<PAGE> 1
Filed Pursuant to Rule 424(b)(5)
Registration No. 33-55789
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MARCH 4, 1997)
$1,250,000,000
PREMIER AUTO TRUST 1997-1
5.90% ASSET BACKED NOTES, CLASS A-2
6.25% ASSET BACKED NOTES, CLASS A-3
6.35% ASSET BACKED NOTES, CLASS A-4
6.55% ASSET BACKED NOTES, CLASS B
CHRYSLER FINANCIAL CORPORATION, SELLER AND SERVICER
------------------------
Premier Auto Trust 1997-1 (the "Trust") will be governed pursuant to an
Amended and Restated Trust Agreement to be dated as of March 1, 1997, among
Chrysler Financial Corporation (the "Seller"), Premier Receivables L.L.C., an
indirectly wholly-owned subsidiary of the Seller (the "Company"), and Chase
Manhattan Bank Delaware, as Owner Trustee. The Trust will issue $250,000,000
aggregate principal amount of Class A-1 5.4766% Asset Backed Notes (the "Class
A-1 Notes"), $600,000,000 aggregate principal amount of Class A-2 5.90% Asset
Backed Notes (the "Class A-2 Notes"), $393,750,000 aggregate principal amount of
Class A-3 6.25% Asset Backed Notes (the "Class A-3 Notes"), $200,000,000
aggregate principal amount of Class A-4 6.35% Asset Backed Notes (the "Class A-4
Notes" and, together with the Class A-1 Notes, Class A-2 Notes and Class A-3
Notes, the "Class A Notes"), and $56,250,000 aggregate principal amount of Class
B 6.55% Asset Backed Notes (the "Class B Notes" and, together with the Class A
Notes,
(Cover continued on following page)
------------------------
THE NOTES REPRESENT OBLIGATIONS OF THE TRUST ONLY AND DO NOT REPRESENT
OBLIGATIONS OF OR INTERESTS IN CHRYSLER FINANCIAL CORPORATION, THE COMPANY OR
ANY OF THEIR RESPECTIVE AFFILIATES. NONE OF THE NOTES OR THE RECEIVABLES
ARE INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
============================================================================================================
ORIGINAL PRICE TO UNDERWRITING PROCEEDS TO
PRINCIPAL AMOUNT PUBLIC(1) DISCOUNT THE SELLER(1)(2)
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Per Class A-2 Note...... $ 600,000,000 99.9746402% .1625% 99.8121402%
- ------------------------------------------------------------------------------------------------------------
Per Class A-3 Note...... $ 393,750,000 99.9884923% .2% 99.7884923%
- ------------------------------------------------------------------------------------------------------------
Per Class A-4 Note...... $ 200,000,000 99.874163% .25% 99.624163%
- ------------------------------------------------------------------------------------------------------------
Per Class B Note........ $ 56,250,000 99.8500642% .35% 99.5000642%
- ------------------------------------------------------------------------------------------------------------
Total................... $1,250,000,000 $1,249,466,516.74 $2,459,375.00 $1,247,007,141.74
============================================================================================================
</TABLE>
(1) Plus accrued interest, if any, from March 18, 1997.
(2) Before deducting expenses, estimated to be $800,000.
------------------------
The Offered Notes are offered subject to prior sale and subject to the
Underwriters' right to reject any order in whole or in part. It is expected that
delivery of the Offered Notes will be made in book-entry form only through the
facilities of The Depository Trust Company and Cedel Bank, societe anonyme and
the Euroclear System on or about March 18, 1997.
------------------------
UNDERWRITERS OF THE OFFERED CLASS A NOTES
MERRILL LYNCH & CO.
BEAR, STEARNS & CO. INC.
LEHMAN BROTHERS
SALOMON BROTHERS INC
UNDERWRITERS OF THE CLASS B NOTES
MERRILL LYNCH & CO. BEAR, STEARNS & CO. INC.
------------------------
The date of this Prospectus Supplement is March 4, 1997.
<PAGE> 2
(Continued from previous page)
the "Notes") pursuant to an Indenture to be dated as of March 1, 1997, between
the Trust and The First National Bank of Chicago, as Indenture Trustee. The
Class A-1 Notes are not being offered hereby. The Class A-2 Notes, Class A-3
Notes, Class A-4 Notes and Class B Notes are collectively referred to herein as
the "Offered Notes". The Class B Notes will be subordinated to the Class A Notes
to the extent provided herein. The assets of the Trust will include a pool of
motor vehicle retail installment sale contracts (the "Receivables"), secured by
security interests in the motor vehicles financed thereby and including certain
monies due or received thereunder on or after February 26, 1997, transferred to
the Trust by the Seller on the Closing Date. The Notes will be secured by the
assets of the Trust pursuant to the Indenture, subject to the release of certain
assets as collateral to the extent provided herein.
Interest on the Notes will accrue at the respective fixed per annum
interest rates specified above. Interest on the Notes will generally be payable
on the sixth day of each month or, if any such day is not a Business Day, on the
next succeeding Business Day (each, a "Distribution Date"), commencing April 7,
1997. Principal of the Notes will be payable on each Distribution Date to the
extent described herein; however, no principal payments will be made (i) on the
Class A-2 Notes until the Class A-1 Notes have been paid in full, (ii) on the
Class A-3 Notes until the Class A-2 Notes have been paid in full, (iii) on the
Class A-4 Notes until the Class A-3 Notes have been paid in full or (iv) on the
Class B Notes until the Class A-4 Notes have been paid in full.
Each class of Notes will be payable in full on the applicable final
scheduled Distribution Date as set forth herein. However, payment in full of a
class of Notes could occur earlier than such dates as described herein. In
addition, the Class A-4 Notes and Class B Notes will be subject to redemption in
whole, but not in part, on any Distribution Date on which the Servicer exercises
its option to purchase the Receivables. The Servicer may purchase the
Receivables when the aggregate principal balance of the Receivables shall have
declined to 10% or less of the initial aggregate principal balance of the
Receivables purchased by the Trust.
Application will be made to list the Offered Notes on the Luxembourg Stock
Exchange.
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH UNDER "SPECIAL
CONSIDERATIONS" HEREIN AND IN THE ACCOMPANYING PROSPECTUS.
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT THE
OFFERING OF THE OFFERED NOTES. ADDITIONAL INFORMATION IS CONTAINED IN THE
PROSPECTUS, AND PROSPECTIVE INVESTORS ARE URGED TO READ BOTH THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF THE OFFERED NOTES MAY NOT BE
CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS. TO THE EXTENT ANY STATEMENTS IN THIS PROSPECTUS SUPPLEMENT
CONFLICT WITH STATEMENTS IN THE PROSPECTUS, THE STATEMENTS IN THIS PROSPECTUS
SUPPLEMENT SHALL CONTROL.
Certain persons participating in this offering may engage in transactions
that stabilize, maintain, or otherwise affect the price of the Offered Notes.
Such transactions may include stabilizing and the purchase of Offered Notes to
cover syndicate short positions. For a description of these activities, see
"Underwriting" herein.
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<PAGE> 3
REPORTS TO NOTEHOLDERS
Unless and until Definitive Notes are issued, monthly and annual unaudited
reports containing information concerning the Receivables will be prepared by
the Servicer and sent on behalf of the Trust only to Cede & Co. ("Cede"), as
nominee of The Depository Trust Company ("DTC") and registered holder of the
Offered Notes. See "Certain Information Regarding the Securities -- Book-Entry
Registration" and "-- Reports to Securityholders" in the accompanying Prospectus
(the "Prospectus"). Such reports will not constitute financial statements
prepared in accordance with generally accepted accounting principles. The
Seller, as originator of the Trust, will file with the Securities and Exchange
Commission (the "Commission") such periodic reports as are required under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations of the Commission thereunder.
S-3
<PAGE> 4
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere herein and in the Prospectus. Certain
capitalized terms used herein are defined elsewhere in this Prospectus
Supplement on the pages indicated in the "Index of Terms" or, to the extent not
defined herein, have the meanings assigned to such terms in the Prospectus.
Issuer....................... Premier Auto Trust 1997-1 (the "Trust" or the
"Issuer"), a Delaware business trust to be
governed pursuant to an Amended and Restated
Trust Agreement dated as of March 1, 1997 (as
amended and supplemented from time to time, the
"Trust Agreement"), among the Seller, the Owner
Trustee and Premier Receivables L.L.C., a
Michigan limited liability company that is
indirectly wholly-owned by the Seller (the
"Company").
Seller....................... Chrysler Financial Corporation (the "Seller" or
"CFC").
Servicer..................... CFC (in such capacity, the "Servicer").
Indenture Trustee............ The First National Bank of Chicago, as trustee
under the Indenture (the "Indenture Trustee").
Owner Trustee................ Chase Manhattan Bank Delaware, as trustee under
the Trust Agreement (the "Owner Trustee").
The Notes.................... The Trust will issue Asset Backed Notes pursuant
to an Indenture to be dated as of March 1, 1997
(as amended and supplemented from time to time,
the "Indenture"), between the Issuer and the
Indenture Trustee, as follows: (i) Class A-1
5.4766% Asset Backed Notes (the "Class A-1
Notes") in the aggregate initial principal amount
of $250,000,000; (ii) Class A-2 5.90% Asset
Backed Notes (the "Class A-2 Notes") in the
aggregate initial principal amount of
$600,000,000; (iii) Class A-3 6.25% Asset Backed
Notes (the "Class A-3 Notes") in the aggregate
initial principal amount of $393,750,000; (iv)
Class A-4 6.35% Asset Backed Notes (the "Class
A-4 Notes") in the aggregate initial principal
amount of $200,000,000 and (v) Class B 6.55%
Asset Backed Notes (the "Class B Notes") in the
aggregate initial principal amount of
$56,250,000. The Class A-1 Notes, Class A-2
Notes, Class A-3 Notes and, Class A-4 Notes are
collectively referred to herein as the "Class A
Notes", and the Class A Notes and the Class B
Notes are collectively referred to herein as the
"Notes". The Class A-1 Notes are not being
offered hereby, and it is expected that all of
the Class A-1 Notes will be purchased on March
18, 1997 (the "Closing Date") by CFC. The Class
A-2 Notes, Class A-3 Notes, Class A-4 Notes and
Class B Notes are referred to herein collectively
as the "Offered Notes."
The Notes will be secured by the assets of the
Trust pursuant to the Indenture.
The Receivables.............. On the Closing Date, the Trust will purchase
Receivables having an aggregate principal balance
of approximately $1,560,012,089.22 (the "Initial
Pool Balance") as of February 26, 1997 (the
"Cutoff Date") from the Seller pursuant to a Sale
and Servicing Agreement to be dated as of March
1, 1997 (as amended and supplemented from time to
time, the "Sale and Servicing Agreement"),
between the Trust and CFC, as Seller and
Servicer. See "Description of the Transfer and
Servicing Agreements -- Sale and Assignment of
Receivables" herein and in the Prospectus. The
Receivables have been selected from the contracts
owned by the Seller based on the criteria
specified in the Sale and Servicing Agreement and
described herein and in the Prospectus. As of the
Cutoff Date, the weighted average annual
percentage rate of the Receivables was
approximately 10.68%, the
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<PAGE> 5
weighted average remaining maturity of the
Receivables was approximately 55.61 months, and
the weighted average original maturity of the
Receivables was approximately 58.12 months. No
Receivable has a scheduled maturity later than
March 31, 2003 (the "Final Scheduled Maturity
Date"). See "The Receivables Pool" herein.
The "Pool Balance" at any time will represent the
aggregate principal balance of the Receivables at
the end of the preceding Collection Period, after
giving effect to all payments received from
Obligors, Purchase Amounts to be remitted by the
Servicer or the Seller, as the case may be, all
for such Collection Period, and all losses
realized on Receivables liquidated during such
Collection Period.
Terms of the Notes........... The principal terms of the Notes will be as
described below:
A. Distribution Dates...... Payments of interest and principal on the Notes
will be made on the sixth day of each month or,
if any such day is not a Business Day, on the
next succeeding Business Day (each, a
"Distribution Date"), commencing April 7, 1997.
Each reference to a "Payment Date" in the
Prospectus shall refer to a Distribution Date
herein. Payments will be made to holders of
record of the Notes (the "Noteholders") as of the
day immediately preceding such Distribution Date
or, if Definitive Notes are issued, as of the
15th day of the preceding month (a "Record
Date"). A "Business Day" is a day other than a
Saturday, a Sunday or a day on which banking
institutions or trust companies in the City of
New York are authorized by law, regulation or
executive order to be closed.
B. Interest Rates.......... The Class A-1 Notes will bear interest at the
rate of 5.4766% per annum (the "Class A-1 Rate"),
the Class A-2 Notes will bear interest at the
rate of 5.90% per annum (the "Class A-2 Rate"),
the Class A-3 Notes will bear interest at the
rate of 6.25% per annum (the "Class A-3 Rate"),
the Class A-4 Notes will bear interest at the
rate of 6.35% per annum (the "Class A-4 Rate")
and the Class B Notes will bear interest at the
rate of 6.55% per annum (the "Class B Rate").
The interest rates for the various classes of
Notes are referred to herein collectively as
"Interest Rates".
C. Interest................ Interest on the outstanding principal amount of
the Notes will accrue at the applicable Interest
Rate from the Closing Date (in the case of the
first Distribution Date) or from the sixth day of
the month preceding the month of a Distribution
Date to and including the fifth day of the month
of such Distribution Date (each an "Interest
Accrual Period"). Interest on each class of Notes
(other than the Class A-1 Notes) will be
calculated on the basis of a 360-day year
consisting of twelve 30-day months. Interest on
the Class A-1 Notes will be calculated on the
basis of the actual number of days in each
Interest Accrual Period divided by 360. See
"Description of the Notes -- Payments of
Interest". Notwithstanding the Events of Default
described in the Prospectus under the caption
"Description of the Indenture -- The Indenture --
Events of Default; Rights upon Event of Default",
until the principal amount of the Class A-4 Notes
has been paid in full, the failure to pay
interest due on the Class B Notes will not be an
Event of Default.
D. Principal............... Principal of the Notes will be payable on each
Distribution Date in an amount equal to the
Noteholders' Principal Distributable Amount for
the calendar month (the "Collection Period")
preceding such Distribution Date (in the case of
the first Distribution Date, the period from and
including February 26, 1997 to and including
March 31, 1997) to
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<PAGE> 6
the extent of funds available therefor. The
"Noteholders' Principal Distributable Amount"
will equal the sum of (i) the Regular Principal
Distribution Amount (less, during the Collateral
Release Period described below under
"Overcollateralization and Release of
Collateral", the Cash Release Amount) plus (ii)
the Accelerated Principal Distribution Amount.
The "Regular Principal Distribution Amount" with
respect to any Distribution Date will equal the
amount of principal paid or, in certain
circumstances, scheduled to be paid with respect
to the Receivables plus, in certain
circumstances, the principal balance of defaulted
Receivables, as calculated by the Servicer as
described under "Description of the Transfer and
Servicing Agreements -- Distributions". The
"Accelerated Principal Distribution Amount" with
respect to a Distribution Date will equal the
portion, if any, of the Total Distribution Amount
for the related Collection Period that remains
after payment of (a) the Servicing Fee (together
with any portion of the Servicing Fee that
remains unpaid from prior Distribution Dates),
(b) the interest due on the Notes, (c) the
Regular Principal Distribution Amount, and (d)
the amount, if any, required to be deposited in
the Reserve Account on such Distribution Date.
On the Business Day immediately preceding each
Distribution Date (a "Determination Date"), the
Indenture Trustee shall determine the amount in
the Collection Account available for distribution
on the related Distribution Date. Payments to
Noteholders will be made on each Distribution
Date in accordance with such determination. The
Servicing Fee in respect of a Collection Period
(together with any portion of the Servicing Fee
that remains unpaid from prior Distribution
Dates) will be paid on the Distribution Date such
Collection Period out of collections for such
Collection Period.
No principal payments will be made (i) on the
Class A-2 Notes until the Class A-1 Notes have
been paid in full; (ii) on the Class A-3 Notes
until the Class A-2 Notes have been paid in full;
(iii) on the Class A-4 Notes until the Class A-3
Notes have been paid in full; or (iv) on the
Class B Notes until the Class A-4 Notes have been
paid in full.
The outstanding principal amount of the Class A-1
Notes, to the extent not previously paid, will be
payable on the December 1997 Distribution Date
(the "Class A-1 Final Scheduled Distribution
Date"); the outstanding principal amount of the
Class A-2 Notes, to the extent not previously
paid, will be payable on the April 2000
Distribution Date (the "Class A-2 Final Scheduled
Distribution Date"); the outstanding principal
amount of the Class A-3 Notes, to the extent not
previously paid, will be payable on the August
2001 Distribution Date (the "Class A-3 Final
Scheduled Distribution Date"); the outstanding
principal amount of the Class A-4 Notes, to the
extent not previously paid, will be payable on
the April 2002 Distribution Date (the "Class A-4
Final Scheduled Distribution Date"); and the
outstanding principal amount of the Class B
Notes, to the extent not previously paid, will be
payable on the September 2003 Distribution Date
(the "Class B Final Scheduled Distribution
Date").
E. Optional Redemption..... The Class A-4 Notes and Class B Notes will be
redeemed in whole, but not in part, on any
Distribution Date on which the Servicer exercises
its option to purchase the Receivables, which can
occur after the Pool Balance declines to 10% or
less of the Initial Pool Balance, at a redemption
price equal to the unpaid principal amount of the
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<PAGE> 7
Class A-4 Notes and Class B Notes plus accrued
and unpaid interest thereon. See "Description of
the Notes -- Optional Redemption" herein.
Overcollateralization and
Release of Collateral........ The Initial Pool Balance ($1,560,012,089.22) will
exceed the initial aggregate principal amount of
the Notes ($1,500,000,000) by an amount equal to
$60,012,089.22 (the "Initial
Overcollateralization Amount"), which amount is
approximately 4% of the initial aggregate
principal amount of the Notes. Unless offset by
losses on the Receivables, the distribution of
the Accelerated Principal Distribution Amount, if
any, on a Distribution Date is expected to cause
the aggregate principal amount of the Notes to
decrease faster than the Pool Balance decreases,
thereby increasing the Overcollateralization
Amount and the Overcollateralization Percentage.
The "Overcollateralization Amount" in respect of
a Distribution Date is equal to (a) the Pool
Balance as of the beginning of the preceding
Collection Period (the "Related Pool Balance")
minus (b) the aggregate outstanding principal
amount of the Notes after giving effect to
payments made on the Notes on the preceding
Distribution Date (the "Note Amount"). The
"Overcollateralization Percentage" in respect of
a Distribution Date is the percentage derived
from a fraction, the numerator of which is the
Overcollateralization Amount for such
Distribution Date and the denominator of which is
the Related Pool Balance. Subject to the
conditions set forth below, on each Distribution
Date, commencing with the First Release
Distribution Date, certain amounts of cash and
Receivables will be released to the Trust, free
of the lien of the Indenture, and thereupon paid
or transferred to the Company. Any such cash and
Receivables released to the Company will not be
available to make payments on the Notes.
The release of cash and Receivables to the Trust
(and then to the Company) is subject to the
satisfaction of all of the following conditions:
(1) No release will be permitted until
the Distribution Date (the "First Release
Distribution Date") on which the
Overcollateralization Amount is at least equal
to:
[Initial Overcollateralization Amount]
plus
[2% x (Related Pool Balance minus
Initial Overcollateralization Amount)]
(2) Subject to condition (4) below, the
aggregate principal balance of Receivables
released in respect of a Distribution Date will
equal:
Overcollateralization Amount
less
Targeted Overcollateralization Amount.
The "Targeted Overcollateralization Amount"
for a Distribution Date is equal to:
[Note Amount
------------------ minus [Note Amount]
94.5%]
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<PAGE> 8
(3) Subject to condition (4) below, the
amount of cash released on a Distribution Date
(the "Cash Release Amount") will equal 5.5% of
the Regular Principal Distribution Amount for
such Distribution Date. However, on any
Distribution Date the Cash Release Amount and any
Receivables will be released only after the
Noteholders shall have received principal in an
amount at least equal to 94.5% of the Regular
Principal Distributable Amount for such
Distribution Date.
(4) The cumulative amount of cash and
principal balances of Receivables released shall
not exceed the Initial Overcollateralization
Amount. Consequently, when such cumulative amount
has been released, there will be no further
release of cash or Receivables to the Trust
pursuant to the release provisions described
above, and the full Regular Principal
Distribution Amount will thereafter again be
distributable as principal to the Noteholders.
The period during which such releases are
permitted is the "Collateral Release Period".
Reserve Account.............. The "Reserve Account" will be created with an
initial deposit by the Seller on the Closing Date
of cash or Eligible Investments having a value
equal to $15,000,000 (the "Specified Reserve
Account Balance"), which is 1% of the initial
aggregate principal amount of the Notes. If,
after the Collateral Release Period, the
Overcollateralization Percentage at any time
equals at least 7.75%, then the Specified Reserve
Account Balance will be $11,250,000, which is
0.75% of the initial aggregate principal amount
of the Notes.
Funds will be withdrawn from the Reserve Account
to the extent that the Total Distribution Amount
with respect to any Collection Period remaining
after the Servicing Fee is paid is less than the
Noteholders' Distributable Amount and will be
deposited in the Note Distribution Account for
distribution to the Noteholders on the related
Distribution Date. On each Distribution Date, the
Reserve Account will be reinstated up to the
Specified Reserve Account Balance to the extent
of the portion, if any, of the Total Distribution
Amount remaining after payment of the Servicing
Fee and the deposit of the Noteholders'
Distributable Amount into the Note Distribution
Account. The Reserve Account will be maintained
as an account in the name of the Indenture
Trustee.
Certain amounts in the Reserve Account on any
Distribution Date (after giving effect to all
distributions made on such Distribution Date) in
excess of the Specified Reserve Account Balance
for such Distribution Date will be released to
the Company (except to the extent described under
"Description of the Transfer and Servicing
Agreements -- Reserve Account").
Collection Account; Priority
of Payments; Subordination of
Class B Notes.............. Except under certain conditions described herein
or as otherwise acceptable to each Rating Agency,
the Servicer will be required to remit
collections received with respect to the
Receivables within two Business Days of receipt
thereof to one or more accounts in the name of
the Indenture Trustee (the "Collection Account").
Pursuant to the Sale and Servicing Agreement, the
Servicer will have the revocable power to
instruct the Indenture Trustee to withdraw funds
on deposit in the Collection Account and to apply
such funds on each Distribu-
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<PAGE> 9
tion Date to the following (in the priority
indicated): (i) the Servicing Fee for the related
Collection Period, together with any unpaid
Servicing Fees from prior Distribution Dates, to
the Servicer, (ii) the Noteholders' Interest
Distributable Amount and the Noteholders'
Principal Distributable Amount into the Note
Distribution Account and (iii) the remaining
balance, if any, to the Reserve Account.
On each Distribution Date, the amount in the Note
Distribution Account will be applied, first, to
pay interest on the Class A Notes and to pay the
Noteholders' Principal Distributable Amount (up
to the outstanding principal amount of the Class
A Notes) as principal of the Class A Notes in the
order described herein and, second, to pay
interest on the Class B Notes and, after the
principal amount of the Class A-4 Notes has been
reduced to zero, to pay the Noteholders'
Principal Distributable Amount (less any portion
thereof applied to the Class A-4 Notes on such
Distribution Date) as principal of the Class B
Notes (up to the outstanding principal amount of
the Class B Notes).
Tax Status................... In the opinion of Brown & Wood LLP ("Federal Tax
Counsel"), for federal income tax purposes, the
Offered Notes will be characterized as debt, and
the Trust will not be characterized as an
association (or a publicly traded partnership)
taxable as a corporation. In the opinion of C. A.
Taravella, Esq., the general counsel of the
Seller ("Michigan Tax Counsel"), the same
characterizations will apply for Michigan income
and single business tax purposes. Each
Noteholder, by the acceptance of a Note, will
agree to treat the Notes as indebtedness.
Alternative characterizations of the Trust and
the Class B Notes are possible, but would not
generally result in materially adverse tax
consequences to Class B Noteholders. See "Certain
Federal Income Tax Consequences" herein and
"Certain Federal Income Tax Consequences" and
"Certain State Tax Consequences with Respect to
Trusts Which Issue One or More Classes of Notes"
in the Prospectus for additional information
concerning the application of federal income and
Michigan tax laws to the Trust and the Notes.
ERISA Considerations......... Subject to the considerations discussed under
"ERISA Considerations" herein and in the
Prospectus, the Notes are eligible for purchase
by employee benefit plans.
Rating of the Offered
Notes........................ It is a condition to the issuance of the Notes
that the Offered Notes (other than the Class B
Notes) be rated in the highest investment rating
category, and that the Class B Notes be rated at
least in the "A" category or its equivalent, by
at least two nationally recognized rating
agencies. There can be no assurance that a rating
will not be lowered or withdrawn by a rating
agency if circumstances so warrant.
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SPECIAL CONSIDERATIONS
Limited Liquidity. There is currently no secondary market for the Notes
offered hereby. Each Underwriter currently intends to make a market in the Notes
offered hereby, but it is under no obligation to do so. There can be no
assurance that a secondary market will develop or, if a secondary market does
develop, that it will provide the Noteholders with liquidity of investment or
that it will continue for the life of the Notes offered hereby.
Trust's Relationship to the Seller; Financial Condition of the Seller and
Chrysler Corporation. CFC is not generally obligated to make any payments in
respect of the Notes or the Receivables. However, if CFC were to cease acting as
Servicer, delays in processing payments on the Receivables and information in
respect thereof could occur and result in delays in payments to the Noteholders.
Chrysler Corporation and its consolidated subsidiaries ("Chrysler")
reported earnings before income taxes, extraordinary item, and the cumulative
effect of a change in accounting principle of $6.1 billion in 1996, compared
with $3.4 billion in 1995. Net earnings for 1996 were $3.5 billion, or $4.77 per
common share, compared with $2.0 billion, or $2.65 per common share in 1995.
Chrysler also reported earnings before income taxes and extraordinary item
of $1,591 million in the fourth quarter of 1996, compared with $1,659 million in
the fourth quarter of 1995. Net earnings for the fourth quarter of 1996 were
$807 million, or $1.12 per common share, compared with $1,040 million, or $1.35
per common share in the fourth quarter of 1995.
Earnings before income taxes, extraordinary item, and the cumulative effect
of a change in accounting principle for 1996 included a charge of $97 million
($61 million after taxes) for costs associated with a voluntary early retirement
program for certain salaried employees, a charge of $77 million ($51 million
after taxes) related to a write-down of Pentastar Electronics, Inc. ("PEI"), a
charge of $65 million ($100 million after taxes) related to a write-down of
Thrifty Rent-A-Car System, Inc. ("Thrifty"), a charge of $50 million ($31
million after taxes) for lump sum retiree pension costs related to the new UAW
collective bargaining agreement, and a gain of $101 million ($87 million after
taxes) from the sale of Electrospace Systems, Inc. ("ESI") and Chrysler
Technologies Airborne Systems, Inc. ("CTAS"). Earnings before income taxes,
extraordinary item, and the cumulative effect of a change in accounting
principle for 1995 included a charge of $263 million ($162 million after taxes)
for costs associated with production changes at Chrysler's Newark assembly plant
and a charge of $115 million ($71 million after taxes) for a voluntary minivan
owner service action.
The following table summarizes this information:
<TABLE>
<CAPTION>
FOURTH QUARTER CALENDAR YEAR
--------------- ---------------
(IN MILLIONS OF DOLLARS) 1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Earnings before income taxes, extraordinary item, and
cumulative effect of a change in accounting principle....... $1,591 $1,659 $6,092 $3,449
Voluntary early retirement program............................ 9 -- 97 --
PEI write-down................................................ 77 -- 77 --
Thrifty write-down............................................ -- -- 65 --
Lump sum retiree pension costs................................ 50 -- 50 --
Gain on sale of ESI and CTAS.................................. -- -- (101) --
Newark production changes..................................... -- -- -- 263
Voluntary minivan owner service action........................ -- -- -- 115
------ ------ ------ ------
Pretax earnings excluding items above.................... $1,727 $1,659 $6,280 $3,827
====== ====== ====== ======
</TABLE>
Pretax earnings excluding items above increased for calendar-year 1996 as
compared with calendar-year 1995 primarily as a result of an increase in vehicle
shipments and improved vehicle margins due to pricing actions and a reduction in
average sales incentives per vehicle, partially offset by increased profit-based
employee compensation costs. The increase in shipments for calendar-year 1996
was primarily due to increased shipments of minivans and Dodge Ram pickup
trucks. Minivan shipments for calendar-year 1995
S-10
<PAGE> 11
were adversely affected by the changeover and launch of Chrysler's all-new
minivans. The increase in shipments of Dodge Ram pickup trucks primarily
reflects a full year of production in 1996 at two additional assembly plants.
In December 1996, Chrysler extinguished $550 million, or 50 percent, of the
outstanding principal amount of its Auburn Hills Trust Guaranteed Exchangeable
Certificates Due 2020 (the "Certificates") at a cost of $859 million. The
extinguishment of the Certificates resulted in an extraordinary after-tax loss
of $191 million (net of income tax benefit of $118 million), or $0.26 per common
share.
Effective January 1, 1995, Chrysler changed its accounting treatment for
certain vehicle sales (principally to non-affiliated rental car companies) in
accordance with Emerging Issues Task Force ("EITF") Issue 95-1, "Revenue
Recognition on Sales with a Guaranteed Minimum Resale Value." This change in
accounting principle resulted in the recognition of an after-tax charge of $96
million (net of income tax benefit of $59 million), or $0.13 per common share in
1995. The ongoing effect of this accounting change was not material to 1996 and
1995 earnings.
CFC achieved record net earnings of $376 million in 1996 compared to $339
million and $195 million in 1995 and 1994, respectively. The increase in net
earnings for 1996 compared to 1995 primarily reflects net margin improvements
partially offset by an increase in the provision for credit losses. The increase
in net earnings for 1995 compared to 1994 primarily reflects higher levels of
automotive financing, lower operating expenses and lower costs of bank
facilities.
Chrysler and CFC are subject to the informational requirements of the
Exchange Act and in accordance therewith file reports and other information with
the Commission. For further information regarding Chrysler and CFC reference is
made to such reports and other information which are available as described
under "Available Information" in the Prospectus.
Subordination of the Class B Notes; Limited Assets. Distributions of
interest and principal on the Class B Notes will be subordinated in priority of
payment to interest and principal due on the Class A Notes. Consequently, the
Class B Noteholders will not receive any payments on a Distribution Date unless
the full amount of interest on and principal of the Class A Notes due on such
Distribution Date has been paid to the Class A Noteholders. The Class B
Noteholders will not receive any distributions of principal until the
Distribution Date on which all of the Class A-4 Notes have been paid in full.
The Trust will not have, nor is it permitted or expected to have, any
significant assets or sources of funds other than the Receivables and the
Reserve Account. Holders of the Notes must rely for repayment upon payments on
the Receivables and, if and to the extent available, amounts on deposit in the
Reserve Account. Although funds in the Reserve Account will be available on each
Distribution Date to cover shortfalls in distributions of interest and principal
on the Notes, amounts to be deposited in the Reserve Account are limited in
amount. If the Reserve Account is exhausted, the Trust will depend solely on
current distributions on the Receivables to make payments on the Notes.
Ratings of the Notes. It is a condition to the issuance of the Notes that
each class of the Class A Notes be rated in the highest investment rating
category, and that the Class B Notes be rated at least in the "A" category or
its equivalent, by at least two nationally recognized rating agencies (the
"Rating Agencies"). A rating is not a recommendation to purchase, hold or sell
Notes, inasmuch as such rating does not comment as to market price or
suitability for a particular investor. The ratings of the Notes address the
likelihood of the payment of principal and interest on the Notes pursuant to
their terms. There can be no assurance that a rating will remain for any given
period of time or that a rating will not be lowered or withdrawn entirely by a
Rating Agency if in its judgment circumstances in the future so warrant.
S-11
<PAGE> 12
THE TRUST
GENERAL
The Issuer, Premier Auto Trust 1997-1, is a business trust formed under the
laws of the State of Delaware pursuant to the Trust Agreement for the
transactions described in this Prospectus Supplement. After its formation, the
Trust will not engage in any activity other than (i) acquiring, holding and
managing the Receivables and the other assets of the Trust and proceeds
therefrom, (ii) issuing the Notes, (iii) making payments on the Notes and (iv)
engaging in other activities that are necessary or suitable to accomplish the
foregoing or are incidental thereto or connected therewith.
The Trust will initially be capitalized with equity (exclusive of the
amounts deposited in the Reserve Account) equal to $60,012,089.22, which is the
difference between the aggregate principal amount of the Receivables as of the
Cutoff Date and the initial aggregate principal amount of the Notes. The equity
in the Trust (including the right to receive distributions from the Reserve
Account) will be evidenced by certificates issued by the Trust to the Company,
which may thereafter hold such equity or sell or otherwise transfer it. In the
case of any such sale or transfer to another entity, such entity may become the
"Company" for purposes of the events described under "Description of the
Transfer and Servicing Agreements -- Insolvency Events" in the Prospectus and
for other purposes. The net proceeds from the sale of the Notes will be used by
the Trust to purchase the Receivables from the Seller pursuant to the Sale and
Servicing Agreement.
If the protection provided to the investment of the Noteholders by the
Reserve Account is insufficient, the Trust will look only to the Obligors on the
Receivables and the proceeds from the repossession and sale of Financed Vehicles
which secure defaulted Receivables. In such event, certain factors, such as the
Trust's not having first priority perfected security interests in some of the
Financed Vehicles, may affect the Trust's ability to realize on the collateral
securing the Receivables, and thus may reduce the proceeds to be distributed to
Noteholders with respect to the Notes. See "Description of the Transfer and
Servicing Agreements -- Distributions" and "-- Reserve Account" herein and
"Certain Legal Aspects of the Receivables" in the Prospectus.
The Trust's principal offices are in Wilmington, Delaware, in care of Chase
Manhattan Bank Delaware, as Owner Trustee, at the address listed below under
"-- The Owner Trustee".
CAPITALIZATION OF THE TRUST
The following table illustrates the capitalization of the Trust as of the
Closing Date, as if the issuance and sale of the Notes had taken place on such
date:
<TABLE>
<S> <C>
Class A-1 Notes.................................. $ 250,000,000.00
Class A-2 Notes.................................. 600,000,000.00
Class A-3 Notes.................................. 393,750,000.00
Class A-4 Notes.................................. 200,000,000.00
Class B Notes.................................... 56,250,000.00
Equity........................................... 60,012,089.22
-----------------
Total.................................. $1,560,012,089.22
===============
</TABLE>
THE OWNER TRUSTEE
Chase Manhattan Bank Delaware is the Owner Trustee under the Trust
Agreement. Chase Manhattan Bank Delaware is a Delaware banking corporation and
its principal offices are located at 1201 Market Street, Wilmington, Delaware
19801. The Seller and its affiliates may maintain normal commercial banking
relations with the Owner Trustee and its affiliates.
S-12
<PAGE> 13
THE RECEIVABLES POOL
The pool of Receivables (the "Receivables Pool") will include only the
Receivables purchased on the Closing Date. The Receivables were purchased,
directly or indirectly, by the Seller from Dealers in the ordinary course of
business and were selected from the Seller's portfolio for inclusion in the
Receivables Pool by several criteria, some of which are set forth in the
Prospectus under "The Receivables Pools", as well as the requirement that, as of
the Cutoff Date, each Receivable (i) had a principal balance of at least $300
and (ii) was not more than 30 days past due (an account is not considered past
due if the amount past due is less than 10% of the scheduled monthly payment).
As of the Cutoff Date, no Obligor on any Receivable was noted in the related
records of the Seller as being the subject of a bankruptcy proceeding, and no
Obligor on any Receivable financed a Financed Vehicle under the Seller's
"New-Finance Buyer Plan" program. No selection procedures believed by the Seller
to be adverse to Noteholders were used in selecting the Receivables.
Set forth in the following tables is information concerning the
composition, distribution by annual percentage rate ("APR") and the geographic
distribution of the Receivables Pool as of the Cutoff Date.
PREMIER AUTO TRUST 1997-1
COMPOSITION OF THE RECEIVABLES POOL
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AGGREGATE AVERAGE AVERAGE AVERAGE
APR OF PRINCIPAL NUMBER OF REMAINING ORIGINAL PRINCIPAL
RECEIVABLES BALANCE RECEIVABLES TERM TERM BALANCE
- ----------- ----------------- ----------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C>
10.68% $1,560,012,089.22 105,287 55.61 months 58.12 months $14,816.75
</TABLE>
PREMIER AUTO TRUST 1997-1
DISTRIBUTION BY APR OF THE RECEIVABLES POOL
<TABLE>
<CAPTION>
PERCENT OF
AGGREGATE
NUMBER OF AGGREGATE PRINCIPAL
APR RANGE RECEIVABLES PRINCIPAL BALANCE BALANCE(1)
- -------------------------------------------------------- ----------- ----------------- ----------
<S> <C> <C> <C>
0.00% - 5.00%......................................... 799 $ 12,219,441.10 0.8%
5.01% - 6.00%......................................... 186 2,460,968.58 0.2
6.01% - 7.00%......................................... 1,497 24,641,434.94 1.6
7.01% - 8.00%......................................... 12,136 188,622,284.92 12.1
8.01% - 9.00%......................................... 18,795 294,033,331.23 18.8
9.01% - 10.00%......................................... 20,415 304,574,121.76 19.5
10.01% - 11.00%......................................... 13,885 217,224,739.60 13.9
11.01% - 12.00%......................................... 10,281 153,786,244.51 9.9
12.01% - 13.00%......................................... 8,256 117,812,809.74 7.6
13.01% - 14.00%......................................... 4,563 60,905,248.53 3.9
14.01% - 15.00%......................................... 3,381 44,276,787.23 2.8
15.01% - 16.00%......................................... 2,266 29,103,342.87 1.9
16.01% - 17.00%......................................... 2,312 31,293,655.18 2.0
17.01% - 18.00%......................................... 3,273 43,358,204.90 2.8
Greater than 18.00%..................................... 3,242 35,699,474.13 2.3
----------- ----------------- ----------
105,287 $1,560,012,089.22 100.1%
======== =============== ========
</TABLE>
- ---------------
(1) Percentages may not add to 100.0% because of rounding.
S-13
<PAGE> 14
PREMIER AUTO TRUST 1997-1
GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES POOL
<TABLE>
<CAPTION>
PERCENT OF AGGREGATE
STATE(2) PRINCIPAL BALANCE(1)
- --------------------------- ---------------------
<S> <C>
Alabama.................... 0.7%
Alaska..................... 0.2%
Arizona.................... 1.8%
Arkansas................... 1.5%
California................. 5.8%
Colorado................... 1.0%
Connecticut................ 2.1%
Delaware................... 0.4%
District of Columbia....... 0.0%
Florida.................... 2.7%
Georgia.................... 1.9%
Hawaii..................... 0.5%
Idaho...................... 0.2%
Illinois................... 4.4%
Indiana.................... 0.6%
Iowa....................... 1.1%
Kansas..................... 1.1%
Kentucky................... 0.0%
Louisiana.................. 0.9%
Maine...................... 1.6%
Maryland................... 6.3%
Massachusetts.............. 5.9%
Michigan................... 4.9%
Minnesota.................. 2.0%
Mississippi................ 0.3%
Missouri................... 2.0%
<CAPTION>
PERCENT OF AGGREGATE
STATE(2) PRINCIPAL BALANCE(1)
- --------------------------- ---------------------
<S> <C>
Montana.................... 0.2%
Nebraska................... 0.6%
Nevada..................... 0.7%
New Hampshire.............. 4.0%
New Jersey................. 5.0%
New Mexico................. 0.7%
New York................... 4.8%
North Carolina............. 4.1%
North Dakota............... 0.3%
Ohio....................... 0.3%
Oklahoma................... 1.4%
Oregon..................... 1.6%
Pennsylvania............... 4.9%
Rhode Island............... 0.9%
South Carolina............. 1.6%
South Dakota............... 0.2%
Tennessee.................. 1.4%
Texas...................... 9.2%
Utah....................... 0.4%
Vermont.................... 0.7%
Virginia................... 3.6%
Washington................. 1.4%
West Virginia.............. 0.3%
Wisconsin.................. 1.6%
Wyoming.................... 0.1%
-------
99.9%
===============
</TABLE>
- ---------------
(1) Percentages may not add to 100.0% because of rounding.
(2) Based on physical addresses of the dealers originating the receivables.
Approximately 31.06% of the aggregate principal balance of the Receivables,
constituting 37.26% of the number of the Receivables, represent previously
titled vehicles. Approximately 76.36% of the aggregate principal balance of the
Receivables represent financing of vehicles manufactured or distributed by
Chrysler.
All of the Receivables are Simple Interest Receivables. Approximately 3.40%
of the Receivables are Fixed Value Receivables. See "The Receivables Pools" in
the Prospectus for a further description of the characteristics of Simple
Interest Receivables and Fixed Value Receivables.
S-14
<PAGE> 15
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
Set forth below is certain information concerning the experience of the
Seller and its United States subsidiaries pertaining to retail new and used
automobile and light duty truck receivables, including those previously sold
which CFC continues to service. Fixed Value Receivables were first originated in
July 1991. There can be no assurance that the delinquency, repossession and net
loss experience on the Receivables will be comparable to that set forth below.
DELINQUENCY EXPERIENCE(1)
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------------------------------------------------------
1996 1995 1994
-------------------- -------------------- --------------------
NUMBER NUMBER NUMBER
OF OF OF
CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT
--------- ------- --------- ------- --------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Portfolio................................................ 1,679,880 $21,197 1,653,533 $20,913 1,444,736 $16,977
Period of Delinquency
31-60 Days............................................. 65,297 $ 843 55,507 $ 720 25,888 $ 293
61 Days or More........................................ 8,175 118 6,792 100 2,085 27
--------- ------- --------- ------- --------- -------
Total Delinquencies...................................... 73,472 $ 961 62,299 $ 820 27,973 $ 320
Total Delinquencies
as a Percent of
the Portfolio.......................................... 4.37% 4.53% 3.77% 3.92% 1.94% 1.88%
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------------------------------------------------------------
1993 1992 1991
--------------------- --------------------- ---------------------
NUMBER NUMBER NUMBER
OF OF OF
CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT
--------- ------- --------- ------- --------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Portfolio........................................ 1,352,218 $14,116 1,344,799 $12,082 1,437,451 $11,994
Period of Delinquency
31-60 Days..................................... 16,350 $ 153 15,964 $ 134 21,025 $ 180
61 Days or More................................ 1,383 15 1,376 13 2,048 20
--------- ------- --------- ------- --------- -------
Total Delinquencies.............................. 17,733 $ 168 17,340 $ 147 23,073 $ 200
Total Delinquencies as a Percent of
the Portfolio.................................. 1.31% 1.19% 1.29% 1.22% 1.61% 1.67%
</TABLE>
- ---------------
(1) All amounts and percentages are based on the gross amount scheduled to be
paid on each contract, including unearned finance and other charges. The
information in the table includes an immaterial amount of retail
installment sale contracts on vehicles other than automobiles and light
duty trucks and includes previously sold contracts which CFC continues to
service.
S-15
<PAGE> 16
CREDIT LOSS/REPOSSESSION EXPERIENCE(1)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
1996 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Average Amount Outstanding During the Period.......... $21,062 $19,486 $15,517 $12,882 $11,818 $12,709
Average Number of Contracts Outstanding During the
Period.............................................. 1,671,405 1,572,963 1,396,497 1,341,084 1,382,898 1,517,178
Percent of Contracts Acquired During the Period with
Recourse to the Dealer.............................. 9.05% 14.8% 17.0% 16.2% 15.8% 21.7%
Repossessions as a Percent of Average Number of
Contracts Outstanding............................... 3.82% 3.05% 2.36% 2.15% 2.31% 2.63%
Net Losses as a Percent of Liquidations(2)(3)......... 3.17% 2.25% 1.38% 1.34% 1.71% 2.28%
Net Losses as a Percent of Average Amount
Outstanding(2)...................................... 1.68% 1.16% 0.73% 0.75% 0.97% 1.21%
</TABLE>
- ---------------
(1) Except as indicated, all amounts and percentages are based on the gross
amount scheduled to be paid on each contract, including unearned finance
and other charges. The information in the table includes an immaterial
amount of retail installment sales contracts on vehicles other than
automobiles and light duty trucks and includes previously sold contracts
that CFC continues to service.
(2) Net losses are equal to the aggregate of the balances of all contracts which
are determined to be uncollectible in the period, less any recoveries on
contracts charged off in the period or any prior periods, including any
losses resulting from disposition expenses and any losses resulting from
the failure to recover commissions to dealers with respect to contracts
that are prepaid or charged off.
(3) Liquidations represent a reduction in the outstanding balances of the
contracts as a result of monthly cash payments and charge-offs.
During the fourth quarter of 1995 and throughout 1996, CFC experienced
higher credit losses on automotive retail receivables. CFC's management
attributes the increased losses to the combined effect of a deterioration in
consumer credit markets, an increase in the frequency of repossessions and the
organizational realignments within CFC that affected retail collections. Recent
credit loss experience may continue while continued actions are taken to improve
the credit mix and servicing of CFC's automotive retail receivables. No
assurance can be given as to the future results.
The net loss figures above reflect the fact that the Seller had recourse to
Dealers on a portion of its retail installment sale contracts. By aggregate
principal balance, approximately 2.89% of the Receivables represent contracts
with recourse to Dealers. The Seller applies underwriting standards to the
purchase of contracts without regard to whether recourse to Dealers is provided.
Based on its experience, the Seller believes that there is no material
difference between the rates of delinquency and repossession on contracts with
recourse against Dealers as compared to contracts without recourse against
Dealers. However, the net loss experience of contracts without recourse against
Dealers is higher than that of contracts with recourse against Dealers because,
under its recourse obligation, the Dealer is responsible to the Seller for
payment of the unpaid balance of the contract, provided that the Seller
repossesses the vehicle from the retail buyer and returns it to the Dealer
within a specified time. In the event of a Dealer's bankruptcy, a bankruptcy
trustee might attempt to characterize recourse sales of contracts as loans to
the Dealer secured by the contracts. Such an attempt, if successful, could
result in payment delays or losses on the affected Receivables.
S-16
<PAGE> 17
CHRYSLER FINANCIAL CORPORATION
Information regarding the Seller is set forth under "Chrysler Financial
Corporation" in the Prospectus. In addition, as of December 31, 1996, the Seller
had approximately 3,000 employees and was managing $39.1 billion in finance
receivables and provided financial services to automobile dealers and their
customers through 25 zone offices in the United States. During 1996, the Seller
financed or leased approximately 790,000 new and used vehicles at retail,
including approximately 485,000 new Chrysler passenger cars and light duty
trucks, representing 20% of Chrysler's U.S. retail and fleet deliveries. The
Seller also financed at wholesale approximately 1,771,000 new Chrysler passenger
cars and light duty trucks, representing 72% of Chrysler's U.S. factory unit
sales for the year ended December 31, 1996.
WEIGHTED AVERAGE LIFE OF THE NOTES
Information regarding certain maturity and prepayment considerations with
respect to the Securities is set forth under "Weighted Average Life of the
Securities" in the Prospectus. No principal payments will be made on the Class
A-2 Notes until all Class A-1 Notes have been paid in full; no principal
payments will be made on the Class A-3 Notes until all Class A-2 Notes have been
paid in full; no principal payments will be made on the Class A-4 Notes until
all Class A-3 Notes have been paid in full and no principal payments will be
made on the Class B Notes until the Class A-4 Notes have been paid in full. See
"Description of the Notes -- Payments of Principal" herein. As the rate of
payment of principal of each class of Notes depends primarily on the rate of
payment (including prepayments) of the principal balance of the Receivables,
final payment of any class of the Notes could occur significantly earlier than
their respective final scheduled Distribution Dates. In addition, the rate of
payment of principal of each class of Notes will be affected by the Accelerated
Principal Distribution Amounts applied to the payment of the principal of the
Notes and, during the Collateral Release Period, the reduction in the amount of
the Regular Principal Distribution Amount that is applied to the payment of
principal of the Notes. Noteholders will bear the risk of being able to reinvest
principal payments on the Notes at yields at least equal to the yields on their
respective Notes.
S-17
<PAGE> 18
DESCRIPTION OF THE NOTES
GENERAL
The Notes will be issued pursuant to the terms of the Indenture, a form of
which has been filed as an exhibit to the Registration Statement. A copy of the
Indenture will be filed with the Commission following the issuance of the Notes.
The following summary describes certain terms of the Notes and the Indenture.
The summary does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, all the provisions of the Notes and the
Indenture. The following summary supplements, and to the extent inconsistent
therewith, replaces the description of the general terms and provisions of the
Notes of any given series and the related Indenture set forth in the Prospectus,
to which description reference is hereby made. The First National Bank of
Chicago, a national banking association, will be the Indenture Trustee under the
Indenture.
PAYMENTS OF INTEREST
Each class of Notes will constitute Fixed Rate Securities, as such term is
defined under "Certain Information Regarding the Securities -- Fixed Rate
Securities" in the Prospectus. Interest on the principal balances of the classes
of the Notes will accrue at their respective per annum Interest Rates and will
be payable to the Noteholders monthly on each Distribution Date, commencing
April 7, 1997. Interest on the outstanding principal amount of the Notes will
accrue at the applicable Interest Rate from the Closing Date (in the case of the
first Distribution Date) or from the sixth day of the month preceding the month
of a Distribution Date to and including the fifth day of the month of the
Distribution Date (each an "Interest Accrual Period"). Interest on the Notes
(other than the Class A-1 Notes) will be calculated on the basis of a 360-day
year consisting of twelve 30-day months. Interest on the Class A-1 Notes will be
calculated on the basis of the actual number of days in each Interest Accrual
Period divided by 360. Interest payments on the Notes will generally be derived
from the Total Distribution Amount remaining after the payment of the Servicing
Fee and from the Reserve Account. See "Description of the Transfer and Servicing
Agreements -- Distributions" and "-- Reserve Account" herein.
Interest payments to all classes of Class A Noteholders will have the same
priority. Under certain circumstances, the amount available for interest
payments could be less than the amount of interest payable on the Notes on any
Distribution Date, in which case each class of Class A Noteholders will receive
their ratable share (based upon the aggregate amount of interest due to such
class of Class A Noteholders) of the aggregate amount available to be
distributed in respect of interest on the Class A Notes. The Class B Noteholders
will receive interest on the Class B Notes only to the extent of the funds
remaining after payment of principal and interest due on the Class A Notes.
However, notwithstanding the Events of Default described in the Prospectus under
the caption "Description of the Indenture -- The Indenture -- Events of Default;
Rights upon Event of Default", until the principal amount of the Class A-4 Notes
has been paid in full, the failure to pay interest due on the Class B Notes will
not be an Event of Default.
PAYMENTS OF PRINCIPAL
Principal payments will be made to the Noteholders on each Distribution
Date in an amount generally equal to the sum of (i) the Regular Principal
Distribution Amount (less the Cash Release Amount during the Collateral Release
Period) plus (ii) the Accelerated Principal Distribution Amount. The "Regular
Principal Distribution Amount" with respect to any Distribution Date will equal
the sum of principal payments received with respect to the Receivables during
the preceding Collection Period or, in certain cases, scheduled to be paid
during such Collection Period plus the principal balances of defaulted
Receivables written off in respect of such Collection Period, subject to certain
limitations. The "Accelerated Principal Distribution Amount" with respect to any
Distribution Date will equal the portion, if any, of the Total Distribution
Amount for the related Collection Period that remains after payment of (a) the
Servicing Fee, (b) the Noteholders' Interest Distributable Amount, (c) the
Regular Principal Distribution Amount, and (d) the amount, if any, required to
be deposited in the Reserve Account on such Distribution Date. Principal
payments on the Notes will generally be derived from the Total Distribution
Amount and the amount, if any, in the Reserve Account
S-18
<PAGE> 19
remaining after the payment of the Servicing Fee and the Noteholders' Interest
Distributable Amount and, in the case of any Accelerated Principal Distribution
Amount, the amount, if any, required to be deposited into the Reserve Account.
See "Description of the Transfer and Servicing Agreements -- Distributions" and
"-- Reserve Account" herein.
On the Business Day immediately preceding each Distribution Date (a
"Determination Date"), the Indenture Trustee shall determine the amount in the
Collection Account for the related Collection Period allocable to interest and
the amount allocable to principal on an actual basis, and payments to
Noteholders on the following Distribution Date will be based on such allocation.
On each Distribution Date, principal payments on the Notes will be applied
in the following order of priority: (i) to the principal balance of the Class
A-1 Notes until the principal balance of the Class A-1 Notes is reduced to zero;
(ii) to the principal balance of the Class A-2 Notes until the principal balance
of the Class A-2 Notes is reduced to zero; (iii) to the principal balance of the
Class A-3 Notes until the principal balance of the Class A-3 Notes is reduced to
zero; (iv) to the principal balance of the Class A-4 Notes until the principal
balance of the Class A-4 Notes is reduced to zero; and (v) to the principal
balance of the Class B Notes until the principal balance of the Class B Notes
has been reduced to zero. It is expected that all of the Class A-1 Notes, which
are not being offered hereby, will be purchased by CFC, which may hold or later
resell such Notes. The principal balance of the Class A-1 Notes, to the extent
not previously paid, will be due on the Class A-1 Final Scheduled Distribution
Date; the principal balance of the Class A-2 Notes, to the extent not previously
paid, will be due on the Class A-2 Final Scheduled Distribution Date; the
principal balance of the Class A-3 Notes, to the extent not previously paid,
will be due on the Class A-3 Final Scheduled Distribution Date; the principal
balance of the Class A-4 Notes, to the extent not previously paid, will be due
on the Class A-4 Final Scheduled Distribution Date; and the principal balance of
the Class B Notes, to the extent not previously paid, will be due on the Class B
Final Scheduled Distribution Date. The actual date on which the aggregate
outstanding principal amount of any class of Notes is paid may be earlier than
the respective Final Scheduled Distribution Dates set forth above based on a
variety of factors, including those described under "Weighted Average Life of
the Securities" herein and in the Prospectus.
OPTIONAL REDEMPTION
The Class A-4 Notes and Class B Notes will be redeemed in whole, but not in
part, on any Distribution Date after all the other classes of Notes have been
paid in full on which the Servicer exercises its option to purchase the
Receivables. The Servicer may purchase the Receivables when the Pool Balance
shall have declined to 10% or less of the Initial Pool Balance, as described in
the Prospectus under "Description of the Transfer and Servicing
Agreements -- Termination". The redemption price of the Class A-4 Notes and
Class B Notes will be equal to the unpaid principal amount of such Notes plus
accrued and unpaid interest thereon (the "Redemption Price").
BOOK-ENTRY REGISTRATION
Holders of the Offered Notes may hold through DTC (in the United States) or
CEDEL or Euroclear (in Europe) if they are participants of such systems, or
indirectly through organizations that are participants in such systems.
Cede, as nominee for DTC, will hold the Offered Notes. CEDEL and Euroclear
will hold omnibus positions in the Offered Notes on behalf of the CEDEL
Participants and the Euroclear Participants, respectively, through customers'
securities accounts in CEDEL's and Euroclear's names on the books of their
respective depositaries (collectively, the "Depositaries"), which in turn will
hold such positions in customers' securities accounts in the Depositaries' names
on the books of DTC.
Transfers between DTC's participating organizations (the "Participants")
will occur in accordance with DTC rules. Transfers between CEDEL Participants
and Euroclear Participants will occur in the ordinary way in accordance with
their applicable rules and operating procedures.
S-19
<PAGE> 20
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through CEDEL
Participants or Euroclear Participants, on the other, will be effected in DTC in
accordance with DTC rules on behalf of the relevant European international
clearing system by its Depositary; however, such cross-market transactions will
require delivery of instructions to the relevant European international clearing
system by the counterparty in such system in accordance with its rules and
procedures and within its established deadlines (European time). The relevant
European international clearing system will, if the transaction meets its
settlement requirements, deliver instructions to its Depositary to take action
to effect final settlement on its behalf by delivering or receiving securities
in DTC, and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. CEDEL Participants and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities in CEDEL or
Euroclear as a result of a transaction with a Participant will be made during
the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in such
securities settled during such processing will be reported to the relevant CEDEL
Participant or Euroclear Participant on such business day. Cash received in
CEDEL or Euroclear as a result of sales of securities by or through a CEDEL
Participant or a Euroclear Participant to a Participant will be received with
value on the DTC settlement date but will be available in the relevant CEDEL or
Euroclear cash account only as of the business day following settlement in DTC.
For a description of transfers between persons holding directly or
indirectly through DTC, see "Certain Information Regarding the
Securities -- Book-Entry Registration" in the Prospectus.
Cedel Bank, societe anonyme ("CEDEL") is incorporated under the laws of
Luxembourg as a professional depository. CEDEL holds securities for its
participating organizations ("CEDEL Participants") and facilitates the clearance
and settlement of securities transactions between CEDEL Participants through
electronic book-entry changes in accounts of CEDEL Participants, thereby
eliminating the need for physical movement of certificates. Transactions may be
settled in CEDEL in any of 28 currencies, including United States dollars. CEDEL
provides to its CEDEL Participants, among other things, services for
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. CEDEL interfaces with domestic
markets in several countries. As a professional depository, CEDEL is subject to
regulation by the Luxembourg Monetary Institute. CEDEL Participants are
recognized financial institutions around the world, including underwriters,
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations and may include the Underwriters. Indirect
access to CEDEL is also available to others, such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
CEDEL Participant, either directly or indirectly.
The Euroclear System was created in 1968 to hold securities for
participants of the Euroclear System ("Euroclear Participants") and to clear and
settle transactions between Euroclear Participants through simultaneous
electronic book-entry delivery against payment, thereby eliminating the need for
physical movement of certificates and any risk from lack of simultaneous
transfers of securities and cash. Transactions may now be settled in Euroclear
in any of 32 currencies, including United States dollars. The Euroclear System
includes various other services, including securities lending and borrowing, and
interfaces with domestic markets in several countries generally similar to the
arrangements for cross-market transfers with DTC. The Euroclear System is
operated by Morgan Guaranty Trust Company of New York, Brussels, Belgium office
(the "Euroclear Operator" or "Euroclear"), under contract with Euroclear
Clearance System, S.C., a Belgian cooperative corporation (the "Cooperative").
All operations are conducted by the Euroclear Operator, and all Euroclear
securities clearance accounts and Euroclear cash accounts are accounts with the
Euroclear Operator, not the Cooperative. The Cooperative establishes policy for
the Euroclear System on behalf of Euroclear Participants. Euroclear Participants
include banks (including central banks), securities brokers and dealers and
other professional financial intermediaries and may include the Underwriters.
Indirect access to the Euroclear System is also available to other firms that
clear through or maintain a custodial relationship with a Euroclear Participant,
either directly or indirectly.
S-20
<PAGE> 21
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 and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawal of
securities and cash from the Euroclear System, and receipts of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific certificates
to specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear Participants and has no record
of or relationship with persons holding through Euroclear Participants.
Distributions with respect to Offered Notes held through CEDEL or Euroclear
will be credited to the cash accounts of CEDEL Participants or Euroclear
Participants in accordance with the relevant system's rules and procedures, to
the extent received by its Depositary. Such distributions will be subject to tax
reporting in accordance with relevant United States tax laws and regulations.
See "Certain Federal Income Tax Consequences" in the Prospectus and "Global
Clearance, Settlement and Tax Documentation Procedures" in Annex I to this
Prospectus Supplement. CEDEL or the Euroclear Operator, as the case may be, will
take any other action permitted to be taken by a Noteholder under the Indenture
on behalf of a CEDEL Participant or Euroclear Participant only in accordance
with its relevant rules and procedures and subject to its Depositary's ability
to effect such actions on its behalf through DTC.
Although DTC, CEDEL and Euroclear have agreed to the foregoing procedures
in order to facilitate transfers of Offered Notes among participants of DTC,
CEDEL and Euroclear, they are under no obligation to perform or continue to
perform such procedures and such procedures may be discontinued at any time.
In the event that any of DTC, Cedel or Euroclear should discontinue its
services, the Administrator would seek an alternative depository (if available)
or cause the issuance of Definitive Notes to the owners thereof or their
nominees in the manner described in the Prospectus under "Certain Information
Regarding the Securities -- Definitive Securities".
S-21
<PAGE> 22
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of the Sale and Servicing
Agreement, the Administration Agreement and the Trust Agreement (collectively,
the "Transfer and Servicing Agreements"). Forms of the Transfer and Servicing
Agreements have been filed as exhibits to the Registration Statement. A copy of
the Sale and Servicing Agreement will be filed with the Commission following the
issuance of the Notes. The summary does not purport to be complete and is
subject to, and qualified in its entirety by reference to, all the provisions of
the Transfer and Servicing Agreements. The following summary supplements, and to
the extent inconsistent therewith replaces, the description of the general terms
and provisions of the Transfer and Servicing Agreements set forth in the
Prospectus, to which description reference is hereby made.
SALE AND ASSIGNMENT OF RECEIVABLES
Certain information regarding the conveyance of the Receivables by the
Seller to the Trust on the Closing Date pursuant to the Sale and Servicing
Agreement is set forth in the Prospectus under "Description of the Transfer and
Servicing Agreements -- Sale and Assignment of Receivables".
ACCOUNTS
No Payahead Account will be established in relation to the Trust because
all of the Receivables are Simple Interest Receivables. The assets of the Trust
also will not include a Pre-Funding Account. All other Accounts referred to
under "Description of the Transfer and Servicing Agreements -- Accounts" in the
Prospectus, as well as a Reserve Account, will be established by the Servicer
and maintained with the Indenture Trustee in the name of the Indenture Trustee
on behalf of the Noteholders.
NO ADVANCES
The Servicer will not make Advances in respect of the Receivables.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicing Fee Rate with respect to the Servicing Fee for the Servicer
will be 1.00% per annum of the Pool Balance as of the first day of the related
Collection Period. The Servicing Fee in respect of a Collection Period (together
with any portion of the Servicing Fee that remains unpaid from prior
Distribution Dates) will be paid on the Distribution Date following such
Collection Period out of collections for such Collection Period. See
"Description of the Transfer and Servicing Agreements -- Servicing Compensation
and Payment of Expenses" in the Prospectus.
DISTRIBUTIONS
Deposits to Collection Account. On or before each Distribution Date, the
Servicer will cause all collections and other amounts constituting the Total
Distribution Amount to be deposited into the Collection Account. The "Total
Distribution Amount" for a Distribution Date shall be the sum of the Interest
Distribution Amount and the Regular Principal Distribution Amount (other than
the portion thereof attributable to Realized Losses). "Realized Losses" means
the excess of the principal balance of any Liquidated Receivable over
Liquidation Proceeds to the extent allocable to principal.
The "Interest Distribution Amount" on any Distribution Date will generally
be the sum of the following amounts with respect to the preceding Collection
Period: (i) that portion of all collections on the Receivables allocable to
interest; (ii) all proceeds of the liquidation of defaulted Receivables
("Liquidated Receivables"), net of expenses incurred by the Servicer in
connection with such liquidation and any amounts required by law to be remitted
to the Obligor on such Liquidated Receivables ("Liquidation Proceeds"), to the
extent attributable to interest due thereon in accordance with the Servicer's
customary servicing procedures, and all recoveries in respect of Liquidated
Receivables which were written off in prior Collection Periods; (iii) the
Purchase Amount of each Receivable that was repurchased by the Seller or
purchased by the Servicer under an obligation which arose during the related
Collection Period, to the extent attributable to accrued interest
S-22
<PAGE> 23
thereon; and (iv) Investment Earnings for such Distribution Date. The Interest
Distribution Amount shall be determined on the related Determination Date on an
actual basis.
The "Regular Principal Distribution Amount" on any Distribution Date will
generally be the sum of the following amounts with respect to the preceding
Collection Period: (i) that portion of all collections on the Receivables
allocable to principal; (ii) all Liquidation Proceeds attributable to the
principal amount of Receivables which became Liquidated Receivables during such
Collection Period in accordance with the Servicer's customary servicing
procedures, plus the amount of Realized Losses with respect to such Liquidated
Receivables; (iii) to the extent attributable to principal, the Purchase Amount
received with respect to each Receivable repurchased by the Seller or purchased
by the Servicer under an obligation which arose during the related Collection
Period; (iv) partial prepayments relating to refunds of extended warranty
protection plan costs or of physical damage, credit life or disability insurance
policy premiums, but only if such costs or premiums were financed by the
respective Obligor as of the date of the original contract; and (v) on the
Distribution Date immediately following the Final Scheduled Maturity Date (the
"Final Scheduled Distribution Date"), any amounts advanced by the Servicer with
respect to principal on the Receivables. The Regular Principal Distribution
Amount shall be determined on the related Determination Date on an actual basis.
The Interest Distribution Amount and the Regular Principal Distribution
Amount on any Distribution Date shall exclude all payments and proceeds
(including Liquidation Proceeds) of any Receivables, the Purchase Amount of
which has been included in the Total Distribution Amount in a prior Collection
Period.
Deposits to the Distribution Account. On each Distribution Date, the
Servicer will instruct the Indenture Trustee to make the following deposits and
distributions, to the extent of the amount then on deposit in the Collection
Account, in the following order of priority:
(i) to the Servicer, from the Interest Distribution Amount (as so
allocated) the Servicing Fee and all unpaid Servicing Fees from prior
Collection Periods;
(ii) to the Note Distribution Account, from the Total Distribution
Amount remaining after the payment of the Servicing Fee for the related
Collection Period and all unpaid Servicing Fees from prior Collection
Periods, the Noteholders' Interest Distributable Amount;
(iii) to the Note Distribution Account, from the Total Distribution
Amount remaining after the application of clauses (i) and (ii), the
Noteholders' Principal Distributable Amount; and
(iv) the remaining balance, if any, to the Reserve Account.
For purposes hereof, the following terms shall have the following meanings:
"Noteholders' Distributable Amount" means, with respect to any
Distribution Date, the sum of the Noteholders' Principal Distributable
Amount and the Noteholders' Interest Distributable Amount.
"Noteholders' Interest Distributable Amount" means, with respect to
any Distribution Date, the sum of the Noteholders' Monthly Interest
Distributable Amount for such Distribution Date and the Noteholders'
Interest Carryover Shortfall for such Distribution Date.
"Noteholders' Monthly Interest Distributable Amount" means, with
respect to any Distribution Date, interest accrued for the related Interest
Accrual Period on each class of Notes at the respective Interest Rate for
such class on the outstanding principal balance of the Notes of such class
on the immediately preceding Distribution Date (or, in the case of the
first Distribution Date, on the Closing Date), after giving effect to all
payments of principal to the Noteholders of such class on or prior to such
Distribution Date.
S-23
<PAGE> 24
"Noteholders' Interest Carryover Shortfall" means, with respect to any
Distribution Date, the excess of the Noteholders' Monthly Interest
Distributable Amount for the preceding Distribution Date and any
outstanding Noteholders' Interest Carryover Shortfall on such preceding
Distribution Date, over the amount in respect of interest that is actually
deposited in the Note Distribution Account on such preceding Distribution
Date, plus interest on the amount of interest due but not paid to
Noteholders on the preceding Distribution Date, to the extent permitted by
law, at the respective Interest Rates borne by each class of the Notes for
the related Interest Accrual Period.
"Noteholders' Principal Distributable Amount" means, with respect to
any Distribution Date, the sum of the Noteholders' Monthly Principal
Distributable Amount for such Distribution Date and the Noteholders'
Principal Carryover Shortfall as of the close of the preceding Distribution
Date; provided, however, that the Noteholders' Principal Distributable
Amount shall not exceed the outstanding principal balance of the Notes; and
provided, further, that (i) the Noteholders' Principal Distributable Amount
on the Class A-1 Final Scheduled Distribution Date shall not be less than
the amount that is necessary (after giving effect to other amounts to be
deposited in the Note Distribution Account on such Distribution Date and
allocable to principal) to reduce the outstanding principal balance of the
Class A-1 Notes to zero; (ii) the Noteholders' Principal Distributable
Amount on the Class A-2 Final Scheduled Distribution Date shall not be less
than the amount that is necessary (after giving effect to other amounts to
be deposited in the Note Distribution Account on such Distribution Date and
allocable to principal) to reduce the outstanding principal balance of the
Class A-2 Notes to zero; (iii) on the Class A-3 Final Scheduled
Distribution Date the Noteholders' Principal Distributable Amount shall not
be less than the amount that is necessary (after giving effect to other
amounts to be deposited in the Note Distribution Account on such
Distribution Date and allocable to principal) to reduce the outstanding
principal balance of the Class A-3 Notes to zero; (iv) on the Class A-4
Final Scheduled Distribution Date the Noteholders' Principal Distributable
Amount shall not be less than the amount that is necessary (after giving
effect to other amounts to be deposited in the Note Distribution Account on
such Distribution Date and allocable to principal) to reduce the
outstanding principal balance of the Class A-4 Notes to zero; and (v) on
the Class B Final Scheduled Distribution Date the Noteholders' Principal
Distributable Amount shall not be less than the amount that is necessary
(after giving effect to other amounts to be deposited in the Note
Distribution Account on such Distribution Date and allocable to principal)
to reduce the outstanding principal balance of the Class B Notes to zero.
"Noteholders' Monthly Principal Distributable Amount" means, with
respect to each Distribution Date, the sum of (i) the Regular Principal
Distribution Amount (less the Cash Release Amount for such Distribution
Date during the Collateral Release Period) and (ii) the Accelerated
Principal Distribution Amount.
"Noteholders' Principal Carryover Shortfall" means, as of the close of
any Distribution Date, the excess of the Noteholders' Monthly Principal
Distributable Amount and any outstanding Noteholders' Principal Carryover
Shortfall from the preceding Distribution Date over the amount in respect
of principal that is actually deposited in the Note Distribution Account.
On each Distribution Date, all amounts on deposit in the Note Distribution
Account (other than Investment Earnings) will be generally paid in the following
order of priority:
(i) to the applicable Class A Noteholders, accrued and unpaid interest
on the outstanding principal balance of the applicable class of Notes at
the applicable Interest Rate;
(ii) the Noteholders' Principal Distributable Amount in the following
order of priority:
(a) to the Class A-1 Noteholders in reduction of principal until
the principal balance of the Class A-1 Notes has been reduced to zero;
(b) to the Class A-2 Noteholders in reduction of principal until
the principal balance of the Class A-2 Notes has been reduced to zero;
(c) to the Class A-3 Noteholders in reduction of principal until
the principal balance of the Class A-3 Notes has been reduced to zero;
S-24
<PAGE> 25
(d) to the Class A-4 Noteholders in reduction of principal until
the principal balance of the Class A-4 Notes has been reduced to zero;
and
(iii) to the Class B Noteholders, accrued and unpaid interest on the
outstanding principal balance of the Class B Notes at the Class B Rate; and
(iv) to the Class B Noteholders in reduction of principal until the
principal balance of the Class B Notes has been reduced to zero.
OVERCOLLATERALIZATION AND RELEASE OF COLLATERAL
The Initial Pool Balance ($1,560,012,089.22) will exceed the initial
aggregate principal amount of the Notes ($1,500,000,000) by an amount equal to
$60,012,089.22 (the "Initial Overcollateralization Amount"), which amount is
approximately 4% of the initial aggregate principal amount of the Notes. Unless
offset by losses on the Receivables, the distribution of the Accelerated
Principal Distribution Amount, if any, on a Distribution Date is expected to
cause the aggregate principal amount of the Notes to decrease faster than the
Pool Balance decreases, thereby increasing the Overcollateralization Amount and
the Overcollateralization Percentage. The "Overcollateralization Amount" in
respect of a Distribution Date is equal to (a) the Pool Balance as of the
beginning of the preceding Collection Period (the "Related Pool Balance") minus
(b) the aggregate outstanding principal amount of the Notes after giving effect
to payments made on the Notes on the preceding Distribution Date (the "Note
Amount"). The "Overcollateralization Percentage" in respect of a Distribution
Date is the percentage derived from a fraction, the numerator of which is the
Overcollateralization Amount for such Distribution Date and the denominator of
which is the Related Pool Balance. Subject to the conditions set forth below, on
each Distribution Date, commencing with the First Release Distribution Date,
certain amounts of cash and Receivables will be released to the Trust, free of
the lien of the Indenture, and thereupon paid or transferred to the Company. Any
such cash and Receivables released to the Company will not be available to make
payments on the Notes.
The release of cash and Receivables to the Trust (and then to the Company)
is subject to the satisfaction of all of the following conditions:
(1) No release will be permitted until the Distribution Date (the "First
Release Distribution Date") on which the Overcollateralization Amount is at
least equal to:
[Initial Overcollateralization Amount]
plus
[2% X (Related Pool Balance minus Initial Overcollateralization Amount)]
(2) Subject to condition (4) below, the aggregate principal balance of
Receivables released in respect of a Distribution Date will equal:.
Overcollateralization Amount less Targeted Overcollateralization Amount
The "Targeted Overcollateralization Amount" for a Distribution Date is equal to:
<TABLE>
<C> <S>
[Note Amount
-------------- minus [Note Amount]
94.5%]
</TABLE>
(3) Subject to condition (4) below, the amount of cash released on such
Distribution Date (the "Cash Release Amount") will equal 5.5% of the Regular
Principal Distribution Amount for such Distribution Date. However, on any
Distribution Date the Cash Release Amount and any Receivables will be released
only after the Noteholders shall have received principal in an amount at least
equal to 94.5% of the Regular Principal Distributable Amount for such
Distribution Date.
(4) The cumulative amount of cash and principal balances of Receivables
released shall not exceed the Initial Overcollateralization Amount.
Consequently, when such cumulative amount has been released, there will be no
further release of cash or Receivables to the Trust pursuant to the release
provisions described
S-25
<PAGE> 26
above, and the full Regular Principal Distribution Amount will thereafter again
be distributable as principal to the Noteholders. The period during which such
releases are permitted is the "Collateral Release Period".
RESERVE ACCOUNT
The protection afforded to the Noteholders will be effected both by the
Overcollateralization Amount and by the establishment of the Reserve Account.
The Reserve Account will be created with an initial deposit by the Seller on the
Closing Date of cash or Eligible Investments in the amount of $15,000,000 (the
"Specified Reserve Account Balance"), which is 1% of the initial aggregate
principal amount of the Notes. If, after the Collateral Release Period, the
Overcollateralization Percentage at any time equals at least 7.75%, then the
Specified Reserve Account Balance will be $11,250,000, which is 0.75% of the
intitial aggregate principal amount of the Notes.
Amounts held from time to time in the Reserve Account will continue to be
held for the benefit of Noteholders. On each Distribution Date, funds will be
withdrawn from the Reserve Account to the extent that the Total Distribution
Amount (after the payment of the Servicing Fee) with respect to any Collection
Period is less than the Noteholders' Distributable Amount and will be deposited
in the Note Distribution Account. On each Distribution Date, the Reserve Account
will be reinstated up to the Specified Reserve Account Balance to the extent of
the portion, if any, of the Total Distribution Amount remaining after payment of
the Servicing Fee and the deposit of the Noteholders' Distributable Amount into
the Note Distribution Account.
If the amount on deposit in the Reserve Account on any Distribution Date
(after giving effect to all deposits therein or other withdrawals therefrom on
such Distribution Date) is greater than the Specified Reserve Account Balance
for such Distribution Date, except as described below and subject to certain
limitations, the Servicer shall instruct the Indenture Trustee to distribute
such excess to the Company. Upon any distribution to the Company of amounts from
the Reserve Account, the Noteholders will not have any rights in, or claims to,
such amounts. Subsequent to any reduction or withdrawal by any Rating Agency of
its rating of any class of Class A Notes, unless such rating has been restored,
any such excess released from the Reserve Account on a Distribution Date will be
deposited in the Note Distribution Account for payment to Class A Noteholders as
an accelerated payment of principal on such Distribution Date.
After the payment in full, or the provision for such payment, of (i) all
accrued and unpaid interest on the Notes and (ii) the outstanding principal
balance of the Notes, any funds remaining on deposit in the Reserve Account,
subject to certain limitations, will be paid to the Company.
The Overcollateralization Amount and the Reserve Account are intended to
enhance the likelihood of receipt by Noteholders of the full amount of principal
and interest due them and to decrease the likelihood that the Noteholders will
experience losses. However, in certain circumstances, the Reserve Account could
be depleted. If the amount required to be withdrawn from the Reserve Account to
cover shortfalls in collections on the Receivables exceeds the amount of
available cash in the Reserve Account, Noteholders could incur losses or a
temporary shortfall in the amounts distributed to the Noteholders could result,
which could, in turn, increase the average life of the Notes.
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<PAGE> 27
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Brown & Wood LLP, counsel for the Underwriters and
special tax counsel for the Trust, for federal income tax purposes, the Offered
Notes will be characterized as debt, and the Trust will not be characterized as
an association (or a publicly traded partnership) taxable as a corporation. If,
contrary to the above opinion, the IRS successfully asserted that the Class B
Notes did not represent debt for federal income tax purposes, such Notes might
be treated as equity interests in the Trust. In the event the Class B Notes were
treated as interests in a partnership, the consequences governing the
Certificates as equity interests in a partnership described in the Prospectus
under "TRUSTS FOR WHICH A PARTNERSHIP ELECTION IS MADE -- Tax Consequences to
Holders of the Certificates" would apply to the holders of such Notes.
ERISA CONSIDERATIONS
The Offered 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 (the "Code"). A fiduciary of a Plan
must determine that the purchase of an Offered Note is consistent with its
fiduciary duties under ERISA and does not result in a nonexempt prohibited
transaction as defined in Section 406 of ERISA or Section 4975 of the Code. For
additional information regarding treatment of the Offered Notes under ERISA, see
"ERISA Considerations" in the Prospectus.
The Offered Notes may not be purchased with the assets of a Plan if the
Seller, the Indenture Trustee, the Owner Trustee or any of their affiliates (a)
has investment or administrative discretion with respect to such Plan assets;
(b) has authority or responsibility to give, or regularly gives, investment
advice with respect to such Plan assets for a fee and pursuant to an agreement
or understanding that such advice (i) will serve as a primary basis for
investment decisions with respect to such Plan assets and (ii) will be based on
the particular investment needs for such Plan; or (c) is an employer maintaining
or contributing to such Plan.
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<PAGE> 28
UNDERWRITING
Subject to the terms and conditions set forth in an Underwriting Agreement
(the "Underwriting Agreement"), the Seller has agreed to cause the Trust to sell
to each of the Underwriters named below (collectively, the "Underwriters"), and
each of the Underwriters has severally agreed to purchase, the principal amount
of the Offered Notes set forth opposite its name below:
CLASS A-2 NOTES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
---------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................................... $150,000,000.00
Bear, Stearns & Co. Inc..................................................... 150,000,000.00
Lehman Brothers Inc. ....................................................... 150,000,000.00
Salomon Brothers Inc ....................................................... 150,000,000.00
---------------
Total............................................................. $600,000,000.00
==============
</TABLE>
CLASS A-3 NOTES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
---------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................................... $ 98,437,500.00
Bear, Stearns & Co. Inc..................................................... 98,437,500.00
Lehman Brothers Inc. ....................................................... 98,437,500.00
Salomon Brothers Inc ....................................................... 98,437,500.00
---------------
Total............................................................. $393,750,000.00
==============
</TABLE>
CLASS A-4 NOTES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
---------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................................... $ 50,000,000.00
Bear, Stearns & Co. Inc..................................................... 50,000,000.00
Lehman Brothers Inc. ....................................................... 50,000,000.00
Salomon Brothers Inc ....................................................... 50,000,000.00
---------------
Total............................................................. $200,000,000.00
==============
</TABLE>
CLASS B NOTES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
--------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................................... $28,125,000.00
Bear, Stearns & Co. Inc...................................................... 28,125,000.00
--------------
Total.............................................................. $56,250,000.00
=============
</TABLE>
The Seller has been advised by the Underwriters that they propose initially
to offer the Offered 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
.1125% per Class A-2 Note, .14% per Class A-3 Note, .15% per Class A-4 Note and
.21% per Class B Note. The Underwriters may allow and such dealers may reallow a
concession not in excess of .085% per Class A-2 Note, .1% per Class A-3 Note,
.1125% per Class A-4 Note and .175% per Class B Note to certain other dealers.
After the initial public offering of the Offered Notes, the public offering
price and such concessions may be changed.
Until the distribution of the Offered Notes is completed, rules of the
Commission may limit the ability of the Underwriters and certain selling group
members to bid for and purchase the Offered Notes. As an exception to these
rules, the Underwriters are permitted to engage in certain transactions that
stabilize the price of the Offered Notes. Such transactions consist of bids or
purchases for the purpose of pegging, fixing or maintaining the price of the
Offered Notes.
S-28
<PAGE> 29
If the Underwriters create a short position in the Offered Notes in
connection with the offering, i.e., if they sell more Offered Notes than are set
forth on the cover page of this Prospectus Supplement, the Underwriters may
reduce that short position by purchasing Offered Notes in the open market.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases.
Neither the Seller nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the prices of the Offered Notes. In addition,
neither the Seller nor any of the Underwriters makes any representation that the
Underwriters will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
Each Underwriter has represented and agreed that (a) it has not offered or
sold, and will not offer or sell, any Offered Notes to persons in the United
Kingdom except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances that do not
constitute an offer to the public in the United Kingdom for the purposes of the
Public Offers of Securities Regulations 1995, (b) it has complied and will
comply with all applicable provisions of the Financial Services Act 1986 of
Great Britain with respect to anything done by it in relation to the Offered
Notes in, from or otherwise involving the United Kingdom and (c) it has only
issued or passed on and will only issue or pass on in the United Kingdom any
document in connection with the issue of the Offered Notes to a person who is of
a kind described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1995 or is a person to whom the document may
otherwise lawfully be issued or passed on.
Upon receipt of a request by an investor who has received an electronic
Prospectus Supplement and Prospectus from an Underwriter or a request by such
investor's representative within the period during which there is an obligation
to deliver a Prospectus Supplement and Prospectus, the Seller or the Underwriter
will promptly deliver, or cause to be delivered, without charge, a paper copy of
the Prospectus Supplement and Prospectus.
LEGAL OPINIONS
In addition to the legal opinions described in the Prospectus, certain
legal matters relating to the Offered Notes will be passed upon for the
Underwriters and certain federal income tax and other matters will be passed
upon for the Trust by Brown & Wood LLP, New York, New York. Brown & Wood LLP may
from time to time render legal services to Chrysler Financial Corporation and
its affiliates.
S-29
<PAGE> 30
INDEX OF TERMS
<TABLE>
<S> <C>
Accelerated Principal Distribution Amount................................ S-18
APR...................................................................... S-13
Business Day............................................................. S-5
Cash Release Amount...................................................... S-25
Cede..................................................................... S-3
CEDEL.................................................................... S-20
CEDEL Participants....................................................... S-20
CFC...................................................................... S-4
Chrysler................................................................. S-10
Class A Notes............................................................ S-4
Class A-1 Final Scheduled Distribution Date.............................. S-6
Class A-1 Notes.......................................................... S-4
Class A-1 Rate........................................................... S-5
Class A-2 Final Scheduled Distribution Date.............................. S-6
Class A-2 Notes.......................................................... S-4
Class A-2 Rate........................................................... S-5
Class A-3 Final Scheduled Distribution Date.............................. S-6
Class A-3 Notes.......................................................... S-4
Class A-3 Rate........................................................... S-5
Class A-4 Final Scheduled Distribution Date.............................. S-6
Class A-4 Notes.......................................................... S-4
Class A-4 Rate........................................................... S-5
Class B Final Scheduled Distribution Date................................ S-6
Class B Notes............................................................ S-4
Class B Rate............................................................. S-5
Closing Date............................................................. S-4
Code..................................................................... S-27
Collateral Release Period................................................ S-26
Collection Account....................................................... S-8
Collection Period........................................................ S-5
Commission............................................................... S-3
Company.................................................................. S-4
Cooperative.............................................................. S-20
CTAS..................................................................... S-10
Cutoff Date.............................................................. S-4
Depositaries............................................................. S-19
Determination Date....................................................... S-19
Distribution Date........................................................ S-5
DTC...................................................................... S-3
EITF..................................................................... S-10
ERISA.................................................................... S-27
ESI...................................................................... S-10
Euroclear................................................................ S-20
Euroclear Operator....................................................... S-20
Euroclear Participants................................................... S-20
Exchange Act............................................................. S-3
Federal Tax Counsel...................................................... S-9
Final Scheduled Distribution Date........................................ S-23
Final Scheduled Maturity Date............................................ S-5
First Release Distribution Date.......................................... S-23
Global Securities........................................................ A-1
Indenture................................................................ S-4
Indenture Trustee........................................................ S-4
Initial Overcollateralization Amount..................................... S-23
Initial Pool Balance..................................................... S-4
Interest Accrual Period.................................................. S-18
Interest Distribution Amount............................................. S-22
Interest Rates........................................................... S-5
Issuer................................................................... S-4
Liquidated Receivables................................................... S-22
Liquidation Proceeds..................................................... S-22
</TABLE>
S-30
<PAGE> 31
<TABLE>
<S> <C>
Michigan Tax Counsel..................................................... S-9
Note Amount.............................................................. S-25
Noteholders.............................................................. S-5
Noteholders' Distributable Amount........................................ S-23
Noteholders' Interest Carryover Shortfall................................ S-24
Noteholders' Interest Distributable Amount............................... S-23
Noteholders' Monthly Interest Distributable Amount....................... S-23
Noteholders' Monthly Principal Distributable Amount...................... S-24
Noteholders' Principal Carryover Shortfall............................... S-24
Noteholders' Principal Distributable Amount.............................. S-24
Notes.................................................................... S-4
Offered Notes............................................................ S-4
Overcollateralization Amount............................................. S-25
Overcollateralization Percentage......................................... S-25
Owner Trustee............................................................ S-4
Participants............................................................. S-19
Payment Date............................................................. S-5
PEI...................................................................... S-10
Plan..................................................................... S-27
Pool Balance............................................................. S-5
Prospectus............................................................... S-3
Rating Agencies.......................................................... S-11
Realized Losses.......................................................... S-22
Receivables.............................................................. S-2
Receivables Pool......................................................... S-13
Record Date.............................................................. S-5
Redemption Price......................................................... S-19
Regular Principal Distribution Amount.................................... S-23
Related Pool Balance..................................................... S-25
Reserve Account.......................................................... S-8
Sale and Servicing Agreement............................................. S-4
Seller................................................................... S-4
Servicer................................................................. S-4
Specified Reserve Account Balance........................................ S-26
Targeted Overcollateralization Amount.................................... S-7
Terms and Conditions..................................................... S-21
Thrifty.................................................................. S-10
Total Distribution Amount................................................ S-22
Transfer and Servicing Agreements........................................ S-22
Trust.................................................................... S-4
Trust Agreement.......................................................... S-4
Underwriters............................................................. S-28
Underwriting Agreement................................................... S-28
U.S Person............................................................... A-3
</TABLE>
S-31
<PAGE> 32
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Offered Notes
(the "Global Securities") will be available only in book-entry form. Investors
in the Global Securities may hold such Global Securities through any of DTC,
CEDEL or Euroclear. The Global Securities will be tradeable as home market
instruments in both the European and U.S. domestic markets. Initial settlement
and all secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities
through CEDEL and Euroclear will be conducted in the ordinary way in accordance
with their normal rules and operating procedures and in accordance with
conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations.
Secondary cross-market trading between CEDEL or Euroclear and DTC
Participants holding Offered Notes will be effected on a
delivery-against-payment basis through the respective Depositaries of CEDEL and
Euroclear (in such capacity) and DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the Global Securities will
be represented through financial institutions acting on their behalf as direct
and indirect Participants in DTC. As a result, CEDEL and Euroclear will hold
positions on behalf of their participants through their respective Depositaries,
which in turn will hold such positions in accounts as DTC Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable to prior debt issues. Investors' securities
custody accounts will be credited with their holdings against payment in
same-day funds on the settlement date.
Investors electing to hold their Global Securities through CEDEL or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to the
securities custody accounts on the settlement date against payments in same-day
funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to book-entry
securities in same-day funds.
Trading between CEDEL and/or Euroclear Participants. Secondary market
trading between CEDEL Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
Trading between DTC seller and CEDEL or Euroclear purchaser. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a CEDEL Participant or a Euroclear Participant, the purchaser will
send instructions to CEDEL or Euroclear through a CEDEL Participant or Euroclear
Participant at least one business day prior to settlement. CEDEL or Euroclear,
as applicable, will
A-1
<PAGE> 33
instruct its Depositary to receive the Global Securities against payment.
Payment will include interest accrued on the Global Securities from and
including the last coupon payment date to and excluding the settlement date.
Payment will then be made by such Depositary to the DTC Participant's account
against delivery of the Global Securities. After settlement has been completed,
the Global Securities will be credited to the applicable clearing system and by
the clearing system, in accordance with its usual procedures, to the CEDEL
Participant's or Euroclear Participant's account. The Global Securities credit
will appear the next day (European time) and the cash debit will be back-valued
to, and the interest on the Global Securities will accrue from, the value date
(which would be the preceding day when settlement occurred in New York). If
settlement is not completed on the intended value date (i.e., the trade fails),
the CEDEL or Euroclear cash debit will be valued instead as of the actual
settlement date.
CEDEL Participants and Euroclear Participants will need to make available
to the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to pre-position funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within CEDEL or Euroclear. Under this approach,
they may take on credit exposure to CEDEL or Euroclear until the Global
Securities are credited to their accounts one day later.
As an alternative, if CEDEL or Euroclear has extended a line of credit to
them, CEDEL Participants or Euroclear Participants can elect not to pre-position
funds and allow that credit line to be drawn upon the finance settlement. Under
this procedure, CEDEL Participants or Euroclear Participants purchasing Global
Securities would incur overdraft charges for one day, assuming they cleared the
overdraft when the Global Securities were credited to their accounts. However,
interest on the Global Securities would accrue from the value date. Therefore,
in many cases the investment income on the Global Securities earned during that
one-day period may substantially reduce or offset the amount of such overdraft
charges, although this result will depend on each CEDEL Participant's or
Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities to
the respective Depositary for the benefit of CEDEL Participants or Euroclear
Participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC Participant a cross-market transaction will
settle no differently than a trade between two DTC Participants.
Trading between CEDEL or Euroclear seller and DTC purchaser. Due to time
zone differences in their favor, CEDEL Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing systems, through
their respective Depositaries, to a DTC Participant. The seller will send
instructions to CEDEL or Euroclear through a CEDEL Participant or Euroclear
Participant at least one business day prior to settlement. In these cases, CEDEL
or Euroclear will instruct their respective Depositaries, as appropriate, to
deliver the bonds to the DTC Participant's account against payment. Payment will
include interest accrued on the Global Securities from and including the last
coupon payment date to and excluding the settlement date. The payment will then
be reflected in the account of the CEDEL Participant or Euroclear Participant
the following day, and receipt of the cash proceeds in the CEDEL Participant's
or Euroclear Participant's account would be back-valued to the value date (which
would be the preceding day, when settlement occurred in New York). Should the
CEDEL Participant or Euroclear Participant have a line of credit with its
clearing system and elect to be in debit in anticipation of receipt of the sale
proceeds in its account, the back-valuation will extinguish any overdraft
charges incurred over that one-day period. If settlement is not completed on the
intended value date (i.e., the trade fails), receipt of the cash proceeds in the
CEDEL Participant's or Euroclear Participant's account would instead be valued
as of the actual settlement date. Finally, day traders that use CEDEL or
Euroclear and that purchase Global Securities from DTC Participants for delivery
to CEDEL Participants or Euroclear Participants should note that these trades
would automatically fail on the sale side unless affirmative action were taken.
At least three techniques should be readily available to eliminate this
potential problem:
A-2
<PAGE> 34
(a) borrowing through CEDEL or Euroclear for one day (until the
purchase side of the day trade is reflected in their CEDEL or Euroclear
accounts) in accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant
no later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their CEDEL or Euroclear
account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC Participant is at
least one day prior to the value date for the sale to the CEDEL Participant
or Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through CEDEL or
Euroclear (or through DTC if the holder has an address outside the U.S.) will be
subject to the 30% U.S. withholding tax that generally applies to payments of
interest (including original issue discount) on registered debt issued by U.S.
Persons, unless (i) each clearing system, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or business
in the chain of intermediaries between such beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements and
(ii) such beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate:
Exemption of non-U.S. Persons (Form W-8). Beneficial owners of
Offered Notes that are non-U.S. Persons generally can obtain a complete
exemption from the withholding tax by filing a signed Form W-8 (Certificate
of Foreign Status). If the information shown on Form W-8 changes, a new
Form W-8 must be filed within 30 days of such change.
Exemption for non-U.S. Person with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a
U.S. branch, for which the interest income is effectively connected with
its conduct of a trade or business in the United States can obtain an
exemption from the withholding tax by filing Form 4224 (Exemption from
Withholding of Tax on Income Effectively Connected with the Conduct of a
Trade or Business in the United States).
Exemption or reduced rate for non-U.S. Persons resident in treaty
countries (Form 1001). Non-U.S. Persons that are beneficial owners of
Offered Notes residing in a country that has a tax treaty with the United
States can obtain an exemption or reduced tax rate (depending on the treaty
terms) by filing Form 1001 (Ownership, Exemption or Reduced Rate
Certificate). If the treaty provides only for a reduced rate, withholding
tax will be imposed at that rate unless the filer alternatively files Form
W-8. Form 1001 may be filed by the beneficial owner of Offered Notes or
such owner's agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a
complete exemption from the withholding tax by filing Form W-9 (Payer's
Request for Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The beneficial owner of
a Global Security or, in the case of a Form 1001 or a Form 4224 filer, such
owner's agent, files by submitting the appropriate form to the person
through whom it holds the security (the clearing agency, in the case of
persons holding directly on the books of the clearing agency). Form W-8 and
Form 1001 are effective for three calendar years and Form 4224 is effective
for one calendar year.
The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of the
United States or any political subdivision thereof, (iii) an estate the income
of which is includible in gross income for United States tax purposes,
regardless of its source, or (iv) a trust if a court within the United States is
able to exercise primary supervision of the administration of the trust and one
or more United States fiduciaries have the authority to control all substantial
decisions of the trust. This summary does not deal with all aspects of U.S.
federal income tax withholding that may be relevant to foreign holders of the
Global Securities. Investors are advised to consult their own tax advisors for
specific tax advice concerning their holding and disposing of the Global
Securities.
A-3
<PAGE> 35
PROSPECTUS
PREMIER AUTO TRUSTS
ASSET BACKED NOTES
ASSET BACKED CERTIFICATES
---------------------
CHRYSLER FINANCIAL CORPORATION
Seller and Servicer
---------------------
The Asset Backed Notes (the "Notes") and the Asset Backed Certificates (the
"Certificates" and, together with the Notes, the "Securities") described herein
may be sold from time to time in one or more series, in amounts, at prices and
on terms to be determined at the time of sale and to be set forth in a
supplement to this Prospectus (a "Prospectus Supplement"). Each series of
Securities, which may include one or more classes of Notes and/or one or more
classes of Certificates, will be issued by a trust to be formed with respect to
such series (each, a "Trust"). Each Trust will be formed pursuant to either (i)
a Trust Agreement to be entered into among Chrysler Financial Corporation
("CFC"), as seller, the Trustee specified in the related Prospectus Supplement
(the "Trustee") and an entity which will be specified in the related Prospectus
Supplement and which initially will be owned, directly or indirectly, by CFC
(such entity, as identified in the related Prospectus Supplement, the
"Company"), or (ii) or a Pooling and Servicing Agreement to be entered into
between the Trustee and CFC, as seller and servicer. If a series of Securities
includes Notes, such Notes will be issued and secured pursuant to an Indenture
between the Trust and the Indenture Trustee specified in the related Prospectus
Supplement (the "Indenture Trustee") and will represent indebtedness of the
related Trust. The Certificates of a series will represent fractional undivided
interests in the related Trust. The related Prospectus Supplement will specify
which class or classes of Notes, if any, and which class or classes of
Certificates, if any, of the related series are being offered thereby. The
property of each Trust will include a pool of motor vehicle retail installment
sale contracts secured by new or used automobiles and light duty trucks (the
"Receivables"), certain monies due or received thereunder on and after the
applicable Cutoff Date set forth in the related Prospectus Supplement, security
interests in the vehicles financed thereby and certain other property, all as
described herein and in the related Prospectus Supplement. In addition, if so
specified in the related Prospectus Supplement, the property of the Trust will
include monies on deposit in a trust account (the "Pre-Funding Account") to be
established with the Indenture Trustee, which will be used to purchase
additional motor vehicle retail installment sale contracts (the "Subsequent
Receivables") from CFC from time to time during the Funding Period specified in
the related Prospectus Supplement.
Except as otherwise provided in the related Prospectus Supplement, each
class of Securities of any series will represent the right to receive a
specified amount of payments of principal and interest on the related
Receivables, at the rates, on the dates and in the manner described herein and
in the related Prospectus Supplement. If a series includes multiple classes of
Securities, the rights of one or more classes of Securities to receive payments
may be senior or subordinate to the rights of one or more of the other classes
of such series. Distributions on Certificates of a series may be subordinated in
priority to payments due on any related Notes to the extent described herein and
in the related Prospectus Supplement. A series may include one or more classes
of Notes and/or Certificates which differ as to the timing and priority of
payment, interest rate or amount of distributions in respect of principal or
interest or both. A series may include one or more classes of Notes or
Certificates entitled to distributions in respect of principal with
disproportionate, nominal or no interest distributions, or to interest
distributions, with disproportionate, nominal or no distributions in respect of
principal. The rate of payment in respect of principal of any class of Notes and
distributions in respect of the Certificate Balance of the Certificates of any
class will depend on the priority of payment of such class and the rate and
timing of payments (including prepayments, defaults, liquidations and
repurchases of Receivables) on the related Receivables. A rate of payment lower
or higher than that anticipated may affect the weighted average life of each
class of Securities in the manner described herein and in the related Prospectus
Supplement.
EXCEPT AS OTHERWISE SPECIFIED IN THE RELATED PROSPECTUS SUPPLEMENT, ANY
NOTES OF A SERIES REPRESENT OBLIGATIONS OF, AND THE CERTIFICATES OF A SERIES
REPRESENT BENEFICIAL INTERESTS IN, THE RELATED TRUST ONLY AND DO NOT REPRESENT
OBLIGATIONS OF OR INTERESTS IN, AND ARE NOT GUARANTEED OR INSURED BY, CHRYSLER
FINANCIAL CORPORATION, THE APPLICABLE COMPANY OR ANY OF THEIR RESPECTIVE
AFFILIATES. PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH UNDER
"SPECIAL CONSIDERATIONS" HEREIN AND IN THE RELATED PROSPECTUS SUPPLEMENT.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
Retain this Prospectus for future reference. This Prospectus may not be
used to consummate sales
of Securities offered hereby unless accompanied by a Prospectus Supplement.
---------------------
The date of this Prospectus is March 4, 1997.
<PAGE> 36
AVAILABLE INFORMATION
Chrysler Financial Corporation, as originator of each Trust, has filed with
the Securities and Exchange Commission (the "Commission") a Registration
Statement (together with all amendments and exhibits thereto, referred to herein
as the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the Notes and the Certificates offered
pursuant to this Prospectus. For further information, reference is made to the
Registration Statement which may be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549; and at the Commission's regional offices at Northwestern Atrium
Center, 500 West Madison Street, 14th Floor, Chicago, Illinois 60661 and Seven
World Trade Center, New York, New York 10048. Copies of the Registration
Statement may be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission maintains a Web site at http://www.sec.gov containing reports, proxy
and information statements and other information regarding registrants,
including Chrysler Financial Corporation, that file electronically with the
Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by Chrysler Financial Corporation, as originator of the
Trust referred to in the accompanying Prospectus Supplement, pursuant to Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended,
subsequent to the date of this Prospectus and prior to the termination of the
offering of the Securities offered by such Trust shall be deemed to be
incorporated by reference in this Prospectus. Any statement contained herein or
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
Chrysler Financial Corporation will provide without charge to each person,
including any beneficial owner of Securities, to whom a copy of this Prospectus
is delivered, on the written or oral request of any such person, a copy of any
or all of the documents incorporated herein or in any related Prospectus
Supplement by reference, except the exhibits to such documents (unless such
exhibits are specifically incorporated by reference in such documents). Requests
for such copies should be directed to Secretary, Chrysler Financial Corporation,
27777 Franklin Road, Southfield, Michigan 48034-8286 (Telephone: 810-948-3058).
2
<PAGE> 37
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and by reference to
the information with respect to the Securities of any series contained in the
related Prospectus Supplement to be prepared and delivered in connection with
the offering of such Securities. Certain capitalized terms used in this summary
are defined elsewhere in this Prospectus on the pages indicated in the "Index of
Terms".
<TABLE>
<S> <C>
Issuer................. With respect to each series of Securities, the trust (referred to
herein as the "Trust" or the "Issuer") to be formed pursuant to
either a Trust Agreement (as amended and supplemented from time to
time, a "Trust Agreement") among the Seller, the Company for such
Trust and the Trustee for such Trust or a Pooling and Servicing
Agreement (as amended and supplemented from time to time, the
"Pooling and Servicing Agreement") between the Trustee and Chrysler
Financial Corporation, as Seller and Servicer.
Seller................. Chrysler Financial Corporation ("CFC" or, in its capacity as seller,
the "Seller").
Servicer............... Chrysler Financial Corporation (in such capacity, the "Servicer").
Trustee................ With respect to each series of Securities, the Trustee specified in
the related Prospectus Supplement.
Indenture Trustee...... With respect to any applicable series of Securities, the Indenture
Trustee specified in the related Prospectus Supplement.
The Notes.............. A series of Securities may include one or more classes of Notes,
which will be issued pursuant to an Indenture between the Trust and
the Indenture Trustee (as amended and supplemented from time to
time, an "Indenture"). The related Prospectus Supplement will
specify which class or classes, if any, of Notes of the related
series are being offered thereby.
Unless otherwise specified in the related Prospectus Supplement,
Notes will be available for purchase in denominations of $1,000 and
integral multiples thereof and will be available in book-entry form
only. Unless otherwise specified in the related Prospectus
Supplement, Noteholders will be able to receive Definitive Notes
only in the limited circumstances described herein or in the related
Prospectus Supplement. See "Certain Information Regarding the
Securities -- Definitive Securities".
Unless otherwise specified in the related Prospectus Supplement,
each class of Notes will have a stated principal amount and will
bear interest at a specified rate or rates (with respect to each
class of Notes, the "Interest Rate"). Each class of Notes may have a
different Interest Rate, which may be a fixed, variable or
adjustable Interest Rate, or any combination of the foregoing. The
related Prospectus Supplement will specify the Interest Rate for
each class of Notes, or the method for determining the Interest
Rate.
With respect to a series that includes two or more classes of Notes,
each class may differ as to the timing and priority of payments,
seniority, allocations of losses, Interest Rate or amount of
payments of principal or interest, or payments of principal or
interest in respect of any such class or classes may or may not be
made upon the occurrence of specified events or on the basis of
collections from designated portions of the Receivables Pool.
In addition, a series may include one or more classes of Notes
("Strip Notes") entitled to (i) principal payments with
disproportionate, nominal or no interest
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payments or (ii) interest payments with disproportionate, nominal or
no principal payments.
If the Servicer exercises its option to purchase the Receivables of
a Trust (or, if not and, if and to the extent provided in the
related Prospectus Supplement, satisfactory bids for the purchase of
such Receivables are received), in the manner and on the respective
terms and conditions described under "Description of the Transfer
and Servicing Agreements -- Termination", the outstanding Notes will
be redeemed as set forth in the related Prospectus Supplement. In
addition, if the related Prospectus Supplement provides that the
property of a Trust will include a Pre-Funding Account (as such term
is defined in the related Prospectus Supplement, the "Pre-Funding
Account"), one or more classes of the outstanding Notes will be
subject to partial redemption on or immediately following the end of
the Funding Period (as such term is defined in the related
Prospectus Supplement, the "Funding Period") in an amount and manner
specified in the related Prospectus Supplement. In the event of such
partial redemption, the Noteholders may be entitled to receive a
prepayment premium from the Trust, in the amount and to the extent
provided in the related Prospectus Supplement.
The Certificates....... A series may include one or more classes of Certificates and may not
include any Notes. The related Prospectus Supplement will specify
which class or classes, if any, of the Certificates are being
offered thereby.
Unless otherwise specified in the related Prospectus Supplement,
Certificates will be available for purchase in a minimum
denomination of $20,000 and in integral multiples of $1,000 in
excess thereof and will be available in book-entry form only. Unless
otherwise specified in the related Prospectus Supplement, Certifi-
cateholders will be able to receive Definitive Certificates only in
the limited circumstances described herein or in the related
Prospectus Supplement. See "Certain Information Regarding the
Securities -- Definitive Securities".
Unless otherwise specified in the related Prospectus Supplement,
each class of Certificates will have a stated Certificate Balance
specified in the related Prospectus Supplement (the "Certificate
Balance") and will accrue interest on such Certificate Balance at a
specified rate (with respect to each class of Certificates, the
"Pass Through Rate"). Each class of Certificates may have a
different Pass Through Rate, which may be a fixed, variable or
adjustable Pass Through Rate, or any combination of the foregoing.
The related Prospectus Supplement will specify the Pass Through Rate
for each class of Certificates or the method for determining the
Pass Through Rate.
With respect to a series that includes two or more classes of
Certificates, each class may differ as to timing and priority of
distributions, seniority, allocations of losses, Pass Through Rate
or amount of distributions in respect of principal or interest, or
distributions in respect of principal or interest in respect of any
such class or classes may or may not be made upon the occurrence of
specified events or on the basis of collections from designated
portions of the Receivables Pool. In addition, a series may include
one or more classes of Certificates ("Strip Certificates") entitled
to (i) distributions in respect of principal with disproportionate,
nominal or no interest distributions or (ii) interest distributions
with disproportionate, nominal or no distributions in respect of
principal.
If a series of securities includes classes of Notes, distributions
in respect of the Certificates may be subordinated in priority of
payment to payments on the Notes to the extent specified in the
related Prospectus Supplement.
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If the Servicer exercises its option to purchase the Receivables of
a Trust (or, if not, and if and to the extent provided in the
related Prospectus Supplement, satisfactory bids for the purchase of
such Receivables are received), in the manner and on the respective
terms and conditions described under "Description of the Transfer
and Servicing Agreements -- Termination", Certificateholders will
receive as a prepayment an amount in respect of the Certificates as
specified in the related Prospectus Supplement. In addition, if the
related Prospectus Supplement provides that the property of a Trust
will include a Pre-Funding Account, Certificateholders may receive a
partial prepayment of principal on or immediately following the end
of the Funding Period in an amount and manner specified in the
related Prospectus Supplement. In the event of such partial
prepayment, the Certificateholders may be entitled to receive a
prepayment premium from the Trust, in the amount and to the extent
provided in the related Prospectus Supplement.
The Trust Property..... The property of each Trust will include a pool of motor vehicle
retail installment sale contracts secured by new or used automobiles
or light duty trucks (the "Receivables"), including rights to
receive certain payments made with respect to such Receivables,
security interests in the vehicles financed thereby (the "Financed
Vehicles"), certain accounts and the proceeds thereof and any
proceeds from claims on certain related insurance policies. On the
Closing Date specified in the related Prospectus Supplement with
respect to a Trust, the Seller will, if so specified in such
Prospectus Supplement, sell or transfer Receivables (the "Initial
Receivables") having an aggregate principal balance specified in the
related Prospectus Supplement as of the dates specified therein (the
"Initial Cutoff Date") to such Trust pursuant to either a Sale and
Servicing Agreement between CFC, as Seller and Servicer, and the
Trust (as amended and supplemented from time to time, a "Sale and
Servicing Agreement") or, if the Trust is to be treated as a grantor
trust for federal income tax purposes, the related Pooling and
Servicing Agreement between CFC, as Seller and Servicer, and the
Trustee. A Prospectus Supplement may specify that there will not be
any Initial Receivables sold to the Trust on the Closing Date and
that all Receivables will be sold to the Trust during the Funding
Period (which may include the Closing Date) as described below. The
property of each Trust will also include amounts on deposit in
certain trust accounts, including the related Collection Account,
any Pre-Funding Account, any Reserve Account and any other account
identified in the applicable Prospectus Supplement.
To the extent provided in the related Prospectus Supplement, the
Seller will be obligated (subject only to the availability thereof)
to sell, and the related Trust will be obligated to purchase
(subject to the satisfaction of certain conditions described in the
applicable Sale and Servicing Agreement or Pooling and Servicing
Agreement), additional Receivables (the "Subsequent Receivables")
from time to time (as frequently as daily) during the Funding Period
specified in the related Prospectus Supplement having an aggregate
principal balance approximately equal to the amount on deposit in
the Pre-Funding Account (the "Pre-Funded Amount") on such Closing
Date.
The Receivables arise or will arise from loans originated by motor
vehicle dealers (the "Dealers") and purchased by the Seller,
directly or indirectly, pursuant to agreements with the Dealers. The
Receivables for any given Receivables Pool will be selected from the
contracts owned by the Seller based on the criteria specified in the
Sale and Servicing Agreement or Pooling and Servicing Agree-
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ment, as applicable, and described herein and in the related
Prospectus Supplement.
Credit and Cash Flow
Enhancement............ If and to the extent specified in the related Prospectus Supplement,
credit enhancement with respect to a Trust or any class or classes
of Securities may include any one or more of the following:
subordination of one or more other classes of Securities, a Reserve
Account, over-collateralization, letters of credit, credit or
liquidity facilities, surety bonds, guaranteed investment contracts,
swaps or other interest rate protection agreements, repurchase
obligations, yield supplement agreements, other agreements with
respect to third party payments or other support, cash deposits or
other arrangements. Unless otherwise specified in the related
Prospectus Supplement, any form of credit enhancement will have
certain limitations and exclusions from coverage thereunder, which
will be described in the related Prospectus Supplement.
Reserve Account........ Unless otherwise specified in the related Prospectus Supplement, a
Reserve Account will be created for each Trust with an initial
deposit by the Seller of cash or certain investments having a value
equal to the amount specified in the related Prospectus Supplement.
To the extent specified in the related Prospectus Supplement, funds
in the Reserve Account will thereafter be supplemented by the
deposit of amounts remaining on any Distribution Date or Payment
Date after making all other distributions required on such date and
any amounts deposited from time to time from the Pre-Funding Account
in connection with a purchase of Subsequent Receivables. Amounts in
the Reserve Account will be available to cover shortfalls in amounts
due to the holders of those classes of Securities specified in the
related Prospectus Supplement in the manner and under the
circumstances specified therein. The related Prospectus Supplement
will also specify to whom and the manner and circumstances under
which amounts on deposit in the Reserve Account (after giving effect
to all other required distributions to be made by the applicable
Trust) in excess of the Specified Reserve Account Balance (as
defined in the related Prospectus Supplement) will be distributed.
Transfer and Servicing
Agreements............. With respect to each Trust, the Seller will sell the related
Receivables to such Trust pursuant to a Sale and Servicing Agreement
or a Pooling and Servicing Agreement. The rights and benefits of any
Trust under a Sale and Servicing Agreement will be assigned to the
Indenture Trustee as collateral for the Notes of the related series.
The Servicer will agree with such Trust to be responsible for
servicing, managing, maintaining custody of and making collections
on the Receivables. CFC will undertake certain administrative duties
under an Administration Agreement with respect to any Trust that has
issued Notes.
Unless otherwise specified in the related Prospectus Supplement, the
Servicer will advance scheduled payments under each Precomputed
Receivable which shall not have been timely made (a "Precomputed
Advance"), to the extent that the Servicer, in its sole discretion,
expects to recoup the Precomputed Advance from subsequent payments
on or with respect to such Receivable or from other Precomputed
Receivables. With respect to Simple Interest Receivables, the
Servicer shall advance any interest shortfall (a "Simple Interest
Advance" and, together with a Precomputed Advance, an "Advance").
The Servicer shall be entitled to reimbursement of Advances from
subsequent payments on or with respect to the Receivables to the
extent described herein and in the related Prospectus Supplement.
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Unless otherwise provided in the related Prospectus Supplement, the
Seller will be obligated to repurchase any Receivable if the
interest of the applicable Trust in such Receivable is materially
adversely affected by a breach of any representation or warranty
made by the Seller with respect to the Receivable, if the breach has
not been cured following the discovery by or notice to the Seller of
the breach.
Unless otherwise provided in the related Prospectus Supplement, the
Servicer will be obligated to purchase or make Advances with respect
to any Receivable if, among other things, it extends the date for
final payment by the Obligor of such Receivable beyond the
applicable Final Scheduled Maturity Date (as defined in the related
Prospectus Supplement, the "Final Scheduled Maturity Date"), changes
the annual percentage rate ("APR") or amount of a scheduled payment
of such Receivable or fails to maintain a perfected security
interest in the related Financed Vehicle.
Unless otherwise specified in the related Prospectus Supplement, the
Servicer will be entitled to receive a fee for servicing the
Receivables of each Trust equal to a specified percentage of the
aggregate principal balance of the related Receivables Pool, as set
forth in the related Prospectus Supplement, plus certain late fees,
prepayment charges and other administrative fees or similar charges.
See "Description of the Transfer and Servicing
Agreements -- Servicing Compensation and Payment of Expenses" herein
and in the related Prospectus Supplement.
Certain Legal Aspects
of the Receivables;
Repurchase
Obligations............ In connection with the sale of Receivables to a Trust, security
interests in the Financed Vehicles securing such Receivables will be
assigned by the Seller to such Trust. Due to administrative burden
and expense, the certificates of title to the Financed Vehicles will
not be amended to reflect the assignment to such Trust. In the
absence of such an amendment, such Trust may not have a perfected
security interest in the Financed Vehicles securing the Receivables
in some states. Unless otherwise specified in the related Prospectus
Supplement, the Seller will be obligated to repurchase any
Receivable sold to a Trust as to which a first perfected security
interest in the name of the Seller in the Financed Vehicle securing
such Receivable shall not exist as of the date such Receivable is
purchased by such Trust, if such breach shall materially adversely
affect the interest of such Trust in such Receivable and if such
failure or breach shall not have been cured by the last day of the
second (or, if the Seller elects, the first) month following the
discovery by or notice to the Seller of such breach. If such Trust
does not have a perfected security interest in a Financed Vehicle,
its ability to realize on such Financed Vehicle in the event of a
default may be adversely affected. To the extent the security
interest is perfected, such Trust will have a prior claim over
subsequent purchasers of such Financed Vehicles and holders of
subsequently perfected security interests. However, as against liens
for repairs of Financed Vehicles or for taxes unpaid by an Obligor
under a Receivable, or because of fraud or negligence, such Trust
could lose the priority of its security interest or its security
interest in Financed Vehicles. Neither the Seller nor the Servicer
will have any obligation to repurchase a Receivable as to which any
of the aforementioned occurrences result in a Trust's losing the
priority of its security interest or its security interest in the
related Financed Vehicle after the Closing Date.
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Federal and state consumer protection laws impose requirements upon
creditors in connection with extensions of credit and collections of
retail installment loans, and certain of these laws make an assignee
of such a loan liable to the obligor thereon for any violation by
the lender. Unless otherwise specified in the related Prospectus
Supplement, the Seller will be obligated to repurchase any Receiva-
ble which fails to comply with such requirements.
Tax Status............. Unless the Prospectus Supplement specifies that the related Trust
will be treated as a grantor trust and, except as otherwise provided
in such Prospectus Supplement, upon the issuance of the related
series of Securities (a) Federal Tax Counsel to such Trust will
deliver an opinion to the effect that, for federal income tax
purposes: (i) any Notes of such series will be characterized as debt
and (ii) such Trust will not be characterized as an association (or
a publicly traded partnership) taxable as a corporation and (b)
Michigan Tax Counsel to such Trust will deliver an opinion to the
effect that the same characterizations would apply for Michigan
income and single business tax purposes as for federal income tax
purposes. In respect of any such series, each Noteholder, by the
acceptance of a Note of such series, will agree to treat such Note
as indebtedness, and each Certificateholder, if the Certificates are
not retained solely by the Seller or an affiliate thereof, by the
acceptance of a Certificate of such series, will agree to treat such
Trust as a partnership in which such Certificateholder is a partner
for federal income and Michigan income and single business tax
purposes. Alternative characterizations of such Trust and such
Certificates are possible, but would not result in materially
adverse tax consequences to Certificateholders.
If the Prospectus Supplement specifies that the related Trust will
be treated as a grantor trust and except as otherwise provided in
such Prospectus Supplement, upon the issuance of the related series
of Certificates, Federal Tax Counsel to such Trust will deliver an
opinion to the effect that such Trust will be treated as a grantor
trust for federal income tax purposes and will not be subject to
federal income tax.
See "Certain Federal Income Tax Consequences" and "Certain State Tax
Consequences" for additional information concerning the application
of federal and Michigan tax laws.
ERISA Considerations... Subject to the considerations discussed under "ERISA Considerations"
herein and in the related Prospectus Supplement, and unless
otherwise specified therein, any Notes of a series and any
Certificates that are issued by a Trust that is a grantor trust and
are not subordinated to any other class of Certificates are eligible
for purchase by employee benefit plans.
Unless otherwise specified in the related Prospectus Supplement, the
Certificates of any series that are subordinated to any other
Security of that series may not be acquired by any employee benefit
plan subject to the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), or by any individual retirement account. See
"ERISA Considerations" herein and in the related Prospectus
Supplement.
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SPECIAL CONSIDERATIONS
Certain Legal Aspects -- Security Interests in Financed Vehicles. In
connection with the sale of Receivables to a Trust, security interests in the
Financed Vehicles securing such Receivables will be assigned by the Seller to
such Trust simultaneously with the sale of such Receivables to such Trust. Due
to administrative burden and expense, the certificates of title to the Financed
Vehicles will not be amended to reflect the assignment to the Trust. In the
absence of such an amendment, such Trust may not have a perfected security
interest in the Financed Vehicles securing the Receivables in some states.
Unless otherwise provided in the related Prospectus Supplement, the Seller will
be obligated to repurchase any Receivable sold to such Trust as to which a
perfected security interest in the name of the Seller in the Financed Vehicle
securing such Receivable shall not exist as of the date such Receivable is
transferred to such Trust, if such breach shall materially adversely affect the
interest of such Trust in such Receivable and if such failure or breach shall
not have been cured by the last day of the second (or, if the Seller elects, the
first) month following the discovery by or notice to the Seller of such breach.
If such Trust does not have a perfected security interest in a Financed Vehicle,
its ability to realize on such Financed Vehicle in the event of a default may be
adversely affected. To the extent the security interest is perfected, such Trust
will have a prior claim over subsequent purchasers of such Financed Vehicles and
holders of subsequently perfected security interests. However, as against liens
for repairs of Financed Vehicles or for taxes unpaid by an Obligor under a
Receivable, or through fraud or negligence, such Trust could lose the priority
of its security interest or its security interest in a Financed Vehicle. Neither
the Seller nor the Servicer will have any obligation to repurchase a Receivable
as to which any of the aforementioned occurrences result in such Trust's losing
the priority of its security interest or its security interest in such Financed
Vehicle after the date such security interest was conveyed to such Trust.
Federal and state consumer protection laws impose requirements upon creditors in
connection with extensions of credit and collections of retail installment loans
and certain of these laws make an assignee of such a loan (such as such Trust)
liable to the obligor thereon for any violation by the lender. Unless otherwise
specified in the related Prospectus Supplement, the Seller will be obligated to
repurchase any Receivable which fails to comply with such requirements.
Certain Legal Aspects -- Bankruptcy Considerations. The Seller will
warrant to each Trust in the related Sale and Servicing Agreement or Pooling and
Servicing Agreement that the sale of the Receivables by the Seller to such Trust
is a valid sale of the Receivables to such Trust. Notwithstanding the foregoing,
if the Seller were to become a debtor in a bankruptcy case and a creditor or
trustee-in-bankruptcy of such debtor or such debtor itself were to take the
position that the sale of Receivables to such Trust should instead be treated as
a pledge of such Receivables to secure a borrowing of such debtor, delays in
payments of collections of Receivables to the related Securityholders could
occur or (should the court rule in favor of any such trustee, debtor or
creditor) reductions in the amounts of such payments could result. If the
transfer of Receivables to a Trust is treated as a pledge instead of a sale, a
tax or government lien on the property of the Seller arising before the transfer
of a Receivable to such Trust may have priority over such Trust's interest in
such Receivable. If the transactions contemplated herein are treated as a sale,
the Receivables would not be part of the Seller's bankruptcy estate and would
not be available to the Seller's creditors.
In a recent case decided by the U.S. Court of Appeals for the Tenth
Circuit, Octagon Gas System, Inc. v. Rimmer, the court determined that
"accounts," a defined term under the Uniform Commercial Code, would be included
in the bankruptcy estate of a transferor regardless of whether the transfer is
treated as a sale or a secured loan. Although the Receivables are likely to be
viewed as "chattel paper," as defined under the Uniform Commercial Code, rather
than as accounts, the 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 the Seller, however, even if the transfer of
Receivables to the Trust were treated as a sale, the Receivables would be part
of the Seller's bankruptcy estate and would be subject to claims of certain
creditors, and delays and reductions in payments to the Securityholders could
result.
With respect to each Trust that is not a grantor trust, if an Insolvency
Event occurs with respect to the Company (which, unless otherwise specified in
the related Prospectus Supplement, will be a wholly-owned
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subsidiary of the Seller or a limited partnership of which such wholly-owned
subsidiary is the general partner and the Seller is the limited partner or a
limited liability company of which the Seller and such wholly-owned subsidiary
are members, as set forth in such Prospectus Supplement), the Indenture Trustee
or Trustee for such Trust will promptly sell, dispose of or otherwise liquidate
the related Receivables in a commercially reasonable manner on commercially
reasonable terms, except under certain limited circumstances. The proceeds from
any such sale, disposition or liquidation of Receivables will be treated as
collections on the Receivables and deposited in the Collection Account of such
Trust. If the proceeds from the liquidation of the Receivables and any amounts
on deposit in the Reserve Account, the Note Distribution Account, if any, and
the Certificate Distribution Account with respect to any such Trust and any
amounts available from any credit enhancement are not sufficient to pay any
Notes and the Certificates of the related series in full, the amount of
principal returned to any Noteholders or the Certificateholders will be reduced
and such Noteholders and Certificateholders will incur a loss. See "Description
of the Transfer and Servicing Agreements -- Insolvency Event".
Trust's Relationship to the Seller and its Affiliates. None of CFC,
Chrysler Corporation ("Chrysler") or any of their affiliates is generally
obligated to make any payments in respect of any Notes, the Certificates or the
Receivables of a given Trust.
However, in connection with the sale of Receivables by the Seller to a
given Trust, the Seller will make representations and warranties with respect to
the characteristics of such Receivables and, in certain circumstances, the
Seller may be required to repurchase Receivables with respect to which such
representations and warranties have been breached. See "Description of the
Transfer and Servicing Agreements -- Sale and Assignment of Receivables". In
addition, under certain circumstances, the Servicer may be required to purchase
Receivables. See "Description of the Transfer and Servicing
Agreements -- Servicing Procedures". Moreover, if CFC were to cease acting as
Servicer, delays in processing payments on the Receivables and information in
respect thereof could occur and result in delays in payments to the
Securityholders.
The related Prospectus Supplement may set forth certain additional
information regarding CFC and Chrysler. In addition, CFC and Chrysler are
subject to the information requirements of the Exchange Act and in accordance
therewith file reports and other information with the Commission. For further
information regarding CFC and Chrysler, reference is made to such reports and
other information, which are available as described under "Available
Information".
Subordination; Limited Assets. To the extent specified in the related
Prospectus Supplement, distributions of interest and principal on one or more
classes of Certificates of a series may be subordinated in priority of payment
to interest and principal due on the Notes, if any, of such series or one or
more other classes of Certificates of such series. Moreover, each Trust will not
have, nor is it permitted or expected to have, any significant assets or sources
of funds other than the Receivables and, to the extent provided in the related
Prospectus Supplement, a Pre-Funding Account, a Reserve Account and any other
credit enhancement. The Notes of any series will represent obligations solely
of, and the Certificates of any series will represent interests solely in, the
related Trust and neither the Notes nor the Certificates of any series will be
insured or guaranteed by CFC, the applicable Trustee, any Indenture Trustee or
any other person or entity. Consequently, holders of the Securities of any
series must rely for repayment upon payments on the related Receivables and, if
and to the extent available, amounts on deposit in the Pre-Funding Account (if
any), the Reserve Account (if any) and any other credit enhancement, all as
specified in the related Prospectus Supplement.
Maturity and Prepayment Considerations. All the Receivables are prepayable
at any time. (For this purpose the term "prepayments" includes prepayments in
full, partial prepayments (including those related to rebates of extended
warranty contract costs and insurance premiums) and liquidations due to default,
as well as receipts of proceeds from physical damage, credit life and disability
insurance policies and certain other Receivables repurchased for administrative
reasons.) The rate of prepayments on the Receivables may be influenced by a
variety of economic, social and other factors, including the fact that an
Obligor generally may not sell or transfer the Financed Vehicle securing a
Receivable without the consent of the Seller. The rate of prepayment on the
Receivables may also be influenced by the structure of the loan. In addition,
under certain
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circumstances, the Seller will be obligated to repurchase Receivables pursuant
to a Sale and Servicing Agreement or Pooling and Servicing Agreement as a result
of breaches of representations and warranties and, under certain circumstances,
the Servicer will be obligated to purchase Receivables pursuant to such Sale and
Servicing Agreement or Pooling and Servicing Agreement as a result of breaches
of certain covenants. See "Description of the Transfer and Servicing
Agreements -- Sale and Assignment of Receivables". Any reinvestment risks
resulting from a faster or slower incidence of prepayment of Receivables held by
a given Trust will be borne entirely by the Securityholders of the related
series of Securities. See also "Description of the Transfer and Servicing
Agreements -- Termination" regarding the Servicer's option to purchase the
Receivables of a given Receivables Pool and "-- Insolvency Event" regarding the
sale of the Receivables owned by a Trust that is not a grantor trust if an
Insolvency Event with respect to the applicable Company occurs.
Risk of Commingling. With respect to each Trust, the Servicer will deposit
all payments on the related Receivables (from whatever source) and all proceeds
of such Receivables collected during each Collection Period into the Collection
Account of such Trust within two business days of receipt thereof. However, in
the event that CFC satisfies certain requirements for monthly or less frequent
remittances and the Rating Agencies (as such term is defined in the related
Prospectus Supplement, the "Rating Agencies") affirm their ratings of the
related Securities at the initial level, then for so long as CFC is the Servicer
and provided that (i) there exists no Servicer Default and (ii) each other
condition to making such monthly or less frequent deposits as may be specified
by the Rating Agencies and described in the related Prospectus Supplement is
satisfied, the Servicer will not be required to deposit such amounts into the
Collection Account of such Trust until on or before the business day preceding
each Distribution Date. The Servicer will deposit the aggregate Purchase Amount
of Receivables purchased by the Servicer into the applicable Collection Account
on or before the business day preceding each Distribution Date. Pending deposit
into such Collection Account, collections may be invested by the Servicer at its
own risk and for its own benefit and will not be segregated from funds of the
Servicer. If the Servicer were unable to remit such funds, the applicable
Securityholders might incur a loss. To the extent set forth in the related
Prospectus Supplement, the Servicer may, in order to satisfy the requirements
described above, obtain a letter of credit or other security for the benefit of
the related Trust to secure timely remittances of collections on the related
Receivables and payment of the aggregate Purchase Amount with respect to
Receivables purchased by the Servicer.
Servicer Default. Unless otherwise provided in the related Prospectus
Supplement with respect to a series of Securities that includes Notes, in the
event a Servicer Default occurs, the Indenture Trustee or the Noteholders with
respect to such series, as described under "Description of the Transfer and
Servicing Agreements -- Rights upon Servicer Default", may remove the Servicer
without the consent of the Trustee or any of the Certificateholders with respect
to such series. The Trustee or the Certificateholders with respect to such
series will not have the ability to remove the Servicer if a Servicer Default
occurs. In addition, the Noteholders of such series have the ability, with
certain specified exceptions, to waive defaults by the Servicer, including
defaults that could materially adversely affect the Certificateholders of such
series. See "Description of the Transfer and Servicing Agreements -- Waiver of
Past Defaults".
Book-Entry Registration. Unless otherwise specified in the related
Prospectus Supplement, each class of Securities of a given series will be
initially represented by one or more certificates registered in the name of Cede
& Co. ("Cede"), or any other nominee for DTC set forth in the related Prospectus
Supplement (Cede, or such other nominee, "DTC's Nominee"), and will not be
registered in the names of the holders of the Securities of such series or their
nominees. Because of this, unless and until Definitive Securities for such
series are issued, holders of such Securities will not be recognized by the
Trustee or any applicable Indenture Trustee as "Certificateholders",
"Noteholders" or "Securityholders", as the case may be (as such terms are used
herein or in the related Pooling and Servicing Agreement or related Indenture
and Trust Agreement, as applicable). Hence, until Definitive Securities are
issued, holders of such Securities will only be able to exercise the rights of
Securityholders indirectly through DTC and its participating organizations. See
"Certain Information Regarding the Securities -- Book-Entry Registration" and
"-- Definitive Securities".
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THE TRUSTS
With respect to each series of Securities, the Seller will establish a
separate Trust pursuant to the respective Trust Agreement or Pooling and
Servicing Agreement, as applicable, for the transactions described herein and in
the related Prospectus Supplement. The property of each Trust will include a
pool (a "Receivables Pool") of motor vehicle retail installment sales contracts
(and, with respect to Fixed Value Receivables (as defined below), the right to
certain payments on retail installment sale contracts) between dealers (the
"Dealers") and purchasers (the "Obligors") of new and used automobiles or light
duty trucks and all payments due thereunder on and after the applicable Cutoff
Date (as such term is defined in the related Prospectus Supplement, a "Cutoff
Date") in the case of Precomputed Receivables and all payments received
thereunder on and after the applicable Cutoff Date in the case of Simple
Interest Receivables. The Receivables of each Receivables Pool were or will be
originated by the Dealers and purchased by CFC, directly or indirectly, pursuant
to agreements with Dealers ("Dealer Agreements"). Such Receivables will continue
to be serviced by the Servicer and evidence indirect financing made available by
the Seller to the Obligors. On the applicable Closing Date, after the issuance
of the Certificates and any Notes of a given series, the Seller will sell the
Initial Receivables of the applicable Receivables Pool to the Trust to the
extent, if any, specified in the related Prospectus Supplement. To the extent so
provided in the related Prospectus Supplement, Subsequent Receivables will be
conveyed to the Trust as frequently as daily during the Funding Period. Any
Subsequent Receivables so conveyed will also be assets of the applicable Trust,
subject to the prior rights of the related Indenture Trustee and the
Noteholders, if any, therein. The property of each Trust will also include (i)
such amounts as from time to time may be held in separate trust accounts
established and maintained pursuant to the related Sale and Servicing Agreement
or Pooling and Servicing Agreement and the proceeds of such accounts, as
described herein and in the related Prospectus Supplement; (ii) security
interests in the Financed Vehicles and any other interest of the Seller in such
Financed Vehicles; (iii) the rights to proceeds from claims on certain physical
damage, credit life and disability insurance policies covering the Financed
Vehicles or the Obligors, as the case may be; (iv) the interest of the Seller in
any proceeds from recourse to Dealers on Receivables or Financed Vehicles with
respect to which the Servicer has determined that eventual repayment in full is
unlikely; (v) any property that shall have secured a Receivable and that shall
have been acquired by the applicable Trust; and (vi) any and all proceeds of the
foregoing. To the extent specified in the related Prospectus Supplement, a
Pre-Funding Account, a Reserve Account or other form of credit enhancement may
be a part of the property of any given Trust or may be held by the Trustee or an
Indenture Trustee for the benefit of holders of the related Securities.
Additionally, pursuant to contracts between the Seller and the Dealers, the
Dealers have an obligation after origination to repurchase Receivables as to
which Dealers have made certain misrepresentations.
The Servicer will continue to service the Receivables held by each Trust
and will receive fees for such services. See "Description of the Transfer and
Servicing Agreements -- Servicing Compensation and Payment of Expenses" herein
and in the related Prospectus Supplement. To facilitate the servicing of the
Receivables, each Trustee will authorize the Servicer to retain physical
possession of the Receivables held by each Trust and other documents relating
thereto as custodian for each such Trust. Due to the administrative burden and
expense, the certificates of title to the Financed Vehicles will not be amended
to reflect the sale and assignment of the security interest in the Financed
Vehicles to each Trust. In the absence of such an amendment, any Trust may not
have a perfected security interest in the Financed Vehicles in all states. See
"Certain Legal Aspects of the Receivables" and "Description of the Transfer and
Servicing Agreements -- Sale and Assignment of Receivables".
If the protection provided to any Noteholders of a given series by the
subordination of the related Certificates and by the Reserve Account, if any, or
other credit enhancement for such series or the protection provided to
Certificateholders by any such Reserve Account or other credit enhancement is
insufficient, such Noteholders or Certificateholders, as the case may be, would
have to look principally to the Obligors on the related Receivables, the
proceeds from the repossession and sale of Financed Vehicles which secure
defaulted Receivables and the proceeds from any recourse against Dealers with
respect to such Receivables. In such event, certain factors, such as the
applicable Trust's not having perfected security interests in the Financed
Vehicles in all states, may affect the Servicer's ability to repossess and sell
the collateral securing the
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Receivables, and thus may reduce the proceeds to be distributed to the holders
of the Securities of such series. See "Description of the Transfer and Servicing
Agreements -- Distributions", "-- Credit and Cash Flow Enhancement" and "Certain
Legal Aspects of the Receivables".
The principal offices of each Trust and the related Trustee will be
specified in the applicable Prospectus Supplement.
THE TRUSTEE
The Trustee for each Trust will be specified in the related Prospectus
Supplement. The Trustee's liability in connection with the issuance and sale of
the related Securities is limited solely to the express obligations of such
Trustee set forth in the related Trust Agreement and the Sale and Servicing
Agreement or the related Pooling and Servicing Agreement, as applicable. A
Trustee may resign at any time, in which event the Servicer, or its successor,
will be obligated to appoint a successor trustee. The Administrator of a Trust
that is not a grantor trust and the Servicer in respect of a Trust that is a
grantor trust may also remove the Trustee if the Trustee ceases to be eligible
to continue as Trustee under the related Trust Agreement or Pooling and
Servicing Agreement, as applicable, or if the Trustee becomes insolvent. In such
circumstances, the Administrator or Servicer, as applicable, will be obligated
to appoint a successor trustee. Any resignation or removal of a Trustee and
appointment of a successor trustee will not become effective until acceptance of
the appointment by the successor trustee.
THE RECEIVABLES POOLS
GENERAL
The Receivables in each Receivables Pool have been or will be purchased by
the Seller, directly or indirectly, from Dealers in the ordinary course of
business through its branches located in the United States. Most of the Dealers
sell products manufactured and/or distributed by Chrysler. The retail
installment sale contracts are purchased pursuant to the Dealer Agreements. The
Seller purchases contracts in accordance with its credit standards which are
based upon the vehicle buyer's ability and willingness to repay the obligation
as well as the value of the vehicle being financed.
The Receivables to be held by each Trust will be selected from the Seller's
portfolio for inclusion in a Receivables Pool by several criteria, including
that, unless otherwise provided in the related Prospectus Supplement, each
Receivable (i) is secured by a new or used vehicle, (ii) was originated in the
United States, (iii) provides for level monthly payments (except for the last
payment, which may be minimally different from the level payments or which, in
the case of Fixed Value Receivables, may be a final fixed value payment) that
fully amortize the amount financed over its original term to maturity, (iv) is a
Precomputed Receivable or a Simple Interest Receivable and (v) satisfies the
other criteria, if any, set forth in the related Prospectus Supplement. No
selection procedures believed by the Seller to be adverse to the Securityholders
of any series were or will be used in selecting the related Receivables.
"Precomputed Receivables" consist of either (i) monthly actuarial
receivables ("Actuarial Receivables") or (ii) receivables that provide for
allocation of payments according to the "sum of periodic balances" or "sum of
monthly payments" method, similar to the "Rule of 78's" ("Rule of 78's
Receivables"). An Actuarial Receivable provides for amortization of the loan
over a series of fixed level payment monthly installments. Each monthly
installment, including the monthly installment representing the final payment on
the Receivable, consists of an amount of interest equal to 1/12 of the APR of
the loan multiplied by the unpaid principal balance of the loan, and an amount
of principal equal to the remainder of the monthly payment. A Rule of 78's
Receivable provides for the payment by the obligor of a specified total amount
of payments, payable in equal monthly installments on each due date, which total
represents the principal amount financed and add-on interest in an amount
calculated on the stated APR for the term of the receivable. The rate at which
such amount of add-on interest is earned and, correspondingly, the amount of
each fixed monthly payment allocated to reduction of the outstanding principal
are calculated in accordance with the "Rule of 78's".
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"Fixed Value Receivables" are monthly receivables originated under CFC's
Gold Key Plus program and secured by new automobiles or light duty trucks with a
final payment which is greater than the scheduled monthly payments. A Fixed
Value Receivable provides for amortization of the loan over a series of fixed
level payment monthly installments like an Actuarial Receivable, but also
requires a final fixed value payment due after payment of such monthly
installments which may be satisfied by (i) payment in full in cash of such
amount, (ii) transfer of the vehicle to CFC provided certain conditions are
satisfied or (iii) refinancing the fixed value payment in accordance with
certain conditions. With respect to Fixed Value Receivables, unless otherwise
provided in the related Prospectus Supplement, only the principal and interest
payments due prior to the final fixed value payment and not the final fixed
value payment will be included in such Trust; the final fixed value payment will
be sold by the Seller to the applicable Company. However, in the case of a Trust
that is not a grantor trust, such Company will have the option to transfer the
final fixed value payments with respect to the related Fixed Value Receivables
retained by such Company to such Trust and to cause such Trust to issue
certificates representing interests in such final fixed value payments or
indebtedness secured by such final fixed value payments.
"Simple Interest Receivables" are receivables that provide for the
amortization of the amount financed under each receivable over a series of fixed
level monthly payments. However, unlike the monthly payment under an Actuarial
Receivable, each monthly payment consists of an installment of interest which is
calculated on the basis of the outstanding principal balance of the receivable
multiplied by the stated APR and further multiplied by the period elapsed (as a
fraction of a calendar year) since the preceding payment of interest was made.
As payments are received under a Simple Interest Receivable, the amount received
is applied first to interest accrued to the date of payment and the balance is
applied to reduce the unpaid principal balance. Accordingly, if an obligor pays
a fixed monthly installment before its scheduled due date, the portion of the
payment allocable to interest for the period since the preceding payment was
made will be less than it would have been had the payment been made as
scheduled, and the portion of the payment applied to reduce the unpaid principal
balance will be correspondingly greater. Conversely, if an obligor pays a fixed
monthly installment after its scheduled due date, the portion of the payment
allocable to interest for the period since the preceding payment was made will
be greater than it would have been had the payment been made as scheduled, and
the portion of the payment applied to reduce the unpaid principal balance will
be correspondingly less. In either case, the obligor pays a fixed monthly
installment until the final scheduled payment date, at which time the amount of
the final installment is increased or decreased as necessary to repay the then
outstanding principal balance and any finance charges up to the date of final
payment.
In the event of the prepayment in full (voluntarily or by acceleration) of
a Rule of 78's Receivable, under the terms of the contract, a "refund" or
"rebate" will be made to the obligor of the portion of the total amount of
payments then due and payable under the contract allocable to "unearned" add-on
interest, calculated in accordance with a method equivalent to the Rule of 78's.
If an Actuarial Receivable is prepaid in full, with minor variations based upon
state law, the Actuarial Receivable requires that the rebate be calculated on
the basis of a constant interest rate. If a Simple Interest Receivable is
prepaid, rather than receive a rebate, the obligor is required to pay interest
only to the date of prepayment. The amount of a rebate under a Rule of 78's
Receivable generally will be less than the amount of a rebate on an Actuarial
Receivable and generally will be less than the remaining scheduled payments of
interest that would have been due under a Simple Interest Receivable for which
all payments were made on schedule.
Unless otherwise provided in the related Prospectus Supplement, each Trust
will account for the Rule of 78's Receivables as if such Receivables were
Actuarial Receivables. Amounts received upon prepayment in full of a Rule of
78's Receivable in excess of the then outstanding principal balance of such
Receivable and accrued interest thereon (calculated pursuant to the actuarial
method) will not be paid to the Noteholders or passed through to the
Certificateholders of the applicable series but will be paid to the Servicer as
additional servicing compensation.
Information with respect to each Receivables Pool will be set forth in the
related Prospectus Supplement, including, to the extent appropriate, the
composition, the distribution by APR and by the states of origination, the
portion of such Receivables Pool consisting of Precomputed Receivables and of
Simple Interest Receivables and the portion of such Receivables Pool secured by
new vehicles and by used vehicles.
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DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
Certain information concerning the experience of the Seller and its United
States subsidiaries pertaining to delinquencies, repossessions and net losses
with respect to new and used retail automobile and light duty truck receivables
(including receivables previously sold which CFC continues to service) will be
set forth in each Prospectus Supplement. There can be no assurance that the
delinquency, repossession and net loss experience on any Receivables Pool will
be comparable to prior experience or to such information.
WEIGHTED AVERAGE LIFE OF THE SECURITIES
The weighted average life of the Notes, if any, and the Certificates of any
series will generally be influenced by the rate at which the principal balances
of the related Receivables are paid, which payment may be in the form of
scheduled amortization or prepayments. (For this purpose, the term "prepayments"
includes prepayments in full, partial prepayments (including those related to
rebates of extended warranty contract costs and insurance premiums),
liquidations due to default, as well as receipts of proceeds from physical
damage, credit life and disability insurance policies and certain other
Receivables repurchased by the Seller or the Servicer for administrative
reasons.) All of the Receivables are prepayable at any time without penalty to
the Obligor. The rate of prepayment of automotive receivables is influenced by a
variety of economic, social and other factors, including the fact that an
Obligor generally may not sell or transfer the Financed Vehicle securing a
Receivable without the consent of the Seller. The rate of prepayment on the
Receivables may also be influenced by the structure of the loan. In addition,
under certain circumstances, the Seller will be obligated to repurchase
Receivables from a given Trust pursuant to the related Sale and Servicing
Agreement or Pooling and Servicing Agreement as a result of breaches of
representations and warranties and the Servicer will be obligated to purchase
Receivables from such Trust pursuant to such Sale and Servicing Agreement or
Pooling and Servicing Agreement as a result of breaches of certain covenants.
See "Description of the Transfer and Servicing Agreements -- Sale and Assignment
of Receivables" and "-- Servicing Procedures". See also "Description of the
Transfer and Servicing Agreements -- Termination" regarding the Servicer's
option to purchase the Receivables from a given Trust and "-- Insolvency Event"
regarding the sale of the Receivables owned by a Trust that is not a grantor
trust if an Insolvency Event with respect to the Company applicable to such
Trust occurs.
In light of the above considerations, there can be no assurance as to the
amount of principal payments to be made on the Notes, if any, or the
Certificates of a given series on each Payment Date or Distribution Date, as
applicable, since such amount will depend, in part, on the amount of principal
collected on the related Receivables Pool during the applicable Collection
Period. Any reinvestment risks resulting from a faster or slower incidence of
prepayment of Receivables will be borne entirely by the Noteholders, if any, and
the Certificateholders of a given series. The related Prospectus Supplement may
set forth certain additional information with respect to the maturity and
prepayment considerations applicable to the particular Receivables Pool and the
related series of Securities.
POOL FACTORS AND TRADING INFORMATION
The "Note Pool Factor" for each class of Notes will be a seven-digit
decimal which the Servicer will compute prior to each distribution with respect
to such class of Notes indicating the remaining outstanding principal balance of
such class of Notes, as of the applicable Payment Date (after giving effect to
payments to be made on such Payment Date), as a fraction of the initial
outstanding principal balance of such class of Notes. The "Certificate Pool
Factor" for each class of Certificates will be a seven-digit decimal which the
Servicer will compute prior to each distribution with respect to such class of
Certificates indicating the remaining Certificate Balance of such class of
Certificates, as of the applicable Distribution Date (after giving effect to
distributions to be made on such Distribution Date), as a fraction of the
initial Certificate Balance of such class of Certificates. Each Note Pool Factor
and each Certificate Pool Factor will initially be 1.0000000 and thereafter will
decline to reflect reductions in the outstanding principal balance of the
applicable class of Notes, or the reduction of the Certificate Balance of the
applicable class of Certificates, as the case may be. A Noteholder's portion of
the aggregate outstanding principal balance of the related class of Notes is the
product
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of (i) the original denomination of such Noteholder's Note and (ii) the
applicable Note Pool Factor. A Certificateholder's portion of the aggregate
outstanding Certificate Balance for the related class of Certificates is the
product of (a) the original denomination of such Certificateholder's Certificate
and (b) the applicable Certificate Pool Factor.
Unless otherwise provided in the related Prospectus Supplement with respect
to each Trust, the Noteholders, if any, and the Certificateholders will receive
reports on or about each Payment Date concerning (i) with respect to the
Collection Period immediately preceding such Payment Date, payments received on
the Receivables, the Pool Balance (as such term is defined in the related
Prospectus Supplement, the "Pool Balance"), each Certificate Pool Factor or Note
Pool Factor, as applicable, and various other items of information, and (ii)
with respect to the Collection Period second preceding such Payment Date, as
applicable, amounts allocated or distributed on the preceding Payment Date and
any reconciliation of such amounts with information provided by the Servicer
prior to such current Payment Date. In addition, Securityholders of record
during any calendar year will be furnished information for tax reporting
purposes not later than the latest date permitted by law. See "Certain
Information Regarding the Securities -- Reports to Securityholders".
USE OF PROCEEDS
Unless otherwise provided in the related Prospectus Supplement, the net
proceeds from the sale of the Securities of a given series will be applied by
the applicable Trust (i) to the purchase of the Receivables from the Seller,
(ii) to make the initial deposit into the Reserve Account, if any, and (iii) to
make the deposit of the Pre-Funded Amount into the Pre-Funding Account, if any.
Unless otherwise specified in the related Prospectus Supplement, the Seller will
use that portion of such net proceeds paid to it with respect to any such Trust
for general corporate purposes.
CHRYSLER FINANCIAL CORPORATION
CFC is a financial services organization, all of the common stock of which
is owned by Chrysler. CFC, a Michigan corporation, is the continuing corporation
resulting from a merger on June 1, 1967, of a financial services subsidiary of
Chrysler into a newly acquired, previously nonaffiliated finance company
incorporated in 1926. CFC is engaged in automotive retail, wholesale and fleet
financing, servicing commercial leases and loans, secured small business
financing, and property, casualty and other insurance and automotive dealership
facility development and management. CFC's business is substantially dependent
upon the operations of Chrysler. In particular, lower levels of production and
sale of Chrysler's automotive products could result in a reduction in the level
of finance and insurance operations of CFC. See "Special
Considerations -- Trust's Relationship to the Seller; Financial Condition of
Chrysler Corporation" in the related Prospectus Supplement. The related
Prospectus Supplement will set forth certain additional information with respect
to CFC. CFC's executive offices are located at 27777 Franklin Road, Southfield,
Michigan 48034-8286, and its telephone number is (810) 948-3058.
CFC will warrant to each Trust in the related Sale and Servicing Agreement
or Pooling and Servicing Agreement that the sale of the applicable Receivables
by CFC to such Trust is a valid sale of such Receivables to such Trust. In
addition, CFC and such Trust will treat the transactions described herein and in
the related Prospectus Supplement as a sale of such Receivables to such Trust
and CFC will take all actions that are required to perfect the Trust's ownership
interest in such Receivables. Notwithstanding the foregoing, if CFC were to
become a debtor in a bankruptcy case and a creditor or trustee in bankruptcy of
such debtor or such debtor itself were to take the position that the sale of
Receivables to a Trust should instead be treated as a pledge of such Receivables
to secure a borrowing of such debtor, then delays in payments of collections of
such Receivables could occur or (should the court rule in favor of any such
trustee, debtor or creditor) reductions in the amount of such payments could
result. If the transfer of Receivables to a Trust is treated as a pledge instead
of a sale, a tax or government lien on the property of CFC arising before the
transfer of Receivables to such Trust may have priority over such Trust's
interest in such Receivables. If the transactions
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contemplated herein are treated as a sale, the Receivables would not be part of
CFC's bankruptcy estate and would not be available to CFC's creditors.
On December 31, 1995, Chrysler Credit Corporation ("CCC"), which had been a
wholly owned subsidiary of CFC and had provided retail, wholesale and lease
financing services to automobile dealers and their customers throughout the
United States and had originated and serviced CFC's motor vehicle loan
portfolio, was merged into CFC.
DESCRIPTION OF THE NOTES
GENERAL
With respect to each Trust that issues Notes, one or more classes of Notes
of the related series will be issued pursuant to the terms of an Indenture, a
form of which has been filed as an exhibit to the Registration Statement of
which this Prospectus forms a part. The following summary does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of the Notes and the Indenture.
Unless otherwise specified in the related Prospectus Supplement, each class
of Notes will initially be represented by one or more Notes, in each case
registered in the name of the nominee of DTC (together with any successor
depository selected by the Trust, the "Depository") except as set forth below.
Unless otherwise specified in the related Prospectus Supplement, the Notes will
be available for purchase in denominations of $1,000 and integral multiples
thereof in book-entry form only. The Seller has been informed by DTC that DTC's
nominee will be Cede, unless another nominee is specified in the related
Prospectus Supplement. Accordingly, such nominee is expected to be the holder of
record of the Notes of each class. Unless and until Definitive Notes are issued
under the limited circumstances described herein or in the related Prospectus
Supplement, no Noteholder will be entitled to receive a physical certificate
representing a Note. All references herein and in the related Prospectus
Supplement to actions by Noteholders refer to actions taken by DTC upon
instructions from its participating organizations (the "Participants") and all
references herein and in the related Prospectus Supplement to distributions,
notices, reports and statements to Noteholders refer to distributions, notices,
reports and statements to DTC or its nominee, as the registered holder of the
Notes, for distribution to Noteholders in accordance with DTC's procedures with
respect thereto. See "Certain Information Regarding the Securities -- Book-Entry
Registration" and "-- Definitive Securities".
PRINCIPAL AND INTEREST ON THE NOTES
The timing and priority of payment, seniority, allocations of losses,
Interest Rate and amount of or method of determining payments of principal and
interest on each class of Notes of a given series will be described in the
related Prospectus Supplement. The right of holders of any class of Notes to
receive payments of principal and interest may be senior or subordinate to the
rights of holders of any other class or classes of Notes of such series, as
described in the related Prospectus Supplement. Unless otherwise provided in the
related Prospectus Supplement, payments of interest on the Notes of such series
will be made prior to payments of principal thereon. To the extent provided in
the related Prospectus Supplement, a series may include one or more classes of
Strip Notes entitled to (i) principal payments with disproportionate, nominal or
no interest payments or (ii) interest payments with disproportionate, nominal or
no principal payments. Each class of Notes may have a different Interest Rate,
which may be a fixed, variable or adjustable Interest Rate (and which may be
zero for certain classes of Strip Notes), or any combination of the foregoing.
The related Prospectus Supplement will specify the Interest Rate for each class
of Notes of a given series or the method for determining such Interest Rate. See
also "Certain Information Regarding the Securities -- Fixed Rate Securities" and
"-- Floating Rate Securities". One or more classes of Notes of a series may be
redeemable in whole or in part under the circumstances specified in the related
Prospectus Supplement, including at the end of the Funding Period (if any) or as
a result of the Servicer's exercising its option to purchase the related
Receivables Pool.
To the extent specified in any Prospectus Supplement, one or more classes
of Notes of a given series may have fixed principal payment schedules, as set
forth in such Prospectus Supplement; Noteholders of such
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Notes would be entitled to receive as payments of principal on any given Payment
Date the applicable amounts set forth on such schedule with respect to such
Notes, in the manner and to the extent set forth in the related Prospectus
Supplement.
Unless otherwise specified in the related Prospectus Supplement, payments
to Noteholders of all classes within a series in respect of interest will have
the same priority. Under certain circumstances, the amount available for such
payments could be less than the amount of interest payable on the Notes on any
of the dates specified for payments in the related Prospectus Supplement (each,
a "Payment Date", which may be the same date as each Distribution Date as
specified in the related Prospectus Supplement), in which case each class of
Noteholders will receive its ratable share (based upon the aggregate amount of
interest due to such class of Noteholders) of the aggregate amount available to
be distributed in respect of interest on the Notes of such series. See
"Description of the Transfer and Servicing Agreements -- Distributions" and
"-- Credit and Cash Flow Enhancement".
In the case of a series of Notes which includes two or more classes of
Notes, the sequential order and priority of payment in respect of principal and
interest, and any schedule or formula or other provisions applicable to the
determination thereof, of each such class will be set forth in the related
Prospectus Supplement. Payments in respect of principal and interest of any
class of Notes will be made on a pro rata basis among all the Noteholders of
such class.
THE INDENTURE
Modification of Indenture. With respect to each Trust that has issued
Notes pursuant to an Indenture, the Trust and the Indenture Trustee may, with
the consent of the holders of a majority of the outstanding Notes of the related
series, execute a supplemental indenture to add provisions to, change in any
manner or eliminate any provisions of, the related Indenture, or modify (except
as provided below) in any manner the rights of the related Noteholders.
Unless otherwise specified in the related Prospectus Supplement with
respect to a series of Notes, without the consent of the holder of each such
outstanding Note affected thereby, however, no supplemental indenture will: (i)
change the due date of any installment of principal of or interest on any such
Note or reduce the principal amount thereof, the interest rate specified thereon
or the redemption price with respect thereto or change any place of payment
where or the coin or currency in which any such Note or any interest thereon is
payable; (ii) impair the right to institute suit for the enforcement of certain
provisions of the related Indenture regarding payment; (iii) reduce the
percentage of the aggregate amount of the outstanding Notes of such series, the
consent of the holders of which is required for any such supplemental indenture
or the consent of the holders of which is required for any waiver of compliance
with certain provisions of the related Indenture or of certain defaults
thereunder and their consequences as provided for in such Indenture; (iv) modify
or alter the provisions of the related Indenture regarding the voting of Notes
held by the applicable Trust, any other obligor on such Notes, the Seller or an
affiliate of any of them; (v) reduce the percentage of the aggregate outstanding
amount of such Notes, the consent of the holders of which is required to direct
the related Indenture Trustee to sell or liquidate the Receivables if the
proceeds of such sale would be insufficient to pay the principal amount and
accrued but unpaid interest on the outstanding Notes of such series; (vi)
decrease the percentage of the aggregate principal amount of such Notes required
to amend the sections of the related Indenture which specify the applicable
percentage of aggregate principal amount of the Notes of such series necessary
to amend such Indenture or certain other related agreements; or (vii) permit the
creation of any lien ranking prior to or on a parity with the lien of the
related Indenture with respect to any of the collateral for such Notes or,
except as otherwise permitted or contemplated in such Indenture, terminate the
lien of such Indenture on any such collateral or deprive the holder of any such
Note of the security afforded by the lien of such Indenture.
Unless otherwise provided in the applicable Prospectus Supplement, the
Trust and the applicable Indenture Trustee may also enter into supplemental
indentures, without obtaining the consent of the Noteholders of the related
series, for the purpose of, among other things, adding any provisions to or
changing in any manner or eliminating any of the provisions of the related
Indenture or of modifying in any manner the
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rights of such Noteholders; provided that such action will not materially and
adversely affect the interest of any such Noteholder.
Events of Default; Rights upon Event of Default. With respect to the Notes
of a given series, unless otherwise specified in the related Prospectus
Supplement, "Events of Default" under the related Indenture will consist of: (i)
a default for five days or more in the payment of any interest on any such Note;
(ii) a default in the payment of the principal of or any installment of the
principal of any such Note when the same becomes due and payable; (iii) a
default in the observance or performance of any covenant or agreement of the
applicable Trust made in the related Indenture and the continuation of any such
default for a period of 30 days after notice thereof is given to such Trust by
the applicable Indenture Trustee or to such Trust and such Indenture Trustee by
the holders of at least 25% in principal amount of such Notes then outstanding;
(iv) any representation or warranty made by such Trust in the related Indenture
or in any certificate delivered pursuant thereto or in connection therewith
having been incorrect in a material respect as of the time made, and such breach
not having been cured within 30 days after notice thereof is given to such Trust
by the applicable Indenture Trustee or to such Trust and such Indenture Trustee
by the holders of at least 25% in principal amount of such Notes then
outstanding; or (v) certain events of bankruptcy, insolvency, receivership or
liquidation of the applicable Trust. However, the amount of principal required
to be paid to Noteholders of such series under the related Indenture will
generally be limited to amounts available to be deposited in the applicable Note
Distribution Account. Therefore, unless otherwise specified in the related
Prospectus Supplement, the failure to pay principal on a class of Notes
generally will not result in the occurrence of an Event of Default until the
final scheduled Payment Date for such class of Notes.
If an Event of Default should occur and be continuing with respect to the
Notes of any series, the related Indenture Trustee or holders of a majority in
principal amount of such Notes then outstanding may declare the principal of
such Notes to be immediately due and payable. Unless otherwise specified in the
related Prospectus Supplement, such declaration may, under certain
circumstances, be rescinded by the holders of a majority in principal amount of
such Notes then outstanding.
If the Notes of any series are due and payable following an Event of
Default with respect thereto, the related Indenture Trustee may institute
proceedings to collect amounts due or foreclose on Trust property, exercise
remedies as a secured party, sell the related Receivables or elect to have the
applicable Trust maintain possession of such Receivables and continue to apply
collections on such Receivables as if there had been no declaration of
acceleration. Unless otherwise specified in the related Prospectus Supplement,
however, such Indenture Trustee is prohibited from selling the related
Receivables following an Event of Default, other than a default in the payment
of any principal of or a default for five days or more in the payment of any
interest on any Note of such series, unless (i) the holders of all such
outstanding Notes consent to such sale, (ii) the proceeds of such sale are
sufficient to pay in full the principal of and the accrued interest on such
outstanding Notes at the date of such sale or (iii) such Indenture Trustee
determines that the proceeds of Receivables would not be sufficient on an
ongoing basis to make all payments on such Notes as such payments would have
become due if such obligations had not been declared due and payable, and such
Indenture Trustee obtains the consent of the holders of 66 2/3% of the aggregate
outstanding amount of such Notes.
Subject to the provisions of the applicable Indenture relating to the
duties of the related Indenture Trustee, if an Event of Default occurs and is
continuing with respect to a series of Notes, such Indenture Trustee will be
under no obligation to exercise any of the rights or powers under such Indenture
at the request or direction of any of the holders of such Notes, if such
Indenture Trustee reasonably believes it will not be adequately indemnified
against the costs, expenses and liabilities which might be incurred by it in
complying with such request. Subject to the provisions for indemnification and
certain limitations contained in the related Indenture, the holders of a
majority in principal amount of the outstanding Notes of a given series will
have the right to direct the time, method and place of conducting any proceeding
or any remedy available to the applicable Indenture Trustee, and the holders of
a majority in principal amount of such Notes then outstanding may, in certain
cases, waive any default with respect thereto, except a default in the payment
of principal or interest or a default in respect of a covenant or provision of
such Indenture that cannot be modified without the waiver or consent of all the
holders of such outstanding Notes.
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<PAGE> 54
Unless otherwise specified in the related Prospectus Supplement, no holder
of a Note of any series will have the right to institute any proceeding with
respect to the related Indenture, unless (i) such holder previously has given to
the applicable Indenture Trustee written notice of a continuing Event of
Default, (ii) the holders of not less than 25% in principal amount of the
outstanding Notes of such series have made written request to such Indenture
Trustee to institute such proceeding in its own name as Indenture Trustee, (iii)
such holder or holders have offered such Indenture Trustee reasonable indemnity,
(iv) such Indenture Trustee has for 60 days failed to institute such proceeding
and (v) no direction inconsistent with such written request has been given to
such Indenture Trustee during such 60-day period by the holders of a majority in
principal amount of such outstanding Notes.
In addition, each Indenture Trustee and the related Noteholders, by
accepting the related Notes, will covenant that they will not at any time
institute against the applicable Trust any bankruptcy, reorganization or other
proceeding under any federal or state bankruptcy or similar law.
With respect to any Trust, neither the related Indenture Trustee nor the
related Trustee in its individual capacity, nor any holder of a Certificate
representing an ownership interest in such Trust nor any of their respective
owners, beneficiaries, agents, officers, directors, employees, affiliates,
successors or assigns will, in the absence of an express agreement to the
contrary, be personally liable for the payment of the principal of or interest
on the related Notes or for the agreements of such Trust contained in the
applicable Indenture.
Certain Covenants. Each Indenture will provide that the related Trust may
not consolidate with or merge into any other entity, unless (i) the entity
formed by or surviving such consolidation or merger is organized under the laws
of the United States, any state or the District of Columbia, (ii) such entity
expressly assumes such Trust's obligation to make due and punctual payments upon
the Notes of the related series and the performance or observance of every
agreement and covenant of such Trust under the Indenture, (iii) no Event of
Default shall have occurred and be continuing immediately after such merger or
consolidation, (iv) such Trust has been advised that the rating of the Notes or
the Certificates of such series then in effect would not be reduced or withdrawn
by the Rating Agencies as a result of such merger or consolidation and (v) such
Trust has received an opinion of counsel to the effect that such consolidation
or merger would have no material adverse tax consequence to the Trust or to any
related Noteholder or Certificateholder.
Each Trust will not, among other things, (i) except as expressly permitted
by the applicable Indenture, the applicable Transfer and Servicing Agreements or
certain related documents with respect to such Trust (collectively, the "Related
Documents"), sell, transfer, exchange or otherwise dispose of any of the assets
of such Trust, (ii) claim any credit on or make any deduction from the principal
and interest payable in respect of the Notes of the related series (other than
amounts withheld under the Code or applicable state law) or assert any claim
against any present or former holder of such Notes because of the payment of
taxes levied or assessed upon such Trust, (iii) dissolve or liquidate in whole
or in part, (iv) permit the validity or effectiveness of the related Indenture
to be impaired or permit any person to be released from any covenants or
obligations with respect to such Notes under such Indenture except as may be
expressly permitted thereby or (v) permit any lien, charge, excise, claim,
security interest, mortgage or other encumbrance to be created on or extend to
or otherwise arise upon or burden the assets of such Trust or any part thereof,
or any interest therein or the proceeds thereof.
No Trust may engage in any activity other than as specified under the
section of the related Prospectus Supplement entitled "The Trust". No Trust will
incur, assume or guarantee any indebtedness other than indebtedness incurred
pursuant to the related Notes and the related Indenture, pursuant to any
Advances made to it by the Servicer or otherwise in accordance with the Related
Documents.
Annual Compliance Statement. Each Trust will be required to file annually
with the related Indenture Trustee a written statement as to the fulfillment of
its obligations under the Indenture.
Indenture Trustee's Annual Report. The Indenture Trustee for each Trust
will be required to mail each year to all related Noteholders a brief report
relating to its eligibility and qualification to continue as Indenture Trustee
under the related Indenture, any amounts advanced by it under the Indenture, the
amount, interest rate and maturity date of certain indebtedness owing by such
Trust to the applicable Indenture Trustee in its
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<PAGE> 55
individual capacity, the property and funds physically held by such Indenture
Trustee as such and any action taken by it that materially affects the related
Notes and that has not been previously reported.
Satisfaction and Discharge of Indenture. An Indenture will be discharged
with respect to the collateral securing the related Notes upon the delivery to
the related Indenture Trustee for cancellation of all such Notes or, with
certain limitations, upon deposit with such Indenture Trustee of funds
sufficient for the payment in full of all such Notes.
THE INDENTURE TRUSTEE
The Indenture Trustee for a series of Notes will be specified in the
related Prospectus Supplement. The Indenture Trustee for any series may resign
at any time, in which event the Issuer will be obligated to appoint a successor
trustee for such series. The Issuer may also remove any such Indenture Trustee
if such Indenture Trustee ceases to be eligible to continue as such under the
related Indenture or if such Indenture Trustee becomes insolvent. In such
circumstances, the Issuer will be obligated to appoint a successor trustee for
the applicable series of Notes. Any resignation or removal of the Indenture
Trustee and appointment of a successor trustee for any series of Notes does not
become effective until acceptance of the appointment by the successor trustee
for such series.
DESCRIPTION OF THE CERTIFICATES
GENERAL
With respect to each Trust, one or more classes of Certificates of the
related series will be issued pursuant to the terms of a Trust Agreement or a
Pooling and Servicing Agreement, a form of each of which has been filed as an
exhibit to the Registration Statement of which this Prospectus forms a part. The
following summary does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the
Certificates and the Trust Agreement or Pooling and Servicing Agreement, as
applicable.
Unless otherwise specified in the related Prospectus Supplement and except
for the Certificates, if any, of a given series purchased by the applicable
Company, each class of Certificates will initially be represented by one or more
Certificates registered in the name of the Depository, except as set forth
below. Unless otherwise specified in the related Prospectus Supplement and
except for the Certificates, if any, of a given series purchased by the
applicable Company, the Certificates will be available for purchase in minimum
denominations of $20,000 and integral multiples of $1,000 in excess thereof in
book-entry form only. The Seller has been informed by DTC that DTC's nominee
will be Cede, unless another nominee is specified in the related Prospectus
Supplement. Accordingly, such nominee is expected to be the holder of record of
the Certificates of any series that are not purchased by the related Company.
Unless and until Definitive Certificates are issued under the limited
circumstances described herein or in the related Prospectus Supplement, no
Certificateholder (other than the applicable Company) will be entitled to
receive a physical certificate representing a Certificate. All references herein
and in the related Prospectus Supplement to actions by Certificateholders refer
to actions taken by DTC upon instructions from the Participants and all
references herein and in the related Prospectus Supplement to distributions,
notices, reports and statements to Certificateholders refer to distributions,
notices, reports and statements to DTC or its nominee, as the case may be, as
the registered holder of the Certificates, for distribution to
Certificateholders in accordance with DTC's procedures with respect thereto. See
"Certain Information Regarding the Securities -- Book-Entry Registration" and
" -- Definitive Securities". Any Certificates of a given series owned by the
applicable Company or its affiliates will be entitled to equal and proportionate
benefits under the applicable Trust Agreement, except that such Certificates
will be deemed not to be outstanding for the purpose of determining whether the
requisite percentage of Certificateholders have given any request, demand,
authorization, direction, notice, consent or other action under the Related
Documents (other than the commencement by the related Trust of a voluntary
proceeding in bankruptcy as described under "Description of the Transfer and
Servicing Agreements -- Insolvency Event").
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<PAGE> 56
DISTRIBUTIONS OF PRINCIPAL AND INTEREST
The timing and priority of distributions, seniority, allocations of losses,
Pass Through Rate and amount of or method of determining distributions with
respect to principal and interest of each class of Certificates will be
described in the related Prospectus Supplement. Distributions of interest on
such Certificates will be made on the dates specified in the related Prospectus
Supplement (each, a "Distribution Date") and will be made prior to distributions
with respect to principal of such Certificates. To the extent provided in the
related Prospectus Supplement, a series may include one or more classes of Strip
Certificates entitled to (i) distributions in respect of principal with
disproportionate, nominal or no interest distributions or (ii) interest
distributions with disproportionate, nominal or no distributions in respect of
principal. Each class of Certificates may have a different Pass Through Rate,
which may be a fixed, variable or adjustable Pass Through Rate (and which may be
zero for certain classes of Strip Certificates) or any combination of the
foregoing. The related Prospectus Supplement will specify the Pass Through Rate
for each class of Certificates of a given series or the method for determining
such Pass Through Rate. See also "Certain Information Regarding the
Securities -- Fixed Rate Securities" and "-- Floating Rate Securities". Unless
otherwise provided in the related Prospectus Supplement, distributions in
respect of the Certificates of a given series that includes Notes may be
subordinate to payments in respect of the Notes of such series as more fully
described in the related Prospectus Supplement. Distributions in respect of
interest on and principal of any class of Certificates will be made on a pro
rata basis among all the Certificateholders of such class.
In the case of a series of Certificates which includes two or more classes
of Certificates, the timing, sequential order, priority of payment or amount of
distributions in respect of interest and principal, and any schedule or formula
or other provisions applicable to the determination thereof, of each such class
shall be as set forth in the related Prospectus Supplement.
CERTAIN INFORMATION REGARDING THE SECURITIES
FIXED RATE SECURITIES
Each class of Securities (other than certain classes of Strip Notes or
Strip Certificates) may bear interest at a fixed rate per annum ("Fixed Rate
Securities") or at a variable or adjustable rate per annum ("Floating Rate
Securities"), as more fully described below and in the applicable Prospectus
Supplement. Each class of Fixed Rate Securities will bear interest at the
applicable per annum Interest Rate or Pass Through Rate, as the case may be,
specified in the applicable Prospectus Supplement. Unless otherwise set forth in
the applicable Prospectus Supplement, interest on each class of Fixed Rate
Securities will be computed on the basis of a 360-day year of twelve 30-day
months. See "Description of the Notes -- Principal and Interest on the Notes"
and "Description of the Certificates -- Distributions of Principal and
Interest".
FLOATING RATE SECURITIES
Each class of Floating Rate Securities will bear interest for each
applicable Interest Reset Period (as such term is defined in the related
Prospectus Supplement with respect to a class of Floating Rate Securities, the
"Interest Reset Period") at a rate per annum determined by reference to an
interest rate basis (the "Base Rate"), plus or minus the Spread, if any, or
multiplied by the Spread Multiplier, if any, in each case as specified in the
related Prospectus Supplement. The "Spread" is the number of basis points (one
basis point equals one one-hundredth of a percentage point) that may be
specified in the applicable Prospectus Supplement as being applicable to such
class, and the "Spread Multiplier" is the percentage that may be specified in
the applicable Prospectus Supplement as being applicable to such class.
The applicable Prospectus Supplement will designate one of the following
Base Rates as applicable to a given Floating Rate Security: (i) LIBOR (a "LIBOR
Security"), (ii) the Commercial Paper Rate (a "Commercial Paper Rate Security"),
(iii) the Treasury Rate (a "Treasury Rate Security"), (iv) the Federal Funds
Rate (a "Federal Funds Rate Security"), (v) the CD Rate (a "CD Rate Security")
or (vi) such other Base Rate as is set forth in such Prospectus Supplement. The
"Index Maturity" for any class of Floating Rate Securities is the period of
maturity of the instrument or obligation from which the Base Rate is calculated.
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<PAGE> 57
"H.15(519)" means the publication entitled "Statistical Release H.15(519),
Selected Interest Rates", or any successor publication, published by the Board
of Governors of the Federal Reserve System. "Composite Quotations" means the
daily statistical release entitled "Composite 3:30 p.m. Quotations for U.S.
Government Securities" published by the Federal Reserve Bank of New York.
"Interest Reset Date" will be the first day of the applicable Interest Reset
Period, or such other day as may be specified in the related Prospectus
Supplement with respect to a class of Floating Rate Securities.
As specified in the applicable Prospectus Supplement, Floating Rate
Securities of a given class may also have either or both of the following (in
each case expressed as a rate per annum): (i) a maximum limitation, or ceiling,
on the rate at which interest may accrue during any interest period and (ii) a
minimum limitation, or floor, on the rate at which interest may accrue during
any interest period. In addition to any maximum interest rate that may be
applicable to any class of Floating Rate Securities, the interest rate
applicable to any class of Floating Rate Securities will in no event be higher
than the maximum rate permitted by applicable law, as the same may be modified
by United States law of general application.
Each Trust with respect to which a class of Floating Rate Securities will
be issued will appoint, and enter into agreements with, a calculation agent
(each, a "Calculation Agent") to calculate interest rates on each such class of
Floating Rate Securities issued with respect thereto. The applicable Prospectus
Supplement will set forth the identity of the Calculation Agent for each such
class of Floating Rate Securities of a given series, which may be either the
related Trustee or Indenture Trustee with respect to such series. All
determinations of interest by the Calculation Agent shall, in the absence of
manifest error, be conclusive for all purposes and binding on the holders of
Floating Rate Securities of a given class. Unless otherwise specified in the
applicable Prospectus Supplement, all percentages resulting from any calculation
of the rate of interest on a Floating 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.
CD Rate Securities. Each CD Rate Security will bear interest for each
Interest Reset Period at the interest rate calculated with reference to the CD
Rate and the Spread or Spread Multiplier, if any, specified in such Security and
in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, the "CD
Rate" for each Interest Reset Period shall be the rate as of the second business
day prior to the Interest Reset Date for such Interest Reset Period (a "CD Rate
Determination Date") for negotiable certificates of deposit having the Index
Maturity designated in the applicable Prospectus Supplement as published in
H.15(519) under the heading "CDs (Secondary Market)". In the event that such
rate is not published prior to 3:00 p.m., New York City time, on the Calculation
Date (as defined below) pertaining to such CD Rate Determination Date, then the
"CD Rate" for such Interest Reset Period will be the rate on such CD Rate
Determination Date for negotiable certificates of deposit of the Index Maturity
designated in the applicable Prospectus Supplement as published in Composite
Quotations under the heading "Certificates of Deposit". If by 3:00 p.m., New
York City time, on such Calculation Date such rate is not yet published in
either H.15(519) or Composite Quotations, then the "CD Rate" for such Interest
Reset Period will be calculated by the Calculation Agent for such CD Rate
Security and will be the arithmetic mean of the secondary market offered rates
as of 10:00 a.m., New York City time, on such CD Rate Determination Date, of
three leading nonbank dealers in negotiable U.S. dollar certificates of deposit
in The City of New York selected by the Calculation Agent for such CD Rate
Security for negotiable certificates of deposit of major United States money
center banks of the highest credit standing (in the market for negotiable
certificates of deposit) with a remaining maturity closest to the Index Maturity
designated in the related Prospectus Supplement in a denomination of $5,000,000;
provided, however, that if the dealers selected as aforesaid by such Calculation
Agent are not quoting offered rates as mentioned in this sentence, the "CD Rate"
for such Interest Reset Period will be the same as the CD Rate for the
immediately preceding Interest Reset Period.
The "Calculation Date" pertaining to any CD Rate Determination Date shall
be the first to occur of (a) the tenth calendar day after such CD Rate
Determination Date or, if such day is not a business day, the next succeeding
business day or (b) the second business day preceding the date any payment is
required to be made for any period following the applicable Interest Reset Date.
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Commercial Paper Rate Securities. Each Commercial Paper Rate Security will
bear interest for each Interest Reset Period at the interest rate calculated
with reference to the Commercial Paper Rate and the Spread or Spread Multiplier,
if any, specified in such Security and in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, the
"Commercial Paper Rate" for each Interest Reset Period will be determined by the
Calculation Agent for such Commercial Paper Rate Security as of the second
business day prior to the Interest Reset Date for such Interest Reset Period (a
"Commercial Paper Rate Determination Date") and shall be the Money Market Yield
(as defined below) on such Commercial Paper Rate Determination Date of the rate
for commercial paper having the Index Maturity specified in the applicable
Prospectus Supplement, as such rate shall be published in H.15(519) under the
heading "Commercial Paper". In the event that such rate is not published prior
to 3:00 p.m., New York City time, on the Calculation Date (as defined below)
pertaining to such Commercial Paper Rate Determination Date, then the
"Commercial Paper Rate" for such Interest Reset Period shall be the Money Market
Yield on such Commercial Paper Rate Determination Date of the rate for
commercial paper of the specified Index Maturity as published in Composite
Quotations under the heading "Commercial Paper". If by 3:00 p.m., New York City
time, on such Calculation Date such rate is not yet published in either
H.15(519) or Composite Quotations, then the "Commercial Paper Rate" for such
Interest Reset Period shall be the Money Market Yield of the arithmetic mean of
the offered rates, as of 11:00 a.m., New York City time, on such Commercial
Paper Rate Determination Date of three leading dealers of commercial paper in
The City of New York selected by the Calculation Agent for such Commercial Paper
Rate Security for commercial paper of the specified Index Maturity placed for an
industrial issuer whose bonds are rated "AA" or the equivalent by a nationally
recognized rating agency; provided, however, that if the dealers selected as
aforesaid by such Calculation Agent are not quoting offered rates as mentioned
in this sentence, the "Commercial Paper Rate" for such Interest Reset Period
will be the same as the Commercial Paper Rate for the immediately preceding
Interest Reset Period.
"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
<TABLE>
<S> <C> <C> <C>
D X 360
Money Market Yield = -------------- X 100
360 - (D X M)
</TABLE>
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the specified Index Maturity.
The "Calculation Date" pertaining to any Commercial Paper Rate
Determination Date shall be the first to occur of (a) the tenth calendar day
after such Commercial Paper Rate Determination Date or, if such day is not a
business day, the next succeeding business day or (b) the second business day
preceding the date any payment is required to be made for any period following
the applicable Interest Reset Date.
Federal Funds Rate Securities. Each Federal Funds Rate Security will bear
interest for each Interest Reset Period at the interest rate calculated with
reference to the Federal Funds Rate and the Spread or Spread Multiplier, if any,
specified in such Security and in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, the
"Federal Funds Rate" for each Interest Reset Period shall be the effective rate
on the Interest Reset Date for such Interest Reset Period (a "Federal Funds Rate
Determination Date") for Federal Funds as published in H.15(519) under the
heading "Federal Funds (Effective)". In the event that such rate is not
published prior to 3:00 p.m., New York City time, on the Calculation Date (as
defined below) pertaining to such Federal Funds Rate Determination Date, the
"Federal Funds Rate" for such Interest Reset Period shall be the rate on such
Federal Funds Rate Determination Date as published in Composite Quotations under
the heading "Federal Funds/Effective Rate". If by 3:00 p.m., New York City time,
on such Calculation Date such rate is not yet published in either H.15(519) or
Composite Quotations, then the "Federal Funds Rate" for such Interest Reset
Period shall be the rate on such Federal Funds Rate Determination Date made
publicly available by the Federal Reserve Bank of New York which is equivalent
to the rate which appears in H.15(519) under the heading "Federal Funds
(Effective)"; provided, however, that if such rate is not made publicly
available by the Federal Reserve Bank of New York by 3:00 p.m., New York City
time, on such Calculation Date, the "Federal Funds Rate"
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<PAGE> 59
for such Interest Reset Period will be the same as the Federal Funds Rate in
effect for the immediately preceding Interest Reset Period. In the case of a
Federal Funds Rate Security that resets daily, the interest rate on such
Security for the period from and including a Monday to but excluding the
succeeding Monday will be reset by the Calculation Agent for such Security on
such second Monday (or, if not a business day, on the next succeeding business
day) to a rate equal to the average of the Federal Funds Rates in effect with
respect to each such day in such week.
The "Calculation Date" pertaining to any Federal Funds Rate Determination
Date shall be the next succeeding business day.
LIBOR Securities. Each LIBOR Security will bear interest for each Interest
Reset Period at the interest rate calculated with reference to LIBOR and the
Spread or Spread Multiplier, if any, specified in such Security and in the
applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, with
respect to LIBOR indexed to the offered rates for U.S. dollar deposits, "LIBOR"
for each Interest Reset Period will be determined by the Calculation Agent for
any LIBOR Security as follows:
(i) On the second London Banking Day prior to the Interest Reset Date
for such Interest Reset Period (a "LIBOR Determination Date"), the
Calculation Agent for such LIBOR Security will determine the arithmetic
mean of the offered rates for deposits in U.S. dollars for the period of
the Index Maturity specified in the applicable Prospectus Supplement,
commencing on such Interest Reset Date, which appear on the Reuters Screen
LIBO Page at approximately 11:00 a.m., London time, on such LIBOR
Determination Date. For purposes of calculating LIBOR, "London Banking Day"
means any business day on which dealings in deposits in United States
dollars are transacted in the London interbank market and "Reuters Screen
LIBO Page" means the display designated as page "LIBO" on the Reuters
Monitor Money Rates Service (or such other page as may replace the LIBO
page on that service for the purpose of displaying London interbank offered
rates of major banks). If at least two such offered rates appear on the
Reuters Screen LIBO Page, "LIBOR" for such Interest Reset Period will be
the arithmetic mean of such offered rates as determined by the Calculation
Agent for such LIBOR Security.
(ii) If fewer than two offered rates appear on the Reuters Screen LIBO
Page on such LIBOR Determination Date, the Calculation Agent for such LIBOR
Security will request the principal London offices of each of four major
banks in the London interbank market selected by such Calculation Agent to
provide such Calculation Agent with its offered quotations for deposits in
U.S. dollars for the period of the specified Index Maturity, commencing on
such Interest Reset Date, to prime banks in the London interbank market at
approximately 11:00 a.m., London time, on such LIBOR Determination Date and
in a principal amount equal to an amount of not less than $1,000,000 that
is representative of a single transaction in such market at such time. If
at least two such quotations are provided, "LIBOR" for such Interest Reset
Period will be the arithmetic mean of such quotations. If fewer than two
such quotations are provided, "LIBOR" for such Interest Reset Period will
be the arithmetic mean of rates quoted by three major banks in The City of
New York selected by the Calculation Agent for such LIBOR Security at
approximately 11:00 a.m., New York City time, on such LIBOR Determination
Date for loans in U.S. dollars to leading European banks, for the period of
the specified Index Maturity, commencing on such Interest Reset Date, and
in a principal amount equal to an amount of not less than $1,000,000 that
is representative of a single transaction in such market at such time;
provided, however, that if the banks selected as aforesaid by such
Calculation Agent are not quoting rates as mentioned in this sentence,
"LIBOR" for such Interest Reset Period will be the same as LIBOR for the
immediately preceding Interest Reset Period.
Treasury Rate Securities. Each Treasury Rate Security will bear interest
for each Interest Reset Period at the interest rate calculated with reference to
the Treasury Rate and the Spread or Spread Multiplier, if any, specified in such
Security and in the applicable Prospectus Supplement.
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<PAGE> 60
Unless otherwise specified in the applicable Prospectus Supplement, the
"Treasury Rate" for each Interest Period will be the rate for the auction held
on the Treasury Rate Determination Date (as defined below) for such Interest
Reset Period of direct obligations of the United States ("Treasury bills")
having the Index Maturity specified in the applicable Prospectus Supplement, as
such rate shall be published in H.15(519) under the heading "U.S. Government
Securities -- Treasury bills -- auction average (investment)" or, in the event
that such rate is not published prior to 3:00 p.m., New York City time, on the
Calculation Date (as defined below) pertaining to such Treasury Rate
Determination Date, the auction average rate (expressed as a bond equivalent on
the basis of a year of 365 or 366 days, as applicable, and applied on a daily
basis) on such Treasury Rate Determination Date as otherwise announced by the
United States Department of the Treasury. In the event that the results of the
auction of Treasury bills having the specified Index Maturity are not published
or reported as provided above by 3:00 p.m., New York City time, on such
Calculation Date, or if no such auction is held on such Treasury Rate
Determination Date, then the "Treasury Rate" for such Interest Reset Period
shall be calculated by the Calculation Agent for such Treasury Rate Security and
shall be the yield to maturity (expressed as a bond equivalent on the basis of a
year of 365 or 366 days, as applicable, and applied on a daily basis) of the
arithmetic mean of the secondary market bid rates, as of approximately 3:30
p.m., New York City time, on such Treasury Rate Determination Date, of three
leading primary United States government securities dealers selected by such
Calculation Agent for the issue of Treasury bills with a remaining maturity
closest to the specified Index Maturity; provided, however, that if the dealers
selected as aforesaid by such Calculation Agent are not quoting bid rates as
mentioned in this sentence, then the "Treasury Rate" for such Interest Reset
Period will be the same as the Treasury Rate for the immediately preceding
Interest Reset Period.
The "Treasury Rate Determination Date" for each Interest Reset Period will
be the day of the week in which the Interest Reset Date for such Interest Reset
Period falls on which Treasury bills would normally be auctioned. Treasury bills
are normally sold at auction on Monday of each week, unless that day is a legal
holiday, in which case the auction is normally held on the following Tuesday,
except that such auction may be held on the preceding Friday. If, as the result
of a legal holiday, an auction is so held on the preceding Friday, such Friday
will be the Treasury Rate Determination Date pertaining to the Interest Reset
Period commencing in the next succeeding week. If an auction date shall fall on
any day that would otherwise be an Interest Reset Date for a Treasury Rate
Security, then such Interest Reset Date shall instead be the business day
immediately following such auction date.
The "Calculation Date" pertaining to any Treasury Rate Determination Date
shall be the first to occur of (a) the tenth calendar day after such Treasury
Rate Determination Date or, if such a day is not a business day, the next
succeeding business day or (b) the second business day preceding the date any
payment is required to be made for any period following the applicable Interest
Reset Date.
INDEXED SECURITIES
To the extent so specified in any Prospectus Supplement, any class of
Securities of a given series may consist of Securities ("Indexed Securities") in
which the principal amount payable at the final scheduled Payment Date or
Distribution Date, as the case may be, for such class (the "Indexed Principal
Amount") is determined by reference to a measure (the "Index") which will be
related to (i) the difference in the rate of exchange between United States
dollars and a currency or composite currency (the "Indexed Currency") specified
in the applicable Prospectus Supplement (such Indexed Securities, "Currency
Indexed Securities"); (ii) the difference in the price of a specified commodity
(the "Indexed Commodity") on specified dates (such Indexed Securities,
"Commodity Indexed Securities"); or (iii) the difference in the level of a
specified stock index (the "Stock Index"), which may be based on U.S. or foreign
stocks, on specified dates (such Indexed Securities, "Stock Indexed
Securities"); or (iv) such other objective price or economic measures as are
described in the applicable Prospectus Supplement. The manner of determining the
Indexed Principal Amount of an Indexed Security and historical and other
information concerning the Indexed Currency, the Indexed Commodity, the Stock
Index or other price or economic measures used in such determination will be set
forth in the applicable Prospectus Supplement, together with information
concerning tax consequences to the holders of such Indexed Securities.
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If the determination of the Indexed Principal Amount of an Indexed Security
is based on an Index calculated or announced by a third party and such third
party either suspends the calculation or announcement of such Index or changes
the basis upon which such Index is calculated (other than changes consistent
with policies in effect at the time such Indexed Security was issued and
permitted changes described in the applicable Prospectus Supplement), then such
Index shall be calculated for purposes of such Indexed Security by an
independent calculation agent named in the applicable Prospectus Supplement on
the same basis, and subject to the same conditions and controls, as applied to
the original third party. If for any reason such Index cannot be calculated on
the same basis and subject to the same conditions and controls as applied to the
original third party, then the Indexed Principal Amount of such Indexed Security
shall be calculated in the manner set forth in the applicable Prospectus
Supplement. Any determination of such independent calculation agent shall in the
absence of manifest error be binding on all parties.
Unless otherwise specified in the applicable Prospectus Supplement,
interest on an Indexed Security will be payable based on the amount designated
in the applicable Prospectus Supplement as the "Face Amount" of such Indexed
Security. The applicable Prospectus Supplement will describe whether the
principal amount of the related Indexed Security, if any, that would be payable
upon redemption or repayment prior to the applicable final scheduled Payment
Date or Distribution Date, as the case may be, will be the Face Amount of such
Indexed Security, the Indexed Principal Amount of such Indexed Security at the
time of redemption or repayment or another amount described in such Prospectus
Supplement.
BOOK-ENTRY REGISTRATION
DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York UCC and a "clearing agency"
registered pursuant to Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and to facilitate the clearance and settlement
of securities transactions between Participants through electronic book-entries,
thereby eliminating the need for physical movement of certificates. Participants
include securities brokers and dealers, banks, trust companies and clearing
corporations. Indirect access to the DTC system also is available to others such
as banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly
("Indirect Participants").
Unless otherwise specified in the related Prospectus Supplement,
Securityholders that are not Participants or Indirect Participants but desire to
purchase, sell or otherwise transfer ownership of, or other interests in,
Securities may do so only through Participants and Indirect Participants. In
addition, Securityholders will receive all distributions of principal and
interest from the related Indenture Trustee or the related Trustee, as
applicable (the "Applicable Trustee"), through Participants. Under a book-entry
format, Securityholders may experience some delay in their receipt of payments,
since such payments will be forwarded by the Applicable Trustee to DTC's
Nominee. DTC will forward such payments to its Participants, which thereafter
will forward them to Indirect Participants or Securityholders. Except to the
extent the applicable Company holds Certificates with respect to any series of
Securities, it is anticipated that the only "Securityholder", "Noteholder" and
"Certificateholder" will be DTC's Nominee. Noteholders will not be recognized by
each Indenture Trustee as Noteholders, as such term is used in each Indenture,
and Noteholders will be permitted to exercise the rights of Noteholders only
indirectly through DTC and its Participants. Similarly, Certificateholders will
not be recognized by each Trustee as Certificateholders as such term is used in
each Trust Agreement or Pooling and Servicing Agreement, and Certificateholders
will be permitted to exercise the rights of Certificateholders only indirectly
through DTC and its Participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
Securities among Participants on whose behalf it acts with respect to the
Securities and to receive and transmit distributions of principal of, and
interest on, the Securities. Participants and Indirect Participants with which
Securityholders have accounts with respect to the Securities similarly are
required to make book-entry transfers and receive and transmit such payments on
behalf of their respective Securityholders. Accordingly, although
Securityholders will not possess Securities,
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the Rules provide a mechanism by which Participants will receive payments and
will be able to transfer their interests.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a
Securityholder to pledge Securities to persons or entities that do not
participate in the DTC system, or to otherwise act with respect to such
Securities, may be limited due to the lack of a physical certificate for such
Securities.
DTC has advised the Seller that it will take any action permitted to be
taken by a Noteholder under the related Indenture or a Certificateholder under
the related Trust Agreement or Pooling and Servicing Agreement only at the
direction of one or more Participants to whose accounts with DTC the applicable
Notes or Certificates are credited. DTC may take conflicting actions with
respect to other undivided interests to the extent that such actions are taken
on behalf of Participants whose holdings include such undivided interests.
Except as required by law, neither the Administrator, if any, the
applicable Trustee nor the applicable Indenture Trustee, if any, will have any
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests of the Securities of any series held by DTC's
Nominee, or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
DEFINITIVE SECURITIES
Unless otherwise specified in the related Prospectus Supplement, the Notes,
if any, and the Certificates of a given series will be issued in fully
registered, certificated form ("Definitive Notes" and "Definitive Certificates",
respectively, and collectively referred to herein as "Definitive Securities") to
Noteholders or Certificateholders or their respective nominees, rather than to
DTC or its nominee, only if (i) the related Administrator or Trustee, as
applicable, determines that DTC is no longer willing or able to discharge
properly its responsibilities as depository with respect to such Securities and
such Administrator or Trustee is unable to locate a qualified successor (and if
it is an Administrator that has made such determination, such Administrator so
notifies the Applicable Trustee in writing), (ii) the Administrator or Trustee,
as applicable, at its option, elects to terminate the book-entry system through
DTC or (iii) after the occurrence of an Event of Default or a Servicer Default
with respect to such Securities, holders representing at least a majority of the
outstanding principal amount of the Notes or the Certificates, as the case may
be, of such series advise the Applicable Trustee through DTC in writing that the
continuation of a book-entry system through DTC (or a successor thereto) with
respect to such Notes or Certificates is no longer in the best interest of the
holders of such Securities.
Upon the occurrence of any event described in the immediately preceding
paragraph, the Applicable Trustee will be required to notify all applicable
Securityholders of a given series through Participants of the availability of
Definitive Securities. Upon surrender by DTC of the definitive certificates
representing the corresponding Securities and receipt of instructions for
re-registration, the Applicable Trustee will reissue such Securities as
Definitive Securities to such Securityholders.
Distributions of principal of, and interest on, such Definitive Securities
will thereafter be made by the Applicable Trustee in accordance with the
procedures set forth in the related Indenture or the related Trust Agreement or
Pooling and Servicing Agreement, as applicable, directly to holders of
Definitive Securities in whose names the Definitive Securities were registered
at the close of business on the applicable Record Date specified for such
Securities in the related Prospectus Supplement. Such distributions will be made
by check mailed to the address of such holder as it appears on the register
maintained by the Applicable Trustee. The final payment on any such Definitive
Security, however, will be made only upon presentation and surrender of such
Definitive Security at the office or agency specified in the notice of final
distribution to the applicable Securityholders.
Definitive Securities will be transferable and exchangeable at the offices
of the Applicable Trustee or of a registrar named in a notice delivered to
holders of Definitive Securities. No service charge will be imposed for any
registration of transfer or exchange, but the Applicable Trustee may require
payment of a sum sufficient to cover any tax or other governmental charge
imposed in connection therewith.
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LIST OF SECURITYHOLDERS
Unless otherwise specified in the related Prospectus Supplement with
respect to the Notes of any series, three or more holders of the Notes of such
series or one or more holders of such Notes evidencing not less than 25% of the
aggregate outstanding principal balance of such Notes may, by written request to
the related Indenture Trustee, obtain access to the list of all Noteholders
maintained by such Indenture Trustee for the purpose of communicating with other
Noteholders with respect to their rights under the related Indenture or under
such Notes. Such Indenture Trustee may elect not to afford the requesting
Noteholders access to the list of Noteholders if it agrees to mail the desired
communication or proxy, on behalf of and at the expense of the requesting
Noteholders, to all Noteholders of such series.
Unless otherwise specified in the related Prospectus Supplement with
respect to the Certificates of any series, three or more holders of the
Certificates of such series or one or more holders of such Certificates
evidencing not less than 25% of the Certificate Balance of such Certificates
may, by written request to the related Trustee, obtain access to the list of all
Certificateholders maintained by such Trustee for the purpose of communicating
with other Certificateholders with respect to their rights under the related
Trust Agreement or Pooling and Servicing Agreement or under such Certificates.
REPORTS TO SECURITYHOLDERS
With respect to each series of Securities that includes Notes, on or prior
to each Payment Date, the Servicer will prepare and provide to the related
Indenture Trustee a statement to be delivered to the related Noteholders on such
Payment Date. With respect to each series of Securities, on or prior to each
Distribution Date, the Servicer will prepare and provide to the related Trustee
a statement to be delivered to the related Certificateholders. With respect to
each series of Securities, each such statement to be delivered to Noteholders
will include (to the extent applicable) the following information (and any other
information so specified in the related Prospectus Supplement) as to the Notes
of such series with respect to such Payment Date or the period since the
previous Payment Date, as applicable, and each such statement to be delivered to
Certificateholders will include (to the extent applicable) the following
information (and any other information so specified in the related Prospectus
Supplement) as to the Certificates of such series with respect to such
Distribution Date or the period since the previous Distribution Date, as
applicable:
(i) the amount of the distribution allocable to principal of each
class of such Notes and to the Certificate Balance of each class of such
Certificates, including, if applicable, the difference, if any (which may
be a positive or negative number) between the amount determined on such
date to be distributable to Noteholders and Certificateholders on account
of principal on the next preceding Payment Date and the amount actually
distributed to Noteholders and Certificateholders on account of principal
on such Payment Date (the "Noteholders' Reconciliation Principal Adjustment
Amount" and "Certificateholders' Reconciliation Principal Adjustment
Amount", respectively);
(ii) the amount of the distribution allocable to interest on or with
respect to each class of Securities of such series;
(iii) the Pool Balance as of the close of business on the last day of
the preceding Collection Period;
(iv) the aggregate outstanding principal balance and the Note Pool
Factor for each class of such Notes, and the Certificate Balance and the
Certificate Pool Factor for each class of such Certificates, each after
giving effect to all payments reported under clause (i) above on such date;
(v) the amount of the Servicing Fee paid to the Servicer with respect
to the related Collection Period or Collection Periods, as the case may be;
(vi) the Interest Rate or Pass Through Rate for the next period for
any class of Notes or Certificates of such series with variable or
adjustable rates;
(vii) the amount of the aggregate realized losses, if any, for the
second preceding Collection Period;
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(viii) the Noteholders' Interest Carryover Shortfall, the Noteholders'
Principal Carryover Shortfall, the Certificateholders' Interest Carryover
Shortfall and the Certificateholders' Principal Carryover Shortfall (each
as defined in the related Prospectus Supplement), if any, in each case as
applicable to each class of Securities, and the change in such amounts from
the preceding statement;
(ix) the aggregate Purchase Amounts for receivables, if any, that were
repurchased in such Collection Period;
(x) the balance of the Reserve Account (if any) on such date, after
giving effect to changes therein on such date;
(xi) for each such date during the Funding Period (if any), the
remaining Pre-Funded Amount; and
(xii) for the first such date that is on or immediately following the
end of the Funding Period (if any), the amount of any remaining Pre-Funded
Amount that has not been used to fund the purchase of Subsequent
Receivables and is being passed through as payments of principal on the
Securities of such series.
Each amount set forth pursuant to subclauses (i), (ii), (v) and (viii) with
respect to the Notes or the Certificates of any series will be expressed as a
dollar amount per $1,000 of the initial principal balance of such Notes or the
initial Certificate Balance of such Certificates, as applicable.
Within the prescribed period of time for tax reporting purposes after the
end of each calendar year during the term of each Trust, the Applicable Trustee
will mail to each person who at any time during such calendar year has been a
Securityholder with respect to such Trust and received any payment thereon a
statement containing certain information for the purposes of such
Securityholder's preparation of federal income tax returns. See "Certain Federal
Income Tax Consequences".
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of each Sale and Servicing
Agreement or Pooling and Servicing Agreement pursuant to which a Trust will
purchase Receivables from the Seller and the Servicer will agree to service such
Receivables, each Trust Agreement (in the case of a grantor trust, the Pooling
and Servicing Agreement) pursuant to which a Trust will be created and
Certificates will be issued and each Administration Agreement pursuant to which
CFC will undertake certain administrative duties with respect to a Trust that
issues Notes (collectively, the "Transfer and Servicing Agreements"). Forms of
the Transfer and Servicing Agreements have been filed as exhibits to the
Registration Statement of which this Prospectus forms a part. This summary does
not purport to be complete and is subject to, and qualified in its entirety by
reference to, all the provisions of the Transfer and Servicing Agreements.
SALE AND ASSIGNMENT OF RECEIVABLES
On the Closing Date specified with respect to any given Trust in the
related Prospectus Supplement (the "Closing Date"), the Seller will, if so
specified in such Prospectus Supplement, transfer and assign to the applicable
Trustee, without recourse, pursuant to a Sale and Servicing Agreement or a
Pooling and Servicing Agreement, as applicable, its entire interest in the
Initial Receivables, if any, of the related Receivables Pool, including its
security interests in the related Financed Vehicles. Each such Receivable will
be identified in a schedule appearing as an exhibit to such Pooling and
Servicing Agreement or Sale and Servicing Agreement (a "Schedule of
Receivables"). The applicable Trustee will, concurrently with such transfer and
assignment, execute and deliver the related Notes and/or Certificates. Unless
otherwise provided in the related Prospectus Supplement, the net proceeds
received from the sale of the Certificates and the Notes of a given series will
be applied to the purchase of the related Receivables from the Seller and, to
the extent specified in the related Prospectus Supplement, to the deposit of the
Pre-Funded Amount into the Pre-Funding Account. The related Prospectus
Supplement for a given Trust will specify whether, and the terms, conditions and
manner under which, Subsequent Receivables will be sold by the Seller to the
applicable Trust from time to time during any
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Funding Period on each date specified as a transfer date in the related
Prospectus Supplement (each, a "Subsequent Transfer Date").
In each Sale and Servicing Agreement or Pooling and Servicing Agreement,
the Seller will represent and warrant to the applicable Trust, among other
things, that: (i) the information provided in the related Schedule of
Receivables is correct in all material respects; (ii) the Obligor on each
related Receivable is required to maintain physical damage insurance covering
the Financed Vehicle in accordance with the Seller's normal requirements; (iii)
as of the applicable Closing Date or the applicable Subsequent Transfer Date, if
any, to the best of its knowledge, the related Receivables are free and clear of
all security interests, liens, charges and encumbrances and no offsets, defenses
or counterclaims have been asserted or threatened; (iv) as of the Closing Date
or the applicable Subsequent Transfer Date, if any, each of such Receivables is
or will be secured by a first perfected security interest in favor of the Seller
in the Financed Vehicle; (v) each related Receivable, at the time it was
originated, complied and, as of the Closing Date or the applicable Subsequent
Transfer Date, if any, complies in all material respects with applicable federal
and state laws, including, without limitation, consumer credit, truth in
lending, equal credit opportunity and disclosure laws; and (vi) any other
representations and warranties that may be set forth in the related Prospectus
Supplement.
Unless otherwise provided in the related Prospectus Supplement, as of the
last day of the second (or, if the Seller elects, the first) month following the
discovery by or notice to the Seller of a breach of any representation or
warranty of the Seller that materially and adversely affects the interests of
the related Trust in any Receivable, the Seller, unless the breach is cured,
will repurchase such Receivable from such Trust at a price equal to the unpaid
principal balance owed by the Obligor thereon plus interest thereon at the
respective APR to the last day of the month of repurchase (the "Purchase
Amount"). The repurchase obligation constitutes the sole remedy available to the
Certificateholders or the Trustee and any Noteholders or Indenture Trustee in
respect of such Trust for any such uncured breach.
Pursuant to each Sale and Servicing Agreement or Pooling and Servicing
Agreement, to assure uniform quality in servicing the Receivables and to reduce
administrative costs, each Trust will designate the Servicer as custodian to
maintain possession, as such Trust's agent, of the related motor vehicle retail
installment sale contracts and any other documents relating to the Receivables.
The Seller's accounting records and computer systems will reflect the sale and
assignment of the related Receivables to the applicable Trust, and Uniform
Commercial Code ("UCC") financing statements reflecting such sale and assignment
will be filed.
ACCOUNTS
With respect to each Trust that issues Notes, the Servicer will establish
and maintain with the related Indenture Trustee one or more accounts, in the
name of the Indenture Trustee on behalf of the related Noteholders and
Certificateholders, into which all payments made on or with respect to the
related Receivables will be deposited (the "Collection Account"). The Servicer
will establish and maintain with such Indenture Trustee an account, in the name
of such Indenture Trustee on behalf of such Noteholders, into which amounts
released from the Collection Account and any Pre-Funding Account, Reserve
Account or other credit enhancement for payment to such Noteholders will be
deposited and from which all distributions to such Noteholders will be made (the
"Note Distribution Account"). The Servicer will establish and maintain with the
related Trustee an account, in the name of such Trustee on behalf of such
Certificateholders, into which amounts released from the Collection Account and
any Pre-Funding Account, Reserve Account or other credit or cash flow
enhancement for distribution to such Certificateholders will be deposited and
from which all distributions to such Certificateholders will be made (the
"Certificate Distribution Account"). With respect to each Trust that does not
issue Notes, the Servicer will also establish and maintain the Collection
Account and any other Trust Account in the name of the related Trustee on behalf
of the related Certificateholders.
If so provided in the related Prospectus Supplement, the Servicer will
establish for each series an additional account (the "Payahead Account"), in the
name of the related Indenture Trustee, into which, to the extent required by the
Sale and Servicing Agreement, early payments by or on behalf of Obligors on
Precomputed Receivables will be deposited until such time as the payment becomes
due. Until such time as payments are transferred from the Payahead Account to
the Collection Account, they will not constitute
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collected interest or collected principal and will not be available for
distribution to the applicable Noteholders or Certificateholders. The Payahead
Account will initially be maintained with the applicable Indenture Trustee or,
in the case of each Trust that does not issue Notes, the applicable Trustee.
Any other accounts to be established with respect to a Trust, including any
Pre-Funding Account or any Reserve Account, will be described in the related
Prospectus Supplement.
For any series of Securities, funds in the Collection Account, the Note
Distribution Account and any Pre-Funding Account, Reserve Account and other
accounts identified as such in the related Prospectus Supplement (collectively,
the "Trust Accounts") will be invested as provided in the related Sale and
Servicing Agreement or Pooling and Servicing Agreement in Eligible Investments.
"Eligible Investments" are generally limited to investments acceptable to the
Rating Agencies rating such Securities as being consistent with the rating of
such Securities and may include motor vehicle retail sale contracts. Except as
described below or in the related Prospectus Supplement, Eligible Investments
are limited to obligations or securities that mature on or before the date of
the next distribution for such series. However, to the extent permitted by the
Rating Agencies, funds in any Reserve Account may be invested in securities that
will not mature prior to the date of the next distribution with respect to such
Certificates or Notes and will not be sold to meet any shortfalls. Thus, the
amount of cash in any Reserve Account at any time may be less than the balance
of the Reserve Account. If the amount required to be withdrawn from any Reserve
Account to cover shortfalls in collections on the related Receivables (as
provided in the related Prospectus Supplement) exceeds the amount of cash in the
Reserve Account, a temporary shortfall in the amounts distributed to the related
Noteholders or Certificateholders could result, which could, in turn, increase
the average life of the Notes or the Certificates of such series. Except as
otherwise specified in the related Prospectus Supplement, investment earnings on
funds deposited in the Trust Accounts, net of losses and investment expenses
(collectively, "Investment Earnings"), shall be deposited in the applicable
Collection Account on each Distribution Date or Payment Date and shall be
treated as collections of interest on the related Receivables.
The Trust Accounts will be maintained as Eligible Deposit Accounts.
"Eligible Deposit Account" means either (a) a segregated account with an
Eligible Institution or (b) a segregated trust account with the corporate trust
department of a depository institution organized under the laws of the United
States of America or any one of the states thereof or the District of Columbia
(or any domestic branch of a foreign bank), having corporate trust powers and
acting as trustee for funds deposited in such account, so long as any of the
securities of such depository institution have a credit rating from each Rating
Agency in one of its generic rating categories which signifies investment grade.
"Eligible Institution" means, with respect to a Trust, (a) the corporate trust
department of the related Indenture Trustee or the related Trustee, as
applicable, or (b) a depository institution organized under the laws of the
United States of America or any one of the states thereof or the District of
Columbia (or any domestic branch of a foreign bank), (i) which has either (A) a
long-term unsecured debt rating acceptable to the Rating Agencies or (B) a
short-term unsecured debt rating or certificate of deposit rating acceptable to
the Rating Agencies and (ii) whose deposits are insured by the FDIC.
SERVICING PROCEDURES
The Servicer will make reasonable efforts to collect all payments due with
respect to the Receivables held by any Trust and will, consistent with the
related Sale and Servicing Agreement or Pooling and Servicing Agreement, follow
such collection procedures as it follows with respect to comparable motor
vehicle retail installment sale contracts it services for itself or others.
Consistent with its normal procedures, the Servicer may, in its discretion,
arrange with the Obligor on a Receivable to extend or modify the payment
schedule, but no such arrangement will, for purposes of any Sale and Servicing
Agreement or Pooling and Servicing Agreement, modify the original due dates or
the amount of the scheduled payments or extend the final payment date of any
Receivable beyond the Final Scheduled Maturity Date (as such term is defined
with respect to any Receivables Pool in the related Prospectus Supplement). Some
of such arrangements may result in the Servicer purchasing the Receivable for
the Purchase Amount, while others may result in the Servicer making Advances.
The Servicer may sell the Financed Vehicle securing the respective Receivable at
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public or private sale, or take any other action permitted by applicable law.
See "Certain Legal Aspects of the Receivables".
COLLECTIONS
With respect to each Trust, the Servicer will deposit all payments on the
related Receivables (from whatever source) and all proceeds of such Receivables
collected during each collection period specified in the related Prospectus
Supplement (each, a "Collection Period") into the related Collection Account
within two business days after receipt thereof. However, at any time that and
for so long as (i) CFC is the Servicer, (ii) there exists no Servicer Default
and (iii) each other condition to making deposits less frequently than daily as
may be specified by the Rating Agencies or set forth in the related Prospectus
Supplement is satisfied, the Servicer will not be required to deposit such
amounts into the Collection Account until on or before the applicable
Distribution Date or Payment Date. Pending deposit into the Collection Account,
collections may be invested by the Servicer at its own risk and for its own
benefit and will not be segregated from its own funds. If the Servicer were
unable to remit such funds, Securityholders might incur a loss. To the extent
set forth in the related Prospectus Supplement, the Servicer may, in order to
satisfy the requirements described above, obtain a letter of credit or other
security for the benefit of the related Trust to secure timely remittances of
collections on the related Receivables and payment of the aggregate Purchase
Amount with respect to Receivables purchased by the Servicer.
Collections on a Precomputed Receivable made during a Collection Period
shall be applied first to repay any outstanding Precomputed Advances made by the
Servicer with respect to such Receivable (as described below), and to the extent
that collections on a Precomputed Receivable during a Collection Period exceed
the outstanding Precomputed Advances, the collections shall then be applied to
the scheduled payment on such Receivable. If any collections remaining after the
scheduled payment is made are insufficient to prepay the Precomputed Receivable
in full, then, unless otherwise provided in the related Prospectus Supplement,
generally such remaining collections (the "Payaheads") shall be transferred to
and kept in the Payahead Account, until such later Collection Period as the
collections may be transferred to the Collection Account and applied either to
the scheduled payment or to prepay such Receivable in full.
ADVANCES
Unless otherwise provided in the related Prospectus Supplement, to the
extent the collections of interest and principal on a Precomputed Receivable
with respect to a Collection Period fall short of the respective scheduled
payment, the Servicer will make a Precomputed Advance of the shortfall. The
Servicer will be obligated to make a Precomputed Advance on a Precomputed
Receivable only to the extent that the Servicer, in its sole discretion, expects
to recoup such advance from subsequent collections or recoveries on such
Receivable or other Precomputed Receivables in the related Receivables Pool. The
Servicer will deposit the Precomputed Advance in the applicable Collection
Account on or before the business day preceding the applicable Distribution Date
or Payment Date. The Servicer will recoup its Precomputed Advance from
subsequent payments by or on behalf of the respective Obligor or from insurance
or liquidation proceeds with respect to the Receivable and will release its
right to reimbursement in conjunction with its purchase of the Receivable as
Servicer, or, upon the determination that reimbursement from the preceding
sources is unlikely, will recoup its Precomputed Advance from any collections
made on other Precomputed Receivables in the related Receivables Pool.
Unless otherwise provided in the related Prospectus Supplement, on or
before the business day prior to each applicable Distribution Date or Payment
Date, the Servicer shall deposit into the related Collection Account as a Simple
Interest Advance an amount equal to the amount of interest that would have been
due on the related Simple Interest Receivables at their respective APRs for the
related Collection Period (assuming that such Simple Interest Receivables are
paid on their respective due dates) minus the amount of interest actually
received on such Simple Interest Receivables during the related Collection
Period. If such calculation results in a negative number, an amount equal to
such amount shall be paid to the Servicer in reimbursement of outstanding Simple
Interest Advances. In addition, in the event that a Simple Interest Receivable
becomes a Liquidated Receivable (as such term is defined in the related
Prospectus Supplement), the amount of
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accrued and unpaid interest thereon (but not including interest for the then
current Collection Period) shall be withdrawn from the Collection Account and
paid to the Servicer in reimbursement of outstanding Simple Interest Advances.
No advances of principal will be made with respect to Simple Interest
Receivables. As used herein, "Advances" means both Precomputed Advances and
Simple Interest Advances.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Unless otherwise specified in the Prospectus Supplement with respect to any
Trust, the Servicer will be entitled to receive the Servicing Fee for each
Collection Period in an amount equal to specified percentage per annum (as set
forth in the related Prospectus Supplement, the "Servicing Fee Rate") of the
Pool Balance as of the first day of the related Collection Period (the
"Servicing Fee"). The Servicing Fee (together with any portion of the Servicing
Fee that remains unpaid from prior Distribution Dates or Payment Dates) will be
paid solely to the extent of the Interest Distribution Amount. However, the
Servicing Fee will be paid prior to the distribution of any portion of the
Interest Distribution Amount to the Noteholders or the Certificateholders of the
given series.
Unless otherwise provided in the related Prospectus Supplement with respect
to a given Trust, the Servicer will also collect and retain any late fees,
prepayment charges and other administrative fees or similar charges allowed by
applicable law with respect to the related Receivables and will be entitled to
reimbursement from such Trust for certain liabilities. Payments by or on behalf
of Obligors will be allocated to scheduled payments and late fees and other
charges in accordance with the Servicer's normal practices and procedures.
The Servicing Fee will compensate the Servicer for performing the functions
of a third party servicer of motor vehicle receivables as an agent for their
beneficial owner, including collecting and posting all payments, responding to
inquiries of Obligors on the Receivables, investigating delinquencies, sending
payment coupons to Obligors, reporting tax information to Obligors, paying costs
of collections and disposition of defaults and policing the collateral. The
Servicing Fee also will compensate the Servicer for administering the particular
Receivables Pool, including making Advances, accounting for collections and
furnishing monthly and annual statements to the related Trustee and Indenture
Trustee with respect to distributions and generating federal income tax
information for such Trust and for the related Noteholders and
Certificateholders. The Servicing Fee also will reimburse the Servicer for
certain taxes, the fees of the related Trustee and Indenture Trustee, if any,
accounting fees, outside auditor fees, data processing costs and other costs
incurred in connection with administering the applicable Receivables Pool.
DISTRIBUTIONS
With respect to each series of Securities, beginning on the Payment Date or
Distribution Date, as applicable, specified in the related Prospectus
Supplement, distributions of principal and interest (or, where applicable, of
principal or interest only) on each class of such Securities entitled thereto
will be made by the Applicable Trustee to the Noteholders and the
Certificateholders of such series. The timing, calculation, allocation, order,
source, priorities of and requirements for all payments to each class of
Noteholders and all distributions to each class of Certificateholders of such
series will be set forth in the related Prospectus Supplement.
With respect to each Trust, on each Payment Date and Distribution Date, as
applicable, collections on the related Receivables will be transferred from the
Collection Account to the Note Distribution Account, if any, and the Certificate
Distribution Account for distribution to Noteholders, if any, and
Certificateholders to the extent provided in the related Prospectus Supplement.
Credit enhancement, such as a Reserve Account, will be available to cover any
shortfalls in the amount available for distribution on such date to the extent
specified in the related Prospectus Supplement. As more fully described in the
related Prospectus Supplement, and unless otherwise specified therein,
distributions in respect of principal of a class of Securities of a given series
will be subordinate to distributions in respect of interest on such class, and
distributions in respect of one or more classes of Certificates of such series
may be subordinate to payments in respect of Notes, if any, of such series or
other classes of Certificates of such series.
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Allocation of Collections on Receivables; Reconciliation. Distributions of
principal on the Securities of a series may be based on the amount of principal
collected or due, or the amount of Realized Losses incurred, in a Collection
Period. Unless otherwise specified in a Prospectus Supplement, the amounts of
collections on the Receivables of a series that are allocable to interest and
principal, respectively, will first be estimated and then be reconciled in the
following manner with the following effect on the distributions on the related
Securities.
On the Business Day immediately preceding each Distribution Date or Payment
Date (a "Determination Date"), the Indenture Trustee, if any, or, otherwise, the
Trustee shall determine the amount in the Collection Account available for
distribution on the related Distribution Date or Payment Date (excluding amounts
retained in the Collection Account from prior periods, as described below). Such
amount shall be allocated first to interest based on the weighted average APR
and Pool Balance of the Receivables as of the first day of the related
Collection Period, plus an amount related to the investment earnings on amounts
contained in the Pre-Funding Account, if any, maintained with the Indenture
Trustee or the Trustee, as applicable, in accordance with the Sale and Servicing
Agreement or Pooling and Servicing Agreement, as applicable, and then any
remaining amount in the Collection Account shall be allocated to principal.
Payments to Securityholders shall be distributed on each Distribution Date or
Payment Date in accordance with such allocations, with appropriate adjustments
from the prior period as described below, together with a payment notice setting
forth the amount of such payment allocable to interest and the amount allocable
to principal, including, separately stated, the amount attributable to any
adjustment from the prior period. On each Determination Date (other than the
first Determination Date), the Servicer will provide the Indenture Trustee or
the Trustee, as applicable, with certain information with respect to the
Collection Period related to the prior Distribution Date or Payment Date. On
such current Determination Date or Payment Date, (i) the amounts so allocated
and distributed on the preceding Distribution Date or Payment Date will be
reconciled with the information provided by the Servicer on the preceding
Determination Date, (ii) amounts will be deposited in the Reserve Account or
held in the Collection Account, as appropriate, and (iii) reports reflecting
such reconciled amounts will be forwarded to Securityholders. If, based on such
reconciliation, the amounts distributed to Securityholders on account of
principal on the preceding Distribution Date or Payment Date were less than the
amounts required to be so distributed based on the reconciliation, the amount of
such deficiency shall be retained in the Collection Account for distribution to
Securityholders on such current Distribution Date or Payment Date. If amounts
were distributed to holders as principal in excess of amounts allocable to
principal based on such reconciliation, the amount of such excess will be
deducted from principal when calculating principal distributable on such current
Distribution Date or Payment Date. The payment of principal as described above
is not expected to have a material effect on the average life of any class of
Securities.
CREDIT AND CASH FLOW ENHANCEMENT
The amounts and types of credit and cash flow enhancement arrangements and
the provider thereof, if applicable, with respect to each class of Securities of
a given series, if any, will be set forth in the related Prospectus Supplement.
If and to the extent provided in the related Prospectus Supplement, credit and
cash flow enhancement may be in the form of subordination of one or more classes
of Securities, Reserve Accounts, over-collateralization, letters of credit,
credit or liquidity facilities, surety bonds, guaranteed investment contracts,
swaps or other interest rate protection agreements, repurchase obligations,
yield supplement agreements, other agreements with respect to third party
payments or other support, cash deposits or such other arrangements as may be
described in the related Prospectus Supplement or any combination of two or more
of the foregoing. If specified in the applicable Prospectus Supplement, credit
or cash flow enhancement for a class of Securities may cover one or more other
classes of Securities of the same series, and credit or cash flow enhancement
for a series of Securities may cover one or more other series of Securities.
The presence of a Reserve Account and other forms of credit enhancement for
the benefit of any class or series of Securities is intended to enhance the
likelihood of receipt by the Securityholders of such class or series of the full
amount of principal and interest due thereon and to decrease the likelihood that
such Securityholders will experience losses. Unless otherwise specified in the
related Prospectus Supplement, the credit enhancement for a class or series of
Securities will not provide protection against all risks of loss and will
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not guarantee repayment of the entire principal balance and interest thereon. 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 series of Securities, Securityholders of any such series
will be subject to the risk that such credit enhancement will be exhausted by
the claims of Securityholders of other series.
Reserve Account. If so provided in the related Prospectus Supplement,
pursuant to the related Sale and Servicing Agreement or Pool and Servicing
Agreement, the Seller will establish for a series or class of Securities an
account, as specified in the related Prospectus Supplement (the "Reserve
Account"), which will be maintained with the related Trustee or Indenture
Trustee, as applicable. Unless otherwise provided in the related Prospectus
Supplement, the Reserve Account will be funded by an initial deposit by the
Seller on the Closing Date in the amount set forth in the related Prospectus
Supplement and, if the related series has a Funding Period, will also be funded
on each Subsequent Transfer Date to the extent described in the related
Prospectus Supplement. As further described in the related Prospectus
Supplement, the amount on deposit in the Reserve Account will be increased on
each Distribution Date or Payment Date thereafter up to the Specified Reserve
Account Balance (as defined in the related Prospectus Supplement) by the deposit
therein of the amount of collections on the related Receivables remaining on
each such Distribution Date or Payment Date after the payment of all other
required payments and distributions on such date. The related Prospectus
Supplement will describe the circumstances and manner under which distributions
may be made out of the Reserve Account, either to holders of the Securities
covered thereby or to the applicable Company.
NET DEPOSITS
As an administrative convenience, unless the Servicer is required to remit
collections daily (see "-- Collections" above), the Servicer will be permitted
to make the deposit of collections, aggregate Advances and Purchase Amounts for
any Trust for or with respect to the related Collection Period net of
distributions to be made to the Servicer for such Trust with respect to such
Collection Period. The Servicer may cause to be made a single, net transfer from
the Collection Account to the related Payahead Account, if any, or vice versa.
The Servicer, however, will account to the Trustee, any Indenture Trustee, the
Noteholders, if any, and the Certificateholders with respect to each Trust as if
all deposits, distributions and transfers were made individually. With respect
to any Trust that issues both Certificates and Notes, if the related Payment
Dates do not coincide with Distribution Dates, all distributions, deposits or
other remittances made on a Payment Date will be treated as having been
distributed, deposited or remitted on the Distribution Date for the applicable
Collection Period for purposes of determining other amounts required to be
distributed, deposited or otherwise remitted on such Distribution Date.
STATEMENTS TO TRUSTEES AND TRUST
Prior to each Distribution Date or Payment Date with respect to each series
of Securities, the Servicer will provide to the applicable Indenture Trustee, if
any, and the applicable Trustee as of the close of business on the last day of
the preceding Collection Period a statement setting forth substantially the same
information as is required to be provided in the periodic reports provided to
Securityholders of such series described under "Certain Information Regarding
the Securities -- Reports to Securityholders".
EVIDENCE AS TO COMPLIANCE
Each Sale and Servicing Agreement and Pooling and Servicing Agreement will
provide that a firm of independent public accountants will furnish to the
related Trust and Indenture Trustee or Trustee, as applicable, annually a
statement as to compliance by the Servicer during the preceding twelve months
(or, in the case of the first such certificate, from the applicable Closing
Date) with certain standards relating to the servicing of the applicable
Receivables, the Servicer's accounting records and computer files with respect
thereto and certain other matters.
Each Sale and Servicing Agreement and Pooling and Servicing Agreement will
also provide for delivery to the related Trust and Indenture Trustee or Trustee,
as applicable, substantially simultaneously with the
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delivery of such accountants' statement referred to above, of a certificate
signed by an officer of the Servicer stating that the Servicer has fulfilled its
obligations under the Sale and Servicing Agreement or Pooling and Servicing
Agreement, as applicable, throughout the preceding twelve months (or, in the
case of the first such certificate, from the Closing Date) or, if there has been
a default in the fulfillment of any such obligation, describing each such
default. The Servicer has agreed to give each Indenture Trustee and each Trustee
notice of certain Servicer Defaults under the related Sale and Servicing
Agreement or Pooling and Servicing Agreement, as applicable.
Copies of such statements and certificates may be obtained by
Securityholders by a request in writing addressed to the Applicable Trustee.
CERTAIN MATTERS REGARDING THE SERVICER
Each Sale and Servicing Agreement and Pooling and Servicing Agreement will
provide that CFC may not resign from its obligations and duties as Servicer
thereunder, except upon determination that CFC's performance of such duties is
no longer permissible under applicable law. No such resignation will become
effective until the related Indenture Trustee or Trustee, as applicable, or a
successor servicer has assumed CFC's servicing obligations and duties under such
Sale and Servicing Agreement or Pooling and Servicing Agreement.
Each Sale and Servicing Agreement and Pooling and Servicing Agreement will
further provide that neither the Servicer nor any of its directors, officers,
employees and agents will be under any liability to the related Trust or the
related Noteholders or Certificateholders for taking any action or for
refraining from taking any action pursuant to such Sale and Servicing Agreement
or Pooling and Servicing Agreement or for errors in judgment; except that
neither the Servicer nor any such person will be protected against any liability
that would otherwise be imposed by reason of willful misfeasance, bad faith or
negligence in the performance of the Servicer's duties thereunder or by reason
of reckless disregard of its obligations and duties thereunder. In addition,
each Sale and Servicing Agreement and Pooling and Servicing Agreement will
provide that the Servicer is under no obligation to appear in, prosecute or
defend any legal action that is not incidental to the Servicer's servicing
responsibilities under such Sale and Servicing Agreement or Pooling and
Servicing Agreement and that, in its opinion, may cause it to incur any expense
or liability.
Under the circumstances specified in each Sale and Servicing Agreement and
Pooling and Servicing Agreement , any entity into which the Servicer may be
merged or consolidated, or any entity resulting from any merger or consolidation
to which the Servicer is a party, or any entity succeeding to the business of
the Servicer or, with respect to its obligations as Servicer, any corporation
50% or more of the voting stock of which is owned, directly or indirectly, by
Chrysler, which corporation or other entity in each of the foregoing cases
assumes the obligations of the Servicer, will be the successor of the Servicer
under such Sale and Servicing Agreement or Pooling and Servicing Agreement.
SERVICER DEFAULT
Except as otherwise provided in the related Prospectus Supplement,
"Servicer Default" under each Sale and Servicing Agreement and Pooling and
Servicing Agreement will consist of (i) any failure by the Servicer to deliver
to the Applicable Trustee for deposit in any of the Trust Accounts or the
Certificate Distribution Account any required payment or to direct the
Applicable Trustee to make any required distributions therefrom, which failure
continues unremedied for three business days after written notice from the
Applicable Trustee is received by the Servicer or after discovery of such
failure by the Servicer; (ii) any failure by the Servicer or the Seller, as the
case may be, duly to observe or perform in any material respect any other
covenant or agreement in such Sale and Servicing Agreement or Pooling and
Servicing Agreement, which failure materially and adversely affects the rights
of the Noteholders or the Certificateholders of the related series and which
continues unremedied for 60 days after the giving of written notice of such
failure (A) to the Servicer or the Seller, as the case may be, by the Applicable
Trustee or (B) to the Servicer or the Seller, as the case may be, and to the
Applicable Trustee by holders of Notes or Certificates of such series, as
applicable, evidencing not less than 25% in principal amount of such outstanding
Notes or of such Certificate Balance; and (iii) the occurrence of an Insolvency
Event with respect to the Servicer, the Seller or any related
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Company. "Insolvency Event" means, with respect to any Person, any of the
following events or actions: certain events of insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings with respect to
such Person and certain actions by such Person indicating its insolvency,
reorganization pursuant to bankruptcy proceedings or inability to pay its
obligations.
RIGHTS UPON SERVICER DEFAULT
In the case of any Trust that has issued Notes, unless otherwise provided
in the related Prospectus Supplement, as long as a Servicer Default under a Sale
and Servicing Agreement remains unremedied, the related Indenture Trustee or
holders of Notes of the related series evidencing not less than 25% of principal
amount of such Notes then outstanding may terminate all the rights and
obligations of the Servicer under such Sale and Servicing Agreement, whereupon
such Indenture Trustee or a successor servicer appointed by such Indenture
Trustee will succeed to all the responsibilities, duties and liabilities of the
Servicer under such Sale and Servicing Agreement and will be entitled to similar
compensation arrangements. In the case of any Trust that has not issued Notes,
unless otherwise provided in the related Prospectus Supplement, as long as a
Servicer Default under the related Pooling and Servicing Agreement remains
unremedied, the related Trustee or holders of Certificates of the related series
evidencing not less than 25% of the principal amount of such Certificates then
outstanding may terminate all the rights and obligations of the Servicer under
such Pooling and Servicing Agreement, whereupon such Trustee or a successor
servicer appointed by such Trustee will succeed to all the responsibilities,
duties and liabilities of the Servicer under such Pooling and Servicing
Agreement and will be entitled to similar compensation arrangements. If,
however, a bankruptcy trustee or similar official has been appointed for the
Servicer, and no Servicer Default other than such appointment has occurred, such
trustee or official may have the power to prevent such Indenture Trustee, such
Noteholders, such Trustee or such Certificateholders from effecting a transfer
of servicing. In the event that such Indenture Trustee or Trustee is unwilling
or unable to so act, it may appoint, or petition a court of competent
jurisdiction for the appointment of, a successor with a net worth of at least
$100,000,000 and whose regular business includes the servicing of motor vehicle
receivables. Such Indenture Trustee or Trustee may make such arrangements for
compensation to be paid, which in no event may be greater than the servicing
compensation to the Servicer under such Sale and Servicing Agreement or Pooling
and Servicing Agreement.
WAIVER OF PAST DEFAULTS
With respect to each Trust that has issued Notes, unless otherwise provided
in the related Prospectus Supplement, the holders of Notes evidencing at least a
majority in principal amount of the then outstanding Notes of the related series
(or the holders of the Certificates of such series evidencing not less than a
majority of the outstanding Certificate Balance, in the case of any Servicer
Default which does not adversely affect the related Indenture Trustee or such
Noteholders) may, on behalf of all such Noteholders and Certificateholders,
waive any default by the Servicer in the performance of its obligations under
the related Sale and Servicing Agreement and its consequences, except a Servicer
Default in making any required deposits to or payments from any of the Trust
Accounts or to the Certificate Distribution Account in accordance with such Sale
and Servicing Agreement. With respect to each Trust that has not issued Notes,
holders of Certificates of such series evidencing not less than a majority of
the principal amount of such Certificates then outstanding may, on behalf of all
such Certificateholders, waive any default by the Servicer in the performance of
its obligations under the related Pooling and Servicing Agreement, except a
Servicer Default in making any required deposits to or payments from the
Certificate Distribution Account or the related Trust Accounts in accordance
with such Pooling and Servicing Agreement. No such waiver will impair such
Noteholders' or Certificateholders' rights with respect to subsequent defaults.
AMENDMENT
Unless otherwise provided in the related Prospectus Supplement, each of the
Transfer and Servicing Agreements may be amended by the parties thereto, without
the consent of the related Noteholders or Certificateholders, for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of such Transfer and Servicing Agreements or of modifying in any
manner the rights of such
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Noteholders or Certificateholders; provided that such action will not, in the
opinion of counsel satisfactory to the related Trustee or Indenture Trustee, as
applicable, materially and adversely affect the interest of any such Noteholder
or Certificateholder. Unless otherwise specified in the related Prospectus
Supplement, the Transfer and Servicing Agreements may also be amended by the
Seller, the Servicer, the related Trustee and any related Indenture Trustee with
the consent of the holders of Notes evidencing at least a majority in principal
amount of then outstanding Notes, if any, of the related series and the holders
of the Certificates of such series evidencing at least a majority of the
principal amount of such Certificates then outstanding, for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of such Transfer and Servicing Agreements or of modifying in any
manner the rights of such Noteholders or Certificateholders; provided, however,
that no such amendment may (i) increase or reduce in any manner the amount of,
or accelerate or delay the timing of, collections of payments on the related
Receivables or distributions that are required to be made for the benefit of
such Noteholders or Certificateholders or (ii) reduce the aforesaid percentage
of the Notes or Certificates of such series which 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.
INSOLVENCY EVENT
Subject to the following paragraph, with respect to a Trust that is not a
grantor trust, if an Insolvency Event occurs with respect to the Company of such
Trust, the related Receivables of such Trust will be liquidated and the Trust
will be terminated 90 days after the date of such Insolvency Event, unless,
before the end of such 90-day period, the related Trustee shall have received
written instructions from (i) holders of each class of the Certificates (other
than such Company) with respect to such Trust representing more than 50% of the
aggregate unpaid principal amount of each such class (not including the
principal amount of such Certificates held by such Company), (ii) holders of
each class of Notes, if any, with respect to such Trust representing more than
50% of the aggregate unpaid principal amount of each such class and (iii)
holders, if any, of certificates representing more than 50% of the aggregate
unpaid principal amount of certificates representing interests in, or
indebtedness secured by, final fixed value payments with respect to the Fixed
Value Receivables, if any, initially purchased by such Company and subsequently
added to such Trust (such certificates or indebtedness being referred to herein
as "Fixed Value Securities"), to the effect that each such party disapproves of
the liquidation of such Receivables and termination of such Trust. Promptly
after the occurrence of an Insolvency Event with respect to such Company, notice
thereof is required to be given to such Noteholders, Certificateholders and
holders of Fixed Value Securities; provided that any failure to give such
required notice will not prevent or delay termination of such Trust. Upon
termination of any Trust, the related Trustee shall, or shall direct the related
Indenture Trustee to, promptly sell the assets of such Trust (other than the
Trust Accounts and the Certificate Distribution Account) in a commercially
reasonable manner and on commercially reasonable terms. The proceeds from any
such sale, disposition or liquidation of the Receivables of such Trust will be
treated as collections on such Receivables and deposited in the related
Collection Account. With respect to any Trust, if the proceeds from the
liquidation of the related Receivables and any amounts on deposit in the Reserve
Account (if any), the Payahead Account (if any), the Note Distribution Account
(if any) and the Certificate Distribution Account are not sufficient to pay the
Notes, if any, and the Certificates of the related series in full, the amount of
principal returned to Noteholders and Certificateholders will be reduced and
some or all of such Noteholders and Certificateholders will incur a loss.
The provisions providing for the sale of the Receivables upon an Insolvency
Event will not be included in a Trust Agreement, or may be deleted at the
election of the Company, if the inclusion of such provisions is not necessary in
order to obtain (i) the opinion of Federal Tax Counsel to the effect that, for
federal income tax purposes, such Trust will not be characterized as an
association (or a publicly traded partnership) taxable as a corporation and (ii)
the opinion of Michigan Tax Counsel to the effect that the same characterization
would apply for Michigan income and single business tax purposes.
Each Trust Agreement will provide that the applicable Trustee does not have
the power to commence a voluntary proceeding in bankruptcy with respect to the
related Trust without the unanimous prior approval of all Certificateholders
(including the applicable Company) of such Trust and the delivery to such
Trustee by
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each such Certificateholder (including such Company) of a certificate certifying
that such Certificateholder reasonably believes that such Trust is insolvent.
PAYMENT OF NOTES
Upon the payment in full of all outstanding Notes of a given series and the
satisfaction and discharge of the related Indenture, the related Trustee will
succeed to all the rights of the Indenture Trustee, and the Certificateholders
of such series will succeed to all the rights of the Noteholders of such series,
under the related Sale and Servicing Agreement, except as otherwise provided
therein.
COMPANY LIABILITY
Under each Trust Agreement, the applicable Company with respect to the
related Trust will agree to be liable directly to an injured party for the
entire amount of any losses, claims, damages or liabilities (other than those
incurred by a Noteholder or a Certificateholder in the capacity of an investor
with respect to such Trust) arising out of or based on the arrangement created
by such Trust Agreement as though such arrangement created a partnership under
the Delaware Revised Uniform Limited Partnership Act in which such Company was a
general partner. The foregoing provision will not be included in a Trust
Agreement, or may be deleted at the election of the Company, if the inclusion of
such provision is not necessary in order to obtain (i) the opinion of Federal
Tax Counsel to the effect that, for federal income tax purposes, such Trust will
not be characterized as an association (or a publicly traded partnership)
taxable as a corporation and (ii) the opinion of Michigan Tax Counsel to the
effect that the same characterization could apply for Michigan income and single
business tax purposes.
TERMINATION
With respect to each Trust, the obligations of the Servicer, the Seller,
the related Trustee and the related Indenture Trustee, if any, pursuant to the
Transfer and Servicing Agreements will terminate upon the earlier of (i) the
maturity or other liquidation of the last related Receivable and the disposition
of any amounts received upon liquidation of any such remaining Receivables, (ii)
the payment to Noteholders, if any, and Certificateholders of the related series
of all amounts required to be paid to them pursuant to the Transfer and
Servicing Agreements and (iii) the occurrence of either event described below.
Unless otherwise provided in the related Prospectus Supplement, in order to
avoid excessive administrative expense, the Servicer will be permitted at its
option to purchase from each Trust, as of the end of any applicable Collection
Period, if the then outstanding Pool Balance with respect to the Receivables
held by such Trust is 10% or less of the Initial Pool Balance (as defined in the
related Prospectus Supplement, the "Initial Pool Balance"), all remaining
related Receivables at a price equal to the aggregate of the Purchase Amounts
thereof as of the end of such Collection Period.
If and to the extent provided in the related Prospectus Supplement with
respect to a Trust, the Applicable Trustee will, within ten days following a
Distribution Date or Payment Date as of which the Pool Balance is equal to or
less than the percentage of the Initial Pool Balance specified in the related
Prospectus Supplement, solicit bids for the purchase of the Receivables
remaining in such Trust, in the manner and subject to the terms and conditions
set forth in such Prospectus Supplement. If the Applicable Trustee receives
satisfactory bids as described in such Prospectus Supplement, then the
Receivables remaining in such Trust will be sold to the highest bidder.
As more fully described in the related Prospectus Supplement, any
outstanding Notes of the related series will be redeemed concurrently with
either of the events specified above, and the subsequent distribution to the
related Certificateholders of all amounts required to be distributed to them
pursuant to the applicable Trust Agreement or Pooling and Servicing Agreement
will effect early retirement of the Certificates of such series.
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ADMINISTRATION AGREEMENT
CFC, in its capacity as administrator (the "Administrator"), will enter
into an agreement (as amended and supplemented from time to time, an
"Administration Agreement") with each Trust that issues Notes and the related
Indenture Trustee pursuant to which the Administrator will agree, to the extent
provided in such Administration Agreement, to provide the notices and to perform
other administrative obligations required by the related Indenture. Unless
otherwise specified in the related Prospectus Supplement with respect to any
such Trust, as compensation for the performance of the Administrator's
obligations under the applicable Administration Agreement and as reimbursement
for its expenses related thereto, the Administrator will be entitled to a
monthly administration fee in an amount equal to $200 per month, or such other
amount as may be set forth in the related Prospectus Supplement (the
"Administration Fee"), which fee will be paid by the Servicer.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
SECURITY INTEREST IN VEHICLES
In states in which retail installment sale contracts such as the
Receivables evidence the credit sale of automobiles and light duty trucks by
dealers to obligors, the contracts also constitute personal property security
agreements and include grants of security interests in the vehicles under the
applicable UCC. Perfection of security interests in the automobiles and light
duty trucks financed by the Seller is generally governed by the motor vehicle
registration laws of the state in which the vehicle is located. In all states in
which the Receivables have been originated, a security interest in automobiles
and light duty trucks is perfected by obtaining the certificate of title to the
Financed Vehicle or notation of the secured party's lien on the vehicles'
certificate of title (in addition, in Louisiana, a copy of the installment sale
contract must be filed with the appropriate governmental recording office).
All contracts originated or acquired by the Seller name the Seller or CCC
as obligee or assignee and as the secured party. The Seller also takes all
actions necessary under the laws of the state in which the financed vehicle is
located to perfect the Seller's or CCC's security interest in the financed
vehicle, including, where applicable, having a notation of its lien or CCC's
lien, as applicable, recorded on such vehicle's certificate of title. Because
the Seller continues to service the contracts, the obligors on the contracts
will not be notified of the sale to the Trust, and no action will be taken to
record the transfer of the security interest from CCC to the Seller or from the
Seller to the Trust by amendment of the certificates of title for the Financed
Vehicles or otherwise.
The Seller will assign its interests in the Financed Vehicles securing the
related Receivables to each Trust pursuant to the related Sale and Servicing
Agreement or Pooling and Servicing Agreement (as applicable). However, because
of the administrative burden and expense, neither the Seller nor the related
Trustee will amend any certificate of title to identify the Trust as the new
secured party on the certificate of title relating to a Financed Vehicle. Also,
the Seller will continue to hold any certificates of title relating to the
vehicles in its possession as custodian for the Trust pursuant to the related
Sale and Servicing Agreement or Pooling and Servicing Agreement. See
"Description of the Transfer and Servicing Agreements -- Sale and Assignment of
Receivables".
In most states, an assignment such as that under each Sale and Servicing
Agreement or Pooling and Servicing Agreement is an effective conveyance of a
security interest without amendment of any lien noted on a vehicle's certificate
of title, and the assignee succeeds thereby to the assignor's rights as secured
party. However, by not identifying a Trust as the secured party on the
certificate of title, the security interest of such Trust in the vehicle could
be defeated through fraud or negligence. In such states, in the absence of fraud
or forgery by the vehicle owner or the Seller or administrative error by state
or local agencies, the notation of the Seller's lien or CCC's lien on the
certificates of title will be sufficient to protect a Trust against the rights
of subsequent purchasers of a Financed Vehicle or subsequent lenders who take a
security interest in a Financed Vehicle. If there are any Financed Vehicles as
to which the Seller failed to obtain or assign to the Trust a perfected security
interest, the security interest of the Trust would be subordinate to, among
others, the
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interests of subsequent purchasers of the Financed Vehicles and holders of
perfected security interests therein. Such a failure, however, would constitute
a breach of the warranties of the Seller under the related Sale and Servicing
Agreement or Pooling and Servicing Agreement and would create an obligation of
the Seller to repurchase the related Receivable unless the breach were cured.
See "Description of the Transfer and Servicing Agreements -- Sale and Assignment
of Receivables" and "Special Considerations -- Certain Legal Aspects -- Security
Interests in Financed Vehicles".
Under the laws of most states, the perfected security interest in a vehicle
would continue for four months after the vehicle is moved to a state other than
the state in which it is initially registered and thereafter until the owner
thereof re-registers the vehicle in the new state. A majority of states
generally require surrender of a certificate of title to re-register a vehicle.
Accordingly, a secured party must surrender possession if it holds the
certificate of title to the vehicle or, in the case of a vehicle 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 vehicle in the state of relocation. In states that do not require a
certificate of title for registration of a motor vehicle, re-registration could
defeat perfection. In the ordinary course of servicing motor vehicle
receivables, the Servicer takes steps to effect re-perfection upon receipt of
notice of re-registration or information from the obligor as to relocation.
Similarly, when an obligor sells a vehicle, the Servicer must surrender
possession of the certificate of title or will receive notice as a result of its
lien noted thereon and accordingly will have an opportunity to require
satisfaction of the related Receivable before release of the lien. Under each
Sale and Servicing Agreement and Pooling and Servicing Agreement, the Servicer
is obligated to take appropriate steps, at the Servicer's expense, to maintain
perfection of security interests in the Financed Vehicles and is obligated to
purchase the related Receivable if it fails to do so.
Under the laws of most states, liens for repairs performed on a motor
vehicle and liens for unpaid taxes take priority over even a perfected security
interest in a financed vehicle. The Code also grants priority to certain federal
tax liens over the lien of a secured party. The laws of certain states and
federal law permit the confiscation of vehicles by governmental authorities
under certain circumstances if used in unlawful activities, which may result in
the loss of a secured party's perfected security interest in the confiscated
vehicle. Under each Sale and Servicing Agreement and Pooling and Servicing
Agreement, the Seller will represent to the related Trust that, as of the date
the related Receivable is sold to such Trust, each security interest in a
Financed Vehicle is or will be prior to all other present liens (other than tax
liens and other liens that arise by operation of law) upon and security
interests in such Financed Vehicle. However, liens for repairs or taxes could
arise, or the confiscation of a Financed Vehicle could occur, at any time during
the term of a Receivable. No notice will be given to the Trustee, any Indenture
Trustee, any Noteholders or the Certificateholders in respect of a given Trust
if such a lien arises or confiscation occurs.
REPOSSESSION
In the event of default by vehicle purchasers, the holder of the motor
vehicle retail installment sale contract has all the remedies of a secured party
under the UCC, except where specifically limited by other state laws. Among the
UCC remedies, the secured party has the right to perform self-help repossession
unless such act would constitute a breach of the peace. Self-help is the method
employed by the Servicer in most cases and is accomplished simply by retaking
possession of the financed vehicle. In the event of default by the obligor, some
jurisdictions require that the obligor be notified of the default and be given a
time period within which he may cure the default prior to repossession.
Generally, the right of reinstatement may be exercised on a limited number of
occasions in any one-year period. In cases where the obligor objects or raises a
defense to repossession, or if otherwise required by applicable state law, a
court order must be obtained from the appropriate state court, and the vehicle
must then be repossessed in accordance with that order.
NOTICE OF SALE; REDEMPTION RIGHTS
The UCC and other state laws require the secured party to provide the
obligor with reasonable notice of the date, time and place of any public sale
and/or the date after which any private sale of the collateral may be
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held. The obligor has the right to redeem the collateral prior to actual sale by
paying the secured party the unpaid principal balance of the obligation plus
reasonable expenses for repossessing, holding and preparing the collateral for
disposition and arranging for its sale, plus, in some jurisdictions, reasonable
attorneys' fees, or, in some states, by payment of delinquent installments or
the unpaid balance.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of the vehicles generally will be applied first to
the expenses of resale and repossession and then to the satisfaction of the
indebtedness. While some states impose prohibitions or limitations on deficiency
judgments if the net proceeds from resale do not cover the full amount of the
indebtedness, a deficiency judgment can be sought in those states that do not
prohibit or limit such judgments. However, the deficiency judgment would be a
personal judgment against the obligor for the shortfall, and a defaulting
obligor can be expected to have very little capital or sources of income
available following repossession. Therefore, in many cases, it may not be useful
to seek a deficiency judgment or, if one is obtained, it may be settled at a
significant discount.
Occasionally, after resale of a vehicle and payment of all expenses and all
indebtedness, there is a surplus of funds. In that case, the UCC requires the
creditor to remit the surplus to any holder of a lien with respect to the
vehicle or if no such lienholder exists or there are remaining funds, the UCC
requires the creditor to remit the surplus to the former owner of the vehicle.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon lenders and servicers involved in consumer
finance. These laws include the Truth-in-Lending Act, the Equal Credit
Opportunity Act, the Federal Trade Commission Act, the Fair Credit Billing Act,
the Fair Credit Reporting Act, the Fair Debt Collection Procedures Act, the
Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B and Z, the
Soldiers' and Sailors' Civil Relief Act of 1940, the Texas Consumer Credit Code,
state adoptions of the National Consumer Act and of the Uniform Consumer Credit
Code and state motor vehicle retail installment sales acts, retail installment
sales acts and other similar laws. Also, state laws impose finance charge
ceilings and other restrictions on consumer transactions and require contract
disclosures in addition to those required under federal law. These requirements
impose specific statutory liabilities upon creditors who fail to comply with
their provisions. In some cases, this liability could affect an assignee's
ability to enforce consumer finance contracts such as the Receivables.
The so-called "Holder-in-Due-Course" Rule of the Federal Trade Commission
(the "FTC Rule"), the provisions of which are generally duplicated by the
Uniform Consumer Credit Code, other statutes or the common law, has the effect
of subjecting a seller in a consumer credit transaction (and certain related
creditors and their assignees) to all claims and defenses which the obligor in
the transaction could assert against the seller of the goods. Liability under
the FTC Rule is limited to the amounts paid by the obligor under the contract
and the holder of the contract may also be unable to collect any balance
remaining due thereunder from the obligor.
Most of the Receivables will be subject to the requirements of the FTC
Rule. Accordingly, each Trust, as holder of the related Receivables, will be
subject to any claims or defenses that the purchaser of the applicable Financed
Vehicle may assert against the seller of the Financed Vehicle. Such claims are
limited to a maximum liability equal to the amounts paid by the Obligor on the
Receivable. If an Obligor were successful in asserting any such claim or
defense, such claim or defense would constitute a breach of the Seller's
warranties under the related Sale and Servicing Agreement or Pooling and
Servicing Agreement and would create an obligation of the Seller to repurchase
the Receivable unless the breach is cured. See "Description of the Transfer and
Servicing Agreements -- Sale and Assignment of Receivables".
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.
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In several cases, consumers have asserted that the self-help remedies of
secured parties under the UCC and related laws violate the due process
protections provided under the 14th Amendment to the Constitution of the United
States. Courts have generally upheld the notice provisions of the UCC and
related laws as reasonable or have found that the repossession and resale by the
creditor do not involve sufficient state action to afford constitutional
protection to borrowers.
Under each Sale and Servicing Agreement and Pooling and Servicing
Agreement, the Seller will warrant to the related Trust that each Receivable
complies with all requirements of law in all material respects. Accordingly, if
an Obligor has a claim against such Trust for violation of any law and such
claim materially and adversely affects such Trust's interest in a Receivable,
such violation would constitute a breach of the warranties of the Seller under
such Sale and Servicing Agreement or Pooling and Servicing Agreement and would
create an obligation of the Seller to repurchase the Receivable unless the
breach is cured. See "Description of the Transfer and Servicing
Agreements -- Sale and Assignment of Receivables".
OTHER LIMITATIONS
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 13 proceeding under the federal bankruptcy law, a court may prevent a
creditor from repossessing a vehicle, and, as part of the rehabilitation plan,
reduce the amount of the secured indebtedness to the market value of the vehicle
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.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of certain federal income tax
consequences of the purchase, ownership and disposition of the Notes and the
Certificates. The summary does not purport to deal with federal income tax
consequences applicable to all categories of holders, some of which may be
subject to special rules. For example, it does not discuss the tax treatment of
Noteholders or Certificateholders that are insurance companies, regulated
investment companies or dealers in securities. Moreover, there are no cases or
Internal Revenue Service ("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. Prospective investors are urged to consult their own
tax advisors in determining the federal, state, local, foreign and any other tax
consequences to them of the purchase, ownership and disposition of the Notes and
the Certificates.
The following summary is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the Treasury regulations
promulgated thereunder and judicial or ruling authority, all of which are
subject to change, which change may be retroactive. Each Trust will be provided
with an opinion of special Federal tax counsel to each Trust specified in the
related Prospectus Supplement ("Federal Tax Counsel"), regarding certain federal
income tax matters discussed below. An opinion of Federal Tax Counsel, however,
is not binding on the IRS or the courts. No ruling on any of the issues
discussed below will be sought from the IRS. For purposes of the following
summary, references to the Trust, the Notes, the Certificates and related terms,
parties and documents shall be deemed to refer, unless otherwise specified
herein, to each Trust and the Notes, Certificates and related terms, parties and
documents applicable to such Trust.
The federal income tax consequences to Certificateholders will vary
depending on whether (i) an election is made to treat the Trust as a partnership
under the Code, (ii) all the certificates are retained by the Seller or an
affiliate thereof, or (iii) whether the Trust will be treated as a grantor
trust. The Prospectus Supplement for each series of Certificates will specify
whether a partnership election will be made or the Trust will be treated as a
grantor trust.
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TRUSTS FOR WHICH A PARTNERSHIP ELECTION IS MADE
TAX CHARACTERIZATION OF THE TRUST AS A PARTNERSHIP
Federal Tax Counsel will deliver its opinion that a Trust for which a
partnership election is made will not be an association (or publicly traded
partnership) taxable as a corporation for federal income tax purposes. This
opinion will be based on the assumption that the terms of the Trust Agreement
and related documents will be complied with, and on counsel's conclusions that
the nature of the income of the Trust will exempt it from the rule that certain
publicly traded partnerships are taxable as corporations.
TAX CONSEQUENCES TO HOLDERS OF THE NOTES
Treatment of the Notes as Indebtedness. The Seller will agree, and the
Noteholders will agree by their purchase of Notes, to treat the Notes as debt
for federal income tax purposes. Federal Tax Counsel will, except as otherwise
provided in the related Prospectus Supplement, advise the Trust that the Notes
will be classified as debt for federal income tax purposes. The discussion below
assumes this characterization of the Notes is correct.
OID, Indexed Securities, etc. The discussion below assumes that all
payments on the Notes are denominated in U.S. dollars, and that the Notes are
not Indexed Securities or Strip Notes. Moreover, the discussion assumes that the
interest formula for the Notes meets the requirements for "qualified stated
interest" under Treasury regulations (the "OID regulations") relating to
original issue discount ("OID"), and that any OID on the Notes (i.e., any excess
of the principal amount of the Notes over their issue price) does not exceed a
de minimis amount (i.e., 1/4% of their principal amount multiplied by the
number of full years included in their term), all within the meaning of the OID
regulations. If these conditions are not satisfied with respect to any given
series of Notes, additional tax considerations with respect to such Notes will
be disclosed in the applicable Prospectus Supplement.
Interest Income on the Notes. Based on the above assumptions, except as
discussed in the following paragraph, the Notes will not be considered issued
with OID. The stated interest thereon will be taxable to a Noteholder as
ordinary interest income when received or accrued in accordance with such
Noteholder's method of tax accounting. Under the OID regulations, a holder of a
Note issued with a de minimis amount of OID must include such OID in income, on
a pro rata basis, as principal payments are made on the Note. It is believed
that any prepayment premium paid as a result of a mandatory redemption will be
taxable as contingent interest when it becomes fixed and unconditionally
payable. A purchaser who buys a Note for more or less than its principal amount
will generally be subject, respectively, to the premium amortization or market
discount rules of the Code.
A holder of a Note that has a fixed maturity date of not more than one year
from the issue date of such Note (a "Short-Term Note") may be subject to special
rules. An accrual basis holder of a Short-Term Note (and certain cash method
holders, including regulated investment companies, as set forth in Section 1281
of the Code) generally would be required to report interest income as interest
accrues on a straight-line basis over the term of each interest period. Other
cash basis holders of a Short-Term Note would, in general, be required to report
interest income as interest is paid (or, if earlier, upon the taxable
disposition of the Short-Term Note). However, a cash basis holder of a
Short-Term Note reporting interest income as it is paid may be required to defer
a portion of any interest expense otherwise deductible on indebtedness incurred
to purchase or carry the Short-Term Note until the taxable disposition of the
Short-Term Note. A cash basis taxpayer may elect under Section 1281 of the Code
to accrue interest income on all nongovernment debt obligations with a term of
one year or less, in which case the taxpayer would include interest on the
Short-Term Note in income as it accrues, but would not be subject to the
interest expense deferral rule referred to in the preceding sentence. Certain
special rules apply if a Short-Term Note is purchased for more or less than its
principal amount.
Sale or Other Disposition. If a Noteholder sells a Note, the holder will
recognize gain or loss in an amount equal to the difference between the amount
realized on the sale and the holder's adjusted tax basis in the Note. The
adjusted tax basis of a Note to a particular Noteholder will equal the holder's
cost for the Note,
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increased by any market discount, acquisition discount, OID and gain previously
included by such Noteholder in income with respect to the Note and decreased by
the amount of bond premium (if any) previously amortized and by the amount of
principal payments previously received by such Noteholder with respect to such
Note. Any such gain or loss will be capital gain or loss if the Note was held as
a capital asset, except for gain representing accrued interest and accrued
market discount not previously included in income. Capital losses generally may
be used only to offset capital gains.
Foreign Holders. Interest payments made (or accrued) to a Noteholder who
is a nonresident alien, foreign corporation or other non-United States person (a
"foreign person") generally will be considered "portfolio interest", and
generally will not be subject to United States federal income tax and
withholding tax, if the interest is not effectively connected with the conduct
of a trade or business within the United States by the foreign person and the
foreign person (i) is not actually or constructively a "10 percent shareholder"
of the Trust or the Seller (including a holder of 10% of the outstanding
Certificates) or a "controlled foreign corporation" with respect to which the
Trust or the Seller is a "related person" within the meaning of the Code and
(ii) provides the Owner Trustee or other person who is otherwise required to
withhold U.S. tax with respect to the Notes with an appropriate statement (on
Form W-8 or a similar form), signed under penalties of perjury, certifying that
the beneficial owner of the Note is a foreign person and providing the foreign
person's name and address. If a Note is held through a securities clearing
organization or certain other financial institutions, the organization or
institution may provide the relevant signed statement to the withholding agent;
in that case, however, the signed statement must be accompanied by a Form W-8 or
substitute form provided by the foreign person that owns the Note. If such
interest is not portfolio interest, then it will be subject to United States
federal income at graduated rates (if received by a non-U.S. person with
effectively connected income) and withholding tax at a rate of 30 percent,
unless reduced or eliminated pursuant to an applicable tax treaty.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a Note by a foreign person will be exempt from United
States federal income and withholding tax, provided that (i) such gain is not
effectively connected with the conduct of a trade or business in the United
States by the foreign person and (ii) in the case of an individual foreign
person, the foreign person is not present in the United States for 183 days or
more in the taxable year.
Backup Withholding. Each holder of a Note (other than an exempt holder
such as a corporation, tax-exempt organization, qualified pension and
profit-sharing trust, individual retirement account or nonresident alien who
provides certification as to status as a nonresident) will be required to
provide, under penalties of perjury, a certificate containing the holder's name,
address, correct federal taxpayer identification number and a statement that the
holder is not subject to backup withholding. Should a nonexempt Noteholder fail
to provide the required certification, the Trust will be required to withhold 31
percent of the amount otherwise payable to the holder, and remit the withheld
amount to the IRS as a credit against the holder's federal income tax liability.
Possible Alternative Treatments of the Notes. If, contrary to the opinion
of Federal Tax Counsel, the IRS successfully asserted that one or more of the
Notes did not represent debt for federal income tax purposes, the Notes might be
treated as equity interests in the Trust. If so treated, the Trust might be
taxable as a corporation with the adverse consequences described above (and the
taxable corporation would not be able to reduce its taxable income by deductions
for interest expense on Notes recharacterized as equity). Alternatively, and
most likely in the view of Federal Tax Counsel, the Trust would be treated as a
publicly traded partnership that would not be taxable as a corporation because
it would meet certain qualifying income tests. Nonetheless, treatment of the
Notes as equity interests in such a partnership could have adverse tax
consequences to certain holders. For example, income to certain tax-exempt
entities (including pension funds) would be "unrelated business taxable income",
income to foreign holders generally would be subject to U.S. tax and U.S. tax
return filing and withholding requirements, and individual holders might be
subject to certain limitations on their ability to deduct their share of Trust
expenses.
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TAX CONSEQUENCES TO HOLDERS OF THE CERTIFICATES
Treatment of the Trust as a Partnership. The Seller and the Servicer will
agree, and the Certificateholders will agree by their purchase of Certificates,
to treat the Trust as a partnership for purposes of federal and state income
tax, franchise tax and any other tax measured in whole or in part by income,
with the assets of the partnership being the assets held by the Trust, the
partners of the partnership being the Certificateholders (including the Company
in its capacity as recipient of distributions from the Reserve Account), and the
Notes being debt of the partnership. However, the proper characterization of the
arrangement involving the Trust, the Certificates, the Notes, the Seller, the
Company and the Servicer is not clear because there is no authority on
transactions closely comparable to that contemplated herein.
A variety of alternative characterizations are possible. For example,
because the Certificates have certain features characteristic of debt, the
Certificates might be considered debt of the Company or the Trust. Any such
characterization would not result in materially adverse tax consequences to
Certificateholders as compared to the consequences from treatment of the
Certificates as equity in a partnership, described below. The following
discussion assumes that the Certificates represent equity interests in a
partnership.
Indexed Securities, etc. The following discussion assumes that all
payments on the Certificates are denominated in U.S. dollars, none of the
Certificates are Indexed Securities or Strip Certificates, and that a series of
Securities includes a single class of Certificates. If these conditions are not
satisfied with respect to any given series of Certificates, additional tax
considerations with respect to such Certificates will be disclosed in the
applicable Prospectus Supplement.
Partnership Taxation. As a partnership, the Trust will not be subject to
federal income tax. Rather, each Certificateholder will be required to
separately take into account such holder's allocated share of 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 bond premium) and any gain
upon collection or disposition of Receivables. The Trust's deductions will
consist primarily of interest accruing with respect to the Notes, servicing and
other fees, and losses or deductions upon collection or disposition of
Receivables.
The tax items of a partnership are allocable to the partners in accordance
with the Code, Treasury regulations and the partnership agreement (here, the
Trust Agreement and related documents). The Trust Agreement will provide, in
general, that the Certificateholders will be allocated taxable income of the
Trust for each month equal to the sum of (i) the interest that accrues on the
Certificates in accordance with their terms for such month, including interest
accruing at the Pass Through Rate for such month and interest on amounts
previously due on the Certificates but not yet distributed; (ii) 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; (iii) prepayment premium payable to the Certificateholders for such
month; and (iv) any other amounts of income payable to the Certificateholders
for such month. Such allocation will be reduced by any amortization by the Trust
of premium on Receivables that corresponds to any excess of the issue price of
Certificates over their principal amount. All remaining taxable income of the
Trust will be allocated to the Company. Based on the economic arrangement of the
parties, this approach for allocating Trust income should be permissible under
applicable Treasury regulations, although no assurance can be given that the IRS
would not require a greater amount of income to be allocated to
Certificateholders. Moreover, even under the foregoing method of allocation,
Certificateholders may be allocated income equal to the entire Pass Through Rate
plus the other items described above even though the Trust might not have
sufficient cash to make current cash distributions of such amount. Thus, cash
basis holders will in effect be required to report income from the Certificates
on the accrual basis and Certificateholders may become liable for taxes on Trust
income even if they have not received cash from the Trust to pay such taxes. In
addition, because tax allocations and tax reporting will be done on a uniform
basis for all Certificateholders but Certificateholders may be purchasing
Certificates at different times and at different prices, Certificateholders may
be required to report on their tax returns taxable income that is greater or
less than the amount reported to them by the Trust.
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All of the taxable income allocated to a Certificateholder that is a
pension, profit sharing or employee benefit plan or other tax-exempt entity
(including an individual retirement account) will constitute "unrelated business
taxable income" generally taxable to such a holder under the Code.
An individual taxpayer's share of expenses of the Trust (including fees to
the Servicer but not interest expense) would be miscellaneous itemized
deductions. Such deductions might be disallowed to the individual in whole or in
part and might result in such holder being taxed on an amount of income that
exceeds the amount of cash actually distributed to such holder over the life of
the Trust.
The Trust intends to make all tax calculations relating to income and
allocations to Certificateholders on an aggregate basis. If the IRS were to
require that such calculations be made separately for each Receivable, the Trust
might be required to incur additional expense but it is believed that there
would not be a material adverse effect on Certificateholders.
Discount and Premium. It is believed that the Receivables were not issued
with OID, and, therefore, the Trust should not have OID income. However, the
purchase price paid by the Trust for the Receivables may be greater or less than
the remaining principal balance of the Receivables at the time of purchase. If
so, the Receivables will have been acquired at a premium or discount, as the
case may be. (As indicated above, the Trust will make this calculation on an
aggregate basis, but might be required to recompute it on a
Receivable-by-Receivable basis.)
If the Trust acquires the Receivables at a market discount or premium, the
Trust will elect to include any such discount in income currently as it accrues
over the life of the Receivables or to offset any such premium against interest
income on the Receivables. As indicated above, a portion of such market discount
income or premium deduction may be allocated to Certificateholders.
Section 708 Termination. Under Section 708 of the Code, the Trust will be
deemed to terminate for federal income tax purposes if 50% or more of the
capital and profits interests in the Trust are sold or exchanged within a
12-month period. If such a termination occurs, the Trust will be considered to
distribute its assets to the partners, who would then be treated as
recontributing those assets to the Trust, as a new partnership. The Trust will
not comply with certain technical requirements that might apply when such a
constructive termination occurs. As a result, the Trust may be subject to
certain tax penalties and may incur additional expenses if it is required to
comply with those requirements. Furthermore, the Trust might not be able to
comply due to lack of data.
Disposition of Certificates. Generally, capital gain or loss will be
recognized on a sale of Certificates in an amount equal to the difference
between the amount realized and the seller's tax basis in the Certificates sold.
A Certificateholder's tax basis in a Certificate will generally equal the
holder's cost increased by the holder's share of Trust income (includible in
income) and decreased by any distributions received with respect to such
Certificate. In addition, both the tax basis in the Certificates and the amount
realized on a sale of a Certificate would include the holder's share of the
Notes and other liabilities of the Trust. A holder acquiring Certificates at
different prices may be required to maintain a single aggregate adjusted tax
basis in such Certificates, and, upon sale or other disposition of some of the
Certificates, allocate a portion of such aggregate tax basis to the Certificates
sold (rather than maintaining a separate tax basis in each Certificate for
purposes of computing gain or loss on a sale of that Certificate).
Any gain on the sale of a Certificate attributable to the holder's share of
unrecognized accrued market discount on the Receivables would generally be
treated as ordinary income to the holder and would give rise to special tax
reporting requirements. The Trust does not expect to have any other assets that
would give rise to such special reporting requirements. Thus, to avoid those
special reporting requirements, the Trust will elect to include market discount
in income as it accrues.
If a Certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the Certificates that exceeds the aggregate
cash distributions with respect thereto, such excess will generally give rise to
a capital loss upon the retirement of the Certificates.
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Allocations Between Transferors and Transferees. In general, the Trust's
taxable income and losses will be determined monthly and the tax items for a
particular calendar month will be apportioned among the Certificateholders in
proportion to the principal amount of Certificates owned by them as of the close
of the last day of such month. As a result, a holder purchasing Certificates may
be allocated tax items (which will affect its tax liability and tax basis)
attributable to periods before the actual transaction.
The use of such a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of the partner's interest), taxable income or losses
of the Trust might be reallocated among the Certificateholders. The Company is
authorized to revise the Trust's method of allocation between transferors and
transferees to conform to a method permitted by future regulations.
Section 754 Election. In the event that a Certificateholder sells its
Certificates at a profit (loss), the purchasing Certificateholder will have a
higher (lower) basis in the Certificates than the selling Certificateholder had.
The tax basis of the Trust's assets will not be adjusted to reflect that higher
(or lower) basis unless the Trust were to file an election under Section 754 of
the Code. In order to avoid the administrative complexities that would be
involved in keeping accurate accounting records, as well as potentially onerous
information reporting requirements, the Trust will not make such election. As a
result, Certificateholders might be allocated a greater or lesser amount of
Trust income than would be appropriate based on their own purchase price for
Certificates.
Administrative Matters. The Owner Trustee is required to keep or have kept
complete and accurate books of the Trust. Such books will be maintained for
financial reporting and tax purposes on an accrual basis and the fiscal year of
the Trust will be the calendar year. The Trustee will file a partnership
information return (IRS Form 1065) with the IRS for each taxable year of the
Trust and will report each Certificateholder's allocable share of items of Trust
income and expense to holders and the IRS on Schedule K-1. The Trust will
provide the Schedule K-1 information to nominees that fail to provide the Trust
with the information statement described below and such nominees will be
required to forward such information to the beneficial owners of the
Certificates. Generally, holders must file tax returns that are consistent with
the information return filed by the Trust or be subject to penalties unless the
holder notifies the IRS of all such inconsistencies.
Under Section 6031 of the Code, any person that holds Certificates as a
nominee at any time during a calendar year is required to furnish the Trust with
a statement containing certain information on the nominee, the beneficial owners
and the Certificates so held. Such information includes (i) the name, address
and taxpayer identification number of the nominee and (ii) as to each beneficial
owner (x) the name, address and identification number of such person, (y)
whether such person is a United States person, a tax-exempt entity or a foreign
government, an international organization, or any wholly owned agency or
instrumentality of either of the foregoing, and (z) certain information on
Certificates that were held, bought or sold on behalf of such person throughout
the year. In addition, brokers and financial institutions that hold Certificates
through a nominee are required to furnish directly to the Trust information as
to themselves and their ownership of Certificates. A clearing agency registered
under Section 17A of the Exchange Act is not required to furnish any such
information statement to the Trust. The information referred to above for any
calendar year must be furnished to the Trust on or before the following January
31. Nominees, brokers and financial institutions that fail to provide the Trust
with the information described above may be subject to penalties.
The Company will be designated as the tax matters partner in the related
Trust Agreement and, as such, will be responsible for representing the
Certificateholders in any dispute with the IRS. The Code provides for
administrative examination of a partnership as if the partnership were a
separate and distinct taxpayer. Generally, the statute of limitations for
partnership items does not expire before three years after the date on which the
partnership information return is filed. Any adverse determination following an
audit of the return of the Trust by the appropriate taxing authorities could
result in an adjustment of the returns of the Certificateholders, and, under
certain circumstances, a Certificateholder may be precluded from separately
litigating a proposed adjustment to the items of the Trust. An adjustment could
also result in an audit of a Certificateholder's returns and adjustments of
items not related to the income and losses of the Trust.
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Tax Consequences to Foreign Certificateholders. It is not clear whether
the Trust would be considered to be engaged in a trade or business in the United
States for purposes of federal withholding taxes with respect to non-U.S.
persons because there is no clear authority dealing with that issue under facts
substantially similar to those described herein. Although it is not expected
that the Trust would be engaged in a trade or business in the United States for
such purposes, the Trust will withhold as if it were so engaged in order to
protect the Trust from possible adverse consequences of a failure to withhold.
The Trust expects to withhold on the portion of its taxable income that is
allocable to foreign Certificateholders pursuant to Section 1446 of the Code, as
if such income were effectively connected to a U.S. trade or business, at a rate
of 35% for foreign holders that are taxable as corporations and 39.6% for all
other foreign holders. Subsequent adoption of Treasury regulations or the
issuance of other administrative pronouncements may require the Trust to change
its withholding procedures. In determining a holder's withholding status, the
Trust may rely on IRS Form W-8, IRS Form W-9 or the holder's certification of
nonforeign status signed under penalties of perjury.
Each foreign holder might be required to file a U.S. individual or
corporate income tax return (including, in the case of a corporation, the branch
profits tax) on its share of the Trust's income. Each foreign holder must obtain
a taxpayer identification number from the IRS and submit that number to the
Trust on Form W-8 in order to assure appropriate crediting of the taxes
withheld. A foreign holder generally would be entitled to file with the IRS a
claim for refund with respect to taxes withheld by the Trust, taking the
position that no taxes were due because the Trust was not engaged in a U.S.
trade or business. However, interest payments made (or accrued) to a
Certificateholder who is a foreign person generally will be considered
guaranteed payments to the extent such payments are determined without regard to
the income of the Trust. If these interest payments are properly characterized
as guaranteed payments, then the interest will not be considered "portfolio
interest." As a result, Certificateholders will be subject to United States
federal income tax and withholding tax at a rate of 30 percent, unless reduced
or eliminated pursuant to an applicable treaty. In such case, a foreign holder
would only be entitled to claim a refund for that portion of the taxes in excess
of the taxes that should be withheld with respect to the guaranteed payments.
Backup Withholding. Distributions made on the Certificates and proceeds
from the sale of the Certificates will be subject to a "backup" withholding tax
of 31% if, in general, the Certificateholder fails to comply with certain
identification procedures, unless the holder is an exempt recipient under
applicable provisions of the Code.
TRUSTS IN WHICH ALL CERTIFICATES ARE RETAINED BY THE SELLER OR AN AFFILIATE OF
THE SELLER
TAX CHARACTERIZATION OF THE TRUST
Federal Tax Counsel will deliver its opinion that a Trust which issues one
or more classes of Notes to investors and all the Certificates of which are
retained by Seller or an affiliate thereof will not be an association (or
publicly traded partnership) taxable as a corporation for federal income tax
purposes. This opinion will be based on the assumption that the terms of the
Trust Agreement and related documents will be complied with, and on counsel's
conclusions that the Trust will constitute a mere security arrangement for the
issuance of debt by the single Certificateholder.
Treatment of the Notes as Indebtedness. The Seller will agree, and the
Noteholders will agree by their purchase of Notes, to treat the Notes as debt
for federal income tax purposes. Federal Tax Counsel will, except as otherwise
provided in the related Prospectus Supplement, advise the Trust that the Notes
will be classified as debt for federal income tax purposes. Assuming such
characterization of the Notes is correct, the federal income tax consequences to
Noteholders described above under the heading "TRUSTS FOR WHICH A PARTNERSHIP
ELECTION IS MADE--Tax Consequences to Holders of the Notes" would apply to the
Noteholders.
If, contrary to the opinion of Federal Tax Counsel, the IRS successfully
asserted that one or more classes of Notes did not represent debt for federal
income tax purposes, such class or classes of Notes might be treated as equity
interests in the Trust. If so treated, the Trust would most likely in the view
of Federal Tax
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Counsel, be treated as a publicly traded partnership that would not be taxable
as a corporation because it would meet certain qualifying income tests.
Nonetheless, treatment of Notes as equity interests in such a partnership
could have adverse tax consequences to certain holders of such Notes. For
example, income to certain tax-exempt entities (including pension funds) would
be "unrelated business taxable income", income to foreign holders may be subject
to U.S. withholding tax and U.S. tax return filing requirements, and individual
holders might be subject to certain limitations on their ability to deduct their
share of Trust expenses. In the event one or more classes of Notes were treated
as interests in a partnership, the consequences governing the Certificates as
equity interests in a partnership described above under "TRUSTS FOR WHICH A
PARTNERSHIP ELECTION IS MADE--Tax Consequences to Holders of the Certificates"
would apply to the holders of such Notes.
TRUSTS TREATED AS GRANTOR TRUSTS
TAX CHARACTERIZATION OF THE TRUST AS A GRANTOR TRUST
If a partnership election is not made, Federal Tax Counsel will deliver its
opinion that the Trust will not be classified as an association taxable as a
corporation and that such Trust will be classified as a grantor trust under
subpart E, Part I of subchapter J of the Code. In this case, owners of
Certificates (referred to herein as "Grantor Trust Certificateholders") will be
treated for federal income tax purposes as owners of a portion of the Trust's
assets as described below. The Certificates issued by a Trust that is treated as
a grantor trust are referred to herein as "Grantor Trust Certificates".
Characterization. Each Grantor Trust Certificateholder will be treated as
the owner of a pro rata undivided interest in the interest and principal
portions of the Trust represented by the Grantor Trust Certificates and will be
considered the equitable owner of a pro rata undivided interest in each of the
Receivables in the Trust. Any amounts received by a Grantor Trust
Certificateholder in lieu of amounts due with respect to any Receivable because
of a default or delinquency in payment will be treated for federal income tax
purposes as having the same character as the payments they replace.
Each Grantor Trust Certificateholder will be required to report on its
federal income tax return in accordance with such Grantor Trust
Certificateholder's method of accounting its pro rata share of the entire income
from the Receivables in the Trust represented by Grantor Trust Certificates,
including interest, OID, if any, prepayment fees, assumption fees, any gain
recognized upon an assumption and late payment charges received by the Servicer.
Under Sections 162 or 212 each Grantor Trust Certificateholder will be entitled
to deduct its pro rata share of servicing fees, prepayment fees, assumption
fees, any loss recognized upon an assumption and late payment charges retained
by the Servicer, provided that such amounts are reasonable compensation for
services rendered to the Trust. Grantor Trust Certificateholders that are
individuals, estates or trusts will be entitled to deduct their share of
expenses only to the extent such expenses plus all other Section 212 expenses
exceed two percent of its adjusted gross income. A Grantor Trust
Certificateholder using the cash method of accounting must take into account its
pro rata share of income and deductions as and when collected by or paid to the
Servicer. A Grantor Trust Certificateholder using an accrual method of
accounting must take into account its pro rata share of income and deductions as
they become due or are paid to the Servicer, whichever is earlier. If the
servicing fees paid to the Servicer are deemed to exceed reasonable servicing
compensation, the amount of such excess could be considered as an ownership
interest retained by the Servicer (or any person to whom the Servicer assigned
for value all or a portion of the servicing fees) in a portion of the interest
payments on the Receivables. The Receivables would then be subject to the
"coupon stripping" rules of the Code discussed below.
Premium. The price paid for a Grantor Trust Certificate by a holder will
be allocated to such holder's undivided interest in each Receivable based on
each Receivable's relative fair market value, so that such holder's undivided
interest in each Receivable will have its own tax basis. A Grantor Trust
Certificateholder that acquires an interest in Receivables at a premium may
elect to amortize such premium under a constant interest method. Amortizable
bond premium will be treated as an offset to interest income on such Grantor
Trust Certificate. The basis for such Grantor Trust Certificate will be reduced
to the extent that amortizable
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premium is applied to offset interest payments. It is not clear whether a
reasonable prepayment assumption should be used in computing amortization of
premium allowable under Section 171. A Grantor Trust Certificateholder that
makes this election for a Grantor Trust Certificate that is acquired at a
premium will be deemed to have made an election to amortize bond premium with
respect to all debt instruments having amortizable bond premium that such
Grantor Trust Certificateholder acquires during the year of the election or
thereafter.
If a premium is not subject to amortization using a reasonable prepayment
assumption, the holder of a Grantor Trust Certificate acquired at a premium
should recognize a loss if a Receivable prepays in full, equal to the difference
between the portion of the prepaid principal amount of such Receivable that is
allocable to the Grantor Trust Certificate and the portion of the adjusted basis
of the Grantor Trust Certificate that is allocable to such Receivable. If a
reasonable prepayment assumption is used to amortize such premium, it appears
that such a loss would be available, if at all, only if prepayments have
occurred at a rate faster than the reasonable assumed prepayment rate. It is not
clear whether any other adjustments would be required to reflect differences
between an assumed prepayment rate and the actual rate of prepayments.
STRIPPED BONDS AND STRIPPED COUPONS
Although the tax treatment of stripped bonds is not entirely clear, based
on recent guidance by the IRS, each purchaser of a Grantor Trust Certificate
will be treated as the purchaser of a stripped bond which generally should be
treated as a single debt instrument issued on the day it is purchased for
purposes of calculating any original issue discount. Generally, under recently
issued Treasury regulations (the "Section 1286 Treasury Regulations"), if the
discount on a stripped bond is larger than a de minimis amount (as calculated
for purposes of the OID rules of the Code) such stripped bond will be considered
to have been issued with OID. See "Original Issue Discount." Based on the
preamble to the Section 1286 Treasury Regulations, Federal Tax Counsel is of the
opinion that, although the matter is not entirely clear, the interest income on
the Certificates at the sum of the Pass Through Rate and the portion of the
Servicing Fee Rate that does not constitute excess servicing will be treated as
"qualified stated interest" within the meaning of the Section 1286 Treasury
Regulations and such income will be so treated in the Trustee's tax information
reporting.
Original Issue Discount. The IRS has stated in published rulings that, in
circumstances similar to those described herein, the special rules of the Code
relating to "original issue discount" (currently Sections 1271 through 1273 and
1275) will be applicable to a Grantor Trust Certificateholder's interest in
those Receivables meeting the conditions necessary for these sections to apply.
Generally, a Grantor Trust Certificateholder that acquires an undivided interest
in a Receivable issued or acquired with OID must include in gross income the sum
of the "daily portions," as defined below, of the OID on such Receivable for
each day on which it owns a Certificate, including the date of purchase but
excluding the date of disposition. In the case of an original Grantor Trust
Certificateholder, the daily portions of OID with respect to a Receivable
generally would be determined as follows. A calculation will be made of the
portion of OID that accrues on the Receivable during each successive monthly
accrual period (or shorter period in respect of the date of original issue or
the final Distribution Date). This will be done, in the case of each full
monthly accrual period, by adding (i) the present value of all remaining
payments to be received on the Receivable under the prepayment assumption used
in respect of the Receivables and (ii) any payments received during such accrual
period, and subtracting from that total the "adjusted issue price" of the
Receivable at the beginning of such accrual period. No representation is made
that the Receivables will prepay at any prepayment assumption. The "adjusted
issue price" of a Receivable at the beginning of the first accrual period is its
issue price (as determined for purposes of the OID rules of the Code) and the
"adjusted issue price" of a Receivable at the beginning of a subsequent accrual
period is the "adjusted issue price" at the beginning of the immediately
preceding accrual period plus the amount of OID allocable to that accrual period
and reduced by the amount of any payment (other than "qualified stated
interest") made at the end of or during that accrual period. The OID accruing
during such accrual period will then be divided by the number of days in the
period to determine the daily portion of OID for each day in the period. With
respect to an initial accrual period shorter than a full monthly accrual period,
the daily portions of OID must be determined according to an appropriate
allocation under either an exact or
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approximate method set forth in the OID Regulations, or some other reasonable
method, provided that such method is consistent with the method used to
determine the yield to maturity of the Receivables.
With respect to the Receivables, the method of calculating OID as described
above will cause the accrual of OID to either increase or decrease (but never
below zero) in any given accrual period to reflect the fact that prepayments are
occurring at a faster or slower rate than the prepayment assumption used in
respect of the Receivables. Subsequent purchasers that purchase Receivables at
more than a de minimis discount should consult their tax advisors with respect
to the proper method to accrue such OID.
Market Discount. A Grantor Trust Certificateholder that acquires an
undivided interest in Receivables may be subject to the market discount rules of
Sections 1276 through 1278 to the extent an undivided interest in a Receivable
is considered to have been purchased at a "market discount." Generally, the
amount of market discount is equal to the excess of the portion of the principal
amount of such Receivable allocable to such holder's undivided interest over
such holder's tax basis in such interest. Market discount with respect to a
Grantor Trust Certificate will be considered to be zero if the amount allocable
to the Grantor Trust Certificate is less than 0.25% of the Grantor Trust
Certificate's stated redemption price at maturity multiplied by the weighted
average maturity remaining after the date of purchase. Treasury regulations
implementing the market discount rules have not yet been issued; therefore,
investors should consult their own tax advisors regarding the application of
these rules and the advisability of making any of the elections allowed under
Code Sections 1276 through 1278.
The Code provides that any principal payment (whether a scheduled payment
or a prepayment) or any gain on disposition of a market discount bond shall be
treated as ordinary income to the extent that it does not exceed the accrued
market discount at the time of such payment. The amount of accrued market
discount for purposes of determining the tax treatment of subsequent principal
payments or dispositions of the market discount bond is to be reduced by the
amount so treated as ordinary income.
The Code also grants the Treasury Department authority to issue regulations
providing for the computation of accrued market discount on debt instruments,
the principal of which is payable in more than one installment. While the
Treasury Department has not yet issued regulations, rules described in the
relevant legislative history will apply. Under those rules, the holder of a
market discount bond may elect to accrue market discount either on the basis of
a constant interest rate or according to one of the following methods. If a
Grantor Trust Certificate is issued with OID, the amount of market discount that
accrues during any accrual period would be equal to the product of (i) the total
remaining market discount and (ii) a fraction, the numerator of which is the OID
accruing during the period and the denominator of which is the total remaining
OID at the beginning of the accrual period. For Grantor Trust Certificates
issued without OID, the amount of market discount that accrues during a period
is equal to the product of (i) the total remaining market discount and (ii) a
fraction, the numerator of which is the amount of stated interest paid during
the accrual period and the denominator of which is the total amount of stated
interest remaining to be paid at the beginning of the accrual period. For
purposes of calculating market discount under any of the above methods in the
case of instruments (such as the Grantor Trust Certificates) that provide for
payments that may be accelerated by reason of prepayments of other obligations
securing such instruments, the same prepayment assumption applicable to
calculating the accrual of OID will apply. Because the regulations described
above have not been issued, it is impossible to predict what effect those
regulations might have on the tax treatment of a Grantor Trust Certificate
purchased at a discount or premium in the secondary market.
A holder who acquired a Grantor Trust Certificate at a market discount also
may be required to defer a portion of its interest deductions for the taxable
year attributable to any indebtedness incurred or continued to purchase or carry
such Grantor Trust Certificate purchased with market discount. For these
purposes, the de minimis rule referred above applies. Any such deferred interest
expense would not exceed the market discount that accrues during such taxable
year and is, in general, allowed as a deduction not later than the year in which
such market discount is includible in income. If such holder elects to include
market discount in income currently as it accrues on all market discount
instruments acquired by such holder in that taxable year or thereafter, the
interest deferral rule described above will not apply.
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Premium. To the extent a Grantor Trust Certificateholder is considered to
have purchased an undivided interest in a Receivable for an amount that is
greater than its stated redemption price at maturity of such Receivable, such
Grantor Trust Certificateholder will be considered to have purchased the
Receivable with "amortizable bond premium" equal in amount to such excess. A
Grantor Trust Certificateholder (who does not hold the Certificate for sale to
customers or in inventory) may elect under Section 171 of the Code to amortize
such premium. Under the Code, premium is allocated among the interest payments
on the Receivables to which it relates and is considered as an offset against
(and thus a reduction of) such interest payments. With certain exceptions, such
an election would apply to all debt instruments held or subsequently acquired by
the electing holder. Absent such an election, the premium will be deductible as
an ordinary loss only upon disposition of the Certificate or pro rata as
principal is paid on the Receivables.
Election to Treat All Interest as OID. The OID regulations permit a
Grantor Trust Certificateholder to elect to accrue all interest, discount
(including de minimis market or original issue discount) and premium in income
as interest, based on a constant yield method. If such an election were to be
made with respect to a Grantor Trust Certificate with market discount, the
Certificateholder would be deemed to have made an election to include in income
currently market discount with respect to all other debt instruments having
market discount that such Grantor Trust Certificateholder acquires during the
year of the election or thereafter. Similarly, a Grantor Trust Certificateholder
that makes this election for a Grantor Trust Certificate that is acquired at a
premium will be deemed to have made an election to amortize bond premium with
respect to all debt instruments having amortizable bond premium that such
Grantor Trust Certificateholder owns or acquires. See "-- Premium" herein. The
election to accrue interest, discount and premium on a constant yield method
with respect to a Grantor Trust Certificate is irrevocable.
Sale or Exchange of a Grantor Trust Certificate. Sale or exchange of a
Grantor Trust Certificate prior to its maturity will result in gain or loss
equal to the difference, if any, between the amount received and the owner's
adjusted basis in the Grantor Trust Certificate. Such adjusted basis generally
will equal the seller's purchase price for the Grantor Trust Certificate,
increased by the OID included in the seller's gross income with respect to the
Grantor Trust Certificate, and reduced by principal payments on the Grantor
Trust Certificate previously received by the seller. Such gain or loss will be
capital gain or loss to an owner for which a Grantor Trust Certificate is a
"capital asset" within the meaning of Section 1221, and will be long-term or
short-term depending on whether the Grantor Trust Certificate has been owned for
the long-term capital gain holding period (currently more than one year).
Grantor Trust Certificates will be "evidences of indebtedness" within the
meaning of Section 582(c)(1), so that gain or loss recognized from the sale of a
Grantor Trust Certificate by a bank or a thrift institution to which such
section applies will be treated as ordinary income or loss.
Non-U.S. Persons. Generally, to the extent that a Grantor Trust
Certificate evidences ownership in underlying Receivables that were issued on or
before July 18, 1984, interest or OID paid by the person required to withhold
tax under Section 1441 or 1442 to (i) an owner that is not a U.S. Person (as
defined below) or (ii) a Grantor Trust Certificateholder holding on behalf of an
owner that is not a U.S. Person will be subject to federal income tax, collected
by withholding, at a rate of 30% or such lower rate as may be provided for
interest by an applicable tax treaty. Accrued OID recognized by the owner on the
sale or exchange of such a Grantor Trust Certificate also will be subject to
federal income tax at the same rate. Generally, such payments would not be
subject to withholding to the extent that a Grantor Trust Certificate evidences
ownership in Receivables issued after July 18, 1984, by natural persons if such
Grantor Trust Certificateholder complies with certain identification
requirements (including delivery of a statement, signed by the Grantor Trust
Certificateholder under penalties of perjury, certifying that such Grantor Trust
Certificateholder is not a U.S. Person and providing the name and address of
such Grantor Trust Certificateholder). Additional restrictions apply to
Receivables of where the obligor is not a natural person in order to qualify for
the exemption from withholding.
As used herein, a "U.S. Person" means a citizen or resident of the United
States, a corporation or a partnership organized in or under the laws of the
United States or any political subdivision thereof, an estate or trust, the
income of which from sources outside the United States is includible in gross
income for federal income tax purposes regardless of its connection with the
conduct of a trade or business within the United
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States, or a trust if a court within the United States is able to exercise
primary supervision of the administration of the trust and one or more United
States fiduciaries have the authority to control all substantial decisions of
the trust.
Information Reporting and Backup Withholding. The Servicer will furnish or
make available, within a reasonable time after the end of each calendar year, to
each person who was a Grantor Trust Certificateholder at any time during such
year, such information as may be deemed necessary or desirable to assist Grantor
Trust Certificateholders in preparing their federal income tax returns, or to
enable holders to make such information available to beneficial owners or
financial intermediaries that hold Grantor Trust Certificates as nominees on
behalf of beneficial owners. If a holder, beneficial owner, financial
intermediary or other recipient of a payment on behalf of a beneficial owner
fails to supply a certified taxpayer identification number or if the Secretary
of the Treasury determines that such person has not reported all interest and
dividend income required to be shown on its federal income tax return, 31%
backup withholding may be required with respect to any payments. Any amounts
deducted and withheld from a distribution to a recipient would be allowed as a
credit against such recipient's federal income tax liability.
CERTAIN STATE TAX CONSEQUENCES WITH RESPECT TO
TRUSTS WHICH ISSUE ONE OR MORE CLASSES OF NOTES
The activities of servicing and collecting the Receivables will be
undertaken by the Servicer which is a Michigan corporation. The State of
Michigan imposes a state individual income tax and a single business tax on
corporations, partnerships and other entities doing business in the State of
Michigan. This discussion relates only to Trusts for which a partnership
election is made, and is based upon present provisions of Michigan statutes and
the regulations promulgated thereunder, and applicable judicial or ruling
authority, all of which are subject to change, which change may be retroactive.
No ruling on any of the issues discussed below will be sought from the Michigan
Department of Treasury.
Because of the variation in each state's tax laws based in whole or in part
upon income, it is impossible to predict tax consequences to holders of Notes
and Certificates in all of the state taxing jurisdictions in which they are
already subject to tax. Noteholders and Certificateholders are urged to consult
their own tax advisors with respect to state tax consequences arising out of the
purchase, ownership and disposition of Notes and Certificates.
For purposes of the following summary, references to the Trust, the Notes,
the Certificates and related terms, parties and documents shall be deemed to
refer, unless otherwise specified herein, to each Trust for which a partnership
election is made and the Notes, Certificates and related terms, parties and
documents applicable to such Trust.
TAX TREATMENT OF THE TRUST
If the arrangement created by the Trust Agreement is treated as a
partnership (not taxable as a corporation) for federal income tax purposes,
General Counsel of the Seller ("Michigan Tax Counsel") will advise each such
Trust that the same treatment will also apply for Michigan tax purposes. In such
case, the resulting constructive partnership would not be treated as doing
business in Michigan but rather would be viewed as a passive holder of
investments and, as a result, would not be subject to the Michigan single
business tax (which, if applicable, could possibly result in reduced
distributions to Certificateholders).
If all the Certificates are retained by the Seller or one of its affiliates
and the arrangement created by the Trust Agreement is treated as a security
arrangement for federal income tax purposes, Michigan Tax Counsel will advise
each such Trust that the same treatment will also apply for Michigan tax
purposes. In such case, the Trust will not be treated as a separate entity but
as a security arrangement for the issuance of debt of the sole
Certificateholder, for Michigan tax purposes. As a result, the Trust will not be
subject to the Michigan single business tax (which, if applicable, could
possibly result in reduced distributions to Certificateholders).
TAX CONSEQUENCES WITH RESPECT TO THE NOTES
It is expected that Michigan Tax Counsel will advise each such Trust that
issues Notes that, assuming the Notes will be treated as debt for federal income
tax purposes, the Notes will be treated as debt for Michigan income and single
business tax purposes. Accordingly, Noteholders not otherwise subject to
taxation
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in Michigan should not become subject to taxation in Michigan solely because of
a holder's ownership of Notes. However, a Noteholder already subject to
Michigan's income tax or single business tax could be required to pay additional
Michigan tax as a result of the holder's ownership or disposition of Notes.
TAX CONSEQUENCES WITH RESPECT TO ANY OFFERED CERTIFICATES
Under current law, Certificateholders that are nonresidents of Michigan and
are not otherwise subject to Michigan income tax should not be subject to
Michigan income tax on the income from the constructive partnership. The
Certificateholders also should not be subject to the Michigan single business
tax on income received through the partnership. In any event, classification of
the arrangement as a "partnership" would not cause a Certificateholder not
otherwise subject to taxation in Michigan to pay Michigan tax on income beyond
that derived from the Certificates.
If the Certificates are instead treated as ownership interests in an
association taxable as a corporation or a "publicly traded partnership" taxable
as a corporation, then the hypothetical entity should not be subject to the
Michigan single business tax (which, if applicable, could result in reduced
distributions to Certificateholders). A Certificateholder not otherwise subject
to tax in Michigan would not become subject to Michigan tax as a result of its
mere ownership of such an interest.
* * *
THE FEDERAL AND STATE TAX DISCUSSIONS SET FORTH ABOVE ARE INCLUDED FOR
GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A NOTEHOLDER'S
OR CERTIFICATEHOLDER'S PARTICULAR TAX SITUATION. PROSPECTIVE PURCHASERS SHOULD
CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF NOTES AND CERTIFICATES, INCLUDING THE TAX
CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE
EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
Section 406 of ERISA and Section 4975 of the Code prohibit a pension,
profit-sharing or other employee benefit plan, as well as individual retirement
accounts and certain types of Keogh Plans (each a "Benefit Plan"), from engaging
in certain transactions with persons that are "parties in interest" under ERISA
or "disqualified persons" under the Code with respect to such Benefit Plan. A
violation of these "prohibited transaction" rules may result in an excise tax or
other penalties and liabilities under ERISA and the Code for such persons.
Certain transactions involving a Trust might be deemed to constitute
prohibited transactions under ERISA and the Code with respect to a Benefit Plan
that purchased Notes or Certificates if assets of the Trust were deemed to be
assets of the Benefit Plan. Under a regulation issued by the United States
Department of Labor (the "Plan Assets Regulation"), the assets of a 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.
56
<PAGE> 91
SENIOR CERTIFICATES ISSUED BY TRUSTS THAT DO NOT ISSUE NOTES
Unless otherwise specified in the related Prospectus Supplement, the
following discussion applies only to nonsubordinated Certificates (referred to
herein as "Senior Certificates") issued by a Trust that does not issue Notes.
The U.S. Department of Labor has granted to the lead Underwriter named in
the Prospectus Supplement an exemption (the "Exemption") from certain of the
prohibited transaction rules of ERISA with respect to the initial purchase, the
holding and the subsequent resale by Benefit Plans of certificates representing
interests in asset-backed pass-through trusts that consist of certain
receivables, loans and other obligations that meet the conditions and
requirements of the Exemption. The receivables covered by the Exemption include
motor vehicle installment sales contracts such as the Receivables. The Exemption
will apply to the acquisition, holding and resale of the Senior Certificates by
a Benefit Plan, provided that certain conditions (certain of which are described
below) are met.
Among the conditions which must be satisfied for the Exemption to apply to
the Senior Certificates are the following:
(1) The acquisition of the Senior Certificates by a Benefit Plan is on
terms (including the price for the Senior Certificates) that are at least
as favorable to the Benefit Plan as they would be in an arm's length
transaction with an unrelated party;
(2) The rights and interests evidenced by the Senior Certificates
acquired by the Benefit Plan are not subordinated to the rights and
interests evidenced by other certificates of the Trust;
(3) The Senior Certificates acquired by the Benefit Plan have received
a rating at the time of such acquisition that is in one of the three
highest generic rating categories from either Standard & Poor's
Corporation, Moody's Investors Service, Inc., Duff & Phelps Inc. or Fitch
Investors Service, Inc.;
(4) The Trustee is not an affiliate of any other member of the
Restricted Group (as defined below);
(5) The sum of all payments made to the Underwriters in connection
with the distribution of the Senior Certificates represents not more than
reasonable compensation for underwriting the Senior Certificates; the sum
of all payments made to and retained by the Seller pursuant to the sale of
the Contracts to the Trust represents not more than the fair market value
of such Contracts; and the sum of all payments made to and retained by the
Servicer represents not more than reasonable compensation for the
Servicer's services under the Agreement and reimbursement of the Servicer's
reasonable expenses in connection therewith; and
(6) The Benefit Plan investing in the Senior Certificates is an
"accredited investor" as defined in Rule 501 (a)(1) of Regulation D of the
Securities and Exchange Commission under the Securities Act of 1933.
Moreover, the Exemption would provide relief from certain
self-dealing/conflict of interest or prohibited transactions only if, among
other requirements, (i) in the case of the acquisition of Senior Certificates in
connection with the initial issuance, at least fifty (50) percent of the Senior
Certificates are acquired by persons independent of the Restricted Group (as
defined below), (ii) the Benefit Plan's investment in Senior Certificates does
not exceed twenty-five (25) percent of all of the Senior Certificates
outstanding at the time of the acquisition, and (iii) immediately after the
acquisition, no more than twenty-five (25) percent of the assets of the Benefit
Plan are invested in certificates representing an interest in one or more trusts
containing assets sold or serviced by the same entity. The Exemption does not
apply to Plans sponsored by the Seller, any Underwriter, the Trustee, the
Servicer, any obligor with respect to Contracts included in the Trust
constituting more than five percent of the aggregate unamortized principal
balance of the assets in the Trust, or any affiliate of such parties (the
"Restricted Group").
The Seller believes that the Exemption will apply to the acquisition and
holding by Benefit Plans of Senior Certificates sold by the Underwriter or
Underwriters named in the Prospectus Supplement and that all conditions of the
Exemption other than those within the control of the investors have been met. In
addition, as
57
<PAGE> 92
of the date hereof, no obligor with respect to Contracts included in the Trust
constitutes more than five percent of the aggregate unamortized principal
balance of the assets of the Trust.
PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement with
respect to the Notes, if any, of a given series and an underwriting agreement
with respect to the Certificates of such series (collectively, the "Underwriting
Agreements"), the Seller will agree to cause the related Trust to sell to the
underwriters named therein and in the related Prospectus Supplement, and each of
such underwriters will severally agree to purchase, the principal amount of each
class of Notes and Certificates, as the case may be, of the related series set
forth therein and in the related Prospectus Supplement.
In each of the Underwriting Agreements with respect to any given series of
Securities, the several underwriters will agree, subject to the terms and
conditions set forth therein, to purchase all the Notes and Certificates, as the
case may be, described therein 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 (i) set forth the price at which
each class of Notes and Certificates, as the case may be, being offered thereby
will be offered to the public and any concessions that may be offered to certain
dealers participating in the offering of such Notes and Certificates or (ii)
specify that the related Notes and Certificates, as the case may be, are to be
resold by the underwriters in negotiated transactions at varying prices to be
determined at the time of such sale. After the initial public offering of any
such Notes and Certificates, such public offering prices and such concessions
may be changed.
Each Underwriting Agreement will provide that the Seller will indemnify the
underwriters against certain civil liabilities, including liabilities under the
Securities Act, or contribute to payments the several underwriters may be
required to make in respect thereof.
Each Trust may, from time to time, invest the funds in its Trust Accounts
in Eligible Investments acquired from such underwriters or from the Seller.
Pursuant to each Underwriting Agreement with respect to a given series of
Securities, the closing of the sale of any class of Securities subject to such
Underwriting Agreement will be conditioned on the closing of the sale of all
other such classes of Securities of that series.
The place and time of delivery for the Securities 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 and the Seller by the General Counsel of the
Seller. Certain Michigan state tax and other matters will be passed upon for the
Trust by the General Counsel of the Seller.
58
<PAGE> 93
INDEX OF TERMS
<TABLE>
<S> <C>
Actuarial Receivables......................................................... 13
Administration Agreement...................................................... 41
Administration Fee............................................................ 41
Administrator................................................................. 41
Advance....................................................................... 6
Applicable Trustee............................................................ 27
APR........................................................................... 7
Base Rate..................................................................... 22
Benefit Plan.................................................................. 56
Calculation Agent............................................................. 23
Calculation Date.............................................................. 26
CCC........................................................................... 17
CD Rate....................................................................... 23
CD Rate Determination Date.................................................... 23
CD Rate Security.............................................................. 22
Cede.......................................................................... 11
Certificate Balance........................................................... 4
Certificate Distribution Account.............................................. 31
Certificate Pool Factor....................................................... 15
Certificateholders............................................................ 27
Certificateholders' Reconciliation Principal Adjustment Amount................ 29
Certificates.................................................................. 1
CFC........................................................................... 3
Chrysler...................................................................... 10
Closing Date.................................................................. 30
Code.......................................................................... 44
Collection Account............................................................ 31
Collection Period............................................................. 33
Commercial Paper Rate......................................................... 24
Commercial Paper Rate Determination Date...................................... 24
Commercial Paper Rate Security................................................ 22
Commission.................................................................... 2
Commodity Indexed Securities.................................................. 26
Company....................................................................... 1
Composite Quotations.......................................................... 23
Currency Indexed Securities................................................... 26
Cutoff Date................................................................... 12
Dealer Agreements............................................................. 12
Dealers....................................................................... 12
Definitive Certificates....................................................... 28
Definitive Notes.............................................................. 28
Definitive Securities......................................................... 28
Depository.................................................................... 17
Determination Date............................................................ 35
Distribution Date............................................................. 22
DTC's Nominee................................................................. 11
Eligible Deposit Account...................................................... 32
Eligible Institution.......................................................... 32
Eligible Investments.......................................................... 32
ERISA......................................................................... 8
Events of Default............................................................. 19
Exemption..................................................................... 57
Federal Funds Rate............................................................ 24
Federal Funds Rate Determination Date......................................... 24
</TABLE>
59
<PAGE> 94
<TABLE>
<S> <C>
Federal Funds Rate Security................................................... 22
Federal Tax Counsel........................................................... 44
Final Scheduled Maturity Date................................................. 7
Financed Vehicles............................................................. 5
Fixed Rate Securities......................................................... 22
Fixed Value Receivables....................................................... 14
Fixed Value Securities........................................................ 39
Floating Rate Securities...................................................... 22
FTC Rule...................................................................... 43
Funding Period................................................................ 4
Grantor Trust Certificateholders.............................................. 51
Grantor Trust Certificates.................................................... 51
H.15(519)..................................................................... 23
Indenture..................................................................... 3
Indenture Trustee............................................................. 1
Index......................................................................... 26
Index Maturity................................................................ 22
Indexed Commodity............................................................. 26
Indexed Currency.............................................................. 26
Indexed Principal Amount...................................................... 26
Indexed Securities............................................................ 26
Indirect Participants......................................................... 27
Initial Cutoff Date........................................................... 5
Initial Pool Balance.......................................................... 40
Initial Receivables........................................................... 5
Insolvency Event.............................................................. 38
Interest Rate................................................................. 3
Interest Reset Date........................................................... 23
Interest Reset Period......................................................... 22
Investment Earnings........................................................... 32
IRS........................................................................... 44
Issuer........................................................................ 3
LIBOR......................................................................... 25
LIBOR Determination Date...................................................... 25
LIBOR Security................................................................ 22
London Banking Day............................................................ 25
Michigan Tax Counsel.......................................................... 55
Money Market Yield............................................................ 24
Note Distribution Account..................................................... 31
Note Pool Factor.............................................................. 15
Noteholders................................................................... 27
Noteholders' Reconciliation Principal Adjustment Amount....................... 29
Notes......................................................................... 1
Obligors...................................................................... 12
OID........................................................................... 45
OID Regulations............................................................... 45
Participants.................................................................. 17
Pass Through Rate............................................................. 4
Payahead Account.............................................................. 31
Payaheads..................................................................... 33
Payment Date.................................................................. 18
Plan Assets Regulation........................................................ 56
Pool Balance.................................................................. 16
Pooling and Servicing Agreement............................................... 3
Pre-Funded Amount............................................................. 5
</TABLE>
60
<PAGE> 95
<TABLE>
<S> <C>
Pre-Funding Account........................................................... 4
Precomputed Advance........................................................... 6
Precomputed Receivables....................................................... 13
Prospectus Supplement......................................................... 1
Purchase Amount............................................................... 31
Rating Agencies............................................................... 11
Receivables................................................................... 5
Receivables Pool.............................................................. 12
Registration Statement........................................................ 2
Related Documents............................................................. 20
Reserve Account............................................................... 36
Restricted Group.............................................................. 57
Reuters Screen LIBO Page...................................................... 25
Rule of 78's.................................................................. 13
Rule of 78's Receivables...................................................... 13
Rules......................................................................... 27
Sale and Servicing Agreement.................................................. 5
Schedule of Receivables....................................................... 30
Securities.................................................................... 1
Securities Act................................................................ 2
Section 1286 Treasury Regulations............................................. 52
Securityholders............................................................... 27
Seller........................................................................ 3
Senior Certificates........................................................... 57
Servicer...................................................................... 3
Servicer Default.............................................................. 37
Servicing Fee................................................................. 34
Servicing Fee Rate............................................................ 34
Short-Term Note............................................................... 45
Simple Interest Advance....................................................... 6
Simple Interest Receivables................................................... 14
Spread........................................................................ 22
Spread Multiplier............................................................. 22
Stock Index................................................................... 26
Stock Indexed Securities...................................................... 26
Strip Certificates............................................................ 4
Strip Notes................................................................... 3
Subsequent Receivables........................................................ 5
Subsequent Transfer Date...................................................... 31
Transfer and Servicing Agreements............................................. 30
Treasury bills................................................................ 26
Treasury Rate................................................................. 26
Treasury Rate Determination Date.............................................. 26
Treasury Rate Security........................................................ 22
Trust......................................................................... 3
Trustee....................................................................... 1
Trust Accounts................................................................ 32
Trust Agreement............................................................... 3
UCC........................................................................... 31
Underwriting Agreements....................................................... 58
U.S. Person................................................................... 54
</TABLE>
61
<PAGE> 96
======================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
SELLER OR BY THE UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO
NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE
SECURITIES OFFERED HEREBY TO ANYONE IN ANY JURISDICTION IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM
IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT INFORMATION HEREIN OR
THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS
SUPPLEMENT OR PROSPECTUS.
------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Reports to Noteholders..................... S-3
Summary of Terms........................... S-4
Special Considerations..................... S-10
The Trust.................................. S-12
The Receivables Pool....................... S-13
Chrysler Financial Corporation............. S-17
Weighted Average Life of the Notes......... S-17
Description of the Notes................... S-18
Description of the Transfer and Servicing
Agreements............................... S-22
Certain Federal Income Tax Consequences.... S-27
ERISA Considerations....................... S-27
Underwriting............................... S-28
Legal Opinions............................. S-29
Index of Terms............................. S-30
Annex I.................................... A-1
PROSPECTUS
Available Information...................... 2
Incorporation of Certain Documents by
Reference................................ 2
Summary of Terms........................... 3
Special Considerations..................... 9
The Trusts................................. 12
The Receivables Pools...................... 13
Weighted Average Life of the Securities.... 15
Pool Factors and Trading Information....... 15
Use of Proceeds............................ 16
Chrysler Financial Corporation............. 16
Description of the Notes................... 17
Description of the Certificates............ 21
Certain Information Regarding the
Securities............................... 22
Description of the Transfer and Servicing
Agreements............................... 30
Certain Legal Aspects of the Receivables... 41
Certain Federal Income Tax Consequences.... 44
Certain State Tax Consequences with respect
to Trusts which Issue one or more Classes
of Notes................................. 55
ERISA Considerations....................... 56
Plan of Distribution....................... 58
Legal Opinions............................. 58
Index of Terms............................. 59
</TABLE>
UNTIL 90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL DEALERS
EFFECTING TRANSACTIONS IN THE NOTES OFFERED BY THIS PROSPECTUS SUPPLEMENT,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. THIS IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
======================================================
======================================================
$1,250,000,000
PREMIER AUTO TRUST
1997-1
$600,000,000
5.90% ASSET BACKED NOTES, CLASS A-2
$393,750,000
6.25% ASSET BACKED NOTES, CLASS A-3
$200,000,000
6.35% ASSET BACKED NOTES, CLASS A-4
$56,250,000
6.55% ASSET BACKED NOTES, CLASS B
CHRYSLER FINANCIAL CORPORATION
SELLER AND SERVICER
---------------------------
PROSPECTUS SUPPLEMENT
---------------------------
UNDERWRITERS OF THE OFFERED
CLASS A NOTES
MERRILL LYNCH & CO.
BEAR, STEARNS & CO. INC.
LEHMAN BROTHERS
SALOMON BROTHERS INC
UNDERWRITERS OF THE
CLASS B NOTES
MERRILL LYNCH & CO.
BEAR, STEARNS & CO. INC.
------------------------
DATED MARCH 4, 1997
======================================================
