Case Credit is the servicer, (b) there exists no servicer
default and (c) each other condition to making deposits less frequently
than daily as may be specified by the applicable rating agencies or set
forth in the related prospectus supplement is satisfied, the servicer will
not be required to deposit payments into the collection account until on or
before 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, and the collections will not be
segregated from its own funds. If the servicer were unable to remit such
funds, securityholders might
35
<PAGE>
incur a loss. To the extent described in the related prospectus supplement,
the servicer may, in order to satisfy the requirements described above,
obtain a letter of credit or other security for the benefit of the related
trust to secure timely remittances of collections on the related
receivables.
At any time when the servicer is permitted to remit collections
once a month, the servicer will be permitted to make that deposit net of
distributions to be made to the servicer with respect to the same calendar
month. The servicer, however, will account to the indenture trustee, the
trustee, the noteholders and the certificateholders with respect to each
trust as if all deposits, distributions and transfers were made
individually.
Servicing Compensation
With respect to each trust, the servicer will be entitled to
receive a servicing fee for each calendar month in an amount equal to a
percentage per annum specified in the related prospectus supplement of the
aggregate contract value of the trust's receivables as of the first day of
the applicable calendar month. The servicing fee will be paid solely from
the sources, and at the priority, specified in the related prospectus
supplement. Any fees agreed to between Case Credit, as servicer, and New
Holland Credit, as subservicer, for servicing receivables originated by New
Holland Credit and ultimately transferred to a trust shall be paid solely
by Case Credit.
Evidence as to Compliance
Each sale and servicing agreement will require that a firm of
independent public accountants furnish to the related trustee and indenture
trustee annually a statement as to compliance by the servicer during the
preceding twelve months (or in the case of the first such certificate, from
the applicable closing date) with specified standards relating to the
servicing of the applicable receivables, the servicer's accounting records
and computer files and certain other matters.
Each sale and servicing agreement will also require that an
officer of the servicer deliver to the related trust and indenture trustee,
substantially simultaneously with the delivery of the accountants'
statement, a certificate stating that the servicer has fulfilled its
obligations under the sale and servicing agreement throughout the preceding
twelve months (or, in the case of the first such certificate, from the
closing date) or, if there has been a default in the fulfillment of any
such obligation, describing each such default.
Securityholders may obtain copies of such statements and
certificates by written request addressed to the applicable trustee.
Appointment of Subservicers
Case Credit, as servicer, may at any time appoint a subservicer to
perform all or any portion of its obligations as servicer. In the case of
receivables originated by New Holland Credit and transferred to a trust,
Case Credit has appointed New Holland Credit to act as subservicer of those
receivables. The appointment of any subservicer, other than New Holland
Credit, is subject to the condition that the applicable rating agencies
confirm in writing that the appointment of any subservicer will not result
in the reduction or withdrawal of the rating of the securities in the
applicable series. The servicer shall remain
36
<PAGE>
obligated and be liable to the trust, the trustee, the indenture trustee,
the certificateholders and the noteholders for the servicing and
administering of the receivables in accordance with the applicable sale and
servicing agreement without diminution of those obligations and liabilities
by virtue of the appointment of any subservicer and to the same extent and
under the same terms and conditions as if the servicer itself were
servicing and administering the receivables. The fees and expenses of each
subservicer shall be as agreed between the servicer and its subservicer
from time to time and none of the issuer, the trustee, the indenture
trustee, the certificateholders or the noteholders shall have any
responsibility therefor.
Resignation, Liability and Successors of the Servicer
Case Credit will not be permitted to resign from its obligations
and duties as servicer for any trust, except upon determination that Case
Credit's performance of such duties is no longer permissible under
applicable law. No resignation will become effective until the related
indenture trustee or a successor servicer has assumed Case Credit's
servicing obligations and duties.
Neither the servicer nor any of its directors, officers, employees
and agents will be under any liability to any trust or the related
noteholders or certificateholders for taking any action or for refraining
from taking any action under the applicable sale and servicing agreement or
for errors in judgment. However, none of the listed parties will be
protected against any liability that would otherwise be imposed by reason
of willful misfeasance, bad faith or negligence in the performance of the
servicer's duties thereunder or by reason of reckless disregard of its
obligations and duties thereunder. In addition, the servicer will not be
under any obligation to appear in, prosecute or defend any legal action
that is not incidental to the servicer's servicing responsibilities under
the related sale and servicing agreement and that, in its opinion, may
cause it to incur any expense or liability.
Upon compliance with procedural requirements specified in the
related sale and servicing agreement, any of the following entities will be
the successor of the servicer under that sale and servicing agreement:
o any entity into which the servicer may be merged or consolidated,
or any entity resulting from any merger or consolidation to which
the servicer is a party,
o any entity succeeding to the business of the servicer, or
o any corporation 50% or more of the voting stock of which
is owned, directly or indirectly, by CNH, which assumes
the obligations of the servicer.
Servicer Default
The following events will constitute "servicer defaults" under
each sale and servicing agreement:
o the servicer fails to make required deposits or to direct
the indenture trustee to make required distributions,
subject to a three business day cure period after
discovery or notice;
37
<PAGE>
o we or the servicer breach our respective obligations
under the sale and servicing agreement, subject to
materiality limitations and a 60 day cure period after
notice; and
o bankruptcy or insolvency of the servicer or us.
Rights Upon Servicer Default
If a servicer default under a sale and servicing agreement occurs
and remains unremedied, the related indenture trustee or holders of notes
of the related series evidencing at least 25% in outstanding principal
amount of such notes (or of one or more particular classes or such notes,
if specified in the related prospectus supplement) may terminate all the
rights and obligations of the servicer under the sale and servicing
agreement. In that event, the indenture trustee or a successor servicer
appointed by the indenture 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. If, however, a bankruptcy trustee or similar official has
been appointed for the servicer, and no servicer default other than that
appointment has occurred, the trustee or other official may have the power
to prevent the indenture trustee or noteholders from effecting a transfer
of servicing.
If the indenture trustee is unwilling or unable to act as
successor servicer, it may appoint, or petition a court of competent
jurisdiction for the appointment of, a successor with a net worth of at
least $50,000,000 and whose regular business includes the servicing of
equipment receivables. The indenture trustee may make arrangements for
compensation to be paid to the successor servicer, but the compensation may
in no event be greater than the servicing fee provided for under the sale
and servicing agreement. Neither the trustee nor the certificateholders
have the right to remove the servicer if a servicer default occurs when any
notes of the same series remain outstanding.
Waiver of Past Defaults
With respect to each trust, unless otherwise provided in the
related prospectus supplement, the holders of notes evidencing at least a
majority in principal amount of the then outstanding notes of the related
series may, on behalf of all noteholders and certificateholders, waive any
default by the servicer in the performance of its obligations under the
related sale and servicing agreement and its consequences, except a default
in making any required deposits to or payments from any of the trust
accounts. Therefore, the noteholders have the ability to waive defaults by
the servicer which could materially adversely affect the
certificateholders. In addition, unless otherwise provided in the related
prospectus supplement, the holders of the related certificates evidencing
at least a majority of the outstanding certificate balance may, on behalf
of all noteholders and certificateholders, waive any servicer default that
does not adversely affect the related indenture trustee or noteholders.
None of these waivers will impair the noteholders' or certificateholders'
rights with respect to subsequent defaults.
Amendment
Unless otherwise provided in the related prospectus supplement,
each of a trust's transaction agreements may be amended by the parties to
the agreement, without the consent of the related noteholders or
certificateholders, so long as
38
<PAGE>
such action will not, in the opinion of counsel satisfactory to the related
indenture trustee and the related trustee, materially and adversely affect
the interest of any of the trust's noteholders or certificateholders. In
addition, unless otherwise provided in the related prospectus supplement,
each of a trust's transaction agreements may be amended by the parties to
the agreement, without the consent of the related noteholders or
certificateholders, to substitute or add credit enhancement for any class
of securities, so long as the applicable rating agencies confirm in writing
that such substitution or addition will not result in a reduction or
withdrawal of the rating of any class of securities in the related series.
Unless otherwise specified in the related prospectus supplement,
each of a trust's transaction agreements may be amended by the parties to
the agreement, with the consent of the indenture trustee, the holders of
notes evidencing at least a majority in principal amount of then
outstanding notes of the related series and the holders of certificates of
such series evidencing at least a majority of the certificate balance.
However, no such amendment may (a) increase or reduce in any manner the
amount of, or accelerate or delay the timing of, collections of payments on
the related receivables or distributions that are required to be made for
the benefit of such noteholders or certificateholders or (b) reduce the
required percentage of the notes or certificates of that are required to
consent to any such amendment, without the consent of the holders of all
the outstanding notes or certificates, as the case may be, of such series.
Payment of Notes
Upon the payment in full of all outstanding notes of a given
series and the satisfaction and discharge of the related indenture, the
related trustee will succeed to all the rights of the indenture trustee,
and the certificateholders will succeed to all the rights of the
noteholders, under the related sale and servicing agreement, except as
otherwise provided therein in the sale and servicing agreement.
Termination
With respect to each trust, our obligations and the obligations of
the servicer, the related trustee and the related indenture trustee
pursuant to the trust's transaction agreements will terminate upon (a) the
maturity or other liquidation of the last related receivables and the
disposition of any amounts received upon liquidation of any such remaining
receivables and (b) the payment to noteholders and certificateholders of
the related series of all amounts required to be paid to them pursuant to
the transaction agreements. The servicer will provide notice of any
termination of a trust to the applicable trustee and the indenture trustee.
Within five business days of the receipt of notice from the servicer, the
trustee will mail notice of such termination to the certificateholders. The
indenture trustee will mail notice of any such termination to the
noteholders.
Administration Agreement
Case Credit will enter into an administration agreement with each
trust and the related indenture trustee under which Case Credit will act as
administrator for the trust. The administrator will perform on behalf of
the trust administrative obligations required by the related indenture.
Unless otherwise specified in the prospectus supplement for any trust, as
compensation for the performance of the administrator's obligations under
the administration agreement and as
39
<PAGE>
reimbursement for its related expenses, the administrator will be entitled
to a quarterly administration fee in an amount equal to $500.
Credit and Cash Flow Enhancement
We will describe the amounts and types of credit enhancement
arrangements and the provider of the credit enhancements, if applicable,
with respect to each class of securities of a given series in the related
prospectus supplement. Credit enhancement may be in the form of
subordination of one or more classes of securities, spread accounts,
over-collateralization, letters of credit, credit or liquidity facilities,
surety bonds, guaranteed investment contracts, swaps or other interest rate
protection agreements, repurchase obligations, other agreements with
respect to third party payments or other support, cash deposits or such
other arrangements as may be described in the related prospectus supplement
or any combination of two or more of the foregoing. Credit enhancement for
a class of securities may cover one or more other classes of securities of
the same series, and credit enhancement for a series of securities may
cover one or more other series of securities. Any credit enhancement that
constitutes a guarantee of the applicable securities will be separately
registered under the Securities Act unless exempt from such registration.
The presence of a spread account and other forms of credit
enhancement for the benefit of any class or series of securities is
intended to enhance the likelihood of receipt by the securityholders of the
full amount of principal and interest due on their securities and to
decrease the likelihood that the securityholders will experience losses.
The credit enhancement for a class or series of securities generally will
not provide protection against all risks of loss and will not guarantee
repayment of the entire principal balance, with interest. If losses occur
which exceed the amount covered by any credit enhancement or which are not
covered by any credit enhancement, securityholders of any class or series
will bear their allocable share of deficiencies, as described in the
related prospectus supplement. In addition, if a form of credit enhancement
covers more than one class or series of securities, securityholders of any
one class or series will be subject to the risk that the credit enhancement
will be exhausted by the claims of securityholders of other classes or
series.
We may replace the credit enhancement for any class of securities
with another form of credit enhancement without the consent of
securityholders, if the applicable rating agencies confirm in writing that
the substitution will not result in the reduction or withdrawal of their
rating of any class of securities of the related series.
Spread Account. If so provided in the related prospectus
supplement, the servicer will establish for a series or class of securities
a spread account, which will be maintained in the name of the applicable
indenture trustee. We may initially fund any spread account by a deposit on
the applicable closing date in an amount set forth in the related
prospectus supplement. As further described in the related prospectus
supplement, the amount on deposit in the spread account may be increased on
each payment date up to a balance specified in the related prospectus
supplement by the deposit of collections on the related receivables
remaining after all higher priority payments on that payment date. We will
describe in the related prospectus supplement the circumstances and manner
under which distributions may be made out of the spread account to holders
of securities, to us or to any of our transferees or assignees.
40
<PAGE>
To the extent permitted by the applicable rating agencies, funds
in a trust's spread account may be invested in securities that will not
mature prior to the next payment date. As a result, the amount of cash in a
spread account at any time may be less than the balance of the spread
account. If the amount required to be withdrawn from any spread account to
cover shortfalls in collections on the related receivables (as provided in
the related prospectus supplement) exceeds the amount of cash in the spread
account, a temporary shortfall in the amounts distributed to the related
noteholders or certificateholders could result, which could, in turn,
increase the average life of the related securities.
We may at any time, without consent of the securityholders, sell
or otherwise transfer our rights to any spread account, if (a) the
applicable rating agencies confirm in writing that doing so will not result
in a reduction or withdrawal of the rating of any class of securities, (b)
we provide to the trustee and the indenture trustee a written opinion from
independent counsel to the effect that the transfer will not cause the
trust to be treated as an association or publicly traded partnership
taxable as a corporation for Federal income tax purposes and (c) the
transferee or assignee agrees in writing to take positions for tax purposes
consistent with the tax positions agreed to be taken by us.
Legal Aspects of the Receivables
Bankruptcy Considerations Relating to the Credit Companies
We and the credit companies will take steps in structuring the
transactions described in this prospectus that are intended to ensure that
the voluntary or involuntary application for relief by either or both of
the credit companies under the United States Bankruptcy Code or other
insolvency laws will not result in consolidation of our assets and
liabilities with those of Case Credit or New Holland Credit. These steps
include our creation as a separate, limited-purpose subsidiary pursuant to
a certificate of incorporation containing restrictions on the nature of our
business and a restriction on our ability to commence a voluntary case or
proceeding under any insolvency law without the unanimous affirmative vote
of all our directors. However, there can be no assurance that our
activities would not result in a court concluding that our assets and
liabilities should be consolidated with those of Case Credit or New Holland
Credit in a proceeding under any insolvency law.
In addition, the indenture trustee, the trustee, all noteholders
and all certificateholders will covenant that they will not at any time
institute against us, any bankruptcy, reorganization or other proceeding
under any federal or state bankruptcy or similar law.
Each credit company that sells receivables to us will warrant that
each sale of receivables by it to us is a valid sale. If a credit company
were to become a debtor in a bankruptcy case, and a creditor or
trustee-in-bankruptcy or the debtor itself were to take the position that
either or both of the transfers of receivables should instead be treated as
a pledge of receivables to secure a borrowing, then delays in payments of
collections of receivables to us (and in payments on the notes) could
occur. If the court ruled in favor of the creditor, trustee or a credit
company, reductions in the amount of such payments could result. Also,
under these circumstances, a bankruptcy trustee of a credit company or
those entities themselves as debtor-in-possession, will, for a period of
time, have the
41
<PAGE>
opportunity to reject any lease that is deemed a true lease, which would
result in a cancellation of the remaining scheduled payments under the
lease.
If any transfer of receivables referred to above, or any of our
transfers of receivables to the trust, were treated as a pledge instead of
a sale, a tax or government lien on the property of the transferor arising
before the sale of the receivable may have priority over the trust's
interest in the receivable. If those transfers are treated as sales, the
receivables would not be part of the transferor's bankruptcy estate and
would not be available to the transferor's creditors, except under limited
circumstances. In addition, while Case Credit is the servicer, cash
collections on the receivables may, under some circumstances, be commingled
with the funds of Case Credit and, in the event of the bankruptcy of Case
Credit, a trust may not have a perfected interest in those collections.
In a 1993 case decided by the U.S. Court of Appeals for the Tenth
Circuit, Octagon Gas System, Inc. v. Rimmer, the court determined that
"accounts," as defined under the Uniform Commercial Code, would be included
in the bankruptcy estate of a transferor regardless of whether the transfer
is treated as a sale or a secured loan. Although the receivables are not
likely to be viewed as accounts, many of the accounts are "chattel paper."
The rationale behind the Octagon holding is equally applicable to chattel
paper. The circumstances under which the Octagon ruling would apply are not
fully known and the extent to which the Octagon decision will be followed
in other courts or outside of the Tenth Circuit is not certain. If the
holding in the Octagon case were applied in a bankruptcy of a credit
company or us, however, even if the applicable transfer of receivables
referred to above was treated as a valid sale, the receivables would be
part of the applicable transferor's bankruptcy estate and would be subject
to claims of some of its creditors and delays and reductions in payments to
us and securityholders could result.
Bankruptcy Considerations Relating to Dealers
A substantial portion of the receivables was originated by CNH
dealers and purchased by one of the credit companies. A significant portion
of those receivables provide for recourse to the originating dealer for
defaults by the obligors. In addition, CNH dealers that sell receivables to
Case Credit and that have not yet entered into new dealer agreements as
described under "Origination of Receivables--Dealer Agreements" retain the
right to repurchase those receivables at any time. In the event of a
dealer's bankruptcy, a creditor or bankruptcy trustee of the dealer or the
dealer itself might attempt to characterize the sales of receivables to a
credit company as loans to the dealer secured by the receivables. Such an
attempt, if successful, could result in payment delays or losses on the
affected receivables. However, in connection with any sale of receivables,
directly or indirectly, by a credit company to us or by a credit company to
one of its subsidiaries and ultimately to us, the transferring credit
company has warranted that at the time of such sale it had good title to
the receivables. Furthermore, in the event of a dealer's bankruptcy, a
dealer or its bankruptcy trustee might also be able to reject any leases
originated by the dealer that were deemed to be "true leases" resulting in
the termination of scheduled payments under those leases.
42
<PAGE>
Perfection and Priority With Respect to Receivables
A purchaser of retail installment contracts, retail installment
loans or leases who gives new value and takes possession of the chattel
paper that evidences the retail installment contracts or leases in the
ordinary course of the purchaser's business may have priority over the
interest of the related trust in the retail installment contracts or
leases. Any sale of retail installment contracts or leases that had been
sold to a trust would be a violation of the credit companies' contractual
obligations.
Security Interests in Financed Equipment
In some states, retail installment sale contracts like the ones
that may be included in your trust evidence the credit sale of
agricultural, construction and other equipment. In those states, the
contracts also constitute personal property security agreements and include
grants of security interests in the equipment under the applicable Uniform
Commercial Code, as do retail installment loans made directly by one of the
credit companies. Perfection of security interests in the equipment is
generally governed by the Uniform Commercial Code. However, under the laws
of some other states, perfection of security interests in some
agricultural, construction or other equipment, including trucks, may be
governed by certificate of title registration laws of the state in which
the equipment is located.
Each of the credit companies takes or requires the applicable
dealer to take appropriate action under the laws of each state in which
financed equipment is located to perfect its security interest in the
equipment. We are required to purchase from each trust any retail
installment contract or retail installment loan as to which necessary
perfection actions have not been taken prior to the time of sale to the
trust, if the failure to take those actions will materially adversely
affect the interest of the trust in the receivable and the failure is not
cured within a specified grace period. Similarly, each credit company that
sells receivables to us is required to purchase any such receivable if the
failure occurred prior to its transfer of the receivable to us. In
addition, the servicer is required to take appropriate steps to maintain
perfection of security interests in the financed equipment and is obligated
to purchase the related receivable if it fails to do so. However, because
the credit companies may not obtain subordination agreements from other
secured lenders when making dealer loans, any security interests obtained
in connection with those loans may not have first priority status.
Due to administrative burden and expense, no action will be taken
to record the transfer of security interests from the credit companies to
us or from a credit company to one of its subsidiaries and ultimately to us
or, in any case, from us to the trust. In most states, an assignment like
the transfers referred to above is effective to convey a security interest,
without any action to record the transfer of record. In those states, the
proper initial filing of the financing statement relating to the equipment,
or, if applicable, the notation of the applicable credit company's lien on
the certificates of title, will be sufficient to protect the related trust
against the rights of subsequent purchasers of financed equipment or
subsequent lenders who take a security interest in financed equipment.
However, by not identifying a trust as the secured party on the financing
statement or certificate of title, the security interest of the trust in
financed equipment could be defeated through fraud or negligence.
43
<PAGE>
In addition, under the laws of most states, liens for repairs
performed on the equipment and liens for unpaid taxes take priority over
even a perfected security interest in equipment. We will represent to each
trust that, as of the date the related receivable is sold to such trust,
each security interest in financed equipment is or will be prior to all
other present liens on and security interests in the financed equipment.
However, liens for repairs or taxes could arise at any time during the term
of a receivable. Also, error, fraud or forgery by the equipment owner or
the servicer or administrative error by state or local agencies could
impair a trust's security interest. Neither we nor the servicer must
repurchase a receivable if any of the occurrences described above, other
than any action by the servicer, result in the trust's losing the priority
of its security interest or its security interest in the financed equipment
after the date the security interest was assigned to the trust.
Under the laws of most states, a perfected security interest in
equipment would continue for four months after the equipment is moved to a
state other than the state in which a financing statement was filed
initially to perfect the security interest, or, if applicable, in which the
equipment is initially registered. With respect to any equipment that is
subject to a certificate of title under the laws of the state in which it
is located, a majority of states generally require a surrender of a
certificate of title to re-register the equipment. Accordingly, a secured
party must surrender possession if it holds the certificate of title to the
equipment, or, in the case of equipment registered in a state providing for
the notation of a lien on the certificate of title but not possession by
the secured party, the secured party would receive notice of surrender if
the security interest is noted on the certificate of title. Thus, the
secured party would have the opportunity to re-perfect its security
interest in the equipment in the state of relocation. In states that do not
require a certificate of title for registration of equipment,
re-registration could defeat perfection.
Security Interests in Leased Equipment
When we sell leases to a trust, we also assign to the trust any
security or ownership interest that we hold in the leased equipment. Each
lease is either a "true lease" or a lease intended for security (often
referred to as a "finance lease"). Whether we are deemed to hold a security
interest or an ownership interest in particular leased equipment depends in
part upon whether the related lease is a "true lease" or not.
-------------------------------------------------------------------------------
"true lease" = the lessor (i.e., the originating dealer and its assigns) is
deemed to be the beneficial owner of the leased equipment.
"finance lease" (not a true lease) = the lessee is deemed to be the
beneficial owner, and the lessor (or its assignee) is deemed to hold a
security interest in the leased equipment.
-------------------------------------------------------------------------------
Under applicable state law standards, any lease transferred to a
trust that has a nominal termination value should be deemed to be a finance
lease. While the term "nominal" is not clearly defined for this purpose, it
is clear that any lease with a $1 termination value should be treated as a
finance lease. The treatment of other leases as finance leases or true
leases under applicable state law is less
44
<PAGE>
certain, and the applicable prospectus supplement will specify the extent
to which any leases included in the property of the related trust are
thought to be finance leases or true leases or are of uncertain
classification.
Each of the credit companies requires dealers that originate
leases to obtain a precautionary first priority perfected security interest
in the leased equipment, in case the leases are deemed to be finance
leases. In the case of leases of trucks, the credit companies require
dealers to have the lessees named as the owner on the certificates of title
and to have the applicable credit company named as holder of a security
interest. These security interests are transferred to the applicable credit
company when it purchases the related leases. When a credit company
originates a lease directly, it also obtains a precautionary first priority
perfected security interest in the leased equipment and, in the case of
truck leases, causes the lessee to be named as owner and itself to be named
as holder of a security interest. As a result of these actions, for leases
that are deemed to be finance leases, the applicable credit company and its
assigns will have a very similar position to the one described above with
respect to retail installment contracts, and the same repurchase
obligations apply if there is no first priority perfected security
interest.
Each of the credit companies also obtains a security interest in
leased equipment against originating dealers in case the leased equipment
is deemed to be owned by the dealer, which would be the case for any lease
that is deemed to be a true lease, and the transfer of the leased equipment
from the dealer to the applicable credit company is not deemed to be a true
sale. However, that security interest may not in all cases have first
priority status. The related prospectus supplement will specify if any
leases that might be true leases will be included in the property of a
trust and, if so, whether any filings will be made to perfect a first
priority security interest in the related leased equipment against the
selling credit company and us, in case any of the transfers of such leased
equipment from that credit company to us, or from us to the applicable
trust, respectively, is deemed not to be a true sale. Due to administrative
burden and expense, it is anticipated that those filings (if any) will
cover only a portion of the leased equipment. Competing liens arising in
favor of creditors of the originating dealer, a credit company, or us could
take priority over the interests of the applicable trust in that leased
equipment if the originating dealer, we or a credit company were not deemed
to have made a true sale and any security interest in the leased equipment
granted to a credit company, us or the trust, respectively, was not
perfected or did not have first priority status. Also, Case Credit and New
Holland Credit do not obtain a perfected security interest in leased
equipment against originating non-CNH dealers.
Bankruptcy Considerations Relating to a Lessee
If the lessee under any lease included in the property of a trust
becomes a debtor in federal bankruptcy proceedings or any similar
applicable state law proceedings, the trust may be delayed or prevented
from enforcing some of its rights under the leases and obtaining possession
of the leased equipment from the lessee. The precise treatment of a lease
in bankruptcy proceedings generally will depend upon whether the bankruptcy
court finds the lease to be a true lease or a finance lease.
If a given lease is a "finance lease," its treatment in bankruptcy
will be similar to the treatment of a retail installment contract. The
trust will have a
45
<PAGE>
bankruptcy claim equal to the outstanding amount of the deemed "loan" to
the lessee, which claim will generally have the benefit of a perfected
security interest in the leased equipment, subject to the qualifications
set out under " --Security Interests in Financed Equipment" above. If a
given lease is a true lease, the lessee's bankruptcy trustee or the lessee
will, for a period of time, have the opportunity to either assume or reject
the lease. The precise length of this period of time will be difficult to
predict in any given case, and the bankruptcy trustee or the lessee will
have possession of the leased equipment during such period.
If a lease is assumed, the bankruptcy trustee or the lessee must:
o cure any default, other than a default based on the lessee's
bankruptcy or financial condition, and possibly other
non-monetary defaults; or
o provide adequate assurance of a prompt cure; and,
o if there has been a prepetition default, provide adequate
assurance of future performance under the lease.
If a lease is rejected:
o the scheduled payments due thereafter under the lease will be
canceled;
o the trust will generally be able to obtain possession of the
leased equipment; and
o the trust will be entitled to assert an unsecured claim for
damages resulting from the rejection of the lease.
Repossession
Upon a default by an equipment purchaser, the holder of a retail
installment sale contract, loan or a lease that is treated as a personal
property security interest, has all the remedies of a secured party under
the Uniform Commercial Code, except where specifically limited by other
state laws. Under those remedies, the secured party may perform self-help
repossession unless it would constitute a breach of the peace. Self-help is
the method employed by the servicer in most cases and is accomplished
simply by retaking possession of the financed or leased equipment. Some
jurisdictions require that the obligor be notified of the default and be
given time to cure the default prior to repossession. Generally, the right
of reinstatement may be exercised on a limited number of occasions in any
one-year period. In cases where the obligor objects or raises a defense to
repossession, or if otherwise required by applicable state law, a court
order must be obtained from the appropriate state court, and the equipment
must then be repossessed in accordance with that order.
Notice of Sale; Redemption Rights
The Uniform Commercial Code and other state laws require a secured
party to provide an obligor with reasonable notice of the date, time and
place of any public sale and/or the date after which any private sale of
collateral may be held. The obligor has the right to redeem the collateral
prior to actual sale by
46
<PAGE>
paying the secured party the unpaid principal balance of the obligation
plus reasonable expenses for repossessing, holding and preparing the
collateral for disposition and arranging for its sale, plus, in some
jurisdictions, reasonable attorneys' fees, or, in some states, by payment
of delinquent installments or the unpaid balance.
Uniform Commercial Code Considerations
Many states have adopted a version of Article 2A of the Uniform
Commercial Code that purports to codify many provisions of existing common
law. Although there is little precedent regarding how Article 2A will be
interpreted, it may, among other things, limit the enforceability of any
"unconscionable" lease or "unconscionable" provision in a lease, provide a
lessee with remedies, including the right to cancel the lease, for certain
lessor breaches or defaults, and may add to or modify the terms of
"consumer leases" and leases where the lessee is a "merchant lessee."
However, each credit company that sells a lease will represent that, to the
best of their knowledge, each lessee has accepted the equipment leased to
it and, after reasonable opportunity to inspect and test, has not notified
the applicable credit company of any defects. Article 2A does, however,
recognize typical commercial lease "hell or high water" rental payment
clauses and validates reasonable liquidated damages provisions in the event
of lessor or lessee defaults. Article 2A also recognizes the concept of
freedom of contract and permits the parties in a commercial context a wide
degree of latitude to vary provisions of the law.
Vicarious Tort Liability
Although each trust will or may own the leased equipment related
to each lease purchased by that trust that is treated as a true lease, the
leased equipment will be operated by the related lessees and their
respective invitees. State laws differ as to whether anyone suffering
injury to person or property involving leased agricultural, construction or
other equipment may bring an action upon which relief may be granted
against the owner of the equipment by virtue of that ownership. To the
extent applicable law permits such an action and such an action is
successful, the related trust and its assets may be subject to liability to
the injured party. If vicarious liability were imposed on a trust as owner
of leased equipment, and the coverage provided by any available insurance
is insufficient to cover the loss, you could incur a loss on your
investment.
Lessees are required to obtain and maintain physical damage
insurance and liability insurance. Dealers that sell receivables to Case
Credit and that have not yet entered into new dealer agreements as
described under "Origination of Receivables--Dealer Agreements" are
responsible for verifying physical damage insurance on the leased equipment
at the time the lease is originated. If a dealer fails to verify physical
damage insurance coverage and the lessee did not obtain insurance coverage
at the time the lease was originated, the dealer is required to repurchase
the lease. Dealers that sell receivables to New Holland Credit and that
have not yet entered into new dealer agreements as described under
"Origination of Receivables--Dealer Agreements" are not required to verify
physical damage insurance on the leased equipment. If, however, the lessee
does not have insurance coverage at the time the lease was originated, New
Holland Credit can require the dealer to repurchase the lease.
47
<PAGE>
Dealers that sell receivables to the credit companies and that
have entered into new dealer agreements with the credit companies are
responsible for verifying physical damage insurance coverage on the
equipment at the time the receivable is originated. If a dealer fails to
verify insurance coverage and the obligor did not obtain insurance coverage
at the time the receivable was originated, the dealer is obligated to
repurchase the receivable.
In any case, if insurance has lapsed or has not been maintained in
full force and effect, the dealers will not be obligated to repurchase the
lease.
Deficiency Judgments and Excess Proceeds; Other Limitations
The proceeds of resale of equipment generally will be applied
first to the expenses of resale and repossession and then to the
satisfaction of the indebtedness. Some states impose prohibitions or
limitations on deficiency judgments if the net proceeds from resale do not
cover the full amount of the indebtedness. In other states, a deficiency
judgment against the debtor can be sought for the shortfall. However,
because a defaulting obligor may have very little capital or sources of
income available following repossession, in many cases it may not be useful
to seek a deficiency judgment. If one is obtained, it may be uncollectible
or settled at a significant discount.
Occasionally, after resale of the equipment and payment of all
expenses and all indebtedness, there is a surplus of funds. In that case,
the Uniform Commercial Code requires the creditor to remit the surplus to
any holder of a lien on the equipment or, if no such lienholder exists, to
the former owner of the equipment.
Courts have applied general equitable principles to secured
parties pursuing repossession and litigation involving deficiency balances.
These equitable principles may have the effect of relieving an obligor from
some or all of the legal consequences of a default.
In several cases, obligors have asserted that the self-help
remedies of secured parties under the Uniform Commercial Code and related
laws violate the due process protections provided under the 14th Amendment
to the Constitution of the United States. Courts have generally upheld the
notice provisions of the Uniform Commercial Code and related laws as
reasonable or have found that the repossession and resale by the creditor
do not involve sufficient state action to afford constitutional protection
to borrowers. As to leases, some jurisdictions require that a lessee be
notified of a default and given a time period within which to cure the
default prior to repossession of leased equipment.
In addition to the laws limiting or prohibiting deficiency
judgments, numerous other statutory provisions, including federal
bankruptcy laws and related state laws, may interfere with or affect the
ability of a secured party to realize upon collateral or to enforce a
deficiency judgment. For example, in a Chapter 11, 12 or 13 proceeding
under the federal bankruptcy law, a court may prevent a creditor from
repossessing equipment, and, as part of the rehabilitation plan, reduce the
amount of the secured indebtedness to the market value of the equipment at
the time of bankruptcy (as determined by the court), leaving the creditor
as a general unsecured creditor for the remainder of the indebtedness. A
bankruptcy court may also reduce the monthly payments due under a contract
or change the rate of interest and time of repayment of the indebtedness.
48
<PAGE>
Consumer Protection Laws
Numerous federal and state consumer protection laws and related
regulations impose substantial requirements upon lenders, lessors and
servicers involved in consumer finance. Also, state laws impose finance
charge ceilings and other restrictions on consumer transactions and require
contract disclosures in addition to those required under federal law. These
requirements impose specific statutory liabilities upon creditors and
lessors who fail to comply with their provisions. In some cases, this
liability could affect an assignee's ability to enforce consumer finance
contracts. Some of the receivables may be deemed to be consumer finance
contracts under applicable federal or state laws.
Each credit company that sells receivables to us will warrant upon
each sale of those receivables that each receivable transferred complies
with all requirements of law in all material respects. We make similar
warranties to each trustee. Accordingly, if an obligor has a claim against
the related trust for violation of any law and such claim materially and
adversely affects the trust's interest in a receivable, the violation would
be a breach of our warranties and would create an obligation on our part to
purchase the receivable unless the breach is cured. Our obligation to
purchase any receivables in these circumstances is subject to the
applicable credit company repurchasing the affected receivable. If the
claim existed at the time the credit company sold the receivable to us, the
violation would also be a breach of that credit company's warranties, and
would require the credit company to repurchase the receivable unless the
breach is cured.
U.S. Federal Income Tax Consequences
The following is a summary of the material Federal income tax
consequences of the purchase, ownership and disposition of the notes and
certificates. This summary is based upon current provisions of the Internal
Revenue Code of 1986, called the "Code", proposed, temporary and final
Treasury regulations thereunder, and published rulings and court decisions
currently in effect. The current tax laws and the current regulations,
rulings and court decisions may be changed, possibly retroactively. The
portions of this summary which relate to matters of law or legal
conclusions represent the opinion of Mayer, Brown & Platt, special Federal
tax counsel for each trust, as qualified in this summary. Mayer, Brown &
Platt have prepared or reviewed the statements in this prospectus under the
heading "U.S. Federal Income Tax Consequences," and are of the opinion that
they are correct in all material respects.
The following summary does not furnish information in the level of
detail or with the attention to an investor's specific tax circumstances
that would be provided by an investor's own tax advisor. For example, it
does not discuss the tax consequences of the purchase, ownership and
disposition of the notes and certificates by investors that are subject to
special treatment under the Federal income tax laws, including banks and
thrifts, insurance companies, regulated investment companies, dealers in
securities, holders that will hold the notes or certificates as a position
in a "straddle" for tax purposes or as a part of a "synthetic security" or
"conversion transaction" or other integrated investment comprised of the
notes or certificates and one or more other investments, trusts and estates
and pass-through entities, the equity holders of which are any of these
specified investors. In addition, the discussion regarding the notes and
certificates is limited to the Federal income tax consequences of the
initial investors and not a purchaser
49
<PAGE>
in the secondary market and to investors who have purchased notes and who
hold those notes as capital assets within the meaning of Section 1221 of
the Code.
Each trust will be provided with an opinion of Mayer, Brown &
Platt regarding certain Federal income tax matters discussed below. An
opinion of Mayer, Brown & Platt, however, is not binding on the Internal
Revenue Service, called the "IRS," or the courts. Moreover, there are no
cases or IRS rulings on similar transactions involving both debt and equity
interests issued by a trust with terms similar to those of the notes and
the certificates. As a result, the IRS may disagree with all or a part of
the discussion below. No ruling on any of the issues discussed below will
be sought from the IRS. For purposes of the following summary, references
to the trust, the notes, the certificates and related terms, parties and
documents refer, unless otherwise specified, to each trust and the notes,
certificates and related terms, parties and documents applicable to that
trust.
Tax Characterization of the Trust
Mayer, Brown & Platt is of the opinion that the trust will not be
an association (or publicly traded partnership) taxable as a corporation
for Federal income tax purposes. This opinion is based on the assumption of
compliance by all parties with the terms of the trust agreement and related
documents.
If the trust were taxable as a corporation for Federal income tax
purposes, the trust would be subject to corporate income tax on its taxable
income. The trust's taxable income would include all its income on the
receivables, possibly reduced by its interest expense on the notes. Any
corporate income tax imposed on the trust could materially reduce cash
available to make payments on the notes and distributions on the
certificates, and certificateholders could be liable for any tax that is
unpaid by the trust.
Tax Consequences to Holders of the Notes
Treatment of the Notes as Indebtedness. We will agree, and if you
purchase notes, you will agree by your purchase of the notes, to treat the
notes as debt for Federal, state and local income and franchise tax
purposes. Mayer, Brown & Platt is of the opinion that the notes will be
classified as debt for Federal income tax purposes. The discussion below
assumes the notes are classified as debt for Federal income tax purposes.
OID, Indexed Securities, etc. The discussion below assumes that
all payments on the notes are denominated in U.S. dollars, and that the
notes are not indexed securities or strip notes. Additionally, the
discussion assumes that the interest formula for the notes meets the
requirements for "qualified stated interest" under Treasury regulations,
called the "OID Regulations," relating to original issue discount, or
"OID." This discussion assumes that any OID on the notes is a de minimis
amount, within the meaning of the OID Regulations. Under the OID
Regulations, the notes will have OID to the extent the principal amount of
the notes exceeds their issue price. Further, if the notes have any OID, it
will be de minimis if it is less than 1/4% of the principal amount of the
notes multiplied by the number of full years included in their term. If
these conditions are not satisfied for any given series of notes and as a
result the notes are treated as issued with OID, additional tax
considerations for these notes will be disclosed in the applicable
prospectus supplement.
50
<PAGE>
Interest Income on the Notes. Based on the above assumptions,
except as discussed below, the notes will not be considered issued with
OID. If you buy notes, you will be required to report as ordinary interest
income the stated interest on the notes when received or accrued in
accordance with your method of tax accounting. Under the OID Regulations,
if you hold a note issued with a de minimis amount of OID, you must include
this OID in income, on a pro rata basis, as principal payments are made on
the note. If you purchase a note for more or less than its principal
amount, you will generally be subject, respectively, to the premium
amortization or market discount rules of the Code.
If you have purchased a note that has a fixed maturity date of not
more than one year from the issue date of the note, called a "Short-Term
Note", you may be subject to special rules. Under the OID Regulations, all
stated interest on a Short-Term Note will be treated as OID. If you are an
accrual basis holder of a Short-Term Note or a cash basis holder specified
in Section 1281 of the Code, including regulated investment companies, you
will generally be required to report interest income as OID accrues on a
straight-line basis over the term of each interest period. If you are a
cash basis holder of a Short-Term Note other than those specified in
Section 1281, you will, in general, be required to report interest income
as interest is paid, or, if earlier, upon the taxable disposition of the
Short-Term Note. However, if you are a cash basis holder of a Short-Term
Note reporting interest income as it is paid, you may be required to defer
a portion of any interest expense otherwise deductible on indebtedness
incurred to purchase or carry the Short-Term Note. This interest expense
would be deferred until the taxable disposition of the Short-Term Note. If
you are a cash basis taxpayer, you may elect under Section 1281 of the Code
to accrue interest income on all nongovernment debt obligations with a term
of one year or less. If you have so elected, you would include OID on the
Short-Term Note in income as it accrues, but you would not be subject to
the interest expense deferral rule. Special rules not discussed in this
summary apply to a Short-Term Note purchased for more or less than its
principal amount.
Sale or Other Disposition. If you sell a note, you will recognize
gain or loss in an amount equal to the difference between the amount
realized on the sale and your adjusted tax basis in the note. The adjusted
tax basis of a note will equal your cost for the note, increased by any
market discount, OID and gain previously included in your income with
respect to the note and decreased by the amount of premium, if any,
previously amortized and by the amount of principal payments you have
previously received on the note. Any gain or loss will be capital gain or
loss, except for gain representing accrued interest and accrued market
discount not previously included in income. Capital losses generally may be
used by a corporate taxpayer only to offset capital gains, and by an
individual taxpayer only to the extent of capital gains plus $3,000 of
other income. In the case of an individual taxpayer, any capital gain on
the sale of a note will be taxed at a maximum rate of 39.6% if the note is
held for not more than 12 months and at a maximum rate of 20% if the note
is held for more than 12 months.
Foreign Holders. If you are a nonresident alien, foreign
corporation or other non-United States person, called a "foreign person",
any interest paid or accrued to you will generally be considered "portfolio
interest," and generally will not be subject to United States Federal
income tax and withholding tax, if the interest is not effectively
connected with the conduct of a trade or business within the United States
by you and you:
51
<PAGE>
o are not actually or constructively a "10 percent
shareholder" of the trust or us, including a holder of
10% of the outstanding certificates, or a "controlled
foreign corporation" with respect to which we or the
trust are a "related person" within the meaning of the
Code; and
o satisfy the statement requirement set forth in section 871(h) and
section 881(c) of the Code and the regulations thereunder.
To satisfy this statement requirement, you, or a financial institution
holding the note on your behalf, must provide, in accordance with specified
procedures, a paying agent of the trust with a statement to the effect that
you are not a United States person. Currently these requirements will be
met if you provide your name and address, and certify, under penalties of
perjury, that you are not a United States person (which certification may
be made on an IRS Form W-8 or on new IRS Form W-8BEN), or if a financial
institution holding the note on your behalf certifies, under penalties of
perjury, that the required statement has been received by it and furnishes
a paying agent with a copy of the statement. Under recently finalized
Treasury regulations, called the "Final Regulations", the statement
requirement may also be satisfied with other documentary evidence with
respect to an offshore account or through certain foreign intermediaries.
The Final Regulations will generally be effective for payments made after
December 31, 2000. We recommend that you consult your own tax advisors
regarding the Final Regulations.
If you are a foreign person and interest paid or accrued to you is
not "portfolio interest," then it will be subject to a 30% withholding tax
unless you provide the trust or its paying agent, as the case may be, with
a properly executed:
o IRS Form 1001, or new IRS Form W-8BEN, claiming an
exemption from withholding tax or a reduction in
withholding tax under the benefit of a tax treaty, or
o IRS Form 4224, or new IRS Form W-8ECI, stating that
interest paid on the note is not subject to withholding
tax because it is effectively connected with your conduct
of a trade or business in the United States.
If you are a foreign person engaged in a trade or business in the
United States and interest on the note is effectively connected with the
conduct of the trade or business, although you will be exempt from the
withholding tax discussed above, you will be subject to United States
Federal income tax on your interest on a net income basis in the same
manner as if you were a United States person. In addition, if you are a
foreign corporation, you may be subject to a branch profits tax equal to
30%, or lower treaty rate, of your effectively connected earnings and
profits for the taxable year, subject to adjustments.
If you are a foreign person, any capital gain realized by you on
the sale, redemption, retirement or other taxable disposition of a note by
you will be exempt from United States Federal income and withholding tax;
provided that:
o the gain is not effectively connected with the conduct of a trade
or business in the United States by you, and
52
<PAGE>
o if you are an individual foreign person, you have not
been present in the United States for 183 days or more in
the taxable year.
Backup Withholding. If you are not an exempt holder, including a
corporation, tax-exempt organization, qualified pension and profit-sharing
trust, individual retirement account or nonresident alien who provides
certification as to status as a nonresident, you will be required to
provide, under penalties of perjury, a certificate containing your name,
address, correct federal taxpayer identification number and a statement
that you are not subject to backup withholding. If you are not an exempt
holder and you fail to provide the required certification, the trust will
be required to withhold 31% of the amount otherwise payable to you, and
remit the withheld amount to the IRS as a credit against your Federal
income tax liability. The Final Regulations make modifications to the
backup withholding rules. We recommend that you consult your own tax
advisors regarding the Final Regulations.
Possible Alternative Treatments of the Notes. If, contrary to the
opinion of Mayer, Brown & Platt, the IRS successfully asserted that one or
more of the notes did not represent debt for Federal income tax purposes,
the notes might be treated as equity interests in the trust. In this case,
the trust would be treated as a publicly traded partnership. This publicly
traded partnership would not, however, be taxable as a corporation because
it would meet certain qualifying income tests. Nonetheless, treatment of
the notes as equity interests in a publicly traded partnership could have
adverse tax consequences to you. For example, if you are a foreign person,
income to you might be subject to U.S. tax and U.S. tax return filing and
withholding requirements, and if you are an individual holder, you might be
subject to certain limitations on your ability to deduct your share of
trust expenses.
Tax Consequences to Holders of the Certificates
The following discussion applies only to the extent certificates
are offered in a related prospectus supplement. Until that time, because
the certificates will be held solely by us or one of our affiliates, under
current Treasury regulations, the trust will be disregarded as an entity
separate from us or one of our affiliates, for Federal income tax purposes.
Treatment of the trust as a Partnership. We and the servicer will
agree, and you will agree by your purchase of certificates, to treat the
trust as a partnership for purposes of Federal and state income tax,
franchise tax and any other tax measured in whole or in part by income. The
assets of the partnership will be the assets held by the trust, the
partners of the partnership will be the certificateholders, including us in
our capacity as recipient of distributions from any account specified in
the related prospectus supplement in which we have an interest, and the
notes will be debt of the partnership. However, the proper characterization
of the arrangement involving the trust, the certificates, the notes, us and
the servicer is not clear because there is no authority on transactions
closely comparable to this arrangement.
A variety of alternative characterizations are possible. For
example, because the certificates have certain features characteristic of
debt, the certificates might be considered our debt or debt of the trust.
This characterization should not result in materially adverse tax
consequences to certificateholders compared to the consequences from
treatment of the certificates as equity in a partnership,
53
<PAGE>
described below. The following discussion assumes that the certificates
represent equity interests in a partnership.
Indexed Securities, etc. The following discussion assumes that all
payments on the certificates are denominated in U.S. dollars, none of the
certificates are indexed securities or strip certificates and a series of
securities includes a single class of certificates. If these conditions are
not satisfied with respect to any given series of certificates, additional
tax considerations for those certificates will be disclosed in the
applicable prospectus supplement.
Partnership Taxation. As a partnership, the trust will not be
subject to Federal income tax. Rather, you will be required to separately
take into account your accruals of guaranteed payments from the trust and
your allocated share of other income, gains, losses, deductions and credits
of the trust. The trust's income will consist primarily of interest and
finance charges earned on the receivables, including appropriate
adjustments for market discount, OID and premium, and any gain upon
collection or disposition of receivables. The trust's deductions will
consist primarily of interest accruing on the notes, guaranteed payments on
the certificates, servicing and other fees, and losses or deductions upon
collection or disposition of receivables.
Under the trust agreement, interest payments on the certificates,
including interest on amounts previously due on the certificates but not
yet distributed, will be treated as "guaranteed payments" under Section
707(c) of the Code. Guaranteed payments are payments to partners for the
use of their capital and, in the present circumstances, are treated as
deductible to the trust and as ordinary income to you. The trust will have
a calendar year tax year and will deduct the guaranteed payments under the
accrual method of accounting. If you use a calendar year tax year, you will
be required to include the accruals of guaranteed payments in income in
your taxable year that corresponds to the year in which the trust deducts
the payments. If you use a taxable year other than a calendar year, you
will be required to include the payments in income in your taxable year
that includes the December 31 of the trust year in which the trust deducts
the payments. It is possible that guaranteed payments will not be treated
as interest for all purposes of the Code.
In addition, the trust agreement will provide, in general, that
you will be allocated taxable income of the trust for each calendar month
equal to the sum of:
o any trust income attributable to discount on the
receivables that corresponds to any excess of the
principal amount of the certificates over their initial
issue price;
o prepayment premium, if any, payable to you for such month; and
o any other amounts of income payable to you for the month.
This allocation will be reduced by any amortization by the trust of premium
on receivables corresponding to any excess of the issue price of
certificates over their principal amount. All remaining items of income,
gain, loss and deduction of the trust will be allocated to us.
Based upon the economic arrangement of the parties, this approach
for accruing guaranteed payments and allocating trust income should be
permissible
54
<PAGE>
under applicable Treasury regulations. However, no assurance can be given
that the IRS would not require a greater amount of income to be allocated
to you. Moreover, even under the method of allocation described above, you
may be subject to tax on income equal to the interest rate on the
certificates plus the other items described above even though the trust
might not have sufficient cash to make current cash distributions of this
amount. Thus, if you are a cash basis taxpayer, you will in effect be
required to report income from the certificates on the accrual basis and
you may become liable for taxes on trust income even if you have not
received cash from the trust to pay those taxes. In addition, because tax
allocations and tax reporting will be done on a uniform basis for all
certificateholders but certificateholders may be purchasing certificates at
different times and at different prices, you may be required to report on
your tax returns taxable income that is greater or less than the amount
reported to you by the trust.
Most of the guaranteed payments and taxable income allocated to a
certificateholder that is a pension, profit-sharing or employee benefit
plan or other tax-exempt entity, including an individual retirement
account, will constitute "unrelated debt-financed income" generally taxable
to the holder under the Code.
Your share of expenses of the trust, including fees to the
servicer but not interest expense, would be miscellaneous itemized
deductions. These deductions might be disallowed to you in whole or in part
and, as a result, you might be taxed on an amount of income that exceeds
the amount of cash actually distributed to you over the life of the trust.
It is not clear if these rules would apply to a certificateholder who
accrues guaranteed payments.
The trust intends to make all tax calculations for income and
allocations to certificateholders on an aggregate basis. If the IRS were to
require that these calculations be made separately for each receivable, the
trust might be required to incur additional expense, but it is believed
that there would not be a material adverse effect to you.
Discount and Premium. The purchase price paid by the trust for the
receivables may be greater or less than the remaining principal balance of
the receivables at the time of purchase. If so, the receivables will have
been acquired at a premium or discount, respectively. As indicated above,
the trust will make this calculation on an aggregate basis, but might be
required to recompute it on a receivable-by-receivable basis.
If the trust acquires the receivables at a market discount or
premium, the trust will elect to include any discount in income currently
as it accrues over the life of the receivables or to offset any premium
against interest income on the receivables. As indicated above, a portion
of any market discount income or premium deduction may be allocated to you.
Section 708 Termination. Under Section 708 of the Code, the trust
will be deemed to terminate for Federal income tax purposes if 50% or more
of the capital and profits interests in the trust are sold or exchanged
within a 12-month period. Under current Treasury regulations, if a
termination occurs, the trust will be considered to have contributed the
assets of the trust, constituting the old partnership, to a new partnership
in exchange for interests in the new partnership. Such interest would be
deemed distributed to the partners of the old partnership in liquidation
thereof. The trust will not comply with certain technical requirements that
might apply if a constructive termination occurs. As a result, the trust
may be
55
<PAGE>
subject to certain tax penalties and may incur additional expenses if it is
required to comply with those requirements. Furthermore, the trust might
not be able to comply due to lack of data.
Disposition of Certificates. Generally, capital gain or loss will
be recognized on a sale of certificates in an amount equal to the
difference between the amount realized and your tax basis in the
certificates sold. Your tax basis in a certificate will generally equal
your cost for the certificate increased by your share of trust income and
accruals of guaranteed payments (includible in income) and decreased by any
distributions received by you with respect to the certificate. In addition,
both the tax basis in the certificates and the amount realized on a sale of
a certificate would include your share of the notes and other liabilities
of the trust. If you acquire certificates at different prices, you may be
required to maintain a single aggregate adjusted tax basis in the
certificates, and, upon sale or other disposition of some of the
certificates, allocate a pro rata portion of the 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 your share
of unrecognized accrued market discount on the receivables would generally
be treated as ordinary income to you and would give rise to special tax
reporting requirements. The trust does not expect to have any other assets
that would give rise to these special reporting requirements. Thus, to
avoid those special reporting requirements, the trust will elect to include
market discount in income as it accrues.
If you are required to recognize an aggregate amount of income,
not including income attributable to disallowed itemized deductions
described above, over the life of the certificates that exceeds the
aggregate cash distributions paid to you on the certificates, this excess
will generally give rise to a capital loss upon the retirement of the
certificates.
Allocations Between Transferors and Transferees. In general, the
trust's taxable income and losses will be determined monthly and the tax
items and accruals of guaranteed payments for a particular calendar month
will be apportioned among the certificateholders in proportion to the
principal amount of certificates owned by them as of the close of the last
day of the month. As a result, you may be allocated tax items and accruals
of guaranteed payments, which will affect your tax liability and tax basis,
attributable to periods before you purchased your certificates.
The use of a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed, or only applies to
transfers of less than all of the partner's interest, taxable income or
losses and accruals of guaranteed payments of the trust might be
reallocated among the certificateholders. We are authorized to revise the
trust's method of allocation between transferors and transferees to conform
to a method permitted by future Treasury regulations.
Section 754 Election. If a certificateholder sells its
certificates at a profit (loss), the purchasing certificateholder will have
a higher (lower) basis in the certificates than the selling
certificateholder had. The tax basis of the trust's assets will not be
adjusted to reflect that higher (or lower) basis unless the trust were to
file an election under Section 754 of the Code. In order to avoid the
administrative
56
<PAGE>
complexities that would be involved in keeping accurate accounting records,
as well as potentially onerous information reporting requirements, the
trust will not make this election. As a result, you might be allocated a
greater or lesser amount of trust income than would be appropriate based
upon your own purchase price for certificates.
Administrative Matters. The trustee is required to keep or have
kept complete and accurate books of the trust. These books will be
maintained for financial reporting and tax purposes on an accrual basis and
the fiscal year of the trust will be the calendar year. The trustee will
file a partnership information return on IRS Form 1065 with the IRS for
each taxable year of the trust and will report each certificateholder's
accruals of guaranteed payments and allocable share of items of trust
income and expense to certificateholders and the IRS on Schedule K-1. The
trust will provide the Schedule K-1 information to nominees that fail to
provide the trust with the information statement described below and these
nominees will be required to forward such information to the beneficial
owners of the certificates. Generally, you must file tax returns that are
consistent with the information return filed by the trust or be subject to
penalties unless you notify the IRS of all inconsistencies.
Under Section 6031 of the Code, any person that holds certificates
as a nominee at any time during a calendar year is required to furnish the
trust with a statement containing certain information on the nominee, the
beneficial owners and the certificates so held. This information includes
the name, address and taxpayer identification number of the nominee, and,
as to each beneficial owner:
o the name, address and taxpayer identification number of that
person,
o whether that 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 a foreign government or an
international organization, and
o certain information on certificates that were held,
bought or sold on behalf of that 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
regarding themselves and their ownership of certificates. A clearing agency
registered under Section 17A of the Securities Exchange Act is not required
to furnish this 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.
We will be designated as the tax matters partner in the trust
agreement and, therefore, will be responsible for representing you in any
dispute with the IRS. The Code provides for administrative examination of a
partnership as if the partnership were a separate and distinct taxpayer.
Generally, the statute of limitations for partnership items does not expire
before three years after the date on which the partnership information
return is filed. Any adverse determination following an audit of the return
of the trust by the appropriate taxing authorities could result in an
adjustment of your tax returns, and, under certain circumstances, you may
be precluded from separately litigating a proposed adjustment to the items
of the trust. An adjustment could also result in an audit of your tax
returns and adjustments of items not related to the income and losses of
the trust.
57
<PAGE>
Tax Consequences to Foreign Certificateholders. It is not clear
whether the trust would be considered to be engaged in a trade or business
in the United States for purposes of Federal withholding taxes on non-U.S.
persons because there is no clear authority dealing with this issue under
facts substantially similar to ours. Although it is not expected that the
trust would be engaged in a trade or business in the United States for
these purposes, the trust will withhold as if it were so engaged in order
to protect the trust from possible adverse consequences of a failure to
withhold. The trust expects to withhold pursuant to Section 1446 of the
Code, on the portion of its taxable income allocable to foreign
certificateholders as if this income were effectively connected to a U.S.
trade or business, at a rate of 35% for foreign certificateholders that are
taxable as corporations and 39.6% for all other foreign certificateholders.
Subsequent adoption of Treasury regulations or the issuance of other
administrative pronouncements may require the trust to change its
withholding procedures. In determining a certificateholder's nonforeign
status, the trust may rely on IRS Form W-8, new IRS Form W-8BEN, IRS Form
W-9 or the certificateholder's certification of nonforeign status signed
under penalties of perjury.
Each foreign certificateholder might be required to file a U.S.
individual or corporate income tax return and pay U.S. income tax on the
amount computed therein, including, in the case of a corporation, the
branch profits tax, on its share of accruals of guaranteed payments and the
trust's income. Each foreign certificateholder must obtain a taxpayer
identification number from the IRS and submit that number to the trust on
Form W-8 or on new IRS Form W-8BEN in order to assure appropriate crediting
of the taxes withheld. A foreign certificateholder generally would be
entitled to file with the IRS a claim for refund for taxes withheld by the
trust, taking the position that no taxes were due because the trust was not
engaged in a U.S. trade or business. However, the IRS may assert that
additional taxes are due, and no assurance can be given as to the
appropriate amount of tax liability.
Backup Withholding. Distributions made on the certificates and
proceeds from the sale of the certificates will be subject to a "backup"
withholding tax of 31% if, in general, you fail to comply with certain
identification procedures, unless you are an exempt recipient under
applicable provisions of the Code. The Final Regulations discussed above
contain modifications to the backup withholding and information reporting
rules. We recommend that you consult your own tax advisors regarding the
Final Regulations. See "Tax Consequences to Holders of the Notes--Backup
Withholding."
Illinois State Tax Consequences
The following is a summary of the material Illinois income tax
consequences of the purchase, ownership and disposition of the notes and
certificates. This summary is based upon current provisions of Illinois
statutes and regulations, and applicable judicial or ruling authority. The
current Illinois statutes and regulations, and judicial and ruling
authority may be changed, possibly retroactively. The portions of the
following summary that relate to matters of law or legal conclusions
represent the opinion of Mayer, Brown & Platt, special Illinois tax counsel
for each trust subject to the qualifications set forth in this summary.
Mayer, Brown & Platt have prepared or reviewed the statements in this
prospectus under the heading "Illinois State Tax Consequences" and are of
the opinion that they are correct in all material respects.
Each trust will be provided with an opinion of Illinois tax
counsel regarding Illinois income tax matters discussed below. An opinion
of Illinois tax counsel, however, is not binding on the Illinois Department
of Revenue, called the "IDOR", or the courts. Additionally, there are no
cases or IDOR rulings on
58
<PAGE>
similar transactions involving both debt and equity interests issued by a
trust with terms similar to those of the notes and the certificates. As a
result, the IDOR may disagree with all or a part of the discussion below.
No ruling on any of the issues discussed below will be sought from the
IDOR.
The State of Illinois imposes a state income tax on individuals,
corporations, partners in partnerships and beneficiaries of trusts earning
income in, or as residents of, the State of Illinois. The State of Illinois
imposes a Personal Property Replacement Income Tax, called the "Illinois
Replacement Tax", on individuals, corporations, partnerships and trusts
earning income in, or as residents of, the State of Illinois. The State of
Illinois also imposes a franchise tax on corporations doing business in
Illinois. If the certificates were treated as equity interests in a
partnership, the partnership may be subject to the Illinois Replacement
Tax.
Treatment of the Notes
If the notes are characterized as indebtedness for Federal income
tax purposes, in the opinion of Illinois tax counsel, although the matter
is not free from doubt, this treatment would also apply for Illinois tax
purposes. If the notes are characterized as debt, noteholders not otherwise
subject to taxation in Illinois will not, although the matter is not free
from doubt, become subject to Illinois taxes solely because of their
ownership of notes. Noteholders already subject to taxation in Illinois,
however, could be required to pay tax on, or measured by, interest income,
including original issue discount, if any, generated by, and on gain from
the disposition of, notes.
Classification of Trust as a Partnership
If a trust were treated as a partnership, not taxable as a
corporation, for Federal income tax purposes, in the opinion of Illinois
tax counsel, although the matter is not free from doubt, the same treatment
would also apply for Illinois tax purposes. In this case, the partnership
may be treated as earning income in the State of Illinois and therefore
would be subject to the Illinois Replacement Tax. If this tax were
applicable, distributions to noteholders and certificateholders could be
reduced.
Treatment of Nonresident Certificateholders
Under current law, certificateholders that are nonresidents of the
State of Illinois and are not otherwise subject to Illinois income tax and
Illinois Replacement Tax should not be subject to Illinois income tax and
Illinois Replacement Tax on income from a trust. In any event,
classification of the arrangement as a partnership would not cause a
certificateholder not otherwise subject to taxation in Illinois to pay
Illinois tax on income beyond that derived from the certificates.
Certificateholders already subject to taxation in Illinois, however, could
be required to pay tax on, or measured by, interest income, including
original issue discount, if any, generated by, and on gain from the
disposition of, notes and certificates.
Risks of Alternative Characterization
If the trust were instead treated as an association taxable as a
corporation or a "publicly traded partnership" taxable as a corporation for
Federal income tax purposes, then the trust could be subject to the
Illinois income tax, the Illinois Replacement Tax, or the Illinois
franchise tax. If any of these taxes were applicable, distributions to
certificateholders could be reduced.
59
<PAGE>
ERISA Considerations
Section 406 of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") and Section 4975 of the Code prohibit a pension,
profit-sharing or other employee benefit plan, as well as individual
retirement accounts and certain types of Keogh Plans (each a "Benefit
Plan"), from engaging in certain transactions with persons that are
"parties in interest" under ERISA or "disqualified persons" under the
Internal Revenue Code with respect to the Benefit Plan. A violation of
these "prohibited transaction" rules may result in an excise tax or other
penalties and liabilities under ERISA and the Code for these persons.
Certain transactions involving the trust might be deemed to
constitute prohibited transactions under ERISA and the Code with respect to
a Benefit Plan that purchased notes or certificates if assets of the trust
were deemed to be assets of the Benefit Plan. Under a regulation issued by
the United States Department of Labor relating to plan assets, the assets
of the trust would be treated as plan assets of a Benefit Plan for the
purposes of ERISA and the Code only if the Benefit Plan acquired an "equity
interest" in the trust and none of the exceptions contained in the plan
assets regulation was applicable. An equity interest is defined under the
plan assets regulation as an interest other than an instrument which is
treated as indebtedness under applicable local law and which has no
substantial equity features. The likely treatment in this context of notes
and certificates of a given series will be discussed in the related
prospectus supplement.
Employee benefit plans that are governmental plans (as defined in
Section 3(32) of ERISA) and certain church plans (as defined in Section
3(33) of ERISA) are not subject to ERISA requirements.
A plan fiduciary considering the purchase of securities of a given
series should consult its tax and/or legal advisors regarding whether the
assets of the related trust would be considered plan assets, the
possibility of exemptive relief from the prohibited transaction rules and
other issues and their potential consequences.
Plan of Distribution
We will enter into one or more underwriting agreements with
respect to the notes of each series and an underwriting agreement with
respect to the certificates of a given series, if offered under this
prospectus. In each underwriting agreement, we will agree to cause the
related trust to sell to the underwriters, and each of the underwriters
will severally agree to purchase, the principal amount of each class of
notes and certificates, as the case may be, of the related series set forth
in the underwriting agreement and in the related prospectus supplement. In
each of the underwriting agreements with respect to any given series of
securities, the several underwriters will agree, subject to the terms and
conditions set forth therein, to purchase all the notes and certificates,
as the case may be, described therein which are offered hereby and by the
related prospectus supplement if any of such notes and certificates, as the
case may be, are purchased.
Each prospectus supplement will either set forth the price at
which each class of notes and certificates, as the case may be, being
offered thereby will be offered to the public and any concessions that may
be offered to certain dealers participating in that offering, or specify
that the related notes and certificates are to be resold by the
underwriters in negotiated transactions at varying prices to be determined
at the time of such sale. After the initial public offering of any notes
and certificates the public offering prices and concessions may be changed.
60
<PAGE>
Each underwriting agreement will provide that we and Case Credit
will indemnify the underwriters against certain civil liabilities,
including liabilities under the Securities Act, or contribute to payments
the several underwriters may be required to make in respect thereof.
Each trust may, from time to time, invest the funds in its trust
accounts in eligible investments acquired from underwriters.
Pursuant to each of the underwriting agreements with respect to a
given series of securities, the closing of the sale of each class of
securities subject to any of those agreements will be conditioned on the
closing of the sale of all other classes subject to any of those
agreements. The place and time of delivery for the securities in respect of
which this prospectus is delivered will be set forth in the related
prospectus supplement.
Legal Opinions
Certain legal matters relating to the securities of any series
will be passed upon for the related trust, us and the servicer by Mayer,
Brown & Platt, Chicago, Illinois and New York, New York.
61
<PAGE>
Where You Can Find More Information
We filed a registration statement relating to the securities with
the Securities and Exchange Commission. This prospectus is part of the
registration statement, but the registration statement includes additional
information.
We will file with the SEC all required annual, monthly and special
SEC reports and other information about any trust we originate.
You may read and copy any reports, statements or other information
we file at the SEC's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You can request copies of these documents, upon
payment of a duplicating fee, by writing to the SEC. Please call the SEC at
(800) SEC-0330 for further information on the operation of the public
reference rooms. Our SEC filings are also available to the public on the
SEC Internet site (http://www.sec.gov.).
The SEC allows us to "incorporate by reference" information that
we file with it, which means that we can disclose important information to
you by referring you to those documents. Any 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 accompanying
prospectus supplement. We incorporate by reference any future annual,
monthly and special SEC reports and proxy materials filed by or on behalf
of any trust until we terminate offering the securities.
We have not been, nor are we currently, required to file reports
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act, except
for the filing of Current Reports on Form 8-K in connection with the trusts
we originate. These Current Reports are also incorporated into this
prospectus by reference and made a part hereof.
As a recipient of this prospectus, you may request a copy of any
document we incorporate by reference, except exhibits to the documents
(unless the exhibits are specifically incorporated by reference), at no cost,
by writing or calling: CNH Capital Receivables Inc., 100 South Saunders Road,
Lake Forest, Illinois 60045, Attention: Vice President (Telephone
(847) 735-9200). You may also access the servicer's Internet site at
(http://www.casecorp.com).
62
<PAGE>
Index of Terms
Set forth below is a list of the defined terms used in this
prospectus and the pages on which the definitions of such terms may be
found herein.
Benefit Plan ........................................................60
Case Credit ........................................................14
Clearstream ........................................................24
CNH ........................................................15
Code ........................................................49
DTC ........................................................24
ERISA ........................................................60
Final Regulations ........................................................52
foreign person ........................................................51
IDOR ........................................................58
Illinois Replacement Tax..................................................59
IRS ........................................................50
New Holland Credit........................................................14
OID ........................................................50
OID Regulations ........................................................50
Short-Term Note ........................................................51
63
<PAGE>
CNH Equipment Trust _____-___
Asset Backed Notes
[Asset Backed Certificates]
CNH Capital Receivables Inc.
Seller
Case Credit Corporation
Originator and Servicer
New Holland Credit Company, LLC
Originator and Sub-Servicer
$___________ A-1 Notes
$___________ A-2 Notes
$___________ A-3 Notes
$___________ A-4 Notes
$___________ [Class B Notes][Certificates]
PROSPECTUS SUPPLEMENT
Underwriters
[ ]
You should rely only on the information contained or incorporated
by reference in this prospectus supplement and the accompanying prospectus.
We have not authorized anyone to provide you with different information.
We are not offering the notes [or certificates] in any state where
the offer is not permitted.
Dealers will deliver a prospectus supplement and prospectus when
acting as underwriters of the Class A Notes or the [Class B
Notes][Certificates] and with respect to their unsold allotments or
subscriptions. In addition, all dealers selling the Class A Notes or the
[Class B Notes][Certificates] will deliver a prospectus supplement and
prospectus until __________ __, _____ (90 days after the date of this
prospectus).
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE AMENDED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT
AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY
THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
Subject to Completion, dated _________ ___, ______
Prospectus Supplement to Prospectus dated _________ ___, ______
CNH Equipment Trust _____-__
CNH Capital Receivables Inc.
Seller
Case Credit Corporation New Holland Credit Company, LLC
Originator and Servicer Originator and Sub-Servicer
The trust will issue the following [classes of
notes,][securities,] which are offered under this
prospectus supplement--
Consider Class A Notes
carefully the A-1 A-2 A-3 A-4 [Class B Notes]
risk factors Notes Notes Notes Notes [Certificates]
beginning on Principal
page S-6 in this Amount $ $ $ $ $
prospectus Interest
supplement and Rate % % % % %
on page 2 in the Final
prospectus. Scheduled
Payment
The notes Date ____, ____, ____, ____, ___ ___,___
represent Price to
obligations of Public(1) % % % % %
the trust only Underwriting
[and do not][.The Discount(2) % % % % %
certificates Proceeds to
represent Seller(3) % % % % %
interests in
the trust only. 1 Plus accrued interest, if any, from _______ ___, _____.
Neither the notes Total price to public (excluding such interest) = $_____.
nor the 2 Total Underwriting Discount = $_______.
certificates] 3 Total Proceeds to Seller = $_______.
represent
obligations of
or interests in CREDIT ENHANCEMENT
CNH Capital
Receivables Inc., o [The trust will also issue $_______ _____% asset backed
Case Credit certificates, which] [The certificates] are subordinated
Corporation, to the notes.
New Holland Credit
Company, LLC or o A spread account will be established with an initial
any of their balance of $___________ (___% of the contract value of
affiliates. the initial receivables).
This prospectus o A principal supplement account may also be established.
supplement may
be used to offer o [The Class B Notes are subordinated to the Class A Notes,
and sell the notes and provide additional credit enhancement for the
[and the Class A Notes.]
certificates] only
if accompanied by o [This prospectus supplement and the accompanying
the prospectus. prospectus relate only to the offering of the notes.
The certificates are not offered under these documents.]
Delivery of the [notes] [securities], in book-entry form only, will be made
through The Depository Trust Company, Clearstream Banking, societe anonyme,
and the Euroclear System on or about _________ ___, _____ against payment
in immediately available funds.
Neither the SEC nor any state securities commission has approved these
securities or determined that this prospectus supplement or the prospectus
is accurate or complete. Any representation to the contrary is a criminal
offense.
Underwriters of the Class A Notes
[Underwriter] [Underwriter]
Underwriters of the [Class B Notes] [Certificates]
[Underwriter] [Underwriter]
_________ ___, ______
<PAGE>
Important Notice about Information Presented in this
Prospectus Supplement and the Accompanying Prospectus
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We
have not authorized anyone to provide you with different information.
We are not offering these securities in any state where the offer is
not permitted.
Dealers will deliver a prospectus supplement and prospectus when
acting as underwriters of the securities and with respect to their unsold
allotments or subscriptions. In addition, all dealers selling the
securities will deliver a prospectus supplement and prospectus until
________ ___, _____ (90 days after the commencement of this offering).
We tell you about the securities in two separate documents that
progressively provide more detail: (a) the accompanying prospectus, which
provides general information, some of which may not apply to a particular
series of securities, including your series; and (b) this prospectus
supplement, which describes the specific terms of your series of
securities.
If the terms of your series of securities vary between this prospectus
supplement and the prospectus, you should rely on the information in this
prospectus supplement.
We include cross-references in this prospectus supplement and in the
accompanying prospectus to captions in these materials where you can find
further related discussions. The following Table of Contents and the Table
of Contents included in the accompanying prospectus provide the pages on
which these captions are located.
You can find a listing of the pages where capitalized terms used in
this prospectus supplement are defined under the caption "Index of Terms"
beginning on page S-___ in this prospectus supplement and under the caption
"Index of Terms" beginning on page __ in the accompanying prospectus.
We have made forward-looking statements in this prospectus supplement
and the accompanying prospectus. Forward-looking statements involve risks
and uncertainties that could cause actual results to differ materially from
those in the forward-looking statements. Forward-looking statements are
statements, other than statements of historical facts, that address
activities, events or developments that we expect or anticipate will or may
occur in the future. Forward-looking statements also include any other
statements that include words such as "anticipate," "believe," "plan,"
"estimate," "expect," "intend" and other similar expressions.
ii
<PAGE>
Forward-looking statements are based on certain assumptions and
analyses we have made in light of our experience and our perception of
historical trends, current conditions, expected future developments and
other factors we believe are appropriate. Whether actual results and
development will conform with our expectations and predictions is subject
to a number of risks and uncertainties.
All of the forward-looking statements made in this prospectus
supplement and the accompanying prospectus are qualified by these
cautionary statements, and there can be no assurance that the actual
results or developments we have anticipated will be realized. Even if the
results and developments in our forward-looking statements are
substantially realized, there is no assurance that they will have the
expected consequences to or effects on us, the trust, Case Credit
Corporation, New Holland Credit Company, LLC or any other person or on our
respective businesses or operations. The foregoing review of important
factors, including those discussed in detail in this prospectus supplement
and the accompanying prospectus should not be construed as exhaustive. We
undertake no obligation to release the results of any future revisions we
may make to forward-looking statements to reflect events or circumstances
after the date of this prospectus supplement and the accompanying
prospectus or to reflect the occurrences of anticipated events.
______________
iii
<PAGE>
Table of Contents
Page
Summary of Terms.........................................................S-1
Offered Securities.......................................................S-1
Subordination.........................................................S-1
Closing Date..........................................................S-1
Indenture Trustee.....................................................S-1
Trustee...............................................................S-1
Payment Dates.........................................................S-2
Principal Payments....................................................S-2
Final Scheduled Maturity Dates........................................S-2
Optional Redemption...................................................S-2
[Mandatory Redemption.................................................S-3
The Initial Receivables...............................................S-3
[Pre-Funding..........................................................S-3
[Negative Carry Account...............................................S-3
Credit Enhancement.......................................................S-3
Spread Account........................................................S-3
Principal Supplement Account..........................................S-4
[The Certificates.....................................................S-4
Subordination.........................................................S-4
Priority of Distributions................................................S-4
Tax Status...............................................................S-5
ERISA Considerations.....................................................S-5
Legal Investment.........................................................S-5
Rating of the [Notes] [Securities].......................................S-5
CNH Capital Receivables Inc..............................................S-5
Risk Factors.............................................................S-6
It may not be possible to find a purchaser
for your securities..............................................S-6
[Prepayments could result from
pre-funding...........................................................S-6
[The trust is dependent upon the credit
companies and CNH for additional
receivables......................................................S-6
Variations in economic and other factors
may reduce the rate of creation of
additional receivables...........................................S-7
[Characteristics of the pool of receivables
may change due to pre-funding....................................S-7
Payments on the receivables vary
seasonally.........................................................S-7
Payments on the [Class B Notes][certificates]
are junior to payments on the
Class A Notes......................................................S-8
Prepayments of receivables could result in
payment shortfalls.................................................S-8
[The certificateholders' remedies are
limited in the case of a servicer default.]..........................S-9
CNH Global N.V..........................................................S-10
The Trust...............................................................S-10
General..............................................................S-10
Capitalization of the Trust..........................................S-11
The Trustee..........................................................S-11
The Receivables Pool....................................................S-11
Delinquencies, Repossessions, and
Net Losses...........................................................S-18
Weighted Average Life of the [Notes]
[Securities]............................................................S-20
iv
<PAGE>
Description of the Notes.................................................S-25
General...............................................................S-25
Payments of Interest..................................................S-25
Payments of Principal.................................................S-25
Cutoff Dates..........................................................S-28
Record Dates..........................................................S-28
Mandatory Redemption..................................................S-28
Optional Redemption...................................................S-29
Registration of Notes.................................................S-29
The Indenture Trustee.................................................S-29
Description of the Certificates..........................................S-29
Distributions of Interest Income......................................S-30
Distributions of Principal............................................S-30
[Mandatory Repurchase.................................................S-30
Optional Repurchase...................................................S-31
Registration of Certificates..........................................S-31
Description of the Transaction Agreements................................S-31
[Sales of Receivables.................................................S-31
Servicing Compensation and Payment of
Expenses...........................................................S-32
Distributions.........................................................S-32
[Negative Carry Account...............................................S-33
Spread Account........................................................S-34
Principal Supplement Account..........................................S-35
Legal Investment.........................................................S-36
ERISA Considerations.....................................................S-36
The Notes.............................................................S-36
Underwriting.............................................................S-37
Class A Notes.........................................................S-37
[Class B Notes] [Certificates]........................................S-38
Legal Opinions...........................................................S-40
Index of Terms...........................................................S-41
v
<PAGE>
Summary of Terms
o This summary highlights selected information from this prospectus
supplement and does not contain all of the information that you need
to consider in making your investment decision. To understand all of
the terms of an offering of the [notes] [securities], read carefully
this entire prospectus supplement and the accompanying prospectus.
o This summary provides an overview of certain calculations, cash
flows and other information to aid your understanding and is
qualified by the full description of these calculations, cash flows
and other information in this prospectus supplement and the
accompanying prospectus.
Offered Securities
We are offering [certificates and] [five] classes of notes issued by CNH
Equipment Trust _____-__:
Aggregate Principal Interest
Class Amount Rate
A-1 $__________ _____%
A-2 $__________ _____%
A-3 $__________ _____%
A-4 $__________ _____%
[B $__________ _____%]
[Certi- $__________ _____%]
ficates
The [notes] [securities] will be book-entry securities clearing through DTC
(in the United States) or Clearstream or Euroclear (in Europe) in minimum
denominations of $1,000 and in greater whole-dollar denominations.
Subordination
The A-1, A-2, A-3 and A-4 Notes are all Class A Notes. The [Class B Notes]
[certificates] will be subordinated to the Class A Notes as follows:
o no interest will be paid on the [Class B Notes] [certificates] on any
payment date until all interest due on the Class A Notes through that
payment date has been paid in full; and
o no principal will be paid on the [Class B Notes][certificates] on any
payment date until all principal due on the Class A Notes through
that payment date has been paid in full.
Closing Date
______ ___, _____.
Indenture Trustee
Harris Trust and Savings Bank.
Trustee
___________________.
S-1
<PAGE>
Payment Dates
Payments on the [notes] [securities] will be made on the 15th day of each
calendar month (or, if not a business day, the next business day),
beginning with ________ ___, _____ [except that interest and principal on
the A-1 Notes will also be paid on ________ ___, _____ if any A-1 Notes
remain outstanding after the ________ _____ payment date].
Principal Payments
The aggregate amount of principal payments to be made on all outstanding
classes of [notes] [securities] on each payment date will generally equal
the decrease during the prior calendar month in the sum of (a) the contract
value of the receivables and (b) the amount on deposit in the trust's
pre-funding account. The contract value of the receivables equals the
discounted present value of their scheduled cash flows, using a discount
rate equal to the weighted average annual percentage rate of all
receivables sold to the trust on a particular day.
Principal payments on each payment date will generally be allocated [___]%
to the Class A Notes and [___]% to the [Class B Notes] [certificates].
However, the following exceptions to this general rule will apply:
o Until the A-1 Notes have been repaid in full, distributions of
principal to the [Class B Notes] [certificates] on any payment date
will be limited to the amount of prepayments on the receivables
during the prior calendar month. The balance will be applied to the
A-1 Notes.
o Any shortfall in the amount of funds available for principal payments
on any payment date will reduce the principal payment on the [Class B
Notes] [certificates] (up to the amount of the full target payment on
the [Class B Notes][certificates]) before the principal payment on
the Class A Notes is reduced.
Principal payments on the Class A Notes will generally be made to the
holders of the various classes of Class A Notes sequentially, so that no
principal will be paid on any class of Class A Notes until each class of
Class A Notes with a lower numerical designation has been paid in full. For
instance, no principal will be paid on the A-2 Notes until the A-1 Notes
have been paid in full.
See "Description of the Transaction Agreements--Distributions" for
additional detail on some of the calculations described above and for
special priority rules that would apply in a default situation.
Final Scheduled Maturity Dates
The outstanding principal amount, if any, of each class of
[notes][securities] will be payable in full on [the date specified or] the
payment date falling in the month specified for each below:
Class Final Maturity Date
A-1.......................... _______ __, ____
A-2.......................... _______, ____
A-3.......................... _______, ____
A-4.......................... _______, ____
[B .......................... _______, ____]
[Certificates................ _______, ____]
Optional Redemption
Any [notes] [securities] that remain outstanding on any payment date on
which the servicer exercises its clean-up call will be prepaid in whole on
that payment date at a redemption price for each class equal to
S-2
<PAGE>
the outstanding principal balance of that class of [notes] [securities],
plus accrued and unpaid interest thereon. The servicer cannot exercise its
clean-up call until the aggregate contract value of the receivables
declines to 10% or less of the aggregate initial contract value of the
receivables, measured for each receivable at the time of its sale to the
trust.
[Mandatory Redemption
The trust will have a pre-funding period. On the payment date on or
immediately following the last day of the pre-funding period, any funds
remaining in the trust's pre-funding account after any purchase of
receivables on that date will be applied to prepay the [notes] [securities]
then outstanding in whole or in part in the same sequence and proportions
that would apply in a normal principal distribution.]
The Initial Receivables
On the closing date, we will sell the trust retail installment contracts
with an aggregate contract value of $__________ [and leases with an
aggregate contract value of $__________, in each case][,] measured as of
________ ___, _____.
[Pre-Funding
We will sell the trust additional retail installment contracts and leases
during a pre-funding period beginning on the closing date and ending not
later than the close of business on the ________ _____ payment date.
The trust will pay for the subsequent receivables with funds on deposit in
a pre-funding account established for the trust, with an initial deposit
of $__________. We expect to sell subsequent receivables to the trust with
an aggregate contract value approximately equal to the amount deposited in
the pre-funding account. Prior to being used to purchase receivables, funds
on deposit in the pre-funding account will be invested from time to time in
highly rated short-term securities.
The pre-funding period will end earlier than the ________ _____ payment
date if and when the balance in the pre-funding account is reduced to less
than $100,000. The pre-funding period will also terminate early if certain
defaults or other adverse events occur. Any balance remaining in the pre-
funding account at the end of the pre-funding period will be payable to the
[noteholders] [securityholders] as principal.]
[Negative Carry Account
We anticipate that the average interest rate earned by the trust on
investment of funds in the pre-funding account may be less than the
weighted average interest rate on the [notes] [securities]. To provide a
source of funds to cover any short fall resulting from this difference, we
will deposit $__________ into the trust's negative carry account.]
Credit Enhancement
Spread Account
As credit enhancement for the [notes] [securities], a spread account will
be established for the trust. The spread account will be funded as follows:
o On the closing date, we will deposit $__________ (_____% of the
contract value of the initial receivables) into the spread account.
[o On the date of each subsequent sale of receivables to the trust, the
indenture trustee will transfer cash or highly rated, short-term
securities having a value approximately equal to _____% of the
aggregate contract value of the receivables purchased
from the pre-funding account to the spread account.]
S-3
<PAGE>
o On each payment date after any draw has been made on the spread
account, available collections remaining after other more senior
payments have been made will be deposited into the spread account to
the extent necessary to maintain a specified minimum balance.
Funds on deposit in the spread account will be available on each payment
date to cover shortfalls in distributions of interest and principal on the
[notes] [securities]. [Funds on deposit in the spread account will not be
used to cover shortfalls in any distributions on the certificates].
Principal Supplement Account
As further enhancement for the [notes] [securities], a principal supplement
account will be established for the trust. [However, no deposit is required
to be made into the principal supplement account on or before the closing
date.] We will make deposits in the principal supplement account on the
date of each subsequent sale of receivables to the trust, but only if, and
to the extent, necessary to maintain the original credit ratings of the
[notes] [securities].
Funds on deposit in the principal supplement account on any payment date
will be used to cover shortfalls in distributions of interest and principal
on the [notes] [securities] if the amount available in the spread account
on that payment date is insufficient to cover those shortfalls. [Funds on
deposit in the principal supplement account will not be used to cover
shortfalls in any distributions on the certificates.]
[The Certificates
On the closing date, the trust will issue certificates to us in an
aggregate principal amount of $__________. We will initially retain the
entire principal amount of the certificates. Distributions of interest on
the certificates will be junior in priority of payment to interest and
principal due on the notes, and no principal will be paid on the
certificates until the notes have been repaid in full.]
[Subordination
The subordination of the Class B Notes to the Class A Notes as described
herein will provide additional credit enhancement for the Class A Notes.]
Priority of Distributions
On each payment date, available collections, plus funds transferred from
various trust accounts as described above, will be applied to the following
(in the priority indicated):
(1) administration fees;
(2) accrued and unpaid interest on the Class A Notes;
[(3) accrued and unpaid interest on the Class B Notes;]
(4) to pay principal on the notes in the priority described above under
"Offered Securities--Principal Payments";
(5) to the spread account, to the extent necessary to maintain a specified
balance;
(6) accrued and unpaid interest on the certificates;
(7) after the notes have been repaid in full, principal on the certificates;
(8) servicing fees, except that if neither Case Credit nor any of its
affiliates is the servicer, servicing fees will be paid prior to any
other application of funds; and
(9) the remaining balance, if any, to us.
S-4
<PAGE>
See "Description of the Transaction Agreements--Distributions" for
additional details and for special priority rules that would apply in a
default situation.
Tax Status
Mayer, Brown & Platt, our special federal tax counsel, is of the opinion
that for federal income tax purposes the notes will be characterized as
debt and the trust will not be characterized as an association (or publicly
traded partnership) taxable as a corporation [and that the trust will be
treated as a partnership in which the certificateholders are partners].
Mayer, Brown & Platt, our special Illinois tax counsel, is also of the
opinion that the same characterizations should apply for Illinois tax
purposes as for federal income tax purposes.
ERISA Considerations
Subject to the considerations discussed under "ERISA Considerations," the
notes are eligible for purchase by employee benefit plans. [The
certificates may not be acquired by any employee benefit plan.]
Legal Investment
The 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.
Rating of the [Notes] [Securities]
The trust will not issue the [notes] [securities] unless the A-1 Notes are
rated in the highest short-term rating category, the A-2 Notes, A-3 Notes
and A-4 Notes are rated in the highest long-term rating category and that
the [Class B Notes] [certificates] are rated at least in the "A" category
or its equivalent, in each case by at least two nationally recognized
statistical rating agencies. A rating is not a recommendation to purchase,
hold or sell securities, inasmuch as such rating does not comment as to
market price or suitability for a particular investor. The ratings of the
notes address the likelihood of the timely payment of interest on, and the
ultimate repayment of principal of, the notes pursuant to their terms.
CNH Capital Receivables Inc.
The mailing address of our principal executive office is 100 South Saunders
Road, Lake Forest, Illinois 60045, Attention: Vice President and our
telephone number is (847) 735-9200.
S-5
<PAGE>
Risk Factors
You should consider the following risk factors in deciding whether to
purchase the [notes] [securities].
It may not be possible
to find a purchaser The underwriters may assist in resales of
for your securities. the [notes][securities], but they are not
required to do so. A trading market for the
[notes] [securities] may not develop. If a
trading market does develop, it might
not continue or it might not be
sufficiently liquid to allow you to
resell any of your [notes] [securities].
[Prepayments could
result from If the principal amount of eligible
pre-funding. receivables purchased or directly
originated by our affiliated credit
companies--Case Credit and New
Holland Credit (which are referred to in
this prospectus supplement for
convenience as the "credit
companies")--during the trust's
pre-funding period, plus other
pre-existing eligible receivables, is
less than the amount deposited in the
trust's pre-funding account, we will not
have sufficient receivables to sell to
the trust during the pre-funding period.
This would result in a prepayment of
principal in an aggregate amount equal
to the amount remaining in the
pre-funding account at the end of the
pre-funding period to the [noteholders]
[securityholders] in the same sequence
and proportions that would apply in a
normal principal distribution. Any
prepayment will shorten the weighted
average life of the affected [notes]
[securities]. The amount of the [notes]
[securities] that will be prepaid is not
known at this time, but the greater the
prepayment, the shorter the weighted
average life of the [notes]
[securities].]
[The trust is dependent
upon the credit The trust will not be able to purchase
companies and CNH receivables from us during the
for additional pre-funding period unless the
receivables. credit companies have eligible
receivables which they are able to
transfer to us. Both of the credit
companies' ability to generate receivables
depends primarily upon sales
of agricultural, construction and
other equipment manufactured or
distributed by CNH. If, during the
pre-funding period, CNH were to
temporarily or permanently stop
manufacturing or distributing
agricultural, construction and other
equipment, the rate of sales of
agricultural, construction and other
equipment manufactured or distributed by
CNH would decrease. This would adversely
affect our ability to sell receivables
to the trust. CNH's use of
manufacturer's rebate and other
incentive programs may also affect
retail sales, and neither we nor the
trust have any control over CNH's future
use of those incentives.]
S-6
<PAGE>
Variations in economic
and other factors The ability of dealers financed by the
may reduce the rate credit companies to sell agricultural,
of creation of construction, and other equipment and
additional receivables. generate eligible receivables through those
sales is affected by the general level of
activity in the agricultural, construction
and other industries, including the rate
of North American agricultural production
and demand, weather conditions, commodity
prices, consumer confidence, government
subsidies for the agricultural sector,
interest rates, prevailing levels of
construction (especially housing starts)
and levels of total industry capacity and
equipment inventory. We have no basis to
predict whether or to what extent these
factors will affect the level of sales of
agricultural, construction or other
equipment.
[Characteristics of the There will be no required characteristics of
pool of receivables the receivables transferred to the trust
may change due to during the pre-funding period, except that
pre-funding. each additional receivable must satisfy the
eligibility criteria specified in the sale
and servicing agreement among us, the
servicer and the trust at the time of
its addition. Additional receivables may
be originated at a later date using
credit criteria different from those
that were applied to the initial
receivables and may be of a different
credit quality and seasoning. In
addition, following the transfer of
subsequent receivables to the trust, the
characteristics of the entire
receivables pool, including the
composition of the receivables, the
distribution by annual percentage rate,
equipment type, payment frequency,
average maturity, current contract value
and geographic distribution, may vary
from those of the initial receivables.
Since the weighted average life of the
[notes] [securities] will be influenced
by the rate at which the principal
balances of the receivables are paid,
some of these variations will affect the
weighted average life of the [notes]
[securities]. However, the trust will
not purchase any receivables that have a
remaining term in excess of __ months or
any receivables that would cause the
weighted average original term of the
receivables in the trust to be greater
than ___ months. These requirements are
intended to minimize the effect of the
addition of subsequent receivables on
the weighted average life of the [notes]
[securities].]
Payments on the Payments on the receivables may be made on a
receivables vary monthly, quarterly, semiannual, annual or
seasonally. irregular basis. A significant portion of
the initial receivables (representing
approximately _____% of the aggregate
statistical contract value of the
initial receivables) are agricultural
equipment sale contracts or leases and
tend to have payment dates that
correspond to periods in which farmers
have stronger cash flows. As a result,
the amounts of cash distributed to
noteholders may reflect this
seasonality, with higher amounts of
principal paid on the payment dates
occurring in the first and fourth
calendar quarters in each year and
relatively lower amounts paid on other
payment dates.
S-7
<PAGE>
Payments on the If you buy [Class B Notes][certificates],
[Class B Notes] your interest payments will be junior to
[certificates] are interest payments on the Class A Notes, and
junior to payments on your principal payments will be junior to
the Class A Notes. principal payments on the Class A Notes as
follows. You will not receive any interest
payments on your [Class B Notes]
[certificates] on any payment date until the
full amount of interest then payable on the
Class A Notes has been paid or provided for
in full. In addition, you will not receive
any principal payments on your [Class B
Notes][certificates] on any payment date
until the full amount of the principal
then payable on the Class A Notes has
been paid or provided for in full.
Prepayments of
receivables could The receivables are subject to voluntary
result in payment prepayment. Upon any prepayment in full of
shortfalls. a receivable, the contract value of that
receivable will be reduced to zero, and the
contract value of that receivable will be
added to the amount of principal to be paid
on the notes on the related payment date.
However, some receivables have contract
values that are greater than their
outstanding principal balances. When a
receivable of this type is prepaid, the
principal collected through the prepayment
will be less than the resulting increase in
the targeted principal distribution by an
amount roughly equal to the excess of
the receivable's contract value over its
outstanding principal balance
immediately prior to the prepayment,
which could lead to a cash flow
shortfall. See "Description of the
Notes--Payments of Principal."
In addition, a significant portion of
the receivables in the trust will be
simple interest receivables. Under
simple interest receivables, if an
obligor pays a fixed periodic
installment early, the portion of the
payment applied to reduce the unpaid
balance will be greater than the
reduction if the payment had been made
as scheduled, and the final payment will
be reduced accordingly. As a result, the
contract value of the receivable, at any
time, may be greater than its principal
balance. Upon final payment (including
prepayment in full) of the receivable,
principal collected through that final
payment will be less than the resulting
increase in the targeted distribution,
which could lead to a cash flow
shortfall.
S-8
<PAGE>
To the extent necessary to maintain the
initial credit ratings on the
[notes][securities], funds may be
deposited in the trust's principal
supplement account each time that the
trust buys additional receivables during
the pre-funding period. Those funds, if
any, are intended to make up for
potential cash flow shortfalls of the
type described in the two preceding
paragraphs. On each payment date, any
funds on deposit in the principal
supplement account will be withdrawn to
cover shortfalls in distributions of
interest and principal on the
[notes][securities] (after giving effect
to any withdraw to be made from the
spread account on that payment date).
However, in many cases, no deposit is
required to be made into the principal
supplement account, and in any event the
amount of any required deposit is
expected to be less than the maximum
aggregate potential shortfalls of the
type described in the two preceding
paragraphs. You might not receive
ultimate payment in full of all amounts
due under your [notes][securities] if
the amount of the shortfalls exceeds the
amount of the deposits and other
available credit enhancement and excess
collections available to make up for the
shortfalls.
[The certificateholders' [If a servicer default occurs, the indenture
remedies are limited trustee or noteholders evidencing 25% or
in the case of a more of the outstanding principal amount of
servicer default.] the notes may remove the servicer without
the consent of the trustee or any of the
certificateholders. If any notes remain
outstanding, neither the trustee nor the
certificateholders will have the ability
to remove the servicer if a servicer default
occurs. In addition, the noteholders have
the ability, with certain specified
exceptions, to waive defaults by the
servicer, including defaults that could
materially adversely affect the
certificateholders.]
S-9
<PAGE>
CNH Global N.V.
In November 1999 Case Corporation and New Holland N.V. merged to form
CNH Global N.V., which is often referred to as "CNH." CNH builds and markets
several of the world's leading brands of agricultural and construction
equipment and is among the world's largest equipment financing companies.
CNH plans to operate under a multiple brand, multiple distribution
business model. It will maintain its various agricultural equipment,
construction equipment and financial services brands and corresponding
distribution networks. Going forward, the company intends to design and
build its products on common platforms, but with differentiated features
that appeal to specific customer groups under the company's multiple
brands. Financial services products also will be offered under each of the
brand organizations.
With strong global brands, CNH is a leader in the agricultural
equipment, construction equipment and financial services industries. CNH is
the number one manufacturer of agricultural tractors and combines in the
world, the third largest maker of construction equipment and has one of the
largest equipment finance companies in the world. Based in the United
States, CNH has operations in 16 countries and sells its products in 160
markets through a network of more than 10,000 dealers and distributors. CNH
products are currently sold under the following brands: Case, Case IH,
Fiatallis, Fiat-Hitachi, New Holland, O&K and Steyr.
The Trust
General
The trust will be formed pursuant to a trust agreement between us
and the trustee. After its formation, the trust will not engage in any
activity other than
o acquiring, holding and managing the receivables[, the
pre-funding account] and the other assets of the trust
and proceeds therefrom,
o issuing the notes and the certificates,
o making payments on the notes and the certificates, and
o engaging in other activities that are necessary,
suitable or convenient to accomplish the foregoing or
are incidental thereto or connected therewith.
The trust will possess only the following property:
o receivables and related collections;
o bank accounts established for the trust;
o security interests in the equipment financed or leased
under the receivables;
o any property obtained in a default situation under those
security interests;
S-10
<PAGE>
o rights to proceeds from certain insurance policies
covering equipment financed or leased under the
receivables or obligors on the receivables; and
o our interest in any proceeds from recourse to dealers
on receivables, which will exclude any amounts
contained in the dealers' reserve accounts.
The trust's principal offices are in __________________, in care
of _________________, as trustee, at the address listed below under "--The
Trustee."
Capitalization of the Trust
The following table illustrates the capitalization of the trust as
of ____________ [initial cutoff date], as if the issuance and sale of the
notes and the certificates had taken place on that date:
A-1 _____% Asset Backed Notes.....................................$_________
A-2 _____% Asset Backed Notes.....................................$_________
A-3 _____% Asset Backed Notes.....................................$_________
A-4 _____% Asset Backed Notes.....................................$_________
[Class B _____% Asset Backed Notes................................$_________]
[_____% Asset Backed Certificates.................................$_________
==========
Total ...................................................$_________
==========
The Trustee
_______________________is the trustee under the trust agreement.
________________ is a ____________________________, and its principal
offices are located at _________________ _____________________________________.
In the ordinary course of its business, the trustee and its affiliates have
engaged and may in the future engage in commercial banking or financial
advisory transactions with CNH and its affiliates. ____________________________
will act as co-trustee for the purpose of complying with certain Delaware legal
requirements.
The Receivables Pool
The pool of receivables held by the trust will include the initial
receivables purchased on the closing date [and any additional receivables
purchased during the trust's pre-funding period].
A number of calculations described in this prospectus supplement,
and calculations required by the agreements governing the trust and the
notes, are based upon the Contract Value of the receivables. "Contract
Value" means, as of any calculation date, the present value of the
scheduled and unpaid payments on the receivables discounted monthly at an
annual rate equal to [(a) in the case of the initial receivable],_____%,
which is the weighted average annual percentage rate of the [initial]
receivables as of ________ ___, _____, [and (b) in the case of the
additional receivables, the weighted average annual percentage rate of the
additional receivables transferred as of the cutoff date designated for
such transfer], plus[, in either case] any amount of past due payments as
of the [applicable] cutoff date. Any defaulted receivables liquidated by
the servicer through the sale or other disposition of the related equipment
or that the servicer has, after using all reasonable efforts
S-11
<PAGE>
to realize upon the related equipment, determined to charge off without
realizing upon the related equipment are deemed to have a Contract Value of
zero.
The Contract Value of the receivables is generally equivalent to
their outstanding principal amount. However, the Contract Value of any
particular receivable may be greater than or less than its outstanding
principal amount, depending primarily upon whether the annual percentage
rate of that receivable is greater or less than the weighted average annual
percentage rate of the [initial] receivables as of the [initial] cutoff
date [(in the case of an initial receivable) or the weighted average annual
percentage rate of the additional receivables as of the applicable addition
cutoff date (in the case of additional receivables)]. If a receivable's
annual percentage rate is greater than the weighted average annual
percentage rate used in calculating its Contract Value, its Contract Value
will be greater than its outstanding principal balance because the discount
rate used to determine its Contract Value is lower than the annual
percentage rate that generated the finance charge component of the
scheduled payments that are discounted to determine the Contract Value.
Conversely, if a receivable's annual percentage rate is lower than the
weighted average annual percentage rate used in calculating its Contract
Value, its Contract Value will be less than its outstanding principal
balance because the discount rate used to determine its Contract Value is
greater than the annual percentage rate that generated the finance charge
component of the scheduled payments that are discounted to determine the
Contract Value.
The [initial] receivables were selected [and the additional
receivables will be selected] from our portfolio using several criteria,
including the criteria set forth in the prospectus under "Characteristics
of the Receivables--Selection Criteria" and the additional criteria that:
(1) each receivable is a retail installment contract or a lease;
(2) each receivable has an annual percentage rate that is equal
to or greater than _____%;
(3) each receivable has a remaining term to maturity of not more
than ___ months;
(4) each receivable has a Contract Value as of the applicable
cutoff date that (when combined with the Contract Value of any other
receivables with the same or an affiliated obligor) does not exceed 1% of
the aggregate Contract Value of all the receivables;
(5) [after giving effect to each transfer of additional
receivables,] the weighted average original term of the receivables in the
trust will not be greater than __ months; and
(6) [after giving effect to each transfer of additional
receivables,] not more than _____% of the principal balances of the
receivables in the trust will represent contracts for the financing of
construction equipment and not more than ___% of the principal balances of
the receivables in the trust will represent contracts for the financing of
all-terrain vehicles, snowmobiles or marine vessels collectively.
[The receivables as they are constituted on any cutoff date for an
addition of receivables will not deviate from the foregoing
characteristics.]
[The [initial] receivables include both precomputed and simple
interest receivables]. No [initial] receivable has[, and no additional
receivable will have,] a scheduled maturity later than the date that is six
months prior to the final scheduled maturity date for the notes. [No dealer
loans will be included in the trust.]
S-12
<PAGE>
[The initial receivables will represent approximately _____% of
the sum of initial outstanding principal amount of the notes and the
certificate balance. Except for the criteria described in the preceding
paragraphs, there will be no required characteristics of the additional
receivables. Therefore, following the transfer of additional receivables to
the trust, the aggregate characteristics of the all of the receivables in
the trust, including the composition of the receivables, the distribution
by annual percentage rate, equipment type, payment frequency, current
Statistical Contract Value and geographic distribution described in the
following tables, may vary from those of the initial receivables. Following
the end of the pre-funding period, we will file a report on Form 8-K
containing information comparable to that contained in the tables set forth
below regarding the aggregate characteristics of all of the receivables in
the trust, after the addition of the additional receivables.]
The composition, distribution by annual percentage rate,
receivable type, equipment type, payment frequency, current Contract Value
and geographic distribution, in each case of the [initial] receivables as
of ________ ___, ____ are as set forth in the following tables. For
purposes of this prospectus supplement, the "Statistical Contract Value"
for each receivable has been calculated as either (a) the sum of the
present value of the scheduled and unpaid payments on the receivable,
discounted monthly at an annual rate equal to its annual percentage rate
(instead of the weighted average annual percentage rate of the initial
receivable) plus any amount of past due payments or (b) the current balance
of the receivable on the servicer's records, depending upon the type of
receivable. Totals may not add to 100% due to rounding.
S-13
<PAGE>
Composition of the Receivables
as of the [Initial] Cutoff Date
Aggregate Weighted Weighted
Weighted Statistical Average Average Average
Average Contract Number of Remaining Original Statistical
APR Value Receivables Term Term Contract Value
---------- ------------ ----------- ---------- --------- --------------
_____% $__________ months months $__________
Distribution by Receivable Type of the Receivables Pool
as of the [Initial] Cutoff Date
Percent of
Aggregate Aggregate
Number of Statistical Statistical
Receivable Type Receivables Contract Value Contract Value
----------- -------------- --------------
Retail Installment Contracts...... $ %
Leases............................ %
----------- ------------- --------------
Total............................. $ 100.00%
=========== ============= ==============
Distribution by Annual Percentage Rate of the Receivables
as of the [Initial] Cutoff Date
Percent of
Aggregate Aggregate
Number of Statistical Statistical
APR Range Receivables Contract Value Contract Value
--------- ----------- -------------- --------------
3.000% to 3.999%................. $ %
4.000% to 4.999%.................
5.000% to 5.999%.................
6.000% to 6.999%.................
7.000% to 7.999%.................
8.000% to 8.999%.................
9.000% to 9.999%.................
10.000% to 10.999%...............
11.000% to 11.999%...............
12.000% to 12.999%...............
13.000% to 13.999%...............
14.000% to 14.999%...............
15.000% to 15.999%...............
16.000% to 16.999%...............
17.000% to 17.999%...............
18.000% to 18.999%...............
20.000% to 20.999%...............
------------ ------------ --------------
Total............................ $ 100.00%
============ ============ =============
S-14
<PAGE>
Distribution by Equipment Type of the Receivables
as of the [Initial] Cutoff Date
Percent of
Aggregate Aggregate
Number of Statistical Statistical
Type Receivables Contract Value Contract Value
---- ----------- -------------- --------------
Agricultural
New........................... $ %
Used..........................
Construction
New...........................
Used..........................
Forestry
New
Used..........................
------------ ------------- --------------
Total............................ $ 100.00%
============ ============= ==============
Distribution by Payment Frequency of the Receivables
as of the [Initial] Cutoff Date
Percent of
Aggregate Aggregate
Number of Statistical Statistical
Frequency Receivables Contract Value Contract Value
--------- ----------- -------------- --------------
Annual(1)........................ $ %
Semiannual.......................
Quarterly........................
Monthly..........................
------------ ------------- --------------
Total............................ $ 100.00%
============ ============= ==============
-------------
(1) Approximately _____%, _____%, _____%, _____%, _____%, _____%,
_____%, _____%, _____%, _____%, _____% and _____%, of the annual
receivables have scheduled payments relating to the payment dates
in January, February, March, April, May, June, July, August,
September, October, November and December, respectively.
S-15
<PAGE>
Distribution by Current Contract Value of the Receivables
as of the [Initial] Cutoff Date
Percent of
Aggregate Aggregate
Number of Statistical Statistical
Value Range Receivables Contract Value Contract Value
----------- ----------- -------------- --------------
Up to $4,999.99..................... $ %
5,000.00 to 9,999.99................
10,000.00 to 14,999.99..............
15,000.00 to 19,999.99..............
20,000.00 to 24,999.99..............
25,000.00 to 29,999.99..............
30,000.00 to 34,999.99..............
35,000.00 to 39,999.99..............
40,000.00 to 44,999.99..............
45,000.00 to 49,999.99..............
50,000.00 to 54,999.99..............
55,000.00 to 59,999.99..............
60,000.00 to 64,999.99..............
65,000.00 to 69,999.99..............
70,000.00 to 74,999.99..............
75,000.00 to 99,999.99..............
100,000.00 to 199,999.99............
200,000.00 to 299,999.99............
300,000.00 and over.................
----------- ----------- -----------
Total $ 100.00%
=========== =========== ===========
S-16
<PAGE>
Geographic Distribution of the Receivables
as of the [Initial] Cutoff Date
Percent of
Aggregate
Statistical
State(1) Contract Value
Alabama................................................... %
Alaska....................................................
Arizona...................................................
Arkansas..................................................
California................................................
Colorado..................................................
Connecticut...............................................
Delaware..................................................
Florida...................................................
Georgia...................................................
Hawaii....................................................
Idaho.....................................................
Illinois..................................................
Indiana...................................................
Iowa......................................................
Kansas....................................................
Kentucky..................................................
Louisiana.................................................
Maine.....................................................
Maryland..................................................
Massachusetts.............................................
Michigan..................................................
Minnesota.................................................
Mississippi...............................................
Missouri..................................................
Montana...................................................
Nebraska..................................................
Nevada....................................................
New Hampshire.............................................
New Jersey................................................
New Mexico................................................
New York..................................................
North Carolina............................................
North Dakota..............................................
Ohio......................................................
Oklahoma..................................................
Oregon....................................................
Pennsylvania..............................................
Rhode Island..............................................
South Carolina............................................
South Dakota..............................................
Tennessee.................................................
Texas.....................................................
Utah......................................................
Vermont...................................................
Virginia..................................................
Washington................................................
West Virginia.............................................
Wisconsin.................................................
Wyoming...................................................
---------------
Total............................................... 100.00%
===============
----------
(1) Based upon billing addresses of the obligors.
S-17
<PAGE>
Delinquencies, Repossessions, and Net Losses
Set forth below is certain combined information concerning the
credit companies' experience pertaining to the entire portfolios of United
States retail agricultural, construction, forestry, truck and other
equipment receivables that they service. This information includes
receivables previously sold to trusts under prior asset-backed
securitizations [and excludes leases originated by New Holland Credit].
Recently, delinquencies, repossessions and net losses have
increased as a result of:
o A decrease in the number of retail agricultural
receivables included in the credit companies'
portfolio due to the continued decline in the
global agricultural market and the ongoing
overall economic uncertainties in several
emerging markets, combined with a substantial
drop year-over-year of commodity prices and
exports of farm commodities, affecting
large-scale production agriculture.
o A related increase in retail construction
receivables, which have traditionally had higher
losses than agricultural receivables, as a
percentage of the credit companies' serviced
portfolio.
o The credit companies' financing of non-CNH
dealers on non-CNH equipment, which has
initially resulted in higher losses than the
credit companies have traditionally incurred in
connection with financing of CNH dealers.
Delinquencies, repossessions and net losses on agricultural
contracts may be affected by weather conditions such as flood and drought,
commodity market prices and the level of farmers' income. Delinquencies,
repossessions and net losses on construction contracts may be affected by
interest rates, housing starts and consumer confidence. There can be no
assurance that the delinquency, repossession and net loss experience on the
receivables of the trust will be comparable to that set forth below.
<TABLE>
<CAPTION>
Delinquency Experience(1)
At December 31,
1999 1998 1997 1996
---- ---- ---- ----
Number Number Number Number
of of of of
Contracts Amount Contracts Amount Contracts Amount Contracts Amount
(Dollars in Millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Portfolio................. 285,205 $6,335.0 280,410 $5,790.7 248,524 $5,029.0 246,840 $ 4,439.4
Period of Delinquency
31-60 days............. 6,028 178.6 5,469 153.0 5,014 114.6 4,172 90.9
60 Days or More........ 6,027 238.1 4,415 163.1 3,286 81.4 2,428 52.4
---------- -------- ------- -------- ------- -------- ------- ----------
Total Delinquencies....... 12,055 $416.7 9,884 $316.1 8,300 $196.0 6,600 $ 143.3
Total Delinquencies as a
Percent of the Portfolio 4.23% 6.58% 3.52% 5.46% 3.34% 3.90% 2.67% 3.23%
</TABLE>
S-18
<PAGE>
(1) Precomputed receivables are recorded based on the gross amount
scheduled to be paid on the receivable, including unearned finance
and other charges. Simple interest receivables are recorded based
on the net amount scheduled to be paid on the receivable. The
information in the table includes an immaterial amount of
receivables relating to equipment other than agricultural,
forestry, truck and construction equipment and includes the
receivables that remained with Tenneco Credit Corporation and
previously sold contracts that the credit companies continue to
service.
Credit Loss/Repossession Experience(1)
Year Ended December 31,
-----------------------
1999 1998 1997 1996
---- ---- ---- ----
(Dollars in Millions)
Average Gross Portfolio Outstanding
During the Period.................... $6,062.8 $5,409.8 $4,734.1 $4,253.6
Repossessions as a Percent of
Average Gross Portfolio Outstanding. 1.73% 1.29% 1.35% 1.33%
Net Losses as a Percent of
Liquidations(2)(3)(4)................ 1.45% 0.62% 0.48% 0.38%
Net Losses as a Percent of Average
Gross Portfolio Outstanding(2)(3) 0.76% 0.33% 0.27% 0.20%
---------------------------
(1) Precomputed receivables are recorded based on the gross amount
scheduled to be paid on the receivable, including unearned finance
and other charges. Simple interest receivables are recorded based
on the net amount scheduled to be paid on the receivable. The
information in the table includes an immaterial amount of
receivables relating to equipment other than agricultural,
forestry, truck and construction equipment and includes the
receivables that remained with Tenneco Credit Corporation and
previously sold contracts that the credit companies continue to
service.
(2) A portion of the contracts provide for recourse to dealers.
Approximately 12%, 15%, 23% and 23% of the aggregate amounts scheduled
to be paid on the contracts acquired during the years ended December
31, 1999, 1998, 1997 and 1996, respectively, provide for recourse to
dealers (excluding some contracts which provide for partial recourse
to dealers through the dealers' reserve accounts). In the event of
defaults by the obligor under any such contract, the contract is
required to be repurchased by the dealer for an amount generally equal
to all amounts due and unpaid thereunder. As a result, any losses
under any such contract are incurred by the dealer.
(3) Net losses are equal to the aggregate of the principal balances of
all contracts (plus accrued but unpaid interest thereon) that are
determined to be uncollectible in the period, less any recoveries
on contracts charged off in the period or any prior periods,
excluding any losses resulting from repossession expenses and
excluding any recoveries from dealers' reserve accounts.
(4) Liquidations represent a reduction in the outstanding balances of the
contracts as a result of cash payments and charge-offs.
The credit companies had recourse to dealers on a portion of the
contracts. This recourse was among the facts taken into consideration in
determining the principal balance of the certificates and the required
spread account balance. In the event of a dealer's bankruptcy, a bankruptcy
trustee,
S-19
<PAGE>
a creditor or the dealer as debtor in possession might attempt to
characterize recourse sales of contracts as loans to the dealer secured by
the contracts. Such an attempt, if successful, could result in payment
delays or losses on the affected receivables.
The losses shown above have been determined in accordance with the
policies of Case Credit and New Holland Credit. It is the policy of Case
Credit to treat each receivable that is over 120 days past due as
nonperforming and to review each of these receivable on a case-by-case
basis to determine the amount and need for charge-off. New Holland Credit
recognizes an estimated loss once a receivable has become more than 120
days past due. Once the receivable is liquidated that estimated loss is
adjusted to reflect the actual loss on the receivable. For purposes of the
trust, however, losses are recognized when a receivable is liquidated by
the servicer through the sale of or other disposition of the related
equipment, if any, or when the servicer, has, after using all reasonable
efforts to realize upon the related equipment determined to charge-off the
receivable without realizing upon the related equipment.
Weighted Average Life of the [Notes] [Securities]
As the rate of payment of principal of the [notes] [securities]
depends primarily on the rate of payment (including prepayments) of the
principal balance of the receivables, final payment of each class of
[notes] [securities] could occur significantly earlier than the final
maturity date for that class. You will bear the risk of being able to
reinvest principal payments on your [notes] [securities] at yields at least
equal to the yield on your [notes] [securities].
Prepayments on retail installment sale contracts can be measured
relative to a prepayment standard or model. The model used in this
prospectus supplement is based on a constant prepayment rate ("CPR"). CPR
is determined by the percentage of principal outstanding at the beginning
of a period that prepays during that period, stated as an annualized rate.
The CPR prepayment model, like any prepayment model, does not purport to be
either an historical description of prepayment experience or a prediction
of the anticipated rate of prepayment.
The tables on pages S-___, S-___ and S-___, have been prepared on
the basis of certain assumptions, including that: (a) the receivables
prepay in full at the specified monthly CPR and neither we nor the servicer
are required to purchase any receivables from the trust, (b) each scheduled
payment on the receivables is made on the last day of each calendar month,
(c) distributions are made on each payment date in respect of the notes in
accordance with the description set forth under "Description of the
Transaction Agreements--Distributions," (d) the balance in the spread
account on any day is equal to the required spread account balance, (e) the
balance in the principal supplement account on any day is equal to the
Required Principal Supplement Account Balance, (f) the closing date occurs
on ________ ___, _____ and (g) the servicer exercises its option to
purchase the receivables on the earliest permitted payment date. The table
indicates the projected weighted average life of each class of [notes]
[securities] and sets forth the percent of the initial principal balance of
each class of [notes] [securities] that is projected to be outstanding
after each of the payment dates shown at various CPR percentages.
S-20
<PAGE>
The table also assumes that the receivables have been aggregated
into four hypothetical pools with all of the receivables within each pool
having the following characteristics:
Aggregate Weighted
Contract Average
Pool Value APR
---- ----- ---
1 ................................. $ %
2 .................................
3 .................................
4 .................................
$ %
======= ======
Hypothetical pool 1 has the same Contract Value and cashflow
characteristics as the initial receivable. Hypothetical pools 2, 3 and 4
have a Contract Value equal in the aggregate to the amount deposited in the
trust's pre-funding account. The cash flow characteristics of hypothetical
pools 2, 3 and 4 are proportionately identical to those of hypothetical
pool 1.
The information included in the following tables represents
forward-looking statements and involves risks and uncertainties that could
cause actual results to differ materially from those in the forward-looking
statements. The actual characteristics and performance of the receivables
will differ from the assumptions used in constructing the tables on pages
S-___, S-___ and S-___. The assumptions used are hypothetical and have been
provided only to give a general sense of how the principal cash flows might
behave under varying prepayment scenarios. For example, it is highly
unlikely that the receivables will prepay at a constant CPR until maturity
or that all of the receivables will prepay at the same CPR. Similarly, the
aggregate Contract Value of additional receivables may be less than the
amount deposited in the trust's pre-funding account. Moreover, the diverse
terms of receivables within each of the four hypothetical pools could
produce slower or faster principal distributions than indicated in the
table at the various CPR specified. Any difference between those
assumptions and the actual characteristics and performance of the
receivables, or actual prepayment experience, will affect the percentages
of initial balances outstanding over time and the weighted average lives of
the [notes] [securities].
S-21
<PAGE>
<TABLE>
<CAPTION>
Percent of Initial Principal Amount of the Notes at Various CPR Percentages
Payment Date 0% 13% 15% 17% 19% 0% 13% 15% 17% 19%
------------ -- --- --- --- --- -- --- --- --- ---
A-1 Notes A-2 Notes
--------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date................................. 100 100 100 100 100 100 100 100 100 100
----------, -----............................
----------, -----............................
----------, -----............................
----------, -----............................
----------, -----............................
----------, -----............................
----------, -----............................
----------, -----............................
----------, -----............................
----------, -----............................
----------, -----............................
----------, -----............................
----------, -----............................
----------, -----............................
----------, -----............................
----------, -----............................
----------, -----............................
----------, -----............................
----------, -----............................
Weighted Average Life (years)(1).............
</TABLE>
-----------
(1) The weighted average life of an A-1 Note or A-2 Note is determined
by: (a) multiplying the amount of each principal payment on the
applicable Note by the number of years from the date of issuance
of such note to the related payment date, (b) adding the results,
and (c) dividing the sum by the related initial principal amount
of such note.
This table has been prepared based on the assumptions described on
pages S-___ and S-___ (including the assumptions regarding the
characteristics and performance of the receivables, which will differ from
the actual characteristics and performance thereof) and should be read in
conjunction therewith.
S-22
<PAGE>
<TABLE>
<CAPTION>
Percent of Initial Principal Amount of the Notes at Various CPR Percentages
Payment Date 0% 13% 15% 17% 19% 0% 13% 15% 17% 19%
------------ -- --- --- --- --- -- --- --- --- ---
A-3 Notes A-4 Notes
--------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date................ 100 100 100 100 100 100 100 100 100 100
----------, -----...........
----------, -----...........
----------, -----...........
----------, -----...........
----------, -----...........
----------, -----...........
----------, -----...........
----------, -----...........
----------, -----...........
----------, -----...........
----------, -----...........
----------, -----...........
----------, -----...........
----------, -----...........
----------, -----...........
----------, -----...........
----------, -----...........
----------, -----...........
----------, -----...........
----------, -----...........
Weighted Average Life (years)(1).
</TABLE>
-----------
(1) The weighted average life of an A-3 Note or A-4 Note is determined
by: (a) multiplying the amount of each principal payment on the
applicable security by the number of years from the date of
issuance of the security to the related payment date, (b) adding
the results, and (c) dividing the sum by the related initial
principal amount of the security.
This table has been prepared based on the assumptions described on
pages S-___ and S-___ (including the assumptions regarding the
characteristics and performance of the receivables, which will differ from
the actual characteristics and performance thereof) and should be read in
conjunction therewith.
S-23
<PAGE>
Percent of Initial Principal Amount of the Notes at Various CPR Percentages
Payment Date 0% 13% 15% 17% 19%
------------ -- --- --- --- ---
[B Notes] [Certificates]
------------------------
Closing Date................................ 100 100 100 100 100
---------, -----............................
---------, -----............................
---------, -----............................
---------, -----............................
---------, -----............................
---------, -----............................
---------, -----............................
---------, -----............................
---------, -----............................
---------, -----............................
---------, -----............................
---------, -----............................
---------, -----............................
---------, -----............................
---------, -----............................
---------, -----............................
---------, -----............................
---------, -----............................
---------, -----............................
---------, -----............................
---------, -----............................
---------, -----............................
Weighted Average Life (years)(1)............
-----------
(1) The weighted average life of a [Class B Note] [certificates] is
determined by: (a) multiplying the amount of each principal
payment on the applicable security by the number of years from the
date of issuance of the security to the related payment date, (b)
adding the results, and (c) dividing the sum by the related
initial principal amount of the security.
This table has been prepared based on the assumptions described on
pages S-___ and S-___ (including the assumptions regarding the
characteristics and performance of the receivables, which will differ from
the actual characteristics and performance thereof) and should be read in
conjunction therewith.
S-24
<PAGE>
Description of the Notes
General
The following summarizes the material terms of the notes offered
hereby and the indenture pursuant to which they will be issued. The summary
does not purport to be complete and is qualified in its entirety by
reference to the provisions of the notes and the indenture. The following
summary supplements, and to the extent it is inconsistent with, replaces,
the description of the general terms and provisions of the notes of any
given series and the related indenture set forth in the prospectus.
Payments of Interest
Interest due on the notes, including any amount of interest on the
notes that was not previously paid when due (and, to the extent permitted
by law, any interest on that unpaid amount), will be payable monthly on
each payment date, commencing _____ __, ____ [, except that interest on the
A-1 Notes will also be paid on _________ ___, _____ if any A-1 Notes remain
outstanding after the _________ _____ payment date]. Interest will accrue
for each class of notes during each interest period at the applicable
interest rate. The interest period applicable to any payment date will be
the period from and including the preceding payment date (or, in the case
of the initial payment date, from and including the closing date) to but
excluding that payment date. Interest on the A-1 Notes will be calculated
on the basis of the actual number of days in the applicable interest period
and a 360-day year. Interest on the other notes will be calculated on the
basis of a 360-day year of twelve 30-day months.
If the trust does not pay the full amount of interest due on any
class of notes on any payment date, the amount of interest not paid will be
due on the next payment date and will itself accrue interest, to the extent
permitted by law, at a rate per annum equal to the interest rate on that
class of notes from that payment date to but excluding the payment date on
which that interest is paid.
If the amount of interest on the Class A Notes payable on any
payment date exceeds the amounts available on that date, the holders of
Class A Notes will receive their ratable share (based upon the total amount
of interest due to each of them) of the amount available to be distributed
in respect of interest on the Class A Notes.
Interest on the [Class B Notes] [certificates] will not be paid on
any payment date until interest on the Class A Notes has been paid in full.
Payments of Principal
As more fully described below in the definition[s] of Class A
Noteholders' Monthly Principal Distributable Amount [and Class B
Noteholders' Monthly Principal Distributable Amount], principal will be
paid on the notes on each payment date in an amount generally equal to the
decrease in the [sum of (i) the] Pool Balance [and (ii) the amount on
deposit in the trust's pre-funding account, in each case] during the prior
calendar month. On each payment date, the principal payments will be
allocated among the various classes of notes as described below.
S-25
<PAGE>
The principal of the Class A Notes will be payable on each payment
date[, except that principal on the A-1 Notes will also be paid on _______,
___, ______ if any A-1 Notes remain outstanding after the ______ ____ payment
date]. Principal payments on the Class A Notes will be payable on each payment
date, to the extent of funds available therefor, in an amount generally equal
to the Class A Noteholders' Monthly Principal Distributable Amount, except that
(a) in no event shall the Class A Noteholder's Monthly Distributable Amount
allocated to any class of Class A Notes exceed the outstanding principal
amount of that class, and (b) on the final maturity date for each class of
Class A Notes, the Class A Noteholder's Monthly Distributable Amount for
that class will include the amount, to the extent of available funds,
necessary (after giving effect to the other amounts to be deposited in the
note distribution account on that payment date and allocable to principal)
to reduce the outstanding principal amount of that class to zero. The Class
A Noteholders' Month Principal Distributable Amount will be allocated to
the holders of the various classes of Class A Notes in the following order
of priority (beginning with the highest priority and descending to the
lowest): the A-1 Notes, the A-2 Notes, the A-3 Notes and the A-4 Notes.
Accordingly, no principal will be paid on any class of Class A Notes until
each class of Class A Notes with a lower numerical designation has been
paid in full (i.e., no principal will be paid on the A-2 Notes until the
A-1 Notes have been paid in full).
[The principal of the Class B Notes will be payable on each
payment date, to the extent of funds available therefor, in an amount
generally equal to the Class B Noteholders' Monthly Principal Distributable
Amount. However, no principal payments will be made on the Class B Notes on
any payment date until all amounts payable with respect to the Class A
Notes on that payment date have been paid in full.]
After an event of default and acceleration of the notes (and, if
any notes remain outstanding, on and after the final scheduled maturity
date for the last of the notes, as specified below), principal payments
will be made first to the holders of the Class A Notes ratably according to
the amounts due and payable on the Class A Notes for principal until paid
in full [and then to the Class B Noteholders until the outstanding
principal amount of the Class B Notes has been paid in full].
The final principal payment with respect to each class of notes is
due not later than the [date specified or the] payment date in the month
specified for each class below:
Class Final Maturity Date
----- --------------------
A-1 ............................................. ______ ___, ____
A-2 ............................................. ______ _____
A-3 ............................................. ______ _____
A-4 ............................................. ______ _____
[B ............................................. ______ _____]
Upon any prepayment in full of a receivable, the Contract Value of
that receivable will be reduced to zero. This results in an increment to
the targeted principal distribution amount for the related payment date
equal to the full Contract Value of the prepaid receivable. However, in
circumstances where the Contract Value of the prepaid receivable exceeded
S-26
<PAGE>
its outstanding principal balance, the principal collected through the
prepayment will be less than the resulting increment to the targeted
principal distribution amount by an amount roughly equal to the excess of
the receivable's Contract Value over its outstanding principal balance
immediately prior to the prepayment. This will generally happen when the
annual percentage rate of the prepaid receivable was greater than the
weighted average annual percentage rate used to calculate its Contract
Value. It may also result from early payments on simple interest
receivables. See "The Receivables Pool."
[To the extent necessary to maintain the initial credit ratings on
the notes, funds will be deposited in the trust's principal supplement
account each time the trust buys any additional receivables during the
pre-funding period. Any such funds are intended to cover shortfalls that
could result from prepayments of this type. On each payment date, funds
will be withdrawn from the principal supplement account and included in the
funds distributed on that payment date to cover shortfalls in distributions
of interest and principal on the [notes] [securities] (after giving effect
to any withdraw to be made from the spread account on that payment date).
However, no funds may be required to be deposited into the principal
supplement account, and in any event any required deposit is expected to be
less than the maximum aggregate shortfall that might result if all
receivables of this type prepaid. Therefore, if a significant number of
those receivables prepay, there may be insufficient funds available in the
principal supplement account to cover the resulting shortfall].
As used herein, with respect to any payment date:
"Class A Noteholders' Monthly Principal Distributable Amount"
means, for any payment date (a) on which any principal of the A-1 Notes
remains outstanding as of the related record date, the greater of (1) the
aggregate scheduled principal payments on the receivables received during
the prior calendar month and (2) the excess of (x) the sum of the
outstanding principal balance of the Class A Notes and the certificates
minus (y) [__]% of the [sum of (I) the] Pool Balance [and (II) any amounts
on deposit in the pre-funding account, in each case] as of the end of the
immediately preceding calendar month, and (b) after the payment date on
which the A-1 Notes have been reduced to zero, the excess of (1) the sum of
the outstanding principal balance of the Class A Notes and the certificates
minus (2) [__]% of the [sum of (I) the] Pool Balance [and (II) any amounts
on deposit in the pre-funding account, in each case] as of the end of the
immediately preceding calendar month; except that in no event shall the
Class A Noteholders' Monthly Principal Distributable Amount exceed the
outstanding amount of the Class A Notes. [For purposes of the calculation
of any amount on deposit in the pre-funding account on any payment date,
any amount in the pre-funding account that is to be paid out on that
payment date in connection with the end of the pre-funding period shall be
deemed to have been withdrawn from the pre-funding account as of the first
day of the calendar month immediately preceding that payment date.]
["Class B Noteholders' Monthly Principal Distributable Amount"
means, for any payment date, the excess of (1) the sum of the outstanding
principal balance of the Class A Notes (after giving effect to payments on
the Class A Notes on that payment date), the Class B Notes and the
certificates minus (2) 100% of the [sum of (x) the] Pool Balance [and (y)
any amounts on deposit in the pre-funding account, in each case] as of the
end of the immediately preceding calendar month; except that (a) in no
event shall the Class B Noteholder's Monthly Distributable Amount exceed
the outstanding principal amount of the Class B Notes, and (b) on the final
S-27
<PAGE>
maturity date for the Class B Notes, the Class B Noteholder's Monthly
Distributable Amount will include the amount, to the extent of available
funds, necessary (after giving effect to the other amounts to be deposited
in the note distribution account on that payment date and allocable to
principal) to reduce the outstanding principal amount of the Class B Notes
to zero. For purposes of the calculation of any amount on deposit in the
pre-funding account on any payment date, any amount in the pre-funding
account that is to be paid out on that payment date in connection with the
end of the pre-funding period shall be deemed to have been withdrawn from
the pre-funding account as of the first day of the calendar month
immediately preceding that payment date.]
"Pool Balance" means, at any time, the sum of the aggregate
Contract Values of the receivables at the beginning of a calendar month,
after giving effect to all payments received from obligors and any amounts
to be remitted by the servicer or us, as the case may be, with respect to
the preceding calendar month and all losses realized on receivables
liquidated during that preceding calendar month.
Cutoff Dates
A number of important calculations relating to the receivables
will be made by reference to "cutoff dates" and "calendar months." For
instance, the Contract Value of the initial receivables and each set of
additional receivables that we sell to the trust will be determined as of a
related cutoff date. A cutoff date will be the last day of the calendar
month prior to the month during which the sale takes place.
[Payments on the notes on each payment date will primarily be
funded with collections on the receivables that are received during the
prior calendar month, however, in the case of the first payment date,
instead of a calendar month payments on the notes will primarily be funded
with collections on the receivables that are received during the period
from and including ______ __, 2000 to but excluding ______ __, 2000.]
Record Dates
Payments on the notes will be made on each payment date to holders
of record as of the fourteenth day of the calendar month in which the
payment date occurs or, if definitive notes are issued, the close of
business on the last day of the prior calendar month. [A special record
date of _________ ___, _____ will apply for the special _____ _____ payment
date relating to the A-1 Notes.]
[Mandatory Redemption
On the payment date on or immediately following the last day of
the pre-funding period, any funds remaining in the pre-funding account
(after giving effect to the purchase of all additional receivables,
including any receivables purchased on that date) will be applied to redeem
the notes then outstanding in the same sequence and proportions that would
apply if the remaining funds were a part of the targeted principal
distribution amount on that payment date.]
S-28
<PAGE>
Optional Redemption
Any notes that remain outstanding on any payment date on which the
servicer exercises its clean-up call will be prepaid in whole at the
applicable redemption price on that payment date. The clean-up call cannot
be exercised until the Pool Balance declines to 10% or less of [the sum of
(i)] the Pool Balance as of the [initial] cutoff date [plus (ii) the
aggregate Contract Value of all additional receivables sold to the trust as
of their respective cutoff dates]. The redemption price for any class of
notes in connection with any optional redemption will equal the unpaid
principal balance of that class of notes, plus accrued and unpaid interest
thereon.
Registration of Notes
The notes will be cleared through DTC. You may hold your notes
through DTC (in the United States) or Clearstream or Euroclear (in Europe)
if you are a participant of those systems, or indirectly through
organizations that are a participant in those systems.
The Indenture Trustee
Harris Trust and Savings Bank is the indenture trustee under the
indenture pursuant to which the notes will be issued. Harris Trust and
Savings Bank is an Illinois banking corporation, and its corporate trust
offices are located at 311 West Monroe Street, Chicago, Illinois. In the
ordinary course of its business, the indenture trustee and its affiliates
have engaged and may in the future engage in commercial banking or
financial advisory transactions with CNH and its affiliates.
[Pursuant to the Trust Indenture Act, the indenture trustee may be
deemed to have a conflict of interest and be required to resign as trustee
for either the Class A Notes or the Class B Notes if a default occurs under
the indenture. The indenture will provide for a successor trustee to be
appointed for one or both classes of notes in these circumstances, so that
there will be separate trustees for the Class A Notes and the Class B
Notes. In these circumstances, the Class A noteholders and Class B
noteholders will continue to vote as a single group. So long as any amounts
remain unpaid with respect to the Class A Notes, only the trustee for the
Class A noteholders will have the right to exercise remedies under the
indenture (but the Class B noteholders will be entitled to their share of
any proceeds of enforcement, subject to the subordination of the Class B
Notes to the Class A Notes as described herein). Upon repayment of the
Class A Notes in full, all rights to exercise remedies under the indenture
will transfer to the trustee for the Class B Notes. Any resignation of the
original indenture trustee as described above with respect to any class of
notes will become effective only upon the appointment of a successor
trustee for that class of notes and the successor's acceptance of that
appointment.]
Description of the Certificates
[On the closing date, the trust will issue $_________ asset-backed
certificates pursuant to the trust agreement. We will initially purchase
the entire principal amount of the certificates.
Distributions of interest and principal on the certificates will
be subordinated in priority of payment to interest and principal due on the
S-29
<PAGE>
notes to the extent described in this prospectus supplement. Funds on
deposit in the spread account and the principal supplement account will not
be available to cover scheduled payments with respect to the certificates.]
The following summarizes the material terms of the certificates
and the trust agreement. The summary does not purport to be complete and is
qualified in its entirety by reference to the provisions of the
certificates and the trust agreement. The following summary supplements,
and to the extent it is inconsistent with, replaces, the description of the
general terms and provisions of the certificates of any given series and
the related trust agreement set forth in the prospectus.
Distributions of Interest Income
The certificates will bear interest at the rate of ___% per
annum[, except that during the pre-funding period no interest will accrue
on a percentage of the certificates balance equal to the pre-funded amount
divided by the outstanding Pool Balance].
On each payment date, certificateholders will be entitled to
distributions in an amount equal to the amount of interest that would
accrue at ____% on the certificate balance as of the last day of the
preceding calendar month. Interest distributable on a payment date will
accrue from and including the closing date or from the most recent payment
date on which interest distributions have been made to but excluding that
payment date and will be calculated on the basis of a 360-day year
consisting of twelve 30-day months. Interest distributions due for any
payment date but not distributed on such payment date will be due on the
next payment date increased by an amount equal to interest on such amount
at a rate per annum equal to ____% (to the extent lawful). Interest on the
certificates will not be paid on any payment date until interest and
principal on the notes have been paid in full.
Distributions of Principal
Principal on the certificates will be payable on each payment date
after principal on all of the notes has been paid in full in an amount
generally equal to the Certificateholders' Principal Distributable Amount
for that payment date (to the extent of funds available) until paid in
full. As use herein,"Certificateholders' Principal Distributable Amount"
means, for any payment date, the excess of (1) the sum of the outstanding
principal balance of the Class A Notes (after giving effect to payments on
the Class A Notes on that payment date) and the certificates minus (2) 100%
of the [sum of (x) the] Pool Balance [and (y) any amounts on deposit in the
pre-funding account, in each case] as of the end of the immediately
preceding calendar month; except that (a) in no event shall the
Certificateholders' Principal Distributable Amount exceed the outstanding
principal amount of certificates, and (b) on the final scheduled maturity
date, the Certificateholders' Principal Distributable Amount will include
the amount, to the extent of available funds, necessary (after giving
effect to the other amounts to be deposited in the note distribution
account and the certificate distribution account on such payment date and
allocable to principal) to reduce the outstanding principal amount of
certificates to zero.
[Mandatory Repurchase
On the payment date on or immediately following the last day of
the pre-funding period, any funds remaining in the pre-funding account
(after giving effect to the purchase of all additional
S-30
<PAGE>
receivables, including any receivables purchased on that date) will be
applied to redeem the notes and then to purchase the certificates then
outstanding in the same sequence and proportions that would apply if the
remaining funds were a part of the targeted principal distribution amount.]
Optional Repurchase
Any certificates that remain outstanding on any payment date on
which the servicer exercises its clean-up call will be repurchased at the
applicable repurchase price on that payment date. The clean-up call cannot
be exercised until the Pool Balance declines to 10% or less of [the sum of
(i)] the Pool Balance as of the [initial] cutoff date [plus (ii) the
aggregate Contract Value of all additional receivables sold to the trust as
of their respective cutoff dates]. The repurchase price for the
certificates in connection with any optional redemption will equal the
unpaid principal balance of those certificates, plus accrued and unpaid
interest thereon.
Registration of Certificates
The certificates will be cleared through DTC. You may hold your
certificates through DTC (in the United States) or Clearstream or Euroclear
(in Europe) if you are a participant of those systems, or indirectly
through organizations that are in participant in those systems.
Description of the Transaction Agreements
We summarize below some material terms of the agreements under
which the credit companies will, directly or indirectly, transfer
receivables to us and we will sell them to the trust, and under which Case
Credit will agree to service the trust's receivables and administer the
trust. This description supplements the disclosure in the prospectus under
the same heading. The following summary does not include all of the terms
of the agreements and is qualified by reference to the actual agreements.
[Sales of Receivables
In addition to the receivables, we expect to sell the trust
additional receivables having an aggregate Contract Value approximately
equal to the amount we will deposit in the trust's pre-funding account. We
expect to sell additional receivables to the trust monthly on dates
specified by us during the pre-funding period. The pre-funding period will
begin on the closing date and end on the earliest of: (a) the day on which
the amount on deposit in the trust's pre-funding account is reduced to less
than $100,000, (b) the date on which an event of default or a servicer
default occurs, (c) the date on which an insolvency event occurs with
respect to us or the servicer and (d) the close of business on the
_________ _____ payment date.
Upon any sale of additional receivables to the trust:
(1) the Pool Balance will increase in an amount equal
to the aggregate Contract Value of the additional receivables;
S-31
<PAGE>
(2) an amount equal to _____% of the aggregate Contract
Value of the additional receivables will be withdrawn from the
pre-funding account and deposited in the spread account;
(3) if any deposit into the principal supplement account
is required, the necessary funds will be withdrawn from the
pre-funding account and deposited in the principal supplement
account; and
(4) an amount equal to the excess of the aggregate
Contract Value of the additional receivables over the sum of the
amounts described in clauses (2) and (3) will be withdrawn from
the pre-funding account and paid to us.]
Servicing Compensation and Payment of Expenses
The servicing fee payable to the servicer will accrue at a rate of
1.00% per annum on the Pool Balance as of the first day of each calendar
month. The servicing fee will be paid solely to the extent that there are
funds available to pay it as described under "-- Distributions" below.
Distributions
On each payment date, the servicer will cause payments on the
notes and other trust liabilities to be made from the following sources:
o the aggregate collections on the receivables during the
prior calendar month, including proceeds of liquidated
receivables obtained through the sale or other
disposition of the related equipment, net of expenses
incurred by the servicer in connection with such
liquidation and any amounts required by law to be
remitted to the related obligor; however, no other monies
collected on any liquidated receivable during any
calendar month after the calendar month in which it
became a liquidated receivable will be included in the
funds available for distribution;
[o any amounts withdrawn from the negative carry account for
that payment date;]
o earnings from investment of funds held in the trust's bank
accounts; and
o the aggregate purchase prices for any receivables repurchased
by us or the servicer.
The aggregate funds available from these sources will be applied
in the following order of priority:
(1) to pay the trust's administrator, all accrued and unpaid
administration fees;
(2) to pay the amount of interest accrued on each class of
Class A Notes during the prior interest period, plus
any amount of interest on the Class A Notes that was
not paid when due (and, to the extent permitted by law,
any interest on that unpaid amount);
S-32
<PAGE>
(3) [to pay the amount of interest accrued on the Class B
Notes during the prior interest period, plus any amount
of interest on the Class B Notes that was not paid when
due (and, to the extent permitted by law, any interest
on that unpaid amount)] [to pay the amount of interest
accrued on the certificates during the prior interest
period, plus any amount of interest on the certificates
that was not paid when due (and, to the extent
permitted by law, any interest on that unpaid amount)];
(4) to pay principal on the notes as follows:
o first, the Class A Noteholders' Monthly Distributable
Amount for each class of Class A Notes and
[o second, the Class B Noteholders' Monthly Principal
Distributable Amount;]
[(4)(5) to pay principal on the certificates in the
Certificateholders' Principal Distributable Amount;]
[(5)(6)] to deposit in the spread account, to the extent
necessary so that the balance in that account will not
be less than the required balance;
[(6)(7)] to pay accrued and unpaid interest on the certificates;
[(7) after the notes have been repaid in full, to pay principal
on the certificates]; and
(8) to pay the servicer its accrued and unpaid servicing
fee; provided that if Case Credit or an affiliate of
Case Credit is not the servicer, the amounts described
in this clause (8) will be paid prior to any other
application of funds on deposit in the collection
account.
Any remaining funds will be paid to us.
After an event of default and acceleration of the notes (and, if
any notes remain outstanding, on and after the final scheduled maturity
date for the last of the notes), principal payments will be made first to
the Class A noteholders ratably according to the amounts due on the Class A
Notes for principal until paid in full [and then to the Class B noteholders
until the outstanding principal amount of the Class B Notes has been paid
in full].
You should note, however, that until the final scheduled payment
date for any class of [notes][securities], the amount of principal [and
interest] due to [noteholders][securityholders] will generally be limited
to amounts available for that purpose. Therefore, the failure to pay
principal [or interest] on a class of [notes][securities] generally will
not result in the occurrence of an event of default until the final
scheduled payment date for that class of [notes][securities].
[Negative Carry Account
The servicer will establish and maintain the negative carry
account as a trust account in the name of the indenture trustee for the
benefit of the noteholders. On the closing date, we will make
S-33
<PAGE>
an initial deposit of $________ into the negative carry account. The amount
of that initial deposit is determined by applying the following "Maximum
Negative Carry Amount" calculation as of the closing date:
"Maximum Negative Carry Amount" equals the product of:
(a) the weighted average of the interest rate on each
class of the notes minus _____%; multiplied by
(b) the percentage equivalent of a fraction the numerator
of which is the outstanding principal balance of the notes and the
denominator of which is the aggregate outstanding principal
balance of the notes and the certificates; multiplied by
(c) the amount on deposit in the pre-funding account;
multiplied by
(d) the fraction of a year represented by the number of
days until the expected end of the pre-funding period, calculated
on the basis of a 360-day year of twelve 30-day months.
On each payment date, the servicer will instruct the indenture
trustee to withdraw from the negative carry account and deposit into the
collection account and include in the funds available for distribution on
that payment date an amount equal to the excess, if any, of
(1) the product of (A) the aggregate interest payable on
all of the notes, multiplied by (B) the Pre-Funded Percentage, as
of the immediately prior payment date, or in the case of the first
payment date, the closing date, minus
(2) investment earnings on the pre-funding account for
the related period.
The "Pre-Funded Percentage" for each calendar month is the
percentage derived from the fraction the numerator of which is the balance
on deposit in the pre-funding account and the denominator of which is the
sum of the Pool Balance and the balance on deposit in the pre-funding
account, after taking into account all transfers of additional receivables
during that calendar month.
If the amount on deposit in the negative carry account on any
payment date, after giving effect to the withdrawal referred to above is
greater than the Maximum Negative Carry Account Balance, the excess will be
released to us. All amounts remaining on deposit in the negative carry
account at the end of the payment date on or immediately following the last
day of the pre-funding period will also be released to us.]
Spread Account
The servicer will establish and maintain the spread account as a
trust account in the name of the indenture trustee for the benefit of the
noteholders. On the closing date, we will make an initial deposit into the
spread account of $________, which equals __% of the aggregate Contract
Value of the initial receivables as of the initial cutoff date. On each day
that we sell additional receivables to the trust, cash or eligible
investments having a value approximately equal to _____% of the aggregate
Contract Value of those additional receivables as of their cutoff date will
S-34
<PAGE>
be withdrawn from the pre-funding account from amounts otherwise
distributable to us in connection with the sale of additional receivables
and deposited in the spread account. Finally, on each payment date, the
servicer will transfer additional amounts into the spread account to the
extent that the balance in that account would otherwise be less than the
Specified Spread Account Balance, and funds are available for that purpose
after other higher priority distributions.
"Specified Spread Account Balance" means, with respect to any
payment date, the lesser of (a) _____% of [the sum of (i)] the Pool Balance
as of the [initial] cutoff date [plus (ii) the aggregate Contract Value of
all additional receivables sold to the trust as of their respective cutoff
dates] and (b) the outstanding principal amount of the notes. We may reduce
or otherwise modify the Specified Spread Account Balance without the
consent of the noteholders if the rating agencies that have rated the notes
confirm in writing that the reduction or modification will not result in a
reduction or withdrawal of the rating of the notes.
If the amount on deposit in the spread account on any payment date
(after giving effect to all deposits or withdrawals therefrom on that
payment date) is greater than the Specified Spread Account Balance for that
payment date, the excess will be distributed to us. However, if, after
giving effect to all payments made on the notes on that payment date, the
[sum of the] Pool Balance [plus the balance on deposit in the pre-funding
account] as of the first day of the calendar month in which that payment
date occurs is less than the aggregate outstanding principal balance of the
notes and certificates, that excess amount will not be distributed to us
and will be retained in the spread account.
After we receive any amounts duly released from the spread
account, the noteholders will not have any or claims to those amounts.
On each payment date, funds will be withdrawn from the spread
account and deposited in the note distribution account to the extent
necessary to cover, any shortfall on that payment date, of the amount of
interest accrued on each class of notes during the prior interest period,
plus any amount of interest on the notes that was not paid when due (and,
to the extent permitted by law, any interest on that unpaid amount)[,][and]
the Class A Noteholder's Monthly Distributable Amount [and the Class B
Noteholders' Monthly Principal Distributable Amount], in each case on that
payment date. For a more detailed description of the amount of interest and
principal payable on the notes, see "Description of the Notes--Payments of
Interest" and "--Payments of Principal" above.
Funds withdrawn from the spread account and deposited in the note
distribution account for distribution as described in this paragraph and
will be applied in the same order of priority applicable to distributions
from the collection account. Funds on deposit in the spread account will
not be used to cover shortfalls in any distributions to the
certificateholders.
Principal Supplement Account
The servicer will establish and maintain in the name of the
indenture trustee a principal supplement account for the benefit of the
noteholders. [However, no deposit is required to be made into the principal
supplement account on or before the closing date]. After the closing date,
deposits will only be required to be made into the principal supplement
account on addition cutoff dates and then only if the Required Principal
Supplement Account Balance determined for the subject addition
S-35
<PAGE>
cutoff date is greater than zero. [On each addition cutoff date, cash or
eligible investments having a value equal to any positive Required
Principal Supplement Account Balance for that addition cutoff date (minus
any amount then on deposit in the principal supplement account) will be
withdrawn from the pre-funding account and deposited in the principal
supplement account.]
On each payment date, funds will be withdrawn from the principal
supplement account and deposited in the note distribution account to the
extent necessary to cover any shortfall on that payment date (after giving
effect to any withdrawals to be made on that payment date from the spread
account) of the amount of interest accrued on each class of notes during
the prior interest period, plus any amount of interest on the notes that
was not paid when due (and, to the extent permitted by law, any interest on
that unpaid amount)[,][and] the Class A Noteholder's Monthly Distributable
Amount [and the Class B Noteholders' Monthly Principal Distributable
Amount], in each case on that payment date. Funds withdrawn from the
principal supplement account and deposited in the note distribution account
for distribution as described in this paragraph will be applied in the same
order of priority applicable to distributions from the collection account.
Funds on deposit in the principal supplement account will not be used to
cover shortfalls in any distributions to the certificateholders.
Funds on deposit in the principal supplement account may be
withdrawn and paid to us on any day if each of the rating agencies for the
notes has confirmed that such action will not result in a withdrawal or
downgrade of its rating of any class of [notes] [securities].
"Required Principal Supplement Account Balance" means, for any
addition cutoff date, the excess, if any, of (a) an amount equal to the
difference (if positive) of (x) the Contract Value of the receivables, and
(y) the aggregate of the contractual payoff amount for each receivable, in
each case as of the end of the prior calendar month (or the applicable
addition cutoff date for additional receivables being transferred on that
addition cutoff date), over (b) the amount determined by the servicer to
represent excess cash flows from the receivables that can reasonably be
expected to be available to cover the amount described in clause (a) above,
provided that each of the rating agencies for the notes has confirmed that
use of such amount determined by the servicer in calculating the Required
Principal Supplement Account Balance for the applicable addition cutoff
date will not result in a withdrawal or downgrade of its rating of any
class of notes.
Legal Investment
The A-1 Notes will be eligible for purchase by money market funds
under paragraph (a)(10) of Rule 2a-7 under the Investment Company Act of
1940, as amended.
ERISA Considerations
The Notes
We have been advised that, although there is little guidance on
the subject, the notes should not be treated as "equity interests" in the
trust under the Plan Asset Regulation. As a result, the notes may be
purchased by an employee benefit plan or an individual retirement account
(a "Plan") subject to the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), or Section 4975 of the Internal Revenue Code of 1986,
as amended.
S-36
<PAGE>
However, whether or not the notes are treated as equity interests
for purposes of the Plan Asset Regulation, the acquisition or holding of
Notes by or on behalf of a Plan could be considered to give rise to a
"prohibited transaction" if the trust, the servicer or the trustee is or
becomes a "party in interest" or a "disqualified person" with respect to
such Plan. Certain exemptions from the prohibited transaction rules could
be applicable to the purchase and holding of Notes by a Plan depending on
the type and circumstances of the plan fiduciary making the decision to
acquire such notes. Included among these exemptions are: Prohibited
Transaction Class Exemption ("PTCE") 75-1, regarding transactions between
registered broker-dealers and plans; PTCE 90-1, regarding investments by
insurance company pooled separate accounts; PTCE 91-38, regarding
investments by bank collective investment funds; PTCE 84-14, regarding
transactions effected by "qualified professional asset managers"; PTCE
95-60, regarding transactions by insurance company general accounts; and
PTCE 96-23, regarding certain transactions determined by in-house asset
managers. By its acquisition of a Note, each purchaser shall be deemed to
represent and warrant that its purchase and holding of the note will not
give rise to a nonexempt prohibited transaction under ERISA or the Internal
Revenue Code of 1986, as amended.
For additional information regarding treatment of the notes under
ERISA, see "ERISA Considerations" in the prospectus.
Underwriting
Class A Notes
Subject to the terms and conditions set forth in an underwriting
agreement relating to the Class A Notes, we have agreed to cause the trust
to sell to each of the underwriters named below, and each of those
underwriters has severally agreed to purchase, the principal amount of the
Class A Notes set forth opposite its name below:
A-1 Notes A-2 Notes A-3 Notes A-4 Notes
[Underwriter].............. $_______ $_______ $_______ $_______
[Underwriter].............. $_______ $_______ $_______ $_______
[Underwriter].............. $_______ $_______ $_______ $_______
[Underwriter].............. $_______ $_______ $_______ $_______
[Underwriter].............. $_______ $_______ $_______ $_______
[Underwriter].............. $ $ $ $
======= ======= ======= =======
$_______ $_______ $_______ $_______
The underwriters of the Class A Notes have advised us
that they propose initially to offer the Class A Notes to the public at the
prices set forth herein, and to certain dealers at such prices less the
initial concession not in excess of the percentages set forth in the
following table. The underwriters of the Class A Notes and such dealers may
reallow a concession not in excess of the percentages set forth in the
following table. After the initial public offering of the Class A Notes,
the public offering prices and the concessions referred to in this
paragraph may be changed.
S-37
<PAGE>
A-1 Notes A-2 Notes A-3 Notes A-4 Notes
Concessions..................... % % % %
Reallowances.................... % % % %
In the ordinary course of their respective businesses, the
underwriters of the Class A Notes and their respective affiliates have
engaged and may in the future engage in investment banking or commercial
banking transactions with CNH and its affiliates.
[Lead Underwriter], on behalf of the underwriters of the Class A
Notes, may engage in stabilizing transactions, syndicate covering
transactions and penalty bids in accordance with Rule 104 of Regulation M
under the Exchange Act. Stabilizing transactions permit bids to purchase
the underlying security so long as the stabilizing bids do not exceed a
specified maximum. Syndicate covering transactions involve purchases of the
Class A Notes in the open market after the distribution has been completed
in order to cover syndicate short positions. Penalty bids permit the
underwriters of the Class A Notes to reclaim a selling concession from an
underwriter of the Class A Notes or a dealer when the Class A Notes
originally sold by that underwriter or dealer are purchased in a syndicate
covering transaction to cover syndicate short positions. Such stabilizing
transactions, syndicate covering transactions and penalty bids may cause
the price of the Class A Notes to be higher than it would otherwise be in
the absence of such transactions. These transactions, if commenced, may be
discontinued at any time.
[Class B Notes] [Certificates]
Subject to the terms and conditions set forth in an underwriting
agreement relating to the [Class B Notes] [certificates], we have agreed to
cause the trust to sell to each of the underwriters named below, and each
of those underwriters has severally agreed to purchase, the principal
amount of [Class B Notes] [certificates] set forth opposite its name below:
[Class B
Notes]
[certificates]
[Underwriter].............................................. $_________
[Underwriter].............................................. $_________
=========
$_________
=========
The underwriters of the [Class B Notes][certificates] have advised
us that they propose initially to offer the [Class B Notes][certificates]
to the public at the prices set forth herein, and to certain dealers at
such prices less the initial concession not in excess of the percentages
set forth in the following table. The underwriters of the [Class B
S-38
<PAGE>
Notes][certificates] and such dealers may reallow a concession not in
excess of the percentages set forth in the following table. After the
initial public offering of the [Class B Notes][certificates], the public
offering prices and the concessions referred to in this paragraph may be
changed.
[Class B Notes]
[Certificates]
Concessions.................................. %
Reallowances................................. %
In the ordinary course of their respective businesses, the
underwriters of the Class B Notes and their respective affiliates have
engaged and may in the future engage in investment banking or commercial
banking transactions with CNH and its affiliates.
[Lead Underwriter], on behalf of the underwriters of the [Class B
Notes,] [certificates] may engage in stabilizing transactions, syndicate
covering transactions and penalty bids in accordance with Rule 104 of
Regulation M under the Exchange Act. Stabilizing transactions permit bids
to purchase the underlying security so long as the stabilizing bids do not
exceed a specified maximum. Syndicate covering transactions involve
purchases of the [Class B Notes] [certificates] in the open market after
the distribution has been completed in order to cover syndicate short
positions. Penalty bids permit the underwriters of the [Class B Notes]
[certificates] to reclaim a selling concession from an underwriter of the
[Class B Notes] [certificates] or a dealer when the [Class B Notes]
[certificates] originally sold by that underwriter or dealer are purchased
in a syndicate covering transaction to cover syndicate short positions.
Such stabilizing transactions, syndicate covering transactions and penalty
bids may cause the price of the [Class B Notes] [certificates] to be higher
than it would otherwise be in the absence of such transactions. These
transactions, if commenced, may be discontinued at any time.
The underwriters will be compensated as set forth in the following
table:
Underwriters' Amount
Discounts and per $1,000
Commissions of Principal Total Amount
------------- ------------- -------------
Class A Notes % $ $
Class B Notes % $ $
--------------
Total Class A and Class B
==============
Additional offering expenses are estimated to be $_______________.
S-39
<PAGE>
Legal Opinions
Certain legal matters relating to the notes will be passed upon
for the trust, us and the servicer by Mayer, Brown & Platt. Certain legal
matters relating to the notes will be passed upon for the underwriters by
Brown & Wood LLP. Certain federal income tax, Illinois state tax and other
matters will be passed upon for the trust by Mayer, Brown & Platt.
S-40
<PAGE>
Index of Terms
Page
----
Certificateholders' Principal Distributable Amount......................S-30
Class A Noteholders' Monthly Principal Distributable Amount.............S-27
Class B Noteholders' Monthly Principal Distributable Amount.............S-27
Contract Value..........................................................S-11
CPR.....................................................................S-20
ERISA...................................................................S-36
Maximum Negative Carry Amount...........................................S-34
Plan....................................................................S-36
Pool Balance............................................................S-28
Pre-Funded Percentage...................................................S-34
PTCE....................................................................S-37
Required Principal Supplement Account Balance...........................S-36
Specified Spread Account Balance........................................S-35
Statistical Contract Value..............................................S-13
S-41
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14 Other Expenses of Issuance and Distribution.
Estimated expenses in connection with the offering of the
Securities being registered herein are as follows:
SEC filing fee............................................ $ 264.00
Legal fees and expenses................................... 175,000.00
Accounting fees and expenses.............................. 210,000.00
Rating agency fees........................................ 420,000.00
Trustee fees and expenses................................. 14,000.00
Indenture Trustee fees and expenses....................... 7,000.00
Blue Sky expenses......................................... 28,000.00
Printing and engraving.................................... 210,000.00
Miscellaneous............................................. 5,736.00
--------
Total................................... $ 1,070,000.00
============
Item 15 Indemnification of Directors and Officers.
The Certificate of Incorporation of CNH Capital Receivables Inc.
(the "Corporation") includes the following provisions:
FIFTEENTH: (a) The Corporation shall indemnify any
officer or director who was or is a party or who is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (except an action
by or in the right of the Corporation) by reason of the fact that he or she
is or was a director or officer of the Corporation, or is or was serving at
the request of the Corporation as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or her in connection
with such action, suit or proceeding if he or she acted in good faith and
in a manner he or she reasonably believed to be in or not opposed to the
best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his or her conduct was
unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the Person did
not act in good faith or in a manner which he or she reasonably believed to
be in or not opposed to the best interests of the Corporation, and, with
respect to any criminal action or proceeding, had reasonable cause to
believe that his or her conduct was unlawful.
(b) The Corporation shall indemnify any officer or director who
was or is a party or who is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgement in its favor by reason of the fact that
he or she is or was a director or officer of the Corporation, or is or was
serving at the request of the Corporation as a director or officer of
another corporation, partnership, joint venture, trust or other enterprise
against expenses, including amounts paid in settlement and attorneys' fees
actually and reasonably incurred by him in connection with the defense or
settlement of the action or suit if he or she acted in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation. Indemnification may not be made for any
claim, issue or matter as to which such a person has been adjudged by a
court of competent jurisdiction, after exhaustion of all appeals therefrom,
to be liable to the Corporation or for amounts paid in settlement to the
Corporation, unless and only to the extent that the court in which the
action or suit was brought or other court of competent jurisdiction
determines upon application that in view of all the circumstances of the
case, the person is fairly and reasonably entitled to indemnity for such
expenses as the court deems proper.
II-1
<PAGE>
(c) Notwithstanding anything contained in this ARTICLE FIFTEENTH
to the contrary and subject to the applicable provisions of the General
Corporation Law of the State of Delaware, as long as any obligations of the
Corporation are outstanding, the rights of each officer and director of the
Corporation hereunder shall be entirely subordinated to the full payment
when due of all such obligation.
The By-Laws of CNH Capital Receivables Inc. (the "Corporation")
include the following provisions:
ARTICLE V
INDEMNIFICATION
Section 1. General: The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than any action by or in
the right of the Corporation) by reason of the fact that such person is or
was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by the
person in connection with such action, suit or proceeding if the person
acted in good faith and in a manner the person reasonably believed to be in
or not opposed to the best interests of the Corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe
his or her conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which
the person reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his or her conduct was
unlawful.
Section 2. Action or Suit By or in the Right of the
Corporation: The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that such person is or was a
director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by the person in connection with the defense or
settlement of such action or suit if the person acted in good faith and in
a manner the person reasonably believed to be in or not opposed to the best
interests of the Corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the Corporation unless and only to the
extent that the Court of Chancery of Delaware or the court in which such
action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery of Delaware or such other court shall
deem proper.
Section 3. Expenses: To the extent that a director,
officer, employee or agent of the Corporation has been successful on the
merits or otherwise in defense of any action, suit or proceeding referred
to in Sections 1 and 2 of this Article V, or in defense of any claim, issue
or matter therein, he or she shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him or her
in connection therewith.
Section 4. Authorization: Any indemnification under
Sections 1 and 2 of this Article V (unless ordered by a court) shall be
made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in Sections 1 and 2. Such
determination shall be made (i) by a majority vote of the directors who
were not parties to such action, suit or proceeding, even though less than
a
12697439.1 52400 1008C 95202263
II-2
<PAGE>
quorum, or (ii) if there are no such directors, or if such directors so
direct, by independent legal counsel in a written opinion, or (iii) by the
stockholders.
Section 5. Advancement of Expenses: Expenses (including
attorneys' fees) incurred by an officer or director in defending any civil,
criminal, administrative or investigative action, suit or proceeding may be
paid by the Corporation in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf of such
director or officer to repay such amount if it shall ultimately be
determined that he or she is not entitled to be indemnified by the
Corporation as authorized in this Article V. Such expenses (including
attorneys' fees) incurred by other employees and agents may be so paid upon
such terms and conditions, if any, as the Board of Directors deems
appropriate.
Section 6. Other Rights: The indemnification and
advancement of expenses provided by, or granted pursuant to, the other
subsections of this Article V shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses
may be entitled under the Certificate of Incorporation, any by-law,
agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in another
capacity while holding such office.
Section 7. Insurance: The Corporation may purchase and
maintain insurance on behalf of any person who is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him or her and incurred by him or
her in any such capacity, or arising out of his or her status as such,
whether or not the Corporation would have the power to indemnify him or her
against such liability under the provisions of this Article V. Insurance
purchased by the Corporation in accordance with this Article V may, but
need not (i) be for the benefit of all directors, officers, employees and
agents of the Corporation and (ii) provide also for indemnification or
reimbursement to the Corporation of and for payments and obligations to
make payments by the Corporation to any of its directors, officers,
employees or agents to the extent such payments or obligations to make
payments are permitted under Sections 1 and 6 of this Article V.
Section 8. The Corporation: For purposes of this Article
V references to "the Corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority
to indemnify its directors, officers, and employees or agents, so that any
person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Article V
with respect to the resulting or surviving corporation as he or she would
have with respect to such constituent corporation if its separate existence
had continued.
Section 9. Other Enterprises: For purposes of this
Article V, references to "other enterprises" shall include employee benefit
plans; references to "fines" shall include any excise taxes assessed on a
person with respect to an employee benefit plan; and references to "serving
at the request of the Corporation" shall include any service as a director,
officer, employee or agent of the Corporation which imposes duties on, or
involves services by, such director, officer, employee, or agent with
respect to an employee benefit plan, its participants, or beneficiaries;
and a person who acted in good faith and in a manner he or she reasonably
believed to be in the interest of the participants and beneficiaries of an
employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this
Article V or in Section 145 of the Delaware General Corporation Law.
Section 10. Continuation: The indemnification and
advancement of expenses provided by, or granted pursuant to, this Article V
shall, unless otherwise provided when authorized or ratified, continue as
to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators of
such a person.
II-3
<PAGE>
Section 11. Contract: All rights to indemnification and
advancement of expenses provided by this Article V shall be deemed to be a
contract between the Corporation and each person referred to herein. Any
repeal or modification of this Article or any repeal or modification of
relevant provisions of the Delaware General Corporation Law or any other
applicable law shall not in any way diminish any rights to indemnification
or advancement of expenses with respect to any state of facts then or
previously existing or any action, suit or proceeding previously or
thereafter brought or threatened based in whole or in part on such state of
facts.
The Corporation has purchased insurance that purports to
insure it against certain costs of indemnification that may be incurred by
it pursuant to the foregoing Certificate of Incorporation and By-Law
provisions, and to insure the officers and directors of the Corporation,
and of its subsidiary companies, against certain liabilities incurred by
them in the discharge of their function as such officers and directors
except for liabilities resulting from their own malfeasance.
Item 16 Exhibits.
1(a)** --Form of Underwriting Agreement for Notes
1(b)** --Form of Underwriting Agreement for Certificates
3(a)* --Certificate of Incorporation of CNH Capital Receivables Inc.
3(b)* --By-Laws of CNH Capital Receivables Inc.
3(c)** --Form of Certificate of Trust of CNH Equipment Trusts
(included as part of Exhibit 4(b))
4(a)** --Form of Indenture between the Trust and the Indenture
Trustee
4(b)** --Form of Trust Agreement between CNH Capital Receivables Inc.
and the Trustee
4(c)** --Form of Class A-1 Note (included as part of Exhibit 4(a))
4(d)** --Form of Class A-2 Note (included as part of Exhibit 4(a))
4(e)** --Form of Class A-3 Note (included as part of Exhibit 4(a))
4(f)** --Form of Class B Note (included as part of Exhibit 4(a))
4(g)** --Form of Certificate (included as part of Exhibit 4(b))
5** --Opinion of Mayer, Brown & Platt with respect to legality
8** --Opinion of Mayer, Brown & Platt with respect to Federal
income and Illinois tax matters
23(a)** --Consent of Mayer, Brown & Platt (included as part of
Exhibit 5)
23(b)** --Consent of Mayer, Brown & Platt (to be included as part of
Exhibit 8)
24* --Power of Attorney (included on page II-4)
25** --Form T-1 Statement of Eligibility
99(a)** --Form of Sale and Servicing Agreement between CNH Capital
Receivables Inc., the Trust and Case Credit Corporation
99(b)** --Form of Administration Agreement between the Trust, Case
Credit Corporation and the Indenture Trustee
99(c)** --Form of Purchase Agreement between Case Credit Corporation
and CNH Capital Receivables Inc.
--------------------
* Filed herewith.
** To be filed by amendment.
II-4
<PAGE>
Item 17 Undertakings
(a) As to Rule 415: The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made of the securities registered hereby, a post-effective
amendment to this registration statement;
(i) to include any prospectus required by Section
10(a)(3) of the Securities Act of 1933, as amended;
(ii) to reflect in the prospectus any facts or events
arising after the effective date of this registration
statement (or the most recent post-effective amendment
hereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in this
registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the
total dollar volume of securities offered would not exceed
that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement;
(iii) to include any material information with respect
to the plan of distribution not previously disclosed in this
registration statement or any material change to such
information in this registration statement;
provided, however, that the undertakings set forth in clauses (i) and (ii)
above do not apply if the information required to be included in a
post-effective amendment by those clauses is contained in periodic reports
filed with or furnished to the Commission by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as
amended, that are incorporated by reference in this registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
(b) As to documents subsequently filed that are incorporated by
reference: The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933, as amended,
each filing of the registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934, as amended, that is
incorporated by reference in this registration statement shall be deemed to
be a new registration statement relating to the securities offered herein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) As to indemnification: Insofar as indemnification for
liabilities arising under the Securities Act of 1933, as amended, may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the provisions described in Item 15 herein, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933, as amended, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
II-5
<PAGE>
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed in
the Securities Act of 1933, as amended, and will be governed by the final
adjudication of such issue.
(d) As to qualification of Trust Indentures under Trust Indenture
Act of 1939 for delayed offerings:
The undersigned registrant hereby undertakes to file an application
for the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with
the rules and regulations prescribed by the Commission under Section 305(b)
of the Act.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3, reasonably believes
that the security rating requirement for the asset-backed securities being
registered on this form will be met by the time of the sale and has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Lake Forest,
Illinois, on the date of May 30, 2000.
CNH CAPITAL RECEIVABLES INC.
By: /s/ Theodore R. French
------------------------------------
Theodore R. French
Chairman of the Board
By: /s/ Robert A. Wegner
-----------------------------------
Robert A. Wegner
Senior Vice President and
Chief Financial Officer
KNOW ALL MEN BY THESE PRESENTS that each person whose signature
appears below constitutes and appoints Theodore R. French and Robert A.
Wegner, and either of them, such person's true and lawful attorneys-in-
fact and agents, with full power of substitution and revocation, for such
person and in such person's name, place and stead, in any and all
capacities to sign any and all amendments (including post-effective
amendments to this Registration Statement) and to file the same with all
exhibits thereto, and the other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact
and agents, and each of them, full power and authority to do and perform
each and every act and things requisite and necessary to be done, as fully
to all intents and purposes as such person might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents
or any of them, or their or his substitute or substitutes, may lawfully do
or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
Signature Title Date
--------- ----- ----
/s/ Andrew E. Graves Principal Executive Officer May 30, 2000
-------------------------------------
Andrew E. Graves
/s/ Robert A. Wegner Principal Financial Officer May 30, 2000
-------------------------------------- and Director
Robert A. Wegner
/s/ James S. Broenen Principal Accounting Officer May 30, 2000
-------------------------------------
James S. Broenen
/s/ Theodore R. French Director May 30, 2000
--------------------------------------
Theodore R. French
/s/ Jean-Pierre Rosso Director May 30, 2000
--------------------------------------
Jean-Pierre Rosso
/s/ John R. Power, Jr. Director May 30, 2000
--------------------------------------
John R. Power, Jr.
/s/ William L. Staples Director May 30, 2000
--------------------------------------
William L. Staples
II-7
</TABLE>
