<PAGE>
SUBJECT TO COMPLETION, DATED MAY 19, 1997
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED WITHOUT DELIVERY OF A FINAL PROSPECTUS SUPPLEMENT AND
ACCOMPANYING PROSPECTUS. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH
SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS SUPPLEMENT FILED PURSUANT TO RULE 424(b)(3)
(TO PROSPECTUS DATED MAY 19, 1997) REGISTRATION NO. 333-24373
$337,970,000
CATERPILLAR FINANCIAL ASSET TRUST 1997-A
<TABLE>
<C> <S> <C>
$ 88,000,000 CLASS A-1 % ASSET BACKED NOTES
$128,000,000 CLASS A-2 % ASSET BACKED NOTES
$108,100,000 CLASS A-3 % ASSET BACKED NOTES
$ 13,870,000 CLASS B % ASSET BACKED NOTES
</TABLE>
CATERPILLAR FINANCIAL FUNDING CORPORATION, SELLER
CATERPILLAR FINANCIAL SERVICES CORPORATION, SERVICER
-----------------
Interest on the Class A-1 % Asset Backed Notes (the "CLASS A-1 NOTES"),
the Class A-2 % Asset Backed Notes (the "CLASS A-2 NOTES") and the Class A-3
% Asset Backed Notes (the "CLASS A-3 NOTES"; together with the Class A-1
Notes and the Class A-2 Notes, the "CLASS A NOTES") and the Class B % Asset
Backed Notes (the "CLASS B NOTES"; together with the Class A Notes, the "NOTES")
issued by Caterpillar Financial Asset Trust 1997-A (the "TRUST" or the "ISSUER")
will be payable monthly on or about the 25th day of each month (each, a
"DISTRIBUTION DATE") commencing June 25, 1997. The Trust will also issue
$8,666,681 % Asset Backed Certificates (the "CERTIFICATES"), which
Certificates are not offered hereby. Principal on the Notes will be payable on
each Distribution Date; PROVIDED, HOWEVER, that no principal payments in respect
of (i) the Class A-2 Notes will be made until the Class A-1 Notes have been paid
in full, (ii) the Class A-3 Notes will be made until the Class A-2 Notes have
been paid in full and (iii) the Class B Notes will be made until the Class A-3
Notes have been paid in full. The final scheduled Distribution Date for the
Class A-1 Notes will be the May 1998 Distribution Date, the final scheduled
Distribution Date for the Class A-2 Notes will be the July 2000 Distribution
Date and the final scheduled Distribution Date for
(CONTINUED ON THE FOLLOWING PAGE)
------------------------
POTENTIAL INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE INFORMATION SET
FORTH IN "RISK FACTORS" COMMENCING ON PAGE S-20 HEREIN AND ON PAGE 13 IN THE
PROSPECTUS.
THE NOTES REPRESENT OBLIGATIONS OF THE ISSUER ONLY AND DO NOT REPRESENT
OBLIGATIONS OF OR INTERESTS IN CATERPILLAR FINANCIAL FUNDING CORPORATION,
CATERPILLAR FINANCIAL SERVICES CORPORATION, CATERPILLAR INC. OR ANY OF
THEIR RESPECTIVE AFFILIATES. NEITHER THE SECURITIES NOR THE
RECEIVABLES ARE ISSUED 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>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT ISSUER(1)(2)
<S> <C> <C> <C>
Per Class A-1 Note.................... % % %
Per Class A-2 Note.................... % % %
Per Class A-3 Note.................... % % %
Per Class B Note...................... % % %
Total................................. $ $ $
</TABLE>
(1) Plus accrued interest, if any, from May , 1997.
(2) Before deducting expenses, estimated to be $693,000.
------------------------
The Notes are offered by the Underwriters, subject to prior sale, when, as
and if issued to and accepted by them and subject to their right to reject
orders in whole or in part. It is expected that delivery of the Notes will be
made in book-entry form only through the Same Day Funds Settlement System of The
Depository Trust Company, or through Cedel Bank, societe anonyme or the
Euroclear System, on or about May , 1997 (the "CLOSING DATE").
-------------------
UNDERWRITERS OF THE CLASS A NOTES
MERRILL LYNCH & CO.
CREDIT SUISSE FIRST BOSTON
UBS SECURITIES
UNDERWRITER OF THE CLASS B NOTES
MERRILL LYNCH & CO.
------------
The date of this Prospectus Supplement is May , 1997.
<PAGE>
(CONTINUED FROM PRECEDING PAGE)
the Class A-3 Notes will be the May 2003 Distribution Date. The final scheduled
Distribution Date for the Class B Notes will be the May 2003 Distribution Date.
The actual payment in full of any Class of the Class A Notes or the Class B
Notes could occur earlier than their respective final scheduled Distribution
Dates. The rights of Class B Noteholders to receive distributions with respect
to the Class B Notes will be subordinated to the rights of the Class A
Noteholders to receive payments of interest on and principal of the Class A
Notes to the extent described herein.
The Certificates will bear interest at a rate of % per annum. The rights
of the Certificateholders to receive distributions with the respect to the
Certificates will be subordinated to the right of the Noteholders to receive
payments of interest on and principal of the Notes to the extent described
herein.
The assets of the Trust will include a pool of fixed rate retail installment
sales contracts (the "RECEIVABLES") secured by new and used machinery
manufactured primarily by Caterpillar Inc. and certain monies due or received
thereunder on or after May 1, 1997, which will be purchased by the Trust from
the Seller on or prior to the date of the issuance of the Notes. The Seller will
purchase the Receivables from Caterpillar Financial Services Corporation
concurrently with the purchase by the Trust of the Receivables from the Seller.
The Notes will be secured by the assets of the Trust.
The Class A-3 Notes and the Class B Notes will be subject to prepayment in
whole, but not in part, on any Distribution Date on which the Servicer exercises
its option to purchase the Receivables when the Pool Balance is reduced to less
than 10% of the Initial Pool Balance.
The Issuer, a newly formed limited-purpose Delaware business trust, will
generally be prohibited from incurring any indebtedness other than the Notes and
its assets will include the Receivables, the Collection Account, the Class A
Note Distribution Account, the Class B Note Distribution Account and the Reserve
Account, as described herein.
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT THE
OFFERING OF THE NOTES. ADDITIONAL INFORMATION IS CONTAINED IN THE PROSPECTUS.
PROSPECTIVE INVESTORS ARE URGED TO READ BOTH THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS IN FULL. SALES OF THE NOTES MAY NOT BE CONSUMMATED UNLESS THE
PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. TO
THE EXTENT ANY STATEMENTS IN THIS PROSPECTUS SUPPLEMENT CONFLICT WITH STATEMENTS
IN THE PROSPECTUS, THE STATEMENTS IN THIS PROSPECTUS SUPPLEMENT SHALL CONTROL.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE NOTES, INCLUDING
OVER-ALLOTMENT TRANSACTIONS, STABILIZING TRANSACTIONS, SYNDICATE COVERING
TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING" HEREIN.
Upon receipt of a request by an investor, or his or her representative,
within the period during which there is a prospectus delivery obligation, the
Underwriters will transmit or cause to be transmitted promptly, without charge
and in addition to any such delivery requirements, a paper copy of this
Prospectus Supplement and a Prospectus or this Prospectus Supplement and a
Prospectus encoded in an electronic format.
REPORTS TO NOTEHOLDERS
Unless and until Definitive Notes are issued, periodic 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 the registered holder of
the Notes. See "Issuance of the Securities--Definitive Securities" and
"--Book-Entry Registration" and "Description of the Transfer and Servicing
Agreements--Reports to Securityholders" in the accompanying Prospectus. Such
reports will not constitute financial statements that have been examined and
reported upon by, with an opinion expressed by, an independent or certified
public accountant. 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 thereunder and as are otherwise agreed to by the Commission.
Copies of such periodic reports may be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates.
S-2
<PAGE>
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 in the summary 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.
<TABLE>
<S> <C>
ISSUER....................... Caterpillar Financial Asset Trust 1997-A (the "TRUST" or the
"ISSUER"), a Delaware business trust formed by the Seller
and the Owner Trustee pursuant to the Trust Agreement dated
as of May 1, 1997 (the "TRUST AGREEMENT") between the Seller
and the Owner Trustee, acting thereunder not in its
individual capacity but solely as Owner Trustee.
SELLER....................... Caterpillar Financial Funding Corporation (the "SELLER"), a
Nevada corporation and a wholly-owned subsidiary of
Caterpillar Financial Services Corporation. The principal
executive offices of the Seller are located at Greenview
Plaza, 2950 East Flamingo Road, Suite C-3B, Las Vegas,
Nevada 89121 and its telephone number is (702) 735-2514.
SERVICER..................... Caterpillar Financial Services Corporation (the "SERVICER"
or "CFSC"), a Delaware corporation and a wholly-owned
finance subsidiary of Caterpillar Inc.
INDENTURE TRUSTEE............ The First National Bank of Chicago, a national banking
association, as indenture trustee under the Indenture (the
"INDENTURE TRUSTEE").
OWNER TRUSTEE................ Chase Manhattan Bank Delaware, a Delaware banking
corporation, as owner trustee under the Trust Agreement (the
"OWNER TRUSTEE").
THE NOTES.................... Class A-1 % Asset Backed Notes (the "CLASS A-1 NOTES")
in the aggregate principal amount of $88,000,000.
Class A-2 % Asset Backed Notes (the "CLASS A-2 NOTES")
in the aggregate principal amount of $128,000,000.
Class A-3 % Asset Backed Notes (the "CLASS A-3 NOTES";
together with the Class A-1 Notes and the Class A-2 Notes,
the "CLASS A NOTES") in the aggregate principal amount of
$108,100,000.
Class B % Asset Backed Notes (the "CLASS B NOTES";
together with the Class A Notes, the "NOTES") in the
aggregate principal amount of $13,870,000.
The rights of Class B Noteholders to receive distributions
with respect to the Class B Notes will be subordinated to
the rights of the Class A Noteholders to receive
distributions with respect to the Class A Notes to the
extent described herein.
The Notes will be issued by the Trust pursuant to an
Indenture to be dated as of May 1, 1997 (the "INDENTURE"),
between the Issuer and the Indenture Trustee. The Notes will
be secured by the assets of the Trust.
The Notes will be available for purchase in book-entry form
only in minimum denominations of $1,000 and integral
multiples thereof. The Noteholders will not be entitled to
receive Definitive Notes except in the limited circumstances
described herein. See "Description of the Notes--General"
and "Issuance of the Securities--Definitive Securities" and
"--Book-Entry Registration" in the Prospectus.
THE TRUST.................... The Trust is a business trust established under the laws of
the State of Delaware pursuant to the Trust Agreement. The
activities of the Trust are limited by the terms of the
Trust Agreement to acquiring, owning and managing the
Receivables, issuing and making payments on the Notes and
the Certificates and other activities related thereto. The
</TABLE>
S-3
<PAGE>
<TABLE>
<S> <C>
Trust Property includes (i) the Receivables, (ii) all monies
(including accrued interest) due thereunder on or after the
Cut-off Date (as defined below), (iii) such amounts as from
time to time may be held in one or more accounts established
and maintained by the Servicer and the Seller pursuant to
the Sale and Servicing Agreement, as described below, (iv)
the security interests in the machinery financed by the
Receivables (the "FINANCED EQUIPMENT") and in certain other
cross-collateralized equipment, (v) the rights to proceeds
from claims on physical damage, credit life and disability
insurance policies, if any, covering Financed Equipment or
Obligors, as the case may be, (vi) any proceeds of
repossessed Financed Equipment (less any repossession
expenses), (vii) the rights of the Seller under the Purchase
Agreement, (viii) the interest of the Seller in any proceeds
from recourse to or other payments by Dealers with respect
to Receivables, (ix) interest earned on short-term
investments made by the Trust and (x) any proceeds of the
foregoing.
In addition to the Notes, the Trust will also issue %
Asset Backed Certificates (the "CERTIFICATES") in the
aggregate principal amount of $8,666,681. The Seller will
initially purchase the entire principal amount of the
Certificates. The Certificates represent fractional undi-
vided interests in the Trust and will be issued pursuant to
the Trust Agreement. The Certificates are not offered
hereby.
RECEIVABLES.................. The Receivables will consist of fixed rate retail
installment sales contracts ("INSTALLMENT SALES CONTRACTS")
secured by new and used machinery manufactured primarily by
Caterpillar including rights to receive certain payments
made with respect to such Installment Sales Contracts (the
"RECEIVABLES"). On or prior to the Closing Date, the Seller
will purchase Receivables having an aggregate Principal
Balance of approximately $346,636,681 (the "INITIAL POOL
BALANCE") as of May 1, 1997 (the "CUT-OFF DATE") from CFSC
pursuant to a Purchase Agreement to be dated as of May 1,
1997 (the "PURCHASE AGREEMENT"), between CFSC and the
Seller, and the Seller will sell the Receivables to the
Trust pursuant to a Sale and Servicing Agreement to be dated
as of May 1, 1997 (the "SALE AND SERVICING AGREEMENT") among
the Seller, the Servicer and the Trust.
The Receivables arise from loans originated in connection
with retail sales by dealers (the "DEALERS") of Financed
Equipment to retail purchasers (the "OBLIGORS") and are
either originated by CFSC, or acquired from such Dealers by
CFSC, in the ordinary course of CFSC's business. The
Receivables have been selected from the contracts owned by
CFSC based on the criteria specified in the Purchase
Agreement and described herein. See "The Receivables Pool"
herein. As of the Cut-off Date, the weighted average annual
percentage rate of interest (the "APR") of the Receivables
(based on their respective Principal Balances (as defined
herein)) was approximately 8.47% (the "CUT-OFF DATE APR"),
the weighted average remaining maturity (i.e., for each
Receivable, the period from but excluding the Cut-off Date
to and including such Receivable's maturity date) of the
Receivables was approximately 42 months and the weighted
average original maturity of the Receivables was
approximately 48 months. As of the Cut-off Date, no Receiv-
able had a scheduled maturity later than the date which is
twelve months prior to the May 2003 Distribution Date.
</TABLE>
S-4
<PAGE>
<TABLE>
<S> <C>
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 and Purchase Amounts
remitted by the Seller or the Servicer, as the case may be,
for such Collection Period, and to all Realized Losses on
Liquidated Receivables during such Collection Period. The
"PRINCIPAL BALANCE" of a Receivable at any time means its
original principal balance, as reduced by principal payments
applied in accordance with the actuarial method, calculated
as of the Cut-off Date or as of the end of the preceding
Collection Period (as applicable). The Principal Balance of
an Over-Rate Receivable reflects the unamortized purchase
premium paid by CFSC to Dealers.
TERMS OF THE NOTES........... The principal terms of the Notes will be as described below:
A. INTEREST PAYMENTS........ The Class A-1 Notes will bear interest at the rate of %
per annum (the "CLASS A-1 NOTE RATE"), the Class A-2 Notes
will bear interest at the rate of % per annum (the
"CLASS A-2 NOTE RATE"), the Class A-3 Notes will bear
interest at the rate of % per annum (the "CLASS A-3 NOTE
RATE") and the Class B Notes will bear interest at the rate
of % per annum (the "CLASS B NOTE RATE") (with respect
to the Class A-1 Notes, calculated on the basis of a 360 day
year and the actual number of days elapsed, and with respect
to the A-2 Notes and the A-3 Notes, in each case calculated
on the basis of a 360-day year of twelve 30-day months).
Interest on the outstanding principal amount of the Notes
will accrue from and including the most recent Distribution
Date on which interest has been paid (or, in the case of the
initial Distribution Date, from and including the Closing
Date) to but excluding the following Distribution Date and
will be payable on the 25th day of each calendar month (or
if any such date is not a business day, on the next
succeeding business day) (each, a "DISTRIBUTION DATE")
commencing June 25, 1997, to the holders of record of the
Class A-1 Notes (the "CLASS A-1 NOTEHOLDERS"), the holders
of record of the Class A-2 Notes (the "CLASS A-2
NOTEHOLDERS"), the holders of record of the Class A-3 Notes
(the "CLASS A-3 NOTEHOLDERS"; together with the Class A-1
Noteholders and the Class A-2 Noteholders, the "CLASS A
NOTEHOLDERS") as of the related Record Date.
Interest on the Class B Notes will not be paid on any
Distribution Date until interest payments on the Class A
Notes have been paid in full. Subject to the foregoing,
interest on the Class B Notes will be paid on each
Distribution Date to the holders of record of the Class B
Notes (the "CLASS B NOTEHOLDERS"; together with the Class A
Noteholders, the "NOTEHOLDERS") as of the Record Date for
such Distribution Date.
Interest payments on the Notes will be generally derived
from (i) the Total Distribution Amount remaining after the
payment of the Servicing Fee (if CFSC or an affiliate is not
the Servicer) and the Administration Fee, and in the case of
the Class B Notes, after the payments of interest on the
Class A Notes, and (ii) from the amount on deposit in the
Reserve Account. If the amount of interest on the principal
amount of the Class A-1 Notes, the Class A-2 Notes and the
Class A-3 Notes payable on any Distribution Date exceeds the
sum of such remaining portion of the Total Distribution
Amount and amounts on deposit in the Reserve Account, each
of the Class A-1 Noteholders, the Class A-2 Noteholders and
the Class A-3 Noteholders will receive their ratable
</TABLE>
S-5
<PAGE>
<TABLE>
<S> <C>
share (based upon the total amount of interest due to such
Class A Noteholders) of the amount available to be
distributed in respect of interest on the Class A Notes.
With respect to any Distribution Date and the Notes, the
"RECORD DATE" is the calendar day immediately preceding each
Distribution Date (or, with respect to any Definitive Note,
the last calendar day of the month preceding the month in
which such Distribution Date occurs).
Interest on the Certificates will only be paid on any
Distribution Date generally to the extent funds are
available following payment of the Servicing Fee, the
Administration Fee, distributions in respect of the Notes
and any required deposit to the Reserve Account. See
"Description of the Transfer and Servicing
Agreements--Distributions--DEPOSITS TO THE DISTRIBUTION
ACCOUNTS."
B. PRINCIPAL PAYMENTS....... Principal on the Notes will be payable on each Distribution
Date in an amount generally equal to the Principal
Distribution Amount (as defined below) for such Distribution
Date (to the extent of funds available therefor as described
herein).
On each Distribution Date before the Distribution Date on
which the Class A-1 Notes have been paid in full, principal
of the Class A-1 Notes will be payable in an amount
generally equal to the Principal Distribution Amount. On
each Distribution Date on and after the Distribution Date on
which the Class A-1 Notes have been paid in full, principal
of the Class A-2 Notes will be payable, until the Class A-2
Notes have been paid in full, in an amount equal to the
difference between (i) the Principal Distribution Amount for
such Distribution Date, and (ii) the portion, if any, of the
Principal Distribution Amount applied on such Distribution
Date to reduce the outstanding principal amount of the Class
A-1 Notes to zero. On each Distribution Date on and after
the Distribution Date on which the Class A-1 Notes and the
Class A-2 Notes have been paid in full, principal of the
Class A-3 Notes will be payable, until the Class A-3 Notes
have been paid in full, in an amount equal to the difference
between (i) the Principal Distribution Amount for such
Distribution Date, and (ii) the portion, if any, of the
Principal Distribution Amount applied on such Distribution
Date to reduce the outstanding principal amount of the Class
A-1 Notes and/or Class A-2 Notes to zero.
On each Distribution Date on and after the Distribution Date
on which the Class A Notes have been paid in full, principal
of the Class B Notes will be payable, until the Class B
Notes have been paid in full, in an amount equal to the
difference between (i) the Principal Distribution Amount for
such Distribution Date, and (ii) the portion, if any, of the
Principal Distribution Amount applied on such Distribution
Date to reduce the outstanding principal amount of the Class
A Notes to zero.
In addition, on each Distribution Date, the amount on
deposit in the Reserve Account in excess of the Specified
Reserve Account Balance for such Distribution Date shall be
paid as principal of the Class A-1 Notes, until the Class
A-1 Notes are paid in full, then paid as principal of the
Class A-2 Notes, until the Class A-2 Notes have been paid in
full, then paid as principal of the Class A-3 Notes, until
the Class A-3 Notes have been paid in full, and then paid as
principal of the Class B Notes,
</TABLE>
S-6
<PAGE>
<TABLE>
<S> <C>
until the Class B Notes have been paid in full. See
"Description of the Transfer and Servicing
Agreements--Distributions" and "--Reserve Account" herein.
No principal will be paid with respect to the Certificates
until the Notes have been paid in full.
The outstanding principal amount, if any, of the Class A-1
Notes will be payable in full on the May 1998 Distribution
Date (the "CLASS A-1 NOTE FINAL SCHEDULED DISTRIBUTION
DATE"), the outstanding principal amount, if any, of the
Class A-2 Notes will be payable in full on the July 2000
Distribution Date (the "CLASS A-2 NOTE FINAL SCHEDULED
DISTRIBUTION DATE"), the outstanding principal amount, if
any, of the Class A-3 Notes will be payable in full on the
May 2003 Distribution Date (the "CLASS A-3 NOTE FINAL
SCHEDULED DISTRIBUTION DATE") and the outstanding principal
amount, if any, of the Class B Notes will be payable in full
on the May 2003 Distribution Date (the "CLASS B NOTE FINAL
SCHEDULED DISTRIBUTION DATE"), in each case from funds
available therefor (including amounts on deposit in the
Reserve Account). See "Description of the Transfer and
Servicing Agreements--Reserve Account" herein.
C. OPTIONAL PREPAYMENT...... The Class A-3 Notes and the Class B Notes will be prepaid in
whole, but not in part, at the Class A-3 Note Prepayment
Price and the Class B Note Prepayment Price, respectively,
on any Distribution Date after the Class A-1 Notes and the
Class A-2 Notes have been paid in full, if the Servicer
exercises its option to purchase the Receivables, which
option may be exercised when the Pool Balance has been
reduced to 10% or less of the Initial Pool Balance. The
prepayment price for the Class A-3 Notes (the "CLASS A-3
NOTE PREPAYMENT PRICE") will equal the unpaid principal
balance of the Class A-3 Notes plus accrued and unpaid
interest thereon. The prepayment price for the Class B Notes
(the "CLASS B NOTE PREPAYMENT PRICE") will equal the unpaid
principal balance of the Class B Notes, plus accrued and
unpaid interest thereon. See "Description of the Notes--The
Class A-2 Notes, the Class A-3 Notes and the Class B
Notes--OPTIONAL PREPAYMENT" herein and "Description of the
Notes--Principal and Interest on the Notes" and "Description
of the Transfer and Servicing Agreements--Termination" in
the Prospectus.
LIMITED RIGHTS............... If an Event of Default occurs under the Indenture, the Class
B Noteholders will not have any right to direct or to
consent to any actions by the Indenture Trustee, including
the sale of Receivables, until the Class A Notes have been
paid in full, and if a Servicer Default occurs, the Class B
Noteholders will not have any right to direct or consent to
removal of the Servicer until the Class A Notes have been
paid in full. See "Risk Factors--SUBORDINATION; LIMITED
ASSETS", "Description of the Notes--The Indenture--EVENTS OF
DEFAULT; RIGHTS UPON EVENT OF DEFAULT" and "Description of
the Transfer and Servicing Agreements-- Rights Upon Servicer
Default" and "--Waiver of Past Defaults" herein.
TERMS OF THE CERTIFICATES.... On the Closing Date, the Trust will issue Certificates in an
aggregate principal amount of $8,666,681. The Seller will
initially purchase the entire principal amount of the
Certificates. The Certificates will bear interest at the
rate of % per annum (the "CERTIFICATE RATE"). The
</TABLE>
S-7
<PAGE>
<TABLE>
<S> <C>
rights of the Certificateholders to receive distributions
with respect to the Certificates will be subordinated to the
rights of the Noteholders to receive distributions with
respect to the Notes to the extent described herein. See
"Description of the Certificates" herein.
PRIORITY OF DISTRIBUTIONS.... As more fully described in "Description of the Transfer and
Servicing Agreements--Distributions" herein, distributions
of the Total Distribution Amount shall be made on each
Distribution Date in the following order of priority (except
as described herein):
(i) to the Servicer (if CFSC or an affiliate is not the
Servicer), the Servicing Fee and all unpaid Servicing Fees
from prior Collection Periods;
(ii) to the Administrator, the Administration Fee and all
unpaid Administration Fees from prior Collection Periods;
(iii) to the Class A Note Distribution Account, the Class A
Noteholders' Interest Distributable Amount;
(iv) to the Class B Note Distribution Account, the Class B
Noteholders' Interest Distributable Amount;
(v) to the Class A Note Distribution Account, the Class A-1
Noteholders' Principal Distributable Amount;
(vi) to the Class A Note Distribution Account, the Class A-2
Noteholders' Principal Distributable Amount;
(vii) to the Class A Note Distribution Account, the Class
A-3 Noteholders' Principal Distributable Amount;
(viii) to the Class B Note Distribution Account, the Class B
Noteholders' Principal Distributable Amount;
(ix) to the Servicer (if CFSC or an affiliate is the
Servicer), the Servicing Fee and all unpaid Servicing Fees
from prior Collection Periods;
(x) to the Reserve Account, an amount equal to the excess of
the Specified Reserve Account Balance (as defined below)
over the amount on deposit in the Reserve Account on such
Distribution Date;
(xi) to the Certificate Distribution Account, the
Certificateholders' Interest Distributable Amount;
(xii) to the Certificate Distribution Account, the
Certificateholders' Principal Distributable Amount; and
(xiii) to the Reserve Account, the remaining Total
Distribution Amount.
Notwithstanding the foregoing, if an Event of Default has
occurred and the maturity of the Notes has been accelerated,
the Class A Noteholders of each Class of Class A Notes will
be entitled to be paid principal pro rata on the basis of
the ratio of the principal amount of such Class A
Noteholder's Class A Note to the aggregate principal amount
of the Class A Notes, and the Class B Noteholders and the
Certificateholders will not be entitled to receive any
distributions of interest or principal until the Class A
Notes have been paid in full.
Funds will be withdrawn from amounts on deposit in the
Reserve Account to the extent that the Total Distribution
Amount (after the payment of the Servicing Fee (if CFSC or
an affiliate is not the Servicer) and the Administration
Fee) and the deposit of the Class B Noteholders' Interest
Distributable Amount in the Class B Note Distribution
Account with respect to any Collection Period is less than
the
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Class A Noteholders' Distributable Amount, and funds in the
amount of such deficiency will be deposited in the Class A
Note Distribution Account. In addition, funds will be
withdrawn from amounts on deposit in the Reserve Account to
the extent that the portion of the Total Distribution Amount
remaining after the payment of the Servicing Fee (if CFSC or
an affiliate is not the Servicer) and the Administration Fee
and the deposit of the Class A Noteholders' Distributable
Amount in the Class A Note Distribution Account is less than
the Class B Noteholders' Distributable Amount, and funds in
the amount of such deficiency will be deposited in the Class
B Note Distribution Account.
"CERTIFICATE BALANCE" equals, on the Closing Date,
$8,666,681 and, thereafter, equals $8,666,681, reduced by
all amounts allocable to principal previously distributed to
Certificateholders. The Certificate Balance shall also be
reduced on any Distribution Date by the excess, if any, of
(i) the sum of (A) the Certificate Balance and (B) the
outstanding principal amount of the Notes (in each case
after giving effect to amounts in respect of principal to be
deposited in the Certificate Distribution Account, the Class
A Note Distribution Account and the Class B Note
Distribution Account on such Distribution Date), over (ii)
the sum of (A) the Pool Balance as of the close of business
on the last day of the preceding Collection Period and (B)
the amount on deposit in the Reserve Account after giving
effect to any distributions therefrom on such Distribution
Date. Thereafter, the Certificate Balance shall be increased
to the extent that any portion of the Total Distribution
Amount is available to pay the existing Certificateholders'
Principal Carryover Shortfall, but not by more than the
aggregate reductions in the Certificate Balance set forth in
the preceding sentence.
"CERTIFICATEHOLDERS' DISTRIBUTABLE AMOUNT" means, with
respect to any Distribution Date, the sum of (i) the
Certificateholders' Principal Distributable Amount and (ii)
the Certificateholders' Interest Distributable Amount.
"CERTIFICATEHOLDERS' INTEREST CARRYOVER SHORTFALL" means,
with respect to any Distribution Date, the sum of (i) the
excess, if any, of (A) the sum of (1) the
Certificateholders' Monthly Interest Distributable Amount
for the preceding Distribution Date and (2) any outstanding
Certificateholders' Interest Carryover Shortfall on such
preceding Distribution Date, over (B) the amount in respect
of interest that is actually deposited in the Certificate
Distribution Account on such preceding Distribution Date,
and (ii) interest on such excess, to the extent permitted by
law, at the Certificate Rate.
"CERTIFICATEHOLDERS' INTEREST DISTRIBUTABLE AMOUNT" means,
with respect to any Distribution Date, the sum of the
Certificateholders' Monthly Interest Distributable Amount
for such Distribution Date and the Certificateholders'
Interest Carryover Shortfall for such Distribution Date.
"CERTIFICATEHOLDERS' MONTHLY INTEREST DISTRIBUTABLE AMOUNT"
means, with respect to any Distribution Date, an amount
equal to the aggregate interest accrued on the Certificates
at the Certificate Rate from and including the preceding
Distribution Date (or from and including the Closing Date in
the case of the initial Distribution Date) to but excluding
such Distribution Date (based on a 360-day year of twelve
30-day months).
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"CERTIFICATEHOLDERS' MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT"
means, with respect to any Distribution Date on or after the
Distribution Date on which the principal amounts of the
Class A Notes and the Class B Notes are reduced to zero, the
Principal Distribution Amount (less the portion thereof, if
any, applied on such Distribution Date to reduce the
principal amount of the Class A Notes and the Class B Notes
to zero, which shall be deposited into the Class A Note
Distribution Account and the Class B Note Distribution
Account, as applicable).
"CERTIFICATEHOLDERS' PRINCIPAL CARRYOVER SHORTFALL" means,
as of the close of any Distribution Date, the sum of (i) the
excess, if any, of (A) the sum of (1) the
Certificateholders' Monthly Principal Distributable Amount
and (2) any outstanding Certificateholders' Principal
Carryover Shortfall from the preceding Distribution Date,
over (B) the amount in respect of principal that is actually
deposited in the Certificate Distribution Account and (ii)
the unreimbursed portion of the amount by which the
Certificate Balance has been reduced as described in the
second sentence of the definition of "Certificate Balance"
above.
"CERTIFICATEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT" means,
with respect to any Distribution Date, the sum of (i) the
Certificateholders' Monthly Principal Distributable Amount
for such Distribution Date and (ii) the Certificateholders'
Principal Carryover Shortfall as of the close of the
preceding Distribution Date; PROVIDED, HOWEVER, that, until
an amount sufficient to reduce the outstanding principal
amounts of the Class A Notes and the Class B Notes to zero
has been deposited in the Class A Distribution Account and
the Class B Note Distribution Account, as applicable, the
Certificateholders' Principal Distributable Amount shall be
zero; PROVIDED, FURTHER, that the sum of clauses (i) and
(ii) shall not exceed the Certificate Balance, and on the
final scheduled Distribution Date with respect to the
Certificates, the Certificateholders' Principal
Distributable Amount will include the amount necessary
(after giving effect to the other amounts to be deposited in
the Certificate Distribution Account on such Distribution
Date and allocable to principal) to reduce the Certificate
Balance to zero.
"CLASS A NOTE DISTRIBUTION ACCOUNT" shall mean a Note
Distribution Account established for the benefit of the
Class A Noteholders.
"CLASS A NOTEHOLDERS' DISTRIBUTABLE AMOUNT" means, with
respect to any Distribution Date, the sum of (i) the Class
A-1 Noteholders' Principal Distributable Amount, (ii) the
Class A-2 Noteholders' Principal Distributable Amount, (iii)
the Class A-3 Noteholders' Principal Distributable Amount
and (iv) the Class A Noteholders' Interest Distributable
Amount.
"CLASS A NOTEHOLDERS' INTEREST CARRYOVER SHORTFALL" means,
with respect to any Distribution Date, the sum of (i) the
excess, if any, of (A) the sum of (1) the Class A
Noteholders' Monthly Interest Distributable Amount for the
preceding Distribution Date and (2) any outstanding Class A
Noteholders' Interest Carryover Shortfall on such preceding
Distribution Date, over (B) the amount in respect of
interest that is actually deposited in the Class A Note
Distribution Account on such preceding Distribution Date,
and (ii) interest on the amount of interest due but not paid
to Class A Noteholders on the preceding
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Distribution Date, to the extent permitted by law, at the
applicable interest rate or rates borne by such Class A
Notes from such preceding Distribution Date through such
current Distribution Date.
"CLASS A NOTEHOLDERS' INTEREST DISTRIBUTABLE AMOUNT" means,
with respect to any Distribution Date, the sum of the Class
A Noteholders' Monthly Interest Distributable Amount for
such Distribution Date and the Class A Noteholders' Interest
Carryover Shortfall for such Distribution Date.
"CLASS A NOTEHOLDERS' MONTHLY INTEREST DISTRIBUTABLE AMOUNT"
means, with respect to any Distribution Date, an amount
equal to the aggregate amount of interest accrued on the
Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes
at their respective interest rates from and including the
preceding Distribution Date (or, in the case of the initial
Distribution Date, from and including the Closing Date), to
but excluding such Distribution Date (with respect to the
Class A-1 Notes, based on a 360-day year and the actual
number of days elapsed, and with respect to the Class A-2
Notes and the Class A-3 Notes, in each case based on a
360-day year of twelve 30-day months).
"CLASS A-1 NOTEHOLDERS' MONTHLY PRINCIPAL DISTRIBUTABLE
AMOUNT" means, with respect to any Distribution Date until
the Distribution Date on which the outstanding principal
amount of the Class A-1 Notes has been reduced to zero, the
Principal Distribution Amount for such Distribution Date. In
addition, on each Distribution Date, amounts on deposit in
the Reserve Account in excess of the Specified Reserve
Account Balance shall be paid as principal of the Class A-1
Notes to the extent described under "--Reserve Account"
below.
"CLASS A-1 NOTEHOLDERS' PRINCIPAL CARRYOVER SHORTFALL"
means, as of the close of any Distribution Date, the excess,
if any, of (i) the sum of (A) the Class A-1 Noteholders'
Monthly Principal Distributable Amount for such Distribution
Date and (B) any outstanding Class A-1 Noteholders'
Principal Carryover Shortfall as of the close of the pre-
ceding Distribution Date over (ii) the amount in respect of
principal that is actually deposited in the Class A Note
Distribution Account in respect of the Class A-1 Notes.
"CLASS A-1 NOTEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT"
means, with respect to any Distribution Date, the sum of (i)
the Class A-1 Noteholders' Monthly Principal Distributable
Amount for such Distribution Date and (ii) the Class A-1
Noteholders' Principal Carryover Shortfall as of the close
of the preceding Distribution Date; PROVIDED, HOWEVER, that
the sum of clauses (i) and (ii) above shall not exceed the
outstanding principal amount of the Class A-1 Notes, and on
the Class A-1 Note Final Scheduled Distribution Date, the
Class A-1 Noteholders' Principal Distributable Amount will
include the amount necessary (after giving effect to the
other amounts to be deposited in the Class A Note
Distribution Account on such Distribution Date and allocable
to principal) to reduce the outstanding principal amount of
the Class A-1 Notes to zero.
"CLASS A-2 NOTEHOLDERS' MONTHLY PRINCIPAL DISTRIBUTABLE
AMOUNT" means, with respect to any Distribution Date on or
after the Distribution Date on which an amount sufficient to
reduce the outstanding principal amount of the Class A-1
Notes to zero has been deposited in the Class A Note
Distribution Account, the excess, if any, of (i) the
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Principal Distribution Amount over (ii) the portion of the
Principal Distribution Amount, if any, applied to reduce the
outstanding principal amount of the Class A-1 Notes to zero
on such Distribution Date. In addition, on each Distribution
Date, amounts on deposit in the Reserve Account in excess of
the Specified Reserve Account Balance for such Distribution
Date shall be paid as principal of the Class A-2 Notes to
the extent described under "--Reserve Account" below.
"CLASS A-2 NOTEHOLDERS' PRINCIPAL CARRYOVER SHORTFALL"
means, as of the close of any Distribution Date, the excess,
if any, of (i) the sum of (A) the Class A-2 Noteholders'
Monthly Principal Distributable Amount for such Distribution
Date and (B) any outstanding Class A-2 Noteholders'
Principal Carryover Shortfall as of the close of the pre-
ceding Distribution Date over (ii) the amount in respect of
principal that is actually deposited in the Class A Note
Distribution Account in respect of the Class A-2 Notes.
"CLASS A-2 NOTEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT"
means, with respect to any Distribution Date, the sum of (i)
the Class A-2 Noteholders' Monthly Principal Distributable
Amount for such Distribution Date and (ii) the Class A-2
Noteholders' Principal Carryover Shortfall as of the close
of the preceding Distribution Date; PROVIDED, HOWEVER, that,
until an amount sufficient to reduce the outstanding
principal amount of the Class A-1 Notes to zero has been
deposited in the Class A Note Distribution Account, the
Class A-2 Noteholders' Principal Distributable Amount shall
be zero; PROVIDED, FURTHER, that the sum of clauses (i) and
(ii) shall not exceed the outstanding principal amount of
the Class A-2 Notes, and on the Class A-2 Note Final
Scheduled Distribution Date, the Class A-2 Noteholders'
Principal Distributable Amount will include the amount
necessary (after giving effect to the other amounts to be
deposited in the Class A Note Distribution Account on such
Distribution Date and allocable to principal) to reduce the
outstanding principal amount of the Class A-2 Notes to zero.
"CLASS A-3 NOTEHOLDERS' MONTHLY PRINCIPAL DISTRIBUTABLE
AMOUNT" means, with respect to any Distribution Date on or
after the Distribution Date on which an amount sufficient to
reduce the outstanding principal amount of the Class A-1
Notes and the Class A-2 Notes to zero has been deposited in
the Class A Note Distribution Account, the excess, if any,
of (i) the Principal Distribution Amount over (ii) the
portion of the Principal Distribution Amount, if any,
applied to reduce the outstanding principal amount of the
Class A-1 Notes and the Class A-2 Notes to zero on such
Distribution Date. In addition, on each Distribution Date,
amounts on deposit in the Reserve Account in excess of the
Specified Reserve Account Balance for such Distribution Date
shall be paid as principal of the Class A-3 Notes to the
extent described under "--Reserve Account" below.
"CLASS A-3 NOTEHOLDERS' PRINCIPAL CARRYOVER SHORTFALL"
means, as of the close of any Distribution Date, the excess,
if any, of (i) the sum of (A) the Class A-3 Noteholders'
Monthly Principal Distributable Amount for such Distribution
Date and (B) any outstanding Class A-3 Noteholders'
Principal Carryover Shortfall as of the close of the pre-
ceding Distribution Date over (ii) the amount in respect of
principal that is actually deposited in the Class A Note
Distribution Account in respect of the Class A-3 Notes.
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"CLASS A-3 NOTEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT"
means, with respect to any Distribution Date, the sum of (i)
the Class A-3 Noteholders' Monthly Principal Distributable
Amount for such Distribution Date and (ii) the Class A-3
Noteholders' Principal Carryover Shortfall as of the close
of the preceding Distribution Date; PROVIDED, HOWEVER, that,
until an amount sufficient to reduce the outstanding
principal amount of the Class A-1 Notes and the Class A-2
Notes to zero has been deposited in the Class A Note
Distribution Account, the Class A-3 Noteholders' Principal
Distributable Amount shall be zero; PROVIDED, FURTHER, that
the sum of clauses (i) and (ii) shall not exceed the
outstanding principal amount of the Class A-3 Notes, and on
the Class A-3 Note Final Scheduled Distribution Date, the
Class A-3 Noteholders' Principal Distributable Amount will
include the amount necessary (after giving effect to the
other amounts to be deposited in the Class A Note
Distribution Account on such Distribution Date and allocable
to principal) to reduce the outstanding principal amount of
the Class A-3 Notes to zero.
"CLASS B NOTE DISTRIBUTION ACCOUNT" shall mean a Note
Distribution Account established for the benefit of the
Class B Noteholders.
"CLASS B NOTEHOLDERS' DISTRIBUTABLE AMOUNT" means, with
respect to any Distribution Date, the sum of (i) the Class B
Noteholders' Principal Distributable Amount and (ii) the
Class B Noteholders' Interest Distributable Amount.
"CLASS B NOTEHOLDERS' INTEREST CARRYOVER SHORTFALL" means,
with respect to any Distribution Date, the sum of (i) the
excess, if any, of (A) the sum of (1) the Class B
Noteholders' Monthly Interest Distributable Amount for the
preceding Distribution Date and (2) any outstanding Class B
Noteholders' Interest Carryover Shortfall on such preceding
Distribution Date, over (B) the amount in respect of
interest that is actually deposited in the Class B Note
Distribution Account on such preceding Distribution Date,
and (ii) interest on such excess, to the extent permitted by
law, at the Class B Note Rate.
"CLASS B NOTEHOLDERS' INTEREST DISTRIBUTABLE AMOUNT" means,
with respect to any Distribution Date, the sum of the Class
B Noteholders' Monthly Interest Distributable Amount for
such Distribution Date and the Class B Noteholders' Interest
Carryover Shortfall for such Distribution Date.
"CLASS B NOTEHOLDERS' MONTHLY INTEREST DISTRIBUTABLE AMOUNT"
means, with respect to any Distribution Date, an amount
equal to the aggregate interest accrued on the Class B Notes
at the Class B Note Rate from and including the preceding
Distribution Date (or from and including the Closing Date in
the case of the initial Distribution Date) to but excluding
such Distribution Date (based on a 360-day year of twelve
30-day months).
"CLASS B NOTEHOLDERS' MONTHLY PRINCIPAL DISTRIBUTABLE
AMOUNT" means, with respect to any Distribution Date on or
after the Distribution Date on which the principal amounts
of the Class A Notes are reduced to zero, the excess, if
any, of (i) the Principal Distribution Amount over (ii) the
portion of the Principal Distribution Amount, if any,
applied on such Distribution Date to reduce the principal
amounts
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of the Class A Notes to zero on such Distribution Date. In
addition, on each Distribution Date, amounts on deposit in
the Reserve Account in excess of the Specified Reserve
Account Balance for such Distribution Date shall be paid as
principal of the Class B Notes to the extent under
"--Reserve Account" below.
"CLASS B NOTEHOLDERS' PRINCIPAL CARRYOVER SHORTFALL" means,
as of the close of any Distribution Date, the excess, if
any, of (i) the sum of (A) the Class B Noteholders' Monthly
Principal Distributable Amount for such Distribution Date
and (B) any outstanding Class B Noteholders' Principal
Carryover Shortfall from the preceding Distribution Date as
of the close of the preceding Distribution Date, over (ii)
the amount in respect of principal that is actually
deposited in the Class B Note Distribution Account.
"CLASS B NOTEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT" means,
with respect to any Distribution Date, the sum of (i) the
Class B Noteholders' Monthly Principal Distributable Amount
for such Distribution Date and (ii) the Class B Noteholders'
Principal Carryover Shortfall as of the close of the
preceding Distribution Date; PROVIDED, HOWEVER, that, until
an amount sufficient to reduce the outstanding principal
amounts of the Class A Notes to zero has been deposited in
the Class A Note Distribution Account, the Class B
Noteholders' Principal Distributable Amount shall be zero;
PROVIDED, FURTHER, that the sum of clauses (i) and (ii)
shall not exceed the outstanding principal amount of the
Class B Notes, and on the Class B Note Final Scheduled
Distribution Date, the Class B Noteholders' Principal
Distributable Amount will include the amount necessary
(after giving effect to the other amounts to be deposited in
the Class B Note Distribution Account on such Distribution
Date and allocable to principal) to reduce the outstanding
principal amount of the Class B Notes to zero.
"COLLECTION PERIOD" means, with respect to the first
Distribution Date, the calendar month ending on May 31,
1997, and with respect to each subsequent Distribution Date,
the preceding calendar month. See "Description of the
Transfer and Servicing Agreements--Distributions" herein.
"PRINCIPAL DISTRIBUTION AMOUNT" means, with respect to any
Distribution Date, the sum of the following amounts, without
duplication, with respect to the preceding Collection
Period: (i) that portion of all collections on the
Receivables (including any Liquidation Proceeds and any
amounts received from Dealers with respect to Receivables)
allocable to principal; (ii) the amount of Realized Losses
for the related Collection Period (except to the extent
included in (iii) below); and (iii) the Principal Balance of
each Receivable that the Servicer became obligated to
purchase or that the Seller became obligated to repurchase
during the related Collection Period (except to the extent
included in (i) above).
"REALIZED LOSSES" means, with respect to any Collection
Period, (i) the excess of the Principal Balance of the
Liquidated Receivables over Liquidation Proceeds for such
Collection Period to the extent allocable to principal and
(ii) amounts payable by Dealers with respect to Over-Rate
Receivables which are deemed uncollectible by the Servicer.
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"TOTAL DISTRIBUTION AMOUNT" means, with respect to any
Distribution Date, the sum of the aggregate collections
(including any Liquidation Proceeds, any Purchase Amounts
paid by the Seller and the Servicer and any amounts received
from Dealers with respect to Receivables) received in
respect of the Receivables during the related Collection
Period and Investment Earnings on the Trust Accounts during
such Collection Period. The Total Distribution Amount on any
Distribution Date shall exclude all payments and proceeds
(including any Liquidation Proceeds and any amounts received
from Dealers with respect to Receivables) of (i) any
Receivables the Purchase Amount of which has been included
in the Total Distribution Amount in a prior Collection
Period, (ii) any Liquidated Receivable after and to the
extent of the reassignment of such Liquidated Receivable by
the Trust to the Seller and (iii) any Servicer's Yield.
On each Distribution Date, all amounts on deposit in the
Class A Note Distribution Account will be distributed to the
Class A Noteholders, all amounts on deposit in the Class B
Note Distribution Account will be distributed to the Class B
Noteholders and all amounts on deposit in the Certificate
Distribution Account will be distributed to the Certifi-
cateholders. See "Description of the Transfer and Servicing
Agreements--Distributions" herein.
RESERVE ACCOUNT.............. The Seller will establish and maintain in the name of the
Indenture Trustee a reserve account (the "RESERVE ACCOUNT")
into which funds will be deposited from time to time as
described herein. Funds on deposit in the Reserve Account
will be available on each Distribution Date to cover
shortfalls in distributions of interest and principal on the
Notes to the extent described herein. The Reserve Account
will be created with an initial deposit by the Seller of
cash or Eligible Investments having a value of at least
$7,799,325. The amount initially deposited in the Reserve
Account is referred to as the "RESERVE ACCOUNT INITIAL
DEPOSIT." The Reserve Account Initial Deposit will be aug-
mented on each Distribution Date by the deposit therein of
the Total Distribution Amount remaining after payment of the
Servicing Fee and the Administration Fee and the deposit in
the Class A Note Distribution Account and the Class B Note
Distribution Account of amounts to be distributed to the
Noteholders on such Distribution Date up to an amount equal
to the excess of the Specified Reserve Account Balance over
the amount on deposit in the Reserve Account, and will be
further augmented on such Distribution Date by the deposit
therein of the Total Distribution Amount remaining after
payment of such amounts and the deposit in the Certificate
Distribution Account of amounts to be distributed to the
Certificateholders on such Distribution Date.
Amounts on deposit in the Reserve Account (after giving
effect to all distributions to be made from the Reserve
Account on such Distribution Date) in excess of the
Specified Reserve Account Balance for such Distribution Date
will be released from the Reserve Account to the Class A
Note Distribution Account and will be distributed first to
the Class A-1 Noteholders as a payment of principal (until
the Class A-1 Notes have been paid in full), then to the
Class A-2 Noteholders as a payment of principal (until the
Class A-2 Notes have been paid in full), then to the Class
A-3 Noteholders as a payment of principal (until the
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Class A-3 Notes have been paid in full), and then such
excess will be released to the Class B Note Distribution
Account to be distributed to the Class B Noteholders as a
payment of principal (until the Class B Notes have been paid
in full). The "SPECIFIED RESERVE ACCOUNT BALANCE" with
respect to any Distribution Date will be equal to the lesser
of (i) the outstanding aggregate principal amount of the
Notes and (ii) $7,799,325 (which is 2.25% of the Initial
Pool Balance). See "Description of the Transfer and
Servicing Agreements--Reserve Account" herein.
Funds will be withdrawn from amounts on deposit in the
Reserve Account to the extent that the Total Distribution
Amount remaining after the payment of the Servicing Fee (if
CFSC or an affiliate is not the Servicer) and the
Administration Fee and the deposit of the Class B
Noteholders' Interest Distributable Amount in the Class B
Note Distribution Account with respect to any Collection
Period is less than the Class A Noteholders' Distributable
Amount, and funds in the amount of such deficiency up to the
amount on deposit in the Reserve Account will be deposited
in the Class A Note Distribution Account. In addition, funds
will be withdrawn from amounts on deposit in the Reserve
Account to the extent that the portion of the Total
Distribution Amount remaining after the payment of the
Servicing Fee (if CFSC or an affiliate is not the Servicer)
and the Administration Fee and the deposit of the Class A
Noteholders' Distributable Amount in the Class A Note
Distribution Account is less than the Class B Noteholders'
Distributable Amount, and funds in the amount of such
deficiency up to the amount on deposit in the Reserve
Account will be deposited in the Class B Note Distribution
Account.
If the amount required to be withdrawn from the Reserve
Account to cover shortfalls in collections on the
Receivables on any Distribution Date exceeds the amount on
deposit in the Reserve Account on such date, a shortfall in
the amounts distributable to the Noteholders would result,
which could, in turn, increase the average life of the
Notes, or result in losses to Noteholders.
COLLECTION ACCOUNT........... The Servicer will be required to remit collections received
with respect to the Receivables during a Collection Period
on or before the business day preceding the related
Distribution Date to one or more accounts in the name of the
Indenture Trustee (collectively, the "COLLECTION ACCOUNT"),
except upon the occurrence of certain conditions described
herein (in which case such remittances will be required more
frequently). See "Description of the Transfer and Servicing
Agreements--Payments on Receivables" in the Prospectus.
Pursuant to the Sale and Servicing Agreement, the Servicer
will have the revocable power to instruct the Indenture
Trustee to withdraw the Total Distribution Amount on deposit
in the Collection Account and to apply such funds on each
Distribution Date in the priority set forth above under
"--Priority of Distributions."
MATURITY AND PREPAYMENT
CONSIDERATIONS.............. All of the Receivables are prepayable at any time. Each
prepayment will shorten the weighted average remaining term
of the Receivables and the weighted average life of the
Securities. Prepayments of principal will be included in the
Principal Distribution Amount and will be
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payable first to the Class A-1 Noteholders until the Class
A-1 Notes have been paid in full, then will be payable to
the Class A-2 Noteholders until the Class A-2 Notes have
been paid in full, then to the Class A-3 Noteholders until
the Class A-3 Notes have been paid in full, and then to the
Class B Noteholders until the Class B Notes have been paid
in full. See "Description of the Transfer and Servicing
Agreements-- Distributions" herein.
The rate of prepayments on the Receivables may be influenced
by a variety of economic, financial, climatic and other
factors, and under certain circumstances relating to
breaches of representations, warranties or covenants, the
Seller is obligated to repurchase Receivables from the
Trust. In addition, if the Servicer extends the final
scheduled payment date of a Receivable beyond May 31, 2003
(the "FINAL MATURITY DATE"), the Servicer is obligated to
purchase such Receivable from the Trust. The Servicer will
be permitted to refinance an existing Receivable for an
Obligor, so long as (a) the proceeds of such refinancing
would be used to repay such existing Receivable in full and
(b) such Obligor executes a new Installment Sales Contract
with respect to such Receivable. Any such new Installment
Sales Contract would not be the property of the Trust. The
purchase or refinancing of a Receivable by the Servicer will
result in the prepayment of the Principal Balance of such
Receivable and the subsequent prepayment of principal to the
Noteholders to the extent described above.
A higher than anticipated rate of prepayments will reduce
the aggregate principal balance of the Receivables more
quickly than expected and thereby reduce anticipated
aggregate interest payments on the Securities. Any
reinvestment risks resulting from a faster or slower
incidence of prepayment of Receivables will be borne
entirely by the Noteholders as set forth in the priority of
distributions herein. Such reinvestment risks include the
risk that interest rates may be lower at the time such
holders received payments from the Trust than interest rates
would otherwise have been had such prepayments not been made
or had such prepayments been made at a different time.
Holders of Notes should consider, in the case of Notes
purchased at a discount, the risk that a slower than
anticipated rate of principal payments on the Receivables
could result in an actual yield that is less than the
anticipated yield and, in the case of any Notes purchased at
a premium, the risk that a faster than anticipated rate of
principal payments on the Receivables could result in an
actual yield that is less than the anticipated yield.
SERVICING FEE................ The Servicer shall receive a fee for each Collection Period
equal to 1.0% per annum (the "SERVICING FEE RATE") of the
Pool Balance as of the first day of such Collection Period
(the "SERVICING FEE") (in accordance with the priority of
distributions set forth herein), plus any Servicer's Yield
for such Collection Period. The Servicer's Yield represents
amounts actually collected by the Servicer on account of
late fees, taxes, and other charges, as described herein.
All collections from an Obligor will be applied first to any
overdue scheduled payment, then to the current scheduled
payment and then to late fees, taxes, and other charges. The
Servicing Fee with respect to each Collection Period will
decline over the term of the Notes as the Pool Balance
decreases. See
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"Description of the Transfer and Servicing
Agreements--Servicing Compensation and Payment of Expenses"
herein and in the Prospectus.
CUSTODIAL AGREEMENT.......... The First National Bank of Chicago, as custodian (the
"CUSTODIAN"), will be responsible for maintaining custody of
the Installment Sales Contracts and any related Dealer
Agreements pursuant to a custodial agreement, to be dated as
of May 1, 1997 (the "CUSTODIAL AGREEMENT"), among CFSC, the
Seller, the Issuer and The First National Bank of Chicago,
in its capacity as Indenture Trustee and as Custodian. See
"Risk Factors--PERFECTION OF INTERESTS IN RECEIVABLES AND IN
FINANCED EQUIPMENT" and "Certain Legal Aspects of the
Receivables--Sale and Transfer of Receivables" herein and in
the Prospectus.
ADMINISTRATION AGREEMENT..... CFSC, in its capacity as administrator (the
"ADMINISTRATOR"), will enter into an agreement (the
"ADMINISTRATION AGREEMENT") with the Trust and the Indenture
Trustee. As compensation for the performance of the
Administrator's obligations under the 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 $500 per month (the
"ADMINISTRATION FEE"). See "Description of the Transfer and
Servicing Agreements--Administration Agreement" in the
Prospectus.
CLEARANCE AND SETTLEMENT..... Noteholders may elect to hold their Notes through any of DTC
(in the United States) or Cedel or Euroclear (in Europe).
Transfers within DTC, Cedel or Euroclear, as the case may
be, will be in accordance with the usual rules and operating
procedures of the relevant system. Cross-market transfers
between persons holding directly or indirectly through DTC,
on the one hand, and counterparties holding directly or
indirectly through Cedel or Euroclear, on the other, will be
effected in DTC through the relevant Depositaries of Cedel
or Euroclear. See "Issuance of the Securities--Book-Entry
Registration" in the Prospectus.
CERTAIN LEGAL ASPECTS
OF THE RECEIVABLES.......... The transfer of ownership of the Receivables from CFSC to
the Seller and from the Seller to the Trust, and the
granting of a security interest in the Receivables by the
Trust to the Indenture Trustee, will in each case be
perfected by the Custodian, on behalf of the applicable
assignee, taking possession of the Installment Sales
Contracts and any related Dealer Agreements (the
"RECEIVABLES FILES") pursuant to the Custodial Agreement.
The Custodian will maintain possession of the Receivables
Files in a space leased by the Custodian proximate to the
principal executive office of the Seller. CFSC will indicate
on its computer records that the Receivables have been sold
to the Seller and by the Seller to the Trust. Each
Receivables File will contain the single original related
Installment Sales Contract (as represented by CFSC in the
Purchase Agreement). UCC financing statements will not be
filed to perfect these transfers of ownership or such grant
of a security interest, and CFSC will not stamp the physical
Receivables Files or the Installment Sales Contracts.
Although steps will be taken to ensure that the Seller does
not obtain possession or control of the Installment Sales
Contracts, should a court find that the Seller did have
possession or control of such Installment Sales Contracts,
the interests of the Trust
</TABLE>
S-18
<PAGE>
<TABLE>
<S> <C>
and the Indenture Trustee in the Receivables would in all
likelihood be unperfected. See "Risk Factors--PERFECTION OF
INTERESTS IN RECEIVABLES AND IN FINANCED EQUIPMENT" and
"Certain Legal Aspects of the Receivables--Sale and Transfer
of the Receivables" herein and in the Prospectus.
TAX STATUS................... In the opinion of Orrick, Herrington & Sutcliffe LLP
("SPECIAL TAX COUNSEL"), for federal income tax purposes the
Notes will be characterized as debt and the Trust will not
be characterized as an association (or publicly traded
partnership) taxable as a corporation. Each Noteholder, by
the acceptance of a Note, will agree to treat the Notes as
indebtedness. Alternative characterizations of the Trust are
possible, but should not result in materially adverse tax
consequences to Noteholders. See "Certain Federal Income Tax
Considerations" in the Prospectus.
STATE TAX CONSIDERATIONS..... In the opinion of Tuke Yopp & Sweeney ("TENNESSEE TAX
COUNSEL"), with respect to corporate Noteholders, the same
tax characterizations should apply for purposes of Tennessee
income tax as for federal income tax purposes. Non-corporate
Noteholders who are residents of Tennessee will be subject
to taxation on income distributions with respect to the
Notes at the rate of six percent (6%). In the opinion of
Tennessee Tax Counsel, the Trust should not be subject to
taxation in Tennessee. See "Certain State Tax
Considerations" in the Prospectus for additional information
concerning the application of Tennessee tax laws to the
Trust and the Securities.
ERISA CONSIDERATIONS......... Subject to the considerations described in "ERISA
Considerations" herein and in the Prospectus, the Notes are
eligible for purchase with "plan assets" of any Plan (as
defined below) ("PLAN ASSETS"). A fiduciary or other person
contemplating purchasing the Notes on behalf of or with Plan
Assets of any employee benefit plan or other plan or
arrangement (including but not limited to an insurance
company general account) subject to Title I of 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") (collectively, "PLANS"),
should carefully review with its legal advisors whether the
purchase or holding of the Notes could give rise to a
transaction prohibited or not otherwise permissible under
ERISA or Section 4975 of the Code.
LEGAL INVESTMENT............. The Class A-1 Notes will be eligible securities for purchase
by money market funds under paragraph (a)(9) of Rule 2a-7
under the Investment Company Act of 1940, as amended.
RATINGS OF THE NOTES......... It is a condition to the issuance of the Notes that the
Class A Notes be rated in the highest investment rating
category by each of Standard & Poor's Ratings Services
("S&P") and Moody's Investors Service ("MOODY'S" and with
S&P, each, a "RATING AGENCY") and that the Class B Notes be
rated at least "A" by S&P and at least "A" by Moody's. See
"Risk Factors--RATINGS OF THE NOTES" herein and "Ratings" in
the Prospectus.
</TABLE>
S-19
<PAGE>
RISK FACTORS
Investors should consider, among other things, the matters discussed under
"Risk Factors" in the Prospectus and the following risk factors in connection
with the purchase of the Notes.
LIMITED LIQUIDITY. There is currently no secondary market for the Notes.
Each Underwriter currently intends to make a market in the Notes for which it is
an Underwriter, but is under no obligation to do so. There can be no assurance
that a secondary market will develop or, if a secondary market does develop,
that it will provide the Noteholders with liquidity of investment or that it
will continue for the life of the Notes.
PERFECTION OF INTERESTS IN RECEIVABLES AND IN FINANCED EQUIPMENT. The
transfer of ownership of the Receivables from CFSC to the Seller and from the
Seller to the Trust, and the granting of the security interest in the
Receivables by the Trust to the Indenture Trustee, will in each case be
perfected by the Custodian, on behalf of the applicable assignee, taking
possession of the Installment Sales Contracts and any related Dealer Agreements
(the "RECEIVABLES FILES") pursuant to the Custodial Agreement. The Custodian
will maintain possession of the Receivables Files in a space leased by the
Custodian proximate to the principal executive office of the Seller. CFSC will
indicate on its computer records that the Receivables have been sold to the
Seller and by the Seller to the Trust. Each Receivables File will contain the
single original Installment Sales Contract related to a Receivable (as
represented by CFSC in the Purchase Agreement). UCC financing statements will
not be filed to perfect these transfers of ownership or such grant of a security
interest, and CFSC will not stamp the physical Receivables Files or the
Installment Sales Contracts. Although steps will be taken to ensure that the
Seller does not obtain possession or control of the Installment Sales Contracts,
should a court find that the Seller did have possession or control of such
Installment Sales Contracts, the interests of the Trust and the Indenture
Trustee in the Receivables would in all likelihood be unperfected, and
distributions to Noteholders may be adversely affected.
Should the related Indenture Trustee's security interest and/or the Trust's
ownership interest in the Receivables be found to be unperfected, such interests
may be inferior to the interests of (i) the Seller or CFSC, (ii) any creditors
of the Trust, the Seller or CFSC, or (iii) a subsequent purchaser of
Receivables, in the event the Trust, the Seller or CFSC fraudulently or
inadvertently sells a Receivable to such purchaser who had no notice of the
prior transfers thereof to such Indenture Trustee, the Trust or the Seller and
such purchaser takes possession of the related physical contract evidencing such
Receivable. As a result of such lack of perfection, the Seller, the Trust and
the holders of Securities may not be entitled to receive all or a portion of the
distributions relating to, or have any other rights with respect to, the
Receivables.
SUBORDINATION; LIMITED ASSETS. Distributions of interest on the Class B
Notes will be subordinated in priority of payment to interest on the Class A
Notes. In addition, the Class B Noteholders will not receive any distributions
of principal until the Class A Notes have been paid in full.
The Trust does 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. Amounts to be deposited in the Reserve Account and the
overcollateralization represented by the Certificates are limited in amount. In
addition, funds in the Reserve Account will be available on each Distribution
Date to cover shortfalls in distributions of interest and principal on the Class
A Notes prior to the application thereof to cover shortfalls on the Class B
Notes. If the Reserve Account is depleted, the Trust will depend solely on
current distributions on the Receivables to make payments on the Notes.
If an Event of Default under the Indenture occurs and the maturity of the
Notes is accelerated, the Indenture Trustee will have the right or be required
in certain circumstances to sell the Receivables to pay the principal of, and
accrued interest on, the Notes. Upon the occurrence of an Event of Default, the
Class B Noteholders will not have any right to direct or to consent to any
actions by the Indenture Trustee until the Class A Notes have been paid in full.
There is no assurance that the proceeds of such sale will be equal to or greater
than the aggregate outstanding principal balance of the Notes plus accrued
interest. Because neither interest nor principal is distributed to Class B
Noteholders upon sale of the Receivables following an Event of Default and
acceleration of the Notes under the Indenture until the Class A Notes have been
paid in full,
S-20
<PAGE>
the interest of the Class B Noteholders and the Class A Noteholders may
conflict, and the exercise by the Indenture Trustee of its right to sell the
Receivables or exercise other remedies may cause the Class B Noteholders to
suffer a loss of all or part of their investment. See "Description of the
Notes--The Indenture--EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT" herein
and in the Prospectus.
In the event that a Servicer Default occurs, the Indenture Trustee or the
Class A Noteholders evidencing not less than 25% of the outstanding principal
amount of the Class A Notes, as described under "Description of the Transfer and
Servicing Agreements--Rights Upon Servicer Default" herein and in the
Prospectus, may remove the Servicer without the consent of the Owner Trustee or
any of the Class B Noteholders. The Owner Trustee or the Class B Noteholders
will not have the ability to remove the Servicer if a Servicer Default occurs
until the Class A Notes have been paid in full. In addition, the Class A
Noteholders have the ability, with certain specified exceptions, to waive
defaults by the Servicer, including defaults that could materially and adversely
affect the Class B Noteholders. If CFSC or an affiliate is no longer the
Servicer, payment of the Servicing Fee will be made prior to distributions to
Class A Noteholders and Class B Noteholders. See "Description of the Transfer
and Servicing Agreements--Waiver of Past Defaults" herein and in the Prospectus.
RATINGS OF THE NOTES. It is a condition to the issuance of the Notes that
the Class A Notes be rated in the highest investment rating category by each of
S&P and Moody's and that the Class B Notes be rated at least "A" by S&P and at
least "A" by Moody's. A rating is not a recommendation to purchase, hold or sell
securities, inasmuch as such rating does not comment as to market price or
suitability for a particular investor. The ratings of the Notes address the
likelihood of the timely payment of interest on and the ultimate payment of
principal of the Notes pursuant to their terms. There can be no assurance that a
rating will remain for any given period of time or that a rating will not be
lowered or withdrawn entirely by a Rating Agency if in its judgment
circumstances in the future so warrant.
FORMATION OF THE TRUST
THE TRUST
The Issuer, Caterpillar Financial Asset Trust 1997-A, 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,
owning and managing the Receivables and the other assets of the Trust and
proceeds therefrom, (ii) issuing and making payments on the Notes, (iii) issuing
and making payments on the Certificates and (iv) engaging in other activities
that are necessary, suitable or convenient to accomplish the foregoing or are
incidental thereto or connected therewith.
The Trust will initially be capitalized with equity of $8,666,681 (excluding
amounts deposited in the Reserve Account), which represents the initial
principal balance of the Certificates which will be sold to the Seller. The
proceeds from the initial sale of the Certificates, together with the proceeds
from the initial sale of the Notes, will be used by the Trust to purchase the
Receivables from the Seller pursuant to the Sale and Servicing Agreement. The
Servicer will initially service the Receivables pursuant to the Sale and
Servicing Agreement, and will be compensated for acting as the Servicer. See
"Description of the Transfer and Servicing Agreements--Servicing Compensation
and Payment of Expenses" herein and in the Prospectus. Each Receivables File
will contain the single original related Installment Sales Contract (as
represented by CFSC in the Purchase Agreement). The Custodian will act as
custodian for the Receivables Files for the Seller, the Owner Trustee and the
Indenture Trustee and will take possession of the Receivables Files at a
location leased by the Custodian proximate to the principal executive office of
the Seller. CFSC will indicate on its computer records that the Receivables have
been sold to the Seller and by the Seller to the Trust. UCC financing statements
will not be filed to evidence these transfers, and CFSC will not stamp the
physical Receivables Files to reflect the sale and assignment of the Receivables
to the Trust. See "Risk Factors-- PERFECTION OF INTERESTS IN RECEIVABLES AND IN
FINANCED EQUIPMENT" herein and in the Prospectus and "Certain Legal Aspects of
the Receivables--Sale and Transfer of Receivables" herein and in the Prospectus
and "Certain Legal Aspects of the Receivables--Security Interest in Equipment"
in the Prospectus.
S-21
<PAGE>
If the protections provided to Class A Noteholders in the Trust by the
subordination of the Class B Notes and the Certificates, the protection provided
to the Class B Noteholders in the Trust by the subordination of the
Certificates, and the protection provided to the holders of the Notes by the
availability of the funds in the Reserve Account are insufficient, the Trust
must rely solely on the payments from the Obligors on the Receivables, and the
proceeds from the repossession and sale of Financed Equipment and certain other
cross-collateralized equipment 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 Receivables or Financed Equipment as a result
of occurrences after the Closing Date, and the risk of fraud or negligence of
CFSC or (under certain circumstances) the related Dealer, may affect the Trust's
ability to realize on the collateral securing the Receivables, and thus the
proceeds to be distributed to Noteholders with respect to the Notes may be
reduced. See "Risk Factors--PERFECTION OF INTERESTS IN RECEIVABLES AND IN
FINANCED EQUIPMENT" herein and in the Prospectus, and "Certain Legal Aspects of
the Receivables" in the Prospectus.
CAPITALIZATION OF THE TRUST
The following table illustrates the capitalization of the Trust as of the
Cut-off Date, as if the issuance and sale of the Notes offered hereby and the
Certificates had taken place on such date:
<TABLE>
<S> <C>
Class A-1 % Asset Backed Notes................................... $ 88,000,000
Class A-2 % Asset Backed Notes.................................... 128,000,000
Class A-3 % Asset Backed Notes.................................... 108,100,000
Class B % Asset Backed Notes...................................... 13,870,000
% Asset Backed Certificates........................................ 8,666,681
------------
Total............................................................... $346,636,681
------------
------------
</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 shall pay the fees of the Owner Trustee and shall reimburse it
for certain liabilities and expenses. In the ordinary course of its business,
the Owner Trustee and its affiliates have engaged and may in the future engage
in commercial banking or financial advisory transactions with CFSC and its
affiliates.
THE RECEIVABLES POOL
The pool of Receivables (the "RECEIVABLES POOL") will include the
Receivables purchased pursuant to the Purchase Agreement with an aggregate
Principal Balance of $346,636,681 as of May 1, 1997 (the "CUT-OFF DATE").
The Receivables were selected from the entire U.S. ISC Portfolio (other than
receivables previously sold to trusts under prior asset-backed securitizations
which CFSC continues to service which are otherwise included in the U.S. ISC
Portfolio) using several criteria, some of which are set forth in the Prospectus
under "The Receivables Pools," as well as that each Receivable (i) has a stated
maturity of not earlier than October 1997 or later than April 2002, (ii) has an
annual percentage rate of interest (based on its Principal Balance) ("APR") of
at least 7.00% and (iii) is not more than 31 days past due as of the Cut-off
Date. As of the Cut-off Date, no Obligor on any Receivable was noted in the
related records of the Servicer as being in default under the related
Installment Sales Contract or as being the subject of a bankruptcy proceeding.
No selection procedures believed by CFSC or the Seller to be adverse to the
Noteholders were used in selecting the Receivables.
The composition of the Receivables and the distribution of the Receivables
by APR, new and used equipment, equipment type, industry application, payment
frequency and remaining Principal Balance as of the Cut-off Date are set forth
in the following tables. Amounts and percentages are based on the Principal
Balance of the Receivables as of the Cut-off Date. The "PRINCIPAL BALANCE" of a
Receivable means its original principal balance, as reduced by principal
payments applied in accordance with the actuarial
S-22
<PAGE>
method. The Principal Balance of an Over-Rate Receivable includes the
unamortized purchase premium paid by CFSC to Dealers. As of the Cut-off Date,
the aggregate current Principal Balance of the Receivables is the Initial Pool
Balance.
COMPOSITION OF THE RECEIVABLES
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
WEIGHTED AVERAGE AVERAGE
AVERAGE APR ORIGINAL REMAINING TERM
OF NUMBER OF TERM (RANGE) (RANGE) (IN AVERAGE
RECEIVABLES POOL BALANCE RECEIVABLES (IN MONTHS) MONTHS) (1) PRINCIPAL BALANCE (RANGE)
- ------------- ----------------- ------------- ------------ -------------- --------------------------------
<S> <C> <C> <C> <C> <C>
8.47% $ 346,636,681.02 4,119 48(12--60) 42(5--60) $84,156 ($5,052-$5,694,861)
</TABLE>
- -------------------
(1) Based on scheduled payments and assuming no prepayments of the Receivables.
DISTRIBUTION BY APR OF THE RECEIVABLES
<TABLE>
<CAPTION>
PERCENT OF
AGGREGATE
NUMBER OF AGGREGATE PRINCIPAL
APR RANGE (1) RECEIVABLES PRINCIPAL BALANCE BALANCE
- ----------------------------------------------------------- ------------- ----------------- -----------
<S> <C> <C> <C>
7.00 - 7.49............................................. 709 $ 73,186,710.77 21.11
7.50 - 7.99............................................. 518 54,590,658.32 15.75
8.00 - 8.49............................................. 231 37,263,674.51 10.75
8.50 - 8.99............................................. 532 62,776,387.50 18.11
9.00 - 9.49............................................. 843 62,712,617.38 18.09
9.50 - 9.99............................................. 712 37,601,678.16 10.85
10.00 - 10.49............................................. 366 14,134,714.37 4.08
10.50 - 10.99............................................. 180 3,588,474.86 1.04
11.00 and over ............................................ 28 781,765.15 0.22
----- ----------------- -----------
Total.................................................... 4,119 $ 346,636,681.02 100.00%
----- ----------------- -----------
----- ----------------- -----------
</TABLE>
- -------------------
(1) CFSC, in conjunction with Caterpillar and its subsidiaries, periodically
offers below market rate financing to Obligors under merchandising programs.
Caterpillar, at the outset of a subsidized transac-
tion, remits to CFSC an amount equal to the interest differential, which
amount is recognized as income over the term of the related contract. The
APR of any Receivable does not take into account, and the Trust does not
have an interest in, any of such amounts remitted to CFSC by Caterpillar
with respect to these Receivables.
DISTRIBUTION BY NEW AND USED FINANCED EQUIPMENT
<TABLE>
<CAPTION>
PERCENT OF
AGGREGATE AGGREGATE
NUMBER OF PRINCIPAL PRINCIPAL
RECEIVABLES BALANCE BALANCE
------------- ----------------- -----------
<S> <C> <C> <C>
New Equipment (1).......................................... 1,550 $ 98,381,891.19 28.38%
Used Equipment............................................. 2,569 248,254,789.83 71.62%
----- ----------------- -----------
Total.................................................... 4,119 $ 346,636,681.02 100.00%
----- ----------------- -----------
----- ----------------- -----------
</TABLE>
- -------------------
(1) Units not previously delivered or sold; rental units of less than 12 months
and 1,000 service meter hours; and units of the current or previous model
year and serial number.
S-23
<PAGE>
DISTRIBUTION OF THE RECEIVABLES BY TYPE OF FINANCED EQUIPMENT
<TABLE>
<CAPTION>
PERCENT OF
AGGREGATE
NUMBER OF AGGREGATE PRINCIPAL
TYPE RECEIVABLES PRINCIPAL BALANCE BALANCE
- ----------------------------------------------------------- ------------- ----------------- -----------
<S> <C> <C> <C>
Construction Equipment..................................... 3,645 $ 331,742,985.06 95.70%
Lift Trucks................................................ 361 6,400,108.94 1.85
Paving Equipment........................................... 113 8,493,587.02 2.45
----- ----------------- -----------
Total.................................................... 4,119 $ 346,636,681.02 100.00%
----- ----------------- -----------
----- ----------------- -----------
</TABLE>
DISTRIBUTION BY INDUSTRY APPLICATION OF FINANCED EQUIPMENT
<TABLE>
<CAPTION>
PERCENT OF
AGGREGATE
NUMBER OF AGGREGATE PRINCIPAL
INDUSTRY RECEIVABLES PRINCIPAL BALANCE BALANCE
- ----------------------------------------------------------- ------------- ----------------- -----------
<S> <C> <C> <C>
Agriculture, Forestry and Fishing.......................... 247 $ 10,971,951.39 3.17%
Construction............................................... 2,716 225,850,383.13 65.15
Mining..................................................... 133 29,869,698.31 8.62
Manufacturing.............................................. 376 30,563,038.00 8.82
Transportation/Public Utilities............................ 148 12,652,197.59 3.65
Wholesale Trade............................................ 158 8,265,864.03 2.38
Other (1).................................................. 341 28,463,548.57 8.21
----- ----------------- -----------
Total.................................................... 4,119 $ 346,636,681.02 100.00%
----- ----------------- -----------
----- ----------------- -----------
</TABLE>
- -------------------
(1) Other includes retail, financial, insurance and real estate, services, and
public administration.
DISTRIBUTION OF THE RECEIVABLES BY PAYMENT FREQUENCY
<TABLE>
<CAPTION>
PERCENT OF
AGGREGATE
NUMBER OF AGGREGATE PRINCIPAL
TYPE RECEIVABLES PRINCIPAL BALANCE BALANCE
- ----------------------------------------------------------- ------------- ----------------- -----------
<S> <C> <C> <C>
Monthly.................................................... 3,409 $ 274,990,282.41 79.33%
Variable Frequency (1)..................................... 710 71,646,398.61 20.67
----- ----------------- -----------
Total.................................................... 4,119 $ 346,636,681.02 100.00%
----- ----------------- -----------
----- ----------------- -----------
</TABLE>
- -------------------
(1) "VARIABLE FREQUENCY RECEIVABLES" have monthly payment schedules but permit
the Obligors thereon to skip or reduce payments during certain specified
months which are predetermined at origination. The majority of skip or
reduced payments take place during months coinciding with the cash flow
patterns of the related Obligors. Although there can be no assurance that
the experience on the Variable Frequency Receivables will be comparable,
CFSC has not identified any cash flow pattern resulting from the existence
of Variable Frequency Receivables in the U.S. ISC Portfolio. The Seller
believes that the pattern of principal payments on the Notes will not be
materially affected by the inclusion of Variable Frequency Receivables in
the Trust. See "The Receivables Pools--The Retail Equipment Financing
Business--INSTALLMENT SALES CONTRACTS--CONTRACT TERMS" in the Prospectus.
S-24
<PAGE>
DISTRIBUTION OF THE RECEIVABLES BY REMAINING PRINCIPAL BALANCE AS OF THE CUT-OFF
DATE
<TABLE>
<CAPTION>
PERCENT OF
AGGREGATE
NUMBER OF AGGREGATE PRINCIPAL
REMAINING PRINCIPAL BALANCE RANGE RECEIVABLES PRINCIPAL BALANCE BALANCE
- ----------------------------------------------------------- ------------- ----------------- -----------
<S> <C> <C> <C>
Up to $25,000.............................................. 819 $ 12,139,825.91 3.50%
$ 25,001-$ 50,000......................................... 1,176 45,015,948.88 12.99
$ 50,001-$ 75,000......................................... 667 40,659,227.99 11.73
$ 75,001-$ 100,000......................................... 394 34,110,233.86 9.84
$100,001-$ 125,000......................................... 319 35,695,144.96 10.30
$125,001-$ 150,000......................................... 235 32,271,832.20 9.31
$150,001-$ 175,000......................................... 131 21,172,439.96 6.11
$175,001-$ 200,000......................................... 91 17,060,831.13 4.92
$200,001-$ 250,000......................................... 105 23,537,294.35 6.79
$250,001-$ 300,000......................................... 58 16,012,450.79 4.62
$300,001-$ 350,000......................................... 27 8,675,287.16 2.50
$350,001-$ 400,000......................................... 22 8,204,799.34 2.37
$400,001-$ 450,000......................................... 13 5,404,306.43 1.56
$450,001-$ 500,000......................................... 13 6,172,637.64 1.78
$500,001-$ 550,000......................................... 5 2,634,756.06 0.76
$550,001-$ 600,000......................................... 11 6,259,318.62 1.81
$600,001-$1,000,000........................................ 26 18,948,112.66 5.47
Over $1,000,000............................................ 7 $ 12,662,233.08 3.65
----- ----------------- -----------
Totals................................................... 4,119 $ 346,636,681.02 100.00%
----- ----------------- -----------
----- ----------------- -----------
</TABLE>
S-25
<PAGE>
GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF AGGREGATE PRINCIPAL AGGREGATE
STATE (1) RECEIVABLES BALANCE PRINCIPAL BALANCE
- ------------------------------------------------------------- ------------- -------------------- -----------------
<S> <C> <C> <C>
Alabama...................................................... 101 $ 10,908,878.83 3.15%
Alaska....................................................... 15 848,738.47 0.24
Arizona...................................................... 90 6,663,784.53 1.92
Arkansas..................................................... 72 4,875,388.31 1.41
California................................................... 308 23,174,904.65 6.69
Colorado..................................................... 20 1,692,994.87 0.49
Connecticut.................................................. 36 3,386,248.35 0.98
Delaware..................................................... 14 1,230,040.94 0.35
Florida...................................................... 282 23,002,298.70 6.64
Georgia...................................................... 143 13,845,758.68 3.99
Hawaii....................................................... 12 727,757.36 0.21
Idaho........................................................ 39 3,035,304.69 0.88
Illinois..................................................... 97 9,287,182.73 2.68
Indiana...................................................... 56 4,713,078.00 1.36
Iowa......................................................... 10 708,541.75 0.20
Kansas....................................................... 17 1,645,642.50 0.47
Kentucky..................................................... 89 8,774,003.80 2.53
Louisiana.................................................... 56 5,148,082.21 1.49
Maine........................................................ 4 74,983.33 0.02
Maryland..................................................... 24 2,074,149.24 0.60
Michigan..................................................... 206 12,029,250.60 3.47
Minnesota.................................................... 11 1,650,141.19 0.48
Mississippi.................................................. 63 4,287,380.37 1.24
Missouri..................................................... 59 4,073,277.57 1.18
Montana...................................................... 28 2,154,998.71 0.62
Nebraska..................................................... 14 1,224,179.87 0.35
Nevada....................................................... 69 8,753,165.56 2.53
New Jersey................................................... 178 14,994,283.44 4.33
New Mexico................................................... 38 2,626,305.25 0.76
New York..................................................... 144 18,477,653.96 5.33
North Carolina............................................... 177 12,677,091,30 3.66
North Dakota................................................. 1 57,173.22 0.02
Ohio......................................................... 226 15,525,065.47 4.48
Oklahoma..................................................... 33 2,834,392.65 0.82
Oregon....................................................... 138 11,075,370.34 3.20
Pennsylvania................................................. 257 18,310,356.48 5.28
Rhode Island................................................. 2 144,811.35 0.04
South Carolina............................................... 115 9,757,598.45 2.81
South Dakota................................................. 5 174,108.88 0.05
Tennessee.................................................... 108 12,069,648.87 3.48
Texas........................................................ 259 22,529,807.28 6.50
Utah......................................................... 109 7,889,306.88 2.28
Virginia..................................................... 145 18,594,157.53 5.36
Washington................................................... 129 9,247,090.91 2.67
West Virginia................................................ 31 3,332,967.18 0.96
Wisconsin.................................................... 55 3,675,689.93 1.06
Wyoming...................................................... 34 2,653,645.84 0.77
----- -------------------- ------
Total...................................................... 4,119 $ 346,636,681.02 100.00%
----- -------------------- ------
----- -------------------- ------
</TABLE>
- -------------------
(1) Based on billing addresses of Obligors.
Unless otherwise specified herein, references herein to percentages of the
Receivables refer in each case to the approximate percentage of the Initial Pool
Balance, based on the Principal Balances of the Receivables as of the Cut-off
Date, and after giving effect to all payments received prior to the Cut-off
Date.
S-26
<PAGE>
All of the Receivables were Installment Sales Contracts. 5.91% of the
Receivables were originated or arranged by Carter Machinery, a Dealer in Salem,
Virginia and the only Dealer owned by Caterpillar. In the aggregate 21.92% of
the Receivables were originated or arranged by the five largest Dealers. No
other Dealer originated or arranged more than 5.13% of the Receivables.
No single Obligor accounted for more than 1.64% of the Receivables, and the
five largest Obligors accounted for approximately 4.71% of the Receivables.
Approximately 93.93% of the Receivables have related Financed Equipment
manufactured by Caterpillar and the remaining approximately 6.07% of the
Receivables have related Financed Equipment manufactured by a variety of other
sources.
At origination CFSC confirms the applicable loan-to-value ratios of its
receivables. Because of the depreciating nature of the Financed Equipment, and
in light of CFSC's credit loss experience set forth herein with respect to the
U.S. ISC Portfolio, the Seller believes that statistical information relating to
original loan-to-value ratios of the Receivables is not material to investors in
the Notes.
Certain Receivables may be cross-collateralized, being secured by junior
liens on other items of equipment (which may or may not be Financed Equipment)
in addition to first priority liens on the related Financed Equipment, and
certain items of Financed Equipment may secure other receivables of CFSC on a
junior basis (which may or may not be Receivables). See "Certain Legal Aspects
of the Receivables--Cross-Collateralization" herein.
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
Set forth below is certain information concerning CFSC's experience
pertaining to delinquencies, repossessions and net losses on the entire United
States portfolio of installment sales contracts serviced by CFSC (including
receivables sold which CFSC continues to service) (the "U.S. ISC PORTFOLIO").
Generally, when an account becomes 120 days delinquent, accrual of finance
income is suspended, the collateral is repossessed and the account is designated
for litigation.
Delinquencies, repossessions and net losses on installment sales contracts
are affected by economic conditions generally. Total delinquencies had decreased
from 1992 to 1993 due to an improving U.S. economy and to CFSC's expansion of
its service center and regional office collection staff and enhanced collection
trading systems. Fluctuations in the level of repossessions and net losses from
1992 to 1996 reflect changes in economic conditions generally and in economic
conditions of industries which CFSC's customers serve.
Although the Seller believes that the composition of the Receivables in the
aggregate is representative of the U.S. ISC Portfolio there can be no assurance
that the delinquency, repossession and net loss experience on the Receivables
will be comparable to that set forth below or that delinquencies, repossessions
and net losses in the future will be comparable to those in the past.
S-27
<PAGE>
DELINQUENCY EXPERIENCE FOR THE U.S. ISC PORTFOLIO(1)(2)
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------------------------------------------------------------------------------
1992 1993 1994 1995
-------------------------- ------------------------ ------------------------ -----------
NUMBER OF NUMBER OF NUMBER OF NUMBER OF
CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS
------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Gross Portfolio.................. 9,833 $ 529.0 11,139 $ 638.4 13,692 $ 882.5 17,354
Unadjusted System Delinquency (3)
31-60 Days..................... 418 $ 28.5 407 $ 25.8 548 $ 27.8 665
over 60 Days................... 994 $ 26.7 418 $ 19.9 406 $ 20.2 504
Total Unadjusted System
Delinquencies.................. 1,412 $ 55.2 825 $ 45.7 954 $ 48.0 1,169
Total Unadjusted System
Delinquencies as a Percent of
the Gross Portfolio............. 14.36% 10.43 % 7.41 % 7.16 % 6.97 % 5.44 % 6.74%
Adjusted Delinquency (4)
31-60 Days..................... N/A N/A 225 $ 9.8 275 $ 12.0 396
over 60 Days................... N/A N/A 308 $ 10.7 271 $ 13.1 387
Total Adjusted Delinquencies..... N/A N/A 533 $ 20.5 546 $ 25.1 783
Total Adjusted Delinquencies as a
Percent of the Gross
Portfolio....................... N/A N/A 4.78 % 3.21 % 3.99 % 2.84 % 4.51%
<CAPTION>
AMOUNT
---------
<S> <C>
Gross Portfolio.................. $ 1,198.8
Unadjusted System Delinquency (3)
31-60 Days..................... $ 38.0
over 60 Days................... $ 38.3
Total Unadjusted System
Delinquencies.................. $ 76.3
Total Unadjusted System
Delinquencies as a Percent of
the Gross Portfolio............. 6.36%
Adjusted Delinquency (4)
31-60 Days..................... $ 17.1
over 60 Days................... $ 32.7
Total Adjusted Delinquencies..... $ 49.8
Total Adjusted Delinquencies as a
Percent of the Gross
Portfolio....................... 4.15%
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, 1996 AT MARCH 31, 1996 AT MARCH 31, 1997
---------------------- ---------------------- ----------------------
NUMBER OF NUMBER OF NUMBER OF
CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT
----------- --------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Gross Portfolio................................ 20,653 $ 1,269.4 18,400 $ 1,275.1 21,342 $ 1,337.4
Unadjusted System Delinquency (3)
31-60 Days................................... 633 $ 33.5 548 $ 31.4 746 $ 51.0
over 60 Days................................. 555 $ 25.6 594 $ 43.7 594 $ 27.5
Total Unadjusted System
Delinquencies................................. 1,188 $ 59.1 1,142 $ 75.1 1,340 $ 78.5
Total Unadjusted System
Delinquencies as a Percent of the
Gross Portfolio............................... 5.75% 4.66% 6.21 % 5.89% 6.28 % 5.87%
Adjusted Delinquency (4)
31-60 Days................................... 445 $ 20.3 334 $ 15.6 480 $ 26.0
over 60 Days................................. 457 $ 19.8 423 $ 33.2 499 $ 20.8
Total Adjusted Delinquencies................... 902 $ 40.1 757 $ 48.8 979 $ 46.8
Total Adjusted Delinquencies
as a Percent of the Gross Portfolio........... 4.37 % 3.16% 4.11 % 3.83% 4.59 % 3.50%
</TABLE>
- ------------------------
(1) Amounts and percentages are based on the gross amount of all unpaid
installments of principal and unearned finance charges scheduled to be paid
on each contract.
(2) Delinquent contracts that have been modified in accordance with CFSC's
credit policies may not be considered to be "delinquent" for purposes of
this table. Such modifications include extensions, restructurings with skip
payments, refinancings, changes of installment due dates, reductions of
interest rates, and partial buyouts. See "The Receivables Pools--The Retail
Equipment Financing Business--EXTENSION/REVISION PROCEDURES" in the
Prospectus. In addition, a contract is no longer considered delinquent and
is no longer included in the U.S. ISC Portfolio upon the repossession of
its related financed equipment. See "The Receivables Pools--The Retail
Equipment Financing Business--REPOSSESSION/WRITEOFF PROCEDURES" in the
Prospectus.
(3) A monthly contract is deemed to be "31-60" or "over 60" days past due if
the amount due is not collected by the last day of the succeeding or next
succeeding month, respectively (I.E., a payment due any time in January is
not considered "31-60" days past due unless the amount due remains
uncollected on February 28).
(4) Adjustments result primarily from the application of payments made but not
allocated by CFSC to the amount then outstanding under delinquent
contracts. Increases or decreases in the contract number or dollar amount
of contracts in a particular delinquency category result from either the
removal of contracts from a particular delinquent status or the shifting of
contracts from one delinquency category to another as a result of the
adjustment process.
S-28
<PAGE>
CREDIT LOSS/REPOSSESSION EXPERIENCE FOR THE U.S. ISC PORTFOLIO(1)
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
---------------------------------------- -------------------
1992 1993 1994 1995 1996 1996(5) 1997(5)
------ ------ ------ ------ -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Average Gross Portfolio Outstanding During the Period....... $574.6 $568.4 $738.5 $1,024.5 $1,214.6 $1,242.0 $1,308.7
Repossessions as a Percent of Average Gross Portfolio
Outstanding (2)............................................ 3.64% 2.66% 0.97% 0.98% 1.02% 0.87% 1.25 %
Net Losses as a Percent of Liquidations (3)(4).............. 1.46% 1.22% 0.42% 0.86% 0.51% 0.40% 0.27 %
Net Losses as a Percent of Average Gross Portfolio
Outstanding (4)............................................ 1.11% 0.79% 0.23% 0.45% 0.30% 0.19% 0.15 %
</TABLE>
- ------------------------
(1) Except as indicated, all amounts and percentages are based on the gross
amount of all unpaid installments of principal and unearned finance charges
scheduled to be paid on each contract.
(2) Repossessions until the third quarter of 1993 represented all unpaid
principal and finance charges accrued but not collected for contracts
repossessed and terminated during the period, and subsequent to the third
quarter of 1993 represented all unpaid principal and finance charges
accrued but not collected for contracts repossessed and either terminated
or in inventory.
(3) Liquidations represent a reduction in the outstanding balances of the
contracts as a result of cash payments and charge-offs.
(4) Net Losses are equal to the aggregate amount of principal and finance
charges accrued on all contracts which are determined to be uncollectible
plus repossession expenses less (i) in the case of repossessed (but not
liquidated) financed equipment, the estimated proceeds of liquidation of
such equipment, and (ii) in the case of liquidated financed equipment, the
actual proceeds of liquidation of such equipment. With respect to Financed
Equipment which is repossessed in one calendar year and sold in another,
the Net Loss figures for the year of repossession include CFSC's estimate
of loss after giving effect to its estimate of the liquidation proceeds,
and the Net Loss figures in the subsequent calendar year are increased to
reflect the amount by which actual liquidation proceeds are less than such
estimate or are decreased to reflect the amount by which actual liquidation
proceeds exceed such estimate. The Trust receives proceeds of liquidations
but will not have the benefit of subsequent amounts received from Obligors
or others (except for recourse payments from Dealers) with respect to a
contract after the related financed equipment is sold and the related
contract is terminated. The Net Loss figures above give effect to payments
by Dealers on a limited number of the contracts which provide for recourse
to the related Dealers. See "The Receivables Pools--The Retail Equipment
Financing Business--DEALER AGREEMENTS" in the Prospectus and "Certain Legal
Aspects of the Receivables--Dealer Recourse Receivables" herein.
(5) Rates have been annualized.
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. The Class A-2 Noteholders will not receive any
principal payments until the Class A-1 Notes are paid in full, the Class A-3
Noteholders will not receive any principal payments until the Class A-2 Notes
are paid in full and the Class B Noteholders will not receive any principal
payments until the Class A-3 Notes are paid in full. See "Description of the
Notes-- The Class A-2 Notes, the Class A-3 Notes and the Class B Notes--PAYMENTS
OF PRINCIPAL" herein. In addition, on each Distribution Date, the Class A-1
Noteholders until paid in full, then the Class A-2 Noteholders until paid in
full, then the Class A-3 Noteholders until paid in full, and then the Class B
Noteholders until paid in full, are entitled to receive amounts on deposit in
the Reserve Account in excess of the Specified Reserve Account Balance for such
Distribution Date as an accelerated payment of principal.
No principal payments on the Class B Notes will be made prior to the
Distribution Date on which the principal amounts of the Class A Notes have been
reduced to zero, See "Description of the Transfer and Servicing
Agreements--Distributions" and "--Reserve Account" herein. If an Event of
Default has occurred and the maturity of the Class A Notes has been accelerated,
the Class B Noteholders will not be entitled to receive any distributions of
interest or principal until the Class A Notes have been paid in full.
S-29
<PAGE>
As the rate of payment of principal of the Notes depends primarily on the
rate of payment (including prepayments) of the aggregate Principal Balance of
the Receivables, final payment of each Class of the Notes could occur
significantly earlier than their respective final scheduled Distribution Dates.
The Servicer will be permitted to extend the final scheduled payment date of a
Receivable; PROVIDED, HOWEVER, if the Servicer extends the final scheduled
payment date of a Receivable beyond the Final Maturity Date, the Servicer will
be obligated to purchase such Receivable from the Trust. Further, the Servicer
will be permitted to refinance an existing Receivable for an Obligor, so long as
(a) the proceeds of such refinancing would be used to repay such existing
Receivable in full and (b) such Obligor executes a new Installment Sales
Contract with respect to such Receivable. The purchase or refinancing of a
Receivable by the Servicer will result in the prepayment of the Principal
Balance of such Receivable to the Trust and may result in the reduction of the
weighted average life of the Notes. Any extensions of Receivables which do not
result in the purchase by the Servicer of such Receivables may lengthen the
weighted average remaining term of the Receivables and the weighted average life
of the Notes. See "Description of the Transfer and Servicing Agreements--Sale
and Assignment of Receivables" herein and in the Prospectus and "The Receivables
Pools--The Retail Equipment Financing Business--EXTENSION/REVISION PROCEDURES"
in the Prospectus. Noteholders will bear the risk of being able to reinvest
principal payments of the Notes at yields at least equal to the yield on their
respective Notes.
POOL FACTORS AND TRADING INFORMATION
Each of the "CLASS A-1 NOTE POOL FACTOR," the "CLASS A-2 NOTE POOL FACTOR"
and the "CLASS A-3 NOTE POOL FACTOR" is a seven-digit decimal which the Servicer
will compute each month, indicating the remaining outstanding principal amount
of the Class A-1 Notes, the Class A-2 Notes or the Class A-3 Notes as of the
related Distribution Date, as a fraction of the initial outstanding principal
amount of the Class A-1 Notes, the Class A-2 Notes or the Class A-3 Notes, as
applicable. Each of the Class A-1 Note Pool Factor, the Class A-2 Note Pool
Factor and the Class A-3 Note Pool Factor will be 1.0000000 as of the Closing
Date, and thereafter will decline to reflect reductions in the outstanding
principal amount of the Class A-1 Notes, the Class A-2 Notes or the Class A-3
Notes, as the case may be. A Class A-1 Noteholder's portion of the aggregate
outstanding principal amount of the Class A-1 Notes is the product of (i) the
original denomination of the Class A-1 Noteholder's Note and (ii) the Class A-1
Note Pool Factor, a Class A-2 Noteholder's portion of the aggregate outstanding
principal amount of the Class A-2 Notes is the product of (i) the original
denomination of the Class A-2 Noteholder's Note and (ii) the Class A-2 Note Pool
Factor and a Class A-3 Noteholder's portion of the aggregate outstanding
principal amount of the Class A-3 Notes is the product of (i) the original
denomination of the Class A-3 Noteholder's Note and (ii) the Class A-3 Note Pool
Factor.
The "CLASS B NOTE POOL FACTOR" is a seven-digit decimal which the Servicer
will compute each month, indicating the remaining outstanding principal amount
of the Class B Notes as of the related Distribution Date, as a fraction of the
initial outstanding principal amount of the Class B Notes. The Class B Note Pool
Factor will be 1.0000000 as of the Closing Date, and thereafter will decline to
reflect reductions in the outstanding principal amount of the Class B Notes. A
Class B Noteholder's portion of the outstanding principal amount of the Class B
Notes is the product of (i) the original denomination of the Class B
Noteholder's Class B Note and (ii) the Class B Note Pool Factor.
Pursuant to the Indenture, the Noteholders of record will receive monthly
reports concerning the payments received on the Receivables, the Pool Balance,
the Class A-1 Note Pool Factor, the Class A-2 Note Pool Factor, the Class A-3
Note Pool Factor and the Class B Note Pool Factor and various other items of
information. Noteholders of record during any calendar year will be furnished
information for tax reporting purposes not later than the latest date permitted
by law. See "Description of the Transfer and Servicing Agreements--Reports to
Securityholders" in the Prospectus.
S-30
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SOURCES OF CAPITAL AND LIQUIDITY
The Trust's primary sources of capital will be the net proceeds of the
offering of the Notes. See "Formation of the Trust--Capitalization of the Trust"
herein.
The Trust's primary sources of liquidity will be payments on the Receivables
and amounts on deposit in the Reserve Account. For a discussion of CFSC's
experience pertaining to delinquencies, repossessions and net losses. See "The
Receivables Pool--Delinquencies, Repossessions and Net Losses" and "Description
of the Transfer and Servicing Agreements--Reserve Account" herein.
RESULTS OF OPERATIONS
The Trust is newly formed and, accordingly, has no results of operations as
of the date of this Prospectus Supplement. Because the Trust does not have any
operating history, there has not been included in this Prospectus Supplement any
historical or pro forma ratio of earnings to fixed charges. The earnings on the
Receivables and other assets owned by the Trust, the interest costs of the Notes
and the related operating expenses will determine the Trust's results of
operations in the future. The income generated from the Trust's assets will be
used to pay principal and interest on the Notes, related operating costs and
expenses of the Trust (to the extent not paid by the Servicer) and distributions
to the Certificateholders. The principal operating expenses of the Trust are
expected to be the Servicing Fee and the Administration Fee.
USE OF PROCEEDS
The net proceeds from the sale of Notes and the Certificates will be applied
to the purchase of the Receivables from the Seller and to make the Seller's
initial deposit to the Reserve Account. The Seller will apply its net proceeds
to the purchase of the Receivables from CFSC.
THE SELLER, CATERPILLAR AND THE SERVICER
For a general discussion of the Seller, Caterpillar and the Servicer, see
"The Seller, Caterpillar and the Servicer" in the Prospectus.
CATERPILLAR INC.
Caterpillar reported profits of $1,361 million on sales and revenues of
$16.5 billion for the year ended December 31, 1996 as compared with profits of
$1,136 million on sales and revenues of $16.1 billion for the year ended
December 31, 1995. As used herein, the term "CATERPILLAR" means Caterpillar Inc.
and its consolidated subsidiary companies, unless the context otherwise
requires.
CATERPILLAR FINANCIAL SERVICES CORPORATION
CFSC currently offers the following types of retail financing plans: (1)
non-tax (financing) leases; (2) installment sales contracts; (3) tax-oriented
leases; (4) customer loans; (5) dealer loans; and (6) governmental
lease-purchase contracts. CFSC also currently offers wholesale financing to
Caterpillar Dealers. At December 31, 1996, the percentages of total value of
CFSC's portfolio represented by these financing plans were as follows: non-tax
(financing) leases, 26%; installment sales contracts, 20%; tax-oriented leases,
19%; customer loans, 19%; wholesale financing, 7%; dealer loans, 6%; and
governmental lease-purchase contracts, 3%.
At December 31, 1996, CFSC had 576 full-time employees and serviced 36,683
accounts, including approximately $6.4 billion in gross finance receivables. In
the United States, as of December 31, 1996, there were 64 independently owned
Dealers and one Dealer that is owned by Caterpillar.
S-31
<PAGE>
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
Securities. The following, as well as other pertinent information included
elsewhere in this Prospectus Supplement and in the Prospectus, summarizes the
material terms of the Notes and the Indenture. The summary does not purport to
be complete and is qualified in its entirety by reference to the provisions of
the Notes and the Indenture. The following summary supplements, and to the
extent inconsistent therewith replaces, the description of the general terms and
provisions of the Notes of any given series and the related Indenture set forth
in the Prospectus, to which description reference is hereby made.
THE CLASS A-1 NOTES
PAYMENTS OF INTEREST. The Class A-1 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
amount of the Class A-1 Notes will accrue at the rate of % per annum (the
"CLASS A-1 NOTE RATE") (calculated on the basis of a 360-day year and the actual
number of days elapsed). Interest on the outstanding principal amount of the
Class A-1 Notes will accrue from and including the most recent Distribution Date
on which interest has been paid (or, in the case of the initial Distribution
Date, from and including the Closing Date) to but excluding the following
Distribution Date and will be payable to the Class A-1 Noteholders monthly on
each Distribution Date commencing June 25, 1997. "DISTRIBUTION DATE" shall mean
the 25th day of each month or, if any such date is not a business day, on the
next succeeding business day. Interest accrued as of any Distribution Date but
not paid on such Distribution Date will be due on the next Distribution Date,
together with interest, to the extent permitted by law, on such amount at the
Class A-1 Note Rate. Interest payments on the Class A-1 Notes will be generally
derived from the Total Distribution Amount remaining after the payment of the
Servicing Fee (if CFSC or an affiliate is not the Servicer) and the
Administration Fee, and from amounts on deposit in the Reserve Account. See
"Description of the Transfer and Servicing Agreements--Distributions" and
"--Reserve Account" herein. If the amount of interest on the principal amounts
of the Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes payable on
any Distribution Date exceeds the sum of such remaining portion of the Total
Distribution Amount and the amounts on deposit in the Reserve Account, the Class
A-1 Noteholders will receive their ratable share (based upon the total amount of
interest due to the Class A-1 Noteholders, the Class A-2 Noteholders and the
Class A-3 Noteholders) of the amount available to be distributed in respect of
interest on the Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes,
and each Class A-1 Noteholder will receive its ratable share (based on the
principal amount of its Class A-1 Note and the total amount distributable to the
Class A-1 Noteholders) of such amount.
PAYMENTS OF PRINCIPAL. Principal payments will be made to the Class A-1
Noteholders on each Distribution Date in an amount generally equal to the
Principal Distribution Amount until the principal balance of the Class A-1 Notes
is reduced to zero. Principal payments on the Class A-1 Notes will generally be
derived from the Total Distribution Amount remaining after the payment of the
Servicing Fee (if CFSC or an affiliate is not the Servicer), the Administration
Fee and the Noteholders' Interest Distributable Amount, and from the amount on
deposit in the Reserve Account remaining after the payment of the Noteholders'
Interest Distributable Amount. See "Description of the Transfer and Servicing
Agreements--Distributions" and "--Reserve Account" herein. Distributions with
respect to principal on the Class A-1 Notes will not be made until all interest
due on the Notes is paid in full. The outstanding principal amount, if any, of
the Class A-1 Notes will be payable in full on the Class A-1 Note Final
Scheduled Distribution Date from funds available therefor (including amounts on
deposit in the Reserve Account).
In addition, on each Distribution Date, amounts on deposit in the Reserve
Account in excess of the Specified Reserve Account Balance for such Distribution
Date shall be paid as principal of the Class A-1 Notes to the extent described
under "--The Class A-2 Notes, the Class A-3 Notes and the Class B Notes--
PAYMENTS OF PRINCIPAL" below.
S-32
<PAGE>
THE CLASS A-2 NOTES, THE CLASS A-3 NOTES AND THE CLASS B NOTES
PAYMENTS OF INTEREST. The Class A-2 Notes, the Class A-3 Notes and the
Class B 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 amount of the Class A-2 Notes will
accrue at the rate of % per annum (the "CLASS A-2 NOTE RATE"), interest on
the principal amount of the Class A-3 Notes will accrue at the rate of % per
annum (the "CLASS A-3 NOTE RATE"), and interest on the principal amount of the
Class B Notes will accrue at the rate of % per annum (the "CLASS B NOTE
RATE") (in each case, calculated on the basis of a 360-day year of twelve 30-day
months). Interest on the outstanding principal amount of the Class A-2 Notes,
the Class A-3 Notes and the Class B Notes will in each case accrue from and
including the most recent Distribution Date on which interest has been paid (or,
in the case of the initial Distribution Date, from and including the Closing
Date), to but excluding the following Distribution Date and will be payable to
the Class A-2 Noteholders, the Class A-3 Noteholders, and the Class B
Noteholders monthly on each Distribution Date commencing June 25, 1997. Interest
accrued on any Class of Notes as of any Distribution Date but not paid on such
Distribution Date will be due on the next Distribution Date together with
interest, to the extent permitted by law, on such amount at the interest rate
applicable to such Class of Notes. Interest on the Class B Notes will not be
paid on any Distribution Date until interest payments on the Class A Notes have
been paid in full. Interest payments on the Class A-2 Notes, the Class A-3
Notes, and the Class B Notes will generally be derived from the Total
Distribution Amount remaining after the payment of the Servicing Fee (if CFSC or
an affiliate is not the Servicer) and the Administration Fee and, in the case of
the Class B Notes, payments of the Class A Noteholders' Interest Distributable
Amount, and in each case from amounts on deposit in the Reserve Account. See
"Description of the Transfer and Servicing Agreements--Distributions" and
"--Reserve Account" herein. If the amount of interest on the principal amounts
of the Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes payable on
any Distribution Date exceeds the sum of such remaining portion of the Total
Distribution Amount and the amount on deposit in the Reserve Account, each of
the Class A-2 Noteholders and the Class A-3 Noteholders will receive their
ratable share (based upon the total amount of interest due to the Class A-1
Noteholders, the Class A-2 Noteholders and the Class A-3 Noteholders) of the
amount available to be distributed in respect of interest on the Class A-1
Notes, the Class A-2 Notes and the Class A-3 Notes, and each Class A-2
Noteholder and each Class A-3 Noteholder will receive its ratable share (based
on the principal amount of its Class A-2 Note or its Class A-3 Note and the
total amount distributable to the Class A-2 Noteholders or the Class A-3
Noteholders) of such amount. In such event, the Class B Noteholders will not
receive any payments of interest on such Distribution Date.
In addition, if an Event of Default has occurred and the maturities of the
Notes have been accelerated, the Class B Noteholders will not be entitled to any
payment of interest or principal until the Class A Notes have been paid in full.
PAYMENTS OF PRINCIPAL. Principal payments will be made to the Class A-2
Noteholders on each Distribution Date on and after the Distribution Date on
which the Class A-1 Notes have been paid in full in an amount equal to the
difference between (i) the Principal Distribution Amount and (ii) the portion,
if any, of the Principal Distribution Amount paid in respect of the Class A-1
Notes on such Distribution Date. Principal payments will be made to the Class
A-3 Noteholders on each Distribution Date on and after the Distribution Date on
which the Class A-1 Notes and the Class A-2 Notes have been paid in full in an
amount equal to the difference between (i) the Principal Distribution Amount and
(ii) the portion, if any, of the Principal Distribution Amount paid in respect
of the Class A-1 Notes and the Class A-2 Notes on such Distribution Date.
Principal payments on the Class A-2 Notes and the Class A-3 Notes will be
generally derived from the Total Distribution Amount remaining after the payment
of the Servicing Fee (if CFSC or an affiliate is not the Servicer), the
Administration Fee and the Noteholders' Interest Distributable Amount, and from
amounts on deposit in the Reserve Account. Principal payments will be made to
the Class B Noteholders on each Distribution Date on or after the Distribution
Date on which the Class A Notes are paid in full in an amount equal to the
difference between (i) the Principal Distribution Amount and (ii) the portion,
if any, of the Principal Distribution Amount paid in respect to the Class A
Notes on such Distribution Date. Principal payments on the Class B Notes will be
generally derived from the Total
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Distribution Amount remaining after the payment of the Servicing Fee (if CFSC or
an affiliate is not the Servicer), the Administration Fee, the Class B
Noteholders' Interest Distributable Amount and the Class A Noteholders'
Distributable Amount, and from amounts on deposit in the Reserve Account. The
Class B Noteholders will not receive any principal payments until the Class A
Notes have been paid in full.
In addition, on each Distribution Date, amounts on deposit in the Reserve
Account (after giving effect to all distributions to be made from the Reserve
Account on such Distribution Date) in excess of the Specified Reserve Account
Balance for such Distribution Date will be released from the Reserve Account and
will be distributed first to the Class A-1 Noteholders as a payment of principal
(until the Class A-1 Notes have been paid in full), then to the Class A-2
Noteholders as a payment of principal (until the Class A-2 Notes have been paid
in full), then to the Class A-3 Noteholders as a payment of principal (until the
Class A-3 Notes have been paid in full) and then to the Class B Notes as a
payment of principal (until the Class B Notes have been paid in full). See
"Description of the Transfer and Servicing Agreements--Distributions" and
"--Reserve Account" herein.
The outstanding principal amount, if any, of the Class A-2 Notes will be
payable in full on the Class A-2 Note Final Scheduled Distribution Date from
funds available therefor (including any amounts on deposit in the Reserve
Account), the outstanding principal amount, if any, of the Class A-3 Notes will
be payable in full on the Class A-3 Note Final Scheduled Distribution Date from
available funds therefor and the outstanding principal amount, if any, of the
Class B Notes will be payable in full on the Class B Note Final Scheduled
Distribution Date from available funds therefore (including in each case any
amounts on deposit in the Reserve Account).
In addition, if an Event of Default has occurred and the maturities of the
Notes have been accelerated, the Class A Noteholders of each Class of Class A
Notes will be entitled to be paid principal pro rata on the basis of the ratio
of the principal amount of such Class A Noteholder's Class A Note to the
aggregate principal amount of the Class A Notes, and the Class B Noteholders
will not be entitled to receive any distributions of interest or principal until
the Class A Notes have been paid in full.
OPTIONAL PREPAYMENT. The Class A-3 Notes and the Class B Notes will be
prepaid in whole, but not in part, at the Class A-3 Note Prepayment Price and
the Class B Note Prepayment Price, respectively, on any Distribution Date after
the Class A-1 Notes and the Class A-2 Notes have been paid in full, if the
Servicer exercises its option to purchase the Receivables for a purchase price
equal to the sum of the Class A-3 Note Prepayment Price and the Class B Note
Prepayment Price, which option may be exercised when the Pool Balance has been
reduced to 10% or less of the Initial Pool Balance. The prepayment price (the
"CLASS A-3 NOTE PREPAYMENT PRICE") for the Class A-3 Notes will be equal to the
unpaid principal amount of the Class A-3 Notes, plus accrued and unpaid interest
thereon at the Class A-3 Note Rate plus, to the extent permitted by law,
interest on any past due interest at the Class A-3 Note Rate. The prepayment
price (the "CLASS B NOTE PREPAYMENT PRICE") for the Class B Notes will be equal
to the unpaid principal amount of the Class B Notes, plus accrued and unpaid
interest thereon at the Class B Note Rate plus, to the extent permitted by law,
interest on any past due interest at the Class B Note Rate. See "Description of
the Transfer and Servicing Agreements--Termination" in the Prospectus.
THE INDENTURE TRUSTEE. The First National Bank of Chicago is the Indenture
Trustee under the Indenture. The First National Bank of Chicago is a national
banking association and its corporate trust offices are located at One First
National Plaza, Chicago, Illinois 60603. In the ordinary course of their
business, the Indenture Trustee and its affiliates have engaged and may in the
future engage in commercial banking or financial advisory transactions with CFSC
and its affiliates.
THE INDENTURE
EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT. Pursuant to the Trust
Indenture Act of 1939, as amended, the Indenture Trustee may be deemed to have a
conflict of interest and be required to resign as trustee for either the Class A
Notes or the Class B Notes if a default occurs under the Indenture. In these
circumstances, the Indenture will provide for a successor trustee to be
appointed for one or both of the Class A Notes and Class B Notes, in order that
there be separate trustees for each of the Class A Notes and the
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Class B Notes. So long as any amounts remain unpaid with respect to the Class A
Notes, only the indenture trustee for the Class A Noteholders will have the
right to exercise remedies under the Indenture (but the Class B Noteholders will
be entitled to their share of any proceeds of enforcement, subject to the
subordination of the Class B Notes to the Class A Notes as described herein),
and only the Class A Noteholders will have the right to direct or consent to any
action to be taken, including sale of the Receivables, until the Class A Notes
are paid in full. Upon repayment of the Class A Notes in full, all rights to
exercise remedies under the Indenture will transfer to the trustee for the Class
B Notes. Any resignation of the original Indenture Trustee as described above
with respect to any Class of Notes will become effective only upon the
appointment of a successor trustee for such Class of Notes and such successor's
acceptance of such appointment.
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued by the Trust pursuant to the Trust
Agreement. The Seller will initially purchase the entire principal amount of the
Certificates. The Certificates will bear interest at the rate of % per annum
(the "CERTIFICATE RATE").
Distributions of interest and principal on the Certificates will be
subordinate in priority of payment to interest and principal due on the Notes to
the extent described herein. Funds on deposit in the Reserve Account will not be
available to cover scheduled payments with respect to the Certificates.
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following, as well as other information included elsewhere in this
Prospectus Supplement and in the Prospectus, summarizes the material terms of
the Sale and Servicing Agreement, the Purchase Agreement, the Administration
Agreement, and the Trust Agreement (collectively, the "TRANSFER AND SERVICING
AGREEMENTS," forms of which have been filed as exhibits to the Registration
Statement). Copies of the Transfer and Servicing Agreements will be filed with
the Commission following the issuance of the Securities. The following summary
does not purport to be complete and is subject to, and qualified in its entirety
by reference to, the provisions of the Transfer and Servicing Agreements. The
following summary supplements, and to the extent inconsistent therewith
replaces, the description of the general terms and provisions of the Transfer
and Servicing Agreements set forth under the heading "Description of the
Transfer and Servicing Agreements" in the Prospectus, to which description
reference is hereby made.
SALE AND ASSIGNMENT OF RECEIVABLES
Certain information with respect to the conveyances on the Closing Date of
the Receivables from CFSC to the Seller pursuant to the Purchase Agreement and
from the Seller to the Trust pursuant to the Sale and Servicing Agreement is set
forth under "Description of the Transfer and Servicing Agreements--Sale and
Assignment of Receivables" in the Prospectus. Under certain circumstances
relating to breaches of representations and warranties, CFSC will be required to
purchase Receivables from the Trust. See "Weighted Average Life of the Notes"
herein and "Description of the Transfer and Servicing Agreements--Sale and
Assignment of Receivables" in the Prospectus.
ACCOUNTS
In addition to the Trust Accounts referred to in the Prospectus under
"Description of the Transfer and Servicing Agreements--Accounts," the Seller
will establish and maintain the Reserve Account in the name of the Indenture
Trustee on behalf of the Noteholders and the Certificateholders. See "--Reserve
Account" below.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicing Fee Rate with respect to the Servicing Fee to be paid to the
Servicer with respect to each Collection Period will be 1.0% per annum of the
Pool Balance as of the first day of such Collection Period. The Servicing Fee
(together with any portion of the Servicing Fee that remains unpaid from prior
Distribution Dates) will be paid solely to the extent of the Total Distribution
Amount. If CFSC or an affiliate is no longer the Servicer, the Servicing Fee
will be paid prior to the distribution of any portion of the Total Distribution
Amount to the Administrator and the Class A Noteholders or the Class B
Noteholders, and
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except under certain circumstances, deposits into the Collection Account shall
be made net of such amounts. The Servicer shall also be entitled to any
Servicer's Yield, and deposits into the Collection Account shall be made net of
such amounts. See "Description of the Transfer and Servicing
Agreements--Servicing Compensation and Payment of Expenses" and "--Net Deposits"
in the Prospectus.
RIGHTS UPON SERVICER DEFAULT
In the event a Servicer Default occurs, the Indenture Trustee or the Class A
Noteholders evidencing not less than 25% of the outstanding principal amount of
the Class A Notes may remove the Servicer without the consent of the Owner
Trustee or any of the Class B Noteholders. The related Owner Trustee or the
Class B Noteholders will not have the ability to remove the Servicer if a
Servicer Default occurs until the Class A Notes have been paid in full.
WAIVER OF PAST DEFAULTS
In the event a Servicer Default occurs, the Class A Noteholders evidencing
more than 50% of the outstanding principal amount of the Class A Notes may, with
certain specified exceptions, waive any Servicer Defaults, without the consent
of the Owner Trustee or any of the Class B Noteholders. The related Owner
Trustee or the Class B Noteholders will not have the right to determine whether
any Servicer Default should be waived until the Class A Notes have been paid in
full.
DISTRIBUTIONS
DEPOSITS TO COLLECTION ACCOUNT. By the fifth business day prior to a
Distribution Date (each, a "DETERMINATION DATE"), the Servicer will provide the
Indenture Trustee with certain information with respect to the related
Collection Period, including the amount of aggregate collections on the
Receivables and the aggregate Purchase Amount of Receivables required to be
repurchased by the Seller or required to be purchased by the Servicer.
Unless the Servicer has been making deposits of collections throughout the
related Collection Period, on or before the business day preceding each
Distribution Date the Servicer will cause 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 aggregate collections (including any Liquidation Proceeds, any Purchase
Amounts paid by the Seller and the Servicer and any amounts received from
Dealers with respect to Receivables) received in respect of the Receivables
during the related Collection Period and Investment Earnings on the Trust
Accounts during such Collection Period. The Total Distribution Amount on any
Distribution Date shall exclude all payments and proceeds (including any
Liquidation Proceeds and any amounts received from Dealers with respect to
Receivables) of (i) any Receivables the Purchase Amount of which has been
included in the Total Distribution Amount in a prior Collection Period, (ii) any
Liquidated Receivable after and to the extent of the reassignment of such
Liquidated Receivable by the Trust to the Seller and (iii) any Servicer's Yield.
"LIQUIDATED RECEIVABLES" means defaulted Receivables in respect of which the
Financed Equipment has been sold or otherwise disposed of, and "LIQUIDATION
PROCEEDS" means all proceeds relating to the Liquidated Receivables (including
proceeds of sale of the Financed Equipment), net of expenses incurred by the
Servicer in connection with such liquidation and any amounts required by law to
be remitted to the Obligor on such Liquidated Receivables.
The "PRINCIPAL DISTRIBUTION AMOUNT" for a Distribution Date shall be the sum
of the following amounts, without duplication, with respect to the preceding
Collection Period: (i) that portion of all collections on the Receivables
(including any Liquidation Proceeds and any amounts received from Dealers with
respect to Receivables) allocable to principal; (ii) the amount of Realized
Losses for the related Collection Period (except to the extent included in (iii)
below); and (iii) the Principal Balance of each Receivable that the Servicer
became obligated to purchase or that the Seller became obligated to repurchase
during the related Collection Period (except to the extent included in (i)
above).
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DEPOSITS TO THE DISTRIBUTION ACCOUNTS. Prior to each Distribution Date, the
Servicer shall instruct the Indenture Trustee to make deposits and distributions
for receipt by the Servicer or Administrator or for deposit in the applicable
Trust Account on the following Distribution Date.
Distributions of the Total Distribution Amount shall be made in the
following order of priority (except as described herein):
(i)
to the Servicer (if CFSC or an affiliate is not the Servicer), the
Servicing Fee and all unpaid Servicing Fees from prior Collection
Periods;
(ii)
to the Administrator, the Administration Fee and all unpaid
Administration Fees from prior Collection Periods;
(iii)
to the Class A Note Distribution Account, the Class A Noteholders'
Interest Distributable Amount;
(iv)
to the Class B Note Distribution Account, the Class B Noteholders'
Interest Distributable Amount;
(v)
to the Class A Note Distribution Account, the Class A-1 Noteholders'
Principal Distributable Amount;
(vi)
to the Class A Note Distribution Account, the Class A-2 Noteholders'
Principal Distributable Amount;
(vii)
to the Class A Note Distribution Account, the Class A-3 Noteholders'
Principal Distributable Amount;
(viii)
to the Class B Note Distribution Account, the Class B Noteholders'
Principal Distributable Amount;
(ix)
to the Servicer (if CFSC or an affiliate is the Servicer), the
Servicing Fee and all unpaid Servicing Fees from prior Collection
Periods;
(x)
to the Reserve Account, an amount equal to the excess of the
Specified Reserve Account Balance over the amount on deposit in the
Reserve Account on such Distribution Date;
(xi)
to the Certificate Distribution Account, the Certificateholders'
Interest Distributable Amount;
(xii)
to the Certificate Distribution Account, the Certificateholders'
Principal Distributable Amount; and
(xiii)
to the Reserve Account, the remaining Total Distribution Amount.
Notwithstanding the foregoing, if an Event of Default has occurred and the
maturity of the Notes has been accelerated, the Class A Noteholders of each
Class of Class A Notes will be entitled to be paid principal pro rata on the
basis of the ratio of the principal amount of such Class A Noteholder's Class A
Note to the aggregate principal amount of the Class A Notes of all Classes and
the Class B Noteholders and the Certificateholders will not be entitled to
receive any distributions of interest or principal until the Class A Notes have
been paid in full.
Funds will be withdrawn from amounts on deposit in the Reserve Account to
the extent that the Total Distribution Amount (after the payment of the
Servicing Fee (if CFSC or an affiliate is not the Servicer) and the
Administration Fee) and the deposit of the Class B Noteholders' Interest
Distributable Amount in the Class B Note Distribution Account with respect to
any Collection Period is less than the Class A Noteholders' Distributable
Amount, and funds in the amount of such deficiency up to the amount on deposit
in the Reserve Account will be deposited in the Class A Note Distribution
Account. In addition, funds will be withdrawn from amounts on deposit in the
Reserve Account to the extent that the portion of the Total Distribution Amount
remaining after the payment of the Servicing Fee (if CFSC or an affiliate is not
the Servicer) and the Administration Fee and the deposit of the Class A
Noteholders' Distributable Amount in the Class A Note Distribution Account is
less than the Class B Noteholders' Distributable Amount, and funds in the amount
of such deficiency up to the amount on deposit in the Reserve Account will be
deposited in the Class B Note Distribution Account.
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"APR" means, with respect to any Receivable, the annual percentage rate of
interest represented by such Receivable, based on its Principal Balance. The APR
of any subsidized Receivable does not take into account any amounts paid to CFSC
by Caterpillar with respect thereto at its origination.
"CERTIFICATE BALANCE" equals, on the Closing Date, $8,666,681 and,
thereafter, equals $8,666,681, reduced by all amounts allocable to principal
previously distributed to Certificateholders. The Certificate Balance shall also
be reduced on any Distribution Date by the excess, if any, of (i) the sum of (A)
the Certificate Balance and (B) the outstanding principal amount of the Notes
(in each case after giving effect to amounts in respect of principal to be
deposited in the Certificate Distribution Account, the Class A Note Distribution
Account and the Class B Note Distribution Account on such Distribution Date),
over (ii) the sum of (A) the Pool Balance as of the close of business on the
last day of the preceding Collection Period and (B) the amount on deposit in the
Reserve Account after giving effect to any distributions therefrom on such
Distribution Date. Thereafter, the Certificate Balance shall be increased to the
extent that any portion of the Total Distribution Amount is available to pay the
existing Certificateholders' Principal Carryover Shortfall, but not by more than
the aggregate reductions in the Certificate Balance set forth in the preceding
sentence.
"CERTIFICATEHOLDERS' DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date, the sum of (i) the Certificateholders' Principal
Distributable Amount and (ii) the Certificateholders' Interest Distributable
Amount.
"CERTIFICATEHOLDERS' INTEREST CARRYOVER SHORTFALL" means, with respect to
any Distribution Date, the sum of (i) the excess, if any, of (A) the sum of (1)
the Certificateholders' Monthly Interest Distributable Amount for the preceding
Distribution Date and (2) any outstanding Certificateholders' Interest Carryover
Shortfall on such preceding Distribution Date, over (B) the amount in respect of
interest that is actually deposited in the Certificate Distribution Account on
such preceding Distribution Date, and (ii) interest on such excess, to the
extent permitted by law, at the Certificate Rate.
"CERTIFICATEHOLDERS' INTEREST DISTRIBUTABLE AMOUNT" means, with respect to
any Distribution Date, the sum of the Certificateholders' Monthly Interest
Distributable Amount for such Distribution Date and the Certificateholders'
Interest Carryover Shortfall for such Distribution Date.
"CERTIFICATEHOLDERS' MONTHLY INTEREST DISTRIBUTABLE AMOUNT" means, with
respect to any Distribution Date, an amount equal to the aggregate interest
accrued on the Certificates at the Certificate Rate from and including the
preceding Distribution Date (or from and including the Closing Date in the case
of the initial Distribution Date) to but excluding such Distribution Date (based
on a 360-day year of twelve 30-day months).
"CERTIFICATEHOLDERS' MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT" means, with
respect to any Distribution Date on or after the Distribution Date on which the
principal amounts of the Class A Notes and Class B Notes are reduced to zero,
the Principal Distribution Amount (less the portion thereof, if any, applied on
such Distribution Date to reduce the principal amount of the Class A Notes and
the Class B Notes to zero, which shall be deposited into the Class A Note
Distribution Account and the Class B Note Distribution Account, as applicable).
"CERTIFICATEHOLDERS' PRINCIPAL CARRYOVER SHORTFALL" means, as of the close
of any Distribution Date, the sum of (i) the excess, if any, of (A) the sum of
(1) the Certificateholders' Monthly Principal Distributable Amount and (2) any
outstanding Certificateholders' Principal Carryover Shortfall from the preceding
Distribution Date, over (B) the amount in respect of principal that is actually
deposited in the Certificate Distribution Account and (ii) the unreimbursed
portion of the amount by which the Certificate Balance has been reduced as
described in the second sentence of the definition of "Certificate Balance"
above.
"CERTIFICATEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to
any Distribution Date, the sum of (i) the Certificateholders' Monthly Principal
Distributable Amount for such Distribution Date and (ii) the Certificateholders'
Principal Carryover Shortfall as of the close of the preceding Distribution
Date; PROVIDED, HOWEVER, that, until an amount sufficient to reduce the
outstanding principal amounts of the Class A Notes and the Class B Notes to zero
has been deposited into the Class A Note Distribution Account and the Class B
Note Distribution Account, as applicable, the Certificateholders' Principal
Distributable
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Amount shall be zero; PROVIDED, FURTHER, that the sum of clauses (i) and (ii)
shall not exceed the Certificate Balance, and on the final scheduled
Distribution Date with respect to the Certificates, the Certificateholders'
Principal Distributable Amount will include the amount necessary (after giving
effect to the other amounts to be deposited in the Certificate Distribution
Account on such Distribution Date and allocable to principal) to reduce the
Certificate Balance to zero.
"CLASS A NOTE DISTRIBUTION ACCOUNT" shall mean a Note Distribution Account
established for the benefit of the Class A Noteholders.
"CLASS A NOTEHOLDERS' DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date, the sum of (i) the Class A-1 Noteholders' Principal
Distributable Amount, (ii) the Class A-2 Noteholders' Principal Distributable
Amount, (iii) the Class A-3 Noteholders' Principal Distributable Amount and (iv)
the Class A Noteholders' Interest Distributable Amount.
"CLASS A NOTEHOLDERS' INTEREST CARRYOVER SHORTFALL" means, with respect to
any Distribution Date, the sum of (i) the excess, if any, of (A) the sum of (1)
the Class A Noteholders' Monthly Interest Distributable Amount for the preceding
Distribution Date and (2) any outstanding Class A Noteholders' Interest
Carryover Shortfall on such preceding Distribution Date, over (B) the amount in
respect of interest that is actually deposited in the Class A Note Distribution
Account on such preceding Distribution Date, and (ii) interest on the amount of
interest due but not paid to Class A Noteholders on the preceding Distribution
Date, to the extent permitted by law, at the applicable interest rate or rates
borne by such Class A Notes from such preceding Distribution Date through such
current Distribution Date.
"CLASS A NOTEHOLDERS' INTEREST DISTRIBUTABLE AMOUNT" means, with respect to
any Distribution Date, the sum of the Class A Noteholders' Monthly Interest
Distributable Amount for such Distribution Date and the Class A Noteholders'
Interest Carryover Shortfall for such Distribution Date.
"CLASS A NOTEHOLDERS' MONTHLY INTEREST DISTRIBUTABLE AMOUNT" means, with
respect to any Distribution Date, an amount equal to the aggregate amount of
interest accrued on the Class A-1 Notes, the Class A-2 Notes and the Class A-3
Notes at their respective interest rates from and including the preceding
Distribution Date (or, in the case of the initial Distribution Date, from and
including the Closing Date), to but excluding such Distribution Date (with
respect to the Class A-1 Notes, based on a 360-day year and the actual number of
days elapsed, and with respect to the A-2 Notes and A-3 Notes, in each case
based on a 360-day year of twelve 30-day months).
"CLASS A-1 NOTE FINAL SCHEDULED DISTRIBUTION DATE" means the May 1998
Distribution Date.
"CLASS A-1 NOTEHOLDERS' MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT" means, with
respect to any Distribution Date until the Distribution Date on which the
outstanding principal amount of the Class A-1 Notes has been reduced to zero,
the Principal Distribution Amount for such Distribution Date. In addition, on
each Distribution Date, amounts on deposit in the Reserve Account in excess of
the Specified Reserve Account Balance shall be paid as principal of the Class
A-1 Notes to the extent described under "--Reserve Account" below.
"CLASS A-1 NOTEHOLDERS' PRINCIPAL CARRYOVER SHORTFALL" means, as of the
close of any Distribution Date, the excess, if any, of (i) the sum of (A) the
Class A-1 Noteholders' Monthly Principal Distributable Amount for such
Distribution Date and (B) any outstanding Class A-1 Noteholders' Principal
Carryover Shortfall as of the close of the preceding Distribution Date over (ii)
the amount in respect of principal that is actually deposited in the Class A
Note Distribution Account in respect of the Class A-1 Notes.
"CLASS A-1 NOTEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect
to any Distribution Date, the sum of (i) the Class A-1 Noteholders' Monthly
Principal Distributable Amount for such Distribution Date and (ii) the Class A-1
Noteholders' Principal Carryover Shortfall as of the close of the preceding
Distribution Date; PROVIDED, HOWEVER, that the sum of clauses (i) and (ii) above
shall not exceed the outstanding principal amount of the Class A-1 Notes, and on
the Class A-1 Note Final Scheduled Distribution Date, the Class A-1 Noteholders'
Principal Distributable Amount will include the amount necessary
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(after giving effect to the other amounts to be deposited in the Class A Note
Distribution Account on such Distribution Date and allocable to principal) to
reduce the outstanding principal amount of the Class A-1 Notes to zero.
"CLASS A-2 NOTE FINAL SCHEDULED DISTRIBUTION DATE" means the July 2000
Distribution Date.
"CLASS A-2 NOTEHOLDERS' MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT" means, with
respect to any Distribution Date on or after the Distribution Date on which an
amount sufficient to reduce the outstanding principal amount of the Class A-1
Notes to zero has been deposited in the Class A Note Distribution Account, the
excess, if any, of (i) the Principal Distribution Amount over (ii) the portion
of the Principal Distribution Amount, if any, applied to reduce the outstanding
principal amount of the Class A-1 Notes to zero on such Distribution Date. In
addition, on each Distribution Date, amounts on deposit in the Reserve Account
in excess of the Specified Reserve Account Balance for such Distribution Date
shall be paid as principal of the Class A-2 Notes to the extent described under
"--Reserve Account" below.
"CLASS A-2 NOTEHOLDERS' PRINCIPAL CARRYOVER SHORTFALL" means, as of the
close of any Distribution Date, the excess, if any, of (i) the sum of (A) the
Class A-2 Noteholders' Monthly Principal Distributable Amount for such
Distribution Date and (B) any outstanding Class A-2 Noteholders' Principal
Carryover Shortfall as of the close of the preceding Distribution Date over (ii)
the amount in respect of principal that is actually deposited in the Class A
Note Distribution Account in respect of the Class A-2 Notes.
"CLASS A-2 NOTEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect
to any Distribution Date, the sum of (i) the Class A-2 Noteholders' Monthly
Principal Distributable Amount for such Distribution Date and (ii) the Class A-2
Noteholders' Principal Carryover Shortfall as of the close of the preceding
Distribution Date; PROVIDED, HOWEVER, that, until an amount sufficient to reduce
the outstanding principal amount of the Class A-1 Notes to zero has been
deposited in the Class A Note Distribution Account, the Class A-2 Noteholders'
Principal Distributable Amount shall be zero; PROVIDED, FURTHER, that the sum of
clauses (i) and (ii) shall not exceed the outstanding principal amount of the
Class A-2 Notes, and on the Class A-2 Note Final Scheduled Distribution Date,
the Class A-2 Noteholders' Principal Distributable Amount will include the
amount necessary (after giving effect to the other amounts to be deposited in
the Class A Note Distribution Account on such Distribution Date and allocable to
principal) to reduce the outstanding principal amount of the Class A-2 Notes to
zero.
"CLASS A-3 NOTE FINAL SCHEDULED DISTRIBUTION DATE" means the May 2003
Distribution Date.
"CLASS A-3 NOTEHOLDERS' MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT" means, with
respect to any Distribution Date on or after the Distribution Date on which an
amount sufficient to reduce the outstanding principal amount of the Class A-1
Notes and the Class A-2 Notes to zero has been deposited in the Class A Note
Distribution Account, the excess, if any, of (i) the Principal Distribution
Amount over (ii) the portion of the Principal Distribution Amount, if any,
applied to reduce the outstanding principal amount of the Class A-1 Notes and
the Class A-2 Notes to zero on such Distribution Date. In addition, on each
Distribution Date, amounts on deposit in the Reserve Account in excess of the
Specified Reserve Account Balance for such Distribution Date shall be paid as
principal of the Class A-3 Notes to the extent described under "-- Reserve
Account" below.
"CLASS A-3 NOTEHOLDERS' PRINCIPAL CARRYOVER SHORTFALL" means, as of the
close of any Distribution Date, the excess, if any, of (i) the sum of (A) the
Class A-3 Noteholders' Monthly Principal Distributable Amount for such
Distribution Date and (B) any outstanding Class A-3 Noteholders' Principal
Carryover Shortfall as of the close of the preceding Distribution Date over (ii)
the amount in respect of principal that is actually deposited in the Class A
Note Distribution Account in respect of the Class A-3 Notes.
"CLASS A-3 NOTEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect
to any Distribution Date, the sum of (i) the Class A-3 Noteholders' Monthly
Principal Distributable Amount for such Distribution Date and (ii) the Class A-3
Noteholders' Principal Carryover Shortfall as of the close of the preceding
Distribution Date; PROVIDED, HOWEVER, that, until an amount sufficient to reduce
the outstanding principal amount of the Class A-1 Notes and the Class A-2 Notes
to zero has been deposited in the Class A Note Distribution Account, the Class
A-3 Noteholders' Principal Distributable Amount shall be zero; PROVIDED,
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FURTHER, that the sum of clauses (i) and (ii) shall not exceed the outstanding
principal amount of the Class A-3 Notes, and on the Class A-3 Note Final
Scheduled Distribution Date, the Class A-3 Noteholders' Principal Distributable
Amount will include the amount necessary (after giving effect to the other
amounts to be deposited in the Class A Note Distribution Account on such
Distribution Date and allocable to principal) to reduce the outstanding
principal amount of the Class A-3 Notes to zero.
"CLASS B NOTE DISTRIBUTION ACCOUNT" shall mean a Note Distribution Account
established for the benefit of the Class B Noteholders.
"CLASS B NOTE FINAL SCHEDULED DISTRIBUTION DATE" means the May 2003
Distribution Date.
"CLASS B NOTEHOLDERS' DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date, the sum of (i) the Class B Noteholders' Principal
Distributable Amount and (ii) the Class B Noteholders' Interest Distributable
Amount.
"CLASS B NOTEHOLDERS' INTEREST CARRYOVER SHORTFALL" means, with respect to
any Distribution Date, the sum of (i) the excess, if any, of (A) the sum of (1)
the Class B Noteholders' Monthly Interest Distributable Amount for the preceding
Distribution Date and (2) any outstanding Class B Noteholders' Interest
Carryover Shortfall on such preceding Distribution Date, over (B) the amount in
respect of interest that is actually deposited in the Class B Note Distribution
Account on such preceding Distribution Date, and (ii) interest on such excess,
to the extent permitted by law, at the Class B Note Rate.
"CLASS B NOTEHOLDERS' INTEREST DISTRIBUTABLE AMOUNT" means, with respect to
any Distribution Date, the sum of the Class B Noteholders' Monthly Interest
Distributable Amount for such Distribution Date and the Class B Noteholders'
Interest Carryover Shortfall for such Distribution Date.
"CLASS B NOTEHOLDERS' MONTHLY INTEREST DISTRIBUTABLE AMOUNT" means, with
respect to any Distribution Date, an amount equal to the aggregate interest
accrued on the Class B Notes at the Class B Note Rate from and including the
preceding Distribution Date (or from and including the Closing Date in the case
of the initial Distribution Date) to but excluding such Distribution Date (based
on a 360-day year of twelve 30-day months).
"CLASS B NOTEHOLDERS' MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT" means, with
respect to any Distribution Date on or after the Distribution Date on which the
principal amounts of the Class A Notes are reduced to zero, the excess, if any,
of (i) the Principal Distribution Amount over (ii) the portion of the Principal
Distribution Amount, if any, applied on such Distribution Date to reduce the
principal amounts of the Class A Notes to zero. In addition, on each
Distribution Date, amounts on deposit in the Reserve Account in excess of the
Specified Reserve Account Balance for such Distribution Date shall be paid as
principal of the Class B Notes to the extent described under "--Reserve Account"
below.
"CLASS B NOTEHOLDERS' PRINCIPAL CARRYOVER SHORTFALL" means, as of the close
of any Distribution Date, the excess, if any, of (i) the sum of (A) the Class B
Noteholders' Monthly Principal Distributable Amount and (B) any outstanding
Class B Noteholders' Principal Carryover Shortfall from the preceding
Distribution Date, over (ii) the amount in respect of principal that is actually
deposited in the Class B Note Distribution Account.
"CLASS B NOTEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to
any Distribution Date, the sum of (i) the Class B Noteholders' Monthly Principal
Distributable Amount for such Distribution Date and (ii) the Class B
Noteholders' Principal Carryover Shortfall as of the close of the preceding
Distribution Date; PROVIDED, HOWEVER, that, until an amount sufficient to reduce
the outstanding principal amounts of the Class A Notes to zero has been
deposited in the Class A Note Distribution Account, the Class B Noteholders'
Principal Distributable Amount shall be zero; PROVIDED, FURTHER, that the sum of
clauses (i) and (ii) shall not exceed the outstanding principal amount of the
Class B Notes, and on the Class B Note Final Scheduled Distribution Date, the
Class B Noteholders' Principal Distributable Amount will include the amount
necessary (after giving effect to the other amounts to be deposited in the Class
B Note Distribution Account on such Distribution Date and allocable to
principal) to reduce the outstanding principal amount of the Class B Notes to
zero.
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"COLLECTION PERIOD" means, with respect to the first Distribution Date, the
calendar month ending on May 31, 1997, and with respect to each subsequent
Distribution Date, the preceding calendar month.
"NOTEHOLDERS' INTEREST DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date, the sum of (i) the Class A Noteholders' Interest
Distributable Amount for such Distribution Date and (ii) the Class B
Noteholders' Interest Distributable Amount for such Distribution Date.
"CUT-OFF DATE APR" is 8.47%, which is the weighted average APR of the
Receivables as of the Cut-off Date.
"INITIAL POOL BALANCE" means $346,636,681.02, which is the sum of the
Principal Balances of each Receivable as of the Cut-off Date.
"POOL BALANCE" means, at any time, the aggregate Principal Balance of the
Receivables at the end of the preceding Collection Period, after giving effect
to all payments received from Obligors and Purchase Amounts remitted by the
Seller or the Servicer, as the case may be, for such Collection Period, and to
all Realized Losses on Liquidated Receivables during such Collection Period.
"REALIZED LOSSES" means, with respect to any Collection Period, (i) the
excess of the Principal Balance of the Liquidated Receivables over Liquidation
Proceeds for such Collection Period to the extent allocable to principal and
(ii) amounts payable by Dealers with respect to Over-Rate Receivables which are
deemed uncollectible by the Servicer.
On each Distribution Date, all amounts on deposit in the Class A Note
Distribution Account will be distributed to the Class A Noteholders, all amounts
on deposit in the Class B Note Distribution Account will be distributed to the
Class B Noteholders and all amounts on deposit in the Certificate Distribution
Account will be distributed to the Certificateholders.
RESERVE ACCOUNT
The rights of the Class B Noteholders to receive distributions with respect
to the Receivables generally will be subordinated to the rights of the Class A
Noteholders in the event of defaults and delinquencies on the Receivables, as
provided in the Indenture, the Trust Agreement and the Sale and Servicing
Agreement. The protection afforded to the Class A Noteholders through
subordination will be effected by the preferential right of the Class A
Noteholders to receive both current distributions with respect to the
Receivables and withdrawals from the Reserve Account. The Reserve Account will
be created with an initial deposit by the Seller on the Closing Date of at least
$7,799,325 (the "RESERVE ACCOUNT INITIAL DEPOSIT") and will be augmented on each
Distribution Date by the deposit therein of the Total Distribution Amount
remaining after the payment of the Servicing Fee (in the priority described
herein), the Administration Fee, the deposit of the Class A Noteholders'
Interest Distributable Amount and the Class A Noteholders' Principal
Distributable Amount in the Class A Note Distribution Account and the deposit of
the Class B Noteholders' Distributable Amount in the Class B Note Distribution
Account up to an amount equal to the excess of the Specified Reserve Account
Balance over the amount on deposit in the Reserve Account, and will be further
augmented on such Distribution Date by the deposit therein of the Total
Distribution Amount remaining after payment of such amounts and deposit in the
Certificate Distribution Account of amounts to be distributed to the
Certificateholders on such Distribution Date, in each case as described above
under "-- Distributions." Amounts on deposit in the Reserve Account will be
released on each Distribution Date to the Class A-1 Noteholders, the Class A-2
Noteholders, the Class A-3 Noteholders and/or the Class B Noteholders on account
of their respective principal amounts, as described herein, to the extent that
the amount on deposit in the Reserve Account (after giving effect to withdrawals
made on such Distribution Date) exceeds the Specified Reserve Account Balance on
such Distribution Date.
The "SPECIFIED RESERVE ACCOUNT BALANCE," with respect to any Distribution
Date, will be equal to the lesser of (a) the outstanding principal balance of
the Notes and (b) $7,799,325 (which is equal to 2.25% of the Initial Pool
Balance).
On each Distribution Date, if the amount on deposit in the Reserve Account
(after giving effect to all deposits or withdrawals therefrom on such
Distribution Date, other than withdrawals described in this
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<PAGE>
sentence) is greater than the Specified Reserve Account Balance for such
Distribution Date, the Servicer shall instruct the Indenture Trustee to deposit
all of the amount of the excess in the Class A Note Distribution Account for
distribution first to the Class A-1 Noteholders as a payment of principal on
such Distribution Date (until the Class A-1 Notes are paid in full), then to the
Class A-2 Noteholders as a payment of principal on such Distribution Date (until
the Class A-2 Notes have been paid in full), and then to the Class A-3
Noteholders as a payment of principal (until the Class A-3 Notes have been paid
in full), and then the Servicer shall instruct the Indenture Trustee to deposit
all or the amount of the excess in the Class B Distribution Account for
distribution to the Class B Noteholders as payment of principal (until the Class
B Notes have been paid in full). Upon the Class B Final Scheduled Distribution
Date or the date of the optional purchase of the Receivables by the Servicer
(but only after payment of all interest and principal of the Notes and
Certificates), the Servicer shall instruct the Indenture Trustee to distribute
the Reserve Account balance to the Seller. Upon any distribution to the Seller
of amounts from the Reserve Account, the Noteholders will not have any rights
in, or claims to, such amounts.
Funds will be withdrawn from the amounts on deposit in the Reserve Account
to the extent that the Total Distribution Amount remaining after the payment of
the Servicing Fee (if CFSC or an affiliate is not the Servicer) and the
Administration Fee and the deposit of the Class B Noteholders' Interest
Distributable Amount in the Class B Note Distribution Account with respect to
any Collection Period is less than the Class A Noteholders' Distributable
Amount, and funds in the amount of such deficiency up to the amount on deposit
in the Reserve Account will be deposited in the Class A Note Distribution
Account. In addition, funds will be withdrawn from amounts on deposit in the
Reserve Account to the extent that the portion of the Total Distribution Amount
remaining after the payment of the Servicing Fee (if CFSC or an affiliate is not
the Servicer) and the Administration Fee and the deposit of the Class A
Noteholders' Distributable Amount in the Class A Note Distribution Account is
less than the Class B Noteholders' Distributable Amount, and funds in the amount
of such deficiency up to the amount on deposit in the Reserve Account will be
deposited in the Class B Note Distribution Account.
If on any Distribution Date the entire Class A Noteholders' Interest
Distributable Amount for such Distribution Date (after giving effect to any
amounts withdrawn from the Reserve Account) is not deposited in the Class A Note
Distribution Account, the Class B Noteholders will not receive any distributions
on account of interest. The Class B Noteholders will not receive any principal
payments until the Class A Notes have been paid in full.
The availability of funds in the Reserve Account and the
overcollateralization provided by the Certificates is intended to enhance the
likelihood of receipt by the Noteholders of the full amount of principal and
interest due them and to decrease the likelihood that the Noteholders will
experience losses. In addition, the subordination of the Class B Notes to the
Class A Notes is intended to provide the Class A Noteholders with these same
protections. However, because in certain circumstances the Reserve Account could
be depleted and/or the aggregate amount of Realized Losses could exceed the
outstanding principal amount of the Class B Notes and the overcollateralization
provided by the Certificates, these protections are limited.
NET DEPOSITS
As an administrative convenience, the Servicer will be permitted to make the
deposit of collections and Purchase Amounts required to be remitted by the
Servicer for or with respect to each Collection Period net of distributions to
be made to the Servicer (including any Servicer's Yield and the Servicing Fee to
the extent of amounts available for the payment thereof) with respect to such
Collection Period; provided, that if the Servicer is required to remit
collections daily, deposits of such amounts may only be made net of the
Servicer's Yield and may not be made net of the Servicing Fee. See "Description
of the Transfer and Servicing Agreements--Net Deposits" in the Prospectus. The
Servicer, however, will account to the Indenture Trustee, the Owner Trustee, the
Noteholders and the Certificateholders as if the Servicing Fees were distributed
individually.
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<PAGE>
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
SALE AND TRANSFER OF RECEIVABLES
The transfer of ownership of the Receivables from CFSC to the Seller and
from the Seller to the Trust, and the granting of the security interest in the
Receivables by the Trust to the Indenture Trustee, will in each case be
perfected by the Custodian, on behalf of the applicable assignee, taking
possession of the Installment Sales Contracts and any related Dealer Agreements
pursuant to the Custodial Agreement. The Custodian will maintain possession of
the Receivables Files in a space leased by the Custodian proximate to the
principal executive office of the Seller. CFSC will indicate on its computer
records that the Receivables have been sold to the Seller and by the Seller to
the Trust. Each Receivables File will contain the single original related
Installment Sales Contract (as represented by CFSC in the Purchase Agreement).
UCC financing statements will not be filed to perfect these transfers of
ownership or such grant of a security interest in the Receivables, and CFSC will
not stamp the physical Receivables Files or the Installment Sales Contracts. See
"Risk Factors--PERFECTION OF INTERESTS IN RECEIVABLES AND IN FINANCED EQUIPMENT"
herein and in the Prospectus. Although steps will be taken to ensure that the
Seller (an affiliate of CFSC) does not obtain possession or control of the
Installment Sales Contracts, should a court find that the Seller did have
possession or control of such Installment Sales Contracts, the interests of the
Trust and the Indenture Trustee in the Receivables would in all likelihood be
unperfected.
DEALER RECOURSE RECEIVABLES
The terms of a limited number of Receivables provide that CFSC has recourse
to the related Dealer for all or a portion of the losses CFSC may incur.
However, in the event of a Dealer's bankruptcy, a bankruptcy trustee, a creditor
or the Dealer as debtor in possession might attempt to characterize recourse
sales of Receivables to CFSC as loans to the Dealer from CFSC secured by the
Receivables; such an attempt, if successful, could result in payment delays or
losses on the affected Receivables. This right of recourse has been assigned to
the Seller, the Trust and the Indenture Trustee.
Under certain circumstances CFSC may acquire Receivables from Dealers at
prices in excess of their stated principal balances ("OVER-RATE RECEIVABLES").
This premium represents the present value of a portion of the interest due under
the related Installment Sales Contract. Upon prepayment in full of an Over-Rate
Receivable, the principal balance due from the Obligor on any such Receivable
will be less than such Receivable's Principal Balance, which is CFSC's, the
Seller's and the Trust's investment in such Receivable. Each related Dealer
Agreement provides that the related Dealer shall pay to CFSC the amount of such
shortfall upon such a prepayment. Pursuant to the Purchase Agreement, CFSC will
assign to the Seller its right to such payment from the Dealer, and pursuant to
the Sale and Servicing Agreement the Seller will assign such right to the Trust.
Pursuant to the Indenture, the Trust will grant a security interest in such
right to the Indenture Trustee. Were each such Over-Rate Receivable to prepay in
full, the Seller believes that the aggregate amount of such shortfall would not
have a material adverse effect on Securityholders given the amount on deposit in
the Reserve Account.
CROSS-COLLATERALIZATION
Because CFSC on occasion cross-collateralizes its installment sales
contracts (whether at origination or pursuant to an adjustment to such
installment sales contract) with a particular Obligor with other equipment of
such Obligor financed by CFSC, it is possible that (i) an item of Financed
Equipment may secure more than one contract with such Obligor, and each of those
contracts may not be included in the Trust as a Receivable and (ii) a Receivable
may be secured by a first priority lien on the related Financed Equipment and a
lien on financed equipment unencumbered or related to contracts with such
Obligor not included in the Trust. In any event, the aggregate principal amount
of CFSC's cross-collateralized installment sales contracts with respect to any
one Obligor, whether or not all are included in the Trust as Receivables, will
not, at the time of origination of any such cross-collateralized contracts,
exceed the aggregate current appraised value of all the financed equipment
serving as security for such contracts, and the Trust will either have a first
priority lien in the related Financed Equipment or CFSC may be required to
repurchase the related Receivable under certain circumstances. See "Description
of Transfer and Servicing Agreements-- Sale and Assignment of the Receivables"
in the Prospectus.
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<PAGE>
Pursuant to the Purchase Agreement, CFSC, as holder of a junior lien on an
item of Financed Equipment, will agree not to exercise its right to foreclose
upon such junior lien until (i) the related Receivable has been paid in full or
(ii) the related first priority lien on the Financed Equipment has been
foreclosed upon or released. Therefore, there is no risk to the Trust that CFSC,
as junior lienholder, would foreclose upon Financed Equipment, possibly
resulting in a substitution of the related Obligor.
The Trust shall have the right to foreclose upon all liens, junior or
otherwise, that it holds with respect to any Receivable, whether on the related
Financed Equipment or on equipment the first priority lien on which has not been
assigned to the Trust. If the Trust forecloses on a junior lien on any equipment
in which it does not have a first priority lien, such foreclosure would be
subject to the senior liens not held by the Trust. In addition, any junior liens
held by the Trust may be eliminated should any more senior liens not held by the
Trust foreclose upon the related equipment.
CFSC does not maintain statistical data with respect to the portion of each
retail installment sales contract secured by related Financed Equipment and the
portion of such contract secured by the cross-collateralized liens. However,
because the existence of such cross-collateralized liens will not place the
Trust in a different credit position than that of CFSC should CFSC retain the
Receivables, and in light of CFSC's credit loss experience with respect to the
U.S. ISC Portfolio, the Seller believes that such statistical data with respect
to the cross-collateralization of the Receivables is not material to investors
in the Securities.
LEGAL INVESTMENT
The Class A-1 Notes will be eligible securities for purchase by money market
funds under paragraph (a)(9) of Rule 2a-7 under the Investment Company Act of
1940, as amended.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and Section 4975 of the Code impose certain requirements on employee benefit
plans and certain other plans and arrangements, including individual retirement
accounts and annuities, Keogh plans and certain collective investment funds or
insurance company general or separate accounts in which such plans, accounts or
arrangements are invested, that are subject to the fiduciary responsibility and
prohibited transaction provisions of ERISA
and/or Section 4975 of the Code (collectively, "PLANS"), and on persons who are
fiduciaries with respect to Plans, in connection with the investment of assets
that are treated as "plan assets" of any Plan for purposes of applying Title I
of ERISA and Section 4975 of the Code ("PLAN ASSETS"). ERISA generally imposes
on Plan fiduciaries certain general fiduciary requirements, including those of
investment prudence and diversification and the requirement that a Plan's
investments be made in accordance with the documents governing the Plan.
Generally, any person who has discretionary authority or control respecting the
management or disposition of Plan Assets, and any person who provides investment
advice with respect to such assets for a fee, is a fiduciary with respect to
such Plan Assets.
Subject to the considerations described below, the Notes are eligible for
purchase with Plan Assets of any Plan.
ERISA and Section 4975 of the Code prohibit a broad range of transactions
involving Plan Assets and persons ("PARTIES IN INTEREST" under ERISA and
"DISQUALIFIED PERSONS" under the Code) who have certain specified relationships
to a Plan or its Plan Assets, unless a statutory or administrative exemption is
available. Parties in Interest or Disqualified Persons that participate in a
prohibited transaction may be subject to a penalty imposed under ERISA and/or an
excise tax imposed pursuant to Section 4975 of the Code, unless a statutory or
administrative exemption is available. These prohibited transactions generally
are set forth in Section 406 of ERISA and Section 4975 of the Code.
Any fiduciary or other Plan investor considering whether to purchase the
Notes with Plan Assets of any Plan should determine whether such purchase is
consistent with its fiduciary duties and whether such purchase would constitute
or result in a non-exempt prohibited transaction under ERISA and/or Section 4975
of the Code because any of the Seller, the Servicer, the Indenture Trustee, the
Owner Trustee, any
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<PAGE>
Certificateholder or any other parties may be deemed to be benefiting from the
issuance of the Notes and are Parties in Interest or Disqualified Persons with
respect to the investing Plan. In particular, the Notes may not be purchased
with Plan Assets of any Plan if any of the Seller, the Servicer, the Indenture
Trustee, the Owner Trustee, any Certificateholder or any of their respective
affiliates (a) has investment or administrative discretion with respect to the
Plan Assets used to effect such purchase; (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 (1)
will serve as a primary basis for investment decisions with respect to such Plan
Assets, and (2) will be based on the particular investment needs of such Plan;
or (c) is an employer maintaining or contributing to such Plan. Each purchaser
of the Notes will be deemed to have represented and warranted that its purchase
of the Notes or any interest therein does not violate the foregoing limitations.
Any such fiduciary or other Plan investor should also consult with its
counsel regarding the applicability of the fiduciary responsibility and
prohibited transaction provisions of ERISA and Section 4975 of the Code to such
investment and the availability of any prohibited transaction exemption, E.G.,
U.S. Department of Labor (the "DOL") Prohibited Transaction Exemptions 96-23
(Class Exemption for Plan Asset Transactions Determined by In-House Investment
Managers), 95-60 (Class Exemption for Certain Transactions Involving Insurance
Company General Accounts), 91-38 (Class Exemption for Certain Transactions
Involving Bank Collective Investment Funds), 90-1 (Class Exemption for Certain
Transactions Involving Insurance Company Pooled Separate Accounts) and 84-14
(Class Exemption for Plan Asset Transactions Determined by Independent Qualified
Professional Asset Managers). A purchaser of the Notes should be aware, however,
that even if the conditions specified in one or more of the above exemptions are
met, the scope of the relief provided by the exemption might not cover all acts
which might be construed as prohibited transactions. In addition, investors
other than Plan investors should be aware that a prohibited transaction could be
deemed to occur if any holder of the Certificates or any of its respective
affiliates is or becomes a Party in Interest or a Disqualified Person with
respect to any Plan that purchases and holds the Notes without being covered by
one or more of the above exemptions.
In addition, under Section 2510.3-101 of the regulations of the DOL (the
"PLAN ASSET REGULATION"), the purchase with Plan Assets of equity interests in
the Trust could, in certain circumstances, cause the Receivables and other
assets of the Trust to be deemed Plan Assets of the investing Plan which, in
turn, would subject the Trust and its assets to the fiduciary responsibility
provisions of ERISA and the prohibited transaction provisions of ERISA and
Section 4975 of the Code. Nevertheless, because the Notes (a) should be treated
as indebtedness under local law and debt, rather than equity, for tax purposes
(see "Certain Federal Income Tax Considerations--Tax Consequences to Holders of
the Notes--TREATMENT OF THE NOTES AS INDEBTEDNESS" in the Prospectus), and (b)
should not be deemed to have any "substantial equity features," purchases of the
Notes with Plan Assets should not be treated as equity investments and,
therefore, the Receivables and other assets included as assets of the Trust
should not be deemed to be Plan Assets of the investing Plans. Those conclusions
are based, in part, upon the traditional debt features of the Notes, including
the reasonable expectation of purchasers of Notes that the Notes (which are
highly rated by the Rating Agencies) will be repaid when due, as well as the
absence of conversion rights, warrants and other typical equity features. Before
purchasing the Notes, a fiduciary or other Plan investor should itself confirm
that the Notes constitute indebtedness, and have no substantial equity features,
for purposes of the Plan Asset Regulation.
For further information see "ERISA Considerations" in the Prospectus.
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<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "CLASS A NOTE UNDERWRITING AGREEMENT"), the Seller has agreed to cause the
Trust to sell to the underwriters named below (the "CLASS A NOTE UNDERWRITERS"),
and each of the Class A Note Underwriters has severally agreed to purchase, the
principal amount of Notes set forth opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF AMOUNT OF
CLASS A-1 CLASS A-2 CLASS A-3
UNDERWRITERS NOTES NOTES NOTES
------------- -------------- --------------
<S> <C> <C> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................
Credit Suisse First Boston Corporation.................
UBS Securities LLC.....................................
------------- -------------- --------------
Total........................................ $ $ $
------------- -------------- --------------
------------- -------------- --------------
</TABLE>
In the Class A Note Underwriting Agreement, the several Underwriters have
agreed, subject to the terms and conditions therein, to purchase all the Class A
Notes offered hereby if any of such Notes are purchased. The Seller has been
advised by the Class A Note Underwriters that they propose initially to offer
the Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes to the public
at the prices set forth herein, and to certain dealers at such prices less a
concession not in excess of % per Class A-1 Note, % per Class A-2 Note and
% per Class A-3 Note. The Underwriters may allow and such dealers may reallow
a concession not in excess of % per Class A-1 Note, % per Class A-2 Note and
% per Class A-3 Note to certain other dealers. After the initial public
offering, such prices and such concessions may be changed.
Subject to the terms and conditions set forth in an underwriting agreement
(the "CLASS B NOTE UNDERWRITING AGREEMENT" and, together with the Class A Note
Underwriting Agreement, the "UNDERWRITING AGREEMENTS"), the Seller has agreed to
cause the Trust to sell to Merrill Lynch, Pierce, Fenner & Smith Incorporated
(the "CLASS B NOTE UNDERWRITER" and, together with the Class A Note
Underwriters, the "UNDERWRITERS"), and the Class B Note Underwriter has agreed
to purchase, the entire principal amount of the Class B Notes.
In the Class B Note Underwriting Agreement, the Class B Note Underwriter has
agreed, subject to the terms and conditions therein, to purchase all of the
Class B Notes offered hereby if any of such Class B Notes are purchased. The
Seller has been advised by the Class B Note Underwriter that it proposes to
initially offer the Class B Notes to the public at the price set forth herein,
and to certain dealers at such price less a concession not in excess of %
per Class B Note. The Class B Note Underwriter may allow and such dealers may
reallow a concession not in excess of % per Class B Note to certain other
dealers. After the initial public offering, such prices and such concessions may
be changed.
Until the distribution of the Securities is completed, rules of the
Commission may limit the ability of the Underwriters and certain selling group
members to bid for and purchase the Securities. As an exception to these rules,
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MERRILL LYNCH"), on behalf
of the Underwriters, is permitted to engage in over-allotment transactions,
stabilizing transactions, syndicate covering transactions and penalty bids with
respect to the Notes in accordance with Regulation M under the Exchange Act.
Over-allotment transactions involve syndicate sales in excess of the
offering size, which create syndicate short positions. Stabilizing transactions
permit bids to purchase the Notes so long as the stabilizing bids do not exceed
a specified maximum. Syndicate covering transactions involve purchases of the
Notes in the open market after the distribution has been completed in order to
cover syndicate short positions. Penalty bids permit Merrill Lynch to reclaim a
selling concession from a syndicate member when the Notes originally sold by
such syndicate member are purchased in a syndicate covering transaction.
Such over-allotment transactions, stabilizing transactions, syndicate
covering transactions and penalty bids may cause the prices of the Notes to be
higher than they would otherwise be in the absence of such
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<PAGE>
transactions. Neither the Issuer, the Seller, CFSC, nor any of the Underwriters
make any representation or prediction as to the direction or magnitude of any
effect that the transactions described above may have on the price of the Notes.
In addition, neither the Issuer, the Seller, CFSC nor any of the Underwriters
represent that the Underwriters will engage in any such transactions or that
such transactions, once commenced, will not be discontinued without notice.
The Underwriting Agreements provide that the Seller and CFSC 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. The Underwriters have agreed to reimburse
the Seller for certain expenses of the issuance and distribution of the Notes.
The Indenture Trustee and the Owner Trustee (on behalf of the Trust) may,
from time to time, invest the funds in the Trust Accounts in Eligible
Investments acquired from the Underwriters.
The closings of the sale of the Notes and Certificates are conditioned on
the closing of the sale of each other.
LEGAL OPINIONS
Certain legal matters relating to the Notes and the Certificates will be
passed upon for the Trust, the Seller and the Servicer by Orrick, Herrington &
Sutcliffe LLP, San Francisco, California, and by Richards Layton & Finger,
Wilmington, Delaware, and for the Underwriters by Skadden, Arps, Slate, Meagher
& Flom LLP, New York, New York. Certain federal income tax and other matters
will be passed upon for the Trust and the Seller by Orrick, Herrington &
Sutcliffe LLP. Certain Tennessee state tax matters will be passed upon for the
Trust and the Seller by Tuke Yopp & Sweeney, Nashville, Tennessee.
S-48
<PAGE>
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Caterpillar
Financial Asset Trust 1997-A Class A-1 % Asset Backed Notes, Class A-2 %
Asset Backed Notes, Class A-3 % Asset Backed Notes and the Class B Notes
(collectively, the "GLOBAL SECURITIES") will be available only in book-entry
form. Investors in the Global Securities may hold such Global Securities through
any of The Depository Trust Company ("DTC"), Cedel Bank, societe anonyme
("CEDEL") or the Euroclear System ("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 Notes will be effected on a delivery against payment basis
through the respective Depositaries of Cedel and Euroclear (in such capacity)
and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. 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 U.S. corporate debt obligations. Investor
securities custody accounts will be credited with their holdings against payment
in same-day funds on the settlement date.
Investors electing to hold their Global Securities through Cedel or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
TRADING BETWEEN DTC PARTICIPANTS. Secondary market trading between DTC
Participants will be settled using the procedures applicable to U.S. corporate
debt obligations in same-day funds.
TRADING BETWEEN CEDEL AND/OR EUROCLEAR PARTICIPANTS. Secondary market
trading between Cedel Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
TRADING BETWEEN DTC SELLER AND CEDEL OR EUROCLEAR PURCHASER. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a Cedel Participant or a Euroclear Participant, the purchaser will
send instructions to Cedel or Euroclear through a Cedel Participant or
A-1
<PAGE>
Euroclear Participant at least one business day prior to settlement. Cedel or
Euroclear will instruct the respective 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, calculated on the basis of a year of 360 days, in each case for
the actual number of days occurring in the period for which such interest is
payable. Payment will then be made by the respective Depositary to the DTC
Participant's account against delivery of the Global Securities. After
settlement has been completed, the Global Securities will be credited to the
respective clearing system and by the clearing system, in accordance with its
usual procedures, to the Cedel Participant's or Euroclear Participant's account.
The 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 to finance settlement. Under
this procedure, Cedel Participants or Euroclear Participants purchasing Global
Securities would incur overdraft charges for one day, assuming they cleared the
overdraft when the Global Securities were credited to their accounts. However,
interest on the Global Securities would accrue from the value date. Therefore,
in many cases the investment income on the Global Securities earned during that
one-day period may substantially reduce or offset the amount of such overdraft
charges, although this result will depend on each Cedel Participant's or
Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities to
the respective Depositary for the benefit of Cedel Participants or Euroclear
Participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC Participant a cross-market transaction will
settle no differently than a trade between two DTC Participants.
TRADING BETWEEN CEDEL OR EUROCLEAR SELLER AND DTC PURCHASER. Due to time
zone differences in their favor, Cedel Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing system, through the
respective Depositary, to a DTC Participant. The seller will send instructions
to Cedel or Euroclear through a Cedel Participant or Euroclear Participant at
least one business day prior to settlement. In these cases, Cedel or Euroclear
will instruct the respective Depositary, as appropriate, to deliver the bonds to
the DTC Participant's account against payment. Payment will include interest
accrued on the Global Securities from and including the last coupon payment date
to and excluding the settlement date, calculated on the basis of a year of 360
days, in each case for the actual number of days occurring in the period for
which such interest is payable. The payment will then be reflected in the
account of the Cedel Participant or Euroclear Participant the following day, and
receipt of the cash proceeds in the Cedel Participant's or Euroclear
Participant's account would be back-valued to the value date (which would be the
preceding day, when settlement occurred in New York). Should the Cedel
Participant or Euroclear Participant have a line of credit with its respective
clearing system and elect to be in debit in anticipation of receipt of the sale
proceeds in its account, the back-valuation will extinguish any overdraft
charges incurred over the 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.
A-2
<PAGE>
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 was taken. At least three techniques should be
readily available to eliminate this potential problem:
(a) borrowing through Cedel or Euroclear for one day (until the purchase
side of the day trade is reflected in their Cedel or Euroclear
accounts) in accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant no
later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their Cedel or Euroclear
account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade so
that the value date for the purchase from the DTC Participant is at
least one day prior to the value date for the sale to the Cedel Participant
or Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through Cedel or
Euroclear (or through DTC if the holder has an address outside the U.S.) will be
subject to the 30% U.S. withholding tax that generally applies to payments of
interest (including original issue discount) on registered debt issued by U.S.
Persons, unless (i) each clearing system, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or business
in the chain of intermediaries between such beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements and
(ii) such beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate:
EXEMPTION FOR NON-U.S. PERSONS (FORM W-8). Beneficial owners of Notes that
are non-U.S. Persons 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. PERSONS WITH EFFECTIVELY CONNECTED INCOME (FORM
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States, can obtain an exemption from the
withholding tax by filing Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States).
EXEMPTION OR REDUCED RATE FOR NON-U.S. PERSONS RESIDENT IN TREATY COUNTRIES
(FORM 1001). Non-U.S. Persons that are Noteholders 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 Noteholder or his agent.
EXEMPTION FOR U.S. PERSONS (FORM W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. FEDERAL INCOME TAX REPORTING PROCEDURE. The holder of a Global
Security or, in the case of a Form 1001 or a Form 4224 filer, his agent, files
by submitting the appropriate form to the person through whom it holds (the
clearing agency, in the case of persons holding directly on the books of the
clearing agency). Form W-8 and Form 1001 are effective for three calendar years
and Form 4224 is effective for one calendar year.
The term "U.S. PERSON" means (i) a citizen or resident of the United States,
(ii) a corporation or partnership organized in or under the laws of the United
States or any political subdivision thereof or (iii) an estate, the income of
which is includible in gross income for United States tax purposes, regardless
of its source, or any trust if a court within the United States is able to
exercise primary supervision over 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>
INDEX OF TERMS
Set forth below is a list of the defined terms used in this Prospectus
Supplement and defined herein and the pages on which the definitions of such
terms may be found herein. Certain defined terms used in this Prospectus
Supplement are defined in the Prospectus. See "Index of Terms" in the
Prospectus.
<TABLE>
<S> <C>
Administration Agreement....................................................... S-18
Administration Fee............................................................. S-18
Administrator.................................................................. S-18
S-4, S-22,
APR............................................................................ S-38
Caterpillar.................................................................... S-31
Cede........................................................................... S-2
Cedel.......................................................................... A-1
Certificate Balance............................................................ S-9, S-38
Certificate Rate............................................................... S-7, S-35
Certificateholders' Distributable Amount....................................... S-9, S-38
Certificateholders' Interest Carryover Shortfall............................... S-9, S-38
Certificateholders' Interest Distributable Amount.............................. S-9, S-38
Certificateholders' Monthly Interest Distributable Amount...................... S-9, S-38
Certificateholders' Monthly Principal Distributable Amount..................... S-10, S-38
Certificateholders' Principal Carryover Shortfall.............................. S-10, S-38
Certificateholders' Principal Distributable Amount............................. S-10, S-38
Certificates................................................................... S-1, S-4
CFSC........................................................................... S-3
Class A Note Distribution Account.............................................. S-10, S-39
Class A Note Underwriters...................................................... S-47
Class A Note Underwriting Agreement............................................ S-47
Class A Noteholders............................................................ S-5
Class A Noteholders' Distributable Amount...................................... S-10, S-39
Class A Noteholders' Interest Carryover Shortfall.............................. S-10, S-39
Class A Noteholders' Interest Distributable Amount............................. S-11, S-39
Class A Noteholders' Monthly Interest Distributable Amount..................... S-11, S-39
Class A Notes.................................................................. S-1, S-3
Class A-1 Note Final Scheduled Distribution Date............................... S-7, S-39
Class A-1 Note Pool Factor..................................................... S-30
Class A-1 Note Rate............................................................ S-5, S-32
Class A-1 Noteholders.......................................................... S-5
Class A-1 Noteholders' Monthly Principal Distributable Amount.................. S-11, S-39
Class A-1 Noteholders' Principal Carryover Shortfall........................... S-11, S-39
Class A-1 Noteholders' Principal Distributable Amount.......................... S-11, S-39
Class A-1 Notes................................................................ S-1, S-3
Class A-2 Note Final Scheduled Distribution Date............................... S-7, S-40
Class A-2 Note Pool Factor..................................................... S-30
Class A-2 Note Rate............................................................ S-5, S-33
Class A-2 Noteholders.......................................................... S-5
Class A-2 Noteholders' Monthly Principal Distributable Amount.................. S-11, S-40
Class A-2 Noteholders' Principal Carryover Shortfall........................... S-12, S-40
Class A-2 Noteholders' Principal Distributable Amount.......................... S-12, S-40
Class A-2 Notes................................................................ S-1, S-3
Class A-3 Note Final Scheduled Distribution Date............................... S-7, S-40
Class A-3 Note Pool Factor..................................................... S-30
Class A-3 Note Prepayment Price................................................ S-7, S-34
Class A-3 Note Rate............................................................ S-5, S-33
Class A-3 Noteholders.......................................................... S-5
</TABLE>
A-4
<PAGE>
<TABLE>
<S> <C>
Class A-3 Noteholders' Monthly Principal Distributable Amount.................. S-12, S-40
Class A-3 Noteholders' Principal Carryover Shortfall........................... S-12, S-40
Class A-3 Noteholders' Principal Distributable Amount.......................... S-13, S-40
Class A-3 Notes................................................................ S-1, S-3
Class B Note Distribution Account.............................................. S-13, S-41
Class B Note Final Scheduled Distribution Date................................. S-7, S-41
Class B Note Pool Factor....................................................... S-30
Class B Note Prepayment Price.................................................. S-7, S-34
Class B Note Rate.............................................................. S-5, S-33
Class B Note Underwriter....................................................... S-47
Class B Note Underwriting Agreement............................................ S-47
Class B Noteholders............................................................ S-5
Class B Noteholders' Distributable Amount...................................... S-13, S-41
Class B Noteholders' Interest Carryover Shortfall.............................. S-13, S-41
Class B Noteholders' Interest Distributable Amount............................. S-13, S-41
Class B Noteholders' Monthly Interest Distributable Amount..................... S-13, S-41
Class B Noteholders' Monthly Principal Distributable Amount.................... S-13, S-41
Class B Noteholders' Principal Carryover Shortfall............................. S-14, S-41
Class B Noteholders' Principal Distributable Amount............................ S-14, S-41
Class B Notes.................................................................. S-1, S-3
Closing Date................................................................... S-1
Code........................................................................... S-19
Collection Account............................................................. S-16
Collection Period.............................................................. S-14, S-42
Commission..................................................................... S-2
Custodial Agreement............................................................ S-18
Custodian...................................................................... S-18
Cut-off Date................................................................... S-4, S-22
Cut-off Date APR............................................................... S-4, S-42
Dealers........................................................................ S-4
Determination Date............................................................. S-36
Disqualified Persons........................................................... S-45
S-1, S-5,
Distribution Date.............................................................. S-32
DOL............................................................................ S-46
DTC............................................................................ S-2, A-1
ERISA.......................................................................... S-19, S-45
Euroclear...................................................................... A-1
Exchange Act................................................................... S-2
Final Maturity Date............................................................ S-17
Financed Equipment............................................................. S-4
Global Securities.............................................................. A-1
Indenture...................................................................... S-3
Indenture Trustee.............................................................. S-3
Initial Pool Balance........................................................... S-4, S-42
Installment Sales Contracts.................................................... S-4
Issuer......................................................................... S-1, S-3
Liquidated Receivables......................................................... S-36
Liquidation Proceeds........................................................... S-36
Merrill Lynch.................................................................. S-47
Moody's........................................................................ S-19
Noteholders.................................................................... S-5
Noteholders' Interest Distributable Amount..................................... S-42
Notes.......................................................................... S-1, S-3
</TABLE>
A-5
<PAGE>
<TABLE>
<S> <C>
Obligors....................................................................... S-4
Over-Rate Receivables.......................................................... S-44
Owner Trustee.................................................................. S-3
Parties in Interest............................................................ S-45
Plan Asset Regulation.......................................................... S-46
Plan Assets.................................................................... S-19, S-45
Plans.......................................................................... S-19, S-45
Pool Balance................................................................... S-5, S-42
Principal Balance.............................................................. S-5, S-22
Principal Distribution Amount.................................................. S-14, S-36
Purchase Agreement............................................................. S-4
Rating Agency.................................................................. S-19
Realized Losses................................................................ S-14, S-42
Receivables.................................................................... S-2, S-4
Receivables Files.............................................................. S-18, S-20
Receivables Pool............................................................... S-22
Record Date.................................................................... S-6
Reserve Account................................................................ S-15
Reserve Account Initial Deposit................................................ S-15, S-42
S&P............................................................................ S-19
Sale and Servicing Agreement................................................... S-4
Seller......................................................................... S-3
Servicer....................................................................... S-3
Servicing Fee.................................................................. S-17
Servicing Fee Rate............................................................. S-17
Special Tax Counsel............................................................ S-19
Specified Reserve Account Balance.............................................. S-15, S-42
Tennessee Tax Counsel.......................................................... S-19
Total Distribution Amount...................................................... S-15, S-36
Transfer and Servicing Agreements.............................................. S-35
Trust.......................................................................... S-1, S-3
Trust Agreement................................................................ S-3
U.S. ISC Portfolio............................................................. S-27
U.S. Person.................................................................... A-3
Underwriters................................................................... S-47
Underwriting Agreements........................................................ S-47
Variable Frequency Receivables................................................. S-24
</TABLE>
A-6
<PAGE>
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR IN THE ACCOMPANYING
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE SELLER, THE SERVICER OR THE
UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT
CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER
OR SOLICITATION IS NOT AUTHORIZED OR 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 SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS, NOR ANY SALE MADE HEREUNDER OR
THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE SELLER OR THE RECEIVABLES SINCE THE DATE
HEREOF OR THEREOF OR THAT THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<S> <C>
Reports to Noteholders................................ S-2
Summary of Terms...................................... S-3
Risk Factors.......................................... S-20
Formation of the Trust................................ S-21
The Receivables Pool.................................. S-22
Weighted Average Life of the Notes.................... S-29
Pool Factors and Trading Information.................. S-30
Management's Discussion and Analysis of Financial
Condition and Results of Operations.................. S-31
Use of Proceeds....................................... S-31
The Seller, Caterpillar and the Servicer.............. S-31
Description of the Notes.............................. S-32
Description of the Certificates....................... S-35
Description of the Transfer and Servicing
Agreements........................................... S-35
Certain Legal Aspects of the Receivables.............. S-44
Legal Investment...................................... S-45
ERISA Considerations.................................. S-45
Underwriting.......................................... S-47
Legal Opinions........................................ S-48
Annex I -- Global Clearance, Settlement and Tax
Documentation Procedures............................. A-1
Index of Terms........................................ A-4
<CAPTION>
PROSPECTUS
<S> <C>
Reports to Noteholders and Certificateholders......... 3
Available Information................................. 3
Incorporation of Certain Documents by Reference....... 3
Summary of Terms...................................... 4
Risk Factors.......................................... 13
The Trusts............................................ 18
The Trust Property.................................... 19
The Receivables Pools................................. 20
Weighted Average Life of the Securities............... 25
Pool Factors and Trading Information.................. 26
Use of Proceeds....................................... 26
The Seller, Caterpillar and the Servicer.............. 26
Description of the Notes.............................. 28
Description of the Certificates....................... 33
Certain Information Regarding the Securities.......... 35
Issuance of the Securities............................ 36
Description of the Transfer and Servicing
Agreements........................................... 39
Certain Legal Aspects of the Receivables.............. 49
Certain Federal Income Tax Considerations............. 53
Certain State Tax Considerations...................... 61
ERISA Considerations.................................. 62
Plan of Distribution.................................. 63
Ratings............................................... 63
Legal Opinions........................................ 63
Index of Terms........................................ 64
</TABLE>
UNTIL AUGUST , 1997 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS
SUPPLEMENT), ALL DEALERS EFFECTING TRANSACTIONS IN THE SECURITIES, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS
SUPPLEMENT AND A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS SUPPLEMENT AND A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
CATERPILLAR
FINANCIAL ASSET
TRUST 1997-A
$88,000,000
CLASS A-1 %
ASSET BACKED NOTES
$128,000,000
CLASS A-2 %
ASSET BACKED NOTES
$108,100,000
CLASS A-3 %
ASSET BACKED NOTES
$13,870,000
CLASS B %
ASSET BACKED NOTES
CATERPILLAR FINANCIAL
FUNDING CORPORATION
SELLER
CATERPILLAR FINANCIAL
SERVICES CORPORATION
SERVICER
-----------------
PROSPECTUS SUPPLEMENT
-----------------
MERRILL LYNCH & CO.
CREDIT SUISSE FIRST BOSTON
UBS SECURITIES
MAY , 1997
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