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Filed pursuant to Rule 424(b)(3)
Registration No. 33-98620
SUBJECT TO COMPLETION, DATED MAY 6, 1996
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED FEBRUARY 23, 1996
$115,941,814.19
AMERICREDIT AUTOMOBILE RECEIVABLES TRUST 1996-B
% Automobile Receivables-Backed Certificates, Class A
AFS FUNDING CORP.
SELLER
AMERICREDIT FINANCIAL SERVICES, INC.
SERVICER
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The Automobile Receivables-Backed Certificates, Class A (the "Class A
Certificates") will represent senior fractional undivided interests in the
AmeriCredit Automobile Receivables Trust 1996-B (the "Trust") to be formed
pursuant to a Pooling and Servicing Agreement to be entered into among AFS
Funding Corp., as Seller (the "Seller"), AmeriCredit Financial Services,
Inc. as Servicer ("AmeriCredit" or the "Servicer"), and LaSalle National
Bank, as Trustee. The Class A Certificates offered hereby are senior
certificates with a pass-through rate of % per annum (the "Pass-
Through Rate") and an aggregate principal balance of $115,941,814.19.
The Underwriters have agreed to purchase from the Seller the Class A
Certificates at % of the principal amount thereof, subject to the
terms and conditions set forth in the Underwriting Agreement referred
to herein under "Underwriting". The aggregate proceeds to the Seller,
before deducting expenses payable by the Seller estimated at
$350,000.00, will be $ plus accrued interest at the
Pass-Through Rate on the Class A Certificates from
May 1, 1996.
The Underwriters propose to offer the Securities from time to time in
negotiated transactions or otherwise, at prices determined at the time
of sale. For further information with respect to the plan of
distribution and any discounts, commissions or profits that may be
deemed underwriting discounts or commissions, see "Underwriting" herein.
The assets of the Trust will include a portfolio of retail installment sale
contracts (the "Receivables"), which are secured by the new and used
automobiles and light duty trucks financed thereby (the "Financed
Vehicles"), certain monies due under the Receivables after April
30, 1996 (the "Cutoff Date"), security interests in the Financed
Vehicles and certain other property, as more fully described herein.
The aggregate principal balance of the Receivables as of the Cutoff
Date was $126,023,711.08. The Class A Certificates will evidence
an undivided interest in the Trust of 92%.
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FOR A DISCUSSION OF CERTAIN FACTORS RELATING TO THE TRANSACTION, SEE "RISK
FACTORS" AT PAGE S-14 HEREIN AND PAGE 13 IN THE ACCOMPANYING PROSPECTUS.
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FULL AND COMPLETE PAYMENT OF THE GUARANTEED DISTRIBUTIONS (AS DEFINED HEREIN) ON
EACH DISTRIBUTION DATE IS UNCONDITIONALLY AND IRREVOCABLY GUARANTEED PURSUANT TO
A FINANCIAL GUARANTY INSURANCE POLICY (THE "POLICY") TO BE ISSUED BY:
[FSA LOGO]
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THE CLASS A CERTIFICATES REPRESENT INTERESTS IN THE TRUST AND DO NOT
REPRESENT INTEREST IN OR OBLIGATIONS OF THE SELLER, THE SERVICER
OR ANY AFFILIATE THEREOF.
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THE CLASS A CERTIFICATES 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.
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The Class A Certificates are offered hereby by the Underwriter when, as and if
issued by the Seller, delivered to and accepted by the Underwriter and
subject to its right to reject orders in whole or in part. It is
expected that delivery of the Class A Certificates will be made on
or about May , 1996 only through The Depository Trust Company.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with and
declared effective by the Securities and Exchange Commission. These securities
may not be sold nor may offers to buy be accepted without the 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.
CS FIRST BOSTON PRUDENTIAL SECURITIES INCORPORATED
The date of this Prospectus Supplement is May , 1996.
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(cover continued from previous page)
AVAILABLE INFORMATION
The Servicer has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (together with all amendments and
exhibits thereto, referred to herein as the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act") with respect to the
Certificates offered pursuant to this Prospectus Supplement. For further
information, reference is made to the Registration Statement which may be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549; and at the
Commission's regional office at 500 West Madison, 14th Floor, Chicago, Illinois
60661 and Seven World Trade Center, 13th Floor, New York, New York 10048. Copies
of the Registration Statement may be obtained from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The Servicer, on behalf of the Trust, will also file or cause
to be filed with the commission such periodic reports as may be required under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules and regulations of the Commission thereunder.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
In addition to the documents described in the accompanying Prospectus
under "Incorporation of Certain Documents by Reference," the financial
statements of the Security Insurer included in, or as exhibits to, the following
documents which have been filed with the Commission by Financial Security
Assurance Holdings Ltd. ("Holdings"), are hereby incorporated by reference in
the Registration Statement of which this Prospectus and Prospectus Supplement
form a part:
(a) Annual Report on Form 10-K for the year ended December 31, 1995;
and
(b) Annual Report on Form 10-K for the year ended December 31, 1994.
All financial statements of the Security Insurer included in documents
filed by Holdings pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act") subsequent to the date of
this Prospectus Supplement and prior to the termination of the offering of the
Class A Certificates shall be deemed to be incorporated by reference into this
Prospectus Supplement and to be a part hereof from the respective dates of
filing of such documents.
Americredit hereby undertakes on behalf of the Trust that, for purposes
of any liability under the Securities Act of 1933, each filing of the financial
statements of Financial Security included in or as an exhibit to the annual
report of Holdings filed pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in the Registration Statement (as
defined in the accompanying Prospectus) shall be deemed to be a new registration
offering of the Class A Certificates at that time shall be deemed to be the
initial bona fide offering thereof.
All documents subsequently filed by the Servicer with the Registration
Statement, either on its own behalf or on behalf of the Trust, relating to the
Class A Certificates, with the Commission pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act, after the date of this Prospectus Supplement and
prior to the termination of the offering of the Certificates offered hereby,
shall be deemed to be incorporated by reference in this Prospectus Supplement
and to be a part of this Prospectus Supplement from the date of the filing of
such documents. Any statement contained herein or in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus Supplement to the extent that a
statement contained herein
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or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein, modifies or replaces such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Servicer will provide without charge to each person to whom this
Prospectus Supplement is delivered, on the written or oral request of such
person, a copy of any or all of the documents referred to above that have been
or may be incorporated by reference in this Prospectus Supplement (not including
exhibits to the information that is incorporated by reference unless such
exhibits are specifically incorporated by reference into the information that
this Prospectus Supplement incorporates). Written requests for such copies
should be directed to: AmeriCredit Financial Services, Inc., 200 Bailey Avenue,
Fort Worth, Texas 76107, Attention: Chief Financial Officer. Telephone requests
for such copies should be directed to AmeriCredit Financial Services, Inc. at
(817) 332-7000.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS A
CERTIFICATES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates are issued periodic reports
containing information concerning the Receivables will be prepared by the
Servicer and sent on behalf of the Trust only to Cede & Co. ("Cede"), as nominee
of The Depository Trust Company ("DTC") and registered holder of the
Certificates. Such reports will not constitute financial statements prepared in
accordance with generally accepted accounting principles. The Servicer will file
with the Commission such periodic reports as are required under 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.S., Washington, D.C.
20549, at prescribed rates.
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SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus Supplement and in
the accompanying Prospectus. Capitalized terms used herein and not otherwise
defined herein shall have the respective meanings ascribed to such terms
elsewhere in this Prospectus Supplement.
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Issuer............................ AmeriCredit Automobile Receivables Trust 1996-B (the
"Issuer" or the "Trust"), to be formed on or about May 16,
1996 (the "Closing Date"), pursuant to a Pooling and
Servicing Agreement, dated as of April 30, 1996 (the
"Pooling and Servicing Agreement"), among AmeriCredit
Financial Services, Inc. ("AmeriCredit"), as Servicer (in
such capacity referred to herein as the "Servicer"), AFS
Funding Corp., as Seller (the "Seller") and LaSalle
National Bank, as Trustee (in such capacity referred to
herein as the "Trustee").
Seller............................ AFS Funding Corp., a special purpose financing
subsidiary of AmeriCredit.
Servicer.......................... AmeriCredit Financial Services, Inc.
Trustee and Backup
Servicer.......................... LaSalle National Bank. AmeriCredit may be terminated
as Servicer under certain circumstances, at which time
the Back-up Servicer will automatically become the
Servicer.
Securities Offered................ The Certificates consist of two classes, entitled 6.50%
Automobile Receivables-Backed Certificates, Class A (the
"Class A Certificates") and Automobile Receivables-
Backed Certificates, Class B (the "Class B Certificates",
together with the Class A Certificates, the "Certificates").
The Class B Certificates are not being offered hereby,
and will be initially retained by the Seller. Each
Certificate will represent a fractional undivided interest in
the Trust. The Class A Certificates will be offered for
purchase in denominations of $1,000 and integral
multiples thereof.
The Class A Certificates will evidence in the aggregate
an undivided ownership interest of 92% (the "Class A
Percentage") of the Trust, and the Class B Certificates
will evidence in the aggregate an undivided ownership
interest of 8% (the "Class B Percentage") of the Trust.
The Class B Certificates are subordinated to the Class A
Certificates to the extent described herein.
Trust Property.................... The Trust's assets (the "Trust Property") will include,
among other things, a pool (the "Receivables Pool") of
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retail installment sales contracts and promissory notes
(the "Receivables") purchased from motor vehicle dealers
("Dealers") by AmeriCredit and secured by new and used
automobiles and light trucks (the "Financed Vehicles"), certain
monies paid or payable thereunder after April 30, 1996 (the
"Cutoff Date"), an assignment of AmeriCredit's security
interests in the Financed Vehicles and of the right to receive
proceeds from claims on certain insurance policies covering the
Financed Vehicles or the Obligors, a financial guaranty
insurance policy (the "Policy") issued by Financial Security
Assurance Inc. ("Financial Security"), the assignment of certain
rights of AmeriCredit against the Dealers originating such
Receivables, the Collection Account, including all investments
therein, all income from the investment of funds therein and all
proceeds thereof, and certain other rights under the Pooling and
Servicing Agreement. See "The Trust" in the Prospectus
Supplement and "The Trust Property" in the Prospectus.
Original Class A Certificate
Principal Balance................. The Class A Certificates will be issued in an initial
principal amount of $115,941,814.19 which is equal to
the Class A Percentage of the Aggregate Principal
Balance of the Receivables as of the Cutoff Date (the
"Original Class A Certificate Principal Balance"). The
"Class A Certificate Balance" as of any date will be equal
to the Original Class A Certificate Principal Balance less
all principal distributed to holders of Class A Certificates
("Class A Certificateholders") prior to such date.
Class A Pass-Through Rate......... 6.50% per annum (the "Pass-Through Rate"), payable
monthly at one-twelfth of the annual rate, calculated on
the basis of a 360-day year consisting of twelve 30-day
months.
Distribution Date................. The 12th day of each month (or if the 12th day is not a
Business Day, the next succeeding Business Day)
commencing June 12, 1996 (each, a "Distribution Date").
A "Business Day" is a day other than a Saturday, Sunday
or other day on which commercial banks located in
Chicago, Illinois or New York, New York are authorized
or obligated to be closed.
Final Scheduled
Distribution Date................. January 12, 2002 (the "Final Scheduled Distribution
Date").
Interest.......................... On each Distribution Date, the Trustee will be required to
pass through and distribute pro rata with respect to each
class of Certificates to the holders of record of the
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applicable class of Certificates as of the last day of the
immediately preceding calendar month (each such date, a "Record
Date"), interest distributable with respect to the applicable
class of Certificates. The amount of interest which the holders
of the Class A Certificates are entitled to receive on each
Distribution Date is an amount equal to one-twelfth (or in the
case of the first Distribution Date a fraction, the numerator of
which is 41 and the denominator of which is 360) of the sum of
(i) the product of the Class A Pass-Through Rate and the Class A
Certificate Balance as of the close of business on the last day
of the preceding Monthly Period (as hereinafter defined) and
(ii) any outstanding Class A Interest Carryover Shortfall (as
defined herein). The amount of interest distributable on the
Class B Certificates will be an amount equal to sum of (i) Class
B Coupon Interest Amount (as hereinafter defined) and (ii) Class
B Excess Interest Amount (as hereinafter defined).
Principal......................... On each Distribution Date, the Class A Certificateholders
and Class B Certificateholders will be entitled to receive,
as of the related Record Date, as a distribution of
principal the Class A Certificateholders' pro rata share
and the Class B Certificateholders' pro rata share, as
applicable, of the amount equal to the sum of the
following amounts with respect to the immediately
preceding Monthly Period, computed in accordance with
the simple interest method:
(i) that portion of all collections on Receivables (other
than Liquidated Receivables and Receivables that were
purchased by the Seller or the Servicer, in each case,
under an obligation that arose during the preceding
Monthly Period as the result of the breach of certain
representations or warranties or breach of certain of
the Servicer's obligations or pursuant to the Optional
Purchase (each a "Purchased Receivable")) allocable
to principal, including all full and partial principal
prepayments, (ii) the Principal Balance of all
Receivables (other than Purchased Receivables) that
became Liquidated Receivables during the related
Monthly Period, (iii) (A) the portion of the Purchase
Amount allocable to principal of all Receivables that
became Purchased Receivables as of the immediately
preceding Record Date, and (B) in the sole discretion
of the Security Insurer, all or any portion of the
Principal Balance as of the immediately preceding
Record Date of all Receivables that were required to
be purchased as of the immediately preceding Record
Date but were not so purchased and (iv) the aggregate
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amount of Cram Down Losses that shall have occurred
during the related Monthly Period.
With respect to each Distribution Date, the Class A
Certificateholders' pro rata share of such principal
distribution (the "Class A Principal Distributable Amount")
is equal to the Class A Percentage of the amounts in
clauses (i) through and including (iv) of the immediately
preceding paragraph, plus the Class A Principal
Carryover Shortfall Amount, if any, provided, that on the
Final Scheduled Distribution Date, the Class A Principal
Distributable Amount will equal the Class A Certificate
Balance as of the Final Scheduled Distribution Date.
With respect to each Distribution Date, the Class B
Certificateholders' pro rata share of such principal
distribution (the "Class B Principal Distributable Amount")
is equal to the Class B Percentage of the amounts
described in clauses (i) through and including (iv) of the
immediately preceding paragraph.
In addition, on the Final Scheduled Distribution Date, the
principal to be distributed to the Class B
Certificateholders will equal the lesser of (i) the Class B
Percentage of any principal due and remaining unpaid
with respect to the Receivables in the Trust as of the last
day of the immediately preceding Monthly Period or
(ii) the portion of the amount under clause (i) of this
paragraph that is necessary (after giving effect to
all other amounts distributed to Class A Certificateholders
on such Distribution Date and allocable to principal) to
reduce the Class B Certificate Balance to zero. A
"Monthly Period" with respect to a Distribution Date will
be the calendar month immediately preceding the month
in which such Distribution Date occurs, or, in the case of
the initial Distribution Date, the period from the Cutoff
Date through the last day of the calendar month
preceding the month in which the initial Distribution Date
occurs.
Subordination..................... Distributions of interest and principal on the Class B
Certificates will be subordinated in priority of payment to
interest and principal due on the Class A Certificates.
The Class B Certificateholders will not receive any
distributions of interest or principal with respect to a
Monthly Period until the full amount of interest and
principal on the Class A Certificates relating to such
Monthly Period has been distributed from the Collection
Account.
The Policy........................ On the Closing Date, Financial Security will issue the
Policy to the Trustee pursuant to an Insurance and
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Indemnity Agreement, dated as of May 1, 1996, among Financial
Security, AmeriCredit, the Seller and AmeriCredit Corp. (the
"Insurance Agreement"). Pursuant to the Policy, Financial
Security will unconditionally and irrevocably guarantee to the
Class A Certificateholders payment of the Class A Interest
Distributable Amount and the Class A Principal Distributable
Amount for each Distribution Date. See "The Policy" and "The
Certificates - Distributions on Certificates".
Receivables....................... As of the Cutoff Date, the aggregate principal balance of
the Receivables is $126,023,711.08 of Receivables. As
of the Cutoff Date, the Receivables had a weighted
average annual percentage rate (the "APR") of 20.46%
and a weighted average remaining maturity of
48.84 months. As of the Cutoff Date, at least one
scheduled payment will have previously been received by
the Servicer, and no Receivable was more than 30 days
past due. The final scheduled payment date on the
Receivable with the latest maturity will occur in April,
2001. All of the Receivables are prepayable at any time
without penalty to the purchaser or co-purchasers of the
Financed Vehicle or other person or persons who are
obligated to make payments thereunder (each, an
"Obligor"). See "The Receivables Pool" in this
Prospectus Supplement and "The Receivables" in the
Prospectus.
Optional Purchase of
Receivables....................... The Servicer may purchase all the Receivables on any
Deposit Date following the first Monthly Period as of
which the Class A Certificate Balance has declined to
10% or less of the Original Class A Certificate Principal
Balance, subject to certain provisions in the Pooling and
Servicing Agreement. In such event, the Class A
Certificateholders will receive on the related Distribution
Date an amount in respect of the Class A Certificates
equal to the Class A Certificate Balance together with
accrued interest at the Class A Pass-Through Rate,
which distribution will effect the early retirement of the
Class A Certificates.
Collection Account................ Except under certain conditions described herein, the
Servicer will establish one or more accounts in the name
of the Trustee (the "Collection Account") for the benefit
of the Certificateholders. All payments from Obligors that
are received by the Lockbox Bank on behalf of the Trust
will be deposited in the Collection Account no later than
three Business Days after receipt thereof. Pursuant to
the Pooling and Servicing Agreement, the Trustee will, on
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each Distribution Date, withdraw the Available Funds with
respect to such Distribution Date from the Collection Account
and apply such funds to the following (in the priority
indicated): (i) to the Servicer, the Basic Servicing Fee for the
related Monthly Period and any Supplemental Servicing Fees (as
such Fees are defined herein), (ii) to the Trustee, any accrued
and unpaid trustee fees and any accrued and unpaid fees of the
separate Lockbox Bank, Custodian, Backup Servicer or Collateral
Agent (in each case, to the extent such fees have not been
previously paid by the Servicer or AmeriCredit), (iii) to the
Class A Certificateholders, the Class A Interest Distributable
Amount, (iv) to the Class A Certificateholders, the Class A
Principal Distributable Amount, (v) to the Security Insurer, to
the extent of any amounts owing to the Security Insurer under
the Insurance and Indemnity Agreement among the Security
Insurer, the Seller and the Servicer (the "Insurance Agreement")
and not paid, whether or not the Seller is also obligated to pay
such amounts and (vi) the remaining Available Funds, if any,
will be distributed to the Class B Certificateholders or as
otherwise provided in the Pooling and Servicing Agreement. See
"The Certificates -- Distributions on Certificates" in this
Prospectus Supplement.
Purchases of Certain
Receivables....................... The Seller will be obligated to repurchase any Receivable
if the interest of the Issuer or the Security Insurer therein
is materially adversely affected by a breach of any
representation or warranty made by AmeriCredit or the
Seller with respect to the Receivables, if such breach has
not been cured following discovery by AmeriCredit or the
Seller or notice to AmeriCredit or the Seller. See
"Description of the Transaction Documents-- Pooling
and Servicing Agreement-- Sale and Assignment of
Receivables" in this Prospectus Supplement and
"Description of the Trust Agreements" in the Prospectus.
The Servicer will be obligated to purchase any
Receivable for breach of certain of its servicing
obligations, including if a perfected security interest in the
related Financed Vehicle is not maintained. See
"Description of the Transaction Documents-- Pooling
and Servicing Agreement-- Servicing Procedures" in this
Prospectus Supplement and "Description of the Trust
Agreements" in the Prospectus.
Servicing......................... The Servicer will be responsible for servicing, managing
and making collections on the Receivables. On or prior
to the Closing Date, the Servicer will notify each Obligor
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to make payments with respect to the Receivables after
the Cutoff Date directly to one or more post office boxes
or other mailing locations (each, a "Lockbox") initially
maintained in the name of the Collateral Agent at First
Interstate Bank of Texas, N.A. (such bank, together with
any replacement or successor, the "Lockbox Bank"). All
payments on Receivables sent by Obligors to a Lockbox
will be deposited by the Lockbox Bank in a segregated
lockbox account at the Lockbox Bank, in the name of the
Collateral Agent for the benefit of the Certificateholders
and the Security Insurer (the "Lockbox Account") within
one business day of receipt. Within two business days
of deposit of amounts into the Lockbox Account, the
Lockbox Bank is required to effect a transfer of funds
from the Lockbox Account to one or more accounts
established with the Collateral Agent. All of the accounts
maintained by or on behalf of the Issuer, including the
Lockbox Account will be pledged by the Issuer to the
Collateral Agent. See "Description of the Transaction
Documents -- Pooling and Servicing Agreement --
Accounts and -- Payments on Receivables" in this
Prospectus Supplement and "Description of the Trust
Agreements" in the Prospectus.
Backup Servicer................... If a Servicer Termination Event occurs under the Pooling
and Servicing Agreement, (x) provided no Security
Insurer Default has occurred and is continuing, the
Security Insurer in its sole and absolute discretion, or
(y) if a Security Insurer Default shall have occurred and
be continuing, then the Issuer, the Trustee or the holders
of Certificates evidencing more than 50% of the
Certificate Balance, may terminate the rights and
obligations of the Servicer under the Pooling and
Servicing Agreement. If such event occurs while
AmeriCredit is the Servicer, or if AmeriCredit resigns as
Servicer or is terminated as Servicer by the Security
Insurer, LaSalle National Bank, (in such capacity, the
"Backup Servicer") has agreed to serve as successor
Servicer under the Agreement pursuant to the Pooling
and Servicing Agreement. The Backup Servicer will
receive a portion of the Servicing Fee (as defined below)
for agreeing to stand by as successor Servicer and for
performing certain other functions.
"Security Insurer Default" shall mean any of the following
events shall have occurred and be continuing: (i) the
Security Insurer fails to make a payment required under
the Policy in accordance with its terms; (ii) the Security
Insurer (A) files any petition or commences any case or
proceeding under any provision of federal or state law
relating to insolvency, bankruptcy, rehabilitation,
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liquidation or reorganization, (B) makes a general
assignment for the benefit of its creditors, or (C) has an
order for relief entered against it under the United States
Bankruptcy Code or any other similar federal or state law
relating to insolvency, bankruptcy, rehabilitation,
liquidation or reorganization which is final and
nonappealable; or (iii) a court of competent jurisdiction,
the New York Department of Insurance or other competent
regulatory authority enters a final nonappealable order,
judgment or decree (A) appointing a custodian, trustee,
agent or receiver for the Security Insurer or for all or
any material portion of its property or (B) authorizing the
taking of possession by a custodian, trustee, agent or
receiver of the Security Insurer (or the taking of
possession of all or any material portion of the property
of the Security Insurer).
Servicing Fee..................... The Servicer will be entitled to receive the Basic
Servicing Fee on each Distribution Date for the preceding
Monthly Period equal to the product of one-twelfth times
2.50% (the "Basic Servicing Fee Rate") of the Aggregate
Principal Balance as of the close of business on the last
day of the Monthly Period preceding a Distribution Date
(the "Accounting Date") for such Monthly Period (the
"Basic Servicing Fee"). The Servicer will also collect and
retain certain late fees, prepayment charges, and other
administrative fees or similar charges (the "Supplemental
Servicing Fee"). For so long as AmeriCredit is Servicer,
a portion of the fee payable to the Servicer will be
payable to the Backup Servicer.
Certain Legal Aspects of
the Receivables; Purchase
Obligations....................... In connection with the sale of the Receivables, security
interests in the Financed Vehicles securing the
Receivables have been assigned by AmeriCredit to the
Seller pursuant to a Receivables Purchase Agreement
and Assignment between AmeriCredit and the Seller (the
"Receivables Purchase Agreement") and by the Seller to
the Trustee pursuant to the Pooling and Servicing
Agreement. Due to the administrative burden and
expense, the certificates of title to the Financed Vehicles
will not be amended or re-issued to reflect the
assignment thereof to the Trustee. In the absence of
such an amendment, the Trustee may not have a
perfected security interest in the Financed Vehicles
securing the Receivables in some states. The Seller will
be obligated to purchase any Receivable sold to the
Issuer as to which there did not exist on the Closing Date
a perfected security interest in the name of the Seller in
the Financed Vehicle, and the Servicer will be obligated
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to purchase any Receivable sold to the Issuer as to which
it failed to maintain a perfected security interest in the
name of AmeriCredit in the Financed Vehicle securing such
Receivable (which perfected security interest has been
assigned to, and is for the benefit of, the Trustee) if, in
either case, such breach materially and adversely affects
the interest of the Issuer, the Trustee or the Security
Insurer in such Receivable and if such failure or breach is
not cured by the last day of the second (or, if AmeriCredit
or the Servicer, as the case may be, elects, the first)
month following the discovery by or notice to AmeriCredit
or the Servicer, as the case may be, of such breach. To the
extent the security interest is perfected, the Trustee will
have a prior claim over subsequent purchasers of such
Financed Vehicle and holders of subsequently perfected
security interests. However, as against liens for repairs
of a Financed Vehicle or for unpaid storage charges or for
taxes unpaid by an Obligor under a Receivable, or through
fraud or negligence, the Trustee could lose its prior
perfected security interest in a Financed Vehicle.
Notwithstanding the foregoing, the Seller will not have any
obligation to purchase a Receivable as to which any of the
aforementioned occurrences result in the Trustee's losing
its prior perfected security interest in such Financed
Vehicle after the Closing Date. See "Risk Factors --
Certain Legal Aspects."
Registration of
Class A Certificates.............. The Class A Certificates initially will be represented by
certificates registered in the name of Cede & Co.
("Cede") as the nominee of The Depository Trust
Company ("DTC"), and will only be available in the form
of book-entries on the records of DTC and participating
members thereof. Certificates representing the Class A
Certificates will be issued in definitive form only under the
limited circumstances described herein. All references
herein to "holders" or "Class A Certificateholders" shall
reflect the rights of beneficial owners of the Class A
Certificates ("Class A Certificate Owners") as they may
indirectly exercise such rights through DTC and
participating members thereof, except as otherwise
specified herein. See "Risk Factors" and "The
Certificates -- Registration of Class A Certificates" in this
Prospectus Supplement and "Description or the
Securities -- Book-Entry Registration" in the Prospectus.
Tax Status........................ In the opinion of Dewey Ballantine, special counsel to
AmeriCredit and the Seller, the Trust will constitute a
grantor trust for federal income tax purposes and will not
</TABLE>
S-12
<PAGE> 13
<TABLE>
<S> <C>
be subject to federal income tax. The Class A
Certificateholders must report their respective allocable
shares of all income earned on the Trust assets (other
than amounts treated as "stripped coupons") and may
deduct their respective allocable shares of reasonable
servicing fees. See "Certain Federal Income Tax
Consequences -- Tax Status of the Trust." Prospective
investors should note that no rulings have been or will be
sought from the Internal Revenue Service (the "Service")
with respect to any of the federal income tax
consequences discussed herein, and no assurance can be
given that the Service will not take contrary positions.
See "Certain Federal Income Tax Consequences" in this
Prospectus Supplement.
ERISA Considerations.............. As described herein, the Class A Certificates may be
purchased by employee benefit plans that are subject to
the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") or entities using assets of such
plans. Any benefit plan fiduciary considering purchase of
the Class A Certificates should, among other things,
consult with its counsel in determining whether all
required conditions have been satisfied. See "ERISA
Considerations" in this Prospectus Supplement.
Ratings........................... As a condition of issuance, the Class A Certificates will
be rated AAA by Standard & Poor's Ratings Services
("S&P") and Aaa by Moody's Investors Service, Inc.
("Moody's" and, together with S&P, the "Rating
Agencies") on the basis of the issuance of the Policy by
Financial Security. There is no assurance that the
ratings initially assigned to the Class A Certificates will
not subsequently be lowered or withdrawn by the Rating
Agencies.
</TABLE>
S-13
<PAGE> 14
RISK FACTORS
Prospective Class A Certificateholders should consider the following
factors in connection with the purchase of the Class A Certificates, as well as
those matters discussed and "Risk Factors" in the Prospectus:
NATURE OF OBLIGORS AND FINANCED VEHICLES; SERVICING
AmeriCredit purchases loans originated for assignment to AmeriCredit
from automobile dealers through AmeriCredit's branch network. AmeriCredit's
customers are generally considered to have marginal credit and fall into one of
two categories: customers with moderate income, limited assets and other income
characteristics which cause difficulty in borrowing from banks, captive finance
companies of automakers or other traditional sources of auto loan financing; and
customers with a derogatory credit record including a history of charged-off
loans, irregular employment, previous bankruptcy filings, repossessions of
property and garnishment of wages. The payment experience on Receivables of
Obligors with the foregoing credit profile is likely to be different than that
on receivables of traditional auto financing sources and is likely to be more
sensitive to changes in the economic climate in the areas in which such Obligors
reside. In addition, as of the Cutoff Date substantially all of the aggregate
principal balance of the Receivables represented financing of used automobiles.
As a result of the credit profile of the Obligors, the APRs of the Receivables,
the historical credit loss and the delinquency rates on AmeriCredit's
receivables are generally higher than those experienced by banks and the captive
finance companies of the automakers. See "AmeriCredit's Automobile Financing
Program -- Delinquencies and Net Losses."
The servicing of receivables of customers with such credit profile
requires special skill and diligence. AmeriCredit believes that its credit loss
and delinquency experience reflect in part its trained staff and collection
procedures. If a Servicer Termination Event occurs and AmeriCredit is removed as
Servicer, or if AmeriCredit resigns or is terminated as Servicer by the Security
Insurer, the Backup Servicer has agreed to assume the obligations of successor
Servicer under the Agreement. See "Description of Transaction Documents -- The
Pooling and Servicing Agreement -- Rights Upon Servicer Termination Event."
There can be no assurance, however, that collections with respect to the
Receivables will not be adversely affected by any change in Servicer.
The Pooling and Servicing Agreement provides that the rights and
obligations of the Servicer terminate after 90 days unless renewed by the
Security Insurer for successive 90-day periods. The Security Insurer will agree
to grant continuous renewals so long as no Servicer Termination Event under the
Pooling and Servicing Agreement has occurred.
CERTAIN LEGAL ASPECTS
In connection with the sale of the Receivables by AmeriCredit to the
Seller, AmeriCredit will assign the related security interests in the Financed
Vehicles to the Seller and the Seller will in turn sell the Receivables and
assign the related security interests in the Financed Vehicles to the Issuer.
The Servicer, as custodian for the Issuer, the Trustee and the Security Insurer
will maintain physical possession of each Receivable and the certificate of
title relating to each Financed Vehicle. Due to the administrative burden and
expense, the certificates of title to the Financed Vehicles will not be amended
or reissued to reflect the assignment to the Issuer. In the absence of such
proper amendment and assignment, the Trustee may not have a perfected security
interest in the Financed Vehicles securing the Receivables. AmeriCredit will be
obligated to purchase from the Issuer any Receivable sold to the Issuer by the
Seller and for which the interests of the Issuer, the Trustee or the Security
Insurer are materially and adversely affected by (1) the failure of the
certificate of title for the Financed Vehicle relating to such Receivable having
been amended or reissued to reflect the Trustee as the lienholder, or (2) the
failure of AmeriCredit to have a perfected security interest in its name in the
Financed Vehicle relating to such Receivable on the Closing
S-14
<PAGE> 15
Date, if such failure is not cured by the last day of the second (or, if
AmeriCredit elects, the first) month following the discovery by or notice to
AmeriCredit of such failure. AmeriCredit will also be obligated to purchase from
the Issuer any Receivable sold to the Issuer by the Seller for which the
AmeriCredit failed to maintain a perfected security interest in the name of the
AmeriCredit in the Financed Vehicle securing such Receivable if such failure
materially and adversely affects the interest of the Issuer, the Trustee, or the
Security Insurer in such Receivable and if such failure is not cured by the last
day of the second (or, if AmeriCredit elects, the first) month following the
discovery by or notice to AmeriCredit of such failure. The repurchase
obligations of the Seller and AmeriCredit will constitute the sole remedy
available to the Issuer, the Trustee, or the Security Insurer for any such
uncured breach or failure if there has been a Security Insurer Default.
To the extent the security interest of the Issuer is perfected in a
Financed Vehicle, the Trustee will have a prior claim over subsequent purchasers
of such Financed Vehicle and holders of a subsequently perfected security
interest. However, as against liens for repairs or unpaid storage charges of a
Financed Vehicle or for taxes by an Obligor under a Receivable or against a
Financed Vehicle, or through fraud or negligence, the Trustee could lose the
priority of security interest or its security interest in a Financed Vehicle.
Notwithstanding the foregoing, neither the Seller nor AmeriCredit will have any
obligation to purchase a Receivable as to which any of the aforementioned
occurrences result in the Issuer's losing the priority of its security interest
or its security interest in such Financed Vehicle due to the creation of such a
lien after the Closing Date. Federal and state consumer protection laws impose
requirements upon creditors in connection with extensions of credit and
collections of retail installment loans and certain of these laws make an
assignee of such a loan liable to the obligor thereon for any violation by the
lender. AmeriCredit will also be obligated to purchase from the Issuer any
Receivable which fails to comply with such requirements.
MATURITY AND PREPAYMENT ASSUMPTIONS
All of the Receivables are prepayable at any time. The rate of
prepayments on the Receivables may be influenced by a variety of economic,
social and other factors, including the fact that an Obligor generally may not
sell or transfer the related Financed Vehicle securing a Receivable without the
consent of AmeriCredit. (For this purpose the term "prepayments" includes
prepayments in full, certain partial prepayments related to refunds of extended
service contract costs and unearned insurance premiums, liquidations due to
default, Cram Down Losses, as well as receipts of proceeds from physical damage,
repossession loss, credit life and credit accident and health insurance policies
and certain other Receivables repurchased for administrative reasons.) The rate
of prepayment on the Receivables may also be influenced by the structure of the
loan, the nature of the Obligors and the Financed Vehicles and servicing
decisions as discussed above. In addition, under certain circumstances, the
Seller and the Servicer are obligated to purchase Receivables pursuant to the
Pooling and Servicing Agreement as a result of breaches of certain covenants.
The Servicer also has the right, subject to certain conditions, to purchase the
Receivables when the outstanding principal balance of the Class A Certificates
is 10% or less of the original issuance amount of the Class A Certificates. See
"Description of the Certificates -- Payments of Principal." Any reinvestment
risks resulting from a faster or slower incidence of prepayment of Receivables
will be borne entirely by the Certificateholders. See "Yield Considerations" and
"Description of The Certificates -- Optional Redemption."
RATINGS OF THE CLASS A CERTIFICATES
It is a condition to the issuance of the Class A Certificates that they
be rated "Aaa" by Moody's Investors Service, Inc. and "AAA" by Standard & Poor's
Ratings Group (the "Rating Agencies") on the basis of the issuance of the Policy
by the Security Insurer. A rating is not a recommendation to purchase, hold or
sell the Class A Certificates, inasmuch as such rating does not comment as to
market price or suitability for a particular investor. The Rating Agencies do
not evaluate, and the ratings do not address, the possibility that
Certificateholders may receive a lower than anticipated yield. There is no
assurance
S-15
<PAGE> 16
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. The ratings of the Class A Certificates
are based on the rating of the Security Insurer. Upon a Security Insurer Default
the rating on the Class A Certificates may be lowered or withdrawn entirely. In
the event that any rating initially assigned to the Class A Certificates were
subsequently lowered or withdrawn for any reason, including by reason of a
downgrading of the Security Insurer's claims-paying ability, no person or entity
will be obligated to provide any additional credit enhancement with respect to
the Class A Certificates. Any reduction or withdrawal of a rating may have an
adverse effect on the liquidity and market price of the Class A Certificates.
LIMITED ASSETS
The Trust does not have, nor is it permitted or expected to have, any
significant assets or sources of funds other than the Receivables and amounts on
deposit in certain accounts held by the Trustee on behalf of the
Certificateholders. The Class A Certificates represent interests solely in the
Trust and the Class A Certificates will not be insured or guaranteed by the
Seller, the Servicer, the Trustee or any other person or entity except for the
Security Insurer pursuant to the Policy, as described herein. AmeriCredit will
take such steps as are necessary for the Security Insurer to issue the Policy to
the Trustee for the benefit of the Class A Certificateholders. Under the Policy,
the Security Insurer will unconditionally and irrevocably guarantee to the Class
A Certificateholders full and complete payment of the Guaranteed Distributions
on each Distribution Date. In the event of an Insurer Default, the Class A
Certificateholders must rely on the collections on the Receivables, and the
proceeds from the repossession and sale of Financed Vehicles which secure
defaulted Receivables. In such event, certain factors, such as the Trustee not
having perfected security interests in the Financed Vehicles, may affect the
Trust's ability to realize on the collateral securing the Receivables and thus
may reduce the proceeds to be distributed to Class A Certificateholders on a
current basis.
Distributions of interest and principal on the Class A Certificates
will be dependent primarily upon the Available Funds (as defined herein) and
amounts paid pursuant to the Policy. The Class B Certificateholders will not
receive any distributions of interest or principal with respect to a Monthly
Period until the full amount of interest and principal on the Class A
Certificates relating to such Monthly Period and any related Class A Interest
and Principal Carryover Shortfall has been funded. Distributions on the Class B
Certificates are subordinated to payments to certain collateral accounts. See
"The Certificates -- Distributions on Certificates."
BOOK-ENTRY REGISTRATION
Issuance of the Certificates in book-entry form may reduce the
liquidity of such Certificates in the secondary trading market since investors
may be unwilling to purchase Certificates for which they cannot obtain
definitive physical securities representing such Certificateholders' interests,
except in certain circumstances described herein.
Certificateholders may experience some delay in their receipt of
distributions of interest on and principal of the Certificates since
distributions may be required to be forwarded by the Trustee to DTC and, in such
case, DTC will be required to credit such distributions to the accounts of its
participating organization which thereafter will be required to credit them to
the accounts of the Certificateholders either directly or indirectly through
indirect participants. See "The Certificates -- Registration of the Class A
Certificates."
GEOGRAPHIC CONCENTRATION OF RECEIVABLES
As of the Cutoff Date (based on principal balance and location of the
originating AmeriCredit branch), Obligors with respect to approximately 16.23%
of the Receivables were located in Texas, and
S-16
<PAGE> 17
substantially all of the rest of the Receivables were located in those states
identified in the table on page S-20. See "The Receivables Pool". Accordingly,
adverse economic conditions or other factors particularly affecting any of these
states could adversely affect the delinquency or loan loss experience of the
Issuer with respect to the Receivables.
DELINQUENCY AND LOAN LOSS EXPERIENCE
AmeriCredit commenced operations in September, 1992. Although
AmeriCredit has calculated and presented herein its net loss experience with
respect to its servicing portfolio, there can be no assurance that the
information presented will reflect actual experience with respect to the
Receivables. In addition, there can be no assurance that the future delinquency
or loan loss experience of the Issuer with respect to the Receivables will be
better or worse than that set forth herein with respect to AmeriCredit's
servicing portfolio. See "The Receivables Pool" in this Prospectus Supplement
and "The Receivables" in the Prospectus.
USE OF PROCEEDS
The net proceeds to be received by AmeriCredit from the sale of the
Class A Certificates will be used by AmeriCredit to pay certain warehouse loans
and any additional proceeds will be added to AmeriCredit's general funds and
used for its general corporate purposes.
THE SERVICER
The Servicer is a wholly-owned subsidiary of AmeriCredit Corp. The
Servicer was incorporated in Delaware on July 22, 1992. AmeriCredit purchases
and services automobile loans which are originated and assigned to AmeriCredit
by automobile dealers. AmeriCredit is the primary operating subsidiary of
AmeriCredit Corp., a Texas corporation the common shares of which are listed on
the New York Stock Exchange. AmeriCredit's executive offices are located at 200
Bailey Avenue, Fort Worth, Texas 76107- 1220; telephone (817) 332-7000.
The Servicer will initially service the Receivables pursuant to the
Pooling and Servicing Agreement and will be compensated for acting as the
Servicer. The Servicer will be appointed custodian for the Receivables and the
Receivables will be delivered to and held by the Servicer. Prior to delivery of
the Receivables to the Servicer, as custodian, AmeriCredit will stamp the
Receivables to reflect the sale and assignment of the Receivables to the Issuer.
AmeriCredit will not seek to have amended or re-issued the certificates of title
of the Financed Vehicles. In the absence of amendments to the certificates of
title, the Issuer may not have perfected security interests in the Financed
Vehicles securing the receivables originated in some states, including Texas.
See "Certain Legal Aspects of Receivables."
THE SELLER
The Seller was incorporated in the State of Nevada in April, 1996. The
Seller is organized for the limited purpose of purchasing receivables from
AmeriCredit and transferring such receivables to third parties and any
activities incidental to and necessary or convenient for the accomplishment of
such purposes. The Seller is a wholly-owned subsidiary of AmeriCredit. The
principal executive offices of the Seller are located at 1325 Airmotive Way,
Reno, Nevada 89502; telephone (702) 322-2221.
The Seller has taken steps in structuring the transaction contemplated
hereby that are intended to ensure that the voluntary or involuntary application
for relief by AmeriCredit under Insolvency Laws will not result in consolidation
of the assets and liabilities of the Seller with those of AmeriCredit. These
steps
S-17
<PAGE> 18
include the creation of the Seller as a separate, limited-purpose subsidiary
pursuant to a certificate of incorporation containing certain limitations
(including restrictions on the nature of the Seller's business, the requirement
of an independent director being on the Board of Directors of the Seller and a
restriction on the Seller's ability to commence a voluntary case or proceeding
under any Insolvency Law without the prior unanimous affirmative vote of all of
its directors). The Seller has received the advice of counsel to the effect
that, subject to certain facts, assumptions and qualifications, it would not be
a proper exercise by a court of its equitable discretion to disregard the
separate corporate existence of the Seller and to require the consolidation of
the assets and liabilities of the Seller with the assets and liabilities of
AmeriCredit in the event of the application of the federal bankruptcy laws to
AmeriCredit. Among other things, it is assumed by counsel that the Seller will
follow certain procedures in the conduct of its affairs, including maintaining
records and books of account separate from those of AmeriCredit, refraining from
commingling its assets with those of AmeriCredit and refraining from holding
itself out as having agreed to pay, or being liable for, the debts of
AmeriCredit. The Seller intends to follow and has represented to such counsel
that it will follow these and other procedures related to maintaining its
separate corporate identity. However, in the event that the Seller did not
follow these procedures, there can be no assurance that a court would not
conclude that the assets and liabilities of the Seller should be consolidated
with those of AmeriCredit. If a court were to reach such a conclusion, or a
filing were made under any Insolvency Law by or against the Seller, or if an
attempt were made to litigate any of the foregoing issues, delays in
distributions on the Certificates (and possible reductions in the amount of such
distributions) could occur. See "Risk Factors- Certain Legal Aspects."
The Seller also will cause the Security Insurer to issue the Policy to
the Trustee for the benefit of the Class A Certificateholders. Under the Policy,
the Security Insurer will unconditionally and irrevocably guarantee to the Class
A Certificateholders full and complete payment of the Class A
Certificateholders' Interest Distributable Amount and Class A Principal
Distributable Amount on each Distribution Date. In the event of a Security
Insurer Default, the Class A Certificateholders must look solely to the Obligors
on the Receivables, and the proceeds from the repossession and sale of Financed
Vehicles which secure defaulted Receivables. In such event, certain factors,
such as the Issuer's not having perfected security interests in the Financed
Vehicles, may affect the Issuer's ability to realize on the collateral securing
the Receivables and thus may reduce the proceeds to be distributed to
Certificateholders. See "Certain Legal Aspects of Receivables."
THE TRUST
The Seller will establish the Trust pursuant to the Pooling and
Servicing Agreement, by selling and assigning the Receivables and the other
Trust Property (other than the Policy) to the Trustee in exchange for the
Certificates. Prior to such sale and assignment, the Trust will have no assets
or obligations. The Trust will not engage in any business activity other than
acquiring and holding the Trust Property, issuing the Certificates and
distributing payments thereon.
Each Certificate will represent a fractional undivided interest in the
Trust. The Trust Property will include, among other things, the Receivables
Pool, certain monies paid or payable thereunder after the Cutoff Date, an
assignment of AmeriCredit's security interests in the Financed Vehicles and of
the right to receive proceeds from claims on certain insurance policies covering
the Financed Vehicles or the Obligors, the Policy, the assignment of certain
rights of AmeriCredit against the Dealers originating such Receivables, the
Collection Account, including all investments therein, all income from the
investment of funds therein and all proceeds thereof, and certain other rights
under the Pooling and Servicing Agreement. See "The Trust."
AmeriCredit, as custodian, will hold the original installment sales
contract or promissory note as well as copies of documents and instruments
relating to each Receivable and evidencing the security interest in the Financed
Vehicle securing each Receivable (the "Receivable Files"). In order to protect
the
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<PAGE> 19
Trust's ownership interest in the Receivables, AmeriCredit will file UCC-1
financing statements in Illinois, Texas and Nevada to give notice of the Trust's
ownership of the Receivables and the related Trust Property.
THE TRUSTEE
LaSalle National Bank is the Trustee under the Pooling and Servicing
Agreement. LaSalle National Bank, is a national banking association, the
principal offices of which are located at 135 South LaSalle Street, Chicago,
Illinois 60674.
AMERICREDIT'S AUTOMOBILE FINANCING PROGRAM
Through its branch offices and marketing representatives, AmeriCredit
serves as a funding source for franchised and independent automobile dealers to
finance their customers' purchase of new and used automobiles and light duty
trucks. Dealers originate retail installment sale contracts ("Contracts") which
conform to AmeriCredit's credit policies which are then purchased by AmeriCredit
generally without recourse to the Dealers. AmeriCredit also services the
Contracts that it purchases.
AmeriCredit's indirect lending programs are designed to serve consumers
who have limited access to traditional auto financing. The typical borrower may
have had previous financial difficulties, but is now attempting to re-establish
credit, or may not yet have an established credit history. Because AmeriCredit
serves consumers who are unable to meet the credit standards imposed by most
traditional auto financing sources, AmeriCredit generally charges interest at
rates which are higher than those charged by traditional auto financing sources.
AmeriCredit also expects to sustain a higher level of delinquencies and credit
losses than that experienced by traditional auto financing sources since
AmeriCredit provides financing in a relatively high risk market.
AmeriCredit has established relationships with a variety of Dealers
located in the markets in which AmeriCredit has branch offices or marketing
representatives. While AmeriCredit occasionally finances purchases of new autos,
substantially all of AmeriCredit's Contracts were originated in connection with
Obligor's purchases of used autos. Of the Contracts purchased by AmeriCredit
during the year ended June 30, 1995, approximately 68% were originated by
manufacturer-franchised Dealers with used auto operations and 32% by independent
Dealers specializing in used auto sales; of the contracts purchased in the nine
months ended March 31, 1996, the respective percentages were 76% and 24%.
AmeriCredit purchased Contracts from 1,861 Dealers during the year ended June
30, 1995 and from 2,532 dealers during the nine months ended March 31, 1996.
Contracts are generally purchased by AmeriCredit without recourse to
the Dealer, and accordingly, the Dealer usually has no liability to AmeriCredit
if the consumer defaults on the Contract. To mitigate AmeriCredit's risk from
potential credit losses, AmeriCredit typically charges the Dealers an
acquisition fee when purchasing Contracts. Such acquisition fees are negotiated
with Dealers on a contract-by-contract basis and are usually non-refundable.
Although Contracts are purchased without recourse to Dealers, Dealers typically
make certain representations as to the validity of the contract and compliance
with certain laws, and indemnify AmeriCredit against any claims, defenses and
set-offs that may be asserted against AmeriCredit because of assignment of the
Contract.
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<PAGE> 20
As of April 30, 1996, AmeriCredit operated 49 indirect consumer finance
branch offices in 25 states as reflected in the following table:
<TABLE>
<CAPTION>
STATE CITY STATE CITY
<S> <C> <C> <C>
Arizona Phoenix New Jersey Marlton
California San Jose New Mexico Albuquerque
San Francisco
Concord
Fresno
Los Angeles
San Diego
Stockton
Colorado Colorado Springs North Carolina Charlotte
Denver Raleigh-Durham
Florida Tampa Ohio Columbus
Ft. Lauderdale Cleveland
Jacksonville Cincinnati
Orlando
Georgia Atlanta (2) Oklahoma Oklahoma City
Illinois Chicago (3) Oregon Portland
Indiana Indianapolis South Carolina Greenville
Charleston
Kentucky Louisville Tennessee Nashville
Memphis
Maryland Baltimore Texas Dallas-Fort Worth
Houston
San Antonio
Massachusetts Boston Utah Salt Lake City
Michigan Detroit Virginia Vienna
Newport News
Norfolk
Richmond
Missouri Kansas City Washington Seattle
St. Louis
Nevada Las Vegas
</TABLE>
These branch offices solicit Dealers for Contracts and maintain AmeriCredit's
relationship with the Dealers in the geographic vicinity of the branch office.
AmeriCredit also has marketing representatives covering certain
existing branch territories and markets where the company does not have a branch
presence. AmeriCredit does business in a total of 39 states.
S-20
<PAGE> 21
See "AmeriCredit's Automobile Financing Program" in the Prospectus for
a description of AmeriCredit's contract acquisition, servicing and collection
practices.
THE RECEIVABLES POOL
GENERAL
The Receivables Pool consists of Receivables having an Aggregate
Principal Balance as of the Cutoff Date (April 30, 1996) of $126,023,711.08. All
of the Receivables are retail installment sales contracts and promissory notes
secured by new and used automobiles and light trucks purchased by AmeriCredit
from Dealers who regularly originate and sell contracts or notes to AmeriCredit.
Retail installment sales contracts and promissory notes are hereinafter referred
to individually as a "Loan" or collectively as the "Loans."
DELINQUENCY AND LOAN LOSS INFORMATION
The following tables set forth information relating to AmeriCredit's
delinquency and loan loss experience for each period indicated with respect to
all Loans it has purchased and serviced. This information includes the
experience with respect to all Loans in AmeriCredit's portfolio of Loans
serviced during each such period, including Loans which do not meet the criteria
for selection as a Receivable.
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<PAGE> 22
DELINQUENCY EXPERIENCE
Financed Vehicles which have been repossessed but not yet liquidated
and bankrupt accounts which have not yet been charged off are both
included as delinquent accounts in the table below.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
At March 31, At June 30,
------------ -----------
1996 1995 1995
---- ---- ----
Number Number Number
of of of
Contracts Amount Contracts Amount Contracts Amount
--------- ------ --------- ------ --------- ------
<S> <C> <C> <C> <C> <C> <C>
Portfolio at end of
period(1) 50,641 $420,395 23,908 $184,935 30,941 $240,491
Period of Delinquency(2)
31-60 days(3) 2,552 $20,434 840 $6,322 1,276 $9,692
61-90 days 937 $7,231 229 $1,680 452 $3,391
91 days or more 1,585 $12,255 365 $2,454 528 $3,271
Total Delinquencies(4) 5,074 $39,920 1,434 $10,456 2,256 $16,354
------ -------- ------ -------- ------ --------
Total Delinquencies as a
Percent of the Portfolio 10.0% 9.5% 6.0% 5.7% 7.3% 6.8%
</TABLE>
<TABLE>
<CAPTION>
At June 30,
-----------
1994 1993
---- ----
Number Number
of of
Contracts Amount Contracts Amount
--------- ------ --------- ------
<S> <C> <C> <C> <C>
Portfolio at end of
period(1) 9,375 $67,636 2,321 $15,964
Period of Delinquency(2)
31-60 days(3) 235 $1,600 50 $328
61-90 days 87 $560 12 $ 84
91 days or more 110 $709 6 $ 53
Total Delinquencies(4) 432 $2,869 68 $465
----- ------- ----- -------
Total Delinquencies as a
Percent of the Portfolio 4.6% 4.2% 2.9% 2.9%
</TABLE>
- ------------------------
(1) All amounts and percentages are based on the principal amount scheduled to
be paid on each Contract. All dollar amounts are in thousands of dollars.
(2) AmeriCredit considers a loan delinquent when an Obligor fails to make a
contractual payment by the due date. The period of delinquency is based
on the number of days payments are contractually past due.
(3) Amounts shown do not include loans which are less than 31 days delinquent.
(4) Financed Vehicles which have been repossessed but not yet liquidated are
considered delinquent accounts in the table above.
CREDIT LOSS EXPERIENCE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended
March 31, Fiscal Year Ended June 30,
-------------------------- ---------------------------------------
1996 1995 1995 1994 1993
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Period-End Principal Outstanding(1).........
$420,395 $184,935 $240,491 $67,636 $15,964
Average Month-End Amount Outstanding
During the Period(1)...................... $318,724 $117,638 $141,526 $37,507 $ 7,645
Net Charge-Offs(2).......................... $13,458 $4,009 $ 6,409 $ 1,432 $ 49
Net Charge-Offs as a Percentage of
Period-End Principal Outstanding(3)....... 4.3% 2.9% 2.7% 2.1% .3%
Net Charge-Offs as a Percent of Average
Month-End Amount Outstanding(3)........... 5.6% 4.5% 4.5% 3.8% .7%
</TABLE>
- ------------------------
(1) All amounts are based on the principal amount scheduled to be paid on each
Contract. All dollar amounts are in thousands of dollars.
(2) Net Charge-Offs equal Gross Charge-Offs minus Recoveries. Gross Charge-Offs
do not include unearned finance charges and other fees. Recoveries include
repossession proceeds received from the sale of repossessed Financed
Vehicles net of repossession expenses, refunds of unearned premiums from
credit life and credit accident and health insurance and extended service
contract costs obtained and financed in connection with the vehicle
financing and recoveries from Obligors on deficiency balances.
(3) Percentages were annualized for the nine months ended March 31, 1996 and
1995, and are not necessarily indicative of results for the year.
S-22
<PAGE> 23
The composition and distribution by APR and geographic concentration of the
Receivables Pool as of the Cutoff Date are set forth in the following table:
COMPOSITION OF THE RECEIVABLES AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
Weighted
Aggregate Number of Average Average Weighted Weighted
Principal Receivables Principal APR of the Average Average
Balance(1) in Pool Balance Receivables(1) Remaining Term Original Term
- ---------------------- -------------- ---------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Total: $126,023,711.08 Total: 12,266 $10,274.23 20.46% 48.84 51.31
Range of Range of
Principal Remaining Range of
New: $ 13,257,238.94 New: 934 Balances: Range of APR's: Terms: Original Terms:
---------------- --------------- ------------ ---------------
$ 567.36 to 14.38% to 3 months to 11 months to
Used: $112,766,472.14 Used: 11,332 $29,789.59 30.08% 59 months 60 months
</TABLE>
- ------------------------
(1) Aggregate Principal balance includes some portion of accrued interest. As
a result, the Weighted Average APR of the Receivables may not be
equivalent to the Contracts' aggregate yield on the Aggregate Principal
Balance.
DISTRIBUTION OF THE RECEIVABLES BY APR AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
Aggregate Percent of
Principal Balance Aggregate Number of Percent of Number
APR Range(1) as of Cutoff Date Principal Balance(2) Receivables of Receivables(2)
- ---------------------- ------------------- ---------------------- ------------- -------------------
<S> <C> <C> <C> <C>
14.000 to 14.999 $ 1,523,236.79 1.21% 101 .82%
15.000 to 15.999 $ 2,278,373.31 1.81% 155 1.26%
16.000 to 16.999 $ 3,781,577.13 3.00% 269 2.19%
17.000 to 17.999 $ 8,629,214.53 6.85% 625 5.10%
18.000 to 18.999 $ 26,038,940.61 20.66% 2,182 17.79%
19.000 to 19.999 $ 11,398,749.58 9.05% 988 8.06%
20.000 to 20.999 $ 15,376,834.04 12.20% 1,421 11.59%
21.000 to 21.999 $ 22,785,868.20 18.08% 2,377 19.38%
22.000 to 22.999 $ 10,615,068.15 8.42% 1,177 9.60%
23.000 to 23.999 $ 8,437,854.57 6.70% 907 7.39%
24.000 to 24.999 $ 6,715,926.48 5.33% 801 6.53%
25.000 to 25.999 $ 4,879,925.47 3.87% 675 5.50%
26.000 to 26.999 $ 2,989,308.40 2.37% 497 4.05%
27.000 to 27.999 $ 218,802.39 .17% 30 .25%
28.000 to 28.999 $ 144,015.83 .11% 24 .20%
29.000 to 29.999 $ 108,335.46 .09% 20 .16%
30.000 to 30.999 $ 101,680.14 .08% 17 .14%
---------------- ------ ------ ------
TOTAL $126,023,711.08 100.00% 12,266 100.00%
</TABLE>
- ------------------------
(1) Aggregate Principal Balances include some portion of accrued interest.
Indicated APR's represent APR's on Principal balance net of such accrued
interest.
(2) Percentages may not add to 100% because of rounding.
S-23
<PAGE> 24
DISTRIBUTION OF THE RECEIVABLES BY GEOGRAPHIC LOCATION OF OBLIGOR
<TABLE>
<CAPTION>
Aggregate Percent of
Principal Balance Aggregate Number of Percent of Number
State as of Cutoff Date Principal Balance(1) Receivables of Receivables(1)
- -------------- ----------------- -------------------- ----------- -----------------
<S> <C> <C> <C> <C>
Texas $ 20,453,617.56 16.23% 1,891 15.42%
California $ 11,061,780.14 8.78% 1,028 8.38%
North Carolina $ 8,465,377.39 6.72% 800 6.52%
Arizona $ 8,160,958.89 6.48% 721 5.88%
Ohio $ 7,627,569.96 6.05% 753 6.14%
Virginia $ 7,599,662.03 6.03% 788 6.42%
Illinois $ 6,886,303.31 5.46% 758 6.18%
Georgia $ 6,041,924.40 4.79% 552 4.50%
Florida $ 5,970,864.54 4.74% 540 4.40%
Colorado $ 4,454,130.98 3.53% 501 4.08%
Missouri $ 3,814,562.60 3.03% 397 3.24%
Nevada $ 3,716,437.69 2.95% 388 3.16%
Tennessee $ 3,457,565.33 2.74% 311 2.54%
South Carolina $ 3,344,021.86 2.65% 304 2.48%
Michigan $ 2,814,989.78 2.23% 256 2.09%
Maryland $ 2,515,561.58 2.00% 272 2.22%
Massachusetts $ 2,449,206.69 1.94% 245 2,00%
Washington $ 2,282,487.78 1.81% 235 1.92%
New Mexico $ 1,971,193.45 1.56% 177 1.44%
New Jersey $ 1,863,432.41 1.48% 210 1.71%
Utah $ 1,723,114.82 1.37% 184 1.50%
Oklahoma $ 1,689,433.97 1.34% 172 1.40%
Indiana $ 1,552,560.94 1.23% 148 1.21%
Other (2) $ 6,106,952.98 4.85% 635 5.18%
---------------- ------ ------ ------
TOTAL $126,023,711.08 100.00% 12,266 100.00%
</TABLE>
- ------------------------
(1) Percentages may not add to 100% because of rounding.
(2) States with principal balances less than $1,500,000.
S-24
<PAGE> 25
All Receivables provide for the payment by the Obligor of a specific
total amount of payments, payable in substantially equal monthly installments on
each due date, which total represents the amount financed plus interest charges
on the amount financed for the term of the Receivable. The amount of interest
charges on the Receivables are determined either by the simple-interest method
("Simple Interest Receivables") or by adding-on to the amount financed, as of
the date of the Receivable, a precomputed interest charge ("Precomputed
Receivables").
In a Simple Interest Receivable, the amount of an Obligor's fixed level
installment payment that is allocated to interest is equal to the product of the
fixed rate of interest on the loan (typically the APR) multiplied by the period
of time (expressed as a fraction of a year) elapsed since the preceding payment
under the loan. The remaining amount of the Obligor's payment is allocated to
reduce the principal amount financed.
The Issuer will account for all Receivables, including Simple Interest
Receivables and Precomputed Receivables, as if such Receivables provided for
amortization of the loans pursuant to the simple interest method. Amounts
received upon prepayment in full of a Precomputed Receivable in excess of the
sum of the then outstanding principal balance of such Receivable and accrued
interest thereon (calculated pursuant to the simple interest method) will not be
deposited to the Collection Account for the benefit of Certificateholders but
will be paid (net of any amounts required to be rebated to the Obligor) to the
Servicer as Supplemental Servicing Fees.
YIELD AND PREPAYMENT CONSIDERATIONS
Interest paid on the Receivables will be passed through to the
Class A Certificateholders on each Distribution Date in an amount equal to
one-twelfth of the annual Pass-Through Rate applied to the Class A Certificate
Balance on the related Record Date. In the event of prepayments on Receivables,
Class A Certificateholders will nonetheless be entitled to receive interest for
the full month in which such prepayment occurs.
All the Receivables are prepayable at any time. If prepayments are
received on the Receivables, the actual weighted average life of the Receivables
may be shorter than the scheduled weighed average life (i.e., the weighted
average life assuming that payments will be made as schedules, and that no
prepayments will be made). (For this purpose, the term "prepayments" also
includes liquidations due to default, as well as receipt of proceeds form credit
life, credit disability, and casualty insurance policies.) Weighted average life
means the average amount of time during which each dollar of principal on a
Receivable is outstanding.
The rate of prepayments on the Receivables may be influenced by a
variety of economic, social, and other factors, including the fact that an
Obligor may not sell or transfer a Financed Vehicle without the consent of the
Servicer. The Servicer believes that the actual rate of prepayments will result
in a substantially shorter weighted average life than the scheduled weighted
average life of the Receivables. Any reinvestment risks resulting form a faster
or slower incidence of prepayment of Receivables will be borne by the Class A
Certificateholders.
FINANCIAL SECURITY ASSURANCE INC.
The following information has been obtained from Financial Security
Assurance Inc. (the "Security Insurer" or "Financial Security") and has not been
verified by AmeriCredit or the Underwriters. No representation or warranty is
made by AmeriCredit or the Underwriters with respect thereto.
S-25
<PAGE> 26
GENERAL
Financial Security is a monoline insurance company incorporated in 1984
under the laws of the State of New York. Financial Security is licensed to
engage in the financial guaranty insurance business in all 50 states, the
District of Columbia and Puerto Rico.
Financial Security and its subsidiaries are engaged in the business of
writing financial guaranty insurance, principally in respect of securities
offered in domestic and foreign markets. In general, financial guaranty
insurance consists of the issuance of a guaranty of scheduled payments of an
issuer's securities -- thereby enhancing the credit rating of those securities
- -- in consideration for the payment of a premium to the insurer. Financial
Security and its subsidiaries principally insure asset-backed, collateralized
and municipal securities. Asset-backed securities are generally supported by
residential mortgage loans, consumer or trade receivables, securities or other
assets having an ascertainable cash flow or market value. Collateralized
securities include public utility first mortgage bonds and sale/leaseback
obligation bonds. Municipal securities consist largely of general obligation
bonds, special revenue bonds and other special obligations of state and local
governments. Financial Security insures both newly issued securities sold in the
primary market and outstanding securities sold in the secondary market that
satisfy Financial Security's underwriting criteria.
Financial Security is a wholly owned subsidiary of Financial Security
Assurance Holdings Ltd. ("Holdings"), a New York Stock Exchange listed company.
Holdings is owned approximately 51% by U S WEST Capital Corporation ("U S
WEST"), 8% by Fund American Enterprises Holdings, Inc. ("Fund American"), and 6%
by The Tokio Marine and Fire Insurance Co. Ltd. ("Tokio Marine"). U S WEST is a
subsidiary of U S WEST, Inc., which operates businesses involved in
communications, data solutions, marketing services and capital assets, including
the provision of telephone services in 14 states in the western and midwestern
United States. Fund American is a financial services holding company whose
principal operating subsidiary is one of the nation's largest mortgage
servicers. Tokio Marine is a major Japanese property and casualty insurance
company. U S WEST has announced its intention to dispose of its remaining
interest in Holdings as part of its strategic plan to withdraw from businesses
not directly involved in telecommunications. Fund American has certain rights to
acquire and vote additional shares of Holdings from U S WEST and Holdings. No
shareholder of Holdings is obligated to pay any debt of Financial Security or
any claim under any insurance policy issued by Financial Security or to make any
additional contribution to the capital of Financial Security.
The principal executive offices of Financial Security are located at
350 Park Avenue, New York, New York 10022, and its telephone number at that
location is (212) 826-0100. At December 31, 1995, Financial Security and its
subsidiaries had 187 employees.
REINSURANCE
Pursuant to an intercompany agreement, liabilities on financial
guaranty insurance written or reinsured from third parties by Financial Security
or any of its domestic operating insurance company subsidiaries are reinsured
among such companies on an agreed-upon percentage substantially proportional to
their respective capital, surplus and reserves, subject to applicable statutory
risk limitations. In addition, Financial Security reinsures a portion of its
liabilities under certain of its financial guaranty insurance policies with
other reinsurers under various quota share treaties and on a
transaction-by-transaction basis. Such reinsurance is utilized by Financial
Security as a risk management device and to comply with certain statutory and
rating agency requirements; it does not alter or limit Financial Security's
obligations under any financial guaranty insurance policy.
S-26
<PAGE> 27
RATING OF CLAIMS-PAYING ABILITY
Financial Security's claims-paying ability is rated "Aaa" by Moody's
Investors Service, Inc. and "AAA" by Standard & Poor's Ratings Services, Nippon
Investors Service Inc. and Standard & Poor's (Australia) Pty. Ltd. Such ratings
reflect only the views of the respective rating agencies, are not
recommendations to buy, sell or hold securities and are subject to revision or
withdrawal at any time by such rating agencies. See "Risk Factors -- Ratings of
the Certificates."
CAPITALIZATION
The following table sets forth the capitalization of Financial Security
and its wholly owned subsidiaries on the basis of generally accepted accounting
principles as of December 31, 1995 (in thousands):
<TABLE>
<CAPTION>
December 31,
1995
------------
<S> <C>
Unearned Premium Reserve (net of prepaid
reinsurance premiums)............................... $ 330,349
-----------
Shareholders' Equity:
Common Stock........................................ 15,000
Additional Paid-In Capital.......................... 681,470
Unrealized Gain on Investments (net of
deferred income taxes)............................ 19,694
Accumulated Earnings................................ 73,822
-----------
Total Shareholders' Equity............................ $ 789,986
-----------
Total Unearned Premium Reserve and
Shareholder's Equity................................ $ 1,120,335
===========
</TABLE>
For further information concerning Financial Security, see the
Consolidated Financial Statements of Financial Security and Subsidiaries, and
the notes thereto, incorporated by reference herein. The New York State
Insurance Department recognizes only statutory accounting practices for
determining and reporting the financial condition and results of operations of
an insurance company, for determining its solvency under the New York Insurance
Law, and for determining whether its financial condition warrants the payment of
a dividend to its stockholders. No consideration is given by the New York State
Insurance Department to financial statements prepared in accordance with
generally accepted accounting principles in making such determinations. Copies
of the statutory quarterly and annual statements filed with the State of New
York Insurance Department by Financial Security are available upon request to
the State of New York Insurance Department.
INSURANCE REGULATION
Financial Security is licensed and subject to regulation as a financial
guaranty insurance corporation under the laws of the State of New York, its
state of domicile. In addition, Financial Security and its insurance
subsidiaries are subject to regulation by insurance laws of the various other
jurisdictions in which they are licensed to do business. As a financial guaranty
insurance corporation licensed to do business in the State of New York,
Financial Security is subject to Article 69 of the New York Insurance Law which,
among other things, limits the business of each such insurer to financial
guaranty insurance and related lines, requires that each such insurer maintain a
minimum surplus to policyholders, establishes
S-27
<PAGE> 28
contingency, loss and unearned premium reserve requirements for each such
insurer, and limits the size of individual transactions ("single risks") and the
volume of transactions ("aggregate risks") that may be underwritten by each such
insurer. Other provisions of the New York Insurance Law, applicable to non-life
insurance companies such as Financial Security, regulate, among other things,
permitted investments, payment of dividends, transactions with affiliates,
mergers, consolidations, acquisitions or sales of assets and incurrence of
liability for borrowings.
THE CERTIFICATES
GENERAL
The Class A Certificates initially will be represented by certificates
registered in the name of Cede & Co. ("Cede") as the nominee of The Depository
Trust Company ("DTC"), and will only be available in the form of book-entries on
the records of DTC and participating members thereof in denominations of $1,000.
All references to "holders" or "Certificateholders," and to authorized
denominations, when used with respect to the Class A Certificates, shall reflect
the rights of beneficial owners of the Class A Certificates ("Certificate
Owners"), and limitations thereof, as they may be indirectly exercised through
DTC and its participating members, except as otherwise specified herein. See
"--Registration of Class A Certificates" below.
REGISTRATION OF CLASS A CERTIFICATES
The Class A Certificates will initially be registered in the name of
Cede & Co. ("Cede"), the nominee of DTC. DTC is a limited-purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934, as amended.
DTC accepts securities for deposit from its participating organizations
("Participants") and facilitates the clearance and settlement of securities
transactions between Participants in such securities through electronic
book-entry changes in accounts of Participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks and trust companies and clearing corporations and may include
certain other organizations. Indirect access to the DTC system is also available
to others such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a Participant, either directly or
indirectly. See "Description of the Securities -- Book-Entry Registration" in
the Prospectus.
DISTRIBUTIONS ON CERTIFICATES
On each Distribution Date, the Trustee shall (based on the information
contained in the Servicer's Certificate delivered on the related Determination
Date) distribute the following amounts and in the following order of priority:
(i) first, from the Distribution Amount, to the Servicer, the
Basic Servicing Fee for the related Monthly Period, any
Supplemental Servicing Fees for the related Monthly Period,
and certain other amounts relating to mistaken deposits,
postings or checks returned for insufficient funds to the
extent the Servicer has not reimbursed itself in respect of
such amounts;
(ii) second, from the Distribution Amount, to any Lockbox Bank
or other relevant local bank, Trustee, Custodian, Backup
Servicer or Collateral Agent (including the Trustee if acting
in any such additional capacity), any accrued and unpaid fees
(in each case, to the extent such Person has not previously
received such amount from the Servicer);
S-28
<PAGE> 29
(iii) third, from the Amount Available, to the Class A
Certificateholders, the Class A Interest Distributable Amount
for such Distribution Date;
(iv) fourth, from the Amount Available, to the Class A
Certificateholders, Class A Principal Distributable Amount for
such Distribution Date;
(v) fifth, from the Distribution Amount, to the Security
Insurer, to the extent of any amounts owing to the Security
Insurer under the Insurance and Indemnity Agreement among the
Security Insurer, the Seller and the Servicer (the "Insurance
Agreement") and not paid, whether or not the Seller is also
obligated to pay such amounts; and
(vi) sixth, the remaining Available Funds, if any, will be
distributed to the Class B Certificateholders, or as otherwise
provided in the Pooling and Servicing Agreement.
The following sets forth an example of the application of the
foregoing to a hypothetical monthly distribution:
<TABLE>
<S> <C>
May 1 - May 31................ Monthly Period. Scheduled Payments and any
prepayments and other collections on the Receivables
are received and deposited into the Collection
Account.
May 31........................ Accounting Date. This is the last day of the Monthly
Period preceding a Distribution Date.
June 3........................ Deposit Date. On or before this date, AmeriCredit and
the Servicer will make required payments of Purchase
Amounts to the Collection Account.
June 5........................ Determination Date. On or before this date the
Servicer will notify the Trustee of, among other things,
the amounts available in the Collection Account and
the amounts required to be distributed on the
Distribution Date.
June 5........................ Draw Date. On this date, the Trustee will make any
required claims under the Policy if the Available Funds
in the Collection Account (plus any amounts deposited
therein by the Collateral Agent), after giving effect to
all of the other distributions having a higher priority as
set forth above, are insufficient to pay in full the
Interest Payment and the Principal Payment.
June 11....................... Record Date. Distributions on the Distribution Date
will be made to Certificateholders of record at the
close of business on this date.
June 12....................... Distribution Date. The Trustee will distribute interest
and principal on the Certificates to Certificateholders,
pay any accrued and unpaid Trustee's fees, the
Servicing Fee and any amounts owing to Financial
Security, and will transfer the remaining Available
Funds to the Collateral Agent.
</TABLE>
S-29
<PAGE> 30
For the purposes of the foregoing paragraph the following terms shall
have the following meanings:
Amount Available: With respect to any Distribution Date, the sum of (i)
the Available Funds for the immediately preceding Determination Date, plus (ii)
the Deficiency Claim Amount, if any, received by the Trustee with respect to
such Distribution Date, plus (iii) the Policy Claim Amount (as defined in the
Policy), if any, received by the Trustee with respect to such Distribution Date.
Available Funds: With respect to any Determination Date, the sum of (i)
the Collected Funds for such Determination Date and (ii) all Purchase Amounts
deposited in the Collection Account on the related Deposit Date and (iii) all
income from investments of funds in the Collection Account during the prior
Monthly Period.
Class A Certificate Balance: Initially, $115,941,814.19 and thereafter
will equal the initial Class A Certificate Balance reduced by all principal
distributions on the Class A Certificateholders.
Class A Interest Carryover Shortfall: As of the close of business on
any Distribution Date, the excess of the Class A Interest Distributable Amount
for such Distribution Date plus (without duplication) any outstanding Class A
Interest Carryover Shortfall from the preceding Distribution Date plus interest
on such outstanding Class A Interest Carryover Shortfall, to the extent
permitted by law, at the Class A Pass-Through Rate from such preceding
Distribution Date through the current Distribution Date, over the amount of
interest that the holders of the Class A Certificates actually received on such
current Distribution Date.
Class A Interest Distributable Amount: With respect to any Distribution
Date, the sum of (x) for the initial Distribution Date, 41 days of interest and
for any Distribution Date thereafter, 30 days of interest, in each case
calculated on the basis of a 360-day year consisting of twelve 30-day months, at
the Class A Pass-Through Rate on the Class A Certificate Balance as of the close
of business on the last day of the preceding Monthly Period and (y) any
outstanding Class A Interest Carryover Shortfall.
Class A Principal Carryover Shortfall: As of the close of business on
any Distribution Date, the excess of the Class A Principal Distributable Amount
plus any outstanding Class A Principal Carryover Shortfall from the preceding
Distribution Date over the amount of principal that the holders of the Class A
Certificates actually received on such current Distribution Date.
Class A Principal Distributable Amount: With respect to any
Distribution Date other than the Final Scheduled Distribution Date, the sum of
(x) the Class A Percentage of the sum of (i) collections on Receivables (other
than Liquidated Receivables and Purchased Receivables) allocable to principal,
including all full and partial principal prepayments, (ii) the Principal Balance
of all Receivables (other than Purchased Receivables) that became Liquidated
Receivables during the related Monthly Period, (iii) (A) the portion of the
Purchase Amount allocable to principal of all Receivables that became Purchased
Receivables as of the immediately preceding Record Date, and (B) in the sole
discretion of the Security Insurer, the Principal Balance as of the immediately
preceding Record Date of all Receivables that were required to be purchased as
of the immediately preceding Record Date but were not so purchased, (iv) the
aggregate amount of Cram Down Losses that shall have occurred during the related
Monthly Period, and (y) the Class A Principal Carryover Shortfall. In addition,
on the Final Scheduled Distribution Date, the Class A Principal Distributable
Amount will equal the Class A Certificate Balance as of the Final Scheduled
Distribution Date.
Class B Certificate Balance: Initially, $10,081,896.89 and thereafter
will equal the initial Class B Certificate Balance reduced by (x) all principal
distributions on the Class B Certificates and (y) on any Distribution Date on
which (i) the sum of the Class A Certificate Balance and the Class B Certificate
Balance as of such Distribution Date and, after taking into account all
distributions to be made on such
S-30
<PAGE> 31
Distribution Date, exceeds (ii) the Pool Balance with respect to the immediately
preceding Monthly Period, the amount of such excess.
Class B Coupon Interest Carryover Shortfall: As of the close of
business on any Distribution Date, the excess of the Class B Coupon Interest
Distributable Amount for such Distribution Date plus any outstanding Class B
Coupon Interest Carryover Shortfall from the preceding Distribution Date plus
interest on such outstanding Class B Coupon Interest Carryover Shortfall, to the
extent permitted by law, at the Class B Pass-Through Rate from such preceding
Distribution Date through the current Distribution Date, over the amount of
interest that the holders of the Class B Certificates actually received on such
current Distribution Date.
Class B Coupon Interest Amount: With respect to any Distribution Date,
the sum of (i) for the initial Distribution Date forty-one (41) days of interest
and for any Distribution Date thereafter, thirty (30) days of interest, in any
case calculated on the basis of a 360-day year consisting of twelve 30-day
months, at the pass-through rate applicable to the Class B Certificate Balance
as of the close of business on the last day of the preceding Collection Period
and (ii) any outstanding Class B Carryover Shortfall with respect to the
immediately preceding Distribution Date.
Class B Excess Interest Amount: For any Distribution Date, an amount
equal to the portion of Available Funds, if any, remaining after the
distribution of the Class B Coupon Interest Amount and the Class B Principal
Distributable Amount.
Class B Principal Carryover Shortfall: As of the close of business on
any Distribution Date, the excess of the Class B Principal Distributable Amount
plus any outstanding Class B Principal Carryover Shortfall from the preceding
Distribution Date over the amount of principal that the holders of the Class B
Certificates actually received on such current Distribution Date.
Class B Principal Distributable Amount: With respect to any
Distribution Date, the Class B Percentage of the sum of (i) collections on
Receivables (other than Liquidated Receivables and Purchased Receivables)
allocable to principal, including all full and partial principal prepayments,
(ii) the Principal Balance of all Receivables (other than Purchased Receivables)
that became Liquidated Receivables during the related Monthly Period, (iii) (A)
the portion of the Purchase Amount allocable to principal of all Receivables
that became Purchased Receivables as of the immediately preceding Record Date,
and (B) in the sole discretion of the Security Insurer, the Principal Balance as
of the immediately preceding Record Date of all Receivables that were required
to be purchased as of the immediately preceding Record Date but were not so
purchased, and (iv) the aggregate amount of Cram Down Losses that shall have
occurred during the related Monthly Period.
Collected Funds: With respect to any Determination Date, the amount of
funds in the Collection Account representing collections on the Receivables
during the related Monthly Period, including all Liquidation Proceeds collected
during the related Monthly Period (but excluding any Purchase Amounts).
Cram Down Loss: With respect to a Receivable, if a court of appropriate
jurisdiction in an insolvency proceeding shall have issued an order reducing the
amount owed on a Receivable or otherwise modifying or restructuring the
scheduled payments to be made on a Receivable, an amount equal to the excess of
the principal balance of such Receivable immediately prior to such order over
the principal balance of such Receivable as so reduced or the net present value
(using as the discount rate the higher of the APR on such Receivable or the rate
of interest, if any, specified by the court in such order) of the scheduled
payments as so modified or restructured. A "Cram Down Loss" shall be deemed to
have occurred on the date of issuance of such order.
Deficiency Claim Amount: With respect to any Determination Date, the
excess, if any, of the sum of the amounts payable on the related Distribution
Date pursuant to clauses (i), (ii), (iii), (iv) and (v) under
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the heading "The Certificates -- Flow of Funds" over the amount of Available
Funds with respect to such Determination Date.
Deficiency Notice: A written notice delivered by the Trustee to the
Collateral Agent, Security Insurer, the fiscal agent, if necessary, and the
Servicer specifying the Deficiency Claim Amount for such Distribution Date.
Determination Date: With respect to any Monthly Period, the earlier of
(i) the fourth Business Day preceding the Distribution Date in the next calendar
month, and (ii) the 5th day of the next calendar month, or if such 5th day is
not a Business Day, the next succeeding Business Day.
Distribution Amount: With respect to a Distribution Date, the sum of
(i) the Available Funds for such Distribution Date, plus (ii) the Deficiency
Claim Amount, if any, received by the Trustee with respect to such Distribution
Date.
Liquidated Receivable: means a Receivable as to which (i) 90 days have
elapsed since the Servicer repossessed the related Financed Vehicle, (ii) the
Servicer has determined in good faith that all amounts it expects to recover
have been received or (iii) 5% or more of a Scheduled Payment shall have become
120 or more days delinquent, except in the case of repossessed Financed
Vehicles.
Pool Factor: With respect to any Distribution Date, a seven digit
decimal figure equal to, as applicable, the Class A Certificate Balance as of
such Distribution Date (after the giving effect to distributions on such date)
divided by the Class A Certificate Balance as of the Closing Date, or, the Class
B Certificate Balance as of such Distribution Date (after giving effect to
distributions on such date) divided by the Class B Certificate Balance as of the
Closing Date.
Purchase Amount: With respect to a Receivable, the Principal Balance
and all accrued and unpaid interest on the Receivable as of the date of
purchase.
Purchased Receivable: means a Receivable (i)(A) that AmeriCredit has
become obligated to repurchase (or, under certain circumstances, has elected to
repurchase) as a result of an uncured breach by AmeriCredit of a representation
or warranty made by AmeriCredit with respect to such Receivable or (B) that the
Seller has become obligated to repurchase (or, under certain circumstances, has
elected to repurchase) as a result of an uncured breach of a representation or
warranty made by the Seller with respect to such Receivable and (ii) as to which
the related Purchase Amount has been deposited in the Collection Account by
AmeriCredit or the Seller, as the case may be, on or before the related Deposit
Date.
STATEMENTS TO CLASS A CERTIFICATEHOLDERS
On each Distribution Date, the Trustee will include with the
distribution to each Class A Certificateholder a statement (based on the
information in the Servicer's Certificate), setting forth the following
information for the related Monthly Period:
(i) the amount of the distribution allocable to interest;
(ii) the amount of the distribution allocable to principal;
(iii) the amount of the distribution payable pursuant to a
claim on the Policy or out of amounts held in certain collateral
accounts;
(iv) the Class A Certificate Principal Balance after giving
effect to the Class A Principal Distributed Amount distributed on such
Distribution Date;
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(v) the amount of the Servicing Fee paid to the Servicer with
respect to such Monthly Period; and
(vi) the Pool Factor after giving effect to the principal
payments distributed on such Distribution Date.
The amounts set forth pursuant to clauses (i) through (iii) above will be
expressed as a dollar amount per $l,000 of original principal balance of a Class
A Certificate.
Within the required period of time after the end of each calendar year,
the Trustee will furnish to each person who at any time during such calendar
year was a Class A Certificateholder, a statement as to the aggregate amounts of
interest and principal paid to such Class A Certificateholder, information
regarding the amount of servicing compensation received by the Servicer and such
other information as Americredit deems necessary to enable such Class A
Certificateholder to prepare its tax returns. See "Certain Federal Income Tax
Consequences".
DESCRIPTION OF THE TRANSACTION DOCUMENTS
THE RECEIVABLES PURCHASE AGREEMENT AND ASSIGNMENT
At the time of issuance of the Certificates, the Servicer will sell and
assign to the Seller, without recourse except as provided in the Receivables
Purchase Agreement and Assignment (the "Purchase Agreement"), among the Servicer
and the Seller, its entire interest in the Receivables, together with its
security interests in the Financed Vehicles pursuant to the Purchase Agreement.
Each Receivable will be identified in a schedule appearing as an exhibit to the
Purchase Agreement.
In the Purchase Agreement, AmeriCredit will represent and warrant to
the Seller, among other things, that (i) the information provided with respect
to the Receivables is correct in all material respects; (ii) the Obligor on each
Receivable is required to maintain physical damage insurance covering the
Financed Vehicle in accordance with AmeriCredit's normal requirements; (iii)
upon the issuance of the Certificates, the Receivables will be free and clear of
all security interests, liens, charges and encumbrances and no offsets,
defenses, or counterclaims have been asserted or threatened under such
Receivables; (iv) at the date of issuance of the Certificates, each of the
Receivables is secured by a first perfected security interest in the Financed
Vehicles in favor of AmeriCredit; and (v) each Receivable, at the time it was
originated, complied and, at the date of issuance of the Certificates, complies
in all material respects with applicable federal and state laws, including,
without limitation, consumer credit, truth in lending, equal credit opportunity,
and disclosure laws. As of the last day of the second (or, if AmeriCredit
elects, the first) month following discovery of a breach of any representation
or warranty that materially and adversely affects the interests of the Issuer,
the Trustee or the Security Insurer in a Receivable, unless the breach is cured,
AmeriCredit is obligated to purchase the Receivable from the Seller for the
Purchase Amount. The "Purchase Amount" equals the unpaid principal balance owed
by the Obligor plus interest thereon at the respective APR to the last day of
the month of repurchase. The repurchase obligation will constitute the sole
remedy available to the Certificateholders, the Trustee, the Security Insurer or
the Seller for any such uncured breach. There is no assurance that AmeriCredit
will have the financial ability to effect any repurchase of Receivables.
THE POOLING AND SERVICING AGREEMENT
SALE AND ASSIGNMENT OF RECEIVABLES
At the time of issuance of the Certificates, the Seller will sell and
assign to the Issuer, without recourse except as provided in the Pooling and
Servicing Agreement, its entire interest in the Receivables,
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together with its security interests in the Financed Vehicles and its interest
in the Purchase Agreement to the Issuer. Each Receivable will be identified in a
schedule appearing as an exhibit to the Pooling and Servicing Agreement.
Concurrently with such sale and assignment the Trustee will authenticate and
deliver the Certificates.
In the Pooling and Servicing Agreement, the Seller will represent and
warrant to the Issuer, among other things, that (i) the information provided
with respect to the Receivables is correct in all material respects; (ii) the
Obligor on each Receivable is required to maintain physical damage insurance
covering the Financed Vehicle in accordance with AmeriCredit's normal
requirements; (iii) upon the issuance of the Certificates, the Receivables will
be free and clear of all security interests, liens, charges and encumbrances and
no offsets, defenses, or counterclaims have been asserted or threatened under
such Receivables; (iv) at the date of issuance of the Certificates, each of the
Receivables is secured by a first perfected security interest in the Financed
Vehicles in favor of AmeriCredit; and (v) each Receivable, at the time it was
originated, complied and, at the date of issuance of the Certificates, complies
in all material respects with applicable federal and state laws, including,
without limitation, consumer credit, truth in lending, equal credit opportunity,
and disclosure laws. As of the last day of the second (or, if AmeriCredit
elects, the first) month following discovery of a breach of any representation
or warranty that materially and adversely affects the interests of the Issuer,
the Trustee or the Security Insurer in a Receivable, unless the breach is cured,
the Seller is obligated to purchase the Receivable from the Issuer for the
Purchase Amount. The "Purchase Amount" equals the unpaid principal balance owed
by the Obligor plus interest thereon at the respective APR to the last day of
the month of repurchase. The repurchase obligation will constitute the sole
remedy available to the Certificateholders, the Trustee, the Security Insurer or
the Issuer for any such uncured breach. There is no assurance that the Seller
will have the financial ability to effect any repurchase of Receivables.
To assure efficiency in servicing the Receivables, as well as to reduce
administrative costs, the Issuer will revocably appoint the Servicer as
custodian of the Receivables and all documents related thereto, and the
Receivables and all documents related thereto will be held by the Servicer as
custodian under the Custodian Agreement dated as of April 30, 1996. Prior to the
Closing Date, the Receivables will be stamped to show the assignment thereof to
the Trustee. AmeriCredit's accounting records and computer systems will reflect
the sale and assignment of the Receivables to the Issuer and Uniform Commercial
Code ("UCC") financing statements reflecting such sale and assignment will be
filed.
ACCOUNTS
Each Obligor will be instructed to make payments with respect to the
Receivables after the Cutoff Date directly to one or more post office boxes or
other mailing locations (each, a "Lockbox") maintained by the Lockbox Bank, and
a segregated account will be established and maintained with a bank or banks
acceptable to the Security Insurer, in the name of the Trustee for the benefit
of the Certificateholders, into which all payments made from Obligors to a
Lockbox on or with respect to the Receivables must be deposited within one
business day of receipt (the "Lockbox Account"). The Issuer will also establish
and maintain with the Trustee one or more accounts (the "Collection Account"),
in the name of the Trustee on behalf of the Certificateholders and the Security
Insurer, into which all amounts previously deposited in the Lockbox Account in
respect of the Receivables will be transferred within three business days of
deposit in the Lockbox Account. The Collection Account will be maintained with
the Trustee so long as the Trustee's deposits have a rating acceptable to the
Security Insurer and the Rating Agencies. If the deposits of the Trustee or its
corporate parent no longer have such acceptable rating, the Servicer shall, with
the Trustee's assistance as necessary, cause such Accounts to be moved within 30
days to a bank whose deposits have such rating.
Funds in the Collection Account will be invested as provided in the
Pooling and Servicing Agreement in Eligible Investments. "Eligible Investments"
are generally limited to investments acceptable to the Rating Agencies and the
Security Insurer as being consistent with the rating of the Certificates. Any
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earnings (net of losses and investment expenses) on amounts on deposit in the
Collection Account will be deposited into the Collection Account and distributed
on the next Distribution Date pursuant to the Pooling and Servicing Agreement.
SERVICING PROCEDURES
The Servicer shall follow its currently employed standards, or such
more exacting standards as the Servicer may employ in the future. The Servicer
will make reasonable efforts to collect all payments due with respect to the
Receivables and, in a manner consistent with the Pooling and Servicing
Agreement, will continue such collection procedures as it follows with respect
to automotive retail installment sale contracts it services for itself and
others. Consistent with its normal procedures, the Servicer may, in its
discretion, arrange with the Obligor to extend the payment due date under the
Receivable; provided, however, that the Servicer may not grant extensions with
respect to a Receivable for an aggregate period in excess of six months or grant
extensions for Receivables in the aggregate during any calendar quarter which
exceed 6.0% of the aggregate Principal Balance of Receivables as of the
Accounting Date immediately prior to the first day of such calendar quarter. No
such arrangement will, for purposes of the Agreement, modify the amount of the
scheduled payments, or extend the final payment date on any Receivable beyond
the last day of the Monthly Period preceding the Final Scheduled Distribution
Date. If the Servicer grants an extension with respect to a Receivable other
than in accordance with the aforementioned limitations the Servicer will be
required to purchase the Receivable for the Purchase Amount. Following any such
purchase of a Receivable by the Servicer, such Receivable will be released from
the Issuer and conveyed to the Servicer. See "Certain Legal Aspects of
Receivables."
PAYMENTS ON RECEIVABLES
The Servicer will notify each Obligor that payments made by such
Obligor after the Cutoff Date with respect to a Receivable must be mailed
directly to a Lockbox. All payments sent by Obligors to a Lockbox will be held
by the Lockbox Bank for the benefit of the Issuer and will be deposited to the
Lockbox Account within three business day of receipt. Any payments received by
the Servicer directly from an Obligor must be deposited in the Collection
Account within one business day of receipt. The Lockbox Bank will, within two
business days following the deposit of funds in the Lockbox Account, direct the
transfer of such funds to the Collection Account. Any payments with respect to
the Receivables received by the Servicer from a source other than an Obligor
must be deposited by the Servicer directly into the Collection Account upon
receipt. Prior to the Distribution Date, the Trustee, on the basis of
instructions provided by the Servicer, will transfer funds held in the
Collection Account to the Certificate Distribution Account for distribution to
the Certificateholders.
SERVICING COMPENSATION
The Servicer will be entitled to receive the Basic Servicing Fee on
each Distribution Date, equal to the product of one-twelfth times 2.50% of the
aggregate principal balance of the Receivables as of the close of business on
the Accounting Date of the preceding Monthly Period (the "Basic Servicing Fee").
So long as AmeriCredit is the Servicer, a portion of the Servicing Fee will be
payable to the Backup Servicer for agreeing to stand by as successor Servicer
and for performing certain other functions. The Servicer will also collect and
retain any late fees, prepayment charges and other administrative fees or
similar charges allowed by applicable law with respect to the Receivables, and
will be entitled to reimbursement from the Issuer for certain expenses. Payments
by or on behalf of Obligors will be allocated to scheduled payments, late fees
and other charges and principal and interest in accordance with the Servicer's
normal practices and procedures.
The Basic Servicing Fee will compensate the Servicer for performing the
functions of a third party servicer of automotive receivables as an agent for
their beneficial owner, including collecting and posting
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all payments, responding to inquiries of Obligors on the Receivables,
investigating delinquencies, reporting tax information to Obligors, paying costs
related to disposition of defaulted accounts, and policing the collateral. The
Basic Servicing Fee also will compensate the Servicer for administering the
Receivables, including accounting for collections and furnishing monthly and
annual statements to the Issuer and the Security Insurer with respect to
distributions and generating federal income tax information. The Basic Servicing
Fee also will reimburse the Servicer for certain taxes, accounting fees, outside
auditor fees, data processing costs and other costs incurred in connection with
administering the Receivables and for payment of the fees of the Backup
Servicer.
EVIDENCE AS TO COMPLIANCE
The Pooling and Servicing Agreement will provide that a firm of
independent public accountants will furnish to the Issuer and the Security
Insurer on or before October 31 of each year, beginning October 31, 1997, a
statement as to compliance by the Servicer during the preceding twelve months
ended June 30 with certain standards relating to the servicing of the
Receivables (or in the case of the first such certificate, the period from the
Closing Date to June 30, 1997).
The Pooling and Servicing Agreement will also provide for delivery to
the Issuer and the Security Insurer, on or before October 31 of each year,
commencing October 31, 1997, of a certificate signed by an officer of the
Servicer stating that the Servicer has fulfilled its obligations under the
Agreement throughout the preceding twelve months ended June 30 or in the case of
the first such certificate, the period from the Cutoff Date to June 30, 1997),
or, if there has been a default in the fulfillment of any such obligation,
describing each such default. The Servicer has agreed to give the Issuer and the
Security Insurer notice of any Servicer Termination Event under the Pooling and
Servicing Agreement.
Copies of such statements and certificates may be obtained by
Certificateholders on request in writing addressed to the Issuer.
CERTAIN MATTERS REGARDING THE SERVICER
The Servicer is retained for an initial term commencing on the Closing
Date and ending on September 30, 1996, which term may be extended in ninety day
increments by the Security Insurer. In the absence of a Servicer Termination
Event under the Pooling and Servicing Agreement, the Security Insurer has agreed
to extend such term. See "Description of the Trust Agreements -- Certain Matters
Regarding the Servicer" in the Prospectus.
SERVICER TERMINATION EVENT
"Servicer Termination Event" under the Pooling and Servicing Agreement
will consist of the occurrence and continuance of any of the following: (i) any
failure by the Servicer to deliver to the Issuer for distribution to the
Certificateholders any required payment, which failure continues unremedied for
two Business Days, or any failure to deliver the Servicer's Certificate (as
defined in the Pooling and Servicing Agreement) by the fourth Business Day prior
to the Distribution Date, and which shall comply with the requirements therefor;
(ii) any failure by the Servicer duly to observe or perform in any material
respect any other covenant or agreement under the Pooling and Servicing
Agreement or the Purchase Agreement (if AmeriCredit is the Servicer) which
failure continues unremedied for 60 days after the giving of written notice of
such failure (1) to the Servicer by the Security Insurer, the Trustee or the
Issuer, or (2) if a Security Insurer Default has occurred and is continuing, to
the Servicer by any holder of a Certificate; (iii) certain events of insolvency,
readjustment of debt, marshalling of assets and liabilities, or similar
proceedings with respect to the Servicer or, so long as AmeriCredit is Servicer,
of any of its affiliates, and certain actions by the Servicer, or, so long as
AmeriCredit is Servicer, of its affiliates, indicating its insolvency,
reorganization pursuant to bankruptcy proceedings, or inability to pay its
obligations; (iv) any representation, warranty or statement of the Servicer
shall prove to be incorrect in any material respect
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and which has a material adverse effect on the Insurer, and the circumstances or
conditions in respect of which such representation, warranty or statement was
incorrect shall not have been eliminated or cured as provided thereunder; (v) so
long as a Security Insurer Default shall not have occurred and be continuing,
the Security Insurer shall not have delivered a Servicer Extension Notice; (vi)
so long as a Security Insurer Default shall not have occurred and be continuing,
any Insurance Agreement Event of Default shall have occurred; or (vii) a claim
is made under the Policy.
RIGHTS UPON SERVICER TERMINATION EVENT
As long as a Servicer Termination Event under the Pooling and Servicing
Agreement remains unremedied, (x) provided no Security Insurer Default shall
have occurred and be continuing, the Security Insurer in its sole and absolute
discretion or (y) if a Security Insurer Default shall have occurred and be
continuing, then the Trustee or holders of Certificates evidencing more than 50%
of the Certificate Balance, may terminate all the rights and obligations of the
Servicer under such Agreement, whereupon (i) if AmeriCredit is terminated under
the Agreement, the Backup Servicer, or such other successor servicer as shall
have been appointed by the Security Insurer (so long as no Security Insurer
Default shall have occurred and be continuing) will succeed to all the
responsibilities, duties, and liabilities of the Servicer under such Agreement
or (ii) if a Servicer other than AmeriCredit is terminated under the Agreement,
a successor servicer will be appointed by the Security Insurer (or, if a
Security Insurer Default shall have occurred and be continuing, by the Trustee).
Any such successor Servicer will succeed to all the responsibilities, duties,
and liabilities of the Servicer under the Pooling and Servicing Agreement and
will be entitled to similar compensation arrangements. There is no assurance
that the succession of a successor servicer will not result in a material
disruption in the performance of the duties of the servicer.
WAIVER OF PAST DEFAULTS
If, but only if, a Security Insurer Default has occurred and is
continuing, the holders of Certificates evidencing not less than a majority of
the Certificate Balance may waive any default by the Servicer in the performance
of its obligations under the Pooling and Servicing Agreement and its
consequences. No such waiver shall impair the Certificateholders' rights with
respect to subsequent defaults.
AMENDMENT
The Pooling and Servicing Agreement may be amended by the Servicer, the
Seller and the Trustee, with the prior written consent of the Security Insurer
(so long as a Security Insurer Default shall not have occurred and be
continuing) but without the consent of the Certificateholders, to cure any
ambiguity, correct or supplement any provision therein or to add any other
provisions with respect to matters or questions arising under such Agreement
which are not inconsistent with the provisions of such Agreement; provided, that
such action will not, in the opinion of counsel satisfactory to the Trustee and
the Security Insurer, adversely affect in any material respect the interests of
any Certificateholder. The Pooling and Servicing Agreement may also be amended
by the Servicer and the Seller with the prior written consent of the Trustee and
the Security Insurer (so long as a Security Insurer Default shall not have
occurred and be continuing) and of the Holders of Certificates evidencing not
less than a majority of the Certificate Balance, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Pooling and Servicing Agreement or of modifying in any manner the rights of
Certificateholders; provided, however, that subject to certain rights of the
Security Insurer to consent to certain modifications of the Receivables and to
cause the Trustee to liquidate the Receivables and the other conveyed property,
no such amendment may (i) increase or reduce in any manner the amount of, or
accelerate or delay the timing of, collections of payments on Receivables or
distributions that are required to be made on the Certificates, (ii) affect the
priority of payment of interest or principal to Certificateholders, or (iii)
reduce the aforesaid percentage of the Certificate Balance required to consent
to any such amendment, without the consent of all Certificateholders.
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THE TRUSTEE
LaSalle National Bank is the Trustee under the Pooling and Servicing
Agreement. The Trustee, in its individual capacity or otherwise, may hold
Certificates in its own name or as pledgee. For the purpose of meeting the legal
requirements of certain jurisdictions, the Servicer and the Trustee (with the
consent of the Security Insurer, so long as a Security Insurer Default shall not
have occurred and be continuing) may appoint co-trustees or separate trustees of
all or any part of the trust estate and confer upon such party such powers,
duties, obligations, rights and trusts as the Trustee deems necessary or
desirable. In the event of such appointment, all rights, powers, duties, and
obligations conferred or imposed upon the Trustee by the Pooling and Servicing
Agreement shall be conferred or imposed upon the Trustee and such separate
trustee or co-trustee jointly, or, in any jurisdiction in which the Trustee
shall be incompetent or unqualified to perform certain acts, singly upon such
separate trustee or co-trustee who shall exercise and perform such rights,
powers, duties, and obligations solely at the direction of the Trustee.
The Trustee may resign at any time, in which event AmeriCredit will be
obligated to appoint a successor trustee with the consent of the Security
Insurer (so long as a Security Insurer Default shall not have occurred and be
continuing). AmeriCredit may also remove the Trustee if, among other reasons,
the Trustee ceases to be eligible to continue as such under the Pooling and
Servicing Agreement, becomes legally unable to act, or becomes insolvent. In
such circumstances, AmeriCredit will be obligated to appoint a successor trustee
with the consent of the Security Insurer (so long as a Security Insurer Default
shall not have occurred and be continuing). Any resignation or removal of the
Trustee and appointment of a successor trustee will not become effective until
acceptance of the appointment by the successor trustee.
The Pooling and Servicing Agreement will provide that the Servicer will
pay the Trustee's fees. The Pooling and Servicing Agreement will further provide
that the Trustee will be entitled to indemnification by the Servicer for and
will be held harmless against, any loss, liability, fee, disbursement, or
expense incurred by the Trustee not resulting from the Trustee's own willful
misfeasance, bad faith, or negligence (other than by reason of a breach of any
of its representations or warranties set forth in the Pooling and Servicing
Agreement). The Pooling and Servicing Agreement will further provide that the
Servicer will indemnify the Trustee for certain taxes that may be asserted in
connection with the transaction.
DUTIES OF THE TRUSTEE
The Trustee makes no representations as to the validity or sufficiency
of the Pooling and Servicing Agreement, the Certificates (other than the
authentication of the Certificates), or any Receivables or related documents,
and is not accountable for the use or application by the Seller or the Servicer
of any funds paid to the Seller or the Servicer in respect of the Certificates
or the Receivables, or the investment of any monies received by the Servicer
before such monies are deposited into the Collection Account. The Trustee has
not independently verified the Receivables. If no Event of Default under the
Pooling and Servicing Agreement has occurred and is continuing, the Trustee is
required to perform only those duties specifically required of it under the
certificates, reports, or other instruments required to be furnished to the
Trustee under the Pooling and Servicing Agreement, in which case it is only
required to determine whether such certificates, reports or other instruments
conform to the requirements of the Pooling and Servicing Agreement.
The obligations of the Trustee will terminate and the Trustee will
release any property remaining subject to the lien of the Pooling and Servicing
Agreement upon the latest of (i) the expiration of the Policy and the return of
the Policy to the Security Insurer for cancellation, (ii) the date on which the
Security Insurer shall have received payment and performance of all amounts and
obligations which the Trust may at any time owe to or on behalf of the Security
Insurer under the Pooling and Servicing Agreement or the Insurance Agreement,
and (iii) the date on which the Trustee shall have received payment and
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performance of all amounts and obligations which the Issuer may at any time owe
to or on behalf of the Trustee for the benefit of the Certificateholders under
the Pooling and Servicing Agreement or the Certificates.
OPTIONAL REDEMPTION
In order to avoid excessive administrative expense, the Pooling and
Servicing Agreement provides that the Servicer is permitted at its option to
purchase from the Issuer (with the consent of the Security Insurer if a claim
has previously been made under the Policy or if such purchase would result in a
claim on the Policy or any amount owing to the Security Insurer or on the
Certificates would remain unpaid), as of any Determination Date on which the
outstanding balance of the Certificates is 10% or less of the original
Certificate Balance, all remaining Receivables at a redemption price which is
not less than the Certificate Balance plus accrued and unpaid interest thereon.
Exercise of such right will cause the redemption of the Certificates. The
Trustee will give written notice of optional redemption to each
Certificateholder of record. The final distribution to any Certificateholder
will be made only upon surrender and cancellation of such holder's Certificate
at the office or agency of the Trustee specified in the notice of termination.
Any funds remaining held by the Trustee for payment of Certificates after the
Trustee has taken certain measures to locate a Certificateholder and such
measures have failed will be distributed to the Seller.
THE POLICY
Simultaneously with the issuance of the Class A Certificates, Financial
Security will deliver the Policy to the Trustee for the benefit of each Class A
Certificateholder. Under the Policy, Financial Security will unconditionally and
irrevocably guarantee to the Trustee for the benefit of each Class A
Certificateholder the full and complete payment of (1) Guaranteed Distributions
(as defined below) with respect to the Class A Certificates and (ii) the amount
of any Guaranteed Distribution which subsequently is avoided in whole or in part
as a preference payment under applicable law. In the event that the Trustee
fails to make a claim under the Policy, Class A Certificateholders do not have
the right to make a claim directly under the Policy, but may sue to compel the
Trustee do so.
"Guaranteed Distributions" means, with respect to each Distribution
Date, the distribution to be made to Class A Certificateholders in an aggregate
amount equal to the Class A Interest Distributable Amount and the Class A
Principal Distributable Amount due and payable on such Distribution Date, in
each case in accordance with the original terms of the Class A Certificates when
issued and without regard to any amendment or modification of the Class A
Certificates or the Pooling and Servicing Agreement which has not been consented
to by Financial Security. Guaranteed Distributions shall not include, nor shall
coverage be provided under the Policy in respect of, any taxes, withholding or
other charge imposed with respect to any Class A Certificateholder by any
governmental authority.
Payment of claims on the Policy made in respect of Guaranteed
Distributions will be made by Financial Security following Receipt by Financial
Security of the appropriate notice for payment on the later to occur of (i)
12:00 noon New York City time, on the third Business Day following Receipt of
such notice for payment, or (ii) 12:00 noon, New York City time, on the date on
which such payment was due on the Class A Certificates.
If payment of any amount avoided as a preference under applicable
bankruptcy, insolvency, receivership or similar law is required to be made under
the Policy, Financial Security shall cause such payment to be made on the later
to occur of (a) the date when such payment is due to be paid pursuant to the
Order referred to below or (b) the first to occur of (i) the fourth Business Day
following Receipt by Financial Security from the Trustee of (A) a certified copy
of the order (the "Order"') of the court or other governmental body which
exercised jurisdiction to the effect that the Class A Certificateholder is
required
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to return the amount of any Guaranteed Distributions distributed with respect to
the Class A Certificates during the term of the Policy because such
distributions were avoidable as preference payments under applicable bankruptcy
law, (B) a certificate of the Class A Certificateholder that the Order has been
entered and is not subject to any stay and (C) an assignment duly executed and
delivered by the Class A Certificateholder, in such form as is reasonably
required by Financial Security and provided to the Class A Certificateholder by
Financial Security, irrevocably assigning to Financial Security all rights and
claims of the Class A Certificateholder relating to or arising under the Class A
Certificates against the debtor which made such preference payment or otherwise
with respect to such preference payment, or (ii) the date of Receipt by
Financial Security from the Trustee of the items referred to in Clauses (A), (B)
and (C) above if, at least four Business Days prior to such date of Receipt,
Financial Security shall have Received written notice from the Trustee that such
items were to be delivered on such date and such date was specified in such
notice. Such payment shall be disbursed to the receiver, conservator, debtor-
in-possession or trustee in bankruptcy named in the Order and not to the Trustee
or any Class A Certificateholder directly (unless a Class A Certificateholder
has previously paid such amount to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Order in which case
such payment shall he disbursed to the Trust for distribution to such Class A
Certificateholder upon proof of such payment reasonably satisfactory to
Financial Security). In connection with the foregoing, Financial Security shall
have the rights provided pursuant to the Pooling and Servicing Agreement.
The terms "Receipt" and "Received," with respect to the Policy, shall
mean actual delivery to Financial Security and to its fiscal agent, if any,
prior to 12:00 noon, New York City time, on a Business Day; delivery either on a
day that is not a Business Day or after 12:00 noon, New York City time, shall be
deemed to be Receipt on the next succeeding Business Day. If any notice or
certificate given under the Policy by the Trustee is not in proper form or is
not properly completed, executed or delivered, it shall be deemed not to have
been Received, and Financial Security or its fiscal agent shall promptly so
advise the Trustee and the Trustee may submit an amended notice.
Under the Policy, "Business Day" means any day other than (i) a
Saturday or Sunday or (ii) a day on which banking institutions in the City of
Chicago, Illinois, New York, New York or Fort Worth, Texas are authorized or
obligated by law or executive order to be closed.
Financial Security's obligations under the Policy in respect of
Guaranteed Distributions shall be discharged to the extent funds are transferred
to the Trustee as provided in the Policy whether or not such funds are properly
applied by the Trustee.
Financial Security shall be subrogated to the rights of each Class A
Certificateholder to receive payments of principal and interest to the extent of
any payment by Financial Security under the Policy.
Claims under the Policy constitute direct, unsecured and unsubordinated
obligations of Financial Security ranking not less than pari passu with other
unsecured and unsubordinated indebtedness of Financial Security for borrowed
money. Claims against Financial Security under each other financial guaranty
insurance policy issued thereby constitute pari passu claims against the general
assets of Financial Security. The terms of the Policy cannot be modified or
altered by any other agreement or instrument, or by the merger, consolidation or
dissolution of the Trust. The Policy may not be canceled or revoked prior to
distribution in full of all Guaranteed Distributions with respect to the Class A
Certificates. The Policy is not covered by the property/casualty insurance
security fund specified in Article 76 of the New York Insurance Law. The Policy
is governed by the laws of the State of New York.
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<PAGE> 41
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of certain federal income tax
consequences of the purchase, ownership and disposition of the Class A
Certificates. This summary is based upon laws, regulations, rulings and
decisions currently in effect, all of which are subject to change. The
discussion does not deal with all federal tax consequences applicable to all
categories of investors, some of which may be subject to special rules. In
addition, this summary is generally limited to investors who will hold the Class
A Certificates as "capital assets" (generally, property held for investment)
within the meaning of Section 1221 of the Internal Revenue Code of 1986, as
amended (the "Code"). Investors should consult their own tax advisors to
determine the federal, state, local and other tax consequences of the purchase,
ownership and disposition of the Class A Certificates. Prospective investors
should note that no rulings have been or will be sought from the Service with
respect to any of the federal income tax consequences discussed below, and no
assurance can be given that the Service will not take contrary positions.
TAX STATUS OF THE TRUST
In the opinion of Dewey Ballantine, special tax counsel to AmeriCredit,
the Trust will be classified as a grantor trust and not as an association
taxable as a corporation for federal income tax purposes. Each Class A
Certificateholder will be treated as the owner of an interest in the ordinary
income and corpus portions of the Trust.
For purposes of federal income tax, the Class B Certificateholders will
be deemed to have retained an additional interest in a fixed portion of the
interest due on each Receivable, the Class B Excess Interest, equal to the sum
of (i) the Class A Percentage of the difference between the APR of such
Receivable and the sum of the Class A Pass-Through Rate and the Servicing Fee
Rate, and (ii) the Class B Percentage of the difference between the APR of such
Receivable and the sum of the Class B Pass- Through Rate and the Servicing Fee
Rate. The Excess Interest will be treated as "stripped coupons" within the
meaning of Section 1286 of the Code. Accordingly, each Class A Certificateholder
will be treated as owning its pro rata percentage interest in the principal of,
and interest payable on, each Receivable (minus the portion of the interest
payable on such Receivable that exceeds the sum of the applicable pass-through
rate on the Class A Certificates and the Servicing Fee Rate) and such ownership
interest in each Receivable will be treated as a "stripped bond" within the
meaning of Section 1286 of the Code.
TAXATION OF CLASS A CERTIFICATEHOLDERS
Subject to the discussion below under the heading "Discount and
Premium," each Class A Certificateholder is required to include for federal
income tax purposes its share of the gross income of the Trust, including
interest and certain other charges accrued on the Receivables and any gain upon
collection or disposition of the Receivables (but not including any portion of
the Excess Interest). Such gross income attributable to interest on the
Receivables exceeds the Class A Pass-Through Rate or the Class B Pass-Through
Rate, as applicable, by an amount equal to the Class A Certificateholder's share
of the expenses of the Trust for the period during which it owns a Class A
Certificate. Each Class A Certificateholder is entitled to deduct its share of
the amount used to pay expenses of the Trust to the extent described below. Any
amounts received by a Class A Certificateholder from the Spread Account, from
the subordination of the Class B Certificateholders, or from any collateral
accounts established for the benefit of the Security Insurer will be treated for
federal income tax purposes as having the same characteristics as the payments
they replace.
Each Class A Certificateholder should report its share of the income of
the Trust under its usual method of accounting. Accordingly, interest is
includible in a Class A Certificateholder's gross income when it accrues on the
Receivables, or in the case of Class A Certificateholders who are cash basis
taxpayers, when received by the Servicer on behalf of the Class A
Certificateholders. Because (i) interest
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<PAGE> 42
accrues on the Receivables over differing monthly periods and is paid in arrears
and (ii) interest collected on a receivable generally is paid to Class A
Certificateholders in the following month, the amount of interest accruing to a
Class A Certificateholder during any calendar month will not equal the interest
distributed in that month. Discount on a Receivable would be includible in
income as described below.
Each Class A Certificateholder will be entitled to deduct, consistent
with its method of accounting, its pro rata share of reasonable servicing fees
and other fees paid or incurred by the Trust as provided in Section 162 or 212
of the Code. If a Class A Certificateholder is an individual, estate or trust,
the deduction for such Class A Certificateholder's share of such fees will be
allowed only to the extent that all of such Class A Certificateholder's
miscellaneous itemized deductions, including such Class A Certificateholder's
share of such fees, exceed 2% of such Class A Certificateholder's adjusted gross
income. In addition, in the case of Class A Certificateholders who are
individuals, certain otherwise allowable itemized deductions will be reduced by
an amount equal to 3% of such Class A Certificateholder's adjusted gross income
in excess of a statutorily defined threshold, but not by more than 80% of such
itemized deductions.
To the extent that any fee is determined to be in excess of a
reasonable amount (and hence not deductible), such excess should be
characterized as an additional ownership right that has been stripped from the
Receivables. Accordingly, the gross income of the Class A Certificateholders
should not include any amount attributable to such excess fee.
DISCOUNT AND PREMIUM
A Class A Certificateholder that purchases a Class A Certificate at a
discount (i.e., for an amount less than its face amount) must include such
discount in income over the life of the Class A Certificates. Distinctions in
the Code between original issue discount and market discount generally are not
relevant in the case of the Class A Certificates.
The rate at which discount must be included in income depends on
whether it is greater or less than a statutorily defined de minimis amount.
Although not entirely certain, it would appear that the de minimis computation
can be done for each overall Class A Certificate and need not be done on a
Receivable-by-Receivable basis. Generally, discount is treated as de minimis if
it is less than 1/4 of one percent of the principal amount of the Class A
Certificate times the number of full years remaining to the maturity date of the
Class A Certificate. It is not clear whether the maturity date for this purpose
is the final maturity date or the weighted average maturity date (and whether
expected prepayments are taken into account).
If the discount is de minimis (which should be the case for original
purchasers of Class A Certificates) it would appear that such discount is
includible in income as principal payments are received on the Receivables and
in proportion to such principal payments. Although not entirely clear, the
income attributable to de minimis discount should be treated as capital gain.
If the discount is more than a de minimis amount, such discount must be
included in income as it accrues on the basis of the yield to maturity of the
Class A Certificate, to the particular purchaser. It is not clear whether a
prepayment assumption must be taken into account in computing this yield to
maturity and how actual prepayments will affect accruals of discount. Unless the
Class A Certificates are originally issued with more than a de minimis amount of
discount, the Servicer will not be providing any information relating to the
computation of the accruals of discount by subsequent purchasers of Class A
Certificates.
In the event that a Receivable is treated as purchased at a premium
(i.e., the Purchase Price exceeds the portion of the remaining principal balance
of the Receivables allocable to the Class A Certificateholders), such premium
will be amortizable by a Class A Certificateholder as an offset to interest
income (with a corresponding reduction in the Class A Certificateholder's basis)
under a constant yield
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<PAGE> 43
method over the term of the Receivable if an election under Section 171 of the
Code is made (or was previously in effect) with respect to the Class A
Certificates. Any such election will also apply to debt instruments held by the
taxpayer during the year in which the election is made and to all debt
instruments acquired thereafter.
SALE OF A CLASS A CERTIFICATE
If a Class A Certificate is sold, gain or loss will be recognized equal
to the difference between the amount realized on the sale and the Class A
Certificateholder's adjusted basis in the Receivables and any other assets held
by the Trust. A Class A Certificateholder's adjusted basis will equal the Class
A Certificateholder's cost for the Class A Certificate increased by any discount
previously included in income, and decreased by any payments received that are
attributable to accrued discount by any offset previously allowed for accrued
premium and by the amount of principal payments previously received on the
Receivables. Any gain or loss will be capital gain or loss if the Class A
Certificate was held as a capital asset.
FOREIGN CLASS A CERTIFICATEHOLDERS
Interest attributable to Receivables which is received by a foreign
Class A Certificateholder, (other than a foreign bank and certain other persons)
generally will not be subject to the normal 30% withholding tax (or lower treaty
rate) imposed with respect to such payments, provided that such Class A
Certificateholder is not engaged in a trade or business in the United States and
that such Class A Certificateholder fulfills certain certification requirements.
Under such requirements, the holder must certify, under penalties of perjury,
that it is not a "United States person" and provide its name and address. For
this purpose, "United States person" means a citizen or resident of the United
States, a corporation, partnership, or other entity created or organized in or
under the laws of the United States or any political subdivision thereof, or an
estate or trust that is subject to United States federal income tax, regardless
of the source of its income.
BACKUP WITHHOLDING
Backup withholding of federal income tax at a rate of 31 percent may
apply to payments made in respect of the Class A Certificates as well as
payments of proceeds from the sale of Class A Certificates, to Class A
Certificateholders that are not "exempt recipients" and that fail to provide
certain identifying information (such as the taxpayer identification number of
the Class A Certificateholder) to the Trustee or its agent in the manner
required. Individuals generally are not exempt recipients, whereas corporations
and certain other entities generally are exempt recipients. Payments made in
respect of the Class A Certificates must be reported to the Service, unless the
recipient is an exempt recipient or establishes an exemption. Any amounts
withheld under the backup withholding rules from a payment to a person would be
allowed as a refund or a credit against such person's United States federal
income tax, provided that the required information is furnished to the Service.
Furthermore, certain penalties may be imposed by the Service on a Class A
Certificateholder who is required to supply information but who does not do so
in the proper manner.
STATE AND LOCAL TAXATION
The discussion above does not address the tax consequences of purchase,
ownership or disposition of the Class A Certificates under any state or local
tax law. Investors should consult their own tax advisors regarding state and
local tax consequences.
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<PAGE> 44
ERISA CONSIDERATIONS
Section 406 of ERISA and Section 4975 of the Code prohibit a pension,
profit sharing, or other employee benefit plan from engaging in certain
transactions involving "plan assets" with persons that are "parties in interest"
under ERISA or "disqualified persons" under the Code with respect to the plan.
ERISA also imposes certain duties on persons who are fiduciaries of plans
subject to ERISA and prohibits certain transactions by such fiduciaries. Under
ERISA, any person who exercises any authority or control respecting the
management or disposition of the assets of a plan is considered to be a
fiduciary of such plan (subject to certain exceptions not here relevant). A
violation of these "prohibited transaction" rules may generate excise tax and
other liabilities under ERISA and the Code for such persons.
In addition to the matters described below, purchasers of Class A
Certificates that are insurance companies should consult with their counsel with
respect to the recent United States Supreme Court case interpreting the
fiduciary responsibility rules of ERISA, John Hancock Mutual Life Insurance Co.
v. Harris Trust and Savings Bank, 114 S.Ct. 517 (1993). In John Hancock, the
Supreme Court ruled that assets held in an insurance company's general account
may be deemed to be "plan assets" for ERISA purposes under certain
circumstances. Prospective purchasers should determine whether the decision
affects their ability to make purchases of the Class A Certificates.
Pursuant to a final regulation (the "Final Regulation") issued by the
Department of Labor ("DOL") concerning the definition of what constitutes the
"plan assets" of an employee benefit plan subject to ERISA or the Code, or an
individual retirement account (an "IRA"), or any entity whose underlying assets
are deemed to be assets of an employee benefit plan or an IRA by reason of such
employee benefit plan's or such IRA's investment in such entity, (collectively
referred to as "Benefit Plans"), the assets and properties of certain entities
in which a Benefit Plan makes an equity investment could be deemed to be assets
of the Benefit Plan unless certain exceptions under the Final Regulation apply
or an exemption is available. If Benefit Plans that purchase the Class A
Certificates are deemed to own an interest in the underlying assets of the
Trust, the operations of the Trust could result in prohibited transactions.
The DOL has granted to First Boston an administrative exemption
(Prohibited Transaction Exemption 89-90 (the "Exemption") which generally
exempts from the application of the prohibited transaction provisions of Section
406(a), Section 406(b)(1), Section 406(b)(2) and Section 407(a) of ERISA and the
excise taxes imposed pursuant to Sections 4975(a) and (b) of the Code, certain
transactions relating to the servicing and operation of asset pools, including
pools of motor vehicle installment obligations such as the Receivables and the
purchase, sale and holding of asset-backed pass-through certificates, including
pass-through certificates evidencing interests in certain receivables, loans and
other obligations, such as the Class A Certificates, provided that certain
conditions set forth in the Exemption are satisfied.
If the general conditions of Section II of the Exemption are satisfied,
the Exemption may provide an exemption from the restrictions imposed by Sections
406(a) and 407(a) of ERISA (as well as the excise taxes imposed by Sections
4975(c)(1)(A) through (D) of the Code) in connection with the direct or indirect
sale, exchange or transfer of Class A Certificates by Benefit Plans in the
initial issue of certificates, the holding of Class A Certificates by Benefit
Plans or the direct or indirect acquisition or disposition in the secondary
market of Class A Certificates by Benefit Plans. However, no exemption is
provided from the restrictions of Section 406(a)(1)(E), 406(a)(2) and 407 of
ERISA for the acquisition or holding of a Class A Certificate on behalf of an
"Excluded Plan" by any person who has discretionary authority or renders
investment advice with respect to the assets of such Excluded Plan. For purposes
of the Class A Certificates, an Excluded Plan is a Benefit Plan sponsored by (1)
First Boston, (2) the originators, (3) the Servicer, (4) the Trustee, (5) any
Obligor with respect to Receivables constituting more than 5 percent of the
aggregate unamortized principal balance of the Receivables as of the date of
initial issuance, (6) the Security Insurer and (7) any affiliate or successor of
a person described in (1) to (6) above (the "Restricted Group").
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<PAGE> 45
If the specific conditions of paragraph I.B. of Section I of the
Exemption are also satisfied, the Exemption may provide an exemption from the
restrictions imposed by Sections 406(b)(1) and (b)(2) of ERISA and the taxes
imposed by Sections 4975(a) and (b) of the Code by reason of Section
4975(c)(1)(E) of the Code in connection with (1) the direct or indirect sale,
exchange or transfer of Class A Certificates in the initial issuance of Class A
Certificates to a Benefit Plan when the person who has discretionary authority
or renders investment advice with respect to the investment of plan assets in
Class A Certificates is (a) an Obligor with respect to 5 percent or less of the
fair market value of the Receivables or (b) an affiliate of such a person, (2)
the direct or indirect acquisition or disposition in the secondary market of
Class A Certificates by Benefit Plans and (3) the holding of Class A
Certificates by Benefit Plans. Among the specific conditions that must be
satisfied is the condition that immediately after the acquisition of the Class A
Certificates no more than 25% of the assets of the Benefit Plan with respect to
which the person is a fiduciary are invested in certificates representing an
interest in a trust containing assets sold or serviced by the same entity. As of
the date hereof, AmeriCredit believes no Obligor with respect to Receivables
included in the Trust constitutes more than 5 percent of the aggregate
unamortized principal balance of the Trust.
If the specific conditions of paragraph I.C. of Section I of the
Exemption are satisfied, the Exemption may provide an exemption from the
restrictions imposed by Sections 406(a), 406(b) and 407(a) of ERISA, and the
taxes imposed by Sections 4975(a) and (b) of the Code by reason of Section
4975(c) of the Code for transactions in connection with the servicing,
management and operation of the Trust.
The Exemption may provide an exemption from the restrictions imposed by
Section 406(a) and 407(a) of ERISA, and the taxes imposed by Sections 4975(a)
and (b) of the Code by reason of Sections 4975(c)(1)(A) through (D) of the Code
if such restrictions are deemed to otherwise apply merely because a person is
deemed to be a "party in interest" or a "disqualified person" with respect to an
investing Benefit Plan by virtue of providing services to the Benefit Plan (or
by virtue of having certain specified relationships to such a person) solely as
a result of such Benefit Plan's ownership of Class A Certificates.
The Exemption sets forth the following six general conditions which
must be satisfied for a transaction to be eligible for exemptive relief
thereunder:
(1) The acquisition of the certificates by a Benefit Plan is on terms
(including the price for the certificates) that are at least as favorable to the
Benefit Plan as they would be in an arm's length transaction with an unrelated
party;
(2) The rights and interests evidenced by the certificates acquired by
the Benefit Plan are not subordinated to the rights and interests evidenced by
other certificates of the trust;
(3) The certificates acquired by the Benefit Plan have received a
rating at the time of such acquisition that is one of the three highest general
rating categories from either S&P, Moody's, Duff & Phelps Rating Co. ("D&P") or
Fitch Investors Service, Inc. ("Fitch");
(4) The Trustee is not an affiliate of any other member of the
Restricted Group;
(5) The sum of all payments made to and retained by First Boston in
connection with the distribution of Class A Certificates represents not more
than reasonable compensation for its services. The sum of all payments made and
retained by AmeriCredit pursuant to the assignment of the Receivables to the
Trust represents not more than the fair market value of such Receivables. The
sum of all payments made to and retained by the Servicer represents not more
than reasonable compensation for such person's services under the Pooling and
Servicing Agreement and reimbursement of such person's reasonable expenses in
connection therewith; and
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<PAGE> 46
(6) The Benefit Plan investing in the certificates is an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D of the Securities and
Exchange Commission under the 1933 Act.
The Trust Estate must also meet the following requirements:
(i) the Receivables must consist solely of assets of the type that
have been included in other investment pools;
(ii) certificates in such other investment pools must have been rated
in one of the three highest rating categories of S&P, Moody's, Fitch or D&P for
at least one year prior to the Benefit Plan's acquisition of certificates; and
(iii) certificates evidencing interest in such other investment pools
must have been purchased by investors other than Benefit Plans for at least one
year prior to the Benefit Plan's acquisition of certificates.
It is a condition of issuance of the Class A Certificates that they be
rated AAA or its equivalent by a nationally recognized rating agency. Before
purchasing a Class A Certificate based on the Exemption, however, a fiduciary of
a Benefit Plan should itself confirm (1) that such Class A Certificate
constitutes a "certificate" for purposes of the Exemption and (2) that the
specific conditions and other requirements set forth in the Exemption would be
satisfied.
Any Benefit Plan fiduciary considering the purchase of a Class A
Certificate should consult with its counsel with respect to the potential
applicability of ERISA and the Code to such investment. Moreover, each Benefit
Plan fiduciary should determine whether, under the general fiduciary standards
of investment prudence and diversification, an investment in the Class A
Certificates is appropriate for the Benefit Plan, taking into account the
overall investment policy of the Benefit Plan and the composition of the Benefit
Plan's investment portfolio.
RATINGS
It is a condition to the issuance of the Class A Certificates that they
be rated in the highest rating category by at least one of the Rating Agencies.
A security rating is not a recommendation to buy, sell or hold securities and
may be subject to revision or withdrawal at any time. The ratings of Rating
Agencies assigned to Class A Certificates addresses the likelihood of the
receipt by the Class A Certificateholders of all distributions to which such
Class A Certificateholders are entitled. The ratings do not address the timely
or ultimate payment of any withholding tax imposed. The ratings assigned to
Class A Certificates do not represent any assessment of the likelihood that
principal prepayments might differ from those originally anticipated or address
the possibility that Class A Certificateholders might suffer a lower than
anticipated yield.
UNDERWRITING
Under the terms and subject to the conditions contained in the
Underwriting Agreement, AmeriCredit and the Seller have agreed to cause the
Trust to sell to CS First Boston Corporation and Prudential Securities
Incorporated (the "Underwriters") and each Underwriter has agreed to purchase
the principal amount of Class A Certificates set forth opposite its name below.
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<TABLE>
<CAPTION>
Underwriters Principal Amount
------------ ----------------
<S> <C>
CS First Boston Corporation $85,941,000
Prudential Securities Incorporated 30,000,000
------------
Total $115,941,000*
============
</TABLE>
AmeriCredit and the Seller have been advised by the Underwriters that
they propose to offer Class A Certificates from time to time for sale in
negotiated transactions or otherwise, at prices determined at the time of sale.
The Underwriters may effect such transactions by selling Class A Certificates to
or through dealers and such dealers may receive compensation in the form of
underwriting discounts, concessions or commissions from the Underwriters and any
purchasers of Class A Certificates for whom they may act as agents. The
Underwriters and any dealers that participate with the Underwriters in the
distribution of the Class A Certificates may be deemed to be underwriters, and
any discounts or commissions received by them and any profit on the resale of
Class A Certificates by them may be deemed to be underwriting discounts or
commissions, under the Securities Act of 1933, as amended.
The Class A Certificates are a new issue of securities with no
established trading market. The Underwriters have advised AmeriCredit and the
Seller that they intend to act as market makers for the Class A Certificates.
However, the Underwriters are not obligated to do so and may discontinue any
market making at any time without notice. No assurance can be given as to the
liquidity of any trading market for the Class A Certificates.
AmeriCredit and the Seller have agreed to indemnify the Underwriters
against certain liabilities, including civil liabilities under the Securities
Act, or contribute to payments which the Underwriters may be required to make in
respect thereof.
LEGAL MATTERS
Certain legal matters will be passed upon for AmeriCredit by Chris A.
Choate, General Counsel, AmeriCredit Corp. Certain legal matters with respect to
the federal income tax matters discussed under "Certain Federal Income Tax
Consequences" herein and certain matters with respect to the validity of the
Certificates will be passed upon for AmeriCredit by Dewey Ballantine, New York,
New York. Dewey Ballantine will also pass upon certain legal matters for the
Underwriters. Certain legal matters relating to the Policy will be passed upon
for the Security Insurer by Bruce E. Stern, General Counsel, Financial Security
Assurance Inc. The Security Insurer is represented by Rogers & Wells, New York,
New York.
EXPERTS
The consolidated balance sheets of the Security Insurer and
Subsidiaries as of December 31, 1995 and 1994 and the related consolidated
statements of income, changes in shareholders' equity and cash flows for each of
the three years in the period ended December 31, 1995, incorporated by reference
herein, have been incorporated herein in reliance on the report of Coopers &
Lybrand L.L.P., independent accountants, given on the authority of that firm as
experts in accounting and auditing.
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INDEX OF DEFINED TERMS
<TABLE>
<S> <C>
Accounting Date.................................................... 11
Aggregate risks.................................................... 28
AmeriCredit........................................................ 1, 4
Amount Available................................................... 30
APR................................................................ 8
Available Funds.................................................... 30
Backup Servicer.................................................... 10
Basic Servicing Fee................................................ 11, 35
Basic Servicing Fee Rate........................................... 11
Benefit Plans...................................................... 44
Business Day....................................................... 5
Cede............................................................... 3, 12, 28
Certificate Owners................................................. 28
Certificates....................................................... 4
Class A Certificate Balance........................................ 5, 30
Class A Certificate Owners......................................... 12
Class A Certificateholders......................................... 5
Class A Certificates............................................... 1, 4
Class A Interest Carryover Shortfall............................... 30
Class A Interest Distributable Amount.............................. 30
Class A Percentage................................................. 4
Class A Principal Carryover Shortfall.............................. 30
Class A Principal Distributable Amount............................. 7, 30
Class B Certificate Balance........................................ 30
Class B Certificates............................................... 4
Class B Coupon Interest Amount..................................... 31
Class B Coupon Interest Carryover Shortfall........................ 31
Class B Excess Interest Amount..................................... 31
Class B Interest Distributable Amount.............................. 31
Class B Percentage................................................. 4
Class B Principal Carryover Shortfall.............................. 31
Class B Principal Distributable Amount............................. 7, 31
Closing Date....................................................... 4
Code............................................................... 41
Collected Funds.................................................... 31
Collection Account................................................. 8, 34
Commission......................................................... 2
Contracts.......................................................... 19
Cram Down Loss..................................................... 31
Cutoff Date........................................................ 1, 5
D&P................................................................ 45
Dealers............................................................ 5
Deficiency Claim Amount............................................ 31
Deficiency Notice.................................................. 32
Determination Date................................................. 32
Distribution Amount................................................ 32
Distribution Date.................................................. 5
DOL................................................................ 44
DTC................................................................ 3, 12, 28
Eligible Investments............................................... 34
ERISA.............................................................. 13
</TABLE>
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<PAGE> 49
<TABLE>
<S> <C>
Exchange Act....................................................... 2
Excluded Plan...................................................... 44
Exemption.......................................................... 44
Final Regulation................................................... 44
Final Scheduled Distribution Date.................................. 5, 7
Financed Vehicles.................................................. 1, 5
Financial Security................................................. 5, 25
Fitch.............................................................. 45
Fund American...................................................... 26
Guaranteed Distributions........................................... 39
Holdings........................................................... 26
Insurance Agreement................................................ 8, 9, 29
IRA................................................................ 44
Issuer............................................................. 4
Liquidated Receivable.............................................. 32
Loan............................................................... 21
Loans.............................................................. 21
Lockbox............................................................ 10, 34
Lockbox Account.................................................... 10, 34
Lockbox Bank....................................................... 10
Monthly Period..................................................... 7
Moody's............................................................ 13
Obligor............................................................ 8
Order.............................................................. 39
Original Class A Certificate Principal Balance..................... 5
Participants....................................................... 28
Pass-Through Rate.................................................. 5
Policy............................................................. 1, 5
Pool Factor........................................................ 32
Pooling and Servicing Agreement.................................... 4
Precomputed Receivables............................................ 25
Purchase Agreement................................................. 33
Purchase Amount.................................................... 32
Purchased Receivable............................................... 6, 32
Rating Agencies.................................................... 13, 15
Receipt............................................................ 40
Receivable Files................................................... 18
Receivables........................................................ 1, 5
Receivables Pool................................................... 4
Receivables Purchase Agreement..................................... 11
Received........................................................... 40
Record Date........................................................ 6
Registration Statement............................................. 2
Restricted Group................................................... 44
S&P................................................................ 13
Security Insurer................................................... 25
Security Insurer Default........................................... 10
Seller............................................................. 1, 4
Service............................................................ 13
Servicer........................................................... 1, 4
Servicer Termination Event......................................... 36
Simple Interest Receivables........................................ 25
Single risks....................................................... 28
</TABLE>
S-49
<PAGE> 50
<TABLE>
<S> <C>
Stripped Coupons................................................... 13
Supplemental Servicing Fee......................................... 11
Tokio Marine....................................................... 26
Trust.............................................................. 1, 4
Trust Property..................................................... 4
Trustee............................................................ 4
U S WEST........................................................... 26
UCC................................................................ 34
Underwriters....................................................... 46
United States person............................................... 43
</TABLE>
S-50
<PAGE> 51
PROSPECTUS
Auto Receivables Backed Securities Issuable in Series
AMERICREDIT FINANCIAL SERVICES, INC.
This Prospectus describes certain Auto Receivables Backed Notes (the
"Notes") and Auto Receivables Backed Certificates (the "Certificates" and,
together with the Notes, the "Securities") that may be sold from time to time in
one or more series, in amounts, at prices and on terms to be determined at the
time of sale and to be set forth in a supplement to this Prospectus (each, a
"Prospectus Supplement"). Each series of Securities may include one or more
classes of Notes and one or more classes of Certificates, which will be issued
either by the Company, a Transferor (as hereinafter defined), or by a trust to
be formed by the Company for the purpose of issuing one or more series of such
Securities (each, a "Trust"). The Company, a Transferor or a Trust, as
appropriate, issuing Securities as described in this Prospectus and the related
Prospectus Supplement shall be referred to herein as the "Issuer."
Each class of Securities of any series will evidence beneficial
ownership in a segregated pool of assets (the "Trust Property") (such
Securities, "Certificates") or will represent indebtedness of the Issuer secured
by the Trust Property (such Securities, "Notes"), as described herein and in the
related Prospectus Supplement. The Trust Property may consist of any combination
of retail installment sales contracts between manufacturers, dealers or certain
other originators and retail purchasers secured by new and used automobiles and
light duty trucks financed thereby, or participation interests therein, together
with all monies received relating thereto (the "Contracts"). The Trust Property
may also include a security interest in the underlying new and used automobiles
and light duty trucks and property relating thereto, together with the proceeds
thereof (the "Vehicles" together with the Contracts, the "Receivables"). If and
to the extent specified in the related Prospectus Supplement, credit enhancement
with respect to the Trust Property or any class of Securities may include any
one or more of the following: a financial guaranty insurance policy (a "Policy")
issued by an insurer specified in the related Prospectus Supplement, a reserve
account, letters of credit, credit or liquidity facilities, third party payments
or other support, cash deposits or other arrangements. In addition to or in lieu
of the foregoing, credit enhancement may be provided by means of subordination,
cross-support among the Receivables or over-collateralization. See "Description
of the Trust Agreements -- Credit and Cash Flow Enhancement." The Receivables in
the Trust Property for a series will have been originated by the Company on or
prior to the date of issuance of the related Securities, as described herein and
in the related Prospectus Supplement. The Receivables included in a Trust Fund
will be serviced by a servicer (the "Servicer") described in the related
Prospectus Supplement.
Each series of Securities may include one or more classes (each, a
"Class"). A series may include one or more Classes of Securities entitled to
principal distributions, with disproportionate, nominal or no interest
distributions, or to interest distributions, with disproportionate, nominal or
no principal distributions. The rights of one or more Classes of Securities of
any series may be senior or subordinate to the rights of one or more of the
other Classes of Securities. A series may include two or more Classes of
Securities which differ as to the timing, order or priority of payment, interest
rate or amount of distributions of principal or interest or both. Information
regarding each Class of Securities of a series, together with certain
characteristics of the related Receivables, will be set forth in the related
Prospectus Supplement. The rate of payment in respect of principal of the
Securities of any Class will depend on the priority of payment of such a Class
and the rate and timing of payments (including prepayments, defaults,
liquidations or repurchases of Receivables) on the related Receivables. A rate
of payment lower or higher than that anticipated may affect the weighted average
life of each Class of Securities in the manner described herein and in the
related Prospectus Supplement. See "Description of the Securities."
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH UNDER "RISK
FACTORS" PAGE 13 HEREIN AND IN THE RELATED PROSPECTUS SUPPLEMENT.
THE NOTES OF A GIVEN SERIES REPRESENT OBLIGATIONS OF THE ISSUER ONLY AND DO NOT
REPRESENT OBLIGATIONS OF THE COMPANY, ANY SERVICER OR ANY OF THEIR RESPECTIVE
AFFILIATES. THE CERTIFICATES OF A GIVEN SERIES REPRESENT BENEFICIAL INTERESTS IN
THE RELATED TRUST ONLY AND DO NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF THE
COMPANY, ANY TRANSFEROR, ANY SERVICER OR ANY OF THEIR RESPECTIVE AFFILIATES.
NEITHER THE SECURITIES NOR THE UNDERLYING RECEIVABLES WILL BE GUARANTEED OR
INSURED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY THE COMPANY, ANY
SERVICER, ANY TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES, EXCEPT AS SET FORTH
IN THE RELATED PROSPECTUS SUPPLEMENT. SEE ALSO "RISK FACTORS" PAGE 13.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Offers of the Securities may be made through one or more different
methods, including offerings through underwriters as more fully described under
"Method of Distribution" herein and in the related Prospectus Supplement. Prior
to issuance, there will have been no market for the Securities of any series,
and there can be no assurance that a secondary market for the Securities will
develop, or if it does develop, it will continue.
Retain this Prospectus for future reference. This Prospectus may not be
used to consummate sales of Securities unless accompanied by a Prospectus
Supplement.
The date of this Prospectus is February 23, 1996.
<PAGE> 52
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to a series of Securities to be
offered hereunder, among other things, will set forth with respect to such
series of Securities: (i) a description of the Class or Classes of such
Securities, (ii) the rate of interest, the "Pass-Through Rate" or "Interest
Rate" or other applicable rate (or the manner of determining such rate) and
authorized denominations of such Class of such Securities; (iii) certain
information concerning the Receivables and insurance polices, cash accounts,
letters of credit, financial guaranty insurance policies, third party guarantees
or other forms of credit enhancement, if any, relating to one or more pools of
Receivables or all or part of the related Securities; (iv) the specified
interest, if any, of each Class of Securities in, and manner and priority of,
the distributions from the Trust Property; (v) information as to the nature and
extent of subordination with respect to such series of Securities, if any; (vi)
the payment date to Securityholders; (vii) information regarding the Servicer(s)
for the related Receivables; (viii) the circumstances, if any, under which the
Trust Property may be subject to early termination; (ix) information regarding
tax considerations; and (x) additional information with respect to the method of
distribution of such Securities.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (together with all amendments and
exhibits thereto, referred to herein as the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Securities offered pursuant to this Prospectus. For further information,
reference is made to the Registration Statement which may be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549; and at the Commission's regional
offices at 500 West Madison, 14th Floor, Chicago, Illinois 60661 and Seven World
Trade Center, 13th Floor, New York, New York 10048. Copies of the Registration
Statement may be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
No person has been authorized to give any information or to make any
representation other than those contained in this Prospectus and any Prospectus
Supplement with respect hereto and, if given or made, such information or
representations must not be relied upon. This Prospectus and any Prospectus
Supplement with respect hereto do not constitute an offer to sell or a
solicitation of an offer to buy any securities other than the Securities offered
hereby and thereby, nor an offer of the Securities to any person in any state or
other jurisdiction in which such offer would be unlawful. The delivery of this
Prospectus at any time does not imply that information herein is correct as of
any time subsequent to its date.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents subsequently filed by the Company with respect to the
Registration Statement, either on its own behalf or on behalf of a Trust,
relating to any series of Securities referred to in the accompanying Prospectus
Supplement, with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), after the
date of this Prospectus and prior to the termination of any offering of the
Securities issued by the Issuer, shall be deemed to be incorporated by reference
in this Prospectus and to be a part of this Prospectus from the date of the
filing of such documents. Any statement contained herein or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein (or in the accompanying Prospectus Supplement) or in
any other subsequently filed document which also is or is deemed to be
incorporated by reference herein, modifies or replaces such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
2
<PAGE> 53
REPORTS TO SECURITYHOLDERS
So long as the Securities are in book-entry form, monthly and annual
reports concerning the Securities and the Trust will be sent by the Trustee to
Cede & Co., as the nominee of DTC and as registered holder of the Securities
pursuant to the related Pooling and Servicing Agreement. DTC will supply such
reports to Securityholders in accordance with its procedures. To the extent
required by the Securities Exchange Act of 1934, as amended, the Trust will
provide financial information to the Securityholders which has been examined and
reported upon, with an opinion expressed by, an independent public accountant;
to the extent not so required, such financial information will be unaudited. The
Company has determined that the financial statements of no entity other than the
Security Insurer are material to the offering made hereby. The Trust will be
formed to own the Receivables, hold and administer the Pre-Funding Account, to
issue the Securities and to acquire the Subsequent Receivables, if available.
The Trust will have no assets or obligations prior to issuance of the Securities
and will engage in no activities other than those described herein. Accordingly,
no financial statements with respect to the Trust are included in the related
Prospectus Supplement. The audited financial statements of the Certificate
Insurer are set forth in Appendix A to the related Prospectus Supplement, and
the unaudited interim financial statements of the Certificate Insurer are set
forth in Appendix B to the related Prospectus Supplement. The Company intends to
discontinue filing periodic reports at the beginning of the company's next
fiscal year, to the extent permitted by Section 15(d) of the Exchange Act.
3
<PAGE> 54
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and by reference to
the information with respect to the Securities of any series contained in the
related Prospectus Supplement to be prepared and delivered in connection with
the offering of such Securities. Certain capitalized terms used in the summary
are defined elsewhere in the Prospectus on the pages indicated in the "Index of
Terms."
Issuer.............................. With respect to each series of Securities,
either the Company, a special-purpose
finance subsidiary of the Company which
may be organized and established by the
Company with respect to the Trust Property
(each such special-purpose finance
subsidiary, a "Transferor") or a trust
(each, a "Trust") to be formed by the
Company. For purposes of this Prospectus,
the term "Company" includes the term
"Transferor". The Company, a Transferor or
a Trust issuing Securities pursuant to
this Prospectus and the related Prospectus
Supplement shall be referred to herein as
the "Issuer" with respect to the related
Securities. See "The Issuers."
Company............................. AmeriCredit Financial Services, Inc.
("AFS" or, the "Company"), a Delaware
corporation. The Receivables will be
either (i) originated by various dealers,
which may or may not be affiliated with
one or more manufacturers of vehicles
("Dealers", and together with such
manufacturers, "Vendors") or (ii) acquired
by the Company from other originators or
owners of Receivables. The Company's
principal executive offices are located at
200 Bailey Avenue, Fort Worth, Texas
76107, and its telephone number is (817)
332-7000. See "The Company and the
Servicer."
Servicer............................ AmeriCredit Financial Services, Inc.
("AFS" or, in its capacity as the
servicer, the "Servicer"). See
"AmeriCredit's Automobile Financing
Program - Servicing and Collections."
Trustee............................. The Trustee for each series of Securities
will be specified in the related
Prospectus Supplement. In addition, a
Trust may separately enter into an
Indenture and may issue Notes pursuant to
such Indenture; in any such case the Trust
and the Indenture will be administered by
separate, independent trustees as required
by the rules and regulations under the
Trust Indenture Act of 1939 and the
Investment Company Act of 1940.
The Securities ..................... Each Class of Securities of any series
will either evidence beneficial ownership
in a segregated pool of assets (the "Trust
Property") (such Securities,
"Certificates") or will represent
indebtedness of the Issuer secured by the
Trust Property (such Securities, "Notes"),
as described herein and in the related
Prospectus Supplement. The Trust Property
may consist of any combination of retail
installment sales contracts between
manufacturers, dealers or certain other
originators and retail purchasers secured
by new and used automobiles and light duty
trucks financed thereby, or participation
interests therein, together with all
monies received relating thereto (the
"Contracts"). The Trust Property also may
include a security interest in the
underlying new and used automobiles and
light duty trucks and property relating
thereto, together with the proceeds
thereof (the "Vehicles" and together with
the Contracts, the "Receivables").
The Trust Property will include
Receivables with respect to which the
related Contract or the related Vehicles
is subject to federal or state
registration or titling requirements. No
Trust Property will include Receivables
with respect to which the underlying
Contracts or Vehicles relate to office
equipment, aircraft, ships or boats,
firearms or other weapons, railroad
rolling stock or facilities such as
factories, warehouses or plants subject to
state laws governing the manner in which
title or security interest in real
property is determined or perfected.
4
<PAGE> 55
If and to the extent specified in the
related Prospectus Supplement, credit
enhancement with respect to the Trust
Property or any class of Securities may
include any one or more of the following:
a financial guaranty insurance policy (a
"Policy") issued by an insurer specified
in the related Prospectus Supplement, a
reserve account, letters of credit, credit
or liquidity facilities, third party
payments or other support, cash deposits
or other arrangements. In addition to or
in lieu of the foregoing, credit
enhancement may be provided by means of
subordination, cross-support among the
Receivables or over- collateralization.
The Company will originate Receivables or
acquire Receivables from one or more
originators on or prior to the date of
issuance of the related Securities, as
described herein and in the related
Prospectus Supplement.
With respect to Securities issued by a
Trust, each Trust will be established
pursuant to an agreement (each, a "Pooling
Agreement") by and between the Company and
the Trustee named therein. Each Pooling
Agreement will describe the related pool
of Receivables held by the Trust.
With respect to Securities that represent
debt issued by the Issuer, the Issuer will
enter into an indenture (each, an
"Indenture") by and between the Issuer and
the trustee named on such Indenture (the
"Indenture Trustee"). Each Indenture will
describe the related pool of Receivables
comprising the Trust Property and securing
the debt issued by the related Issuer.
The Receivables comprising the Trust
Property will be serviced by the Servicer
pursuant to a servicing agreement (each, a
"Servicing Agreement") by and between the
Servicer and the related Issuer.
In the case of the Trust Property of any
class of Securities, the contractual
arrangements relating to the establishment
of a Trust, if any, the servicing of the
related Receivables and the issuance of
the related Securities may be contained in
a single agreement, or in several
agreements which combine certain aspects
of the Pooling Agreement, the Servicing
Agreement and the Indenture described
above (for example, a pooling and
servicing agreement, or a servicing and
collateral management agreement). For
purposes of this Prospectus, the term
"Trust Agreement" as used with respect to
Trust Property means, collectively, and
except as otherwise described in the
related Prospectus Supplement, any and all
agreements relating to the establishment
of a Trust, if any, the servicing of the
related Receivables and the issuance of
the related Securities. The term "Trustee"
means any and all persons acting as a
trustee pursuant to a Trust Agreement.
Securities Will Be Non-Recourse.
The Securities will not be obligations,
either recourse or non-recourse (except
for certain non-recourse debt described
under "Certain Tax Considerations"), of
the Company, the related Servicer or any
person other than the related Issuer. The
Notes of a given series represent
obligations of the Issuer, and the
Certificates of a given series represent
beneficial interests in the related Issuer
only and do not represent interests in or
obligations of the Company, the related
Servicer or any of their respective
affiliates other than the related Issuer.
In the case of Securities that represent
beneficial ownership interest in the
related Issuer, such Securities will
represent the beneficial ownership
interests in such Issuer and the sole
source of payment will be the assets of
such Issuer. In the case of Securities
that represent debt issued by the related
Issuer, such Securities will be secured by
assets in the related Trust Property.
Notwithstanding the foregoing, and as to
be described in the related Prospectus
Supplement, certain types of credit
enhancement, such as a letter of credit,
financial guaranty insurance policy or
reserve fund may
5
<PAGE> 56
constitute a full recourse obligation of
the issuer of such credit enhancement.
General Nature of the Securities as Investments.
All of the Securities offered pursuant to
this Prospectus and the related Prospectus
Supplement will be rated in one of the
four highest rating categories by one or
more Rating Agencies (as defined herein).
Additionally, except to the extent
provided in the related Prospectus
Supplement, all of the Securities offered
pursuant to this Prospectus and the
related Prospectus Supplement will be of
the fixed-income type ("Fixed Income
Securities"). Fixed Income Securities will
generally be styled as debt instruments,
having a principal balance and a specified
interest rate ("Interest Rate"). Fixed
Income Securities may either represent
beneficial ownership interests in the
related Receivables held by the related
Trust or debt secured by certain assets of
the related Issuer.
Each series or Class of Fixed Income
Securities offered pursuant to this
Prospectus may have a different Interest
Rate, which may be a fixed or adjustable
Interest Rate. The related Prospectus
Supplement will specify the Interest Rate
for each series or Class of Fixed Income
Securities described therein, or the
initial Interest Rate and the method for
determining subsequent changes to the
Interest Rate.
A series may include one or more Classes
of Fixed Income Securities ("Strip
Securities") entitled (i) to principal
distributions, with disproportionate,
nominal or no interest distributions, or
(ii) to interest distributions, with
disproportionate, nominal or no principal
distributions. In addition, a series of
Securities may include two or more Classes
of Fixed Income Securities that differ as
to timing, sequential order, priority of
payment, Interest Rate or amount of
distribution of principal or interest or
both, or as to which distributions of
principal or interest or both on any Class
may be made upon the occurrence of
specified events, in accordance with a
schedule or formula, or on the basis of
collections from designated portions of
the related pool of Receivables. Any such
series may include one or more Classes of
Fixed Income Securities ("Accrual
Securities"), as to which certain accrued
interest will not be distributed but
rather will be added to the principal
balance (or nominal balance, in the case
of Accrual Securities which are also Strip
Securities) thereof on each Payment Date,
as hereinafter defined, or in the manner
described in the related Prospectus
Supplement.
If so provided in the related Prospectus
Supplement, a series may include one or
more other Classes of Fixed Income
Securities (collectively, the "Senior
Securities") that are senior to one or
more other Classes of Fixed Income
Securities (collectively, the "Subordinate
Securities") in respect of certain
distributions of principal and interest
and allocations of losses on Receivables.
In addition, certain Classes of Senior (or
Subordinate) Securities may be senior to
other Classes of Senior (or Subordinate)
Securities in respect of such
distributions or losses.
General Payment Terms of Securities.
As provided in the related Trust Agreement
and as described in the related Prospectus
Supplement, the holders of the Securities
("Securityholders") will be entitled to
receive payments on their Securities on
specified dates (each, a "Payment Date").
Payment Dates with respect to Fixed Income
Securities will occur monthly, quarterly
or semi-annually, as described in the
related Prospectus Supplement.
6
<PAGE> 57
The related Prospectus Supplement will
describe a date (the "Record Date")
preceding such Payment Date, as of which
the Trustee or its paying agent will fix
the identity of the Securityholders for
the purpose of receiving payments on the
next succeeding Payment Date. As described
in the related Prospectus Supplement, the
Payment Date will be a specified day of
each month, commonly the tenth, twelfth,
fifteenth or twenty-fifth day of each
month (or, in the case of quarterly-pay
Securities, the tenth, twelfth, fifteenth
or twenty-fifth day of every third month;
and in the case of semi-annual pay
Securities, the tenth, twelfth, fifteenth
or twenty-fifth day of every sixth month)
and the Record Date will be the close of
business as of the last day of the
calendar month that precedes the calendar
month in which such Payment Date occurs.
Each Trust Agreement will describe a
period (each, a "Remittance Period")
preceding each Payment Date (for example,
in the case of monthly-pay Securities, the
calendar month preceding the month in
which a Payment Date occurs). As more
fully described in the related Prospectus
Supplement, collections received on or
with respect to the related Receivables
constituting Trust Property during a
Remittance Period will be required to be
remitted by the Servicer to the related
Trustee prior to the related Payment Date
and will be used to fund payments to
Securityholders on such Payment Date. As
may be described in the related Prospectus
Supplement, the related Trust Agreement
may provide that all or a portion of the
payments collected on or with respect to
the related Receivables may be applied by
the related Trustee to the acquisition of
additional Receivables during a specified
period (rather than be used to fund
payments of principal to Securityholders
during such period), with the result that
the related Securities will possess an
interest-only period, also commonly
referred to as a revolving period, which
will be followed by an amortization
period. Any such interest only or
revolving period may, upon the occurrence
of certain events to be described in the
related Prospectus Supplement, terminate
prior to the end of the specified period
and result in the earlier than expected
amortization of the related Securities.
In addition, and as may be described in
the related Prospectus Supplement, the
related Trust Agreement may provide that
all or a portion of such collected
payments may be retained by the Trustee
(and held in certain temporary
investments, including Receivables) for a
specified period prior to being used to
fund payments of principal to
Securityholders.
Such retention and temporary investment by
the Trustee of such collected payments may
be required by the related Trust Agreement
for the purpose of (a) slowing the
amortization rate of the related
Securities relative to the installment
payment schedule of the related
Receivables, or (b) attempting to match
the amortization rate of the related
Securities to an amortization schedule
established at the time such Securities
are issued. Any such feature applicable to
any Securities may terminate upon the
occurrence of events to be described in
the related Prospectus Supplement,
resulting in distributions to the
specified Securityholders and an
acceleration of the amortization of such
Securities.
As more fully specified in the related
Prospectus Supplement, neither the
Securities nor the underlying Receivables
will be guaranteed or insured by any
governmental agency or instrumentality or
the Company, the related Servicer, any
Trustee, or any of their affiliates.
No Investment Companies............. Neither the Company nor any Trust will
register as an "investment company" under
the Investment Company Act of 1940, as
amended (the "Investment Company Act").
The Residual Interest............... With respect to each Trust, the "Residual
Interest" at any time represents the
rights to the related Trust Property in
excess of the
7
<PAGE> 58
Securityholders' interest of all series
then outstanding that were issued by such
Trust. The Residual Interest in any Trust
Property will fluctuate as the aggregate
Pool Balance (as hereinafter defined) of
such Trust Fund changes from time to time.
A portion of the Residual Interest in any
Trust may be sold separately in one or
more public or private transactions.
Master Trusts; Issuance of
Additional Series .................. As may be described in the related
Prospectus Supplement, the Company may
cause one or more of the Trusts (such a
Trust, a "Master Trust") to issue
additional series of Securities from time
to time. Under each Trust Agreement
relating to a Master Trust (each, a
"Master Trust Agreement"), the Company may
determine the terms of any such new
series. See "Description of the Securities
-- Master Trusts."
The Company may cause the related Trustee
to offer any such new series to the public
or other investors, in transactions either
registered under the Securities Act or
exempt from registration thereunder,
directly or through one or more
underwriters or placement agents, in
fixed-price offerings or in negotiated
transactions or otherwise.
A new series to be issued by a Master
Trust which has a series outstanding may,
only be issued upon satisfaction of the
conditions described herein under
"Description of the Securities -- Master
Trusts". Securities secured by Receivables
held by a Master Trust shall be entitled
to moneys received relating to such
Receivables on a pari passu basis with
other Securities issued pursuant to the
other Trust Agreements by such Master
Trust.
Cross-Collateralization ............ As described in the related Trust
Agreement and the related Prospectus
Supplement, the source of payment for
Securities of each series will be the
assets of the related Trust Property only.
However, as may be described in the
related Prospectus Supplement, a series or
class of Securities may include the right
to receive moneys from a common pool of
credit enhancement which may be available
for more than one series of Securities,
such as a master reserve account, master
insurance policy or a master collateral
pool consisting of similar Receivables.
Notwithstanding the foregoing, and as
described in the related Prospectus
Supplement, no payment received on any
Receivable held by any Trust may be
applied to the payment of Securities
issued by any other Trust (except to the
limited extent that certain collections in
excess of the amounts needed to pay the
related Securities may be deposited in a
common master reserve account or an
overcollateralization account that
provides credit enhancement for more than
one series of Securities issued pursuant
to the related Trust Agreement).
Trust Property...................... As specified in the related Prospectus
Supplement, the Trust Property will
consist of the related Contracts, and may
include a security interest in the related
Vehicles. If and to the extent specified
in the related Prospectus Supplement,
credit enhancement with respect to Trust
Property or any class of Securities may
include any one or more of the following:
a Policy issued by an insurer specified in
the related Prospectus Supplement, a
reserve account, letters of credit, credit
or liquidity facilities, repurchase
obligations, third party payments or other
support, cash deposits or other
arrangements. In addition to or in lieu of
the foregoing, credit enhancement may be
provided by means of subordination,
cross-support among the Receivables or
over- collateralization. See "Description
of the Trust Agreement -- Credit and Cash
Flow Enhancement." The Contracts are
obligations for the purchase of the
Vehicles, or evidence borrowings used to
acquire the Vehicles. As specified in the
related Prospectus Supplement, the
Contracts may consist of any combination
of Rule of 78s Contracts, Fixed Value
Contracts or Simple Interest Contracts.
Generally, "Rule of 78s Contracts" provide
for fixed level monthly payments which
will
8
<PAGE> 59
amortize the full amount of the Contract
over its term. The Rule of 78s Contracts
provide for allocation of payments
according to the "sum of periodic
balances" or "sum of monthly payments"
method (the "Rule of 78s"). Each Rule of
78s Contract provides for the payment by
the Obligor of a specified total amount of
payments, payable in monthly installments
on the related due date, which total
represents the principal amount financed
and finance charges in an amount
calculated on the basis of a stated annual
percentage rate ("APR") for the term of
such Contract. The rate at which such
amount of finance charges is earned and,
correspondingly, the amount of each fixed
monthly payment allocated to reduction of
the outstanding principal balance of the
related Contract are calculated in
accordance with the Rule of 78s. Under the
Rule of 78s, the portion of each payment
allocable to interest is higher during the
early months of the term of a Contract and
lower during later months than that under
a constant yield method for allocating
payments between interest and principal.
Notwithstanding the foregoing, as
specified in the related Prospectus
Supplement, all payments received by the
related Servicer on or in respect of the
Rule of 78s Contracts may be allocated on
an actuarial or simple interest basis.
Generally, the "Fixed Value Contracts"
provide for monthly payments with a final
fixed value payment which is greater than
the scheduled monthly payments. A Fixed
Value Contract provides for amortization
of the loan over a series of fixed level
payment monthly installments, but also
requires a final fixed value payment due
after payment of such monthly installments
which may be satisfied by (i) payment in
full in cash of such amount, (ii) transfer
of the vehicle to the Company provided
certain conditions are satisfied or (iii)
refinancing the fixed value payment in
accordance with certain conditions. With
respect to Fixed Value Contracts, as
specified in the related Prospectus
Supplement, only the principal and
interest payments due prior to the final
fixed value payment and not the final
fixed value payment may be included
initially in the related Trust Property.
"Simple Interest Contracts" provide for
the amortization of the amount financed
under the receivable over a series of
fixed level monthly payments. However,
unlike the monthly payment under Rule of
78s Contracts, each monthly payment
consists of an installment of interest
which is calculated on the basis of the
outstanding principal balance of the
receivable multiplied by the stated APR
and further multiplied by the period
elapsed (as a fraction of a calendar year)
since the preceding payment of interest
was made. As payments are received under a
Simple Interest Contract, the amount
received is applied first to interest
accrued to the date of payment and the
balance is applied to reduce the unpaid
principal balance. Accordingly, if an
Obligor pays a fixed monthly installment
before its scheduled due date, the portion
of the payment allocable to interest for
the period since the preceding payment was
made will be less than it would have been
had the payment been made as scheduled,
and the portion of the payment applied to
reduce the unpaid principal balance will
be correspondingly greater. Conversely, if
an Obligor pays a fixed monthly
installment after its scheduled due date,
the portion of the payment allocable to
interest for the period since the
preceding payment was made will be greater
than it would have been had the payment
been made as scheduled, and the portion of
the payment applied to reduce the unpaid
principal balance will be correspondingly
less. In either case, the Obligor pays a
fixed monthly installment until the final
scheduled payment date, at which time the
amount of the final installment is
increased or decreased as necessary to
repay the then outstanding principal
balance.
If an Obligor elects to prepay a Rule of
78s Contract in full, it is entitled to a
rebate of the portion of the outstanding
balance then due and payable attributable
to unearned finance charges. If a Simple
Interest Contract is prepaid, rather than
receive a rebate, the Obligor is required
to pay interest only to the date of
prepayment. The
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amount of a rebate under a Rule of 78s
Contract calculated in accordance with the
Rule of 78s will always be less than had
such rebate been calculated on an
actuarial basis and generally will be less
than the remaining scheduled payments of
interest that would be due under a Simple
Interest Contract for which all payments
were made on schedule. Distributions to
Securityholders may not be affected by
Rule of 78s rebates under the Rule of 78s
Contracts because pursuant to the related
Prospectus Supplement such distributions
may be determined using the actuarial or
simple interest method.
The related Prospectus Supplement will
further describe the type and
characteristics of the Contracts included
in the Trust Property relating to the
Securities offered pursuant to this
Prospectus and the related Prospectus
Supplement.
The Receivables comprising the Trust
Property will be originated by the
Company; such Receivables will have
theretofore been either (i) originated by
Vendors and acquired by the Company or
(ii) acquired by the Company from other
originators or owners of Receivables.
The Company will either transfer
Receivables to a Trust pursuant to a
Pooling Agreement or pledge the Company's
right, title and interest in and to such
Receivables to a Trustee on behalf of
Securityholders pursuant to an Indenture.
The obligations of the Company, the
Servicer, the related Trustee and the
related Indenture Trustee, if any, under
the related Trust Agreement include those
specified below and in the related
Prospectus Supplement.
In addition, if so specified in the
related Prospectus Supplement, the Trust
Property will include monies on deposit in
a Pre-Funding Account (the "Pre-Funding
Account") to be established with the
Trustee, which will be used to acquire
Additional Receivables (as hereinafter
defined) from time to time during the
"Pre-Funding Period" specified in the
related Prospectus Supplement. The
Pre-Funding Account, if any, will be
reduced during the related Pre-Funding
Period by the amount thereof used to
purchase Additional Receivables. Any
amount remaining in the Pre-Funding
Account at the end of the related
Pre-Funding Period will be distributed to
the related Securityholders, pro rata, on
the Payment Date immediately following the
end of the Pre-Funding Period.
If and to the extent provided in the
related Prospectus Supplement, the Company
will be obligated (subject only to the
availability thereof) to either transfer
to a Trust or pledge to a Trustee on
behalf of Securityholders, additional
Receivables (the "Additional Receivables")
from time to time during any Pre-Funding
Period specified in the related Prospectus
Supplement.
Registration of Securities.......... Securities may be represented by global
securities registered in the name of Cede
& Co. ("Cede"), as nominee of The
Depository Trust Company ("DTC"), or
another nominee. In such case,
Securityholders will not be entitled to
receive definitive securities representing
such Securityholders' interests, except in
certain circumstances described in the
related Prospectus Supplement. See
"Description of the Securities -- Book
Entry Registration" herein.
Credit and Cash Flow
Enhancement ........................ If and to the extent specified in the
related Prospectus Supplement, credit
enhancement with respect to Trust Property
or any class of Securities may include any
one or more of the following: a Policy
issued by an insurer specified in the
related Prospectus Supplement (a "Security
Insurer"), a reserve account, letters of
credit, credit or liquidity facilities,
third party payments or other support,
cash deposits or other arrangements. Any
form of credit enhancement will have
certain limitations and exclusions from
coverage thereunder, which will be
described in the related Prospectus
Supplement. See "Description of the Trust
Agreement -- Credit and Cash Flow
Enhancement."
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Repurchase Obligations and
the Receivables Acquisition
Agreement........................... As more fully described in the related
Prospectus Supplement, the Company will be
obligated to acquire from the related
Trust Property any Receivable which was
transferred pursuant to a Pooling
Agreement or pledged pursuant to an
Indenture if the interest of the
Securityholders therein is materially
adversely affected by a breach of any
representation or warranty made by the
Company with respect to such Receivable,
which breach has not been cured. In
addition, if so specified in the related
Prospectus Supplement, the Company may
from time to time reacquire certain
Receivables of the Trust Property, subject
to specified conditions set forth in the
related Trust Agreement.
Servicer's Compensation............. The Servicer shall be entitled to receive
a fee for servicing the Trust Property
equal to a specified percentage of the
value of such Trust Property, as set forth
in the related Prospectus Supplement. See
"Description of the Trust Agreements --
Servicing Compensation" herein and in the
related Prospectus Supplement.
Certain Legal Aspects
of the Contracts.................... With respect to the transfer of the
Contracts to the related Trust pursuant to
a Pooling Agreement or the pledge of the
related Issuer's right, title and interest
in and to such Contracts on behalf of
Securityholders pursuant to an Indenture,
the Company will warrant, in each case,
that such transfer is either a valid
transfer and assignment of the Contracts
to the Trust or the grant of a security
interest in the Contracts. Each Prospectus
Supplement will specify what actions will
be taken by which parties as will be
required to perfect either the Issuer's or
the Securityholders' security interest in
the Contracts. The Company may also
warrant that, if the transfer or pledge by
it to the Trust or to the Securityholders
is deemed to be a grant to the Trust or to
the Securityholders of a security interest
in the Contracts, then the related Issuer
or the Securityholders will have a first
priority perfected security interest
therein, except for certain liens which
have priority over previously perfected
security interests by operation of law,
and, with certain exceptions, in the
proceeds thereof. Similar security
interest and priority representations and
warranties, as described in the related
Prospectus Supplement, may also be made by
the Company with respect to the Vehicles.
Perfection of security interests in
automobiles and light duty trucks is
generally governed by the vehicle
registration or titling laws of the state
in which each vehicle is registered or
titled. In most states, a security
interest in a vehicle is perfected by
notation of the secured party's lien on
the vehicle's certificate of title. Each
Prospectus Supplement will specify whether
the Company, the Servicer or the Trustee,
in light of the administrative burden and
expense, will amend any certificate of
title to identify the Company or the
Trustee as the new secured party on the
certificates of title relating to the
Vehicles. See "Certain Legal Aspects of
the Receivables."
Each Prospectus Supplement will specify if
the Company has filed or will be required
to file UCC (as herein defined) financing
statements identifying the Vehicles as
collateral pledged in favor of the related
Trust or Trustee on behalf of the
Securityholders. In the absence of such
filings any security interest in the
Vehicles will not be perfected in favor of
the related Trust or Trustee. See "Certain
Legal Aspects of the Receivables."
Optional Termination................ The Servicer, the Company, or, if
specified in the related Prospectus
Supplement, certain other entities may, at
their respective options, effect early
retirement of a series of Securities under
the circumstances and in the manner set
forth herein under "Description of The
Trust Agreement -- Termination" and in the
related Prospectus Supplement.
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Mandatory Termination............... The Trustee, the Servicer or certain other
entities specified in the related
Prospectus Supplement may be required to
effect early retirement of all or any
portion of a series of Securities by
soliciting competitive bids for the
purchase of the Trust Property or
otherwise, under other circumstances and
in the manner specified in "Description of
The Trust Agreement -- Termination" and in
the related Prospectus Supplement.
Tax Considerations.................. Securities of each series offered hereby
will, for federal income tax purposes,
constitute either (i) interests in a Trust
treated as a grantor trust under
applicable provisions of the Code
("Grantor Trust Securities"), (ii) debt
issued by a Trust or by the Company ("Debt
Securities") or (iii) interests in a Trust
which is treated as a partnership
("Partnership Interests").
The Prospectus Supplement for each series
of Securities will summarize, subject to
the limitations stated therein, federal
income tax considerations relevant to the
purchase, ownership and disposition of
such Securities.
Investors are advised to consult their tax
advisors and to review "Certain Federal
and State Income Tax Consequences" in the
related Prospectus Supplement.
ERISA Considerations................ The Prospectus Supplement for each series
of Securities will summarize, subject to
the limitations discussed therein,
considerations under the Employee
Retirement Income Security Act of 1974, as
amended ("ERISA"), relevant to the
purchase of such Securities by employee
benefit plans and individual retirement
accounts. See "ERISA Considerations" in
the related Prospectus Supplement.
Ratings............................. Each Class of Securities offered pursuant
to this Prospectus and the related
Prospectus Supplement will be rated in one
of the four highest rating categories by
one or more "national statistical rating
organizations", as defined in the
Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and commonly
referred to as "Rating Agencies". Such
ratings will address, in the opinion of
such Rating Agencies, the likelihood that
the Issuer will be able to make timely
payment of all amounts due on the related
Securities in accordance with the terms
thereof. Such ratings will neither address
any prepayment or yield considerations
applicable to any Securities nor
constitute a recommendation to buy, sell
or hold any Securities.
The ratings expected to be received with
respect to any Securities will be set
forth in the related Prospectus
Supplement.
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<PAGE> 63
RISK FACTORS
Prospective Securityholders should consider, among other things, the
following factors in connection with the purchase of the Securities:
Limited Liquidity. There can be no assurance that a secondary market
for the Securities of any series or Class will develop or, if it does develop,
that it will provide Securityholders with liquidity of investment or that it
will continue for the life of such Securities. The Prospectus Supplement for any
series of Securities may indicate that an underwriter specified therein intends
to establish and maintain a secondary market in such Securities; however, no
underwriter will be obligated to do so. The Securities will not be listed on any
securities exchange.
Ownership of Contracts. In connection with the issuance of any series
of Securities, the Company will originate Contracts. The Company will warrant in
a Trust Agreement (i) if the Company retains title to the Contracts, that the
Trustee for the benefit of Securityholders has a valid security interest in such
Contracts, or (ii) if the Company transfers such Contracts to a Trust, that the
transfer of the Contracts to such Trust is either a valid assignment, transfer
and conveyance of the Contracts to the Trust or the Trustee on behalf of the
Securityholders has a valid security interest in such Contracts. As to be
described in the related Prospectus Supplement, the related Trust Agreement will
provide either that the Trustee will be required to maintain possession of the
original copies of all Contracts that constitute chattel paper or that the
Company or the Servicer will retain possession of such Contracts; provided that
in case the Company retains possession of the related Contracts, the Servicer
may take possession of such original copies as necessary for the enforcement of
any Contract. If any Contracts remain in the possession of the Company, the
related Prospectus Supplement may describe specific trigger events that will
require delivery to the Trustee. If the Company, the Servicer, the Trustee or
other third party, while in possession of the Contracts, sells or pledges and
delivers such Contracts to another party, in violation of the Receivables
Acquisition Agreement or the Trust Agreement, there is a risk that such other
party could acquire an interest in such Contracts having a priority over the
Issuer's interest. Furthermore, if the Company, the Servicer or a third party,
while in possession of the Contracts, is rendered insolvent, such event of
insolvency may result in competing claims to ownership or security interests in
the Contracts. Such an attempt, even if unsuccessful, could result in delays in
payments on the Securities. If successful, such attempt could result in losses
to the Securityholders or an acceleration of the repayment of the Securities.
The Company will be obligated to repurchase any Contract originated by the
Company and currently in the related Trust Property if there is a breach of the
Company's representations and warranties that materially and adversely affects
the interests of the Trust in such Contract and such breach has not been cured.
Security Interests. The transfer of the Receivables by the Company to
the Trustee pursuant to the related Pooling Agreement, Indenture or Trust
Agreement, the perfection of the security interests in the Receivables and the
enforcement of rights to realize on the Vehicles as collateral for the
Receivables are subject to a number of federal and state laws, including the UCC
as in effect in various states. As specified in each Prospectus Supplement, the
Servicer will take such action as is required to perfect the rights of the
Trustee in the Receivables. If, through inadvertence or otherwise, a third party
were to purchase (including the taking of a security interest in) a Receivable
for new value in the ordinary course of its business, without actual knowledge
of the Trust's interest, and take possession of a Receivable, the purchaser
would acquire an interest in such Receivable superior to the interest of the
Trust. As further specified in each Prospectus Supplement, no action will be
taken to perfect the rights of the Trustee in proceeds of a VSI Insurance Policy
(as hereinafter defined) or of any other insurance policies covering individual
Vehicles or Obligors. Therefore, the rights of a third party with an interest in
such proceeds could prevail against the rights of the Trust prior to the time
such proceeds are deposited by the Servicer into a Trust Account (as hereinafter
defined). See "Certain Legal Aspects of the Receivables".
Except to the extent specified in the related Prospectus Supplement,
each Contract will include a perfected security interest in the related Vehicle
in favor of the Trustee or the Company (and, if perfected in the name of the
Company, assigned pursuant to the related Pooling Agreement, Indenture or Trust
Agreement to the Trustee for the benefit of the Securityholders). However, to
the extent provided in the
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<PAGE> 64
related Prospectus Supplement, due to the administrative burden and expense, the
certificates of title of the Vehicles securing certain Contracts which reflect
the security interest of the Company in such Vehicles may not be endorsed to
reflect the Trustee's interest therein or delivered to the Trustee. In the
absence of such endorsement and delivery, the Trustee may not have a perfected
security interest in such Vehicles. As a result, a third party buyer of a
Vehicle for value from an Obligor may extinguish the interest of the Trust in
the Vehicle, a subsequent perfected lienholder may obtain a security interest
senior in right to that of the Trust, and a trustee in bankruptcy of the Company
may be able to assert successfully that the Trust did not have a security
interest in the Vehicle. In addition, statutory liens for repairs or unpaid
taxes and other liens arising by operation of law may have priority even over
prior perfected security interests in the name of the Trustee in the Vehicles.
Restrictions on Recoveries. Unless specific limitations are described
on the related Prospectus Supplement with respect to specific Contracts, all
Contracts will provide that the obligations of the Obligors thereunder are
absolute and unconditional, regardless of any defense, set-off or abatement
which the Obligor may have against the Company or any other person or entity
whatsoever. The Company will warrant that no claims or defenses have been
asserted or threatened with respect to the Contracts and that all requirements
of applicable law with respect to the Contracts have been satisfied.
In the event that the Company or the Trustee must rely on repossession
and disposition of Vehicles to recover scheduled payments due on Defaulted
Contracts (as defined in the related Pooling Agreement), the Issuer may not
realize the full amount due on a Contract (or may not realize the full amount on
a timely basis). Other factors that may affect the ability of the Issuer to
realize the full amount due on a Contract include whether amendments to
certificates of title relating to the Vehicles had been filed, whether financing
statements to perfect the security interest in the Vehicles had been filed,
depreciation, obsolescence, damage or loss of any Vehicle, and the application
of Federal and state bankruptcy and insolvency laws. As a result, the
Securityholders may be subject to delays in receiving payments and suffer loss
of their investment in the Securities.
Insolvency and Bankruptcy Matters. The Company will take steps in
structuring the transactions contemplated hereby that are intended to ensure
that the voluntary or involuntary application for relief by the Company under
the United States Bankruptcy Code or similar applicable state laws ("Insolvency
Laws") will not result in the Trust Property becoming property of the estate of
the Company within the meaning of such Insolvency Laws. Such steps will
generally involve the creation by the Company of one or more separate,
limited-purpose subsidiaries (each, a "Finance Subsidiary") pursuant to articles
of incorporation containing certain limitations (including restrictions on the
nature of such Finance Subsidiary's business and a restriction on such Finance
Subsidiary's ability to commence a voluntary case or proceeding under any
Insolvency Law without the prior unanimous affirmative vote of all its
directors). However, there can be no assurance that the activities of any
Finance Subsidiary would not result in a court's concluding that the assets and
liabilities of such Finance Subsidiary should be consolidated with those of the
Company in a proceeding under any Insolvency Law.
With respect to the Trust Property, the Trustee and all Securityholders
will covenant that they will not at any time institute against the Company or
the related Finance Subsidiary any bankruptcy, reorganization or other
proceeding under any federal or state bankruptcy or similar law.
While an originator is the Servicer, cash collections held by such
originator may, subject to certain conditions, be commingled and used for the
benefit of such originator prior to each Payment Date and, in the event of the
bankruptcy of such originator, the Company, a Trust or Trustee may not have a
perfected interest in such collections.
The Company believes that the transfer of the Receivables by the
Company to a Finance Subsidiary should be treated as a valid assignment,
transfer and conveyance of such Receivables. However, in the event of an
insolvency of the Company, a court, among other remedies, could attempt to
recharacterize the transfer of the Receivables by the Company to the Finance
Subsidiary as a borrowing by the Company from the Finance Subsidiary or the
related Securityholders, secured by a pledge of such Receivables. Such an
attempt, even if unsuccessful, could result in delays in payments on the
Securities.
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<PAGE> 65
If such an attempt were successful, a court, among other remedies, could elect
to accelerate payment of the Securities and liquidate the Receivables, with the
Securityholders entitled to the then outstanding principal amount thereof and
interest thereon at the applicable Security Interest Rate to the date of
payment. Thus, the Securityholders could lose the right to future payments of
interest and might incur reinvestment losses. As more fully described in the
related Prospectus Supplement, in the event the related Issuer is rendered
insolvent, the related Trustee for a Trust, in accordance with the Trust
Agreement, will promptly sell, dispose of or otherwise liquidate the related
Receivables in a commercially reasonable manner on commercially reasonable
terms. The proceeds from any such sale, disposition or liquidation of such
Receivables will be treated as collections on such Receivables. If the proceeds
from the liquidation of the Receivables and any amount available from any credit
enhancement, if any, are not sufficient to pay Securities of the related series
in full, the amount of principal returned to such Securityholders will be
reduced and such Securityholders will incur a loss.
Obligors of the Vehicles may be entitled to assert against the Company,
the Issuer, or the Trust, if any, claims and defenses which they have against
the Company with respect to the Receivables. The Company will warrant that no
such claims or defenses have been asserted or threatened with respect to the
Receivables and that all requirements of applicable law with respect to the
Receivables have been satisfied.
Insurance on Vehicles. Each Receivable generally requires the Company
to maintain insurance covering physical damage to the Vehicle in an amount not
less than the unpaid principal balance of such Receivable pursuant to which the
Company is named as a loss payee. Since the Obligors select their own insurers
to provide the requisite coverage, the specific terms and conditions of their
policies vary.
In addition, although each Receivable generally gives the Company the
right to force place insurance coverage in the event the required physical
damage insurance on a Vehicle is not maintained by an Obligor, neither the
Company nor the Servicer is obligated to place such coverage. In the event
insurance coverage is not maintained by Obligors and coverage is not force
placed, then insurance recoveries may be limited in the event of losses or
casualties to Vehicles included in the Trust Property, as a result of which
Securityholders could suffer a loss on their investment.
Delinquencies. There can be no assurance that the historical levels of
delinquencies and losses experienced by the Company on its respective loan and
vehicle portfolio will be indicative of the performance of the Contracts
included in the Trust or that such levels will continue in the future.
Delinquencies and losses could increase significantly for various reasons,
including changes in the federal income tax laws, changes in the local, regional
or national economies or due to other events.
Subordination; Limited Assets. To the extent specified in the related
Prospectus Supplement, distributions of interest and principal on one Class of
Securities of a series may be subordinated in priority of payment to interest
and principal due on other Classes of Securities of a related series. Moreover,
the Trust Property will not have, nor is it permitted or expected to have, any
significant assets or sources of funds other than the related Receivables and,
to the extent provided in the related Prospectus Supplement, the related reserve
account and any other credit enhancement. The Securities represent obligations
solely of the related Trust or debt secured by the related Trust Property, and
will not represent a recourse obligation to other assets of the Company. No
Securities of any series will be insured or guaranteed by the Company, the
Servicer, or the applicable Trustee. Consequently, holders of the Securities of
any series must rely for repayment primarily upon payments on the Receivables
and, if and to the extent available, the reserve account, if any, and any other
credit enhancement, all as specified in the related Prospectus Supplement.
Master Trusts. As may be described in the related Prospectus
Supplement, a Master Trust may issue from time to time more than one series.
While the terms of any additional series will be specified in a supplement to
the related Master Trust Agreement, the provisions of such supplement and,
therefore, the terms of any additional series, will not be subject to prior
review by, or consent of, holders of the Securities of any series previously
issued by such Master Trust. Such terms may include methods for determining
applicable investor percentages and allocating collections, provisions creating
different or
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<PAGE> 66
additional security or credit enhancements and any other provisions which are
made applicable only to such series. The obligation of the related Trustee to
issue any new series is subject to the condition, among others, that such
issuance will not result in any Rating Agency reducing or withdrawing its rating
of the Securities of any outstanding series (any such reduction or withdrawal is
referred to herein as a "Ratings Effect"). There can be no assurance, however,
that the terms of any series might not have an impact on the timing or amount of
payments received by a Securityholder of another series issued by the same
Master Trust. See "Description of the Securities -- Master Trusts."
Book-Entry Registration. Issuance of the Securities in book-entry form
may reduce the liquidity of such Securities in the secondary trading market
since investors may be unwilling to purchase Securities for which they cannot
obtain definitive physical securities representing such Securityholders'
interests, except in certain circumstances described in the related Prospectus
Supplement.
Since transactions in Securities will, in most cases, be able to be
effected only through DTC, direct or indirect participants in DTC's book-entry
system ("Direct Participants" or "Indirect Participants") or certain banks, the
ability of a Securityholder to pledge a Security to persons or entities that do
not participate in the DTC system, or otherwise to take actions in respect to
such Securities, may be limited due to lack of a physical security representing
the Securities.
Securityholders may experience some delay in their receipt of
distributions of interest on and principal of the Securities since distributions
may be required to be forwarded by the Trustee to DTC and, in such case, DTC
will be required to credit such distributions to the accounts of its
Participants which thereafter will be required to credit them to the accounts of
the applicable class of Securityholders either directly or indirectly through
Indirect Participants. See "Description of the Securities -- Book Entry
Registration."
Security Rating. The rating of Securities credit enhanced by a letter
of credit, financial guaranty insurance policy, reserve fund, credit or
liquidity facilities, cash deposits or other forms of credit enhancement
(collectively "Credit Enhancement") will depend primarily on the
creditworthiness of the issuer of such external Credit Enhancement device (a
"Credit Enhancer"). Any reduction in the rating assigned to the claims-paying
ability of the related Credit Enhancer to honor its obligations pursuant to any
such Credit Enhancement below the rating initially given to the Securities would
likely result in a reduction in the rating of the Securities.
Maturity and Prepayment Considerations. Because the rate of payment of
principal on the Securities will depend, among other things, on the rate of
payment on the related Contracts, the rate of payment of principal on the
Securities cannot be predicted. Payments on the Contracts will include scheduled
payments as well as partial and full prepayments (to the extent not replaced
with substitute Contracts), payments upon the liquidation of Defaulted
Contracts, payments upon acquisitions by the Servicer or the Company of
Contracts from the related Trust Property on account of a breach of certain
representations and warranties in the related Trust Agreement, payments upon an
optional acquisition by the Servicer or the Company of Contracts from the
related Trust Property (any such voluntary or involuntary prepayment or other
early payment of a Contract, a "Prepayment"), and residual payments. The rate of
early terminations of Contracts due to Prepayments and defaults may be
influenced by a variety of economic and other factors, including, among others,
obsolescence, then current economic conditions and tax considerations. The risk
of reinvesting distributions of the principal of the Securities will be borne by
the Securityholders. The yield to maturity on Strip Securities or Securities
purchased at premiums or discounts to par will be extremely sensitive to the
rate of Prepayments on the related Receivables. In addition, the yield to
maturity on certain other types of classes of Securities, including Strip
Securities, Accrual Securities or certain other Classes in a series including
more than one Class of Securities, may be relatively more sensitive to the rate
of prepayment of the related Contracts than other Classes of Securities.
The rate of Prepayments of Contracts cannot be predicted and is
influenced by a wide variety of economic, social, and other factors, including
prevailing interest rates, the availability of alternate financing
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<PAGE> 67
and local and regional economic conditions. Therefore, no assurance can be given
as to the level of Prepayments that a Trust will experience.
Securityholders should consider, in the case of Securities purchased at
a discount, the risk that a slower than anticipated rate of Prepayments on the
Receivables could result in an actual yield that is less than the anticipated
yield and, in the case of any Securities purchased at a premium, the risk that a
faster than anticipated rate of Prepayments on the Receivables could result in
an actual yield that is less than the anticipated yield.
Limitations on Interest Payments and Foreclosures. Generally, under the
terms of the Soldiers' and Sailors' Civil Relief Act of 1940, as amended (the
"Relief Act"), or similar state legislation, an Obligor who enters military
service after the origination of the related Receivable (including an Obligor
who is a member of the National Guard or is in reserve status at the time of the
origination of the Receivable and is later called to active duty) may not be
charged interest (including fees and charges) above an annual rate of 6% during
the period of such Obligor's active duty status, unless a court orders otherwise
upon application of the lender. It is possible that such action could have an
effect, for an indeterminate period of time, on the ability of the Servicer to
collect full amounts of interest on certain of the Receivables. In addition, the
Relief Act imposes limitations that would impair the ability of the Servicer to
foreclose on an affected Receivable during the Obligor's period of active duty
status. Thus, in the event that such a Receivable goes into default, there may
be delays and losses occasioned by the inability of the Servicer to realize upon
the Financed Vehicle in a timely fashion.
Financial Condition of AFS. The Company is generally not obligated to
make any payments in respect of the Securities or the Receivables of a specific
Trust. If the Company were to cease acting as Servicer, delays in processing
payments on the Receivables and information in respect thereof could occur and
result in delays in payments to the Securityholders.
In certain circumstances, the Company will be required to acquire
Receivables from the related Trust Property with respect to which such
representations and warranties have been breached. In the event that the Company
is incapable of complying with its reacquire obligations and no other party is
obligated to perform or satisfy such obligations, Securityholders may be subject
to delays in receiving payments and suffer loss of their investment in the
Securities.
The related Prospectus Supplement will set forth certain information
regarding the Company. In addition, the Company is subject to the information
requirements of the Exchange Act and, in accordance therewith, file reports and
other information with the Commission. For further information regarding the
Company reference is made to such reports and other information which are
available as described under "Available Information."
THE TRUST PROPERTY
The Trust Property will include, as specified in the related Prospectus
Supplement, (i) a pool of Receivables, (ii) all moneys (including accrued
interest) due thereunder on or after the applicable Cut-off Date, (iii) such
amounts as from time to time may be held in one or more accounts established and
maintained by the Servicer pursuant to the related Trust Agreement, as described
below and in the related Prospectus Supplement, (iv) the security interests, if
any, in the Vehicles relating to such pool of Receivables, (v) the right to
proceeds from claims on physical damage policies, if any, covering such Vehicles
or the related Obligors, as the case may be, (vi) the proceeds of any
repossessed Vehicles related to such pool of Receivables, (vii) the rights of
the Company under the related Receivables Acquisition Agreement and (viii)
interest earned on certain short-term investments held in such Trust Property,
unless the related Prospectus Supplement specifies that such earnings may be
paid to the Servicer or the Company. The Trust Property will also include, if so
specified in the related Prospectus Supplement, monies on deposit in a
Pre-Funding Account, which will be used by the Trustee to acquire or receive a
security interest in Additional Receivables from time to time during the
Pre-Funding Period specified in the related Prospectus Supplement. See
"Desciption of the Securities -- Forward Commitments; Pre-Funding." In addition,
to the extent specified in the related Prospectus Supplement,
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some combination of Credit Enhancements may be issued to or held by the Trustee
on behalf of the related Trust for the benefit of the holders of one ore more
classes of Securities.
The Receivables comprising the Trust Property will, as specifically
described in the related Prospectus Supplement, be either (i) originated by the
Company, (ii) originated by various manufacturers and acquired by the Company,
(iii) originated by various Dealers and acquired by the Company or (iv) acquired
by the Company from originators or owners of Receivables.
The Trust Property will include Receivables with respect to which the
related Contract or the related Vehicles is subject to federal or state
registration or titling requirements. No Trust Property will include Receivables
with respect to which the underlying Contracts or Vehicles relate to office
equipment, aircraft, ships or boats, firearms or other weapons, railroad rolling
stock or facilities such as factories, warehouses or plants subject to state
laws governing the manner in which title or security interest in real property
is determined or perfected.
The Receivables included in the Trust Property will be selected from
those Receivables held by the Company based on the criteria specified in the
applicable Trust Agreement and described herein or in the related Prospectus
Supplement.
With respect to each series of Securities, on or prior to the Closing
Date on which the Securities are delivered to Securityholders, the Company or a
Finance Subsidiary will form a Trust by either (i) transferring the related
Receivables into a Trust pursuant to a Trust Agreement between the Company or a
Finance Subsidiary and the Trustee or (ii) entering into an Indenture with an
Indenture Trustee, relating to the issuance of such Securities, secured by the
related Receivables.
The Receivables comprising the Trust Property will generally have been
originated by the Company or acquired by the Company from Dealers in accordance
with the Company's specified underwriting criteria. The underwriting criteria
applicable to the Receivables included in any Trust Property will be described
in all material respects in the related Prospectus Supplement.
THE ISSUERS
With respect to each series of Securities, the Company will either
establish a separate Trust that will issue such Securities, or the Company will
form a Finance Subsidiary that will issue such Securities, in each case pursuant
to the related Trust Agreement. For purposes of this Prospectus and the related
Prospectus Supplement, the Finance Subsidiary, if the Finance Subsidiary issues
the related Securities, or the related Trust, if a Trust issues the related
Securities, shall be referred to as the "Issuer" with respect to such
Securities.
Upon the issuance of the Securities of a given series, the proceeds
from such issuance will be used by the Company to originate Receivables. The
Servicer will service the related Receivables pursuant to the applicable
Servicing Agreement, and will be compensated for acting as the Servicer. To
facilitate servicing and to minimize administrative burden and expense, the
Servicer may be appointed custodian for the related Receivables by each Trustee
and the Company, as may be set forth in the related Prospectus Supplement.
If the protection provided to the Securityholders of a given class by
the subordination of another Class of Securities of such series and by the
availability of the funds in the reserve account, if any, or any other Credit
Enhancement for such series is insufficient, the Issuer must rely solely on the
payments from the Obligors on the related Contracts, and the proceeds from the
sale of Vehicles which secure the Defaulted Contracts. In such event, certain
factors may affect such Issuer's ability to realize on the collateral securing
such Contracts, and thus may reduce the proceeds to be distributed to the
Securityholders of such series.
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THE RECEIVABLES
RECEIVABLES POOLS
Information with respect to the Receivables in the related Trust
Property will be set forth in the related Prospectus Supplement, including, to
the extent appropriate, the composition of such Receivables and the distribution
of such Receivables by geographic concentration, payment frequency and current
principal balance as of the applicable Cut-off Date.
THE CONTRACTS
As specified in the related Prospectus Supplement, the Contracts may
consist of any combination of Rule of 78s Contracts, Fixed Value Contracts or
Simple Interest Contracts. Generally, "Rule of 78s Contracts" provide for fixed
level monthly payments which will amortize the full amount of the Contract over
its term. The Rule of 78s Contracts provide for allocation of payments according
to the "sum of periodic balances" or "sum of monthly payments" method (the "Rule
of 78s"). Each Rule of 78s Contract provides for the payment by the Obligor of a
specified total amount of payments, payable in monthly installments on the
related due date, which total represents the principal amount financed and
finance charges in an amount calculated on the basis of a stated annual
percentage rate ("APR") for the term of such Contract. The rate at which such
amount of finance charges is earned and, correspondingly, the amount of each
fixed monthly payment allocated to reduction of the outstanding principal
balance of the related Contract are calculated in accordance with the Rule of
78s. Under the Rule of 78s, the portion of each payment allocable to interest is
higher during the early months of the term of a Contract and lower during later
months than that under a constant yield method for allocating payments between
interest and principal. Notwithstanding the foregoing, as specified in the
related Prospectus Supplement, all payments received by the Servicer on or in
respect of the Rule of 78s Contracts may be allocated on an actuarial or simple
interest basis.
Generally, the "Fixed Value Contracts" provide for monthly payments
with a final fixed value payment which is greater than the scheduled monthly
payments. A Fixed Value Contract provides for amortization of the loan over a
series of fixed level payment monthly installments, but also requires a final
fixed value payment due after payment of such monthly installments which may be
satisfied by (i) payment in full in cash of such amount, (ii) transfer of the
vehicle to the Company, provided certain conditions are satisfied or (iii)
refinancing the fixed value payment in accordance with certain conditions. With
respect to Fixed Value Contracts, as specified in the related Prospectus
Supplement, only the principal and interest payments due prior to the final
fixed value payment and not the final fixed value payment may be included
initially in the related Trust Property.
"Simple Interest Contracts" provide for the amortization of the amount
financed under the receivable over a series of fixed level monthly payments.
However, unlike the monthly payment under Rule of 78s Contracts, each monthly
payment consists of an installment of interest which is calculated on the basis
of the outstanding principal balance of the receivable multiplied by the stated
APR and further multiplied by the period elapsed (as a fraction of a calendar
year) since the preceding payment of interest was made. As payments are received
under a Simple Interest Contract, the amount received is applied first to
interest accrued to the date of payment and the balance is applied to reduce the
unpaid principal balance. Accordingly, if an Obligor pays a fixed monthly
installment before its scheduled due date, the portion of the payment allocable
to interest for the period since the preceding payment was made will be less
than it would have been had the payment been made as scheduled, and the portion
of the payment applied to reduce the unpaid principal balance will be
correspondingly greater. Conversely, if an Obligor pays a fixed monthly
installment after its scheduled due date, the portion of the payment allocable
to interest for the period since the preceding payment was made will be greater
than it would have been had the payment been made as scheduled, and the portion
of the payment applied to reduce the unpaid principal balance will be
correspondingly less. In either case, the Obligor pays a fixed monthly
installment until the final scheduled payment date, at which time the amount of
the final installment is increased or decreased as necessary to repay the then
outstanding principal balance.
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If an Obligor elects to prepay a Rule of 78s Contract in full, it is
entitled to a rebate of the portion of the outstanding balance then due and
payable attributable to unearned finance charges. If a Simple Interest Contract
is prepaid, rather than receive a rebate, the Obligor is required to pay
interest only to the date of prepayment. The amount of a rebate under a Rule of
78s Contract calculated in accordance with the Rule of 78s will always be less
than had such rebate been calculated on an actuarial basis and generally will be
less than the remaining scheduled payments of interest that would be due under a
Simple Interest Contract for which all payments were made on schedule.
Distributions to Security holders may not be affected by Rule of 78s rebates
under the Rule of 78s Contract because pursuant to the related Prospectus
Supplement such distributions may be determined using the actuarial or simple
interest method.
DELINQUENCIES, REPOSSESSIONS, AND NET LOSSES
Certain information relating to the Company's delinquency, repossession
and net loss experience with respect to Contracts it has originated or acquired
will be set forth in each Prospectus Supplement. This information may include,
among other things, the experience with respect to all Contracts in the
Company's portfolio during certain specified periods. There can be no assurance
that the delinquency, repossession and net loss experience on any Trust Property
will be comparable to the Company's prior experience.
MATURITY AND PREPAYMENT CONSIDERATIONS
As more fully described in the related Prospectus Supplement, if a
Contract permits a Prepayment, such payment, together with accelerated payments
resulting from defaults, will shorten the weighted average life of the related
pool of Receivables and the weighted average life of the related Securities. The
rate of Prepayments on the Receivables may be influenced by a variety of
economic, financial and other factors. In addition, under certain circumstances,
the Company will be obligated to acquire Receivables from the related Trust
Property pursuant to the applicable Trust Agreement or Receivables Acquisition
Agreement as a result of breaches of representations and warranties. Any
reinvestment risks resulting from a faster or slower amortization of the related
Securities which results from Prepayments will be borne entirely by the related
Securityholders.
The related Prospectus Supplement will set forth certain additional
information with respect to the maturity and prepayment considerations
applicable to a particular pool of Receivables and the related series of
Securities, together with a description of any applicable prepayment penalties.
AMERICREDIT'S AUTOMOBILE FINANCING PROGRAM
GENERAL
Through its branch offices and marketing representatives, AFS serves as
a funding source for franchised and independent automobile dealers to finance
their customers' purchase of new and used automobiles and light duty trucks.
Retail installment sale contracts ("Contracts") originated by Dealers which
conform to AFS's credit policies are purchased by AFS generally without recourse
to Dealers. AFS also services the Contracts that it purchases.
AFS's indirect lending programs are designed to serve consumers who
have limited access to traditional auto financing. The typical borrower may have
had previous financial difficulties, but is now attempting to re-establish
credit, or may not yet have sufficient credit history. Because AFS serves
consumers who are unable to meet the credit standards imposed by most
traditional auto financing sources, AFS generally charges interest at rates
which are higher than those charged by traditional auto financing sources. AFS
also expects to sustain a higher level of delinquencies and credit losses than
that experienced by traditional auto financing sources since AFS provides
financing in a relatively high risk market.
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AFS has established relationships with a variety of Dealers located in
the markets in which AFS has branch offices or marketing representatives. While
AFS occasionally finances purchases of new autos, substantially all of AFS's
Contracts were originated in connection with Obligor's purchases of used autos.
Contracts are generally purchased by AFS without recourse to the
Dealer, and accordingly, the Dealer usually has no liability to AFS if the
consumer defaults on the Contract. To mitigate AFS's risk from potential credit
losses, AFS charges the Dealers an acquisition fee when purchasing Contracts.
Such acquisition fees are negotiated with Dealers on a contract-by-contract
basis and are usually non-refundable. Although Contracts are purchased without
recourse to Dealers, Dealers typically make certain representations as to the
validity of the contract and compliance with certain laws, and indemnify AFS
against any claims, defenses and set-offs that may be asserted against AFS
because of assignment of the Contract.
CONTRACT ACQUISITION
AFS purchases individual Contracts through its branch offices and
through its central purchasing office, which underwrites applications solicited
by certain marketing representatives. The central purchasing office operates in
a manner similar to the branch office network.
All credit extensions are executed at the branch level. Each branch
manager has a specific credit authority based upon their experience and
historical loan portfolio results and credit scoring parameters. Extensions of
credit outside these limits are reviewed and approved by a regional vice
president. Although the credit approval process is decentralized, all credit
decisions are guided by AFS's credit scoring strategies and overall credit and
underwriting policies and procedures.
The Company has implemented a credit scoring system across its branch
network to support the branch level credit approval process. The credit scoring
system was developed by Fair Isaac & Co., Inc. from the Company's loan
origination and portfolio databases. Credit scoring is used to prioritize
applications for processing and to tailor pricing and structure to an empirical
assessment of credit risk.
Loan application packages completed by prospective Obligors are
received via facsimile at the branch offices from Dealers. Application data is
entered into AFS's automated application processing system. A credit bureau
report is automatically generated and a credit score is computed. Depending on
the credit quality of the applicant, a customer service representative may then
investigate the residence, employment and credit history of the applicant or
forward the application directly to the branch manager. In either case, the
Company's credit policy requires that all applications be investigated prior to
loan funding. The branch manager reviews the application package and determines
whether to approve the application, approve the application subject to
conditions that must be met, or to deny the application. The branch manager
considers many factors in arriving at a credit decision, including the
applicant's credit score, capacity to pay, stability, character and intent to
pay and the contract terms and collateral value. In certain cases, a regional
vice president may review and approve the branch manager's credit decision. AFS
estimates that approximately 50% of applicants are denied credit by AFS
typically because of their credit histories or because their income levels are
not sufficient to support the proposed level of monthly auto payments. Dealers
are contacted regarding credit decisions by facsimile and/or telephone. Declined
applicants are also provided with appropriate notification of the decision.
Completed loan packages are received from Dealers at the branch office.
Loan terms are reverified with the Obligor by branch personnel and the loan
packages are forwarded to the centralized loan services department where the
package is scanned to create an electronic copy. Key original documents are
stored in a fire-proof vault and the loan packages are further processed in an
electronic environment. The loans are reviewed for proper documentation and
regulatory compliance and are entered into the loan accounting system. A daily
report is generated for final review by consumer finance operations management.
Once cleared for funding by consumer finance operations management, the
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loan services department issues a funding check to the Dealer. Upon funding of
the Contract, AFS acquires a perfected security interest in the Vehicle.
AFS requires all consumers to obtain or provide evidence that they
carry current comprehensive and collision insurance. Through a third party
administrator, AFS tracks the insurance status of each Contract and sends
notices to Obligors when collateral becomes uninsured. If no action is taken by
the Obligor to insure the collateral, continuing efforts are made to persuade
the Obligor to comply with the insurance requirements of the Contract. Although
it has the right, AFS rarely repossesses a Vehicle due to its being uninsured.
AFS also does not typically force place insurance coverage and add the premium
to the Obligor's obligations, although it has the right to do so under the terms
of the Contracts.
SERVICING AND COLLECTIONS
AFS's servicing activities consist of collecting and processing Obligor
payments, responding to Obligor inquiries, initiating contact with Obligors who
are delinquent in payment of a Receivable installment, maintaining the security
interest in the Vehicle, and repossessing and liquidating collateral when
necessary. AFS utilizes various automated systems to support its servicing and
collections activities.
Approximately 15 days before an Obligor's first payment due date and
each month thereafter, AFS mails the Obligor a billing statement directing them
to mail payments to a lockbox banking facility for deposit in a lockbox account.
Payment receipt data is electronically transferred to AFS by a lockbox banking
facility for posting to AFS records. All subsequent payment processing and
customer account maintenance is performed centrally by AFS's loan services
department.
Collection activity on Contracts is performed by collection personnel
("Collectors") at AFS's headquarters facility. The Collectors follow
standardized collection policies and procedures. Collectors monitor the
Receivables portfolio through a computer assisted collection system and usually
take action on delinquencies within a few days after delinquency occurs.
A Collector's action is typically telephone contact with the Obligor
utilizing AFS's automated predictive dialing system. This system dials multiple
telephone numbers simultaneously based upon parameters set by management. When a
telephone connection is made, the call is routed to a collector and the
delinquent Obligor's account information is displayed on a Collector's computer
terminal. The Collector then attempts to work out the delinquency with the
Obligor.
If an Obligor continues to be delinquent, AFS's policy is to work out
suitable payment arrangements with the Obligor. However, if the Obligor becomes
seriously delinquent or deals in bad faith with AFS, AFS may ultimately have to
repossess the Vehicle and generally will take prompt action to do so.
Repossessions are handled by independent repossession firms engaged by AFS. All
repossessions are approved by collection officers.
AFS follows prescribed legal procedures for repossessions, which
include peaceful repossession, one or more notifications to Obligors, a
prescribed waiting period prior to disposition of the Vehicle, and return of
personal items to the Obligor.
Upon repossession and after any prescribed waiting period, the Vehicle
is typically sold at auction. AFS will pursue collection of deficiencies when it
deems such action to be appropriate.
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POOL FACTORS
The "Pool Factor" for each Class of Securities will be a seven-digit
decimal, which the Servicer will compute prior to each distribution with respect
to such Class of Securities, indicating the remaining outstanding principal
balance of such Class of Securities as of the applicable Payment Date, as a
fraction of the initial outstanding principal balance of such Class of
Securities. Each Pool Factor will be initially 1.0000000, and thereafter will
decline to reflect reductions in the outstanding principal balance of the
applicable Class of Securities. A Securityholder's portion of the aggregate
outstanding principal balance of the related Class of Securities is the product
of (i) the original aggregate purchase price of such Securityholder's Securities
and (ii) the applicable Pool Factor.
As more specifically described in the related Prospectus Supplement
with respect to each series of Securities, the related Securityholders of record
will receive reports on or about each Payment Date concerning the payments
received on the Receivables, the Pool Balance (as such term is defined in the
related Prospectus Supplement, the "Pool Balance"), each Pool Factor and various
other items of information. In addition, Securityholders of record during any
calendar year will be furnished information for tax reporting purposes not later
than the latest date permitted by law.
USE OF PROCEEDS
Except as provided in the related Prospectus Supplement, the proceeds
from the sale of the Securities of a given series will be used by the Company
for the acquisition of the related Receivables, for general corporate purposes,
including, but not limited to, the purchase of additional Receivables from
Dealers, repayment of indebtedness and general working capital purposes. The
Company expects that it will make additional transfers of Receivables to the
Trust from time to time, but the timing and amount of any such additional
transfers will be dependent upon a number of factors, including the volume of
Contracts originated or acquired by the Company, prevailing interest rates,
availability of funds and general market conditions.
THE COMPANY AND THE SERVICER
AFS is a wholly-owned subsidiary of AmeriCredit Corp. AFS was
incorporated in Delaware on July 22, 1992. AFS purchases and services automobile
loans which are originated and assigned to AFS by automobile dealers. AFS is the
primary operating subsidiary of AmeriCredit Corp., a Texas corporation the
common shares of which are listed on the New York Stock Exchange. AFS's
executive offices are located at 200 Bailey Avenue, Fort Worth, Texas
76107-1220; telephone (817) 332-7000.
THE TRUSTEE
The Trustee for each series of Securities will be specified in the
related Prospectus Supplement. The Trustee's liability in connection with the
issuance and sale of the related Securities is limited solely to the express
obligations of such Trustee set forth in the related Trust Agreement.
With respect to each series of Securities, the procedures for the
resignation or removal of the Trustee and the appointment of a successor Trustee
shall be specified in the related Prospectus Supplement.
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DESCRIPTION OF THE SECURITIES
GENERAL
The Securities will be issued in series. Each series of Securities (or,
in certain instances, two or more series of Securities) will be issued pursuant
to a Trust Agreement. The following summaries (together with additional
summaries under "The Trust Agreement" below) describe all material terms and
provisions relating to the Securities common to each Trust Agreement. The
summaries do not purport to be complete and are subject to, and are qualified in
their entirety by reference to, all of the provisions of the Trust Agreement for
the related Securities and the related Prospectus Supplement.
All of the Securities offered pursuant to this Prospectus and the
related Prospectus Supplement will be rated in one of the four highest rating
categories by one or more Rating Agencies.
The Securities will generally be styled as debt instruments, having a
principal balance and a specified Interest Rate. The Securities may either
represent beneficial ownership interests in the related Receivables held by the
related Trust or debt secured by certain assets of the related Issuer.
Each series or Class of Securities offered pursuant to this Prospectus
may have a different Interest Rate, which may be a fixed or adjustable interest
rate. The related Prospectus Supplement will specify the Interest Rate for each
series or Class of Securities described therein, or the initial interest rate
and the method for determining subsequent changes to the Interest Rate.
A series may include one or more Classes of Strip Securities entitled
(i) to principal distributions, with disproportionate, nominal or no interest
distributions, or (ii) to interest distributions, with disproportionate, nominal
or no principal distributions. In addition, a series of Securities may include
two or more Classes of Securities that differ as to timing, sequential order,
priority of payment, Interest Rate or amount of distribution of principal or
interest or both, or as to which distributions of principal or interest or both
on any Class may be made upon the occurrence of specified events, in accordance
with a schedule or formula, or on the basis of collections from designated
portions of the related pool of Receivables. Any such series may include one or
more Classes of Accrual Securities, as to which certain accrued interest will
not be distributed but rather will be added to the principal balance (or nominal
balance, in the case of Accrual Securities which are also Strip Securities)
thereof on each Payment Date, as hereinafter defined, or in the manner described
in the related Prospectus Supplement.
If so provided in the related Prospectus Supplement, a series may
include one or more other Classes of Senior Securities that are senior to one or
more other Classes of Subordinate Securities in respect of certain distributions
of principal and interest and allocations of losses on Receivables.
In addition, certain Classes of Senior (or Subordinate) Securities may
be senior to other Classes of Senior (or Subordinate) Securities in respect of
such distributions or losses.
GENERAL PAYMENT TERMS OF SECURITIES
As provided in the related Trust Agreement and as described in the
related Prospectus Supplement, Securityholders will be entitled to receive
payments on their Securities on the specified Payment Dates. Payment Dates with
respect to the Securities will occur monthly, quarterly or semi-- annually, as
described in the related Prospectus Supplement.
The related Prospectus Supplement will describe the Record Date
preceding such Payment Date, as of which the Trustee or its paying agent will
fix the identity of the Securityholders for the purpose of receiving payments on
the next succeeding Payment Date. As more fully described in the related
Prospectus Supplement, the Payment Date may be the tenth, twelfth, fifteenth or
twenty-fifth day of each month (or, in the case of quarterly-pay Securities, the
tenth, twelfth, fifteenth or twenty-fifth day of every third month; and in the
case of semi-annual pay Securities, the tenth, twelfth, fifteenth or
twenty-fifth day
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of every sixth month) and the Record Date will be the close of business as of
the last day of the calendar month that precedes the calendar month in which
such Payment Date occurs.
Each Trust Agreement will describe a Remittance Period preceding each
Payment Date (for example, in the case of monthly-pay Securities, the calendar
month preceding the month in which a Payment Date occurs). As more fully
provided in the related Prospectus Supplement, collections received on or with
respect to the related Receivables held by a Trust during a Remittance Period
will be required to be remitted by the Servicer to the related Trustee prior to
the related Payment Date and will be used to fund payments to Securityholders on
such Payment Date. As may be described in the related Prospectus Supplement, the
related Trust Agreement may provide that all or a portion of the payments
collected on or with respect to the related Receivables may be applied by the
related Trustee to the acquisition of additional Receivables during a specified
period (rather than be used to fund payments of principal to Securityholders
during such period) with the result that the related Securities will possess an
interest-only period, also commonly referred to as a revolving period, which
will be followed by an amortization period. Any such interest only or revolving
period may, upon the occurrence of certain events to be described in the related
Prospectus Supplement, terminate prior to the end of the specified period and
result in the earlier than expected amortization of the related Securities.
In addition, and as may be described in the related Prospectus
Supplement, the related Trust Agreement may provide that all or a portion of
such collected payments may be retained by the Trustee (and held in certain
temporary investments, including Receivables) for a specified period prior to
being used to fund payments of principal to Securityholders.
Such retention and temporary investment by the Trustee of such
collected payments may be required by the related Trust Agreement for the
purposes of (a) slowing the amortization rate of the related Securities relative
to the installment payment schedule of the related Receivables, or (b)
attempting to match the amortization rate of the related Securities to an
amortization schedule established at the time such Securities are issued. Any
such feature applicable to any Securities may terminate upon the occurrence of
events to be described in the related Prospectus Supplement, resulting in
distributions to the specified Securityholders and an acceleration of the
amortization of such Securities.
Neither the Securities nor the underlying Receivables will be
guaranteed or insured by any governmental agency or instrumentality or the
Company, the Servicer, any Trustee or any of their respective affiliates unless
specifically set forth in the related Prospectus Supplement.
As may be described in the related Prospectus Supplement, Securities of
each series covered by a particular Trust Agreement will either evidence
specified beneficial ownership interests in the Trust Property or represent debt
secured by the related Trust Property. To the extent that any Trust Property
includes certificates of interest or participations in Receivables, the related
Prospectus Supplement will describe the material terms and conditions of such
certificates or participations.
MASTER TRUSTS
As may be described in the related Prospectus Supplement, each Trust
Agreement may provide that, pursuant to any one or more supplements thereto, the
Company may direct the related Trustee to issue from time to time new series
subject to the conditions described below (each such issuance a "Master Trust
New Issuance"). Each Master Trust New Issuance will have the effect of
decreasing the Residual Interest in the related Master Trust. Under each such
Master Trust Agreement, the Company may designate, with respect to any newly
issued series: (i) its name or designation; (ii) its initial principal amount
(or method for calculating such amount); (iii) its Interest Rate (or formula for
the determination thereof); (iv) the Payment Dates and the date or dates from
which interest shall accrue; (v) the method for allocating collections to
Securityholders of such series; (vi) any bank accounts to be used by such series
and the terms governing the operation of any such bank accounts; (vii) the
percentage used to calculate monthly servicing fees; (viii) the provider and
terms of any form of Credit Enhancement with respect thereto; (ix) the terms on
which the Securities of such series may be repurchased or remarketed to other
investors; (x) the number of Classes of Securities of such series, and if such
series consists of
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more than one Class, the rights and priorities of each such Class; (xi) the
extent to which the Securities of such series will be issuable in book-entry
form; (xii) the priority of such series with respect to any other series; and
(xiii) any other relevant terms. None of the Company, the Servicer, the related
Trustee or any Master Trust is required or intends to obtain the consent of any
Securityholder of any outstanding series to issue any additional series.
Each Master Trust Agreement provides that the Company may designate
terms such that each Master Trust New Issuance has an amortization period which
may have a different length and begin on a different date than such periods for
any series previously issued by the related Master Trust and then outstanding.
Moreover, each Master Trust New Issuance may have the benefits of Credit
Enhancements issued by enhancement providers different from the providers of the
Credit Enhancement, if any, with respect to any series previously issued by the
related Master Trust and then outstanding. Under each Master Trust Agreement,
the related Trustee shall hold any such Credit Enhancement only on behalf of the
Securityholders to which such Credit Enhancement relates. The Company will have
the option under each Master Trust Agreement to vary among series the terms upon
which a series may be repurchased by the Issuer or remarketed to other
investors. As more fully described in a related Prospectus Supplement, there is
no limit to the number of Master Trust New Issuances that the Company may cause
under a Master Trust Agreement. Each Master Trust will terminate only as
provided in the related Master Trust Agreement. There can be no assurance that
the terms of any Master Trust New Issuance might not have an impact on the
timing and amount of payments received by Securityholders of another series
issued by the same Master Trust.
Under each Master Trust Agreement and pursuant to a related supplement,
a Master Trust New Issuance may only occur upon the satisfaction of certain
conditions provided in each such Master Trust Agreement. The obligation of the
related Trustee to authenticate the Securities of any such Master Trust New
Issuance and to execute and deliver the supplement to the related Master Trust
Agreement is subject to the satisfaction of the following conditions: (a) on or
before the date upon which the Master Trust New Issuance is to occur, the
Company shall have given the related Trustee, the Servicer, the Rating Agency
and certain related providers of Credit Enhancement, if any, written notice of
such Master Trust New Issuance and the date upon which the Master Trust New
Issuance is to occur; (b) the Company shall have delivered to the related
Trustee a supplement to the related Master Trust Agreement, in form satisfactory
to such Trustee, executed by each party to the related Master Trust Agreement
other than such Trustee; (c) the Company shall have delivered to the related
Trustee any related Credit Enhancement agreement; (d) the related Trustee shall
have received confirmation from the Rating Agency that such Master Trust New
Issuance will not result in any Rating Agency reducing or withdrawing its rating
with respect to any other series or Class of such Trust (any such reduction or
withdrawal is referred to herein as a "Ratings Effect"); (e) the Company shall
have delivered to the related Trustee, the Rating Agency and certain providers
of Credit Enhancement, if any, an opinion of counsel acceptable to the related
Trustee that for federal income tax purposes (i) following such Master Trust New
Issuance the related Master Trust will not be deemed to be an association (or
publicly traded partnership) taxable as a corporation, (ii) such Master Trust
New Issuance will not affect the tax characterization as debt of Securities of
any outstanding series or Class issued by such Master Trust that were
characterized as debt at the time of their issuance and (iii) such Master Trust
New Issuance will not cause or constitute an event in which gain or loss would
be recognized by any Securityholders or the related Master Trust; and (f) any
other conditions specified in any supplement. Upon satisfaction of the above
conditions, the related Trustee shall execute the supplement to the related
Master Trust Agreement and issue the Securities of such new series.
INDEXED SECURITIES
To the extent so specified in any Prospectus Supplement, any class of Securities
of a given series may consist of Securities ("Indexed Securities") in which the
principal amount payable at the final scheduled Payment Date (the "Indexed
Principal Amount") is determined by reference to a measure (the "Index") which
will be related to (i) the difference in the rate of exchange between United
States dollars and a currency or composite currency (the "Indexed Currency")
specified in the applicable Prospectus Supplement (such Indexed Securities,
"Currency Indexed Securities"); (ii) the difference in the price of a specified
commodity (the "Indexed Commodity") on specified dates (such Indexed Securities,
"Commodity
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Indexed Securities"); (iii) the difference in the level of a specified stock
index (the "Stock Index"), which may be based on U.S. or foreign stocks, on
specified dates (such Indexed Securities, "Stock Indexed Securities"); or (iv)
such other objective price or economic measures as are described in the
applicable Prospectus Supplement. The manner of determining the Indexed
Principal Amount of an Indexed Security and historical and other information
concerning the Indexed Currency, the Indexed Commodity, the Stock Index or other
price or economic measures used in such determination will be set forth in the
applicable Prospectus Supplement, together with information concerning tax
consequences to the holders of such Indexed Securities.
If the determination of the Indexed Principal Amount of an Indexed
Security is based on an Index calculated or announced by a third party and such
third party either suspends the calculation or announcement of such Index or
changes the basis upon which such Index is calculated (other than changes
consistent with policies in effect at the time such Indexed Security was issued
and permitted changes described in the applicable Prospectus Supplement), then
such Index shall be calculated for purposes of such Indexed Security by an
independent calculation agent named in the applicable Prospectus Supplement on
the same basis, and subject to the same conditions and controls, as applied to
the original third party. If for any reason such index cannot be calculated on
the same basis and subject to the same conditions and controls as applied to the
original third party, then the Indexed Principal Amount of such Indexed Security
shall be calculated in the manner set forth in the applicable Prospectus
Supplement. Any determination of such independent calculation agent shall in the
absence of manifest error be binding on all parties.
Interest on an Indexed Security will be payable based on the amount
designated in the applicable Prospectus Supplement (the "Face Amount"). The
applicable Prospectus Supplement will describe whether the principal amount of
the related Indexed Security, if any, that would be payable upon redemption or
repayment prior to the applicable final scheduled Distribution Date will be the
Face Amount of such Indexed Security, the Indexed Principal Amount of such
Indexed Security at the time of redemption or repayment or another amount
described in such Prospectus Supplement.
BOOK-ENTRY REGISTRATION
As may be described in the related Prospectus Supplement,
Securityholders of a given series may hold their Securities through DTC (in the
United States) or CEDEL or Euroclear (in Europe) if they are participants of
such systems, or indirectly through organizations that are participants in such
systems.
Cede, as nominee for DTC, will hold the global Securities in respect of
a given series. CEDEL and Euroclear will hold omnibus positions on behalf of the
CEDEL Participants (as defined below) and the Euroclear Participants (as defined
below) (collectively, the "Participants"), respectively, through customers'
securities accounts in CEDEL's and Euroclear's names on the books of their
respective depositaries (collectively, the "Depositaries") which in turn will
hold such positions in customers' securities accounts in the Depositaries' names
on the books of DTC.
DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York UCC and a "clearing agency"
registered pursuant to Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and to facilitate the clearance and settlement
of securities transactions between Participants through electronic book-entries,
thereby eliminating the need for physical movement of notes or certificates.
Participants include securities brokers and dealers, banks, trust companies and
clearing corporations. Indirect access to the DTC system also is available to
others such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants").
Transfers between DTC Participants will occur in accordance with DTC
rules. Transfers between CEDEL Participants and Euroclear Participants will
occur in the ordinary way in accordance with their applicable rules and
operating procedures.
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Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through CEDEL
Participants or Euroclear Participants, on the other, will be effected in DTC in
accordance with DTC rules on behalf of the relevant European international
clearing system by its Depositary; however, such cross-market transactions will
require delivery of instructions to the relevant European international clearing
system by the counterparty in such system in accordance with its rules and
procedures and within its established deadlines (European time). The relevant
European international clearing system will, if the transaction meets its
settlement requirements, deliver instructions to its Depositary to take action
to effect final settlement on its behalf by delivering or receiving securities
in DTC, and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. CEDEL Participants and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities in CEDEL or
Euroclear as a result of a transaction with a DTC Participant will be made
during the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in such
securities settled during such processing will be reported to the relevant CEDEL
Participant or Euroclear Participant on such business day. Cash received in
CEDEL or Euroclear as a result of sales of securities by or through a CEDEL
Participant or a Euroclear Participant to a DTC Participant will be received
with value on the DTC settlement date but will be available in the relevant
CEDEL or Euroclear cash account only as of the business day following settlement
in DTC.
The Securityholders of a given series that are not Participants or
Indirect Participants but desire to purchase, sell or otherwise transfer
ownership of, or other interests in, Securities of such series may do so only
through Participants and Indirect Participants. In addition, Securityholders of
a given series will receive all distributions of principal and interest through
the Participants who in turn will receive them from DTC. Under a book-entry
format, Securityholders of a given series may experience some delay in their
receipt of payments, since such payments will be forwarded by the applicable
Trustee to Cede, as nominee for DTC. DTC will forward such payments to its
Participants, which thereafter will forward them to Indirect Participants or
such Securityholders. It is anticipated that the only "Securityholder" in
respect of any series will be Cede, as nominee of DTC. Securityholders of a
given series will not be recognized as Securityholders of such series, and such
Securityholders will be permitted to exercise the rights of Securityholders of
such series only indirectly through DTC and its Participants.
Under the rules, regulations and procedures creating and affecting DTC
and its operations (the "Rules"), DTC is required to make book-entry transfers
of Securities of a given series among Participants on whose behalf it acts with
respect to such Securities and to receive and transmit distributions of
principal of, and interest on, such Securities. Participants and Indirect
Participants with which the Securityholders of a given series have accounts with
respect to such Securities similarly are required to make book-entry transfers
and receive and transmit such payments on behalf of their respective
Securityholders of such series. Accordingly, although such Securityholders will
not possess Securities, the Rules provide a mechanism by which Participants will
receive payments and will be able to transfer their interests.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a
Securityholder of a given series to pledge Securities of such series to persons
or entities that do not participate in the DTC system, or to otherwise act with
respect to such Securities, may be limited due to the lack of a physical
certificate for such Securities.
DTC will advise the Trustee in respect of each series that it will take
any action permitted to be taken by a Securityholder of the related series only
at the direction of one or more Participants to whose accounts with DTC the
Securities of such series are credited. DTC may take conflicting actions with
respect to other undivided interests to the extent that such actions are taken
on behalf of Participants whose holdings include such undivided interests.
CEDEL is incorporated under the laws of Luxembourg as a professional
depository. CEDEL holds securities for its participating organizations ("CEDEL
Participants") and facilitates the clearance and settlement of securities
transactions between CEDEL Participants through electronic book-entry changes
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in accounts of CEDEL Participants, thereby eliminating the need for physical
movement of certificates. Transactions may be settled in CEDEL in any of 28
currencies, including United States dollars. CEDEL provides to its CEDEL
Participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. CEDEL interfaces with domestic markets in several
countries. As a professional depository, CEDEL is subject to regulation by the
Luxembourg Monetary Institute. CEDEL Participants are recognized financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. Indirect access to CEDEL is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a CEDEL Participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for participants of
the Euroclear System ("Euroclear Participants") and to clear and settle
transactions between Euroclear Participants through simultaneous electronic
book-entry delivery against payment, thereby eliminating the need for physical
movement of certificates and any risk from lack of simultaneous transfers of
securities and cash. Transactions may now be settled in any of 28 currencies,
including United States dollars. The Euroclear System includes various other
services, including securities lending and borrowing and interfaces with
domestic markets in several countries generally similar to the arrangements for
cross-market transfers with DTC described above. Euroclear is operated by Morgan
Guaranty Trust Company of New York, Brussels, Belgium office, under contract
with Euroclear Clearance System, S.C., a Belgian cooperative corporation (the
"Cooperative"). All operations are conducted by the "Euroclear Operator" (as
defined below), and all Euroclear securities clearance accounts and Euroclear
cash accounts are accounts with the Euroclear Operator, not the Cooperative. The
Cooperative establishes policy for the Euroclear System on behalf of Euroclear
Participants. Euroclear Participants include banks (including central banks),
securities brokers and dealers and other professional financial intermediaries
and may include the Underwriters. Indirect access to the Euroclear System is
also available to other firms that clear through or maintain a custodial
relationship with a Euroclear Participant, either directly or indirectly.
The "Euroclear Operator" is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of Euroclear and
the related Operating Procedures of the Euroclear System and applicable Belgian
law (collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawal of
securities and cash from the Euroclear System, and receipts of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific certificates
to specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear Participants and has no record
of relationship with persons holding through Euroclear Participants.
Except as required by law, the Trustee in respect of a series will not
have any liability for any aspect of the records relating to or payments made or
account of beneficial ownership interests of the related Securities held by
Cede, as nominee for DTC, or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
DEFINITIVE NOTES
As may be described in the related Prospectus Supplement, the
Securities will be issued in fully registered, certificated form ("Definitive
Securities") to the Securityholders of a given series or their nominees, rather
than to DTC or its nominee, only if (i) the Trustee in respect of the related
series advises in writing that DTC is no longer willing or able to discharge
properly its responsibilities as depository with respect to such Securities and
such Trustee is unable to locate a qualified successor, (ii) such Trustee, at
its option, elects to terminate the book-entry-system through DTC or (iii) after
the occurrence of an
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"Event of Default" under the related Indenture or a default by the Servicer
under the related Trust Agreements, Securityholders representing at least a
majority of the outstanding principal amount of such Securities advise the
applicable Trustee through DTC in writing that the continuation of a book-entry
system through DTC (or a successor thereto) is no longer in such
Securityholders' best interest.
Upon the occurrence of any event described in the immediately preceding
paragraph, the applicable Trustee will be required to notify all such
Securityholders through Participants of the availability of Definitive
Securities. Upon surrender by DTC of the definitive certificates representing
such Securities and receipt of instructions for re-registration, the applicable
Trustee will reissue such Securities as Definitive Securities to such
Securityholders.
Distributions of principal of, and interest on, such Securities will
thereafter be made by the applicable Trustee in accordance with the procedures
set forth in the related Indenture or Trust Agreement directly to holders of
Definitive Securities in whose names the Definitive Securities were registered
at the close of business on the applicable Record Date specified for such
Securities in the related Prospectus Supplement. Such distributions will be made
by check mailed to the address of such holder as it appears on the register
maintained by the applicable Trustee. The final payment on any such Security,
however, will be made only upon presentation and surrender of such Security at
the office or agency specified in the notice of final distribution to the
applicable Securityholders.
Definitive Securities in respect of a given series of Securities will
be transferable and exchangeable at the offices of the applicable Trustee or of
a certificate registrar named in a notice delivered to holders of such
Definitive Securities. No service charge will be imposed for any registration of
transfer or exchange, but the applicable Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge imposed in connection
therewith.
REPORTS TO SECURITYHOLDERS
With respect to each series of Securities, on or prior to each Payment
Date for such series, the Servicer or the related Trustee will forward or cause
to be forwarded to each holder of record of such class of Securities a statement
or statements with respect to the related Trust Property setting forth the
information specifically described in the related Trust Agreement which
generally will include the following information:
(i) the amount of the distribution with respect to each
class of Securities;
(ii) the amount of such distribution allocable to principal;
(iii) the amount of such distribution allocable to interest;
(iv) the Pool Balance, if applicable, as of the close of
business on the last day of the related Remittance Period;
(v) the aggregate outstanding principal balance and the
Pool Factor for each Class of Securities after giving effect to all
payments reported under (ii) above on such Payment Date;
(vi) the amount paid to the Servicer, if any, with respect
to the related Remittance Period;
(vii) the amount of the aggregate purchase amounts for
Receivables that have been reacquired, if any, for such Remittance
Period; and
(viii) the amount of coverage under any letter of credit,
financial guaranty insurance policy, reserve account or other form of
credit enhancement covering default risk as of the close of business on
the applicable Payment Date and a description of any Credit Enhancement
substituted therefor.
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Each amount set forth pursuant to subclauses (i), (ii), (iii) and (v)
with respect to the Securities of any series will be expressed as a dollar
amount per $1,000 of the initial principal balance of such Securities, as
applicable. The actual information to be set forth in statements to
Securityholders of a series will be described in the related Prospectus
Supplement.
Within the prescribed period of time for tax reporting purposes after
the end of each calendar year, the applicable Trustee will provide to the
Securityholders a statement containing the amounts described in (ii) and (iii)
above for that calendar year and any other information required by applicable
tax laws, for the purpose of the Securityholders' preparation of federal income
tax returns.
FORWARD COMMITMENTS; PRE-FUNDING
A Trust may enter into an agreement (each, a "Forward
Purchase Agreement") with the Sponsor whereby the Sponsor will agree to transfer
additional Mortgage Loans to such Trust following the date on which such Trust
is established and the related Certificates are issued. The Trust may enter into
Forward Purchase Agreements to permit the acquisition of additional Mortgage
Loans that could not be delivered by the Sponsor or have not formally completed
the origination process, in each case prior to the date on which the
Certificates are delivered to the Certificateholders (the "Closing Date"). Any
Forward Purchase Agreement will require that any Mortgage Loans so transferred
to the Trust conform to the requirements specified in such Forward Purchase
Agreement.
If a Forward Purchase Agreement is to be utilized, and unless
otherwise specified in the related Prospectus Supplement, the related Trustee
will be required to deposit in a segregated account (each, a "Pre-Funding
Account") up to 100% of the net proceeds received by the Trustee in connection
with the sale of one or more classes of Certificates of the related Series; the
additional Mortgage Loans will be transferred to the related Trust in exchange
for money released to the Sponsor from the related Pre-Funding Account. Each
Forward Purchase Agreement will set a specified period (the "Funding Period")
during which any such transfers must occur; for a Trust which elects federal
income treatment as REMIC or as a grantor trust, the related Funding Period will
be limited to three months from the date such Trust is established; for a Trust
which is treated as a mere security device for federal income tax purposes, the
related Funding Period will be limited to nine months from the date such Trust
is established. The Forward Purchase Agreement or the related Pooling and
Servicing Agreement will require that, if all moneys originally deposited to
such Pre-Funding Account are not so used by the end of the related Funding
Period, then any remaining moneys will be applied as a mandatory prepayment of
the related class or classes of Certificates as specified in the related
Prospectus Supplement.
During the Funding Period the moneys deposited to the
Pre-Funding Account will either (i) be held uninvested or (ii) will be invested
in cash-equivalent investments rated in one of the four highest rating
categories by at least one nationally recognized statistical rating orgnaization
and which will either mature prior to the end of the Funding Period, or will be
drawable on demand and in any event, will not constitute the type of investment
which would require registration of the related Trust as an "investment company"
under the Investment Company Act of 1940, as amended.
DESCRIPTION OF THE TRUST AGREEMENTS
The following summary describes certain terms of each Trust Agreement
pursuant to which a Trust Property will be created and the related Securities in
respect of such Trust Property will be issued. For purposes of this Prospectus,
the term "Trust Agreement" as used with respect to a Trust means, collectively,
and except as otherwise specified, any and all agreements relating to the
establishment of the related Trust, the servicing of the related Receivables and
the issuance of the related Securities, including without limitation the
Indenture, (i.e. pursuant to which any Notes shall be issued). Forms of the
Trust Agreement have been filed as exhibits to the Registration Statement of
which the Prospectus forms a part. The summary does not purport to be complete.
It is qualified in its entirety by reference to the provisions of the Trust
Agreements.
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ORIGINATION OF THE RECEIVABLES BY THE COMPANY AND ACQUISITION OF THE RECEIVABLES
PURSUANT TO A RECEIVABLES ACQUISITION AGREEMENT
On the closing date specified with respect to any given series of
Securities (the "Closing Date"), the Company or a Finance Subsidiary will
transfer Receivables originated by the Company either to a Trust pursuant to a
Pooling Agreement, or will pledge the Company's or the Finance Subsidiary's
right, title and interests in and to such Receivables to a Trustee on behalf of
the Securityholders pursuant to an Indenture. The Company or a Finance
Subsidiary will either transfer the Receivables to a Trust pursuant to a Pooling
Agreement, or will pledge the Company's right, title and interests in and to
such Receivables to a Trustee on behalf of Securityholders pursuant to an
Indenture. The obligations of the Company or a Finance Subsidiary and the
Servicer under the related Trust Agreement include those specified below and in
the related Prospectus Supplement.
As more fully described in the related Prospectus Supplement, the
Company will be obligated to acquire from the related Trust Property its
interest in any Receivable transferred to a Trust or pledged to a Trustee on
behalf of Securityholders if the interest of the Securityholders therein is
materially adversely affected by a breach of any representation or warranty made
by the Company with respect to such Receivable, which breach has not been cured
following the discovery by or notice to the Company of the breach. In addition,
if so specified in the related Prospectus Supplement, the Company may from time
to time reacquire certain Receivables or substitute other Receivables for such
Receivable subject to specified conditions set forth in the related Trust
Agreement.
ACCOUNTS
With respect to each series of Securities issued by a Trust, the
Servicer will establish and maintain with the applicable Trustee one or more
accounts, in the name of such Trustee on behalf of the related Securityholders,
into which all payments made on or with respect to the related Receivables will
be deposited (the "Collection Account"). The Servicer will also establish and
maintain with such Trustee separate accounts, in the name of such Trustee on
behalf of such Securityholders, in which amounts released from the Collection
Account and the reserve account or other Credit Enhancement, if any, for
distribution to such Securityholders will be deposited and from which
distributions to such Securityholders will be made (the "Distribution Account").
Any other accounts to be established with respect to a Trust, including
any reserve account, will be described in the related Prospectus Supplement.
For any series of Securities, funds in the Collection Account, the
Distribution Account, any reserve account and other accounts identified as such
in the related Prospectus Supplement (collectively, the "Trust Accounts") shall
be invested as provided in the related Trust Agreement in Eligible Investments.
"Eligible Investments" are generally limited to investments acceptable to the
Rating Agencies as being consistent with the rating of such Securities. Subject
to certain conditions, Eligible Investments may include securities issued by the
Company, the Servicer or their respective affiliates or other trusts created by
the Company or its affiliates. Except as described below or in the related
Prospectus Supplement, Eligible Investments are limited to obligations or
securities that mature not later than the business day immediately preceding the
related Payment Date. However, subject to certain conditions, funds in the
reserve account may be invested in securities that will not mature prior to the
date of the next distribution and will not be sold to meet any shortfalls. Thus,
the amount of cash in any reserve account at any time may be less than the
balance of such reserve account. If the amount required to be withdrawn from any
reserve account to cover shortfalls in collections on the related Receivables
exceeds the amount of cash in such reserve account a temporary shortfall in the
amounts distributed to the related Securityholders could result, which could, in
turn, increase the average life of the Securities of such series. Except as
otherwise specified in the related Prospectus Supplement, investment earnings on
funds deposited in the applicable Trust Accounts, net of losses and investment
expenses (collectively, "Investment Earnings"), shall be deposited in the
applicable Collection Account on each Payment Date and shall be treated as
collections of interest on the related Receivables.
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The Trust Accounts will be maintained as Eligible Deposit Accounts.
"Eligible Deposit Account" means either (a) a segregated account with an
Eligible Institution or (b) a segregated trust account with the corporate trust
department of a depository institution organized under the laws of the United
States of America or any one of the states thereof or the District of Columbia
(or any domestic branch of a foreign bank), having corporate trust powers and
acting as trustee for funds deposited in such account, so long as any of the
securities of such depository institution has a credit rating from each Rating
Agency in one of its generic rating categories which signifies investment grade.
"Eligible Institution" means, with respect to a Trust, (a) the corporate trust
department of the related Indenture Trustee or the related Trustee, as
applicable, or (b) a depository institution organized under the laws of the
United States of America or any one of the states thereof or the District of
Columbia (or any domestic branch of a foreign bank), which (i) (A) has either
(w) a long-term unsecured debt rating acceptable to the Rating Agencies or (x) a
short-term unsecured debt rating or certificate of deposit rating acceptable to
the Rating Agencies or (B) the parent corporation of which has either (y) a
long-term unsecured debt rating acceptable to the Rating Agencies or (z) a
short-term unsecured debt rating or certificate of deposit rating acceptable to
the Rating Agencies and (ii) whose deposits are insured by the FDIC.
THE SERVICER
The Servicer under each Trust Agreement will be named in the related
Prospectus Supplement. The entity serving as Servicer may be the Company or an
affiliate of the Company and may have other business relationships with the
Company or the Company's affiliates. The Servicer with respect to each series
will service the Receivables contained in the Trust Fund for such series. Any
Servicer may delegate its servicing responsibilities to one or more
sub-servicers, but will not be relieved of its liabilities with respect thereto.
The Servicer will make certain representations and warranties regarding
its authority to enter into, and its ability to perform its obligations under,
the related Trust Agreement. An uncured breach of such a representation or
warranty that in any respect materially and adversely affects the interests of
the Securityholders will constitute a Servicer Default (as hereinafter defined)
by the Servicer under the related Trust Agreement.
SERVICING PROCEDURES
Each Trust Agreement will provide that the Servicer will make
reasonable efforts to collect all payments due with respect to the Receivables
which are part of the Trust Fund and, in a manner consistent with the related
Trust Agreement, will continue such collection procedures as the Servicer
follows with respect to the particular type of Receivable in the particular pool
it services for itself and others. Consistent with its normal procedures, the
Servicer may, in its discretion and on a case-by-case basis, arrange with the
Obligor on a Receivable to extend or modify the payment schedule. Some of such
arrangements (including, without limitation any extension of the payment
schedule beyond the final scheduled Payment Date for the related Securities) may
result in the Servicer acquiring such Receivable if such Contract becomes a
Defaulted Contract. The Servicer may sell the Vehicle securing the respective
Defaulted Contract, if any, at a public or private sale, or take any other
action permitted by applicable law. See "Certain Legal Aspects of the
Receivables".
The material aspects of any particular Servicer's collections and other
relevant procedures will be set forth in the related Prospectus Supplement.
PAYMENTS ON RECEIVABLES
With respect to each series of Securities, unless otherwise specified
in the related Prospectus Supplement, the Servicer will deposit into the
Collection Account all payments on the related Receivables (from whatever
source) and all proceeds of such Receivables collected within three (3) business
days of receipt thereof in the related collection facility, such as a lock-box
account or collection account. Moneys deposited in such collection facility for
Trust Property may be commingled with funds from other sources.
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SERVICING COMPENSATION
As may be described in the related Prospectus Supplement with respect
to any series of securities issued by a Trust, the Servicer will be entitled to
receive a servicing fee for each Collection Period (the "Servicing Fee") in an
amount equal to a specified percentage per annum (as set forth in the related
Prospectus Supplement, the "Servicing Fee Rate") of the value of the assets of
the Trust Property, generally as of the first day of such Collection Period.
Each Prospectus Supplement and Servicing Agreement will specify the priority of
distributions with respect to the Servicing Fee (together with any portion of
the Servicing Fee that remains unpaid from prior Payment Dates). Generally, the
Servicing Fee will be paid prior to any distribution to the related
Securityholders.
The Servicer will also collect and retain any late fees, the penalty
portion of interest paid on past due amounts and other administrative fees or
similar charges allowed by applicable law with respect to the Receivables, and
will be entitled to reimbursement from each Trust for certain liabilities.
Payments by or on behalf of Obligors will be allocated to scheduled payments and
late fees and other charges in accordance with the Servicer's normal practices
and procedures.
The Servicing Fee will compensate the Servicer for performing the
functions of a third party servicer of similar types of receivables as an agent
for their beneficial owner, including collecting and posting all payments,
responding to inquiries of Obligors on the related Receivables, investigating
delinquencies, sending billing statements to Obligors, reporting tax information
to Obligors, paying costs of collection and disposition of defaults, and
policing the collateral. The Servicing Fee also will compensate the Servicer for
administering the related Receivables, accounting for collections and furnishing
statements to the applicable Trustee and the applicable Indenture Trustee, if
any, with respect to distributions. The Servicing Fee also will reimburse the
Servicer for certain taxes, accounting fees, outside auditor fees, data
processing costs and other costs incurred in connection with administering the
Receivables.
DISTRIBUTIONS
With respect to each series of Securities, beginning on the Payment
Date specified in the related Prospectus Supplement, distributions of principal
and interest (or, where applicable, of principal or interest only) on each Class
of such Securities entitled thereto will be made by the applicable Indenture
Trustee to the holders of Notes (the "Noteholders") and by the applicable
Trustee to the holders of Certificates (the "Certificateholders") of such
series. The timing, calculation, allocation, order, source, priorities of and
requirements for each class of Noteholders and all distributions to each class
of Certificateholders of such series will be set forth in the related Prospectus
Supplement.
With respect to each series of Securities, on each Payment Date
collections on the related Receivables will be transferred from the Collection
Account to the Distribution Account for distribution to Securityholders,
respectively, to the extent provided in the related Prospectus Supplement.
Credit Enhancement, such as a reserve account, may be available to cover any
shortfalls in the amount available for distribution on such date, to the extent
specified in the related Prospectus Supplement. As more fully described in the
related Prospectus Supplement, and unless otherwise specified therein,
distributions in respect of principal of a Class of Securities of a given series
will be subordinate to distributions in respect of interest on such Class, and
distributions in respect of the Certificates of such series may be subordinate
to payments in respect of the Notes of such series.
CREDIT AND CASH FLOW ENHANCEMENTS
The amounts and types of Credit Enhancement arrangements, if any, and
the provider thereof, if applicable, with respect to each class of Securities of
a given series will be set forth in the related Prospectus Supplement. If and to
the extent provided in the related Prospectus Supplement, credit enhancement may
be in the form of a Policy, subordination of one or more Classes of Securities,
reserve accounts, overcollateralization, letters of credit, credit or liquidity
facilities, third party payments or other support, surety bonds, guaranteed cash
deposits or such other arrangements as may be described in the
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related Prospectus Supplement or any combination of two or more of the
foregoing. If specified in the applicable Prospectus Supplement, Credit
Enhancement for a Class of Securities may cover one or more other Classes of
Securities of the same series, and Credit Enhancement for a series of Securities
may cover one or more other series of Securities.
The presence of Credit Enhancement for the benefit of any Class or
series of Securities is intended to enhance the likelihood of receipt by the
Securityholders or such Class or series of the full amount of principal and
interest due thereon and to decrease the likelihood that such Securityholders
will experience losses. As more specifically provided in the related Prospectus
Supplement, the credit enhancement for a Class or series of Securities will not
provide protection against all risks of loss and will not guarantee repayment of
the entire principal balance and interest thereon. If losses occur which exceed
the amount covered by any Credit Enhancement or which are not covered by any
Credit Enhancement, Securityholders of any Class or series will bear their
allocable share of deficiencies, as described in the related Prospectus
Supplement. In addition, if a form of Credit Enhancement covers more than one
series of Securities, Securityholders of any such series will be subject to the
risk that such Credit Enhancement will be exhausted by the claims of
Securityholders of other series.
STATEMENTS TO INDENTURE TRUSTEES AND TRUSTEES
Prior to each Payment Date with respect to each series of Securities,
the Servicer will provide to the applicable Indenture Trustee and/or the
applicable Trustee and Credit Enhancer as of the close of business on the last
day of the preceding related Collection Period a statement setting forth
substantially the same information as is required to be provided in the periodic
reports provided to Securityholders of such series described under "Description
of the Securities--Reports to Securityholders".
EVIDENCE AS TO COMPLIANCE
Each Trust Agreement will provide that a firm of independent public
accountants will furnish to the related Trust and/or the applicable Indenture
Trustee and Credit Enhancer, annually, a statement as to compliance by the
Servicer during the preceding twelve months (or, in the case of the first such
certificate, the period from the applicable Closing Date) with certain standards
relating to the servicing of the Receivables.
Each Trust Agreement will also provide for delivery to the related
Trust and/or the applicable Indenture Trustee of a certificate signed by an
officer of the Servicer stating that the Servicer either has fulfilled its
obligations under such Trust Agreement in all material respects throughout the
preceding 12 months (or, in the case of the first such certificate, the period
from the applicable Closing Date) or, if there has been a default in the
fulfillment of any such obligation in any material respect, describing each such
default. The Servicer also will agree to give each Indenture Trustee and each
Trustee notice of certain Servicer Defaults (as hereinafter defined) under the
related Trust Agreement.
Copies of such statements and certificates may be obtained by
Securityholders by a request in writing addressed to the applicable Indenture
Trustee or the applicable Trustee.
CERTAIN MATTERS REGARDING THE SERVICERS
Each Trust Agreement will provide that the Servicer may not resign from
its obligations and duties as Servicer thereunder, except upon determination
that the performance by the Servicer of such duties is no longer permissible
under applicable law. No such resignation will become effective until the
related Trustee or a successor servicer has assumed the Servicer's servicing
obligations and duties under the Trust Agreement.
Except as otherwise provided in the related Prospectus Supplement, each
Trust Agreement will further provide that neither the Servicer nor any of its
respective directors, officers, employees, or agents shall be under any
liability to the related Issuer or the related Securityholders for taking any
action or for refraining from taking any action pursuant to such Trust
Agreement, or for errors in judgment; provided,
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however, that neither the Servicer nor any such person will be protected against
any liability that would otherwise be imposed by reason of willful misfeasance,
bad faith or gross negligence in the performance of duties or by reason of
reckless disregard of obligations and duties thereunder. In addition, such Trust
Agreement will provide that the Servicer is under no obligation to appear in,
prosecute, or defend any legal action that is not incidental to its servicing
responsibilities under such Trust Agreement and that, in its opinion, may cause
it to incur any expense or liability.
Under the circumstances specified in any such Trust Agreement, any
entity into which the Servicer may be merged or consolidated, or any entity
resulting from any merger or consolidation to which the Servicer is a party, or
any entity succeeding to the business of the Servicer or, with respect to its
obligations as Servicer, which corporation or other entity in each of the
foregoing cases assumes the obligations of the Servicer, will be the successor
to the Servicer under such Trust Agreement.
SERVICER DEFAULT
Except as otherwise provided in the related Prospectus Supplement,
"Servicer Default" under a Trust Agreement will include (i) any failure by the
Servicer to deliver to the applicable Trustee for deposit in any of the related
Trust Accounts any required payment or to direct such Trustee to make any
required distributions therefrom, which failure continues unremedied for more
than three (3) Business Days after written notice from such Trustee is received
by the Servicer or after discovery by the Servicer; (ii) any failure by the
Servicer duly to observe or perform in any material respect any other covenant
or agreement in such Trust Agreement, which failure materially and adversely
affects the rights of the related Securityholders and which continues unremedied
for more than thirty (30) days after the giving of written notice of such
failure (1) to the Servicer by the applicable Trustee or (2) to the Servicer,
and to the applicable Trustee by holders of the related Securities, as
applicable, evidencing not less than 50% of the voting rights of such
outstanding Securities; (iii) any Insolvency Event; and (iv) any claim being
made on a Policy issued as Credit Enhancement. An "Insolvency Event" shall mean
financial insolvency, readjustment of debt, marshalling of assets and
liabilities, or similar proceedings with respect to the Servicer and certain
actions by the Servicer indicating its insolvency, reorganization pursuant to
bankruptcy proceedings, or inability to pay its obligations.
RIGHTS UPON SERVICER DEFAULT
As more fully described in the related Prospectus Supplement, as long
as a Servicer Default under a Trust Agreement remains unremedied, the applicable
Trustee, Credit Enhancer or holders of Securities of the related series
evidencing not less than 50% of the voting rights of such then outstanding
Securities may terminate all the rights and obligations of the Servicer, if any,
under such Trust Agreement, whereupon a successor servicer appointed by such
Trustee or such Trustee will succeed to all the responsibilities, duties and
liabilities of the Servicer under such Trust Agreement and will be entitled to
similar compensation arrangements. If, however, a bankruptcy trustee or similar
official has been appointed for the Servicer, and no Servicer Default other than
such appointment has occurred, such bankruptcy trustee or official may have the
power to prevent the applicable Trustee or such Securityholders from effecting a
transfer of servicing. In the event that the Trustee is unwilling or unable to
so act, it may appoint, or petition a court of competent jurisdiction for the
appointment of, a successor with a net worth of at least $25,000,000 and whose
regular business includes the servicing of a similar type of receivables. Such
Trustee may make such arrangements for compensation to be paid, which in no
event may be greater than the servicing compensation payable to the Servicer
under the related Trust Agreement.
WAIVER OF PAST DEFAULTS
With respect to each Trust, unless otherwise provided in the related
Prospectus Supplement and subject to the approval of any Credit Enhancer, the
holders of Notes evidencing at least a majority of the voting rights of such
then outstanding Securities may, on behalf of all Securityholders of the related
Securities, waive any default by the Servicer in the performance of its
obligations under the related Trust Agreement and its consequences, except a
default in making any required deposits to or payments from
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any of the Trust Accounts in accordance with such Trust Agreement. No such
waiver shall impair the Securityholders' rights with respect to subsequent
defaults.
AMENDMENT
As more fully described in the related Prospectus Supplement, each of
the Trust Agreements may be amended by the parties thereto, without the consent
of the related Securityholders, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of such Trust
Agreements or of modifying in any manner the rights of such Securityholders;
provided that such action will not, in the opinion of counsel satisfactory to
the applicable Trustee, materially and adversely affect the interests of any
such Securityholder and subject to the approval of any Credit Enhancer. As may
be described in the related Prospectus Supplement, the Trust Agreements may also
be amended by the Company, the Servicer, and the applicable Trustee with the
consent of the holders of Securities evidencing at least a majority of the
voting rights of such then outstanding Securities for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
such Trust Agreements or of modifying in any manner the rights of such
Securityholders; provided, however, that no such amendment may (i) increase or
reduce in any manner the amount or priority of, or accelerate or delay the
timing of, collections of payments on the related Receivables or distributions
that are required to be made for the benefit of such Securityholders or (ii)
reduce the aforesaid percentage of the Securities of such series which are
required to consent to any such amendment, without the consent of the
Securityholders of such series.
INSOLVENCY EVENT
As described in the related Prospectus Supplement, if an Insolvency
Event occurs with respect to a Debtor relating to the applicable Trust Property,
the related Trust will terminate, and the Receivables of the related Trust
Property will be liquidated and each such Trust will be terminated 90 days after
the date of such Insolvency Event, unless, before the end of such 90-day period,
the Trustee of such Trust shall have received written instructions from each of
the related Securityholders (other than the Company) and/or Credit Enhancer to
the effect that such party disapproves of the liquidation of such Receivables.
Promptly after the occurrence of any Insolvency Event with respect to a Debtor,
notice thereof is required to be given to such Securityholders and/or Credit
Enhancer; provided, however, that any failure to give such required notice will
not prevent or delay termination of any Trust. Upon termination of any Trust,
the applicable Trustee shall direct that the assets of such Trust be promptly
sold (other than the related Trust Accounts) in a commercially reasonable manner
and on commercially reasonable terms. The proceeds from any such sale,
disposition or liquidation of such Receivables will be treated as collections on
such Receivables and deposited in the related Collection Account. If the
proceeds from the liquidation of such Receivables and any amounts on deposit in
the Reserve Account, if any, and the related Distribution Account are not
sufficient to pay the Securities of the related series in full, and no
additional Credit Enhancement is available, the amount of principal returned to
Securityholders will be reduced and some or all of such Securityholders will
incur a loss.
Each Trust Agreement will provide that the applicable Trustee does not
have the power to commence a voluntary proceeding in bankruptcy with respect to
any related Trust without the unanimous prior approval of all Certificateholders
(including the Company, if applicable) of such Trust and the delivery to such
Trustee by each such Certificateholder of a certificate certifying that such
Certificateholder reasonably believes that such Trust is insolvent.
TERMINATION
With respect to each Trust, the obligations of the Servicer, the
Company and the applicable Trustee pursuant to the related Trust Agreement will
terminate upon the earlier to occur of (i) the maturity or other liquidation of
the last related Receivable and the disposition of any amounts received upon
liquidation of any such remaining Receivables and (ii) the payment to
Securityholders of the related series of all amounts required to be paid to them
pursuant to such Trust Agreement. As more fully described in the related
Prospectus Supplement, in order to avoid excessive administrative expense, the
Servicer
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will be permitted in respect of the applicable Trust Property, unless otherwise
specified in the related Prospectus Supplement, at its option to purchase from
such Trust Property, as of the end of any Collection Period immediately
preceding a Payment Date, if the Pool Balance of the related Contracts is less
than a specified percentage (set forth in the related Prospectus Supplement) of
the initial Pool Balance in respect of such Trust Property, all such remaining
Receivables at a price equal to the aggregate of the Purchase Amounts thereof as
of the end of such Collection Period. The related Securities will be redeemed
following such purchase.
If and to the extent provided in the related Prospectus Supplement with
respect to the Trust Property, the applicable Trustee will, within ten days
following a Payment Date as of which the Pool Balance is equal to or less than
the percentage of the initial Pool Balance specified in the related Prospectus
Supplement, solicit bids for the purchase of the Receivables remaining in such
Trust, in the manner and subject to the terms and conditions set forth in such
Prospectus Supplement. If such Trustee receives satisfactory bids as described
in such Prospectus Supplement, then the Receivables remaining in such Trust
Property will be sold to the highest bidder.
As more fully described in the related Prospectus Supplement, any
outstanding Notes of the related series will be redeemed concurrently with
either of the events specified above and the subsequent distribution to the
related Certificateholders of all amounts required to be distributed to them
pursuant to the applicable Trust Agreement may effect the prepayment of the
Certificates of such series.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
GENERAL
The transfer of Receivables by the Company or its Finance Subsidiary to
the Trust pursuant to the related Trust Agreement, the perfection of the
security interests in the Receivables and the enforcement of rights to realize
on the Vehicles as collateral for the Receivables are subject to a number of
federal and state laws, including the UCC as in effect in various states. As
specified in each Prospectus Supplement, the Servicer will take such action as
is required to perfect the rights of the Trustee in the Receivables. If, through
inadvertence or otherwise, a third party were to purchase (including the taking
of a security interest in) a Receivable for new value in the ordinary course of
its business, without actual knowledge of the Trust's interest, and take
possession of a Receivable, the purchaser would acquire an interest in such
Receivable superior to the interest of the Trust. As further specified in each
Prospectus Supplement, no action will be taken to perfect the rights of the
Trustee in proceeds of any insurance policies covering individual Vehicles or
Obligors. Therefore, the rights of a third party with an interest in such
proceeds could prevail against the rights of the Trust prior to the time such
proceeds are deposited by the Servicer into a Trust Account.
SECURITY INTERESTS IN THE FINANCED VEHICLES
General
Retail installment sale contracts such as the Receivables evidence the
credit sale of automobiles and light duty trucks by dealers to consumers. The
contracts also constitute personal property security agreements and include
grants of security interests in the related automobiles and light duty trucks
under the UCC. Perfection of security interests in automobiles and light duty
trucks is generally governed by the vehicle registration or titling laws of the
state in which each vehicle is registered or titled. In most states a security
interest in a vehicle is perfected by notation of the secured party's lien on
the vehicle's certificate of title.
Perfection
Pursuant to the Trust Agreement, the Company will sell and assign the
Receivables it has originated or acquired and its security interests in the
Vehicles to the Trustee. Alternatively, the Company
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may sell and assign the Receivables and its interest in the Vehicles to a
Finance Subsidiary which will, in turn, sell and assign such Receivables and
related security interests to the Trustee. Each of the related Prospectus
Supplements will specify whether, because of the administrative burden and
expense, the Company, the Servicer or the Trustee will amend any certificate of
title to identify the Trustee as the new secured party on the certificates of
title relating to the Vehicles. Each of the related Prospectus Supplements will
specify the UCC financing statements to be filed in order to perfect the
transfer to the Finance Subsidiary of Receivables and the transfer by the
Finance Subsidiary to the Trustee of the Receivables. Further, although the
Trustee will not rely on possession of the Receivables as the legal basis for
the perfection of its interest therein or in the security interests in the
Vehicles, the Servicer, as specified in the related Prospectus Supplement, will
continue to hold the Receivables and any certificates of title relating to the
Vehicles in its possession as custodian for the Trustee pursuant to the related
Trust Agreement which, as a practical matter, should preclude any other party
from claiming a competing security interest in the Receivables on the basis that
the security interest is perfected by possession.
A security interest in a motor vehicle registered in most states may be
perfected against creditors and subsequent purchasers without notice for
valuable consideration only by one or more of the following: depositing with the
related Department of Motor Vehicles or analogous state office a properly
endorsed certificate of title for the vehicle showing the secured party as legal
owner or lienholder thereon, or filing a sworn notice of lien with the related
Department of Motor Vehicles or analogous state office and noting such lien on
the certificate of title, or, if the vehicle has not been previously registered,
filing an application in usual form for an original registration together with
an application for registration of the secured party as legal owner or
lienholder, as the case may be. However, under the laws of most states, a
transferee of a security interest in a motor vehicle is not required to reapply
to the related Department of Motor Vehicles or analogous state office for a
transfer of registration when the security interest is sold or when the interest
of the transferee arises from the transfer of a security interest by the
lienholder to secure payment or performance of an obligation. Accordingly, under
the laws of such states, the assignment by the Company of its interest in the
Receivables to the Trustee under the related Trust Agreement is an effective
conveyance of the security interest of the Company in the Receivables, and
specifically, the Vehicles, without such re-registration and without amendment
of any lien noted on the related certificate of title, and (subject to the
immediately succeeding paragraphs) the Trustee will succeed to the Company's
rights as secured party.
Although re-registration of a Vehicle is not necessary to convey a
perfected security interest in the Vehicles to the Trustee, the Trustee's
security interest could be defeated through fraud, negligence, forgery or
administrative error since it may not be listed as legal owner or lienholder on
the certificates of title to the Vehicles. However, in the absence of fraud,
negligence, forgery or administrative error , the notation of the Company's lien
on the certificates of title will be sufficient to protect the Trust against the
rights of subsequent purchasers of a Vehicle or subsequent creditors who take a
security interest in a Vehicle. In the related Trust Agreement, the Company or
its Finance Subsidiary will represent and warrant that it has, or has taken all
action necessary to obtain, a perfected security interest in each Vehicle. If
there are any Vehicles as to which the Company failed to obtain a first priority
perfected security interest, the Company's security interest would be
subordinate to, among others, subsequent purchasers of such Vehicles and holders
of first priority perfected security interests therein. Such a failure, however,
would constitute a breach of the Company's or the Finance Subsidiary's
representations and warranties under the related Trust Agreement. Accordingly,
pursuant to the related Trust Agreement, the Company or Finance Subsidiary would
be required to repurchase the related Receivables from the Trustee unless the
breach were cured.
Continuity of Perfection
Under the laws of most states, a perfected security interest in a motor
vehicle continues for four months after the vehicle is moved to a new state from
the one in which it is initially registered and thereafter until the owner
re-registers such motor vehicle in the new state. A majority of states generally
require surrender of a certificate of title to re-register a vehicle. In those
states that require a secured party to hold possession of the certificate of
title to maintain perfection of the security interest, the secured party would
learn of the re-registration through the request from the Obligor under the
related installment
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sale contract to surrender possession of the certificate of title to assist in
such re-registration. In the case of vehicles registered in states providing for
the notation of a lien on the certificate of title but not requiring possession
by the secured party (such as Texas), the secured party would receive notice of
surrender from the state of re-registration if the security interest is noted on
the certificate of title. Thus, the secured party would have the opportunity to
reperfect its security interest in the vehicle in the state of relocation.
However, these procedural safeguards will not protect the secured party if,
through fraud, forgery or administrative error, the debtor somehow procures a
new certificate of title that does not list the secured party's lien.
Additionally, in states that do not require surrender of a certificate of title
for re-registration of a vehicle, re-registration could defeat perfection. In
each of the Trust Agreements, the Servicer will be required to take steps to
effect re-perfection upon receipt of notice of re-registration or information
from the Obligor as to relocation. Similarly, when an Obligor sells a Vehicle,
the Servicer will have an opportunity to require satisfaction of the related
Receivable before release of the lien, either because the Servicer will be
required to surrender possession of the certificate of title in connection with
the sale, or because the Servicer will receive notice as a result of its lien
noted thereon. Pursuant to the related Trust Agreement, the related Servicer
will hold the certificates of title for the related Vehicles as custodian for
the Trustee. Under the related Trust Agreement, the Servicer will be obligated
to take appropriate steps, at its own expense, to maintain perfected security
interests in the Vehicles.
Priority of Certain Liens Arising by Operation of Law
Under the laws of most states, certain statutory liens such as
mechanics', repairmen's and garagemen's liens for repairs performed on a motor
vehicle, motor vehicle accident liens, towing and storage liens, liens arising
under various state and federal criminal statutes and liens for unpaid taxes
take priority over even a first priority perfected security interest in such
vehicle by operation of law. The UCC also grants priority to certain federal tax
liens over the lien of a secured party. The laws of most states and federal law
permit the confiscation of motor vehicles by governmental authorities under
certain circumstances if used in or acquired with the proceeds of unlawful
activities, which may result in the loss of a secured party's perfected security
interest in a confiscated vehicle. The Company will represent and warrant to the
Trustee in the related Trust Agreement that, as of the related Closing Date,
each security interest in a Vehicle shall be a valid, subsisting and enforceable
first priority security interest in such Vehicle. However, liens for repairs or
taxes superior to the security interest of the Trustee in any such Vehicle, or
the confiscation of such Vehicle, could arise at any time during the term of a
Receivable. No notice will be given to the Trustee or any Securityholder in the
event such a lien or confiscation arises and any such lien or confiscation
arising after the related Closing Date would not give rise to the Company's
repurchase obligation under the related Trust Agreement.
REPOSSESSION
In the event of default by an Obligor, the holder of the related retail
installment sale contract has all the remedies of a secured party under the UCC,
except where specifically limited by other state laws. The UCC remedies of a
secured party include the right to repossession by self-help means, unless such
means would constitute a breach of the peace. Unless a vehicle is voluntarily
surrendered, self-help repossession is accomplished simply by taking possession
of the related financed vehicle. In cases where the Obligor objects or raises a
defense to repossession, or if otherwise required by applicable state law, a
court order is obtained from the appropriate state court, and the vehicle must
then be recovered in accordance with that order. In some jurisdictions, the
secured party is required to notify the debtor of the default and the intent to
repossess the collateral and give the debtor a time period within which to cure
the default prior to repossession. Generally, this right of cure may only be
exercised on a limited number of occasions during the term of the related
contract. Other jurisdictions permit repossession without prior notice if it can
be accomplished without a breach of the peace (although in some states, a course
of conduct in which the creditor has accepted late payments has been held to
create a right by the Obligor to receive prior notice).
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NOTICE OF SALE; REDEMPTION RIGHTS
The UCC and other state laws require a secured party to provide the
Obligor with reasonable notice of the date, time and place of any public sale
and/or the date after which any private sale of the collateral may be held. In
addition, some states also impose substantive timing requirements on the sale of
repossessed vehicles in certain circumstances and/or various substantive timing
and content requirements on such notices. In some states, under certain
circumstances after a financed vehicle has been repossessed, the Obligor may
redeem the collateral by paying the delinquent installments and other amounts
due. The Obligor has the right to redeem the collateral prior to actual sale or
entry by the secured party into a contract for sale of the collateral by paying
the secured party the unpaid principal balance of the obligation, accrued
interest thereon, reasonable expenses for repossessing, holding, and preparing
the collateral for disposition and arranging for its sale, plus, in some
jurisdictions, reasonable attorneys' fees and legal expenses or in some other
states, by payment of delinquent installments on the unpaid principal balance of
the related obligation.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of the Vehicles generally will be applied first
to the expenses of resale and repossession and then to the satisfaction of the
indebtedness. In many instances, the remaining principal amount of such
indebtedness will exceed such proceeds. Under the UCC and laws applicable in
some states, a creditor is entitled to bring an action to obtain a deficiency
judgment from a debtor for any deficiency on repossession and resale of a motor
vehicle securing such debtor's loan; however, in some states, a creditor may not
seek a deficiency judgment from a debtor whose financed vehicle had an initial
cash sales price less than a specified amount, usually $3,000. Some states,
impose prohibitions or limitations or notice requirements on actions for
deficiency judgments. In addition to the notice requirement described above, the
UCC requires that every aspect of the sale or other disposition, including the
method, manner, time, place and terms, be "commercially reasonable". Generally,
courts have held that when a sale is not "commercially reasonable", the secured
party loses its right to a deficiency judgment. In addition, the UCC permits the
debtor or other interested party to recover for any loss caused by noncompliance
with the provisions of the UCC. Also, prior to a sale, the UCC permits the
debtor or other interested person to obtain an order mandating that the secured
party refrain from disposing of the collateral if it is established that the
secured party is not proceeding in accordance with the "default" provisions
under the UCC. However, the deficiency judgment would be a personal judgment
against the Obligor for the shortfall, and a defaulting Obligor can be expected
to have very little capital or sources of income available following
repossession. Therefore, in many cases, it may not be useful to seek a
deficiency judgment or, if one is obtained, it may be settled at a significant
discount or be uncollectible.
Occasionally, after resale of a vehicle and payment of all expenses and
indebtedness, there is a surplus of funds. In that case, the UCC requires the
creditor to remit the surplus to any holder of a subordinate lien with respect
to the vehicle or if no such lienholder exists or if there are remaining funds,
the UCC requires the creditor to remit the surplus to the Obligor under the
contract.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related
regulations impose substantial requirements upon creditors and servicers
involved in consumer finance. These laws include the Truth-in-- Lending Act, the
Equal Credit Opportunity Act, the Federal Trade Commission Act, the Fair Credit
Reporting Act, the Fair Debt Collection Practices Act, the Magnuson-Moss
Warranty Act, the Federal Reserve Board's Regulations B and Z, state adaptations
of the Uniform Consumer Credit Code, state motor vehicle retail installment sale
acts, state "lemon" laws and other similar laws. In addition, the laws of
certain states impose finance charge ceilings and other restrictions on consumer
transactions and require contract disclosures in addition to those required
under federal law. These requirements impose specific statutory liabilities upon
creditors who fail to comply with their provisions. In some cases, this
liability could affect the ability of an assignee such as the Trustee to enforce
consumer finance contracts such as the Receivables.
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<PAGE> 92
The so-called "Holder-in-Due-Course Rule" of the Federal Trade
Commission (the "FTC Rule") has the effect of subjecting any assignee of the
seller in a consumer credit transaction (and certain related creditors and their
assignees) to all claims and defenses which the Obligor in the transaction could
assert against the seller. Liability under the FTC Rule is limited to the
amounts paid by the Obligor under the contract, and the holder of the contract
may also be unable to collect any balance remaining due thereunder from the
Obligor. The FTC Rule is generally duplicated by the Uniform Consumer Credit
Code, other state statutes or the common law in certain states. To the extent
that the Receivables will be subject to the requirements of the FTC Rule, the
Trustee, as holder of the Receivables, will be subject to any claims or defenses
that the purchaser of the related Vehicle may assert against the seller of such
Vehicle. Such claims will be limited to a maximum liability equal to the amounts
paid by the Obligor under the related Receivable.
Under most state vehicle dealer licensing laws, sellers of automobiles
and light duty trucks are required to be licensed to sell vehicles at retail
sale. In addition, with respect to used vehicles, the Federal Trade Commission's
Rule on Sale of Used Vehicles requires that all sellers of used vehicles
prepare, complete and display a "Buyer's Guide" which explains the warranty
coverage for such vehicles. Furthermore, Federal Odometer Regulations
promulgated under the Motor Vehicle Information and Cost Savings Act and the
motor vehicle title laws of most states require that all sellers of used
vehicles furnish a written statement signed by the seller certifying the
accuracy of the odometer reading. If a seller is not properly licensed or if
either a Buyer's Guide or Odometer Disclosure Statement was not provided to the
purchaser of a Vehicle, the Obligor may be able to assert a defense against the
seller of the Vehicle. If an Obligor on a Receivable were successful in
asserting any such claim or defense, the Servicer would pursue on behalf of the
Trust any reasonable remedies against the seller or manufacturer of the vehicle,
subject to certain limitations as to the expense of any such action to be
specified in the related Trust Agreement.
Any such loss, to the extent not covered by credit support (as
specified in the Related Prospectus Supplement), could result in losses to the
Securityholders. As specified in the related Prospectus Supplement, if an
Obligor were successful in asserting any such claim or defense as described in
this paragraph or the two immediately preceding paragraphs, such claim or
defense may constitute a breach of a representation and warranty under the
related Trust Agreement and may create an obligation of the Company to
repurchase such Receivable unless the breach were cured.
Courts have applied general equitable principles to secured parties
pursuing repossession or litigation involving deficiency balances. These
equitable principles may have the effect of relieving an Obligor from some or
all of the legal consequences of a default.
In several cases, consumers have asserted that the self-help remedies
of secured parties under the UCC and related laws violate the due process
protections of the 14th Amendment to the Constitution of the United States.
Courts have generally either upheld the notice provisions of the UCC and related
laws as reasonable or have found that the creditor's repossession and resale do
not involve sufficient state action to afford constitutional protection to
consumers.
As specified in the related Prospectus Supplement, the Company (or its
Finance Subsidiary, if any) will represent and warrant under the related Trust
Agreement that each Receivable complies with all requirements of law in all
material respects. Accordingly, if an Obligor has a claim against the Trustee
for violation of any law and such claim materially and adversely affects the
Trustee's interest in a Receivable, such violation would constitute a breach of
representation and warranty under the related Trust Agreement and would create
an obligation of the Company (or its Finance Subsidiary, if any) to repurchase
such Receivable unless the breach were cured.
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940
Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940,
as amended (the "Relief Act"), an Obligor who enters military service after the
origination of such Obligor's Receivable (including an Obligor who was in
reserve status and is called to active duty after origination of the
Receivable), may
42
<PAGE> 93
not be charged interest (including fees and charges) above an annual rate of 6%
during the period of such Obligor's active duty status, unless a court orders
otherwise upon application of the lender. The Relief Act applies to Obligors who
are members of the Army, Navy, Air Force, Marines, National Guard, Reserves,
Coast Guard, and officers of the U.S. Public Health Service assigned to duty
with the military. Because the Relief Act applies to Obligors who enter military
service (including reservists who are called to active duty) after origination
of the related Receivable, no information can be provided as to the number of
loans that may be effected by the Relief Act. Application of the Relief Act
would adversely affect, for an indeterminate period of time, the ability of the
Servicer to collect full amounts of interest on certain of the Receivables. Any
shortfall in interest collections resulting from the application of the Relief
Act or similar legislation or regulations, which would not be recoverable from
the related Receivables, would result in a reduction of the amounts
distributable to the holders of the related Securities, and would not be covered
by advances, any form of Credit Enhancement provided in connection with the
related series of Securities. In addition, the Relief Act imposes limitations
that would impair the ability of the Servicer to foreclose on an affected
Receivable during the Mortgagor's period of active duty status, and, under
certain circumstances, during an additional three month period thereafter. Thus,
in the event that the Relief Act or similar legislation or regulations applies
to any Receivable which goes into default, there may be delays in payment and
losses on the related Securities in connection therewith. Any other interest
shortfalls, deferrals or forgiveness of payments on the Receivables resulting
from similar legislation or regulations may result in delays in payments or
losses to Securityholders of the related series.
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a creditor to
realize upon collateral or enforce a deficiency judgment. For example, in a
Chapter 13 proceeding under the federal bankruptcy law, a court may prevent a
creditor from repossessing a motor vehicle, and, as part of the rehabilitation
plan, reduce the amount of the secured indebtedness to the market value of the
motor vehicle at the time of bankruptcy (as determined by the court), leaving
the party providing financing as a general unsecured creditor for the remainder
of the indebtedness. A bankruptcy court may also reduce the monthly payments due
under a contract or change the rate of interest and time of repayment of the
indebtedness. Any such shortfall, to the extent not covered by credit support
(as specified in each Prospectus Supplement), could result in losses to the
Securityholders.
CERTAIN TAX CONSIDERATIONS
The Prospectus Supplement for each series of Securities will summarize,
subject to the limitations stated therein, federal income tax considerations
relevant to the purchase, ownership and disposition of such Securities.
ERISA CONSIDERATIONS
The Prospectus Supplement for each series of Securities will summarize,
subject to the limitations discussed therein, considerations under ERISA
relevant to the purchase of such Securities by employee benefit plans and
individual retirement accounts.
METHODS OF DISTRIBUTION
The Securities offered hereby and by the related Prospectus Supplement
will be offered in series through one or more of the methods described below.
The Prospectus Supplement prepared for each series will describe the method of
offering being utilized for that series and will state the public offering or
purchase price of such series and the net proceeds to the Company from such
sale.
43
<PAGE> 94
The Company intends that Securities will be offered through the
following methods from time to time and that offerings may be made concurrently
through more than one of these methods or that an offering of a particular
series of Securities may be made through a combination of two or more of these
methods. Such methods are as follows:
1. By negotiated firm commitment or best efforts underwriting
and public re-offering by underwriters;
2. By placements by the Company with institutional investors
through dealers;
3. By direct placements by the Company with institutional
investors; and
4. By competitive bid.
In addition, if specified in the related Prospectus Supplement, a
series of Securities may be offered in whole or in part in exchange for the
Receivables (and other assets, if applicable) that would comprise the Trust
Property in respect of such Securities.
If underwriters are used in a sale of any Securities (other than in
connection with an underwriting on a best efforts basis), such Securities will
be acquired by the underwriters for their own account and may be resold from
time to time in one or more transactions, including negotiated transactions, at
fixed public offering prices or at varying prices to be determined at the time
of sale or at the time of commitment therefor. The Securities will be set forth
on the cover of the Prospectus Supplement relating to such series and the
members of the underwriting syndicate, if any, will be named in such Prospectus
Supplement.
In connection with the sale of the Securities, underwriters may receive
compensation from the Company or from purchasers of the Securities in the form
of discounts, concessions or commissions. Underwriters and dealers participating
in the distribution of the Securities may be deemed to be underwriters in
connection with such Securities, and any discounts or commissions received by
them from the Company and any profit on the resale of Securities by them may be
deemed to be underwriting discounts and commissions under the Securities Act.
The Prospectus Supplement will describe any such compensation paid by the
Company.
It is anticipated that the underwriting agreement pertaining to the
sale of any series of Securities will provide that the obligations of the
underwriters will be subject to certain conditions precedent, that the
underwriters will be obligated to purchase all such Securities if any are
purchased (other than in connection with an underwriting on a best efforts
basis) and that, in limited circumstances, the Company will indemnify the
several underwriters and the underwriters will indemnify the Company against
certain civil liabilities, including liabilities under the Securities Act or
will contribute to payments required to be made in respect thereof.
The Prospectus Supplement with respect to any series offered by
placements through dealers will contain information regarding the nature of such
offering and any agreements to be entered into between the Company and
purchasers of Securities of such series.
Purchasers of Securities, including dealers, may, depending on the
facts and circumstances of such purchases, be deemed to be "underwriters" within
the meaning of the Securities Act in connection with reoffers and sales by them
of Securities. Holders of Securities should consult with their legal advisors in
this regard prior to any such reoffer or sale.
LEGAL OPINIONS
Certain legal matters relating to the issuance of the Securities of any
series, including certain federal and state income tax consequences with respect
thereto, will be passed upon by Dewey Ballantine, New York, New York, or other
counsel specified in the related Prospectus Supplement.
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<PAGE> 95
FINANCIAL INFORMATION
Certain specified Trust Property will secure each series of Securities,
no Trust will engage in any business activities or have any assets or
obligations prior to the issuance of the related series of Securities, except
for serial issuances by a Master Trust. Accordingly, no financial statements
with respect to any Trust Property will be included in this Prospectus or in the
related Prospectus Supplement.
A Prospectus Supplement may contain the financial statements of the
related Credit Enhancer, if any.
ADDITIONAL INFORMATION
This Prospectus, together with the Prospectus Supplement for each
series of Securities, contains a summary of the material terms of the applicable
exhibits to the Registration Statement and the documents referred to herein and
therein. Copies of such exhibits are on file at the offices of the Securities
and Exchange Commission in Washington, D.C., and may be obtained at rates
prescribed by the Commission upon request to the Commission and may be
inspected, without charge, at the Commission's offices.
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<PAGE> 96
INDEX OF TERMS
Set forth below is a list of the defined terms used in this Prospectus
and the pages on which the definitions of such terms may be found herein.
Accrual Securities............................................................6
Additional Receivables.......................................................10
AFS...........................................................................4
APR.......................................................................9, 19
Cede.........................................................................10
CEDEL Participants...........................................................28
Certificateholders...........................................................34
Certificates...............................................................1, 4
Class.........................................................................1
Closing Date.............................................................31, 32
Collection Account...........................................................32
Collectors...................................................................22
Commission....................................................................2
Commodity Indexed Securities.................................................26
Company.......................................................................4
Contracts..............................................................1, 4, 20
Cooperative..................................................................29
Credit Enhancement...........................................................16
Credit Enhancer..............................................................16
Currency Indexed Securties...................................................26
Dealers.......................................................................4
Debt Securities..............................................................12
Definitive Securities........................................................29
Depositaries.................................................................27
Direct Participants..........................................................16
Distribution Account.........................................................32
DTC..........................................................................10
Eligible Deposit Account.....................................................33
Eligible Institution.........................................................33
Eligible Investments.........................................................32
ERISA........................................................................12
Euroclear Operator...........................................................29
Euroclear Participants.......................................................29
Event of Default.............................................................30
Exchange Act..............................................................2, 12
Face Amount..................................................................27
Finance Subsidiary...........................................................14
Fixed Income Securities.......................................................6
Fixed Value Contracts.....................................................9, 19
Forward Purchase Agreement...................................................31
FTC Rule.....................................................................42
Funding Period...............................................................31
Grantor Trust Securities.....................................................12
Holder-in-Due-Course Rule....................................................42
Indenture.....................................................................5
Indenture Trustee ............................................................5
Index........................................................................26
Indexed Commodity ...........................................................26
Indexed Currency.............................................................26
Indexed Principal Amount.....................................................26
46
<PAGE> 97
Indexed Securities...........................................................26
Indirect Participants....................................................16, 27
Insolvency Event.............................................................36
Insolvency Laws..............................................................14
Interest Rate..............................................................2, 6
Investment Company Act........................................................7
Investment Earnings..........................................................32
Issuer.................................................................1, 4, 18
Master Trust..................................................................8
Master Trust Agreement........................................................8
Master Trust New Issuance....................................................25
Noteholders..................................................................34
Notes......................................................................1, 4
Participants.................................................................27
Partnership Interests........................................................12
Pass-Through Rate ............................................................2
Payment Date..................................................................6
Policy.....................................................................1, 5
Pool Balance.................................................................23
Pool Factor..................................................................23
Pooling Agreement ............................................................5
Pre-Funding Account..........................................................10
Pre-Funding Period...........................................................10
Prepayment...................................................................16
Prospectus Supplement.........................................................1
Rating Agencies..............................................................12
Ratings Effect...........................................................16, 26
Receivables.............................................................1, 4, 5
Record Date...................................................................7
Registration Statement........................................................2
Relief Act...............................................................17, 42
Remittance Period ............................................................7
Residual Interest ............................................................7
Rule of 78s...............................................................9, 19
Rule of 78s Contracts........................................................19
Rules........................................................................28
Securities....................................................................1
Securities Act................................................................2
Security Insurer.............................................................10
Securityholder...............................................................28
Securityholders...............................................................6
Senior Securities ............................................................6
Servicer...................................................................1, 4
Servicer Default.............................................................36
Servicing Agreement...........................................................5
Servicing Fee................................................................34
Servicing Fee Rate...........................................................34
Simple Interest Contracts.................................................9, 19
Stock Index..................................................................27
Stock Indexed Securities.....................................................27
Strip Securities..............................................................6
Subordinate Securities........................................................6
Terms and Conditions.........................................................29
Transferor....................................................................4
Trust......................................................................1, 4
Trust Accounts...............................................................32
47
<PAGE> 98
Trust Agreement...........................................................5, 31
Trust Property.............................................................1, 4
Trustee.......................................................................5
Vehicles...................................................................1, 4
Vendors.......................................................................4
48
<PAGE> 99
No dealer, salesperson or other person has been authorized to give any
information or to make any representation not contained in this Prospectus
Supplement or the Prospectus and, if given or made, such information or
representation must not be relied upon as having been authorized by the Seller
or the Underwriters. This Prospectus Supplement and the Prospectus do not
constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make such offer in such jurisdiction. Neither the delivery of this
Prospectus Supplement or the Prospectus nor any sale made hereunder shall, under
any circumstances, create any implication that the information herein is correct
as of any time subsequent to the date hereof or that there has been no change in
the affairs of the Trust, the Receivables or the Security Insurer since such
date.
TABLE OF CONTENTS
Page
----
PROSPECTUS SUPPLEMENT
Available Information..................................................... S-2
Incorporation of Certain Documents by Reference........................... S-2
Reports to Certificateholders............................................. S-3
Summary................................................................... S-4
Risk Factors.............................................................. S-14
Use of Proceeds........................................................... S-17
The Servicer.............................................................. S-17
The Seller................................................................ S-17
The Trust................................................................. S-18
AmeriCredit's Automobile Financing
Program.............................................................. S-19
The Receivables Pool...................................................... S-21
Yield and Prepayment Considerations....................................... S-25
Financial Security Assurance Inc.......................................... S-25
The Certificates.......................................................... S-28
Description of the Transaction Documents.................................. S-33
The Policy................................................................ S-39
Certain Federal Income Tax Consequences................................... S-41
ERISA Considerations...................................................... S-44
Ratings................................................................... S-46
Underwriting.............................................................. S-46
Legal Matters............................................................. S-47
Experts................................................................... S-47
Index of Defined Terms.................................................... S-48
PROSPECTUS
Prospectus Supplement..................................................... 2
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 2
Reports to Securityholders................................................ 3
Summary of Terms.......................................................... 4
Risk Factors.............................................................. 13
The Trust Property........................................................ 17
The Issuers............................................................... 18
The Receivables........................................................... 19
AmeriCredit's Automobile Financing Program................................ 20
Pool Factors.............................................................. 23
Use of Proceeds........................................................... 23
The Company and the Servicer.............................................. 23
The Trustee............................................................... 23
Description of the Securities............................................. 24
Description of the Trust Agreements....................................... 31
Certain Legal Aspects of Receivables...................................... 38
Certain Tax Considerations................................................ 43
ERISA Considerations...................................................... 43
Methods of Distribution................................................... 43
Legal Opinions............................................................ 44
Financial Information..................................................... 45
Additional Information.................................................... 45
Index of Terms............................................................ 46
UNTIL (90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT), ALL DEALERS
EFFECTING TRANSACTIONS IN THE CERTIFICATES DESCRIBED IN THIS PROSPECTUS
SUPPLEMENT, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. THIS IS IN ADDITION
TO THE OBLIGATION OF DEALERS TO DELIVER THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
AmeriCredit Automobile
Receivables Trust 1996-B
$
% Automobile
Receivables-Backed Certificates,
Class A
AFS Funding Corp.
Seller
AmeriCredit Financial Services, Inc.
Servicer
PROSPECTUS SUPPLEMENT
CS FIRST BOSTON
PRUDENTIAL SECURITIES
INCORPORATED
