REGISTRATION NO. 33-52597
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_________________________
CAPITAL AUTO RECEIVABLES, INC.
(ORIGINATOR OF THE TRUSTS DESCRIBED HEREIN)
A DELAWARE CORPORATION-I.R.S. EMPLOYER IDENTIFICATION NO. 38-2963650
_________________________
CORPORATION TRUST CENTER
1209 ORANGE STREET
WILMINGTON, DELAWARE 19801
(302-658-7851)
AGENT FOR SERVICE
F. A. HENDERSON, VICE PRESIDENT
CAPITAL AUTO RECEIVABLES, INC.
3044 WEST GRAND BOULEVARD
DETROIT, MICHIGAN 48202
(313-556-1508)
WITH A COPY TO:
ROBERT L. SCHWARTZ, GENERAL COUNSEL
CAPITAL AUTO RECEIVABLES, INC.
3031 WEST GRAND BOULEVARD
DETROIT, MICHIGAN 48232
_________________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after the effective date of this Registration Statement as
determined by market conditions.
If the only securities being registered on this form are to be offered
pursuant to dividend or interest reinvestment plans, please check the
following box. / /
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, other than securities offered only in connection with dividend or
interest reinvestment plans, please check the following box. /X/
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Maximum Maximum
Offering Aggregate Amount of
Securities Amount to be Price Per Offering Registration
Being Registered Registered (1) Unit(2) Price(2) Fee
___________________________________________________________________________
Asset Backed
Securities . . . $6,193,150,815.02 100% $6,193,150,815.02 $2,135,584.20
___________________________________________________________________________
(1) $1,806,849,184.98 aggregate principal amount of Asset Backed Securities
registered by the Registrant under Registration Statement No. 33-49307
referred to below and not previously sold are consolidated in this
Registration Statement pursuant to Rule 429. All registration fees in
connection with such unsold amount of Asset Backed Securities have
previously been paid under Registration Statement No. 33-49307. The
total amount registered under this Registration Statement as so
consolidated as of the date of this filing is $8,000,000,000.
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(2) Estimated solely for the purpose of calculating the registration fee.
_________________________
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 COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
PURSUANT TO RULE 429 UNDER THE SECURITIES ACT OF 1933, THE PROSPECTUS
WHICH IS PART OF THIS REGISTRATION STATEMENT IS A COMBINED PROSPECTUS AND
INCLUDES ALL OF THE INFORMATION CURRENTLY REQUIRED IN A PROSPECTUS RELATING
TO THE SECURITIES COVERED BY REGISTRATION STATEMENT NO. 33-49307 PREVIOUSLY
FILED BY THE REGISTRANT. THIS REGISTRATION STATEMENT, WHICH RELATES TO
$8,000,000,000 AGGREGATE PRINCIPAL AMOUNT OF ASSET BACKED SECURITIES,
CONSTITUTES POST-EFFECTIVE AMENDMENT NO. 1 TO REGISTRATION STATEMENT NO. 33-
49307.
CAPITAL AUTO RECEIVABLES ASSET TRUSTS
ASSET BACKED NOTES
ASSET BACKED CERTIFICATES
_________________________
CAPITAL AUTO RECEIVABLES, INC.
SELLER
_________________________
GENERAL MOTORS ACCEPTANCE CORPORATION
SERVICER
_________________________
The Asset Backed Notes (the "Notes") and the Asset Backed Certificates
(the "Certificates" and, collectively with the Notes, the "Securities")
described herein may be sold from time to time in one or more series, in
amounts, at prices and on terms to be determined at the time of sale and to
be set forth in a supplement to this Prospectus (a "Prospectus Supplement").
Each series of Securities will include one or more classes of Notes and one
or more classes of Certificates.
The Notes and the Certificates of each series will be issued by a trust
to be formed with respect to such series (each, a "Trust"). The property of
each Trust will include a pool of retail instalment sale contracts secured by
automobiles and light trucks (the "Receivables"), certain monies due or
received thereunder on and after the Cutoff Date set forth in the related
Prospectus Supplement, security interests in the vehicles financed thereby and
certain other property. Each Trust will be formed pursuant to a Trust
Agreement (the "Trust Agreement") to be entered into between Capital Auto
Receivables, Inc., as Seller (the "Seller"), and the Owner Trustee specified
in the related Prospectus Supplement (the "Owner Trustee"). The Notes of each
series will be issued and secured pursuant to an Indenture (the "Indenture")
between the Trust and the Indenture Trustee specified in the related
Prospectus Supplement (the "Indenture Trustee").
Except as otherwise provided in the related Prospectus Supplement, each
class of Securities of any series will represent the right to receive a
specified amount of payments of principal and interest on the related
Receivables in the manner described herein and in the related Prospectus
Supplement. The right of each class of Securities to receive payments may be
senior or subordinate to the rights of one or more of the other classes of
such series. A series may include two or more classes of Notes or
Certificates which differ as to the timing and priority of payment, interest
rate or amount of distributions in respect of principal or Certificate
Balance, as applicable, or interest or both. A series may include one or more
classes of Notes or Certificates entitled to principal payments or
distributions in respect of Certificate Balance, with disproportionate,
nominal or no interest distributions, or to interest distributions, with
disproportionate, nominal or no principal payments or distributions in respect
of Certificate Balance. Distributions on Certificates of a series will be
subordinated in priority to payments due on the related Notes to the extent
described herein and in the related Prospectus Supplement. The Certificates
will represent fractional undivided interests in the related Trust. At the
time of issuance, each series will be rated investment grade by at least one
Rating Agency.
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EXCEPT AS OTHERWISE PROVIDED IN THE RELATED PROSPECTUS SUPPLEMENT, THE
ONLY OBLIGATIONS OF THE SELLER OR OF GENERAL MOTORS ACCEPTANCE CORPORATION AS
ORIGINATOR OF RECEIVABLES WITH RESPECT TO A SERIES OF SECURITIES WILL BE
PURSUANT TO CERTAIN REPRESENTATIONS AND WARRANTIES MADE BY SUCH PARTY.
GENERAL MOTORS ACCEPTANCE CORPORATION WILL BE THE SERVICER (THE "SERVICER")
FOR EACH SERIES. THE OBLIGATIONS OF THE SERVICER WILL BE LIMITED TO ITS
CONTRACTUAL SERVICING OBLIGATIONS (WHICH INCLUDE ITS LIMITED OBLIGATION TO
MAKE CERTAIN ADVANCES IN THE EVENT OF DELINQUENCIES IN PAYMENTS ON
RECEIVABLES).
Each class of Securities will represent the right to receive payments or
distributions in the amounts, at the rates, and on the dates set forth in the
related Prospectus Supplement. The rate of payment in respect of principal
on Notes and distributions in respect of Certificate Balance on Certificates
of any class will depend on the priority of payment of such class and the rate
and timing of payments (including prepayments, defaults, liquidations and
repurchases of Receivables) on the related Receivables. A rate of payment
lower or higher than that anticipated may affect the weighted average life of
each class of Securities in the manner described herein and in the related
Prospectus Supplement.
There will be no secondary market for the Notes or the Certificates prior
to the offering thereof. There can be no assurance that a secondary market
for the Notes or the Certificates will develop or, if it does develop, that
it will continue. The Notes and the Certificates will not be listed on any
securities exchange.
Unless otherwise provided in the related Prospectus Supplement, the Notes
and the Certificates initially will be represented by Notes and Certificates
registered in the name of Cede & Co., the nominee of The Depository Trust
Company ("DTC"). The interests of beneficial owners of the Notes and
Certificates will be represented by book entries on the records of DTC and
participating members thereof. Definitive Notes and Definitive Certificates
will be available only under limited circumstances.
_________________________
EXCEPT AS OTHERWISE PROVIDED IN THE RELATED PROSPECTUS SUPPLEMENT, PROCEEDS
OF THE ASSETS OF THE TRUST FOR ANY SERIES AND LIMITED AMOUNTS ON DEPOSIT IN
THE RESERVE ACCOUNT ARE THE SOLE SOURCES OF PAYMENTS ON THE NOTES AND THE
CERTIFICATES FOR SUCH SERIES. NEITHER THE NOTES NOR THE CERTIFICATES WILL
REPRESENT AN INTEREST IN OR OBLIGATION OF, AND ARE NOT INSURED OR GUARANTEED
BY, GENERAL MOTORS ACCEPTANCE CORPORATION, CAPITAL AUTO RECEIVABLES, INC., ANY
OTHER TRUST OR ANY OF THEIR RESPECTIVE AFFILIATES, EXCEPT AS SET FORTH IN THE
RELATED PROSPECTUS SUPPLEMENT.
_________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Retain this Prospectus for future reference. This Prospectus may not be
used to consummate sales of securities offered hereby unless accompanied by
a Prospectus Supplement.
The date of this Prospectus is March 21, 1994.
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AVAILABLE INFORMATION
Capital Auto Receivables, Inc., as originator of each Trust, has filed
with the Securities and Exchange Commission (the "Commission") a Registration
Statement (together with all amendments and exhibits thereto, referred to
herein as the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Notes and the Certificates
offered pursuant to this Prospectus. This Prospectus, which forms part of the
Registration Statement, does not contain all of the information contained in
the Registration Statement and is qualified in its entirety by reference to
the Registration Statement. The Registration Statement is available for
inspection without charge at the public reference facilities of the Commission
at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
regional offices of the Commission at 7 World Trade Center, 13th Floor, New
York, New York 10048 and the Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such information
can be obtained from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington D.C. 20549, at prescribed rates.
REPORTS TO NOTEHOLDERS AND CERTIFICATEHOLDERS
Unless otherwise provided in the related Prospectus Supplement,unless and
until Definitive Notes or Definitive Certificates are issued, monthly,
quarterly and annual unaudited reports containing information concerning the
Receivables will be prepared by the Servicer and sent on behalf of each Trust
only to Cede & Co. ("Cede"), as nominee of DTC and registered holder of the
Notes and the Certificates. See "Certain Information Regarding The
Securities-Book-Entry Registration;" and "-Reports to Securityholders." Such
reports will not constitute financial statements prepared in accordance with
generally accepted accounting principles. Each Trust will file with the
Commission such periodic reports as are required under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the rules and regulations
of the Commission thereunder. The Seller will provide, without charge, to
each person to whom this Prospectus is delivered, upon the written or oral
request of such person, a copy of any such document incorporated by reference
herein, other than exhibits to such documents not specifically described
above. Requests should be directed to the Seller, in care of General Motors
Acceptance Corporation, as Servicer, 3044 West Grand Boulevard, Detroit,
Michigan 48202 (telephone number (313) 556-1281).
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PROSPECTUS SUMMARY
This Prospectus Summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and by reference
to the information with respect to the Securities contained in the related
Prospectus Supplement to be prepared and delivered in connection with the
offering of such Securities. Certain capitalized terms used in this
Prospectus Summary are defined elsewhere in this Prospectus and in the related
Prospectus Supplement. A listing of the pages on which some of such terms are
defined is found in the "Index of Terms."
Issuer . . . . . . . . . . . .With respect to each series of Notes and
Certificates, the Trust to be formed by
the Seller and the Owner Trustee pursuant
to the Trust Agreement.
Seller . . . . . . . . . . . .Capital Auto Receivables, Inc., a wholly-
owned subsidiary of General Motors
Acceptance Corporation.
Servicer . . . . . . . . . . .General Motors Acceptance Corporation, a
wholly-owned subsidiary of General Motors
Corporation.
Indenture Trustee. . . . . . .The Indenture Trustee specified in the
related Prospectus Supplement.
Owner Trustee. . . . . . . . .The Owner Trustee specified in the
related Prospectus Supplement.
The Notes. . . . . . . . . . .Each series of Securities will include one
or more classes of Notes and will be
issued pursuant to an Indenture between
the Trust and the Indenture Trustee.
Unless otherwise specified in the related
Prospectus Supplement, Notes will be
available for purchase in denominations of
$1,000 and integral multiples thereof, and
will be available in book-entry form only.
Unless otherwise specified in the related
Prospectus Supplement, Noteholders will be
able to receive Definitive Notes only in
the limited circumstances described herein
or in the related Prospectus Supplement.
See "Certain Information Regarding the
Securities-Definitive Securities."
Unless otherwise specified in the related
Prospectus Supplement, each class of Notes
will have a stated principal amount and
will bear interest at a specified rate or
rates (with respect to each class of
Notes, the "Interest Rate"). Each class
of Notes may have a different Interest
Rate, which may be a fixed, variable or
adjustable Interest Rate, or any
combination of the foregoing. The related
Prospectus Supplement will specify the
Interest Rate for each class of Notes, or
the initial Interest Rate and the method
for determining subsequent changes to the
Interest Rate.
A series may include two or more classes
of Notes which differ as to the timing and
priority of payment, seniority,
3 <PAGE>
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allocations of loss, Interest Rate or
amount of payments of principal or
interest, or as to which payments of
principal or interest may or may not be
made upon the occurrence of specified
events or on the basis of collections from
designated portions of the Receivables
Pool. In addition, a series may include
one or more classes of Notes ("Strip
Notes") entitled to (i) principal payments
with disproportionate, nominal or no
interest payments, or (ii) interest
payments with disproportionate, nominal or
no principal payments.
If the Servicer exercises its option to
purchase the Receivables of a Trust on the
terms and conditions described below under
"The Transfer and Servicing Agreements-
Termination," the outstanding Notes will
be redeemed as set forth in the related
Prospectus Supplement.
The Certificates . . . . . . . Each series of Securities will include one
or more classes of Certificates and will
be issued pursuant to a Trust Agreement
between the Seller and the Owner Trustee.
Unless otherwise specified in the related
Prospectus Supplement, Certificates will
be available for purchase in a minimum
denomination of $20,000 and in integral
multiples of $1,000 in excess thereof and
will be available in book-entry form only.
Unless otherwise specified in the related
Prospectus Supplement, Certificateholders
will be able to receive Definitive
Certificates only in the limited
circumstances described herein or in the
related Prospectus Supplement. See
"Certain Information Regarding the
Securities-Definitive Securities."
Unless otherwise specified in the related
Prospectus Supplement, each class of
Certificates will have a stated
Certificate Balance (as defined in the
related Prospectus Supplement) and will
accrue interest on such Certificate
Balance at a specified rate (with respect
to each class of Certificates, the "Pass
Through Rate"). Each class of
Certificates may have a different Pass
Through Rate, which may be a fixed,
variable or adjustable Pass Through Rate,
or any combination of the foregoing. The
related Prospectus Supplement will specify
the Pass Through Rate for each class of
Certificates, or the initial Pass Through
Rate and the method for determining
subsequent changes to the Pass Through
Rate.
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A series may include two or more classes
of Certificates which differ as to timing
of distributions, sequential order,
priority of payment, seniority, allocation
of loss, Pass Through Rate or amount of
distributions in respect of Certificate
Balance or interest, or as to which
distributions in respect of Certificate
Balance or interest on any class may or
may not be made upon the occurrence of
specified events or on the basis of
collections from designated portions of
the Receivables Pool. In addition, a
series may include one or more classes of
Certificates ("Strip Certificates")
entitled to (i) distributions in respect
of Certificate Balance with
disproportionate, nominal or no interest
distributions, or (ii) interest
distributions, with disproportionate,
nominal or no distributions in respect of
Certificate Balance.
To the extent specified in the related
Prospectus Supplement, distributions in
respect of the Certificates will be
subordinated in priority of payment to
payments on the Notes.
If the Servicer exercises its option to
purchase the Receivables of a Trust on the
terms and conditions described below under
"The Transfer and Servicing Agreement-
Termination," Certificateholders will
receive an amount in respect of the
Certificates as specified in the related
Prospectus Supplement.
The Trust Property . . . . . . The property of each Trust will include a
pool of retail instalment sale contracts
for automobiles and light trucks, certain
monies due or received thereunder on and
after the Cutoff Date specified in the
related Prospectus Supplement (a "Cutoff
Date"), security interests in the vehicles
financed thereby, certain accounts and the
proceeds thereof, any proceeds from claims
on certain insurance policies and certain
rights of the Seller under the related
Pooling and Servicing Agreement. The
aggregate Amount Financed under the
Receivables held by a Trust (the
"Aggregate Amount Financed") will be
specified in the related Prospectus
Supplement.
Credit Enhancement . . . . . . If and to the extent specified in the
related Prospectus Supplement, credit
enhancement with respect to a Trust or any
class of Securities may include any one or
more of the following: subordination of
one or more other classes of Securities,
a Reserve Account, overcollateralization,
5 <PAGE>
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letters of credit, credit or liquidity
facilities, repurchase obligations, third
party payments or other support, cash
deposits or other arrangements. Unless
otherwise specified in the related
Prospectus Supplement, any form of credit
enhancement will have certain limitations
and exclusions from coverage thereunder,
which will be described in the related
Prospectus Supplement.
Reserve Account. . . . . . . . Unless otherwise specified in the related
Prospectus Supplement, a Reserve Account
will be created for each Trust with an
initial deposit by the Seller of cash or
certain investments having a value of the
Reserve Account Initial Deposit (the
amount of which will be specified in the
related Prospectus Supplement). To the
extent specified in the related Prospectus
Supplement, the funds in the Reserve
Account will thereafter be supplemented by
the deposit of amounts remaining after
payment to the Servicer of the Total
Servicing Fee and providing for amounts to
be distributed to the Noteholders and the
Certificateholders. Unless otherwise
provided in the related Prospectus
Supplement, amounts in the Reserve Account
(after giving effect to all distributions
to be made to the Servicer, the
Noteholders and the Certificateholders) in
excess of the Specified Reserve Account
Balance (as defined in the related
Prospectus Supplement) may be paid to the
Seller.
Transfer and Servicing
Agreements . . . . . . . . . With respect to each series of Securities,
the Seller will purchase the Receivables
from General Motors Acceptance Corporation
("GMAC") pursuant to a Pooling and
Servicing Agreement and the Seller will
transfer such Receivables to the related
Trust pursuant to a Trust Sale and
Servicing Agreement. The rights and
benefits of the Seller under the Pooling
and Servicing Agreement and of the Trust
under the Trust Sale and Servicing
Agreement will be assigned to the
Indenture Trustee as collateral for the
related Securities. The Servicer will
agree to be responsible for servicing,
managing and making collections on
Receivables and GMAC, as Custodian, will
maintain custody of the Receivables. Each
Trust will be created pursuant to a Trust
Agreement and GMAC, as Administrator, will
undertake certain administrative duties
with respect to the Trust under an
Administration Agreement.
Monthly Advances . . . . . . . Unless otherwise specified in the related
Prospectus Supplement, the Servicer will
make Monthly Advances to the Trust.
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With respect to each Scheduled Interest
Receivable, the Servicer will make a
Scheduled Interest Advance of that portion
of Scheduled Payments that was not timely
made. The Servicer will be entitled to
reimbursement of all Scheduled Interest
Advances from subsequent payments and
collections on or with respect to the
Receivables. The Servicer will not be
required to make any Scheduled Interest
Advance to the extent that it does not
expect to recover such advance from
subsequent collections or recoveries on
the Receivables. With respect to Simple
Interest Receivables, the Servicer will
make a Simple Interest Advance of the
aggregate interest shortfall, if any,
resulting from payments being received
other than on their respective due dates.
Any monthly surplus resulting from
payments on Simple Interest Receivables
being received other than on their due
dates will be paid to the Servicer. See
"The Transfer and Servicing Agreements-
Monthly Advances."
Servicing Fee. . . . . . . . . Unless otherwise specified in the related
Prospectus Supplement, the Servicer will
be entitled to receive a monthly fee for
servicing the Receivables of each Trust
equal to the sum of (i) the product of
one-twelfth of the Basic Servicing Fee
Rate specified in the related Prospectus
Supplement and the Aggregate Principal
Balance of such Receivables as of the
first day of such Monthly Period and (ii)
to the extent payable as provided herein
and in the related Prospectus Supplement,
Additional Servicing. In addition, the
Servicer will be entitled each month to
Supplemental Servicing Fees and Investment
Earnings. See "The Transfer and Servicing
Agreements-Servicing Compensation and
Payment of Expenses."
Certain Federal Income
Tax Consequences . . . . . . Upon the issuance of each series of
Securities, except as otherwise provided
in the related Prospectus Supplement,
Kirkland & Ellis, special tax counsel to
the Seller, will deliver an opinion to the
effect that, for federal income tax
purposes: (1) the Notes will constitute
indebtedness; (2) the Certificates of such
series will constitute interests in a
trust fund which will not be treated as an
association taxable as a corporation or
publicly traded partnership taxable as a
corporation; (3) such Certificates, if
identified as Partnership Certificates,
will constitute interests in a
partnership;
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and (4) such Certificates, if identified
as Trust Certificates, should constitute
interests in a grantor trust. See
"Certain Federal Income Tax Consequences"
and "State and Local Tax Consequences" for
additional information concerning the
application of federal, state and local
laws.
ERISA Considerations . . . . . Subject to the considerations discussed
under "ERISA Considerations" herein and in
the related Prospectus Supplement, and
unless otherwise specified in the
Prospectus Supplement, the Notes are
eligible for purchase by employee benefit
plans.
Unless otherwise specified in the related
Prospectus Supplement, the Certificates
may not be acquired by any employee
benefit plan subject to ERISA or by an
individual retirement account. See "ERISA
Considerations" herein and in the related
Prospectus Supplement.
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THE TRUSTS
With respect to each series of Securities, the Seller will establish a
Trust by selling and assigning the Trust Property to the Trust in exchange for
the related Securities. The Trust Property of each Trust will include (i) a
pool (a "Receivables Pool") of retail instalment sales contracts for new and
used automobiles and light trucks (the "Receivables"), all Scheduled Payments
due thereunder on and after the Cutoff Date (in the case of Scheduled Interest
Receivables) and all payments received thereunder on and after the Cutoff Date
(in the case of Simple Interest Receivables), in each case exclusive of any
amount allocable to the premium for physical damage insurance force-placed by
the Servicer, (ii) such amounts as from time to time may be held in separate
trust accounts established and maintained pursuant to the related Trust Sale
and Servicing Agreement and the proceeds of such accounts, (iii) security
interests in vehicles financed by the Receivables (the "Financed Vehicles")
and, to the extent permitted by law, any accessions thereto, (iv) any recourse
against dealers with respect to the Receivables, (v) except for those
Receivables originated in Wisconsin, the right to proceeds of credit life,
credit disability, physical damage or other insurance policies covering the
Financed Vehicles and (vi) certain rights of the Seller under the related
Pooling and Servicing Agreement. To the extent specified in the related
Prospectus Supplement, a Reserve Account or other form of credit enhancement
may be held by the Owner Trustee or the Indenture Trustee for the benefit of
holders of the Securities. The Reserve Account, if any, for a series of
Securities may not be included in the property of the related Trust but will
be a segregated trust account held by the Indenture Trustee for the benefit
of the holders of such related Securities.
Except as otherwise set forth in the related Prospectus Supplement, the
activities of each Trust will be limited to (i) acquiring, managing and
holding the related Receivables and the other assets contemplated herein and
in the related Prospectus Supplement and proceeds therefrom, (ii) issuing the
related Securities and making payments and distributions thereon and (iii)
engaging in other activities that are necessary, suitable or convenient to
accomplish any of the foregoing or are incidental thereto or connected
therewith.
The Servicer will continue to service the Receivables held by each Trust
and will receive fees for such services. See "The Transfer and Servicing
Agreements-Servicing Compensation and Payment of Expenses." To facilitate the
servicing of the Receivables, the Owner Trustee will authorize GMAC, as
Custodian, to retain physical possession of the Receivables held by each Trust
and other documents relating thereto as custodian for the Owner Trustee. Due
to the administrative burden and expense, the certificates of title to the
Financed Vehicles will not be amended to reflect the sale and assignment of
the security interest in the Financed Vehicles to the Owner Trustee. In the
absence of such an amendment, the Owner Trustee may not have a perfected
security interest in the Financed Vehicles in all states. Neither the Trust
nor the Owner Trustee will be responsible for the legality, validity or
enforceability of any security interest in any Financed Vehicle. See "Certain
Legal Aspects of the Receivables" and "The Transfer and Servicing Agreements-
Sale and Assignment of Receivables."
If the protection provided to Noteholders by the subordination of the
related Certificates and by the Reserve Account or other credit enhancement
for such series or the protection provided to Certificateholders by such
Reserve Account or other credit enhancement is insufficient, Noteholders or
Certificateholders, as the case may be, would have to look principally to the
obligors on the related Receivables, the proceeds from the repossession and
sale of Financed Vehicles which secure defaulted Receivables and the proceeds
from any recourse against dealers with respect to such Receivables. In such
event, certain factors, such as the Owner Trustee's not having perfected
security interests in the Financed Vehicles in all states, may affect the
ability to repossess and sell the collateral securing the Receivables, and
thus may reduce the proceeds to be distributed to the holders of the
Securities. See "The Transfer and Servicing Agreements-Distributions," "-
Credit Enhancement" and "Certain Legal Aspects of the Receivables."
The principal offices of each Trust will be specified in the related
Prospectus Supplement.
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THE OWNER TRUSTEE
The Owner Trustee for each Trust will be specified in the related
Prospectus Supplement. The Owner Trustee's liability in connection with the
issuance and sale of the Notes and the Certificates is limited solely to the
express obligations of such Owner Trustee set forth in the related Trust
Agreement. An Owner Trustee may resign at any time, in which event the
Servicer, or its successor, will be obligated to appoint a successor trustee.
The Administrator of a Trust may also remove the Owner Trustee if the Owner
Trustee ceases to be eligible to continue as Owner Trustee under the related
Trust Agreement or if the Owner Trustee becomes insolvent. In such
circumstances, the Administrator will be obligated to appoint a successor
trustee. Any resignation or removal of an Owner Trustee and appointment of
a successor trustee will not become effective until acceptance of the
appointment by the successor trustee.
THE RECEIVABLES POOLS
The Receivables in each Receivables Pool have been or will be acquired
by General Motors Acceptance Corporation ("GMAC") through its nationwide
branch system, directly or through General Motors Corporation ("General
Motors"), from automobile and light truck dealers pursuant to agreements with
General Motors dealers and dealerships affiliated with General Motors dealers.
See "The Seller" and "The Servicer."
The Receivables have been or will be originated by participating dealers
in accordance with GMAC's requirements under the dealer agreements. The
Receivables have been or will be acquired in accordance with GMAC's
underwriting standards, which evaluate the prospective purchaser's ability to
pay and creditworthiness, as well as the value of the vehicle to be financed.
GMAC's standards also require physical damage insurance to be maintained on
each Financed Vehicle. The Receivables have been or will be acquired by GMAC
in the ordinary course of business.
The Receivables to be held by each Trust will be selected from GMAC's
portfolio for inclusion in a Receivables Pool by several criteria, including
that, unless otherwise provided in the related Prospectus Supplement, each
Receivable (i) is secured by a new or used vehicle, (ii) was originated in the
United States, (iii) provides for level monthly payments (except for the first
and last payments which may be different from the level payments) that fully
amortize the amount financed over its original term to maturity and (iv)
satisfies the other criteria set forth in the related Prospectus Supplement.
The "Amount Financed" with respect to a Receivable will equal the aggregate
amount advanced toward the purchase price of the Financed Vehicle, including
accessories, insurance premiums, service and warranty contracts and other
items customarily financed as part of retail automobile instalment sale
contracts and related costs, exclusive of any amount allocable to the premium
for physical damage insurance covering the Financed Vehicle force-placed by
GMAC, less, in the case of a Scheduled Interest Receivable, payments due from
the related obligor prior to the related Cutoff Date allocable to principal
and, in the case of a Simple Interest Receivable, payments received from the
obligor prior to the related Cutoff Date allocable to principal.
"Scheduled Interest Receivables" are Receivables pursuant to which the
payments due from the Obligors during any month (the "Scheduled Payments") are
allocated between finance charges and principal on a scheduled basis, without
regard to the period of time which has elapsed since the preceding payment was
made, using the actuarial method or the method known as the Rule of 78s or
sum-of-the-digits method. If an obligor elects to prepay a Scheduled Interest
Receivable in full, the obligor is entitled to a rebate of the portion of the
Scheduled Payments attributable to unearned finance charges. The amount of
the rebate is determined with reference to the contract type and applicable
state law. With minor variations based on state law, actuarial rebates are
calculated on the basis of a constant interest rate. Rebates calculated on
a Rule of 78s or sum-of-the-digits basis are smaller than the corresponding
rebates under the actuarial method. Scheduled Interest Receivables provide
for Rule of 78s rebates except in states that require the actuarial method.
Distributions to Noteholders and Certificateholders will not be affected by
Rule of 78s rebates, because all allocations with respect to Scheduled
Interest Receivables for purposes of the related Trust are made using the
actuarial method. The portion of a Receivables Pool which consists of
Scheduled Interest Receivables will be specified in the related Prospectus
Supplement.
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<PAGE>13
"Simple Interest Receivables" are Receivables which provide for
allocation of payments between finance charges and principal based on the
actual date on which a payment is received. Late payments (or early payments)
on a Simple Interest Receivable may result in the obligor making a greater (or
smaller) number of payments than originally scheduled. The amount of any such
additional payments required to pay the outstanding principal balance in full
generally will not exceed the amount of an originally scheduled payment. If
an obligor elects to prepay a Simple Interest Receivable in full, the obligor
will not receive a rebate attributable to unearned finance charges. Instead,
the obligor is required to pay finance charges only to, but not including, the
date of prepayment. The amount of finance charges on a Simple Interest
Receivable that would have accrued from and after the date of prepayment if
all monthly payments had been made as scheduled will generally be greater than
the rebate on a Scheduled Interest Receivable that provides for a Rule of 78s
rebate, and will generally be equal to the rebate on a Scheduled Interest
Receivable that provides for an actuarial rebate. The portion of a
Receivables Pool which consists of Simple Interest Receivables will be
specified in the related Prospectus Supplement.
With respect to each Trust, the "Aggregate Principal Balance," as of any
date, means the sum of the Principal Balances of all outstanding Receivables
(other than Liquidating Receivables) held by the Trust on such date. The
"Principal Balance," as of any date with respect to any Receivable, is equal
to the Amount Financed minus the sum of either (a) in the case of a Scheduled
Interest Receivable, (i) that portion of all Scheduled Payments due on or
prior to such date allocable to principal, (ii) that portion of any Warranty
Payment or Administrative Purchase Payment with respect to such Receivable
allocable to principal and (iii) any Prepayment applied by the Servicer to
reduce the Principal Balance of such Receivable, or (b) in the case of a
Simple Interest Receivable, (i) that portion of all payments received on or
prior to such date allocable to principal and (ii) that portion of any
Warranty Payment or Administrative Purchase Payment with respect to such
Receivable allocable to principal.
Information with respect to each Receivables Pool will be set forth in
the related Prospectus Supplement, including, to the extent appropriate, the
composition, distribution by annual percentage rate ("APR"), states of
origination and portion of such Receivables Pool secured by new vehicles and
by used vehicles.
WEIGHTED AVERAGE LIFE OF THE SECURITIES
The weighted average life of Notes and Certificates will generally be
influenced by the rate at which the principal balances of the related
Receivables are paid, which payment may be in the form of scheduled
amortization or prepayments (for this purpose, the term "prepayment" includes
charge-offs, liquidations due to defaults and repurchases by the Seller or
GMAC pursuant to the related Trust Sale and Servicing Agreement, as well as
receipt of proceeds from credit life and casualty insurance policies). All
of the Receivables are prepayable at any time without penalty to the obligor.
The rate of prepayment of automotive receivables is influenced by a variety
of economic, social and other factors, including the fact that an obligor
generally may not sell or transfer the Financed Vehicle securing a Receivable
without the consent of the Servicer. See also "Certain Legal Aspects of the
Receivables-Transfer of Vehicles."
POOL FACTORS AND TRADING INFORMATION
The "Note Pool Factor" for each class of Notes will be a seven-digit
decimal which the Servicer will compute prior to each distribution with
respect to such Notes indicating the remaining outstanding principal balance
of such Notes, as of the close of such date, as a fraction of the initial
outstanding principal balance of such Notes. The "Certificate Pool Factor"
for each class of Certificates will be a seven-digit decimal which the
Servicer will compute prior to each distribution with respect to such
Certificates indicating the remaining Certificate Balance as of the close of
such date, as a fraction of the initial Certificate Balance. Each Note Pool
Factor and each Certificate Pool Factor will initially be 1.0000000;
thereafter the Note Pool Factor and the Certificate Pool Factor will decline
to reflect reductions in the outstanding principal balance of the Notes,
11 <PAGE>
<PAGE>14
or the reduction of the Certificate Balance of the Certificates, as the case
may be. A Noteholder's portion of the aggregate outstanding principal balance
of the related class of Notes is the product of (i) the original denomination
of such Noteholder's Note and (ii) the Note Pool Factor. A
Certificateholder's portion of the aggregate outstanding Certificate Balance
for the related class of Certificates is the product of (a) the original
denomination of the Certificateholder's Certificate and (b) the Certificate
Pool Factor.
With respect to each Trust, the holder or holders of record of the Notes
(the "Noteholders") will receive reports on or about each Payment Date
concerning payments received on the Receivables, the Aggregate Principal
Balance, each 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 "Certain Information Regarding the Securities-Reports to Securityholders."
Unless otherwise provided in the related Prospectus Supplement, with respect
to the Trust, the holder or holders of record of the Certificates (the
"Certificateholders") will receive reports on or about each Distribution Date
concerning payments received on the Receivables, the Aggregate Principal
Balance, each Certificate Pool Factor and various other items of information.
Certificateholders of record during any calendar year will be furnished
information for tax reporting purposes not later than the latest date
permitted by law. See "Certain Information Regarding the Securities-Reports
to Securityholders."
USE OF PROCEEDS
Unless otherwise provided in the related Prospectus Supplement, the net
proceeds to be received by the Seller from the sale of the Notes and the
Certificates will be applied to the purchase of the Receivables from GMAC.
THE SELLER
The Seller, a wholly-owned subsidiary of GMAC, was incorporated in the
State of Delaware on November 6, 1992. The Seller is organized for the
limited purposes of purchasing receivables from GMAC, transferring such
receivables to third parties, forming trusts and engaging in related
activities. The principal executive offices of the Seller are located at
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801.
The Seller has taken steps in structuring the transactions contemplated
hereby that are intended to make it unlikely that the voluntary or involuntary
application for relief by GMAC under the United States Bankruptcy Code or
similar applicable state laws ("Insolvency Laws") will result in consolidation
of the assets and liabilities of the Seller with those of GMAC. These steps
include the creation of the Seller as a separate, limited-purpose subsidiary
pursuant to a certificate of incorporation containing certain limitations
(including restrictions on the nature of the Seller's business 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). The Seller's By-laws include a provision that, under certain
circumstances, requires the Seller to have two directors who qualify under the
By-laws as "Independent Directors."
If, notwithstanding the foregoing measures, a court concluded that the
assets and liabilities of the Seller should be consolidated with the assets
and liabilities of GMAC in the event of the application of the federal
bankruptcy laws to GMAC, a filing were made under any Insolvency Law by or
against the Seller, or an attempt were made to litigate the consolidation
issue, then delays in distributions on the Notes and the Certificates (and
possible reductions in the amount of such distributions) could occur. See
also "Certain Legal Aspects of the Receivables-Sale of Receivables by GMAC."
The Seller will retain a portion of the Certificates issued by each
Trust as described in the related Prospectus Supplement. Certain of the
Securities issued by a Trust may be sold by the Seller in private placements
or other transactions and will not be offered hereby and by the related
Prospectus Supplement.
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<PAGE>15
THE SERVICER
GMAC, a wholly-owned subsidiary of General Motors, was incorporated in
1919 under the New York Banking Law relating to investment companies.
Operating directly and through subsidiaries and associated companies in which
it has equity investments, GMAC provides a wide variety of automotive
financial services to and through franchised General Motors dealers in many
countries throughout the world. Financial services also are offered to other
dealerships in which General Motors dealers have an interest and to the
customers of those dealerships. Other financial services offered by GMAC or
its subsidiaries include insurance, mortgage banking and investment services.
The principal business of GMAC and its subsidiaries is to finance the
acquisition and resale by franchised General Motors dealers of various new
automotive and nonautomotive products manufactured by General Motors or
certain of its subsidiaries and associates, and to acquire from such dealers,
either directly or indirectly, instalment obligations covering retail sales
and leases of new General Motors products as well as used units of any make.
In addition, new products of other manufacturers are financed. GMAC also
leases motor vehicles and certain types of capital equipment to others.
GMAC has its principal office at 767 Fifth Avenue, New York, New York
10153 (Tel. No. 212-418-6120) and administrative offices at 3044 West Grand
Boulevard, Detroit, Michigan 48202 (Tel. No. 313-556-5000).
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
Certain information concerning GMAC's experience in the United States
pertaining to delinquencies on new and used retail automobile and light truck
receivables and repossessions and net loss information relating to its entire
vehicle portfolio (including receivables previously sold which GMAC continues
to service) will be set forth in each Prospectus Supplement. There can be no
assurance that the delinquency, repossession and net loss experience on any
Receivables Pool will be comparable to prior experience.
THE NOTES
GENERAL
With respect to each Trust, one or more classes of Notes will be issued
pursuant to the terms of an Indenture, a form of which has been filed as an
exhibit to the Registration Statement of which this Prospectus forms a part.
The following summary does not purport to be complete and is subject to, and
is qualified in its entirety by reference to, all of the provisions of the
Notes and the Indenture. Where particular provisions or terms used in the
Indenture are referred to, the actual provisions (including definitions of
terms) are incorporated by reference as part of this summary.
Unless otherwise specified in the related Prospectus Supplement, each
class of Notes will initially be represented by one or more Notes, in each
case registered in the name of the nominee of DTC (together with any successor
depository selected by the Trust, the "Depository") except as set forth below.
Unless otherwise specified in the related Prospectus Supplement, Notes will
be available for purchase in denominations of $1,000 and integral multiples
thereof in book-entry form only. The Seller has been informed by DTC that
DTC's nominee will be Cede. Accordingly, Cede is expected to be the holder
of record of the Notes. Unless and until Definitive Notes are issued under
the limited circumstances described herein or in the related Prospectus
Supplement, no Noteholder will be entitled to receive a physical certificate
representing a Note. All references herein to actions by Noteholders refer
to actions taken by DTC upon instructions from its participating organizations
(the "Participants") and all references herein to distributions, notices,
reports and statements to Noteholders refer to distributions, notices, reports
and statements to DTC or Cede, as the registered holder of the Notes, as the
case may be, for distribution to Noteholders in accordance with DTC's
procedures with respect thereto. See "Certain Information Regarding the
Securities-Book-Entry Registration" and "-Definitive Securities."
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<PAGE>16
PRINCIPAL AND INTEREST ON THE NOTES
The timing and priority of payment, seniority, allocations of loss,
Interest Rate and amount of or method of determining payments of principal and
interest on the Notes will be described in the related Prospectus Supplement.
The right of holders of any class of Notes to receive payments of principal
and interest may be senior or subordinate to the rights of holders of any
other class or classes of Notes in the series, as described in the related
Prospectus Supplement. Unless otherwise provided in the related Prospectus
Supplement, payments of interest on the Notes will be made prior to payments
of principal thereon. A series may include one or more classes of Strip Notes
entitled to (i) principal payments with disproportionate, nominal or no
interest payment or (ii) interest payments with disproportionate, nominal or
no principal payments. Each class of Notes may have a different Interest
Rate, which may be a fixed, variable or adjustable Interest Rate (and which
may be zero for certain classes of Strip Notes), or any combination of the
foregoing. The related Prospectus Supplement will specify the Interest Rate
for each class of Notes, or the initial Interest Rate and the method for
determining the Interest Rate. One or more classes of Notes of a series may
be redeemable under the circumstances specified in the related Prospectus
Supplement.
Unless otherwise specified in the related Prospectus Supplement,
payments to Noteholders of all classes within a series in respect of interest
will have the same priority. Under certain circumstances, the amount
available for such payments could be less than the amount of interest payable
on the Notes on any of the dates specified for payments on any class of Notes
in the related Prospectus Supplement (each, a "Payment Date"). In which case,
each such class of 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. See "The Transfer and Servicing Agreements-Distributions" and "-Credit
Enhancement."
In the case of a series of Notes which includes two or more classes of
Notes, the sequential order and priority of payment in respect of principal
and interest, and any schedule or formula or other provisions applicable to
the determination thereof, of each such class will be set forth in the related
Prospectus Supplement. Unless otherwise specified in the related Prospectus
Supplement, payments in respect of principal and interest of any class of
Notes will be made on a pro rata basis among all of the Notes of such class.
THE INDENTURE
A form of Indenture has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. The Seller will provide a
copy of the applicable Indenture (without exhibits) upon request to a holder
of Notes issued thereunder.
Modification of Indenture Without Noteholder Consent. Each Trust and
related Indenture Trustee (on behalf of such Trust) may, without consent of
the related Noteholders, enter into one or more supplemental indentures for
any of the following purposes: (i) to correct or amplify the description of
the collateral or add additional collateral; (ii) to provide for the
assumption of the Notes and the Indenture obligations by a permitted successor
to the Trust; (iii) to add additional covenants for the benefit of the related
Noteholders, or to surrender any rights or power conferred upon the Trust;
(iv) to convey, transfer, assign, mortgage or pledge any property to or with
the Indenture Trustee; (v) to cure any ambiguity or correct or supplement any
provision in the Indenture or in any supplemental indenture which may be
inconsistent with any other provision of the Indenture or in any supplemental
indenture; (vi) to provide for the acceptance of the appointment of a
successor Indenture Trustee or to add to or change any of the provisions of
the Indenture as shall be necessary and permitted to facilitate the
administration by more than one trustee; (vii) to modify, eliminate or add to
the provisions of the Indenture in order to comply with the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act"); and (viii) to add any
provisions to, change in any manner, or eliminate any of the provisions of,
the Indenture or modify in any manner the rights of Noteholders under such
Indenture; provided that any action specified in this clause (viii) shall
14
<PAGE>17
not, as evidenced by an opinion of counsel, adversely affect in any material
respect the interests of any related Noteholder unless Noteholder consent is
otherwise obtained as described below.
Modification of Indenture With Noteholder Consent. With respect to each
Trust, with the consent of the holders of a majority of the outstanding
related Notes, the Trust and the Indenture Trustee may execute a supplemental
indenture to add provisions to, change in any manner or eliminate any
provisions of, the related Indenture, or modify in any manner the rights of
the related Noteholders.
Without the consent of the holder of each outstanding related Note
affected thereby, however, no supplemental indenture will: (i) change the due
date of any instalment 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 or change any place of payment where or
the coin or currency in which any Note or any interest thereon is payable;
(ii) impair the right to institute suit for the enforcement of certain
provisions of the Indenture regarding payment; (iii) reduce the percentage of
the aggregate amount of the outstanding Notes the consent of the holders of
which is required for any such supplemental indenture or the consent of the
holders of which is required for any waiver of compliance with certain
provisions of the Indenture or of certain defaults thereunder and their
consequences as provided for in the Indenture; (iv) modify any of the
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 regarding the voting of Notes held by the related Trust, any other
obligor on the Notes, the Seller or an affiliate of any of them; (v) reduce
the percentage of the aggregate outstanding amount of the Notes the consent
of the holders of which is required to direct the Indenture Trustee to sell
or liquidate the Receivables if the proceeds of such sale would be
insufficient to pay the principal amount and accrued but unpaid interest on
the outstanding Notes; (vi) decrease the percentage of the aggregate principal
amount of the Notes required to amend the sections of the Indenture which
specify the applicable percentage of aggregate principal amount of the Notes
necessary to amend the Indenture or certain other related agreements; or (vii)
permit the creation of any lien ranking prior to or on a parity with the lien
of the Indenture with respect to any of the collateral for the Notes 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.
Events of Default; Rights Upon Event of Default. With respect to each
Trust, unless otherwise specified in the related Prospectus Supplement,
"Events of Default" under the Indenture will consist of: (i) any failure to
pay interest on the related Notes as and when the same becomes due and
payable, which failure continues unremedied for five days; (ii) any failure
(a) to make any required payment of principal on the Notes or (b) to observe
or perform in any material respect any other covenants or agreements in the
Indenture, which failure in the case of a default under clause (ii)(b)
materially and adversely affects the rights of related Noteholders, and which
failure in either case continues for 30 days after the giving of written
notice of such failure to the Seller or the Servicer, as applicable, by the
Indenture Trustee or to the Seller or the Servicer, as applicable, and the
Indenture Trustee by the holders of not less than 25% of the principal amount
of the related Notes; (iii) failure to pay the unpaid principal balance of any
related class of Notes on or prior to the respective final scheduled Payment
Date for such class; and (iv) certain events of insolvency, readjustment of
debt, marshalling of assets and liabilities or similar proceedings and certain
actions by the Trust indicating its insolvency, reorganization pursuant to
bankruptcy proceedings or inability to pay its obligations. However, the
amount of principal required to be paid to Noteholders under the related
Indenture will generally be limited to amounts available to be deposited in
the Note Distribution Account. Therefore, unless otherwise specified in the
related Prospectus Supplement, the failure to pay principal on a class of
Notes generally will not result in the occurrence of an Event of Default
unless such class of Notes has a final scheduled Payment Date, and then not
until such final scheduled Payment Date for such class of Notes.
<PAGE>
<PAGE>18
If an Event of Default should occur and be continuing with respect to
the Notes of any series, the related Indenture Trustee or holders of a
majority in principal amount of such Notes then outstanding may declare the
principal of the Notes to be immediately due and payable. Such declaration
may, under certain circumstances, be rescinded by the holders of a majority
in principal amount of the Notes then outstanding.
If the Notes of any series are due and payable following an Event of
Default with respect thereto, the related Indenture Trustee may institute
proceedings to collect amounts due or foreclose on Trust property,
15
exercise remedies as a secured party, sell the related Receivables or elect
to have the Trust maintain possession of such Receivables and continue to
apply collections on such Receivables as if there had been no declaration of
acceleration. The Indenture Trustee, however, is prohibited from selling the
related Receivables following an Event of Default, unless (i) the holders of
all the outstanding related Notes consent to such sale, (ii) the proceeds of
such sale are sufficient to pay in full the principal of and the accrued
interest on such outstanding Securities at the date of such sale or (iii) in
certain cases, the Indenture Trustee determines that the Receivables will not
continue to provide sufficient funds 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 the holders of a majority of the aggregate outstanding amount of
the Notes. Following a declaration upon an Event of Default that the Notes
are immediately due and payable, (i) Noteholders will be entitled to ratable
repayment of principal on the basis of their respective unpaid principal
balances and (ii) repayment in full of the accrued interest on and unpaid
principal balances of the Notes will be made prior to any further payment of
interest on the Certificates or in respect of the Certificate Balance.
Subject to the provisions of the Indenture relating to the duties of the
Indenture Trustee, if an Event of Default occurs and is continuing with
respect to a series of 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 holders of such Notes, 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. Subject to the provisions for indemnification and certain
limitations contained in the Indenture, the holders of a majority in principal
amount of the outstanding Notes in a series will have the right to direct the
time, method and place of conducting any proceeding for any remedy available
to the Indenture Trustee and the holders of a majority in principal amount of
such Notes then outstanding may, in certain cases, waive any default with
respect thereto, except a default in the payment of principal or interest or
a default in respect of a covenant or provision of the Indenture that cannot
be modified without the waiver or consent of all of the holders of such
outstanding Notes.
No holder of a Note of any series will have the right to institute any
proceeding with respect to the related Indenture, unless (i) such holder
previously has given to the Indenture Trustee written notice of a continuing
Event of Default, (ii) the holders of not less than 25% in principal amount
of the outstanding Notes of such series have made written request of the
Indenture Trustee to institute such proceeding in its own name as Indenture
Trustee, (iii) such holder or holders have offered the Indenture Trustee
reasonable indemnity, (iv) the Indenture Trustee has for 60 days failed to
institute such proceeding and (v) 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 in principal amount of such outstanding Notes.
If an Event of Default occurs and is continuing and if it is known to
the Indenture Trustee, the Indenture Trustee will mail to each Noteholder
notice of the Event of Default within 90 days after it occurs. Except in the
case of a failure to pay principal of or interest on any Note, the Indenture
Trustee may withhold the notice if and so long as it determines in good faith
that withholding the notice is in the interests of Noteholders.
<PAGE>19
In addition, each Indenture Trustee and the related Noteholders, by
accepting the related Notes, will covenant that they will not, for a period
of one year and one day after the payment in full of the Certificate Balance
of all related Certificates, institute against the related Trust or Seller,
any bankruptcy, reorganization or other proceeding under any federal or state
bankruptcy or similar law.
Neither the Indenture Trustee nor the Owner Trustee in its individual
capacity, nor any holder of a Certificate including, without limitation, the
Seller, nor any of their respective owners, beneficiaries, agents, officers,
directors, employees, affiliates, or any successors or assigns of the
Indenture Trustee or the Owner Trustee will, in the absence of an express
16
agreement to the contrary, be personally liable for the payment of the
principal of or interest on the related Notes or for the agreements of the
related Trust contained in the Indenture.
Certain Covenants. Each Indenture provides that the related Trust may
not consolidate with or merge into any other entity, unless, (i) the entity
formed by or surviving such consolidation or merger is organized under the
laws of the United States, any state or the District of Columbia, (ii) such
entity expressly assumes the Trust's obligation to make due and punctual
payments upon the Notes and the performance or observance of every agreement
and covenant of the Trust under the Indenture, (iii) no Event of Default shall
have occurred and be continuing immediately after giving effect to such merger
or consolidation, (iv) the Trust has been advised that the rating of the
related Notes or Certificates then in effect would not be reduced or withdrawn
by the Rating Agencies as a result of such merger or consolidation, (v) any
action necessary to maintain the lien and security interest created by the
related Indenture shall have been taken and (vi) the Trust has received an
opinion of counsel to the effect that such consolidation or merger would have
no material adverse tax consequence to the Trust or to any related Noteholder
or Certificateholder.
Each Trust will not, among other things, (i) except as expressly
permitted by the Indenture, the Transfer and Servicing Agreements or certain
related documents for such Trust (collectively, the "Related Documents"),
sell, transfer, exchange or otherwise dispose of any of the assets of the
Trust, (ii) claim any credit on or make any deduction from the principal and
interest payable in respect of the related Notes (other than amounts withheld
under the Code or applicable state law) or assert any claim against any
present or former holder of such Notes because of the payment of taxes levied
or assessed upon the Trust, (iii) dissolve or liquidate in whole or in part,
(iv) permit the validity or effectiveness of the related Indenture to be
impaired or permit any person to be released from any covenants or obligations
with respect to the related Notes under such Indenture except as may be
expressly permitted thereby or (v) permit any lien, charge, excise, claim,
security interest, mortgage or other encumbrance to be created on or extend
to or otherwise arise upon or burden the assets of the Trust or any part
thereof, or any interest therein or the proceeds thereof.
No Trust may engage in any activity other than as specified under "The
Trusts" above. No Trust will incur, assume or guarantee any indebtedness other
than indebtedness incurred pursuant to the related Notes and the related
Indenture or otherwise in accordance with the Related Documents.
Annual Compliance Statement. Each Trust will be required to file
annually with the related Indenture Trustee a written statement as to the
fulfillment of its obligations under the Indenture.
Indenture Trustee's Annual Report. The Indenture Trustee will be
required to mail each year to all related Noteholders, to the extent required
under the Trust Indenture Act, a brief report relating to its eligibility and
qualification to continue as Indenture Trustee under the related Indenture,
any amounts advanced by it under the Indenture, the amount, interest rate and
maturity date of certain indebtedness owing by the Trust to the Indenture
Trustee in its individual capacity, the property and funds physically held by
the Indenture Trustee as such and any action taken by it that materially
affects the Notes and that has not been previously reported.
<PAGE>20
Satisfaction and Discharge of Indenture. The Indenture will be
discharged with respect to the related Notes upon the delivery to the related
Indenture Trustee for cancellation of all such Notes or, with certain
limitations, upon deposit with the Indenture Trustee of funds sufficient for
the payment in full of all of such Notes. The Indenture Trustee will continue
to act as Indenture Trustee under the Indenture and the related Trust Sale and
Servicing Agreement for the benefit of the related Certificateholders until
such time as all payments in respect of Certificate Balance and interest due
to such Certificateholders have been paid in full.
THE INDENTURE TRUSTEE
The Indenture Trustee for a series of Notes will be specified in the
related Prospectus Supplement. The Indenture Trustee may give notice of its
intent to resign at any time, in which event the Trust will be obligated to
appoint a successor trustee. The Trust may also remove the Indenture Trustee
if the Indenture Trustee ceases to be eligible to continue as such
17
under the Indenture or if the Indenture Trustee becomes insolvent or otherwise
becomes incapable of acting. In such circumstances, the Trust will be
obligated to appoint a successor trustee. The holders of a majority of Notes
outstanding also have the right to remove the Indenture Trustee and appoint
a successor. Any resignation or removal of the Indenture Trustee and
appointment of a successor trustee does not become effective until acceptance
of the appointment by the successor trustee.
THE CERTIFICATES
GENERAL
With respect to each Trust, the Certificates will be issued pursuant to
the terms of a Trust Agreement, a form of which has been filed as an exhibit
to the Registration Statement of which this Prospectus forms a part. The
following summary does not purport to be complete and is subject to, and
qualified in its entirety by reference to, all of the provisions of the
Certificates and the Trust Agreement. Where particular provisions or terms
used in the Trust Agreement are referred to, the actual provisions (including
definitions of terms) are incorporated by reference as part of this summary.
Each class of Certificates to be sold by the Certificate Underwriters
(as defined in the related Prospectus Supplement) will initially be
represented by a single Certificate registered in the name of the Depository,
except as set forth below. Unless otherwise specified in the related
Prospectus Supplement, the Certificates will be available for purchase in
minimum denominations of $20,000 and integral multiples of $1,000 in excess
thereof in book-entry form only and resales or other transfers will not be
permitted in amounts of less than $20,000. The Seller has been informed by
DTC that DTC's nominee will be Cede. Accordingly, Cede is expected to be the
holder of record of the Certificates that are not retained by the Seller.
Unless and until Definitive Certificates are issued under the limited
circumstances described herein or in the related Prospectus Supplement, no
Certificateholder (other than the Seller) will be entitled to receive a
physical certificate representing a Certificate. All references herein to
actions by Certificateholders refer to actions taken by DTC upon instructions
from the Participants and all references herein to distributions, notices,
reports and statements to Certificateholders refer to distributions, notices,
reports and statements to DTC or Cede, as the registered holder of the
Certificates, as the case may be, for distribution to Certificateholders in
accordance with DTC's procedures with respect thereto. See "Certain
Information Regarding the Securities-Book Entry Registration" and "-Definitive
Securities." Certificates owned by the Seller or its affiliates will be
entitled to equal and proportionate benefits under the Trust Agreement, except
that such Certificates will be deemed not to be outstanding for the purpose
of determining whether the requisite percentage of Certificateholders have
given any request, demand, authorization, direction, notice, consent or other
action under the Related Documents (other than the commencement by the Trust
of a voluntary proceeding in bankruptcy as described in "The Transfer and
Servicing Agreements-Insolvency Event").
Under the Trust Agreement, the Trust (and the Owner Trustee on its
behalf) and the related Certificateholders, by accepting the related
Certificates, will covenant that they will not, for a period of one year and
one day after the termination of the Trust Agreement, institute against the
Seller any bankruptcy, reorganization or other proceeding under any federal
or state bankruptcy or similar law.
<PAGE>21
DISTRIBUTIONS OF INTEREST AND CERTIFICATE BALANCE
The timing and priority of distributions, seniority, allocations of
loss, Pass Through Rate and amount of or method of determining distributions
with respect to Certificate Balance and interest (or, where applicable, with
respect to Certificate Balance only or interest only) on the Certificates of
any series will be described in the related Prospectus Supplement.
Distributions of interest on the Certificates will be made on the dates
specified in the related Prospectus Supplement (each, a "Distribution Date")
and will be made prior to distributions with respect to Certificate Balance.
A series may include one or more classes of Strip Certificates
18
entitled to (i) distributions in respect of Certificate Balance with
disproportionate, nominal or no interest distributions, or (ii) interest
distributions, with disproportionate, nominal or no distributions in respect
of Certificate Balance. Each class of Certificates may have a different Pass
Through Rate, which may be a fixed, variable or adjustable Pass Through Rate
(and which may be zero for certain classes of Strip Certificates), or any
combination of the foregoing. The related Prospectus Supplement will specify
the Pass Through Rate for each class of Certificate, or the initial Pass
Through Rate and the method for determining the Pass Through Rate. Unless
otherwise specified in the related Prospectus Supplement, interest on the
Certificates will be calculated on the basis of a 360-day year consisting of
twelve 30-day months. Distributions in respect of the Certificates will be
subordinate to payments in respect of the Notes as more fully described in the
related Prospectus Supplement. Distributions in respect of Certificate
Balance of any class of Certificates will be made on a pro rata basis among
all of the Certificateholders of such class.
In the case of a series of Certificates which includes two or more
classes of Certificates, the timing, sequential order, priority of payment or
amount of distributions in respect of principal, and any schedule or formula
or other provisions applicable to the determination thereof, of each such
class shall be as set forth in the related Prospectus Supplement.
CERTAIN INFORMATION REGARDING THE SECURITIES
BOOK-ENTRY REGISTRATION
DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York UCC and a "clearing agency"
registered pursuant to Section 17A of the Exchange Act. DTC was created to
hold securities for its Participants and to facilitate the clearance and
settlement of securities transactions between Participants through electronic
book-entries, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks,
trust companies and clearing corporations. Indirect access to the DTC system
also is available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly ("Indirect Participants").
Unless otherwise specified in the related Prospectus Supplement, owners
of beneficial interest in Notes and Certificates ("Note Owners" and
"Certificate Owners", respectively) that are not Participants or Indirect
Participants but desire to purchase, sell or otherwise transfer ownership of,
or other interests in, Notes or Certificates may do so only through
Participants and Indirect Participants. In addition, Note Owners will receive
all distributions of principal and interest and Certificate Owners will
receive all distributions of interest and in respect of Certificate Balance
through DTC Participants. Under a book-entry format, Note Owners and
Certificate Owners may experience some delay in their receipt of payments,
since such payments will be forwarded by the trustees to Cede, as nominee for
DTC. DTC will forward such payments to its Participants, which thereafter
will forward them to Indirect Participants, Note Owners or Certificate Owners.
Except for the Seller, it is anticipated that the only "Noteholder" and
"Certificateholder" will be 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, and Note Owners will be permitted to exercise the rights of
Noteholders only indirectly through DTC and its Participants. Likewise,
Certificate Owners will not be recognized by the Owner Trustee as
Certificateholders as such term is used in the Trust Agreement, and
<PAGE>22
Certificate Owners will be permitted to exercise the rights of
Certificateholders only indirectly through DTC and its Participants.
Under the rules, regulations and procedures creating and affecting DTC
and its operations (the "Rules"), DTC is required to make book-entry transfers
of Notes and Certificates among Participants on whose behalf it acts with
respect to the Notes and Certificates and to receive and transmit
distributions of principal of, and interest on, the Notes and distributions
in respect of interest and Certificate Balance on the Certificates.
Participants and Indirect Participants with which Note Owners and Certificate
Owners have accounts with respect to the Notes and Certificates similarly are
required to make book-entry transfers and receive and transmit such payments
19
on behalf of their respective Note Owners and Certificate Owners.
Accordingly, although Note Owners and Certificate Owners will not possess
Notes or Certificates, the Rules provide a mechanism by which Note Owners and
Certificate Owners will receive payments and will be able to transfer their
Note or Certificate interests.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Note Owner
or Certificate Owner to pledge Notes or Certificates to persons or entities
that do not participate in the DTC system, or to otherwise act with respect
to such Notes or Certificates, may be limited due to the lack of a physical
certificate for such Notes and Certificates.
DTC has advised the Seller that it will take any action permitted to be
taken by a Noteholder under the related Indenture or a Certificateholder under
the related Trust Agreement only at the direction of one or more Participants
to whose accounts with DTC the Notes or Certificates are credited. DTC may
take conflicting actions with respect to other undivided interests to the
extent that such actions are taken on behalf of Participants whose holdings
include such undivided interests.
Except as required by law, neither the Administrator, the Owner Trustee
nor the Indenture Trustee will have any liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of the Notes or the Certificates of any series held by Cede, as
nominee for DTC, or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
DEFINITIVE SECURITIES
Unless otherwise specified in the related Prospectus Supplement, Notes
and Certificates will be issued in fully registered, certificated form
("Definitive Notes" or "Definitive Certificates," as the case may be, and,
collectively, the "Definitive Securities") to Noteholders, Certificateholders
or their respective nominees, rather than to DTC or its nominee, only if (i)
the related Administrator advises the appropriate trustee in writing that DTC
is no longer willing or able to discharge properly its responsibilities as
depository with respect to such Securities and the Trust is unable to locate
a qualified successor, (ii) the Administrator, at its option, elects to
terminate the book-entry system through DTC or (iii) after the occurrence of
an Event of Default or a Servicer Default, holders representing at least a
majority of the outstanding principal amount of such Securities advise the
appropriate trustee through DTC in writing that the continuation of a book-
entry system through DTC (or a successor thereto) is no longer in the best
interest of the holders of such Securities.
Upon the occurrence of any event described in the immediately preceding
paragraph, the appropriate trustee will be required to notify DTC of the
availability of Definitive Notes or Definitive Certificates, as the case may
be. DTC shall notify all the Note Owners or Certificate Owners, as
applicable, of the availability of Definitive Notes or Definitive
Certificates, as the case may be. Upon surrender by DTC of the definitive
certificates representing the Securities and receipt of instructions for re-
registration, the appropriate trustee will reissue such Securities as
Definitive Notes or Definitive Certificates, as the case may be, to holders
thereof.
<PAGE>23
Distributions of principal of, and interest on, the Definitive
Securities will thereafter be made in accordance with the procedures set forth
in the related Indenture or related Trust Agreement, as applicable, directly
to holders of Definitive Securities in whose names the Definitive Securities
were registered at the close of business on the last day of the preceding
Monthly Period. Such distributions will be made by check mailed to the
address of such holder as it appears on the register maintained by the
Indenture Trustee or Owner Trustee, as applicable. The final payment on any
Definitive Security, however, will be made only upon presentation and
surrender of such Definitive Security at the office or agency specified in the
notice of final distribution to the holders of such class.
Definitive Securities will be transferable and exchangeable at the
offices of the appropriate trustee or of a registrar named in a notice
delivered to holders of Definitive Securities. No service charge will be
20
imposed for any registration of transfer or exchange, but the appropriate
trustee may require payment of a sum sufficient to cover any tax or other
governmental charge imposed in connection therewith.
REPORTS TO SECURITYHOLDERS
With respect to each Trust, on or prior to each Payment Date, the
Servicer will prepare and provide to the Indenture Trustee a statement to be
delivered to the related Noteholders on such Payment Date and on or prior to
each Distribution Date, the Servicer will prepare and provide to the Owner
Trustee a statement to be delivered to the related Certificateholders. With
respect to each series (to the extent applicable) each such statement to be
delivered to Noteholders will include the following information as to the
Notes with respect to such Payment Date or the period since the previous
Payment Date on such Notes, as applicable, and each such statement to be
delivered to Certificateholders will include the following information as to
the Certificates with respect to such Distribution Date or the period since
the previous Distribution Date, as applicable:
(i) the amount of the distribution allocable to principal of each
class of the Notes and to the Certificate Balance of each class of
Certificates;
(ii) the amount of the distribution allocable to interest on or
with respect to each class of securities;
(iii) the Aggregate Principal Balance as of the close of business
on the last day of the preceding Monthly Period;
(iv) the aggregate outstanding principal balance and the Note Pool
Factor for each class of Notes, and the Certificate Balance and the
Certificate Pool Factor for each class of Certificates, each after
giving effect to all payments reported under (i) above on such date;
(v) the aggregate amount in the Payment Ahead Servicing Account
or on deposit with the Servicer as Payments Ahead and the change in such
amount from the previous statement, as the case may be;
(vi) the amount of outstanding Monthly Advances on such date;
(vii) the amount of the Total Servicing Fee paid to the Servicer
with respect to the related Monthly Period or Periods, as the case may
be;
(viii) the Interest Rate or Pass Through Rate for the next period
for any class of Notes or Certificates with variable or adjustable
rates;
(ix) the amount, if any, distributed to Noteholders and
Certificateholders from amounts on deposit in the Reserve Account or
from other forms of credit enhancement;
(x) the Noteholders' Interest Carryover Shortfall, the
Noteholders' Principal Carryover Shortfall, the Certificateholders'
Interest Carryover Shortfall and the Certificateholders' Principal
Carryover Shortfall (each as defined in the related Prospectus
Supplement), if any, and the change in such amounts from the preceding
statement; and
<PAGE>24
(xi) the balance of the Reserve Account, if any, on such date,
after giving effect to changes therein on such date.
Each amount set forth pursuant to subclauses (i), (ii), (vii), (ix) and
(x) with respect to Notes or Certificates will be expressed as a dollar amount
per $1,000 of the initial principal balance of the Notes or the initial
Certificate Balance, as applicable.
Within the prescribed period of time for tax reporting purposes after
the end of each calendar year during the term of the Trust, the trustees will
mail to each holder of a class of Securities who at any time during such
calendar year has been a securityholder, and received any payment thereon, a
statement containing certain information for the purposes of such
securityholder's preparation of federal income tax returns. As long as the
holder of record of the Securities is Cede, as nominee of DTC, beneficial
owners of the Securities will receive tax and other information from
Participants and Indirect Participants rather than from the trustees. See
"Certain Federal Income Tax Consequences."
THE TRANSFER AND SERVICING AGREEMENTS
Except as otherwise specified in the related Prospectus Supplement, the
following summary describes certain terms of the Pooling and Servicing
Agreement pursuant to which the Seller will purchase Receivables
21
from GMAC, the Servicer will agree to service such Receivables, and GMAC, as
Custodian, will agree to act as custodian for the documents evidencing the
Receivables, the Trust Sale and Servicing Agreement pursuant to which a Trust
will acquire such Receivables from the Seller and agree to the servicing
thereof by the Servicer and the appointment of GMAC as Custodian, the Trust
Agreement pursuant to which such Trust will be created and Certificates will
be issued and the Administration Agreement pursuant to which GMAC will
undertake certain administrative duties with respect to such Trust
(collectively, the "Transfer and Servicing Agreements"). Forms of the
Transfer and Servicing Agreements have been filed as exhibits to the
Registration Statement of which this Prospectus forms a part. The Seller will
provide a copy of the Transfer and Servicing Agreements (without exhibits)
upon request to a holder of Securities described therein. This summary does
not purport to be complete and is subject to, and qualified in its entirety
by reference to, all of the provisions of the Transfer and Servicing
Agreements. Where particular provisions or terms used in the Transfer and
Servicing Agreements are referred to, the actual provisions (including
definitions of terms) are incorporated by reference as part of such summary.
SALE AND ASSIGNMENT OF RECEIVABLES
On the Closing Date specified in the related Prospectus Supplement (the
"Closing Date"), GMAC will sell and assign to the Seller, without recourse,
its entire interest in the related Receivables, including its security
interests in the Financed Vehicles, pursuant to a Pooling and Servicing
Agreement between GMAC and the Seller (a "Pooling and Servicing Agreement").
On the Closing Date, the Seller will transfer and assign to the applicable
Owner Trustee, without recourse, its entire interest in the related
Receivables, including its security interests in the Financed Vehicles,
pursuant to a Trust Sale and Servicing Agreement among the Seller, the
Servicer and the Trust (a "Trust Sale and Servicing Agreement"). Each
Receivable with respect to a Trust will be identified in a schedule which will
be on file at the locations set forth in an exhibit to the related Trust Sale
and Servicing Agreement (a "Schedule of Receivables"). The Owner Trustee
will, concurrently with such transfer and assignment, execute and deliver the
related Notes and Certificates to the Seller in exchange for such Receivables.
Except as set forth in the related Prospectus Supplement, the Seller will sell
the Certificates (other than those Certificates it is retaining) and the Notes
to the respective underwriters set forth in the related Prospectus Supplement.
See "Plan of Distribution." Unless otherwise provided in the related
Prospectus Supplement, the Seller will apply the net proceeds received from
the sale of the Certificates and the Notes to the purchase of the related
Receivables from GMAC.
<PAGE>25
In each Pooling and Servicing Agreement, GMAC will represent and warrant
to the Seller, among other things, that: (i) the information provided in the
related Schedule of Receivables is correct in all material respects; (ii) the
obligor on each Receivable is required to maintain physical damage insurance
covering the Financed Vehicle in accordance with GMAC's normal requirements;
(iii) as of the Closing Date, to the best of its knowledge, the related
Receivables are free and clear of all filed security interests, liens, charges
and encumbrances on account of work, labor or materials (other than tax liens
and other liens that arise by operation of law) and no offsets, defenses or
counterclaims have been asserted or threatened; (iv) as of the Closing Date,
each Receivable is or will be secured by a first perfected security interest
in favor of GMAC in the Financed Vehicle; and (v) each related Receivable, at
the time it was originated complied, and as of the Closing Date complies, in
all material respects with applicable federal and state laws, including,
without limitation, consumer credit, truth-in-lending, equal credit
opportunity and disclosure laws. In the related Trust Sale and Servicing
Agreement, the Seller will assign the representations and warranties of GMAC,
as set forth above, to the Trust, and will represent and warrant to the Trust
that the Seller has taken no action which would cause such representations and
warranties of GMAC to be false in any material respect as of the Closing Date.
As of the last day of the second (or, if the Seller elects, the first)
month following the discovery by the Seller, the Servicer, the Owner Trustee
or the Indenture Trustee of a breach of any representation or warranty of the
Seller or GMAC that materially and adversely affects the interests of the
related Securityholders in any Receivable, the Seller, unless the breach is
cured in all material respects, will repurchase (or, together with the
Servicer, will use reasonable efforts to enforce the obligation of GMAC under
the Pooling and Servicing Agreement to repurchase) such Receivable (a
"Warranty Receivable") from the Trust at a price equal to: (a) in the case
22
of a Scheduled Interest Receivable, the sum of all remaining Scheduled
Payments on such Receivable, plus all past due Scheduled Payments with respect
to which a Scheduled Interest Advance has not been made, plus all outstanding
Scheduled Interest Advances on such Receivable, plus an amount equal to any
reimbursements of outstanding Scheduled Interest Advances made to the Servicer
with respect to such Receivable from the proceeds of other Receivables, minus
(i) the rebate that would be payable to the obligor on such Receivable were
the obligor to prepay such Receivable in full on such day and (ii) any
Liquidation Proceeds with respect to such Receivable previously received (to
the extent applied to reduce the Principal Balance of such Receivable); or (b)
in the case of a Simple Interest Receivable, the Amount Financed minus (i)
that portion of all payments received on or prior to the last day of the
related Monthly Period allocable to principal and (ii) any Liquidation
Proceeds with respect to such Receivable (to the extent applied to reduce the
Principal Balance of such Receivable) (in either case, the "Warranty
Payment"). The Seller or GMAC, as applicable, will be entitled to receive any
amounts held by the Servicer or in the Payment Ahead Servicing Account with
respect to such Warranty Receivable. The repurchase obligation constitutes
the sole remedy available to the Trust, the Noteholders, the Indenture
Trustee, the Certificateholders or the Owner Trustee for any such uncured
breach.
In each Pooling and Servicing Agreement, the Servicer will covenant that
(i) except as contemplated in such Agreement, the Servicer will not release
any Financed Vehicle from the security interest securing the related
Receivable, (ii) the Servicer will do nothing to impair the rights of the
Indenture Trustee, the Owner Trustee, the Noteholders or the
Certificateholders in the related Receivables and (iii) the Servicer will not
amend or otherwise modify any such Receivable such that the Amount Financed,
the APR, the total number of Scheduled Payments (in the case of a Scheduled
Interest Receivable) or the number of originally scheduled due dates (in the
case of a Simple Interest Receivable) is altered or such that the last
Scheduled Payment (in the case of a Scheduled Interest Receivable) or the last
scheduled due date (in the case of a Simple Interest Receivable) occurs after
the final scheduled Distribution Date. As of the last day of the second (or,
if the Servicer so elects, the first) month following the discovery by the
Servicer, the Owner Trustee or the Indenture Trustee of a breach of any
covenant that materially and adversely affects any Receivable and unless such
breach is cured in all material respects, the Servicer will, with respect to
such Receivable (an "Administrative Receivable"): (i) in the case of a
Scheduled Interest Receivable, (a) release all claims for
<PAGE>26
reimbursement of Scheduled Interest Advances made on such Receivable and (b)
purchase such Receivable from the Trust at a price equal to the sum of all
remaining Scheduled Payments on such Receivable plus an amount equal to any
reimbursements of outstanding Scheduled Interest Advances made to the Servicer
with respect to such Receivable from the proceeds of other Receivables, plus
all past due Scheduled Payments with respect to which a Scheduled Interest
Advance has not been made, minus the rebate that would be payable to the
obligor on such Receivable were the obligor to prepay such Receivable in full
on such day; or (ii) in the case of a Simple Interest Receivable, purchase
such Receivable from the Trust at a price equal to the Amount Financed minus
that portion of all payments made on or prior to the last day of the related
Monthly Period allocable to principal (in either case, the "Administrative
Purchase Payment"). The Servicer will be entitled to receive any amounts held
by the Servicer or in the Payment Ahead Servicing Account with respect to such
Administrative Receivable. This repurchase obligation constitutes the sole
remedy available to the Trust, the Indenture Trustee, the Owner Trustee, the
Noteholders and the Certificateholders for any such uncured breach.
Pursuant to each Trust Sale and Servicing Agreement, the Trust will
agree to GMAC acting as custodian to maintain possession, as the Trust's
agent, of the related retail instalment sale contracts and any other documents
relating to the Receivables. To assure uniform quality in servicing both the
Receivables and the GMAC's own portfolio of receivables, as well as to
facilitate servicing and save administrative costs, the documents will not be
physically segregated from other similar documents that are in GMAC's
possession or otherwise stamped or marked to reflect the transfer to the
related Trust so long as GMAC is the custodian of such documents. However,
Uniform Commercial Code ("UCC") financing statements reflecting the sale and
assignment of such Receivables to the Trust will be filed, and the Servicer's
accounting records and computer files will reflect such sale and assignment.
Because such Receivables will remain in the possession of GMAC, as Custodian,
and will not be stamped or otherwise
23
marked to reflect the assignment to the Trust, if a subsequent purchaser were
able to take physical possession of the Receivables without knowledge of the
assignment, the Trust's interests in such Receivables could be defeated.
ACCOUNTS
With respect to each Trust, the Servicer will establish and maintain one
or more accounts, in the name of the Indenture Trustee on behalf of the
related Noteholders and the Certificateholders, into which all payments made
on or with respect to the related Receivables will be deposited (the
"Collection Account"). The Servicer will establish and maintain with respect
to each Trust an account, in the name of the Indenture Trustee on behalf of
the related Noteholders, in which amounts released from the Collection Account
and any Reserve Account or other credit enhancement for payment to such
Noteholders will be deposited and from which all distributions to such
Noteholders will be made (the "Note Distribution Account"). The Servicer will
establish and maintain with respect to each Trust an account, in the name of
the Owner Trustee on behalf of the related Certificateholders, in which
amounts released from the Collection Account and any Reserve Account or other
credit enhancement for distribution to such Certificateholders will be
deposited and from which all distributions to such Certificateholders will be
made (the "Certificate Distribution Account"). The Servicer will establish
for each Trust an additional account (the "Payment Ahead Servicing Account")
in the name of the Indenture Trustee, into which to the extent required by the
Trust Sale and Servicing Agreement, early payments by or on behalf of obligors
on Scheduled Interest Receivables which do not constitute either Scheduled
Payments or Prepayments will be deposited until such time as payment becomes
due. The Payment Ahead Servicing Account will not be property of the related
Trust. Unless otherwise provided in the related Prospectus Supplement, the
Payment Ahead Servicing Account will initially be maintained in the trust
department of the Indenture Trustee.
For any series, funds in the Collection Account, the Note Distribution
Account and any Reserve Account and other accounts identified as such in the
related Prospectus Supplement (collectively, the "Designated Accounts") will
<PAGE>27
be invested as provided in the Trust Sale and Servicing Agreement in Eligible
Investments. "Eligible Investments" are generally limited to investments
acceptable to the rating agencies then rating the related Notes and
Certificates at the request of the Seller (the "Rating Agencies") as being
consistent with the rating of such Notes. Except as described below or in the
related Prospectus Supplement, Eligible Investments are limited to obligations
or securities that mature on or before the date of the next distribution or,
in the case of the Note Distribution Account, the date of the next
distribution with respect to the Notes. To the extent permitted by the Rating
Agencies, funds in any Reserve Account may be invested in related Notes that
will not mature prior to the date of the next distribution with respect to the
Notes. Except as otherwise specified in the related Prospectus Supplement,
such Notes will not be sold to meet any shortfalls unless they are sold at a
price equal to or greater than the unpaid principal balance thereof if,
following such sale, the amount on deposit in such Reserve Account would be
less than the related Specified Reserve Account Balance. Thus, the amount of
cash in any Reserve Account at any time may be less than the balance of the
Reserve Account. If the amount required to be withdrawn from any Reserve
Account to cover shortfalls in collections on the Receivables (as provided in
the related Prospectus Supplement) exceeds the amount of cash in the Reserve
Account, a temporary shortfall in the amounts distributed to the Noteholders
or Certificateholders could result, which could, in turn, increase the average
life of the Notes or the Certificates. Except as otherwise specified in the
related Prospectus Supplement, investment earnings on funds deposited in the
Designated Accounts and the Payment Ahead Servicing Account, net of losses and
investment expenses (collectively, "Investment Earnings"), will be payable to
the Servicer.
The Designated Accounts will be maintained as Eligible Deposit Accounts.
"Eligible Deposit Account" means either (a) a segregated account with an
Eligible Institution or (b) a segregated trust account with the corporate
trust department of a depository institution organized under the laws of the
United States of America or any one of the states thereof or the District of
Columbia (or any domestic branch of a foreign bank), having corporate trust
powers and acting as trustee for funds deposited in such account, so long as
any of the securities of such depository institution have a credit rating from
each Rating Agency then rating such institution in one
24
of its generic rating categories which signifies investment grade. "Eligible
Institution" means, with respect to a Trust, (a) the corporate trust
department of the related Indenture Trustee or the Owner Trustee, as
applicable, or (b) a depository institution organized under the laws of the
United States of America or any one of the states thereof or the District of
Columbia (or any domestic branch of a foreign bank), (i) which has either (A)
a long-term unsecured debt rating acceptable to the Rating Agencies or (B) a
short-term unsecured debt rating or certificate of deposit rating acceptable
to the Rating Agencies and (ii) whose deposits are insured by the Federal
Deposit Insurance Corporation or any successor thereto.
Any other accounts to be established with respect to a Trust will be
described in the related Prospectus Supplement.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
With respect to each Trust, unless otherwise provided in the related
Prospectus Supplement, on each Distribution Date, the Servicer will receive
a servicing fee (the "Basic Servicing Fee") for the preceding Monthly Period
equal to one-twelfth of the Basic Servicing Fee Rate specified in the related
Prospectus Supplement multiplied by the Aggregate Principal Balance of all
Receivables held by such Trust as of the first day of such Monthly Period.
Unless otherwise specified in the related Prospectus Supplement, on each
Distribution Date, the Servicer will also receive with respect to each Trust
an additional amount (the "Additional Servicing") equal to the lesser of (i)
the amount by which (A) the amount equal to the aggregate amount of the Basic
Servicing Fee for such Distribution Date and all prior Distribution Dates
exceeds (B) the aggregate amount of Additional Servicing paid to the Servicer
on all prior Distribution Dates and (ii) the amount by which the amount on
deposit in the Reserve Account on such Distribution Date (after giving effect
to all deposits, withdrawals and payments affecting any such Reserve Account
other than the Additional Servicing and payments to the Seller) exceeds the
<PAGE>28
Specified Reserve Account Balance. On each Distribution Date, the Servicer
will be paid the Basic Servicing Fee, any unpaid Basic Servicing Fees from all
prior Distribution Dates and the Additional Servicing (collectively, the
"Total Servicing Fee") to the extent of funds available therefor. In
addition, unless otherwise provided in the related Prospectus Supplement, with
respect to each Trust the Servicer will be entitled to retain any late fees,
prepayment charges or certain similar fees and charges collected during a
Monthly Period (the "Supplemental Servicing Fee") and any Investment Earnings
during a Monthly Period.
The foregoing amounts with respect to each Trust are intended to
compensate the Servicer for performing the functions of a third party servicer
of automobile receivables as an agent for their beneficial owner, including
collecting and posting all payments, responding to inquiries of obligors on
the Receivables, investigating delinquencies, sending payment coupons to
obligors, reporting tax information to obligors, paying costs of collections
and policing the collateral. Such amounts will also compensate the Servicer
for its services as the Receivables Pool administrator, including making
Monthly Advances, accounting for collections, furnishing monthly and annual
statements to the Owner Trustee and the Indenture Trustee with respect to
distributions and generating federal income tax information for the Trust, the
Certificateholders and the Noteholders. Such amounts also will reimburse the
Servicer for certain taxes, the fees of the Owner Trustee and the Indenture
Trustee, accounting fees, outside auditor fees, data processing costs and
other costs incurred in connection with administering the Receivables Pool.
SERVICING PROCEDURES
The Servicer will make reasonable efforts to collect all payments due
with respect to the Receivables held by any Trust and will, consistent with
the related Pooling and Servicing Agreement and Trust Sale and Servicing
Agreement, follow such collection procedures as it follows with respect to
comparable automobile receivables that it services for itself or others. See
"Certain Legal Aspects of the Receivables." The Servicer is authorized to
grant certain rebates, adjustments or extensions with respect to a Receivable.
However, if any such modification of a Receivable alters the Amount Financed,
the APR, the total number of Scheduled Payments (in the case of a Scheduled
Interest Receivable) or the number of originally scheduled due 25
dates (in the case of a Simple Interest Receivable) such that the last
Scheduled Payment (in the case of a Scheduled Interest Receivable) or the last
scheduled due date (in the case of a Simple Interest Receivable) occurs after
the final scheduled Distribution Date, the Servicer will be obligated to
purchase such Receivable.
If the Servicer determines that eventual payment in full of a Receivable
is unlikely, the Servicer will follow its normal practices and procedures to
realize upon the Receivable, including the repossession and disposition of the
Financed Vehicle securing the Receivable at a public or private sale, or the
taking of any other action permitted by applicable law. The Servicer will be
entitled to receive an amount specified in the Pooling and Servicing Agreement
as an allowance for amounts charged to the account of the obligor, in keeping
with the Servicer's customary procedures, for refurbishing and disposition of
the Financed Vehicle and other out-of-pocket costs related to the liquidation
("Liquidation Expenses").
COLLECTIONS
With respect to each Trust, the Servicer will deposit all payments on
the related Receivables received from obligors and all proceeds of Receivables
collected during each calendar month (each, a "Monthly Period") into the
related Collection Account not later than two Business Days after receipt.
However, at any time that (i) GMAC is the Servicer, (ii) there exists no
Servicer Default and (iii) either (A) the short-term unsecured debt of the
Servicer is rated at least A-1 by Standard & Poor's Corporation and P-1 by
Moody's Investors Service, Inc., or (B) certain arrangements are made which
are acceptable to the Rating Agencies, the Servicer may retain such amounts
until the related Distribution Date. Pending deposit into the Collection
Account, collections may be employed by the Servicer at its own risk and for
its own benefit and will not be segregated from its own funds.
<PAGE>
<PAGE>29
Collections on a Scheduled Interest Receivable made during a Monthly
Period (other than an Administrative Receivable or a Warranty Receivable)
which are not late fees, prepayment charges or certain other similar fees or
charges will be applied first to any outstanding Scheduled Interest Advances
made by the Servicer with respect to such Receivable and then to the Scheduled
Payment. Any collections on such a Receivable remaining after such
applications will be considered an "Excess Payment." Such Excess Payment will
be held by the Servicer (or, if the Servicer has not satisfied conditions (ii)
and (iii) described in the preceding paragraph, will be deposited in the
Payment Ahead Servicing Account), and will be deemed a "Payment Ahead," except
as described in the following sentence. If and to the extent that an Excess
Payment (i) together with any unapplied Payments Ahead exceeds the sum of
three Scheduled Payments, or (ii) constitutes, either alone or together with
any previous unapplied Payments Ahead, full prepayment, then such portion of
such Excess Payment shall not be deemed a Payment Ahead and shall instead be
applied as a full or partial prepayment of such Receivable (a "Prepayment").
Collections made during a Monthly Period with respect to Simple Interest
Receivables (other than Administrative Receivables and Warranty Receivables)
which are not late fees or certain other similar fees or charges will be
applied first to the payment to the Servicer of Excess Simple Interest
Collections, if any, and next to principal and interest on all such
Receivables. With respect to a Monthly Period, "Excess Simple Interest
Collections" represent the excess, if any, of (i) all payments received during
such Monthly Period on all Simple Interest Receivables held by the Trust to
the extent allocable to interest over (ii) the amount of interest that would
be due during such Monthly Period on all Simple Interest Receivables held by
the Trust, assuming that the payment on each such Receivable was received on
its respective due date.
Collections on Administrative Receivables and Warranty Receivables
(including Administrative Purchase Payments and Warranty Payments) will
generally be applied in the manner described above, except that unapplied
Payments Ahead on a Scheduled Interest Receivable will be made to the Servicer
or the Seller, as applicable, and Administrative Purchase Payments and
Warranty Payments on a Simple Interest Receivable will not be applied to
Excess Simple Interest Collections.
MONTHLY ADVANCES
Unless otherwise provided in the related Prospectus Supplement, if the
full Scheduled Payment due on a Scheduled Interest Receivable is not received
by the end of the month in which it is due, whether as the result of any
26
extension granted to the obligor or otherwise, the amount of Payments Ahead,
if any, not previously applied with respect to such Receivable will be applied
by the Servicer to the extent of the shortfall and the Payments Ahead will be
reduced accordingly. If any shortfall remains, the Servicer will advance an
amount (a "Scheduled Interest Advance") equal to the amount of such shortfall.
The Servicer will be obligated to make a Scheduled Interest Advance only to
the extent that the Servicer, in its sole discretion, expects to recoup such
advance from subsequent collections or recoveries on any Receivable. The
Servicer will be reimbursed for any Scheduled Interest Advances with respect
to a Receivable from subsequent payments or collections relating to such
Receivable. Upon the determination that reimbursement from the preceding
sources is unlikely, the Servicer will be entitled to recoup its Scheduled
Interest Advances from collections from other related Receivables.
Unless otherwise provided in the related Prospectus Supplement, with
respect to each Trust, as of the last day of each Monthly Period, the Servicer
will advance an amount (a "Simple Interest Advance" and, collectively with a
Scheduled Interest Advance, a "Monthly Advance") equal to the excess, if any,
of (i) the amount of interest that would be due during such Monthly Period on
all Simple Interest Receivables held by the Trust assuming that the payment
on each such Receivable was received on its respective due date over (ii) all
payments received during such Monthly Period on all Simple Interest
Receivables held by the Trust to the extent allocable to interest. In
addition, with respect to each Trust, the Servicer
<PAGE>
<PAGE>30
will be paid, to the extent all previously made Simple Interest Advances
exceed all Excess Simple Interest Collections previously paid to the Servicer,
all Liquidation Proceeds realized with respect to Simple Interest Receivables
allocable to accrued and unpaid interest thereon (but not including interest
for the then current Monthly Period). The Servicer will not make any advance
with respect to principal on any Simple Interest Receivable.
DISTRIBUTIONS
With respect to each Trust, beginning on the Payment Date or
Distribution Date, as applicable, specified in the related Prospectus
Supplement, distributions of principal and interest (or, where applicable, of
principal or interest only) (with respect to the Notes) and distributions in
respect of Certificate Balance and interest (or, where applicable, of
Certificate Balance or interest only) (with respect to the Certificates) on
each class of Securities entitled thereto will be made by the Indenture
Trustee or the Owner Trustee, as applicable, to the Noteholders and the
Certificateholders. The timing, calculation, allocation, order, source,
priorities of and requirements for all payments to each class of Noteholders
and all distributions to each class of Certificateholders will be set forth
in the related Prospectus Supplement.
With respect to each Trust, on each Payment Date and Distribution Date,
collections on the Receivables will be transferred from the Collection Account
to the Note Distribution Account and the Certificate Distribution Account for
distribution to Noteholders and Certificateholders as and to the extent
described in the related Prospectus Supplement. Credit enhancement, such as
a Reserve Account, will be available to cover any shortfalls in the amount
available for distribution on such date to the extent specified in the related
Prospectus Supplement. Distributions in respect of principal and Certificate
Balance will be subordinate to distributions in respect of interest, and
distributions in respect of the Certificates will be subordinate to payments
in respect of the Notes, as more fully described in the related Prospectus
Supplement.
CREDIT ENHANCEMENT
The amounts and types of credit enhancement arrangements and the
provider thereof, if applicable, with respect to each class of Securities will
be set forth in the related Prospectus Supplement. If and to the extent
provided in the related Prospectus Supplement, credit enhancement may be in
the form of subordination of one or more classes of Securities, Reserve
Accounts, overcollateralization, letters of credit, credit or liquidity
facilities, repurchase obligations, third party payments or other support,
cash deposits or such other arrangements as may be described in the related
Prospectus Supplement or any combination of two or more of the foregoing. If
specified in the applicable Prospectus Supplement, credit enhancement for a
series of Securities may cover one or more other series of Securities.
27
The presence of a Reserve Account and other forms of credit enhancement
is intended to enhance the likelihood of receipt by the Noteholders and the
Certificateholders of the full amount of principal or Certificate Balance, as
the case may be, and interest due thereon and to decrease the likelihood that
the Noteholders and the Certificateholders will experience losses. Unless
otherwise specified in the related Prospectus Supplement, the credit
enhancement for a class of Securities will not provide protection against all
risks of loss and will not guarantee repayment of the entire principal balance
or Certificate Balance, as the case may be, and interest thereon. If losses
occur which exceed the amount covered by any credit enhancement or which are
not covered by any credit enhancement, securityholders will bear their
allocable share of deficiencies. In addition, if a form of credit enhancement
covers more than one series of Securities, securityholders of any such series
will be subject to the risk that such credit enhancement will be exhausted by
the claims of securityholders of other series.
Reserve Account. If so provided in the related Prospectus Supplement,
pursuant to the Trust Sale and Servicing Agreement, the Seller will establish
for a series an account, as specified in the related Prospectus Supplement
(the "Reserve Account"), which will be maintained with the Indenture Trustee.
<PAGE>31
Unless otherwise provided in the related Prospectus Supplement, the Reserve
Account will not be included in the property of the related Trust but will be
a segregated trust account held by the Indenture Trustee for the benefit of
Noteholders and Certificateholders. Unless otherwise provided in the related
Prospectus Supplement, the Reserve Account will be funded by an initial
deposit by the Seller on the Closing Date of the Reserve Account Initial
Deposit (in the amount set forth in the related Prospectus Supplement). As
further described in the related Prospectus Supplement, the amount on deposit
in the Reserve Account will be increased on each Distribution Date thereafter
up to the Specified Reserve Account Balance (as defined in the related
Prospectus Supplement) by the deposit therein of the amount of collections on
the related Receivables remaining on each such Distribution Date after the
payment of the Total Servicing Fee and the distributions and allocations to
the Noteholders and the Certificateholders required on such date. Unless
otherwise provided in the related Prospectus Supplement or agreed by the
Seller, amounts on deposit in the Reserve Account after payments to
Noteholders, Certificateholders and the Servicer may be paid to the Seller to
the extent that such amounts exceed the Specified Reserve Account Balance.
Upon any distribution to the Seller of amounts from the Reserve Account,
neither the Noteholders nor the Certificateholders will have any rights in,
or claims to, such amounts.
NET DEPOSITS
As an administrative convenience the Servicer will be permitted to make
the deposit of collections, aggregate Monthly Advances, Warranty Purchase
Payments and Administrative Purchase Payments for any Trust for or with
respect to the Monthly Period net of distributions to be made to the Servicer
for such Trust with respect to the Monthly Period. Similarly, the Servicer
may cause to be made a single, net transfer from the Collection Account to the
related Payment Ahead Servicing Account, or vice versa. The Servicer,
however, will account to the Indenture Trustee, the Owner Trustee, the
Noteholders and the Certificateholders with respect to each Trust as if all
deposits, distributions and transfers were made individually. In addition,
in connection with any Trust at any time that the Servicer is not required to
remit collections on a daily basis, the Servicer may retain collections
allocable to the Notes or the Note Distribution Account until the related
Payment Date, and pending deposit into the Collection Account or the Note
Distribution Account, such collections may be employed by the Servicer at its
own risk and for its own benefit and will not be segregated from its own
funds. On each Payment Date, the Servicer, the Seller, the Indenture Trustee
and the Owner Trustee will make all distributions, deposits and other
remittances with respect to the Notes or the Note Distribution Account of a
Trust for the periods since the previous distribution was to have been made.
If Payment Dates do not coincide with Distribution Dates, all distributions,
deposits or other remittances made on a Payment Date will be treated as having
been distributed, deposited or remitted on the Distribution Date for the
applicable Monthly Period for purposes of determining other amounts required
to be distributed, deposited or otherwise remitted on such Distribution Date.
28
STATEMENTS TO TRUSTEES AND TRUST
Prior to each Payment Date and Distribution Date, with respect to each
Trust the Servicer will provide to the Indenture Trustee and the Owner Trustee
as of the close of business on the last day of the preceding Monthly Period
a statement setting forth substantially the same information as is required
to be provided in the periodic reports provided to securityholders on such
date described under "Certain Information Regarding the Securities-Reports to
Securityholders."
EVIDENCE AS TO COMPLIANCE
Each Trust Sale and Servicing Agreement will provide that a firm of
independent public accountants will furnish to the Owner Trustee and the
Indenture Trustee on or before August 15 of each year, beginning the first
August 15 which is at least twelve months after the related Closing Date, a
statement as to compliance by the Servicer during the preceding twelve months
ended June 30 (or in the case of the first such certificate, the period from
the Closing Date to the June 30 of such year) with certain standards relating
to the servicing of the Receivables, the Servicer's accounting records and
computer files with respect thereto and certain other matters.
<PAGE>32
Each Trust Sale and Servicing Agreement will also provide for delivery
to the Owner Trustee and the Indenture Trustee, on or before August 15 of each
year, beginning the first August 15 which is at least twelve months after the
related Closing Date, of a certificate signed by an officer of the Servicer
stating that the Servicer has fulfilled its obligations under the Trust Sale
and Servicing Agreement throughout the preceding twelve months ended June 30
(or in the case of the first such certificate, the period from the Closing
Date to the June 30 of such year) or, if there has been a default in the
fulfillment of any such obligation, describing each such default. Such
certificate may be provided as a single certificate making the required
statements as to more than one Trust Sale and Servicing Agreement.
Copies of such statements and certificates may be obtained by
securityholders by a request in writing addressed to the applicable Indenture
Trustee or Owner Trustee.
In each Trust Sale and Servicing Agreement, the Seller will agree to
give the Indenture Trustee and the Owner Trustee notice of any event which
with the giving of notice or the lapse of time, or both, would become a
Servicer Default. In addition, the Seller will agree to give the Indenture
Trustee, the Owner Trustee and the Trust notice of certain covenant breaches
which with the giving of notice or lapse of time, or both, would constitute
a Servicer Default.
CERTAIN MATTERS REGARDING THE SERVICER
Each Trust Sale and Servicing Agreement will provide that GMAC may not
resign from its obligations and duties as Servicer thereunder and under the
Pooling and Servicing Agreement, except upon determination that GMAC's
performance of such duties is no longer permissible under applicable law. No
such resignation will become effective until the related Indenture Trustee or
a successor servicer has assumed GMAC's servicing obligations and duties under
the related Transfer and Servicing Agreements.
Each Trust Sale and Servicing Agreement will further provide that
neither the Servicer nor any of its directors, officers, employees and agents
will be under any liability to the related Trust or the related Noteholders
or Certificateholders for taking any action or for refraining from taking any
action pursuant to the related Transfer and Servicing Agreements or the
related Indenture or for errors in judgment; except that neither the Servicer
nor any such person will be protected against any liability that would
otherwise be imposed by reason of wilful misfeasance, bad faith or negligence
(except errors in judgment) in the performance of the Servicer's duties
thereunder or by reason of reckless disregard of its obligations and duties
thereunder. Each Trust Sale and Servicing Agreement will further provide that
the Servicer and its directors, officers, employees and agents will be
reimbursed by the Indenture Trustee or the Owner Trustee for any contractual
damages, liability or expense incurred by reason of such trustee's wilful
misfeasance, bad faith or negligence (except errors in judgment) in the
29
performance of such trustee's duties thereunder or by reason of reckless
disregard of its obligations and duties thereunder or under the related Trust
Agreement or the related Indenture. In addition, each Trust Sale and
Servicing Agreement will provide that the Servicer is under no obligation to
appear in, prosecute or defend any legal action that is not incidental to the
Servicer's servicing responsibilities under the related Transfer and Servicing
Agreements and that, in its opinion, may cause it to incur any expense or
liability. The Servicer may, however, undertake any reasonable action that
it may deem necessary or desirable in respect of the related Transfer and
Servicing Agreements and the rights and duties of the parties thereto and the
interests of the Noteholders and the Certificateholders thereunder. In such
event, the legal expenses and costs of such action and any liability resulting
therefrom will be expenses, costs and liabilities of the related Trust, and
the Servicer will be entitled to be reimbursed therefor out of the related
Collection Account. Any such indemnification or reimbursement will reduce the
amount otherwise available for distribution to the Noteholders and the
Certificateholders.
<PAGE>33
Under the circumstances specified in each Trust Sale and Servicing
Agreement, any entity into which the Servicer may be merged or consolidated,
or any entity resulting from any merger or consolidation to which the Servicer
is a party, or any entity succeeding to the business of the Servicer or, with
respect to its obligations as Servicer, any entity 50% or more of the voting
interests of which are owned, directly or indirectly, by General Motors, which
entity in each of the foregoing cases assumes the obligations of the Servicer,
will be the successor of the Servicer under such Trust Sale and Servicing
Agreement. The Servicer may at any time subcontract any duties as Servicer
under any Trust Sale and Servicing Agreement and the Pooling and Servicing
Agreement to any entity in which more than 50% of the voting interests are
owned, directly or indirectly, by General Motors. In the event of any such
subcontract, the Servicer will remain responsible for the subcontractor's
performance in accordance with such Trust Sale and Servicing Agreement.
SERVICER DEFAULT
Except as otherwise provided in the related Prospectus Supplement,
"Servicer Default" under each Trust Sale and Servicing Agreement will consist
of (i) any failure by the Servicer to deliver to the Indenture Trustee for
deposit in any of the Designated Accounts or to the Owner Trustee for deposit
in the Certificate Distribution Account any required payment or to direct the
Indenture Trustee to make any required distributions therefrom, which failure
continues unremedied for five Business Days after written notice from the
Indenture Trustee or the Owner Trustee is received by the Servicer or after
discovery of such failure by an officer of the Servicer; (ii) any failure by
the Servicer to duly observe or perform in any material respect any other
covenant or agreement in such Trust Sale and Servicing Agreement, the related
Pooling and Servicing Agreement, the related Trust Agreement or the related
Indenture which failure materially and adversely affects the rights of the
Noteholders or the Certificateholders and which continues unremedied for 90
days after the giving of written notice of such failure (A) to the Servicer
or the Seller, as the case may be, by the Indenture Trustee or the Owner
Trustee or (B) to the Servicer or the Seller, as the case may be, and to the
Indenture Trustee and the Owner Trustee by holders of Notes or Certificates,
as applicable, evidencing not less than 25% in principal amount of such
outstanding Notes or of such Certificate Balance; and (iii) certain events of
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings with respect to the Servicer and certain actions by the
Servicer indicating its insolvency, reorganization pursuant to bankruptcy
proceedings, or inability to pay its obligations (each, an "Insolvency
Event").
Notwithstanding the foregoing, there will be no Servicer Default where
a Servicer Default would otherwise exist under clause (i) above for a period
of ten Business Days or under clause (ii) for a period of 60 days if the delay
or failure giving rise to such Servicer Default was caused by an act of God
or other similar occurrence. Upon the occurrence of any such event, the
Servicer will not be relieved from using its best efforts to perform its
obligations in a timely manner in accordance with the terms of the Pooling and
Servicing Agreement and the Trust Sale and Servicing Agreement and the
Servicer will provide the Indenture Trustee, the Owner Trustee, the Seller and
the Securityholders prompt notice of such failure or delay by it, together
with a description of its efforts to so perform its obligations.
30
RIGHTS UPON SERVICER DEFAULT
As long as a Servicer Default under a Trust Sale and Servicing Agreement
remains unremedied, the related Indenture Trustee or holders of related Notes
evidencing not less than a majority in principal amount of such then
outstanding Notes (or, if the Notes have been paid in full and the Indenture
has been discharged with respect thereto, the related Owner Trustee or the
holders of related Certificates evidencing not less than a majority of the
aggregate outstanding Certificate Balance of all Certificates other than
Certificates owned by the Trust, the Seller, GMAC or any of their affiliates)
may terminate all the rights and obligations of the Servicer under such Trust
Sale and Servicing Agreement and the related Pooling and Servicing Agreement,
<PAGE>
<PAGE>34
whereupon such Indenture Trustee will succeed to all the responsibilities,
duties and liabilities of the Servicer under such agreements and will be
entitled to similar compensation arrangements. If, however, a bankruptcy
trustee or similar official has been appointed for the Servicer, and no
Servicer Default other than such appointment has occurred, such trustee or
official may have the power to prevent the Indenture Trustee or the
Noteholders from effecting a transfer of servicing. In the event that the
Indenture Trustee is unwilling to so act, it may, and if it is unable to so
act, it shall appoint, or petition a court of competent jurisdiction for the
appointment of, a successor with a net worth of at least $100,000,000 and
whose regular business includes the servicing of automotive receivables and
which satisfies the other criteria set forth in the Trust Sale and Servicing
Agreement. The Indenture Trustee may make such arrangements for compensation
to be paid, which in no event may be greater than the servicing compensation
to the Servicer under such Trust Sale and Servicing Agreement.
WAIVER OF PAST DEFAULTS
With respect to each Trust, the holders of Notes evidencing at least a
majority in principal amount of the then outstanding related Notes (or the
holders of the related Certificates evidencing not less than a majority of the
outstanding Certificate Balance, in the case of any Servicer Default which
does not adversely affect the Indenture Trustee or the Noteholders) may, on
behalf of all such Noteholders and Certificateholders, waive any default by
the Servicer in the performance of its obligations under the Pooling and
Servicing Agreement and the Trust Sale and Servicing Agreement and its
consequences, except a Servicer Default in making any required deposits to or
payments from any of the Designated Accounts or the Certificate Distribution
Account in accordance with the Trust Sale and Servicing Agreement. No such
waiver will impair such Noteholders' or Certificateholders' rights with
respect to subsequent defaults.
AMENDMENT
Each of the Transfer and Servicing Agreements may be amended by the
parties thereto without the consent of the related Noteholders or
Certificateholders (i) to cure any ambiguity, (ii) to correct or supplement
any provision therein that may be defective or inconsistent with any other
provision therein, (iii) to add or supplement any credit enhancement for the
benefit of Noteholders or Certificateholders (provided that if any such
addition affects any class of Noteholders or Certificateholders differently
than any other class of Noteholders or Certificateholders, then such addition
will not, as evidenced by an opinion of counsel, adversely affect in any
material respect the interests of any class of Noteholders or
Certificateholders), (iv) to add to the covenants, restrictions or obligations
of the Seller, the Servicer, the Owner Trustee or the Indenture Trustee or (v)
to add, change or eliminate any other provisions of such Agreement in any
manner that will not, as evidenced by an opinion of counsel, adversely affect
in any material respect the interests of the Noteholders or the
Certificateholders. Each such Agreement may also be amended by the parties
thereto with the consent of the holders of at least a majority in principal
amount of such then outstanding Notes and the holders of such Certificates
evidencing at least a majority of the Certificate Balance for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of such Agreement or of modifying in any manner the rights of such
Noteholders or Certificateholders; except that no such amendment may (i)
increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collection of payments on Receivables or distributions that are
required to be made on any Note or Certificate, any Interest Rate, any Pass
Through Rate or the Specified Reserve Account Balance or (ii) reduce the
aforesaid percentage required of Noteholders or Certificateholders to consent
to any such amendment without the consent of all of the Noteholders or
Certificateholders, as the case may be.
31
INSOLVENCY EVENT
With respect to each Trust, if an Insolvency Event occurs with respect
to the Seller, the related Trust will be terminated. In such event, the Trust
will be liquidated 90 days after the date of such Insolvency Event, unless,
before the end of such 90-day period, the Owner Trustee shall have
<PAGE>35
received written instructions from (i) each of the Certificateholders (other
than the Seller) and (ii) each of the Noteholders to the effect that each such
party disapproves of the liquidation of such Receivables and termination of
such Trust. Promptly after the occurrence of any Insolvency Event with
respect to the Seller, notice thereof is required to be given to Noteholders
and Certificateholders; except that any failure to give such required notice
will not prevent or delay termination of any Trust. Upon termination of any
Trust, the Owner Trustee shall direct the Indenture Trustee promptly to sell
the assets of such Trust (other than the Designated Accounts and the
Certificate Distribution Account) in a commercially reasonable manner and on
commercially reasonable terms. The proceeds from any such sale, disposition
or liquidation of the Receivables will be treated as collections on the
Receivables and deposited in the related Collection Account. With respect to
any series, if the proceeds from the liquidation of the Receivables and any
other available assets and any amounts on deposit in the Reserve Account, the
Payment Ahead Servicing Account, the Note Distribution Account and the
Certificate Distribution Account are not sufficient to pay the Notes in full,
the amount of principal returned to Noteholders and Certificateholders will
be reduced and the Noteholders and the Certificateholders will incur a loss.
Each Trust Agreement will provide that the Owner Trustee does not have
the power to commence a voluntary proceeding in bankruptcy relating to the
related Trust without the unanimous prior approval of all related
Certificateholders (including the Seller) and the delivery to the Owner
Trustee by each such Certificateholder (including the Seller) of a certificate
certifying that such Certificateholder reasonably believes that such Trust is
insolvent. In the Trust Sale and Servicing Agreement, the Servicer and the
Seller will covenant that they will not, for a period of one year and one day
after the final distribution with respect to the related Notes and the related
Certificates to the Note Distribution Account or the Certificate Distribution
Account, as applicable, institute against the related Trust any bankruptcy,
reorganization or other proceeding under any federal or state bankruptcy or
similar law.
SELLER LIABILITY
Under each Trust Agreement, the Seller will agree to be liable directly
to an injured party for the entire amount of any losses, claims, damages or
liabilities (other than those incurred by a Noteholder or a Certificateholder
in the capacity of an investor) arising out of or based on the arrangement
created by such Trust Agreement as though such arrangement created a
partnership under the Delaware Revised Uniform Limited Partnership Act in
which the Seller were a general partner.
TERMINATION
Each Trust will terminate on the earlier to occur of (a) the final
distributions by the Indenture Trustee and the Owner Trustee of all monies and
other property of the Trust in accordance with the terms of the Trust
Agreement, the Indenture and the Trust Sale and Servicing Agreement (including
in the case of the exercise by the Servicer of its repurchase option as
described above in "Optional Repurchase by the Servicer") and (b) in the event
of certain insolvency events with respect to the Seller as described above
under "Insolvency Event." Upon termination of the Trust and payment (or
deposit into the Note Distribution Account and the Certificate Distribution
Account) of all amounts to be paid to the related Securityholders, any
remaining assets of the Trust and any amounts remaining on deposit in the
related Reserve Account will be paid to the Seller. Unless otherwise provided
in the related Prospectus Supplement, in order to avoid excessive
administrative expense, the Servicer, or its successor, will be permitted at
its option to purchase from each Trust, as of the last day of any Monthly
Period, if the then outstanding Aggregate Principal Balance of the Receivables
held by such Trust is 10% or less of the Aggregate Amount Financed, all
remaining related Receivables at a price equal to the aggregate Administrative
Purchase Payments for such Receivables plus the appraised value of any other
property held as part of the Trust less Liquidation Expenses, all as of the
end of such Monthly Period. As more fully described in the related Prospectus
Supplement, any related outstanding Notes will be
32
redeemed concurrently therewith and the subsequent distribution to related
Certificateholders of all amounts required to be distributed to them pursuant
<PAGE>36
to the Trust Agreement will effect early retirement of the Certificates. The
Indenture Trustee will give written notice of redemption to each related
Noteholder of record and the Owner Trustee will give written notice of
termination to each related Certificateholder of record. The final
distribution to any Noteholder or Certificateholder will be made only upon
surrender and cancellation of such Noteholder's Note at an office or agency
of the Indenture Trustee specified in the notice of redemption or such
Certificateholder's Certificate at an office or agency of the Owner Trustee
specified in the notice of termination.
ADMINISTRATION AGREEMENT
GMAC, in its capacity as administrator (the "Administrator"), will enter
into an agreement (an "Administration Agreement") with each Trust and the
related Indenture Trustee pursuant to which the Administrator will agree, to
the extent provided in such Administration Agreement, to provide the notices
and to perform other administrative obligations required by the related
Indenture. With respect to each Trust, as compensation for the performance
of the Administrator's obligations under the Administration Agreement and as
reimbursement for its expenses related thereto, the Administrator will be
entitled to an administration fee in an amount equal to $1,500 per month,
which fee will be paid by the Servicer.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
SECURITY INTEREST IN VEHICLES
In all states in which the Receivables have been originated, retail
instalment sale contracts such as the Receivables evidence the credit sale of
automobiles and light trucks by dealers to purchasers. 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 the vehicles is generally governed by the motor vehicle
registration laws of the state in which the vehicle is located. In all states
in which the Receivables have been originated, a security interest in a
vehicle is perfected by notation of the secured party's lien on the vehicle's
certificate of title.
With respect to each Trust, pursuant to the Pooling and Servicing
Agreement, GMAC will assign its security interest in the Financed Vehicles
securing the related Receivables to the Seller and pursuant to the Trust Sale
and Servicing Agreement, the Seller will assign its security interest in the
Financed Vehicles securing such Receivables to the Trust. However, because
of the administrative burden and expense, neither the Servicer nor the Owner
Trustee will amend any certificate of title to identify the Trust as the new
secured party on such certificate of title relating to a Financed Vehicle.
Also, GMAC will continue to hold any certificates of title relating to the
vehicles in its possession as custodian for the Seller and the Owner Trustee
pursuant to a custodian agreement entered into pursuant to the related Pooling
and Servicing Agreement and Trust Sale and Servicing Agreement. See "The
Transfer and Servicing Agreements-Sale and Assignment of Receivables."
In most states, an assignment such as that under both the related
Pooling and Servicing Agreement and the related Trust Sale and Servicing
Agreement is an effective conveyance of a security interest without amendment
of any lien noted on a vehicle's certificate of title, and the assignee
succeeds thereby to the assignor's rights as secured party. In the absence
of fraud or forgery by the vehicle owner or GMAC or administrative error by
state or local agencies, in most states the notation of GMAC's lien on the
certificates of title will be sufficient to protect the related Trust against
the rights of subsequent purchasers of a Financed Vehicle from an obligor or
subsequent lenders to an obligor who take a security interest in a Financed
Vehicle. If there are any Financed Vehicles as to which GMAC failed 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. Such a failure, however, would constitute a
breach of the warranties of GMAC under the related Pooling and Servicing
Agreement and, if the interests of the Securityholders in the related
Receivable are materially and adversely affected, would create an obligation
of GMAC to repurchase such Receivable unless the breach is cured. Similarly,
the security interest of the related Trust in the vehicle could be
defeated through fraud or negligence and, because the Trust is not identified
33
<PAGE>37
as the secured party on the certificate of title, by the bankruptcy petition
of the obligor.
Under the laws of most states, the perfected security interest in a
vehicle would continue for four months after a vehicle is moved to a state
other than the state in which it is initially registered and thereafter until
the vehicle owner re-registers the vehicle in the new state. A majority of
states generally require surrender of a certificate of title to re-register
a vehicle. Accordingly, a secured party must surrender possession if it holds
the certificate of title to the vehicle or, in the case of vehicles registered
in states providing for the notation of a lien on the certificate of title but
not possession by the secured party, the secured party would receive notice
of surrender if the security interest is noted on the certificate of title.
Thus, the secured party would receive notice of surrender if the security
interest is noted on the certificate of title. Thus, the secured party would
have the opportunity to re-perfect its security interest in the vehicles in
the state of relocation. In states that do not require surrender of a
certificate of title for registration of a motor vehicle, re-registration
could defeat perfection. In the ordinary course of servicing receivables, the
Servicer takes steps to effect re-perfection upon receipt of notice of re-
registration or information from the obligors as to relocation. Similarly,
when an obligor sells a vehicle, the Servicer must surrender possession of the
certificate of title or will receive notice as a result of its lien noted
thereon and accordingly will have an opportunity to require satisfaction of
the related Receivables before release of the lien. Under each Pooling and
Servicing Agreement, the Servicer is obligated to take appropriate steps, at
the Servicer's expense, to maintain perfection of security interests in the
Financed Vehicles.
Under the laws of most states, liens for repairs performed on a motor
vehicle and liens for unpaid taxes take priority over even a perfected
security interest in a financed vehicle. The Code also grants priority to
certain federal tax liens over the lien of a secured party. The laws of
certain states and federal law permit the confiscation of motor vehicles by
governmental authorities under certain circumstances if used in unlawful
activities, which may result in the loss of a secured party's perfected
security interest in the confiscated motor vehicle. Under each Pooling and
Servicing Agreement, GMAC will have represented to the Seller that, as of the
Closing Date, each Receivable is or will be secured by a first perfected
security interest in favor of GMAC in the Financed Vehicle. The Seller will
have assigned such representation, among others, to the Owner Trustee pursuant
to the related Trust Sale and Servicing Agreement. However, liens for repairs
or taxes, or the confiscation of a Financed Vehicle, could arise at any time
during the term of a Receivable. No notice will be given to the Owner
Trustee, the Indenture Trustee, the Noteholder or the Certificateholder if
such a lien or confiscation arises.
REPOSSESSION
In the event of default by vehicle purchasers, the holder of the retail
instalment sale contract has all the remedies of a secured party under the
UCC, except where specifically limited by other state laws. Among the UCC
remedies, the secured party has the right to perform self-help repossession
unless such act would constitute a breach of the peace. Self-help is the
method employed by the Servicer in most cases and is accomplished simply by
retaking possession of the financed vehicle. In the event of default by the
obligor, some jurisdictions require that the obligor be notified of the
default and be given a time period within which he may cure the default prior
to repossession. Generally, the right of reinstatement may be exercised on
a limited number of occasions in any one-year period. In cases where the
obligor objects or raises a defense to repossession, or if otherwise required
by applicable state law, a court order must be obtained from the appropriate
state court, and the vehicle must then be repossessed in accordance with that
order. A secured party may be held responsible for damages caused by a
wrongful repossession of a vehicle.
NOTICE OF SALE; REDEMPTION RIGHTS
The UCC and other state laws require the secured party to provide the
obligor with reasonable notice of the date, time and place of any public sale
and/or the date after which any private sale of the collateral may be held.
In addition, a consent order between the Servicer and the Federal Trade
Commission ("FTC Repossession Consent Order") imposes similar requirements
34
<PAGE>38
for the giving of notice for any such sale. The obligor has the right to
redeem the collateral prior to actual sale by paying the secured party the
unpaid principal balance of the obligation plus reasonable expenses for
repossessing, holding and preparing the collateral for disposition and
arranging for its sale, plus, in some jurisdictions, reasonable attorneys'
fees, or, in some states, by payment of delinquent instalments or the unpaid
balance.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of the Financed Vehicles generally will be
applied first to the expenses of resale and repossession and then to the
satisfaction of the indebtedness. In many instances, the remaining principal
amount of such indebtedness will exceed such proceeds. While some states
impose prohibitions or limitations on deficiency judgments if the net proceeds
from resale do not cover the full amount of the indebtedness, a deficiency
judgment can be sought in those states that do not prohibit or limit such
judgments. However, the deficiency judgment would be a personal judgment
against the obligor for the shortfall, and a defaulting obligor can be
expected to have very little capital or sources of income available following
repossession. Therefore, in many cases, it may not be useful to seek a
deficiency judgment or, if one is obtained, it may be settled at a significant
discount.
Occasionally, after resale of a vehicle and payment of all expenses and
all indebtedness, there is a surplus of funds. In that case, the UCC requires
the creditor to remit the surplus to any holder of a lien with respect to the
vehicle or if no such lienholder exists or there are remaining funds, the UCC
and the FTC Repossession Consent Order require the creditor to remit the
surplus to the former owner of the vehicle.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related
regulations impose substantial requirements upon lenders and servicers
involved in consumer finance. These laws include the Truth-in-Lending Act,
the Equal Credit Opportunity Act, the Federal Trade Commission Act, the Fair
Credit Reporting Act, the Fair Debt Collection Procedures Act, the Magnuson-
Moss Warranty Act, the Federal Reserve Board's Regulations B and Z, the
Soldiers' and Sailors' Civil Relief Act of 1940, the Texas Consumer Credit
Code, state adoptions of the National Consumer Act and of the Uniform Consumer
Credit Code (the "UCCC") and state sales finance and other similar laws.
Also, state laws impose finance charge ceilings and other restrictions on
consumer transactions and require contract disclosures in addition to those
required under federal law. These requirements impose specific statutory
liabilities upon creditors who fail to comply with their provisions. In some
cases, this liability could affect an assignee's ability to enforce consumer
finance contracts such as the Receivables (or, if a seller with respect to a
Receivable is not liable for indemnifying the Trust as assignee of the
Receivables from the Seller, failure to comply could impose liability on an
assignee in excess of the amount of the Receivable).
The so-called "Holder-in-Due-Course" Rule of the Federal Trade
Commission (the "FTC Rule"), the provisions of which are generally duplicated
by the UCC, other state statutes or the common law, has the effect of
subjecting a seller in a consumer credit transaction (and certain related
creditors and their assignees) to all claims and defenses which the obligor
in the transaction could assert against the seller. Liability under the FTC
Rule is limited to the amounts paid by the obligor under the contract and the
holder of the contract may also be unable to collect any balance remaining due
thereunder from the obligor.
Most of the Receivables will be subject to the requirements of the FTC
Rule. Accordingly, the Owner Trustee of a Trust, as holder of the related
Receivables, will be subject to any claims or defenses that the purchaser of
the Financed Vehicle may assert against the seller of the Financed Vehicle.
Such claims are limited to a maximum liability equal to the amounts paid by
the obligor on the Receivable. If an obligor were successful in asserting any
such claim or defense, such claim or defense would constitute a breach of
GMAC's warranties under the related Pooling and Servicing Agreement and may
create an obligation of GMAC to repurchase the Receivable unless the breach
is cured. See "The Transfer and Servicing Agreements-Sale and Assignment of
Receivables."
<PAGE>39
Courts have imposed general equitable principles upon secured parties
pursuing repossession and litigation involving deficiency balances. These
equitable principles may have the effect of relieving an obligor from some or
all of the legal consequences of a default.
35
In several cases, consumers have asserted that the self-help remedies
of secured parties under the UCC and related laws violate the due process
protections provided under the 14th Amendment to the Constitution of the
United States. Courts have generally upheld the notice provisions of the UCC
and related laws as reasonable or have found that the repossession and resale
by the creditor do not involve sufficient state action to afford
constitutional protection to consumers.
Under each Pooling and Servicing Agreement, GMAC will represent to the
Seller that each Receivable complies with all requirements of law in all
material respects. The Seller will have assigned such representation, among
others, to the related Trust. Accordingly, if an obligor has a claim against
the Trust for violation of any law and such claim materially and adversely
affects the related Trust's interest in a Receivable, such violation would
constitute a breach of representation and would create an obligation to
repurchase the Receivable unless the breach is cured. See "The Transfer and
Servicing Agreements-Sale and Assignment of the Receivables."
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a secured
party to realize upon collateral or to enforce a deficiency judgment. For
example, in a Chapter 13 proceeding under the federal bankruptcy law, a court
may prevent a creditor from repossessing the Financed Vehicle, and, as part
of the rehabilitation plan, reduce the amount of the secured indebtedness to
the market value of the Financed Vehicle at the time of bankruptcy, leaving
the creditor as a general unsecured creditor for the remainder of the
indebtedness. A bankruptcy court may also reduce the monthly payments due
under a contract or change the rate of finance charge and time of repayment
of the indebtedness.
TRANSFER OF VEHICLES
The Receivables prohibit the sale or transfer of a Financed Vehicle
without the Servicer's consent and permit the Servicer to accelerate the
maturity of the Receivable upon a sale or transfer without the Servicer's
consent. The Servicer will not consent to a sale or transfer and will require
prepayment of the Receivable. Although the Servicer, as agent of each Owner
Trustee, may enter into a transfer of equity agreement with the secondary
purchaser for the purpose of effecting the transfer of the vehicle, the new
obligation will not be included in the related Receivables Pool.
SALE OF RECEIVABLES BY GMAC
As described herein, the transaction of the Receivables that are being
sold by GMAC to the Seller and from the Seller to the Trust have been
structured as, and will be treated by the parties as, sales. The United
States Court of Appeals for the Tenth Circuit recently found that accounts
sold prior to a bankruptcy should be treated as property of the bankruptcy
estate. In the event that GMAC or the Seller were a debtor in a bankruptcy
proceeding and the bankruptcy court applied this analysis, delays or
reductions in receipt of collections on the Receivables to the related Trust
and distributions on the related Securities to Securityholders could occur.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
Set forth below is a discussion of the anticipated material United
States federal income tax consequences of the purchase, ownership and
disposition of the Notes and Certificates. 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.
There are no cases or Internal Revenue Service ("IRS") rulings on similar
transactions involving both debt and equity interests issued by a trust with
terms similar to those of the Notes and the Certificates. As a result, there
36
<PAGE>40
can be no assurance that the 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. Furthermore, legislative, judicial or administrative
changes may occur, perhaps with retroactive effect, which could affect the
accuracy of the statements and conclusions set forth herein as well as the tax
consequences to Noteholders and Certificateholders.
This discussion does not purport to deal with all aspects of federal
income taxation that may be relevant to the Noteholders and Certificateholders
in light of their personal investment circumstances nor, except for certain
limited discussions of particular topics, to certain types of holders 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 prospective purchasers who
purchase Notes or Certificates in the initial distribution thereof, who are
citizens or residents of the United States, including domestic corporations
and partnerships, and who hold the Notes or Certificates as "capital assets"
within the meaning of Section 1221 of the Code. Taxpayers and preparers of
tax returns (including those filed by any partnership or other issuer) should
be aware that under applicable Treasury regulations a provider of advice on
specific issues of law is not considered an income tax return preparer unless
the advice is (i) given with respect to events that have occurred at the time
the advice is rendered and is not given with respect to the consequences of
contemplated actions, and (ii) is directly relevant to the determination of
an entry on a tax return. Accordingly, taxpayers should consult their own tax
advisors and tax return preparers regarding the preparation of any item on a
tax return, even where the anticipated tax treatment has been discussed
herein. PROSPECTIVE INVESTORS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS AS
TO THE FEDERAL, STATE, LOCAL, FOREIGN AND ANY OTHER TAX CONSEQUENCES TO THEM
OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF NOTES OR CERTIFICATES.
The following discussion addresses Securities falling into three general
categories: (i) Notes (other than Strip Notes or any other series of Notes
specifically identified as receiving different tax treatment in the related
Prospectus Supplement) which the Seller, the Servicer and the Noteholders will
agree to treat as indebtedness secured by the related Receivables, (ii)
Certificates representing interests in a trust fund which the Seller, the
Servicer and the applicable Certificateholders will agree to treat as equity
interests in a grantor trust (a "Tax Trust"), and (iii) Certificates
(including Strip Certificates) and Strip Notes, representing interests in a
trust fund which the Seller, the Servicer and the applicable holders will
agree to treat as equity interests in a partnership (a "Tax Partnership"), in
each case for purposes of federal, state and local income and franchise taxes.
Certificates issued by a Tax Trust are referred to herein as "Trust
Certificates", and Certificates (including Strip Certificates) and Strip Notes
issued by a Tax Partnership are referred to herein as "Partnership
Certificates." The Prospectus Supplement for each series of Certificates will
indicate whether the related trust fund is a Tax Trust or a Tax Partnership.
For purposes of this discussion, references to a "Certificateholder" or a
"holder" are to the beneficial owner of a Trust Certificate, Partnership
Certificate, or both, as the context may require.
The following discussion is based in part upon the rules governing
original issue discount ("OID") that are set forth in Sections 1271-1275 of
the Code and in Treasury regulations issued under the OID provisions of the
Code which become effective April 4, 1994.
THE NOTES
Characterization as Debt. With respect to each series of Notes (except
for Strip Notes and any series which is specifically identified as receiving
different tax treatment in the applicable Prospectus Supplement), regardless
of whether such Notes are issued by a Tax Trust or a Tax Partnership, Kirkland
& Ellis, special tax counsel to the Seller ("Tax Counsel"), will deliver its
opinion to the effect that, although no specific authority exists with respect
to the characterization for federal income tax purposes of securities having
the same terms as the Notes, based on the terms of the Notes, the transactions
relating to the Receivables as set forth herein, and the discussions of Trust
Certificates and Partnership Certificates below, the
37
<PAGE>41
Notes will be treated as debt for federal income tax purposes. The Seller,
the Servicer and each Noteholder, by acquiring an interest in a Note, will
agree to treat the Notes as indebtedness for federal, state and local income
and franchise tax purposes. See "Trust Certificates-Classification of Trusts
and Trust Certificates" or "Partnership Certificates-Classification of
Partnerships and Partnership Certificates" for a discussion of the potential
federal income tax consequences to Noteholders if the IRS were successful in
challenging the characterization of a Tax Trust or a Tax Partnership for
federal income tax purposes.
Treatment of Stated Interest. Based on the foregoing opinion, the stated
interest on the Notes will be taxable to a Noteholder as ordinary income when
received or accrued in accordance with such Noteholder's method of tax
accounting. Except to the extent indicated in the related Prospectus
Supplement, no series of Notes will be issued with OID. A holder who
purchases a Note after the initial distribution thereof at a discount that
exceeds a statutorily defined de minimis amount will be subject to the "market
discount" rules of the Code, and a holder who purchases a Note at a premium
will be subject to the bond premium amortization rules of the Code.
If any Notes were treated as being issued with OID, a Noteholder would
be required to include OID in income as interest over the term of the Notes
under a constant yield method. In general, OID must be included in income in
advance of the receipt of cash representing that income. Thus, each cash
distribution would be treated as an amount already included in income (to the
extent OID has accrued as of the date of the interest distribution and is not
allocated to prior distributions), or as a repayment of principal. This
treatment would have no significant effect on Noteholders using the accrual
method of accounting. However, cash method Noteholders may be required to
report income with respect to the Notes in advance of the receipt of cash
attributable to such income.
A holder of a Note which has a fixed maturity date not more than one
year from the issue date of such Note (a "Short-Term Note") will generally not
be required to include market discount on the Note in income as it accrues,
provided such holder is not an accrual method taxpayer, a bank, a broker or
dealer that holds the Note as inventory, a regulated investment company or
common trust fund, or the beneficial owner of certain pass-through entities
specified in the Code, or provided such holder does not hold the instrument
as part of a hedging transaction, or as a stripped bond or stripped coupon.
Instead, the holder of a Short-Term Note would include the market discount
accrued on the Note in gross income upon sale or exchange or at maturity, or
if such Note is payable in installments, as principal is paid thereon. Such
a holder would be required to defer deductions for any interest expense on an
obligation incurred to purchase or carry the Short-Term Note to the extent it
exceeds the sum of the interest income, if any, and market discount accrued
on such Note. However, a holder may elect to include market discount in
income as it accrues on all obligations having a maturity of one year or less
held by the holder in that taxable year or thereafter, in which case the
deferral rule of the preceding sentence will not apply. For purposes of this
paragraph, market discount accrues on a Short-Term Note on a ratable
(straight-line) basis, unless the holder irrevocably elects (under regulations
to be issued by the Treasury Department) with respect to such obligation to
apply a constant interest method, using the holder's yield to maturity and
daily compounding.
Disposition of Notes. If a Noteholder sells a Note, the holder will
recognize gain or loss in an amount equal to the difference between the amount
realized on the sale and the holder's adjusted tax basis in the Note. The
adjusted tax basis of the Note to a particular Noteholder will equal the
holder's cost for the Note, increased by any OID, market discount and gain
previously included by such Noteholder in income with respect to the Note and
decreased by any bond premium previously amortized and any principal payments
previously received by such Noteholder with respect to such Note. Subject to
the market discount rules of the Code, any such gain or loss will be capital
gain or loss if the Note was held as a capital asset. Capital gain or loss
will be long-term if the Note was held by the holder for more than one year
and otherwise will be short-term. Any capital losses realized generally may
be used by a corporate taxpayer only to offset capital gains, and by an
individual taxpayer only to the extent of capital gains plus $3,000 of other
income.
<PAGE>42
Information Reporting and Backup Withholding. Each Tax Trust or Tax
Partnership will be required to report annually to the IRS, and to each
related Noteholder of record, the amount of interest paid on the Notes
38
(and the amount of interest withheld for federal income taxes, if any) for
each calendar year, except as to exempt holders (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 holder (other than holders who are not subject to the
reporting requirements) will be required to provide to the related Tax Trust
or Tax Partnership, under penalties of perjury, a certificate containing the
holder's name, address, correct federal taxpayer identification number and a
statement that the holder is not subject to backup withholding. Should a
nonexempt Noteholder fail to provide the required certification, the Tax Trust
or Tax Partnership will be required to withhold, from interest otherwise
payable to the holder, 31% of such interest and remit the withheld amount to
the IRS as a credit against the holder's federal income tax liability.
Because the Seller will treat each Tax Trust as a grantor trust, each
Tax Partnership as a partnership and all Notes (except Strip Notes and others
as specifically identified in the related Prospectus Supplement) as
indebtedness for federal income tax purposes, the Seller will not comply with
the tax reporting requirements that would apply under any alternative
characterizations of a Tax Trust or Tax Partnership.
Tax Consequences to Foreign Noteholders. If interest paid (or accrued)
to a Noteholder who is a nonresident alien, foreign corporation or other non-
United States person (a "foreign person") is not effectively connected with
the conduct of a trade or business within the United States by the foreign
person, the interest generally will 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 (i) is not actually or
constructively a "10 percent shareholder" of the related Tax Trust, Tax
Partnership, or the Seller (including a holder of 10% of the applicable
outstanding Certificates) or a "controlled foreign corporation" with respect
to which the related Tax Trust, Tax Partnership or the Seller is a "related
person" within the meaning of the Code, and (ii) provides an appropriate
statement, signed under penalties of perjury, certifying that the beneficial
owner of the Note 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 related Tax Trust or Tax Partnership 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 tax treaty.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a Note by a foreign person will be exempt from United
States federal income and withholding tax, provided that (i) the gain is not
effectively connected with the conduct of a trade or business in the United
States by the foreign person, and (ii) in the case of an individual foreign
person, the foreign person is not present in the United States for 183 days
or more in the taxable year.
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 holder (although exempt from the withholding
tax previously discussed if an appropriate statement 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
equal to 30 percent of its "effectively connected earnings and profits" within
the meaning of the Code for the taxable year, as adjusted for certain items,
unless it qualifies for a lower rate under an applicable tax treaty.
<PAGE>43
TRUST CERTIFICATES
Classification of Trusts and Trust Certificates. With respect to each
series of Certificates identified in the related Prospectus Supplement as
Trust Certificates, Tax Counsel will deliver its opinion to the effect that
the related Tax Trust will not be taxable as an association or publicly traded
partnership taxable as a corporation, but should be classified as a grantor
trust under Sections 671 through 679 of the Code. For each such series, the
Seller and the Certificateholders will express in the Trust
39
Agreement and on the Trust Certificates their intent that, for federal, state
and local income and franchise tax purposes, the Trust Certificates will
represent an equity interest in a grantor trust. The Seller and each
Certificateholder, by acquiring an interest in any such Trust Certificate,
will agree to treat such Trust Certificates as an equity interest in the Tax
Trust, for federal, state and local income and franchise tax purposes.
However, the proper characterization of the arrangement involving the Tax
Trust, the Trust Certificates, the Seller and the Servicer is not clear
because there is no authority on transactions closely comparable to that
contemplated herein.
Although, as described above, Tax Counsel will opine that each such Tax
Trust should properly be characterized as a grantor trust for federal income
tax purposes, such opinion is not binding on the IRS or the courts and no
assurance can be given that this characterization would prevail. If the IRS
were to contend successfully that any such Tax Trust is not a grantor trust,
such Tax Trust should be classified for federal income tax purposes as a
partnership which is not taxable as a corporation. The income reportable by
the holders of such Trust Certificates as partners could differ from the
income reportable by the holders of such Trust Certificates as grantors of a
grantor trust. However, it is not expected that such differences would be
material. See discussion of Partnership Certificates below.
If, however, the IRS were to contend successfully that a Tax Trust is
an association taxable as a corporation for federal income tax purposes, such
Tax Trust would be subject to federal and state income tax at corporate rates
on the income from the Receivables (reduced by deductions, including interest
on any Notes unless the Notes were treated as an equity interest). Any such
corporate income tax could materially reduce or eliminate cash that would
otherwise be distributable with respect to the related Trust Certificates and
any related Notes. The Certificateholders and, if the Notes were also treated
as an equity interest in the taxable corporation, the Noteholders could be
liable for any such tax to the extent it is not paid by the related Tax Trust.
However, as described above, in the opinion of Tax Counsel, each Tax Trust
will not be classified as an association taxable as a corporation because it
will not have certain characteristics necessary for a trust to constitute an
association taxable as a corporation.
If a Tax Trust were classified for federal income tax purposes as a
partnership, the IRS might contend that it is a "publicly traded partnership"
taxable as a corporation. However, in the opinion of Tax Counsel, even if a
Tax Trust were treated as a publicly traded partnership, such Tax Trust would
not be taxable as a corporation because it would meet certain qualifying
income tests. Nonetheless, if the Tax Trust were treated as a publicly traded
partnership and the Notes were treated as equity interests in such a
partnership, certain holders could suffer adverse tax consequences. For
example, income to certain tax-exempt entities (including pension funds) would
be "unrelated business taxable income," and individual holders might be
subject to certain limitations on their ability to deduct their share of such
Tax Trust's expenses.
Despite Tax Counsel's opinion that a Tax Trust should be classified as
a grantor trust, the lack of cases or rulings on similar transactions, as
discussed above, permits a variety of alternative characterizations in
addition to the position to be taken that the Trust Certificates represent
equity interests in a grantor trust. For example, because Trust Certificates
will have certain features characteristic of debt, the Trust Certificates
might be considered indebtedness of a Tax Trust, the Seller or the Issuer.
Except as described above, any such characterization would not result in
materially adverse tax consequences to Certificateholders as compared to the
consequences from treatment of Trust Certificates as equity in a trust,
described below. The following discussion assumes that Trust Certificates
represent equity interests in a grantor trust.
<PAGE>44
Grantor Trust Treatment. As a grantor trust, a Tax Trust will not be
subject to federal income tax. Assuming that the Receivables are not
characterized as "stripped bonds" or otherwise recharacterized, in Tax
Counsel's opinion each Certificateholder will be required to report on its
federal income tax return its pro rata share of the entire income from the
Receivables and any other property in the related Tax Trust for the period
during which it owns a Trust Certificate, including interest or finance
charges earned on the Receivables and any gain or loss upon collection or
disposition of the Receivables, in accordance with such Certificateholder's
method of accounting. A Certificateholder using the cash method of
40
accounting should take into account its pro rata share of income as and when
received by the Owner Trustee. A Certificateholder using an accrual method
of accounting should take into account its pro rata share of income as it
accrues or is received by the Owner Trustee, whichever is earlier.
Assuming that the market discount rules do not apply, the portion of
each payment to a Certificateholder that is allocable to principal on the
Receivables will represent a recovery of capital, which will reduce the tax
basis of such Certificateholder's undivided interest in the Receivables. In
computing its federal income tax liability, a Certificateholder will be
entitled to deduct, consistent with its method of accounting, its pro rata
share of interest paid on any related Notes, reasonable servicing fees, and
other fees paid or incurred by the related Tax Trust as provided in Section
162 or 212 of the Code. If a Certificateholder is an individual, estate or
trust, the deduction for such Certificateholder's pro rata share of such fees
will be allowed only to the extent that all of such Certificateholder's
miscellaneous itemized deductions, including such fees, exceed 2% of such
Certificateholder's adjusted gross income. In addition, in the case of
Certificateholders who are individuals, certain otherwise allowable itemized
deductions will be reduced, but not by more than 80%, by an amount equal to
3% of the Certificateholder's adjusted gross income in excess of a statutorily
defined threshold (which is $111,800 in the case of a married couple filing
jointly for a taxable year beginning in 1994). Because the Servicer will not
report to Certificateholders the amount of income or deductions attributable
to miscellaneous charges, such a Certificateholder may effectively underreport
its net taxable income. See "Recharacterization of Fees" below for a
discussion of other possible consequences if amounts paid to the Servicer
exceed reasonable compensation for services rendered.
Recharacterization of Fees. The Servicer intends to report income to
Certificateholders on the assumption that the Certificateholders own a 100%
interest in all of the principal and interest derived from the related
Receivables. However, a portion of the amounts paid to the Servicer or the
Seller may exceed reasonable fees for services rendered, by reason of the
extent to which either the weighted average APR of the Receivables, or the
individual stated APRs of some of the Receivables, exceed the Pass Through
Rate. There are no authoritative guidelines, for federal income tax purposes,
as to the maximum amount of compensation that may be considered reasonable for
servicing the Receivables or performing other services, in the context of this
or similar transactions; accordingly, Tax Counsel is unable to give an opinion
on this issue. If amounts paid to the Servicer or the Seller exceed
reasonable compensation for services provided, the Servicer or the Seller or
both may be viewed as having retained, for federal income tax purposes, an
ownership interest in a portion of each interest payment with respect to
certain Receivables. As a result, such Receivables may be treated as
"stripped bonds" within the meaning of the Code.
To the extent that the Receivables are characterized as "stripped
bonds," the income and deductions of the related Tax Trust allocable to
Certificateholders would not include the portion of the interest on the
Receivables treated as having been retained by the Servicer or the Seller, as
the case may be, and such Tax Trust's deductions would be limited to
reasonable servicing fees, interest paid on any related Notes and other fees.
In addition, a Certificateholder would not be subject to the market discount
and premium rules discussed below with respect to the stripped Receivables,
but instead would be subject to the OID rules of the Code. However, if the
price at which a Certificateholder were deemed to have acquired a stripped
Receivable is less than the remaining principal balance of such Receivable by
<PAGE>45
an amount which is less than a statutorily defined de minimis amount, such
Receivable would not be treated as having OID. In general, under Temporary
Regulations it appears that the amount of OID on a Receivable treated as a
"stripped bond" will be de minimis if it is less than 1/4 of 1% for each full
year remaining after the purchase date until the final maturity of the
Receivable, although the IRS could take the position that the weighted average
maturity date, rather than the final maturity date, should be used in
performing this calculation. If the amount of OID was de minimis under this
rule, the actual amount of discount on such a Receivable would be includible
in income as principal payments are received on the Receivable.
If the OID on a Receivable were not treated as de minimis, a
Certificateholder would be required to include any OID in income as it
accrues, regardless of when cash payments are received, using a method
reflecting a constant yield on the Receivables. It is possible that the IRS
41
could assert that a prepayment assumption should be used in computing the
yield of a stripped Receivable. If a stripped Receivable is deemed to be
acquired by a Certificateholder at a significant discount, such prepayment
assumption could accelerate the accrual of income by a Certificateholder. No
representation is made, nor is Tax Counsel able to give an opinion, that
Receivables will prepay at any particular rate. Prospective investors are
urged to consult their own tax advisors regarding the likelihood that a
portion of the amounts paid to the Servicer or Seller might be characterized
other than as compensation for services rendered for federal income tax
purposes.
It is also possible that any fees deemed to be excessive could be
recharacterized as deferred purchase price payable to the Seller by
Certificateholders in exchange for the related Receivables. The likely effect
of such recharacterization would be to increase current taxable income to a
Certificateholder.
Discount and Premium. The following discussion generally assumes that
the fees and other amounts payable to the Servicer and the Seller will not be
recharacterized as being retained ownership interests in the Receivables (as
discussed above). A purchaser of a Trust Certificate should be treated as
purchasing an interest in each Receivable and any other property in the
related Tax Trust at a price determined by allocating the purchase price paid
for the Trust Certificate among the Receivables and other property in
proportion to their fair market values at the time of purchase of the Trust
Certificate.
It is believed that the Receivables were not and will not be issued with
OID and, therefore, that a Tax Trust should not have OID income. However, the
purchase price paid by said Tax Trust for the Receivables may be greater or
less than the remaining principal balance of the Receivables at the time of
purchase. If so, the Receivables will have been acquired at a premium or
market discount, as the case may be. The market discount on a Receivable will
be considered to be zero if it is less than the statutorily defined de minimis
amount.
Any gain on the sale of a Trust Certificate attributable to the holder's
share of unrecognized accrued market discount on the related Receivables would
generally be treated as ordinary income to the holder and would give rise to
special tax reporting requirements. Moreover, a holder who acquires a Trust
Certificate representing an interest in Receivables acquired at a market
discount may be required to defer a portion of any interest expense otherwise
deductible with respect to indebtedness incurred or maintained to purchase or
carry the Trust Certificate until the holder disposes of the Trust Certificate
in a taxable transaction. Instead of recognizing market discount, if any,
upon a disposition of Trust Certificates (and deferring any applicable
interest expense), a holder may elect to include market discount in income
currently as the discount accrues. The current inclusion election, once made,
applies to all market discount obligations acquired on or after the first day
of the first taxable year to which the election applies, and may not be
revoked without the consent of the IRS.
<PAGE>46
In the event that a Receivable is treated as purchased at a premium
(i.e., the allocable portion of the Certificateholder's purchase price for the
related Trust Certificate exceeds the remaining principal balance of the
Receivable), such premium will be amortizable by a Certificateholder as an
offset to interest income (with a corresponding reduction in basis) under a
constant yield method over the term of the Receivable if the Certificateholder
makes an election under Section 171 of the Code with respect to the
Receivables. Any such election will also apply to debt instruments held by
the Certificateholder during the year in which the election is made and to all
debt instruments acquired thereafter.
Disposition of Trust Certificates. Generally, capital gain or loss will
be recognized on a sale of Trust Certificates in an amount equal to the
difference between the amount realized and the seller's tax basis in the Trust
Certificates sold. A Certificateholder's tax basis in a Trust Certificate
will generally equal his cost increased by his share of the Tax Trust's income
(includible in his income) and decreased by any distributions received with
respect to such Trust Certificate. Any gain on the sale of a Trust
Certificate attributable to the holder's share of unrecognized accrued market
discount on the related Receivables would generally be treated as ordinary
income to the holder and would give rise to special tax reporting
requirements, unless a Certificateholder makes the special election described
under "Discount and Premium" above.
42
If a Certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the Trust Certificates that exceeds the
aggregate cash distributions with respect thereto, such excess will generally
give rise to a capital loss upon the retirement of the Trust Certificates.
Backup Withholding. Distributions made on Trust Certificates and
proceeds from the sale of the Certificates will be subject to a "backup"
withholding tax of 31% if, as discussed above with respect to the Notes, the
Certificateholder fails to comply with certain identification procedures,
unless the holder is an exempt recipient under applicable provisions of the
Code.
Tax Consequences to Foreign Trust Certificateholders. Interest
attributable to Receivables which is received by a Certificateholder which is
a foreign person will generally not be subject to the normal 30% withholding
tax imposed with respect to such payments, provided that such
Certificateholder is not engaged in a trade or business in the United States
and that such Certificateholder fulfills the certification requirements
discussed above under "The Notes-Tax Consequences to Foreign Noteholders."
PARTNERSHIP CERTIFICATES
Classification of Partnerships and Partnership Certificates. With
respect to each series of Certificates identified in the related Prospectus
Supplement as Partnership Certificates, the Seller and the Servicer will
agree, and the Certificateholders will agree by their purchase of such
Partnership Certificates, to treat the Tax Partnership as a partnership for
purposes of federal, state and local income and franchise tax purposes, with
the partners of such Partnership being the Certificateholders and the Seller
(in its capacity as recipient of distributions from the Reserve Account), and
any related Notes being debt of such Tax Partnership. However, the proper
characterization of the arrangement involving the Tax Partnership, the
Partnership Certificates, the Seller and the Servicer is not clear because
there is no authority on transactions closely comparable to that contemplated
herein.
If the Tax Partnership were an association taxable as a corporation for
federal income tax purposes, such Tax Partnership would be subject to
corporate income tax. Any such corporate income tax could materially reduce
or eliminate cash that would otherwise be distributable with respect to the
Partnership Certificates (and Certificateholders could be liable for any such
tax that is unpaid by such Tax Partnership). However, upon the issuance of
each series of Partnership Certificates, Tax Counsel will deliver its opinion
generally to the effect that such Tax Partnership will not be classified as
an association taxable as a corporation because it will not have certain
characteristics necessary for a trust to be an association taxable as a
corporation.
<PAGE>47
Even if a Tax Partnership were not an association taxable as a
corporation, it would be subject to corporate income tax if it were a
"publicly traded partnership" taxable as a corporation. However, in the
opinion of Tax Counsel, even if such Tax Partnership were treated as a
publicly traded partnership, it would not be taxable as a corporation because
it would meet certain qualifying income tests. Nonetheless, if a Tax
Partnership were treated as a publicly traded partnership and the Partnership
Certificates were treated as equity interests in such a partnership, certain
holders could suffer adverse consequences. For example, income to certain
tax-exempt entities (including pension funds) would be "unrelated business
taxable income," and individual holders might be subject to certain
limitations on their ability to deduct their share of the Tax Partnership's
expenses.
Despite Tax Counsel's opinion that a Tax Partnership will be classified
as a partnership and not as an association or publicly traded partnership
taxable as a corporation, the lack of cases or rulings on similar
transactions, as discussed above, permits a variety of alternative
characterizations in addition to the position to be taken that the Partnership
Certificates represent equity interests in a partnership. For example,
because the Partnership Certificates will have certain features characteristic
of debt, the Partnership Certificates might be considered indebtedness of the
Tax Partnership, the Seller or the Issuer. Except as
43
described above, any such characterization would not result in materially
adverse tax consequences to Certificateholders as compared to the consequences
from treatment of the Partnership Certificates as equity in a partnership,
described below. The following discussion assumes that the Partnership
Certificates represent equity interests in a partnership.
Partnership Taxation. As a partnership, a Tax Partnership will not be
subject to federal income tax, but each Certificateholder will be required to
separately take into account such holder's allocated share of income, gains,
losses, deductions and credits of such Tax Partnership. The Tax Partnership's
income will consist primarily of interest and finance charges earned on the
related Receivables (including appropriate adjustments for market discount,
OID, and bond premium) and any gain upon collection or disposition of such
Receivables. The Tax Partnership's deductions will consist primarily of
interest accruing with respect to any related Notes, servicing and other fees,
and losses or deductions upon collection or disposition of the related
Receivables.
The tax items of a partnership are allocable to the partners in
accordance with the Code, Treasury regulations and the partnership agreement
(with respect to any series of Partnership Certificates, the Trust Agreement
and related documents). Each Trust Agreement for a Tax Partnership will
provide that the Certificateholders will be allocated taxable income of the
related Tax Partnership for each month equal to the sum of (i) the Pass
Through Rate on the related Partnership Certificates for such month; (ii) an
amount equivalent to interest that accrues during such month on amounts
previously due on such Partnership Certificates but not yet distributed; (iii)
any Tax Partnership income attributable to discount on the related Receivables
that corresponds to any excess of the principal amount of the Partnership
Certificates over their initial issue price; and (iv) any Prepayment Surplus
(as defined in the related Prospectus Supplement) payable to the Partnership
Certificates for such month. If the Tax Partnership issues any Strip Notes
or Strip Certificates, it will also provide that the related
Certificateholders will be allocated taxable income of such Tax Partnership
for each month in the amounts described in the related Prospectus Supplement.
All taxable income of the Tax Partnership remaining after the allocations to
the Certificateholders will be allocated to the Seller. It is believed that
the allocations to Certificateholders will be valid under applicable Treasury
regulations, although no assurance can be given that the IRS would not require
a greater amount of income to be allocated to Certificateholders. Moreover,
even under the foregoing method of allocation, Certificateholders may be
allocated income equal to the entire Pass Through Rate plus the other items
described above, and holders of Strip Notes or Strip Certificates may be
allocated income equal to the amount described in the related Prospectus
Supplement, even though the related Tax Partnership might not have sufficient
cash to make current cash distributions of such
<PAGE>48
amount. Thus, cash basis holders will in effect be required to report income
from the Partnership Certificates on the accrual basis. In addition, because
tax allocations and tax reporting will be done on a uniform basis for all
Certificateholders but Certificateholders may be purchasing Partnership
Certificates at different times and at different prices, Certificateholders
may be required to report on their tax returns taxable income that is greater
or less than the amount reported to them by the related Tax Partnership.
Additionally, all of the taxable income allocated to a Certificateholder
that is a pension, profit sharing or employee benefit plan or other tax-exempt
entity (including an individual retirement account) will constitute "unrelated
business taxable income" generally taxable to such a holder under the Code.
An individual taxpayer may generally deduct miscellaneous itemized
deductions (which do not include interest expense) only to the extent they
exceed two percent of adjusted gross income, and, in addition, certain other
limitations may apply. Those limitations would apply to an individual
Certificateholder's share of expenses of a Tax Partnership (including fees to
the Servicer) and might result in such holder being taxed on an amount of
income that exceeds the amount of cash actually distributed to such holder
over the life of such Tax Partnership.
Each Tax Partnership intends to make all tax calculations relating to
income and allocations to Certificateholders on an aggregate basis. If the
IRS were to require that such calculations be made separately for each
44
Receivable, a Tax Partnership might be required to incur additional expense
but it is believed that there would not be a material adverse effect on
Certificateholders.
Discount and Premium. It is believed that the Receivables were not and
will not be issued with OID and, therefore, that a Tax Partnership should not
have OID income. However, the purchase price paid by such Tax Partnership for
the related Receivables may be greater or less than the remaining principal
balance of such Receivables at the time of purchase. If so, such Receivables
will have been acquired at a premium or discount, as the case may be. (As
indicated above, each Tax Partnership will make this calculation on an
aggregate basis, but might be required to recompute it on a Receivable by
Receivable basis.)
Each Tax Partnership will make an election that will result in any
market discount on the related Receivables being included in income currently
as such discount accrues over the life of such Receivables. As indicated
above, a portion of such market discount income will be allocated to
Certificateholders.
Section 708 Termination. Under Section 708 of the Code, a Tax
Partnership will be deemed to terminate for federal income tax purposes if 50%
or more of the capital and profits interests in such Tax Partnership are sold
or exchanged within a 12-month period. If such a termination occurs, a Tax
Partnership will be considered to distribute its assets to the partners (i.e.,
Certificateholders and the Seller), who would then be treated as
recontributing those assets to a Tax Partnership, as a new partnership. A Tax
Partnership will not comply with certain technical requirements that might
apply when such a constructive termination occurs. As a result, such Tax
Partnership may be subject to certain tax penalties and may incur additional
expenses if it is required to comply with those requirements. Furthermore,
a Tax Partnership might not be able to comply due to lack of data.
Disposition of Certificates. Generally, capital gain or loss will be
recognized on a sale of Partnership Certificates in an amount equal to the
difference between the amount realized and the seller's tax basis in the
Partnership Certificates sold. A Certificateholder's tax basis in a
Partnership Certificate will generally equal his cost increased by his share
of the related Tax Partnership's income (includible in his income) and
decreased by any distributions received with respect to such Partnership
Certificate. In addition, both tax basis in the Partnership Certificates and
the amount realized on a sale of a Partnership Certificate would include the
<PAGE>49
holder's share of any related Notes and other liabilities of such Tax
Partnership. A holder acquiring Partnership Certificates of the same series
at different prices may be required to maintain a single aggregate adjusted
tax basis in such Partnership Certificates, and, upon sale or other
disposition of some of the Partnership Certificates, allocate a pro rata
portion of such aggregate tax basis to the Partnership Certificates sold
(rather than maintaining a separate tax basis in each Partnership Certificate
for purposes of computing gain or loss on a sale of that Partnership
Certificate).
Any gain on the sale of a Partnership Certificate attributable to the
holder's share of unrecognized accrued market discount on the related
Receivables would generally be treated as ordinary income to the holder and
would give rise to special tax reporting requirements. Each Tax Partnership
does not expect to have any other assets that would give rise to such special
reporting requirements. Thus, to avoid those special reporting requirements,
each Tax Partnership will elect to include market discount in income as it
accrues.
If a Certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the Partnership Certificates that exceeds
the aggregate cash distributions with respect thereto, such excess will
generally give rise to a capital loss upon the retirement of the Partnership
Certificates.
Allocations Between Transferors and Transferees. In general, each Tax
Partnership's taxable income and losses will be determined monthly and the tax
items for a particular calendar month will be apportioned among the
Certificateholders in proportion to the principal amount of the Partnership
Certificates or a fractional share of the Strip Notes or Strip Certificates
owned by them as of the first Record Date following the end of such month.
As a result, a holder purchasing Partnership Certificates may be allocated tax
items (which will affect its tax liability and tax basis) attributable to
periods before the actual transaction.
45
The use of such a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of the partner's interest), taxable income or
losses of a Tax Partnership might be reallocated among the Certificateholders.
The Trustee is authorized to revise a Tax Partnership's method of allocation
between transferors and transferees to conform to a method permitted by future
regulations.
Section 754 Election. In the event that a Certificateholder sells its
Partnership Certificate at a profit (loss), the purchasing Certificateholder
will have a higher (lower) basis in the Partnership Certificates than the
selling Certificateholder had. The tax basis of the related Tax Partnership's
assets will not be adjusted to reflect that higher (or lower) basis unless
such Tax Partnership were to file an election under Section 754 of the Code.
In order to avoid the administrative complexities that would be involved in
keeping accurate accounting records, as well as potentially onerous
information reporting requirements, a Tax Partnership will not make such
election. As a result, Certificateholders might be allocated a greater or
lesser amount of Tax Partnership income than would be based on their own
purchase price for Partnership Certificates.
Administrative Matters. For each Tax Partnership, the related Owner
Trustee is required to keep or have kept complete and accurate books of such
Tax Partnership. Such books will be maintained for financial reporting and
tax purposes on an accrual basis and the fiscal year of each Tax Partnership
will be the calendar year. The Owner Trustee will file a partnership
information return (IRS Form 1065) with the IRS for each taxable year of such
Tax Partnership and will report each Certificateholder's allocable share of
items of Tax Partnership income and expense to holders and the IRS on Schedule
K-1. Each Tax Partnership will provide the Schedule K-1 information to
nominees that fail to provide such Tax Partnership with the information
statement described below and such nominees will be required to forward such
information to the beneficial owners of the related Partnership Certificates.
Generally, holders must file tax returns that are consistent with the
information return filed by the related Tax Partnership or be subject to
penalties unless the holder notifies the IRS of all such inconsistencies.
<PAGE>50
Under Code Section 6031, any person that holds Partnership Certificates
as a nominee at any time during a calendar year is required to furnish the
related Tax Partnership with a statement containing certain information on the
nominee, the beneficial owners and the Partnership Certificates so held. Such
information includes (i) the name, address and taxpayer identification number
of the nominee and (ii) as to each beneficial owner (x) the name, address and
taxpayer identification number of such person, (y) whether such person is a
United States person, a tax-exempt entity or a foreign government, an
international organization, or any wholly-owned agency or instrumentality of
either of the foregoing, and (z) certain information on Partnership
Certificates that were held, bought or sold on behalf of such person
throughout the year. In addition, brokers and financial institutions that
hold Partnership Certificates through a nominee are required to furnish
directly to the related Tax Partnership information as to themselves and their
ownership of Partnership Certificates. A clearing agency registered under
Section 17A of the Exchange Act is not required to furnish any such
information statement to a Tax Partnership. The information referred to above
for any calendar year must be furnished to the related Tax Partnership on or
before the following January 31. Nominees, brokers and financial institutions
that fail to provide the Tax Partnership with the information described above
may be subject to penalties.
The Seller, as the tax matters partner for each Tax Partnership, will
be responsible for representing the Certificateholders in any dispute with the
IRS. The Code provides for administrative examination of a partnership as if
the partnership were a separate taxpayer. Generally, the statute of
limitations for partnership items does not expire until three years after the
date on which the partnership information return is filed or deemed filed.
Any adverse determination following an audit of the return of a Tax
Partnership by the appropriate taxing authorities could result in an
adjustment of the returns of the Certificateholders and, under certain
circumstances, a Certificateholder may be precluded from separately litigating
a proposed adjustment to the items of the related Tax Partnership. An
adjustment could result in an audit of a Certificateholder's returns and
adjustments of items not related to the income and losses of the related Tax
Partnership.
46
Tax Consequences to Foreign Certificateholders. It is not clear whether
any Tax Partnership would be considered to be engaged in a trade or business
in the United States for purposes of Federal withholding taxes with respect
to non-U.S. persons because there is no clear authority regarding that issue
under facts substantially similar to those described herein. Although it is
not expected that any Tax Partnership would be engaged in a trade or business
in the United States for such purposes, such Tax Partnership will withhold as
if it were so engaged in order to protect such Tax Partnership from possible
adverse consequences of a failure to withhold. It is expected that each Tax
Partnership will withhold on the portion of its taxable income that is
allocable to foreign Certificateholders pursuant to Code Section 1446, as if
such income were effectively connected to a U.S. trade or business, at a rate
of 35% for foreign holders that are taxable as corporations and 39.6% for all
other foreign holders. Subsequent adoption of Treasury regulations or
issuance of other administrative pronouncements may require a Tax Partnership
to change its withholding procedures. In determining a holder's nonforeign
status, a Tax Partnership may rely on IRS Form W-8, IRS Form W-9 or the
holder's certification of nonforeign status signed under penalties of perjury.
Each foreign holder might be required to file a U.S. individual or
corporate income tax return and pay tax (including, in the case of a
corporation, the branch profits tax) on its share of the related Tax
Partnership's income. Each foreign holder must obtain a taxpayer
identification number from the IRS and submit that number to the related Tax
Partnership on Form W-8 in order to assure appropriate crediting of the taxes
withheld. A foreign holder generally would be entitled to file with the IRS
a claim for refund with respect to taxes withheld by the related Partnership,
taking the position that no taxes were due because such Tax Partnership was
not engaged in a U.S. trade or business. However, the IRS may assert that
the tax liability should be based on gross income, and no assurance can be
given as to the appropriate amount of tax liability.
<PAGE>51
Backup Withholding. Distributions made on any Partnership Certificates
and proceeds from sale of such Partnership Certificates will be subject to a
"backup" withholding tax of 31% if, as discussed above with respect to the
Notes, the Certificateholder fails to comply with certain identification
procedures, unless the holder is an exempt recipient under applicable
provisions of the Code.
STATE AND LOCAL TAX CONSEQUENCES
The above discussion does not address the tax treatment of any Tax
Trust, Tax Partnership, Notes, Certificates, Noteholders or Certificateholders
under any state or local tax laws. The activities to be undertaken by the
Servicer in servicing and collecting the Receivables will take place
throughout the United States and, therefore, many different tax regimes
potentially apply to different portions of these transactions. Prospective
investors are urged to consult with their own tax advisors regarding the state
and local tax treatment of any Tax Trust or Tax Partnership as well as any
state and local tax consequences to them of purchasing, holding and disposing
of Notes or Certificates.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and Section 4975 of the Code prohibit a pension, profit-
sharing or other employee benefit plan, as well as individual retirement
accounts and certain types of Keogh Plans (each a "Benefit Plan"), from
engaging in certain transactions with persons that are "parties in interest"
under ERISA or "disqualified persons" under the Code with respect to such
Benefit Plan. A violation of these "prohibited transaction" rules may result
in an excise tax or other penalties and liabilities under ERISA and the Code
for such persons.
Certain transactions involving the Trust might be deemed to constitute
prohibited transactions under ERISA and the Code with respect to a Benefit
Plan that purchased Notes or Certificates if assets of the Trust were deemed
to be assets of the Benefit Plan. Under a regulation issued by the United
States Department of Labor (the "Plan Assets Regulation"), the assets of the
Trust would be treated as plan assets of a Benefit Plan for the purposes of
47
ERISA and the Code only if the Benefit Plan acquired an "equity interest" in
the Trust and none of the exceptions contained in the Plan Assets Regulation
was applicable. An equity interest is defined under the Plan Assets
Regulation as an interest other than an instrument which is treated as
indebtedness under applicable local law and which has no substantial equity
features. The likely treatment of Notes and Certificates is discussed in the
related Prospectus Supplement.
Employee benefit plans that are governmental plans (as defined in
Section 3(32) of ERISA) and certain church plans (as defined in Section 3(33)
of ERISA) are not subject to ERISA requirements.
A plan fiduciary considering the purchase of Notes should consult its
tax and/or legal advisors regarding whether the assets of the Trust would be
considered plan assets, the possibility of exemptive relief from the
prohibited transaction rules and other issues and their potential
consequences.
PLAN OF DISTRIBUTION
On the terms and conditions set forth in one or more underwriting
agreements (each an "Underwriting Agreement") with respect to each Trust, the
Seller will agree to sell to each of the underwriters named therein and in the
related Prospectus Supplement, and each of such underwriters will severally
agree to purchase from the Seller, the principal amount of each class of
Securities of the related series set forth therein and in the related
Prospectus Supplement.
<PAGE>52
In each Underwriting Agreement, the several underwriters will agree,
subject to the terms and conditions set forth therein, to purchase all the
Securities described therein which are offered hereby and by the related
Prospectus Supplement if any of such Securities are purchased. In the event
of a default by any such underwriter, each Underwriting Agreement will provide
that, in certain circumstances, purchase commitments of the nondefaulting
underwriters may be increased or the Underwriting Agreement may be terminated.
Each Prospectus Supplement will either (i) set forth the price at which
each class of Securities being offered thereby will be offered to the public
and any concessions that may be offered to certain dealers participating in
the offering of such Securities or (ii) specify that the related Securities
are to be resold by the Underwriters in negotiated transactions at varying
prices to be determined at the time of such sale. After the initial public
offering of any Securities, the public offering price and such concessions may
be changed.
Each Underwriting Agreement will provide that the Seller will indemnify
the underwriters against certain liabilities, including liabilities under the
Securities Act.
The Indenture Trustee may, from time to time, invest the funds in the
Designated Accounts in Eligible Investments acquired from the underwriters.
Under each Underwriting Agreement, except as otherwise provided in the
related Prospectus Supplement, the closing of the sale of any class of
Securities subject thereto will be conditioned on the closing of the sale of
all other such classes.
The place and time of delivery for the Securities in respect of which
this Prospectus is delivered will be set forth in the related Prospectus
Supplement.
LEGAL OPINIONS
Certain legal matters relating to the Notes and the Certificates will
be passed upon for each Trust, the Seller and GMAC by Richard B. Wagner,
Esq., General Counsel of GMAC, and by Kirkland & Ellis, special counsel to the
Seller, each Trust and GMAC. Mr. Wagner owns shares of each of the classes
of General Motors common stock and has options to purchase shares of General
Motors common stock, $123 par value. Certain federal income tax matters will
be passed upon for GMAC, each Trust and the Seller by Kirkland & Ellis.
48
<PAGE>53
INDEX OF TERMS
Set forth below is a list of the defined terms used in this Prospectus
and the pages on which the definitions of such terms may be found herein.
Page
Additional Servicing . . . . . . . . . . . . . . . . . . . 25
Administration Agreement . . . . . . . . . . . . . . . . . 33
Administrative Purchase Payment. . . . . . . . . . . . . . 23
Administrative Receivable. . . . . . . . . . . . . . . . . 23
Administrator. . . . . . . . . . . . . . . . . . . . . . . 33
Aggregate Amount Financed. . . . . . . . . . . . . . . . . 5
Aggregate Principal Balance. . . . . . . . . . . . . . . . 11
Amount Financed. . . . . . . . . . . . . . . . . . . . . . 10
APR. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Basic Servicing Fee. . . . . . . . . . . . . . . . . . . . 25
Benefit Plan . . . . . . . . . . . . . . . . . . . . . . . 47
Cede . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Certificate Distribution Account . . . . . . . . . . . . . 24
Certificate Pool Factor. . . . . . . . . . . . . . . . . . 11
Certificateholder. . . . . . . . . . . . . . . . . . . . . 12
Certificates . . . . . . . . . . . . . . . . . . . . . . . 1
Closing Date . . . . . . . . . . . . . . . . . . . . . . . 22
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Collection Account . . . . . . . . . . . . . . . . . . . . 24
Commission . . . . . . . . . . . . . . . . . . . . . . . . 2
Cutoff Date. . . . . . . . . . . . . . . . . . . . . . . . 5
Definitive Certificates. . . . . . . . . . . . . . . . . . 20
Definitive Notes . . . . . . . . . . . . . . . . . . . . . 20
Definitive Securities. . . . . . . . . . . . . . . . . . . 20
Depository . . . . . . . . . . . . . . . . . . . . . . . . 13
Designated Accounts. . . . . . . . . . . . . . . . . . . . 24
Distribution Date. . . . . . . . . . . . . . . . . . . . . 18
DTC. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Eligible Deposit Account . . . . . . . . . . . . . . . . . 24
Eligible Institution . . . . . . . . . . . . . . . . . . . 25
Eligible Investment. . . . . . . . . . . . . . . . . . . . 24
ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Event of Default . . . . . . . . . . . . . . . . . . . . . 15
Excess Payment . . . . . . . . . . . . . . . . . . . . . . 26
Excess Simple Interest Collections . . . . . . . . . . . . 26
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . 2
Financed Vehicles. . . . . . . . . . . . . . . . . . . . . 9
FTC Repossession Consent Order . . . . . . . . . . . . . . 34
FTC Rule . . . . . . . . . . . . . . . . . . . . . . . . . 35
General Motors . . . . . . . . . . . . . . . . . . . . . . 10
GMAC . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Indenture. . . . . . . . . . . . . . . . . . . . . . . . . 1
Indenture Trustee. . . . . . . . . . . . . . . . . . . . . 1
Indirect Participants. . . . . . . . . . . . . . . . . . . 19
Insolvency Event . . . . . . . . . . . . . . . . . . . . . 30
Insolvency Laws. . . . . . . . . . . . . . . . . . . . . . 12
Interest Rate. . . . . . . . . . . . . . . . . . . . . . . 3
49
<PAGE>54
Page
Investment Earnings. . . . . . . . . . . . . . . . . . . . 24
IRS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Liquidation Expenses . . . . . . . . . . . . . . . . . . . 26
Monthly Advance. . . . . . . . . . . . . . . . . . . . . . 27
Monthly Period . . . . . . . . . . . . . . . . . . . . . . 26
Note Distribution Account. . . . . . . . . . . . . . . . . 24
Note Pool Factor . . . . . . . . . . . . . . . . . . . . . 11
Noteholders. . . . . . . . . . . . . . . . . . . . . . . . 12
Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
OID. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Owner Trustee. . . . . . . . . . . . . . . . . . . . . . . 1
Participants . . . . . . . . . . . . . . . . . . . . . . . 13
Partnership Certificates . . . . . . . . . . . . . . . . . 37
Pass Through Rate. . . . . . . . . . . . . . . . . . . . . 4
Payment Ahead. . . . . . . . . . . . . . . . . . . . . . . 26
Payment Ahead Servicing Account. . . . . . . . . . . . . . 24
Payment Date . . . . . . . . . . . . . . . . . . . . . . . 14
Plan Assets Regulation . . . . . . . . . . . . . . . . . . 47
Pooling and Servicing Agreement. . . . . . . . . . . . . . 22
Prepayment . . . . . . . . . . . . . . . . . . . . . . . . 26
Principal Balance. . . . . . . . . . . . . . . . . . . . . 11
Prospectus Supplement. . . . . . . . . . . . . . . . . . . 1
Rating Agency. . . . . . . . . . . . . . . . . . . . . . . 24
Receivables. . . . . . . . . . . . . . . . . . . . . . . . 1
Receivables Pool . . . . . . . . . . . . . . . . . . . . . 9
Recently Enacted OID Regulations . . . . . . . . . . . . . 37
Registration Statement . . . . . . . . . . . . . . . . . . 2
Related Documents. . . . . . . . . . . . . . . . . . . . . 17
Reserve Account. . . . . . . . . . . . . . . . . . . . . . 28
Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Schedule of Receivables. . . . . . . . . . . . . . . . . . 22
Scheduled Interest Advance . . . . . . . . . . . . . . . . 27
Scheduled Interest Receivables . . . . . . . . . . . . . . 10
Scheduled Payments . . . . . . . . . . . . . . . . . . . . 10
Securities . . . . . . . . . . . . . . . . . . . . . . . . 1
Securities Act . . . . . . . . . . . . . . . . . . . . . . 2
Seller . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Servicer . . . . . . . . . . . . . . . . . . . . . . . . . 1
Servicer Default . . . . . . . . . . . . . . . . . . . . . 30
Short-Term Note. . . . . . . . . . . . . . . . . . . . . . 38
Simple Interest Advance. . . . . . . . . . . . . . . . . . 27
Simple Interest Receivables. . . . . . . . . . . . . . . . 11
Strip Certificates . . . . . . . . . . . . . . . . . . . . 5
Strip Notes. . . . . . . . . . . . . . . . . . . . . . . . 4
Supplemental Servicing Fee . . . . . . . . . . . . . . . . 25
Tax Counsel. . . . . . . . . . . . . . . . . . . . . . . . 37
Tax Partnership. . . . . . . . . . . . . . . . . . . . . . 37
Tax Trust. . . . . . . . . . . . . . . . . . . . . . . . . 37
Total Servicing Fee. . . . . . . . . . . . . . . . . . . . 22
Transfer and Servicing Agreements. . . . . . . . . . . . . 21
Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Trust Agreement. . . . . . . . . . . . . . . . . . . . . . 1
Trust Certificates . . . . . . . . . . . . . . . . . . . . 37
Trust Indenture Act. . . . . . . . . . . . . . . . . . . . 14
Trust Sale and Servicing Agreement . . . . . . . . . . . . 22
UCC. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
UCCC . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Underwriting Agreement . . . . . . . . . . . . . . . . . . 48
Warranty Payment . . . . . . . . . . . . . . . . . . . . . 23
Warranty Receivable. . . . . . . . . . . . . . . . . . . . 22
50
<PAGE>55
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses to be incurred in
connection with the offering of the Notes and the Certificates, other than
underwriting discounts and commissions, described in this Registration
Statement:
Securities and Exchange Commission
Registration Fee . . . . . . . . . . . . . . . . .$2,135,584.20
Printing Expenses. . . . . . . . . . . . . . . . .200,000.00*
Legal Fees and Expenses. . . . . . . . . . . . . .175,000.00*
Blue Sky Filing and Counsel Fees . . . . . . . . .20,000.00*
Accountants' Fees. . . . . . . . . . . . . . . . .225,000.00*
Trustee Fees and Expenses. . . . . . . . . . . . .125,000.00*
Rating Agencies' Fees. . . . . . . . . . . . . . .1,200,000.00*
Miscellaneous. . . . . . . . . . . . . . . . . . .19,415.80*
______________
Total. $4,100,000.00
==============
_______________
*Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Capital Auto Receivables, Inc. is incorporated under the laws of
Delaware. Section 145 of the Delaware General Corporation Law provides that
a Delaware corporation may indemnify any persons, including officers and
directors, who are, or are threatened to be made, parties 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
such corporation, by reason of the fact that such person was an officer,
director, employee or agent of such corporation, or is or was serving at the
request of such corporation as a director, officer, employee or agent of
another corporation or enterprise). The indemnity may include expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such
action, suit or proceeding, provided such person acted in good faith and in
a manner he reasonably believed to be in or not opposed to the corporation's
best interests and, for criminal proceedings, had no reasonable cause to
believe that his conduct was illegal. A Delaware corporation may indemnify
officers and directors in an action by or in the right of the corporation
under the same conditions, except that no indemnification is permitted without
judicial approval if the officer or director is adjudged to be liable to the
corporation. Where an officer or director is successful on the merits or
otherwise in the defense of any action referred to above, the corporation must
indemnify him against the expenses which such officer or director actually and
reasonably incurred.
Capital Auto Receivables, Inc.'s By-laws provide, in effect, that,
subject to certain limited exceptions, such corporation shall indemnify and
advance expenses to its directors and officers in the manner and to the full
extent permitted by applicable law against any and all amounts reasonably
incurred by reason of the fact that such person is or was a director or
officer of such corporation. General Motors Acceptance Corporation has agreed
to satisfy such indemnification obligations of Capital Auto Receivables, Inc.
if and to the extent that Capital Auto Receivables, Inc. fails to do so.
Certain controlling persons of the registrant may also be entitled to
indemnification from General Motors Acceptance Corporation, the parent of the
registrant. Under sections 7015 and 7018-7023 of the New York Banking Law,
General Motors Acceptance Corporation may or shall, subject to various
exceptions and limitations, indemnify its directors or officers and may
purchase and maintain insurance as follows:
(a) If the director is made or threatened to be made a party to
an action by or in the right of General Motors Acceptance Corporation
to procure a judgment in its favor, by reason of the fact that he is or
was a director or officer of General Motors Acceptance Corporation or
<PAGE>56
is or was serving at the request of General Motors Acceptance
Corporation as a director or officer of some other enterprise
(including, without limitation, an employee benefit plan), General
Motors Acceptance Corporation may indemnify him against amounts paid
II-1
in settlement and reasonable expenses, including attorneys' fees,
incurred in the defense or settlement of such action or an appeal
therein, if such director or officer acted, in good faith, for a purpose
which he reasonably believed to be in (or, in the case of service for
any other enterprise, not opposed to) the best interests of General
Motors Acceptance Corporation, except that no indemnification is
available under such statutory provisions in respect of a threatened
action or a pending action which is settled or otherwise disposed of,
or any claim or issue or matter as to which such person is found liable
to General Motors Acceptance Corporation, unless in each such case a
court determines that such person is fairly and reasonably entitled to
indemnity for such amount as the court deems proper.
(b) With respect to any action or proceeding other than one by or
in the right of General Motors Acceptance Corporation to procure a
judgment in its favor, if a director or officer is made or threatened
to be made a party by reason of the fact that he was a director or
officer of General Motors Acceptance Corporation, or served some other
enterprise (including, without limitation, an employee benefit plan) at
the request of General Motors Acceptance Corporation, General Motors
Acceptance Corporation may indemnify him against judgments, fines,
amounts paid in settlement and reasonable expenses, including attorneys'
fees, incurred as a result of such action or proceeding or an appeal
therein, if he acted in good faith for a purpose which he reasonably
believed to be in (or, in the case of service for any other enterprise,
not opposed to) the best interests of General Motors Acceptance
Corporation and, in criminal actions or proceedings, in addition, had
no reasonable cause to believe that his conduct was unlawful.
(c) A director or officer who has been wholly successful, on the
merits or otherwise, in the defense of a civil or criminal action or
proceeding of the character described in paragraphs (a) or (b) above,
shall be entitled to indemnification as authorized in such paragraphs.
(d) General Motors Acceptance Corporation may purchase and
maintain insurance to indemnify directors and officers in instances in
which they may not otherwise be indemnified by General Motors Acceptance
Corporation under the provisions of the New York Banking Law, provided
that the contract of insurance provides for a retention amount and for
co-insurance, except that no such insurance may provide for any payment,
other than cost of defense, to or on behalf of any director or officer
if a judgment or other final adjudication adverse to such director or
officer establishes that his acts of active and deliberate dishonesty
were material to the cause of action so adjudicated or that he
personally gained in fact a financial profit or other advantage to which
he was not legally entitled.
The foregoing statement is subject to the detailed provisions of
sections 7015 and 7018-7023 of the New York Banking Law.
As a subsidiary of General Motors Corporation, General Motors Acceptance
Corporation is insured against liabilities which it may incur by reason of the
foregoing provisions of the New York Banking Law and directors and officers
of General Motors Acceptance Corporation are insured against some liabilities
which might arise out of their employment and not be subject to
indemnification under said Banking Law.
Pursuant to resolutions adopted by the Board of Directors of General
Motors Corporation, that company to the fullest extent permissible under law
will indemnify, and has purchased insurance on behalf of, directors or
officers of the company, or any of them, who incur or are threatened with
personal liability, including expenses, under Employee Retirement Income
Security Act of 1974 or any amendatory or comparable legislation or regulation
thereunder.
<PAGE>57
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
1.1** Form of Underwriting Agreement for the Notes
3.1* Certificate of Incorporation of the Seller
3.2** By-laws of the Seller
4.1*** Form of Indenture between the Trust and the Indenture Trustee
II-2
4.2*** Form of Trust Agreement between the Seller and the Owner
Trustee
5.1 Opinion of Kirkland & Ellis with respect to legality
8.1 Opinion of Kirkland & Ellis with respect to tax matters
23.1 Consent of Kirkland & Ellis (included as part of Exhibit 5.1)
24.1*** Power of Attorney
99.1*** Form of Trust Sale and Servicing Agreement among the Trust,
the Seller and the Servicer
99.2*** Form of Pooling and Servicing Agreement between General Motors
Acceptance Corporation and the Seller
99.3** Form of Administration Agreement among the Servicer, the Owner
Trustee and the Indenture Trustee
99.4** Form of Custodian Agreement
99.5** Form of Prospectus Supplement
* Incorporated by reference to registrant's Registration Statement No. 33-
49169
** Incorporated by reference to registrant's Registration Statement No.
33-49307
*** Previously filed
<PAGE>58
ITEM 17. UNDERTAKINGS.
The Undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration Statement
(i) To include any prospectus required by section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such information
in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment 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.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors and officers of the Company pursuant
to the provisions discussed in Item 15 above, or otherwise, the Company has
been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 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 or officer of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director or
officer 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 Securities Act of 1933 and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the Indenture Trustee to act
under subsection (a) of Section 310 of the Trust Indenture Act ("Act") in
accordance with the rules and regulations prescribed by the Commission under
section 305(b)(2) of the Act.
II-3
<PAGE>59
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS
ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF DETROIT, STATE OF MICHIGAN, ON THE
21ST DAY OF MARCH, 1994.
Capital Auto Receivables, Inc.
Robert T. O'Connell*
By_________________________________________
Robert T. O'Connell, Chairman of the Board
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW ON MARCH 21, 1994 BY THE
FOLLOWING PERSONS IN THE CAPACITIES INDICATED.
SIGNATURE TITLE
--------- -----
ROBERT T. O'CONNELL*
- ------------------------------ Chairman of the Board and Director
Robert T. O'Connell
JOHN R. RINES*
- ------------------------------ President and Director
John R. Rines
JOHN D. FINNEGAN*
- ------------------------------ Vice President and Director
John D. Finnegan
JOHN E. GIBSON*
- ------------------------------ Vice President and Director
John E. Gibson
FREDERICK A. HENDERSON*
- ------------------------------ Vice President and Director
Frederick A. Henderson
JOHN RAKOLTA, JR.*
- ------------------------------ Director
John Rakolta, Jr.
RAYMOND R. REILLY*
- ------------------------------ Director
Raymond R. Reilly
CHRISTOPHER J. RUTKOWSKI*
- ------------------------------ Vice President and Director
Christopher J. Rutkowski
JEROME B. VAN ORMAN, JR.*
- ------------------------------ Vice President and Director
Jerome B. Van Orman, Jr.
s/ GERALD E. GROSS
- ------------------------------ Comptroller
Gerald E. Gross
*By: s/ GERALD E. GROSS
- ------------------------------
Gerald E. Gross
Attorney-in-Fact
II-4
EXHIBIT 5.1
March 21, 1994
Capital Auto Receivables, Inc.
Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
Re: CAPITAL AUTO RECEIVABLES, INC.
REGISTRATION STATEMENT ON FORM S-3 (NO. 33-52597)
We have acted as special counsel to Capital Auto
Receivables, Inc., a Delaware corporation (the "Company"), in
connection with the above-referenced Registration Statement
(together with the exhibits and any amendments thereto, the
"Registration Statement"), filed by the Company with the
Securities and Exchange Commission in connection with the
registration by the Company of Asset Backed Securities (the
"Securities") with an aggregate principal amount of
$6,193,150,815.02.
As described in the Prospectus forming a part of the
Registration Statement on the date of effectiveness, the
Securities will be Asset Backed Notes ("Notes") and Asset Backed
Certificates ("Certificates") that will be issued in series.
Each series of Notes and Certificates will be issued by a
Delaware business trust (each, a "Trust") to be formed by the
Company pursuant to a Trust Agreement (each, a "Trust Agreement")
between the Company and an Owner Trustee. Each series issued by
a Trust may include one or more classes of Notes and one or more
classes of Certificates. The Notes of any Trust will be issued
pursuant to an Indenture (each, an "Indenture") by and between
such Trust and an Indenture Trustee to be specified in the
related Prospectus Supplement and a Trust Sale and Servicing
Agreement by and among such Trust, the Company and General Motors
Acceptance Corporation, as servicer (each, a "Trust Sale and
Servicing Agreement"). The Certificates of any Trust will be
issued pursuant to a Trust Agreement (each, a "Trust Agreement")
by and among the Company and an Owner Trustee to be specified in
the related Prospectus Supplement.
We are generally familiar with the proceedings required
to be taken in connection with the proposed authorization,
issuance and sale of the Notes and Certificates, and in order to
express the opinion hereinafter stated, we have examined copies
of the Registration Statement and, in each case as filed with the
Registration Statement, the form of Indenture, the form of Trust
Agreement (including the form of Certificate of Trust to be filed
pursuant to the Delaware Business Trust Act included as an
exhibit thereto (a "Trust Certificate")), the form of Trust Sale
and Servicing Agreement, the form of Pooling and Servicing
Agreement between General Motors Acceptance Corporation and the
Company and the form of Administration Agreement among the
related Trust, the related Indenture Trustee and General Motors
Acceptance Corporation, as administrator (collectively, the
"Operative Documents"). We have examined such other documents
and such matters of law, and we have satisfied ourselves as to
such matters of fact, as we have considered relevant for purposes
of this opinion.
<PAGE>2
Capital Auto Receivables, Inc.
March 21, 1994
Page 2
On the basis of the foregoing and on the basis of our
examination of the Company's Amended and Restated Certificate of
Incorporation and Amended and Restated By-laws and a review of a
Certificate of the Secretary of State of the State of Delaware as
to the good standing of the Company, it is our opinion that:
(a) The Company is a corporation validly
existing and in good standing under the laws of the
State of Delaware.
(b) With respect to the Notes and Certificates
of any series issued by any Trust, when, as and if (i)
the Registration Statement becomes effective pursuant
to the provisions of the Securities Act of 1933, as
amended, (ii) the principal amount or certificate
balance, price, interest rate and other principal terms
of such Notes and Certificates and the forms of such
Notes and Certificates have been duly established and
approved by the Company's Board of Directors, (iii) the
Operative Documents relating thereto have each been
duly completed, executed and delivered by the parties
thereto substantially in the form we have examined,
duly reflecting the terms established as described
above, (iv) the Trust Certificate for the related Trust
has been duly executed by the Owner Trustee and timely
filed with the Secretary of State of the State of
Delaware, (v) the related Indenture has been duly
qualified under the Trust Indenture Act of 1939, as
amended, and (vi) such Notes and Certificates have been
duly executed and issued by such Trust and
authenticated by the Indenture Trustee or the Owner
Trustee and sold by the Company, all in accordance with
the terms and conditions of the related Operative
Documents and in the manner described in the
Registration Statement, such Notes and Certificates
will have been duly authorized by all necessary action
of the Trust and will have been legally issued and will
be enforceable in accordance with their terms and
entitled to the benefits of the Operative Documents,
except as the same may be limited by Title 11 of the
United States Code or other bankruptcy, insolvency,
reorganization, moratorium, or other laws relating to
or affecting the enforcement of creditors' rights or
the relief of debtors, as may be in effect from time
to time, or by general principles of equity.
We do not find it necessary for the purposes of this
opinion, and accordingly we do not purport to cover herein, the
application of securities or "Blue Sky" laws of the various
states to the offer or sale of the Notes and Certificates.
We wish to advise you that we are members of the bar
of the State of Illinois and the opinions expressed herein are
limited to the laws of the State of Illinois, the federal laws of
the United States, the General Corporation Law of the State of
Delaware and the Delaware Business Trust Act.
<PAGE>3
Capital Auto Receivables, Inc.
March 21, 1994
Page 3
We hereby consent to the filing of this opinion as
Exhibit 5.1 to the Registration Statement, the filing of our
opinion of even date herewith with respect to certain tax matters
as Exhibit 8.1 to the Registration Statement and to the reference
to our firm in the Prospectus included in the Registration
Statement under the captions "PROSPECTUS SUMMARY--Certain Federal
Income Tax Consequences," "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES" and "LEGAL OPINIONS."
Sincerely,
-----------------------------
KIRKLAND & ELLIS
EXHIBIT 8.1
March 21, 1994
Capital Auto Receivables, Inc.
Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
Re: CAPITAL AUTO RECEIVABLES, INC.
REGISTRATION STATEMENT ON FORM S-3 (NO. 33-52597)
We have acted as special counsel to Capital Auto
Receivables, Inc., a Delaware corporation (the "Company"), in
connection with the above-referenced Registration Statement
(together with the exhibits and any amendments thereto, the
"Registration Statement"), filed by the Company with the
Securities and Exchange Commission in connection with the
registration by the Company of Asset Backed Securities (the
"Securities") with an aggregate principal amount of
$6,193,150,815.02.
As described in the Prospectus forming a part of the
Registration Statement on the date of effectiveness, the
Securities will be Asset Backed Notes ("Notes") and Asset Backed
Certificates ("Certificates") that will be issued in series.
Each series of Notes and Certificates will be issued by a
Delaware business trust (each, a "Trust") to be formed by the
Company pursuant to a Trust Agreement (each, a "Trust Agreement")
between the Company and an Owner Trustee. Each series issued by
a Trust may include one or more classes of Notes and one or more
classes of Certificates. The Notes of any Trust will be issued
pursuant to an Indenture (each, an "Indenture") by and between
such Trust and an Indenture Trustee to be specified in the
related Prospectus Supplement and a Trust Sale and Servicing
Agreement by and among such Trust, the Company and General Motors
Acceptance Corporation, as servicer (each, a "Trust Sale and
Servicing Agreement"). The Certificates of any Trust will be
issued pursuant to a Trust Agreement (each, a "Trust Agreement")
by and among the Company and an Owner Trustee to be specified in
the related Prospectus Supplement.
We are generally familiar with the proceedings required
to be taken in connection with the proposed authorization,
issuance and sale of the Notes and Certificates, and in order to
express the opinion hereinafter stated, we have examined copies
of the Registration Statement and, in each case as filed with the
Registration Statement, the form of Indenture, the form of Trust
Agreement (including the form of Certificate of Trust to be filed
pursuant to the Delaware Business Trust Act included as an
exhibit thereto (a "Trust Certificate")), the form of Trust Sale
and Servicing Agreement, the form of Pooling and Servicing
Agreement between General Motors Acceptance Corporation and the
Company and the form of Administration Agreement among the
related Trust, the related Indenture Trustee and General Motors
Acceptance Corporation, as administrator (collectively, the
"Operative Documents"). We have examined such other documents
and such matters of law, and we have satisfied ourselves as to
such matters of fact, as we have considered relevant for purposes
of this opinion.
<PAGE>2
Capital Auto Receivables, Inc.
March 21, 1994
Page 2
The opinion set forth in this letter is based upon the
applicable provisions of the Internal Revenue Code of 1986, as
amended, Treasury regulations promulgated and proposed
thereunder, current positions of the Internal Revenue Service
(the "IRS") contained in published Revenue Rulings and Revenue
Procedures, current administrative positions of the IRS and
existing judicial decisions. No tax rulings will be sought from
the IRS with respect to any of the matters discussed herein.
Based on the foregoing and assuming that the Operative
Documents with respect to each series of Notes and Certificates
are duly authorized, executed and delivered in substantially the
form we have examined and that the transactions contemplated to
occur under the Operative Documents in fact occur in accordance
with the terms thereof, we are of the opinion that the
discussions presented in the Prospectus forming part of the
Registration Statement under the captions "PROSPECTUS SUMMARY--
Certain Federal Income Tax Consequences" and "CERTAIN FEDERAL
INCOME TAX CONSEQUENCES" are based upon reasonable
interpretations of existing U.S. federal tax law. There can be
no assurance, however, that the conclusions of U.S. federal tax
law presented therein will not be successfully challenged by the
IRS or significantly altered by new legislation, changes in IRS
positions or judicial decisions, any of which challenges or
alterations may be applied retroactively with respect to
completed transactions.
Sincerely,
------------------------------
KIRKLAND & ELLIS
