AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 15, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
MMCA AUTO OWNER TRUST 2000-2
(Issuer with respect to the Notes)
MMCA AUTO RECEIVABLES TRUST
(Originator of the Issuer)
(Exact name of registrant as specified in its charter)
DELAWARE 9999 33-0869011
(State or other (PRIMARY STANDARD (I.R.S. EMPLOYER
jurisdiction of INDUSTRIAL CLASSIFICATION IDENTIFICATION NO.)
incorporation or CODE NO.)
organization)
STEVEN E. GRIMALDI
6363 KATELLA AVENUE
CYPRESS, CALIFORNIA 90630-5205
(714) 236-1614
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
-----------
STEVEN E. GRIMALDI
6363 KATELLA AVENUE
CYPRESS, CALIFORNIA 90630-5205
(714) 236-1614
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-----------
Copies to:
DAVID H. MIDVIDY, ESQ. DALE W. LUM, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP BROWN & WOOD LLP
FOUR TIMES SQUARE 555 CALIFORNIA STREET
NEW YORK, NEW YORK 10036 SAN FRANCISCO, CALIFORNIA 94104
Approximate date of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. |_|
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration number of the earlier effective registration
statement for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule
434, check the following box. |_|
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT (1) OFFERING PRICE (1) FEE (1)
<S> <C> <C> <C> <C>
% Class A-1 Asset Backed Notes........... $200,000 100% $200,000 $52.80
% Class A-2 Asset Backed Notes........... $200,000 100% $200,000 $52.80
% Class A-3 Asset Backed Notes........... $200,000 100% $200,000 $52.80
% Class A-4 Asset Backed Notes........... $200,000 100% $200,000 $52.80
-------------------------------------------------------------------------------------------------------------------
% Class B Asset Backed Notes............. $200,000 100% $200,000 $52.80
===================================================================================================================
(1) Estimated solely for the purpose of calculating the registration fee.
</TABLE>
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Securities and
Exchange Commission, acting pursuant to said Section 8(a), may determine.
[FLAG]
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT
AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY
THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED _____________, 2000
PROSPECTUS
$____________
MMCA AUTO OWNER TRUST 2000-2
$_______ ____% CLASS A-1 ASSET BACKED NOTES
$_______ ____% CLASS A-2 ASSET BACKED NOTES
$_______ ____% CLASS A-3 ASSET BACKED NOTES
$_______ ____% CLASS A-4 ASSET BACKED NOTES
$_______ ____% CLASS B ASSET BACKED NOTES
MMCA AUTO RECEIVABLES TRUST
SELLER
[INSERT GRAPHIC]
SERVICER
<TABLE>
<CAPTION>
Underwriting Discounts
Price* and Commissions Net Proceeds to Seller
------------------------- --------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A-1 Notes $__________ (________%) $__________ (_____%) $__________ (________%)
Class A-2 Notes $__________ (________%) $__________ (_____%) $__________ (________%)
Class A-3 Notes $__________ (________%) $__________ (_____%) $__________ (________%)
Class A-4 Notes $__________ (________%) $__________ (_____%) $__________ (________%)
Class B Notes $__________ (________%) $__________ (_____%) $__________ (________%)
Total $__________ $__________ $__________
-----------------
* The price of the notes will also include any interest accrued on the notes from the date the notes are issued.
</TABLE>
Interest on and principal of the notes will be payable monthly, on the 15th
or the first business day after the 15th.
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 10.
THE NOTES REPRESENT OBLIGATIONS OF THE ISSUER AND ARE BACKED ONLY BY THE
ASSETS OF THE ISSUER. THE NOTES DO NOT REPRESENT OBLIGATIONS OF OR
INTERESTS IN MMCA AUTO RECEIVABLES TRUST, MITSUBISHI MOTORS CREDIT OF
AMERICA, INC. OR ANY OF THEIR AFFILIATES.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED ON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
UNDERWRITERS OF THE CLASS A NOTES
SALOMON SMITH BARNEY
UNDERWRITERS OF THE CLASS B NOTES
SALOMON SMITH BARNEY
The date of this Prospectus is __________, 2000
TABLE OF CONTENTS
Page
IMPORTANT NOTICE ABOUT INFORMATION
PRESENTED IN THIS PROSPECTUS..............................................4
SUMMARY OF TERMS..........................................................5
RISK FACTORS.............................................................10
THE ISSUER...............................................................17
Limited Purposes and Limited Assets................................17
Capitalization of the Issuer.......................................18
The Owner Trustee..................................................18
PROPERTY OF THE ISSUER...................................................18
MMCA'S CONTRACT PORTFOLIO................................................19
Types of Contracts Included in MMCA's
Contract Portfolio............................................19
Underwriting Standards.............................................19
Servicing and Collection Procedures................................20
Physical Damage Insurance on MMCA's
Contracts.....................................................21
Delinquency and Loss Data of MMCA's
Contracts.....................................................21
THE RECEIVABLES POOL.....................................................25
Selection Criteria.................................................25
Characteristics of the Receivables Pool............................27
Payment Methods....................................................30
Deferred Payment Receivables.......................................30
Balloon Payment Receivables........................................31
Defaulted Receivables..............................................32
Maturity and Prepayment Considerations.............................32
HOW NOTEHOLDERS CAN COMPUTE THEIR
PORTION OF THE AMOUNT OUTSTANDING
ON THE NOTES.............................................................43
USE OF PROCEEDS..........................................................43
MMCA AUTO RECEIVABLES TRUST..............................................43
THE SERVICER.............................................................44
TERMS OF THE NOTES.......................................................44
Principal Amount and Interest Rates................................44
Interest Payments..................................................45
Principal Payments.................................................46
Mandatory Prepayment...............................................47
Optional Redemption................................................47
The Indenture Trustee..............................................48
The Yield Supplement Agreement and Yield
Supplement Account............................................48
The Issuer's Bank Accounts.........................................49
Indenture Cash Flows...............................................50
The Negative Carry Account.........................................52
Yield Supplement Overcollateralization
Amount........................................................53
The Reserve Account................................................54
Subordination of the Class B Notes.................................55
Subordination of the Certificates..................................55
Advances by the Servicer of Amounts
Payable on the Receivables....................................55
Deposit of Collections on the Receivables to
the Collection Account........................................56
Statements to Noteholders..........................................56
Book Entry Registration............................................58
Issuance of Definitive Notes Upon the
Occurrence of Various Circumstances...........................62
Terms of the Indenture.............................................63
THE SALE AND SERVICING AGREEMENT AND
THE TRUST AGREEMENT......................................................69
Sale and Assignment................................................69
The Pre-Funding and Reinvestment Period............................73
Mandatory Repurchase of Receivables................................73
Servicing Procedures...............................................74
Servicing Compensation.............................................76
Evidence to be Provided as to Servicer's
Compliance with its Servicing
Obligations...................................................76
Resignation by the Servicer........................................77
Consequences of Merger, Conversion,
Consolidation or Similar Actions by
Servicer......................................................77
Limits on Servicer's Liability.....................................77
Limits on Servicer's Obligations in
Connection with Legal Actions.................................77
Events of Servicing Termination....................................77
Rights of Indenture Trustee and Noteholders
Upon an Event of Servicing
Termination Under the Sale and
Servicing Agreement...........................................78
Requirements for Amendments of the Sale
and Servicing Agreement and the Trust
Agreement.....................................................79
Requirements for Termination of the Issuer.........................79
Actions to be Taken by Indenture Trustee
Upon Termination of the Issuer................................80
The Administration Agreement.......................................80
SOME IMPORTANT LEGAL ASPECTS OF THE
RECEIVABLES..............................................................80
Bankruptcy Considerations..........................................80
Issuer's Rights in the Receivables.................................81
Security Interests in Vehicles.....................................81
Repossession.......................................................82
Notice of Sale; Redemption Rights..................................83
Deficiency Judgments and Excess Proceeds...........................83
Obligor's Right to Excess Proceeds Upon
Sale of a Vehicle.............................................83
Consumer Protection Laws...........................................83
Other Limitations..................................................85
LEGAL INVESTMENT.........................................................85
FEDERAL INCOME TAX
CONSEQUENCES.............................................................85
Tax Treatment of the Notes and the Issuer
under Federal Income Tax Law..................................85
Federal Tax Consequences of Waivers of
Events of Default and Amendments of
Notes by Noteholders..........................................88
Information Reporting and Backup
Withholding of Taxes by Indenture
Trustee.......................................................88
Tax Consequences to Foreign Investors..............................88
STATE TAX CONSEQUENCES...................................................90
ERISA CONSIDERATIONS.....................................................90
Special ERISA Considerations for
Employee Benefit Plans........................................91
Special ERISA Considerations Applicable
to Insurance Company General
Accounts......................................................92
General Investment Considerations for
Employee Benefit Plans........................................92
UNDERWRITING.............................................................92
LEGAL OPINIONS...........................................................94
REPORTS TO NOTEHOLDERS...................................................94
WHERE YOU CAN FIND MORE
INFORMATION.............................................................94
GLOSSARY.................................................................96
IMPORTANT NOTICE
ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS
You should rely only on information on the notes provided in this
prospectus. We have not authorized anyone to provide you with different
information.
We include cross-references to sections where you can find additional
information. Check the table of contents to locate these sections.
You can find a glossary of capitalized terms used in this prospectus
beginning on page 96.
SUMMARY OF TERMS
This summary does not contain all of the information that you should
consider in making your investment decision. To understand all of the terms
of this offering, you should read carefully this prospectus in its
entirety.
The Issuer: MMCA Auto Owner Trust 2000-2
Seller of the Receivables to the Issuer: MMCA Auto Receivables Trust
Seller's Address: 6363 Katella Avenue, Cypress,
California 90630-5205
Seller's Telephone Number: (714) 236-1614
Servicer of the Receivables: Mitsubishi Motors Credit of
America, Inc.
Indenture Trustee: Bank of Tokyo-Mitsubishi Trust
Company
Owner Trustee: Wilmington Trust Company
The Property of the Issuer: The property of the issuer will
include:
o the receivables, which
are motor vehicle retail
installment sale
contracts originated by
Mitsubishi Motors Credit
of America, Inc.;
o the security interests in
the motor vehicles
financed by the
receivables;
o the pre-funding and
reinvestment account;
o the payahead account;
o the reserve account;
o the yield supplement
account; and
o the negative carry
account.
THE TERMS OF THE NOTES
<TABLE>
<CAPTION>
CLASS A-1 NOTES CLASS A-2 NOTES CLASS A-3 NOTES CLASS A-4 NOTES CLASS B NOTES
<S> <C> <C> <C> <C> <C>
Principal Amount: $__________ $___________ $__________ $__________ $__________
Interest Rate Per Annum: _____% _____% _____% _____% _____%
Interest Accrual Method: actual/360 30/360 30/360 30/360 30/360
Payment Dates: monthly (15th) monthly (15th) monthly (15th) monthly (15th) monthly (15th)
First Payment Date:
Final Payment Date:
Anticipated Ratings P-1/A-1+ Aaa/AAA Aaa/AAA Aaa/AAA A2/A
(Moody's/S&P):*
-----------------
*It is a condition to the offering of the notes that these ratings be
obtained. However, Moody's or S&P in its discretion may lower or withdraw
its rating in the future.
</TABLE>
THE RECEIVABLES
The issuer will own three types of receivables:
o receivables which provide for equal monthly payments over their
term;
o receivables which provide that the first payment is deferred for a
specified period--between __ and __ days --and for equal monthly
payments for the remainder of the term of the receivable; and
o receivables which provide for equal monthly payments and one
substantially larger final balloon payment.
None of the receivables with a deferred first payment have a final
balloon payment.
On __________, 2000:
o The principal balance of the receivables was $__________.
o The principal balance of receivables with a deferred first payment
was $__________.
o The principal balance of the balloon payments was $__________.
MMCA Auto Receivables Trust--MART--expects to sell additional
receivables having a principal balance of $__________ to the issuer by no
later than __________, 2000. Not more than $_________ of these receivables
will have a deferred first payment and not more than $___________ of these
receivables will have a balloon payment.
On each payment date through __________, 2001, the issuer intends to use
prepayments on deferred payment receivables to purchase additional
receivables from MART. On each payment date during this period, the issuer
will apply prepayments on these receivables received during the prior month
to purchase additional receivables if payment of those prepayments to
noteholders would cause the principal of the notes to be repaid at a faster
rate than would be the case if those receivables prepaid at the anticipated
prepayment rate for receivables that do not have a deferred first payment.
None of these additional receivables will have a deferred first payment.
PAYMENTS ON THE NOTES
SOURCES OF PAYMENTS
On each payment date, the issuer will pay the amounts owed by the issuer
from the following sources:
o collections on the receivables during the prior month;
o amounts withdrawn from the reserve account, the yield supplement
account and the negative carry account; and
o advances by the Servicer of amounts due on the receivables but not
paid during the prior month.
MONTHLY INTEREST PAYMENTS
On each payment date, the issuer will pay interest on the class A notes
based on the total amount of interest due on each class of class A notes
without preference or priority between the classes of class A notes.
Interest on the class B notes is subordinate to interest on the class A
notes and will not be paid on any payment date until accrued interest on
the class A notes has been paid in full.
SEQUENTIAL PAYMENT OF MONTHLY PRINCIPAL AMOUNT
The notes feature sequential payment of principal. No principal will be
paid on any class of class A notes until each class with a lower numerical
designation has been paid in full. For example, no principal will be paid
on the class A-2 notes until the class A-1 notes have been paid in full. No
principal will be paid on the class B notes until all of the class A notes
have been paid in full.
On each payment date, the amount required to be paid as principal of the
notes will equal:
o the sum of the outstanding balance of the notes and the
certificates on the last day of the preceding month; minus
o the total principal amount of the receivables on the last day of
the preceding month; minus
o the total yield supplement overcollateralization amount of the
receivables on the last day of the preceding month; minus
o the amount on deposit in the pre-funding and reinvestment account
on that payment date.
In addition, on the __________, 2001 payment date, any amounts on
deposit in the pre-funding and reinvestment account will be paid as
principal on the notes.
PRIORITY OF DISTRIBUTIONS
On each payment date, the issuer will make the following payments in the
following order:
(1) payment to the servicer of amounts advanced by the servicer on
previous payment dates;
(2) payment to the servicer of the monthly servicing fee for the prior
month;
(3) payment of the interest payable on all classes of the class A
notes;
(4) payment of the interest payable on the class B notes;
(5) payment of the principal payable on the class A-1 notes, until the
class A-1 notes have been paid in full;
(6) payment of the principal payable on the class A-2 notes, until the
class A-2 notes have been paid in full;
(7) payment of the principal payable on the class A-3 notes, until the
class A-3 notes have been paid in full;
(8) payment of the principal payable on the class A-4 notes, until the
class A-4 notes have been paid in full;
(9) payment of the principal payable on the class B notes, until the
class B notes have been paid in full; and
(10) any required deposits to the reserve account.
For further information on the priority of distributions, see "Terms of
the Notes--Indenture Cash Flows."
The order of the payments of interest and principal on the notes will
change if there is a default under the indenture and the maturity of the
notes is accelerated. This change is important to noteholders. Principal
will be paid to all four classes of the class A notes simultaneously--not
sequentially by class--and no interest will be paid on the class B notes
until all of the accrued interest and principal of the class A notes have
been paid.
CERTIFICATES
In addition to the notes, the issuer will issue $__________ of
certificates. The issuer will not make any distributions on the
certificates on any payment date until the interest and principal payable
on the notes on that payment date have been paid. The certificates are not
being offered by this prospectus.
MONTHLY SERVICING FEE
The monthly servicing fee payable to the servicer on each payment date
will equal the sum of:
o One-12th of _____% of the total principal balance of all
receivables other than deferred payment receivables; plus
o One-12th of _____% of the total principal balance of deferred
payment receivables.
CREDIT ENHANCEMENT
The credit enhancement for the notes will be as follows:
o the total yield supplement overcollateralization amount;
o the subordination of the certificates; and
o the reserve account.
The credit enhancement for the notes is intended to protect you against
losses or delays in payments on your notes by absorbing losses on the
receivables and other shortfalls in cash flows.
TOTAL YIELD SUPPLEMENT OVERCOLLATERALIZATION AMOUNT
The total principal amount of the notes and certificates on the closing
date will equal:
o the total principal amount of the receivables transferred to the
issuer on the closing date; minus
o the total yield supplement overcollateralization amount of the
receivables transferred to the issuer on the closing date; plus
o $__________, which will be deposited to the pre-funding and
reinvestment account on the closing date.
During the pre-funding and reinvestment period, the issuer will acquire
additional receivables from MART with the $__________ deposited in the
pre-funding and reinvestment account on the closing date. The total
principal amount of the these additional receivables minus the total yield
supplement overcollateralization amount of these receivables will be
approximately equal the $________ deposited to the pre-funding and
reinvestment account on the closing date.
On the closing date, the total yield supplement overcollateralization
amount of the receivables will be $__________, or _____% of the total
principal amount of the notes and certificates on the closing date.
On any date, the total yield supplement overcollateralization amount for
the receivables will be the sum of the yield supplement
overcollateralization amount for each receivable which is not a defaulted
receivable or which has not been repurchased by MART or the servicer
following a breach of certain representations or warranties.
On any payment date, the yield supplement overcollateralization amount
for any receivable will equal the excess, if any, of:
o the present value of the remaining scheduled payments due on the
receivable discounted at a rate equal to the annual percentage
rate provided in the related contract; over
o the present value of the remaining scheduled payments due on the
receivable discounted at a rate equal to _____%.
RESERVE ACCOUNT
On each payment date, the issuer will use funds in the reserve account
to pay the following amounts if collections on the receivables are
insufficient to pay those amounts:
o first, the amounts due to the servicer; and then
o the interest and principal due on the notes.
On the closing date, MART will deposit $__________ into the reserve
account. On each date during the period from _______ to _______ on which
the issuer acquires receivables from MART with funds deposited in the
pre-funding and reinvestment account on the date of issuance of the notes,
an amount equal to the product of (a) __% and (b) the total principal
balance of the receivables, minus the total yield supplement
overcollateralization amount of those receivables will be withdrawn from
the pre-funding and reinvestment account and deposited to the reserve
account.
On each payment date, available funds remaining after payment of the
servicing fee and interest and principal on the notes will be deposited to
the reserve account until the total amount on deposit in the reserve
account equals the lesser of:
o the product of (a) the total principal balance of the receivables,
minus the total yield supplement overcollateralization amount of
the receivables as of the dates on which the issuer acquired them
and (b) _____%; and
o the total principal balance of the notes.
YIELD SUPPLEMENT ACCOUNT
On each payment date, the issuer will use funds in the yield supplement
account in an amount equal to the product of (a) the total principal
balance of deferred payment receivables, minus the yield supplement
overcollateralization amount on those receivables and (b) _____% to make
required payments under the indenture, including payments on the notes.
This amount will be used to cover the shortfall in amounts available to
make required payments on the notes due to the absence of collections on
deferred payment receivables during the previous month.
OPTIONAL REDEMPTION
The servicer can purchase all of the remaining receivables once their
total principal balance is 10% or less of their principal balances as of
the dates the receivables were sold to the issuer. If the servicer
purchases the receivables, the indenture trustee will redeem the notes for
the unpaid principal amount plus the accrued and unpaid interest on the
notes.
TAX STATUS
In the opinion of Skadden, Arps, Slate, Meagher & Flom LLP, for federal
income and Delaware and California income and franchise tax purposes:
o the notes will be treated as debt; and
o the issuer will not be classified as an association or a publicly
traded partnership taxable as a corporation.
If you purchase a note, you agree to treat it as debt for tax purposes.
ERISA CONSIDERATIONS
The notes are generally eligible for purchase by employee benefit plans
subject to the Employee Retirement Income Security Act of 1974, as amended,
or Section 4975 of the Internal Revenue Code of 1986, as amended. However,
fiduciaries of employee benefit plans, and any other person investing plan
assets, should review the matters discussed under "ERISA Considerations" in
this prospectus and should consult with their legal advisors before
purchasing the notes.
ELIGIBILITY OF NOTES FOR PURCHASE BY MONEY MARKET
FUNDS
The class A-1 notes are structured to be eligible for purchase by money
market funds under Rule 2a-7 under the Investment Company Act of 1940, as
amended. A money market fund should consult its legal advisors regarding
whether an investment by the money market fund in the class A-1 notes
satisfies the money market fund's investment policies and objectives.
RISK FACTORS
You should consider the following risk factors in deciding
whether to purchase notes.
ABSENCE OF SECONDARY MARKET The underwriters for the notes may assist
FOR NOTES COULD LIMIT YOUR in resales of the notes but they are
ABILITY TO RESELL NOTES not required to do so. A secondary
market for the notes may not develop.
If a secondary market for the notes
does develop, it may not continue or
it may not be sufficiently liquid to
allow you to resell any of your
notes. Consequently, you must be
prepared to hold your notes until
their final maturity dates.
INTERESTS OF OTHER PERSONS IN Another person could acquire an interest
RECEIVABLES AND FINANCED VEHICLES in a receivable that is superior to the
COULD REDUCE THE FUNDS AVAILABLE issuer's interest in the receivable
TO MAKE PAYMENTS ON THE NOTES because the servicer will not segregate
or mark the receivables as belonging
to the issuer. If another person
acquires an interest in a receivable
that is superior to the issuer's
interest in the receivable, the
collections on that receivable will
not be available to make payments on
the notes.
Another person could acquire an
interest in a vehicle financed by a
receivable that is superior to the
issuer's interest in the vehicle
because the servicer will not amend
the certificate of title or ownership
to identify the issuer as the new
secured party. If another person
acquires an interest in a vehicle
that is superior to the issuer's
interest in the vehicle, the proceeds
from the sale of the vehicle will not
be available to make payments on the
notes. See "Some Important Legal
Aspects of the Receivables--Security
Interests in Vehicles."
BANKRUPTCY OF MMCA COULD If MMCA enters a bankruptcy proceeding,
RESULT IN LOSSES OR DELAYS IN you could experience losses or delays in
PAYMENTS ON THE NOTES the payments on your notes. MMCA will
sell the receivables to MART, and
MART will transfer the receivables to
the issuer. However, if MMCA enters a
bankruptcy proceeding, the court in
the bankruptcy proceeding could
conclude that the sale of the
receivables by MMCA to MART was not a
true sale for bankruptcy purposes and
that MMCA still owns the receivables.
The court also could conclude that
MMCA and MART should be consolidated
for bankruptcy purposes. If the court
were to reach either of these
conclusions, you could experience
losses or delays in payments on your
notes because:
o the indenture trustee will
not be able to exercise
remedies against MMCA on your
behalf without permission
from the court;
o the court may require the
indenture trustee to accept
property in exchange for the
receivables that is of less
value than the receivables;
o tax or other government liens
on MMCA's property that arose
before the transfer of the
receivables to the issuer
will be paid from the
collections on the
receivables before the
collections are used to make
payments on your notes; and
o the indenture trustee may not
have a perfected security
interest in one or more of
the vehicles securing the
receivables or cash
collections held by MMCA at
the time that a bankruptcy
proceeding begins.
MART has taken steps in structuring
the transactions described in this
prospectus to minimize the risk that
a court would conclude that the sale
of the receivables to MART was not a
"true sale" or that MMCA and MART
should be consolidated for bankruptcy
purposes. See "MMCA Auto Receivables
Trust" and "Some Important Legal
Aspects of the
Receivables--Bankruptcy
Considerations."
POTENTIAL LOSS ON NOTES DUE TO The first payment on $________, or ____%
RECEIVABLES WITH NO PAYMENTS by principal balance of the receivables
FOR AN INITIAL PERIOD to be transferred to the issuer on
the closing date, is deferred for a
specified period. The value of the
vehicles financed with deferred
payment receivables will be reduced
during the deferral period without
any reduction of the principal
balance of the related receivables
because no payments on those
receivables will be made during the
deferral period. On the date on which
the first payment is due on a
deferred payment receivable, the
difference between the value of the
vehicle and the principal balance of
the related receivable will be larger
than would have been the case had the
first payment on the receivable not
been deferred. MMCA does not have
extensive historical data on the
default rate of receivables with
deferred first payments. The severity
of any credit loss on a deferred
payment receivable will depend, in
part, on the length of the deferral
period. The severity of the credit
losses on these receivables may be
higher than the severity of the
credit losses on MMCA's combined
portfolio of receivables. You may
experience delays in payments or
losses on your notes if the severity
of credit losses on these receivables
is higher than expected by MMCA and
the following are insufficient to
protect you against such delays or
losses:
o the protection provided to
the class A notes by the
subordination of the class B
notes; and
o the protection provided to
all of the notes by:
o the total yield
supplement
overcollateralization
amount; and
o the subordination of the
certificates and the
funds on deposit in the
reserve account.
See "MMCA's Contract
Portfolio--Delinquency and Loss Data
of MMCA's Contracts" for information
concerning MMCA's combined portfolio
of receivables.
RISK THAT YOU MAY BE REQUIRED POTENTIAL PREPAYMENT OF NOTES DUE TO
TO REINVEST YOUR PRINCIPAL IN PREPAYMENT OF RECEIVABLES. Prepayments
THE NOTES AT A LOWER RATE OF on the receivables by the related
RETURN BECAUSE OF PREPAYMENTS obligors and purchases of the receiv-
ON THE NOTES ables by MART and the servicer due to
breaches of representations,
warranties and covenants by MART and
the servicer will accelerate the
payment of principal of your notes.
The extent of this prepayment cannot
be fully predicted. You will bear the
risk that you will have to reinvest
the principal of your notes earlier
than you expected at a rate of
interest that is less than the rate
of interest on your notes.
The obligors on the receivables may
prepay the receivables voluntarily at
any time. The receivables are
required to be prepaid in full upon
the sale, insured loss or other
disposition of the related vehicle.
In addition, if MMCA breaches its
representations and warranties with
respect to any receivables in a way
that has a material adverse effect on
the noteholders, MMCA will be
required to repurchase those
receivables from MART, and MART will
be required to repurchase those
receivables from the issuer. MMCA
will also be required to purchase
receivables from the issuer if it
breaches its servicing obligations
with respect to those receivables.
MMCA will be entitled to purchase all
of the remaining receivables from the
issuer once the total principal
balance of the receivables is 10% or
less of the principal balances of the
receivables as of the dates on which
they were sold to the issuer.
POTENTIAL PREPAYMENT OF NOTES DUE TO
AN INCENTIVE PROGRAM OFFERED BY MMCA.
Obligors on receivables that provide
for a balloon payment can return the
related vehicle at the end of the
term of the receivable instead of
paying the balloon payment. MMCA will
sell each returned vehicle on behalf
of the issuer but expects the amount
realized from the sale of the vehicle
to be less than the related balloon
payment. To reduce losses from
obligors returning their vehicles at
the end of the term of their
receivables instead of paying the
balloon payments, MMCA and its
affiliates offer incentives for the
obligors to prepay their receivables
and return the related vehicles early
if they purchase another vehicle
manufactured by Mitsubishi Motors
Corporation or one of its affiliates.
The incentives may encourage a higher
level of prepayments on the
receivables resulting in a higher
level of prepayments on the notes
than would otherwise be the case. See
"The Receivables Pool--Maturity and
Prepayment Considerations."
POTENTIAL PREPAYMENT OF NOTES DUE TO
PREPAYMENTS OF RECEIVABLES WITH A
DEFERRED FIRST PAYMENT. MMCA began
originating receivables with a
deferred first payment in 1999. MMCA
does not have significant historical
data on the rate of prepayment of
this type of receivable. Obligors on
receivables may prepay their
receivables in full or in part at any
time and no prediction can be made of
the rate at which obligors on
deferred payment receivables will
make prepayments. Obligors on
deferred payment receivables may have
greater incentive to refinance their
vehicles with other lenders at more
attractive terms--for example, at
lower interest rates--than obligors
on non-deferred payment receivables
and use the proceeds to prepay in
full the receivable sold to the
issuer. If the rate of prepayment on
these receivables is higher than the
rate of prepayment on the receivables
in MMCA's combined portfolio that do
not provide for a deferred first
payment, the level of prepayments on
the notes would be higher than
anticipated.
On each payment date through
__________, 2001, the issuer intends
to use prepayments on deferred
payment receivables--with deferral
periods of between __ and __ days--to
purchase additional receivables from
MART. On each payment date during
this period, the issuer will apply
prepayments on these receivables
received during the prior month to
purchase additional receivables to
the extent that payment of those
prepayments to noteholders would
cause the principal of the notes to
be repaid at a faster rate than would
be the case if those receivables
pre-paid at the anticipated
prepayment rate for receivables that
do not have a deferred first payment.
None of these additional receivables
will have a deferred first payment.
If MART does not have sufficient
receivables to transfer to the issuer
on the payment date following the
month in which the prepayments are
received, the excess of those
prepayments over the total principal
balance of the receivables available
for purchase minus the total yield
supplement overcollateralization
amount of those receivables will be
deposited to the pre-funding and
reinvestment account until the
earlier of the date sufficient
receivables are available and
_______, 2001. However, such amounts
only will be held in the pre-funding
and reinvestment account--and not
paid to noteholders as an early
payment of principal--if the amount
on deposit in the negative carry
account is at least equal to the
maximum amount specified for that
account. If there is a shortfall in
the funds in the negative carry
account, MMCA has the option, but not
the obligation, to deposit funds
equal to the shortfall into the
negative carry account. Although MMCA
intends to make these deposits, if
MMCA chooses not to, the excess
prepayments on the deferred payment
receivables will be paid to the
noteholders as an early repayment of
principal on the notes.
POTENTIAL PREPAYMENTS ON NOTES If the principal balance of the
DUE TO FAILURE TO TRANSFER A receivables - less the total yield
SUFFICIENT NUMBER OF ADDITIONAL supplement overcollateralization
RECEIVABLES TO THE ISSUER amount for those receivables -
acquired by the issuer during the
pre-funding and reinvestment period
with the funds deposited to the
pre-funding and reinvestment account
on the date of issuance of the notes
is less than the amount deposited to
the pre-funding and reinvestment
account on the closing date, the
notes will be prepaid in the amount
of the shortfall. See "Terms of the
Notes--Mandatory Prepayment."
The issuer's ability to apply
prepayments on deferred payment
receivables to the purchase of
receivables from MART during the
pre-funding and reinvestment period
depends on the manufacture,
distribution, sale and financing of
motor vehicles by Mitsubishi Motors
Corporation and its affiliates and on
MMCA's willingness to sell additional
receivables to MART. MART will not be
able to transfer receivables to the
issuer during the pre-funding and
reinvestment period unless MMCA
originates those receivables and is
willing to sell additional
receivables to MART. MMCA mostly
finances vehicles manufactured by
Mitsubishi Motors Corporation and its
affiliates. If Mitsubishi Motors
Corporation and its affiliates
temporarily or permanently stop
manufacturing, distributing, selling
or financing motor vehicles, or if
there is a sharp decline in sales of
motor vehicles generally, then MMCA's
ability to originate receivables for
sale to MART during the pre-funding
and reinvestment period will be
adversely affected.
POTENTIAL LOSS OR PREPAYMENTS The addition of receivables during the
ON NOTES DUE TO CHANGES IN POOL pre-funding and reinvestment period may
CHARACTERISTICS change the overall characteristics of
the pool of receivables. The addition
of these receivables may increase the
risk of losses or delays in payments
on your notes or prepayments on your
notes. The credit criteria MMCA uses
to originate the receivables to be
transferred by MART to the issuer
during the pre-funding and
reinvestment period may differ from
the credit criteria used by MMCA in
originating the receivables
transferred to the issuer on the date
that the notes are issued. Any
changes in those credit criteria may
result in a higher rate of
delinquencies and losses on the
receivables or a higher rate of
prepayment than would otherwise be
the case, affecting the timing and
amount of payment of principal and
interest on your notes.
POTENTIAL LOSS ON NOTES DUE TO You may suffer a loss on your notes if
LIMITED ASSETS OF THE ISSUER the assets of the issuer are
insufficient to pay the principal
amount of the notes in full. The only
source of funds for payments on the
notes will be the assets of the
issuer. The assets of the issuer are
limited to the receivables and the
funds on deposit in the issuer's bank
accounts. The notes will not be
insured or guaranteed by MMCA,
including in its capacity as
servicer, or by MART, the indenture
trustee, the owner trustee or any
other person or entity. Consequently,
you must rely for payment of the
notes solely upon collections on the
receivables and funds on deposit in
the issuer's bank accounts. See
"Terms of the Notes--The Reserve
Account."
CLASS B NOTES HAVE GREATER You may suffer a loss on your class B
CREDIT RISK BECAUSE THE CLASS B notes because payments of interest on
NOTES ARE SUBORDINATE TO THE and principal of the class B notes
CLASS A NOTES are subordinated to payments of
interest and principal of the class A
notes.
Interest payments on the class B
notes on each payment date will be
subordinated to servicing fees due to
the servicer and interest payments on
the class A notes. Also, if a default
under the indenture occurs, interest
payments on the class B notes will be
subordinated to the payment of
principal of the class A notes.
Principal payments on the class B
notes will be fully subordinated to
principal payments on the class A
notes. No principal will be paid on
the class B notes until principal of
all of the class A notes has been
paid in full. You may experience
losses on the class B notes if the
protection provided to the class B
notes by the total yield supplement
overcollateralization amount, the
subordination of the certificates and
the funds on deposit in the reserve
account are insufficient to protect
the class B notes from losses on the
receivables.
POTENTIAL LOSS ON NOTES IN The obligors on balloon payment receiv-
CONNECTION WITH SALES OF ables will not have to pay the balloon
VEHICLES payment if they return the related
vehicle to MMCA at the end of the
term of the receivable. MMCA will
sell the returned vehicle on behalf
of the issuer and the issuer will use
the proceeds from the sale to make
payments on the notes. You may
experience delays in payments or
losses on your notes if the proceeds
from the sale of the returned
vehicles are less than the amount of
the balloon payments and if the
following are insufficient to protect
you against these delays or losses:
o the protection provided to
the class A notes by the
subordination of the class B
notes; and
o the protection provided to
all of the notes by:
o the total yield
supplement
overcollateralization
amount; and
o the subordination of the
certificates and the
funds on deposit in the
reserve account.
See "MMCA's Contract
Portfolio--Delinquency and Loss Data
of MMCA's Contracts" for information
concerning MMCA's combined portfolio
of receivables.
MMCA expects the proceeds from the
sale of a returned vehicle to be less
than the balloon payment because MMCA
sets the balloon payments higher than
its estimate of the end of term value
of the vehicle in order to stimulate
sales of a particular model. See "The
Receivables Pool--Balloon Payment
Receivables."
POTENTIAL LOSS ON NOTES IF The obligor under a balloon payment
MMCA DOES NOT REFINANCE receivable also has the option to
BALLOON RECEIVABLES refinance the balloon payment with
MMCA, if various conditions are
satisfied. MMCA will be obligated to
provide that financing to the extent
it offers vehicle financing. No
successor to MMCA as servicer will be
obligated to provide that
refinancing. If at any time MMCA no
longer makes refinancing available,
MART may contract with third parties
to do so. If a refinancing option is
not available, more obligors may
return their vehicles on the date the
related balloon payment is due
instead of refinancing the balloon
payment, and consequently more motor
vehicles may be sold by MMCA on
behalf of the issuer for prices less
than the related balloon payments.
POTENTIAL LOSS ON NOTES DUE TO Economic conditions in the states where
GEOGRAPHIC CONCENTRATION OF the obligors under the receivables reside
RECEIVABLES may affect the delinquency, loan loss
and repossession experience of the
issuer with respect to the
receivables. Based on the principal
balance of the initial pool of
receivables as of the date as of
which the receivables were acquired
by the issuer, _____% of the
receivables relate to obligors with a
billing address in California and
_____% relate to obligors with a
billing address in Texas.
Accordingly, adverse economic
conditions or other factors affecting
California or Texas could have an
especially significant effect on the
delinquency, loan loss or
repossession experience of the issuer
and may adversely affect the timing
and amount of payment of principal
and interest on your notes.
RISKS IN CONNECTION WITH AN If a default occurs under the indenture
EVENT OF DEFAULT UNDER and the maturity dates of the notes are
INDENTURE accelerated, the indenture trustee
may sell the receivables and prepay
the notes in advance of their
respective final scheduled payment
dates. You may not be able to
reinvest the principal repaid to you
earlier than expected at a rate of
return that is equal to or greater
than the rate of return on your
notes. You also may not be paid the
principal amount of your notes in
full if the assets of the issuer are
insufficient to pay the total
principal amount of the notes.
In addition, the acceleration of the
maturity dates will change the order
of priority for the payment of
principal of the different classes of
notes. After an event of default
occurs under the indenture,
distributions to the class B
noteholders become fully subordinated
to the class A noteholders. No
interest on or principal of the class
B notes will be paid after an event
of default has occurred until the
full principal balance of each class
of class A notes has been paid in
full. See "Terms of the
Notes--Principal Payments."
If the maturity dates of the notes
are accelerated following an event of
default and the indenture trustee
determines that the receivables will
not be sufficient to make scheduled
payments on the notes, all of the
noteholders, voting as a group, will
have the right to vote as to whether
the receivables should be sold. The
proportion of the principal amount of
the class B notes to the total
principal amount of the class A notes
and the class B notes will increase
as principal of the class A notes is
paid. Accordingly, the class A
noteholders may require the consent
of class B noteholders to sell the
receivables. Payments on the class A
notes could be delayed if this
consent is required and not obtained.
THE ISSUER
LIMITED PURPOSES AND LIMITED ASSETS
MMCA Auto Owner Trust 2000-2, the issuer, is a business trust
formed under the laws of the State of Delaware under a trust agreement
between MART and Wilmington Trust Company, as owner trustee. The issuer's
principal offices are in the State of Delaware in care of the owner
trustee, at Rodney Square North, 1100 North Market Street, Wilmington,
Delaware 19890-0001. The issuer will not engage in any activity other than:
o acquiring and holding the assets of the issuer, including
the receivables, and the proceeds of those assets;
o issuing the notes and the certificates;
o making payments on the notes and the certificates; and
o engaging in other activities that are necessary, suitable
or convenient to accomplish any of the other purposes
listed above or that are in any way connected with those
activities.
The issuer will be capitalized through the issuance of
$__________ of notes and $__________ of certificates. The certificates will
entitle certificateholders to receive distributions of amounts not required
to make payments on the notes or to pay expenses of the issuer. The
certificates will be subordinated to the notes to the extent described in
this prospectus. The principal amount of the certificates will be reduced
on each payment date by principal payments made on the certificates. The
certificates are not being offered by this prospectus and will be retained
by MART or an affiliate.
On the closing date, the issuer will purchase from MART retail
installment contracts originated by MMCA in connection with the financing
of automobiles and sport-utility vehicles. The purchase will be made under
a sale and servicing agreement in exchange for the proceeds of the notes
and the issuance to MART or an affiliate of the certificates. On or prior
to __________, 2001, the issuer intends to use funds deposited to the
pre-funding and reinvestment account on the closing date to acquire
pre-funded receivables. In addition, on each payment date through
__________, 2001 the issuer intends to use prepayments on deferred payment
receivables to purchase reinvestment receivables from MART. On each payment
date during this period, the issuer will apply prepayments on deferred
payment receivables, with deferral periods of between _______ and _______
days, received during the prior month to purchase additional receivables to
the extent that payment of those prepayments to noteholders would cause the
principal of the notes to be repaid at a faster rate than would be the case
if those deferred payment receivables pre-paid at the anticipated
pre-payment rate for non-deferred payment receivables. None of these
additional receivables will be deferred payment receivables.
MMCA or a successor will service the receivables, either
directly or through subservicers. The servicer will be paid the servicing
fee and will be reimbursed for any advances that are due and payable to it
out of collections from the receivables prior to distributions to
noteholders. Some other expenses of the issuer will be paid by the servicer
or by MART as provided in the sale and servicing agreement. See "The Sale
and Servicing Agreement and the Trust Agreement--Servicing Procedures,"
"--Servicing Compensation" and "Terms of the Notes--Indenture Cash Flows."
The servicer, either directly or through subservicers, will hold
the receivables and the certificates of title for the vehicles as custodian
for the indenture trustee and the issuer. However, the receivables will not
be marked or stamped to indicate that they have been sold to the issuer,
and the certificates of title for the vehicles will not be endorsed or
otherwise amended to identify the issuer as the new secured party. Under
those circumstances, the issuer may not have a perfected security interest
in the receivables and the vehicles in some jurisdictions. See "Some
Important Legal Aspects of the Receivables."
If the protection provided to the noteholders by the total yield
supplement overcollateralization amount, the subordination of the
certificates and by amounts on deposit in the reserve account is
insufficient, the noteholders would have to look for payment of the notes
to the receivables that have not defaulted, the proceeds from the
repossession and sale of vehicles which secure defaulted receivables and
the proceeds from any recourse against dealers. Absent fraud or
misrepresentation by a dealer, the issuer will not have recourse to the
dealer for a default by an obligor on a receivable originated by the
dealer. In that event, factors including the issuer's not having perfected
security interests in the vehicles in all states may affect the issuer's
ability to repossess and sell the vehicles, and thus may reduce the funds
distributed to noteholders. Losses on the receivables or other shortfalls
in the funds to be distributed to the noteholders, after withdrawals from
the accounts of the issuer, will be allocated first to the certificates and
then to the Class B notes because payments on the certificates and the
Class B notes are subordinate to the payments on the Class A notes. See
"Terms of the Notes--Indenture Cash Flows" and "Some Important Legal
Aspects of the Receivables."
CAPITALIZATION OF THE ISSUER
The following table illustrates the capitalization of the issuer
as of the closing date, after the issuance of the notes and certificates
and the sale of the notes has taken place:
Class A-1 notes..................................... $__________
Class A-2 notes..................................... $__________
Class A-3 notes..................................... $__________
Class A-4 notes..................................... $__________
Class B notes....................................... $__________
Certificates........................................ $__________
-------------
Total............................................... $__________
=============
Because the issuer will have no operating history upon its
establishment and will not engage in any business other than acquiring and
holding the receivables and related assets and issuing and distributing
payments on the notes and the certificates, no historical or pro forma
financial statements or ratios of earnings to fixed charges for the issuer
have been included in this prospectus.
THE OWNER TRUSTEE
Wilmington Trust Company is the owner trustee under the trust
agreement. Wilmington Trust Company is a Delaware banking corporation and
its principal offices are located at Rodney Square North, 1100 North Market
Street, Wilmington, Delaware 19801. MART, the servicer and their individual
affiliates may have other banking relationships with the owner trustee and
its affiliates in the ordinary course of their businesses.
PROPERTY OF THE ISSUER
Under the indenture, the notes will be secured by the property
of the issuer, which will include:
o a pool of motor vehicle retail installment sale contracts
originated during or after __________ and rights and
obligations thereunder;
o all monies due under Actuarial Receivables on or after
the related Cutoff Date and all monies received under
Simple Interest Receivables on or after the related
Cutoff Date;
o amounts and property held in or credited to the
collection account, the note payment account, the
payahead account, the reserve account and the negative
carry account;
o MART's rights in the yield supplement account and the
pre-funding and reinvestment account;
o MART's security interests in the vehicles;
o MART's rights to receive proceeds from claims on
insurance policies covering the vehicles or the obligors;
o MART's rights of recourse against the dealers under the
dealer agreements relating to the receivables;
o all of the issuer's rights under the sale and servicing
agreement and the purchase agreement, including its right
to cause MMCA and MART to repurchase receivables from the
issuer;
o all of MART's rights under the yield supplement
agreement; and
o all proceeds of the above.
MMCA'S CONTRACT PORTFOLIO
TYPES OF CONTRACTS INCLUDED IN MMCA'S CONTRACT PORTFOLIO
MMCA purchases retail installment contracts relating to new
automobiles and sport-utility vehicles manufactured or distributed by
Mitsubishi Motors and contracts relating to used vehicles manufactured or
distributed by Mitsubishi Motors or other motor vehicle manufacturers. MMCA
applies the same underwriting standards to its purchases of receivables
whether or not the related vehicle was manufactured by Mitsubishi Motors.
MMCA purchases contracts from dealers that regularly sell
contracts to MMCA and to other finance providers. MMCA purchases the
contracts from the dealers under the terms of a dealer agreement with each
dealer. Each dealer agreement requires the dealer to repurchase any
contract that it sold to MMCA for the outstanding principal balance if the
dealer breaches specified representations and warranties. Those
representations and warranties typically relate to the origination of the
contract and the security interest in the related vehicles and not to the
creditworthiness of the obligor under the contract.
UNDERWRITING STANDARDS
MMCA's underwriting standards emphasize each prospective
obligor's ability to pay and creditworthiness as well as the asset value of
the vehicle that secures the related contract.
Before purchasing a contract, MMCA reviews credit applications
from applicants that include information about each applicant's income,
residential status, monthly mortgage or rent payments, credit obligations,
bank accounts and other personal information. MMCA also reviews a credit
report from an independent credit bureau to determine the applicant's
current credit status and past credit performance. If necessary, MMCA
verifies the employment or the income of an applicant.
MMCA uses a credit scoring system and considers other factors to
reach each credit decision. The credit scoring system first assigns the
application to one of three credit segments: prime, non-prime and limited
credit experience. Each segment considers different credit application and
credit bureau report characteristics or assigns different weighting to some
characteristics that are considered by all segments. This segmentation is
based solely upon the information in the applicant's credit bureau report.
The credit scoring system identifies those aspects of an applicant's credit
report and credit application and the proposed financing arrangement that,
based upon the specific performance experience of MMCA's portfolio, are
most predictive of the probability that the applicant will pay MMCA as
agreed. MMCA considers attributes other than the credit score in its credit
decision process. These factors include:
o the ratio of income to debt;
o an applicant's equity in the vehicle;
o satisfactory existing account relationships;
o excellent recent reported credit history; and
o availability of an acceptable guarantor.
MMCA management sets limits on the percentage of credit
decisions that approve credit to applicants scoring below MMCA's credit
score minimums and on the percentage of credit decisions that deny credit
to applicants scoring above those minimums. Where the applicant is a
business entity, MMCA reviews information about bank accounts, credit
references and financial results of the business entity. In addition, MMCA
obtains and reviews any published credit reports on the business entity. In
some cases, MMCA may require an individual to guarantee the business
entity's obligation under the contract. The application, if approved, is
assigned to one of the three credit tiers reflecting its degree of credit
risk. The interest rate for the customer's account is determined by the
credit tier, with more risky accounts receiving a higher interest rate.
SERVICING AND COLLECTION PROCEDURES
MMCA measures delinquency by the number of days elapsed from the
date a payment is due under a contract, after giving effect to any
extension of that date by MMCA. MMCA considers a payment to be past due or
delinquent when the obligor fails to make at least 90% of a scheduled
payment by the date the payment is due. MMCA begins collection activities
on delinquent contracts through telephone contact based upon the credit
risk initially assigned to each obligor. Obligors considered to be weaker
credits are contacted by telephone when the contract becomes 12 days
delinquent. Obligors considered strong credits with lesser risk are
contacted when the contract becomes 20 days delinquent. Computer generated
delinquency notices are mailed to all delinquent obligors on the 12th day
of delinquency. MMCA also uses an automated system of monitoring
delinquency, which categorizes delinquent accounts into different
priorities of collection activity, based on the level of delinquency of
each account. Except for some limitations, MMCA as servicer is able to
extend the dates on which payments on receivables are due. See "The Sale
and Servicing Agreement and the Trust Agreement--Servicing Procedures."
MMCA's collectors are assigned to specific delinquent obligors
and attempt to contact each one by telephone or by letter based on the
length of delinquency and the history of the account. Repossession
procedures typically begin when a contract becomes between 60 to 75 days
delinquent. Repossession is carried out according to applicable state law
and specific procedures adopted by MMCA.
If the vehicle securing a delinquent contract is repossessed,
MMCA charges off the related delinquent contract on the date on which the
proceeds from the sale of the repossessed vehicle are applied to the
contract balance and the deficiency is determined. If the vehicle cannot be
repossessed, MMCA charges off the delinquent contract on the date on which
it determines that it will be unable to recover the vehicle from the
obligor. Any deficiencies remaining after repossession and sale of the
vehicle or after the full charge off of the related contract are pursued by
MMCA to the extent practicable and legally permitted. If a vehicle financed
with a balloon payment contract is returned to MMCA at the end of the
contract term, MMCA will not charge off any loss on sale of the vehicle,
because that loss is not a credit loss. However, MMCA does charge off
losses on the amortizing monthly installments and the balloon payments
following defaults by obligors and acceleration of the amounts owed under
the receivables. Furthermore, MMCA does not charge off collection expenses
but does charge off repossession and disposition expenses. Obligors are
contacted, and when warranted by individual circumstances, repayment
schedules are established and monitored until the deficiencies are either
paid in full or become impractical to pursue.
PHYSICAL DAMAGE INSURANCE ON MMCA'S CONTRACTS
Each contract requires the obligor to obtain physical damage
insurance covering loss or damage to the related vehicle. The dealer
agreements require that the dealers provide MMCA with written confirmation
that there is physical damage insurance acceptable to MMCA covering each
vehicle at the time that MMCA purchased the contract from the dealers.
There is no assurance that a vehicle will continue to be covered by
physical damage insurance for the entire term during which the related
contract is outstanding. In the event that MMCA determines that an obligor
did not obtain acceptable physical damage insurance covering loss or damage
to the related vehicle at any time during the term of the related contract,
MMCA may in its discretion, based in part or in whole upon the
creditworthiness of the obligor, treat the related receivable as a
defaulted receivable.
DELINQUENCY AND LOSS DATA OF MMCA'S CONTRACTS
Delinquency and loss experience of receivables may differ from
the loss experience of MMCA's combined portfolio and may change in the
future. The following tables describe the delinquency and loss experience
of MMCA with its portfolio of contracts. Those contracts include previously
sold contracts which MMCA continues to service. Delinquency and loss
experience may be influenced by a variety of economic, social, geographic
and other factors. There is no assurance that the delinquency, repossession
or loss experience of the receivables will be similar to MMCA's historical
experience described below.
HISTORICAL DELINQUENCY EXPERIENCE. MMCA tracks delinquency
information for periods of 30 to 59 days, 60 to 89 days, and 90 days or
more. As of June 30, 2000, delinquencies of between 30 and 59 days as a
percentage of contracts outstanding were about 1.57%. As of June 30, 2000,
delinquencies of between 60 and 89 days as a percentage of contracts
outstanding were about 0.28%. As of June 30, 2000, delinquencies of 90 days
or more as a percentage of contracts outstanding were about 0.05%.
Additional detail and historical information on delinquencies is shown in
the table below.
In the following delinquency experience table:
o the information includes contracts for new and used
vehicles owned by MMCA or previously sold by MMCA which
MMCA continues to service and delinquency numbers are net
of bankrupt accounts and repossessions;
o the period of delinquency is based on the number of days
more than 10% of a payment is contractually past due
after giving effect to any extension by MMCA and the
percent represents delinquent dollars as a percent of
dollars outstanding; and
o repossessions means the vehicle has been repossessed but
the sale proceeds have not yet been applied to the
contract balance.
MMCA's ability, in its capacity as servicer, to extend the dates
on which payments on receivables are due is limited. See "The Sale and
Servicing Agreement and the Trust Agreement--Servicing Procedures."
<TABLE>
<CAPTION>
DELINQUENCY EXPERIENCE
AS OF JUNE 30, AS OF DECEMBER 31,
-------------- ------------------
2000 1999 1999 1998 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Number of Contracts Outstanding at End of Period...................... 196,223 129,377 149,644 127,475 120,961
Delinquencies as a Percent of Contracts Outstanding...................
30-59 Days...................................................... 1.57% 2.96% 2.50% 3.81% 4.45%
60-89 Days...................................................... 0.28% 0.65% 0.50% 1.08% 1.58%
90 Days or More................................................. 0.05% 0.10% 0.09% 0.29% 0.52%
Repossessions as a Percent of Contracts Outstanding................... 0.31% 0.52% 0.43% 0.79% 0.96%
</TABLE>
CREDIT LOSS EXPERIENCE. The following table provides information
concerning MMCA's combined portfolio of contracts, including contracts
previously sold which MMCA continues to service. In the following table:
o the information includes contracts for new and used
vehicles owned by MMCA or previously sold by MMCA which
MMCA continues to service;
o Amount Outstanding means the remaining principal balance
of the contracts, including the principal portion of
balloon payments, plus any outstanding fees and charges
and any accrued and unpaid interest;
o averages are computed by taking a simple average of the
average for the months outstanding for each period
presented;
o Charge-offs represent the total amount due on contracts
that is determined to be uncollectible in the period,
less proceeds from disposition of related vehicles, other
than recoveries. The calculation of charge-offs for the
contracts in the combined portfolio includes both earned
but unpaid finance charges and balloon payments;
o Recoveries consist of amounts received on contracts
following the time at which the contract is charged off,
net of collection expenses;
o Number of Repossessions means the number of repossessed
vehicles in a given period;
o The information for the six-month period ended June 30,
2000 is an annualized rate and is not necessarily
indicative of a full year's actual results; and
o Amounts may not add due to rounding.
MMCA's credit loss experience is dependent upon the number of
repossessions, the amount outstanding at the time of repossession, and the
resale value of repossessed vehicles. Losses and delinquencies are affected
by, among other things, general and regional economic conditions and the
supply of and demand for vehicles.
<TABLE>
<CAPTION>
NET CREDIT LOSS AND REPOSSESSION EXPERIENCE
(DOLLARS IN THOUSANDS)
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
--------------------------- ------------------------------------
2000 1999 1999 1998 1997
-------------- ----------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Amount Outstanding..................................$ 3,472,917 $ 1,913,350 $ 2,401,448 $ 1,879,226 $ 1,729,312
Average Amount Outstanding..........................$ 2,903,790 $ 1,899,778 $ 1,954,819 $ 1,805,701 $ 1,737,477
Number of Contracts Outstanding..................... 196,223 129,377 149,644 127,475 120,961
Average Number of Contracts Outstanding............. 171,009 128,598 131,009 123,663 122,652
Charge-offs.........................................$ 19,663 $ 25,280 $ 44,494 $ 51,325 $ 72,986
Recoveries..........................................$ 3,052 $ 4,714 $ 8,114 $ 9,490 $ 13,089
Net Losses..........................................$ 16,611 $ 20,566 $ 36,380 $ 41,835 $ 59,897
Number of Repossessions............................. 1,938 2,230 4,201 4,796 7,338
Number of Repossessions as a Percent of the
Average Number of Contracts Outstanding.......... 2.27% 3.47% 3.21% 3.88% 5.98%
Net Losses as a Percent of Average Amount 1.14% 2.17% 1.86% 2.32% 3.45%
Outstanding......................................
</TABLE>
RETURNED VEHICLE LOSS EXPERIENCE ON CONTRACTS PROVIDING FOR
BALLOON PAYMENTS. The following table provides information concerning
MMCA's combined portfolio of contracts, including contracts previously sold
which MMCA continues to service. In the following table:
o the information includes vehicles returned upon the
expiration of the related contracts and vehicles returned
under MMCA's program that offers attractive terms to
owners of vehicles to prepay their accounts in connection
with their respective purchases of a new Mitsubishi
Motors vehicle;
o Return Ratio means the number of vehicles returned to
MMCA through June 30, 2000 as a percentage of the number
of balloon payment receivables scheduled to terminate in
the period indicated; and
o losses are calculated without deduction for auction or
other disposition expenses on resale.
<TABLE>
<CAPTION>
CONTRACTS PROVIDING FOR BALLOON PAYMENTS: LOSS EXPERIENCE ON RETURNED VEHICLES
FOR CONTRACTS SCHEDULED TO FOR CONTRACTS SCHEDULED
TERMINATE IN THE SIX MONTHS TO TERMINATE IN THE
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
---------------------------- -----------------------------------
2000 1999 1999 1998 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total Number of Balloon Payment Receivables............ 13,300 14,639 25,533 19,723 10,734
Total Number of Vehicles Returned to MMCA
through June 30, 2000............................ 2,582 3,606 6,135 4,757 2,928
Return Ratio........................................... 19.41% 24.63% 24.03% 24.12% 27.28%
Total Losses on Returned Vehicles Sold through
June 30, 2000.................................... $ 2,010,002 $ 4,492,139 $ 8,250,143 $ 7,734,842 $ 5,893,649
Total Number of Returned Vehicles Sold through
June 30, 2000.................................... 2,005 3,608 6,131 4,737 2,913
Average Loss per Returned Vehicle Sold through
June 30, 2000.................................... $1,002 $1,245 $1,346 $1,633 $2,023
</TABLE>
No assurance can be given that the performance of the balloon
payment receivables will be similar to the information provided in the
preceding table.
MMCA's loss experience on returned vehicles depends on:
o the number of vehicles returned;
o any programs offered by MMCA that permit the early return
of vehicles;
o the amount of the related receivables outstanding at the
time the vehicles are returned; and
o the resale value of the returned vehicles.
Because obligors on balloon payment receivables have an option
to return the vehicle to MMCA, MMCA historically has realized losses more
frequently than gains on returned vehicles. Based on results for the
contracts included in the preceding table, from 1997 through 1999, in each
year:
o an average of 27.28%, 24.12%, and 24.03%, respectively,
of all vehicles financed with balloon payment receivables
which terminated at or near the end of the scheduled
terms were not purchased by the obligor and were returned
to MMCA and subsequently sold by MMCA to a third party;
and
o of those vehicles returned to MMCA on or near the
scheduled end of term of the related contract and which
were subsequently sold by MMCA at auction, substantially
all of them were sold for a loss.
THE RECEIVABLES POOL
The issuer will purchase from MART receivables which consist of
a pool of retail installment sale contracts secured by new and used
vehicles. The property to be purchased by the issuer includes rights to
receive payments made on the receivables, as well as security interests in
the vehicles and any proceeds of the sale of the vehicles. MART will
purchase the receivables from MMCA under a purchase agreement and will
simultaneously sell the receivables to the issuer under a sale and
servicing agreement. Under the purchase agreement, MART will purchase
receivables from MMCA on the closing date and during the pre-funding and
reinvestment period. Under the sale and servicing agreement, MART will
transfer those receivables to the issuer on the date it purchases them from
MMCA. The receivables will be selected based on the criteria specified in
the sale and servicing agreement and described in this prospectus.
The initial receivables have a total principal balance of
$__________, calculated as of the initial Cutoff Date. Balloon payments
comprised _____% of the total principal balance of initial receivables.
Deferred payment receivables comprised _____% of the total principal
balance of the initial receivables.
None of the receivables transferred to the issuer will have a
final scheduled maturity later than __________.
On any date after __________, 2000, the principal balance of the
receivables will equal the total principal balance of the receivables at
the end of the preceding month less the sum of the following amounts
received after the end of the preceding month through that date:
o for Simple Interest Receivables, the principal payments
received from obligors;
o for Actuarial Receivables, the principal payments
received from obligors that were due during that month;
o amounts to be remitted by the servicer or MART as the
purchase price for receivables they are required to
repurchase from the issuer;
o advances made by the servicer; and
o the principal balance of receivables which defaulted
during that month.
On any date from the closing date through __________, 2000, the
principal balance of the receivables will equal the total principal balance
of the receivables as of the initial Cutoff Date less the sum of the
preceding amounts received after the end of __________, 2000, through that
date.
SELECTION CRITERIA
The receivables will be purchased by MMCA from dealers in the
ordinary course of business under MMCA's underwriting standards. The
receivables were selected and will be selected from MMCA's portfolio by
several criteria, including:
o each receivable is secured by a new or used vehicle;
o each receivable has an annual percentage rate of at least
0% and not more than 30%;
o each receivable had not more than 60 payments remaining
until the maturity of the receivable;
o each receivable had an original principal balance, net of
unearned pre-computed finance charges, of not more than
$60,000 and a remaining principal balance of not less
than $100 as of the related Cutoff Date;
o no receivable was more than 30 days delinquent for more
than 10% of a payment as of the related Cutoff Date;
o no receivable had been pre-paid by more than six monthly
payments as of the related Cutoff Date;
o no vehicle had been repossessed as of the related Cutoff
Date;
o each receivable is an installment sale contract;
o each receivable is an Actuarial Receivable or a Simple
Interest Receivable, and may also be a balloon payment
receivable;
o each receivable was originated during or after
__________;
o if the first payment on a receivable was deferred, the
first payment on that receivable will be due not later
than __ days after the date of origination of that
receivable;
o no receivable was due from an obligor who, as of the
related Cutoff Date, was the subject of a proceeding
under the United States Bankruptcy Code; and
o each receivable was originated in the United States by a
dealer for the consumer or commercial sale of a vehicle
in the ordinary course of that dealer's business.
During the pre-funding and reinvestment period, MART will
transfer separate groups of pre-funded receivables to the issuer.
Each group of pre-funded receivables transferred to the trust
during the pre-funding and reinvestment period will have the following
characteristics:
o the weighted average number of payments remaining until
maturity of the receivables in that group will not be
more than ___ payments;
o the aggregate balloon payments of the receivables in that
group as a percentage of the aggregate principal balance
of the receivables in that group will not be more than
__%;
o if the first payment on a receivable in that group was
deferred, the deferral period will not extend for more
than 216 days after origination of that receivable;
o the aggregate principal balance of the limited credit
experience receivables in that group as a percentage of
the aggregate principal balance of the receivables in
that group will be not more than __%; and
o the aggregate principal balance of the receivables in
that group originated with a deferred first payment as a
percentage of the aggregate principal balance of the
receivables in that group will be not more than __%.
In addition, on each payment date during the pre-funding and
reinvestment period, the issuer intends to use prepayments on receivables
originated with a deferred first payment received during the prior month to
purchase reinvestment receivables. Each group of reinvestment receivables
acquired by the issuer during the pre-funding and reinvestment period with
prepayments on deferred payment receivables will have the following
characteristics:
o the weighted average number of payments remaining until
the maturity of the receivables in that group will not be
more than ___ payments;
o the total balloon payments of the receivables in that
group as a percentage of the total principal balance of
the receivables in that group will not be more than
_____%;
o none of the receivables in that group will be deferred
payment receivables; and
o the total principal balance of the limited credit
experience receivables in that group as a percentage of
the total principal balance of the receivables in that
group will not be more than ___%.
The receivables transferred to the issuer during the pre-funding
and reinvestment period will have no required characteristics except for
the criteria described in the preceding paragraph and in "The Sale and
Servicing Agreement and the Trust Agreement-Sale and Assignment."
Following each transfer, the aggregate characteristics of the
entire pool of receivables, including the composition of the receivables,
the geographic distribution of the receivables and the distribution by the
annual percentage rate of the receivables described in the following
tables, may vary from those of the receivables transferred to the issuer on
the closing date. Following the end of the pre-funding and reinvestment
period, the issuer will file a report with the Securities and Exchange
Commission on Form 8-K containing information comparable to that contained
in the tables below regarding the aggregate characteristics of the entire
pool of receivables.
CHARACTERISTICS OF THE RECEIVABLES POOL
COMPOSITION. The following tables set forth the composition of
the initial receivables calculated as of the initial Cutoff Date. The
initial receivables contained balloon payment receivables with balloon
payments of approximately _____% of the total principal balance of the
initial receivables on the initial Cutoff Date. A balloon payment
receivable may be either a Simple Interest Receivable or an Actuarial
Receivable. The initial receivables contained deferred payment receivables
of approximately _____% of the total principal balance of the initial
receivables on initial Cutoff Date. All deferred payment receivables are
Simple Interest Receivables. No deferred payment receivable is also a
balloon payment receivable. The Average Balloon Payment Principal Balance
is based on balloon payment receivables balances only. See "--Balloon
Payment Receivables."
<TABLE>
<CAPTION>
COMPOSITION OF THE INITIAL RECEIVABLES AS OF THE INITIAL CUTOFF DATE
<S> <C> <C>
Balance of Initial Receivables..................................................$
Level Pay Balance of Initial Receivables........................................$
Balloon Payment Balance of Initial Receivables..................................$
Deferred Payment Balance of Initial Receivables.................................$
Number of Initial Receivables...................................................
Average Principal Balance.......................................................$
(Range)...................................................................$ to $
Average Original Amount Financed................................................$
(Range)...................................................................$ to $
Average Level Pay Balance.......................................................$
(Range)...................................................................$ to $
Average Balloon Payment Principal Balance.......................................$
(Range)...................................................................$ to $
Average Deferred Payment Principal Balance......................................$
(Range)...................................................................$ to $
Average Balloon Payment Principal Balance as a Percentage of the
Average Principal Balance of the Balloon Payment Receivables in the
Initial Receivables.......................................................
Weighted Average Annual Percentage Rate.........................................
(Range)...................................................................$ to $
Weighted Average Original Number of Payments....................................
(Range)...................................................................$ to $
Weighted Average Remaining Number of Payments..................................
(Range)...................................................................$ to $
</TABLE>
GEOGRAPHIC DISTRIBUTION. The following table shows the
geographic distribution of the principal balance of the initial
receivables, calculated as of the initial Cutoff Date. Geographic
distribution is based on the current billing address of the obligors.
Percentages may not add to 100% due to rounding.
<TABLE>
<CAPTION>
GEOGRAPHIC DISTRIBUTION OF THE INITIAL RECEIVABLES AS OF THE INITIAL CUTOFF DATE
PERCENTAGE OF PERCENTAGE OF
PRINCIPAL BALANCE PRINCIPAL BALANCE
OF INITIAL OF INITIAL
STATE RECEIVABLES STATE RECEIVABLES
----- ----------- ----- -----------
<S> <C> <C> <C>
Alabama............................ % Montana.............................. %
Alaska............................. Nebraska.............................
Arizona............................ Nevada...............................
Arkansas........................... New Hampshire........................
California......................... New Jersey...........................
Colorado........................... New Mexico...........................
Connecticut........................ New York.............................
Delaware........................... North Carolina.......................
District of Columbia............... North Dakota.........................
Florida............................ Ohio.................................
Georgia............................ Oklahoma.............................
Hawaii............................. Oregon...............................
Idaho.............................. Pennsylvania.........................
Illinois........................... Puerto Rico..........................
Indiana............................ Rhode Island.........................
Iowa............................... South Carolina.......................
Kansas............................. South Dakota.........................
Kentucky........................... Tennessee............................
Louisiana.......................... Texas................................
Maine.............................. Utah.................................
Maryland........................... Vermont..............................
Massachusetts...................... Virginia.............................
Michigan........................... Washington...........................
Minnesota.......................... West Virginia........................
Mississippi........................ Wisconsin............................
Missouri........................... Wyoming..............................
Other................................
-------------
Total 100.00%
=============
</TABLE>
DISTRIBUTION BY ANNUAL PERCENTAGE RATE. The following table
shows the distribution by annual percentage rate of the principal balance
of the initial receivables, calculated as of the initial Cutoff Date. The
Principal Balance of Initial Receivables means the remaining principal
balance for Simple Interest Receivables, and the present value of scheduled
remaining payments for Actuarial Receivables discounted at a rate equal to
the annual percentage rate for those receivables. Percentages may not add
to 100% due to rounding.
<TABLE>
<CAPTION>
DISTRIBUTION BY ANNUAL PERCENTAGE RATE OF THE INITIAL RECEIVABLES AS OF THE INITIAL CUTOFF DATE
PERCENTAGE
PRINCIPAL OF PRINCIPAL
NUMBER OF BALANCE OF BALANCE OF
INITIAL INITIAL INITIAL
ANNUAL PERCENTAGE RATE RANGE (%) RECEIVABLES RECEIVABLES RECEIVABLES
-------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
---------- ----------- -----------
Total............................... $ 100.00%
========== =========== ===========
</TABLE>
Based on the principal balance of the initial receivables as of
__________, 2000:
o approximately _____% of the total number of initial
receivables, or approximately _____% of the principal
balance of the initial receivables, relate to new
vehicles, substantially all of which were manufactured or
distributed by Mitsubishi Motors;
o approximately _____% of the total number of initial
receivables, or approximately _____% of the principal
balance of the initial receivables, relate to program
vehicles, substantially all of which were manufactured or
distributed by Mitsubishi Motors; and
o approximately _____% of the total number of initial
receivables, or approximately _____% of the principal
balance of the initial receivables, relate to used
vehicles, substantially all of which were manufactured or
distributed by Mitsubishi Motors and approximately _____%
of the total number of initial receivables, or
approximately _____% of the principal balance of the
initial receivables, relate to other used vehicles.
Program vehicles are used vehicles which dealers have acquired under a
remarketing program administered by MMCA. This program allows dealers to
offer to purchasers of program vehicles the same rate of interest and terms
offered to new car buyers. Program vehicles are primarily vehicles returned
to MMCA by rental car companies, but also include off-lease MMCA company
and employee lease vehicles and MMCA pool cars.
PAYMENT METHODS
Simple Interest Receivables account for approximately _____% of
the principal balance, calculated as of the initial Cutoff Date, of the
initial receivables. A Simple Interest Receivable provides for the
amortization of the loan over a series of fixed level monthly installments.
Each monthly payment under a Simple Interest Receivable consists of an
installment of interest which is equal to (1) the principal balance of the
receivable actually outstanding, as opposed to scheduled, at the time of
calculation multiplied by (2) the stated annual percentage rate, and
further multiplied by (3) the period elapsed, as a fraction of a calendar
year, since the preceding payment of interest was made. As payments are
received under a Simple Interest Receivable, the amount received is applied
first to interest accrued to the date of payment and the balance is applied
to reduce the unpaid principal balance. Accordingly, if an obligor pays a
fixed monthly installment before the date on which the installment is due,
the interest portion of the payment will be less than it would have been
had the payment been made as scheduled, and the principal portion of the
payment will be correspondingly greater. Conversely, if an obligor pays a
fixed monthly installment after the date on which it is due, the interest
portion of the payment will be greater than it would have been had the
payment been made when due and the principal portion of the payment 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. In the case of a balloon
payment receivable that is also a Simple Interest Receivable, the remaining
principal balance on the due date of the receivable may be greater or less
than the scheduled balloon payment on the receivable. In November 1996,
MMCA began phasing out Actuarial Receivables in favor of Simple Interest
Receivables.
Actuarial Receivables, excluding Actuarial Receivables based on
the Rule of 78's, account for approximately _____% of the principal
balance, calculated as of the initial Cutoff Date, of the initial
receivables. An Actuarial Receivable provides for the amortization of the
loan over a series of fixed level monthly installments. Each monthly
installment is deemed to consist of an amount of interest equal to
one-twelfth of the stated annual percentage rate of the loan multiplied by
the scheduled principal balance. The remainder of the scheduled payment is
applied to principal. No adjustment typically is made in the event of early
or late payments, although in the case of a late payment the obligor may
have to pay a late payment charge.
Balloon payment receivables account for approximately _____% of
the principal balance, calculated as of the initial Cutoff Date, of the
initial receivables. A balloon payment receivable may be either a Simple
Interest Receivable or an Actuarial Receivable. See "--Balloon Payment
Receivables" below.
The remainder of the initial receivables transferred to the
issuer on the closing date were Simple Interest Receivables that have a cap
on the total amount of the interest to be paid over the term of the
receivable or Actuarial Receivables based on the Rule of 78's. If the
obligor on a capped receivable consistently makes scheduled payments after
the date on which the scheduled payments are due, the amount of interest
accrued over the term of the loan will be less than would be the case in
the absence of the cap. If, as a result of those delinquencies, the total
amount of interest paid under the receivable reaches the lifetime cap, no
further interest will accrue and each scheduled payment due later will be
applied to the reduction of principal. The amount of any refund due to the
obligor on a prepayment in full of a Rule of 78's receivable may be
different than the amount of the refund if the receivable were not a Rule
of 78's receivable.
DEFERRED PAYMENT RECEIVABLES
Deferred payment receivables account for approximately _____% of
the principal balance, calculated as of the initial Cutoff Date, of the
initial receivables. None of the deferred payment receivables are balloon
payment receivables. The obligor on a deferred payment is not required to
make any payments of interest or principal for a period specified in the
related contract. On and after the date the first payment is due, the
obligor is required to make monthly payments of interest and principal
under the receivable. The effect of the deferment of the first payment is
to increase the term of the receivable for the period of the deferment. A
receivable ceases to be a deferred payment receivable on the last day of
the calendar month preceding the calendar month in which the first
scheduled payment on that receivable becomes due.
Of the initial receivables originated with a deferred first payment:
(1) $__________total principal balance of those receivables
were originated with a deferral period of between _____
and _____ days. $____ of these receivables had a first
payment due prior to the initial Cutoff Date.
(2) $__________total principal balance of those receivables
were originated with a deferral period of between _____
and _____ days. $____ of these receivables had a first
payment due prior to the initial Cutoff Date.
(3) $__________total principal balance of those receivables
were originated with a deferral period of between _____
and _____ days. $____ of these receivables had a first
payment due prior to the initial Cutoff Date.
(4) $__________total principal balance of those receivables
had a deferral period of 90 days or less. $_____ of these
receivables had a first payment due prior to the initial
Cutoff Date.
BALLOON PAYMENT RECEIVABLES
Balloon payment receivables provide for the receivable to
amortize over a series of equal monthly installments, but also provide for
a substantially larger final scheduled payment of principal, together with
one month's interest. This final payment is known as a balloon payment and
is due at the end of the term of the receivable. MMCA sets the balloon
payment for a particular model of vehicle at the time the contract is
entered into.
The actual amount owed by an obligor at the end of term of a
balloon payment receivable may be different than the scheduled balloon
payment provided in the contract. If a balloon payment receivable is a
Simple Interest Receivable, the actual amount owed by the obligor at the
end of term of the receivable may be different than the scheduled balloon
payment provided in the related contract as a result of:
o early payments by the obligor during the term of the
receivable which will reduce the amount owed;
o late payments by the obligor during the term of the
receivable which will increase the amount owed; and
o additional fees and charges that may be owed by the
obligor on the contract, including late charges and any
other miscellaneous charges, which will increase the
amount owed.
If a balloon payment receivable is an Actuarial Receivable, the
actual amount owed by the obligor at the end of term of the receivable will
be the scheduled balloon payment set forth in the related contract,
increased by any additional fees and charges that may be owed by the
obligor on the contract, including late charges and other miscellaneous
charges.
Upon maturity of a balloon payment receivable, the obligor may
satisfy the amount it owes by:
o paying the actual balloon payment due under the contract;
o subject to various conditions, refinancing the actual
balloon payment due under the contract; or
o returning the vehicle to MMCA for a credit against the
actual amount due under the contract equal to the
scheduled balloon payment provided in the contract, less
charges for excess wear and tear and excess mileage and a
disposition fee payable to the servicer, and paying the
excess, if any, of the actual amount due under the
contract over the amount credited by MMCA for the
returned vehicle.
If the obligor returns the vehicle to MMCA, acting on behalf of
the issuer, it is anticipated that the issuer will not receive the full
amount of the balloon payment provided in the contract upon the subsequent
sale of the vehicle by MMCA on behalf of the issuer. MMCA sets the balloon
payment for a particular model at the time of origination of the related
contract by reference to its estimate of the wholesale market value of the
model at the end of the contract's term. However, in connection with sales
incentive programs for particular models, MMCA may increase the size of the
balloon payment to above its estimate of the wholesale market value at the
end of the contract's term in order to stimulate sales of particular models
by reducing the amount of the monthly payments under the contract. As a
result, the balloon payment provided in the contract may be higher than the
wholesale market value of the vehicle at the end of term of the contract.
If there is a total loss of the vehicle caused by its theft or
physical damage, MMCA does not require the obligor under a receivable
providing for a balloon payment to pay the difference between the amount
owed on the receivable as of the date of the total loss and the insurance
proceeds, including payment by the obligor of any applicable deductible,
received for the vehicle. MMCA will instead reduce the principal amount of
the balloon payment by that amount.
If the full amount of a balloon payment is not collected upon
sale of the vehicle, the shortfall will reduce the Available Funds
available to pay the Total Required Payment and to make any required
transfers from the collection account to the reserve account which may
reduce the amount available to pay interest on and principal of the notes.
None of MMCA, the servicer, MART or the issuer will have any recourse to
the obligor for any shortfall, nor will MMCA, the servicer or MART be
obligated to pay any shortfall to the issuer.
Obligors may prepay the receivables in full at any time.
Prepayments may also result from liquidations due to default, the receipt
of insurance proceeds after destruction or theft of the vehicle and
purchases of the receivable by MART or the servicer as a result of uncured
breaches of representations and warranties in the sale and servicing
agreement. See "--Maturity and Prepayment Considerations."
DEFAULTED RECEIVABLES
A receivable, other than a receivable which has been purchased
from the issuer by MART or the servicer, will be considered to have
defaulted if:
o the related vehicle has been repossessed and liquidated;
o more than 10% of a scheduled payment is 120 or more days
past due as of the end of the month in which the payment
was due and the servicer has not repossessed the related
vehicle; or
o the servicer has determined, in accordance with its
customary standards, policies and procedures, that
eventual payment in full, excluding charges for excess
wear and tear or excess mileage, of the receivable is
unlikely and has either repossessed and liquidated the
related vehicle or repossessed and held the related
vehicle in its repossession inventory for a period which
may not exceed 90 days.
MATURITY AND PREPAYMENT CONSIDERATIONS
The weighted average life of the notes will be influenced by the
rate of payment of principal balances of the receivables. This payment may
be in the form of scheduled payments or prepayments. Prepayments in full on
Actuarial Receivables and Simple Interest Receivables and partial
prepayments on Simple Interest Receivables will have the effect of reducing
the weighted average life of the notes. Delinquencies by obligors under
Simple Interest Receivables and extensions and payment deferrals on any
type of receivable will have the effect of increasing the weighted average
life of the notes. "Prepayments" for these purposes includes the following
circumstances:
o Prepayments in full and partial prepayments. The obligors
may prepay the receivables in full or in part.
o Mandatory prepayments. An obligor may be required to
prepay a receivable in full because of, among other
things, the sale, insured loss or other disposition of
the related vehicle or the receivable becoming defaulted.
o Repurchases of the receivables by MART or the servicer.
MART or the servicer may be required to repurchase a
receivable from the issuer if breaches of representations
and warranties occur that materially and adversely affect
the receivable.
In light of the above considerations, there can be no assurance
as to the amount of principal payments that will be made on the notes on
each payment date. The amount will depend, in part, on the amount of
principal collected on the receivables during the preceding calendar month.
Any reinvestment risks resulting from a faster or slower incidence of
prepayment of receivables will be borne entirely by the noteholders.
In addition, if MMCA or any affiliate of MMCA decides to
implement a program that encourages prepayments, prepayments may increase.
MMCA currently maintains a program that offers attractive terms to obligors
to prepay their accounts and return their vehicles early if they purchase
or lease a new vehicle manufactured by Mitsubishi Motors or an affiliate.
While this program may encourage prepayments, the effect on prepayments of
the program and other programs like it cannot be predicted.
Obligors of receivables that allow a deferred first payment, for
example, may prepay their receivables in full or in part at any time.
Obligors of these receivables may refinance their vehicles with other
lenders at more attractive terms, such as lower interest rates, and use the
proceeds to prepay in full the receivable transferred to the issuer.
Prepayments on the receivables can be measured relative to a
prepayment standard or model. This prospectus uses the Absolute Prepayment
Model--ABS. ABS assumes that a percentage of the receivables in a pool will
be repaid each month. It also assumes that all the receivables are the same
size and amortize at the same rate. The final assumption is that each
receivable will either be paid as scheduled or be prepaid in full in any
given month. For example, in a pool of receivables originally containing
10,000 receivables, a 1% ABS rate means that 100 receivables prepay each
month. ABS does not purport to be an historical description of prepayment
experience or a prediction of the anticipated rate of prepayment of any
pool of receivables, including the receivables purchased by the issuer.
Approximately _____% of the principal balance of the receivables
transferred to the issuer on the closing date, calculated as of the initial
Cutoff Date, consists of balloon payments. Accordingly, a portion of the
principal amount of the notes is expected to be paid from balloon payments.
All of the balloon payments are due between __________, 2000 and
__________, 2005. The average principal balance of those balloon payments
is $__________, which is approximately _____% of the average principal
balance of those receivables.
The tables relating to ABS captioned "Projected Class A-1 Note
Amortization", "Projected Class A-2 Note Amortization", "Projected Class
A-3 Note Amortization," "Projected Class A-4 Note Amortization and
"Projected Class B Note Amortization" assume that:
o the Yield Supplement Amount is deposited into the
collection account each period;
o the Negative Carry Amount is deposited into the
collection account each period;
o amount deposited into the pre-funding and reinvestment
account on the closing date is applied in its entirety to
the purchase of the pre-funded receivables on or before
__________, 2000 and to make the related deposits to the
reserve account, the yield supplement account and the
payahead account;
o receivables prepay in full at the specified constant
percentage of ABS monthly, with no defaults, losses or
repurchases;
o if the first payment on a receivable is deferred, no
prepayments are made on that receivable prior to the date
the first payment on that receivable is due;
o each scheduled monthly payment on the receivables is made
on the last day of each month, and each month has 30
days;
o payments on the notes are made on each payment date,
which is assumed to be the 15th day of each applicable
month;
o the first date on which receivables will be transferred
to the issuer is the closing date;
o the servicer exercises its option to purchase the
receivables;
o MMCA's program to manage end-of-term risks and mitigate
returned vehicle losses by offering attractive terms to
obligors to prepay their receivables and return their
vehicle early, if they purchase a new Mitsubishi Motors
vehicle, does not extend to the receivables; and
o the total yield supplement overcollateralization amount
of the hypothetical pools as described below is adjusted
to equal $__________, which is the total yield supplement
overcollateralization amount of the initial receivables
as of the Initial Cutoff Date.
In addition, on each payment date during the pre-funding and
reinvestment period, the issuer intends to use prepayments on deferred
payment receivables -- with deferred periods of between ___ and ___ days --
received during the prior month to purchase reinvestment receivables from
MART, to the extent that payment of those prepayments as principal of the
notes would cause the principal of the notes to be repaid at a faster rate
than would be the case if these deferred payment receivables pre-paid at
the anticipated pre-payment rate for non-deferred payment receivables.
On each payment date during the pre-funding and reinvestment
period, the issuer intends to purchase reinvestment receivables having a
total adjusted principal balance equal to the Required Reinvestment Amount
for that payment date. The Required Reinvestment Amount for any payment
date will be determined by comparing:
o the adjusted principal balance of the deferred payment
receivables at the end of the prior month to the Minimum
Adjusted Principal Balance of Deferred Payment
Receivables for that month; and
o the adjusted principal balance of all of the receivables
owned by the issuer on the last day of the prior month to
the Minimum Adjusted Principal Balance of Receivables for
that month.
The Minimum Adjusted Principal Balance of Deferred Payment
Receivables has been calculated based on the hypothetical pools provided
below assuming the deferred payment receivables prepay at a rate equal to
[0.5 ABS] during the period from the closing date through __________, 2000
and [2.0 ABS] during the period from __________, [2001] though __________,
[2002]. The Minimum Adjusted Principal Balance of Receivables has been
calculated based on the hypothetical pools provided below assuming that the
receivables pool as a whole prepays at a rate equal to [1.3 ABS]. The
effect of these assumptions is that the issuer will use pre-payments on
deferred payment receivables received in any calendar month during the
pre-funding and reinvestment period to purchase reinvestment receivables to
the extent that pre-payments on deferred payment receivables in excess of
[0.5 ABS] during the period from the closing date though __________, 2000
and [2.0 ABS] during the period from __________, [2001] though __________,
[2001] would cause the notes to pre-pay at a faster rate than would be the
case if the receivables pool as a whole pre-paid at a rate of [1.3 ABS].
However, the issuer's obligation to purchase reinvestment
receivables on any payment date during the pre-funding and reinvestment
period will be subject to the availability of receivables satisfying the
selection criteria in the sale and servicing agreement. Accordingly, the
total adjusted principal balance of reinvestment receivables which the
issuer will be able to purchase on any payment date during the pre-funding
and reinvestment period will be the lesser of:
o the total adjusted principal balance of receivables
available for purchase on that payment date that satisfy
the selection criteria in the sale and servicing
agreement; and
o the Required Reinvestment Amount for that payment date.
If on the business day before any payment date in the
pre-funding and reinvestment period MART does not have receivables that
satisfy the selection criteria in the sale and servicing agreement with a
total adjusted principal balance equal to the Required Reinvestment Amount
for that payment date, the excess cash either will be deposited into the
pre-funding and reinvestment account until sufficient receivables are
available for purchase or paid to the noteholders as an early payment of
principal. The excess cash will be held in the pre-funding and reinvestment
account only if the amount on deposit in the negative carry account would
at least equal the maximum amount specified for that account after giving
effect to the deposit of the excess cash to the pre-funding and
reinvestment account. If there is a shortfall in the funds in the negative
carry account, MMCA has the option, but not the obligation, to deposit
funds in the amount of the shortfall into the negative carry account.
Although MMCA intends to make these deposits, if MMCA chooses not to do so,
the excess cash will be paid to the noteholders as an early repayment of
principal on the notes.
The ABS tables indicate the projected weighted average life of
the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class
A-4 Notes and the Class B Notes and set forth the percent of the initial
principal amount of the Class A-1 Notes, the Class A-2 Notes, the Class A-3
Notes, the Class A-4 Notes and the Class B Notes that is projected to be
outstanding after each of the payment dates shown at various constant ABS
percentages.
For purposes of creating the ABS tables, the receivables have
been aggregated into different hypothetical pools.
The initial receivables have been divided into [16] hypothetical
pools made up of receivables that have equal scheduled monthly payments
that fully amortize those receivables. Pools [13] through [16] include
receivables with no payments due for an initial period of [6] months and
which then amortize over the weighted average number of payments remaining
until the maturity of the receivable. These hypothetical pools have the
following characteristics:
<TABLE>
<CAPTION>
WEIGHTED
WEIGHTED AVERAGE
AVERAGE REMAINING LENGTH OF
LEVEL TOTAL WEIGHTED ORIGINAL NUMBER NUMBER DEFERMENT
PAYMENT PRINCIPAL AVERAGE ANNUAL OF PAYMENTS OF PAYMENTS PERIOD
POOL BALANCE PERCENTAGE RATE (IN MONTHS) (IN MONTHS) (IN MONTHS)
--------------- -------------- ----------------- ---------------- ------------- -----------
<S> <C> <C>
1 $ %
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
</TABLE>
The initial receivables also have been divided into six
hypothetical pools made up of balloon payment receivables. These
hypothetical pools have the following characteristics:
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
WEIGHTED AVERAGE AVERAGE
BALLOON TOTAL AVERAGE ORIGINAL NUMBER REMAINING NUMBER
PAYMENT PRINCIPAL ANNUAL OF PAYMENTS OF PAYMENTS
POOL BALANCE PERCENTAGE RATE (IN MONTHS) (IN MONTHS)
--------- --------------- ----------------- --------------- ------------------
<S> <C> <C> <C>
1 $ %
2
3
4
5
6
</TABLE>
The ABS tables also assume that the pre-funded receivables to be
transferred to the issuer during the pre-funding and reinvestment period
occur in two groups. The first group, with an assumed total principal
balance of $______________, are assumed to be transferred to the issuer on
______ __, 2001. The second group, with an assumed total principal balance
of $_____________, are assumed to be transferred to the issuer on ______
__, 2001.
The receivables to be transferred to the issuer on ______ __,
2001 have been divided into [five] hypothetical pools made up of
receivables that have equal monthly payments that fully amortize those
receivables. Pools _____ through _____ include receivables with no payments
due for an initial period of _____ months and which then amortize over the
weighted average number of payments remaining until the maturity of the
receivable. These hypothetical pools have the following characteristics:
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE AVERAGE
ORIGINAL REMAINING LENGTH OF
LEVEL AGGREGATE WEIGHTED NUMBER OF NUMBER OF DEFERMENT
PAYMENT PRINCIPAL AVERAGE ANNUAL PAYMENTS PAYMENTS PERIOD
POOL BALANCE PERCENTAGE RATE (IN MONTHS) (IN MONTHS) (IN MONTHS)
---------- ----------- --------------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
1 ......................... $ %
2 .........................
3 .........................
4 .........................
5 .........................
</TABLE>
The receivables to be transferred to the issuer on ______ __,
2001 also have been divided into [four] hypothetical pools made up of
balloon payment receivables. These hypothetical pools have the following
characteristics:
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE AVERAGE
ORIGINAL REMAINING
BALLOON AGGREGATE WEIGHTED NUMBER OF NUMBER OF
PAYMENT PRINCIPAL AVERAGE ANNUAL PAYMENTS PAYMENTS
POOL BALANCE PERCENTAGE RATE (IN MONTHS) (IN MONTHS)
--------- ------------ ---------------- ------------ -------------
<S> <C> <C>
1 ....................... $ %
2 .......................
3 .......................
4 .......................
</TABLE>
The receivables to be transferred to the issuer on ______ __,
2001 have been divided into five hypothetical pools made up of receivables
that have equal monthly payments that fully amortize those receivables.
Pools _____ through _____ include receivables with no payments due for an
initial period of _____ months and which then amortize over the weighted
average number of payments remaining until the maturity of the receivable.
These hypothetical pools have the following characteristics:
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE AVERAGE
ORIGINAL REMAINING LENGTH OF
LEVEL AGGREGATE WEIGHTED NUMBER OF NUMBER OF DEFERMENT
PAYMENT PRINCIPAL AVERAGE ANNUAL PAYMENTS PAYMENTS PERIOD
POOL BALANCE PERCENTAGE RATE (IN MONTHS) (IN MONTHS) (IN MONTHS)
-------- ------------ --------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
1 .................. $ %
2 ..................
3 ..................
4 ..................
5 ..................
</TABLE>
The receivables to be transferred to the trust on ______ __,
2001 also have been divided into [four] hypothetical pools made up of
balloon payment receivables. These hypothetical pools have the following
characteristics:
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE AVERAGE
ORIGINAL REMAINING
BALLOON AGGREGATE WEIGHTED TERM TO TERM TO
PAYMENT PRINCIPAL AVERAGE ANNUAL MATURITY MATURITY
POOL BALANCE PERCENTAGE RATE (IN MONTHS) (IN MONTHS)
--------- ----------- --------------- ----------- -----------
<S> <C> <C> <C> <C>
1 ..................... $ %
2 .....................
3 .....................
4 .....................
</TABLE>
The actual characteristics and performance of the receivables
transferred to the issuer will differ from the assumptions used in
constructing the ABS tables. The assumptions used are hypothetical and have
been provided only to give a general sense of how the principal cash flow
might behave under varying prepayment scenarios. It is very unlikely that
the receivables will prepay at the same level of ABS. Moreover, the diverse
terms of receivables within each of the hypothetical pools could produce
slower or faster principal distributions than indicated in the ABS tables.
In addition, the characteristics of the initial receivables and the
pre-funded receivables may be different from any reinvestment receivables
transferred to the issuer during the pre-funding and reinvestment period.
Any difference between those assumptions and the actual characteristics and
performance of the receivables, or actual prepayment experience, will
affect the percentages of initial balances outstanding over time, as well
as collections of interest and principal of receivables. See "--Selection
Criteria."
THE ABS TABLES HAVE BEEN PREPARED BASED ON THE ASSUMPTIONS
DESCRIBED ABOVE AND SHOULD BE READ IN CONJUNCTION WITH THOSE ASSUMPTIONS.
<TABLE>
<CAPTION>
PROJECTED CLASS A-1 NOTE AMORTIZATION
PERCENT OF INITIAL NOTE PRINCIPAL AMOUNT
CLASS A-1 NOTE BALANCE (%)
--------------------------------------------------------------
0.5% 1.0% 1.3% 1.5% 2.0%
---- ---- ---- ---- ----
PAYMENT DATE ABS ABS ABS ABS ABS
------------ --- --- --- --- ---
<S> <C> <C> <C> <C> <C>
0% 0% 0% 0% 0%
-------- ------ ------- ------- -------
Weighted Average Life
(yrs)..................
</TABLE>
<TABLE>
<CAPTION>
PROJECTED CLASS A-2 NOTE AMORTIZATION
PERCENT OF INITIAL NOTE PRINCIPAL AMOUNT
CLASS A-2 NOTE BALANCE (%)
-----------------------------------------------------------------
1.0% 1.5% 2.0%
---- ---- ----
PAYMENT DATE 0.5% ABS ABS 1.3% ABS ABS ABS
------------ -------- --- -------- --- ---
<S> <C> <C> <C> <C> <C>
0% 0% 0% 0% 0%
-------- ------ ----- ------ -----
Weighted Average Life (yrs).......
</TABLE>
<TABLE>
<CAPTION>
PROJECTED CLASS A-3 NOTE AMORTIZATION
PERCENT OF INITIAL NOTE PRINCIPAL AMOUNT
CLASS A-3 NOTE BALANCE (%)
----------------------------------------------------------------
PAYMENT DATE 0.5% ABS 1.0% 1.3% 1.5% 2.0%
------------ --------- ABS ABS ABS ABS
---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
0% 0% 0% 0% 0%
---------- -------- ------- -------- -----
Weighted Average Life (yrs)............
</TABLE>
<TABLE>
<CAPTION>
PROJECTED CLASS A-4 NOTE AMORTIZATION
PERCENT OF INITIAL NOTE PRINCIPAL AMOUNT
CLASS A-4 NOTE BALANCE (%)
---------------------------------------------------------------------
PAYMENT DATE 0.5% ABS 1.0% ABS 1.3% ABS 1.5% ABS 2.0% ABS
------------ -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
0% 0% 0% 0% 0%
-------- -------- ------- ------ --------
Weighted Average Lives (yrs)...............
</TABLE>
<TABLE>
<CAPTION>
PROJECTED CLASS B NOTE AMORTIZATION
PERCENT OF INITIAL NOTE PRINCIPAL AMOUNT
CLASS B NOTE BALANCE (%)
-----------------------------------------------------------
PAYMENT DATE 0.5% ABS 1.0% ABS 1.3% ABS 1.5% ABS 2.0% ABS
------------ -------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
0% 0% 0% 0% 0%
--------- -------- ------ -------- -------
Weighted Average Life (yrs)................
</TABLE>
HOW NOTEHOLDERS CAN COMPUTE THEIR PORTION OF THE
AMOUNT OUTSTANDING ON THE NOTES
The servicer's monthly report will give the noteholders a factor
that can be used to compute the portion of the principal amount outstanding
on the notes.
How the Servicer Computes the Factor For Each Class of Notes.
The servicer will compute a separate factor for each class of notes before
each distribution for that class. This factor will be a seven-digit decimal
which the servicer will compute before each distribution for that class of
notes indicating the remaining outstanding principal amount of that class
of notes, as of the applicable payment date. The servicer will compute the
factor after giving effect to payments to be made on that payment date, as
a fraction of the initial outstanding principal amount of that class of
notes.
Portion of the Outstanding Amount of the Notes. For each note,
the portion outstanding is the product of:
o the original denomination of the note; and
o the factor relating to that class of notes computed by
the servicer in the manner described above.
The Factors Described Above Will Decline as the Issuer Makes
Payments on the Securities. Each of the factors described above will
initially be 1.0000000. They will decline as the principal amount of the
applicable class of notes is reduced by scheduled payments, prepayments,
liquidations of the receivables and prepayment arising from application of
funds in the pre-funding and reinvestment account. The addition of
receivables to the issuer will not change any of these factors.
USE OF PROCEEDS
The net proceeds from the sale of the notes will be applied:
o to the purchase of the receivables;
o to make the required deposit into the pre-funding and
reinvestment account;
o to make the required deposit into the negative carry
account;
o to make the required deposit into the payahead account;
o to make the required deposit into the yield supplement
account; and
o to make the required deposit into the reserve account.
MMCA AUTO RECEIVABLES TRUST
MART was established as a business trust in the State of
Delaware on May 19, 1999. MMCA is the sole beneficial owner of MART. MART
was established for limited purposes, which include purchasing receivables
from MMCA, transferring the receivables to third parties and any activities
related to those purposes. MART's principal executive offices are located
at 6363 Katella Avenue, Cypress, California 90630-5205. MART's telephone
number is (714) 236-1614.
In structuring these transactions MART has taken steps intended
to ensure that the voluntary or involuntary application for relief by MMCA
under the United States Bankruptcy Code or similar state laws will not
cause the assets and liabilities of MART to be consolidated with those of
MMCA. These steps include the maintenance of MART as a separate,
limited-purpose entity. The trust agreement by which MART was formed and
which governs MART's activities restricts the nature of MART's business and
MART's ability to commence a voluntary case or proceeding under any
insolvency law without the unanimous vote of all of its managers. However,
there can be no assurance that the activities of MART would not result in a
court concluding that its assets and liabilities should be consolidated
with those of MMCA in an insolvency proceeding.
MART's counsel has advised that it would not be a proper
exercise by a court of its equitable discretion to disregard the separate
existence of MART and consolidate its assets and liabilities with the
assets and liabilities of MMCA if MMCA filed for bankruptcy protection.
MART's counsel has assumed that MART will follow various procedures in the
conduct of its affairs, including maintaining records and books of account
separate from those of MMCA, refraining from commingling its assets with
those of MMCA and refraining from holding itself out as having agreed to
pay, or being liable for, the debts of MMCA. MART intends to follow and has
represented to that counsel that it will follow these and other procedures
related to maintaining its separate legal identity. However, if MART does
not follow those procedures, a court could conclude that the assets and
liabilities of MART should be consolidated with those of MMCA. If a court
were to reach that conclusion, or if a filing were made under any
insolvency law by or against MART, or if an attempt were made to litigate
any of the preceding issues, delays in payments on the notes or reductions
in the amounts of the payments could result.
THE SERVICER
MMCA is a Delaware corporation which primarily provides retail
and wholesale financing, retail leasing and other financial services to
authorized dealers of Mitsubishi Motors vehicles and their customers in the
United States. MMCA was incorporated in August 1990 and commenced
operations in March 1991.
MMCA is a wholly-owned subsidiary of MMSA, a California
corporation which is engaged in the wholesale distribution of vehicles
throughout the United States manufactured by Mitsubishi Motors and its
affiliates. MMSA is a subsidiary of Mitsubishi Motors, a Japanese
corporation that is a worldwide manufacturer and distributor of motor
vehicles and light-duty trucks. Mitsubishi Motors owns 97.20% of the stock
of MMSA. Mitsubishi Corporation, a Japanese corporation that is a worldwide
general trading company, owns 2.00% of the stock of MMSA. Mitsubishi
International Corporation, a New York corporation that is a worldwide
trading company and a wholly-owned subsidiary of Mitsubishi Corporation,
owns 0.80% of the stock of MMSA.
MMCA's national headquarters is located at 6363 Katella Avenue,
Cypress, California 90630-5205. Its telephone number is (714) 236-1500.
TERMS OF THE NOTES
PRINCIPAL AMOUNT AND INTEREST RATES
The issuer will issue $__________ total principal amount of
asset-backed notes under an indenture to be dated as of __________, 2000,
between the issuer and Bank of Tokyo-Mitsubishi Trust Company, in its
capacity as indenture trustee.
The notes will be issued in five classes:
o $__________ total principal amount of __________% Class
A-1 notes;
o $__________ total principal amount of __________% Class
A-2 notes;
o $__________ total principal amount of __________% Class
A-3 notes;
o $__________ total principal amount of __________% Class
A-4 notes; and
o $__________ total principal amount of __________% Class B
notes.
A form of the indenture has been filed as an exhibit to the
registration statement of which this prospectus forms a part. The following
summary is qualified in its entirety by reference to the notes, the
indenture, the trust agreement and the sale and servicing agreement, copies
of which will be filed with the Securities and Exchange Commission after
the date of issue of the notes and the certificates.
INTEREST PAYMENTS
The notes will bear interest at the following annual rates:
o the Class A-1 notes: __________%;
o the Class A-2 notes: __________%;
o the Class A-3 notes: __________%;
o the Class A-4 notes: __________%; and
o the Class B notes: __________%.
Interest on the outstanding principal amount of each class of
notes will accrue at the applicable interest rate and will be payable to
the applicable noteholders on the 15th day of each month. If the 15th day
of a month is not a business day, the payment will be made on the next
following business day. The first payment will be made on __________ 15,
2000. Payments will be made to noteholders as of each record date. The
record date will be the business day preceding each payment date. However,
if notes in fully registered, certificated form are issued, the record date
will become the 15th day of the preceding month, or if that day is not a
business day, the preceding business day.
Calculation of interest. Interest will accrue during each
interest period and will be calculated on the Class A-1 notes on the basis
of the actual number of days elapsed and a 360-day year and will be
calculated on the Class A-2 notes, the Class A-3 notes, the Class A-4 notes
and the Class B notes on the basis of a 360-day year of twelve 30-day
months. Interest accrued as of any payment date but not paid on that
payment date will be due on the next payment date, together with interest
on that amount at the applicable interest rate, to the extent lawful.
Interest Periods. Interest payable on the notes on each payment
date will accrue from the 15th of the month preceding the payment date
through the 14th of the month of the payment date. For the first payment
date, interest will accrue from the closing date through __________ 14,
2000.
Priority of Interest Payments. Funds to make interest payments
on the notes will come from the Available Funds remaining after the payment
of the servicing fee for the related month plus any portion of the
servicing fee that remains unpaid from prior months. If the total Available
Funds remaining are insufficient, the interest will be paid from amounts on
deposit in the reserve account.
Interest payments on all of the Class A notes will have the same
priority of payment and will be paid to each class of Class A notes without
priority or preference of any kind among classes based upon the total
amount of interest due on each class of Class A notes. Interest on the
Class B notes is subordinate to interest on the Class A notes. No interest
will be paid on the Class B notes on any payment date until interest on the
Class A notes has been paid in full. If the amount available for interest
payments is less than the amount of interest payable on the Class A notes
on any payment date, each class of Class A notes will receive its ratable
share of the total amount available to pay interest on the Class A notes
and no interest will be paid on the Class B notes.
If a default under the indenture occurs, interest payments on
the Class B notes also will be subordinated to the payment of principal of
the Class A notes.
Events of Default Under the Indenture. An event of default under
the indenture will occur if the full amount of interest due on all classes
of notes is not paid within five days after the payment date on which the
interest is due. No distributions will be made on the certificates on any
payment date until the interest and principal payable on the notes on that
payment date are paid in full.
PRINCIPAL PAYMENTS
On each payment date, principal payments will be made to the
noteholders in an amount equal to the Principal Distribution Amount for
that payment date, with several limitations. Certificateholders will not be
entitled to receive payments of principal until all classes of notes have
been paid in full. See "--Indenture Cash Flows" and "--The Reserve
Account."
On each payment date, the Principal Distribution Amount will be
paid:
o to the holders of the Class A-1 notes, until the Class
A-1 notes have been paid in full;
o after the Class A-1 notes are paid in full, to the
holders of the Class A-2 notes, until the Class A-2 notes
have been paid in full;
o after the Class A-2 notes are paid in full, to the
holders of the Class A-3 notes, until the Class A-3 notes
have been paid in full;
o after the Class A-3 notes are paid in full, to the
holders of the Class A-4 notes, until the Class A-4 notes
have been paid in full; and
o after the Class A-4 notes are paid in full, to the
holders of the Class B notes, until the Class B notes
have been paid in full.
Events of Default Under the Indenture. Payments on the notes may
be accelerated upon an event of default under the indenture. If this
occurs, the order of priority for principal payments on the notes will
change. Amounts available to pay principal of the Class A notes will be
paid to the holders of each class of Class A notes in proportion to the
principal balance of that class to the sum of the principal balances of all
of the Class A notes, until all of the Class A notes are paid in full. See
"--Indenture Cash Flows--Monthly Withdrawals From the Note Payment Account
On and After an Acceleration of the Maturity Dates of the Notes."
Following an event of default, principal of the Class A notes
will be paid only after the payment of the following:
o amounts due to the servicer; and
o interest due on the Class A notes.
Following an event of default, principal of the Class B notes
will be paid only after payment of the following:
o amounts due to the servicer;
o interest due on the Class A notes;
o principal in full of all of the Class A notes; and
o interest due on the Class B notes.
The noteholders will be paid in full before any distributions may be made
on the certificates.
Final Payment Dates. Any outstanding principal balance of each
class of notes will be payable in full on the final payment date in the
months specified below:
o for the Class A-1 notes, ________, __ 200_;
o for the Class A-2 notes, ________, __ 200_;
o for the Class A-3 notes, ________, __ 200_;
o for the Class A-4 notes, ________, __ 200_;
o for the Class B notes, ________, __ 200_.
The actual date on which the total outstanding principal amount
of any class of notes is paid may be earlier or later than these dates due
to a variety of factors, including those described under "Risk
Factors--Risk that You May Be Required to Reinvest Your Principal in the
Notes at a Lower Rate of Return Because of Prepayments on the Notes" and
"The Receivables Pool--Maturity and Prepayment Considerations."
MANDATORY PREPAYMENT
The pre-funding and reinvestment account will be funded on the
closing date in an amount that MART anticipates will allow the issuer to
acquire the pre-funded receivables and make the required deposits to the
reserve account and the yield supplement account. In addition, on each
payment date during the pre-funding and reinvestment period, the Excess
Cash Amount -- the excess of the Required Reinvestment Amount for the prior
month over the total adjusted principal balance of receivables available
for purchase from MMCA on that payment date -- will be deposited into the
pre-funding and reinvestment account if MMCA, at its option, makes any
required deposits to the negative carry account. On the __________, 2001
payment date, any funds remaining in the pre-funding and reinvestment
account will be applied to pay principal of the notes then outstanding in
the same sequence and proportions that would apply if the remaining funds
were a part of the principal distribution amount.
OPTIONAL REDEMPTION
All of the outstanding notes and certificates will be redeemed
on any payment date on which the servicer exercises its option to purchase
the receivables. The servicer may purchase the receivables on any payment
date on which the principal balance of the receivables pool as of the end
of the preceding calendar month is 10% or less of the Initial Pool Balance.
The redemption price will be equal to the unpaid principal amount of the
notes plus accrued and unpaid interest on the notes, together with the
unpaid principal amount of the certificates.
THE INDENTURE TRUSTEE
Bank of Tokyo-Mitsubishi Trust Company, a New York banking
corporation, will be the indenture trustee. The indenture trustee's
corporate trust office is located at 1251 Avenue of the Americas, New York,
New York 10020-1104. MART, the servicer, and their respective affiliates
may have other banking relationships with the indenture trustee and its
affiliates in the ordinary course of their businesses.
THE YIELD SUPPLEMENT AGREEMENT AND YIELD SUPPLEMENT ACCOUNT
Simultaneously with the sale and assignment of the receivables
by MMCA to MART, MMCA and MART will enter into the yield supplement
agreement. The yield supplement agreement will obligate MMCA to pay any
Yield Supplement Amount to the issuer on the business day before each
payment date. The issuer will apply those funds to make required payments
under the indenture, including payments on the notes.
Payments of the Yield Supplement Amount due under the yield
supplement agreement will be secured by funds on deposit in the yield
supplement account. The Yield Supplement Amount will be needed to pay
interest on the notes because the first payment on the deferred payment
receivables having an aggregate principal balance of $__________ on the
closing date will not have any payments due from the related obligors until
after the closing date. Until the first payment on these receivables is
received from the related obligors, these deferred payment receivables will
not generate any collections which the issuer can apply to make required
payments under the indenture, including payments on the notes. The Yield
Supplement Amount for any payment date has been calculated to cover the
shortfall in collections due to the inclusion of deferred payment
receivables in the receivables owned by the issuer.
If MMCA either obtains a letter of credit securing timely
payment to the indenture trustee of amounts due from MMCA under the yield
supplement agreement or otherwise satisfies several other conditions
satisfactory to each of Moody's and S&P, then after the delivery of any
required tax opinions the yield supplement account may be terminated. Any
letter of credit related to the yield supplement agreement will be issued
by a bank that has a debt rating sufficient to maintain the rating of each
class of notes at the initial level at which it was rated by each of
Moody's and S&P. If the rating of the letter of credit bank that issues the
letter of credit is reduced below either of those ratings, the indenture
trustee will be required to obtain a suitable replacement letter of credit,
to obtain funds in the required amount for deposit in the yield supplement
account or to draw the full amount available under the letter of credit and
deposit those funds in the yield supplement account.
On each payment date, after giving effect to payments on that
date, the amount required to be on deposit in the yield supplement account
or to be available under an acceptable letter of credit will be an amount
equal to the sum of all projected Yield Supplement Amounts for all future
payment dates, which will be determined assuming that future scheduled
payments on the deferred payment receivables are made on the dates they are
scheduled. The amount on deposit in the yield supplement account will
decrease as payments are made from that account and funds in excess of the
maximum required balance are released to MART.
MART Will Make Deposits into the Yield Supplement Account upon
the Transfer of Pre-Funded Receivables to the Issuer. MART will make an
initial deposit to the yield supplement account on the closing date, in the
amount specified in the sale and servicing agreement. On each date during
the pre-funding and reinvestment period on which deferred payment
receivables are included in the pre-funded receivables transferred to the
issuer, the indenture trustee will make an additional deposit to the yield
supplement account from funds on deposit in the pre-funding and
reinvestment account that otherwise would be distributable to MART as
payment for the deferred payment receivables sold to the issuer on that
date, unless the yield supplement account has been replaced by an
acceptable letter of credit on or before that date.
THE ISSUER'S BANK ACCOUNTS
The servicer will establish and maintain the pre-funding and
reinvestment account, the payahead account, the reserve account and the
yield supplement account in the name of the indenture trustee for the
benefit of the noteholders and the certificateholders. The servicer will
establish and maintain the note payment account and the negative carry
account in the name of the indenture trustee for the exclusive benefit of
the noteholders. The servicer will establish and maintain the certificate
distribution account in the name of the owner trustee for the exclusive
benefit of the certificateholders.
ACCOUNTS RELATING TO THE ISSUER
COLLECTION ACCOUNT Payments made on receivables and advances
made by the servicer will be deposited into
the collection account.
PRE-FUNDING AND The pre-funding initial deposit will be
REINVESTMENT ACCOUNT deposited into the pre-funding and
reinvestment account on the closing date.
During the pre-funding and reinvestment
period, the issuer may deposit Excess Cash
Amounts to the pre-funding and reinvestment
account to the extent that the Required
Reinvestment Amount for any month during the
period exceeds the total adjusted principal
amount of receivables available for purchase
from MART.
NOTE PAYMENT ACCOUNT Amounts released from the collection account
for distribution to noteholders will be
deposited into the note payment account and
all payments to noteholders will be made
from this account.
CERTIFICATE DISTRIBUTION Amounts released from the collection account
ACCOUNT for distribution to certificateholders will
be deposited into the certificate
distribution account and all distributions
to certificateholders will be made from this
account.
PAYAHEAD ACCOUNT Early payments by obligors of less than the
remaining balance of Actuarial Receivables
will be deposited into the payahead account
until the time payment on the receivables
falls due or until those funds are applied
to shortfalls in the scheduled payments for
those receivables.
On the closing date, MART will deposit to the payahead account
the early payments on Actuarial Receivables which were received before the
initial Cutoff Date. On each date during the pre-funding and reinvestment
period on which receivables are transferred to the issuer, the indenture
trustee will withdraw from the pre-funding and reinvestment account and
deposit to the payahead account any early payments on Actuarial Receivables
transferred to the issuer on that date which were received before the
related date of transfer.
Funds in the collection account, the pre-funding and
reinvestment account, the payahead account, the reserve account, the
negative carry account and the yield supplement account will be invested in
the types of investments permitted by the sale and servicing agreement,
which normally will be limited to investments acceptable to each of Moody's
and S&P as being consistent with the ratings of the notes. Investments
permitted by the sale and servicing agreement will be limited to
obligations or securities that mature not later than the business day
immediately preceding the next payment date or the date on which payment is
due, in the case of early payments as to Actuarial Receivables on deposit
in the payahead account.
Any earnings, net of losses and investment expenses, on amounts
on deposit in each account will be paid out as follows:
o any earnings in the collection account will be paid to
the certificateholders;
o any earnings in the payahead account will be paid to the
servicer as additional servicing compensation and will
not be available to pay noteholders; and
o any earnings on, and any amounts released from, the
reserve account, the negative carry account and the yield
supplement account will be distributed to MART and will
not be available to pay noteholders, but only to the
extent that the amounts on deposit in those accounts
exceed the required balances of those accounts.
INDENTURE CASH FLOWS
Calculations Made by the Servicer. On or before the seventh
business day, but no later than the tenth calendar day of each month, the
servicer will calculate the following for the payment date occurring in
that month:
o the Available Funds;
o the Total Available Funds;
o the servicing fee for that payment date plus any portion
of the servicing fee that remains unpaid from prior
payment dates;
o the Accrued Note Interest;
o the Principal Distribution Amount;
o the Total Yield Supplement Overcollateralization Amount;
o the Negative Carry Amount; and
o the Yield Supplement Amount.
Notice to the Indenture Trustee. On or before each payment date,
the servicer will deliver to the indenture trustee a certificate indicating
the deposits to and withdrawals from the collection account, the
supplemental reserve account, the reserve account, the note payment
account, the certificate distribution account and the negative carry
account, as applicable, to be made on that payment date.
STEP 1. DAILY DEPOSITS TO THE COLLECTION ACCOUNT.
On or before each payment date, the servicer will cause all
payments on the receivables and all proceeds of the receivables to be
deposited into the collection account.
STEP 2. MONTHLY WITHDRAWALS FROM THE COLLECTION ACCOUNT TO
REIMBURSE SERVICER ADVANCES.
On each payment date, the indenture trustee will withdraw from
the collection account and pay to the servicer the amounts on deposit in
the collection account that are allocable to reimbursement of servicer
advances in accordance with the sale and servicing agreement.
STEP 3. MONTHLY WITHDRAWALS FROM THE RESERVE ACCOUNT TO
REIMBURSE SERVICER ADVANCES.
On each payment date, the indenture trustee will withdraw from
the reserve account and pay to the servicer an amount equal to the lesser
of:
o the amount on deposit in the reserve account on that
payment date, calculated before giving effect to any
deposits or withdrawals on or relating to that payment
date; and
o the amount of servicer advances due to be reimbursed on
that payment date but not reimbursed from funds on
deposit in the collection account under step 2.
STEP 4. MONTHLY WITHDRAWALS FROM THE RESERVE ACCOUNT TO PAY THE
TOTAL REQUIRED PAYMENT.
If on any payment date the Total Required Payment is greater
than the Available Funds on deposit in the collection account after
reimbursement of servicer advances under step 2, the indenture trustee will
withdraw from the reserve account and deposit in the collection account an
amount equal to the lesser of:
o the amount on deposit in the reserve account on that
payment date, calculated after any reimbursement of
advances under step 3 but before any deposits or other
withdrawals from the reserve account relating to that
payment date; and
o the amount, if any, by which the Total Required Payment
exceeds the Available Funds for that payment date.
STEP 5. MONTHLY WITHDRAWALS FROM COLLECTION ACCOUNT.
On each payment date, the indenture trustee will withdraw the
Total Available Funds for the preceding calendar month from the collection
account and make deposits, distributions and payments in the amounts and in
the order of priority specified below:
o to the servicer, the servicing fee due on that payment
date, together with any portion of the servicing fee that
remains unpaid from prior payment dates;
o to the note payment account, the Accrued Note Interest
for each class of notes;
o to the note payment account, the Principal Distribution
Amount;
o to the reserve account, the amount required to bring the
amount in the reserve account up to the Specified Reserve
Balance; and
o to the certificate distribution account, any remaining
Total Available Funds.
Notwithstanding the foregoing, following an acceleration of the
maturity dates of the notes following the occurrence of an event of default
under the indenture, the Total Available Funds will be deposited in the
note payment account for distribution in the order of priority provided
under "--Monthly Withdrawals From the Note Payment Account On and After an
Acceleration of the Maturity Dates of the Notes."
STEP 6. MONTHLY WITHDRAWALS FROM THE NOTE PAYMENT ACCOUNT.
On each payment date, unless the maturity dates of the notes
have been accelerated following the occurrence of an event of default under
the indenture, all amounts on deposit in the note payment account will be
paid in the following order of priority:
o to the Class A noteholders, the Accrued Note Interest on
the applicable class of the Class A notes;
o to the Class B noteholders, the Accrued Note Interest on
the Class B notes;
o to the Class A-1 noteholders, the Principal Distribution
Amount until the Class A-1 notes have been paid in full;
o following payment in full of the Class A-1 notes, to the
Class A-2 noteholders, the Principal Distribution Amount
less any amounts paid to the Class A-1 noteholders on
that payment date, until the Class A-2 notes have been
paid in full;
o following payment in full of the Class A-2 notes, to the
Class A-3 noteholders, the Principal Distribution Amount
less any amounts paid to the Class A-2 noteholders on
that payment date, until the Class A-3 notes have been
paid in full;
o following payment in full of the Class A-3 notes, to the
Class A-4 noteholders, the Principal Distribution Amount
less any amounts paid to the Class A-3 noteholders on
that payment date, until the Class A-4 notes have been
paid in full; and
o following payment in full of the Class A-4 notes, to the
Class B noteholders, the Principal Distribution Amount
less any amounts paid to the Class A-4 noteholders on
that payment date, until the Class B notes have been paid
in full.
STEP 7. WITHDRAWALS FROM THE CERTIFICATE DISTRIBUTION ACCOUNT.
On each payment date, the amount on deposit in the certificate
distribution account, if any, will be distributed to the
certificateholders.
Monthly Withdrawals From the Note Payment Account On and After
an Acceleration of the Maturity Dates of the Notes. On each payment date
occurring on or after the acceleration of the maturity dates of the notes
following the occurrence of an event of default under the indenture, all
amounts on deposit in the note payment account will be paid in the
following order of priority:
o to the indenture trustee, amounts due as compensation or
indemnity payments under the terms of the indenture;
o to the servicer, the amounts accrued and unpaid in
respect of the servicing fee plus any portion of the
servicing fee that remains unpaid from prior payment
dates;
o to the noteholders of all classes of the Class A notes,
without priority or preference of any kind, the Accrued
Note Interest on each class of the Class A notes;
o to the noteholders of all classes of the Class A notes
without priority or preference of any kind, all unpaid
principal of the Class A notes until each class of the
Class A notes has been paid in full;
o to the noteholders of the Class B notes, the Accrued Note
Interest on the Class B notes;
o to the noteholders of the Class B notes, unpaid principal
of the Class B notes until the Class B notes have been
paid in full; and
o to the certificate distribution account, any amount
remaining in the note payment account after each class of
notes has been paid in full.
THE NEGATIVE CARRY ACCOUNT
During the pre-funding and reinvestment period, the amounts on
deposit in the pre-funding and reinvestment account will earn interest at a
rate that is less than the weighted average interest rate on the notes. The
amount on deposit in the negative carry account is intended to cover that
shortfall. On each payment date during the pre-funding and reinvestment
period, the indenture trustee will withdraw the Negative Carry Amount for
that payment date from the negative carry account and deposit that amount
to the collection account as a part of the funds available to pay interest
on the notes.
On the closing date, MART will make an initial deposit of
$__________ into the negative carry account. That amount is equal to the
estimated shortfall of the investment earnings on amounts deposited to the
pre-funding and reinvestment account on the closing date and the interest
on the notes required to be paid in respect of that amount until the
pre-funded receivables are transferred to the issuer. Additional amounts
may be deposited in the negative carry account during the pre-funding and
reinvestment period. The additional deposits may be made, at MMCA's option,
as a condition to the deposit to the pre-funding and reinvestment account
of the Excess Cash Amount, if any, equal to the Required Reinvestment
Amount for any month during that period less the total adjusted principal
balance of receivables that satisfy the selection criteria in the sale and
servicing agreement that are available for purchase from MMCA for that
month.
If the amount on deposit in the negative carry account on any
payment date, after the withdrawal of the Negative Carry Amount, for that
payment date, is greater than the amount required to be on deposit in the
negative carry account, the excess will be released to MART. All amounts
remaining on deposit in the negative carry account on the first payment
date after the pre-funding and reinvestment period, after giving effect to
any withdrawals from that account on that payment date, will be released to
MART.
On any payment date, the amount required to be on deposit in the
negative carry account is equal to the lesser of:
o the initial deposit into the negative carry account, plus
the amount of any subsequent deposits to the negative
carry account during the pre-funding and reinvestment
period, minus the sum of the withdrawal of the Negative
Carry Amount on that payment date and all previous
withdrawals of the Negative Carry Amount; and
o the Maximum Negative Carry Amount as of that payment
date.
YIELD SUPPLEMENT OVERCOLLATERALIZATION AMOUNT
The notes and the certificates have the benefit of the Total
Yield Supplement Overcollateralization Amount. The total principal amount
of the notes and certificates on the closing date will equal $__________,
which is the sum of the $_________ adjusted principal balance of the
initial receivables on the closing date, plus the $_________ deposited to
the pre-funding and reinvestment account on the closing date.
On the closing date, the total yield supplement
overcollateralization amount of the initial receivables will be $__________
or _____% of the total principal amount of the notes and certificates on
the closing date. During the pre-funding and reinvestment period, the
issuer will use the $_________ deposited to the pre-funding and
reinvestment account on the closing date to purchase pre-funded receivables
with a total adjusted principal balance of approximately equal to that
amount.
On any date, the total yield supplement overcollateralization
amount for the receivables will be the sum of the yield supplement
overcollateralization amounts for each receivable which is not a defaulted
receivable or which has not been repurchased by MART or the servicer
following a breach of certain representations or warranties.
On any date, the yield supplement overcollateralization amount
for any receivable will equal the excess, if any, of:
o the present value of the remaining scheduled payments due
on the receivable discounted at a rate equal to the
annual percentage rate provided in the related contract;
over
o the present value of the remaining scheduled payments due
on the receivable discounted at a rate equal to _____%.
The total yield supplement overcollateralization amount is
intended to enhance the likelihood of receipt by noteholders of amounts due
them and to decrease the likelihood that the noteholders will experience
losses. The total yield supplement overcollateralization amount has been
provided because some of the receivables owned by the issuer will have an
annual percentage rate which is lower than the minimum annual percentage
rate MART and MMCA have agreed is required to cover interest on the notes,
the monthly servicing fee and anticipated losses on defaulted receivables.
If the losses on defaulted receivables depletes the collections on the
receivables represented by the total yield supplement overcollateralization
amount, shortfalls in Available Funds may occur. If such losses also
deplete the amount on deposit in the reserve account, a shortfall in the
amounts distributed to the noteholders could result. Losses on the
receivables or other shortfalls in the amounts to be distributed to the
noteholders will, after depletion of the collections on the receivables
represented by the total yield supplement overcollateralization amount, and
depletion of the reserve account, be allocated first to the certificates
and then Class B notes because payments on the certificates and the Class B
notes are subordinate to the payments on the Class A notes.
THE RESERVE ACCOUNT
On the closing date, MART will make an initial deposit to the
reserve account of cash or investments permitted by the sale and servicing
agreement having a value of $__________. That amount is equal to 1.00% of
the adjusted principal balance of the initial receivables pool as of the
initial Cutoff Date. On each date on which pre-funded receivables are
transferred to the issuer, cash or investments permitted by the sale and
servicing agreement having a value approximately equal to 1.00% of the
adjusted principal balance of the pre-funded receivables as of the related
Cutoff Date will be withdrawn from the pre-funding and reinvestment account
and deposited in the reserve account.
On or before each payment date, the indenture trustee will make
the following payments and deposits from funds in the reserve account:
o to the servicer, an amount equal to any shortfall between
the total amount of advances that are due and payable to
the servicer on that payment date and the total amount of
the collections on the receivables that are paid to the
servicer on that payment date as reimbursement for those
advances; and
o to the collection account, an amount equal to any
shortfall between the Total Required Payment for that
payment date and the Available Funds allocable to pay the
Total Required Payment.
The reserve account will be funded on each payment date with the
Available Funds remaining after payment of interest and principal of the
notes on that payment date, in an amount, equal to the excess, if any, of
the Specified Reserve Balance for that payment date over the amount on
deposit in the reserve account.
If amounts on deposit in the reserve account on any date exceed
the Specified Reserve Balance, after giving effect to withdrawals made on
that payment date, the excess will be withdrawn and paid to MART. The
noteholders will not have any rights in, or claims to, any of those amounts
paid to MART.
Amounts in the reserve account are intended to enhance the
likelihood of receipt by noteholders of amounts due them and to decrease
the likelihood that the noteholders will experience losses. If the amount
withdrawn from the reserve account on any payment date to reimburse the
servicer for advances and to cover shortfalls in Available Funds exceeds
the amount on deposit in the reserve account, a shortfall in the amounts
distributed to the noteholders could result. In addition, depletion of the
reserve account ultimately could result in losses to noteholders, as
noteholders will have no recourse to the assets of MART as a source of
payment. Losses on the receivables or other shortfalls in the amounts to be
distributed to the noteholders will, after depletion of the reserve
account, be allocated first to the certificates and then to the Class B
notes because payments on the certificates and Class B notes are
subordinate to the payments on the Class A notes.
The servicer may request each of Moody's and S&P to approve a
reduction in the Specified Reserve Balance or a change in the manner in
which the reserve account is funded. If each of Moody's and S&P confirms
that the requested action will not result in the qualification, reduction
or withdrawal of its then-current rating of any class of notes, then the
required balance of the account will be reduced and the indenture will be
amended without the consent of any noteholders to reflect the change in the
required balances of the accounts. A reduction in the Specified Reserve
Balance will also require the delivery of several tax opinions to the
effect that, among other things, the reduction will not adversely affect
the characterization of the notes for federal income tax purposes.
SUBORDINATION OF THE CLASS B NOTES
The rights of the Class B noteholders to be paid interest and
principal are subordinated to the rights of the Class A noteholders to be
paid interest on each payment date. Following an event of default under the
indenture, the rights of the Class B noteholders to be paid interest and
principal are subordinated to the rights of the Class A noteholders to be
paid all accrued interest and all of the principal of the Class A notes.
Interest on the Class B notes will be paid on each payment date after
servicing fees due to the servicer and interest due on the Class A notes.
However, if an event of default under the indenture occurs, interest on the
Class B notes also will be subordinated to the payment of principal of the
Class A notes.
Principal of the Class B notes will be subordinated to the
payment of the servicing fee, interest on the Class A notes, interest on
the Class B notes and principal of the Class A notes. No principal will be
paid on the Class B notes until the principal of the Class A notes has been
paid in full.
SUBORDINATION OF THE CERTIFICATES
The rights of certificateholders to receive distributions are
subordinated to the rights of noteholders to receive payments of interest
and principal. Funds on deposit in the collection account will be applied
to the reimbursement of advances made by the servicer and the servicing fee
plus any portion of the servicing fee that remains unpaid from prior
payment dates, the Accrued Note Interest on the notes and principal payable
on the notes on each payment date and to making the required deposits to
the reserve account before distributions on the certificates. In addition,
following the occurrence of an event of default under the indenture that
has resulted in an acceleration of the notes, the noteholders will be
entitled to be paid in full before the certificateholders are entitled to
any distributions. The subordination of the certificates is intended to
enhance the likelihood of receipt by noteholders of amounts due them and to
decrease the likelihood that the noteholders will experience losses. See
"--Indenture Cash Flows."
ADVANCES BY THE SERVICER OF AMOUNTS PAYABLE ON THE RECEIVABLES
If the monthly payment made by an obligor in respect of an
Actuarial Receivable and amounts in the payahead account allocable to that
receivable are less than the scheduled payment due, the servicer will make
an advance of the remaining amount on the related payment date.
The servicer will be reimbursed for each of these advances:
o on each subsequent payment date from any payments made by
or on behalf of the related obligor; and
o on the payment date following the calendar month in which
the related receivable becomes defaulted, out of
collections on other receivables.
In addition, the servicer will advance any portion of a balloon
payment not received in the calendar month in which the balloon payment is
due, less any amounts in the payahead account allocable to the balloon
payment.
The servicer will be reimbursed for any advance relating to a
balloon payment on each payment date following the payment date on which
the advance was made:
o out of payments by or on behalf of the related obligor to
the extent those payments are allocable to the
reimbursement of the advance; and
o out of collections on other receivables to the extent of
any losses allocable to the balloon payment that the
servicer has recorded in its books and records during the
preceding calendar month, but only to the extent the
balloon payment and the advance have not otherwise been
reimbursed.
If MMCA is replaced in its capacity as servicer, the successor
servicer will not be required to make advances. In the absence of advances
by the servicer, noteholders must rely for payment of the notes upon the
following:
o payments on the receivables, including sales proceeds of
repossessed vehicles or vehicles relating to balloon
payment receivables that are returned to the servicer for
sale;
o payments under the yield supplement agreement and the
yield supplement account;
o withdrawals from the negative carry account; and
o available amounts on deposit in the reserve account.
See "--Indenture Cash Flows" and "--The Reserve Account."
DEPOSIT OF COLLECTIONS ON THE RECEIVABLES TO THE COLLECTION ACCOUNT
The servicer will deposit the payments and proceeds on the
receivables, other than extension or deferral fees collected on the
receivables which are payable to the servicer, into the collection account
not later than two business days after receipt unless:
(1) the servicer has a rating acceptable to each of Moody's
and S&P on its short-term indebtedness, MMCA is the
servicer, and no events of servicing termination have
occurred; or
(2) the issuer shall have received written notice from each
of Moody's and S&P that no outstanding rating on any
class of notes would be lowered or withdrawn as a result,
in which case those amounts will be paid into the
collection account on the business day before each
payment date.
On each payment date, MART and the servicer also will deposit
into the collection account the purchase amount of each receivable required
to be repurchased or purchased by either of them during the preceding
calendar month. The servicer will be entitled to be reimbursed for the
amounts previously deposited in the collection account but which are later
determined to have resulted from mistaken deposits or posting or checks
returned unpaid for insufficient funds or other reasons from amounts
otherwise payable into the collection account or amounts on deposit in the
collection account.
In those cases where a subservicer is servicing a receivable
under a subservicing agreement, the servicer will cause the subservicer to
remit to the collection account the amounts collected by that subservicer
within two business days of receipt.
As an administrative convenience, unless the servicer is
required to remit collections within two business days of receipt, the
servicer will be permitted to make the deposit of collections and purchase
amounts for the related calendar month, net of distributions to be made to
the servicer. The servicer, however, will account to the indenture trustee
and the noteholders as if all deposits, distributions and transfers were
made individually.
STATEMENTS TO NOTEHOLDERS
On or before each payment date, the servicer will prepare and
provide to the indenture trustee a statement to be delivered to the
noteholders. Each of those statements to be delivered to noteholders will
include the following information as to the notes for that payment date and
the preceding calendar month:
(1) the amount of the payment allocable to principal of each
class of notes;
(2) the amount of the payment allocable to interest on each
class of notes;
(3) the Yield Supplement Amount;
(4) the amount of the servicing fee due on that payment date
plus any portion of the servicing fee that remains unpaid
from prior payment dates;
(5) the total outstanding principal amount of each class of
notes and the applicable note pool factor, after giving
effect to payments on that payment date;
(6) the principal balance of the receivables pool, the total
yield supplement overcollateralization amount, and the
adjusted principal balance of the receivables pool
calculated as of the close of business on the last day of
the preceding calendar month;
(7) the principal balance of the receivables pool exclusive
of the total principal balance of balloon payments, and
the total principal balance of the balloon payments
calculated as of the close of business on the last day of
the preceding calendar month;
(8) the principal balance of the deferred payment receivables
calculated as of the close of business on the last day of
the preceding calendar month;
(9) the cumulative amount of interest due but not paid to the
noteholders of each class on that payment date and on
prior payment dates plus interest on the overdue interest
at the applicable note interest rate, to the extent
permitted by law;
(10) the cumulative amount of principal due but not paid to
the noteholders of each class on that payment date and on
prior payment dates;
(11) for receivables that became defaulted during the related
calendar month, the total amount of the excess of the
principal balance of those contracts, including any
principal of a balloon payment, over the net proceeds
from the liquidation of those contracts;
(12) the balance of the reserve account on that payment date,
after giving effect to changes in the balance on that
payment date;
(13) the advances by the servicer, if any;
(14) the total purchase amount of receivables repurchased by
MART or purchased by the servicer during the preceding
calendar month;
(15) for each payment date during the pre-funding and
reinvestment period and the payment date that is on or
immediately following the end of the pre-funding and
reinvestment period, (A) the amount, if any, withdrawn
from the pre-funding and reinvestment account to purchase
receivables during the preceding calendar month, (B) the
Excess Cash Amount, if any, deposited to the pre-funding
and reinvestment account during the preceding calendar
month, (C) the remaining amount on deposit in the
pre-funding and reinvestment account, if any, (D) the
Negative Carry Amount, if any, for the preceding calendar
month, (E) the amount of any deposits to the negative
carry account during the month in which the payment date
occurs, and (F) the amount remaining on deposit in the
negative carry account after all withdrawals made on that
payment date; and
(16) for the payment date on or immediately following the end
of the pre-funding and reinvestment period, the remaining
amount on deposit in the pre-funding and reinvestment
account, if any, that has not been used to fund the
purchase of receivables and is being passed through as
payments of principal of the notes.
Each amount set forth in clauses (1), (2), (3), (4), (9) and (10) of this
paragraph will be expressed in the aggregate and as a dollar amount per
$1,000 of original denomination of the notes or class of notes, as
applicable. Copies of those statements may be obtained by the beneficial
owners of the notes by a request in writing addressed to the indenture
trustee.
Within a reasonable period of time after the end of each
calendar year, but not later than the latest date permitted by law, the
indenture trustee will furnish to each person, who at any time during that
calendar year was a noteholder, a statement prepared for the purposes of
that noteholder's preparation of federal income tax returns. See "Federal
Income Tax Consequences" and "--Book Entry Registration."
BOOK ENTRY REGISTRATION
Each class of notes will be represented by one or more notes, in
each case registered in the name of Cede & Co. as nominee of The Depository
Trust Company. The notes will be available for purchase in book-entry form
only. Accordingly, Cede & Co. will be the holder of record of the notes. No
person acquiring a beneficial ownership interest in the notes will be
entitled to receive a definitive note registered in that person's name
unless and until definitive notes are issued under the limited
circumstances described in this prospectus. All references in this
prospectus to:
o actions by noteholders of any class refer to actions
taken by DTC upon instructions from its participating
organizations; and
o distributions, notices, reports and statements to the
noteholders of any class will be made to DTC or Cede &
Co., as the registered holder of that class, for
distribution to the noteholders of that class according
to DTC procedures.
Investors in the global notes may hold them through any of DTC,
Clearstream Banking Luxembourg S.A. or the Euroclear System. The global
notes will be tradeable as home market instruments in both the European and
U.S. domestic markets. Initial settlement and all secondary trades will
settle in same-day funds.
INITIAL SETTLEMENT OF THE GLOBAL NOTES. Investors' interests in
the global notes will be represented through financial institutions acting
on their behalf as direct and indirect participating members of DTC. As a
result, Clearstream Banking and Euroclear will hold positions on behalf of
their customers or participants through their respective depositories,
which, in turn, will hold those positions in accounts as DTC participants.
Investors electing to hold their global notes through DTC will
follow the settlement practices applicable to U.S. corporate debt
obligations. Investors' securities custody accounts will be credited with
their holdings against payment in same-day funds on the settlement date.
Investors electing to hold their global notes through
Clearstream Banking or Euroclear accounts will follow the settlement
procedures applicable to conventional eurobonds, except that there will be
no temporary global security and no lock-up or restricted period. Global
notes will be credited to the securities custody accounts on the settlement
date against payment in same-day funds.
If any of DTC, Clearstream Banking or Euroclear should stop its
services, the administrative agent would seek an alternative depository, if
available, or cause the issuance of definitive notes to noteholders or
their nominees in the manner described under "--Issuance of Definitive
Notes Upon the Occurrence of Various Circumstances."
Except as required by law, none of the servicer, the indenture
trustee or the owner trustee will have any liability:
o for any aspect of the records relating to or payments
made on account of beneficial ownership interests of the
notes held by DTC's nominee; or
o for maintaining, supervising or reviewing any records
relating to those beneficial ownership interests.
SECONDARY MARKET TRADING OF THE GLOBAL NOTES. Since the
purchaser determines the place of delivery, it is important to establish at
the time of the trade where both the purchaser's and seller's accounts are
located to ensure that settlement can be made on the desired value date.
Secondary market trading between DTC participants will be
settled using the procedures applicable to U.S. corporate debt obligations
in same-day funds.
Secondary market trading between Clearstream Banking customers
or Euroclear participants will be settled using the procedures applicable
to conventional eurobonds in same-day funds.
When global notes are to be transferred from the account of a
DTC participant to the account of a Clearstream Banking customer or
Euroclear participant:
o the purchaser sends instructions to Clearstream Banking
or Euroclear through a Clearstream Banking customer or
Euroclear participant at least one business day before
settlement;
o Clearstream Banking or Euroclear instructs its depositary
to receive the global notes against payment, which
includes interest accrued on the global notes from and
including the last coupon payment date to and excluding
the settlement date;
o that depositary credits payments to the DTC participant's
account against delivery of the global notes; and
o after settlement has been completed, the depositary
credits the global notes to the relevant clearing system,
which, in turn, under its usual procedures, credits those
global notes to that customer's or participant's account.
The securities credit will appear the next day, European time, and the cash
debit will be back-valued to, and the interest on the global notes will
accrue from, the value date--which would be the preceding day when
settlement occurred in New York. If settlement is not completed on the
intended value date, which means the trade fails, the Clearstream Banking
or Euroclear cash debit will be valued instead as of the actual settlement
date.
Clearstream Banking customers and Euroclear participants will
need to make available to the respective clearing systems the funds
necessary to process same-day funds settlement. The most direct means of
doing so is to pre-position funds for settlement, either from cash on hand
or existing lines of credit, as they would for any settlement occurring
within Clearstream Banking or Euroclear. Under this approach, they may take
on credit exposure to Clearstream Banking or Euroclear until the global
notes are credited to their accounts one day later.
As an alternative, if Clearstream Banking or Euroclear has
extended a line of credit to them, Clearstream Banking customers or
Euroclear participants can elect not to pre-position funds and allow that
credit line to be drawn upon to finance settlement. Under this procedure,
Clearstream Banking customers or Euroclear participants purchasing global
notes would incur overdraft charges for one day, assuming they cleared the
overdraft when the global notes were credited to their accounts. However,
interest on the global notes would accrue from the value date. So the
investment income on the global notes earned during that one-day period may
substantially reduce or offset the amount of the overdraft charges,
although this result will depend on each Clearstream Banking customer's or
Euroclear participant's particular cost of funds.
Since the settlement is taking place during New York business
hours, DTC participants can use their usual procedures for sending global
notes to the respective depositary for the benefit of Clearstream Banking
customers or Euroclear participants. The sale proceeds will be available to
the DTC seller on the settlement date. In this way, to the DTC participant,
a cross-market transaction will settle no differently than a trade between
two DTC participants.
Due to time zone differences in their favor, Clearstream Banking
customers and Euroclear participants may use their customary procedures for
transactions in which global notes are to be transferred by the respective
clearing system, through the respective depositary, to a DTC participant.
Trading usually occurs as follows:
o the seller sends instructions to Clearstream Banking or
Euroclear through a Clearstream Banking customer or
Euroclear participant at least one business day before
settlement;
o Clearstream Banking or Euroclear instructs its depositary
to deliver the bonds to the DTC participant's account
against payment, which includes interest accrued on the
global notes from and including the last coupon payment
date to and excluding the settlement date; and
o the payment is reflected in the account of the
Clearstream Banking customer or Euroclear participant the
next day, and receipt of the cash proceeds in the
Clearstream Banking customer's or Euroclear participant's
account is back-valued to the value date--the preceding
day when settlement occurred in New York.
Should the Clearstream Banking customer or Euroclear participant have a
line of credit with its clearing system and elect to be in debit in
anticipation of receipt of the sale proceeds in its account, the
back-valuation will cancel out any overdraft charges incurred over that
one-day period. If settlement is not completed on the intended value date,
which means the trade fails, receipt of the cash proceeds in the
Clearstream Banking customer's or Euroclear participant's account would
instead be valued as of the actual settlement date.
Finally, day traders that use Clearstream Banking or Euroclear
and that purchase global notes from DTC participants for delivery to
Clearstream Banking customers or Euroclear participants should note that
these trades would automatically fail on the sale side unless affirmative
action were taken. At least three techniques should be readily available to
eliminate this potential problem:
o borrowing through Clearstream Banking or Euroclear for
one day--until the purchase side of the day trade is
reflected in their Clearstream Banking or Euroclear
accounts--under the clearing system's customary
procedures;
o borrowing the global notes in the U.S. from a DTC
participant no later than one day before settlement which
would give the global notes sufficient time to be
reflected in their Clearstream Banking or Euroclear
account to settle the sale side of the trade; or
o staggering the value dates for the buy and sell sides of
the trade so that the value date for the purchase from
the DTC participant is at least one day before the value
date for the sale to the Clearstream Banking customer or
Euroclear participant.
Those persons who are not participants, either directly or
indirectly, but who desire to purchase, sell or otherwise transfer
ownership of, or other interest in, the notes may do so only through direct
and indirect participants. In addition, noteholders will receive all
distributions of principal and interest from the indenture trustee through
the participants who, in turn, will receive them from DTC. Under a
book-entry format, noteholders may experience some delay in their receipt
of payments, since those payments will be forwarded by the indenture
trustee to DTC's nominee. DTC will forward those payments to its
participants which, then, will forward them to indirect participants or
noteholders. The only noteholder will be DTC's nominee. Noteholders will
not be recognized by the indenture trustee as noteholders and noteholders
will be permitted to exercise the rights of noteholders only indirectly
through DTC and its participants.
Under the rules, regulations and procedures creating and
affecting DTC and its operations, DTC is required to:
o make book-entry transfers of securities among
participants on whose behalf it acts as to the
securities; and
o receive and transmit distributions of principal and
interest on the securities.
Participants and indirect participants with which
securityholders have accounts as to their respective securities similarly
are required to:
o make book-entry transfers; and
o receive and transmit the payments on behalf of their
respective securityholders.
Accordingly, although securityholders will not possess their respective
securities, the rules provide a mechanism by which participants will
receive payments and will be able to transfer their interests.
Because DTC can only act on behalf of participants, who in turn
act on behalf of indirect participants and some banks, the ability of a
securityholder to pledge securities to persons or entities that do not
participate in the DTC system, or otherwise take actions related to the
securities, may be limited due to the lack of a physical certificate for
those securities.
DTC will advise the indenture trustee that it will take any
action permitted to be taken by a noteholder under the indenture only at
the direction of one or more participants to whose accounts with DTC the
notes are credited. DTC may take conflicting actions related to other
undivided interests to the extent that those actions are taken on behalf of
participants whose holdings include those undivided interests.
Non-U.S. holders of global notes will be liable for U.S.
withholding taxes unless the holders meet specified requirements and
deliver appropriate U.S. tax documents to the securities clearing
organizations or their participants.
THE DEPOSITORIES. DTC is a limited-purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a clearing corporation within the meaning of the New York
Uniform Commercial Code, and a clearing agency registered under the
provisions of Section 17A of the Securities Exchange Act of 1934, as
amended. DTC was created to hold securities for its participants and
facilitate the clearance and settlement of securities transactions between
participants through electronic book-entries to eliminate the need for
physical movement of certificates. Participants in the DTC system:
o include securities brokers and dealers, who may include
any of the underwriters of securities of the issuer,
banks, trust companies and clearing corporations; and
o may include other organizations.
Indirect access to the DTC system also is available to others,
such as banks, brokers, dealers and trust companies, that clear through or
maintain a custodial relationship with a participant, either directly or
indirectly.
Clearstream Banking Luxembourg S.A. is incorporated under the
laws of Luxembourg as a professional depository. Clearstream Banking holds
securities for its customers and facilitates the clearance and settlement
of securities transactions between Clearstream Banking customers through
electronic book-entry changes in accounts of Clearstream Banking customers
to eliminate the need for physical movement of certificates. Transactions
may be settled by Clearstream Banking in any of 36 currencies, including
United States dollars. Clearstream Banking provides to its Clearstream
Banking customers, among other things, services for safekeeping,
administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. Clearstream Banking
interfaces with domestic markets in several countries. As a professional
depository, Clearstream Banking is subject in Luxembourg to regulation by
and supervision by the Commission for the Supervision of the Financial
Sector. Clearstream Banking customers:
o are recognized financial institutions around the world,
including underwriters, securities brokers and dealers,
banks, trust companies, clearing corporations and some
other organizations; and
o may include any of the underwriters of any securities of
the issuer.
Indirect access to Clearstream Banking is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain
a custodial relationship with a Clearstream Banking customer, either
directly or indirectly.
Euroclear was created in 1968 to hold securities for its
participants and to clear and settle transactions between Euroclear
participants through simultaneous electronic book-entry delivery against
payment to eliminate the need for physical movement of certificates and the
risk from transfers of securities and cash that are not simultaneous.
The Euroclear system has subsequently been extended to clear and
settle transactions between Euroclear participants and counterparties both
in Clearstream Banking and in many domestic securities markets.
Transactions may be settled in any of 34 currencies. In addition to
safekeeping, custody and securities clearance and settlement, the Euroclear
system includes securities lending and borrowing and money transfer
services. The Euroclear system is operated by the Brussels, Belgium office
of Morgan Guaranty Trust Company of New York under contract with Euroclear
Clearance System, S.C., a Belgian cooperative corporation that establishes
policy on behalf of Euroclear participants. 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.
All operations are conducted by the Euroclear operator and all
Euroclear securities clearance accounts and cash accounts are accounts with
the Euroclear operator. They are governed by the Terms and Conditions
Governing Use of Euroclear and the related Operating Procedures of the
Euroclear system and applicable Belgian law. These govern all transfers of
securities and cash, both within the Euroclear system, and receipts and
withdrawals of securities and cash. All securities in the Euroclear system
are held on a fungible basis without attribution of specific certificates
to specific securities clearance accounts.
Euroclear participants:
o include banks, including central banks, securities
brokers and dealers and other professional financial
intermediaries; and
o may include any of the underwriters of any securities of
the issuer.
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 acts
under the Terms and Conditions Governing Use of Euroclear, the related
Operating Procedures of the Euroclear system and applicable Belgian law
only on behalf of Euroclear participants and has no record of or
relationship with persons holding through Euroclear participants.
ISSUANCE OF DEFINITIVE NOTES UPON THE OCCURRENCE OF VARIOUS CIRCUMSTANCES
The notes of each class will be issued in fully registered,
certificated form to noteholders or their nominees, rather than to DTC or
its nominee or a successor clearing agency, only if:
o the issuer, the administrator or the servicer advises the
indenture trustee in writing that DTC or its successor is
no longer willing or able to discharge properly its
responsibilities as depository for the notes and the
indenture trustee or the administrator is unable to
locate a qualified successor;
o the administrator, at its option, elects to terminate the
book-entry system through DTC or its successor; or
o after the occurrence of an event of default under the
indenture or an event of servicing termination under the
sale and servicing agreement, beneficial owners of notes
representing at least 51% of the total outstanding
principal amount of the notes advise the indenture
trustee and DTC or its successor in writing that the
continuation of a book-entry system through DTC or its
successor is no longer in the best interest of the
beneficial owners of the notes.
Upon the occurrence of any of these events, DTC is required to
notify all of its direct participants and the indenture trustee of the
availability through DTC of notes in fully registered, certificated form.
Upon surrender by DTC of the physical certificates representing the notes
and receipt by the indenture trustee of instructions for re-registration,
the indenture trustee will reissue the notes in fully registered,
certificated form, and afterwards the indenture trustee will recognize the
holders of those notes as noteholders.
Payments of principal of and interest on the notes in fully
registered, certificated form will be made by the indenture trustee
directly to noteholders in accordance with the procedures set forth in this
prospectus and in the indenture. Payments of principal and interest on each
payment date will be made to noteholders in whose names the notes in fully
registered, certificated form were registered at the close of business on
the related record date. Those payments will be made by check mailed to the
address of that noteholder as it appears on the register maintained by the
indenture trustee. The final payment on any note in fully registered,
certificated form, however, will be made only upon presentation and
surrender of the note in that form at the office or agency specified in the
notice of final payment mailed to noteholders.
Notes in fully registered, certificated form will be
transferable and exchangeable at the offices of the indenture trustee. No
service charge will be imposed for any registration of transfer or
exchange, but the indenture trustee may require payment of a sum sufficient
to cover any tax or other governmental charge imposed in connection
therewith.
TERMS OF THE INDENTURE
Events of Default Under the Indenture. The events of default
under the indenture consist of:
o a default for five days or more in the payment of
interest on any note when it becomes due and payable;
o a default in the payment of principal of, or any
installment of principal of, any note when it becomes due
and payable including, for each class of notes, on the
final payment date of that class;
o a default in the observance or performance of any
material covenant or agreement of the issuer made in the
indenture other than those dealt with specifically
elsewhere as an event of default and the continuation of
any of these defaults for a period of 60 days after
notice is given to the issuer by the indenture trustee or
to the issuer and the indenture trustee by the holders of
at least 25% of the total principal amount of the notes;
o any representation or warranty made by the issuer in the
indenture or in any certificate delivered under the terms
of the indenture having been incorrect in any material
respect as of the time made, and the breach not having
been cured within 30 days after notice is given to the
issuer by the indenture trustee or to the issuer and the
indenture trustee by the holders of at least 25% of the
total principal amount of the notes; or
o events of bankruptcy, insolvency, receivership or
liquidation of the issuer.
Under the Trust Indenture Act of 1939, the indenture trustee may
be deemed to have a conflict of interest and be required to resign as
trustee for either the Class A notes or the Class B notes if a default
occurs under the indenture. In these circumstances, the indenture will
provide for a successor trustee to be appointed for one or both of the
Class A notes and Class B notes, in order that there be separate trustees
for each of the Class A notes and the Class B notes.
If an indenture trustee relating to any class of notes resigns,
its resignation will become effective only after a successor indenture
trustee for that class of notes is appointed and the successor accepts the
appointment.
Noteholders holding at least a majority of the total principal
amount of the notes outstanding may waive any past default or event of
default under the indenture prior to the declaration of the acceleration of
the maturity of the notes. Notwithstanding that, they may not waive a
default in payment of principal of or interest on any of the notes or of
any covenant or provision in the indenture which cannot be modified or
amended without unanimous consent of the noteholders. Any waivers could be
treated, for federal income tax purposes, as a constructive exchange of the
notes by the noteholders for deemed new notes upon which gain or loss would
be recognized.
Remedies Following an Event of Default Under the Indenture. If
an event of default under the indenture should occur and be continuing, the
indenture trustee or the holders of a majority of the total outstanding
principal amount of the notes, voting as a group, may declare the principal
of the notes to be immediately due and payable. The declaration may be
rescinded by the holders of a majority of the total principal amount of the
notes before a judgment or decree for payment of the amount due has been
obtained by the indenture trustee if:
o the issuer has deposited with the indenture trustee an
amount sufficient to pay (A) all interest on and
principal of the notes as if the event of default under
the indenture giving rise to the declaration had not
occurred and (B) all amounts advanced by the indenture
trustee and its costs and expenses; and
o all events of default under the indenture, other than the
nonpayment of principal of the notes that has become due
solely by that acceleration, have been cured or waived.
Any rescission could be treated, for federal income tax purposes, as a
constructive exchange of the notes by the noteholders for deemed new notes
upon which gain or loss would be recognized.
If the notes have been declared due and payable following an
event of default under the indenture, the indenture trustee may institute
proceedings to collect amounts due, exercise remedies as a secured party,
including foreclosure or sale of the property of the issuer, or elect to
maintain the property of the issuer and continue to apply proceeds from the
property of the issuer as if there had been no declaration of acceleration.
The indenture trustee may not, however, sell the property of the issuer
following an event of default under the indenture, other than a default in
the payment of any principal or a default for five days or more in the
payment of any interest on the notes, unless:
o 100% of the noteholders consent;
o the proceeds of the sale will be sufficient to pay in
full the principal of and the accrued interest on all of
the outstanding notes; or
o the indenture trustee determines that the property of the
issuer would not be sufficient on an ongoing basis to
make all payments on the notes as those payments would
have become due if those obligations had not been
declared due and payable, and the indenture trustee
obtains the consent of holders of 66 2/3% of the total
principal amount of the outstanding notes, voting as a
group, to the sale.
The indenture trustee may, but need not, obtain and rely upon an opinion of
an independent accountant or investment banking firm as to whether the
property of the issuer will suffice to pay interest on and principal of the
notes on an ongoing basis.
If the property of the issuer is sold after an event of default
under the indenture has occurred, the proceeds of that sale will be
distributed:
o first, to the indenture trustee for amounts due as
compensation or indemnity payments under the indenture;
o second, to the servicer for amounts due in respect of
accrued and unpaid servicing fees and unreimbursed
advances;
o third, to the Class A noteholders pro rata for interest
which is due and unpaid;
o fourth, to the Class A noteholders pro rata for principal
which is due and unpaid;
o fifth, to the Class B noteholders for interest which is
due and unpaid; and
o sixth, to the Class B noteholders for principal which is
due and unpaid.
Any remaining amounts will be distributed to the
certificateholders for amounts due and unpaid in accordance with the terms
of the trust agreement and the sale and servicing agreement.
If an event of default occurs under the indenture and is
continuing on the notes, the indenture trustee will not be required to
exercise any of its rights or powers at the request or direction of any of
the noteholders if it reasonably believes it will not be adequately
indemnified against the costs, expenses and liabilities which might be
incurred by it in complying with that request. The holders of at least a
majority of the total principal amount of the outstanding notes, voting as
a group, will have the right to direct the time, method and place of
conducting any proceeding or any remedy available to the indenture trustee
as to the notes or exercising any trust power conferred on the indenture
trustee.
A noteholder will not have the right to institute any proceeding
as to the indenture unless:
o the noteholder has given written notice to the indenture
trustee of a continuing event of default under the
indenture;
o the holders of not less than 25% of the total principal
amount of the outstanding notes have made a written
request of the indenture trustee to institute a
proceeding in its own name as indenture trustee;
o the noteholder has offered the indenture trustee
reasonable indemnity;
o the indenture trustee has for 60 days failed to institute
the requested proceeding; and
o no direction inconsistent with that written request has
been given to the indenture trustee during that 60-day
period by the holders of a majority of the total
principal amount of the outstanding notes.
Neither the indenture trustee nor the owner trustee in their
respective individual capacities, nor any holder of a certificate, nor any
of their respective owners, beneficiaries, agents, officers, directors,
employees, successors or assigns will be personally liable for the payment
of interest on or principal of the notes or for the agreements of the
issuer and the owner trustee, in its capacity as trustee, contained in the
indenture.
Covenants by the Issuer under the Indenture. The issuer will
not, among other things:
o sell, transfer, exchange or otherwise dispose of any of
its assets, except as expressly permitted by the
indenture, the sale and servicing agreement, the trust
agreement or related documents;
o claim any credit on or make any deduction from the
principal or interest payable in respect of the notes,
other than amounts withheld under the Internal Revenue
Code of 1986, as amended, or applicable state law, or
assert any claim against any present or former holder of
notes because of the payment of taxes levied or assessed
upon the issuer;
o dissolve or liquidate in whole or in part;
o permit the validity or effectiveness of the indenture to
be impaired;
o permit any person to be released from any covenants or
obligations as to the notes under the indenture except as
may be expressly permitted by the indenture;
o permit any lien, charge, excise, claim, security
interest, mortgage or other encumbrance to be created on
or extend to or otherwise arise upon or burden any assets
of the issuer, or any interest in those assets or their
proceeds;
o permit the lien of the indenture not to constitute a
valid, first priority security interest in the property
of the issuer, other than for any tax, mechanics or other
lien;
o engage in any activities other than financing, acquiring,
owning and pledging the contracts as contemplated by the
indenture, the sale and servicing agreement, the trust
agreement and other related documents and incidental
activities;
o incur, assume or guarantee any indebtedness other than
indebtedness incurred under the notes, or otherwise in
accordance with the indenture, the sale and servicing
agreement, the trust agreement and other related
documents;
o make any payments to certificateholders in respect of
their certificates for any calendar month unless the
Total Required Payment and any deposits required to be
made to the reserve account have been provided for; or
o fail to or fail to cause the servicer to deliver to the
indenture trustee on or before each payment date the
disbursement and payment instructions as required by the
indenture.
Replacement of Indenture Trustee. Noteholders holding not less
than a majority of the total principal amount of the outstanding notes, may
remove the indenture trustee without cause by so notifying the indenture
trustee and the issuer, and following that removal the issuer may appoint a
successor indenture trustee. Any successor indenture trustee must at all
times satisfy the requirements of Section 310(a) of the Trust Indenture Act
of 1939, as amended, and must have a combined capital and surplus of at
least $50,000,000 and a long-term debt rating of investment grade by each
of Moody's and S&P or otherwise acceptable to each of Moody's and S&P.
The indenture trustee may resign at any time by so notifying the
issuer and the noteholders. The issuer will be required to remove the
indenture trustee if the indenture trustee:
o ceases to be eligible to continue as the indenture
trustee;
o is adjudged to be bankrupt or insolvent;
o comes under the charge of a receiver or other public
officer; or
o otherwise becomes incapable of acting.
Upon the resignation or required removal of the indenture
trustee, the issuer will be required promptly to appoint a successor
indenture trustee.
Duties of Indenture Trustee Under the Indenture. The indenture
trustee:
o will perform the duties specifically set forth in the
indenture;
o may, in the absence of bad faith, rely on certificates or
opinions furnished to the indenture trustee which conform
to the requirements of the indenture and on the truth of
the statements and the correctness of the opinions
expressed in those certificates or opinions; and
o will examine any of those certificates and opinions which
are specifically required to be furnished to the
indenture trustee by the indenture to determine whether
or not they conform to the requirements of the indenture.
However, upon the continuance of an event of default under the
indenture, the indenture trustee will be required to exercise the rights
and powers vested in it by the indenture and use the same degree of care
and skill in the exercise of those rights and powers as a prudent person
would exercise or use under the circumstances in the conduct of that
person's own affairs.
Compensation and Indemnity of the Indenture Trustee under the
Indenture. The issuer will:
o pay to the indenture trustee from time to time reasonable
compensation for its services;
o reimburse the indenture trustee for all expenses,
advances and disbursements reasonably incurred; and
o indemnify the indenture trustee for, and hold it harmless
against, any and all losses, liability or expense,
including attorneys' fees, incurred by it in connection
with the performance of its duties.
The indenture trustee will not be indemnified against any loss,
liability or expense incurred by it through its own willful misconduct,
negligence or bad faith, although the indenture trustee will not be liable:
o for any error of judgment made by it in good faith unless
it is proved that the indenture trustee was negligent in
ascertaining the pertinent facts;
o for any action it takes or omits to take in good faith in
accordance with a direction received by it from
noteholders in accordance with the terms of the
indenture; and
o for interest on any money received by it except as the
indenture trustee and the issuer may agree in writing.
The indenture trustee will not be deemed to have knowledge of
any event of default under the indenture unless an officer of the indenture
trustee has actual knowledge or has received written notice of the event of
default in accordance with the provisions of the indenture.
Indenture Trustee's Access to Noteholder Lists. If notes are
issued in fully registered, certificated form and the indenture trustee is
not the registrar for the notes, the issuer will furnish or cause to be
furnished to the indenture trustee a list of the names and addresses of the
noteholders:
o as of each record date, within five days after the record
date; and
o as of not more than 10 days before that list is
furnished, within 30 days after receipt by the issuer of
a written request for that list.
Annual Compliance Statement to be Provided by Issuer to
Indenture Trustee. The issuer will be required to file annually with the
indenture trustee a written statement as to the fulfillment of its
obligations under the indenture.
Requirements for Satisfaction and Discharge of Indenture. The
indenture will be discharged as to the collateral securing the notes upon
the delivery to the indenture trustee for cancellation of all the notes or,
with several limitations, including receipt of various opinions on tax
matters, upon deposit with the indenture trustee of funds sufficient for
the payment in full of all of the notes, including interest and any fees
due and payable to the owner trustee or the indenture trustee.
Requirements for Modification of Indenture. Without the consent
of the noteholders, the owner trustee, on behalf of the issuer, and the
indenture trustee, upon request by the issuer, may execute a supplemental
indenture for the purpose of, among other things, adding to the covenants
of the issuer, curing any ambiguity, correcting or supplementing any
provision which may be inconsistent with any other provision or making any
other provision as to matters or questions arising under the indenture
which will not be inconsistent with other provisions of the indenture,
provided that:
o the action will not, (1) as evidenced by an opinion of
counsel, materially adversely affect the interests of any
noteholder and (2) as confirmed by each of Moody's and
S&P, cause the then-current rating assigned to any class
of notes to be withdrawn, reduced or qualified; and
o an opinion of counsel as to various tax matters is
delivered.
The owner trustee, on behalf of the issuer, and the indenture
trustee, upon request by the issuer, may also enter into supplemental
indentures, with the consent of noteholders holding not less than a
majority of the total principal amount of the outstanding notes, voting as
a group, and with prior written notice to each of Moody's and S&P, for the
purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of the indenture or of modifying in any
manner the rights of noteholders, provided that:
o the action will not, (1) as evidenced by an opinion of
counsel, materially adversely affect the interests of any
noteholder and (2) as confirmed by each of Moody's and
S&P, cause the then-current rating assigned to any class
of notes to be withdrawn, reduced or qualified; and
o an opinion of counsel as to various tax matters is
delivered.
Any opinion of counsel referred to in this paragraph or the preceding one
may be rendered by internal counsel to MART or the servicer.
However, no supplemental indenture may do any of the following
without the consent of the holder of each outstanding note affected by that
supplemental indenture:
o change the final payment date for any class of notes or
the date on which any installment of principal of or
interest on any note is due or reduce the principal
amount of any note, the specified interest rate of any
note or the redemption price of any note, change the
provisions of the indenture relating to the application
of collections on, or the proceeds of the sale of, the
property of the issuer to payment of principal of or
interest on the notes, or change any place of payment
where, or the coin or currency in which, any note or any
interest on the notes is payable;
o impair the right to institute suit for the enforcement of
various provisions of the indenture regarding payment;
o reduce the percentage of the total outstanding principal
amount of the notes the consent of the holders of which
is required for any supplemental indenture or for any
waiver of compliance with various provisions of the
indenture, or of various defaults under the indenture,
and their consequences as provided for in the indenture;
o modify or alter the provisions of the indenture regarding
the voting of notes held by the issuer, MART, the
servicer or an affiliate of any of them;
o reduce the percentage of the total outstanding principal
amount of the notes the consent of the holders of which
is required to direct the indenture trustee to sell or
liquidate the property of the issuer if the proceeds of
that sale would be insufficient to pay the principal
amount and accrued but unpaid interest on the notes and
the certificates;
o modify any provision of the indenture specifying a
percentage of the total principal amount of the notes
necessary to amend the indenture, the sale and servicing
agreement, the trust agreement or any other related
documents except to increase any percentage specified in
the indenture or to provide that various additional
provisions of the indenture, the sale and servicing
agreement, the trust agreement or any other related
documents cannot be modified or waived without the
consent of the holder of each outstanding note affected
by the modification;
o modify any provisions of the indenture in a manner as to
affect the calculation of the amount of any payment of
interest or principal due on any note on any payment date
or to affect the rights of the holders of notes to the
benefit of any provisions for the mandatory prepayment of
the notes contained in the indenture; or
o permit the creation of any lien ranking prior to or on a
parity with the lien of the indenture on any of the
property of the issuer or, except as otherwise permitted
or contemplated in the indenture, terminate the lien of
the indenture on any of that collateral or deprive the
holder of any note of the security afforded by the lien
of the indenture.
The trust agreement will require the owner trustee to give the
certificateholders 30 days' written notice of any proposed supplemental
indenture if it materially adversely affects the certificateholders or if
any noteholders' consent to the proposed supplemental indenture is required
and provides that the owner trustee will not enter into the amendment
unless certificateholders holding a majority of the certificate balance
including, for this purpose, certificates held by MART or any affiliate of
MART, consent in writing.
THE SALE AND SERVICING AGREEMENT AND
THE TRUST AGREEMENT
We have summarized below some of the important terms of the sale
and servicing agreement and the trust agreement. We will file copies of
those agreements with the Securities and Exchange Commission after we issue
the notes and the certificates. This summary is not a complete description
of all of the provisions of those agreements.
SALE AND ASSIGNMENT
Initial Receivables
Together with the issuance of the notes, and under the terms of
the purchase agreement, MMCA will sell and assign to MART its entire right,
title and interest in, to and under the initial receivables to be purchased
by the issuer on the closing date, including its security interests in the
related vehicles. At the time the notes are issued, MART will sell and
assign to the issuer, without recourse, MART's entire interest in the
initial receivables, including its security interests in the related
vehicles. Each of the initial receivables conveyed by MART to the issuer
will be identified in a schedule attached to the sale and servicing
agreement.
The initial receivables will be sold and assigned by MMCA to
MART and sold and assigned by MART to the issuer on the initial Cutoff
Date. The owner trustee will, at the same time as the sale and assignment
of the initial receivables, execute, authenticate and deliver the
certificates. The net proceeds received from the sale of the notes on the
closing date will be applied to the purchase of the receivables, including
the pre-funded receivables, and to the deposits required to be made to the
reserve account, the pre-funding and reinvestment account, the negative
carry account, the payahead account and the yield supplement account.
Pre-Funded Receivables
The pre-funded receivables will be conveyed to the issuer on
dates specified by MART occurring during the pre-funding and reinvestment
period. MART will designate as a Cutoff Date the date as of which
particular pre-funded receivables are conveyed to the issuer. On or before
each transfer of pre-funded receivables to the issuer during the
pre-funding and reinvestment period, MMCA will sell and assign to MART,
without recourse, its entire right, title and interest in, to and under the
pre-funded receivables to be transferred by MART to the issuer on that
date, including MMCA's security interests in the related financed vehicles.
On each of those dates, subject to the conditions described below, MART
will sell and assign to the issuer, without recourse, MART's entire
interest in the pre-funded receivables sold on that date designated by MART
as of the related Cutoff Date.
The issuer will pay the purchase price for pre-funded
receivables with funds deposited in the pre-funding and reinvestment
account on the closing date. MART will deposit the pre-funding initial
deposit - an amount equal to $___________ - in the pre-funding and
reinvestment account on the closing date with proceeds from the sale of the
notes. MART expects to sell pre-funded receivables to the issuer after the
closing date with an aggregate principal balance approximately equal to
$_____________. The remaining portion of the pre-funding initial deposit
will be applied to make required deposits to the reserve account, the
payahead account and the yield supplement account. Before being used to
purchase pre-funded receivables or to pay holders of the notes as described
under "Terms of the Notes-Mandatory Prepayment," funds on deposit in the
pre-funding and reinvestment account will be invested in investments as
permitted by the sale and servicing agreement. The net earnings from the
investment of funds on deposit in the pre-funding and reinvestment account
will be transferred to the collection account on a monthly basis on the
business day preceding each payment date.
Upon the conveyance of the pre-funded receivables on
any date to the issuer:
(1) an amount equal to 1.00% of the adjusted principal
balance of the pre-funded receivables as of the related
Cutoff Date will be withdrawn from the pre-funding and
reinvestment account and deposited in the reserve
account;
(2) an amount equal to the projected Yield Supplement Amounts
for all future payment dates for any pre-funded
receivables transferred on that date that are deferred
payment receivables will be withdrawn from the
pre-funding and reinvestment account and deposited in the
yield supplement account unless the yield supplement
account has been replaced by an acceptable letter of
credit on or before that date; and
(3) an amount equal to the excess of the aggregate principal
balance of the receivables transferred to the trust on
that date over the sum of the amounts described in
clauses (1) and (2) of this paragraph will be withdrawn
from the pre-funding and reinvestment account and paid to
MART.
Reinvestment Receivables
In addition, on each payment date during the pre-funding and
reinvestment period, the issuer will apply prepayments on deferred payment
receivables, with deferral periods of between ___ and ___ days, received
during the prior month to purchase reinvestment receivables to the extent
that payment of those prepayments to noteholders would cause the principal
of the notes to be repaid at a faster rate than would be the case if the
deferred payment receivables pre-paid at the anticipated prepayment rate
for non-deferred payment receivables. None of the reinvestment receivables
will be deferred payment receivables.
On each payment date during the pre-funding and reinvestment
period, the issuer will be required to purchase reinvestment receivables
having a total adjusted principal balance equal to the Required
Reinvestment Amount. However, the issuer's obligation to purchase
reinvestment receivables on any payment date during the pre-funding and
reinvestment period will be subject to the availability of receivables
satisfying the selection criteria in the sale and servicing agreement.
Accordingly, the total adjusted principal balance of reinvestment
receivables which the issuer will purchase on any payment date during the
pre-funding and reinvestment period will be the lesser of:
o the total adjusted principal balance of receivables
available for purchase on that payment date that satisfy
the selection criteria in the sale and servicing
agreement; and
o the Required Reinvestment Amount for that payment date.
If on the business day before any payment date during the
pre-funding and reinvestment period MART does not have receivables that
satisfy the selection criteria in the sale and servicing agreement with a
total adjusted principal balance equal to the Required Reinvestment Amount
for that payment date, the Excess Cash Amount either will be deposited to
the pre-funding and reinvestment account until sufficient receivables are
available for purchase or paid to the noteholders as an early payment of
principal. The Excess Cash Amount will be held in the pre-funding and
reinvestment account only if the amount on deposit in the negative carry
account would at least equal the maximum amount specified for that account
after giving effect to the deposit of the excess cash to the pre-funding
and reinvestment account. If there is a shortfall in the funds in the
negative carry account, MMCA has the option, but not the obligation, to
deposit funds in the amount of the shortfall into the negative carry
account. Although MMCA intends to make these deposits, if MMCA chooses not
to do so, the Excess Cash Amount will be paid to the noteholders as an
early repayment of principal on the notes.
Conditions to the Transfer of Receivables to the Issuer after
the Closing Date
After giving effect to the transfer to the issuer of additional
receivables -- whether pre-funded receivables or reinvestment receivables
-- on any payment date during the pre-funding and reinvestment period, the
principal balance of the receivables pool, the total yield supplement
overcollateralization amount and the adjusted principal balance of the
receivables pool will increase in an amount equal to the principal balance,
yield supplement overcollateralization amount and the adjusted principal
balance of the pre-funded receivables, as of the related Cutoff Date,
respectively. Any conveyance of receivables - whether pre-funded
receivables or reinvestment receivables - during the pre-funding and
reinvestment period requires the satisfaction, on or before the date of
conveyance, of the following conditions precedent, among others:
o each of the receivables transferred to the issuer on that
date must satisfy the eligibility criteria specified in
the sale and servicing agreement (see "The Receivables
Pool--Selection Criteria");
o MART must not have selected those receivables in a manner
that it believes is adverse to the interests of the
issuer, the noteholders or the certificateholders;
o the applicable reserve account deposit for that date must
have been made;
o the applicable payahead account deposit for that date
must have been made;
o the applicable yield supplement account deposit for that
date must have been made;
o MART must have executed and delivered to the issuer, with
a copy to the indenture trustee, a written assignment
conveying those receivables to the issuer, including a
schedule identifying the receivables;
o MART must have delivered opinions of counsel relating to
the transfer of those receivables to the owner trustee,
the indenture trustee, the representative of the
underwriters, and each of Moody's and S&P; and
o the owner trustee, the indenture trustee and each of
Moody's and S&P must have received written notification
from MART of the addition of all receivables transferred
to the issuer on that date.
In addition, each group of receivables - whether pre-funded receivables or
reinvestment receivables-acquired by the issuer during the pre-funding and
reinvestment period will be required to have the following characteristics:
o the weighted average number of payments remaining until
the maturity of the receivables in that group will not be
more than [__] payments;
o the total balloon payments of the receivables in that
group as a percentage of the total principal balance of
the receivables in that group will not be more than
[____]%;
o none of the reinvestment receivables in that group will
be deferred payment receivables;
o the total principal balance of deferred payment
receivables in that group as a percentage of the total
principal balance of the receivables in that group will
not be more than [___]%; and
o the total principal balance of the limited credit
experience receivables in that group as a percentage of
the total principal balance of the receivables in that
group will be not more than [____]%.
Except for the criteria described in the two preceding
paragraphs, there will be no required characteristics of receivables
transferred to the issuer after the closing date. For this reason,
following the transfer of receivables to the issuer on any date during the
pre-funding and reinvestment period, the aggregate characteristics of the
entire pool of receivables may vary from those of the receivables
transferred to the issuer on the closing date. See "Risk Factors" and "The
Receivables Pool."
In the purchase agreement, MMCA will represent and warrant to
MART, and in the sale and servicing agreement, MART will represent and
warrant to the issuer, among other things, that:
o the information provided in the schedule of receivables
transferred to the issuer on the closing date attached to
the sale and servicing agreement and each schedule of
receivables transferred to the issuer on any date during
the pre-funding and reinvestment period attached to the
related assignment is and will be correct in all material
respects;
o each contract requires the related obligor to maintain
physical damage insurance covering the financed vehicle,
in the amount determined by MMCA in accordance with its
customary procedures;
o on any date that receivables are transferred to the
issuer, the receivables are free and clear of all
security interests, liens, charges, and encumbrances and
no setoffs, defenses, or counterclaims against it have
been asserted or threatened;
o on any date that receivables are transferred to the
issuer, each of the receivables is or will be secured by
a perfected first priority security interest in the
vehicle in favor of MMCA; and
o each receivable, at the time it was originated, complied,
and complies or will comply in all material respects with
applicable federal and state laws, including consumer
credit, truth in lending, equal credit opportunity and
disclosure laws.
The noteholders, the issuer, the indenture trustee, the
certificateholders and the owner trustee will have no recourse against MMCA
or MART for breach of any of these representations and warranties as to a
receivable other than the right to require MMCA and MART to repurchase the
receivable. See "--Mandatory Repurchase of Receivables."
The owner trustee, the indenture trustee, the issuer and the
servicer will covenant in the sale and servicing agreement not to institute
or join in the institution of any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceeding, or other similar proceeding against
MART for a period of one year and a day after any securities rated by
Moody's or S&P were issued by MART or by a trust for which MART was the
depositor.
To assure uniform quality in servicing the contracts and to
reduce administrative costs, the issuer will appoint the servicer as
initial custodian of the contracts. The servicer, in its capacity as
custodian, will hold all documents and instruments relating to the
contracts, either directly or through subservicers, on behalf of the
indenture trustee and the issuer. The contracts will not be stamped or
otherwise marked to reflect the sale and assignment of the receivables to
the issuer and will not be segregated from other receivables held by the
servicer or the subservicers. However, Uniform Commercial Code financing
statements reflecting the sale and assignment of the receivables by MMCA to
MART and by MART to the issuer will be filed, and the servicer's accounting
records and computer systems will be marked to reflect that sale and
assignment. See "The Issuer" and "Some Important Legal Aspects of the
Receivables."
THE PRE-FUNDING AND REINVESTMENT PERIOD
The pre-funding and reinvestment period is expected to begin on
the closing date and end on ______________, 2001, but will end earlier if:
o there is an event of default under the indenture;
o there is an event of servicing termination under the sale
and servicing agreement; or
o MART or the servicer becomes subject to various
insolvency events.
Any funds remaining on deposit in the pre-funding and
reinvestment account at the end of the pre-funding and reinvestment period
will be payable to the noteholders as described under "Terms of the
Notes-Mandatory Prepayment."
MANDATORY REPURCHASE OF RECEIVABLES
In the event of a breach of any representation or warranty as to
the receivables, which materially and adversely affects the interest of the
issuer in a receivable, MART, unless that breach or failure has been cured
by the last day of the calendar month which includes the 60th day after the
date on which MART becomes aware of, or receives written notice from the
owner trustee or the servicer of, the breach or failure, will be required
to repurchase the receivable from the issuer, and MMCA will be required to
repurchase the receivable from MART for an amount equal to the purchase
amount of the receivable. See "--Sale and Assignment."
The purchase amount will be payable on the payment date
immediately following that calendar month. The purchase amount of a
receivable to be purchased on any payment date will equal the sum of:
o the outstanding principal balance of the receivable as of
the first day of the preceding calendar month; and
o the accrued and unpaid interest on the principal balance
at the annual percentage rate of the receivable from the
date a payment was last made on the receivable through
the date on which payment was due for that receivable in
the preceding calendar month.
This calculation will be made after giving effect to the receipt
of monies collected on the contract in the preceding calendar month.
The obligation of MART to repurchase a receivable will not be
conditioned on performance by MMCA of its obligation to repurchase a
receivable. The repurchase obligation will constitute the sole remedy
available to the noteholders, the issuer, the indenture trustee, the
certificateholders or the owner trustee against MART and MMCA for any
uncured breach or failure.
SERVICING PROCEDURES
The servicer will make reasonable efforts to collect all
payments due on the receivables in a manner consistent with the sale and
servicing agreement and will exercise the degree of skill and care that the
servicer exercises for comparable motor vehicle receivables owned and/or
serviced by the servicer for itself or others.
MMCA performs certain of its serving functions utilizing
employees of its parent, MMSA. Although it has no current plans to do so,
the servicer may enter into subservicing agreements with servicers
unaffiliated with MMCA that are eligible under the sale and servicing
agreement for the subservicing of receivables. Any subservicing agreements
will contain provisions substantially identical to those contained in the
sale and servicing agreement and may contain other provisions that are not
inconsistent with the terms of the sale and servicing agreement. The
servicer may terminate a subservicing agreement and either service the
related receivables directly or enter into a new subservicing agreement for
the receivables with another subservicer, provided that any subservicer
must be eligible to act as servicer.
Notwithstanding any subservicing agreement, the servicer will
remain obligated and liable to the issuer and the owner trustee for
servicing and administering the receivables in accordance with the sale and
servicing agreement as if the servicer alone were servicing the
receivables. All references in this prospectus to actions required or
permitted to be taken, or restrictions on actions to be taken, by the
servicer apply equally to actions by a subservicer. References in this
prospectus to amounts received by the servicer include amounts received by
a subservicer.
To be eligible to act as a servicer or subservicer under the
sale and servicing agreement, a person must, at the time of its appointment
as servicer or as a subservicer:
o have a net worth of not less than $50,000,000;
o be servicing a portfolio of motor vehicle retail
installment sale contracts and/or motor vehicle loans;
o be legally qualified, and have the capacity, to service
the receivables;
o have demonstrated the ability professionally and
competently to service a portfolio of motor vehicle
retail installment sale contracts and/or motor vehicle
loans similar to the receivables in accordance with
standards of skill and care that are consistent with
prudent industry standards; and
o be qualified and entitled to:
- use under a license or other written agreement the
software which the servicer or any subservicer uses
in connection with performing its duties and
responsibilities under the sale and servicing
agreement or the related subservicing agreement; and
- agree to maintain the confidentiality of that
software, or, obtain the right to use, or develop at
its own expense, software which is adequate to
perform its duties and responsibilities under the
sale and servicing agreement or the related
subservicing agreement.
The servicer will covenant in the sale and servicing agreement
that:
(1) the vehicle securing each receivable will not be released
from the security interest granted by the receivable in
whole or in part, except as contemplated by the sale and
servicing agreement;
(2) the servicer will not and will not permit any subservicer
to impair in any material respect the rights of the
issuer, the indenture trustee, the noteholders, the owner
trustee or the certificateholders in the receivables or
otherwise amend or alter the terms of a contract if, as a
result of that amendment or alteration, the interests of
the issuer, the noteholders, the indenture trustee, the
owner trustee, or the certificateholders under the sale
and servicing agreement would be materially adversely
affected; and
(3) the servicer will not increase or decrease the number or
amount of scheduled payments or the amount financed under
a contract, or extend, rewrite or otherwise modify the
payment terms of a contract; provided, however, that:
- the servicer may extend any contract for
credit-related reasons that would be acceptable to
the servicer for comparable motor vehicle receivables
that it services for itself or others in accordance
with its customary standards if the cumulative
extensions on any contract shall not cause the term
of that contract to extend beyond __________ 2007;
provided further, that the extensions, in total, do
not exceed two months for each twelve months of the
original term of the contract; and
- if the obligor on a deferred payment receivable has
made one or more partial prepayments on the
receivable on or before the date the first scheduled
payment was due under that receivable, the Servicer
may, at any time on or before __________, 2001,
modify the terms of the receivable including reducing
the amount of the scheduled payments. However, the
servicer may not:
o change the annual percentage rate of the
receivable; or
o change the date on which the final scheduled
payment under the receivable was due from the
date specified in the related contract.
If the servicer breaches any covenant described in the preceding
paragraph that materially and adversely affects a receivable, the servicer
will be required to purchase the receivable from the issuer. That purchase
obligation is the sole remedy against the servicer for any uncured breach,
except for the indemnities of the servicer specified in the sale and
servicing agreement. The servicer's obligation to purchase a receivable in
the case of a breach does not apply if the breach has been cured by the
last day of the calendar month which includes the 60th day after the date
on which the servicer becomes aware of, or receives written notice of, the
breach.
The sale and servicing agreement normally requires the servicer
to charge off a receivable in conformity with its normal practice. It will
usually also require the servicer to follow its normal collection practices
and procedures that are consistent with the standard of care required by
the sale and servicing agreement to realize upon any receivable. Currently,
MMCA charges off a receivable at the time that the related vehicle has been
repossessed and sold, or at the time as MMCA determines that it will not
recover the vehicle. The servicer may sell the vehicle securing the
receivable at judicial sale, if any, or take any other action permitted by
law. See "Some Important Legal Aspects of the Receivables." The net
proceeds of the sale will be deposited in the collection account at the
time and in the manner described above.
The sale and servicing agreement will also require the servicer
to make advances, for which the servicer will be reimbursed in the manner
described under "Terms of the Notes--Advances by the Servicer of Amounts
Payable on the Receivables."
The sale and servicing agreement will provide that the servicer
will defend and indemnify:
o the issuer;
o the indenture trustee;
o the owner trustee;
o the noteholders;
o the certificateholders; and
o MART
against any and all liabilities, including reasonable fees and expenses of
counsel and expenses of litigation, arising out of or resulting from the
use, ownership or operation by the servicer or any of its affiliates of any
vehicle, or in respect of any negligence, willful misfeasance or bad faith
of the servicer in the performance of its duties--other than errors in
judgment--or by reason of reckless disregard of its obligations and duties,
under the sale and servicing agreement or under any of the documents to
which it is a party.
The servicer's obligations to indemnify the issuer, the
indenture trustee, the owner trustee, the noteholders, MART and the
certificateholders for the servicer's actions or omissions will survive the
removal of the servicer, but will not apply to any action or omission of a
successor servicer.
SERVICING COMPENSATION
The servicer will be entitled to receive a servicing fee for
servicing the receivables each calendar month, in an amount equal to the
product of one-twelfth of the sum of _____% of the total principal balance
of the receivables--other than deferred payment receivables, plus _____% of
the total principal balance of deferred payment receivables, in each case,
as of the first day of the calendar month. A receivable ceases to be a
deferred payment receivable on the last day of the calendar month prior to
the calendar month in which the first scheduled payment on that receivable
becomes due. The servicer will also be entitled to receive, as additional
servicing compensation, earnings, net of losses and investment expenses, on
amounts on deposit in the payahead account, all disposition fees paid as to
receivables providing for balloon payments, all administrative fees and
charges, and all late payment fees paid as to the receivables, other than
fees paid in connection with extension or deferral of payments on a
receivable, which will be deposited in the collection account. The
servicing fee, together with any portion of the servicing fee that remains
unpaid from prior payment dates, will be paid to the servicer on each
payment date.
The servicing fee and the additional servicing compensation will
compensate the servicer for performing the functions of a third party
servicer of contracts and for administering the receivables on behalf of
the noteholders and the certificateholders, including collecting payments,
accounting for collections, furnishing monthly and annual statements to the
indenture trustee and the owner trustee as to distributions, responding to
inquiries of obligors, investigating delinquencies, and providing
collection and repossession services in cases of obligor default. In
addition, the servicing fee and the additional servicing compensation will
further compensate the servicer for various taxes, accounting fees, outside
auditor fees, data processing costs, and other costs incurred by the
servicer under the sale and servicing agreement in connection with
administering and servicing the receivables.
EVIDENCE TO BE PROVIDED AS TO SERVICER'S COMPLIANCE WITH ITS SERVICING
OBLIGATIONS
The sale and servicing agreement will provide that a firm of
independent certified public accountants, who may provide audit and other
services to the servicer, MART or MMCA, will furnish to the indenture
trustee and the owner trustee, on or before __________ of each year,
beginning __________, 2001, a report of examination as to compliance by the
servicer during the 12 months--or shorter period in the case of the first
report--ended the preceding __________ with various standards relating to
the servicing of the receivables.
The sale and servicing agreement will also provide for delivery
to the indenture trustee and the owner trustee, on or before __________ of
each year, beginning __________, 2001, of a certificate signed by an
officer of the servicer stating that to the best of that officer's
knowledge the servicer has fulfilled its obligations under the sale and
servicing agreement throughout the 12 months--or shorter period in the case
of the first report--ended the preceding __________ or, if there has been a
default in the fulfillment of any of those obligations, describing each of
those defaults.
Beneficial owners of the notes may obtain copies of those
statements and certificates by written request addressed to the indenture
trustee.
RESIGNATION BY THE SERVICER
The sale and servicing agreement will provide that the servicer
may not resign from its obligations and duties as servicer, except upon a
determination that the servicer's performance of its duties is no longer
permissible under applicable law. No resignation of the servicer will
become effective until the indenture trustee or a successor servicer has
assumed the servicer's servicing obligations and duties under the sale and
servicing agreement and becomes the administrator under the administration
agreement.
CONSEQUENCES OF MERGER, CONVERSION, CONSOLIDATION OR SIMILAR ACTIONS BY
SERVICER
Any legal successor to the servicer, whether by merger,
consolidation or purchase and assumption of all or substantially all of the
business of the servicer, will become the servicer under the sale and
servicing agreement, provided that any successor must be eligible to be
servicer under the sale and servicing agreement.
LIMITS ON SERVICER'S LIABILITY
The sale and servicing agreement will provide that the servicer
will be liable only to the extent of the obligations specifically
undertaken by it under the sale and servicing agreement and will have no
other obligations or liabilities under the sale and servicing agreement.
LIMITS ON SERVICER'S OBLIGATIONS IN CONNECTION WITH LEGAL ACTIONS
The sale and servicing agreement will also provide that the
servicer will be under no obligation to appear in, prosecute or defend any
legal action that is not incidental to the servicer's responsibilities
under the sale and servicing agreement and that, in its opinion, may cause
it to incur any expense or liability. The servicer may, however, at its
expense undertake any reasonable action that it may deem necessary or
desirable in respect of the interests of the noteholders and the
certificateholders under the sale and servicing agreement.
EVENTS OF SERVICING TERMINATION
The following events will constitute events of servicing
termination under the sale and servicing agreement:
o any failure by the servicer to deliver to the owner
trustee or the indenture trustee the monthly certificate
detailing the collections and distributions for any
calendar month, which failure continues beyond the
earlier of three business days from the date the
servicer's certificate was due to be delivered and the
related payment date;
o any failure by the servicer to deliver to the collection
account or any other account, any required payment or
deposit under the sale and servicing agreement, which
failure continues unremedied for five business days, or,
in the case of a payment or deposit to be made no later
than a payment date, the failure to make the payment or
deposit by the payment date;
o any failure by the servicer duly to observe or perform in
any material respect any other covenant or agreement in
the notes, the certificates or the sale and servicing
agreement, which failure materially and adversely affects
the rights of noteholders or certificateholders and which
continues unremedied for 30 days after written notice of
the failure is given to the servicer by the indenture
trustee or the owner trustee, or to MART, the servicer,
the owner trustee and the indenture trustee by the
holders of notes or certificates evidencing not less than
25% of the total principal amount of the outstanding
notes, or 25% of the certificate balance, as applicable;
o various events of bankruptcy, receivership, insolvency,
readjustment of debt, marshalling of assets and
liabilities, or similar proceedings as to MART or the
servicer and various actions by MART or the servicer
indicating its insolvency or reorganization under
bankruptcy, receivership, conservatorship, insolvency, or
similar proceedings; and
o failure of the servicer to be eligible to act as servicer
under the sale and servicing agreement.
If one of the events of servicing termination occurs and is not
remedied, either the indenture trustee or the holders of notes evidencing
not less than 51% of the total principal amount of the outstanding notes
will have the right to remove the servicer. If the servicer is removed,
either the indenture trustee will act as successor servicer or the
indenture trustee will appoint a successor servicer.
The holders of notes evidencing not less than 51% of the total
principal amount of the outstanding notes or the holders of certificates
evidencing not less than 51% of the certificate balance, in the case of any
default which does not adversely affect the indenture trustee or the
noteholders may, on behalf of all noteholders and certificateholders, as
applicable, waive any event of servicing termination under the sale and
servicing agreement except an event resulting from the failure to make any
required deposit to or payment from any account.
For purposes of the foregoing, any notes or certificates owned
by MART, the servicer, or any affiliate will not be considered to be
outstanding.
The indenture trustee will have no obligation to notify
noteholders of any event which, with lapse of time to cure, would become an
event of servicing termination under the sale and servicing agreement,
until after the expiration of any applicable cure period, according to the
obligation of the indenture trustee to deliver to each noteholder a copy of
any certificate received by the indenture trustee from the servicer under
the sale and servicing agreement notifying the indenture trustee of any
event which constitutes or, with the giving of notice or lapse of time or
both, would become, an event of servicing termination under the sale and
servicing agreement. See "--Rights of Indenture Trustee and Noteholders
Upon an Event of Servicing Termination Under the Sale and Servicing
Agreement."
RIGHTS OF INDENTURE TRUSTEE AND NOTEHOLDERS UPON AN EVENT OF SERVICING
TERMINATION UNDER THE SALE AND SERVICING AGREEMENT
As long as an event of servicing termination under the sale and
servicing agreement remains unremedied, the indenture trustee or the
holders of notes evidencing not less than a majority of the total principal
amount of the outstanding notes may terminate the servicer's rights and
obligations under the sale and servicing agreement. Thereafter, the
indenture trustee or a servicer meeting the requisite eligibility
standards, which may be an affiliate of the indenture trustee, appointed by
the indenture trustee will succeed to all the responsibilities, duties, and
liabilities of the original servicer.
The successor servicer will then be entitled to the compensation
payable to the servicer. If the indenture trustee is unwilling or legally
unable so to act, the indenture trustee may appoint, or petition a court of
competent jurisdiction to appoint, a person eligible to act as servicer as
successor to the outgoing servicer under the sale and servicing agreement.
In no event may the servicing compensation to be paid to that successor be
greater than the servicing compensation payable to the servicer under the
sale and servicing agreement. In the event of the bankruptcy of the
servicer, the bankruptcy trustee or the servicer, as debtor in possession,
may have the power to prevent a termination of the servicer's rights and
obligations under the sale and servicing agreement.
REQUIREMENTS FOR AMENDMENTS OF THE SALE AND SERVICING AGREEMENT AND THE TRUST
AGREEMENT
Both the sale and servicing agreement and the trust agreement
may be amended by the parties without the consent of the noteholders or the
certificateholders, to cure any ambiguity, to correct or supplement any
provision of either agreement which may be inconsistent with any other
provision of that agreement, and to add, change or eliminate any other
provisions of either agreement which are not inconsistent with the
provisions of that agreement; provided that the action will not, as
evidenced by an opinion of counsel--which may be given by internal counsel
to MART or the servicer--to the indenture trustee and the owner trustee,
materially and adversely affect the interest of any noteholder or
certificateholder or, as to the trust agreement, have adverse tax
consequences.
The sale and servicing agreement may be amended by the parties
for the purpose of adding any provisions to, or changing in any manner or
eliminating any of the provisions of, the sale and servicing agreement or
for the purpose of modifying the rights of noteholders or
certificateholders, with the consent of the indenture trustee, the holders
of notes evidencing not less than 51% of the total principal amount of then
outstanding notes, voting as a group, and the holders of certificates
evidencing not less than 51% of the certificate balance.
For purposes of the foregoing, any notes or certificates owned
by MART, the servicer, or any affiliate will not be considered to be
outstanding.
The trust agreement may be amended by the parties for the
purpose of adding any provisions to or changing in any manner, or
eliminating any of the provisions of the trust agreement, or for the
purpose of modifying the rights of noteholders or certificateholders, with
the consent of the indenture trustee, MART, the holders of notes evidencing
not less than a majority of the total principal amount of the then
outstanding notes, voting as a group, and the holders of certificates
evidencing not less than a majority of the certificate balance.
However, no amendment of either agreement may:
o increase or reduce in any manner the amount of, or
accelerate or delay the timing of, or change the
allocation or priority of, collections of payments on
receivables or distributions that are required to be made
on any note or certificate, or change any interest rate
of any note, the Specified Reserve Balance, without the
consent of all adversely affected noteholders or
certificateholders;
o reduce the aforesaid percentage of the notes and the
certificates which is required to consent to any
amendment, without the consent of all noteholders or
certificateholders affected by the amendment;
o adversely affect the ratings of any class of notes by
Moody's and S&P without the consent of holders of notes
evidencing not less than 66 2/3% of the total principal
amount of the then outstanding notes of that class as to
any amendment to the sale and servicing agreement or the
trust agreement; or
o amend the provisions of the trust agreement setting forth
the permitted activities of the trust.
Additionally, as to an amendment of the trust agreement, an
opinion of counsel to the effect that the amendment will not have specified
adverse tax consequences will be furnished to the indenture trustee and the
owner trustee. See "Terms of the Notes--Book Entry Registration."
REQUIREMENTS FOR TERMINATION OF THE ISSUER
The issuer will terminate and be of no further force and effect
upon the earlier of:
o payment to noteholders and certificateholders of all
amounts required to be paid to them under the indenture,
the trust agreement and the sale and servicing agreement;
and
o the payment date following the month which is one year
after the maturity or other liquidation of the last
receivable and the disposition of any amounts received
upon liquidation of any property remaining with the
issuer in accordance with the terms and priorities set
forth in the indenture, the trust agreement and the sale
and servicing agreement.
In order to avoid excessive administrative expense, the servicer
will be permitted, at its option, if the principal balance of the
receivables pool as of the close of business on the last day of a calendar
month has declined to 10% or less of the Initial Pool Balance, to purchase
from the issuer, on any payment date occurring in a subsequent calendar
month, all remaining receivables transferred to the issuer at a purchase
price equal to the outstanding principal amount of the notes and the
certificates, in each case plus accrued and unpaid interest thereon. The
exercise of this right will effect early retirement of the notes and the
certificates.
ACTIONS TO BE TAKEN BY INDENTURE TRUSTEE UPON TERMINATION OF THE ISSUER
The indenture trustee will give written notice of termination of
the issuer to each noteholder of record. The final distribution to any
noteholder will be made only upon surrender and cancellation of that
holder's note, whether a note in fully registered, certificated form or one
or more physical notes representing the notes, at the office or agency of
the indenture trustee specified in the notice of termination. Any funds
remaining with the issuer, after the indenture trustee has taken various
measures to locate a noteholder and the measures have failed, will be
distributed to MART or as otherwise provided in the sale and servicing
agreement and the trust agreement.
THE ADMINISTRATION AGREEMENT
MMCA, in its capacity as administrator, will enter into an
administration agreement with the issuer and the indenture trustee. Under
the administration agreement, the administrator will agree to provide the
notices and to perform other administrative obligations required by the
indenture. As compensation for the performance of the administrator's
obligations under the administration agreement and as reimbursement for its
expenses relating to the administration agreement, the administrator will
be entitled to a monthly administration fee to be paid by the servicer.
SOME IMPORTANT LEGAL ASPECTS OF THE RECEIVABLES
The discussion below examines the material legal aspects of the
receivables under applicable federal and state laws including the laws of
California and Texas, the states in which the largest number of obligors
reside.
BANKRUPTCY CONSIDERATIONS
MMCA and MART intend that each transfer of receivables by MMCA
to MART be structured so that the receivables and the related proceeds
would not be part of MMCA's bankruptcy estate under Section 541 of the
United States Bankruptcy Code should MMCA become the subject of a
bankruptcy case after the transfers of the receivables to MART. This is
known as a "true sale." Legal counsel has advised MART that if MMCA were to
become the subject of a voluntary or involuntary case under the United
States Bankruptcy Code, the receivables and their proceeds would not be
part of MMCA's bankruptcy estate under Section 541 of the United States
Bankruptcy Code.
In Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d 948 (10th Cir.
1993), cert. denied, 114 S. Ct. 554 (1993), the United States Court of
Appeals for the 10th Circuit suggested that even where a transfer of
accounts from a seller to a buyer constitutes a "true sale," the accounts
would nevertheless constitute property of the seller's estate in a
bankruptcy of the seller. If MMCA were to become part of a bankruptcy
proceeding and the court follows the Octagon court's reasoning, you could
experience losses or delays in payments on your notes. Counsel to MART has
advised MART that the reasoning of the Octagon case appears to be
inconsistent with other precedent. In addition, the Permanent Editorial
Board of the Uniform Commercial Code has issued PEB Commentary No. 14,
which characterizes the Octagon court's interpretation of Article 9 of the
Uniform Commercial Code as erroneous. That commentary states that nothing
in Article 9 is intended to prevent the transfer of ownership of accounts
or chattel paper.
ISSUER'S RIGHTS IN THE RECEIVABLES
The receivables are "chattel paper" as defined in the Uniform
Commercial Code. Under the Uniform Commercial Code, for most purposes, a
sale of chattel paper is treated in a manner similar to a transaction
creating a security interest in chattel paper. Following transfers of the
receivables, MMCA and MART will cause financing statements to be filed with
the appropriate governmental authorities to perfect the interest of MART
and the issuer, as the case may be, in the receivables.
Under the sale and servicing agreement, the servicer will hold
the receivables, either directly or through subservicers, as custodian for
the indenture trustee and the issuer following the sale and assignment of
the receivables to the issuer on any date. MART will take the action that
is required to perfect the rights of the indenture trustee and the issuer
in the receivables. The receivables will not be stamped, or otherwise
marked, to indicate that they have been sold to the issuer. If, through
inadvertence or otherwise, another party purchases or takes a security
interest in the receivables for new value in the ordinary course of
business and takes possession of the receivables without actual knowledge
of the issuer's interest, the purchaser or secured party will acquire an
interest in the receivables superior to the interest of the issuer.
The servicer will be obligated to take those actions which are
necessary to protect and perfect the issuer's interest in the receivables
and their proceeds.
SECURITY INTERESTS IN VEHICLES
In all states in which the receivables have been originated,
retail installment sale contracts evidence the credit sale of vehicles by
dealers to obligors; the contracts also constitute personal property
security agreements and include grants of security interests in the
vehicles under the Uniform Commercial Code. Perfection of security
interests in the vehicles is usually governed by the motor vehicle
registration laws of the state in which the vehicle is located. In most
states in which the receivables have been originated, a security interest
in a vehicle is perfected by notation of the secured party's lien on the
vehicle's certificate of title. In California and Texas, a security
interest in a vehicle is perfected by recording the security interest on
the vehicle's certificate of title.
MMCA will assign its security interests in the vehicles securing
the related receivables to MART and MART will subsequently assign its
security interests in the vehicles to the issuer. However, because of the
administrative burden and expense, MMCA, the servicer, MART and the issuer
will not amend any certificate of title to identify the issuer as the new
secured party on the certificates of title relating to the vehicles. Also,
the servicer will continue to hold any certificates of title relating to
the vehicles in its possession as custodian for the issuer.
In most states, assignments together with a perfected security
interest in the chattel paper are an effective conveyance of a security
interest in the vehicles subject to the chattel paper without amendment of
any lien noted on a vehicle's certificate of title, and the assignee
succeeds to the assignor's rights as secured party. In the absence of fraud
or forgery by the vehicle owner or the servicer or administrative error by
state or local agencies, the notation of MMCA's lien on the certificates of
title will be sufficient to protect the issuer against the rights of
subsequent purchasers of a vehicle or subsequent lenders who take a
security interest in a vehicle. If there are any vehicles as to which MMCA
failed to obtain a perfected security interest, its security interest would
be subordinate to, among others, subsequent purchasers of the vehicles and
holders of perfected security interests.
A failure would constitute a breach of MMCA's warranties under
the purchase agreement and of MART's warranties under the sale and
servicing agreement and would create an obligation of MMCA and of MART to
purchase the related receivable if the breach materially adversely affects
the interest of the issuer in the receivable. By not identifying the issuer
as the secured party on the certificate of title, the issuer's interest in
the chattel paper may not have the benefit of the security interest in the
vehicle in all states or the security interest could be defeated through
fraud or negligence. MART will assign its rights under the purchase
agreement to the issuer. If the issuer does not have a perfected security
interest in a vehicle, its ability to realize on the vehicle in the event
of a default may be adversely affected.
Under the laws of most states, a perfected security interest in
a vehicle would continue for four months after a vehicle is moved to a
state other than the state in which it is initially registered and
thereafter until the vehicle owner re-registers the vehicle in the new
state. A vehicle brought into California will be perfected under the laws
of the state which issued the certificate of title until four months after
the vehicle was removed from that state. The security interest in a vehicle
brought into Texas will remain perfected for four months after the vehicle
first enters Texas and will then become unperfected if no action is taken
to perfect the vehicle in Texas. A majority of states, including
California, require surrender of a certificate of title to re-register a
vehicle. If a vehicle brought into Texas from another state is required to
be registered in Texas, satisfactory evidence of title is required before
the vehicle can be sold or transferred in Texas. Accordingly, a secured
party must surrender possession if it holds the certificate of title to the
vehicle, or, in the case of vehicles registered in states providing for the
notation of a lien on the certificate of title but not possession by the
secured party, the secured party would receive notice of surrender if the
security interest is noted on the certificate of title. Thus, the secured
party would have the opportunity to re-perfect its security interest in the
vehicle in the state of relocation.
In states that do not require a certificate of title for
registration of a motor vehicle, re-registration could defeat perfection.
In the ordinary course of servicing receivables, MMCA takes steps to effect
re-perfection upon receipt of notice of re-registration or information from
the obligor as to relocation. Similarly, when an obligor sells a vehicle,
MMCA must either surrender possession of the certificate of title or it
will receive notice as a result of its lien noted on the certificate of
title and, will have an opportunity to require satisfaction of the
receivable before release of the lien. The servicer will be obligated to
take appropriate steps, at the servicer's expense, to maintain perfection
of security interests in the vehicles.
Under the laws of most states, liens for repairs performed on a
motor vehicle and liens for unpaid taxes may take priority over even a
perfected security interest in a vehicle. California gives priority to
those liens given by statute or rule of law. In Texas, liens for work
intended to enhance or preserve the value of the vehicle, such as a
mechanic's lien, may take priority over even a perfected security interest
in that vehicle. The Internal Revenue Code of 1986, as amended, also grants
priority to some federal tax liens over the lien of a secured party.
Federal law and the laws of some states permit the confiscation of motor
vehicles under some circumstances if used in unlawful activities, which may
result in the loss of a secured party's perfected security interest in the
confiscated motor vehicle.
MMCA will represent to MART and MART will represent to the
issuer that the issuer's security interest in each vehicle is or will be
prior to all other present liens (other than tax liens and liens that arise
by operation of law) and security interests in, the vehicle. However, liens
for repairs or taxes, or the confiscation of a vehicle, could arise or
occur at any time during the term of a receivable. No notice will be given
to the owner trustee, certificateholders, and the indenture trustee or
noteholders in the event a lien arises or confiscation occurs. Neither MART
nor the servicer will have any obligation to repurchase a receivable as to
which any of the preceding occurrences result in the issuer losing the
priority of its security interest or its security interest in the vehicle
after the date a receivable is sold to the trust.
REPOSSESSION
In the event of default by a purchaser of a vehicle, the holder
of the retail installment sale contract has all the remedies of a secured
party under the Uniform Commercial Code, except where specifically limited
by other state laws. Under the Uniform Commercial Code, remedies of a
secured party include the right to repossession by self-help, unless
repossession would constitute a breach of the peace. Unless a vehicle is
voluntarily surrendered, self-help repossession is the method employed by
MMCA in the majority of instances in which a default occurs and is
accomplished simply by retaking possession of the vehicle. In cases where
the obligor objects or raises a defense to repossession, or if otherwise
required by applicable state law, a court order must be obtained from the
appropriate state court, and the vehicle must then be repossessed in
accordance with that order.
NOTICE OF SALE; REDEMPTION RIGHTS
In the event of default by an obligor, some jurisdictions
require that the obligor be notified of the default and be given a time
period within which the obligor may cure the default prior to repossession.
This right of reinstatement may be exercised on a limited number of
occasions in any one-year period.
The Uniform Commercial Code and other state laws require the
secured party to provide a defaulting 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. The obligor has the right to
redeem the collateral prior to actual sale by paying the secured party the
unpaid principal balance of the obligation plus reasonable expenses for
repossessing, holding, and preparing the collateral for disposition and
arranging for the sale, plus, in some jurisdictions, reasonable attorneys'
fees, or, in some states, by payment of delinquent installments or the
unpaid balance.
In California, the secured party must give written notice to a
defaulting obligor at least fifteen days before a public sale or before the
day on or after which any private sale of the collateral is to be made.
Texas requires the secured party to provide a defaulting obligor with
reasonable notice of the time and place of any public sale and/or the time
after which any private sale of the collateral may be held. In both Texas
and California, the obligor has the right to redeem the collateral prior to
actual sale by paying the secured party the unpaid principal balance of the
obligation plus reasonable expenses for repossessing, holding, and
preparing the collateral for disposition and arranging for the sale, and
reasonable attorney's fees and legal expenses.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of a repossessed vehicle will usually be
applied first to the expenses of resale and repossession and then to the
satisfaction of the indebtedness of the obligor on the related receivable.
While some states impose prohibitions or limitations on deficiency
judgments, if the net proceeds from resale do not cover the full amount of
the indebtedness, a deficiency judgment can be sought in those states that
do not prohibit or limit these judgments. However, the deficiency judgment
would be a personal judgment against a defaulting obligor, who can be
expected to have very limited capital or 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 not paid at all. MMCA will normally seek to recover
any deficiency existing after repossession and sale of a vehicle.
OBLIGOR'S RIGHT TO EXCESS PROCEEDS UPON SALE OF A VEHICLE
Occasionally, after resale of a financed vehicle and payment of
all expenses and indebtedness, there is a surplus of funds. In that case,
the Uniform Commercial Code requires the lender to remit the surplus to any
holder of any lien on the vehicle sold or if no lienholder exists or there
are remaining funds, the Uniform Commercial Code requires the lender to
remit the surplus to the former obligor.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related
regulations impose substantial requirements upon lenders and servicers
involved in consumer finance. These laws include:
o the Truth-in-Lending Act;
o the Equal Credit Opportunity Act;
o the Federal Trade Commission Act;
o the Fair Credit Reporting Act;
o the Fair Debt Collection Practices Act;
o the Magnuson-Moss Warranty Act;
o the Federal Reserve Board's Regulations B and Z;
o state adaptations of the National Consumer Act and of the
Uniform Consumer Credit Code; and
o state motor vehicle retail installment sales acts, retail
installment sales acts, and other similar laws.
Also, state laws impose finance charge ceilings and other
restrictions on consumer transactions and require contract disclosures in
addition to those required under federal law. Those requirements impose
specific statutory liabilities upon creditors who fail to comply with their
provisions. In some cases, this liability could affect an assignee's
ability to enforce consumer finance contracts like the receivables.
The so-called holder-in-due-course rule of the Federal Trade
Commission, also known as the FTC rule, the provisions of which have been
duplicated by the Uniform Consumer Credit Code, other state statutes, or
the common law in some states, has the effect of subjecting a seller, and
some related lenders and their assignees, in a consumer credit transaction
and any assignee of the seller to all claims and defenses which the buyer
in a transaction could assert against the seller of the goods.
Liability under the FTC rule is limited to the amounts paid by
the buyer, and may result in the inability of the holder of the contract to
collect all or a portion of the balance remaining due from the buyer under
that contract. Most of the receivables will fall under the requirements of
the FTC rule. Also, the issuer, as holder of the related receivables, will
be liable to any claims or defenses that a purchaser of a vehicle may
assert against the seller of the vehicle. Those claims are limited to a
maximum liability equal to the amounts paid by the obligor on the
receivable.
Under most state motor vehicle dealer licensing laws, sellers of
motor vehicles are required to be licensed to sell motor vehicles at retail
sale. Furthermore, Federal Odometer Regulations promulgated under the Motor
Vehicle Information and Cost Savings Act require that all sellers of new
and 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 an Odometer Disclosure Statement was not provided
to the purchaser of the related vehicle, the obligor may be able to assert
a defense against the seller of the vehicle. If an obligor were successful
in asserting one of these claims or defenses, it would be a breach of
MMCA's and MART's representations and warranties under the purchase
agreement and the sale and servicing agreement and would create an
obligation of MMCA and MART to repurchase the receivable unless the breach
is cured. See "The Sale and Servicing Agreement and the Trust
Agreement--Sale and Assignment."
Courts have imposed general equitable principles on secured
parties pursuing repossession of collateral 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, obligors have asserted that the self-help
remedies of secured parties under the Uniform Commercial Code and related
laws violate the due process protections provided under the 14th Amendment
to the Constitution of the United States. Courts have often upheld the
notice provisions of the Uniform Commercial Code and related laws as
reasonable or have found that the repossession and resale by the creditor
do not involve sufficient state action to afford constitutional protection
to consumers.
MMCA and MART will warrant that each receivable complies with
all requirements of law in all material respects. Accordingly, if an
obligor has a claim against the issuer for violation of any law and the
claim materially and adversely affects the issuer's interest in a
receivable, the violation would constitute a breach of warranty and would
create an obligation of MMCA and MART to repurchase the affected receivable
unless the breach is cured. See "The Sale and Servicing Agreement and the
Trust Agreement--Mandatory Repurchase of Receivables."
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency
judgments, numerous other statutory provisions, including the United States
Bankruptcy Code and related state laws, may interfere with or affect the
ability of a lender to realize upon collateral or enforce a deficiency
judgment. For example, in a Chapter 13 proceeding under the United States
Bankruptcy Code, a court may prevent a lender 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 lender 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.
LEGAL INVESTMENT
The class A-1 notes are structured to be eligible for purchase
by money market funds under Rule 2a-7 under the Investment Company Act of
1940, as amended. A money market fund should consult its legal advisors
regarding whether an investment by the money market fund in the class A-1
notes satisfies the money market fund's investment policies and objectives.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of some of the United
States federal income tax consequences of the purchase, ownership and
disposition of the notes. This discussion is based upon current provisions
of the tax code, existing and proposed Treasury regulations under the tax
code, current administrative rulings, judicial decisions and other
applicable authorities in effect as of the date of this prospectus, all of
which are subject to change, possibly with retroactive effect. There can be
no assurance that the IRS will not challenge the conclusions reached in
this prospectus, and no ruling from the IRS has been or will be sought on
any of the issues discussed below.
This summary does not purport to deal with all aspects of
federal income taxation that may be relevant to beneficial owners of notes
in light of their personal investment circumstances nor, except for some
limited discussions of particular topics, to some types of beneficial
owners of notes subject to special treatment under the federal income tax
laws (e.g., financial institutions, broker-dealers, life insurance
companies and tax-exempt organizations). This information is directed to
beneficial owners who hold the notes as "capital assets" within the meaning
of Section 1221 of the tax code.
TAX TREATMENT OF THE NOTES AND THE ISSUER UNDER FEDERAL INCOME TAX LAW
Tax Status of the Notes and the Issuer. On the closing date,
Skadden, Arps, Slate, Meagher & Flom LLP will render its opinion that for
federal income tax purposes under existing law, subject to customary
assumptions and qualifications:
o the notes will be treated as debt; and
o the issuer will not be classified as an association or a
publicly traded partnership taxable as a corporation.
MART, the owner trustee and the indenture trustee have agreed, and the
noteholders will agree by their purchase of notes, to treat the notes for
federal, state and local income and franchise tax purposes as indebtedness
of the issuer.
Stated Interest. Stated interest on the notes will be taxable as
ordinary income for federal income tax purposes when received or accrued in
accordance with a beneficial owner's method of tax accounting.
Original Issue Discount. A note will be treated as issued with
original issue discount or "OID" if the excess of the note's "stated
redemption price at maturity" over the issue price equals or exceeds a de
minimis amount equal to 1/4 of 1 percent of the note's stated redemption
price at maturity multiplied by the number of complete years to its
maturity based on the anticipated weighted average life of a note.
In general, OID, if any, will equal the difference between the
stated redemption price at maturity of a note and its issue price. A holder
of a note must include OID in gross income as ordinary interest income as
it accrues under a method taking into account an economic accrual of the
discount. In general, OID must be included in income in advance of the
receipt of the cash representing that income. The amount of OID on a note
will be considered to be zero if it is less than a de minimis amount
determined as described above.
The issue price of a note will generally be the initial offering
price at which a substantial amount of the notes are sold. The issuer
intends to treat the issue price as including, in addition, the amount paid
by the noteholder for accrued interest that relates to a period prior to
the closing date. The stated redemption price at maturity generally will
equal the principal amount of the Note.
The holder of a note issued with OID must include in gross
income for each taxable year the OID accrued for each day during its
taxable year on which it holds the note. The daily portions are determined
by calculating the OID for the accrual period and then allocating to each
day a pro rata portion of the OID that accrued during the accrual period.
The issuer intends to report OID on the basis of an accrual period that
corresponds to the interval between payment dates.
OID on the notes will be computed by taking into account the
anticipated rate of prepayments assumed in pricing the notes, which will be
_____% ABS. The amount of OID that will accrue during an accrual period
will equal:
o the present value of all payments remaining to be made on
the note as of the close of the accrual period, plus the
payments during the accrual period of amounts included in
the stated redemption price of the note, minus
o the "adjusted issue price" of the note at the beginning
of the accrual period.
The adjusted issue price of a note is the sum of its issue price
plus prior accruals of OID, reduced by the total payments made with respect
to the note in all prior periods, other than qualified stated interest
payments. The present value of the remaining payments is determined on the
basis of three factors:
o the original yield to maturity of the note, determined on
the basis of compounding at the end of each accrual
period and properly adjusted for the length of the
accrual period,
o events which have occurred before the end of the accrual
period and
o the assumption that the remaining payments will be made
in accordance with the original assumption.
The effect of this method is to increase the rate at which a
noteholder includes OID in income to take into account prepayments on the
receivables at a rate that exceeds the anticipated rate of prepayments, and
to decrease (but not below zero) for any period the rate at which a
noteholder includes OID in income to take into account prepayments with
respect to the receivables at a rate that is slower than the anticipated
rate of prepayments. Although OID will be reported to noteholders based on
the anticipated rate of prepayments, no representation is made to
noteholders that receivables will be prepaid at that rate or at any other
rate.
A holder of a note that acquires the note for an amount that
exceeds its stated redemption price will not include any OID in gross
income. A holder of a note which acquires the notes for an amount that is
less than its stated redemption price will be required to include OID in
gross income, but a subsequent holder who purchases a note for an amount
that exceeds its adjusted issue price will be entitled, as will an initial
holder who pays more than a note's issue price, to reduce the amount of OID
included in income in each period by the amount of OID multiplied by a
fraction, the numerator of which is:
o the purchaser's adjusted basis in the note immediately
after purchase thereof minus
o the adjusted issue price of the note;
and the denominator of which is:
o all amounts remaining to be paid on the note after the
purchase date, other than qualified stated interest,
minus
o the adjusted issue price of the note.
Total Accrual Election. As an alternative to separately accruing
stated interest, OID, de minimis OID, market discount, de minimis market
discount, unstated interest, premium, and acquisition premium, a holder of
a note may elect to include all income that accrues on the note using the
constant yield method. If a noteholder makes this election, income on a
note will be calculated as though:
o the issue price of the note were equal to the
noteholder's adjusted basis in the note immediately after
its acquisition by the noteholder;
o the note were issued on the noteholder's acquisition
date; and
o none of the interest payments on the note were "qualified
stated interest."
A noteholder may make this election for a note that has premium or market
discount, respectively, only if the noteholder makes, or has previously
made, an election to amortize bond premium or to include market discount in
income currently. See "--Market Discount" and "--Amortizable Bond Premium."
Market Discount. The notes, whether or not issued with OID, will
be subject to the market discount rules of the tax code. In general, these
rules provide that if the beneficial owner purchases a note at a discount
(if the discount exceeds a de minimis amount specified in the tax code)
from its stated redemption price at maturity or, if the notes were issued
with OID, its adjusted issue price, and thereafter (1) recognizes gain upon
a disposition, or (2) receives payments of principal, the lesser of (x) the
gain or principal payment or (y) the accrued market discount will be taxed
as ordinary interest income and not as capital gain. Generally, the accrued
market discount will be the total market discount on the note multiplied by
a fraction equal to:
o the number of days the beneficial owner held the note,
divided by
o the number of days from the date the beneficial owner
acquired the note until its maturity date.
The beneficial owner may elect, however, to determine accrued market
discount under the constant yield method.
Limitations imposed by the tax code which are intended to match
deductions with the taxation of income may defer deductions for interest on
indebtedness incurred or continued, or short-sale expenses incurred, to
purchase or carry a note with market discount. A beneficial owner of a note
may elect to include market discount in gross income as it accrues and, if
it makes this election, is exempt from this rule. This election will apply
to all debt instruments acquired by the taxpayer on or after the first day
of the first taxable year to which the election applies. The adjusted basis
of a note subject to the election will be increased to reflect market
discount included in gross income, thereby reducing any gain or increasing
any loss on a sale or other taxable disposition.
Amortizable Bond Premium. In general, if a beneficial owner of a
note purchases a note at a premium--that is, an amount in excess of the
amount payable upon the maturity of that note--that beneficial owner will
be considered to have purchased the note with "amortizable bond premium"
equal to the amount of the excess. The beneficial owner of a note may elect
to amortize bond premium as an offset to interest income, and not as a
separate deduction item, as it accrues under a constant yield method over
the remaining term of the note. That beneficial owner's tax basis in the
note will be reduced by the amount of the amortized bond premium. Any
election will apply to all debt instruments, other than instruments the
interest on which is excludible from gross income, held by that beneficial
owner at the beginning of the first taxable year for which the election
applies or later acquired, and cannot be revoked without the consent of the
IRS. Bond premium on a note held by a beneficial owner who does not elect
to amortize the premium will decrease the gain or increase the loss
otherwise recognized on the disposition of the note.
Disposition of Notes. A beneficial owner of a note's adjusted
tax basis will be its cost, increased by the amount of any OID, market
discount and gain previously included in income with respect to the note,
and reduced by the amount of any payment on the note that is not qualified
stated interest and the amount of bond premium previously amortized with
respect to the note. A beneficial owner will generally recognize gain or
loss on the sale or retirement of a note equal to the difference between
the amount realized on the sale or retirement and the tax basis of the
note. The gain or loss will be capital gain or loss--except to the extent
attributable to OID not previously accrued, accrued but unpaid interest, or
as described above under "--Market Discount"--and will be long-term capital
gain or loss if the note was held for more than one year. In addition, if
the prepayable obligation rules apply, any OID that has not accrued at the
time of the payment in full of a note will be treated as ordinary income.
FEDERAL TAX CONSEQUENCES OF WAIVERS OF EVENTS OF DEFAULT AND AMENDMENTS OF
NOTES BY NOTEHOLDERS
The indenture permits the noteholders to waive an event of
default under the indenture or rescind an acceleration of the notes in some
circumstances upon a vote of the requisite percentage of noteholders. Any
waiver or rescission under the indenture, or any amendment of the terms of
the notes, could be treated for federal income tax purposes as a
constructive exchange by a noteholder of the notes for new notes, upon
which gain or loss would be recognized.
INFORMATION REPORTING AND BACKUP WITHHOLDING OF TAXES BY INDENTURE TRUSTEE
The indenture trustee will be required to report annually to the
IRS, and to each beneficial owner of a note, the amount of interest paid on
the notes and the amount withheld for federal income taxes for each
calendar year, except as to exempt recipients which are generally
corporations, tax-exempt organizations, qualified pension and
profit-sharing trusts, individual retirement accounts, or nonresident
aliens who provide certification as to their status. Each beneficial owner
of note, other than beneficial owners who are not subject to the reporting
requirements will be required to provide, under penalty of perjury, a
certificate containing the beneficial owner's name, address, correct
federal taxpayer identification number--which includes a social security
number--and a statement that the beneficial owner is not subject to backup
withholding. Should a non-exempt beneficial owner fail to provide the
required certification or should the IRS notify the indenture trustee or
the issuer that the beneficial owner has provided an incorrect federal
taxpayer identification number or is otherwise subject to backup
withholding, the indenture trustee will be required to withhold, or cause
to be withheld, 31% of the interest otherwise payable to the beneficial
owner, and remit the withheld amounts to the IRS as a credit against the
beneficial owner's federal income tax liability.
TAX CONSEQUENCES TO FOREIGN INVESTORS
The following information describes the U.S. federal income tax
treatment of investors that are not U.S. persons, which are any persons
other than:
o citizens or residents of the United States;
o corporations, partnerships or other entities treated as
corporations or partnerships for United States federal
income tax purposes organized in or under the laws of the
United States, any state or the District of Columbia,
unless, in the case of a partnership or entity treated as
a partnership, Treasury regulations provide otherwise;
o estates the income of which is includible in gross income
for U.S. federal income tax purposes, regardless of
source; or
o trusts if a U.S. court is able to exercise primary
supervision over the administration of the trusts and one
or more U.S. persons has authority to control all
substantial decisions of the trust.
Interest paid or accrued to a non-U.S. person that is not
effectively connected with the conduct of a trade or business within the
United States by the non-U.S. person will generally be considered
"portfolio interest" and generally will not be subject to U.S. federal
income tax and withholding tax, as long as the non-U.S. person:
o is not actually or constructively a "10 percent
shareholder" of the issuer or a "controlled foreign
corporation" with respect to which the issuer is a
"related person" within the meaning of the tax code, and
o provides an appropriate statement, signed under penalties
of perjury, certifying that the beneficial owner of a
note is a non-U.S. person and providing that non-U.S.
person's name and address.
If the information provided in this statement changes, the
non-U.S. person must so inform the indenture trustee within 30 days of the
change. The statement generally must be provided in the year a payment
occurs or in either of the two preceding years. If the interest were not
portfolio interest, then it would be subject to U.S. federal income and
withholding tax at a rate of 30 percent unless reduced or eliminated under
an applicable income tax treaty.
Any capital gain realized on the sale or other taxable
disposition of a note by a non-U.S. person will be exempt from U.S. federal
income and withholding tax, provided that:
o the gain is not effectively connected with the conduct of
a trade or business in the United States by the non-U.S.
person, and
o in the case of an individual non-U.S. person, the
non-U.S. person is not present in the United States for
183 days or more in the taxable year and several other
requirements are met.
If the interest, gain or income on a note held by a non-U.S.
person is effectively connected with the conduct of a trade or business in
the United States by the non-U.S. person, the beneficial owner of a note,
although exempt from the withholding tax previously discussed if a duly
executed Form 4224 is furnished, generally will be subject to U.S. federal
income tax on the interest, gain or income at regular federal income tax
rates. In addition, if the non-U.S. person is a foreign corporation, it may
be subject to a branch profits tax under the tax code equal to 30 percent
of its "effectively connected earnings and profits" for the taxable year,
as adjusted for specified items, unless it qualified for a lower rate under
an applicable tax treaty.
Recent Treasury regulations could affect the procedures to be
followed by a non-U.S. person in complying with the United States federal
withholding, backup withholding, and information reporting rules. The
regulations will generally be effective for payments made after December
31, 2000. Prospective investors are advised to consult their own tax
advisors regarding the effect, if any, of the regulations on the purchase,
ownership and disposition of the notes.
STATE TAX CONSEQUENCES
Set forth below is a summary of some of the state income tax
consequences of the purchase, ownership and disposition of the notes.
Because of the variation in each state's income tax laws, it is impossible
to predict tax consequences to noteholders in all states. Noteholders are
urged to consult their tax advisors with respect to state tax consequences
arising out of the purchase, ownership and disposition of the notes.
The issuer has been organized as a Delaware business trust, and
MART and the servicer are headquartered in the State of California. In the
opinion of Skadden, Arps, Slate, Meagher & Flom LLP, assuming that the
notes are treated as debt for federal income tax purposes:
o the notes will be treated as debt for Delaware and
California income and franchise tax purposes;
o the issuer will not be subject to Delaware or California
income or franchise taxes at the entity level; and
o noteholders not otherwise subject to taxation in
California or Delaware, respectively, would not become
subject to taxation in California or Delaware,
respectively, solely because of a noteholder's ownership
of a note.
THE FEDERAL AND STATE TAX DISCUSSIONS SET FORTH ABOVE ARE
INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING
UPON A NOTEHOLDER'S PARTICULAR TAX SITUATION. PROSPECTIVE PURCHASERS SHOULD
CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF
ACQUIRING, HOLDING AND DISPOSING OF NOTES, INCLUDING THE TAX CONSEQUENCES
UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF
CHANGES IN FEDERAL OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended,
and the tax code impose restrictions on:
o employee benefit plans (as defined in Section 3(3) of
ERISA);
o plans described in Section 4975(e)(1) of the tax code,
including individual retirement accounts and some Keogh
Plans;
o any entities whose underlying assets include plan assets
by reason of a plan's investment in those entities; and
o persons who have specified relationships to one of the
benefit plans described in the preceding clauses, who are
called "Parties-in-Interest" under ERISA and
"Disqualified Persons" under the tax code.
In addition, the general account of an insurance company may be
deemed to include assets of employee benefit plans investing in its general
account and the insurance company might be treated as a Party-in-Interest
with respect to an employee benefit plan by virtue of that type of
investment. ERISA also imposes duties on persons who are fiduciaries of
employee benefit plans subject to ERISA.
ERISA and the tax code prohibit some transactions between an
employee benefit plan and Parties-in-Interest or Disqualified Persons with
respect to that employee benefit plan. A violation of these prohibited
transaction rules may give rise to an excise tax under the tax code or a
civil penalty under ERISA on all parties to the transaction, other than the
employee benefit plan but including the person who caused the employee
benefit plan to engage in the transaction, and may give rise to the
obligation to correct the prohibited transaction, unless a statutory,
regulatory or administrative exemption is available.
SPECIAL ERISA CONSIDERATIONS FOR EMPLOYEE BENEFIT PLANS
If assets of the issuer were deemed to be assets of an employee
benefit plan for purposes of ERISA or the tax code, some transactions
involving the issuer might be deemed to constitute prohibited transactions.
Under a regulation issued by the United States Department of Labor relating
to assets of employee benefit plans, the assets of the issuer would be
treated as plan assets of an employee benefit plan that invested in the
issuer for purposes of ERISA and the tax code if the employee benefit plan
acquired an "Equity Interest" in the issuer and none of the exceptions
contained in the regulation were applicable.
Under this regulation, a security is treated as Equity Interest
unless it is treated as a debt security under applicable local law and it
has no substantial equity features. Although there is very little direct
guidance from the Department of Labor on this point, because the notes (1)
are expected to be treated as indebtedness under local law and will, in the
opinion of Skadden, Arps, Slate, Meagher & Flom LLP, be treated as debt,
rather than equity, for federal tax purposes (see "Federal Income Tax
Consequences"), and (2) should not be deemed to have any "substantial
equity features," the notes should not be treated as an Equity Interest for
purposes of the plan assets regulation. This conclusion is based, in part,
upon the traditional debt features of the notes, including the reasonable
expectation of purchasers of the notes that the notes will be repaid when
due, as well as the absence of conversion rights, warrants and other
typical equity features.
Whether or not the notes are treated as an Equity Interest, if
an employee benefit plan acquires the notes, a prohibited transaction could
arise if the issuer, the owner trustee, the indenture trustee, any holder
of the certificates or any of their respective affiliates, is or becomes a
Party in Interest or a Disqualified Person with respect to that employee
benefit plan. These prohibited transactions may, however, be eligible for
an exemption from the excise tax and penalties that would otherwise be
applicable under ERISA and the tax code. The availability of one or more of
these exemptions will generally depend on the type of employee benefit plan
fiduciary making the decision to acquire a note. Included among these
exemptions are:
o Prohibited Transaction Class Exemption 90-1, regarding
investments by insurance company pooled separate
accounts;
o Prohibited Transaction Class Exemption 91-38, regarding
investments by bank collective investment funds;
o Prohibited Transaction Class Exemption 84-14, regarding
transactions effected by "qualified professional asset
managers;"
o Prohibited Transaction Class Exemption 95-60, regarding
investments by insurance company general accounts; and
o Prohibited Transaction Class Exemption 96-23, regarding
investments effected by "in-house asset managers."
A violation of the prohibited transaction rules may result in
the imposition of an excise tax and other penalties under ERISA and the tax
code unless one or more statutory, regulatory or administrative exemptions
is available. Each benefit plan and each government plan subject to a
federal, state or local law substantially similar to ERISA, by its
acceptance of a note, will be deemed to represent that an exemption applies
to its acquisition, holding and disposition of the note.
SPECIAL ERISA CONSIDERATIONS APPLICABLE TO INSURANCE COMPANY GENERAL ACCOUNTS
Investors should note that special rules are applicable to the
assets of insurance company general accounts under ERISA and Section 4975
of the tax code. The Department of Labor published final regulations
effective January 5, 2000 with respect to insurance policies issued on or
before December 31, 1998 that are supported by an insurer's general
account. As a result of these regulations, assets of an insurance company
general account will not be treated as "plan assets" for purposes of the
fiduciary responsibility provisions of ERISA and Section 4975 of the Code
to the extent such assets relate to contracts issued to employee benefit
plans on or before December 31, 1998 and the insurer satisfies various
conditions. Section 401(c) also provides that, until July 5, 2001, no
person will be subject to liability under the fiduciary responsibility and
prohibited transaction provisions of ERISA and Section 4975 of the tax code
on the basis of a claim that the assets of the general account of an
insurance company constitute the assets of any plan. This exception does
not apply to actions brought by the Secretary of Labor relating to
specified breaches of fiduciary duties that also constitute breaches of
state or federal criminal law. The plan asset status of insurance company
separate accounts is unaffected by these new rules and separate account
assets continue to be treated as the assets of any plan invested in the
separate account. Insurance companies should consult with their counsel
regarding the potential impact of these new rules on their purchase of
notes. The regulations do not adversely affect the applicability of
Prohibited Transaction Class Exemption 95-60 to purchases of notes.
GENERAL INVESTMENT CONSIDERATIONS FOR EMPLOYEE BENEFIT PLANS
Prior to making an investment in the notes, prospective benefit
plan investors should consult with their legal advisors concerning the
impact of ERISA and the tax code and the potential consequences of that
investment with respect to their specific circumstances. In this regard,
each employee benefit plan fiduciary should take into account, among other
considerations:
o whether the fiduciary has the authority to make the
investment;
o the composition of the benefit plan's portfolio with
respect to diversification by type of asset;
o the benefit plan's funding objectives;
o the tax effects of the investment; and
o whether under the general fiduciary standards of
investment prudence and diversification an investment in
the notes 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.
UNDERWRITING
Under the terms and conditions set forth in the underwriting
agreement for the notes, MART has agreed to sell to each of the
underwriters named below in this paragraph, and each of the underwriters,
for whom Salomon Smith Barney Inc. is acting as representative, has
severally agreed to purchase from MART, the principal amount of the notes
set forth opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT
OF CLASS A-1 OF CLASS A-2 OF CLASS A-3 OF CLASS A-4 OF CLASS B
UNDERWRITERS NOTES NOTES NOTES NOTES NOTES
------------ ------------- ------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Salomon Smith Barney Inc............. $ $ $ $ $
Total...............................
</TABLE>
In the underwriting agreement, the several underwriters have
agreed, in accordance with the terms and conditions set forth in the
underwriting agreement, to purchase all the notes offered hereby. The
closing of the sale of the notes is conditioned upon the issuance of the
certificates. In the event of a default under the underwriting agreement by
any underwriter, the underwriting agreement provides that, in some
circumstances, purchase commitments of the non-defaulting underwriters may
be increased or the underwriting agreement may be terminated.
The underwriting discounts and commissions of the underwriters,
the selling concessions that the underwriters may allow to some dealers and
the discounts that some dealers may reallow to some other dealers, each
expressed as a percentage of the principal amount of the Class A-1 notes,
the Class A-2 notes, the Class A-3 notes, the Class A-4 notes and the Class
B notes, will be as follows:
<TABLE>
<CAPTION>
UNDERWRITING
DISCOUNTS AND NET PROCEEDS SELLING
PLACEMENT FEES TO THE SELLER CONCESSIONS REALLOWANCE
-------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Class A-1 notes.......................
Class A-2 notes.......................
Class A-3 notes.......................
Class A-4 notes.......................
Class B notes.........................
Total for all of the notes............
</TABLE>
The transaction expenses payable by MART are estimated to be
$__________.
The representative of the underwriters has informed MART that it
does not expect discretionary sales by the underwriters to exceed ___% of
the principal amount of the notes being offered hereby.
The underwriters may engage in over-allotment, stabilizing
transactions, syndicate covering transactions and penalty bids in
accordance with Regulation M of the Securities Exchange Act of 1934, as
amended. Over-allotment involves syndicate sales in excess of the offering
size, which creates a syndicate short position. Stabilizing transactions
permit bids to purchase the underlying security so long as the stabilizing
bids do not exceed a specified maximum. Syndicate covering transactions
involve purchases of the securities in the open market after the
distribution has been completed in order to cover syndicate short
positions. Penalty bids permit the underwriters to reclaim a selling
concession from a syndicate member when the securities originally sold by
that syndicate member are purchased in a syndicate covering transaction to
cover syndicate short positions. Those stabilizing transactions, syndicate
covering transactions and penalty bids may cause the price of the
securities to be higher than it would be in the absence of those
transactions.
The indenture trustee may, from time to time, invest the funds
in the accounts of the issuer in investments permitted by the sale and
servicing agreement acquired from the underwriters.
In the ordinary course of business, the underwriters and their
affiliates have engaged and may engage in investment banking and commercial
banking transactions with the servicer and its affiliates.
MMCA and MART have agreed to indemnify the underwriters and the
placement agent against specified liabilities, including liabilities under
the Securities Act of 1933, as amended, or to contribute to payments the
underwriters or the placement agent may be required to make.
Upon receipt of a request by an investor who has received an
electronic prospectus from an underwriter or a request by the investor's
representative within the period during which there is an obligation to
deliver a prospectus, MART or the underwriters will promptly deliver, or
cause to be delivered, without charge, a paper copy of the prospectus.
LEGAL OPINIONS
The validity of the notes and federal income tax matters will be
passed upon for MART by Skadden, Arps, Slate, Meagher & Flom LLP, New York,
New York. Brown & Wood LLP, San Francisco, California, will act as counsel
to the underwriters.
REPORTS TO NOTEHOLDERS
Unless and until definitive notes are issued under the limited
circumstances described under "Terms of the Notes--Issuance of Definitive
Notes Upon the Occurrence of Various Circumstances," all notices, reports
and statements to noteholders, including any monthly and annual reports
concerning the issuer and the receivables, will be prepared by the servicer
and sent on behalf of the issuer only to DTC or Cede & Co. as nominee of
DTC and registered holder of the notes. Those notices, reports and
statements will not contain audited financial statements for the issuer.
The servicer also does not intend to send any financial reports of the
servicer or MART to noteholders. See "Terms of the Notes--Principal Amount
and Interest Rates," "--Book Entry Registration" and "--Issuance of
Definitive Notes Upon the Occurrence of Various Circumstances."
WHERE YOU CAN FIND MORE INFORMATION
MART, as originator of the issuer, filed with the Securities and
Exchange Commission a registration statement under the Securities Act of
1933 relating to the notes. This prospectus is part of the registration
statement, but the registration statement includes additional information,
including forms of some of the agreements discussed in this prospectus.
The servicer, on behalf of MART in its capacity as originator of
the issuer, will file or cause to be filed with the Securities and Exchange
Commission periodic reports for the issuer as may be required under the
Securities Exchange Act of 1934, as amended, and the rules and regulations
of the Securities and Exchange Commission.
You may read and copy any notices, reports, statements or other
information the servicer files or causes to be filed at the Securities and
Exchange Commission's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You can request copies of these documents, upon
payment of a duplicating fee, by writing to the Securities and Exchange
Commission. Please call the Securities and Exchange Commission at (800)
SEC-0330 for further information on the operation of the public reference
rooms. Our filings with the Securities and Exchange Commission are also
available to the public without charge on the Securities and Exchange
Commission's Internet site (http://www.sec.gov), which contains reports,
proxy and information statements, and other information regarding issuers
that file publicly with the Securities and Exchange Commission.
GLOSSARY
ABS means the Absolute Prepayment Model.
ACCRUED NOTE INTEREST means, for any payment date and each class
of notes, the sum of the Monthly Accrued Note Interest and the Interest
Carryover Shortfall for the class for that payment date.
ACTUARIAL RECEIVABLES mean receivables which provide for
amortization of the loan over a series of fixed level monthly installments.
Actuarial Receivables which are also Balloon Payment Receivables amortize
the receivable to the Balloon Payment. Each monthly installment, including
the monthly installment representing the Balloon Payment, consists of an
amount of interest equal to 1/12 of the annual percentage rate of the loan
multiplied by the scheduled principal balance of the receivable, and an
amount of principal equal to the remainder of the monthly installment.
ADJUSTED PRINCIPAL BALANCE means, for any receivable and on any
date, the principal balance of that receivable, minus the Yield Supplement
Overcollateralization Amount for that receivable, as of that date.
AVAILABLE FUNDS means, for any payment date:
(1) an amount equal to the sum of the following amounts for
the preceding calendar month:
o all collections on the contracts, including amounts
withdrawn from the payahead account;
o the proceeds of sale by the issuer of any vehicle sold by
the issuer upon termination of a Balloon Payment
Receivable;
o all proceeds of the liquidation of receivables which
became defaulted receivables during the preceding
calendar month, net of expenses incurred by the servicer
in connection with the liquidation and any amounts
required by law to be remitted to the obligor on any
defaulted receivable;
o any recoveries in respect of contracts that became
defaulted in prior calendar months;
o all extension and deferral fees paid as to the contracts;
o the purchase amount of each receivable purchased from the
issuer during or before the preceding calendar month, net
of applicable expenses;
o all advances made by the servicer;
o the Yield Supplement Amount for that payment date;
o the Negative Carry Amount for that payment date;
o partial prepayments of any refunded item included in the
principal balance of a contract, like extended warranty
protection plan costs, or physical damage, credit life,
disability insurance premiums, or any partial prepayment
which causes a reduction in the obligor's periodic
payment to an amount below the scheduled payment as of
the related Cutoff Date;
o the net earnings on funds on deposit in the pre-funding
and reinvestment account to the extent deposited to the
collection account on that payment date by the indenture
trustee; and
o on the payment date on or immediately following the last
day of the pre-funding and reinvestment period, any funds
remaining in the pre-funding and reinvestment account,
calculated after giving effect to the purchase of all
receivables purchased by the issuer during the
pre-funding and reinvestment period,
minus
(2) the sum of the amount of the funds described in clause (1)
above that are used in the related calendar month to reimburse servicer
advances that are due and payable on that payment date,
minus
(3) if the payment date occurs during the pre-funding and
reinvestment period, the sum of the total principal balance of reinvestment
receivables transferred to the issuer on that payment date and the Excess
Cash Amount, if any, deposited to the pre-funding and reinvestment account
on the business day preceding the payment date.
BALLOON PAYMENT means, as to a Balloon Payment Receivable, the
final payment which is due at the end of the term of the receivable.
BALLOON PAYMENT RECEIVABLE means a receivable that provides for
the amortization of the entire amount financed under the receivable to one
substantially larger final payment which is due at the end of the term of
the receivable.
CLOSING DATE means __________, 2000.
CUTOFF DATE means, as to receivables transferred to the issuer,
(1) on the Closing Date, __________, 2000, and (2) during the pre-funding
and reinvestment period, the date which will be on or before the date of
transfer, as of which the issuer will be entitled to collections of the
receivables.
DEFERRED PAYMENT RECEIVABLE means any receivable for which no
scheduled payment is due until a date more than 50 days from the date of
the contract. A receivable will no longer be considered a deferred payment
receivable beginning on the last day of the calendar month preceding the
calendar month in which the first scheduled payment is due.
EXCESS CASH AMOUNT means, for any payment date, the excess, if
any, of the Required Reinvestment Amount for that payment date, over the
total adjusted principal balance of receivables satisfying the selection
criteria in the sale and servicing agreement that are available to be
transferred to the issuer on that payment date.
INITIAL POOL BALANCE means the sum of (a) the principal balance
of the receivables pool as of the initial Cutoff Date, plus (b) the total
principal balance of all receivables transferred to the issuer during the
pre-funding and reinvestment period, calculated as of the related Cutoff
Dates.
INITIAL RECEIVABLES means the receivables having a total
principal balance of $__________ that will be transferred to the issuer on
the Closing Date.
INTEREST CARRYOVER SHORTFALL means, on any payment date and any
class of notes, the excess of the sum of the Monthly Accrued Note Interest
for the preceding payment date and any outstanding Interest Carryover
Shortfall from the close of business on the preceding payment date, over
the amount in respect of interest that is actually deposited in the note
payment account on the preceding payment date as to that class, plus
interest on the excess, to the extent permitted by law, at the applicable
note interest rate for the related interest period.
MAXIMUM NEGATIVE CARRY AMOUNT means, the sum of (1) $__________
until __________, 2000, and zero after that date, and (2) the product of
the product of (x) the weighted average interest rate on the notes as of
that date minus 2.5%, multiplied by (y) the product of the Note Percentage
as of that date and the amount, if any, of Excess Cash on deposit in the
pre-funding and reinvestment account as of that date, multiplied by (z) the
percentage equivalent of a fraction, the numerator of which is the actual
number of days until the expected end of the pre-funding and reinvestment
period and the denominator of which is 360.
MART means MMCA Auto Receivables Trust.
MINIMUM ADJUSTED PRINCIPAL BALANCE OF LONG DEFERMENT PERIOD
RECEIVABLES means, the amount shown in the table below for each of the
following dates:
DATE AMOUNT
$
$
$
$
$
$
$
$
$
$
MINIMUM ADJUSTED PRINCIPAL BALANCE OF RECEIVABLES means, the
amount shown in the table below for each of the following dates:
DATE AMOUNT
$
$
$
$
$
$
$
$
$
$
MITSUBISHI MOTORS means Mitsubishi Motors Corporation and its
affiliates.
MMCA means Mitsubishi Motors Credit of America, Inc.
MMSA means Mitsubishi Motor Sales of America, Inc.
MONTHLY ACCRUED NOTE INTEREST means, for any payment date and
(a) any class of notes, interest accrued for the related interest period at
the applicable interest rate for that class on the total principal balance
of the notes of that class as of the immediately preceding payment date,
after giving effect to all payments of principal to noteholders on or
before that preceding payment date, or, in the case of the first payment
date, the initial principal amount of the notes; and (b) the notes
collectively, the sum of the Monthly Accrued Note Interest for each class.
NEGATIVE CARRY AMOUNT will be calculated by the servicer for any
payment date as the difference (if positive) between (1) the product of (a)
the Monthly Accrued Note Interest for that payment date, multiplied by (b)
the Pre-Funded and Excess Cash Percentage as of the immediately preceding
payment date, or in the case of the first payment date, the Closing Date,
minus (2) the net investment earnings on the Pre-Funded and Excess Cash
Amount for the related collection period (or in the case of the first
payment date, from the Closing Date until __________, 2000).
NOTE PERCENTAGE means, as of any payment date, the percentage
equivalent of a fraction, the numerator of which is the total principal
amount of the notes as of that payment date, and the denominator of which
is an amount equal to the sum of the total principal amount of the notes as
of that payment date and the total principal amount of the certificates as
of that payment date, in each case after giving effect to any payment of
principal of that payment date.
PRE-FUNDED AND EXCESS CASH AMOUNT means, as of any date, the
amount on deposit in the pre-funding and reinvestment account on such date
exclusive of any interest and other income (net of losses and expenses) on
amounts on deposit in the pre-funding and reinvestment account.
PRE-FUNDED AND EXCESS CASH PERCENTAGE means, as of any date, the
percentage equivalent of a fraction, the numerator of which is the
Pre-Funded and Excess Cash Amount and the denominator of which is the sum
of the principal balance of the receivables pool and the Pre-Funded and
Excess Cash Amount, in each case as of that date after taking into account
all withdrawals from the pre-funding and reinvestment account and all
transfers of contracts transferred to the issuer after the Closing Date on
or before that date.
PRE-FUNDED RECEIVABLES means additional receivables purchased by
MART from MMCA and transferred by MART to the issuer during the pre-funding
and reinvestment period with proceeds from the sale of the notes deposited
to the pre-funding and reinvestment account on the closing date.
PRE-FUNDING AND REINVESTMENT PERIOD means a period beginning on
the Closing Date and ending on the earliest of (a) the date on which an
event of default or an event of servicing termination occurs, (b) the date
on which an insolvency event occurs as to the seller or the servicer and
(d) the close of business on __________, 2001.
PRE-FUNDING INITIAL DEPOSIT means $__________.
PRINCIPAL DISTRIBUTION AMOUNT means, for any payment date:
o the sum of the outstanding balance of the notes and the
certificates on the last day of the preceding month;
minus
o the total principal amount of the receivables on the last
day of the preceding month; minus
o the total yield supplement overcollateralization amount
on the last day of the preceding month; minus
o the amount on deposit in the pre-funding and reinvestment
account on that payment date.
On the last day of the pre-funding and reinvestment period, the
Principal Distribution Amount also will include all amounts remaining in
the pre-funding and reinvestment account.
REINVESTMENT RECEIVABLES means additional receivables purchased
by MART from MMCA and transferred by MART to the issuer during the
pre-funding and reinvestment period with prepayments on deferred payment
receivables.
REQUIRED REINVESTMENT AMOUNT means, for any payment date, an
amount equal to the lesser of (i) the excess, if any, of (a) the Minimum
Adjusted Principal Balance of deferred payment receivables, as of the last
day of the preceding calendar month, over (b) the sum of (x) the total
adjusted principal balance of deferred payment receivables, as of the last
day of the preceding calendar month, (y) the total adjusted principal
balance of reinvestment receivables, and (z) the Pre-Funded and Excess Cash
Amount as of the last day of the preceding collection period, and (ii) the
excess, if any, of the Minimum Adjusted Principal Balance of Receivables,
over the adjusted principal balance of all of the receivables then owned by
the issuer, in each case, as of the last day of the preceding calendar
month.
SIMPLE INTEREST RECEIVABLES are receivables that provide for the
amortization of the amount financed under each receivable over a series of
fixed level monthly installments. Each monthly installment consists of an
amount of interest which is calculated on the basis of the outstanding
principal balance of the receivable multiplied by the stated annual
percentage rate and further multiplied by the period elapsed, as a fraction
of a calendar year, since the preceding payment of interest was made.
SPECIFIED RESERVE BALANCE means, for any payment date, an amount
equal to the lesser of:
(1) the sum of (x) 2.25% of the adjusted principal balance of
the initial receivables transferred to the issuer on the
Closing Date, calculated as of the initial Cutoff Date,
and (y) 2.25% of the adjusted principal balances of
receivables transferred to the issuer after that date,
calculated as of the related Cutoff Dates; and
(2) the outstanding principal amount of the notes on that
payment date, after giving effect to any principal
payment made on that payment date.
TOTAL AVAILABLE FUNDS for a payment date is an amount equal to
the Available Funds for that payment date plus the amounts, if any,
deposited by the indenture trustee to the collection account from the
reserve account on that payment date.
TOTAL REQUIRED PAYMENT means, for any payment date, the sum of:
(1) the total due and unpaid servicing fee;
(2) the Accrued Note Interest; and
(3) the Principal Distribution Amount on that payment date.
TOTAL YIELD SUPPLEMENT OVERCOLLATERALIZATION AMOUNT means, for
any payment date, the sum of the Yield Supplement Overcollateralization
Amounts with respect to all receivables, other than defaulted receivables
or receivables purchased by the servicer or repurchased by MART.
YIELD SUPPLEMENT AMOUNT for any payment date, will be determined
by aggregating for all of the deferred payment receivables, other than (i)
a defaulted receivable or a receivable purchased by the servicer or
repurchased by MART, or (ii) any receivable sold by the indenture trustee
following an event of default under the indenture for calendar months after
the calendar month in which the receivable is sold by the indenture
trustee, the amount equal to the product of (x) one-twelfth multiplied by
(y) the adjusted principal balance of that receivable on the first day of
the preceding calendar month and multiplied by (z) the weighted average
interest rate on the notes and the certificates on the Closing Date plus
0.25%.
YIELD SUPPLEMENT OVERCOLLATERALIZATION AMOUNT means, for any
payment date and any receivable other than a defaulted receivable or a
receivable purchased by the servicer or repurchased by MART, the excess, if
any, of:
o the present value of the remaining scheduled payments due
on the receivable discounted at a rate equal to the
annual percentage rate provided in the contract; over
o the present value of the remaining scheduled payments due
on the receivable discounted at a rate equal to _____%.
PROSPECTUS
$----------
MMCA AUTO OWNER TRUST 2000-2
$__________ _____% CLASS A-1 ASSET BACKED NOTES
$__________ _____% CLASS A-2 ASSET BACKED NOTES
$__________ _____% CLASS A-3 ASSET BACKED NOTES
$__________ _____% CLASS A-4 ASSET BACKED NOTES
$__________ _____% CLASS B ASSET BACKED NOTES
MMCA AUTO RECEIVABLES TRUST
SELLER
GRAPHIC OMITTED
SERVICER
UNDERWRITERS OF THE CLASS A NOTES
SALOMON SMITH BARNEY
UNDERWRITERS OF THE CLASS B NOTES
SALOMON SMITH BARNEY
You should rely only on the information contained in this
prospectus. We have not authorized anyone to provide you with different
information.
We are not offering the notes in any state where the offer of
the notes is not permitted.
We do not claim the accuracy of the information in this
prospectus as of any date other than the date stated on the cover of this
prospectus.
Dealers will deliver a prospectus when acting as underwriters of
the notes and for their unsold allotments or subscriptions. In addition,
all dealers that effect transactions in the notes, whether or not
participating in the offering of the notes, will be required to deliver a
prospectus until __________, 2001.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Registration Fee....................................................... $*
Printing and Engraving................................................. $*
Trust's Fee............................................................ $*
Legal Fees and Expenses................................................ $*
Blue Sky Fees and Expenses............................................. $*
Accountant's Fees and Expenses......................................... $*
Rating Agency Fees..................................................... $*
Miscellaneous Fees and Expenses........................................ $*
------
Total Expenses ........................................................ $*
======
* to be provided by amendment
ITEM 14. INDEMNIFICATION OF TRUSTEES AND BENEFICIAL OWNERS
Section 3817 of the Delaware Code provides as follows:
(a) Subject to such standards and restrictions, if any, as are set
forth in the governing instrument of a business trust, a business
trust shall have the power to indemnify and hold harmless any
trustee or beneficial owner or other person from and against any and
all claims and demands whatsoever.
(b) The absence of a provision for indemnity in the governing
instrument of a business trust shall not be construed to deprive any
trustee or beneficial owner or other person of any right to
indemnity which is otherwise available to such person under the laws
of this State.
Clause (b) of Section 5.7 of the Amended and Restated Trust
Agreement, dated as of ________, 2000, between Mitsubishi Motors Credit of
America, Inc. and Chase Manhattan Bank Delaware provides as follows:
(b) Subject to the terms of this Agreement, the Beneficial Owner
shall hold harmless the Trustee, its officers, directors, employees,
shareholders and agents (collectively the "Indemnified Persons" or
individually an "Indemnified Person"), against any and all losses,
liabilities, claims, actions, suits, costs, damages, expenses and
liabilities, joint or several (including, but not limited to, any
investigation, reasonable legal and other expenses (including
expenses of investigation) of any kind and nature whatsoever
incurred in connection with, and any amount paid in settlement of
any action, suit, proceeding or claim) (collectively, "Losses")
which such Indemnified Persons may become subject to or liable for
by reason of Trustee's acting as trustee under this Agreement.
Notwithstanding the foregoing, the Beneficial Owner shall not be
liable to any Indemnified Person, and shall not be required to
indemnify the Trustee under this Agreement, for any Losses arising
out of the negligence, bad faith or wilful misconduct of such
Indemnified Person or any other Indemnified Person.
Section 3.8 of the Amended and Restated Trust Agreement provides as
follows:
No person shall be personally liable to MMCA Auto Receivables Trust
or the Beneficial Owner for any breach of its duties as a Manager;
provided, however, that the foregoing shall not eliminate or limit
the liability of a Manager for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of
the law.
Section 3.10 of the Amended and Restated Trust Agreement provides as
follows:
No Authorized Officer shall be personally liable to MMCA Auto
Receivables Trust or the Beneficial Owner for any breach of its
duties as an Authorized Officer; provided, however, that the
foregoing shall not eliminate or limit the liability of an
Authorized Officer of MMCA Auto Receivables Trust for acts or
omissions not in good faith or which involve intentional misconduct
or a knowing violation of the law.
"Agreement" means the Amended and Restated Trust Agreement, dated as
of ________, 2000, between Mitsubishi Motors Credit of America, Inc. and
Chase Manhattan Bank Delaware.
"Authorized Officer" means officers appointed by the Board of
Managers or Chief Executive Receivables Trust as may be appropriate for the
conduct of the trust's business, subject to the supervision and control of
the Board of Managers and Chief Executive Officer.
"Beneficial Owner" means Mitsubishi Motors Credit of America, Inc.,
in its capacity as the exclusive beneficial owner of MMCA Auto Receivables
Trust and its successors and assigns in such capacity.
"Manager" means a person appointed by the Beneficial Owner to serve
as a member of the Board of Managers of the MMCA Auto Receivables Trust.
"Trustee" means Chase Manhattan Bank Delaware, as trustee under the
Agreement, and its permitted successors and assigns in such capacity.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Not applicable.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
Number Description
------ -----------
1.1 Form of Underwriting Agreement*
3.1 Form of Amended and Restated Trust Agreement of MART*
4.1 Form of Amended and Restated Trust Agreement of the Issuer
between MART and the Owner Trustee*
4.2 Form of Sale and Servicing Agreement among MART the
Servicer and the Issuer*
4.3 Form of Indenture between the Issuer and the Indenture
Trustee*
4.4 Form of Administration Agreement among the Issuer, the
Administrator and the Indenture Trustee*
4.5 Form of Note (contained in Exhibit 4.3)*
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP re
Legality*
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP re Tax
Matters*
10.1 Form of Purchase Agreement between Mitsubishi Motors Credit
of America, Inc. and MART*
10.2 Form of Yield Supplement Agreement*
23.1 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(contained in Exhibit 5.1)*
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(contained in Exhibit 8.1)*
24 Powers of Attorney (included on signature page)
24.1 Board Resolutions of MART*
25 Form T-1 of Indenture Trustee*
-----------
* To be filed by amendment.
(b) Financial Statement Schedules
Not applicable.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes as follows:
(a) To provide to the underwriters at the closing specified in
the underwriting agreement, certificates in such denominations and
registered in such names as required by the underwriters to permit prompt
delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. If a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(c) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act of 1933, as amended
shall be deemed to be part of this Registration Statement as of the time it
was declared effective.
(d) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new Registration Statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Cypress, State of California, on September 15, 2000.
MMCA AUTO RECEIVABLES TRUST
By: /s/ Hiroshi Yajima
-----------------------
Hiroshi Yajima
Manager and President
KNOW ALL MEN BY THESE PRESENTS that each individual whose
signature appears below constitutes and appoints Steven E. Grimaldi, J.
Sean Plater and Tatsuo Nonaka, and each of them, his or her true and lawful
attorneys-in-fact and agents with full power of substitution, for him or
her and in his or her name, place and stead, in any and all capacities, to
sign any and all amendments, including post-effective amendments, to this
Registration Statement, and to file the same, with all exhibits thereto,
and all documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents
or any of them, or their or his or her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated:
SIGNATURE Title Date
/s/ Hiroshi Yajima Manager and President September 15, 2000
-------------------------- (principal executive
Hiroshi Yajima officer)
/s/ Hideyuki Kitamura Secretary and Treasurer September 15, 2000
------------------------- (principal financial
Hideyuki Kitamura officer and principal
accounting officer)
/s/ John Maynard Manager September 15, 2000
------------------------
John Maynard
/s/ Akinobu Saito Manager September 15, 2000
------------------------
Akinobu Saito
/s/ Charles A. Tredway Manager September 15, 2000
-------------------------
Charles A. Tredway
/s/ Yasuhiro Hagihara Manager September 15, 2000
-------------------------
Yasuhiro Hagihara
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT DESCRIPTION NUMBERED
NUMBER ----------- PAGE
------ -----
1.1 Form of Underwriting Agreement*
3.1 Form of Amended and Restated Trust Agreement of MART
between MMCA and the MART Trustee*
4.1 Form of Amended and Restated Trust Agreement of the Issuer
between MART and the Owner Trustee*
4.2 Form of Sale and Servicing Agreement among MART, the
Servicer and the Issuer*
4.3 Form of Indenture between the Issuer and the Indenture
Trustee*
4.4 Form of Administration Agreement among the Issuer, the
Administrator and the Indenture Trustee*
4.5 Form of Note (contained in Exhibit 4.3)*
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP re
Legality*
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP re Tax
Matters*
10.1 Form of Purchase Agreement between Mitsubishi Motors Credit
of America, Inc. and MART*
10.2 Form of Yield Supplement Agreement*
23.1 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(contained in Exhibit 5.1)*
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(contained in Exhibit 8.1)*
24 Powers of Attorney
24.1 Board Resolutions of MART*
25 Form T-1 of Indenture Trustee*
----------------------
* To be filed by amendment.
