Registration No. 333-66063
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 2
TO
FORM S-1
Registration Statement Under The Securities Act of 1933
MMCA AUTO OWNER TRUST 1998-2
(Issuer with respect to the Notes)
MMCA AUTO RECEIVABLES, INC.
(Originator of the Trust described herein)
(Exact name of registrant as specified in its charter)
Delaware 9999 33-0570905
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)0
incorporation or Classification Code No.)
organization)
6363 Katella Avenue
Cypress, California 90630-5205
(714) 236-1592
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
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Eric L. Eckes
6363 Katella Avenue
Cypress, California 90630-5205
(714) 236-1509
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies to:
Susan M. Curtis, Esq. Dale W. Lum, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP Brown & Wood LLP
919 Third Avenue 555 California Street
New York, New York 10022 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
Proposed Maximum 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 (2)
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<S> <C> <C> <C> <C>
% Class A-1 Asset
Backed Notes.............. $ 250,000 100% $ 250,000 $ 69.50
% Class A-2 Asset
Backed Notes.............. $ 250,000 100% $ 250,000 $ 69.50
% Class A-3 Asset
Backed Notes.............. $ 250,000 100% $ 250,000 $ 69.50
% Class B Asset Backed
Notes..................... $ 250,000 100% $ 250,000 $ 69.50
==============================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Previously paid.
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.
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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 December , 1998
PROSPECTUS
$
MMCA Auto Owner Trust 1998-2
$ % Class A-1 Asset Backed Notes
$ % Class A-2 Asset Backed Notes
$ % Class A-3 Asset Backed Notes
$ % Class B Asset Backed Notes
MMCA Auto Receivables, Inc.
Seller
[LOGO]
Servicer
The trust will issue the following notes:
<TABLE>
<CAPTION>
Class A-1 Notes Class A-2 Notes Class A-3 Notes Class B Notes
<S> <C> <C> <C> <C>
Principal Amount $______________ $______________ $______________ $______________
Price (*) $ ( %) $ ( %) $ ( %) $ ( %)
--------------- --------------- --------------- ---------------
Underwriting Discounts
and Commissions $______________ $______________ $______________ $______________
Net Proceeds to the
Seller $______________ $______________ $______________ $______________
</TABLE>
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(*) The price of the notes will also include any interest accrued on the
notes from the date on which the notes are issued.
Interest and principal on the notes will be payable monthly, on the 15th or
the first business day after the 15th.
The Class B Notes are subordinated to the Class A Notes.
Consider carefully the risk factors beginning on page 5 of this prospectus.
The notes represent obligations of the trust and are backed only by the
assets of the trust. The notes do not represent obligations of or interests
in MMCA Auto Receivables, Inc., 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.
The trust is offering the notes subject to availability.
Underwriters of the Class A Notes
Merrill Lynch & Co. [ ]
Underwriter of the Class B Notes
Merrill Lynch & Co.
The date of this Prospectus is December , 1998
TABLE OF CONTENTS
Page
IMPORTANT NOTICE ABOUT INFORMATION
PRESENTED IN THIS PROSPECTUS...............................................iii
SUMMARY OF TERMS.............................................................1
RISK FACTORS.................................................................5
DESCRIPTION OF MMCA AUTO OWNER
TRUST 1998-2..............................................................10
Description of the Limited Purposes and Assets of the Trust.................10
Capitalization of the Trust.................................................11
Description of the Owner Trustee............................................11
DESCRIPTION OF THE PROPERTY OF THE TRUST....................................11
MMCA'S VEHICLE CONTRACT PORTFOLIO...........................................12
Types of Contracts Included in MMCA's Motor Vehicle Contract
Portfolio.................................................................12
MMCA's Underwriting Standards...............................................12
MMCA's Servicing and Collection Procedures..................................13
Physical Damage Insurance on MMCA's Contracts...............................14
Delinquency, Credit Loss and Returned Vehicle Loss Experience
of MMCA's Contracts.......................................................14
DESCRIPTION OF THE RECEIVABLES..............................................17
Selection Criteria for the Receivables......................................17
Certain Characteristics of the Initial Receivables..........................18
Payment Methods of the Receivables..........................................22
Maturity and Prepayment Considerations for the Receivables..................23
POOL FACTORS AND OTHER INFORMATION..........................................30
USE OF PROCEEDS.............................................................30
DESCRIPTION OF THE SELLER...................................................30
DESCRIPTION OF THE SERVICER.................................................31
DESCRIPTION OF THE TERMS OF THE NOTES.......................................31
Principal Amount of and Interest Rates on the Notes.........................31
Registration of the Notes in the Name of Cede as Nominee
of DTC....................................................................32
Book Entry Registration of the Notes........................................32
Issuance of Definitive Notes Upon Occurrence of Certain
Circumstances.............................................................35
Interest Payable on the Notes...............................................36
Principal Payable on the Notes..............................................37
Mandatory Redemption of the Notes...........................................38
Optional Redemption of the Notes............................................38
Description of the Indenture Trustee........................................39
Description of the Trust's Bank Accounts....................................39
Description of the Yield Supplement Agreement...............................40
Description of the Yield Supplement Account.................................41
Description of the Indenture Cash Flows.....................................41
Description of the Negative Carry Account...................................47
Description of the Reserve Account and Supplemental Reserve
Account...................................................................47
Description of the Balloon Payment Receivables..............................49
Subordination of the Class B Notes and the Certificates to the
Class A Notes.............................................................51
Advances by the Servicer of Amounts Payable on the
Receivables...............................................................51
Deposit of Collections on the Receivables to Collection
Account...................................................................52
Description of the Statements to Noteholders................................53
Description of the Terms of the Indenture...................................54
DESCRIPTION OF THE TRANSFER AND SERVICING
AGREEMENTS................................................................60
Sale and Assignment of the Initial Receivables and the Subsequent
Receivables...............................................................60
Description of the Pre-Funding Period.......................................63
Mandatory Repurchase of Receivables.........................................63
Description of Servicing Procedures.........................................64
Servicing Compensation......................................................65
Evidence to be Provided as to Servicer's Compliance with its
Servicing Obligations.....................................................66
Resignation by the Servicer.................................................66
Consequences of Merger, Conversion, Consolidation or Similar
Actions by Servicer.......................................................66
Limits on Servicer's Liability..............................................67
Limits on Servicer's Obligations in Connection with Legal Actions...........67
Events of Servicing Termination.............................................67
Rights of Indenture Trustee and Noteholders Upon an Event of
Servicing Termination.....................................................68
Requirements for Amendments of the Transfer and Servicing
Agreements................................................................68
Requirements for Termination of the Trust...................................69
Actions to be Taken by Indenture Trustee Upon Termination of the
Trust.....................................................................69
Description of the Administration Agreement.................................69
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES....................................69
Bankruptcy Considerations Relating to the Transfer of the
Receivables by MMCA to the Seller.........................................69
Trust's Rights in the Receivables...........................................70
Trust's Security Interests in the Financed Vehicles.........................70
Repossession of Financed Vehicles by Servicer on Behalf of the
Trust.....................................................................72
Servicer's Obligation to Provide Notice of Sale of a Financed
Vehicle; Obligor's Redemption Rights in a Financed Vehicle................72
Trust's Right to Deficiency Judgments Against Obligors......................72
Obligor's Right to Excess Proceeds Upon Sale of a Financed
Vehicle...................................................................73
Consumer Protection Laws Affecting the Trust's Rights under the
Receivables...............................................................73
Other Laws that Impose Limits on Enforcing the Receivables..................74
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.....................................74
Tax Treatment of the Notes and the Trust Under Federal Income
Tax Law...................................................................74
Federal Tax Consequences of Waivers of Events of Default and
Amendments of Notes by Noteholders........................................77
Information Reporting and Backup Withholding of Taxes by
Indenture Trustee.........................................................77
Tax Consequences to Foreign Investors.......................................77
CERTAIN STATE TAX CONSEQUENCES..............................................78
ELIGIBILITY OF NOTES FOR PURCHASE BY MONEY
MARKET FUNDS..............................................................78
ERISA CONSIDERATIONS........................................................78
Special ERISA Considerations for Employee Benefit Plans.....................79
Special ERISA Considerations Applicable to Insurance Company
General Accounts..........................................................79
General Investment Considerations for Employee Benefit Plans................80
UNDERWRITING................................................................80
LEGAL OPINIONS..............................................................81
REPORTS TO NOTEHOLDERS......................................................82
WHERE YOU CAN FIND MORE INFORMATION.........................................82
INDEX OF PRINCIPAL TERMS....................................................83
ANNEX A.....................................................................87
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 listing of the pages where capitalized terms used in this
prospectus are defined beginning on page 83 in this prospectus.
SUMMARY OF TERMS
This summary contains a brief description of the notes. You will find a
detailed description of the terms of the offering of the notes following
this summary.
The Trust: MMCA Auto Owner Trust 1998-2
Seller of the Receivables to MMCA Auto Receivables, Inc.
the Trust:
Seller's Address: 6363 Katella Avenue, Cypress, CA 90630
Seller's Telephone Number: (714) 236-1592
Servicer of the Receivables: Mitsubishi Motors Credit of America, Inc.
Indenture Trustee: Bank of Tokyo - Mitsubishi Trust Company
Owner Trustee: Wilmington Trust Company
The Trust Property: The trust property 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 reserve account;
o the supplemental reserve account;
o the yield supplemental account; and
o the negative carry account
The Terms of the Notes
<TABLE>
<CAPTION>
Class A-1 Class A-2 Class A-3
Notes Notes Notes Class B Notes
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<S> <C> <C> <C> <C>
Principal Amount: $__________ $__________ $__________ $__________
Interest Rate Per Annum: _____% _____% _____% _____%
Interest Accrual Method: actual/360 30/360 30/360 30/360
Payment Dates: monthly (15th) monthly (15th) monthly (15th) monthly (15th)
First Payment Date: January 15, January 15, January 15, January 15,
1999 1999 1999 1999
Scheduled Final Payment
Date: ____________ ____________ ____________ ____________
Anticipated Ratings
(Moody's/Standard &
Poor's):* Aaa/AAA Aaa/AAA Aaa/AAA A/A
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* It is a condition to the offering of the notes that these ratings be
obtained. However, a rating agency in its discretion may lower or
withdraw its rating in the future.
</TABLE>
The Receivables
The trust will own two types of receivables:
o receivables that provide for equal monthly payments over the term of the
receivable; and
o receivables that provide for equal monthly payments plus a substantially
larger final balloon payment.
The principal balance of the receivables on [ ], 1998 was $[ ].
The principal balance of the balloon payments on [ ], 1998 was
$[ ].
The seller expects to sell additional receivables to the trust during a
pre-funding period that begins on the closing date and ends no later than
[ ].
Payment Sources
On each payment date, the trust will pay the amounts owed by the trust from
the following sources:
o collections on the receivables during the prior month;
o amounts withdrawn from the reserve account and the supplemental reserve
account;
o amounts withdrawn from 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.
Priority of Distributions
On each payment date, the trust will pay the amounts owed by the trust in
the following order:
(1) payment to the servicer of amounts advanced by the servicer on
previous payment dates;
(2) payment of the servicing fee equal to 1/12th of 1.0% of the total
principal balance of the receivables on the first day of the prior month;
(3) payment of the interest and principal payable on the notes; and
(4) any required deposits to the reserve account and the supplemental
reserve account.
For further information on the priority of distributions, see "Description
of the Terms of the Notes-Description of the Indenture Cash Flows" in this
prospectus.
Priority of Interest Payments
On each payment date, the trust will pay interest on the notes in the
following order:
(1) on the Class A Notes, in proportion to the principal balance of
each class; and
(2) after payment of interest on the Class A Notes, on the Class B Notes.
Priority of Principal Payments
On each payment date, the amount required to be paid as principal on the
notes will equal:
o the principal scheduled to be paid on the receivables during the prior
month; plus
o the full prepayments on the receivables received during the prior
month; plus
o the principal balance of receivables that became defaulted receivables
during the prior month.
On each payment date, the trust will distribute principal on the notes in
the following order:
(1) to the Class A-1 Notes until the Class A-1 Notes have been paid in full;
(2) after the Class A-1 Notes are paid in full,
(A) to the Class A-2 Notes until % of the amount required to be paid as
principal on the notes has been paid to the Class A-2 Notes; then
(B) to the Class B Notes until % of the amount required to be paid as
principal on the notes has been paid to the Class B Notes; and
(3) after the Class A-2 Notes are paid in full,
(A) to the Class A-3 Notes until % of the amount required to be paid as
principal on the notes has been paid to the Class A-3 Notes; then
(B) to the Class B Notes until % of the amount required to be paid as
principal on the notes has been paid to the Class B Notes.
If a default under the indenture occurs, the order of priority for
principal payments will change, and the trust will pay principal on the
notes in the following order:
(1) to the Class A Notes, in proportion to the principal balance of each
class, until the Class A Notes are paid in full; and
(2) after the Class A Notes are paid in full, to the Class B Notes, until
the Class B Notes are paid in full.
Credit Enhancement
The credit enhancement for the notes will be as follows:
o for the Class A Notes: (1) the subordination of the Class B Notes and
the certificates and (2) the reserve account, the supplemental reserve
account and the yield supplement account; and
o for the Class B Notes: (1) the subordination of the certificates and
(2) the reserve account, the supplemental reserve account and the yield
supplement account.
The credit enhancement for the notes will protect you against losses or
delays in payments on your notes by absorbing losses on the receivables and
other shortfalls in cash flows.
Certificates
In addition to the notes, on the closing date the trust will issue $[ ]
total principal amount of certificates. The trust 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.
Reserve Account and Supplemental Reserve Account
On each payment date, the trust will use funds in the supplemental reserve
account and the reserve account to pay the following amounts if collections
on the receivables are insufficient to pay such amounts:
(1) first, the amounts due to the servicer; and
(2) then, the interest and principal due on the notes.
On each payment date, the combined amount required to be on deposit in the
reserve account and the supplemental reserve account will equal the lesser
of (1) [ ]% of the principal balances of the receivables on the dates they
were sold to the trust and (2) the principal balance of the notes.
Yield Supplement Account
On each payment date, the trust will use funds in the yield supplement
account to cover any shortfall between:
o the sum of (1) the weighted average interest rate on the notes and
(2) [ ]%; and
o the interest rate on each receivable.
Optional Redemption
The servicer can purchase the receivables once the total principal balance
of the receivables is 10% or less of the principal balances of the
receivables on the dates they were sold to the trust. 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 characterized as debt; and
o the trust will not be characterized 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
that are subject to the Employee Retirement Income Security Act of 1974.
However, administrators of employee benefit plans should review the matters
discussed under "ERISA Considerations" in this prospectus and also should
consult with their legal advisors before purchasing 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.
RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase notes.
Absence of Secondary The underwriters for the notes may assist in
Market for Notes Could resales of the notes but they are not required to
Limit Your Ability to do so. A secondary market for the notes may not
Resell Notes 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.
Interests of Other Another person could acquire an interest in a
Persons in receivable that is superior to the trust's
Receivables and Vehicles interest in the receivable because the servicer
Could Reduce the Funds will not segregate or mark the receivables as
Available to Make belonging to the trust. See "Certain Legal Aspects
Payments on the Notes of the Receivables-Trust's Rights in the
Receivables." If another person acquires an
interest in a receivable that is superior to the
trust'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 trust's interest in the vehicle because the
servicer will not amend the certificate of title
or ownership to identify the trust as the new
secured party. See "Certain Legal Aspects of the
Receivables-Trust's Security Interests in the
Financed Vehicles." If another person acquires an
interest in a vehicle that is superior to the
trust's interest in the vehicle, the proceeds from
the sale of the vehicle will not be available to
make payments on the notes.
Bankruptcy of Mitsubishi If Mitsubishi Motors Credit of America, Inc.
Motors Credit of ("MMCA") enters a bankruptcy proceeding, you could
America, Inc. Could experience losses or delays in the payments on
Result in Losses or your notes. MMCA will sell the receivables to the
Delays in Payments on seller, and the seller will transfer the
the Notes receivables to the trust. However, if MMCA enters a
bankruptcy proceeding, the court in the bankruptcy
proceeding could conclude that the sale of the
receivables by MMCA to the seller was not a "true
sale" and that MMCA still owns the receivables.
The court could also conclude that MMCA and the
seller 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 government liens on MMCA's property
that arose before the transfer of the
receivables to the trust 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 (a) one or more of the
vehicles securing the receivables or (b) cash
collections held by MMCA at the time that a
bankruptcy proceeding begins.
The seller 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 the seller was not
a "true sale" or that MMCA and the seller should
be consolidated for bankruptcy purposes. See
"Certain Legal Aspects of the Receivables-
Bankruptcy Considerations Relating to the Transfer
of the Receivables by MMCA to the Seller" and
"Description of the Seller."
In a case decided by the U.S. Court of Appeals for
the 10th Circuit in 1993, the court concluded that
accounts transferred by a seller to a buyer should
be included in the bankruptcy estate of the seller
even if the transfer was a "true sale". If MMCA
enters a bankruptcy proceeding and the court in
the bankruptcy proceeding applies the reasoning of
the court in that case, you could experience
losses or delays in the payments on your notes.
See "Certain Legal Aspects of the
Receivables-Bankruptcy Considerations Relating to
the Transfer of the Receivables by MMCA to the
Seller."
Class B Notes are The Class B Notes bear greater credit risk than
Subject to the Class A Notes because payments of interest and
Greater Credit Risk principal on the Class B Notes are subordinated to
payments of interest and principal on the Class A
Notes. See "Description of the Terms of the Notes
- Subordination of the Class B Notes and the
Certificates to the Class A Notes."
Class A-2 and Class A-3 You could suffer a loss in your investment in the
Notes Could Suffer Class A-2 Notes or the Class A-3 Notes because a
Losses Because portion of the principal of the Class B Notes will
Principal Will Be Paid be paid before payment in full of the Class A-2
on the Class B Notes Notes and the Class A-3 Notes. Holders of the
Before the Class A-2 Class B Notes are not required to return any
and A-3 Notes are Paid amounts paid to them as principal even if an event
in Full of default under the indenture occurs and the
indenture trustee sells the receivables at a price
insufficient to pay the Class A Notes in full.
Risk that You May Be Potential Prepayment of Notes Due to Prepayment of
Required to Reinvest Receivables. The payment of principal on your
Your Principal in notes will be accelerated to an extent that cannot
the Notes at a be fully predicted by prepayments on the
Lower Rate of Return receivables by the related obligors and purchases
Because of Prepayments of the receivables by the seller and the servicer
on the Notes due to breaches of representations, warranties and
covenants by the seller and servicer. You will
bear the risk that you will have to reinvest the
principal on your notes earlier than you expected
at a rate of interest that is less than the rate
of interest on your notes.
MMCA does not generally maintain historical
records on the rate of prepayment on its
receivables. The obligors on the receivables may
prepay the receivables voluntarily at any time.
The receivables are required to be prepaid upon
the sale, insured loss or other disposition of the
related vehicle. In addition, if MMCA breaches any
of its representations and warranties with respect
to any receivables, MMCA will be required to
repurchase those receivables from the seller, and
the seller will be required to repurchase those
receivables from the trust. MMCA will also be
required to purchase receivables from the trust if
it breaches its servicing obligations with respect
to those receivables. MMCA will also be entitled
to purchase all of the remaining receivables from
the trust once the aggregate principal balance of
the receivables is 10% or less of the principal
balances of the receivables on the dates on which
they were sold to the trust.
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 the returned vehicles on behalf of
the trust. MMCA expects the amount realized from
the sale of the returned vehicles to be less than
the balloon payments. 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 encourage a higher
level of prepayments on receivables than would
otherwise be the case. The higher level of
prepayments on receivables will be reflected in a
higher level of prepayments on the notes than
would otherwise be the case. See "Description of
the Receivables-Maturity and Prepayment
Considerations for the Receivables."
Potential Prepayments on If the aggregate principal balance of the
Notes Due to Failure to receivables transferred to the trust during the
Transfer a Sufficient pre-funding period is less than the amount
Number of Additional deposited to the pre-funding account on the
Receivables to the Trust closing date, the notes will to be prepaid in the
amount of the shortfall. See "Description of the
Terms of the Notes-Mandatory Redemption of the
Notes."
The ability of the seller to apply the entire
balance of the pre-funding account to the transfer
of receivables to the trust during the pre-funding
period depends on the manufacture, distribution,
sale and financing of motor vehicles by Mitsubishi
Motors Corporation and its affiliates. The seller
will not be able to transfer receivables to the
trust during the pre-funding period unless MMCA
originates those receivables. MMCA mostly finances
vehicles manufactured by Mitsubishi Motors
Corporation and its affiliates. If Mitsubishi
Motors Corporation and its affiliates temporarily
or permanently stops manufacturing, distributing,
selling or financing motor vehicles, then MMCA's
ability to originate receivables for sale to the
seller will be adversely affected.
Potential Loss or Changes in the overall characteristics of the
Prepayments on Notes trust's pool of receivables resulting from the
Due to Changes in addition of receivables during the in pre-funding
Pool Characteristics period may increase the risk that you will
experience losses or delays in payments on your
notes or prepayments on your notes. The
receivables to be transferred by the seller to the
trust during the pre-funding period may be
originated by MMCA using credit criteria that are
different from the credit criteria used by MMCA in
originating the receivables transferred to the
trust on the closing date. Any changes in such
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, which will be reflected in the timing and
amount of payment of principal and interest on the
notes.
Potential Loss on Notes You may suffer a loss on your notes if the assets
Due to Limited Assets of the trust are insufficient to pay the principal
of the Trust amount of the notes in full. The only source of
funds for payments on the notes will be the assets
of the trust. The assets of the trust are limited
to the receivables and the funds on deposit in the
trust's bank accounts. The notes will not be
insured or guaranteed by MMCA, including in its
capacity as servicer, or by the seller, 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 trust's
bank accounts. See "Description of the Terms of
the Notes-Description of the Reserve Account and
Supplemental Reserve Account."
Potential Loss on Notes The obligors on receivables that provide for a
in Connection with balloon payment will not have to pay the balloon
Sales of 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
trust. The trust will use the proceeds from the
sale of the returned vehicle to make payments on
the notes. You may experience delays or losses in
the payments on your notes if the proceeds from
the sale of the returned vehicles are less than
the amount of the balloon payment.
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 wholesale value of
the vehicle. See "Description of the Terms of the
Notes-Description of the Balloon Payment
Receivables."
Potential Loss on Notes The obligor under a receivable that provides for a
if MMCA Does Not balloon payment also has the option to refinance
Refinance Balloon with MMCA the total amount due at the end of the
Receivables term of the receivable, subject to the
satisfaction of certain conditions. MMCA will be
obligated to provide such financing to the extent
it offers vehicle financing. No successor to MMCA
as servicer will be obligated to provide such
refinancing. If at any time MMCA no longer makes
refinancing available, the seller may contract
with third parties to do so. If a refinancing
option is not available, more obligors may return
their vehicles on the due date of the balloon
payment instead of paying the balloon payment
through refinancing of the motor vehicle, and
consequently more motor vehicles may be sold by
MMCA on behalf of the trust for prices less than
the balloon payment.
Potential Loss on Notes MMCA does not require the obligor under a
if Vehicles Financed by receivable that provides for a balloon payment to
Receivables that are pay the "gap amount" if theft or physical damage
Stolen or Destroyed to th vehicle results in a total loss of the motor
vehicle. The "gap amount" is the difference
between the amount owed in respect of the
receivable as of the date of the total loss and
insurance proceeds received with respect to the
motor vehicle. In accordance with its customary
servicing practices and procedures, MMCA treats
any gap amount as a non-cash reduction of the
principal amount of the balloon payment. Any such
reduction will decrease the amount of collections
available to the trust. See "Description of the
Terms of the Notes-Description of the Balloon
Payment Receivables."
Lack of Historical Data Receivables that provide for a balloon payment
Regarding the Return have matured in large volumes only in recent
Rates of Vehicles years. MMCA therefore does not have extensive
Financed by Balloon historical information regarding (a) the
Receivables percentage of motor vehicles that will be returned
to MMCA upon the maturity of receivables that
provide for a balloon payment or (b) MMCA's loss
experience upon resale of such returned motor
vehicles. MMCA expects that, in the aggregate, the
amounts received by MMCA from the sale of such
vehicles will be less than the principal amounts
of the balloon payment because, as discussed
above, MMCA sets balloon payments higher than its
estimate of the wholesale value of the vehicle.
Potential Loss on Notes Economic conditions in the states where the
Due to Geographic obligors under the receivables reside may affect
Concentration of the delinquency, loan loss and repossession
Receivables experience of the trust with respect to the
receivables. Based on the principal balance of the
original pool of receivables as of the date as of
which the receivables were acquired by the trust,
% of the receivables were originated in
California, % in Texas, % in Florida and %
in Alabama. Accordingly, adverse economic conditions
or other factors affecting California, Texas,
Florida or Alabama could have an especially
significant effect on the delinquency, loan loss
or repossession experience of the trust and may
adversely affect the timing and amount of payment
of principal and interest on the notes.
Risks in Connection If a default occurs under the indenture and the
with an Event of Default maturity dates of the notes areaccelerated, the
under Indenture indenture trustee may sell the receivables and
prepay the notes in advance of their respective
maturity 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 trust are
insufficient to pay the aggregate principal amount
of the notes in full. In addition, the
acceleration of the maturity dates will change the
order of priority for the payment of principal on
the different classes of notes. See "Description
of the Terms of the Notes-Principal Payable on
the Notes."
Potential Delays in The payment of principal and interest on the notes
Payments could be delayed if MMCA, in its capacity as
on Notes Due to servicer, or the indenture trustee experience
Potential problems in their computer programs relating to
Computer Program the year 2000. Many existing computer programs use
Problems only two digits to identify a year. These programs
Beginning in the Year could fail or produce erroneous results during the
2000 transition from the year 1999 to the year 2000 and
afterwards. MMCA has evaluated the impact of
preparing its systems for the year 2000. It has
identified areas of potential impact and is
implementing conversion efforts. It believes its
mission-critical applications, including its
systems for operations, collections on the
receivables and servicing the receivables, are
already year 2000 compliant, subject to further
testing. MMCA's target is to have all systems
ready for the year 2000 in advance of December 31,
1999.
If MMCA, in its capacity as the servicer, does not
have a computer system that is year 2000 compliant
by the year 2000, MMCA's ability to service the
receivables may be materially and adversely
affected. If the indenture trustee does not have a
computer system that is year 2000 compliant by the
year 2000, the indenture trustee's ability to make
distributions on the notes may be materially and
adversely affected.
DESCRIPTION OF MMCA AUTO OWNER TRUST 1998-2
Description of the Limited Purposes and Assets of the Trust
MMCA Auto Owner Trust 1998-2 (the "Trust") is a business trust formed
under the laws of the State of Delaware pursuant to a Trust Agreement,
dated as of , 1998 (as amended and supplemented from time to time, the
"Trust Agreement"), between the Seller and Wilmington Trust Company in its
capacity as the owner trustee (the "Owner Trustee") of the Trust. The Trust
was formed for purposes of the transactions described in this Prospectus.
The Trust will hold title to the Receivables, the Pre-Funding Account and
the other assets of the Trust and the proceeds therefrom, issue the Notes
and the Certificates and distribute payments on the Notes and the
Certificates. The Trust's principal offices are in the State of Delaware in
care of Wilmington Trust Company, as Owner Trustee, at the address listed
below. See "--Description of the Owner Trustee."
The Trust will initially be capitalized through the issuance of the
Notes and $[ ] aggregate principal amount of Asset Backed Certificates (the
"Certificates"). The Certificates evidence beneficial ownership of the
Trust and will entitle Certificateholders to receive distributions of
amounts not required to be used to make payments on the Notes or to pay
expenses of the Trust. The Certificates will be subordinated to the Notes
to the extent described herein. 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 hereby and will be
retained by the Seller or an affiliate.
The Trust will purchase the Initial Receivables from the Seller
pursuant to the Sale and Servicing Agreement in exchange for the proceeds
of the Notes and the issuance to the Seller or an affiliate thereof of the
Certificates. The Seller or an affiliate will retain the Certificates.
The Servicer will service the Receivables, either directly or through
subservicers, and will be paid the Total Servicing Fee and reimbursed for
any Advances that are due and payable to it out of collections from the
Receivables prior to distributions to Noteholders. Certain other expenses
of the Trust will be paid by the Servicer or by the Seller as provided in
the Sale and Servicing Agreement. See "Description of the Transfer and
Servicing Agreements- Description of Servicing Procedures," "--Servicing
Compensation" and "Description of the Terms of the Notes- Description of
the Indenture Cash Flows."
The Servicer will hold the Receivables and the certificates of title
or ownership relating to the Financed Vehicles as custodian for the
Indenture Trustee and the Trust. However, the Receivables will not be
marked or stamped to indicate that they have been sold to the Trust, and
the certificates of title or ownership for the Financed Vehicles will not
be endorsed or otherwise amended to identify the Trust as the new secured
party. Under such circumstances and in certain jurisdictions, the Trust's
security interest in the Receivables and the Financed Vehicles may be
defeated or may not be perfected. See "Certain Legal Aspects of the
Receivables."
The Trust will not acquire any assets other than the Trust Property
and it is not anticipated that the Trust will have any need for additional
capital resources. Because the Trust will have no operating history upon
its establishment and will not engage in any business other than acquiring
and holding the Trust Property 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 with respect to the Trust have been
included herein.
If the protection provided to the Noteholders by the subordination of
the Certificates and by amounts on deposit in the Supplemental Reserve
Account, the Reserve Account, the Negative Carry Account and the Yield
Supplement Account from time to time is insufficient, the Noteholders would
have to look principally to the Receivables that are not Defaulted
Receivables, the proceeds from the repossession and sale of Financed
Vehicles which secure Defaulted Receivables and the proceeds from recourse,
if any, against Dealers with respect to the Receivables for payment of the
Notes. In such event, certain factors, such as the Trust's not having
perfected security interests in the Financed Vehicles in all states, may
affect the Trust's ability to repossess and sell the collateral securing
the Receivables, and thus may reduce the proceeds to be distributed to
Noteholders. See "Description of the Terms of the Notes-Description of the
Indenture Cash Flows" and "Certain Legal Aspects of the Receivables."
Capitalization of the Trust
The following table illustrates the capitalization of the Trust as of
the Closing Date:
Class A-1 Notes.................................... $
Class A-2 Notes....................................
Class A-3 Notes....................................
Class B Notes......................................
Certificates.......................................
------------------
Total........................................ $ ==================
Description of the Owner Trustee
Wilmington Trust Company is the Owner Trustee under the Trust
Agreement. The Owner Trustee's Corporate Trust Office is located at Rodney
Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001.
The Seller, the Servicer and their respective affiliates may have other
banking relationships with the Owner Trustee and its affiliates in the
ordinary course of their businesses.
DESCRIPTION OF THE PROPERTY OF THE TRUST
The Notes will be secured by the property of the Trust (the "Trust
Property") pursuant to the Indenture. The Trust Property will include:
(1) a pool of motor vehicle retail installment sale contracts
originated on and after and certain rights and obligations
thereunder (collectively, the "Receivables");
(2) with respect to Actuarial Receivables, monies due thereunder on
or after the related Cutoff Date (including Payaheads) and,
with respect to Simple Interest Receivables, monies received
thereunder on or after the related Cutoff Date;
(3) amounts and property from time to time held in or credited to
one or more accounts maintained by the Indenture Trustee
pursuant to the Sale and Servicing Agreement as described
below, including the Pre-Funding Account, the Reserve Account,
the Supplemental Reserve Account, the Negative Carry Account
and the Yield Supplement Account;
(4) the Seller's security interests in the Financed Vehicles;
(5) the Seller's rights to receive proceeds from claims on physical
damage, credit life, theft and disability insurance policies
covering the Financed Vehicles or the obligors;
(6) the Seller's rights of recourse against the Dealers under the
Dealer Agreements relating to the Receivables;
(7) all of the Seller's rights to certain documents contained in
the Receivable Files;
(8) all of the Seller's rights under the Sale and Servicing
Agreement and the Yield Supplement Agreement;
(9) all of the Seller's rights under the Purchase Agreement,
including the Seller's right to cause MMCA to repurchase
certain Receivables from the Seller;
(10) payments and proceeds with respect to the Receivables held by
the Servicer;
(11) all property (including the right to receive liquidation
proceeds and recoveries and Financed Vehicles and the proceeds
thereof acquired by the Trust pursuant to the terms of a
Balloon Payment Receivable) that shall have secured a
Receivable (other than a Receivable repurchased by the Seller
or purchased by the Servicer) and that shall have been acquired
by or on behalf of the Trust;
(12) rebates of premiums and other amounts relating to insurance
policies and other items financed under the Receivables in
effect as of the related Cutoff Date; and
(13) all proceeds of the foregoing.
MMCA'S VEHICLE CONTRACT PORTFOLIO
Types of Contracts Included in MMCA's Motor Vehicle Contract Portfolio
MMCA currently purchases motor vehicle and light-duty truck retail
installment sale contracts (the "Motor Vehicle Contracts") and medium-duty
truck retail installment sale contracts (the "Truck Contracts," and,
together with the Motor Vehicle Contracts, the "Contracts") directly from
authorized Mitsubishi Motors motor vehicle dealers and authorized
Mitsubishi Motors FUSO truck dealers (each, a "Dealer"), respectively,
throughout the United States. The Contracts are originated by Dealers who
regularly sell such contracts to MMCA and other finance providers. MMCA
purchases Contracts in accordance with its established underwriting
procedures and subject to the terms of its agreements (each, a "Dealer
Agreement") with each Dealer. Each Dealer Agreement, among other things,
obligates the related Dealer to repurchase any Motor Vehicle Contract or
Truck Contract that it sold to MMCA for the outstanding principal balance
thereof if the Dealer breaches certain representations and warranties set
forth in the agreement. Such representations and warranties typically
relate to the origination of the Motor Vehicle Contract or Truck Contract
and the security interest in the related automobile or light-duty truck (a
"Motor Vehicle") or medium-duty truck (a "Truck") and not the
creditworthiness of the obligor under the Contract.
MMCA currently purchases Motor Vehicle Contracts relating to new
Motor Vehicles manufactured or distributed by Mitsubishi Motors and Motor
Vehicle Contracts relating to used Motor Vehicles manufactured or
distributed by Mitsubishi Motors or other motor vehicle manufacturers. MMCA
has applied the same underwriting standards to its purchases of Motor
Vehicle Contracts whether or not the Contracts related to Motor Vehicles
manufactured or distributed by Mitsubishi Motors. See "--MMCA's
Underwriting Standards."
MMCA has at all times purchased Truck Contracts relating to new
Trucks manufactured or distributed by Mitsubishi Motors and used Trucks
manufactured or distributed by Mitsubishi Motors or other truck
manufacturers. MMCA has applied the same underwriting standards to its
purchases of Truck Contracts whether or not the Contracts related to Trucks
manufactured or distributed by Mitsubishi Motors. See "--MMCA's
Underwriting Standards."
MMCA's Underwriting Standards
MMCA's underwriting standards emphasize each prospective obligor's
ability to pay and creditworthiness as well as the asset value of the Motor
Vehicle or Truck that secures the related Motor Vehicle Contract or Truck
Contract.
Prior to its purchase of a Motor Vehicle Contract, MMCA reviews
credit applications from the obligors that include information about each
obligor's income, residential status, monthly mortgage or rent payments,
credit obligations, bank accounts and other personal information. Upon
receipt of a credit application, MMCA obtains a credit report from an
independent credit bureau which MMCA reviews to determine the applicant's
current credit status and past credit performance. Where 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.
In November 1996, MMCA introduced a new credit scoring system for all Motor
Vehicle Contracts, replacing the one that had been used since June 1994.
The new credit scoring system first assigns the application to one of three
credit segments: prime, limited credit experience and non-prime. Each
segment considers different credit application and credit bureau report
characteristics or assigns different weighting to certain characteristics
that are considered by all segments. This segmentation is based solely upon
the information in the applicant's credit bureau report. The new 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 as part of its credit
decision process, including such factors as ratio of income to debt, an
applicant's equity in the Motor Vehicle, satisfactory existing account
relationships, excellent recent reported credit history and availability of
an acceptable guarantor. MMCA management sets limits on the percentage of
credit decisions that approve credit to applicants scoring below company
credit score minimums and deny credit to applicants scoring above such
minimums. Prior to June 1994, MMCA used a credit-scoring system for Motor
Vehicle Contracts (other than Contracts relating to Balloon Payment
Receivables) that took into account additional factors from the credit
application. Where the obligor of a Motor Vehicle Contract is a business
entity, MMCA reviews credit applications that include information about
bank accounts, credit references and financial results of such business
entity. In addition, MMCA obtains and reviews published credit reports on
the business entity, where available. In some cases, MMCA may require an
individual to guarantee the business' obligation under the Motor Vehicle
Contract.
After considering the relevant information, an assessment is made of
the relative degree of credit risk of a particular application and the
decision to grant or deny credit for a Contract is made at the appropriate
management level. The application, if approved, is assigned to one of four
credit tiers reflecting its degree of credit risk. The interest rate for
the customer's account is determined by the credit tier, with the
relatively more risky accounts receiving a higher interest rate.
Prior to its purchase of a particular Truck Contract, MMCA reviews
credit applications from the obligors that include information about the
business of the applicant, its trade references, its bank references and
personal information of sole proprietors, partners or guarantors. MMCA does
not use a formal credit scoring system but considers, where appropriate,
Dun & Bradstreet reports, business checking account references, business
credit references, review of business financial statements and the
projected income to be generated from the Truck. An individual guarantor is
generally required for a business entity.
MMCA's Servicing and Collection Procedures
MMCA measures delinquency by the number of days elapsed from the date
a payment is due under the Motor Vehicle Contract or the Truck Contract
(the "Due Date"). 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
related Due Date. MMCA generally begins collection activities with respect
to delinquent Motor Vehicle Contracts or Truck Contracts through telephone
contact based upon the original credit risk assigned to each obligor at
contract origination. Obligors considered to be weaker credits are
generally contacted by telephone when the Contract becomes seven days
delinquent, while obligors considered strong credits with lesser risk are
generally contacted when the Contract becomes 15 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.
MMCA's collectors are assigned to specific delinquencies and attempt
to contact the delinquent obligor by telephone or by letter based on the
term of delinquency and the history of the account. Repossession procedures
typically begin when a Motor Vehicle Contract or Truck Contract becomes
between 60 to 75 days delinquent. Repossession is carried out pursuant to
applicable state law and specific procedures adopted by MMCA.
If the Motor Vehicle or Truck securing a delinquent Contract is
repossessed, MMCA's current policy is generally to charge off the Motor
Vehicle Contract or Truck Contract on the date on which the proceeds of
sale of the Motor Vehicle or Truck are applied to the Contract balance and
the deficiency is determined. Prior to February 1997, MMCA's policy was
generally to charge off a Contract on the earlier of the date on which the
proceeds of sale of the repossessed Financed Vehicle were applied to the
Contract balance and the date on which the Motor Vehicle Contract became
120 days delinquent or the Truck Contract became 180 days delinquent if
MMCA had not yet repossessed the related Motor Vehicle or Truck. MMCA's
current policy, which was first implemented in February 1997, is to charge
off a delinquent Contract as to which the related Financed Vehicle has not
been repossessed only at such time as it determines that it will be unable
to recover the Financed Vehicle (which time may be later than the time at
which the Contract would have been charged off under MMCA's prior policy).
Any deficiencies remaining after repossession and sale of the related Motor
Vehicle or Truck or after the full charge-off of the related Motor Vehicle
Contract or Truck Contract are pursued by MMCA to the extent practicable
and legally permitted. 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 generally requires the obligor to obtain physical
damage insurance covering loss or damage to the Motor Vehicle or Truck. The
Dealer Agreements include a requirement that the Dealers provide MMCA with
written confirmation that there is physical damage insurance acceptable to
MMCA covering each Motor Vehicle or Truck at the time that MMCA purchased
the related Motor Vehicle Contract or Truck Contract from the Dealers. MMCA
tracks the ongoing status of insurance by the obligors, and attempts to
cause the obligors to reinstate such insurance in the event that it is
allowed to lapse; nevertheless, there is no assurance that each Motor
Vehicle or Truck will continue to be covered by physical damage insurance
for the entire term during which the related Contract is outstanding.
Delinquency, Credit Loss and Returned Vehicle Loss Experience of MMCA's
Contracts
Set forth below is certain information concerning MMCA's combined
portfolio of Motor Vehicle Contracts and Truck Contracts, including
Contracts previously sold which MMCA continues to service. MMCA changed its
credit scoring system for Motor Vehicle Contracts (other than Contracts
relating to Balloon Payment Receivables) in June 1994. MMCA changed its
credit scoring system again in November 1996 and made the changes
applicable to all types of Motor Vehicle Contracts. See "--MMCA's
Underwriting Standards" above. The Initial Receivables were originated more
recently than, on average, the receivables related to Motor Vehicles and
Trucks in the tables in the following pages.
Because (1) the composition of Initial Receivables included in the
Trust differs from, and the Subsequent Receivables to be included in the
Trust are anticipated to differ from, MMCA's combined portfolio, (2) MMCA
changed its underwriting criteria with respect to non-Balloon Payment
Receivables in June 1994 and (3) MMCA changed its underwriting criteria
again in November 1996 with respect to all types of receivables, no
assurance can be given that the performance of the Receivables included in
the Trust will be similar to the historical performance of the portfolio as
a whole. Further, for the same reasons as are set forth above, the
delinquencies, credit losses and returned vehicle losses experienced by the
Trust may differ from the delinquencies, credit losses and returned vehicle
losses experienced by the combined portfolio in the past or in the future.
<TABLE>
<CAPTION>
Delinquency Experience (1)
As of September
30, As of December 31,
---------------- ------------------------
1998 1997 1997 1996 1995
-------- ------ ------ ------- -------
<S> <C> <C> <C> <C> <C>
Number of Contracts Outstanding at End
of Period.............................. 129,738 126,493 123,274 122,224 107,507
Delinquencies as a Percent of
Contracts Outstanding (2)
30-59 Days.......................... 3.42% 4.14% 4.42% 5.13% 4.00%
60-89 Days.......................... 0.94% 1.20% 1.56% 1.69% 0.92%
90 Days or More..................... 0.33% 0.28% 0.51% 0.54% 0.30%
Repossessions as a Percent of
Contracts Outstanding (2)(3)......... 0.76% 1.26% 0.96% 1.41% 1.70%
</TABLE>
(1) The information in the table includes Motor Vehicle Contracts for new
and used Motor Vehicles and Truck Contracts for new and used Trucks
owned by MMCA or previously sold by MMCA which MMCA continues to
service. Delinquency numbers are net of bankrupt accounts and
repossessions.
(2) The period of delinquency is based on the number of days more than 10%
of a payment is contractually past due, and the percent represents
delinquent dollars as a percent of dollars outstanding.
(3) Repossessions means Contracts with respect to which the Financed
Vehicle has been repossessed but for which sale proceeds have not yet
been applied to the Contract balance.
<TABLE>
<CAPTION>
T
Net Credit Loss and Repossession Experience (1)
(Dollars in thousands)
Nine Months Ended
September 30, Year Ended December 31,
------------------------ ----------------------------------
1998 1997 1997 1996 1995
---------- ----------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Amount Outstanding (2)....... $1,934,366 $1,823,622 $1,769,219 $1,687,592 $1,436,009
Average Amount Outstanding
(3).......................... $1,820,045 $1,768,391 $1,776,481 $1,590,046 $1,221,467
Number of Contracts
Outstanding.................. 129,738 126,493 123,274 122,224 107,507
Average Number of Contracts
Outstanding (3)............ 124,704 124,952 124,945 117,048 93,879
Charge-offs (4).............. $ 39,700 $ 55,632 $ 73,242 $ 84,872 $ 20,171
Recoveries (5)............... $ 7,515 $ 10,404 $ 13,126 $ 7,372 $ 1,058
Net Losses................... $ 32,185 $ 45,228 $ 60,116 $ 77,500 $ 19,113
Number of Repossessions (6).. 3,673 5,976 7,382 6,712 4,260
Number of Repossessions
as a Percent of the Average
Number of Contracts
Outstanding (7)............ 3.93 % 6.38 % 5.91 % 5.73 % 4.54 %
Net Losses as a Percent of
Average Amount
Outstanding (7)............ 2.36 % 3.41 % 3.38 % 4.87 % 1.56 %
</TABLE>
(1) The information in the table includes Motor Vehicle Contracts for new
and used Motor Vehicles and Truck Contracts for new and used Trucks
owned by MMCA or previously sold by MMCA which MMCA continues to
service.
(2) Amount outstanding is remaining principal balance of the Contracts,
including Balloon Payments to the extent attributable to principal on
Balloon Payment Receivables, plus any outstanding fees and charges
and any accrued and unpaid interest.
(3) Averages are computed by taking a simple average of the average
months outstanding for each period presented.
(4) Charge-offs represent the total aggregate amount due on Motor Vehicle
Contracts and Truck Contracts that is determined to be uncollectible
in the period, less proceeds from disposition of related vehicles,
other than recoveries described in Note (5). The calculation of
Charge-offs for the Contracts in the portfolio includes both earned
but unpaid finance charges and Balloon Payments. Charge-offs do not
include any losses on sales of Motor Vehicles that were purchased by
MMCA pursuant to the terms of a Balloon Payment Receivable, because
such losses would not constitute credit losses, but Charge-offs do
include losses with respect to both the amortizing monthly
installments and Balloon Payments for Balloon Payment Receivables
which have defaulted. Charge-offs do not include expenses associated
with collection, but do include expenses associated with repossession
or disposition of the vehicles. MMCA currently charges off a Contract
upon the earlier of (a) the date upon which the related Financed
Vehicle is sold following repossession or (b) the date as of which
MMCA determines that it will be unable to recover the Financed
Vehicle from the obligor. Prior to February 1997, MMCA had a policy
of charging off Motor Vehicle Contracts and Truck Contracts upon the
earlier of the date of sale of the repossessed Financed Vehicle and
the dates as of which the Motor Vehicle Contract or Truck Contract
became 120 days and 180 days delinquent, respectively. Contracts of
bankrupt obligors are included only if charged off.
(5) Recoveries generally consist of amounts received on Contracts
following the time at which the Contract is charged off net of
collection expenses.
(6) Number of Repossessions means the number of repossessed Motor
Vehicles and Trucks in a given period.
(7) Annualized rate. The nine-month period ending September 30, 1998 is
not necessarily indicative of a full year's actual results. 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 automobiles and light- or medium-duty
trucks.
MMCA began originating Balloon Payment Receivables in October 1993.
Because Balloon Payment Receivables have matured in large volumes only more
recently, the experience shown in the tables below may not be comparable to
the actual performance of the Balloon Payment Receivables included in the
Trust Property.
Balloon Payment Receivables: Loss Experience on Returned Vehicles (1)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
---------------------- -------------------------------
1998 1997 1997 1996 1995
---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Total Number of Final Payment
Receivables Scheduled to
Terminate................... 13,958 5,462 10,716 1,022 34
Total Number of Vehicles
Returned to MMCA............ 3,466 1,365 2,926 435 7
Return Ratio (2).............. 24.83% 24.99% 27.31% 42.56% 20.59%
Total Losses on Returned
Vehicles Sold (3)........... $4,911,496 $2,699,576 $5,371,694 $726,208 $12,464
Total Number of Returned
Vehicles Sold............... 2,884 1,322 2,578 432 7
Average Loss per Returned
Vehicle Sold (3)............ $ 1,703 $ 2,027 $ 2,084 $ 1,681 $ 1,781
</TABLE>
- -----------
(1) The information in the table includes Motor Vehicles returned upon
the expiration of the related Contracts and Motor Vehicles returned
under MMCA's program that offers attractive terms to owners of Motor
Vehicles to prepay their accounts in connection with their respective
purchases of a new Motor Vehicle.
(2) The number of vehicles returned to MMCA as a percentage of the number
of Balloon Payment Receivables scheduled to terminate in the related
period.
(3) Losses are calculated without deduction for auction or other
disposition expenses on resale.
MMCA's loss experience on returned Motor Vehicles is dependent upon
the number of Motor Vehicles returned, any programs offered by MMCA that
permit the early return of Motor Vehicles, the amount of the related
receivables outstanding at the time the Motor Vehicles are returned and the
resale value of the returned Motor Vehicles.
DESCRIPTION OF THE RECEIVABLES
The Receivables will consist of a pool of retail installment sale
contracts secured by new and used automobiles and light- and medium-duty
trucks, including rights to receive certain payments made with respect to
such Receivables, security interests in the vehicles financed thereby (the
"Financed Vehicles") and the proceeds thereof. The Receivables will include
the Initial Receivables purchased as of the Initial Cutoff Date and any
Subsequent Receivables purchased as of the related Subsequent Cutoff Date.
As of the Initial Cutoff Date, the Initial Receivables had an aggregate
principal balance of $ , which consisted of a Level Pay Pool Balance of $
and a Balloon Payment Pool Balance of $ .
The Receivables will be purchased by the Trust from the Seller
pursuant to a Sale and Servicing Agreement, to be dated as of , 1998 (as
amended or supplemented from time to time, the "Sale and Servicing
Agreement"), among the Trust, the Seller and MMCA providing for the
purchase of the Initial Receivables on or before the date of issuance of
the Notes (the "Closing Date") and any Subsequent Receivables on the
related Subsequent Transfer Date. The Receivables will be purchased by the
Seller from MMCA pursuant to a Purchase Agreement, to be dated as of
, 1998 (as amended or supplemented from time to time, the
"Purchase Agreement"), between the Seller and MMCA, providing for the
purchase of the Initial Receivables on or before the Closing Date and any
Subsequent Receivables on the related Subsequent Transfer Date. The
Receivables will be selected from the Contracts owned by MMCA based on the
criteria specified in the Sale and Servicing Agreement and described
herein. No Receivable will have a scheduled maturity later than (the "Final
Scheduled Maturity Date").
The "Pool Balance" at any time will represent the aggregate principal
balance of the Receivables (including the aggregate principal balance of
Balloon Payments) at the end of the preceding Collection Period or, with
respect to any time during the first Collection Period, on the Initial
Cutoff Date, after giving effect to all payments (other than Payaheads)
received from obligors, and the principal component of all Advances and
Purchase Amounts to be remitted by the Servicer or the Seller, as the case
may be, for such Collection Period, and reduced by the principal amount of
Receivables that became Defaulted Receivables during such Collection
Period. The "Initial Pool Balance" means the sum of (a) the Pool Balance as
of the Initial Cutoff Date plus (b) the aggregate principal balance of all
Subsequent Receivables sold to the Trust as of their respective Subsequent
Cutoff Dates.
Selection Criteria for the Receivables
The Initial Receivables were purchased, and the Subsequent
Receivables have been or will be purchased, by MMCA from Dealers in the
ordinary course of business in accordance with MMCA's underwriting
standards. The Initial Receivables were selected, and the Subsequent
Receivables will be selected, from MMCA's portfolio by several criteria,
including the following:
(1) each Receivable is secured by a new or used automobile or a
light- or medium-duty truck;
(2) each Receivable has an annual percentage rate ("APR") of at
least 0% and not more than 30%;
(3) each Receivable had a remaining maturity as of the related
Cutoff Date of not more than 60 months, and an original
maturity of not more than 60 months;
(4) each Receivable had an original principal balance (net of
unearned precomputed finance charges) of not more than $60,000
and a remaining principal balance of not less than $100 as of
the related Cutoff Date;
(5) no Receivable was more than 30 days delinquent with respect to
more than 10% of a payment as of the related Cutoff Date;
(6) no Financed Vehicle had been repossessed as of the related
Cutoff Date;
(7) each Receivable is an installment sale contract;
(8) each Receivable is an Actuarial Receivable or a Simple Interest
Receivable (and may also be a Balloon Payment Receivable);
(9) each Receivable was originated during or after ;
(10) as of the related Cutoff Date, no obligor under a Receivable is
the subject of a proceeding under the United States Bankruptcy
Code; and
(11) each Receivable was originated in the United States by a Dealer
for the consumer or commercial sale of a Financed Vehicle in
the ordinary course of such Dealer's business.
In addition, the pool of Receivables will not deviate from the
following characteristics as of each Subsequent Transfer Date (after giving
effect to Subsequent Receivables sold to the Trust on such Subsequent
Transfer Date):
(1) the weighted average remaining maturity of the Receivables will
not be more than [ ] months; and
(2) the aggregate Balloon Payments as a percentage of the aggregate
Pool Balance of the Receivables will not be greater than
[ ]%.
The Initial Receivables will represent approximately % of an amount
equal to the sum of the initial principal amount of the Notes and the
initial principal amount of the Certificates. Except for the criteria
described in the preceding paragraph, there will be no required
characteristics of the Subsequent Receivables. Therefore, following the
transfer of Subsequent Receivables to the Trust, 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 APR of the Receivables described in the
following tables may vary from those of the Initial Receivables. Following
the end of the Pre-Funding Period, the Seller will file a report on Form
8-K containing information comparable to that contained in the tables set
forth below regarding the aggregate characteristics of the entire pool of
Receivables, after the addition of the Subsequent Receivables.
Certain Characteristics of the Initial Receivables
The composition of the Initial Receivables as of , 1998 and the
geographical distribution and distribution by APR of the Pool Balance of
the Initial Receivables as of , 1998 are set forth in the following tables.
"Level Pay Pool Balance" means the Pool Balance exclusive of the Balloon
Payment Pool Balance. "Balloon Payment Pool Balance" means the aggregate
principal balance of Balloon Payments. See "Description of the Terms of the
Notes -- Description of the Balloon Payment Receivables."
Composition of the Initial Receivables as of the Initial Cutoff Date
Pool Balance............................................ $
Level Pay Pool Balance.................................. $
Balloon Payment Pool Balance............................ $
Number of Receivables
Average Principal Balance............................... $
(Range)...........................................$ to $
Average Original Amount Financed........................ $
(Range)...........................................$ to $
Average Level Pay Balance............................... $
(Range)...........................................$ to $
Average Balloon Payment Balance (1).....................$
(Range)...........................................$ to $
Weighted Average APR.................................... %
(Range)........................................... 0.00% to %
Weighted Average Original Term to Maturity.............. months
(Range)...........................................12 months to 60 months
Weighted Average Remaining Term to Maturity............. months
(Range)........................................... 3 months to 60 months
- -----------
(1) Based on Balloon Payment Receivable balances only.
Geographic Distribution of the Initial Receivables
as of the Initial Cutoff Date
Percentage of Percentage of
Pool Balance Pool Balance
State (1) (2) State (1) (2)
- --------- --- --------- --------------
Alabama.................. % Montana................. %
Alaska................... Nebraska................
Arizona.................. Nevada..................
Arkansas................. New Hampshire...........
California............... New Jersey..............
Colorado................. New Mexico..............
Connecticut.............. New York................
Delaware................. North Carolina..........
Florida.................. North Dakota............
Georgia.................. Ohio....................
Idaho.................... Oklahoma................
Illinois................. Oregon..................
Indiana.................. Pennsylvania............
Iowa..................... Rhode Island............
Kansas................... South Carolina..........
Kentucky................. South Dakota............
Louisiana................ Tennessee...............
Maine.................... Texas...................
Maryland................. Utah....................
Massachusetts............ Vermont.................
Michigan................. Virginia................
Minnesota................ Washington..............
Mississippi.............. West Virginia...........
Missouri................. Wisconsin...............
Montana.................. Total 100.00%
- -----------
(1) State of origination is based on the addresses of the originating
Dealers.
(2) Percentages may not add to 100.00% due to rounding.
Distribution by APR of the Initial Receivables as of the Initial Cutoff Date
Percentage
Number of Pool of Pool
APR Range(%) Receivables Balance(1)(2) Balance(3)
0.00 to 0.99.......................... $ %
1.00 to 1.99..........................
2.00 to 2.99..........................
3.00 to 3.99..........................
4.00 to 4.99..........................
5.00 to 5.99..........................
6.00 to 6.99..........................
7.00 to 7.99..........................
8.00 to 8.99..........................
9.00 to 9.99..........................
10.00 to 10.99........................
11.00 to 11.99........................
12.00 to 12.99........................
13.00 to 13.99........................
14.00 to 14.99........................
15.00 to 15.99........................
16.00 to 16.99........................
17.00 to 17.99........................
18.00 to 18.99........................
19.00 to 19.99........................
20.00 to 20.99........................
21.00 to 21.99........................
22.00 to 22.99........................
23.00 to 23.99........................ __________ _____________ ________
Total................................. $ %
============= ========
- -----------
(1) Remaining principal balance for Simple Interest Receivables, and the
present value of scheduled remaining payments for Actuarial Receivables.
(2) Pool Balance does not add up to Initial Pool Balance because of rounding.
(3) Percentages may not add to 100.00% due to rounding.
Approximately % of the total number of Receivables and approximately
% of the Pool Balance as of the Initial Cutoff Date relate to new
automobiles and light- or medium-duty trucks. Substantially all of such new
automobiles and light- or medium-duty trucks were manufactured or
distributed by Mitsubishi Motors.
Approximately % of the total number of Receivables and
approximately % of the Pool Balance as of the Initial Cutoff Date
relate to used automobiles and light- or medium-duty trucks.
Approximately % of the total number of Receivables and approximately
% of the Pool Balance as of the Initial Cutoff Date relate to program
automobiles and light-duty trucks. Program automobiles are vehicles in the
current and immediately preceding model years which dealers have acquired
under a remarketing program administered by MMCA. This program allows
dealers to offer to purchasers of program automobiles the same rate of
interest and terms offered to new car buyers. Program vehicles are
primarily automobiles returned to MMCA by rental car companies, but also
include off-lease MMCA company and employee lease vehicles and MMCA pool
cars.
Approximately % of the total number of Receivables and approximately
% of the Pool Balance as of the Initial Cutoff Date, relate to medium-duty
trucks, the primary purchasers of which are businesses.
Approximately % of the total number of Receivables and approximately
% of the Pool Balance as of the Initial Cutoff Date relate to refinanced
program automobiles and light- or medium-duty trucks manufactured in prior
model years which are financed at the original rates set forth in the
related Contracts or at used vehicle rates.
Payment Methods of the Receivables
Approximately % of the Pool Balance as of the Initial Cutoff Date was
attributable to Receivables that provide for the allocation of payments
according to the "actuarial" method ("Actuarial Receivables") excluding
Actuarial Receivables of the type described in the immediately following
paragraph. An Actuarial Receivable provides for 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 APR of the loan multiplied by the scheduled principal balance. The
remainder of the scheduled payment is applied to principal. Generally, no
adjustment is made in the event of early or late payments, although in the
latter case the obligor may be subject to a late payment charge.
Approximately % of the Pool Balance as of the Initial Cutoff Date was
attributable to Actuarial Receivables that provide that if the Receivable
is prepaid in full, the amount payable will be determined in accordance
with a contractual calculation that is based upon the "Rule of 78's." In
the event of the prepayment in full of such Actuarial Receivables, the
excess of the amount that would be due if the Receivable generally provided
for allocation of payments between principal and interest using the Rule of
78's over the amount that would be payable upon such prepayment using the
actuarial method (the "Rule of 78's Payment") will not be used to make
payments due to Noteholders but will be paid to the Servicer.
Approximately % of the Pool Balance as of the Initial Cutoff Date was
attributable to Receivables that provide for the allocation of payments
according to the "simple interest" method ("Simple Interest Receivables")
including Simple Interest Receivables of the type described in the
immediately following paragraph. In November 1996, MMCA began phasing out
Motor Vehicle Contracts and Truck Contracts that provide for the allocation
of payments according to the actuarial method in favor of those Contracts
that provide for allocation of payments according to the "simple interest"
method. Since June 1997, MMCA has purchased only Motor Vehicle Contracts
and Truck Contracts which provide for allocation of payments according to
the "simple interest" method. A Simple Interest Receivable also provides
for the amortization of the amount financed under the Receivable over a
series of fixed level monthly payments. However, unlike the monthly payment
under an Actuarial Receivable, each monthly payment consists of an
installment of interest which is calculated on the basis of the outstanding
principal balance of the Receivable multiplied by the stated APR and
further multiplied by the period elapsed (as a fraction of a calendar year)
since the preceding payment of interest was made. As payments are received
under a Simple Interest Receivable, the amount received is applied first to
interest accrued to the date of payment and the balance is applied to
reduce the unpaid principal balance. Accordingly, if an obligor pays a
fixed monthly installment before the Due Date, the portion of the payment
allocable to interest for the period since the preceding payment was made
will be less than it would have been had the payment been made as
scheduled, and the portion of the payment applied to reduce the unpaid
principal balance will be correspondingly greater. Conversely, if an
obligor pays a fixed monthly installment after its Due Date, the portion of
the payment allocable to interest for the period since the preceding
payment was made will be greater than it would have been had the payment
been made as scheduled, and the portion of the payment applied to reduce
the unpaid principal balance will be correspondingly less. In either case,
the obligor pays a fixed monthly installment until the final scheduled
payment date, at which time the amount of the final installment is
increased or decreased as necessary to repay the then outstanding principal
balance. In the case of a Balloon Payment Receivable that is a Simple
Interest Receivable, this allocation of payments may result in the
remaining principal balance of the Balloon Payment Receivable on the Due
Date for the Balloon Payment being greater or less than the Balloon
Payment.
Approximately % of the Pool Balance as of the Initial Cutoff Date
was attributable to Simple Interest Receivables that are subject to a cap on
the aggregate amount of interest to be paid during the term of such
Receivables ("Capped Receivables"). With respect to Capped Receivables, if
the obligor consistently makes scheduled payments after the Due Date, 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 on the aggregate amount of
interest payable over the term of a Capped Receivable. If, as a result of
such delinquencies, the aggregate amount of interest paid under the
Receivable reaches the lifetime cap, no further interest will accrue and
each scheduled payment due thereafter will be applied to the reduction of
principal.
Approximately % of the Pool Balance as of the Initial Cutoff Date was
attributable to Balloon Payment Receivables. Such Receivables provide for
amortization of a portion of the amount financed over a series of fixed
level monthly installments in accordance with the actuarial method or the
simple interest method, but also provide for a substantially larger final
scheduled payment of principal together with one month's interest after
payment of such monthly installments. Upon maturity of a Balloon Payment
Receivable, an obligor thereunder may satisfy the amount then owed by the
obligor by (1) paying the remaining principal amount of the Receivable, all
accrued and unpaid interest, plus any fees, charges, and other amounts then
owing, on the Due Date of the Balloon Payment; (2) refinancing the net
amount then due, which may be greater or less than the Balloon Payment,
subject to certain conditions; or (3) selling the related Motor Vehicle to
MMCA or its assignee for an amount equal to the Balloon Payment (reduced by
certain charges) and paying any excess of the total amount owed over the
Balloon Payment to MMCA. See "Description of the Terms of the Notes -
Description of the Balloon Payment Receivables."
The Receivables will be prepayable by the obligors at any time.
Prepayments may also result from liquidations due to default, the receipt
of proceeds from physical damage or other insurance, repurchases by the
Seller as a result of certain uncured breaches of the representations and
warranties made by it in the Sale and Servicing Agreement with respect to
the Receivables, purchases by the Servicer as a result of certain uncured
breaches of the covenants made by it in the Sale and Servicing Agreement
with respect to the Receivables, or the Servicer exercising its option to
purchase all of the remaining Receivables. The rate of prepayments on the
Receivables may be influenced by a variety of economic, social, and other
factors. See "-- Maturity and Prepayment Considerations for the
Receivables."
Maturity and Prepayment Considerations for the Receivables
Prepayments in full on Actuarial Receivables and full or partial
prepayments on Simple Interest Receivables generally will have the effect
of reducing the weighted average life of the Notes, while delinquencies by
obligors under the Simple Interest Receivables, as well as extensions and
deferrals on the Receivables generally, will have the effect of increasing
the weighted average life of the Notes. The Receivables may be prepaid by
the obligors at any time and mandatory prepayments of a Receivable may
result from, among other things, the sale, insured loss or other
disposition of the Financed Vehicle or the Receivable becoming a Defaulted
Receivable. No assurance can be given as to the rate of prepayments or as
to whether there will be a substantial amount of prepayments, nor can any
assurance be given as to the level or timing of prepayments, since
prepayments are affected by numerous social, economic and other factors.
Noteholders will bear all reinvestment risk resulting from the rate of
prepayment of the Receivables. To the extent that MMCA or any affiliate of
MMCA maintains any program which has the effect of encouraging prepayments,
prepayments may increase. MMCA currently maintains a program that offers
attractive terms to obligors to prepay their accounts and return their
vehicles early, provided that they purchase a new Mitsubishi Motors
vehicle, which has the effect of encouraging prepayments. No prediction can
be made of the effect of such programs on prepayments, and MMCA is not
required to establish or maintain any such program.
The Receivables have different APRs, and the rates of prepayments of
Receivables with higher and lower APRs may differ. Higher rates of
prepayments of Receivables with higher APRs will decrease the amount
available to cover delinquencies and defaults on the Receivables and may
decrease the amount available to the Reserve Account and the Supplemental
Reserve Account. See "Description of the Terms of the Notes -Description of
the Indenture Cash Flows" and " -Description of the Reserve Account and
Supplemental Reserve Account." The Yield Supplement Agreement will mitigate
this effect in the case of Receivables having APRs less than the sum of the
Servicing Rate and the Weighted Average Rate.
Prepayments on receivables relating to Motor Vehicle Contracts and
Truck Contracts can be measured relative to a prepayment standard or model.
The model used in this Prospectus, the Absolute Prepayment Model ("ABS"),
represents an assumed rate of prepayment each month relative to the
original number of receivables in a pool of receivables. ABS further
assumes that all the receivables are the same size and amortize at the same
rate and that each receivable in each month of its life will either be paid
as scheduled or be prepaid in full. 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.
As the rate of payment of principal of the Notes will depend on the
rate of payment (including prepayments) of the principal balance of the
Receivables, final payment of the Notes of any class could occur
significantly earlier than the Final Payment Date for such class.
Reinvestment risk associated with early payment of the Notes will be borne
exclusively by the Noteholders.
% of the Pool Balance as of the Initial Cutoff Date
consists of the principal balance of the Balloon Payments on Initial
Receivables. Accordingly, a portion of the principal amount of the Notes is
expected to be paid from Balloon Payments. All of the Balloon Payments on
Initial Receivables that are Balloon Payment Receivables are due, as of the
Closing Date, between and . Accordingly, significant payments of principal
are likely to be made during such period. The average amount of a Balloon
Payment on an Initial Receivable that is a Balloon Payment Receivable is
approximately $ , which is approximately % of the average principal
balance of an Initial Receivable that is a Balloon Payment Receivable.
The tables captioned "Projected Class A-1 Note Amortization",
"Projected Class A-2 Note Amortization", "Projected Class A-3 Note
Amortization" and "Projected Class B Note Amortization" (collectively, the
"ABS Tables") assume that:
(1) the Yield Supplement Amount is deposited into the Collection
Account each period;
(2) the Negative Carry Amount is deposited into the Collection
Account each period;
(3) the Initial Pre-Funded Amount is applied in its entirety to the
purchase of Subsequent Receivables and the related deposits to
the Reserve Account and the Yield
Supplement Account;
(4) the Receivables prepay in full at the specified constant
percentage of ABS monthly, with no defaults, losses or
repurchases;
(5) each scheduled monthly payment on the Receivables is made on
the last day of each month, and each month has 30 days;
(6) payments on the Notes are made on each Payment Date (and each
such date is assumed to be the 15th day of each applicable
month);
(7) the Closing Date is , 1998;
(8) the Servicer does exercise its option to purchase the
Receivables; and
(9) MMCA's program to manage end-of-term risks and mitigate
returned vehicle losses by offering attractive terms to owners
of Motor Vehicles to prepay their accounts and return their
Motor Vehicles early, provided that they purchase a new Motor
Vehicle manufactured by Mitsubishi Motors, does not extend to
the Receivables.
The ABS Tables indicate the percent of the initial principal balance
of each class of the Notes that is projected to be outstanding after each
of the Payment Dates shown at various constant ABS percentages.
The ABS Tables also assume that the Receivables have been aggregated
into four hypothetical level payment pools with all of the Receivables
within each such pool having the following characteristics and that the
level scheduled monthly payment for each of the four pools (which is based
on its aggregate principal balance, APR, original term to maturity and
remaining term to maturity as of the Initial Cutoff Date) will be such that
each pool will be fully amortized by the end of its remaining term to
maturity.
Weighted Weighted
Average Average
Level Aggregate Weighted Original Term Remaining Term
Payment Principal Average to Maturity to Maturity
Pool Balance APR (in months) (in months)
1 ........................ $ %
2 ........................
3 ........................
4 ........................
The ABS Tables also assume that the principal amounts of the Balloon
Payments on the Receivables have been aggregated into four hypothetical
last scheduled payment pools with all of the Balloon Payment Receivables
within each pool having the following characteristics and that the
principal amount is due at the maturity of the pool.
Weighted
Weighted Average
Last Average Remaining Term
Scheduled Aggregate Weighted Original Term to
Payment Principal Average to Maturity Maturity
Pool Balance APR (in months) (in months)
1 ........................ $ %
2 ........................
3 ........................
4 ........................
The actual characteristics and performance of the Receivables in the
Trust 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. For example, 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 four hypothetical level payment pools and
the four hypothetical last scheduled payment pools could produce slower or
faster principal distributions than indicated in the ABS Tables at the
various constant percentages of ABS specified, even if the original and
remaining terms to maturity of the Receivables are as assumed. In addition,
the characteristics of the Subsequent Receivables are expected to be
different from the characteristics of the Initial Receivables. See
"Description of the Receivables-Selection Criteria for the Receivables."
Any difference between such 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 on Receivables.
The ABS Tables have been prepared based on the assumptions described
above and should be read in conjunction therewith.
Projected Class A-1 Note Amortization
Percent of Initial Note Principal Amount
Class A-1 Note Balance (%)
------------------------------------------
Payment Date 0.0% ABS 1.0% ABS 1.5% ABS 2.0% ABS
- ------------ -------- -------- -------- --------
January 15, 1999.................
February 15, 1999................
March 15, 1999...................
April 15, 1999...................
May 15, 1999.....................
June 15, 1999....................
July 15, 1999....................
August 15, 1999..................
September 15, 1999...............
October 15, 1999.................
November 15, 1999................
December 15, 1999................
January 15, 2000.................
-------- -------- -------- --------
Weighted Average Life (yrs)......
Projected Class A-2 Note Amortization
Percent of Initial Note Principal Amount
Class A-2 Note Balance (%)
-----------------------------------------
Payment Date 0.0% ABS 1.0%ABS 1.5% ABS 2.0% ABS
- ------------ -------- ------- -------- --------
January 15, 1999....................
February 15, 1999...................
March 15, 1999......................
April 15, 1999......................
May 15, 1999........................
June 15, 1999.......................
July 15, 1999.......................
August 15, 1999.....................
September 15, 1999..................
October 15, 1999....................
November 15, 1999...................
December 15, 1999...................
January 15, 2000....................
February 15, 2000...................
March 15, 2000......................
April 15, 2000......................
May 15, 2000........................
June 15, 2000.......................
July 15, 2000.......................
August 15, 2000.....................
September 15, 2000..................
-------- ------- -------- --------
Weighted Average Life (yrs).........
Projected Class A-3 Note Amortization
Percent of Initial Note Principal Amount
Class A-3 Note Balance (%)
-----------------------------------------
Payment Date 0.0% ABS 1.0% ABS 1.5% ABS 2.0% ABS
- ------------ -------- -------- -------- --------
January 15, 1999...................
February 15, 1999..................
March 15, 1999.....................
April 15, 1999.....................
May 15, 1999.......................
June 15, 1999......................
July 15, 1999......................
August 15, 1999....................
September 15, 1999.................
October 15, 1999...................
November 15, 1999..................
December 15, 1999..................
January 15, 2000...................
February 15, 2000..................
March 15, 2000.....................
April 15, 2000.....................
May 15, 2000.......................
June 15, 2000......................
July 15, 2000......................
August 15, 2000....................
September 15, 2000.................
October 15, 2000...................
November 15, 2000..................
December 15, 2000..................
January 15, 2001...................
February 15, 2001..................
March 15, 2001.....................
April 15, 2001.....................
May 15, 2001.......................
June 15, 2001......................
July 15, 2001......................
August 15, 2001....................
September 15, 2001.................
October 15, 2001...................
November 15, 2001..................
December 15, 2001..................
January 15, 2002...................
February 15, 2002..................
-------- -------- -------- --------
Weighted Average Life (yrs)........
Projected Class B Note Amortization
Percent of Initial Note Principal Amount
Class B Note Balance (%)
-----------------------------------------
Payment Date 0.0% ABS 1.0% ABS 1.5% ABS 2.0% ABS
- ------------ -------- -------- -------- --------
January 15, 1999..................
February 15, 1999.................
March 15, 1999....................
April 15, 1999....................
May 15, 1999......................
June 15, 1999.....................
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Weighted Average Life (yrs)..........
POOL FACTORS AND OTHER INFORMATION
The "Note Pool Factor" for each class of Notes will be a seven-digit
decimal which the Servicer will compute each month indicating the remaining
outstanding principal amount of the Notes of each class as of the close of
business on the Payment Date in that month, as a fraction of the initial
outstanding principal amount of the Notes of such class. The Note Pool
Factor for each class of Notes will be 1.0000000 as of the Closing Date,
and thereafter will decline to reflect reductions in the outstanding
principal amount of the Notes. A Noteholder's portion of the aggregate
outstanding principal amount of the Notes of a class will be the product of
(a) the original denomination of the Noteholder's Note and (b) the Note
Pool Factor for such Class.
Pursuant to the Sale and Servicing Agreement, the Noteholders will
receive monthly reports concerning the payments received on the
Receivables, the Pool Balance, the Note Pool Factor and various other items
of information. Noteholders of record during any calendar year will be
furnished information for tax reporting purposes not later than the latest
date permitted by law. See "Description of the Terms of the
Notes-Description of the Statements to Noteholders."
USE OF PROCEEDS
The net proceeds to be received by the Seller from the sale of the
Notes will be applied to the purchase of the Initial Receivables from MMCA
and to make the deposits required to be made by the Seller on the Closing
Date to the Pre-Funding Account, the Negative Carry Account, the Yield
Supplement Account and the Reserve Account.
DESCRIPTION OF THE SELLER
MMCA Auto Receivables, Inc. (the "Seller"), a wholly-owned subsidiary
of MMCA, was incorporated in the State of Delaware on July 8, 1993. The
Seller was organized for limited purposes, which include purchasing
receivables from MMCA and transferring such receivables to third parties
and any activities incidental to and necessary or convenient for the
accomplishment of such purposes. The principal executive offices of the
Seller are located at 6363 Katella Avenue, Cypress, California 90630-5205.
The telephone number of such offices is (714) 236-1592. The Seller is
subject to the informational requirements of the Exchange Act and the
Commission's rules and regulations thereunder. For further information
regarding the periodic reports concerning the Trust and the Receivables
that will be filed with the Commission, reference is made to the
information that is available as described under "Where You Can Find More
Information."
The Seller has taken steps in structuring the transactions
contemplated hereby that are intended to ensure that the voluntary or
involuntary application for relief by MMCA under the United States
Bankruptcy Code or similar state laws ("Insolvency Laws") will not result
in consolidation of the assets and liabilities of the Seller with those of
MMCA. These steps include the maintenance of the Seller as a separate,
limited-purpose subsidiary pursuant to a certificate of incorporation
containing certain limitations (including restrictions on the nature of the
Seller's business and a restriction on the Seller's ability to commence a
voluntary case or proceeding under any Insolvency Law without the unanimous
affirmative vote of all of its directors). However, there can be no
assurance that the activities of the Seller would not result in a court
concluding that the assets and liabilities of the Seller should be
consolidated with those of MMCA in a proceeding under any Insolvency Law.
The Seller has received the advice of counsel to the effect that,
subject to certain facts, assumptions and qualifications, it would not be a
proper exercise by a court of its equitable discretion to disregard the
separate corporate existence of the Seller and to require the consolidation
of the assets and liabilities of the Seller with the assets and liabilities
of MMCA in the event of the application of the Federal bankruptcy laws to
MMCA. Among other things, it is assumed by counsel that the Seller will
follow certain procedures in the conduct of its affairs, including
maintaining records and books of account separate from those of 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. The Seller intends to follow and has represented to such
counsel that it will follow these and other procedures related to
maintaining its separate corporate identity. However, in the event that the
Seller did not follow these procedures, there can be no assurance that a
court would not conclude that the assets and liabilities of the Seller
should be consolidated with those of MMCA. If a court were to reach such a
conclusion, or a filing were made under any Insolvency Law by or against
the Seller, or if an attempt were made to litigate any of the foregoing
issues, delays in payments on the Notes could occur or reductions in the
amounts of such payments could result.
DESCRIPTION OF THE SERVICER
Mitsubishi Motors Credit of America, Inc. ("MMCA" or the "Servicer")
is a Delaware corporation which primarily provides retail and wholesale
financing, retail leasing and certain other financial services to
authorized Mitsubishi automobile and truck dealers and their customers in
the United States. MMCA was incorporated in the State of Delaware in August
1990 and commenced operations in March 1991.
MMCA is a wholly-owned subsidiary of Mitsubishi Motor Sales of
America, Inc. ("MMSA"), a California corporation which is engaged in the
wholesale distribution of automobiles and light-duty trucks throughout the
United States manufactured by Mitsubishi Motors Corporation and its
affiliates (collectively, "Mitsubishi Motors"). MMSA is a subsidiary of
Mitsubishi Motors Corporation, a Japanese corporation that is a worldwide
manufacturer and distributor of motor vehicles and trucks. Mitsubishi
Motors Corporation owns 97.2% of the stock of MMSA. Mitsubishi Corporation,
a Japanese corporation that is a worldwide general trading company, owns
2.0% 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 0.8% of the stock of MMSA.
The national headquarters of MMCA is located at 6363 Katella Avenue,
Cypress, CA 90630-5205. Its telephone number is (714) 236-1500. MMCA has
five regional offices throughout the United States.
DESCRIPTION OF THE TERMS OF THE NOTES
Principal Amount of and Interest Rates on the Notes
The Trust will issue $[ ] aggregate principal amount of Asset Backed
Notes (collectively, the "Notes") pursuant to an indenture to be dated as
of , 1998 (as amended and supplemented from time to time, the "Indenture"),
between the Trust and Bank of Tokyo-Mitsubishi Trust Company in its
capacity as indenture trustee (the "Indenture Trustee").
The Notes will be issued in four classes consisting of:
o the % Class A-1 Notes in the aggregate principal amount of
$ (the "Class A-1 Notes");
o the % Class A-2 Notes in the aggregate principal amount of
$ (the "Class A-2 Notes");
o the % Class A-3 Notes in the aggregate principal amount of
$ (the "Class A-3 Notes" and, together with the
Class A-1 Notes and the Class A-2 Notes, the "Class A Notes"); and
o the % Class B Notes in the aggregate principal amount of
$ (the "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 does not purport to be complete and is subject to, and qualified in
its entirety by reference to, the Notes, the Indenture, the Trust Agreement
and the Sale and Servicing Agreement.
Registration of the Notes in the Name of Cede as Nominee of DTC
The Notes of each class will be offered for purchase in minimum
denominations of $1,000 and integral multiples thereof and will be
represented initially by one or more physical notes registered in the name
of Cede & Co. ("Cede") as nominee of The Depository Trust Company ("DTC").
No person acquiring a beneficial ownership interest in the Notes (a "Note
Owner") will be entitled to receive a definitive note representing such
person's beneficial ownership interest in the applicable class of Notes
except in the event that Definitive Notes are issued under the limited
circumstances described herein. Unless and until Definitive Notes are
issued, all references to actions by Noteholders shall refer to actions
taken by DTC upon instructions from its Direct Participants and all
references to payments, notices, reports and statements to Noteholders
shall refer to payments, notices, reports and statements to DTC or Cede, as
the registered holder of the Notes, for payment or distribution to Note
Owners in accordance with DTC's procedures with respect thereto. See
"--Book Entry Registration of the Notes" and "--Issuance of Definitive
Notes Upon the Occurrence of Certain Circumstances."
Book Entry Registration of the Notes
Beneficial owners of Notes may hold their Notes through DTC (in the
United States) or Cedel Bank, societe anonyme ("Cedel") or Euroclear (in
Europe) if they are participants of such systems, or indirectly through
organizations that are participants in such systems.
DTC is a limited purpose trust company organized under the laws of
the State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and
a "clearing agency" registered pursuant to Section 17A of the Exchange Act.
DTC was created to hold securities for its participating organizations
("Direct Participants") and to facilitate the clearance and settlement of
securities transactions between Direct Participants through electronic
book-entries, thereby eliminating the need for physical movement of
certificates. Direct Participants include securities brokers and dealers,
banks, trust companies and clearing corporations, and may include certain
other organizations. Indirect access to the DTC system is also available to
others such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a Direct Participant,
either directly or indirectly ("Indirect Participants" and, together with
Direct Participants, "DTC Participants").
To facilitate subsequent transfers, all Notes deposited with DTC will
be registered in the name of DTC's nominee, Cede. The deposit of Notes with
DTC and their registration in the name of Cede will effect no change in
beneficial ownership. DTC has no knowledge of the actual Note Owners of the
Notes; DTC's records reflect only the identity of the Direct Participants
to whose accounts such Notes are credited, which may or may not be the Note
Owners. The DTC Participants will remain responsible for keeping account of
their holdings on behalf of their customers.
No Noteholder will be entitled to receive a certificate representing
such person's interest in a class of Notes. Unless and until Definitive
Notes are issued under the limited circumstances described below, all
references herein to actions by Noteholders shall refer to actions taken by
DTC upon instructions from DTC Participants, and all references herein to
distributions, notices, reports and statements to Noteholders shall refer
to distributions, notices, reports and statements to Cede, as the
registered holder of the Notes, for distribution to Noteholders in
accordance with DTC procedures.
Note Owners will receive all payments of principal and interest on
the Notes through Direct Participants or Indirect Participants. DTC will
forward such payments to its Direct Participants which thereafter will
forward them to Indirect Participants or Note Owners. Under a book-entry
format, Note Owners may experience some delay in their receipt of payments,
since such payments will be forwarded to Cede as nominee of DTC. Note
Owners will not be recognized by the Indenture Trustee as Noteholders, as
such term is used in the Indenture. Note Owners will be permitted to
exercise the rights of Noteholders only indirectly through DTC and its
Direct Participants and Indirect Participants. Because DTC can act only on
behalf of Direct Participants, who in turn act on behalf of Indirect
Participants, and on behalf of certain banks, trust companies and other
persons approved by it, the ability of a Note Owner to pledge the Notes to
persons or entities that do not participate in the DTC system, or to
otherwise act with respect to such Notes, may be limited due to the absence
of physical notes for such Notes.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants and by Direct
Participants and Indirect Participants to Note Owners will be governed by
arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payments by DTC
Participants to Note Owners will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts
of customers in bearer form or registered in "street name" and will be the
responsibility of such DTC Participant and not of DTC, the Indenture
Trustee, the Owner Trustee, the Seller or the Servicer, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of principal and interest to DTC is the responsibility of the
Indenture Trustee, disbursement of such payments to Direct Participants
shall be the responsibility of DTC and disbursement of such payments to
Note Owners shall be the responsibility of Direct Participants and Indirect
Participants.
Purchases of Notes under the DTC system must be made by or through
Direct Participants, which will receive a credit for the Notes on DTC's
records. The ownership interest of each actual Note Owner is in turn to be
recorded on the Direct Participants' and Indirect Participants' records.
Note Owners will not receive written confirmation from DTC of their
purchase, but Note Owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of
their holdings, from the Direct Participant or Indirect Participant through
which the Note Owner entered into the transaction. Transfers of ownership
interests in the Notes are to be accomplished by entries made on the books
of DTC Participants acting on behalf of Note Owners. Note Owners will not
receive physical notes representing their ownership interest in Notes,
except in the event that use of the book-entry system for the Notes is
discontinued.
Neither DTC nor Cedel will comment or vote with respect to the Notes.
DTC has advised the Seller that it will take any action permitted to be
taken by a Noteholder under the Indenture only at the direction of one or
more Direct Participants to whose accounts with DTC the Notes are credited.
Additionally, DTC has advised the Seller that to the extent that the
Indenture requires that any action may be taken only by holders of Notes
representing a specified percentage of the aggregate outstanding principal
amount thereof, DTC will take such action only at the direction of and on
behalf of Direct Participants whose holdings include undivided interests
that satisfy such specified percentage. Under its usual procedures, DTC
will mail an "Omnibus Proxy" to the Indenture Trustee as soon as possible
after any applicable record date with respect to a consent or vote. The
Omnibus Proxy will assign Cede's consenting or voting rights to those
Direct Participants to whose accounts the Notes will be credited on that
record date (identified on a listing attached to the Omnibus Proxy).
DTC may discontinue providing its services as securities depository
with respect to the Notes at any time by giving reasonable notice to the
Indenture Trustee. Under such circumstances, in the event that a successor
securities depository is not obtained, Definitive Notes are required to be
printed and delivered. The Seller may decide to discontinue use of the
system of book-entry transfers through DTC (or a successor securities
depository). In that event, Definitive Notes will be delivered to
Noteholders. See "--Issuance of Definitive Notes Upon the Occurrence of
Certain Circumstances."
Cedel and Euroclear will hold omnibus positions on behalf of the
Cedel Participants and the Euroclear Participants, respectively, through
customers' securities accounts in Cedel's and Euroclear's names on the
books of their respective depositaries (each, a "Depositary" and
collectively, the "Depositaries") which in turn will hold such positions in
customers' securities accounts in the Depositaries' names on the books of
DTC.
Transfers between Direct Participants will occur in accordance with
DTC rules. Transfers between Cedel Participants and Euroclear Participants
will occur in the ordinary way in accordance with their applicable rules
and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC in the United States, on the one hand, and directly or
indirectly through Cedel or Euroclear, on the other, will be effected in
DTC in accordance with DTC rules through the relevant European
international clearing system through its Depositary; however, such
cross-market transactions will require delivery of instructions to the
relevant European international clearing system by the counterparty in such
system in accordance with its rules and procedures and within its
established deadlines (European time). The relevant European international
clearing system will, if the transaction meets its settlement requirements,
deliver instructions to its Depositary to take action to effect final
settlement on its behalf by delivering or receiving securities in DTC, and
making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. Cedel Participants and
Euroclear Participants may not deliver instructions directly to the
Depositaries.
Because of time-zone differences, credits of securities in Cedel or
Euroclear as a result of a transaction with a DTC Participant will be made
during the subsequent securities settlement processing day, dated the
business day following the DTC settlement date, and such credits or any
transactions in such securities settled during such processing day will be
reported to the relevant Cedel Participant or Euroclear Participant on such
business day. Cash received in Cedel or Euroclear as a result of sales of
securities by or through a Cedel Participant or a Euroclear Participant to
a DTC Participant will be received with value on the DTC settlement date
but will be available in the relevant Cedel or Euroclear cash account only
as of the business day following settlement in DTC.
The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that the Seller believes to be
reliable, but the Seller takes no responsibility for the accuracy thereof.
Cedel is incorporated under the laws of Luxembourg as a professional
depository. Cedel holds securities for its participating organizations
("Cedel Participants") and facilitates the clearance and settlement of
securities transactions between Cedel Participants through electronic
book-entry changes in accounts of Cedel Participants, thereby eliminating
the need for physical movement of certificates. Transactions may be settled
in Cedel in any of 36 currencies, including United States dollars. Cedel
provides to its Cedel Participants, among other things, services for
safekeeping, administration, clearance and settlement of internationally
traded securities and securities lending and borrowing. Cedel interfaces
with domestic markets in several countries. As a professional depository,
Cedel is subject to regulation by the Luxembourg Monetary Institute. Cedel
Participants are recognized financial institutions around the world,
including underwriters, securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations and may
include the underwriters of the Notes. Indirect access to Cedel is also
available to others, such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Cedel
Participant, either directly or indirectly.
The Euroclear System was created in 1968 to hold securities for
participants of the Euroclear System ("Euroclear Participants") and to
clear and settle transactions between Euroclear Participants through
simultaneous electronic book-entry delivery against payment, thereby
eliminating the need for physical movement of certificates and any risk
from lack of simultaneous transfers of securities and cash. Transactions
may now be settled in any of 34 currencies, including United States
dollars. The Euroclear System includes various other services, including
securities lending and borrowing and interfaces with domestic markets in
several countries generally similar to the arrangements for cross-market
transfers with DTC described above. The Euroclear System is operated by
Morgan Guaranty Trust Company of New York, Brussels, Belgium office (the
"Euroclear Operator" or "Euroclear"), under contract with Euroclear
Clearance System, S.C., a Belgian cooperative corporation (the
"Cooperative"). All operations are conducted by the Euroclear Operator, and
all Euroclear securities clearance accounts and Euroclear cash accounts are
accounts with the Euroclear Operator, not the Cooperative. The Cooperative
establishes policy for the Euroclear System on behalf of Euroclear
Participants. Euroclear Participants include banks (including central
banks), securities brokers and dealers and other professional financial
intermediaries and may include the underwriters of the Notes. Indirect
access to the Euroclear System is also available to other firms that clear
through or maintain a custodial relationship with a Euroclear Participant,
either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such,
it is regulated and examined by the Board of Governors of the Federal
Reserve System and the New York State Banking Department, as well as the
Belgian Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of
Euroclear and the related Operating Procedures of the Euroclear System and
applicable Belgian law (collectively, the "Terms and Conditions"). The
Terms and Conditions govern transfers of securities and cash within the
Euroclear System, withdrawal of securities and cash from the Euroclear
System, and receipts of payments with respect to securities in the
Euroclear System. All securities in the Euroclear System are held on a
fungible basis without attribution of specific securities to specific
securities clearance accounts. The Euroclear Operator acts under the Terms
and Conditions only on behalf of Euroclear Participants and has no record
of or relationship with persons holding through Euroclear Participants.
Payments on Notes held through Cedel or Euroclear will be credited to
the cash accounts of Cedel Participants or Euroclear Participants in
accordance with the relevant system's rules and procedures, to the extent
received by its Depositary. Such payments will be subject to tax reporting
in accordance with relevant United States tax laws and regulations. See
"Certain Federal Income Tax Consequences" and Annex A. Cedel or the
Euroclear Operator, as the case may be, will take any other action
permitted to be taken by a Noteholder under the related agreement on behalf
of a Cedel Participant or Euroclear Participant only in accordance with its
relevant rules and procedures and subject to its Depositary's ability to
effect such actions on its behalf through DTC.
Although DTC, Cedel and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Notes among participants of
DTC, Cedel and Euroclear, they are under no obligation to perform or
continue to perform such procedures and such procedures may be discontinued
at any time.
Issuance of Definitive Notes Upon Occurrence of Certain Circumstances
The Notes of each class will be issued in fully registered,
certificated form ("Definitive Notes") to Noteholders or their nominees,
rather than to DTC or its nominee or a successor clearing agency, only if:
(1) the Trust, the Administrator or the Servicer advises the
Indenture Trustee in writing that DTC (or such
successor clearing agency) is no longer willing or able to
discharge properly its responsibilities as depository with
respect to the Notes and the Indenture Trustee or the
Administrator is unable to locate a qualified successor;
(2) the Administrator, at its option, elects to terminate the
book-entry system through DTC (or such successor clearing
agency); or
(3) after the occurrence of an Event of Default or an Event of
Servicing Termination, Note Owners representing in the
aggregate not less than 51% of the aggregate outstanding
principal amount of the Notes advise the Indenture Trustee and
DTC (or such successor clearing agency) in writing that the
continuation of a book-entry system through DTC (or such
successor clearing agency) is no longer in the best interest of
Note Owners.
Upon the occurrence of any event described in the immediately
preceding paragraph, DTC is required to notify all Direct Participants and
the Indenture Trustee of the availability through DTC of Definitive Notes.
Upon surrender by DTC of the definitive notes representing the Notes and
receipt by the Indenture Trustee of instructions for re-registration, the
Indenture Trustee will reissue the Notes as Definitive Notes, and
thereafter the Indenture Trustee will recognize the holders of such
Definitive Notes as Noteholders.
Payments of principal of, and interest on, the Definitive Notes will
be made by the Indenture Trustee directly to Noteholders in accordance with
the procedures set forth herein and in the Indenture. Payments of principal
and interest on each Payment Date will be made to Noteholders in whose
names the Definitive Notes were registered at the close of business on the
preceding Record Date. Such payments will be made by check mailed to the
address of such Noteholder as it appears on the register maintained by the
Indenture Trustee. The final payment on any Definitive Note, however, will
be made only upon presentation and surrender of such Definitive Note at the
office or agency specified in the notice of final payment mailed to
Noteholders.
Definitive Notes 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.
Interest Payable on the Notes
The Notes will bear interest at the following rates per annum:
o the Class A-1 Notes: % per annum (the "Class A-1 Rate");
o the Class A-2 Notes: % per annum (the "Class A-2 Rate");
o the Class A-3 Notes: % per annum (the "Class A-3 Rate"); and
o the Class B Notes: % per annum (the "Class B Rate").
The interest rates for the various classes of Notes are referred to
herein collectively as the "Note Interest Rates."
Interest on the outstanding principal amount of each class of the
Notes will accrue at the applicable Note Interest Rate and will be payable
to the applicable Noteholders monthly on the 15th of each month or, if the
15th day of the month is not a Business Day, the next following Business
Day (each, a "Payment Date"), commencing January 15, 1999. Payments will be
made to holders of record of the Notes (the "Noteholders") as of the
Business Day immediately preceding each Payment Date or, if Definitive
Notes are issued, as of the 15th day of the preceding month unless such day
is not a Business Day, in which case the immediately preceding Business Day
(a "Record Date"). A "Business Day" is a day other than a Saturday, a
Sunday or a day on which banking institutions or trust companies in New
York, New York, Los Angeles, California or Wilmington, Delaware are
authorized or obligated by law, regulation or executive order to be closed.
Interest will accrue: (1) with respect to the Class A-1 Notes, from
and including the Closing Date (in the case of the first Payment Date) or
from and including the previous Payment Date, to but excluding the
following Payment Date and (2) with respect to the Class A-2 Notes, the
Class A-3 Notes and the Class B Notes, from and including the Closing Date
(in the case of the first Payment Date) or from and including the 15th day
of the calendar month preceding each Payment Date to but excluding the 15th
day of the following calendar month (each such period, an "Interest
Period").
Interest will be calculated in the case of the Class A-1 Notes on the
basis of the actual number of days elapsed and a 360-day year, and in the
case of the Class A-2 Notes, the Class A-3 Notes and the Class B Notes on
the basis of a 360-day year of twelve 30-day months. Interest payable on a
Payment Date will be calculated on the basis of the outstanding principal
amount of the Notes of each class as of the preceding Payment Date, after
giving effect to any payments of principal of the Notes on such preceding
Payment Date (or, in the case of the first Payment Date, on the basis of
the initial outstanding principal amount of the Notes of such class).
Interest accrued as of any Payment Date but not paid on such Payment
Date will be due on the next Payment Date, together with interest on such
amount at the applicable Note Interest Rate (to the extent permitted by
law). Interest payments on the Notes will generally be derived from the
Available Funds remaining after the payment of the Total Servicing Fee for
the related Collection Period and, to the extent the Available Funds
remaining are insufficient, from amounts on deposit in the Supplemental
Reserve Account and, to the extent such amounts are insufficient, from
amounts on deposit in the Reserve Account. See "--Description of the
Indenture Cash Flows" and "--Description of the Reserve Account and
Supplemental Reserve Account."
Interest payments to all classes of Class A Notes will have the same
priority of payment, and interest payments to the Class B Notes will be
subordinated to interest payments on the Class A Notes. Under certain
circumstances, the amount available for interest payments could be less
than the amount of interest payable on the Notes on any Payment Date, in
which case Class A Noteholders will be paid interest in full prior to
payments of interest on the Class B Notes and, if the amount available for
interest payments is less than the amount of interest payable on the Class
A Notes, each class of Class A Noteholders will receive their ratable share
(based upon the aggregate amount of interest due to such class of
Noteholders) of the aggregate amount available to be distributed in respect
of interest on the Notes. An Event of Default will occur if the full amount
of interest due to all classes of Noteholders is not paid within five days.
No distributions will be made on the Certificates on any Payment Date until
the interest and principal payable on the Notes on such Payment Date are
paid in full.
Principal Payable on the Notes
Principal payments will be made to the Noteholders on each Payment
Date in an amount equal in the aggregate to the Principal Distribution
Amount in respect of such Payment Date, subject to certain limitations.
Certificateholders will not be entitled to receive payments of principal
until all classes of Notes have been paid in full. Following the occurrence
and during the continuation of an Event of Default resulting in an
acceleration of the Notes, the Noteholders will be paid in full before any
distributions may be made on the Certificates. See "--Description of the
Indenture Cash Flows" and "--Description of the Reserve Account and
Supplemental Reserve Account."
On each Payment Date, an amount equal to the Principal Distribution
Amount will be paid to the holders of the Class A-1 Notes (the "Class A-1
Noteholders") until the Class A-1 Notes have been paid in full.
On each Payment Date on and after the Payment Date on which the Class
A-1 Notes have been paid in full:
(1) an amount equal to the Class A Noteholders' Percentage of the
difference between (x) the Principal Distribution Amount and
(y) any portion of the Principal Distribution Amount applied on
such Payment Date to reduce the outstanding principal amount of
the Class A-1 Notes to zero will be paid (A) to the holders of
the Class A-2 Notes (the "Class A-2 Noteholders") until the
Class A-2 Notes have been paid in full and (B) following payment
in full of the Class A-2 Notes, to the holders of the Class A-3
Notes (the "Class A-3 Noteholders" and, together with the Class
A-1 Noteholders and the Class A-2 Noteholders, the "Class A
Noteholders") until the Class A-3 Notes have been paid in full;
and
(2) following payment of the Class A Noteholders' Percentage of the
Principal Distribution Amount on such Payment Date, an amount
equal to the Class B Noteholders' Percentage of the difference
between (x) the Principal Distribution Amount and (y) any
portion of the Principal Distribution Amount applied on such
Payment Date to reduce the outstanding principal amount of the
Class A-1 Notes to zero will be paid to the holders of the
Class B Notes (the "Class B Noteholders") until the Class B
Notes have been paid in full.
If the maturity dates of the Notes are accelerated following the
occurrence of an Event of Default under the Indenture, the order of
priority for principal payments on the Notes will change. On each Payment
Date occurring on or after the date on which the maturity dates of the
Notes have been accelerated following the occurrence of an Event of
Default, an amount equal to the Principal Distribution Amount will be paid:
(1) to the Class A-1 Noteholders, the Class A-2 Noteholders and the
Class A-3 Noteholders pro rata in proportion to the respective
principal balances of the Class A-1 Notes, the Class A-2 Notes
and the Class A-3 Notes until all of such classes have been
paid in full; and
(2) following payment in full of the Class A Notes, to the Class B
Noteholders until the Class B Notes
have been paid in full.
As used herein, "Class A Noteholders' Percentage" means %, the
percentage equivalent of a fraction, the numerator of which is an amount
equal to the sum of the initial principal balances of the Class A-2 Notes
and the Class A-3 Notes, and the denominator of which is an amount equal to
the sum of the initial principal balances of the Class A-2 Notes, the Class
A-3 Notes and the Class B Notes.
As used herein, "Class B Noteholders' Percentage" means %, the
percentage equivalent of a fraction, the numerator of which is the initial
principal balance of the Class B Notes, and the denominator of which is an
amount equal to the sum of the initial principal balances of the Class A-2
Notes, the Class A-3 Notes and the Class B Notes.
The outstanding principal balance, if any, of each class of Notes
will be payable in full on the date specified below for such class of Notes
to the extent not previously paid:
o for the Class A-1 Notes, [ ] (the "Class
A-1 Final Payment Date");
o for the Class A-2 Notes, [ ] (the "Class
A-2 Final Payment Date");
o for the Class A-3 Notes, [ ] (the "Class
A-3 Final Payment Date"); and
o for the Class B Notes, [ ] (the "Class B
Final Payment Date" and, together with the foregoing, each a
"Final Payment Date").
The actual date on which the aggregate outstanding principal amount
of any class of Notes is paid may be earlier or later than the respective
Final Payment Dates based on 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 "Description of the Receivables -- Maturity
and Prepayment Considerations."
Mandatory Redemption of the Notes
On the Payment Date on or immediately following the last day of the
Pre-Funding Period, any funds remaining in the Pre-Funding Account (after
giving effect to the purchase of all Subsequent Receivables, including any
such purchase on such date) exclusive of any net earnings from the
investment of funds on deposit in the Pre-Funding Account will be applied
to redeem the Notes then outstanding in the same sequence and proportions
that would apply if such remaining funds were a part of the Principal
Distribution Amount.
Optional Redemption of the Notes
The Notes (and the Certificates) will be redeemed in whole, but not
in part, 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 with respect to which the Pool Balance as of the end of the
related Collection Period 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 thereon, together with the unpaid
principal amount of the Certificates. The Seller does not anticipate,
although no assurances can be given, that the Pool Balance will decline to
a level permitting the Servicer to purchase the Receivables while the Notes
are outstanding.
Description of 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. The Seller, 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.
Description of the Trust's Bank Accounts
The Servicer will establish an account in the name of the Indenture
Trustee on behalf of the Noteholders and the Certificateholders (the
"Collection Account") into which payments made on or with respect to the
Receivables and Advances made by the Servicer will be deposited and into
which amounts on deposit in the Reserve Account, the Supplemental Reserve
Account, the Negative Carry Account and the Yield Supplement Account may be
transferred from time to time, other than certain amounts payable to the
Servicer under the Sale and Servicing Agreement that are not required to be
so deposited or transferred.
The Servicer will also establish and maintain:
(1) an account in the name of the Indenture Trustee on behalf of
the Noteholders and the Certificateholders in which the Initial
Pre-Funded Amount will be deposited on the Closing Date (the
"Pre-Funding Account");
(2) an account, in the name of the Indenture Trustee on behalf of
the Noteholders, in which amounts released from the Collection
Account for distribution to Noteholders will be deposited and
from which all payments to Noteholders will be made (the "Note
Payment Account");
(3) an account, in the name of the Owner Trustee, on behalf of the
holders of record of the Certificates (the "Certificateholders"),
in which amounts released from the Collection Account for
distribution to Certificateholders will be deposited and from
which all distributions to Certificateholders will be made (the
"Certificate Distribution Account"); and
(4) an account, in the name of the Indenture Trustee on behalf of
the Noteholders and the Certificateholders, in which early
payments with respect to Actuarial Receivables by or on behalf
of the obligors which constitute neither current scheduled
payments nor full prepayments ("Payaheads") will be deposited
until such time as the payment falls due or until such funds
are applied to shortfalls in the scheduled payments with
respect to Actuarial Receivables (the "Payahead Account" and,
together with the Pre-Funding Account, the Collection Account
and the Note Payment Account, the "Trust Accounts").
The Payahead Account will be funded on the Closing Date with an
initial deposit by the Seller of $[ ]. On each Subsequent Transfer Date,
the Indenture Trustee will make an additional deposit to the Payahead
Account of an amount equal to the aggregate amount of the Payaheads as of
the related Subsequent Cutoff Date of the Subsequent Receivables sold to
the Trust on such Subsequent Transfer Date. The Indenture Trustee will make
the additional deposit to the Payahead Account on each Subsequent Transfer
Date from funds on deposit in the Pre-Funding Account that otherwise would
be distributable to the Seller as payment for the Subsequent Receivables.
The Seller will also establish and maintain the Reserve Account, the
Supplemental Reserve Account and the Yield Supplement Account, each in the
name of the Indenture Trustee for the benefit of the Noteholders and the
Certificateholders and the Negative Carry Account in the name of the
Indenture Trustee for the exclusive benefit of the Noteholders. The Trust
Accounts, the Reserve Account, the Supplemental Reserve Account, the
Negative Carry Account and the Yield Supplement Account shall each be a
segregated trust account initially established with the Indenture Trustee
and maintained with the Indenture Trustee so long as permitted by each of
Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's, a
division of The McGraw-Hill Companies, Inc. ("Standard & Poor's" and,
together with Moody's, each a "Rating Agency"). In the event that a Rating
Agency no longer permits the Trust Accounts, the Reserve Account, the
Supplemental Reserve Account, the Negative Carry Account and the Yield
Supplement Account to be located at the Indenture Trustee, such accounts
shall be moved to either a Qualified Institution or a Qualified Trust
Institution.
A "Qualified Institution" is a depository institution organized under
the laws of the United States or any state thereof or incorporated under
the laws of a foreign jurisdiction with a branch or agency located in the
United States qualified to take deposits and subject to supervision and
examination by Federal or state banking authorities, having a short-term
deposit rating acceptable to each Rating Agency, and, if such institution
is organized under the laws of the United States, the deposits of which are
insured by the Federal Deposit Insurance Corporation or any successor
thereto.
A "Qualified Trust Institution" is the corporate trust department of
an institution organized under the laws of the United States or any state
thereof or incorporated under the laws of a foreign jurisdiction with a
branch or agency located in the United States qualified to take deposits
and subject to supervision and examination by Federal or state banking
authorities, with authority to act under such laws as trustee or in any
other fiduciary capacity, having not less than $1 billion in assets under
fiduciary management and a long-term deposit rating acceptable to each
Rating Agency.
Funds in the Collection Account, the Pre-Funding Account, the
Payahead Account, the Reserve Account, the Supplemental Reserve Account,
the Negative Carry Account and the Yield Supplement Account will be
invested in Permitted Investments as provided in the Sale and Servicing
Agreement. "Permitted Investments" generally will be limited to investments
acceptable to each Rating Agency as being consistent with the ratings of
the Notes. Permitted Investments will be limited to obligations or
securities that mature not later than the Business Day immediately
preceding the next Payment Date (or the payment due date, in the case of a
Payahead). Any earnings (net of losses and investment expenses) on amounts
on deposit in the Collection Account will be paid to the
Certificateholders. Any earnings (net of losses and investment expenses) on
amounts on deposit in the Payahead Account will be paid to the Servicer as
additional servicing compensation and will not be available to Noteholders,
and any earnings (net of losses and investment expenses) on, and any
amounts released from the Reserve Account, the Supplemental Reserve
Account, the Negative Carry Account and the Yield Supplement Account will
be distributed to the Seller. However, earnings on amounts on deposit in
the Reserve Account, the Supplemental Reserve Account and the Negative
Carry Account will be distributed to the Seller only to the extent that the
amounts on deposit in those accounts exceed the required balances of those
accounts.
Description of the Yield Supplement Agreement
Simultaneously with the sale and assignment of the Initial
Receivables by MMCA to the Seller, MMCA and the Seller will enter into a
yield supplement agreement (the "Yield Supplement Agreement"), pursuant to
which MMCA will be obligated to pay the Yield Supplement Amount, if any, to
the Trust on the Business Day prior to each Payment Date.
The "Yield Supplement Amount" with respect to any Payment Date will
be determined by aggregating with respect to all of the Receivables the
amount (if positive) calculated by the Servicer with respect to each
Receivable equal to the product of (x) one-twelfth times (y) an amount
equal to the difference (if positive) between (1) interest on such
Receivable's principal balance as of the first day of the related
Collection Period at a rate equal to the sum of (A) the Servicing Rate, (B)
the Weighted Average Rate as of the first day of the related Collection
Period and (C) % and (2) interest on such Receivable's principal balance as
of the first day of the related Collection Period at the APR on such
Receivable. The Seller will assign the Yield Supplement Agreement to the
Trust, and the Trust will pledge it to the Indenture Trustee for the
benefit of the Noteholders.
The "Weighted Average Rate" means, with respect to any date of
determination, a per annum rate equal to (1) the sum of (a) the product of
(x) the outstanding principal amount of the Class A-1 Notes on such date,
(y) the Class A-1 Rate and (z) a fraction, the numerator of which is 360
and the denominator of which is 365, plus (b) the product of (x) the
outstanding principal amount of the Class A-2 Notes on such date and (y)
the Class A-2 Rate, plus (c) the product of (x) the outstanding principal
amount of the Class A-3 Notes on such date and (y) the Class A-3 Rate, plus
(d) the product of (x) the outstanding principal amount of the Class B
Notes on such date and (y) the Class B Rate, divided by (2) the outstanding
principal amount of the Notes on such date.
Description of the Yield Supplement Account
Payments of the Yield Supplement Amount due under the Yield
Supplement Agreement will be secured by funds on deposit in a segregated
trust deposit account initially to be established with the Indenture
Trustee for the benefit of the Noteholders and the Certificateholders (the
"Yield Supplement Account"). The Yield Supplement Account will initially be
a segregated trust deposit account in the corporate trust department of the
Indenture Trustee. Notwithstanding the foregoing, in the event that MMCA
either obtains a letter of credit (a "Yield Supplement Letter of Credit")
securing timely remittance to the Indenture Trustee of amounts due from
MMCA under the Yield Supplement Agreement or otherwise satisfies certain
other conditions satisfactory to each Rating Agency, then subject to the
delivery of certain tax opinions the Yield Supplement Account may be
terminated. On the Closing Date, the Seller will make an initial deposit to
the Yield Supplement Account in the amount specified in the Sale and
Servicing Agreement. On each Subsequent Transfer Date, the Indenture
Trustee will make an additional deposit to the Yield Supplement Account
from funds on deposit in the Pre-Funding Account that otherwise would be
distributable to the Seller as payment for the Subsequent Receivables sold
to the Trust on such Subsequent Transfer Date unless the Yield Supplement
Account has been replaced by a Yield Supplement Letter of Credit on or
prior to such Subsequent Transfer Date.
On each Payment Date, the amount required to be on deposit in such
Yield Supplement Account or to be available under such Yield Supplement
Letter of Credit after giving effect to the withdrawal or drawing, as the
case may be, required to be made therefrom on such Payment Date 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 Receivables are made on their scheduled Due
Dates. The amount on deposit in the Yield Supplement Account will decrease
as payments are made from such account with respect to the Yield Supplement
Amounts and funds in excess of the maximum required balance are released to
the Seller.
The Yield Supplement Letter of Credit, if any, 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 Rating Agency.
In the event that the rating of the letter of credit bank that issues any
Yield Supplement Letter of Credit is reduced below any such rating, the
Indenture Trustee will be required to obtain a suitable replacement Yield
Supplement 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 Yield Supplement Letter of Credit and deposit such
funds in the Yield Supplement Account.
Description of the Indenture Cash Flows
Deposits to the Collection Account; Calculations Made by the
Servicer; Notice to the Indenture Trustee. On or before each Payment Date,
the Servicer will cause all payments on the Receivables (from whatever
source) and all proceeds of the Receivables (other than certain amounts
payable to the Servicer under the Sale and Servicing Agreement that are not
required to be deposited in the Collection Account) received by the
Servicer during the related Collection Period to be deposited into the
Collection Account. On or before the seventh Business Day, but no later
than the tenth calendar day (the "Determination Date"), of each month, the
Servicer will calculate the Available Funds, the Total Available Funds, the
Total Servicing Fee, the Accrued Note Interest, the Scheduled Principal,
the Principal Distribution Amount, the principal attributable to Balloon
Payments, the Negative Carry Amount, if any, and the Yield Supplement
Amount, if any, in each case with respect to such Payment Date. On or
before each Payment Date, the Servicer will deliver to the Indenture
Trustee a certificate setting forth the deposits to and withdrawals from,
the Collection Account, the Supplemental Reserve Account and the Reserve
Account to be made on such Payment Date.
Withdrawals from the Supplemental Reserve Account and the Reserve
Account to Reimburse Advances. On each Payment Date, the Indenture Trustee
will withdraw from the Supplemental Reserve Account and pay to the Servicer
an amount equal to the lesser of (x) the amount on deposit in the
Supplemental Reserve Account on such Payment Date (prior to giving effect
to any deposits thereto or withdrawals therefrom relating to such Payment
Date) and (y) the amount, if any, of Advances due to be reimbursed on such
Payment Date but not reimbursed from funds on deposit in the Collection
Account.
In the event, that the amount on deposit in the Supplemental Reserve
Account is insufficient to fully reimburse the Servicer for Advances due to
be reimbursed on such Payment Date, the Indenture Trustee will withdraw
from the Reserve Account and pay to the Servicer an amount equal to the
lesser of (x) the amount on deposit in the Reserve Account on such Payment
Date (prior to giving effect to any deposits thereto or withdrawals
therefrom relating to such Payment Date) and (y) the amount, if any, of
Advances due to be reimbursed on such Payment Date but not reimbursed from
funds on deposit in the Collection Account or the Supplemental Reserve
Account.
Withdrawals from the Supplemental Reserve Account and the Reserve
Account to pay the Total Required Payment. In the event that on any Payment
Date the Total Required Payment exceeds the Available Funds, the Indenture
Trustee will withdraw from the Supplemental Reserve Account and deposit in
the Collection Account an amount equal to the lesser of (x) the amount on
deposit in the Supplemental Reserve Account on such Payment Date (after any
reimbursement of Advances but prior to any deposits thereto or other
withdrawals therefrom relating to such Payment Date), and (y) the amount,
if any, by which the Total Required Payment for such Payment Date exceeds
the Available Funds for such Payment Date.
In the event that the amount on deposit in the Supplemental Reserve
Account is insufficient to make up a shortfall in the Available Funds to
pay the Total Required Payment, the Indenture Trustee will withdraw from
the Reserve Account and deposit in the Collection Account an amount equal
to the lesser of (x) the amount on deposit in the Reserve Account on such
Payment Date (after any reimbursement of Advances but prior to any deposits
thereto or other withdrawals therefrom relating to such Payment Date), and
(y) the amount, if any, by which the Total Required Payment for such
Payment Date exceeds the sum of the Available Funds and amounts withdrawn
from the Supplemental Reserve Account to pay the Total Required Payment.
The "Available Funds" for a Payment Date to be deposited into the
Collection Account on or prior to such Payment Date shall equal:
(1) the sum of the following amounts with respect to the preceding
calendar month, beginning , 1998 (the related "Collection
Period"):
(A) all collections on the Receivables including Payaheads
withdrawn from the Payahead Account but excluding
Payaheads deposited into the Payahead Account and
excluding Rule of 78's Payments (and including the
proceeds of sale by the Trust of any Financed Vehicle
sold to the Trust upon termination, including a
prepayment, of a Balloon Payment Receivable);
(B) all proceeds of the liquidation of Receivables which
became Defaulted Receivables during the related
Collection Period, net of expenses incurred by the
Servicer in connection with such liquidation and any
amounts required by law to be remitted to the obligor on
such Defaulted Receivable ("Liquidation Proceeds");
(C) any recoveries in respect of Receivables that became
Defaulted Receivables in prior Collection Periods
("Recoveries");
(D) all extension and deferral fees paid with respect to the
Receivables;
(E) the Purchase Amount of each Receivable that was
repurchased by the Seller or purchased by the Servicer
under an obligation which arose during or prior to the
related Collection Period (net of applicable expenses);
(F) all Actuarial Advances and Balloon Payment Advances
deposited to the Collection Account on such Payment Date
by the Servicer;
(G) the Yield Supplement Amount for such Payment Date;
(H) the Negative Carry Amount for such Payment Date;
(I) partial prepayments of any refunded item included in the
principal balance of a Receivable, such as 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;
(J) the net earnings on funds on deposit in the Pre-Funding
Account to the extent deposited to the Collection Account
on such Payment Date by the Indenture Trustee; and
(K) with respect to the Payment Date on or immediately
following the last day of the Pre-Funding Period, any
funds remaining in the Pre-Funding Account (after giving
effect to the purchase of all Subsequent Receivables,
including any purchase on the last day of the Pre-
Funding Period) exclusive of any net earnings on funds on
deposit in the Pre-Funding Account; minus
(2) the aggregate amount of the funds described in clause (1) above
that are used in the related Collection Period to reimburse the
Servicer for the aggregate amount of Advances previously made
by the Servicer that are due and payable to the Servicer with
respect to such Payment Date.
A "Defaulted Receivable" will be a Receivable (other than a
Receivable with respect to which payment of the Purchase Amount has been
made by the Seller or the Servicer) as to which:
(1) the related Financed Vehicle has been repossessed and liquidated;
(2) more than 10% of a scheduled payment (including, in the case of
a Balloon Payment Receivable, the amount owed by an obligor
with respect to a Balloon Payment but excluding charges for
excess wear and tear or excess mileage) is, in the case of
Motor Vehicles, 120 or more days past due or, in the case
of Trucks, 180 days past due and, in either case, the Servicer
has not repossessed the related Financed Vehicle; or
(3) the Servicer has determined, in accordance with its customary
standards, policies and procedures, that eventual payment in
full (including, in the case of a Balloon Payment Receivable,
the amount owed by an obligor with respect to a Balloon Payment
but excluding charges for excess wear and tear or
excess mileage) of the Contract is unlikely and has either
repossessed and liquidated the related Financed Vehicle or
repossessed and held the related Financed Vehicle in its
repossession inventory for 90 days, which 90 days shall not,
when added to the aggregate number of days since a scheduled
payment was due but not paid, exceed 180 days.
The Available Funds on any Payment Date shall exclude all payments
and proceeds (including Liquidation Proceeds) of any Receivables the
Purchase Amount of which has been included in the Available Funds for a
prior Collection Period (which shall be paid to the Seller or Servicer, as
applicable).
The "Total Available Funds" for a Payment Date is an amount equal to
the Available Funds for such Payment Date plus the amounts, if any,
deposited by the Indenture Trustee to the Collection Account from the
Supplemental Reserve Account and the Reserve Account on such Payment Date.
Monthly Withdrawals from Collection Account. On each Payment Date,
the Indenture Trustee will make the following withdrawals of Total
Available Funds in respect of the related Collection Period from the
Collection Account and make deposits, distributions and payments in the
amounts and in the order of priority specified below:
(1) to the Servicer, the Total Servicing Fee;
(2) to the Note Payment Account, the Accrued Note Interest for each
class of Notes;
(3) to the Note Payment Account, the Principal Distribution Amount;
(4) to the Reserve Account, the amount, if any, required to bring
the amount in the Reserve Account up to the Specified Reserve
Balance;
(5) to the Supplemental Reserve Account, the amount, if any,
required to bring the amount in the Supplemental Reserve
Account up to the Maximum Supplemental Reserve Amount; and
(6) to the Certificate Distribution Account, any remaining portion
of Total Available Funds.
Notwithstanding the foregoing, following the occurrence and during
the continuation of an Event of Default which has resulted in an
acceleration of the maturity dates of Notes, the Total Available Funds
remaining after the application of clause (1) above will be deposited in
the Note Payment Account for distribution in the order of priority set
forth under "-- Monthly Withdrawals from the Note Payment Account On and
After an Acceleration of the Maturity Dates of the Notes."
For purposes hereof, the following terms have the following meanings:
"Accrued Note Interest" means, with respect to any Payment Date and
each class of Notes, the sum of the Monthly Accrued Note Interest and the
Interest Carryover Shortfall for such class for such Payment Date.
"Certificate Balance" equals, initially, $ and, thereafter, equals
the initial Certificate Balance minus all amounts paid as principal on the
Certificates.
"Interest Carryover Shortfall" means, with respect to 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 such preceding Payment
Date, over the amount in respect of interest that is actually deposited in
the Note Payment Account on such preceding Payment Date with respect to
such class, plus interest on such excess, to the extent permitted by law,
at the applicable Note Interest Rate for the related Interest Period.
"Monthly Accrued Note Interest" means, with respect to any Payment
Date and (a) any class of Notes, interest accrued for the related Interest
Period at the applicable Note Interest Rate for such class on the aggregate
principal balance of the Notes of such class as of the immediately
preceding Payment Date, after giving effect to all payments of principal to
Noteholders on or prior to such preceding Payment Date (or, in the case of
the first Payment Date, the initial principal amount of the Notes); and (b)
with respect to the Notes collectively, the sum of Monthly Accrued Note
Interest for each class.
"Note Interest Rate" means in the case of (a) the Class A-1 Notes, %
per annum, (b) the Class A-2 Notes, % per annum, (c) the Class A-3 Notes, %
per annum and (d) the Class B Notes, % per annum. Interest on the Class A-1
Notes will be calculated on the basis of the actual number of days elapsed
and a 360-day year, and interest on the Class A-2 Notes, the Class A-3
Notes and the Class B Notes will be calculated on the basis of a 360-day
year consisting of twelve 30-day months.
"Principal Carryover Shortfall" means, as of the close of business on
any Payment Date, the excess of the Principal Distribution Amount and any
outstanding Principal Carryover Shortfall from the preceding Payment Date
over the amount in respect of principal that is actually deposited in the
Note Payment Account on such Payment Date.
"Principal Distribution Amount" means, with respect to any Payment
Date, the sum of (1) the Scheduled Principal for such Payment Date
(including, in the case of a Balloon Payment Receivable, the amount owed by
an obligor with respect to a Balloon Payment), (2) any outstanding
Principal Carryover Shortfall as of the close of business on the preceding
Payment Date and (3) with respect to the Payment Date on or immediately
following the end of the Pre-Funding Period, any funds remaining in the
Pre-Funding Account (after giving effect to the purchase of all Subsequent
Receivables, including any purchase on the last day of the Pre-Funding
Period) exclusive of any net earnings on funds on deposit in the
Pre-Funding Account; provided, however, that the Principal Distribution
Amount shall not exceed the outstanding aggregate principal balance of the
Notes; and provided further, that, on the Final Payment Date for each class
of Notes, the principal required to be deposited in the Note Payment
Account will include the amount necessary (after giving effect to the other
amounts to be deposited in the Note Payment Account on such Payment Date
and allocable to principal) to reduce the outstanding principal amount of
such class of Notes to zero.
"Realized Losses" means with respect to each Payment Date and each
Receivable that became a Defaulted Receivable during the related Collection
Period, the excess of the principal balance of such Defaulted Receivable
(including the principal of a Balloon Payment) over the Liquidation
Proceeds attributable to such Defaulted Receivable.
"Scheduled Principal" shall mean, with respect to any Payment Date, the
sum of:
(1) the sum of (A) collections of principal on Simple Interest
Receivables received during the related Collection Period,
including collections of principal attributable to the Balloon
Payment of a Simple Interest Receivable that is a Balloon
Payment Receivable (unless a Balloon Payment Advance has
previously been made with respect to such Balloon Payment) and
charges for excess wear and tear and excess mileage and (B)
Balloon Payment Advances made on such Payment Date with respect
to Simple Interest Receivables that are Balloon Payment
Receivables;
(2) the principal portion of each scheduled payment, including a
Balloon Payment on a Balloon Payment Receivable, due on any
Actuarial Receivable during the related
Collection Period;
(3) (without duplication of amounts taken into account under (1) or
(2)) the outstanding principal balance of (A) Receivables
prepaid in full during the related Collection Period, and (B)
Receivables which became Defaulted Receivables during the
related Collection Period;
(4) the Purchase Amount of each Receivable that was repurchased by
the Seller or purchased by the Servicer during such Collection
Period, to the extent attributable to principal;
(5) the proceeds of any other sale of a Receivable to the extent
allocable to principal; and
(6) partial prepayments attributable to any refunded item included
in the amount financed, such as 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 be below the
scheduled payment as of the related Cutoff Date; provided,
however, that in calculating the Scheduled Principal, (A) all
payments and proceeds (including Liquidation Proceeds) of any
purchased Receivables the Purchase Amount of which has been
included in Scheduled Principal in a prior Collection Period
(which shall be paid to the Seller or Servicer, as applicable)
and (B) all amounts released from the Pre-Funding Account will
be excluded.
"Total Required Payment" means, on any Payment Date, the Total
Servicing Fee, the Accrued Note Interest and the Principal Distribution
Amount.
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, all amounts on deposit in
the Note Payment Account will be paid in the following order of priority:
(1) to the Class A Noteholders, the Accrued Note Interest on the
applicable class of Class A Notes;
(2) following payment in full of the Accrued Note Interest payable
to the Class A Noteholders, the Accrued Note Interest on the
Class B Notes;
(3) to the Class A-1 Noteholders, the Principal Distribution Amount
until the Class A-1 Notes have been paid in full;
(4) following payment in full of the Class A-1 Notes, to the Class
A-2 Noteholders, until the Class A Noteholders' Percentage of
the remaining Principal Distribution Amount has been paid to the
Class A-2 Notes on such Payment Date;
(5) following payment in full of the Class A-2 Notes, to the Class
A-3 Noteholders, until the Class A Noteholders' Percentage of
the remaining Principal Distribution Amount has been paid to
the Class A-3 Notes on such Payment Date; and
(6) following payment in full of the Class A-1 Notes and payment of
the Class A Noteholders' Percentage of the Principal
Distribution Amount on such Payment Date, to the Class B
Noteholders, until the Class B Noteholders' Percentage of the
remaining Principal Distribution Amount has been paid to the
Class B Notes on such Payment Date.
On each Payment Date, all amounts on deposit in the Certificate
Distribution Account 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, all amounts on deposit in
the Note Payment Account will be paid:
(1) to the Indenture Trustee, amounts due as compensation or
indemnity payments pursuant to the terms of the Indenture;
(2) to the Servicer, the amounts due and unpaid in respect of the
Total Servicing Fee;
(3) to the Class A Noteholders, the Accrued Note Interest on the
applicable class of Class A Notes;
(4) to the Class B Noteholders, the Accrued Note Interest on the
Class B Notes;
(5) to the Class A Noteholders, all unpaid principal on the Class A
Notes pro rata in proportion to the respective principal balances
of the Class A-1 Notes, the Class A-2 Notes and the Class A-3
Notes until each of such classes has been paid in full;
(6) to the Class B Noteholders, all unpaid principal on the Class B
Notes until the Class B Notes have been paid in full; and
(7) to the Certificateholders.
Description of the Negative Carry Account
An account to be known as the "Negative Carry Account" will be
established by the Seller and held in the name of the Indenture Trustee for
the exclusive benefit of the Noteholders. The Negative Carry Account will
be created with an initial deposit by the Seller of $ (the "Negative Carry
Account Initial Deposit"), which is equal to the Maximum Negative Carry
Amount as of the Closing Date.
The "Maximum Negative Carry Amount" means, as of any date of
determination, the product of (1) the weighted average interest rate on the
Notes as of such date minus %, multiplied by (2) the product of the Note
Percentage as of such date and the Pre-Funded Amount as of such date after
giving effect to any withdrawals from the Pre-Funding Account on such date,
multiplied by (3) the percentage equivalent of a fraction, the numerator of
which is the actual number of days until the expected end of the
Pre-Funding Period and the denominator of which is 360.
"Note Percentage" means, as of any date of determination, the
percentage equivalent of a fraction, the numerator of which is the
aggregate principal amount of the Notes as of such date, and the
denominator of which is an amount equal to the sum of the aggregate
principal amount of the Notes as of such date and aggregate principal
amount of the Certificates as of such date, in each case after giving
effect to any payment of principal on such date.
On each Payment Date, the Servicer will instruct the Indenture
Trustee to withdraw from the Negative Carry Account and deposit into the
Collection Account an amount equal to the Negative Carry Amount for the
related Collection Period. For each Collection Period, the "Negative Carry
Amount" will be calculated by the Servicer as the difference (if positive)
between (1) the product of (a) the Monthly Accrued Note Interest for such
Collection Period, multiplied by (b) the Pre-Funded Percentage as of the
Payment Date occurring in such Collection Period, or in the case of the
first Payment Date, the Closing Date, minus (2) the net investment earnings
on the Pre-Funded Amount for such Collection Period.
The "Pre-Funded Percentage" means, as of any date of determination,
the percentage equivalent of a fraction, the numerator of which is the
Pre-Funded Amount as of such date and the denominator of which is the sum
of the Pool Balance and the Pre-Funded Amount, in each case as of such
date, after taking into account all withdrawals from the Pre-Funding
Account and all transfers of Subsequent Receivables on or prior to such
date.
The amount required to be on deposit in the Negative Carry Account
(the "Required Negative Carry Account Balance") as of any Payment Date will
be equal to the lesser of (x) the Negative Carry Account Initial Deposit
minus all previous withdrawals of the Negative Carry Amount from the
Negative Carry Account, including any withdrawals of the Negative Carry
Amount therefrom on such Payment Date and (y) the Maximum Negative Carry
Amount as of such Payment Date. If the amount on deposit in the Negative
Carry Account on any Payment Date (after giving effect to the withdrawal of
the Negative Carry Amount, if any, for such Payment Date) is greater than
the Required Negative Carry Account Balance, the excess will be released to
the Seller. All amounts remaining on deposit in the Negative Carry Account
on the Payment Date on or immediately following the last day of the
Pre-Funding Period (after giving effect to all withdrawals therefrom on
such Payment Date for deposit to the Collection Account on such Payment
Date) will be released to the Seller.
Description of the Reserve Account and Supplemental Reserve Account
Accounts to be known as the "Reserve Account" and the "Supplemental
Reserve Account" will be established by the Seller and held in the name of
the Indenture Trustee for the benefit of Noteholders and
Certificateholders.
The Reserve Account will be funded initially by a deposit by the
Seller on the Closing Date of cash or Permitted Investments having a value
of $ , which is equal to the Pool Balance as of the Initial Cutoff Date
multiplied by %. On each Subsequent Transfer Date, cash or Permitted
Investments having a value approximately equal to % of the aggregate
principal balance as of the related Subsequent Cutoff Date of the
Subsequent Receivables conveyed to the Trust on such Subsequent Transfer
Date will be withdrawn from the Pre-Funding Account from amounts otherwise
distributable to the Seller in connection with the sale of Subsequent
Receivables and deposited in the Reserve Account. The Supplemental Reserve
Account will not be funded by an initial deposit by the Seller on the
Closing Date or an additional deposit by the Seller on any Subsequent
Transfer Date.
On or before each Payment Date, the Servicer will instruct the
Indenture Trustee to withdraw from the Supplemental Reserve Account to the
extent of the funds available therein the following amounts in the
following order of priority:
(1) an amount equal to the shortfall, if any, between the aggregate
amount of Advances previously made by the Servicer that are due
and payable to the Servicer on such Payment Date and the
aggregate amount of the collections on the Receivables that are
paid to the Servicer on such Payment Date as reimbursement for
such Advances, which will be paid to the Servicer; and
(2) an amount equal to the shortfall, if any, between the Total
Required Payment for such Payment Date and Available Funds
allocable to the payment of the Total Required Payment, which
will be deposited to the Collection Account on such Payment
Date.
On each Payment Date, the Servicer will instruct the Indenture
Trustee to withdraw from the Reserve Account to the extent of funds
available in the Reserve Account the shortfall, if any, between the funds
available in the Supplemental Reserve Account on such Payment Date and the
amounts described in clauses (1) and (2) of the preceding paragraph, for
application in the same order of priority.
On each Payment Date, after payment of the amount owed to the
Servicer for Advances and the Total Servicing Fee for such Payment Date and
the deposit to the Note Payment Account of an amount equal to the Accrued
Note Interest for each class of Notes and the Principal Distribution Amount
for such Payment Date, the Indenture Trustee will make the following
withdrawals from the Total Available Funds in the Collection Account in the
following order of priority, to the extent of the remaining funds available
therein:
(1) the withdrawal from the Collection Account for deposit to the
Reserve Account of the amount, if any, required to bring the
amount in the Reserve Account up to the Specified Reserve
Balance for such Payment Date after giving effect to any
withdrawals made from the Reserve Account on such Payment
Date; and
(2) the withdrawal from the Collection Account for deposit to the
Supplemental Reserve Account of the amount, if any, required to
bring the amount in the Supplemental Reserve Account up to the
Maximum Supplemental Reserve Amount for such Payment Date after
giving effect to any withdrawals made from the Supplemental
Reserve Account on such Payment Date.
Amounts on deposit in the Reserve Account and the Supplemental
Reserve Account will be invested by the Seller in Permitted Investments. On
any Payment Date, to the extent that the amounts on deposit in the Reserve
Account and the Supplemental Reserve Account (including amounts
attributable to investment income, net of losses and investment expenses)
exceed the required balances in such accounts after giving effect to the
withdrawals to be made from such accounts on such Payment Date, such excess
will be withdrawn from the Reserve Account or the Supplemental Reserve
Account, as the case may be, and paid to the Seller on such Payment Date.
The Noteholders will not have any rights in, or claims to, any such amounts
paid to the Seller.
Amounts on deposit in the Reserve Account and the Supplemental
Reserve Account from time to time 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 aggregate amount
required to be withdrawn from the Reserve Account and the Supplemental
Reserve Account on any Payment Date to reimburse the Servicer for Advances
and to cover shortfalls in Available Funds exceeds the aggregate amount on
deposit in the Reserve Account and the Supplemental Reserve Account, a
temporary shortfall in the amounts distributed to the Noteholders could
result. In addition, depletion of the Reserve Account and the Supplemental
Reserve Account ultimately could result in losses to Noteholders. To the
extent that amounts on deposit in the Reserve Account and the Supplemental
Reserve Account are exhausted, Noteholders and Certificateholders will have
no recourse to the assets of the Seller as a source of payment.
The "Specified Reserve Balance" with respect to any Payment Date will
be an amount equal to the lesser of (a) % of the sum of (x) the aggregate
principal balance of the Initial Receivables as of the Initial Cutoff Date
and (y) the principal balances of the Subsequent Receivables transferred to
the Trust on or prior to such Payment Date as of the related Subsequent
Cutoff Dates and (b) an amount equal to (x) the outstanding principal
amount of the Notes as of such Payment Date (after giving effect to any
principal payment made on such Payment Date) less (y) the amounts on
deposit in the Supplemental Reserve Account on such Payment Date (after
giving effect to any deposits to or withdrawals from the Supplemental
Reserve Account on such Payment Date).
The "Maximum Supplemental Reserve Amount" with respect to any Payment
Date will be an amount equal to the lesser of (a) $ and (b) the outstanding
principal amount of the Notes on such Payment Date (after giving effect to
any principal payment made on such Payment Date).
The Servicer may, from time to time after the date of this
Prospectus, request each Rating Agency to approve a reduction in the
Specified Reserve Balance or the Maximum Supplemental Reserve Amount or a
change in the manner in by which the Reserve Account or the Supplemental
Reserve Account is funded. If each Rating Agency delivers a letter to the
Indenture Trustee to the effect that the reduction in the Specified Reserve
Balance or the Maximum Supplemental Reserve Amount, as the case may be,
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, provided that a reduction in the Specified Reserve
Balance will also require the delivery of certain tax opinions. The
Indenture will accordingly be amended to reflect the change in the required
balance of the account without the consent of any Noteholders.
Description of the Balloon Payment Receivables
Certain of the Motor Vehicle Contracts (the "Balloon Payment
Receivables") provide for level monthly payments that do not amortize the
entire amount financed over the term of the Receivable, plus one
substantially larger payment (the "Balloon Payment"). MMCA sets the Balloon
Payment for a particular model of Motor Vehicle at the time the related
Contract is entered into. The Balloon Payment Receivables provide for a
series of scheduled payments which, if each is made on its scheduled Due
Date, will amortize the initial principal amount of the Receivable minus
the principal portion of the Balloon Payment (such amount, the "Level Pay
Balance") by the Due Date immediately preceding the maturity date of the
Receivable. Upon maturity of the Receivable, the obligor thereunder will
owe (assuming that all payments have been made on their scheduled Due
Dates) an amount consisting of interest for the period from the preceding
Due Date through the maturity date and the remaining principal amount of
the Receivable. The net amount actually due from an obligor on a Balloon
Payment Receivable upon maturity may be greater or less than the Balloon
Payment as a result of (a) in the case of a Simple Interest Receivable,
changes in the amortization schedule of the Receivable as a result of early
or late payments by the obligor during the term of the Receivable and the
application of certain day counting conventions, and (b) additional fees
and charges that may be owed by the obligor with respect to the Receivable
or the Financed Vehicle, including charges for excess wear and tear and
excess mileage on the Financed Vehicle.
The initial aggregate principal amount of the Notes and Certificates
will be an amount equal to the sum of the aggregate principal amount of the
Initial Receivables and the Pre-Funded Amount on the Initial Cutoff Date,
including the aggregate of the principal portions of the Balloon Payments
on the Balloon Payment Receivables. As of the Initial Cutoff Date, the
Balloon Payments of the Initial Receivables had an aggregate principal
balance of $ .
Collections attributable to Balloon Payments, plus payments by
related obligors in respect of charges for excess wear and tear and excess
mileage (but not disposition fees, which are payable to the Servicer) with
respect to any Collection Period will be deposited by the Servicer during
such Collection Period into the Collection Account and, on the related
Payment Date, will be available to reimburse the Servicer for Advances, to
pay the Total Required Payment and to make required deposits into the
Reserve Account and the Supplemental Reserve Account. Any amount remaining
will be paid in accordance with the priority of payments described herein.
See "--Description of the Indenture Cash Flows."
Upon maturity of a Balloon Payment Receivable, an obligor thereunder
may satisfy the amount then owed by the obligor by:
(1) paying the remaining principal amount of the Receivable (which,
in the case of a Simple Interest Receivable, may be greater
than or less than the Balloon Payment), all accrued and unpaid
interest, plus any fees, charges, and other amounts then owing
on the Due Date of the Balloon Payment;
(2) refinancing the net amount then due, which may be greater or
less than the Balloon Payment, subject to certain conditions;
or
(3) selling the related Motor Vehicle to MMCA or its assignee for
an amount equal to the Balloon Payment (reduced by charges for
excess wear and tear and excess mileage and by a disposition
fee payable to the Servicer) and paying any excess of the total
amount owed (calculated as in clause (1)) over the Balloon
Payment to MMCA.
MMCA will sell its rights to the Balloon Payment Receivables,
including the Balloon Payments and amounts paid in respect of excess wear
and tear and excess mileage (but not disposition fees), to the Seller,
which will sell its rights to the Trust. If the payments by or on behalf of
an obligor on a Balloon Payment Receivable in the Collection Period in
which the Balloon Payment is due that are attributable to the Balloon
Payment and the amounts, if any, in the Payahead Account allocable to the
payment of the Balloon Payment are less than the amount due with respect to
such Balloon Payment, the Servicer will make a Balloon Payment Advance on
the following Payment Date in an amount equal to such shortfall. The
Servicer will be reimbursed for the amount of the Balloon Payment Advance
on each subsequent Payment Date:
(1) out of payments by or on behalf of the related obligor in the
preceding Collection Period to the extent such payments are
allocable to the reimbursement of the Balloon Payment Advance;
and
(2) out of collections on other Receivables in the preceding
Collection Period to the extent of losses on the related
Receivable that the Servicer has recorded in its books and
records during the preceding Collection Period, but only to the
extent such losses are allocable to the Balloon Payment and the
Balloon Payment Advance has not otherwise been reimbursed.
See "-- Description of the Indenture Cash Flows" and "-- Description of the
Reserve Account and Supplemental Reserve Account."
If the obligor sells the Motor Vehicle to MMCA (acting on behalf of
the Trust), it is anticipated that the full amount of the Balloon Payment
will not be realized upon the subsequent sale of the Motor Vehicle on
behalf of the Trust. MMCA sets the Balloon Payment for a particular model
of Motor Vehicle at the time the related retail installment sale contract
is entered into by reference to its estimate of the wholesale market value
of such model at the end of the Motor Vehicle Contract's term. However, in
connection with sales incentive programs for particular models, MMCA may
increase the Balloon Payments set forth in Motor Vehicle Contracts to
levels above its estimate of the wholesale market values of the related
Motor Vehicles at the end of their respective Motor Vehicle Contract terms,
in order to stimulate sales of particular models by reducing the amount of
the amortizing monthly installments which would be owed by obligors.
MMCA does not require the obligor under a Balloon Payment Receivable
to pay the "Gap Amount" in the event there is a total loss of the Motor
Vehicle caused by its theft or physical damage. The "Gap Amount" is the
difference between the amount owed in respect of the Balloon Payment
Receivable as of the date of the total loss and insurance proceeds
(including payment by the obligor of any applicable deductible) received
with respect to the Motor Vehicle. In accordance with its customary
servicing practices and procedures, MMCA treats such Gap Amount, if any, as
a non-cash reduction of the principal of the related Balloon Payment.
In the event that the full amount owed by an obligor under a Balloon
Payment Receivable is not collected, the shortfall will reduce the
Available Funds available to pay the Total Required Payment and to make
required transfers, if any, from the Collection Account to the Reserve
Account and the Supplemental Reserve Account. None of MMCA, the Servicer,
the Seller or the Trust will have any recourse to the obligor for any
shortfall, nor will MMCA, the Servicer or the Seller be obligated to pay
any such shortfall to the Trust.
Subordination of the Class B Notes and the Certificates to the Class A Notes
No interest will be paid on the Class B Notes on any payment date
until the interest due on the Class A Notes on that payment date has been
paid in full. No principal will be paid on the Class B Notes until the
Class A-1 Notes have been paid in full.
On each payment date, principal payments on the Class B Notes will be
subordinated to principal payments on the Class A-2 Notes. If the amount
available for payment of principal on the notes is less than the aggregate
amount of principal payable on the Class A-2 Notes and the Class B Notes,
the Indenture Trustee will apply the amount available for payment of
principal to pay principal due on the Class A-2 Notes before paying any
principal due on the Class B Notes. In that case, the Class B Notes would
be paid less principal on that payment date than expected.
On each payment date, principal payments on the Class B Notes will
subordinated to principal payments on the Class A-3 Notes. If the amount
available for payment of principal on the notes is less than the aggregate
amount of principal payable on the Class A-3 Notes and the Class B Notes,
the Indenture Trustee will apply the amount available for payment of
principal to pay principal due on the Class A-3 Notes before paying any
principal to the Class B Notes. In that case, the Class B Notes would be
paid less principal on that payment date than expected.
No interest or principal payments will be made on the Class B Notes
following an event of default under the indenture until all interest on and
the principal amount of the Class A Notes has been paid in full.
The rights of Certificateholders to receive distributions are
subordinated to the rights of Noteholders to receive payments of interest
and principal to the extent set forth herein. Funds on deposit in the
Collection Account (including amounts deposited therein from the Reserve
Account and the Supplemental Reserve Account) will be applied to the
payment to the Servicer of Advances to the extent due and payable to the
Servicer and Rule of 78's Payments due and payable to the Servicer, the
payment of the Total Servicing Fee, the Accrued Note Interest on the Notes
and principal payable on the Notes on such Payment Date (including the
Principal Distribution Amount) and to making the required deposits to the
Reserve Account and the Supplemental Reserve Account before distributions
on the Certificates. In addition, following the occurrence of an Event of
Default 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 foregoing 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 "-- Description of the Indenture
Cash Flows."
Advances by the Servicer of Amounts Payable on the Receivables
If the collection of interest and principal on an Actuarial
Receivable (other than a Balloon Payment) with respect to a Collection
Period is less than the scheduled payment due thereon, after application of
amounts on deposit in the Payahead Account by the Indenture Trustee against
such shortfall, the Servicer will make an advance of the remaining amount
(such an advance, an "Actuarial Advance") on the related Payment Date.
The Servicer will be reimbursed for each Actuarial Advance:
(1) on each subsequent Payment Date out of any payments by or on
behalf of the related obligor in the preceding Collection
Period to the extent such payments are allocable to the
reimbursement of the Actuarial Advance; and
(2) on the Payment Date following the Collection Period in which the
related Actuarial Receivable becomes a Defaulted Receivable out
of collections on other Receivables in the preceding Collection
Period to the extent the Servicer has not previously been
reimbursed for the amount of such Actuarial Advance.
In addition, the Servicer will make an advance for any portion of a
Balloon Payment on an Actuarial Receivable or a Simple Interest Receivable
for the Collection Period in which such payment becomes due from the
related obligor to the extent such payment has not been made by or on
behalf of such obligor, including amounts in the Payahead Account allocable
to such Balloon Payment (such advance, a "Balloon Payment Advance" and,
together with an Actuarial Advance, each an "Advance").
The Servicer will be reimbursed for the amount of a Balloon Payment
Advance on each Payment Date following the Payment Date on which the
Balloon Payment Advance was made:
(1) out of any payments by or on behalf of the related obligor in
the preceding Collection Period to the extent such payments are
allocable to the reimbursement of the Balloon Payment Advance;
and
(2) out of collections on other Receivables in the preceding
Collection Period to the extent of losses on the related
Receivable that the Servicer has recorded in its books and
records during the preceding Collection Period, but only to the
extent such losses are allocable to the Balloon Payment and the
Balloon Payment Advance has 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
payments on the Receivables (including sales proceeds of Financed Vehicles
returned to the Servicer for sale), payments under the Yield Supplement
Agreement and the Yield Supplement Account, withdrawals from the Negative
Carry Account and, to the extent available, amounts on deposit in the
Reserve Account and the Supplemental Reserve Account. See "--Description of
the Indenture Cash Flows" and "--Description of the Reserve Account and
Supplemental Reserve Account."
Deposit of Collections on the Receivables to Collection Account
The Servicer will deposit all payments on the Receivables (from
whatever source) and all proceeds of the Receivables (other than
disposition fees paid with respect to Balloon Payment Receivables, late
fees and certain other administrative fees and charges (other than
extension or deferral fees) collected on the Receivables that are payable
to the Servicer under the Sale and Servicing Agreement and therefore are
not required to be deposited in the Collection Account) into the Collection
Account not later than two Business Days after receipt thereof unless (a)
the Servicer shall have a rating acceptable to each Rating Agency with
respect to its short-term indebtedness, MMCA is the Servicer, and no Events
of Servicing Termination have occurred or (b) the Trust shall have received
written notice from each Rating Agency that no outstanding rating on any
class of Notes would be lowered or withdrawn as a result, in which case
such amounts will be paid into the Collection Account on the Business Day
prior to each Payment Date. The Seller and the Servicer will also deposit
into the Collection Account on each Payment Date the Purchase Amount of
each Receivable required to be repurchased or purchased by either of them
pursuant to an obligation that arose during the related Collection Period.
The Servicer will be entitled to be reimbursed for the amounts previously
deposited in the Collection Account but 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 pursuant
to a subservicing agreement, as described below, the Servicer will cause
the subservicer to remit to the Collection Account the amounts collected by
such subservicer on or with respect to the Receivables being serviced by
it, within the period after receipt, and subject to the limitations,
described above.
As an administrative convenience, unless the Servicer is required to
remit collections within two Business Days of receipt thereof, the Servicer
will be permitted to make the deposit of collections and Purchase Amounts
for or with respect to the Collection Period net of distributions to be
made to the Servicer with respect to the Collection Period. The Servicer,
however, will account to the Indenture Trustee and the Noteholders as if
all deposits, distributions and transfers were made individually.
Description of the Statements to Noteholders
On or prior to each Payment Date, the Servicer will prepare and
provide to the Indenture Trustee a statement to be delivered to the
Noteholders. Each such statement to be delivered to Noteholders will
include the following information as to the Notes with respect to such
Payment Date and the related Collection Period:
(1) the amount of the payment allocable to principal of each class of
Notes;
(2) the amount of the payment allocable to interest on or with
respect to each class of Notes;
(3) the Yield Supplement Amount;
(4) the amount of the Total Servicing Fee with respect to such
Collection Period;
(5) the aggregate outstanding principal amount of each class of the
Notes and the applicable Note Pool Factor, after giving effect
to payments allocated to principal reported under clause (1)
above;
(6) the Pool Balance, the Level Pay Pool Balance and the Balloon
Payment Pool Balance (calculated as of the close of business on
the last day of the related Collection Period);
(7) the amounts of the Interest Carryover Shortfall, if any, for
the next Payment Date, and the Principal Carryover Shortfall,
if any, for such Payment Date and the portion thereof
attributable to each class of Notes;
(8) the amount of the aggregate Realized Losses, if any, for such
Collection Period;
(9) the balance of the Reserve Account on such Payment Date, after
giving effect to changes therein on such Payment Date;
(10) the balance of the Supplemental Reserve Account on such Payment
Date, after giving effect to changes therein on such Payment
Date;
(11) the amount of Actuarial Advances and Balloon Payment Advances,
if any, for such Collection Period;
(12) the aggregate Purchase Amount of Receivables repurchased by the
Seller or purchased by the Servicer during such Collection
Period;
(13) for each Payment Date during the Pre-Funding Period and the
Payment Date that is on or immediately following the end of the
Pre-Funding Period, (A) the amount, if any, withdrawn from the
Pre-Funding Account to purchase Subsequent Receivables during
such Collection Period, (B) the remaining Pre- Funded Amount,
if any, (C) the Negative Carry Amount, if any, for the related
Collection Period and (D) the amount remaining on deposit in
the Negative Carry Account, if any, after all withdrawals, if
any, made on such Payment Date; and
(14) for the Payment Date on or immediately following the end of the
Pre-Funding Period, the remaining Pre-Funded Amount, if any,
that has not been used to fund the purchase of Subsequent
Receivables and is being passed through as payments of
principal on the Notes.
Each amount set forth pursuant to clauses (1), (2), (3), (4) and (7)
above 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 such statements may be obtained by Note Owners 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 such calendar
year was a Noteholder a statement containing the sum of the amounts
described in clauses (1), (2), (3), (4) and (7) above for the purposes of
such Noteholder's preparation of Federal income tax returns. See "Certain
Federal Income Tax Consequences" and "--Book Entry Registration of the
Notes."
Description of the Terms of the Indenture
Events of Default under the Indenture.
The "Events of Default" in the Indenture consist of:
(1) a default for five days or more in the payment of interest on any
Note when the same becomes due and payable;
(2) a default in the payment of principal of, or any installment of
principal of, any Note when the same becomes due and payable;
(3) a default in the observance or performance of any material
covenant or agreement of the Trust made in the Indenture, or
any representation or warranty of the Trust made in the
Indenture or in any certificate or writing delivered pursuant
thereto proves to have been incorrect in any material respect
as of the time when made, and the continuation of such default
for a period of 60 days or in the case of a materially
incorrect representation or warranty, 30 days, after notice
thereof is given to the Trust by the Indenture Trustee or the
Trust and the Indenture Trustee by the holders of not less than
25% of the aggregate principal amount of the Notes of all
classes; or
(4) certain events of bankruptcy, insolvency, receivership or
liquidation of the Trust. (Indenture, Section 5.1).
Noteholders holding not less than a majority of the aggregate
principal amount of the Notes outstanding, voting as a group, may waive any
past default or Event of Default prior to the declaration of the
acceleration of the maturity of the Notes, except a default: (a) in payment
of principal of or interest on any of the Notes; or (b) in respect of any
covenant or provision in the Indenture which cannot be modified or amended
without unanimous consent of the Noteholders. (Indenture, Section 5.12).
Any such waiver 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 should occur and be continuing, the Indenture Trustee or
the holders of a majority of the aggregate outstanding principal amount of
the Notes of all classes, voting as a group, may declare the principal of
the Notes to be immediately due and payable. Such declaration may be
rescinded by the holders of a majority of the aggregate principal amount of
the Notes before a judgment or decree for payment of the amount due has
been obtained by the Indenture Trustee if: (a) the Trust has deposited with
the Indenture Trustee an amount sufficient to pay (x) all interest on and
principal of the Notes as if the Event of Default giving rise to such
declaration had not occurred and (y) all amounts advanced by the Indenture
Trustee and its costs and expenses; and (b) all Events of Default (other
than the nonpayment of principal of the Notes that has become due solely by
such acceleration) have been cured or waived. (Indenture, Section 5.2). Any
such 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, the Indenture Trustee may institute proceedings to collect amounts
due, exercise remedies as a secured party, including foreclosure or sale of
the Trust Property, or elect to maintain the Trust Property and continue to
apply proceeds from the Trust Property as if there had been no declaration
of acceleration. The Indenture Trustee may not, however, sell the Trust
Property following an Event of Default, 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: (a) 100% of the Noteholders consent thereto;
(b) the proceeds of such sale are sufficient to pay in full the principal
of and the accrued interest on the then outstanding Notes; or (c) the
Indenture Trustee determines that the Trust Property would not be
sufficient on an ongoing basis to make all payments on the Notes as such
payments would have become due if such obligations had not been declared
due and payable, and the Indenture Trustee obtains the consent of holders
of 66 2/3% of the aggregate principal amount of the outstanding Notes,
voting as a group, to such sale. The Indenture Trustee may, but need not,
obtain and rely upon an opinion of an independent accountant or investment
banking firm as to the sufficiency of the Trust Property to pay interest on
and principal of the Notes on an ongoing basis. (Indenture, Sections 5.4
and 5.5).
In the event of a sale of the Trust Property following the occurrence
of an Event of Default under the circumstances described in the preceding
paragraph pursuant to the direction of the Indenture Trustee or the
Noteholders, the proceeds of such sale will be distributed:
(1) first, to the Indenture Trustee for amounts due as compensation
or indemnity payments pursuant to the terms of the Indenture;
(2) second, to the Servicer for amounts due in respect of unpaid
Total Servicing Fees;
(3) third, to the Noteholders for interest which is due and unpaid;
and
(4) fourth, to the 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. (Indenture, Section 5.4).
Subject to the provisions of the Indenture relating to the duties of
the Indenture Trustee, in case an Event of Default occurs and is continuing
with respect to the Notes, the Indenture Trustee will be under no
obligation to exercise any of the rights or powers under the Indenture at
the request or direction of any of the Noteholders, if the Indenture
Trustee reasonably believes it will not be adequately indemnified against
the costs, expenses and liabilities which might be incurred by it in
complying with such request. (Indenture, Sections 6.1 and 6.2). Subject to
such provisions for indemnification and certain other limitations contained
in the Indenture, the holders of not less than a majority of the aggregate
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 with respect to the Notes or
exercising any trust power conferred on the Indenture Trustee, and the
holders of not less than a majority of the aggregate principal amount of
the outstanding Notes, voting as a group, may, in certain cases, waive any
default with respect thereto prior to the acceleration of the maturity of
Notes, except a default in the payment of principal or interest or a
default in respect of a covenant or provision of the Indenture that cannot
be modified without the waiver or consent of all of the holders of the
outstanding Notes. (Indenture, Sections 5.11 and 5.12). Until such time, if
any, as Definitive Notes have been issued, the Indenture Trustee will act
only in accordance with the instructions of Cede, as nominee for DTC.
However, under the rules, DTC will act only in accordance with the
instructions of the DTC Participants to whom Notes are credited, which will
in turn act in accordance with the instructions of persons holding
beneficial interests in such Notes through such DTC Participants.
Accordingly, although only Cede will be entitled to vote under the
Indenture, Note Owners will be entitled to instruct DTC as to the manner in
which to vote.
No Noteholder or Noteholders will have the right to institute any
proceeding with respect to the Indenture unless:
(1) such Noteholder or Noteholders previously has given to the
Indenture Trustee written notice of a continuing Event of
Default;
(2) the holders of not less than 25% of the aggregate principal
amount of the Notes outstanding have made written request of
the Indenture Trustee to institute such proceeding in its own
name as Indenture Trustee;
(3) such Noteholder or Noteholders have offered the Indenture
Trustee reasonable indemnity;
(4) the Indenture Trustee has for 60 days failed to institute such
proceeding; and
(5) no direction inconsistent with such written request has been
given to the Indenture Trustee during such 60-day period by the
holders of a majority of the aggregate principal amount of the
Notes outstanding. (Indenture, Section 5.6).
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, in the absence of an express
agreement to the contrary, be personally liable for the payment of interest
on or principal of the Notes or for the agreements of the Trust and the
Owner Trustee, in its capacity as trustee, contained in the Indenture.
Certain Covenants by the Trust under the Indenture. The Trust will
not, among other things:
(1) except as expressly permitted by the Indenture, the Transfer
and Servicing Agreements or certain related documents
(collectively, the "Basic Documents") sell, transfer, exchange
or otherwise dispose of any of the assets of the Trust;
(2) 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 Code 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 Trust;
(3) dissolve or liquidate in whole or in part; or
(4) permit:
(A) the validity or effectiveness of the Indenture to be
impaired;
(B) any person to be released from any covenants or
obligations with respect to the Notes under the Indenture
except as may be expressly permitted thereby;
(C) any lien, charge, excise, claim, security interest,
mortgage or other encumbrance to be created on or extend
to or otherwise arise upon or burden the assets of the
Trust or any part thereof, or any interest therein or the
proceeds therefrom; or
(D) the lien of the Indenture not to constitute a valid, first
priority (other than with respect to any such tax, mechanics
or other lien) security interest in the Trust Property.
(Indenture, Section 3.8).
The Trust may not engage in any activities other than financing,
acquiring, owning, pledging and managing the Receivables as contemplated by
the Basic Documents and activities incidental thereto. (Indenture, Section
3.12).
The Trust will not incur, assume or guarantee any indebtedness other
than indebtedness incurred pursuant to
the Notes, or otherwise in accordance with the Basic Documents. (Indenture,
Section 3.13).
The Trust will not make any payments to Certificateholders in respect
of their Certificates for any Collection Period unless the Accrued Note
Interest, the Principal Distribution Amount, the Total Servicing Fee and
the deposits, if any, required to be made to the Reserve Account and the
Supplemental Reserve Account have been provided for. (Indenture, Section
2.8).
The Trust will or will cause the Servicer to deliver to the Indenture
Trustee on or prior to each Payment Date the disbursement and payment
instructions as required pursuant to the Indenture. (Sale and Servicing
Agreement, Section 4.11).
Replacement of Indenture Trustee. Noteholders holding not less than a
majority of the aggregate principal amount of the outstanding Notes, voting
as a group, may remove the Indenture Trustee without cause by so notifying
the Indenture Trustee and the Trust, and following such removal 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
Rating Agency or otherwise acceptable to each Rating Agency. (Indenture,
Sections 6.8 and 6.11).
The Indenture Trustee may resign at any time by so notifying the
Trust and the Noteholders. The Trust will be required to remove the
Indenture Trustee if the Indenture Trustee:
(1) ceases to be eligible to continue as the Indenture Trustee;
(2) is adjudged to be bankrupt or insolvent;
(3) comes under the charge of a receiver or other public officer; or
(4) otherwise becomes incapable of acting.
Upon the resignation or required removal of the Indenture Trustee, or
the failure of the Noteholders to appoint a successor Indenture Trustee
following the removal without cause of the Indenture Trustee, the Trust
will be required promptly to appoint a successor Indenture Trustee.
(Indenture, Section 6.8).
Duties of Indenture Trustee under the Indenture. Except during the
continuance of an Event of Default, the Indenture Trustee:
(1) will perform such duties and only such duties as are
specifically set forth in the Indenture;
(2) may in the absence of bad faith, rely, as to the truth of the
statements and the correctness of the opinions expressed
therein, on certificates or opinions furnished to the Indenture
Trustee which conform to the requirements of the Indenture; and
(3) will examine any such 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.
Upon the continuance of an Event of Default, 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 thereof
as a prudent person would exercise or use under the circumstances in the
conduct of such person's own affairs. (Indenture, Section 6.1).
Compensation and Indemnity of the Indenture Trustee under the
Indenture. The Trust will:
(1) pay to the Indenture Trustee from time to time reasonable
compensation for its services;
(2) reimburse the Indenture Trustee for all expenses, advances and
disbursements reasonably incurred; and
(3) 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, except that the Indenture Trustee will not be
liable:
(1) 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;
(2) with respect to 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
(3) for interest on any money received by it except as the
Indenture Trustee and the Trust may agree in writing.
The Indenture Trustee will not be deemed to have knowledge of any
Event of Default unless an officer of the Indenture Trustee has actual
knowledge thereof or has received written notice thereof in accordance with
the provisions of the Indenture. (Indenture, Sections 6.1 and 6.7).
Indenture Trustee's Access to Noteholder Lists. If Definitive Notes
are issued in the limited circumstances described herein and the Indenture
Trustee is not the registrar for the Notes, the Trust will furnish or cause
to be furnished to the Indenture Trustee a list of the names and addresses
of the Noteholders: (a) as of each Record Date, within five days
thereafter; and (b) as of not more than 10 days prior to the time such list
is furnished, within 30 days after receipt by the Trust of a written
request therefor. (Indenture, Section 7.1).
Annual Compliance Statement to be Provided by Trust to Indenture
Trustee. The Trust will be required to file annually with the Indenture
Trustee a written statement as to the fulfillment of its obligations under
the Indenture. (Indenture, Section 3.9).
Requirements for Satisfaction and Discharge of Indenture. The
Indenture will be discharged with respect to the collateral securing the
Notes upon the delivery to the Indenture Trustee for cancellation of all
the Notes or, with certain limitations, including receipt of certain
opinions with respect to 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). (Indenture, Section 4.1).
Requirements for Modification of Indenture. Without the consent of
the Noteholders, the Owner Trustee, on behalf of the Trust, and the
Indenture Trustee, upon request by the Trust, may execute a supplemental
indenture for the purpose of, among other things, adding to the covenants
of the Trust, curing any ambiguity, correcting or supplementing any
provision which may be inconsistent with any other provision or making any
other provision with respect to matters or questions arising under the
Indenture which will not be inconsistent with other provisions of the
Indenture; provided that (a) such action will not, (1) as evidenced by an
opinion of counsel (which may be internal counsel to the Seller or the
Servicer (an "Opinion of Counsel")), materially adversely affect the
interests of any Noteholder and (2) as confirmed by each Rating Agency
rating any class of Notes, cause the then-current rating assigned to any
class of Notes to be withdrawn, reduced or qualified and (b) an Opinion of
Counsel as to certain tax matters is delivered. (Indenture, Section 9.1).
The Owner Trustee, on behalf of the Trust, and the Indenture Trustee,
upon request by the Trust, may also enter into supplemental indentures,
with the consent of not less than a majority of the aggregate principal
amount of the outstanding Notes, voting as a group, and with prior written
notice to each Rating Agency, 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 (a) such 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 Rating Agency rating any class of Notes, cause the
then- current rating assigned to any such class of Notes to be withdrawn,
reduced or qualified and (b) an Opinion of Counsel as to certain tax
matters is delivered. (Indenture, Section 9.1).
Without the consent of the holder of each outstanding Note affected
thereby, however, no supplemental indenture may:
(1) change the Final Payment Date for any class of Notes or the due
date of any installment of principal of or interest on any Note
or reduce the principal amount thereof, the interest rate
specified thereon or the redemption price with respect thereto,
change the provisions of the Indenture relating to the
application of collections on, or the proceeds of the sale of,
the Trust Property 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 thereon is payable;
(2) impair the right to institute suit for the enforcement of
certain provisions of the Indenture regarding payment;
(3) reduce the percentage of the aggregate outstanding principal
amount of the Notes the consent of the holders of which is
required for any such supplemental indenture or for any waiver
of compliance with certain provisions of the Indenture or of
certain defaults thereunder and their consequences as provided
for in the Indenture;
(4) modify or alter the provisions of the Indenture regarding the
voting of Notes held by the Trust, the Seller, the Servicer, an
affiliate of any of them or any obligor on the Notes;
(5) reduce the percentage of the aggregate 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 Trust Property if the proceeds of such sale would be
insufficient to pay the principal amount and accrued but unpaid
interest on the Notes and the Certificates;
(6) modify any provision of the Indenture specifying a percentage
of the aggregate principal amount of the Notes necessary to
amend the Indenture or the other Basic Documents except to
increase any percentage specified in the Indenture or to
provide that certain additional provisions of the Indenture or
the Basic Documents cannot be modified or waived without the
consent of the holder of each outstanding Note affected
thereby;
(7) modify any provisions of the Indenture in such 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 redemption of the Notes contained
in the Indenture; or
(8) permit the creation of any lien ranking prior to or on a parity
with the lien of the Indenture with respect to any of the Trust
Property or, except as otherwise permitted or contemplated in
the Indenture, terminate the lien of the Indenture on any such
collateral or deprive the holder of any Note of the security
afforded by the lien of the Indenture.
(Indenture, Section 9.2).
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 is required and provides that the Owner Trustee
will not enter into such amendment unless Certificateholders holding a
majority of the Certificate Balance including, for this purpose,
Certificates held by the Seller or any affiliate of the Seller, consent in
writing. (Trust Agreement, Section 4.1).
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The Trust will purchase a pool of motor vehicle retail installment
sale contracts (the "Initial Receivables") on the Closing Date. It is
anticipated that the Trust will purchase additional motor vehicle retail
installment sale contracts (the "Subsequent Receivables") on one or more
Subsequent Transfer Dates with an aggregate principal balance approximately
equal to the Initial Pre-Funded Amount. The Initial Receivables and the
Subsequent Receivables are referred to collectively in this Prospectus as
the "Receivables". The Servicer will undertake to service the Receivables
pursuant to the Sale and Servicing Agreement. The Trust will be created and
the Certificates will be issued pursuant to the Trust Agreement. MMCA will
undertake certain administrative duties with respect to the Trust pursuant
to the Administration Agreement (together with the Sale and Servicing
Agreement and the Trust Agreement, the "Transfer and Servicing
Agreements"). Forms of the Transfer and Servicing Agreements have been
filed as exhibits to the Registration Statement of which this Prospectus
forms a part. The following summary does not purport to be complete and is
subject to, and qualified in its entirety by reference to, the provisions
of the Transfer and Servicing Agreements.
Sale and Assignment of the Initial Receivables and the Subsequent Receivables
Prior to the time of issuance of the Notes, pursuant to the Purchase
Agreement MMCA will sell and assign to the Seller, without recourse, its
entire right, title and interest in, to and under the Initial Receivables,
including its security interests in the related Financed Vehicles. At the
time of issuance of the Notes, the Seller will sell and assign to the
Trustee, without recourse, the Seller's entire interest in the Initial
Receivables, including its security interests in the related Financed
Vehicles. Each Initial Receivable conveyed by the Seller to the Trust will
be identified in a schedule attached to the Sale and Servicing Agreement.
The Initial Receivables will be sold and assigned by MMCA to the Seller and
sold and assigned by the Seller to the Trust as of [ ], 1998 (the "Initial
Cutoff Date"). The Owner Trustee will, concurrently with such sale and
assignment of the Initial Receivables, execute, authenticate and deliver
the Certificates. The net proceeds received from the sale of the Notes will
be applied to the purchase of the Initial Receivables on the Closing Date
and to the deposits required to be made to the Reserve Account, the
Pre-Funding Account, the Negative Carry Account, the Payahead Account and
the Yield Supplement Account on the Closing Date.
It is anticipated that Subsequent Receivables will be conveyed to the
Trust monthly on dates specified by the Seller (each, a "Subsequent
Transfer Date") occurring during a period beginning on the Closing Date and
ending not later than [ ] (the "Pre-Funding Period"). The Seller will
designate as a cutoff date (each, a "Subsequent Cutoff Date" and, together
with the Initial Cutoff Date, each a "Cutoff Date") the date as of which
particular Subsequent Receivables are conveyed to the Trust. On or prior to
each Subsequent Transfer Date, MMCA will sell and assign to the Seller,
without recourse, its entire right, title and interest in, to and under the
Subsequent Receivables to be transferred by the Seller to the Trust on such
date, including MMCA's security interests in the related Financed Vehicles.
On each Subsequent Transfer Date, subject to the conditions described
below, the Seller will sell and assign to the Trust, without recourse, the
Seller's entire interest in the Subsequent Receivables designated by the
Seller as of the related Subsequent Cutoff Date.
Upon the conveyance of Subsequent Receivables to the Trust on a
Subsequent Transfer Dates:
(1) the Pool Balance will increase in an amount equal to the
aggregate principal balance of the Subsequent Receivables;
(2) an amount equal to % of the aggregate principal balance of the
Subsequent Receivables will be withdrawn from the Pre-Funding
Account from funds otherwise distributable to the Seller as
payment for the Subsequent Receivables and deposited in the
Reserve Account;
(3) an amount equal to the Payaheads as of the related Subsequent
Cutoff Date of the Subsequent Receivables conveyed to the Trust
on such Subsequent Transfer Date will be withdrawn from the Pre-
Funding Account from funds otherwise distributable to the
Seller as payment for the Subsequent Receivables and deposited
in the Payahead Account;
(4) an amount equal to the projected Yield Supplement Amounts for
all future Payment Dates for the Subsequent Receivables
conveyed to the Trust on such Subsequent Transfer Date will be
withdrawn from the Pre-Funding Account from funds otherwise
distributable to the Seller as payment for the Subsequent
Receivables and deposited in the Yield Supplement
Account unless the Yield Supplement Account has been replaced
by a Yield Supplement Letter of Credit on or prior to such
date; and
(5) an amount equal to the excess of the aggregate principal
balance of such Subsequent Receivables over the amount
described in clauses (2), (3) and (4) will be withdrawn from
the Pre-Funding Account and paid to the Seller.
Any conveyance of Subsequent Receivables is subject to the
satisfaction, on or before the related Subsequent Transfer Date, of the
following conditions precedent, among others:
(1) each such Subsequent Receivable shall satisfy the eligibility
criteria specified in the Sale and Servicing Agreement (see
"Description of the Receivables--Selection Criteria for the
Receivables";)
(2) the Seller shall not have selected such Subsequent Receivables
in a manner that it believes is adverse to the interests of the
Trust, the Noteholders or the Certificateholders;
(3) as of the related Subsequent Cutoff Date, the pool of
Receivables, after giving effect to the inclusion of the
Subsequent Receivables, shall satisfy the parameters specified
in the Sale and Servicing Agreement (see "Description of the
Receivables -- Selection Criteria for the Receivables");
(4) the applicable Reserve Account deposit for such Subsequent
Transfer Date shall have been made;
(5) the applicable Payahead Account deposit for such Subsequent
Transfer Date shall have been made;
(6) the applicable Yield Supplement Account deposit for such
Subsequent Transfer Date shall have been made;
(7) the Seller shall have executed and delivered to the Trust (with
a copy to the Indenture Trustee) a written assignment conveying
such Subsequent Receivables to the Trust (including a schedule
identifying such Subsequent Receivables);
(8) the Seller shall have delivered certain opinions of counsel to
the Owner Trustee, the Indenture Trustee and the Rating
Agencies with respect to the transfer of such
Subsequent Receivables;
(9) the Servicer and the representative of the Underwriters shall
have received written confirmation from a firm of certified
independent public accountants that the pool of Receivables,
after giving effect to the inclusion of the Subsequent
Receivables in the pool of Receivables as of the related
Subsequent Cutoff Date, satisfy the criteria described under
"Description of the Receivables-Selection Criteria for the
Receivables"; and
(10) the Owner Trustee, the Indenture Trustee and the Rating
Agencies shall have received written notification from the
Seller of the addition of all such Subsequent Receivables.
Except for the criteria described in the preceding paragraph, there
will be no required characteristics of the Subsequent Receivables.
Therefore, following the transfer of Subsequent Receivables to the Trust,
the aggregate characteristics of the entire pool of Receivables may vary
from those of the Initial Receivables. See "Risk Factors" and "Description
of the Receivables."
In the Purchase Agreement, MMCA will represent and warrant to the
Seller, and in the Sale and Servicing Agreement the Seller will represent
and warrant to the Owner Trustee, among other things, that:
(1) the information provided in the schedule of Initial Receivables
attached to the Sale and Servicing Agreement and each schedule
of Subsequent Receivables attached to the related assignment is
correct in all material respects;
(2) MMCA shall have determined whether or not the obligor on each
Receivable has maintained physical damage insurance (which
shall not be force-placed insurance) covering the Financed
Vehicle in accordance with its normal requirements;
(3) at the Closing Date or the related Subsequent Transfer Date, as
applicable, 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;
(4) at the Closing Date or the related Subsequent Transfer Date, as
applicable, each of the Receivables is or will be secured by a
perfected first priority security interest in the Financed
Vehicle in favor of MMCA; and
(5) each Receivable, at the time it was originated, complied, and
at the Closing Date or the related Subsequent Transfer Date, as
applicable, 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 only recourse the Noteholders, the Trust, the Indenture Trustee,
the Certificateholders or the Owner Trustee will have against MMCA and the
Seller for breach of any of the foregoing representations and warranties
with respect to a Receivable will be to require MMCA and the Seller to
repurchase the Receivable. See "--Mandatory Repurchase of Receivables." The
Owner Trustee, the Indenture Trustee, the Trust 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 the Seller
for a period of one year and a day after any securities rated by a Rating
Agency were issued by the Seller or by a trust for which the Seller was the
depositor.
To assure uniform quality in servicing the Receivables and to reduce
administrative costs, the Trust will appoint the Servicer as initial
custodian of the Receivables. The Servicer, in its capacity as custodian,
will hold the Receivables and all documents and instruments relating
thereto (each, a "Receivable File"), either directly or through
subservicers, on behalf of the Trust. The Receivables will not be stamped
or otherwise marked to reflect the sale and assignment of the Receivables
to the Trust 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
the Seller and by the Seller to the Trust will be filed, and the Servicer's
accounting records and computer systems will be marked to reflect such sale
and assignment. See "Description of MMCA Auto Owner Trust 1998-2" and
"Certain Legal Aspects of the Receivables."
Description of the Pre-Funding Period
The Trust will pay the purchase price for Subsequent Receivables with
funds on deposit in an account to be known as the "Pre-Funding Account".
The Seller will deposit an amount equal to $ (the "Initial Pre-Funded
Amount") in the Pre-Funding Account on the Closing Date. The Seller expects
to sell Subsequent Receivables to the Trust with an aggregate principal
balance approximately equal to the Initial Pre-Funded Amount. Prior to
being used to purchase Subsequent Receivables or paid to holders of the
Notes as described under "Description of the Notes-Mandatory Redemption,"
funds on deposit in the Pre-Funding Account will be invested from time to
time in Permitted Investments. The net earnings from the investment of
funds on deposit in the Pre-Funding Account will be transferred to the
Collection Account on a monthly basis on the Business Day preceding each
Payment Date.
The Pre-Funding Period will end earlier than the date specified above
if:
(1) the amount of funds on deposit in the Pre-Funding Account (the
"Pre-Funded Amount") is reduced to less than $100,000 because
of purchases of Subsequent Receivables;
(2) there is an Event of Default under the Indenture;
(3) there is no Event of Servicing Termination under the Sale and
Servicing Agreement; or
(4) the Seller or the Servicer becomes subject to certain
insolvency events.
Any funds remaining on deposit in the Pre-Funding Account at the end
of the Pre-Funding Period will be payable to the Noteholders as described
under "Description of the Notes-Mandatory Redemption."
Mandatory Repurchase of Receivables
In the event of a breach or failure to be true of any representation
or warranty with respect to the Receivables described in "--Sale and
Assignment of the Initial Receivables and the Subsequent Receivables,"
which breach or failure materially and adversely affects the interest of
the Trust in a Receivable, the Seller, unless such breach or failure has
been cured by the last day of the Collection Period which includes the 60th
day after the date on which the Seller becomes aware of, or receives
written notice from the Owner Trustee or the Servicer of, such breach or
failure, will be required to repurchase the Receivable from the Trust, and
MMCA will be required to repurchase such Receivable from the Seller, for
the Purchase Amount. The Purchase Amount will be payable on the Payment
Date immediately following such Collection Period. The obligation of the
Seller 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 Trust, the Indenture Trustee, the Certificateholders or the Owner
Trustee against the Seller and MMCA for any such uncured breach or failure.
The "Purchase Amount" means, with respect to a Payment Date and a
Receivable to be purchased or repurchased on such Payment Date by the
Seller or the Servicer, an amount equal to the sum of (a) the outstanding
principal balance of such Receivable as of the first day of the related
Collection Period and (b) an amount equal to the amount of accrued and
unpaid interest on such principal balance at the related APR from the date
a payment was last made by or on behalf of the obligor through the Due Date
for such Receivable in the related Collection Period and in the case of
clauses (a) and (b), after giving effect to the receipt of monies collected
on such Receivable in such Collection Period.
Description of Servicing Procedures
The Servicer will make reasonable efforts to collect all payments due
with respect to 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 with respect to comparable motor vehicle receivables
owned and/or serviced by the Servicer for itself or others.
Although it has no current plans to do so, the Servicer may enter
into subservicing agreements with Eligible Servicers for the subservicing
of Receivables. Any such subservicing agreements will contain provisions
substantially identical to those contained in the Sale and Servicing
Agreement and may contain such other provisions as 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 such
Receivables with another subservicer, provided that any such subservicer is
an Eligible Servicer. Notwithstanding any subservicing agreement, the
Servicer will remain obligated and liable to the Trust 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. References herein to actions required or permitted to be
taken, or restrictions on actions to be taken, by the Servicer include such
actions by a subservicer. References herein to amounts received by the
Servicer include amounts received by a subservicer.
"Eligible Servicer" means a person which, at the time of its
appointment as Servicer or as a subservicer:
(1) has a net worth of not less than $50,000,000;
(2) is servicing a portfolio of motor vehicle retail installment
sale contracts and/or motor vehicle loans;
(3) is legally qualified, and has the capacity, to service the
Receivables;
(4) has demonstrated the ability to service a portfolio of motor
vehicle retail installment sale contracts and/or motor vehicle
loans similar to the Receivables professionally and competently
in accordance with standards of skill and care that are
consistent with prudent industry standards; and
(5) is qualified and entitled to use pursuant to a license or other
written agreement, and agrees to maintain the confidentiality
of, 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 or obtains rights to use, or develops 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 Financed 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 (nor will it permit any subservicer to)
impair in any material respect the rights of the Trust, the
Indenture Trustee, the Noteholders, the Owner Trustee or the
Certificateholders in the Receivables, or, subject to clause
(3) below, otherwise amend or alter the terms thereof if, as a
result of such amendment or alteration, the interests of the
Trust, 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
Receivable, or extend, rewrite or otherwise modify the payment
terms of a Receivable; provided, however, that the Servicer may
extend any Receivable for credit-related reasons that would be
acceptable to the Servicer with respect to comparable motor
vehicle receivables that it services for itself or others in
accordance with its customary standards if the cumulative
extensions with respect to any Receivable shall not cause the
term of any such Receivable to extend beyond the Final
Scheduled Maturity Date; provided further that such extensions,
in the aggregate, do not exceed two months for each twelve
months of the original term of the Receivable.
In the event of a breach by the Servicer of any covenant described
above that materially and adversely affects the interests of the Trust in a
Receivable, the Servicer, unless such breach has been cured by the last day
of the Collection Period which includes the 60th day after the date on
which the Servicer becomes aware of, or receives written notice of, such
breach, will be required to purchase the Receivable from the Trust for the
Purchase Amount on the Payment Date immediately following such Collection
Period; provided, however, that with respect to a breach of the covenant
described in clause (3) of the preceding paragraph, the Servicer will be
required to purchase the related Receivable from the Trust at the end of
the Collection Period in which such breach occurs. The purchase obligation
will constitute the sole remedy available to the Noteholders, the Trust,
the Indenture Trustee, the Owner Trustee, or the Certificateholders against
the Servicer for any such uncured breach, except with respect to certain
indemnities of the Servicer under the Sale and Servicing Agreement related
thereto.
The Sale and Servicing Agreement will also generally require the
Servicer to charge off a Receivable in conformity with its normal practice
and to follow such of its normal collection practices and procedures as it
deems necessary or advisable, and 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 Contract at the time that the
related Financed Vehicle has been repossessed and sold, and the proceeds of
sale of the Financed Vehicle are applied against the amount owing on the
Contract, or at such time as MMCA determines that it will not recover the
Financed Vehicle. The Servicer may sell the Financed Vehicle securing such
Receivable at judicial sale or take any other action permitted by
applicable law. See "Certain Legal Aspects of the Receivables." The net
proceeds of such 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 Actuarial Advances and Balloon Payment Advances for which the Servicer
will be reimbursed in the manner described under "Description of the Notes-
Advances."
The Sale and Servicing Agreement will provide that the Servicer will
defend and indemnify the Trust, the Indenture Trustee, the Owner Trustee,
the Noteholders, the Certificateholders and the Seller against any and all
costs, expenses, losses, damages, claims, and 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 affiliate thereof of any Financed 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 any Basic Document
to which it is a party. The Servicer's obligations to indemnify the Trust,
the Indenture Trustee, the Owner Trustee, the Noteholders, the Seller 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 fee for servicing the
Receivables each Collection Period (the "Servicing Fee"), in an amount
equal to the product of one-twelfth of the Servicing Rate and the Pool
Balance as of the first day of such Collection Period. The "Servicing Rate"
will equal 1.00% per annum. 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, Rule of
78's Payments, all disposition fees paid with respect to Balloon Payment
Receivables and all administrative fees and charges and all late payment
fees paid with respect 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 (the "Total Servicing Fee"), will be paid to the Servicer on
each Payment Date out of Total Available Funds prior to distributions to
Noteholders and Certificateholders.
The Servicing Fee and the additional servicing compensation will
compensate the Servicer for performing the functions of a third party
servicer of Motor Vehicle Contracts and Truck 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 with respect 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 certain 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, the Seller or MMCA, will furnish to the Indenture
Trustee and the Owner Trustee, on or before May 31 of each year, beginning
May 31, 2000, a report of examination as to compliance by the Servicer
during the 12 months (or longer period in the case of the first such
report) ended the preceding December 31 with certain 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 May 31 of each
year, beginning May 31, 2000, of a certificate signed by an officer of the
Servicer stating that to the best of such officer's knowledge the Servicer
has fulfilled its obligations under the Sale and Servicing Agreement
throughout the 12 months (or longer period in the case of the first such
certificate) ended the preceding December 31 or, if there has been a
default in the fulfillment of any such obligation, describing each such
default.
Note Owners may obtain copies of such 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 thereunder, except
upon a determination that the Servicer's performance of such duties is no
longer permissible under applicable law. No such resignation 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 corporation or other entity into which the Servicer may be merged
or consolidated, or that may result from any merger, conversion or
consolidation to which the Servicer is a party, or any entity that may
succeed by purchase and assumption to all or substantially all of the
business of the Servicer, where the Servicer is not the surviving entity
and where such corporation or other entity is an Eligible Servicer and
assumes the obligations of the Servicer under the Sale and Servicing
Agreement, will be the successor to the 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 thereunder.
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 servicing 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 Sale and Servicing Agreement and the rights and
duties of the parties thereto and the interests of the Noteholders and the
Certificateholders thereunder.
Events of Servicing Termination
The following events will constitute "Events of Servicing
Termination" under the Sale and Servicing Agreement:
(1) any failure by the Servicer to deliver to the Owner Trustee or
the Indenture Trustee the monthly certificate pursuant to the
Sale and Servicing Agreement detailing the collections and
distributions for any Collection Period (which failure
continues beyond the earlier of three Business Days from the
date such Servicer's certificate was due to be delivered and
the related Payment Date);
(2) 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 following the due date (or,
in the case of a payment or deposit to be made no later than a
Payment Date, the failure to make such payment or deposit by
such Payment Date);
(3) 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 such failure is
given to the Servicer by the Indenture Trustee or the Owner
Trustee, as applicable (the "Applicable Trustee"), or to the
Seller, the Servicer, the Owner Trustee and the Indenture
Trustee by the holders of Notes or Certificates, as applicable,
evidencing not less than 25% in aggregate principal amount of
the outstanding Notes (voting as a group) or Certificates;
(4) certain events of bankruptcy, receivership, insolvency,
readjustment of debt, marshalling of assets and liabilities, or
similar proceedings with respect to the Seller or the Servicer
and certain actions by the Seller or the Servicer indicating
its insolvency or reorganization pursuant to bankruptcy,
receivership, conservatorship, insolvency, or similar
proceedings; and
(5) failure of the Servicer to be an Eligible Servicer.
The holders of Notes evidencing not less than 51% of the aggregate
principal amount of the outstanding Notes (voting as a group) (or the
holders of Certificates evidencing not less than a majority 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, waive any Event of Servicing
Termination except an event resulting from the failure to make any required
deposit to or payment from any account. For purposes of the foregoing,
Notes or Certificates owned by the Seller, the Servicer, or any affiliate
of either shall 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, until after the expiration of any applicable cure
period.
Rights of Indenture Trustee and Noteholders Upon an Event of Servicing
Termination
As long as an Event of Servicing Termination remains unremedied, the
Indenture Trustee or the holders of Notes evidencing not less than a
majority of the aggregate principal amount of the outstanding Notes may
terminate the Servicer's rights and obligations under the Sale and
Servicing Agreement, whereupon the Indenture Trustee or a servicer
appointed by the Indenture Trustee will succeed to all the
responsibilities, duties, and liabilities of the Servicer under the Sale
and Servicing Agreement. Thereafter, the successor Servicer will be
entitled to the compensation otherwise payable to the Servicer and will be
entitled to similar compensation arrangements. In the event that the
Indenture Trustee is unwilling or legally unable so to act, the Indenture
Trustee may appoint, or petition a court of competent jurisdiction for the
appointment of, an Eligible Servicer to act as successor to the outgoing
Servicer under the Sale and Servicing Agreement. In no event may the
servicing compensation to be paid to such 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 Transfer and Servicing Agreements
The Transfer and Servicing Agreements may be amended by the parties
thereto without the consent of the Noteholders or the Certificateholders,
to cure any ambiguity, to correct or supplement any provision therein which
may be inconsistent with any other provision therein, and to add, change or
eliminate any other provision of the applicable Transfer and Servicing
Agreement which are not inconsistent with the provisions of such Transfer
and Servicing Agreement; provided that such action will not, as evidenced
by an Opinion of Counsel to the Indenture Trustee and the Owner Trustee,
materially and adversely affect the interest of any Noteholder or
Certificateholder or, with respect to the Trust Agreement, have certain
adverse tax consequences.
The Transfer and Servicing Agreements may also be amended by the
parties thereto (with, in the case of the Sale and Servicing Agreement, the
consent of the Indenture Trustee and with, in the case of the
Administration Agreement, the consent of the Seller) with the consent of
the holders of Notes evidencing not less than 51% of the aggregate
principal amount of then outstanding Notes, voting as a group (except that
in the case of the Administration Agreement, the consent of holders of
Notes evidencing not less than a majority of the aggregate principal amount
of then outstanding Notes, voting as a group, will be required), and the
holders of Certificates evidencing not less than 51% of the Certificate
Balance (except that in the case of the Administration Agreement, the
consent of holders of Certificates evidencing not less than a majority of
the Certificate Balance will be required), for the purpose of adding any
provisions to or changing in any manner or eliminating any of the
provisions of the Transfer and Servicing Agreements or of modifying the
rights of Noteholders or Certificateholders.
However, no such amendment may:
(1) 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 Note Interest Rate, the Specified Reserve Balance or
the Maximum Supplemental Reserve Amount, without the consent of
all adversely affected Noteholders or Certificateholders;
(2) reduce the aforesaid percentage of the Notes and the
Certificates which is required to consent to any such
amendment, without the consent of all Noteholders or
Certificateholders affected thereby; or
(3) with respect to any amendment to the Sale and Servicing
Agreement or the Trust Agreement, adversely affect the ratings
of any class of Notes by the Rating Agencies without the
consent of holders of Notes evidencing not less than 66 2/3% of
the aggregate principal amount of the then outstanding Notes of
such class.
Additionally, with respect to an amendment of the Trust Agreement, an
Opinion of Counsel to the effect that such amendment will not have certain
adverse tax consequences shall be furnished to the Indenture Trustee and
the Owner Trustee. See "Description of the Terms of the Notes-Book Entry
Registration of the Notes."
Requirements for Termination of the Trust
The Trust shall terminate and be of no further force and effect upon
the earliest of (a) payment to Noteholders and Certificateholders of all
amounts required to be paid to them pursuant to the Indenture and the
Transfer and Servicing Agreements and (b) the Payment Date next succeeding
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 in the Trust in accordance with the
terms and priorities set forth in the Indenture and the Transfer and
Servicing Agreements.
In order to avoid excessive administrative expense, the Servicer will
be permitted, at its option, in the event that the Pool Balance as of the
close of business on the last day of a Collection Period has declined to
10% or less of the Initial Pool Balance, to purchase from the Trust, on any
Payment Date occurring in a subsequent Collection Period, all remaining
Receivables in the Trust 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 Trust
The Indenture Trustee will give written notice of termination of the
Trust to each Noteholder of record. The final distribution to any
Noteholder will be made only upon surrender and cancellation of such
holder's Note (whether a Definitive Note or the 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 in the Trust,
after the Indenture Trustee has taken certain measures to locate a
Noteholder and such measures have failed, will be distributed to the Seller
or as otherwise provided in the Transfer and Servicing Agreements.
Description of the Administration Agreement
MMCA, in its capacity as administrator (the "Administrator"), will
enter into an Administration Agreement (as amended and supplemented from
time to time, the "Administration Agreement") with the Trust and the
Indenture Trustee pursuant to which the Administrator will agree, to the
extent provided in the Administration Agreement, 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
thereto, the Administrator will be entitled to a monthly administration
fee, which fee will be paid by the Servicer.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
Bankruptcy Considerations Relating to the Transfer of the
Receivables by MMCA to the Seller
It is intended by MMCA and the Seller that the transfer of the
Receivables by MMCA to the Seller on the Closing Date and each Subsequent
Transfer Date under the Purchase Agreement constitute a "true sale" of the
Receivables to the Seller. If such transfers constitute such a "true sale,"
the Receivables and the proceeds thereof 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 subsequent to the
transfers of the Receivables to the Seller.
The Seller has received the advice of counsel to the effect that,
subject to certain facts, assumptions and qualifications, in the event MMCA
were to become the subject of a voluntary or involuntary case under the
United States Bankruptcy Code subsequent to the transfers of the
Receivables to the Seller on the Closing Date and each Subsequent Transfer
Date, the transfers of the Receivables by MMCA to the Seller pursuant to
the Purchase Agreement would be characterized as a "true sale" of the
Receivables from MMCA to the Seller and the Receivables and the proceeds
thereof would not form part of MMCA's bankruptcy estate pursuant to 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 ever becomes subject to 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 the
seller has advised the seller that the reasoning of the Octagon case
appears to be inconsistent with other precedent. In addition, the Permanent
Editorial Board of the UCC has issued an official commentary (PEB
Commentary No. 14) which characterizes the Octagon court's interpretation
of Article 9 of the UCC as erroneous. Such commentary states that nothing
in Article 9 is intended to prevent the transfer of ownership of accounts
or chattel paper.
Trust's Rights in the Receivables
The Receivables are "chattel paper" as defined in the Uniform
Commercial Code (the "UCC"). Pursuant to the UCC, for most purposes, a sale
of chattel paper is treated in a manner similar to a transaction creating a
security interest in chattel paper. MMCA and the Seller will cause
financing statements to be filed with the appropriate governmental
authorities to perfect the interest of the Seller and the Trust, as the
case may be, in its purchase of the Receivables.
Pursuant to the Sale and Servicing Agreement, the Servicer will hold
the Receivables, either directly or through subservicers, as custodian for
the Indenture Trustee and the Trust following the sale and assignment of
the Receivables to the Trust on the Closing Date and each Subsequent
Transfer Date. The Seller will take such action as is required to perfect
the rights of the Indenture Trustee and the Trust in the Receivables. The
Receivables will not be stamped, or otherwise marked, to indicate that they
have been sold to the Trust. 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 Trust's interest, the purchaser
(or secured party) will acquire an interest in the Receivables superior to
the interest of the Trust.
Under the Sale and Servicing Agreement, the Servicer will be
obligated from time to time to take such actions as are necessary to
protect and perfect the Trust's interest in the Receivables and their
proceeds.
Trust's Security Interests in the Financed Vehicles
Generally, retail installment sale contracts such as the Receivables
evidence the credit sale of automobiles and light- and medium-duty trucks
by dealers to obligors; the contracts also constitute personal property
security agreements and include grants of security interests in the
vehicles under the UCC. Perfection of security interests in motor vehicles
is generally 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 (including California, Florida and Texas, the states
in which the largest number of Financed Vehicles are located), a security
interest in the vehicle is perfected by notation of the secured party's
lien on the vehicle's certificate of ownership or title.
MMCA's practice is to take such action as is required in order to
perfect its security interest in a Motor Vehicle or Truck under the laws of
the jurisdiction in which the Motor Vehicle or Truck is registered. If
MMCA, because of clerical error or otherwise, has failed to take such
action with respect to a Financed Vehicle, it will not have a perfected
security interest in the Financed Vehicle, and its security interest may be
subordinate to the interests of, among others, subsequent purchasers of the
Financed Vehicle that give value without notice of MMCA's security interest
and to whom a certificate of ownership is issued in such purchaser's name,
holders of perfected security interests in the Financed Vehicle, and the
trustee in bankruptcy of the obligor. MMCA's security interest may also be
subordinate to such third parties in the event of fraud or forgery by the
obligor or administrative error by state recording officials or in the
circumstances noted below. As described more fully below, MMCA and the
Seller will warrant in the Purchase Agreement and the Sale and Servicing
Agreement, respectively, that an enforceable first priority perfected
security interest exists for the benefit of the Seller and the Trust,
respectively, with respect to each Financed Vehicle and will be required to
repurchase the related Receivable in the event of an uncured breach of such
warranty.
Pursuant to the Purchase Agreement, MMCA will assign its security
interests in the Financed Vehicles, along with the sale and assignment of
the Receivables, to the Seller, and pursuant to the Sale and Servicing
Agreement, the Seller will assign its security interests in the Financed
Vehicles, along with the sale and assignment of the Receivables, to the
Trust on the Closing Date and each Subsequent Transfer Date. The Servicer
will hold the certificates of title relating to the Financed Vehicles,
either directly or through subservicers, as custodian for the Indenture
Trustee and the Trust following such sale and assignment. The certificates
of title will not be endorsed or otherwise amended to identify the Trust as
the new secured party, however, because of the administrative burden and
expense involved. The Seller will assign its rights under the Purchase
Agreement to the Trust. See "Risk Factors-Interests of Other Persons in
Receivables and Vehicles Could Reduce the Funds Available to Make Payments
on the Notes."
In most states, an assignment of a security interest in a Financed
Vehicle along with the applicable Receivable is an effective conveyance of
a security interest without amendment of any lien noted on a vehicle's
certificate of title or ownership, and the assignee succeeds thereby to the
assignor's rights as secured party. However, because the Trust will not be
identified as the secured party on any such certificate, the security
interest of the Trust in any Financed Vehicle could be defeated through
fraud, forgery, negligence or error and may not be perfected in every
state. In most states, in the absence of fraud or forgery by the vehicle
owner or of fraud, forgery, negligence or error by MMCA or administrative
error by state or local agencies, the notation of MMCA's lien on the
certificates of ownership or possession of such certificates with such
notation will be sufficient to protect the Trust against the rights of
subsequent purchasers of a Financed Vehicle or subsequent lenders who take
a security interest in a Financed Vehicle. If there are any Financed
Vehicles as to which the Trust fails to obtain a perfected security
interest, its security interest would be subordinate to, among others,
subsequent purchasers of the Financed Vehicles and holders of perfected
security interests.
MMCA and the Seller will warrant in the Purchase Agreement and the
Sale and Servicing Agreement, respectively, as to each Receivable that, on
the Closing Date or the related Subsequent Transfer Date, there will exist
a valid, subsisting, and enforceable first priority perfected security
interest in the Financed Vehicle securing the Receivable (subject to any
statutory or other lien arising by operation of law after the Closing Date
or the related Subsequent Transfer Date which is prior to such security
interest) and, at such time as enforcement of such security interest is
sought, there shall exist a valid, subsisting, and enforceable first
priority perfected security interest in the Financed Vehicle for the
benefit of the Seller and the Trust, respectively (subject to any statutory
or other lien arising by operation of law after the Closing Date or the
related Subsequent Transfer Date which is prior to such security interest).
In the event of an uncured breach of such warranty, MMCA and the Seller,
pursuant to the terms of the Purchase Agreement and the Sale and Servicing
Agreement, respectively, will be required to repurchase such Receivable for
its Purchase Amount. This repurchase obligation will constitute the sole
remedy available to the Trust, the Noteholders and the Certificateholders
for such breach. MMCA's and the Seller's warranties with respect to
perfection and enforceability of a security interest in a Financed Vehicle
will not cover statutory or other liens arising after the Closing Date or
the related Subsequent Transfer Date by operation of law which are prior to
such security interest. Accordingly, any such lien would not by itself give
rise to a repurchase obligation on the part of MMCA and the Seller.
Under the laws of most states, a perfected security interest in a
motor vehicle continues for four months after the motor vehicle is moved to
a new state from the one in which it was initially registered and
thereafter until the motor vehicle owner re-registers the motor vehicle in
the new state, but in any event not beyond the surrender of the
certificate. A majority of states require surrender of a certificate of
title to re-register a motor vehicle and require that notice of such
surrender be given to each secured party noted on the certificate of title.
In those states, such as California, that require a secured party to take
possession of a certificate of title to perfect a security interest, the
secured party would learn of the re-registration through the request from
the obligor to surrender possession of the certificate of title. In those
states that require a secured party to note its lien on a certificate of
title to perfect a security interest but do not require possession of the
certificate of title, such as Texas and Florida the secured party would
learn of the re-registration through the notice from the state department
of motor vehicles that the certificate of title had been surrendered. The
requirements that a certificate of title be surrendered and that notices of
such surrender be given to each secured party also apply to
re-registrations effected following a sale of a motor vehicle. MMCA would
therefore have the opportunity to re-perfect its security interest in a
Financed Vehicle in the state of re-registration following relocation of
the obligor and would be able to require satisfaction of the related
Receivable following a sale of the Financed Vehicle. 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 Contracts, MMCA takes steps to effect reperfection upon receipt
of notice of re-registration or information from the obligor as to
relocation.
Under the laws of many states, including California, Florida and
Texas, liens for repairs performed on a motor vehicle and liens for unpaid
taxes take priority over a perfected security interest in the motor
vehicle. MMCA and the Seller will warrant in the Purchase Agreement and the
Sale and Servicing Agreement, respectively, that, as of the Closing Date or
the related Subsequent Transfer Date, to the best of its knowledge, no such
liens are pending. In the event of a breach of such warranty which has a
material and adverse effect on the interest of the Trust in a Receivable,
MMCA and the Seller, pursuant to the terms of the Purchase Agreement and
the Sale and Servicing Agreement, respectively, will be required to
repurchase the Receivable secured by the Financed Vehicle involved. This
repurchase obligation will constitute the sole remedy available to the
Trust, the Noteholders and the Certificateholders for such breach. Any
liens for repairs or taxes arising at any time after the Closing Date or
the related Subsequent Transfer Date during the term of a Receivable would
not give rise to a repurchase obligation on the part of MMCA and the
Seller.
Repossession of Financed Vehicles by Servicer on Behalf of the Trust
In the event of a default by an obligor, the holder of a receivable
has all the remedies of a secured party under the UCC, except where
specifically limited by other state laws or by contract. The remedies of a
secured party under the UCC include the right to repossession by means of
self-help, unless such means would constitute a breach of the peace.
Self-help repossession is the method employed by MMCA in most cases, and is
accomplished simply by taking possession of the motor vehicle. Generally,
where the obligor objects or raises a defense to repossession, a court
order must be obtained from the appropriate state court and the motor
vehicle must then be repossessed in accordance with that order. In the
event of a default by an obligor, many jurisdictions require that the
obligor be notified of the default and be given a time period within which
he may cure the default prior to or after repossession. Generally, this
right of reinstatement may be exercised on a limited number of occasions
during the term of a Receivable.
Servicer's Obligation to Provide Notice of Sale of a Financed Vehicle;
Obligor's Redemption Rights in a Financed Vehicle
The UCC and other state laws require the secured party to provide an
obligor with reasonable notice of the date, time, and place of any public
sale and/or the date after which any private sale of the collateral may be
held. The obligor generally has the right to redeem the collateral prior to
actual sale by paying the secured party the unpaid principal amount of the
obligation, accrued and unpaid interest, plus, in most cases, reasonable
expenses for repossessing, holding, and preparing the collateral for
disposition and arranging for its sale plus, in some jurisdictions,
reasonable attorneys' fees. In some states, the obligor has the right,
prior to actual sale, to reinstatement of the original loan terms and to
return of the collateral by payment of delinquent installments of the
unpaid amount and cure any other defaults.
Trust's Right to Deficiency Judgments Against Obligors
The proceeds of resale of Financed Vehicles generally will be applied
first to the expenses of repossession and resale and then to the
satisfaction of the indebtedness 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 such judgments. Any such deficiency judgment would be a personal
judgment against the obligor for the shortfall, however, and a defaulting
obligor may have very little capital or few sources of income available
following repossession. Therefore, in many cases, it may not be useful to
seek a deficiency judgment or, if one is obtained, it may be settled at a
significant discount or not paid at all. MMCA generally seeks to recover
any deficiency existing after repossession and sale of a motor vehicle.
Obligor's Right to Excess Proceeds Upon Sale of a Financed Vehicle
Occasionally, after resale of a repossessed motor vehicle and payment
of all expenses and indebtedness, there is a surplus of funds. In that
case, the UCC requires the secured party to remit the surplus to any other
holder of a lien with respect to the motor vehicle or, if no such
lienholder exists or funds remain after paying such other lienholder, to
the former owner of the motor vehicle.
Consumer Protection Laws Affecting the Trust's Rights under the Receivables
Numerous Federal and state consumer protection laws and related
regulations impose substantial requirements upon lenders and servicers
involved in consumer finance. These laws include the Truth-in-Lending Act,
the Equal Credit Opportunity Act, the Federal Trade Commission Act, the
Fair Credit Billing Act, the Fair Credit Reporting Act, the Fair Debt
Collection Practices Act, the Magnuson-Moss Warranty Act, the Federal
Reserve Board's Regulations B, M and Z, and other similar acts, state
adaptations of the Uniform Consumer Credit Code and state motor vehicle
retail installment sale acts, and other similar laws. Also, state laws
impose finance charge ceilings and other restrictions on consumer
transactions and require contract disclosures in addition to those required
under Federal law. These requirements impose specific statutory liabilities
upon creditors who fail to comply with their provisions. In some cases,
this liability could affect the ability of an assignee, such as the Trust,
to enforce consumer and commercial finance contracts such as the
Receivables. The "Credit Practices" Rule of the Federal Trade Commission
(the "FTC") imposes additional restrictions on contract provisions and
credit practices.
The FTC's holder-in-due-course rule (the "FTC Rule") has the effect
of subjecting a holder of an obligation created in a consumer credit
transaction to all claims and defenses which the purchaser could assert
against the seller of the goods. Liability under the FTC Rule is limited to
the amounts paid by the purchaser under the contract, and the holder of the
contract may also be unable to collect any balance remaining due thereunder
from the purchaser. The FTC Rule is generally duplicated by state statutes
or the common law in certain states. Accordingly, the Indenture Trustee and
the Trust, as holders of the Receivables, may be subject to claims or
defenses, if any, that the purchaser of a Financed Vehicle may assert
against the seller of such vehicle.
Under the motor vehicle dealer licensing laws of most states, sellers
of motor vehicles are required to be licensed to sell such vehicles at
retail sale and to originate certain installment sale contracts in
connection with such sales. In addition, with respect to used motor
vehicles, the FTC's Rule on Sale of Used Vehicles requires that all sellers
of used motor vehicles prepare, complete and display a "Buyer's Guide"
which explains the warranty coverage for such vehicles. Federal Odometer
Regulations promulgated under the Motor Vehicle Information and Cost
Savings Act require that all sellers of motor vehicles furnish a written
statement signed by the seller certifying the accuracy of the odometer
reading. If a seller is not properly licensed, or if either a Buyer's Guide
or Odometer Disclosure Statement was not properly provided to the purchaser
of a Financed Vehicle, such purchaser may be able to assert a defense as to
a retail installment sale contract against the seller of such vehicle or of
a subsequent holder of the retail installment sale contract.
Courts have applied general equitable principles to secured parties
pursuing repossession or litigation involving deficiency balances. These
equitable principles may have the effect of relieving an obligor from some
or all of the legal consequences of a default.
MMCA and the Seller will warrant in the Purchase Agreement and the
Sale and Servicing Agreement, respectively, as to each Receivable that such
Receivable complied at the time it was originated and as of the Closing
Date or the related Subsequent Transfer Date in all material respects with
all requirements of applicable law. If, as of the related Cutoff Date, an
obligor had a claim against the Trust for violation of any law, and such
claim materially and adversely affected the Trust's interest in a
Receivable, such violation would create an obligation of MMCA and the
Seller under the Purchase Agreement and the Sale and Servicing Agreement,
respectively, to repurchase the Receivable unless the breach were cured.
This repurchase obligation will constitute the sole remedy of the Trust,
the Noteholders, and the Certificateholders, against the Seller in respect
of any such uncured breach. See "Description of the Transfer and Servicing
Agreements-Sale and Assignment of the Initial Receivables and the
Subsequent Receivables."
Other Laws that Impose Limits on Enforcing the Receivables
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including insolvency 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 such
vehicle at the time of bankruptcy (as determined by the court), leaving the
party providing financing as a general unsecured creditor for the remainder
of the indebtedness. A bankruptcy court may also reduce the monthly
payments due under a contract or change the rate of interest and time of
repayment of the indebtedness.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Set forth below is a summary of certain United States Federal income
tax consequences of the purchase, ownership and disposition of the Notes.
This discussion is based upon current provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), existing and proposed Treasury
regulations thereunder, current administrative rulings, judicial decisions
and other applicable authorities in effect as of the date hereof, all of
which are subject to change, possibly with retroactive effect. There can be
no assurance that the Internal Revenue Service ("IRS") will not challenge
the conclusions reached herein, 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 Note Owners in light of their
personal investment circumstances nor, except for certain limited
discussions of particular topics, to certain types of Note Owners 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 Note Owners who hold the
Notes as "capital assets" within the meaning of Section 1221 of the Code.
Tax Treatment of the Notes and the Trust under Federal Income Tax Law
Tax Status of the Notes and the Trust. On the Closing Date, Skadden,
Arps, Slate, Meagher & Flom LLP ("Special Tax Counsel") will render its
opinion that for Federal income tax purposes under existing law, and
subject to customary assumptions and qualifications set forth therein: (a)
the Notes will be treated as debt, and (b) the Trust will not be classified
as an association (or publicly traded partnership) taxable as a
corporation. The Seller, 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 Trust.
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 Note Owner's method of tax accounting.
Original Issue Discount. A Note will be treated as issued with
Original Issue Discount ("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 (based on the
anticipated weighted average life of a Note) to its maturity.
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 such 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 Trust
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. Under applicable Treasury regulations governing the
accrual of OID (the "OID Regulations"), the stated redemption price at
maturity is the sum of all payments on the Note other than any "qualified
stated interest" payments. Qualified stated interest is defined as any one
of a series of payments equal to the product of the outstanding principal
balance of the Note and a single fixed rate, or certain variable rates of
interest that is unconditionally payable at least annually.
The holder of a Note issued with OID must include in gross income,
for all days during its taxable year on which it holds such Note, the sum
of the "daily portions" of such OID. Such daily portions are computed by
allocating to each day during a taxable year a pro rata portion of the OID
that accrued during the relevant accrual period. In the case of an
obligation the principal on which is subject to prepayment as a result of
prepayments on the underlying collateral (a "Prepayable Obligation"), such
as the Notes, OID is computed by taking into account the anticipated rate
of prepayments assumed in pricing the debt instrument (the "Prepayment
Assumption"). The Prepayment Assumption that will be used in determining
the rate of accrual of original issue discount, premium and market
discount, if any, is 1.5% ABS. The amount of OID that will accrue during an
accrual period (generally the period between interest payments or
compounding dates) is the excess (if any) of the sum of (a) the present
value of all payments remaining to be made on the Note as of the close of
the accrual period and (b) the payments during the accrual period of
amounts included in the stated redemption price of the Note, over the
"adjusted issue price" of the Note at the beginning of the accrual period.
An "accrual period" is the period over which OID accrues, and may be of any
length, provided that each accrual period is no longer than one year and
each scheduled payment of interest or principal occurs on either the last
day or the first day of an accrual period. The Trust intends to report OID
on the basis of an accrual period that corresponds to the interval between
Payment Dates. 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 such 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: (a) 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), (b) events which have occurred before the end of the accrual
period and (c) the assumption that the remaining payments will be made in
accordance with the original Prepayment Assumption.
The effect of this method is to increase the portions of OID required
to be included in income by a Noteholder to take into account prepayments
on the Receivables at a rate that exceeds the Prepayment Assumption, and to
decrease (but not below zero for any period) the portions of OID required
to be included in income by a Noteholder to take into account prepayments
with respect to the Receivables at a rate that is slower than the
Prepayment Assumption. Although OID will be reported to Noteholders based
on the Prepayment Assumption, 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
subsequent 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 such a holder who purchases such 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 the excess of (w) the purchaser's
adjusted basis in the Note immediately after purchase thereof over (x) the
adjusted issue price of the Note, and the denominator of which is the
excess of (y) all amounts remaining to be paid on the Note after the
purchase date, other than qualified stated interest, over (z) 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 (a) the issue price of the Note were
equal to the Noteholder's adjusted basis in the Note immediately after its
acquisition by the Noteholder; (b) the Note were issued on the Noteholder's
acquisition date; and (c) none of the interest payments on the Note were
"qualified stated interest." A Noteholder may make such an election for an
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 original issue
discount, will be subject to the "market discount rules" of section 1276 of
the Code. In general, these rules provide that if the Note Owner purchases
a Note at a market discount (that is, a discount from its stated redemption
price at maturity or, if the Notes were issued with OID, its original issue
price plus any accrued original issue discount that exceeds a de minimis
amount specified in the Code) and thereafter (a) recognizes gain upon a
disposition, or (b) receives payments of principal, the lesser of (x) such
gain or principal payment or (y) the accrued market discount will be taxed
as ordinary interest income. Generally, the accrued market discount will be
the total market discount on the Note multiplied by a fraction, the
numerator of which is the number of days the Note Owner held the Note and
the denominator of which is the number of days from the date the Note Owner
acquired the Note until its maturity date. The Note Owner may elect,
however, to determine accrued market discount under the constant-yield
method.
Limitations imposed by the 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 accrued market discount. A Note Owner may
elect to include market discount in gross income as it accrues and, if the
Note Owner makes such an election, is exempt from this rule. Any such
election will apply to all debt instruments acquired by the taxpayer on or
after the first day of the first taxable year to which such election
applies. The adjusted basis of a Note subject to such election will be
increased to reflect market discount included in gross income, thereby
reducing any gain or increasing any loss on a sale or taxable disposition.
Amortizable Bond Premium. In general, if a Note Owner purchases a
Note at a premium (that is, an amount in excess of the amount payable upon
the maturity thereof), such Note Owner will be considered to have purchased
such Note with "amortizable bond premium" equal to the amount of such
excess. Such Note Owner may elect to amortize such 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.
Such Note Owner's tax basis in the Note will be reduced by the amount of
the amortized bond premium. Any such election shall apply to all debt
instruments (other than instruments the interest on which is excludible
from gross income) held by the Note Owner at the beginning of the first
taxable year for which the election applies or thereafter acquired and is
irrevocable without the consent of the IRS. Bond premium on a Note held by
a Note 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 Note Owner's adjusted tax basis in a Note
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 Note 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. Such 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 or
rescind an acceleration of the Notes in some circumstances upon a vote of
the requisite percentage of Noteholders. Any such waiver or rescission, 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 Note Owner, the amount of interest paid on the Notes (and the
amount withheld for Federal income taxes, if any) for each calendar year,
except as to exempt recipients (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 Note Owner (other than Note Owners who are not subject
to the reporting requirements) will be required to provide, under penalties
of perjury, a certificate containing the Note Owner's name, address,
correct Federal taxpayer identification number (which includes a social
security number) and a statement that the Note Owner is not subject to
backup withholding. Should a non-exempt Note Owner fail to provide the
required certification or should the IRS notify the Indenture Trustee or
the Trust that the Note 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 Note Owner, and remit the
withheld amounts to the IRS as a credit against the Note 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 (each, a "Foreign
Person"). The term "Foreign Person" means any person other than (a) a
citizen or resident of the United States, (b) a corporation, partnership or
other entity organized in or under the laws of the United States, any state
or the District of Columbia (unless, in the case of a partnership, Treasury
regulations provide otherwise), (c) an estate the income of which is
includible in gross income for U.S. Federal income tax purposes, regardless
of its source or (d) a trust if a U.S. court is able to exercise primary
supervision over the administration of such trust and one or more U.S.
persons has authority to control all substantial decisions of the trust.
(a) Interest paid or accrued to a Foreign Person that is not
effectively connected with the conduct of a trade or business within
the United States by the Foreign Person will generally be considered
"portfolio interest" and generally will not be subject to United
States Federal income tax and withholding tax, as long as the Foreign
Person (1) is not actually or constructively a "10 percent
shareholder" of the Trust or a "controlled foreign corporation" with
respect to which the Trust is a "related person" within the meaning
of the Code, and (2) provides an appropriate statement, signed under
penalties of perjury, certifying that the Note Owner is a Foreign
Person and providing that Foreign Person's name and address. If the
information provided in this statement changes, the Foreign Person
must so inform the Indenture Trustee within 30 days of such change.
The statement generally must be provided in the year a payment occurs
or in either of the two preceding years. If such interest were not
portfolio interest, then it would be subject to United States Federal
income and withholding tax at a rate of 30 percent unless reduced or
eliminated pursuant to an applicable income tax treaty.
(b) Any capital gain realized on the sale or other taxable
disposition of a Note by a Foreign Person will be exempt from United
States Federal income and withholding tax, provided that (1) the gain
is not effectively connected with the conduct of a trade or business
in the United States by the Foreign Person, and (2) in the case of an
individual Foreign Person, the Foreign Person is not present in the
United States for 183 days or more in the taxable year and certain
other requirements are met.
(c) If the interest, gain or income on a Note held by a Foreign
Person is effectively connected with the conduct of a trade or
business in the United States by the Foreign Person, the Note Owner
(although exempt from the withholding tax previously discussed if a
duly executed Form 4224 is furnished) generally will be subject to
United States Federal income tax on the interest, gain or income at
regular Federal income tax rates. In addition, if the Foreign Person
is a foreign corporation, it may be subject to a branch profits tax
under the Code equal to 30 percent of its "effectively connected
earnings and profits" for the taxable year, as adjusted for certain
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, 1998. 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.
CERTAIN STATE TAX CONSEQUENCES
Set forth below is a summary of certain 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 Notes.
The Trust has been organized as a Delaware business trust, and the
Seller and Servicer are headquartered in the State of California; however,
in the opinion of Special Tax Counsel, assuming that the Notes are treated
as debt for federal income tax purposes, (a) the Notes will be treated as
debt for Delaware and California income and franchise tax purposes, (b) the
Trust will not be subject to Delaware or California income or franchise
taxes at the entity level, and (c) 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 advisers 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.
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 the eligibility of the Class A-1 Notes under Rule 2a-7 and
whether an investment by the money market fund in the Class A-1 Notes
satisfies the money market fund's investment policies and objectives.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and the Code impose certain restrictions on (a) employee benefit
plans (as defined in Section 3(3) of ERISA), (b) plans described in Section
4975(e)(1) of the Code, including individual retirement accounts or Keogh
Plans, (c) any entities whose underlying assets include plan assets by
reason of a plan's investment in such entities (each of (a), (b) and (c) a
"Benefit Plan") and (d) persons who have certain specified relationships to
a Benefit Plan ("Parties-in-Interest" under ERISA and "Disqualified
Persons" under the Code). Moreover, based on the reasoning of the United
States Supreme Court in John Hancock Life Mut. Ins. Co. v. Harris Trust and
Sav. Bank, 114 S.Ct. 517 (1993), the general account of an insurance
company may be deemed to include assets of Benefit Plans investing in its
general account (e.g., through the purchase of an annuity contract), and
the insurance company might be treated as a Party-in-Interest with respect
to a Benefit Plan by virtue of such an investment. ERISA also imposes
certain duties on persons who are fiduciaries of Benefit Plans subject to
ERISA. In addition, ERISA and the Code prohibit certain transactions
between a Benefit Plan and Parties-in-Interest or Disqualified Persons with
respect to such Benefit Plan.
Special ERISA Considerations for Employee Benefit Plans
Certain transactions involving the Trust might be deemed to
constitute prohibited transactions under ERISA and the Code if assets of
the Trust were deemed to be assets of a Benefit Plan. Under a regulation
issued by the United States Department of Labor (the "Plan Assets
Regulation"), the assets of the Trust would be treated as plan assets of a
Benefit Plan for purposes of ERISA and the Code only if the Benefit Plan
acquires an "Equity Interest" in the Trust and none of the exceptions
contained in the Plan Assets Regulation is applicable. An Equity Interest
is defined under the Plan Assets Regulation as an interest other than an
instrument which is treated as indebtedness under applicable local law and
which has no substantial equity features. The Seller believes that the
Notes should be treated as indebtedness without substantial equity features
for purposes of the Plan Assets Regulation. However, without regard to
whether the Notes are treated as an Equity Interest for such purposes, the
acquisition or holding of Notes by or on behalf of a Benefit Plan could be
considered to give rise to a prohibited transaction if the Trust, 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 such Benefit Plan. In such case,
certain exemptions from the prohibited transaction rules could be
applicable depending on the type and circumstances of the Benefit Plan
fiduciary making the decision to acquire a Note. Included among these
exemptions are: Prohibited Transaction Class Exemption ("PTCE") 90-1,
regarding investments by insurance company pooled separate accounts; PTCE
91-38, regarding investments by bank collective investment funds; PTCE
84-14, regarding transactions effected by "qualified professional asset
managers"; PTCE 95-60, regarding investments by insurance company general
accounts; and PTCE 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 liabilities under ERISA and the Code,
unless one or more statutory or administrative exemptions is available.
Special ERISA Considerations Applicable to Insurance Company
General Accounts
It should be noted that the Small Business Job Protection Act of 1996
added new Section 401(c) of ERISA relating to the status of the assets of
insurance company general accounts under ERISA and Section 4975 of the
Code. Pursuant to Section 401(c), the Department of Labor is required to
issue final regulations (the "General Account Regulations") with respect to
insurance policies issued on or before December 31, 1998 that are supported
by an insurer's general account. The General Account Regulations are to
provide guidance on which assets held by the insurer constitute "plan
assets" for purposes of the fiduciary responsibility provisions of ERISA
and Section 4975 of the Code. Section 401(c) also provides that, except in
the case of avoidance of the General Account Regulation and actions brought
by the Secretary of Labor relating to certain breaches of fiduciary duties
that also constitute breaches of state or federal criminal law, until the
date that is 18 months after the General Account Regulations become final,
no person shall be subject to liability under the fiduciary responsibility
and prohibited transaction provisions of ERISA and Section 4975 of the Code
on the basis of a claim that the assets of the general account of an
insurance company constitute the assets of any plan. The plan asset status
of insurance company separate accounts is unaffected by new Section 401(c)
of ERISA, 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 Section 401(c)
on their purchase of Notes.
As of the date hereof, the Department of Labor has issued proposed
regulations under Section 401(c). It should be noted that if the General
Account Regulations are adopted substantially in the form in which
proposed, the General Account Regulations may not exempt the assets of
insurance company general accounts from treatment as "plan assets" of plans
holding policies issued after December 31, 1998. The proposed regulations
should not, however, adversely affect the applicability of PTCE 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 Code and the potential consequences of such investment with
respect to their specific circumstances. Moreover, each Benefit Plan
fiduciary should take into account, among other considerations, whether the
fiduciary has the authority to make the investment; the composition of the
Benefit Plan's portfolio with respect to diversification by type of asset;
the Benefit Plan's funding objectives; the tax effects of the investment;
and 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
Subject to the terms and conditions set forth in an underwriting
agreement (the "Underwriting Agreement"), the Seller has agreed to sell to
each of the Underwriters named below (collectively, the "Underwriters"),
and each of the Underwriters, for whom Merrill Lynch, Pierce, Fenner &
Smith Incorporated is acting as representative (the "Representative"), has
severally agreed to purchase from the Seller, the principal amount of the
Notes set forth opposite its name below:
<TABLE>
<CAPTION>
Principal Principal Principal Principal
Amount Amount Amount Amount
of Class A-1 of Class A-2 of Class A-3 of Class B
Underwriters Notes Notes Notes Notes
- ------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Merrill Lynch, Pierce,
Fenner & Smith Incorporated..... $ $ $ $
--------- --------- --------- ---------
Total........................... $ $ $ $
========= ========= ========= =========
</TABLE>
In the Underwriting Agreement, the several Underwriters have agreed,
subject to the terms and conditions set forth therein, to purchase all the
Notes offered hereby if any of the Notes are purchased. In the event of a
default by any Underwriter, the Underwriting Agreement provides that, in
certain circumstances, purchase commitments of the non-defaulting
Underwriters may be increased or the Underwriting Agreement may be
terminated.
The price to the public, the underwriting discounts and commissions
of the Underwriters, the selling concessions that the Underwriters may
allow to certain dealers, the discounts that certain dealers may reallow to
certain other dealers and the net proceeds to the Seller in the offering of
the Notes, 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 and the Class B
Notes and as an aggregate dollar amount, will be as follows:
<TABLE>
<CAPTION>
Underwriting Selling Net Proceeds
Price to Discounts and Concessions, Reallowance, to the
Public (1) Commissions Not to Exceed Not to Exceed Seller(1)(2)
---------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Class A-1 Notes % % % % %
Class A-2 Notes % % % % %
Class A-3 Notes % % % % %
Class B Notes % % % % %
Total $ $ $ $ $
- --------------
(1) Plus accrued interest, if any, from , 1998.
(2) Before deducting expenses estimated at $ .
</TABLE>
Until the distribution of the Notes is completed, rules of the
Commission may limit the ability of the Underwriters and certain selling
group members to bid for and purchase the Notes. As an exception to these
rules, the Underwriters are permitted to engage in certain transactions
that stabilize the price of the Notes. Such transactions consist of bids or
purchases for the purpose of pegging, fixing or maintaining the price of
the Notes.
If the Underwriters create a short position in the Notes in
connection with this offering, (i.e., they sell more Notes than are set
forth on the cover page of this Prospectus), the Underwriters may reduce
that short position by purchasing Notes in the open market.
The Underwriters may also impose a penalty bid on certain
Underwriters and selling group members. This means that if the Underwriters
purchase Notes in the open market to reduce the Underwriters' short
position or to stabilize the price of the Notes, they may reclaim the
amount of the selling concession from any Underwriter or selling group
member who sold those Notes as part of the offering.
In general, purchases of a security for the purpose of stabilization
or to reduce a short position could cause the price of the security to be
higher than it might be in the absence of such purchases. The imposition of
a penalty bid might also have an effect on the price of a security to the
extent that it were to discourage resales of the security.
Neither the Seller nor any of the Underwriters makes any
representation or prediction as to the direction or magnitude of any effect
that the transactions described above may have on the price of the Notes.
In addition, neither the Seller nor any of the Underwriters makes any
representation that the Underwriters will engage in such transactions or
that such transactions, once commenced, will not be discontinued without
notice.
The closing of the sale of the Notes is conditioned on the issuance
of the Certificates.
The Indenture Trustee may, from time to time, invest the funds in the
Trust Accounts, the Negative Carry Account, the Yield Supplement Account,
the Reserve Account and the Supplemental Reserve Account in Permitted
Investments 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 the Seller have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933, as amended (the "Securities Act") or to contribute to payments the
Underwriters may be required to make in respect thereof.
Upon receipt of a request by an investor who has received an
electronic Prospectus from an Underwriter or a request by such investor's
representative within the period during which there is an obligation to
deliver a Prospectus, the Seller 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 certain Federal income tax matters will
be passed upon for the Seller 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 "Description of the Notes-Definitive Notes,"
all notices, reports and statements to Noteholders, including any monthly
and annual reports concerning the Trust and the Receivables, will be
prepared by the Servicer and sent on behalf of the Trust only to DTC or
Cede as nominee of DTC and registered holder of the Notes. See "Description
of the Terms of the Notes-Principal Amount of and Interest Rates on the
Notes," "-Book Entry Registration of the Notes" and "-Issuance of
Definitive Notes Upon the Occurrence of Certain Circumstances." Such
notices, reports and statements will not contain audited financial
statements with respect to the Trust. The Servicer also does not intend to
send any financial reports of the Servicer or the Seller to Noteholders.
WHERE YOU CAN FIND MORE INFORMATION
The Seller, as originator of the Trust, filed with the Securities and
Exchange Commission (the "Commission") a registration statement under the
Securities Act relating to the Notes. This Prospectus is part of the
registration statement, but the registration statement includes additional
information.
The Servicer, on behalf of the Seller in its capacity as originator
of the Trust, will file or cause to be filed with the Commission such
periodic reports with respect to the Trust as may be required under the
Securities and Exchange Act of 1934, as amended (the "Exchange Act") and
the rules and regulations of the Commission thereunder.
You may read and copy any notices, reports, statements or other
information the Servicer files or causes to be filed at the 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 Commission. Please call the Commission at (800)
SEC-0330 for further information on the operation of the public reference
rooms. Our filings with the Commission are also available to the public on
the 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 Commission.
INDEX OF PRINCIPAL TERMS
Page
----
ABS....................................................................24
ABS Tables.............................................................24
accrual period.........................................................75
Accrued Note Interest..................................................44
Actuarial Advance......................................................51
Actuarial Receivables..................................................22
Administration Agreement...............................................69
Administrator..........................................................69
Advance................................................................52
Applicable Trustee.....................................................67
APR....................................................................17
Available Funds........................................................42
Balloon Payment........................................................49
Balloon Payment Advance................................................52
Balloon Payment Pool Balance...........................................49
Balloon Payment Receivables............................................49
Basic Documents........................................................56
Benefit Plan...........................................................78
Business Day...........................................................36
Capped Receivables.....................................................23
Cede...................................................................32
Cedel..................................................................32
Cedel Participants.....................................................34
Certificate Balance....................................................44
Certificate Distribution Account.......................................39
Certificateholders.....................................................39
Certificates...........................................................10
Class A Noteholders....................................................37
Class A Noteholders' Percentage........................................38
Class A Notes..........................................................31
Class A-1 Final Payment Date...........................................38
Class A-1 Noteholders..................................................37
Class A-1 Notes........................................................31
Class A-1 Rate.........................................................36
Class A-2 Final Payment Date...........................................38
Class A-2 Noteholders..................................................37
Class A-2 Notes........................................................31
Class A-2 Rate.........................................................36
Class A-3 Final Payment Date...........................................38
Class A-3 Noteholders..................................................37
Class A-3 Notes........................................................31
Class A-3 Rate.........................................................36
Class B Final Payment Date.............................................38
Class B Noteholders....................................................37
Class B Noteholders' Percentage........................................38
Class B Notes..........................................................31
Class B Rate...........................................................36
Closing Date...........................................................17
Code...................................................................74
Collection Account.....................................................39
Collection Period......................................................42
Commission.............................................................82
Contracts..............................................................12
Cooperative............................................................34
Cutoff Date............................................................60
Dealer.................................................................12
Dealer Agreement.......................................................12
Defaulted Receivable...................................................43
Definitive Notes.......................................................35
Depositaries...........................................................33
Depositary.............................................................33
Determination Date.....................................................41
Direct Participants....................................................31
Disqualified Persons...................................................78
DTC....................................................................32
DTC Participants.......................................................32
Due Date...............................................................13
Eligible Servicer......................................................64
Equity Interest........................................................79
ERISA..................................................................78
Euroclear..............................................................34
Euroclear Operator.....................................................34
Euroclear Participants.................................................34
Events of Default......................................................54
Events of Servicing Termination........................................67
Exchange Act...........................................................82
Final Payment Date.....................................................38
Final Scheduled Maturity Date..........................................17
Financed Vehicles......................................................17
Foreign Person.........................................................77
FTC....................................................................73
FTC Rule...............................................................73
Gap Amount.............................................................50
General Account Regulations............................................79
Indenture..............................................................31
Indenture Trustee......................................................31
Indirect Participants..................................................32
Initial Cutoff Date....................................................60
Initial Pool Balance...................................................17
Initial Pre-Funded Amount..............................................63
Initial Receivables....................................................60
Insolvency Laws........................................................30
Interest Carryover Shortfall...........................................44
Interest Period........................................................36
IRS....................................................................74
Level Pay Balance......................................................49
Level Pay Pool Balance.................................................18
Liquidation Proceeds...................................................42
Maximum Negative Carry Amount..........................................47
Maximum Supplemental Reserve Amount....................................49
Mitsubishi Motors......................................................31
MMCA................................................................5, 31
MMSA...................................................................31
Monthly Accrued Note Interest..........................................44
Moody's................................................................40
Motor Vehicle..........................................................12
Motor Vehicle Contracts................................................12
Negative Carry Account.................................................47
Negative Carry Account Initial Deposit.................................47
Negative Carry Amount..................................................47
Note Interest Rate.....................................................44
Note Interest Rates....................................................36
Note Owner.............................................................32
Note Payment Account...................................................39
Note Percentage........................................................47
Note Pool Factor.......................................................30
Noteholders............................................................36
Notes..................................................................31
OID....................................................................74
OID Regulations........................................................75
Opinion of Counsel.....................................................59
Owner Trustee..........................................................10
Parties-in-Interest....................................................78
Payahead Account.......................................................39
Payaheads..............................................................39
Payment Date...........................................................36
Permitted Investments..................................................40
Plan Assets Regulation.................................................79
Pool Balance...........................................................17
Pre-Funded Amount......................................................63
Pre-Funded Percentage..................................................47
Pre-Funding Account................................................39, 63
Pre-Funding Period.....................................................60
Prepayable Obligation..................................................75
Prepayment Assumption..................................................75
Principal Carryover Shortfall..........................................45
Principal Distribution Amount..........................................45
PTCE...................................................................79
Purchase Agreement.....................................................17
Purchase Amount........................................................63
Qualified Institution..................................................40
Qualified Trust Institution............................................40
Rating Agency..........................................................40
Realized Losses........................................................45
Receivable File........................................................62
Receivables........................................................11, 60
Record Date............................................................36
Recoveries.............................................................42
Representative.........................................................80
Reserve Account........................................................47
Required Negative Carry Account Balance................................47
Rule of 78's...........................................................22
Rule of 78's Payment...................................................22
Sale and Servicing Agreement...........................................17
Scheduled Principal....................................................45
Securities Act.........................................................81
Seller.................................................................30
Servicer...............................................................31
Servicing Fee..........................................................65
Servicing Rate.........................................................65
Simple Interest Receivables............................................22
Special Tax Counsel....................................................74
Specified Reserve Balance..............................................49
Standard & Poor's......................................................40
Subsequent Cutoff Date.................................................60
Subsequent Receivables.................................................60
Subsequent Transfer Date...............................................60
Supplemental Reserve Account...........................................47
Terms and Conditions...................................................35
Total Available Funds..................................................44
Total Required Payment.................................................46
Total Servicing Fee....................................................66
Transfer and Servicing Agreements......................................60
Truck..................................................................12
Truck Contracts........................................................12
Trust..................................................................10
Trust Accounts.........................................................39
Trust Agreement........................................................10
Trust Property.........................................................11
U.S. Person............................................................89
UCC....................................................................70
Underwriters...........................................................80
Underwriting Agreement.................................................80
Weighted Average Rate..................................................40
Yield Supplement Account...............................................40
Yield Supplement Agreement.............................................40
Yield Supplement Amount................................................40
Yield Supplement Letter of Credit......................................41
ANNEX A
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered MMCA
Auto Owner Trust 1998-2 Asset Backed Notes will be available only in
book-entry form. Investors in the Notes may hold such Notes through any of
DTC, Cedel, or Euroclear. The 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.
Secondary market trading between investors holding Notes through
Cedel and Euroclear will be conducted in the ordinary way in accordance
with their normal rules and operating procedures and in accordance with
conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Notes directly
through DTC will be conducted according to the rules and procedures
applicable to U.S. corporate debt obligations.
Secondary cross-market trading between Cedel or Euroclear and DTC
Participants holding Notes will be effected on a delivery-against-payment
basis through the respective Depositaries of Cedel and Euroclear (in such
capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Notes will be subject to
U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing
organizations or their participants.
Initial Settlement
All Notes will be held in book-entry form by DTC in the name of Cede
& Co. as nominee of DTC. Investors' interests in the Notes will be
represented through financial institutions acting on their behalf as DTC
Participants. As a result, Cedel and Euroclear will hold positions on
behalf of their participants through their respective Depositaries, which
in turn will hold such positions in accounts as DTC Participants.
Investors electing to hold their Notes through DTC will follow the
settlement practices applicable to U.S. corporate debt obligations.
Investor securities custody accounts will be credited with their holdings
against payment in same-day funds on the settlement date.
Investors electing to hold their Notes through Cedel or Euroclear
accounts will follow the settlement procedures applicable to conventional
eurobonds, except that there will be no temporary global security and no
"lock-up" or restricted period. Notes will be credited to the securities
custody accounts on the settlement date against payment in the same-day
funds.
Secondary Market Trading
Since the purchaser determines the place of delivery, it is important
to establish at the time of the trade where both the purchaser's and
seller's accounts are located to ensure that settlement can be made on the
desired value date.
Trading between DTC Participants. Secondary market trading between
DTC Participants will be settled using the procedures applicable to U.S.
corporate debt obligations in same-day funds.
Trading between Cedel and/or Euroclear Participants. Secondary market
trading between Cedel Participants or Euroclear Participants will be
settled using the procedures applicable to conventional eurobonds in
same-day funds.
Trading between DTC seller and Cedel or Euroclear purchaser. When
Notes are to be transferred from the account of a DTC Participant to the
accounts of a Cedel Participant or a Euroclear Participant, the purchaser
will send instructions to Cedel or Euroclear through a Cedel Participant or
Euroclear Participant at least one business day prior to settlement. Cedel
or Euroclear, as the case may be, will instruct the respective Depositary
to receive the Notes against payment. Payment will include interest accrued
on the Notes from and including the last coupon payment date to and
excluding the settlement date, which with respect to the Class A-1 Notes
will be on the basis of a 360-day year and the actual number of days
elapsed and with respect to the Class A-2 Notes, the Class A-3 Notes and
the Class B Notes will be on the basis of a 360-day year consisting of
twelve 30-day months. Payment will then be made by the Depositary to the
DTC Participant's account against delivery of the Notes. After settlement
has been completed, the Notes will be credited to the respective clearing
system and by the clearing system, in accordance with its usual procedures,
to the Cedel Participant's or Euroclear Participant's account. The Notes
credit will appear the next day (European time) and the cash debit will be
back-valued to, and the interest on the 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 (i.e., the
trade fails), the Cedel or Euroclear cash debit will be valued instead as
of the actual settlement date.
Cedel Participants and Euroclear Participants will need to make
available to the respective clearing systems the funds necessary to process
same-day funds settlement. The most direct means of doing so is to
pre-position funds for settlement, either from cash on hand or existing
lines of credit, as they would for any settlement occurring within Cedel or
Euroclear. Under this approach, they may take on credit exposure to Cedel
or Euroclear until the Notes are credited to their accounts one day later.
As an alternative, if Cedel or Euroclear has extended a line of
credit to them, Cedel Participants or Euroclear Participants can elect not
to pre-position funds and allow that credit line to be drawn upon the
finance settlement. Under this procedure, Cedel Participants or Euroclear
Participants purchasing Notes would incur overdraft charges for one day,
assuming they cleared the overdraft when the Notes were credited to their
accounts. However, interest on the Notes would accrue from the value date.
Therefore, in many cases the investment income on the Notes earned during
that one-day period may substantially reduce or offset the amount of such
overdraft charges, although this result will depend on each Cedel
Participant's or Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours,
DTC Participants can employ their usual procedures for sending Notes to the
respective Depositary for the benefit of Cedel Participants or Euroclear
Participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC Participants a cross-market transaction
will settle no differently than a trade between two DTC Participants.
Trading between Cedel or Euroclear seller and DTC purchaser. Due to
time zone differences in their favor, Cedel Participants and Euroclear
Participants may employ their customary procedures for transactions in
which Notes are to be transferred by the respective clearing system,
through the respective Depositary, to a DTC Participant. The seller will
send instructions to Cedel or Euroclear through a Cedel Participant or
Euroclear Participant at least one business day prior to settlement. In
these cases, Cedel or Euroclear will instruct the respective Depositary, as
appropriate, to deliver the bonds to the DTC Participant's account against
payment. Payment will include interest accrued on the Notes from and
including the last coupon payment date to and excluding the settlement
date, which with respect to the Class A-1 Notes will be on the basis of a
360-day year and the actual number of days elapsed and with respect to the
Class A-2 Notes, the Class A-3 Notes and the Class B Notes will be on the
basis of a 360-day year consisting of twelve 30-day months. The payment
will then be reflected in the account of the Cedel Participant or Euroclear
Participant the following day, and receipt of the cash proceeds in the
Cedel Participant's or Euroclear Participant's account would be back-valued
to the value date (which would be the preceding day, when settlement
occurred in New York). Should the Cedel Participant or Euroclear
Participant have a line of credit with its respective clearing system and
elect to be in debt in anticipation of receipt of the sale proceeds in its
account, the back-valuation will extinguish any overdraft charges incurred
over that one-day period. If settlement is not completed on the intended
value date (i.e., the trade fails), receipt of the cash proceeds in the
Cedel Participant's or Euroclear Participant's account would instead be
valued as of the actual settlement date.
Finally, day traders that use Cedel or Euroclear and that purchase
Notes from DTC Participants for delivery to Cedel Participants or Euroclear
Participants should note that these trades would automatically fail on the
sale side unless affirmative action were taken. At least three techniques
should be readily available to eliminate this potential problem:
(a) borrowing through Cedel or Euroclear for one day (until the
purchase side of the day trade is reflected in their Cedel or
Euroclear accounts) in accordance with the clearing system's
customary procedures;
(b) borrowing the Notes in the U.S. from a DTC Participant no
later than one day prior to settlement, which would give the Notes
sufficient time to be reflected in their Cedel or Euroclear account
in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of
the trade so that the value date for the purchase from the DTC
Participant is at least one day prior to the value date for the sale
to the Cedel Participant or Euroclear Participant.
Certain U.S. Federal Income Tax Documentation Requirements
A beneficial owner of Notes holding securities through Cedel or
Euroclear (or through DTC if the holder has an address outside the U.S.)
will be subject to the 30% U.S. withholding tax that generally applies to
payments of interest (including original issue discount) on registered debt
issued by U.S. Persons, unless (a) each clearing system, bank, or other
financial institution that holds customers' securities in the ordinary
course of its trade or business in the chain of intermediaries between such
beneficial owner and the U.S. entity required to withhold tax complies with
applicable certification requirements and (b) such beneficial owner takes
one of the following steps to obtain an exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of Notes
that are non-U.S. Persons can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (Certificate of Foreign
Status). If the information shown on Form W-8 changes, a new Form W-8 must
be filed within 30 days of such change.
Exemption for non-U.S. Persons with effectively connected income
(Form 4224). A non-U.S. Person, including a non-U.S. corporation or bank
with a U.S. branch, for which the interest income is effectively connected
with its conduct of a trade or business in the United States, can obtain an
exemption from the withholding tax by filing Form 4224 (Exemption from
Withholding of Tax on Income Effectively Connected with the Conduct of a
Trade or Business in the United States).
Exemption or reduced rate for non-U.S. persons resident in treaty
countries (Form 1001). Non-U.S. Persons that are Note Owners residing in a
country that has a tax treaty with the United States can obtain an
exemption or reduced tax rate (depending on the treaty terms) by filing
Form 1001 (Ownership, Exemption or Reduced Rate Certificate). If the treaty
provides only for a reduced rate, withholding tax will be imposed at that
rate unless the filer alternatively files Form W-8. Form 1001 may be filed
by the Note Owner or his agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a
complete exemption from the withholding tax by filing Form W-9 (Payer's
Request for Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The Note Owner or, in
the case of a Form 1001 or a Form 4224 filer, his agent, files by
submitting the appropriate form to the person through whom it holds (the
clearing agency, in the case of persons holding directly on the books of
the clearing agency). Form W-8 and Form 1001 are effective for three
calendar years and Form 4224 is effective for one calendar year.
The term "U.S. Person" means (a) a citizen or resident of the United
States, (b) a corporation or partnership (including an entity treated as a
corporation or partnership) organized in or under the laws of the United
States or any state or the District of Columbia (unless, in the case of a
partnership, Treasury regulations provide otherwise), (c) an estate the
income of which is includible in gross income for United States tax
purposes, regardless of its source, or (iv) a trust if a U.S. court is able
to exercise primary supervision over the administration of such trust and
one or more U.S. persons has the authority to control all substantial
decisions of the trust. This summary does not deal with all aspects
of U.S. Federal income tax withholding that may be relevant to foreign
holders of the Notes. Investors are advised to consult their own tax
advisors for specific tax advice concerning their holding and disposing of
the Notes.
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 generally will be effective for payments made after December
31, 1998. 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.
MMCA AUTO OWNER TRUST 1998-2
$ % Class A-1 Asset Backed Notes
$ % Class A-2 Asset Backed Notes
$ % Class A-3 Asset Backed Notes
$ % Class B Asset Backed Notes
MMCA Auto Receivables, Inc.
Seller
[LOGO]
Servicer
------------------------
PROSPECTUS
------------------------
Underwriters of the Class A Notes
Merrill Lynch & Co. [ ]
Underwriter of the Class B Notes
Merrill Lynch & Co.
You should rely only on the information contained in or incorporated by
reference 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 with respect to 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 , 1999.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
Registration Fee.............................................. $ *
Printing and Engraving........................................ $ *
Trustee'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 supplied by amendment.
Item 14. Indemnification of Directors and Officers
Section 145 of the General Corporation Law of Delaware provides as
follows:
145 Indemnification of Officers, Directors, Employees and Agents;
Insurance
(a) A corporation shall have power to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the corporation) by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by the
person in connection with such action, suit or proceeding if the person
acted in good faith and in a manner the person reasonably believed to be in
or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe
the person's conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which
the person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that the person's conduct was
unlawful.
(b) A corporation shall have power to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that the person is or
was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by the person in connection with the defense or
settlement of such action or suit if the person acted in good faith and in
a manner the person reasonably believed to be in or not opposed to the best
interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the
extent that the Court of Chancery or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person
is fairly and reasonably entitled to indemnity for such expenses which the
Court of Chancery or such other court shall deem proper.
(c) To the extent that a present or former director or officer of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
this section, or in defense of any claim, issue or matter therein, such
person shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification
of the present or former director, officer, employee or agent is proper in
the circumstances because the person has met the applicable standard of
conduct set forth in subsections (a) and (b) of this section. Such
determination shall be made, with respect to a person who is a director or
officer at the time of determination, (1) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even
though less than a quorum, (2) by a committee of such directors designated
by majority vote of such directors, even though less than a quorum, (3) if
there are no such directors, or if such directors so direct, by independent
legal counsel in a written opinion, or (4) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that such person is not
entitled to be indemnified by the corporation as authorized in this
section. Such expenses (including attorneys' fees) incurred by former
directors and officers or other employees and agents may be so paid upon
such terms and conditions, if any, as the corporation deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any bylaw, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action
in such person's official capacity and as to action in another capacity
while holding such office.
(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against such person and incurred by such person in
any such capacity, or arising out of such person's status as such, whether
or not the corporation would have the power to indemnify such person
against such liability under this section.
(h) For purposes of this section, references to "the corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as such
person would have with respect to such constituent corporation if its
separate existence had continued.
(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include
any excise taxes assessed on a person with respect to any employee benefit
plan; and references to "serving at the request of the corporation" shall
include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such
director, officer, employee or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner such person reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive jurisdiction
to hear and determine all actions for advancement of expenses or
indemnification brought under this section or under any bylaw, agreement,
vote of stockholders or disinterested directors, or otherwise. The Court of
Chancery may summarily determine a corporation's obligation to advance
expenses (including attorneys' fees).
Article VIII of the By-Laws of MMCA Auto Receivables, Inc. provides as
follows:
Section 1. Definitions. For purposes of this Article VIII: (i)
"Corporation" shall be deemed to mean this Corporation and shall include,
in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power
and authority to indemnify its directors, officers, employees and agents so
that any person who is or was a director, officer, employee or agent of
such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of
another legal entity shall stand in the same position under the provisions
of this Article VIII with respect to the resulting or surviving corporation
as he would have with respect to such constituent corporation if its
separate existence had continued; (ii) a "legal entity" is a corporation,
partnership, joint venture, trust or other enterprise; (iii) a "proceeding"
is any action, suit, or proceeding, whether civil, criminal,
administrative, arbitrative or investigative, including an action or suit
by or in the right of the Corporation to procure a judgment in its favor,
and any appeal in such an action, suit, or proceeding, and any inquiry or
investigation that could lead to such action, suit or proceeding; and (iv)
a "qualified position" with respect to any legal entity is a position as a
director or an officer of such legal entity or a position held by a
director, officer or employee of such legal entity which does or might
constitute him a fiduciary with respect to any employee benefit plan for
the employees of such legal entity under any Federal or state law
regulating employee benefit plans.
Section 2. Mandatory Indemnification. The Corporation shall indemnify
each person who was or is a party or is threatened to be made a party to
any proceeding by reason of the fact that he is serving in a qualified
position with respect to the Corporation or is serving in a similar
capacity with respect to any other legal entity at the request of the
Corporation, against all expenses (including attorneys' fees and costs of
investigation and litigation), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with any
such proceeding to the maximum extent permitted under the General
Corporation Law of the State of Delaware (the "Delaware Law", which term
shall be deemed to include the General Corporation Law of the State of
Delaware or any successor statute or section thereof, as now written or
hereafter amended). The termination of any proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not of itself create a presumption that such person acted
in such a manner as to make him ineligible for indemnification. The right
of a person to be indemnified hereunder shall be a contract right and shall
include the right to be paid by the Corporation all expenses incurred in
defending any such proceeding in advance of its final disposition upon
compliance with the provisions of Delaware Law then in effect concerning
advancement of expenses.
Section 3. Permissive Indemnification. In addition to the
indemnification provided for in Section 2, the Corporation shall have the
power to indemnify or contract in advance to indemnify, to a lesser or the
same extent that indemnification is required under Section 2, any person
who was or is a party or is threatened to be made a party to any proceeding
by reason of the fact that he is serving in any capacity with respect to
the Corporation or with respect to any other legal entity at the request of
the Corporation.
Section 4. Determination that Indemnification is Proper. Any
indemnification under this Article VIII (unless ordered by a court) shall
be made by the Corporation only as authorized in the specific case upon a
determination that such indemnification is permitted under Delaware Law,
or, in the case of indemnification under Section 3, is proper because the
requirements specified by the Corporation with respect to such
indemnification have been met. Such determination shall be made (i) by the
Board of Directors by a majority vote of a quorum consisting of directors
who neither are nor were parties to the proceeding, or (ii) if such a
quorum is not obtainable or, even though obtainable, a majority of
disinterested directors so directs, by independent legal counsel in a
written opinion, or (iii) by the stockholders. In making a determination
the directors may rely, as to all questions of law, on the advice of
independent legal counsel.
Section 5. Claims for Indemnification or Advances. If a claim for
indemnification or advancement of expenses hereunder is not paid in full by
the Corporation within 60 days after a written claim has been received by
the Corporation, the claimant may at any time thereafter bring suit against
the Corporation to recover the unpaid amount of the claim, and if
successful in whole or in part, the claimant shall be entitled to be paid
the expenses of prosecuting such claim. It shall be a defense to any such
action that such indemnification or advancement of costs of defense are not
permitted under Delaware Law, but the burden of proving such defense shall
be on the Corporation.
Section 6. Miscellaneous. Every reference in this Article VIII to
persons who are entitled to indemnification and advancement of expenses
shall include all persons who formerly occupied any of the positions
hereinabove set forth in this Article VIII, to the extent they would have
been entitled to indemnification and advancement of expenses under the
provisions of this Article VIII if they still held such positions and their
respective heirs, executors and administrators. Indemnification or
advancement of expenses provided pursuant to the foregoing provisions of
this Article VIII shall not be exclusive of any other rights of
indemnification or advancement of expenses to which any person may be
entitled. Such rights include, but are not limited to, any and all rights
under insurance policies that may be purchased and maintained by the
Corporation or others, whether or not the Corporation would have the power
to indemnify such person in the particular instance under the provisions of
this Article VIII, but no person shall be entitled to indemnification by
the Corporation to the extent he is indemnified by any other party,
including an insurer.
Section 7. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer or
employee of the Corporation, or is or was serving at the request of the
Corporation as a director, officer or employee of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising
out of his status as such, whether or not the Corporation would have the
power or the obligation to indemnify him against such liability under the
provisions of this Article VIII.
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 - Certificate of Incorporation of the Seller*
3.2 - Bylaws of the Seller**
4.1 - Form of Amended and Restated Trust Agreement of the Trust
between the Seller and the Owner Trustee****
4.2 - Form of Sale and Servicing Agreement among the Seller, the
Servicer and the Trust****
4.3 - Form of Indenture between the Trust and the Indenture Trustee****
4.4 - Form of Administration Agreement among the Trust, 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 the Seller****
10.2 - 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 the Seller****
25 - Form T-1 of Indenture Trustee****
- -----------
* Incorporated by reference to Exhibit 3.1 of Registration Statement
No. 33-67014.
** Incorporated by reference to Exhibit 3.2 of Registration Statement
No. 33-67014.
*** Previously filed.
**** 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. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the 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 Amendment No. 2 to Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Cypress, State of California, on December 1, 1998.
MMCA AUTO RECEIVABLES, INC.
By: /s/ Hiroshi Yajima*
----------------------------
Hiroshi Yajima
Director and President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 2 to Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated:
Signature Title Date
/s/ Hiroshi Yajima * Director and President December 1, 1998
- ------------------------------ (principal executive
Hiroshi Yajima officer)
/s/ Hideyuki Kitamura * Secretary and Treasurer December 1, 1998
- ------------------------------ (principal financial
Hideyuki Kitamura officer and principal
accounting officer)
/s/ John Maynard * Director December 1, 1998
- ------------------------------
John Maynard
/s/ Masaki Takahashi * Director December 1, 1998
- ------------------------------
Masaki Takahashi
/s/ Charles A. Tredway * Director December 1, 1998
- ------------------------------
Charles A. Tredway
/s/ Yasuhiro Hagihara * Director December 1, 1998
- ------------------------------
Yasuhiro Hagihara
*By: /s/ J. Sean Plater
--------------------------
J. Sean Plater
Attorney-in-fact
INDEX TO EXHIBITS
Sequentially
Exhibit Numbered
Number Description Page
- ------- ----------- ------------
1.1 Form of Underwriting Agreement****
3.1 Certificate of Incorporation of the Seller*
3.2 Bylaws of the Seller**
4.1 Form of Amended and Restated Trust Agreement of the
Trust between the Seller and the Owner Trustee****
4.2 Form of Sale and Servicing Agreement among the Seller,
the Servicer and the Trust****
4.3 Form of Indenture between the Trust and the Indenture
Trustee****
4.4 Form of Administration Agreement among the Trust, the
Administrator Indenture 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 the Seller****
10.2 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 the Seller****
25 Form T-1 of Indenture Trustee****
- -----------
* Incorporated by reference to Exhibit 3.1 of Registration Statement
No. 33-67014.
** Incorporated by reference to Exhibit 3.2 of Registration Statement
No. 33-67014.
*** Previously filed.
**** To be filed by amendment.
