<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 22, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CAPITAL AUTO RECEIVABLES, INC.
(Originator of the Trusts Described Herein)
(Exact name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 38-3082892
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
<TABLE>
<S> <C>
CORPORATION TRUST CENTER JEROME B. VAN ORMAN, JR.
1209 ORANGE STREET CAPITAL AUTO RECEIVABLES, INC.
WILMINGTON, DELAWARE 19801 3031 WEST GRAND BOULEVARD
(302-658-7851) DETROIT, MICHIGAN 48202
(Address, including zip code, and telephone (313-556-1508)
number, including (Name, address, including zip code, and telephone
area code, of principal executive offices of number,
Registrant) including area code, of agent for service)
</TABLE>
-------------------------
WITH A COPY TO:
ROBERT L. SCHWARTZ, ESQ.
GENERAL COUNSEL
CAPITAL AUTO RECEIVABLES, INC.
3031 WEST GRAND BOULEVARD
DETROIT, MICHIGAN 48202
-------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: from time
to time after the effective date of this Registration Statement as determined in
light of market conditions.
If the only securities being registered on this Form are being 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
reinvestment plans, check the following box. X
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE
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<S> <C> <C> <C> <C>
Asset Backed Securities.............................. $1,000,000 100% $1,000,000 $264
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</TABLE>
(1) 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.
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<PAGE> 2
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 22, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CENTRAL ORIGINATING LEASE TRUST
(Exact name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 38-3278697
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
<TABLE>
<S> <C>
C/O LEASE AUTO RECEIVABLES, INC.
CORPORATION TRUST CENTER JEROME B. VAN ORMAN, JR.
1209 ORANGE STREET LEASE AUTO RECEIVABLES, INC.
WILMINGTON, DELAWARE 19801 3031 WEST GRAND BOULEVARD
(302-658-7851) DETROIT, MICHIGAN 48202
(Address, including zip code, and telephone (313-556-1508)
number, including (Name, address, including zip code, and telephone
area code, of principal executive offices of number,
Registrant) including area code, of agent for service)
</TABLE>
------------------------
WITH A COPY TO:
ROBERT L. SCHWARTZ, ESQ.
GENERAL COUNSEL
LEASE AUTO RECEIVABLES, INC.
3031 WEST GRAND BOULEVARD
DETROIT, MICHIGAN 48202
------------------------
Approximate date of commencement of proposed sale to the public: from time
to time after the effective date of this Registration Statement as determined in
light of market conditions.
If the only securities being registered on this Form are being 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
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE(2)
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<S> <C> <C> <C> <C>
Secured Notes................................ $1,000,000 100% $1,000,000 $264
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Previously paid. A separate registration statement on Form S-3 (No.
333- ) registering asset backed securities, which are secured by the
secured notes, is being concurrently filed under which a registration fee of
$264 has been paid.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 3
EXPLANATORY NOTE
This registration statement contains three forms of prospectus relating to
the offering of:
- asset backed notes and/or asset backed certificates secured by loan
receivables by various Capital Auto Receivables Asset Trusts created from
time to time by Capital Auto Receivables, Inc., with that form of
prospectus identified on the outside front cover page as the "Preliminary
Owner Trust Prospectus Form;"
- asset backed certificates by various GMAC Grantor Trusts secured by loan
receivables created from time to time by Capital Auto Receivables, Inc.,
with that form of prospectus identified on the outside front cover page
as "Preliminary GMAC Grantor Trust Prospectus Form;"
- asset backed notes and/or asset backed certificates secured by secured
notes by various Capital Auto Receivables Asset Trusts created from time
to time by Capital Auto Receivables, Inc., with that form of prospectus
identified on the outside front cover page as "Preliminary Secured Note
Prospectus Form;" and
three forms of prospectus supplement relating to the offering of:
- particular series of asset backed notes and/or classes of asset backed
certificates secured by loan receivables, with that form of prospectus
supplement identified on the outside front cover page as the "Preliminary
Owner Trust Prospectus Supplement Form;"
- particular classes of asset backed certificates secured by loan
receivables, with that form of prospectus supplement identified on the
outside front cover page as "Preliminary GMAC Grantor Trust Prospectus
Supplement Form;" and
- particular series of asset backed notes and/or classes of asset backed
certificates secured by secured notes, with that form of prospectus
supplement identified on the outside front cover page as "Preliminary
Secured Note Prospectus Supplement Form."
Each prospectus supplement form relates only to the securities described
therein.
<PAGE> 4
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER
OR SALE IS NOT PERMITTED.
VERSION 1
PROSPECTUS
CAPITAL AUTO RECEIVABLES ASSET TRUSTS
Asset Backed Notes
Asset Backed Certificates
CAPITAL AUTO RECEIVABLES, INC.
Seller
GENERAL MOTORS ACCEPTANCE CORPORATION
Servicer
<TABLE>
<S> <C>
THE TRUSTS--
YOU SHOULD CONSIDER CAREFULLY
THE RISK FACTORS BEGINNING ON - We will form a new trust to issue each series of
PAGE IN THIS PROSPECTUS. securities.
The notes of any series - The primary assets of each trust will be a pool
represent obligations of the of fixed rate retail motor vehicle instalment sales
related trust only. The contracts, including security interests in the
certificates of such series automobiles and light trucks financed under such
represent the beneficial contracts.
interest in the related trust
only. The certificates and THE SECURITIES--
notes issued by any trust do
not represent obligations of or - will represent indebtedness of the related trust
interests in, and are not (in the case of notes) or beneficial interests in
guaranteed by Capital Auto the related trust (in the case of certificates);
Receivables, Inc., GMAC or any
of their affiliates. - will be paid only from the assets of the related
trust and other available funds, including amounts
This prospectus may be used to on deposit in any related reserve account;
offer and sell any securities
only if accompanied by the - will represent the right to payments in the
related prospectus supplement. amounts and at the times described in the related
prospectus supplement;
- may benefit from one or more forms of credit
enhancement; and
- will be issued as part of a designated series,
which will include one or more classes of notes and
may include one or more classes of certificates.
</TABLE>
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
[DATE]
<PAGE> 5
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
We provide information to you about the notes or certificates, which we
refer to as the "securities," in two separate documents:
(a) this prospectus, which provides general information and terms of
the securities, some of which may not apply to a particular series of
securities, including your series.
(b) the accompanying prospectus supplement, which will provide
information regarding the pool of contracts held by the trust and will
specify the terms of your series of securities.
IF THE TERMS OF YOUR SERIES OF SECURITIES VARY BETWEEN THIS PROSPECTUS AND
THE PROSPECTUS SUPPLEMENT, YOU SHOULD RELY ON THE INFORMATION IN THE PROSPECTUS
SUPPLEMENT.
You should rely only on the information provided in this prospectus and the
accompanying prospectus supplement, including the information incorporated by
reference. We have not authorized anyone to provide you with other or different
information. We are not offering the securities in any state where the offer is
not permitted. We do not claim that the information in this prospectus and the
accompanying prospectus supplement is accurate on any date other than the dates
stated on their respective covers.
You can find definitions of the capitalized terms used in this prospectus
in the "Glossary of Terms to Prospectus" which appears at the end of this
prospectus and in the "Glossary of Terms to Prospectus Supplement" which appears
at the end of the prospectus supplement.
2
<PAGE> 6
RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase the securities.
RISK OF UNCOLLECTIBLE
RECEIVABLES DUE TO PRIORITY
OF CERTAIN LIENS ON FINANCED
VEHICLES OR RECEIVABLES Obligors who purchase financed vehicles give
GMAC a security interest in those vehicles. If
GMAC fails to perfect its security interest in
a financed vehicle, GMAC must repurchase the
receivable from the trust.
GMAC will assign its security interest in the
financed vehicles to the seller. The seller
will in turn assign its security interest in
the financed vehicles to the trust and the
trust will pledge such security interest to the
indenture trustee. If, for any reason, these
assignments and this pledge are not perfected,
the interests of the seller, the trust and the
indenture trustee would be subordinate to,
among others, the following: (1) bankruptcy
trustee of the obligor, (2) subsequent
purchaser of the financed vehicle and (3)
holder of a perfected security interest
The trust and the indenture trustee may not be
able to collect on a defaulted receivable in
the absence of a perfected security interest in
the related financed vehicle.
Even if the trust and the indenture trustee has
a perfected security interest in the financed
vehicles, certain events could jeopardize that
interest, such as: (1) fraud or forgery by the
vehicle owner, (2) negligence or fraud by the
servicer, (3) mistakes by government agencies
and (4) liens for repairs or unpaid taxes.
See "Certain Legal Aspects of the
Receivables--Security Interest in Vehicles" in
this prospectus.
GMAC, the seller and the indenture trustee will
file financing statements with respect to each
pool of receivables sold to a trust. The
financing statements will perfect the security
interests of the seller, the trust and the
indenture trustee in the pool of receivables.
However, GMAC will serve as the custodian of
the receivables and will not physically
segregate or mark the receivables to indicate
that they have been sold to the seller, sold by
the seller to the trust or pledged by the trust
to the indenture trustee. See "The Transfer and
Servicing Agreements--Sale and Assignment of
Receivables" in this prospectus.
If another party purchases or takes a security
interest in the receivables (1) for value, (2)
in the ordinary course of business and (3)
without actual knowledge of the seller's, the
trust's or the indenture trustee's interest,
such purchaser or secured party will acquire an
interest
3
<PAGE> 7
in the receivables superior to the trust's and
the indenture trustee's interest.
POSSIBLE REDUCTIONS AND
DELAYS IN PAYMENTS DUE TO
BANKRUPTCY If GMAC filed for bankruptcy under the federal
bankruptcy code or any state insolvency laws, a
court may (1) consolidate the assets and
liabilities of GMAC with those of the seller,
(2) decide that the sale of the receivables to
the seller was not a "true sale" or (3)
disallow a transfer of receivables prior to the
bankruptcy. Thus, the receivables might become
part of GMAC's bankruptcy estate, in which case
you might experience reductions and/or delays
in payments on your securities. See "Certain
Legal Aspects of the Receivables--Sales of
Receivables by GMAC" in this prospectus.
MATURITY AND PREPAYMENT
CONSIDERATIONS Obligors may prepay the receivables in full or
in part at any time. In addition, the
receivables may be prepaid as a result of
defaults or from credit life, disability or
physical damage insurance. Also, GMAC or the
seller may be required to repurchase
receivables from a trust in certain
circumstances, and the servicer may have the
right to purchase all remaining receivables
from a trust pursuant to its optional purchase
right.
Each such prepayment, repurchase or purchase
will shorten the average life of the related
securities. A variety of unpredictable
economic, social and other factors influence
prepayment rates.
You will bear all reinvestment risk resulting
from a faster or slower rate of prepayment,
repurchase or extension of the receivables held
by your trust, unless otherwise provided in the
related prospectus supplement.
LIMITED ENFORCEABILITY OF THE
RECEIVABLES Federal and state consumer protection laws
regulate the creation and enforcement of
consumer loans such as the receivables.
Specific statutory liabilities are imposed upon
creditors who fail to comply with these
regulatory provisions. In some cases, this
liability could affect an assignee's ability to
enforce secured loans such as the receivables.
If an obligor had a claim for violation of
these laws prior to the Cutoff Date, GMAC must
repurchase the receivable unless the breach is
cured. If GMAC fails to repurchase such
receivable, you might experience reductions
and/or delays in payments on your securities.
See "Certain Legal Aspects of the
Receivables--Consumer Protection Laws" in this
prospectus.
LIMITED OBLIGATIONS OF GMAC
AND THE SELLER GMAC, the seller and their respective
affiliates are generally not obligated to make
any payments to you
4
<PAGE> 8
with respect to your securities and do not
guarantee payments on the receivables or your
notes or certificates. However, GMAC will make
representations and warranties with respect to
the characteristics of the receivables and such
representations and warranties will then be
assigned to the trust. If GMAC breaches the
representations and warranties, it may be
required to repurchase the applicable
receivables from the trust.
If GMAC fails to repurchase such receivables,
you might experience reductions and/or delays
in payments on your securities. See "The
Transfer and Servicing Agreements--Sale and
Assignment of Receivables" in this prospectus.
LIMITED ASSETS OF EACH TRUST No trust will have any significant assets or
sources of funds other than its receivables,
its rights in any reserve account or other
rights or credit enhancements as are specified
in the related prospectus supplement. The
securities will represent interests in the
related trust only. Except as described in the
related prospectus supplement, the securities
will not be insured or guaranteed by GMAC, the
seller, the owner trustee, the indenture
trustee, any of their affiliates or any other
person or entity. You must rely primarily on
payments on the related receivables and on the
reserve account for repayment of your
securities. In addition, with respect to the
defaulted receivables, you may have to look to
the obligors on the related receivables and the
proceeds from the repossession and sale of
financed vehicles which secure defaulted
receivables. If these sources are insufficient,
you may receive payments late or not receive
back your full principal investment or all
interest due to you. See "The Transfer and
Servicing Agreements--Distributions," "--Credit
Enhancement" and "Certain Legal Aspects of the
Receivables" in this prospectus.
LIMITED ABILITY TO RESELL
SECURITIES The underwriters may assist in the resale of
securities, but they are not required to do so.
A secondary market for any securities may not
develop. If a secondary market does develop, it
might not continue or it might not be
sufficiently liquid to allow you to resell any
of your securities.
LIMITED NATURE OF RATINGS The securities for each trust will be issued
only if they receive the required rating. A
security rating is not a recommendation to buy,
sell or hold the securities. The ratings may be
revised or withdrawn at any time. Ratings on
the securities do not address the timing of
distributions of principal on the securities
prior to their applicable final scheduled
payment date.
5
<PAGE> 9
THE TRUSTS
With respect to each series of securities, the seller will establish a
separate trust by selling and assigning the trust property described below to
the trust in exchange for the related securities. Each series of securities will
include one or more classes of asset backed notes and one or more classes of
asset backed certificates. The related prospectus supplement will specify which
classes of notes and certificates included in each series will be offered to
investors.
The trust property of each trust will include:
(1) a pool of retail instalment sales contracts for new and used
automobiles and light trucks (we refer to these contracts as
"receivables"), all Scheduled Payments due thereunder on and after the
Cutoff Date to be specified in the prospectus supplement (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,
(2) 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,
(3) security interests in the financed vehicles and, to the extent
permitted by law, any accessions thereto,
(4) any recourse against dealers with respect to the receivables,
(5) 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
(6) 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 may instead 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:
(1) acquiring, managing and holding the related receivables and the
other assets of the trust and proceeds therefrom,
(2) issuing the related securities and making payments and
distributions thereon and
(3) 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" in this prospectus.
To facilitate the servicing of the receivables, the trust 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 trust. Due to
the administrative burden and expense, the certificates of title to the financed
vehicles will not be
6
<PAGE> 10
amended to reflect the sale and assignment of the security interest in the
financed vehicles to the seller or the trust or the pledge thereof by the trust
to the indenture trustee. In the absence of such an amendment, the trust and the
indenture trustee may not have a perfected security interest in the financed
vehicles in all states. None of the trust, the indenture trustee 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" in this prospectus.
The principal offices of each trust will be specified in the related
prospectus supplement.
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 securities 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 pool of receivables have been or will be acquired
by General Motors Acceptance Corporation through its nationwide branch system,
directly or through General Motors Corporation, 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" in
this prospectus.
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
in the ordinary course of business, which evaluate the prospective purchaser's
ability to pay and creditworthiness, as well as the asset value of the vehicle
to be financed. GMAC's standards generally 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 pool of receivables by several criteria, including
that, unless otherwise provided in the related prospectus supplement, each
receivable
(1) is secured by a new or used vehicle,
(2) was originated in the United States,
(3) 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
(4) satisfies the other criteria set forth in the related prospectus
supplement.
Each receivable is classified as either a Scheduled Interest Receivable or
a Simple Interest Receivable. If an obligor elects to prepay a Scheduled
Interest Receivable in full, the
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<PAGE> 11
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 pool of
receivables which consists of Scheduled Interest Receivables will be specified
in the related prospectus supplement.
Payments pursuant to a Simple Interest Receivable are allocated 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 pool of receivables which consists of Simple Interest
Receivables will be specified in the related prospectus supplement.
Information with respect to each pool of receivables will be set forth in
the related prospectus supplement, including, to the extent appropriate, the
composition, distribution by APR, states of origination and portion of such pool
of receivables secured by new vehicles and by used vehicles.
WEIGHTED AVERAGE LIFE OF THE SECURITIES
The weighted average life of the securities 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. Any
reinvestment risk resulting from prepayment of receivables will be borne
entirely by the holders of securities. See also "Certain Legal Aspects of the
Receivables--Transfer of Vehicles" in this prospectus.
POOL FACTORS AND TRADING INFORMATION
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
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reductions in the outstanding principal balance of the notes, 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 (1) the original denomination of such
noteholder's note and (2) 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 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 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" in this prospectus.
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 securities of a given
series will be applied to the purchase of the receivables from GMAC.
THE SELLER
Capital Auto Receivables, Inc., 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.
GMAC Auto receivables Corporation, a wholly-owned subsidiary of GMAC
incorporated in the State of Delaware on November 16, 1990, was merged with and
into the seller on February 22, 1996. It was also organized for the limited
purposes of purchasing receivables from GMAC, transferring such receivables to
third parties, forming trusts and engaging in related activities.
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 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 the United
States Bankruptcy Code or similar applicable state laws without the unanimous
affirmative vote of all of its directors). Under certain circumstances, the
seller is required to have at least one director who qualifies under its By-laws
as an "Independent Director."
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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 the United States Bankruptcy Code or
similar applicable state laws 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" in this prospectus.
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. The seller may also retain all or a portion
of the certificates or of one or more classes of notes issued by each trust as
described in the related prospectus supplement.
THE SERVICER
GMAC, a wholly-owned subsidiary of General Motors, was incorporated in 1919
under the New York Banking Law relating to investment companies. GMAC
relinquished this status and became a Delaware corporation on January 1, 1998.
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 pool
of receivables 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
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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 (in the United States) or Cedelbank
or Euroclear (in Europe) 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 & Co.
Accordingly, Cede & Co. 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. All references herein to distributions,
notices, reports and statements to noteholders refer to distributions, notices,
reports and statements to DTC or Cede & Co., 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" in this
prospectus.
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 (1)
principal payments with disproportionate, nominal or no interest payment or (2)
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 Payment Dates specified for any class of notes in the related prospectus
supplement. In that 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 this prospectus.
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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. Notes
legally and/or beneficially owned by the seller or its affiliates will be
entitled to equal and proportionate benefits under the indenture, except that
such notes that are both legally and beneficially owned by the seller or its
affiliates will be deemed not to be outstanding for the purpose of determining
whether the requisite percentage of noteholders have given any request, demand,
authorization, direction, notice, consent or other action under the Related
Documents. If more than one class of notes in a series is issued and the rights
of the classes are different with respect to voting on any matters, including
giving any request, demand, authorization, direction, notice, consent or other
action under the Related Documents, such rights will be described in the related
prospectus supplement.
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:
(1) to correct or amplify the description of the collateral or add
additional collateral;
(2) to provide for the assumption of the notes and the indenture
obligations by a permitted successor to the trust;
(3) to add additional covenants for the benefit of the related
noteholders;
(4) to convey, transfer, assign, mortgage or pledge any property to or
with the indenture trustee;
(5) 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
or in any other Related Document;
(6) 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;
(7) to modify, eliminate or add to the provisions of the indenture in
order to comply with the Trust Indenture Act of 1939, as amended; and
(8) 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 (8) shall 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, unless otherwise specified in the related prospectus supplement, with the
consent of the holders of a
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majority in principal amount of the outstanding notes affected thereby, 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:
(1) 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 or 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;
(2) impair the right to institute suit for the enforcement of certain
provisions of the indenture regarding payment;
(3) reduce the percentage of the aggregate principal 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;
(4) modify any of the provisions of the indenture 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;
(5) reduce the percentage of the aggregate outstanding principal
amount of the notes the consent of the holders of which is required to
direct the indenture trustee to sell or liquidate the assets of the trust
if the proceeds of such sale would be insufficient to pay the principal
amount and accrued but unpaid interest on the outstanding notes;
(6) 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
(7) permit the creation of any lien ranking prior to or on a parity
with the lien of the indenture with respect to any part of the assets of
the trust 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:
(1) 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;
(2) except as provided in clause (3), 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 (2)(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 (X) to the trust, to the seller or the servicer, as
applicable, by the indenture
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trustee or (Y) 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;
(3) 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
(4) certain events of bankruptcy, insolvency or receivership with
respect to 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
therefor 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.
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.
Unless otherwise specified in the related prospectus supplement, if the
notes of any series are declared due and payable following an Event of Default
with respect thereto, in lieu of the trust maintaining possession of the assets
of the trust and continuing to apply collections on such receivables as if there
had been no declaration of acceleration, the related indenture trustee may:
(1) institute proceedings to collect amounts due on foreclosed
property,
(2) exercise remedies as a secured party or
(3) sell the assets of the trust.
In such event, any money or property collected by the indenture trustee
shall be applied:
(1) first to the indenture trustee for fees, expenses and
indemnification due to it under the indenture and not paid, if any,
(2) next to the related owner trustee for amounts due (not including
amounts due for payments to the certificateholders) under the Related
Documents and
(3) the remainder to the related Collection Account for distribution
pursuant to the Related Documents.
The indenture trustee, however, is prohibited from selling the related
receivables following an Event of Default, unless:
(1) the holders of all the outstanding related notes consent to such
sale,
(2) 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
(3) (X) there has been a default in the payment of interest or
principal on the notes,
(Y) 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
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payments would have become due if such obligations had not been declared
due and payable and
(Z) the indenture trustee obtains the consent of the holders of a
majority of the aggregate outstanding amount of the notes.
Unless otherwise specified in the related prospectus supplement following a
declaration upon an Event of Default that the notes are immediately due and
payable, (X) noteholders will be entitled to ratable repayment of principal on
the basis of their respective unpaid principal balances and (Y) repayment in
full of the accrued interest on and unpaid principal balances of the notes will
be made prior to any further distribution 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 aggregate principal
amount of the outstanding notes of a trust, voting together as a single class
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 aggregate principal amount of such notes then outstanding voting
together as a single class, 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:
(1) such holder previously has given to the indenture trustee written
notice of a continuing Event of Default,
(2) the holders of not less than 25% in aggregate principal amount of
the outstanding notes of a trust voting together as a single class such
series have made written request of the indenture trustee to institute such
proceeding in its own name as indenture trustee,
(3) such holder or holders have offered the indenture trustee
reasonable indemnity,
(4) the indenture trustee has for 60 days failed to institute such
proceeding and
(5) no direction inconsistent with such written request has been given
to the indenture trustee during such 60-day period by the holders of a
majority in aggregate principal amount of such outstanding notes.
If an Event of Default occurs and is continuing with respect to any trust
and if it is known to the indenture trustee, the indenture trustee will mail to
each noteholder of such trust notice of the Event of Default within 90 days
after it occurs. Except in the case of a failure to make any required payment of
principal of or interest on any note, the indenture trustee may withhold the
notice beyond such 90-day period if and so long as it determines in good faith
that withholding the notice is in the interests of noteholders.
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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 termination of the related trust agreement,
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 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:
(1) 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,
(2) such entity expressly assumes the trust's obligation to make due
and punctual payments on the notes and the performance or observance of
every agreement and covenant of the trust under the indenture,
(3) no Event of Default has occurred and is continuing immediately
after such merger or consolidation,
(4) 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,
(5) any action necessary to maintain the lien and security interest
created by the related indenture has been taken and
(6) 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, except as expressly permitted by
the Related Documents (i.e., the indenture, the Transfer and Servicing
Agreements and certain related documents for that trust):
(1) sell, transfer, exchange or otherwise dispose of any of the assets
of the trust,
(2) claim any credit on or make any deduction from the principal 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,
(3) dissolve or liquidate in whole or in part,
(4) 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
(5) 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.
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Except as specified in the related prospectus supplement, a trust may not
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.
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 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 the aggregate
principal amount of the outstanding 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, one or more classes of certificates may 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 certificates issued by each trust may be offered hereby or may be
sold in transactions exempt from registration under the Securities Act or
retained by the seller or its affiliates. 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.
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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 DTC, except as set forth below.
Unless otherwise specified in the related prospectus supplement, any
certificates offered under any such prospectus supplement 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 of the
certificates 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 & Co. Accordingly, Cede
& Co. is expected to be the holder of record of any offered 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 such certificateholder (other than the seller) will be
entitled to receive a physical certificate representing a certificate. In such
case, all references herein to actions by certificateholders refer to actions
taken by DTC upon instructions from the DTC participants and all references
herein to distributions, notices, reports and statements to certificateholders
refer to distributions, notices, reports and statements to DTC or Cede & Co., 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" in this prospectus. Certificates owned by the seller
or its affiliates will be entitled to equal and proportionate benefits under the
trust agreement, except that, unless all such certificates are owned by the
seller and its affiliates, such certificates will be deemed not to be
outstanding for purposes 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
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.
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 Distribution Dates specified in
the related prospectus supplement and will be made prior to distributions with
respect to Certificate Balance. A series may include one or more classes of
Strip Certificates, entitled to (1) distributions in respect of Certificate
Balance with disproportionate, nominal or no interest distributions, or (2)
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
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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
The Depository Trust Company is a limited purpose trust company organized
under the laws of the State of New York, a member of the Federal Reserve System,
a "clearing corporation" within the meaning of the New York Uniform Commercial
Code and a "clearing agency" registered pursuant to Section 17A of the Exchange
Act. DTC was created to hold securities for its DTC participants and to
facilitate the clearance and settlement of securities transactions between DTC
participants through electronic book-entries, thereby eliminating the need for
physical movement of certificates. DTC participants include securities brokers
and dealers, banks, trust companies and clearing corporations. Indirect access
to the DTC system also is available to indirect DTC participants such as banks,
brokers, dealers and trust companies, that clear through or maintain a custodial
relationship with a DTC participant, either directly or indirectly.
Unless otherwise specified in the related prospectus supplement,
securityholders (i.e., holders of a beneficial interest in a book-entry
security) that are not DTC participants or indirect DTC participants but desire
to purchase, sell or otherwise transfer ownership of, or other interests in,
securities may do so only through DTC participants and indirect DTC
participants. In addition, securityholders will receive all distributions of
principal and interest from the owner trustee or indenture trustee, as
applicable, through DTC participants. Under a book-entry format, securityholders
may experience some delay in their receipt of payments, since such payments will
be forwarded by the owner trustee or indenture trustee, as applicable, to Cede &
Co. , as nominee for DTC. DTC will forward such payments to its DTC
participants, which thereafter will forward them to indirect DTC participants or
securityholders. Except for the seller, it is anticipated that the only
noteholder and certificateholder will be Cede & Co., as nominee of DTC.
Securityholders will not be recognized by the trustee as noteholders or
certificateholders, as such term is used in the trust agreement and indenture,
as applicable, and securityholders will be permitted to exercise the rights of
securityholders only indirectly through DTC and its DTC participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers of securities among
DTC participants on whose behalf it acts with respect to the securities and to
receive and transmit payments of principal of, and interest on, the securities.
DTC participants and indirect DTC participants with which securityholders have
accounts with respect to the securityholders similarly are required to make
book-entry transfers and receive and transmit such payments on behalf of their
respective securityholders. Accordingly, although securityholders will not
possess securities, the rules, regulations and procedures creating and affecting
DTC and its operations provide a mechanism by which securityholders will receive
payments and will be able to transfer their interests.
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Because DTC can only act on behalf of DTC participants, who in turn act on
behalf of indirect DTC participants and certain banks, the ability of
securityholders to pledge securities to persons or entities that do not
participate in the DTC system, or to otherwise act with respect to such
securityholders may be limited due to the lack of a physical certificate for
such securities.
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 DTC
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 DTC participants whose
holdings include such undivided interests.
In addition to holding notes through DTC participants or indirect DTC
participants of DTC in the United States as described above, holders of
book-entry notes may hold their notes through Cedelbank or Euroclear in Europe
if they are participants of such systems, or indirectly through organizations
which are participants in such systems.
Cedelbank and Euroclear will hold omnibus positions on behalf of their
participants through customers' securities accounts in Cedelbank's and
Euroclear's names on the books of their respective depositaries which in turn
will hold such positions in customers' securities accounts in the depositaries'
names on the books of DTC.
Transfers between Cedelbank participants and Euroclear participants will
occur in accordance with their respective rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly through
DTC, on the one hand, and directly or indirectly through Cedelbank participants
or Euroclear participants, on the other hand, will be effected in DTC in
accordance with DTC rules on behalf of the relevant European international
clearing systems by its depositary. Cross-market transactions will require
delivery of instructions to the relevant European international clearing system
by the counterparty in such system in accordance with its rules and procedures
and within its established deadlines (European time). The relevant European
international clearing system will, if the transaction meets its settlement
requirements, deliver instructions to its depositary to take action to effect
final settlement on its behalf by delivering or receiving securities in DTC, and
making or receiving payment in accordance with normal procedures for same-day
funds settlement applicable to DTC. Cedelbank participants and Euroclear
participants may not deliver instructions directly to the depositaries.
Because of time-zone differences, credits of securities received in
Cedelbank or Euroclear as a result of a transaction with a participant will be
made during subsequent securities settlement processing and dated the Business
Day following the DTC settlement date. Such credits or any transactions in such
securities settled during such processing will be reported to the relevant
Euroclear or Cedelbank participants on such Business Day. Cash received in
Cedelbank or Euroclear as a result of sales of securities by or through a
Cedelbank participant or a Euroclear participant to a participant will be
received with value on the DTC settlement date but will be available in the
relevant Cedelbank or Euroclear cash account only as of the Business Day
following settlement in DTC. For information with respect to tax documentation
procedures, see "Certain Federal Income Tax Considerations--Characterization and
Treatment--Tax Consequences to Foreign Noteholders" in this prospectus.
Cedelbank is incorporated under the laws of Luxembourg as a professional
depository. Cedelbank holds securities for its participating organizations and
facilitates the clearance and
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settlement of securities transactions between Cedelbank participants through
electronic book-entry changes in accounts of Cedelbank participants, thereby
eliminating the need for physical movement of certificates. Transactions may be
settled in Cedelbank in any of 28 currencies, including United States dollars.
Cedelbank provides to Cedelbank participants, among other things, services for
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. Cedelbank interfaces with
domestic markets in several countries. As a professional depository, Cedelbank
is subject to regulation by the Luxembourg Monetary Institute. Cedelbank
participants are recognized financial institutions around the world, including
underwriters, securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations and may include the underwriters.
Indirect access to Cedelbank is also available to others, such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Cedelbank participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for participants of
Euroclear and to clear and settle transactions between Euroclear participants
through simultaneous electronic book-entry delivery against payment, thereby
eliminating the need for physical movement of certificates and any risk from
lack of simultaneous transfers of securities and cash. Transactions may now be
settled in any of 29 currencies, including United States dollars. Euroclear
includes various other services, including securities lending and borrowing and
interfaces with domestic markets in several countries generally similar to the
arrangements for cross-market transfers with DTC described above. Euroclear is
operated by the Euroclear Operator under contract with Euro-clear Clearance
Systems S.C., a Belgian cooperative corporation. All operations are conducted by
the Euroclear Operator, and all Euroclear securities clearance accounts and
Euroclear cash accounts are accounts with the Euroclear Operator, not Euro-clear
Clearance Systems S.C. Euro-clear Clearance Systems S.C. establishes policy for
Euroclear on behalf of Euroclear participants. Euroclear participants include
banks (including central banks), securities brokers and dealers and other
professional financial intermediaries and may include the underwriters. Indirect
access to Euroclear is also available to other firms that clear through or
maintain a custodial relationship with a Euroclear participant, either directly
or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and the applicable Belgian
law. These laws and procedures govern transfers of securities and cash with
Euroclear, withdrawals of securities and cash from Euroclear, and receipts of
payments with respect to securities in Euroclear. All securities in Euroclear
are held on a fungible basis without attribution of specific certificates to
specific securities clearance accounts. The Euroclear Operator acts under these
laws and procedures only on behalf of Euroclear participants, and has no record
of or relationship with persons holding through Euroclear participants.
Distributions with respect to notes held through Cedelbank or Euroclear
will be credited to the cash accounts of Cedelbank participants or Euroclear
participants in accordance with the relevant system's rules and procedures, to
the extent received by its depositary. Such distributions will be subject to tax
reporting in accordance with relevant United States tax laws and regulations.
See "Certain Federal Income Tax Considerations--Characterization
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and Treatment--Information Reporting and Backup Withholding" in this prospectus.
Cedelbank or the Euroclear Operator, as the case may be, will take any other
action permitted to be taken by a noteholder under the indenture or other
Related Document on behalf of a Cedelbank participant or Euroclear participant
only in accordance with its relevant rules and procedures and subject to its
depositary's ability to effect such actions on its behalf through DTC.
Although DTC, Cedelbank and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of notes among participants of DTC,
Cedelbank and Euroclear, they are under no obligation to perform or continue to
perform such procedures and such procedures may be discontinued at any time.
Except as required by law, neither the trust, the seller, the servicer, 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, by Cedelbank or by Euroclear in Europe, or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
DEFINITIVE SECURITIES
Unless otherwise specified in the related prospectus supplement, any notes
and certificates originally issued in book-entry form will be issued in fully
registered, certificated form as definitive notes or definitive certificates, as
the case may be, to noteholders, certificateholders or their respective
nominees, rather than to DTC or its nominee, only if
(1) 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,
(2) the administrator, at its option, elects to terminate the
book-entry system through DTC or
(3) 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.
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
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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 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. Each such statement
to be delivered to noteholders will include the information set forth below as
to the notes with respect to such Payment Date or the period since the previous
Payment Date on such notes, as applicable. Each such statement to be delivered
to certificateholders will include the information set forth below as to the
certificates with respect to such Distribution Date or the period since the
previous Distribution Date, as applicable:
(1) the amount of the distribution allocable to principal of each
class of the notes and to the Certificate Balance of each class of
certificates;
(2) the amount of the distribution allocable to interest on or with
respect to each class of securities;
(3) the Aggregate Principal Balance as of the close of business on the
last day of the preceding Monthly Period;
(4) 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 (1) above on such date;
(5) 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;
(6) the amount of outstanding Monthly Advances on such date;
(7) 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;
(8) the Interest Rate or Pass Through Rate for the next period for any
class of notes or certificates with variable or adjustable rates;
(9) the amount, if any, distributed to noteholders and
certificateholders from amounts on deposit in the Reserve Account or from
other forms of credit enhancement;
(10) 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
(11) the balance of the Reserve Account, if any, on such date, after
giving effect to changes therein on such date.
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Each amount set forth pursuant to subclauses (1), (2), (7), (9) and (10)
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 & Co., as nominee of DTC, beneficial owners of the
securities will receive tax and other information from DTC participants and
indirect DTC participants rather than from the trustees. See "Certain Federal
Income Tax Considerations" in this prospectus.
THE TRANSFER AND SERVICING AGREEMENTS
Except as otherwise specified in the related prospectus supplement, the
following summary describes certain terms of the Transfer and Servicing
Agreements relating to each trust consisting of:
(1) the Pooling and Servicing Agreement pursuant to which the seller
will purchase receivables 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,
(2) 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,
(3) the trust agreement pursuant to which such trust will be created
and certificates will be issued and
(4) the administration agreement pursuant to which GMAC will undertake
certain administrative duties with respect to such trust.
Forms of the Transfer and Servicing Agreements in the above list 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, 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. On
the Closing Date, the seller will transfer and assign to the applicable trust,
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. 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. The trust will, concurrently with such transfer
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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 related securities offered
hereby (which may or may not include all securities of a series) to the
respective underwriters set forth in the related prospectus supplement. See
"Plan of Distribution" in this prospectus.
In each Pooling and Servicing Agreement, GMAC will represent and warrant to
the seller, among other things, that:
(1) the information provided in the related schedule of receivables
exhibit to the related Trust Sale and Servicing Agreement is correct in all
material respects;
(2) the obligor on each receivable is required to maintain physical
damage insurance covering the financed vehicle in accordance with GMAC's
normal requirements;
(3) 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;
(4) 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
(5) 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, will enforce the obligation
of GMAC under the Pooling and Servicing Agreement to repurchase) such Warranty
Receivable from the trust at a price equal to 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:
(1) except as contemplated in such Agreement, the servicer will not
release any financed vehicle from the security interest securing the
related receivable,
(2) 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
(3) 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
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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 make an Administrative Purchase Payment with respect to such
Administrative Receivable. 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
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 financing statements reflecting
the sale and assignment of such receivables to the trust and the pledge by the
trust to the indenture trustee 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 marked to reflect the assignment to the trust or the pledge
to the indenture trustee, if a subsequent purchaser were able to take physical
possession of the receivables without knowledge of the assignment, the trust's
and the indenture trustee's interests in such receivables could be defeated.
ACCOUNTS
With respect to each trust, the servicer will establish and maintain one or
more Collection 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 servicer will
establish and maintain with respect to each trust a Note Distribution 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 servicer
will establish and maintain with respect to each trust a Certificate
Distribution 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 servicer will establish for each trust a
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
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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 Designated Accounts (i.e., the Collection
Account, the Note Distribution Account and any Reserve Account and other
accounts identified as such in the related prospectus supplement) will 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 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 no later than
the business day preceding the next Distribution Date or, in the case of the
Note Distribution Account, the next Payment Date 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 next Payment Date
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, will be payable to the servicer.
The Designated Accounts will be maintained in either of two types of
accounts. The first type of account is a segregated account with an eligible
institution. The institutions which are eligible are:
(1) the corporate trust department of the related indenture trustee or
the owner trustee, as applicable, or
(2) 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) as long as that
depository institution:
(A) has either (X) a long-term unsecured debt rating acceptable to
the Rating Agencies or (Y) a short-term unsecured debt rating or
certificate of deposit rating acceptable to the Rating Agencies and
(B) has its deposits insured by the Federal Deposit Insurance
Corporation or any successor thereto.
The second type of account is 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). This depository institution
must have corporate trust powers and act as trustee for funds deposited in the
account and the securities of that depository institution must have a credit
rating from each Rating Agency then rating such institution in one of its
generic rating categories which signifies investment grade.
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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
Total Servicing Fee equal to the following:
- a basic servicing fee for the prior month 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
- an additional servicing fee equal to the lesser of
(1) the amount by which
(A) the amount equal to the aggregate amount of the basic servicing
fees for such Distribution Date and all prior Distribution Dates exceeds
(B) the aggregate amount of additional servicing fees paid to the
servicer on all prior Distribution Dates and
(2) 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 fees and payments to the seller) exceeds the Specified Reserve
Account Balance
- any unpaid basic servicing fees from all prior Distribution Dates and the
additional servicing fees to the extent of funds available therefor.
Unless otherwise provided in the prospectus supplement, the Total Servicing
Fee for each Monthly Period and any portion of the Total Servicing Fee that
remains unpaid from prior Distribution Dates may be paid at the beginning of
such Monthly Period out of collections for such Monthly Period. 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
and any investment earnings on trust accounts 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 and policing the collateral. Such amounts
will also compensate the servicer for its services as the pool of receivables
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 pool of receivables.
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
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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"
in this prospectus. 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 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 its liquidation expenses as 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.
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 Monthly Period into the related Collection Account not
later than two Business Days after receipt. However, the servicer may retain
such amounts until the related Distribution Date at any time that:
(1) GMAC is the servicer;
(2) there exists no Servicer Default; and
(3) either:
(A) the short-term unsecured debt of the servicer is rated at least
A-1 by Standard & Poor's Rating Services and P-1 by Moody's Investors
Service, Inc., or
(B) certain arrangements are made which are acceptable to the
Rating Agencies.
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.
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
Excess Payment will be held by the servicer (or, if the servicer has not
satisfied conditions (2) and (3) described in the second preceding paragraph,
will be deposited in the Payment Ahead Servicing Account), and will be treated
as a Payment Ahead, except as described in the following sentence. If and to the
extent that an Excess Payment (1) together with any unapplied payments ahead
exceeds the sum of three Scheduled Payments, or (2) constitutes, either alone or
together with any previous unapplied payments ahead, full prepayment, then such
portion of such Excess
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Payment shall not be deemed a payment ahead and shall instead be applied as a
full or partial 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. Excess Simple
Interest Collections represent the excess, if any, of (1) all payments received
during such Monthly Period on all Simple Interest Receivables held by the trust
to the extent allocable to interest over (2) 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 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 make 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. At such time as the
servicer determines that Scheduled Interest Advances will not be recoverable
from payments with respect to such receivable, 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 make a Simple Interest Advance equal to the excess, if any, of (1) 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 (2) 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 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). Unless otherwise
provided in the related prospectus supplement, the servicer will not make any
advance with respect to principal on any Simple Interest Receivable.
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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 advances or
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.
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 a Reserve Account which will be maintained with the indenture
trustee.
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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). To the extent, if any,
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 during such Monthly Periods as the
servicer is permitted to hold payments on receivables until the related
Distribution Date, the servicer will also 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.
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
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such date described under "Certain Information Regarding the Securities--Reports
to Securityholders" in this prospectus.
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.
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 and the Pooling 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, except
as specifically provided otherwise, 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.
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
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incurred by reason of such trustee's wilful misfeasance, bad faith or negligence
(except errors in judgment) in the 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.
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 under the
Trust Sale and Servicing Agreement and the Pooling and Servicing Agreement, will
be the successor of the servicer under such Trust Sale and Servicing Agreement
and the Pooling and Servicing Agreement. So long as GMAC acts as servicer, 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 or to any entity that agrees to conduct such duties in
accordance with the servicer's servicing guidelines and the Trust Sale and
Servicing Agreement. The servicer may at any time perform specific duties as
servicer through subcontractors who are in the business of servicing receivables
similar to the receivables, provided that no such delegation will relieve the
servicer of its responsibility with respect to such duties.
SERVICER DEFAULT
Except as otherwise provided in the related prospectus supplement, Servicer
Defaults under each Trust Sale and Servicing Agreement will consist of:
(1) any failure by the servicer to make any required distribution,
payment, transfer or deposit or to direct the related indenture trustee to
make any required distribution, 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;
(2) any failure by the servicer to 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 to the servicer by the indenture trustee or the owner trustee or to
the servicer, the indenture trustee and the owner trustee by holders of
notes or
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certificates, as applicable, evidencing not less than 25% in principal
amount of such outstanding notes or of such Certificate Balance or after
discovery of such failure by an officer of the servicer;
(3) any representation, warranty or certification made by the servicer
in such Trust Sale and Servicing Agreement or in any certificate delivered
pursuant thereto proves to have been incorrect when made and which has a
material adverse effect on the rights of the related securityholders and
which effect continues unremedied for a period of 60 days after the giving
of written notice thereof to the servicer by the indenture trustee or the
owner trustee; or
(4) certain events of bankruptcy, insolvency or receivership with
respect to the servicer by the servicer indicating its insolvency,
reorganization pursuant to bankruptcy proceedings, or inability to pay its
obligations.
Notwithstanding the foregoing, there will be no Servicer Default where a
Servicer Default would otherwise exist under clause (1) above for a period of
ten Business Days or under clause (2) or (3) 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.
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, 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. If the indenture trustee is unwilling to so act, it may, and if it is
unable to so act, it will 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 if all of
the notes have been paid in full,
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holders of the related certificates whose certificates evidence not less than a
majority of the outstanding Certificate Balance) 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:
(1) to cure any ambiguity,
(2) to correct or supplement any provision therein that may be
defective or inconsistent with any other provision therein or in any other
Related Document,
(3) to add or supplement any credit, liquidity or other enhancement
arrangement 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),
(4) to add to the covenants, restrictions or obligations of the
seller, the servicer, the owner trustee or the indenture trustee or
(5) 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. No such amendment may:
(1) increase or reduce in any manner the amount of, or accelerate or
delay the timing of, distributions of payments that are required to be made
on any note or certificate without the consent of the holder thereof, any
Interest Rate, any Pass Through Rate or the Specified Reserve Account
Balance,
(2) adversely affect the rating of any series by any Rating Agency
without the consent of two-thirds of the principal amount of the
outstanding notes or the Voting Interests of the outstanding certificates,
as appropriate, of such series or
(3) 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.
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INSOLVENCY EVENT
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 certificateholders (including
the seller); provided, however, that under no circumstance will the owner
trustee commence any such proceeding prior to the date that is one year and one
day after the termination of the trust. 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.
CERTIFICATEHOLDER LIABILITY; INDEMNIFICATION
Under each trust agreement, certificateholders will be entitled to the same
limitation of personal liability extended to stockholders of for profit
corporations under the Delaware General Corporation Law.
Each Trust Sale and Servicing Agreement provides that the servicer will
indemnify the indenture trustee and the owner trustee from and against any loss,
liability, expense, damage or cost arising out of or incurred in connection with
the acceptance or performance of its duties pursuant to the Transfer and
Servicing Agreements, including any judgment, award, settlement, reasonable
attorneys' fees and other costs or expenses incurred in connection with the
defense of any actual or threatened action, proceeding or claim. Neither the
indenture trustee nor owner trustee will be so indemnified if such acts or
omissions or alleged acts or omissions constitute willful misfeasance bad faith
or negligence by the indenture trustee or the owner trustee, as applicable. In
addition, the servicer will indemnify the trust, the indenture trustee, the
owner trustee, the noteholders and the certificateholders against losses arising
out of the negligence, willful misfeasance or bad faith of the servicer in the
performance of its duties under the Transfer and Servicing Agreements and the
indenture or by reason of its reckless disregard of its obligations and duties
thereunder. The servicer will also indemnify such parties against any taxes that
may be asserted against such parties with respect to the transactions
contemplated in the Trust Sale and Servicing Agreement, other than taxes with
respect to the sale of receivables or securities, the ownership of receivables
or the receipt of payments on securities or other compensation.
TERMINATION
Each trust will terminate upon the final distribution 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 below). 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 and other trust assets at a
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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 (which amount will in no event be less than the sum of the outstanding
notes and certificates plus accrued and unpaid interest thereon) and determined
as of the end of such Monthly Period. As further described in the related
prospectus supplement, any related outstanding notes will be redeemed
concurrently therewith and the subsequent distribution to related
certificateholders of all amounts required to be distributed to them pursuant 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, will enter into an administration
agreement with each trust and the related indenture trustee pursuant to which
GMAC, as 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, unless otherwise specified in the prospectus supplement, as
compensation for the performance of the administrator's obligations under the
administration agreement and as reimbursement for its expenses related thereto,
GMAC, as administrator, will be entitled to an administration fee in an amount
equal to $1,500 per month. The servicer will pay the administration fee.
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 Uniform Commercial Code. 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 and the trust will
pledge its interest to the indenture trustee. However, because of the
administrative burden and expense, no certificate of title will be amended to
identify the trust as the new secured party relating to a financed vehicle or
the interest of the indenture trustee therein. Also, GMAC will continue to hold
any certificates of title relating to the vehicles in its possession as
custodian for the seller and trust 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 this prospectus.
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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 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 of the certificate of title from the state department of motor
vehicles. 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 receivable 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.
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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
Uniform Commercial Code, except where specifically limited by other state laws.
Among the Uniform Commercial Code 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 Uniform Commercial Code 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 imposes similar requirements 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 Uniform Commercial
Code 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 Uniform Commercial Code and a consent order between the servicer and
the Federal Trade Commission 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
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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 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 provisions of which are generally duplicated by the Uniform Commercial Code,
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 holder-in-due-course 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
holder-in-due-course rule. The 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 in all material
respects. See "The Transfer and Servicing Agreements--Sale and Assignment of
Receivables" in this prospectus.
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.
In several cases, consumers have asserted that the self-help remedies of
secured parties under the Uniform Commercial Code and related laws violate the
due process protections provided under the 14th Amendment to the Constitution of
the United States. Courts have generally upheld the notice provisions of the
Uniform Commercial Code and related laws as reasonable or have found that the
repossession and resale by the creditor do not involve sufficient state action
to afford constitutional protection to consumers.
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 may create an
obligation to repurchase the receivable unless the breach is cured in all
material respects. See "The Transfer and Servicing Agreements--Sale and
Assignment of the Receivables" in this prospectus.
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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 pool of receivables.
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. In 1993, the United States Court
of Appeals for the Tenth Circuit 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 CONSIDERATIONS
GENERAL
Set forth below is a discussion of the anticipated material United States
federal income tax considerations relevant to the purchase, ownership and
disposition of the notes and certificates. This discussion is based upon current
provisions of 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 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 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
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circumstances nor, except for certain limited discussions of particular topics,
to 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. PROSPECTIVE INVESTORS SHOULD CONSULT
WITH THEIR 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 notes and certificates falling into four
general categories: (1) 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, (2) certificates representing interests in a trust which the
seller, the servicer and the applicable certificateholders will agree to treat
as equity interests in a grantor trust (i.e., a Tax Trust ), (3) certificates
(including Strip Certificates) and Strip Notes, representing interests in a
trust which the seller, the servicer and the applicable holders will agree to
treat as equity interests in a partnership (i.e., a Tax Partnership), and (iv)
certificates, all of which are owned by the seller, representing interests in a
trust which the seller and the servicer will agree to treat as a division of the
seller and hence disregarded as a separate entity (i.e., a Tax Non-Entity), in
each case for purposes of federal, state and local income and franchise taxes.
The prospectus supplement for each series of certificates will indicate whether
the related trust fund is a Tax Trust, Tax Partnership or Tax Non-Entity.
Because the seller will treat each Tax Trust as a grantor trust, each Tax
Partnership as a partnership, and each Tax Non-Entity as a division of seller,
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, Tax Partnership or Tax Non-Entity. For purposes of this
discussion, references to a "holder" are to the beneficial owner of a note,
Trust Certificate, Partnership Certificate or Tax Non-Entity Certificate, as the
context may require.
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 or a Tax
Non-Entity, Tax Counsel to the seller, will deliver its opinion to the effect
that the 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", "Partnership Certificates--Classification of
Partnerships and Partnership Certificates" or "Tax Non-Entity
Certificates--Classification of Tax Non-Entity and Tax Non-Entity 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, a
Tax Partnership or a Tax Non-Entity, as applicable, for federal income tax
purposes.
Treatment of Stated Interest. Based on the foregoing opinion, and assuming
the notes are not issued with OID, the stated interest on a note will be taxable
to a noteholder as ordinary income when received or accrued in accordance with
such noteholder's method of tax
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accounting. Interest received on a note may constitute "investment income" for
purposes of certain limitations of the Code concerning the deductibility of
investment interest expense.
Original Issue Discount. Except to the extent indicated in the related
prospectus supplement, no series of notes will be issued with OID. In general,
OID is the excess of the "stated redemption price at maturity" of a debt
instrument over its "issue price," unless such excess falls within a statutorily
defined de minimis exception. A note's "stated redemption price at maturity" is
the aggregate of all payments required to be made under the note through
maturity except "qualified stated interest." Qualified stated interest is
generally interest that is unconditionally payable in cash or property (other
than debt instruments of the issuer) at fixed intervals of one year or less
during the entire term of the instrument at certain specified rates. The "issue
price" will be the first price at which a substantial amount of the notes are
sold, excluding sales to bond holders, brokers or similar persons acting as
underwriters, placement agents or wholesalers.
If a note were treated as being issued with OID, a noteholder would be
required to include OID in income as interest over the term of the note 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. Even
if a note has OID falling within the de minimis exception, the noteholder must
include such OID in income proportionately as principal payments are made on
such note.
A holder of a Short-Term Note which has a fixed maturity date not more than
one year from the issue date of such note will generally not be required to
include OID on the Short-Term 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 OID accrued on the note in gross income upon a
sale or exchange of the note 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 OID accrued on such note. However, a holder may elect to
include OID 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, OID 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.
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.
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
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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 and market discount 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. Any such gain or loss will be capital gain or loss if the note was
held as a capital asset, except for gain representing accrued interest or
accrued market discount not previously included in income. 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.
Information Reporting and Backup Withholding. Each Tax Trust, Tax
Partnership and Tax Non-Entity will be required to report annually to the IRS,
and to each related noteholder of record, the amount of interest paid on the
notes (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 will be required to provide to the related Tax
Trust, Tax Partnership or Tax Non-Entity, 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, Tax Partnership or Tax Non-Entity 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.
The IRS has issued new regulations governing the backup withholding and
information reporting requirements. The new regulations are generally effective
for payments made after December 31, 1999. Noteholders should consult their tax
advisors with respect to the impact, if any, of the new regulations.
Because the seller will treat each Tax Trust as a grantor trust, each Tax
Partnership as a partnership, each Tax Non-Entity as a division of the seller
and all notes (except Strip Notes and any other series of notes specifically
identified as receiving different tax treatment 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, Tax Partnership or Tax Non-Entity.
Tax Consequence to Foreign Noteholders. If interest paid (or accrued) to a
noteholder who is 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:
(1) is not actually or constructively a "10 percent shareholder" of a
related Tax Trust, Tax Partnership or the seller (including a holder of 10
percent 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
(2) 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
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Foreign Person must so inform the related Tax Trust or Tax Partnership
within 30 days of such change.
If such interest were not portfolio interest or if applicable certification
requirements were not satisfied, 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. The IRS has amended the
transition period relating to new regulations governing backup withholding and
information reporting requirements. Withholding certificates or statements that
are valid on December 31, 1999, may be treated as valid until the earlier of its
expiration or December 31, 2000. All existing certificates or statements will
cease to be effective after December 31, 2000.
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
(1) the gain is not effectively connected with the conduct of a trade
or business in the United States by the Foreign Person, and
(2) in the case of a foreign individual, 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.
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 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 the Tax Trust.
Although 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. 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. If 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
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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). See "Partnership Certificates--Classification of Partnerships
and Partnership Certificates" below.
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.
Grantor Trust Treatment. As a grantor trust, a Tax Trust will not be
subject to federal income tax. Subject to the discussion below under "Treatment
of Fees or Payment," 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 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. 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. 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 "Treatment of Fees or Payments" below for a discussion
of other possible consequences if amounts paid to the servicer exceed reasonable
compensation for services rendered.
Treatment of Fees or Payments. It is expected that income will be reported
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. 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
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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 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 an amount which is less than a statutorily defined de minimis
amount, such receivable would not be treated as having OID. In general, 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 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.
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; therefore, a Tax Trust should not have OID income. However, the purchase
price paid by such 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. Moreover, a holder who
acquires a Trust Certificate representing an interest in receivables acquired at
a market discount may be required to defer
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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.
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. Any
such election will apply to all 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 any OID and market discount previously included in
income, and decreased by any bond premium previously amortized and by the amount
of principal payments previously received on the receivables held by the related
Tax Trust. 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
certificateholder, unless such certificateholder makes the special election
described under "Discount and Premium" above.
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 certain 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
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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 classified as 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.
Even if a Tax Partnership were not classified as 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, certain 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 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. 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 paid or accrued 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
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for a Tax Partnership will provide that the certificateholders will be allocated
taxable income of the related Tax Partnership for each month equal to their
allocable share of the sum of:
(1) the Pass Through Rate on the related Partnership Certificates for
such month;
(2) an amount equivalent to interest that accrues during such month on
amounts previously due on such Partnership Certificates but not yet
distributed;
(3) 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
(4) any Prepayment Surplus payable to the Partnership Certificates for
such month.
In addition, each trust agreement for a Tax Partnership will provide that
the certificateholders will be allocated their allocable share for each month of
the entire amount of interest expense paid by the related Tax Partnership on any
related notes. 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 amount. Thus, cash basis holders will in effect be required to report
income from the Partnership Certificates on the accrual method. 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, certain additional 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 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.
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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 market 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 contribute all of its assets to a new partnership followed by a
liquidation of the original Tax 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) for the current and prior
taxable years 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 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 a 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).
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 its actual purchase.
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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
owner 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 for greater (less) than its adjusted basis therefor, 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 an
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. 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. Each Tax Partnership will provide the Schedule K-1
information to nominees that fail to provide such Tax Partnership with the
information referenced in the preceding sentence 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.
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.
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-United States 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
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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 as if such income were effectively
connected to a United States trade or business, at a rate of 35% for foreign
holders that are taxable as corporations and 39.6% for all other foreign
holders. In determining a holder's nonforeign status, a Tax Partnership may
generally rely on the holder's certification of nonforeign status signed under
penalties of perjury.
Each foreign holder might be required to file a United States 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 Tax 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.
Backup Withholding. Distributions made on any Partnership Certificates and
proceeds from the 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.
TAX NON-ENTITY CERTIFICATES
Classification of Tax Non-Entity and Tax Non-Entity Certificates. With
respect to certificates identified in the related prospectus supplement as Tax
Non-Entity Certificates and which are entirely owned by the seller, the seller
and the servicer will agree, pursuant to the "check-the-box" Treasury
Regulations, to treat the Tax Non-Entity as a division of the seller, and hence
a disregarded entity, for federal income tax purposes. In other words, for
federal income tax purposes, the seller will be treated as the owner of all the
assets of the Tax Non-Entity and the obligor of all the liabilities of the Tax
Non-Entity. Under the "check-the-box" Treasury Regulations, unless it is treated
as a Tax Trust for federal income tax purposes, an unincorporated domestic
entity with more than one equity owner is automatically classified as a Tax
Partnership for federal income tax purposes. If the trust is classified as a Tax
Non-Entity when all its equity interests are wholly-owned by the seller and if
certificates are then sold or issued in any manner which results in there being
more than one certificateholder, the trust will be treated as a Tax Partnership.
If certificates are issued to more than one person, the seller and the
servicer will agree, and the applicable certificateholders will agree by their
purchase, to treat the trust as a Tax Partnership for purposes of federal, state
and local income and franchise tax purposes, with the partners of such
partnership being the certificateholders (including the seller) and the notes
being debt of such partnership.
Risks of Alternative Characterization. If a Tax Non-Entity were an
association or a "publicly traded partnership" taxable as a corporation for
federal income tax purposes, it would be subject to corporate income tax as
discussed above under "Partnership Certificates--Classification of Partnerships
and Partnership Certificates."
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STATE AND LOCAL TAX CONSEQUENCES
The above discussion does not address the tax treatment of any Tax Trust,
Tax Partnership, Tax Non-Entity, 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 tax advisors regarding the state and
local tax treatment of any Tax Trust, Tax Partnership or Tax Non-Entity 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 ERISA and Section 4975 of the Code prohibit Benefit Plans
such as a pension, profit-sharing or other employee benefit plan, and individual
retirement accounts and certain types of Keogh Plans and certain collective
investment funds or insurance company general or separate accounts in which such
plans and accounts are invested, 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. The acquisition or
holding of securities by a Benefit Plan could be considered to give rise to a
prohibited transaction if the seller, the servicer, the related trust or any of
their respective affiliates is or becomes a party in interest or a disqualified
person with respect to such Benefit Plan.
In addition, 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 the United States Department of
Labor's plan assets regulations, the assets of the trust would be treated as
plan assets of a Benefit Plan for the purposes of 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 regulations 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 and refer to the applicable prospectus supplement
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 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.
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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 (1) 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 (2) 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 Robert L. Schwartz, Esq.,
General Counsel of the seller and Assistant General Counsel of GMAC, and by
Kirkland & Ellis, special counsel to the seller, each trust and GMAC. Mr.
Schwartz owns shares of each of the classes of General Motors common stock and
has options to purchase shares of General Motors common stock, $1 2/3 par value.
Certain federal income tax matters will be passed upon for GMAC, each trust and
the seller by Kirkland & Ellis.
WHERE YOU CAN FIND MORE INFORMATION
We filed a registration statement relating to the securities with the
Securities and Exchange Commission under the Securities Act of 1933, as amended.
This prospectus is part of the registration statement, but the registration
statement includes additional information.
The servicer will file with the SEC all required annual, monthly and
special SEC reports and other information about the trust.
You may read and copy any reports, statements or other information we file
at the SEC's public reference room in Washington, D.C. You can request copies of
these documents, upon payment of a duplicating fee, by writing to the SEC.
Please call the SEC at (800) SEC-0330 for further information on the operation
of the public reference rooms. Our SEC filings are also available to the public
on the SEC Internet site (http://www.sec.gov).
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INCORPORATION BY REFERENCE
The SEC allows us to "incorporate by reference" information we file with
it, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this prospectus. Information that we file later with the SEC will
automatically update the information in this prospectus. In all cases, you
should rely on the later information over different information included in this
prospectus or the accompanying prospectus supplement. We incorporate by
reference any future SEC reports and materials filed by or on behalf of the
trust until we terminate our offering of the certificates.
As a recipient of this prospectus, you may request a copy of any document
we incorporate by reference, except exhibits to the documents (unless the
exhibits are specifically incorporated by reference), at no cost, by writing us
at: General Motors Acceptance Corporation, 3044 West Grand Boulevard, Detroit,
Michigan 48202.
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GLOSSARY OF TERMS TO PROSPECTUS
This Glossary of Terms to Prospectus is not complete and is qualified in
its entirety by reference to the Related Agreements, forms of which are filed as
an exhibit to the registration statement of which this prospectus is a part.
References to the singular include references to the plural and vice versa.
"Administrative Purchase Payment" means,
(1) in the case of a Scheduled Interest Receivable, a release of all
claims for reimbursement of Scheduled Interest Advances made on such
receivable plus the sum of
(A) all remaining Scheduled Payments on such receivable,
(B) 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, and
(C) all past due Scheduled Payments with respect to which a
Scheduled Interest Advance has not been made, less the rebate that would
be payable to the obligor on such receivable were the obligor to prepay
such receivable in full on such day.
(2) in the case of a Simple Interest Receivable, a payment equal to
the Amount Financed less that portion of all payments made on or prior to
the last day of the related Monthly Period allocable to principal.
"Administrative Receivable" means a receivable which the servicer is
required to purchase as a result of a breach of a covenant which materially and
adversely affects any receivable held by the related trust pursuant to the
Pooling and Servicing Agreement or which the servicer has elected to repurchase
pursuant to the Trust Sale and Servicing Agreement.
"Aggregate Amount Financed" means the aggregate Amount Financed under the
receivables held by a trust as specified in the related prospectus supplement.
"Aggregate Principal Balance" means with respect to each trust as of any
date, the sum of the Principal Balances of all outstanding receivables (other
than Liquidating Receivables) held by the trust on such date.
"Amount Financed" means, with respect to a receivable, 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 less:
(1) (A) in the case of a Scheduled Interest Receivable, payments due
from the related obligor prior to the related Cutoff Date allocable to
principal and
(B) in the case of a Simple Interest Receivable, payments received
from the obligor prior to the related Cutoff Date allocable to
principal; and
(2) any amount allocable to the premium for physical damage insurance
covering the financed vehicle force-placed by GMAC.
"APR" means, with respect to a receivable, the annual percentage rate.
"Basic Servicing Fee Rate" means, with respect to a trust, the Basic
Servicing Fee Rate specified in the related prospectus supplement.
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"Benefit Plan" means a pension, profit-sharing or other employee benefit
plan, and individual retirement accounts and certain types of Keogh Plans and
certain collective investment funds or insurance company general or separate
accounts in which such plans and accounts are invested.
"Business Day" means any day other than a Saturday, Sunday or any other day
on which banks in New York, New York, Detroit, Michigan or Chicago, Illinois
may, or are required to, remain closed.
"Certificate Distribution Account" means any account designated as such,
established and maintained pursuant to the Trust Sale and Servicing Agreement.
"Certificate Pool Factor" means, for each class of Certificates, 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.
"Closing Date" means the Closing Date specified in the related prospectus
supplement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collection Account" means any account designated as such, established
pursuant to the Trust Sale and Servicing Agreement.
"Cutoff Date" means, with respect to a trust, the Cutoff Date specified in
the related prospectus supplement.
"Designated Accounts" means the Collection Account, the Note Distribution
Account, and any Reserve Account and other accounts identified as such in the
related prospectus supplement and for which the funds on deposit are invested in
Eligible Investments.
"Distribution Date" means the date or dates specified in the related
prospectus supplement on which the trust makes payments on the notes and the
certificates.
"Eligible Investments" means generally investments (1) which are acceptable
to the Rating Agencies as being consistent with the rating of such notes and (2)
that mature no later than the business day preceding the next Distribution Date
or Payment Date.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Euroclear Operator" means the operator of Euroclear, which is the
Brussels, Belgium office of Morgan Guaranty Trust Company of New York.
"Events of Default" has the meaning, unless otherwise set forth in the
prospectus supplement, set forth in "The Notes--The Indenture--Events of
Default; Rights Upon Events of Default."
"Excess Payment" means, with respect to a Scheduled Interest Receivable,
the portion of a payment on such receivable in excess of the Scheduled Payment
thereon which is not late fees, prepayment charges or certain other similar fees
or charges.
"Excess Simple Interest Collections" means, with respect to a Monthly
Period, the excess, if any, of (1) all payments received during such Monthly
Period on all Simple Interest Receivables held by the trust to the extent
allocable to interest over (2) 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.
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"Foreign Person" means a nonresident alien, foreign corporation or other
non-United States person.
"General Motors" means General Motors Corporation.
"GMAC" means General Motors Acceptance Corporation.
"IRS" means the Internal Revenue Service.
"Liquidation Proceeds" means, with respect to a Liquidating Receivable, all
amounts realized with respect to such receivable, net of amounts that are
required to be refunded to the obligor on such receivable.
"Liquidating Receivables" means a receivable as to which the servicer has:
(1) reasonably determined, in accordance with customary servicing
procedures, that eventual payment of amounts owing on such receivable is
unlikely, or
(2) repossessed and disposed of the financed vehicle.
"Monthly Advance" means, with respect to a trust, as of the last day of the
Monthly Period, either a Scheduled Interest Advance or a Simple Interest
Advance, or both, as applicable, in respect of the related Monthly Period.
"Monthly Period" means, with respect to a Distribution Date, the calendar
month preceding the month in which such Distribution Date occurs.
"Note Distribution Account" means any account designated as such,
established and maintained pursuant to the Trust Sale and Servicing Agreement.
"Note Pool Factor" means, for each class of notes, 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.
"OID" means original issue discount.
"Partnership Certificates" means certificates (including Strip
Certificates) and Strip Notes issued by a Tax Partnership. References to a
holder of these certificates shall be to the beneficial owner thereof.
"Payment Date" means the dates for payments on any class of notes as
specified in the prospectus supplement.
"Payment Ahead" means, with respect to a Scheduled Interest Receivable, any
Excess Payment (not representing prepayment in full of such receivable) that is
of an amount such that the sum of such Excess Payment (together with any
unapplied Payments Ahead) is equal to or less than three times the Scheduled
Payment.
"Payment Ahead Servicing Account" means any account designated as such
established and maintained pursuant to the Trust Sale and Servicing Agreement.
"Pooling and Servicing Agreement" means, with respect to each trust, the
Pooling and Servicing Agreement dated as of the Closing Date between GMAC and
the seller, as amended and supplemented from time to time.
"Prepayments" means Excess Payments other than a Payment Ahead.
"Prepayment Surplus" means, on any Distribution Date on which a Prepayment
is to be applied with respect to a Scheduled Interest Receivable, that portion
of the Prepayment, net
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of any rebate to the obligor of the portion of the Scheduled Payments
attributable to unearned finance charges, which is not allocable to principal.
"Principal Balance" means, as of any date with respect to any receivable,
the Amount Financed minus the sum of either:
(1) in the case of a Scheduled Interest Receivable,
(A) that portion of all Scheduled Payments due on or prior to such
date allocable to principal,
(B) that portion of any Warranty Payment or Administrative Purchase
Payment with respect to such receivable allocable to principal and
(C) any Prepayment applied by the servicer to reduce the Principal
Balance of such receivable, or
(2) in the case of a Simple Interest Receivable,
(A) that portion of all payments received on or prior to such date
allocable to principal and
(B) that portion of any Warranty Payment or Administrative Purchase
Payment with respect to such receivable allocable to principal.
"Rating Agencies" means the rating agencies then rating a class of notes or
certificates at the request of the seller.
"Related Documents" means the indenture, the Transfer and Servicing
Agreements and other related documents for a trust.
"Reserve Account" means, with respect to a trust, the account designated as
such, established and maintained pursuant to the Trust Sale and Servicing
Agreement.
"Scheduled Interest Advance" means, with respect to a Scheduled Interest
Receivable, the amount, as of the last day of the Monthly Period, by which the
amount of the Scheduled Payment exceeds the amount of the Payments Ahead not
previously applied to such receivable and any amounts received by an obligor in
respect of such Scheduled Payment.
"Scheduled Interest Receivables" means receivables pursuant to which the
payments due from the obligors during any month 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.
"Scheduled Payment" means, with respect to a Scheduled Interest Receivable,
the payment set forth in such receivable due from the obligor during any month.
"Securities Act" means the Securities Act of 1933, as amended.
"Servicer Default" has the meaning set forth in "The Transfer and Servicing
Agreements--Servicer Defaults."
"Short-Term Note" means a note which has a fixed maturity date not more
than one year from the issue date of such note.
"Simple Interest Advance" means, unless otherwise provided in the related
prospectus supplement, as of the last day of each Monthly Period, the amount
advanced by the servicer equal to the excess, if any, of
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(1) 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
(2) all payments received during such Monthly Period on all Simple
Interest Receivables held by the trust to the extent allocable to interest.
"Simple Interest Receivables" means receivables which provide for the
allocation of payments between finance charges and principal based on the actual
date on which a payment is received.
"Strip Certificates" means one or more classes of certificates entitled to
disproportionate, nominal or no distributions of Certificate Balance or
interest.
"Strip Notes" means one or more classes of notes entitled to
disproportionate, nominal or no distributions of principal or interest.
"Tax Counsel" means Kirkland & Ellis, as special tax counsel to the seller.
"Tax Non-Entity" means a trust in which all of the certificates in such
trust which are owned by the seller, and the seller and the servicer agree to
treat the trust as a division of the seller and hence disregarded as a separate
entity for purposes of federal, state and local income and franchise taxes.
"Tax Non-Entity Certificates" means certificates issued by a Tax
Non-Entity. References to a holder of these certificates shall be to the
beneficial owner thereof.
"Tax Partnership" means a trust in which the seller, the servicer and the
applicable holders agree to treat certificates (including Strip Certificates)
and Strip Notes as equity interests in a partnership for purposes of federal,
state and local income and franchise taxes.
"Tax Trust" means a trust in which the seller, the servicer and the
applicable certificateholders agree to treat the certificates of the trust as
equity interests in a grantor trust for purposes of federal, state and local
income and franchise taxes.
"Total Servicing Fee" has the meaning set forth in "The Transfer and
Servicing Agreements--Servicing Compensation and Payment of Expenses."
"Transfer and Servicing Agreements" means, with respect to each trust, the
Pooling and Servicing Agreement, the Trust Sale and Servicing Agreement, the
trust agreement and the administration agreement.
"Trust Certificates" means certificates issued by a Tax Trust. References
to a holder of these certificates shall be to the beneficial owner thereof.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
"Trust Sale and Servicing Agreement" means, with respect to each trust, the
Trust Sale and Servicing Agreement, dated as of the related Closing Date, among
the servicer, the seller and the trust, as amended and supplemented from time to
time.
"Warranty Payment" means:
(1) in the case 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 (1) the rebate
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that would be payable to the obligor on such receivable were the obligor to
prepay such receivable in full on such day and (2) any Liquidation Proceeds
with respect to such receivable previously received (to the extent applied
to reduce the Principal Balance of such receivable); or
(2) in the case of a Simple Interest Receivable, the Amount Financed
minus (A) that portion of all payments received on or prior to the last day
of the related Monthly Period allocable to principal and (B) any
Liquidation Proceeds with respect to such receivable (to the extent applied
to reduce the Principal Balance of such receivable).
"Warranty Receivable" means a receivable which must be repurchased by
either the trust or GMAC as a result of a breach of a representation or warranty
with respect to such receivable which materially and adversely affects the
interests of any securityholder in such receivable.
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The information in this prospectus is not complete and may be changed. We
may not sell the securities until the registration statement filed with
the Securities and Exchange Commission is effective. This prospectus is
not an offer to sell these securities and we are not soliciting an offer
to buy these securities in any State where the offer or sale is not
permitted.
VERSION 2
PROSPECTUS
GMAC GRANTOR TRUSTS
Asset Backed Certificates, Class A
CAPITAL AUTO RECEIVABLES, INC.
Seller
GENERAL MOTORS ACCEPTANCE CORPORATION
Servicer
<TABLE>
<S> <C>
THE TRUSTS--
CONSIDER CAREFULLY THE RISK
FACTORS BEGINNING ON PAGE IN - We will form a new trust to issue each series of
THIS PROSPECTUS. certificates. Each series will include two
classes of certificates, the Class A Certificates
The certificates of a series and the Class B Certificates. We will sell only
represent the beneficial the Class A Certificates with this prospectus.
interest in the related trust
only. The certificates issued - The primary assets of each trust will be a pool
by any trust do not represent of fixed rate retail motor vehicle installment
obligations of or interests in, sales contracts, including security interests in
and are not guaranteed by the automobiles and light trucks financed under
Capital Auto Receivables, Inc., such contracts.
GMAC, or any of their
respective affiliates. THE CLASS A CERTIFICATES ISSUED BY A TRUST--
This prospectus may be used to - will represent the right to payments of principal
offer and sell any certificates and interest on a monthly basis;
only if accompanied by an
applicable prospectus - will be rated in the highest rating category
supplement. (i.e., "AAA") by at least one nationally recognized
rating agency;
- will be paid only from the assets of the trust
and amounts on deposit in the related Subordination
Spread Account; and
- will be senior to the Class B Certificates issued
by the trust.
</TABLE>
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED
THE CLASS A CERTIFICATES OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
We provide information to you about the certificates in two separate
documents:
(a) this prospectus, which provides general information and terms of
the certificates.
(b) the accompanying prospectus supplement, which will provide
information regarding the pool of contracts held by the trust and will
specify the terms of your certificate.
IF THE TERMS OF THE CLASS A CERTIFICATES VARY BETWEEN THIS PROSPECTUS AND
THE PROSPECTUS SUPPLEMENT, YOU SHOULD RELY ON THE INFORMATION IN THE PROSPECTUS
SUPPLEMENT.
You should rely only on the information provided in this prospectus and the
accompanying prospectus supplement, including the information incorporated by
reference. We have not authorized anyone to provide you with other or different
information. We are not offering the Class A Certificates in any state where the
offer is not permitted. We do not claim that the information in this prospectus
and the accompanying prospectus supplement is accurate on any date other than
the dates stated on their respective covers.
Capitalized terms used in this prospectus are defined under the caption
"Glossary of Terms" beginning on page in this prospectus.
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SUMMARY
- This prospectus summary highlights selected information from this
document and does not contain all of the information that you need to
consider in making your investment decision. To understand all of the
terms of an offering of the certificates, read carefully this entire
document and the accompanying prospectus supplement.
THE PARTIES
Issuer
The Parties will create a separate trust to issue each series of certificates.
The trust will operate under a pooling and servicing agreement.
Seller
Capital Auto Receivables, Inc., a wholly-owned subsidiary of GMAC, will be the
seller for each trust.
Servicer
GMAC, a wholly-owned subsidiary of General Motors Corporation, will be the
servicer for each trust.
Trustee
Each prospectus supplement will specify the trustee for each trust.
THE OFFERED CERTIFICATES
We will describe in the accompanying prospectus supplement the Class A
Certificates that we are offering. Each trust will issue two classes of
asset-backed certificates, the Class A Certificates and the Class B
Certificates, but we will sell only the Class A Certificates pursuant to the
related prospectus supplement.
Interest Payments
- - - The trustee will pay interest on the Class A Certificates at the Pass Through
Rate, which is an interest rate that will be specified in the prospectus
supplement.
- - - The trustee will pay interest monthly, on the Distribution Date, which will be
the 15th day of each month (or the next following business day).
- - - The trustee will pay interest on the Distribution Date only if funds are
available. This prospectus describes how the available funds are allocated to
interest payments.
- - - Interest and principal payments on the Class B Certificates will be
subordinated to interest payments on the Class A Certificates. This prospectus
describes the extent of the subordination.
Principal Payments
- - - The trustee will make a monthly principal payment on the Class A Certificates
on each Distribution Date.
- - - The trustee will make principal payments based on the amount of principal
received during the month prior to the Distribution Date. The trustee will
make principal payments only to the extent that funds are available. This
prospectus describes how the available funds are allocated to principal
payments.
- - - The trustee will generally pay principal proportionately to the holders of
Class A Certificates and Class B Certificates. The principal payments will be
based on each certificateholder's percentage interest in the trust.
- - - Principal payments on the Class B Certificates will be subordinated to
principal and interest payments on the Class A Certificates. This prospectus
describes the extent of the subordination.
Subordination of Class B Certificates
On each Distribution Date:
- - - The trustee will make each monthly interest payment to the Class B
Certificateholders only after the trustee pays the full amount of interest
owed that month on the Class A Certificates.
- - - The trustee will make each monthly principal payment to the Class B
Certificateholders only after the trustee pays the full amount of interest and
principal owed that month on the Class A Certificates.
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Certificate Ratings
- - - We will not issue Class A Certificates unless they are rated in the highest
rating category (i.e., "AAA") by at least one nationally recognized rating
agency.
- - - We cannot assure that a rating agency will maintain its rating if
circumstances change. If a rating agency changes its rating, no one has an
obligation to provide additional credit enhancement.
- - - A certificate rating is not a recommendation to buy the Class A Certificates.
The rating considers only the likelihood that the trustee will pay interest on
time and will ultimately pay principal. The rating does not consider the Class
A Certificate's price, its suitability to a particular investor, or the timing
of principal payments.
THE TRUST PROPERTY
The primary assets of each trust will be a pool of fixed-rate retail instalment
sales contracts used to finance new and used car and light truck purchases. We
refer to these contracts as " receivables" and to the persons who financed their
purchases with these contracts as "obligors." The receivables in each trust will
be sold by GMAC to the seller, and then by the seller to the trust. The trust
property will also include, with certain exceptions described in this
prospectus:
- - - Monies due or received under the receivables after a cut-off date;
- - - Amounts held on deposit in trust accounts maintained for the trust;
- - - Security interests in the vehicles financed by the receivables;
- - - Any recourse GMAC has against the dealers from which it purchased the
receivables;
- - - Any proceeds from claims on insurance policies covering the financed vehicles;
- - - Certain rights of the seller under its purchase agreement with GMAC; and
- - - All rights of the trust under the related pooling and servicing agreement.
SUBORDINATION SPREAD ACCOUNT
There are two different types of receivables in each trust: Scheduled Interest
Receivables and Simple Interest Receivables. The way that payments are allocated
between principal and interest varies depending on the type of receivable. This
prospectus provides more information on the different types of receivables.
The seller will maintain for the benefit of each trust a Subordination Spread
Account that is separate from the trust. The Subordination Spread Account
enhances the likelihood that the Class A Certificateholders will receive the
full amount of principal and interest that is owed to them.
The seller will fund the Subordination Spread Account as follows:
- - - On the Closing Date, the seller will make an initial deposit in the
Subordination Spread Account.
- - - On each Distribution Date, the Subordination Spread Account will receive funds
that would have been allocated to the Class B Certificates, until its balance
reaches the Specified Subordination Spread Account Balance.
- - - The amount in the Subordination Spread Account will have a set maximum and
minimum. Both of these amounts are stated in the related prospectus
supplement.
- - - Generally, the Specified Subordination Spread Account Balance will be the
minimum amount required. However, certain events relating to the collection of
receivables may cause the trustee to increase the Specified Subordination Spread
Account Balance. See "The Certificates-- Subordination of the Class B
Certificates; Subordination Spread Account" in this prospectus.
ADVANCES
The servicer will advance monthly payments to the trustee to compensate for
untimely payments. The terms of the
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advance will vary depending on the type of receivable.
- - - For Scheduled Interest Receivables, the servicer will advance to the trustee
the portion of each receivable that was due but unpaid as of the end of the
month when due. The trust must reimburse the servicer for the advance. The
servicer is obligated to advance the payment only to the extent that the
servicer expects to recover the advanced amount through later collections and
payments on the receivables.
- - - For Simple Interest Receivables, the servicer will advance to the trustee any
aggregate interest shortfall that results from obligors paying on dates other
than the due dates. The trustee will pay to the servicer any surplus interest
that results from obligors paying on dates other than due dates.
SERVICING FEES
For each series of certificates, the trustee will pay the servicer a set monthly
fee as compensation for servicing the receivables. The trustee will also pay the
servicer any late fees, prepayment charges and other administrative fees and
expenses collected during the related month. The trustee may also pay the
servicer additional servicing fees.
OPTIONAL REPURCHASE
The servicer may purchase all of the property of the trust when the Aggregate
Principal Balance falls below 10% of the Aggregate Amount Financed. Any
repurchase would result in the full payment of all outstanding Class A
Certificates.
TAX STATUS
In the opinion of Kirkland & Ellis, special tax counsel to the seller, each
trust will be classified for Federal income tax purposes as a grantor trust and
not as an association taxable as a corporation. certificate owners must report
their respective allocable shares of income earned on trust assets. Subject to
certain limitations applicable to individuals, estates and trusts, certificate
owners may deduct their respective allocable shares of reasonable servicing and
other fees. Individuals should consult their tax advisors to determine the
federal, state, local and other tax consequences of the purchase, ownership and
disposition of the Class A Certificates.
ERISA CONSIDERATIONS
Subject to the considerations discussed under "ERISA Considerations," an
employee benefit plan subject to the Employee Retirement Income Security Act of
1974, as amended, may purchase the Class A Certificates. An employee benefit
plan should consult with its counsel before purchasing the Class A Certificates.
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RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase Class A Certificates.
RISK OF UNCOLLECTIBLE
RECEIVABLES DUE TO PRIORITY
OF CERTAIN LIENS ON FINANCED Obligors who purchase financed vehicles give
GMAC a security interest in those vehicles. If
GMAC fails to perfect its security interest in
a financed vehicle, GMAC must repurchase the
receivable from the trust.
VEHICLES OR RECEIVABLES GMAC will assign its security interest in the
financed vehicles to the seller. The seller
will in turn assign its security interest in
the financed vehicles to the trust. If, for any
reason, this assignment does not perfect a
trust's security interest in a financed
vehicle, its security interest would be
subordinate to, among others, the following:
- A bankruptcy trustee of the obligor
- A subsequent purchaser of the financed
vehicle
- A holder of a perfected security interest
The trust may not be able to collect on a
defaulted receivable unless the trust has a
perfected security interest in the related
financed vehicle.
Even if the trust has a perfected security
interest in the financed vehicles, certain
events could jeopardize that interest, such as:
- Fraud or forgery by the vehicle owner
- Negligence or fraud by the servicer
- Mistakes by government agencies
- Liens for repairs or unpaid taxes
See "Certain Legal Aspects of the
Receivables--Security Interest in Vehicles" in
this prospectus.
GMAC and the seller will file financing
statements with respect to each pool of
receivables sold to a trust. The financing
statements will perfect the security interests
of the seller and the trust in the pool of
receivables. However, GMAC will serve as the
custodian of the receivables and will not
physically segregate or mark the receivables to
indicate that they have been sold to the trust.
See "The Certificates--Sale and Assignment of
Receivables and Warranties Thereon" in this
prospectus.
If another party purchases or takes a security
interest in the receivables (1) for value, (2)
in the ordinary course of business and (3)
without actual knowledge of the seller's or the
trust's interest, such purchaser or secured
party will acquire an interest in the
receivables superior to the trust's interest.
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POSSIBLE REDUCTIONS AND
DELAYS IN PAYMENTS DUE TO
BANKRUPTCY If GMAC filed for bankruptcy under the federal
bankruptcy code or any state insolvency laws, a
court may (1) consolidate the assets and
liabilities of GMAC with those of the seller,
(2) decide that the sale of the receivables to
the seller was not a "true sale" or (3)
disallow a transfer of receivables prior to the
bankruptcy. Thus, the receivables might become
part of GMAC's bankruptcy estate, in which case
you might experience reductions and/or delays
in payments on your certificates. See "Certain
Legal Aspects of the Receivables--Other
Limitations" in this prospectus.
MATURITY AND PREPAYMENT
CONSIDERATIONS Obligors may prepay the receivables in full or
in part. In addition, the receivables may be
prepaid as a result of defaults or from credit
life, disability or physical damage insurance.
Also, GMAC or the seller may be required to
repurchase receivables from a trust in certain
circumstances, and GMAC may have the right to
purchase all remaining receivables from a trust
pursuant to its optional purchase right. See
"The Certificates--Sale and Assignment of
Receivables and Warranties Thereon" and
"--Termination" in this prospectus.
Each such prepayment, repurchase or purchase
will shorten the average life of the related
Class A Certificates. A variety of
unpredictable economic, social and other
factors influence prepayment rates.
You will bear all reinvestment risk resulting
from a faster or slower rate of prepayment,
repurchase or extension of the receivables held
by your trust.
LIMITED ENFORCEABILITY OF THE
RECEIVABLES Federal and state consumer protection laws
regulate the creation and enforcement of
consumer loans such as the receivables.
Specific statutory liabilities are imposed upon
creditors who fail to comply with these
regulatory provisions. In some cases, this
liability could affect an assignee's ability to
enforce secured loans such as the receivables.
If an obligor had a claim against the trustee
for violation of these laws prior to the Cutoff
Date, GMAC must repurchase the receivable
unless the breach is cured. If GMAC fails to
repurchase such receivable, you might
experience reductions and/or delays in payments
on your certificates. See "Certain Legal
Aspects of the Receivables--Consumer Protection
Laws" in this prospectus.
LIMITED OBLIGATIONS OF GMAC
AND THE SELLER GMAC, the seller, and their respective
affiliates are generally not obligated to make
any payments to you with respect to your
certificates and do not guarantee payments on
the receivables or your certificates. However,
GMAC will make representations and warranties
with respect to the characteristics of the
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receivables and such representations and
warranties will then be assigned to the trust.
If GMAC breaches the representations and
warranties, it may be required to repurchase
the applicable receivables from the trust.
If GMAC fails to repurchase such receivables,
you might experience reductions and/or delays
in payments on your certificates. See "The
Certificates--Sale and Assignment of
Receivables and Warranties Thereon" in this
prospectus.
LIMITED ASSETS OF EACH TRUST Each trust will not have any significant assets
or sources of funds other than its receivables
and its rights in the Subordination Spread
Account. The Class A Certificates will
represent interests in the related trust only.
Except as described in the related prospectus
supplement, the Class A Certificates will not
be insured or guaranteed by GMAC, the seller,
the trustee, any of their affiliates or any
other person or entity. You must rely primarily
on payments on the related receivables and on
the Subordination Spread Account for repayment
of your Class A Certificates. If those sources
are insufficient, you may receive payments late
or not receive back your full principal
investment.
LIMITED ABILITY TO RESELL
CERTIFICATES The underwriters for a series may assist in the
resale of Class A Certificates, but they are
not required to do so. A secondary market for
any certificates may not develop. If a
secondary market does develop, it might not
continue or it might not be sufficiently liquid
to allow you to resell any of your Class A
Certificates.
LIMITED NATURE OF RATINGS The Class A Certificates for each trust will be
issued only if they receive the required
rating. A security rating is not a
recommendation to buy, sell or hold the
certificates. The ratings may be revised or
withdrawn at any time. Ratings on the Class A
Certificates do not address the timing of
distributions of principal on the Class A
Certificates prior to the applicable final
Distribution Date.
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THE TRUSTS
With respect to each series of certificates, the seller will establish a
separate grantor trust by selling and assigning the trust property to the trust
in exchange for the related certificates. The property of each trust will
include:
(1) a pool of retail instalment sales contracts for new and used
automobiles and light trucks, all Scheduled Payments due thereunder on and
after the Cutoff Date in the case of Scheduled Interest Receivables and all
payments received thereunder on or 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;
(2) such amounts as from time to time may be held in separate trust
accounts established and maintained pursuant to the related Agreement and
the proceeds of such accounts;
(3) security interests in the financed vehicles consisting of new and
used automobiles and light trucks and, to the extent permitted by law, any
accessions thereto;
(4) any recourse against dealers with respect to the receivables;
(5) 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
(6) certain rights of the seller under the related purchase agreement.
The Subordination Spread Account for a series of certificates will not be
included in the property of the related trust but will be a segregated trust
account held by the trustee for the benefit of the holders of such certificates.
Except as otherwise set forth in the related prospectus supplement, the
activities of each trust will be limited to
(1) acquiring, managing and holding the related receivables and the
other assets contemplated herein and in the related prospectus supplement
and proceeds therefrom;
(2) issuing the related certificates and making payments and
distributions thereon; and
(3) engaging in other activities that are related or incidental to the
foregoing and necessary, convenient or advisable to accomplish the
foregoing.
The servicer will continue to service the receivables held by each trust
and will receive fees for such services. See "The Certificates--Servicing
Compensation and Payment of Expenses" in this prospectus. To facilitate the
servicing of the receivables, the trustee will authorize General Motors
Acceptance Corporation, as custodian to retain physical possession of the
receivables held by each trust and other documents relating thereto as custodian
for the 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 trustee. In
the absence of such an amendment, the trustee may not have a perfected security
interest in the financed vehicles in all states. The trustee will not be
responsible for the legality, validity or enforceability of any security
interest in any financed vehicle. See "Certain Legal Aspects of the
Receivables," "The Certificates--Sale and Assignment of Receivables and
Warranties Thereon" and "The Certificates--Duties of the Trustee" in this
prospectus.
If the protection provided to the Class A Certificateholders by the
subordination of the related Class B Certificates and by the related
Subordination Spread Account is insufficient,
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the Class A Certificateholders 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 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 certificateholders. See "The Certificates--Subordination of the
Class B Certificates; Subordination Spread Account" and "Certain Legal Aspects
of the Receivables" in this prospectus.
The principal offices of each trust will be specified in the related
prospectus supplement.
THE RECEIVABLES
The receivables in each pool of receivables have been or will be acquired
by GMAC through its nationwide branch system, directly or through General Motors
from automobile and light truck dealers pursuant to agreements with General
Motors dealers and dealerships affiliated with General Motors dealers. See "The
Servicer" in this prospectus.
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
in the ordinary course of business, which evaluate the prospective purchaser's
ability to pay and creditworthiness, as well as the asset value of the vehicle
to be financed. GMAC's standards generally also require physical damage
insurance to be maintained on each financed vehicle.
The receivables to be held by each trust will be selected from GMAC's
portfolio for inclusion in a pool of receivables by several criteria, including
that, unless otherwise provided in the related prospectus supplement, each such
receivable:
(1) is secured by a new or used vehicle;
(2) was originated in the United States;
(3) 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
(4) satisfies the other criteria set forth in the related prospectus
supplement.
Each receivable is classified as either a Scheduled Interest Receivable or
a Simple Interest Receivable. If an obligor elects to prepay a Scheduled
Interest Receivable in full, the obligor is entitled to a rebate of the portion
of monthly 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 Class A 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 pool of receivables which consists of Scheduled
Interest Receivables will be specified in the related prospectus supplement.
Payments pursuant to a Simple Interest Receivable are allocated 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
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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 any 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 pool
of receivables which consists of Simple Interest Receivables will be specified
in the related prospectus supplement.
Information with respect to each pool of receivables will be set forth in
the related prospectus supplement, including, to the extent appropriate, the
composition, distribution by APR, states of origination and portion of such pool
of receivables secured by new vehicles and by used vehicles.
WEIGHTED AVERAGE LIFE OF THE CERTIFICATES
The weighted average life of 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
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. Any reinvestment risk
resulting from prepayments of receivables will be borne entirely by the
certificateholders. See also "Certain Legal Aspects of the
Receivables--Transfers of Vehicles" in this prospectus.
CLASS A POOL FACTOR AND TRADING INFORMATION
The Class A Pool Factor for each series will initially be 1.0000000;
thereafter, the Class A Pool Factor will decline to reflect reductions in the
related Class A Certificate Balance. The amount of a Class A Certificateholder's
pro rata share of the related Class A Certificate Balance can be determined by
multiplying the original denomination of the holder's certificate by the then
current Class A Pool Factor.
Unless otherwise provided in the related prospectus supplement, with
respect to the trust, the certificateholders will receive reports on or about
each Distribution Date concerning payments received on the receivables, the
Aggregate Principal Balance, each Class A 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 "The Certificates--Statements to Class A
Certificateholders" in this prospectus.
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 certificates will be
applied to the purchase of the related receivables from GMAC.
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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.
GMAC Auto Receivables Corporation, a wholly-owned subsidiary of GMAC,
incorporated in the State of Delaware on November 16, 1990 was merged with and
into the seller on February 22, 1996.
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 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 certificates (and possible reductions in the amount of
such distributions) could occur. See also "Certain Legal Aspects of the
Receivables--Other Limitations" in this prospectus.
THE SERVICER
GMAC was incorporated in 1919 under the New York Banking Law relating to
investment companies. GMAC relinquished this status and became a Delaware
corporation on January 1, 1998. GMAC is a wholly-owned subsidiary of General
Motors. 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).
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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 pool
of receivables will be comparable to prior experience.
THE CERTIFICATES
Each trust will issue a series of certificates consisting of two classes:
the Class A Certificates and the Class B Certificates. Each series of
certificates will be issued pursuant to an Agreement to be entered into between
the seller, the servicer and the trustee, a form of which has been filed as an
exhibit to the registration statement of which this prospectus is a part.
Citations to the relevant sections of the form of Agreement as filed appear
below in parentheses. 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 certificate and the related Agreement. Where particular
provisions or terms used in an Agreement are referred to, the actual provisions
(including definitions of terms) are incorporated by reference as part of this
summary.
GENERAL
The Class A Certificates will be offered for purchase in fully registered
form in minimum denominations of $1,000 and integral multiples thereof. Unless
otherwise provided in the related prospectus supplement, the certificates will
initially be represented by physical certificates registered in the name of the
nominee of DTC, except as provided below. The seller has been informed by DTC
that DTC's nominee will be Cede & Co. Accordingly, Cede & Co. is expected to be
the Class A Certificateholder. Unless and until definitive certificates are
issued under the limited circumstances described herein or in the related
prospectus supplement, no Certificate Owner will be entitled to receive a
certificate representing such person's interest in such Class A Certificates.
All references herein to actions by Class A Certificateholders refer to actions
taken by DTC upon instructions from DTC participants, and all references herein
to distributions, notices, reports and statements to Class A Certificateholders
refer to distributions, notices, reports and statements to DTC or Cede & Co., as
the registered holder of such Class A Certificates, as the case may be, for
distribution to Certificate Owners in accordance with DTC procedures. (Sections
5.01 and 5.08). See "Book-Entry Registration" in this prospectus.
The certificates will evidence interests in the trust created pursuant to
the related Agreement. The Class A Certificates will evidence in the aggregate
an undivided ownership interest of the Class A Percentage of the related trust
and the Class B Certificates will evidence in the aggregate an undivided
ownership interest of the Class B Percentage of the related trust. (Section
5.03).
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 Uniform Commercial Code and a
"clearing agency" registered pursuant to Section 17A of the Securities Exchange
Act of 1934, as amended. DTC was created to hold securities for its participants
and to facilitate the clearance and settlement of securities transactions
between DTC participants through electronic book-entries, thereby eliminating
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the need for physical movement of certificates. DTC participants include
securities brokers and dealers, banks, trust companies and clearing
corporations. Indirect access to the DTC system also is available to indirect
DTC participants such as banks, brokers, dealers, and trust companies that clear
through or maintain a custodial relationship with a DTC participant, either
directly or indirectly.
Unless otherwise specified in the related prospectus supplement,
Certificate Owners that are not DTC participants or indirect DTC participants
but desire to purchase, sell or otherwise transfer ownership of, or other
interests in, Class A Certificates may do so only through DTC participants and
indirect DTC participants. In addition, Certificate Owners will receive all
distributions of principal of and interest on the Class A Certificates from the
trustee through DTC and its Participants. Under a book-entry format, Certificate
Owners may experience some delay in their receipt of payments, since such
payments will be forwarded by the trustee to Cede & Co., as nominee for DTC. DTC
will forward such payments to its Participants, which thereafter will forward
them to indirect DTC participants or Certificate Owners. Certificate Owners will
not be recognized by the trustee as Class A Certificateholders, as such term is
used in each related Agreement, and Certificate Owners will be permitted to
exercise the rights of Class A Certificateholders only indirectly through DTC
and its Participants.
Under the DTC rules, DTC is required to make book-entry transfers of Class
A Certificates among Participants on whose behalf it acts with respect to the
Class A Certificates and to receive and transmit payments of principal of, and
interest on, the Class A Certificates. DTC participants and indirect DTC
participants with which Certificate Owners have accounts with respect to the
Class A Certificates similarly are required to make book-entry transfers and
receive and transmit such payments on behalf of their respective Certificate
Owners. Accordingly, although Class A Certificate Owners will not possess Class
A Certificates, the DTC rules provide a mechanism by which Certificate Owners
will receive payments and will be able to transfer their interests.
Because DTC can only act on behalf of DTC participants, who in turn act on
behalf of indirect DTC participants and certain banks, the ability of a
Certificate Owner to pledge Class A Certificates to persons or entities that do
not participate in the DTC system, or otherwise act with respect to Class A
Certificates, may be limited due to the lack of physical certificates for such
Class A Certificates.
DTC has advised the seller that it will take any action permitted to be
taken by a Class A Certificateholder under the related Agreement only at the
direction of one or more DTC participants to whose accounts with DTC the Class A
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
DTC participants whose holdings include such undivided interests.
Except as required by law, neither the seller nor the trustee will have any
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests of the Class A Certificates of any series held
by Cede & Co., as nominee for DTC, or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests.
DEFINITIVE CERTIFICATES
Unless otherwise provided in the related prospectus supplement, the Class A
Certificates will be issued in fully registered, certificated form to
Certificate Owners or their nominees, rather than to DTC or its nominee, only if
(i) the seller advises the trustee in writing that DTC is no longer willing or
able to discharge properly its responsibilities as Depository with
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respect to the Class A Certificates and the seller is unable to locate a
qualified successor, (ii) the seller, at its option, advises the trustee in
writing that it elects to terminate the book-entry system through DTC or (iii)
after the occurrence of an Event of Default for any series, Certificate Owners
representing at least a majority of the voting interests of the Class A
Certificates of such series advise the 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 interests of the Certificate Owners. The "voting interests"
of the Class A Certificates will be allocated among the Class A Certificate
Owners in accordance with the Class A Certificate Balance represented thereby;
except that in certain circumstances any Class A Certificates held by the
seller, the servicer or any of their respective affiliates shall be excluded
from such determination.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the trustee is required to notify DTC of the availability
of definitive certificates. DTC shall notify all Class A Certificateholders of
availability of definitive certificates. Upon surrender by DTC of the Class A
Certificates and receipt of instructions for re-registration, the trustee will
reissue the Class A Certificates as definitive certificates, and thereafter the
trustee will recognize the holders of such definitive certificates as Class A
Certificateholders under the related Agreement. (Section 5.10).
Distribution of principal of and interest on the Class A Certificates will
be made by the trustee directly to holders of definitive certificates in
accordance with the procedures set forth herein and in the related Agreement.
Distributions of principal of and interest on each Distribution Date will be
made to holders in whose names such definitive certificates were registered at
the close of business on the last day of the related Monthly Period. The final
payment on any Class A Certificate (whether a definitive certificate or a Class
A Certificate registered in the name of Cede & Co.) will be made only upon
presentation and surrender of such Class A Certificate at the office or agency
specified in the related notice of final distribution to certificateholders.
(Sections 5.10 and 10.01).
Definitive certificates will be transferable and exchangeable at the
offices of the trustee or of a registrar named in a notice delivered to holder
of definitive certificates. No service charge will be imposed for any
registration of transfer or exchange, but the trustee may require payment of a
sum sufficient to cover any tax or other governmental charge imposed in
connection therewith. (Section 5.03).
SALE AND ASSIGNMENT OF RECEIVABLES AND WARRANTIES THEREON
On or prior to a Closing Date, pursuant to the related purchase agreement,
GMAC will sell and assign to the seller, without recourse, its entire interest
in the related receivables, including the security interests in the financed
vehicles, the proceeds from certain insurance policies and the proceeds from
recourse against dealers with respect to such receivables. On the Closing Date,
the seller will sell and assign to the trustee, without recourse, the seller's
entire interest in the related receivables, including the security interests in
the financed vehicles, the proceeds from certain insurance policies and the
proceeds from recourse against dealers with respect to such receivables.
(Section 2.01). 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 purchase agreement and the related Agreement. The trustee will,
concurrently with such sale and assignment, authenticate and deliver the
certificates to the seller in exchange for such receivables. (Section 5.02). The
seller will sell the Class A Certificates to the underwriters specified in the
related prospectus supplement. See "Underwriting" in this prospectus.
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In each purchase agreement, GMAC will represent and warrant to the seller,
among other things, that:
(1) the information set forth in the related schedule of receivables
exhibit to the related purchase agreement is correct in all material
respects;
(2) the obligor on each related receivable is required to maintain
physical damage insurance covering the financed vehicle in accordance with
GMAC's normal requirements;
(3) as of the related 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;
(4) as of the related Closing Date, each of the related receivables is
or will be secured by a first perfected security interest in favor of GMAC
in the financed vehicle; and
(5) each related receivable, at the time it was originated complied,
and on the related Closing Date complies, in all material respects with
applicable state and federal laws, including, without limitation, consumer
credit, truth-in-lending, equal credit opportunity and disclosure laws. In
each related Pooling and Servicing Agreement, the seller will assign the
representations and warranties of the servicer, 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
the servicer to be false in any material respect as of the Closing Date.
As of the last day of the second (or, if the seller so elects, the first)
month following the discovery by the seller, the servicer or the trustee of a
breach of any representation or warranty of the seller or the servicer that
materially and adversely affects the interests of the certificateholders of any
series in any receivable held by the related trust, the seller, unless the
breach is cured in all material respects, will repurchase (or will enforce the
obligation of GMAC under the related purchase agreement to repurchase) such
Warranty Receivable from the trust at a price equal to 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. This repurchase obligation constitutes the sole remedy
available to certificateholders or the trustee for any such uncured breach.
(Sections 2.04 and 2.05).
In each Agreement, the servicer will covenant that:
(1) except as contemplated in such Agreement, the servicer will not
release any financed vehicle from the security interest securing the
related receivable;
(2) the servicer will do nothing to impair the rights of trustee or
the certificateholders in the related receivables; and
(3) the servicer will not amend or otherwise modify any 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 or the trustee of a breach of any
covenant that materially and
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adversely affects any receivable held by the related trust and unless such
breach is cured in all material respects, the servicer will, with respect to
such Administrative Receivable, purchase the receivable from the trust at a
price equal to 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
certificateholders or the trustee for any such uncured breach. (Sections 3.07
and 3.08).
Pursuant to each Agreement, the trustee will agree to GMAC acting as
custodian to maintain possession, as the trust's agent, of the retail instalment
sale contracts and any other documents relating to the receivables (Section
2.02). To assure uniform quality in servicing both the receivables and 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 financing statements reflecting
the sale and assignment of such receivables to the trust will be filed, and
GMAC's accounting records and computer files will reflect such sale and
assignment. Because such receivables will remain in possession of GMAC as
custodian, and will not be stamped or otherwise marked to reflect such
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
interest in such receivables could be defeated. See "Certain Legal Aspects of
the Receivables--Security Interest in Vehicles" in this prospectus.
COLLECTIONS
With respect to each series of certificates, the servicer will establish
two accounts in the name of the trustee on behalf of the certificateholders, the
Collection Account into which certain payments made on or with respect to the
related receivables will be deposited, and the Certificate Account from which
all distributions with respect to the related receivables and the certificates
will be made. The servicer will also establish with respect to each series of
certificates the Payment Ahead Servicing Account in the name of the trustee,
into which, to the extent required by the related Agreement, early payments by
or on behalf of obligors on a Scheduled Interest Receivable which do not
constitute either Scheduled Payments or Prepayments will be deposited until such
time as payment falls due. The Payment Ahead Servicing Account will not be
property of the related trust. Each Collection Account and each Payment Ahead
Servicing Account will be maintained with the trustee so long as (1) the
trustee's short-term unsecured debt obligations have a rating of P-l by Moody's
Investors Service, Inc., a rating of A-l+ by Standard & Poor's Ratings Services
and, if rated by Fitch IBCA, Inc., a rating of F-1+ by Fitch IBCA, Inc. or (2)
such accounts are maintained in the trust department of the trustee. If the
short-term unsecured debt obligations of the trustee do not have the rating set
forth above, the servicer will, with the trustee's assistance as necessary,
cause any Collection Account and any Payment Ahead Servicing Account to be moved
to a bank whose short-term unsecured debt obligations have the necessary rating
or moved to the trust department of the trustee. Unless otherwise provided in
the related prospectus supplement, each Collection Account, Payment Ahead
Servicing Account and Certificate Account will initially be maintained in the
trust department of the trustee. (Section 4.01).
The servicer will deposit all payments on receivables held by any trust
received from obligors and all proceeds of such receivables collected during
each Monthly Period into the
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related Collection Account not later than two business days after receipt.
However, the servicer may retain such amounts until the Distribution Date at any
time that:
(1) GMAC is the servicer;
(2) there exists no Event of Default; and
(3) either (A) the short-term unsecured debt of the servicer is rated
at least A-1 by Standard & Poor's Ratings Services and P-1 by Moody's
Investors Service, Inc. or (B) certain arrangements are made which are
acceptable to the relevant rating agency or agencies.
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. (Section 4.02).
Collections on a Scheduled Interest Receivable held by any trust 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 Excess Payment will be held by the servicer (or, if the
servicer has not satisfied conditions (1), (2) and (3)described in the preceding
paragraph, will be deposited in the Payment Ahead Servicing Account), and will
be treated as a Payment Ahead, except as described in the following sentence. If
and to the extent that an Excess Payment (1) together with any unapplied
Payments Ahead, exceeds the sum of three Scheduled Payments or (2) 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 Prepayment. (Section 4.03(a)).
Collections made during a Monthly Period with respect to Simple Interest
Receivables held by any trust (other than Administrative Receivables or 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
held by the related trust. (Section 4.03(b)). With respect to a Monthly Period,
Excess Simple Interest Collections represent the excess, if any, of (1) all
payments received during such Monthly Period on all Simple Interest Receivables
held by the related trust to the extent allocable to interest over (2) the
amount of interest that would be due during such Monthly Period on all Simple
Interest Receivables held by such 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. (Section 4.03(c)).
MONTHLY ADVANCES
Unless otherwise provided in the related prospectus supplement, if the full
Scheduled Payment due on a Scheduled Interest Receivable held by any trust is
not received by the end of the month in which it is due, whether as the result
of any 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 make a
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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 Scheduled Interest Receivable. The
servicer will be reimbursed for any such Scheduled Interest Advances from
subsequent payments or collections relating to such Scheduled Interest
Receivable. Upon the determination that reimbursement from the preceding sources
is unlikely, the servicer will be entitled to recoup its Scheduled Interest
Advance from collections from other receivables. (Section 4.04(a)).
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 make a Simple Interest Advance equal to the excess, if any, of (1) the
amount of interest that would be due during such Monthly Period on all Simple
Interest Receivables held by the related trust assuming that the payment on each
such receivable was received on its respective due date over (2) all payments
received during such Monthly Period on all Simple Interest Receivables held by
the related trust to the extent allocable to interest. Any Excess Simple
Interest Collections will be paid to the servicer. In addition, the servicer
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. (Section 4.04(b)).
DISTRIBUTIONS
With respect to each trust, on or before each Distribution Date, the
servicer or the trustee, as the case may be, will transfer collections on the
receivables held by the related trust for the related Monthly Period and all
Prepayments to the related Certificate Account. On each Distribution Date
starting on the date identified in the related prospectus supplement, the
trustee will cause collections made during such Monthly Period which constitute
Payments Ahead to be transferred from such Certificate Account to the servicer
or to the related Payment Ahead Servicing Account, if required. (Sections 4.01
and 4.06).
The trustee will make distributions to the Class A Certificateholders of
record at the close of business on the Record Date out of the amounts on deposit
in the related Certificate Account. The amount to be distributed to the
certificateholders will be determined in the manner described below. Prior to
each Distribution Date, the servicer will calculate the amount to be distributed
to certificateholders.
The holders of the Class A Certificates will receive on each Distribution
Date, to the extent of available funds, an amount equal to the sum of the
related Class A Distributable Amount and any outstanding Class A Interest
Carryover Shortfall and Class A Principal Carryover Shortfall (each as defined
below). On each Distribution Date on which the sum of the Class A Interest
Distributable Amount and any outstanding Class A Interest Carryover Shortfall
from the preceding Distribution Date exceeds the related Class A Percentage of
the Available Interest (after payment of the Total Servicing Fee including any
unpaid Total Servicing Fees with respect to prior Monthly Periods), the Class A
Certificateholders will be entitled to receive such excess: first, from the
related Class B Percentage of such Available Interest, second, if such amounts
are insufficient, from amounts on deposit in the related Subordination Spread
Account, and third, if such amounts are insufficient, from the related Class B
Percentage of the Available Principal. (Section 4.06).
With respect to any series of certificates, on each Distribution Date on
which the sum of the Class A Principal Distributable Amount and any outstanding
Class A Principal Carryover
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Shortfall from the preceding Distribution Date exceeds the Class A Percentage of
the Available Principal on such Distribution Date, the Class A
Certificateholders will be entitled to receive such excess, first, from the
related Class B Percentage of the Available Principal, second, if such amounts
are insufficient, from amounts on deposit in the related Subordination Spread
Account, and third, if such amounts are insufficient, from any remaining related
Available Interest. (Section 4.06).
The holders of the Class B Certificates will be entitled to receive on any
Distribution Date an amount equal to the sum of the related Class B Interest
Distributable Amount and the Class B Principal Distributable Amount (and any
shortfalls from prior Distribution Dates in payments to the Class B
Certificateholders), after giving effect to (i) amounts required to pay the
related Total Servicing Fee payable to the servicer on such Distribution Date,
and (ii) any amounts required to be distributed to the holders of Class A
Certificates pursuant to the subordination of the rights of the holders of such
Class B Certificates. (Section 4.06).
SUBORDINATION OF THE CLASS B CERTIFICATES; SUBORDINATION SPREAD ACCOUNT
The rights of the Class B Certificateholders to receive distributions with
respect to the receivables held by the related trust will be subordinated to the
rights of the Class A Certificateholders of the related series in the event of
defaults and delinquencies on such receivables as provided in the related
Agreement. The protection afforded to the Class A Certificateholders will be
effected both by the preferential right of the Class A Certificateholders to
receive current distributions with respect to the receivables held by the
related trust and by the establishment of a Subordination Spread Account. Each
Subordination Spread Account will be created with an initial deposit by the
seller of the applicable Subordination Initial Deposit and will thereafter be
increased by deposit therein of amounts otherwise distributable to the related
Class B Certificateholders until the amount in such Subordination Spread Account
reaches an amount equal to the applicable Specified Subordination Spread Account
Balance. Thereafter, amounts otherwise distributable to the Class B
Certificateholders will be deposited in such Subordination Spread Account to the
extent necessary to maintain the amount in such Subordination Spread Account at
the applicable Specified Subordination Spread Account Balance. (Section 4.07).
With respect to any series of certificates, the Specified Subordination
Spread Account Balance with respect to any Distribution Date, will be the
Minimum Subordination Spread Amount, except that, unless otherwise provided in
the related prospectus supplement, if on any Distribution Date (1) the average
of the Charge-off Rates for the preceding three months exceeds 2.0% or (2) the
average of the Delinquency Percentages for the preceding three months exceeds
1.5%, then such Specified Subordination Spread Account Balance for such
Distribution Date will be an amount equal to a specified percentage of the
aggregate Principal Balance. Such specified percentage shall be determined by
deducting from the Specified Subordination Percentage (as defined in the related
prospectus supplement) the following fraction, expressed as a percentage: (A) 1
minus (B) a fraction, the numerator of which is the related Class A Certificate
Balance and the denominator of which is the aggregate Principal Balance.
Notwithstanding the foregoing, in no event (except as described below) will any
Specified Subordination Spread Account Balance be more than the Maximum
Subordination Spread Amount or less than the Minimum Subordination Spread
Amount. As of any Distribution Date, the amount of funds actually on deposit in
any Subordination Spread Account may, in certain circumstances, be less than the
applicable Specified Subordination Spread Account Balance. Finally, on any
Distribution Date on which the related Class A Certificate Balance is equal to
or less than the Subordination Spread Trigger (as defined in the related
prospectus supplement) after giving effect to distributions on such Distribution
Date, the Specified Subordination Spread Account Balance will be the greater of
the
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applicable balance determined as described above or the Trigger Subordination
Spread Amount (as defined in the related prospectus supplement).
A Subordination Spread Account will not be a part of or otherwise
includable in the related trust and will be a segregated trust account held by
the trustee. With respect to any series of certificates, on each Distribution
Date, (1) if the amounts on deposit in the related Subordination Spread Account
are less than the Specified Subordination Spread Account Balance for such
Distribution Date, the trustee will, after payment of any amounts required to be
distributed to holders of the Class A Certificates and the payment of the Total
Servicing Fee due with respect to the related Monthly Period, withdraw from the
related Certificate Account and deposit in the related Subordination Spread
Account the amount remaining in the Certificate Account that would otherwise be
distributed to the holders of the Class B Certificates, or such lesser portion
thereof as is sufficient to bring the amount in such Subordination Spread
Account up to such Specified Subordination Spread Account Balance and (2) if the
amount on deposit in the related Subordination Spread Account on such
Distribution Date (after giving effect to all deposits or withdrawals therefrom
on such Distribution Date) is greater than the applicable Specified
Subordination Spread Account Balance for such Distribution Date, the trustee
will release and distribute any such excess to the holders of the Class B
Certificates. Upon any such distribution to the Class B Certificateholders, the
Class A Certificateholders of such series will have no further rights in, or
claims to, such amounts. (Section 4.07).
Amounts held from time to time in each Subordination Spread Account will
continue to be held for the benefit of holders of the certificates. Funds in
each Subordination Spread Account will be invested as provided in the related
Agreement. The holders of the Class B Certificates will be entitled to receive
all investment earnings on amounts in the related Subordination Spread Account.
Investment income on amounts in any Subordination Spread Account will not be
available for distribution to the holders of the related Class A Certificates or
otherwise subject to any claims or rights of the holders of the related Class A
Certificates. (Section 4.07).
If on any Distribution Date the holders of the Class A Certificates do not
receive the sum of the related Class A Distributable Amount, Class A Interest
Carryover Shortfall and Class A Principal Carryover Shortfall for such
Distribution Date (after giving effect to any amounts applied to such deficiency
which were withdrawn from the related Subordination Spread Account or withheld
from the related Class B Distributable Amount), the holders of the Class B
Certificates of such series will not receive any portion of the Total Available
Amount.
The subordination of the Class B Certificates and the related Subordination
Spread Account is intended to enhance the likelihood of receipt by the Class A
Certificateholders of the full amount of principal and interest on the
receivables held by the related trust due them and to decrease the likelihood
that the Class A Certificateholders will experience losses. However, in certain
circumstances, the related Subordination Spread Account could be depleted and
shortfalls could result.
So long as certain conditions are satisfied, the servicer is permitted for
administrative convenience to deposit in each Certificate Account only the net
amount distributable to certificateholders on the Distribution Date. (Section
4.08). Similarly, the seller is entitled to net its payment obligations to the
trustee against any amounts distributable on the related Class B Certificates on
any Distribution Date. The amounts available for distribution to
certificateholders as described above could be reduced if certain
indemnification or reimbursement payments were required to be made from the
related Certificate Account as
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described under "Monthly Advances," "Certain Matters Regarding the Servicer" and
"The Trustee" in this prospectus.
The following chart sets forth an example of the application of the
foregoing provisions to a hypothetical monthly distribution:
<TABLE>
<S> <C>
September 1-September 30............... Monthly Period. The servicer receives
payments and other proceeds in respect
of the receivables.
October 10............................. The tenth calendar day of the month. On
or before this date the servicer
notifies the trustee of, among other
things, the amounts to be distributed
on the Distribution Date.
October 14............................. Record Date. Distributions on the
Distribution Date are made to
certificateholders of record at the
close of business on this date (or, if
definitive certificates are issued, the
Record Date will be September 30).
October 15............................. Distribution Date. On or before this
date, the seller and the servicer (or
the trustee) make the required
remittances and transfers to the
Collection Account and the Certificate
Account in immediately available funds,
and the trustee pays the Total
Servicing Fee, distributes to holders
of the Class A and Class B Certificates
amounts payable in respect of the
certificates and remits amounts to the
Subordination Spread Account (if
required).
</TABLE>
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
With respect to each trust, unless otherwise provided in the related
prospectus supplement, the servicer will receive the Basic Servicing Fee for
each 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 last day of
the preceding Monthly Period. Unless otherwise provided in the related
prospectus supplement with respect to each series of certificates, the servicer
will also receive the Additional Servicing for each Monthly Period. On each
Distribution Date, the servicer will be paid the Total Servicing Fee consisting
of the Basic Servicing Fee, any unpaid Basic Servicing Fees from all prior
Distribution Dates and the Additional Servicing, to the extent of funds
available therefor. Unless otherwise provided in the prospectus supplement, the
Total Servicing Fee for each Monthly Period (together with any portion of the
Total Servicing Fee that remains unpaid from prior Distribution Dates) may be
paid at the beginning of such Monthly Period out of collections for such Monthly
Period. In addition, with respect to each series of certificates, the servicer
will be entitled to the Supplemental Servicing Fee, representing any late fees,
prepayment charges or certain similar fees and charges collected during the
Monthly Period, plus any interest earned during the Monthly Period on deposits
in the related Collection Account and Payment Ahead Servicing Account.
The Total Servicing Fee and the Supplemental Servicing Fee with respect to
each series of certificates is intended to compensate the servicer for
performing the functions of a third party servicer of automobile receivables
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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 trustee with respect to
distributions and generating federal income tax information for the related
trust. Such amounts also will reimburse the servicer for certain taxes, the
trustee's fees, accounting fees, outside auditor fees, data processing costs and
other costs incurred in connection with administering the related pool of
receivables. (Section 3.09).
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 Agreement, follow such collection procedures as it follows with respect
to comparable automotive receivables that it services for itself or others.
(Section 3.02). See "Certain Legal Aspects of the Receivables" in this
prospectus. The servicer is authorized to grant certain rebates, adjustments or
extensions with respect to a receivable subject to certain restrictions on
amending or modifying receivables, as described under "The Certificates--Sale
and Assignment of Receivables and Warranties Thereon" in this prospectus.
(Sections 3.02 and 3.07).
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 such receivable, including the repossession and disposition of the
financed vehicle securing such receivable at a public or private sale, or the
taking of any other action permitted by applicable law. (Section 3.04). The
servicer will be entitled to receive Liquidation Expenses 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. (Section 3.04).
REPORTS TO CLASS A CERTIFICATEHOLDERS
With respect to each series of certificates, on each Distribution Date, the
trustee will include with each distribution to each Class A Certificateholder
(which will be Cede & Co. as the nominee for DTC unless definitive certificates
are issued under the limited circumstances described herein) a statement setting
forth the following information with respect to the related Monthly Period, to
the extent applicable (Section 4.09(a)):
(1) the amount of the distribution allocable to principal;
(2) the amount of the distribution allocable to interest;
(3) the aggregate Principal Balance as of the close of business on the
last day of such Monthly Period;
(4) the amount of the Total Servicing Fee paid to the servicer with
respect to the related Monthly Period and the certificateholder's Class A
Percentage of the Total Servicing Fee;
(5) the amount of the Class A Interest Carryover Shortfall and Class A
Principal Carryover Shortfall, if any, on such Distribution Date and the
change in such amounts from those of the prior Distribution Date;
(6) the Class A Pool Factor on such Distribution Date (after giving
effect to payments allocated to principal reported under (i) above);
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(7) the amount otherwise distributable to the Class B
Certificateholders that is distributed to Class A Certificateholders on
such Distribution Date;
(8) the balance of the Subordination Spread Account on such
Distribution Date, after giving effect to distributions made on such
Distribution Date, and the change in such balance from that of the prior
Distribution Date;
(9) 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 Distribution Date; and
(10) the amount of Monthly Advances on such Distribution Date.
Each amount set forth pursuant to subclauses (1), (2), (4) and (5) above
will be expressed as a dollar amount per $1,000 of original principal balance of
a Class A Certificate.
Within the prescribed period of time for tax reporting purposes after the
end of each calendar year during the term of each related Agreement, the trustee
will mail to each person who at any time during such calendar year will have
been a Class A Certificateholder, a statement containing the sum of the amounts
described in (1), (2), (4) and (5) above for the purposes of such Class A
Certificateholder's preparation of federal income tax returns. (Section
4.09(b)). See "Federal Income Tax Consequences" in this prospectus.
EVIDENCE AS TO COMPLIANCE
Each Agreement will provide that a firm of independent accountants will
furnish to the 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 with certain standards relating to the servicing of the related
receivables, the servicer's accounting records and computer files with respect
thereto and certain other matters. (Section 3.12).
Each Agreement will also provide for delivery to the trustee, on or before
August 15 of such 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
related Agreement throughout the preceding twelve months ended June 30 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 Agreement. (Section 3.11).
Copies of such statements and certificates may be obtained by
certificateholders by a request in writing to the trustee addressed to the
Corporate Trust Office. (Section 3.11(a)).
In each Agreement, the seller will agree to give the trustee notice of any
event which with the giving of notice or the lapse of time, or both, would
become an Event of Default as defined in Section 8.01 therein. In addition, the
seller will agree to give the trustee and the trust notice of certain covenant
breaches which with the giving of notice or lapse of time, or both, would become
an Event of Default. (Section 3.11(b)).
CERTAIN MATTERS REGARDING THE SERVICER
Each Agreement will provide that GMAC may not resign from its obligations
and duties as the servicer thereunder, 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 trustee or a successor servicer
has assumed GMAC's servicing obligations and duties under the related Agreement.
(Section 7.05).
Each 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
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certificateholders for taking any action or for refraining from taking any
action pursuant to such Agreement 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 Agreement will further provide that the servicer and its
directors, officers, employees and agents will be reimbursed by the trustee for
any contractual damages, liability or expense incurred by reason of the
trustee's wilful misfeasance, bad faith or negligence (except errors in
judgment) in the performance of the trustee's duties thereunder or by reason of
reckless disregard of its obligations and duties thereunder. In addition, each
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 such Agreement 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 such
Agreement and the rights and duties of the parties thereto and the interests of
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 Certificate Account. Any such
indemnification or reimbursement will reduce the amount otherwise available for
distribution to certificateholders. (Section 7.03).
Under the circumstances specified in each Agreement, any entity into which
the servicer or the seller, as the case may be, may be merged or consolidated,
or any entity resulting from any merger, conversion or consolidation to which
the servicer or the seller, as the case may be, is a party, or any entity
succeeding to the business of the servicer or the seller, as the case may be 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 or the seller, as the case may be, will be the successor of the
servicer or the seller, as the case may be, under each Agreement. (Sections 6.02
and 7.02). The servicer may at any time subcontract any duties as servicer under
any Agreement to any entity more than 50% of the voting interests of which are
owned, directly or indirectly, by General Motors. The servicer may at any time
perform specific duties as servicer through subcontractors who are in the
business of servicing receivables similar to the receivables, provided that no
such delegation will relieve the servicer of its responsibility with respect to
such duties. (Section 7.04).
EVENTS OF DEFAULT
With respect to any series of certificates, Events of Default under the
related Agreement will consist of:
(1) any failure by the servicer to make any required distribution,
payment, transfer or deposit or to direct the trustee to make any required
distribution, which failure continues unremedied for five business days
after receipt by the servicer of notice thereof from the trustee or
discovery of such failure by an officer of the servicer;
(2) any failure by the seller or the servicer to observe or perform in
any material respect any other of its covenants or agreements in the
related Agreement which failure materially and adversely affects the rights
of certificateholders and which continues unremedied for 90 days after the
giving of written notice of such failure to the seller, by the trustee or
to the seller and the trustee by the holders of Class A Certificates
evidencing not less than 25% of the voting interests thereof;
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(3) any representation, warranty or certification made by the servicer
in such Pooling and Servicing Agreement or in any certificate delivered
pursuant thereto proves to have been incorrect when made and which has a
material adverse effect on the rights of the related Securityholders and
which effect continues unremedied for a period of 60 days after the giving
of written notice thereof to the servicer by the trustee; or
(4) certain events of bankruptcy insolvency or receivership with
respect to the servicer. (Section 8.01).
Notwithstanding the foregoing, there will be no Servicer Default where a
Servicer Default would otherwise exist under clause (1) above for a period of
ten Business Days or under clause (2) 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 reasonable efforts to perform its obligations in
a timely manner in accordance with the terms of the Pooling and Servicing
Agreement and the servicer will provide the trustee, the seller and the
certificateholders prompt notice of such failure or delay by it, together with a
description of its efforts to so perform its obligations.
RIGHTS UPON EVENT OF DEFAULT
As long as an Event of Default under an Agreement remains unremedied, the
trustee or holders of Class A Certificates evidencing at least a majority of the
voting interests thereof may terminate all of the rights and obligations of the
servicer under such Agreement, whereupon such trustee will succeed to all the
responsibilities, duties and liabilities of the servicer under such Agreement
and will be entitled to similar compensation arrangements. If, however, a
bankruptcy trustee or similar official has been appointed for the servicer, and
no Event of Default other than such appointment has occurred, such trustee or
official may have the power to prevent the trustee or the certificateholders
from effecting a transfer of servicing. If the trustee is unwilling to act, then
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 having a net worth of
at least $100,000,000 and whose regular business includes the servicing of
automobile receivables and which satisfies the other criteria set forth in the
Agreement. The trustee and such successor may agree upon the servicing
compensation to be paid, which in no event may be greater than the servicing
compensation to the servicer under the related Agreement. (Sections 8.02 and
8.03).
WAIVER OF PAST DEFAULTS
With respect to each trust, the holders of Class A Certificates evidencing
at least a majority of the voting interests thereof may waive any default by the
servicer in the performance of its obligations under the related Agreement and
its consequences, except a default in making any required deposits to or
payments from the related Collection Account or Certificate Account in
accordance with the Agreement. No such waiver will impair the rights of the
trustee or the certificateholders with respect to subsequent defaults. (Section
8.05).
AMENDMENT
Each Agreement may be amended by the seller, the servicer and the trustee
without the consent of the Class A Certificateholders:
(1) to cure any ambiguity;
(2) to correct or supplement any provision therein that may be
defective or inconsistent with any other provision therein;
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(3) to add or supplement any credit, liquidity or other enhancement
arrangement for the benefit of certificateholders;
(4) to add to the covenants, restrictions or obligations of the
seller, the servicer or the trustee for the benefit of certificateholders;
or
(5) 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
certificateholders.
Each such Agreement may also be amended by parties thereto with the consent
of the holders of certificates evidencing at least a majority of the voting
interests of each class of certificates 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 certificateholders; except
that no such amendment may (A) increase or reduce in any manner the amount of,
or accelerate or delay the timing of, distributions of payments that are
required to be made on any related certificate, the applicable Pass Through Rate
or the applicable Specified Subordination Spread Account Balance, (B) adversely
affect the rating by any Rating Agency of the certificates without the consent
of holders of certificates evidencing at least two-thirds of the voting
interests of the outstanding certificates or (C) reduce the aforesaid percentage
required of certificateholders to consent to any such amendment without the
consent of all certificateholders. (Section 11.01).
TERMINATION
With respect to each trust, the respective obligations of the seller, the
servicer and the trustee created by each Agreement will terminate upon the
distribution to the related certificateholders of all amounts required to be
distributed to them pursuant to such Agreement. In order to avoid excessive
administrative expense, the servicer, or its successor, is permitted at its
option to purchase from the related trust, as of the last day of any Monthly
Period as of which the aggregate Principal Balance of all receivables held by
the related trust is equal to or less than 10% of the Aggregate Amount Financed,
the corpus of such trust at a price equal to the aggregate Administrative
Purchase Payments for the related receivables plus the appraised value of any
other property held as part of such trust less Liquidation Expenses. Exercise of
such right and the subsequent distribution to certificateholders of all amounts
required to be distributed to them pursuant to the related Agreement will effect
early retirement of such certificates. In such case, the trustee will give
written notice of termination to each certificateholder of record. The final
distribution to any certificateholder will be made only upon surrender and
cancellation of such certificateholder's certificate at an office or agency of
the trustee specified in the notice of termination. (Sections 10.01 and 10.02).
DUTIES OF THE TRUSTEE
The trustee will make no representations as to the validity or sufficiency
of any Agreement, the certificates or any receivables or related documents, and
will not be accountable for the use or application by the seller or the servicer
of any funds paid to the seller or the servicer in respect of the certificates
or the receivables, or the investment of any monies by the servicer before such
monies are deposited into the related Certificate Account. The trustee will not
independently verify any receivables. If no Event of Default has occurred, the
trustee will be required to perform only those duties specifically required of
it under the related Agreement. Generally, those duties will be limited to the
receipt of the various certificates, reports or other instruments required to be
furnished to the trustee, in which case it will only be required to examine them
to determine whether they conform to the requirements of the related Agreement.
(Sections 9.01 and 9.05).
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THE TRUSTEE
The related prospectus supplement will specify the entity that will be the
trustee for each trust. The trustee and any of its affiliates may hold
certificates in their own names. In addition, for the purpose of meeting the
legal requirements of certain local jurisdictions, the trustee, with the consent
of the servicer, will have the power to appoint co-trustees or separate trustees
of all or any part of each trust. In the event of such appointment, all rights,
powers, duties and obligations conferred or imposed upon the trustee by an
Agreement will be conferred or imposed upon the trustee and such separate
trustee or co-trustee jointly, or, in any jurisdiction in which the trustee will
be incompetent or unqualified to perform certain acts, singly upon such separate
trustee or co-trustee who will exercise and perform such rights, powers, duties
and obligations solely at the direction of the trustee. (Section 9.12).
The trustee will be under no obligation to exercise any of the trusts or
powers vested in it by an Agreement or to make any investigation of matters
arising thereunder or to institute, conduct or defend any litigation thereunder
or in relation thereto at the request, order or direction of any of the
certificateholders, unless such certificateholders have offered to the trustee
reasonable security or indemnity against the costs, expenses and liabilities
which may be incurred therein or thereby. (Section 9.04). No certificateholder
will have any right under an Agreement to institute any proceeding with respect
to such Agreement, unless such holder previously has given to the trustee
written notice of default and unless the holders of Class A Certificates
evidencing not less than 25% of the voting interests of such series have made
written request upon the trustee to institute such proceeding in its own name as
trustee thereunder and have offered to the trustee reasonable indemnity and the
trustee for 30 days has neglected or refused to institute any such proceedings.
(Section 11.03).
The trustee may give notice of its intent to resign at any time, in which
event the servicer will be obligated to appoint a successor trustee. The
servicer may also remove the trustee if the trustee ceases to be eligible to
continue as such under the related Agreement or if the trustee becomes insolvent
or unable to act. In such circumstances, the servicer will be obligated to
appoint a successor trustee. Any resignation or removal of the trustee and
appointment of a successor trustee will not become effective until acceptance of
the appointment by the successor trustee. (Section 9.09).
Each Agreement will provide that the servicer will pay the trustee's fees.
(Section 9.07). Each Agreement will further provide that the trustee will be
entitled to indemnification by the servicer for, and will be held harmless
against, any loss, liability or expense incurred by the trustee in the
acceptance or performance of its duties under such Agreement (other than through
its own wilful misfeasance, bad faith or negligence (other than errors in
judgment) or by reason of a breach of any of its representations or warranties
set forth in such Agreement). (Sections 6.01, 7.01 and 9.07). Any such
indemnification by a trust will reduce the amount otherwise available for
distribution to certificateholders.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
SECURITY INTEREST IN VEHICLES
In all states in which the receivables are originated, retail installment
sale contracts such as the receivables evidence the credit sale of automobiles
and light trucks by dealers to purchasers. The contracts also will constitute
personal property security agreements and include grants of security interests
in the vehicles under the Uniform Commercial Code. Perfection of security
interests in the vehicles is generally governed by the motor vehicle
registration laws of the state in which the vehicle is located. In all states in
which the
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receivables are 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 related purchase agreement,
GMAC will assign its security interest in the financed vehicles securing the
related receivables to the seller and pursuant to each Agreement, the seller
will assign its security interest in the financed vehicles securing the
receivables to the trust. However, because of the administrative burden and
expense, no certificate of title will be amended to identify the related trust
as the new secured party relating to a financed vehicle. Also, the servicer will
continue to hold any certificates of title relating to the vehicles in its
possession as custodian for the seller and the trustee pursuant to the related
Custodian Agreement. See "The Certificates--Sale and Assignment of Receivables
and Warranties Thereon" in this prospectus.
In most states, an assignment such as that under both the related purchase
agreement and the related 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
the servicer'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 GMAC's warranties under the related purchase agreement
and, if the interests of the certificateholders in the related receivable are
materially and adversely affected, would create an obligation of GMAC to
repurchase such receivable unless the breach is cured. See "The
Certificates--Sale and Assignment of Receivables and Warranties Thereon" in this
prospectus. Similarly, the security interest of the related trust in the vehicle
could be defeated through fraud or negligence and, because such trust is not
identified 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 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 obligor 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 receivable before release of the lien. Under each
Agreement, the servicer will be 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
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Internal Revenue Code of 1986, as amended, 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. With respect to each series of certificates, GMAC
will have represented to the seller that, as of the date of issuance of the
certificates of such series, each security interest in a financed vehicle is or
will be prior to all other present liens (other than tax liens and other liens
that arise by operation of law) upon and security interests in such financed
vehicle. The seller will have assigned such representation, among others, to the
related trust pursuant to the related 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 trustee or
certificateholders if such a lien or confiscation arises.
REPOSSESSION
In the event of default by vehicle purchasers, the holder of the retail
installment sale contract has all the remedies of a secured party under the
Uniform Commercial Code, except where specifically limited by other state laws.
Among Uniform Commercial Code 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 taking 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 the obligor may
cure the default prior to repossession. Generally, this 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 Uniform Commercial Code 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, the FTC Repossession Consent Order imposes similar
requirements 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 installments 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
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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 Uniform Commercial
Code 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 Uniform Commercial Code 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 Practices 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 adaptations of the
National Consumer Act and of the Uniform Consumer Credit Code 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 related 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 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 holder-in-due-course rule is limited to the
amounts paid by an 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 held by any trust will be subject to the
requirements of the holder-in-due-course rule. Accordingly, the trustee, as
holder of the related receivables, will be subject to any claims or defenses
that the purchaser of the related 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 Agreement and may create an
obligation of GMAC to repurchase the receivables unless the breach is cured in
all material respects. See "The Certificates--Sale and Assignment of the
Receivables and Warranties Thereon" in this prospectus.
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.
In several cases, consumers have asserted that the self-help remedies of
secured parties under the Uniform Commercial Code and related laws violate the
due process protections provided under the 14th Amendment to the Constitution of
the United States. Courts have generally upheld the notice provisions of the
Uniform Commercial Code and related laws as
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reasonable or have found that the repossession and resale by the creditor does
not involve sufficient state action to afford constitutional protection to
consumers.
Under each purchase agreement, GMAC will represent to the seller that each
related receivable complies with all requirements of law in all material
respects. The seller will assign 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 may constitute a breach and
would create an obligation of GMAC to repurchase such receivable unless the
breach is cured in all material respects. See "The Certificates--Sale and
Assignment of the Receivables and Warranties Thereon" in this prospectus.
OTHER LIMITATIONS
In addition to 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.
TRANSFERS OF VEHICLES
The receivables prohibit the sale or transfer of a financed vehicle without
the servicer's consent and will 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 the 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 pool of receivables.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of the material federal income tax
considerations relevant to the purchase, ownership and disposition of Class A
Certificates which are purchased in the initial distribution thereof. This
summary is based upon laws, regulations, rulings and decisions currently in
effect, all of which are subject to change, possibly with retroactive effect.
The discussion does not purport to deal with all federal tax considerations
applicable to all categories of investors, some of which may be subject to
special rules (e.g., financial institutions, broker-dealers, life insurance
companies and tax-exempt organizations). In addition, this summary is generally
directed to prospective purchasers who purchase the Class A Certificates in the
initial distribution thereof, who are citizens or residents of the United
States, including domestic corporations and partnerships, and who will hold the
Class A Certificates as "capital assets" (generally, property held for
investment) within the meaning of Section 1221 of the Code. Investors should
consult their tax advisors to determine the federal, state, local, foreign and
other tax consequences of the purchase, ownership and disposition of the Class A
Certificates. Prospective investors should note that no rulings have been or
will be sought from the IRS with respect to any of the federal income tax
consequences discussed below, and no assurance can be given that the IRS will
not take contrary positions.
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TAX STATUS OF THE TRUST
In the opinion of Tax Counsel, each trust will be classified as a grantor
trust and not as an association taxable as a corporation for federal income tax
purposes. Subject to the discussion below under "Treatment of Fees or Payments,"
each Class A Certificate Owner will be treated as the owner of a pro rata
undivided interest in the applicable Class A Percentage of the ordinary income
and corpus portions of the related trust.
INCOME OF CERTIFICATEHOLDERS
Subject to the discussion below under "Treatment of Fees or Payments," in
the opinion of Tax Counsel, each Class A Certificate Owner will be required to
report on its federal income tax return, in a manner consistent with its method
of accounting, its pro rata share of the applicable Class A Percentage of the
entire income of the related trust, including interest or finance charges earned
on the receivables held by such trust and any gain or loss upon collection or
disposition of such receivables. Assuming the market discount rules do not apply
to the receivables, the portion of each monthly payment to a Class A Certificate
Owner that is allocable to principal will represent a recovery of capital, which
will reduce the tax basis of such Class A Certificate Owner's undivided interest
in the receivables held by the related trust. In computing its federal income
tax liability, a Class A Certificate Owner generally will be entitled to deduct,
consistent with its method of accounting, its pro rata share of reasonable
servicing fees and other fees paid or incurred by the related trust as provided
in Section 162 or 212 of the Code. However, if a Class A Certificate Owner is an
individual, estate or trust, the deduction for its pro rata share of such fees
will be subject to certain limitations. In particular, the deduction (taken
together with all of such person's other miscellaneous itemized deductions) will
be allowed, for regular tax purposes, only to the extent that all of such
person's miscellaneous itemized deductions, including such person's share of
such fees, exceed 2% of such person's adjusted gross income (including any
income from the certificates) and (in the case of an individual) only to the
extent that all of such person's itemized deductions (as defined in Section
68(c) of the Code) exceed an amount equal to the lesser of (i) 3% of such
person's adjusted gross income in excess of certain statutorily-defined
thresholds which are adjusted annually for inflation (for 1997, $121,200 for
married individuals filing jointly) or (ii) 80% of such itemized deductions. The
deduction will not be allowed for alternative minimum tax purposes. Because the
trustee will not report to Class A Certificate Owners the amount of income or
deductions attributable to the related Surplus Interest, Supplemental Servicing
Fee or Prepayment Surplus, any such Class A Certificate Owner who is an
individual, estate or trust may effectively underreport its net taxable income.
See "Treatment of Fees and Payments" below for a discussion of other possible
consequences if amounts paid to the servicer exceed reasonable compensation for
services rendered.
TREATMENT OF FEES OR PAYMENTS. It is expected that income will be reported
to Class A Certificate Owners on the assumption that the Class A Certificate
Owners own a 100% interest in the applicable Class A Percentage of 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
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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 of the related trust allocable to Class A Certificate Owner 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 trust's
deductions would be limited to reasonable servicing fees and other fees. In
addition, a Class A Certificate Owner purchasing certificates in the initial
distribution thereof 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 described below.
It is also possible that any fees deemed to be excessive could be
recharacterized as deferred purchase price payable to the seller by Class A
Certificate Owners in exchange for the related receivables. The likely effect of
such recharacterization would be to increase current taxable income to a Class A
Certificate Owner.
DISCOUNT AND PREMIUM. If the price at which a Class A Certificate Owner
were deemed to have acquired a receivable (or a stripped receivable described
above) is less than the remaining principal balance of such receivable by an
amount which is less than a statutorily defined de minimis amount, such
receivable would not be treated as having OID. In general, under Regulations it
appears that the amount of OID on a receivable 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 is de minimis under
this rule, the actual amount of OID on such a receivable would be includable in
income as principal payments are received on the receivable.
If the OID on a receivable (or a stripped receivable described above) were
not treated as de minimis, a Class A Certificate Owner would be required to
include any such OID in income as it accrues, regardless of when cash payments
are received, using a method reflecting a constant yield on the receivables.
Moreover, the IRS could assert that a prepayment assumption should be used in
computing the yield to maturity of a receivable. If a receivable is deemed to be
acquired by a Class A Certificate Owner at a significant discount, such
prepayment assumption could accelerate the accrual of income by a Class A
Certificate Owner. No representation is made, nor is Tax Counsel able to give an
opinion, that the receivable will prepay at any particular rate.
It is believed that the receivables were not and will not be issued with
OID, and, therefore, a trust should not have OID income. However, the purchase
price paid by a trust for the receivables may be greater or less than the
remaining principal balance of such 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 Class A Certificate attributable to the Class A
Certificate Owner'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 Class A 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 Class A Certificate until the holder disposes of the Class
A Certificate in a taxable transaction. Instead of recognizing market discount,
if any, upon a disposition of a Class A Certificate (and deferring any
applicable interest expense), a holder may elect to
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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.
In the event that a receivable held by any trust is treated as purchased at
a premium (i.e., the purchase price exceeds the sum of principal payments to be
made thereon), such premium will be amortizable by a Class A Certificate Owner
as an offset to interest income (with a corresponding reduction in the Class A
Certificate Owner's basis) under a constant yield method over the term of such
receivable if an election under Section 171 of the Code is made. Any such
election will apply to all debt instruments held by the Class A Certificate
Owner during the year in which the election is made and to all debt instruments
acquired thereafter.
SALE OF A CLASS A CERTIFICATE. In the opinion of Tax Counsel, if a Class A
Certificate is sold, gain or loss will be recognized equal to the difference
between the amount realized on the sale and the Class A Certificate Owner's
adjusted basis in such Class A Certificate. A Class A Certificate Owner's
adjusted basis will equal the cost of the Class A certificate, increased by any
discount previously included in income and decreased by any deduction previously
allowed for premium and by the amount of principal payments previously received
on the receivables held by the related trust.
BACKUP WITHHOLDING
Payments made on Class A Certificates and proceeds from the sale of Class A
Certificates will not be subject to a "backup" withholding tax of 31% unless, in
general, the Class A Certificate Owner fails to comply with certain reporting
procedures and is not an exempt recipient under applicable provisions of the
Code.
ERISA CONSIDERATIONS
Section 406 of ERISA, and Section 4975 of the Code prohibit a pension,
profit sharing or other employee benefit plan from engaging in certain
transactions involving "plan assets" with persons that are "parties in interest"
under ERISA or "disqualified persons" under the Code with respect to the plan.
ERISA also imposes certain duties and certain prohibitions on persons who are
fiduciaries of plans subject to ERISA. Under ERISA, generally, any person who
exercises any authority or control with respect to the management or disposition
of the assets of a plan is considered to be a fiduciary of such plan. A
violation of these "prohibited transaction" rules may generate excise tax and
other liabilities under ERISA and the Code for such persons.
Pursuant to a final regulation issued by the Department of Labor concerning
the definition of what constitutes the "plan assets" of Benefit Plans, the
assets and properties of certain entities in which a Benefit Plan makes an
equity investment could be deemed to be assets of the Benefit Plan in certain
circumstances. Accordingly, if Benefit Plans purchase Class A Certificates, the
related trust could be deemed to hold plan assets.
Unless otherwise provided in the related prospectus supplement, the
Department of Labor has granted an administrative exemption to the underwriter
specified in the related prospectus supplement from certain of the prohibited
transaction and conflict of interest rules of ERISA with respect to the initial
purchase, the holding and the subsequent resale by Benefit Plans of certificates
in pass-through trusts with respect to which such underwriter is the sole
underwriter or the manager or co-manager of the underwriting syndicate and that
consist of certain receivables, loans and other obligations that meet the
conditions and requirements of such exemption. The receivables covered by an
exemption include motor
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vehicle installment obligations such as the receivables. An exemption will apply
only if specific conditions (certain of which are described below) are met. The
seller believes that an exemption will apply to the acquisition and holding of
each series of Class A Certificates by Benefit Plans and that all conditions of
such exemption other than those within the control of the investors have been or
will be met.
Among the conditions which must be satisfied for an exemption to apply to
the acquisition by a Benefit Plan of Class A Certificates are the following:
(1) The acquisition of the Class A Certificates by a Benefit Plan is
on terms (including the price for the certificates) that are at least as
favorable to the Benefit Plan as they would be in an arm's-length
transaction with an unrelated party;
(2) The rights and interests evidenced by the Class A Certificates
acquired by the Benefit Plan are not subordinated to the rights and
interests evidenced by other certificates of the related trust;
(3) The Class A Certificates acquired by the Benefit Plan have
received a rating at the time of such acquisition that is in one of the
three highest generic rating categories from Standard & Poor's Ratings
Services, Moody's Investors Service, Inc., Duff & Phelps Credit Rating Co.
or Fitch IBCA, Inc.
(4) The sum of all payments made to the related underwriters in
connection with the distribution of such Class A Certificates represents
not more than reasonable compensation for underwriting such Class A
Certificates. The sum of all payments made to and retained by the seller
pursuant to the sale of the receivables to the related trust represents not
more than the fair market value of such receivables. The sum of all
payments made to and retained by the servicer represents not more than
reasonable compensation for the servicer's services as servicer under the
related Agreement and reimbursement of the servicer's reasonable expenses
in connection therewith;
(5) The trustee is not an "affiliate" (as defined in the exemption) of
any other member of the Restricted Group (as defined below);
(6) The Benefit Plan investing in the Class A Certificates is an
"accredited investor" as defined in Rule 501(a)(1) of Regulation D of the
Commission under the Securities Act; and
(7) The related trust satisfies the following requirements:
(a) the corpus of such trust consists solely of assets of the type
which have been included in other investment pools,
(b) certificates in such other investment pools have been rated in
one of the three highest generic rating categories of Standard & Poor's
Ratings Services, Moody's Investors Service, Inc., Duff & Phelps Credit
Rating Co. or Fitch IBCA, Incorporated for at least one year prior to
the Benefit Plan's acquisition of Class A Certificates, and
(c) certificates evidencing interests in such other investment
pools have been purchased by investors other than Benefit Plans for at
least one year prior to any Benefit Plan's acquisition of Class A
Certificates.
Certain transactions are not covered by an applicable exemption. An
exemption does not exempt the acquisition and holding of Class A Certificates by
Benefit Plans sponsored by the Restricted Group. Unless otherwise provided in
the related prospectus supplement, as of the date thereof, no obligor with
respect to receivables included in any trust will constitute more than five
percent of the aggregate unamortized principal balance of such trust.
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Moreover, the exemptive relief from the self-dealing/conflict of interest
prohibited transaction rules of ERISA is available, only if, among other
requirements:
(1) the person who has discretionary authority or renders investment
advice with respect to the investment of a Benefit Plan's assets in the
Class A certificates (or such person's affiliate) is an obligor with
respect to five percent or less of the fair market value of the assets
contained in the related trust;
(2) a Benefit Plan's investment in such Class A Certificates does not
exceed 25% of all of the Class A Certificates of such series outstanding at
the time of the acquisition;
(3) immediately after the acquisition, no more than 25% of the assets
of a Benefit Plan with respect to which the person who has discretionary
authority or renders investment advice are invested in certificates
representing an interest in a trust containing assets sold or serviced by
the same entity; and
(4) in the case of the acquisition of Class A Certificates in
connection with their initial issuance, at least 50% of such Class A
Certificates are acquired by persons independent of the Restricted Group
and at least 50% of the aggregate interest in the related trust is acquired
by persons independent of the Restricted Group.
An applicable exemption will also apply to transactions in connection with
the servicing, management and operation of the related trust, provided that, in
addition to the general requirements described above, such transactions are
carried out in accordance with the terms of a binding pooling and servicing
agreement and the pooling and servicing agreement is provided to, or described
in all material respects in the prospectus or private placement memorandum
provided to investing Benefit Plans before the Plans purchase Class A
Certificates issued by the related trust. Each Agreement is a pooling and
servicing agreement as defined in the related exemption. All transactions
relating to the servicing, management and operations of each trust will be
carried out in accordance with the related Agreement, which Agreement is
described in all material respects in "The Certificates" and in the related
prospectus supplement.
Any Benefit Plan fiduciary considering the purchase of Class A Certificates
should consult with its counsel with respect to the applicability of the related
exemption and other issues and determine on its own whether all conditions have
been satisfied and whether the certificates are an appropriate investment for a
Benefit Plan under ERISA and the Code.
PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement with
respect to each series of certificates, 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 Class A Certificates set forth therein and in the related
prospectus supplement.
In each underwriting agreement, the several underwriters will agree,
subject to the terms and conditions set forth therein, to purchase all the Class
A Certificates described therein which are offered hereby and by the related
prospectus supplement if any of such Class A Certificates are purchased. In the
event of a default by any 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 (1) set forth the price at which the
Class A Certificates being offered thereby will be offered to the public and any
concessions that may
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be offered to certain dealers participating in the offering of such certificates
or (2) specify that the Class A Certificates are to be resold by such
underwriter in negotiated transactions at varying prices to be determined at the
time of such sale. After the initial public offering of any certificates, the
public offering price and such concessions may be changed.
Each underwriting agreement will provide that the seller will indemnify the
related underwriters against certain liabilities, including liabilities under
the Securities Act.
The place and time of delivery for the certificates in respect of which
this prospectus is delivered will be set forth in the accompanying prospectus
supplement. The trustee may, from time to time, invest the funds in the
Designated Accounts in eligible investments acquired from the underwriters.
LEGAL OPINIONS
Certain legal matters relating to the certificates will be passed upon for
the seller and the servicer by Robert L. Schwartz, Esq., General Counsel of the
seller and Assistant General Counsel of GMAC, and by Kirkland & Ellis, special
counsel to the seller and the servicer. Mr. Schwartz owns shares of each of the
classes of General Motors common stocks and has options to purchase shares of
General Motors common stock, $1 2/3 par value. Certain federal income tax
matters will be passed upon for the seller by Kirkland & Ellis.
REPORTS TO CERTIFICATEHOLDERS
The servicer will prepare monthly reports that will contain information
about the trust. The financial information contained in the reports will not be
prepared in accordance with generally accepted accounting principles. Unless and
until definitive certificates are issued, the reports will be sent to Cede & Co.
which is the nominee of The Depository trust Company and the registered holder
of the certificates. No financial reports will be sent to you. See "Description
of the Certificates--Book Entry Registration" "--Reports to Class A
Certificateholders" and "--Evidence as to Compliance" in this prospectus.
WHERE YOU CAN FIND MORE INFORMATION
We filed a registration statement relating to the certificates with the
SEC. This prospectus is part of the registration statement, but the registration
statement includes additional information.
The servicer will file with the SEC all required annual, monthly and
special SEC reports and other information about the trust.
You may read and copy any reports, statements or other information we file
at the SEC's public reference room in Washington, D.C. You can request copies of
these documents, upon payment of a duplicating fee, by writing to the SEC.
Please call the SEC at (800) SEC-0330 for further information on the operation
of the public reference rooms. Our SEC filings are also available to the public
on the SEC Internet site (http://www.sec.gov).
INCORPORATION BY REFERENCE
The SEC allows us to "incorporate by reference" information we file with
it, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this prospectus. Information that we file later with the SEC will
automatically update the information in this prospectus. In all cases, you
should rely on the later information over different information included in this
prospectus or the accompanying prospectus supplement. We incorporate by
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reference any future SEC reports and materials filed by or on behalf of the
trust until we terminate our offering of the certificates.
As a recipient of this prospectus, you may request a copy of any document
we incorporate by reference, except exhibits to the documents (unless the
exhibits are specifically incorporated by reference), at no cost, by writing us
at: General Motors Acceptance Corporation, 3044 West Grand Boulevard, Detroit,
Michigan 48202.
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GLOSSARY OF TERMS
This Glossary of Terms does not purport to be complete and is qualified in
its entirety by reference to the related Agreements, forms of which are filed as
an exhibit to the registration statement of which this prospectus is a part.
Some of the capitalized terms used but not defined in the prospectus or in this
Glossary of Terms are defined in the related prospectus supplement. Reference to
the singular include references to the plural and vice versa.
"Additional Servicing" means, with respect to each series of certificates
and any Monthly Period, an amount equal to the lesser of:
(1) the amount by which:
(A) 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
(2) the amount, if any, by which:
(A) the sum of Available Interest and Available Principal for the
related Distribution Date exceeds
(B) the sum, without duplication, of (x) all amounts required to
be distributed with respect to the Class A Certificates and the Class B
Certificates on such Distribution Date, (y) the Basic Servicing Fee paid on
such Distribution Date and any unpaid Basic Servicing Fees from all prior
Distribution Dates and (z) the amount, if any, deposited into the
Subordination Spread Account on such Distribution Date.
"Administrative Purchase Payment" means, with respect to any Administrative
Receivable:
(1) in the case of a Scheduled Interest Receivable, a release of all
claims for reimbursement of Scheduled Interest Advances made on such
receivable plus a payment equal to the sum of
(A) the Scheduled Payments on such receivable;
(B) an amount equal to any reimbursement of outstanding Scheduled
Interest Advances made to the servicer with respect to such receivable from
the proceeds of other receivables; and
(C) all past due Scheduled Payments with respect to which a
Scheduled Interest Advance has not been made less 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
(2) in the case of a Simple Interest Receivable, a payment 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.
"Administrative Receivable" means a receivable which the servicer is
required to purchase as a result of a breach of a covenant which materially and
adversely affects any receivable held by the related trust.
"Agreement" means, for each series of certificates, the Pooling and
Servicing Agreement which incorporates the GMAC Grantor Trust Standard Terms and
Conditions.
"Aggregate Amount Financed" means the aggregate Amount Financed under the
receivables held by a trust as specified in the related prospectus supplement.
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"Aggregate Net Losses" means, with respect to a series of certificates and
any Monthly Period, an amount equal to the aggregate Principal Balance of all
receivables newly designated during such Monthly Period as Liquidating
Receivables minus Liquidation Proceeds collected during such Monthly Period with
respect to all Liquidating Receivables.
"Amount Financed" means, with respect to a receivable, the aggregate amount
advanced under such receivable 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 less:
(1) (A) in the case of a Scheduled Interest Receivable, payments due
from the related obligor prior to the Cutoff Date allocable to principal;
and
(B) in the case of a Simple Interest Receivable, payments received
from the related obligor prior to the Cutoff Date allocable to
principal; and
(2) any amount allocable to the premium for physical damage insurance
covering the financed vehicle force-placed by the servicer.
"APR" means, with respect to a receive, the annual percentage rate.
"Available Interest" means, with respect to each series of certificates, on
a Distribution Date, an amount equal to the sum of the following amounts with
respect to the related Monthly Period:
(1) that portion of all collections on the receivables held by the
related trust (other than Liquidating Receivables) allocable to interest or
Prepayment Surplus (including, in the case of Scheduled Interest
Receivables, the interest portion of existing Payments Ahead being applied
in such Monthly Period but excluding Excess Payments made during such
Monthly Period that are treated as Payments Ahead);
(2) Liquidation Proceeds, to the extent allocable to interest in
accordance with the servicer's customary servicing procedures;
(3) all Simple Interest Advances;
(4) all Scheduled Interest Advances to the extent allocable to
interest; and
(5) the Warranty Payment or the Administrative Purchase Payment of
each receivable that the seller repurchased or the servicer purchased
during such related Monthly Period, to the extent allocable to accrued
interest or Prepayment Surplus thereon
less an amount equal to the sum of the following amounts with respect to the
related Monthly Period:
(1) all amounts received on any Scheduled Interest Receivable (other
than a Liquidating Receivable) to the extent that the servicer has
previously made an unreimbursed Scheduled Interest Advance;
(2) Liquidation Proceeds with respect to Scheduled Interest
Receivables to the extent of any unreimbursed Scheduled Interest Advances;
(3) any Excess Simple Interest Collections;
(4) Liquidation Proceeds with respect to Simple Interest Receivables
paid to the Servicer; and
(5) amounts representing reimbursement for certain Liquidation
Expenses.
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"Available Principal" means, with respect to each series of certificates,
on any Distribution Date, an amount equal to the sum of the following amounts
with respect to the related Monthly Period:
(1) that portion of all collections on the receivables held by the
related trust (other than Liquidating Receivables) allocable to principal
(including, in the case of Scheduled Interest Receivables, the principal
portion of Prepayments and existing Payments Ahead being applied in such
Monthly Period but excluding Excess Payments made during such Monthly
Period that are treated as Payments Ahead);
(2) Liquidation Proceeds to the extent allocable to principal in
accordance with the Servicer's customary servicing procedures;
(3) all Scheduled Interest Advances to the extent allocable to
principal; and
(4) to the extent allocable to principal, the Warranty Payment or the
Administrative Purchase Payment received with respect to each receivable
that the seller repurchased or the servicer purchased during the related
Monthly Period
less an amount equal to the sum, with respect to the related Monthly Period:
(1) all amounts received on any Scheduled Interest Receivable (other
than a Liquidating Receivable) to the extent that the servicer has
previously made an unreimbursed Scheduled Interest Advance;
(2) Liquidation Proceeds with respect to Scheduled Interest
Receivables to the extent of any unreimbursed Scheduled Interest Advances;
(3) any Excess Simple Interest Collections;
(4) Liquidation Proceeds with respect to Simple Interest Receivables
paid to the servicer; and
(5) amounts representing reimbursement for certain Liquidation
Expenses.
"Basic Servicing Fee" means, with respect to each trust and any Monthly
Period, the product of (1) one-twelfth of the Basic Servicing Fee Rate and (2)
the aggregate Principal Balance of receivables held by such trust as of the last
day of the preceding Monthly Period.
"Benefit Plan" means a pension, profit-sharing or other employee benefit
plan and individual retirement accounts and certain types of Keogh Plans and
certain collective investment funds or insurance company general or separate
accounts in which such plans and accounts are invested.
"Certificate Account" means, with respect to each series of certificates,
the account designated as such, established and maintained pursuant to the
Agreement.
"Certificate Owner" means, with respect to a book-entry certificate, the
person who is the beneficial owner of such book-entry certificate, as reflected
on the books of the clearing agency or on the books of a person maintaining an
account with such clearing agency.
"Charge-off Rate" means, with respect to a series of certificates and any
Monthly Period, an amount equal to the Aggregate Net Losses with respect to the
receivables held by the trust expressed, on an annualized basis, as a percentage
of the average of (1) the aggregate Principal Balance on the last day of the
Monthly Period preceding such Monthly Period and (2) the aggregate Principal
Balance on the last day of such Monthly Period.
"Class A Interest Carryover Shortfall" means, with respect to a series of
certificates, as of the close of any Distribution Date, the excess, if any, of
(1) the Class A Interest Distributable Amount for such Distribution Date plus
any outstanding Class A Interest Carryover Shortfall from the preceding
Distribution Date, to the extent permitted by law, at the applicable Pass
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Through Rate from such preceding Distribution Date through the current
Distribution Date minus (2) the amount of interest that the holders of the Class
A Certificates actually received on such current Distribution Date.
"Class A Certificate Balance" means, with respect to any series of
certificates, initially, the Class A Percentage of the Aggregate Amount Financed
and, thereafter, will equal such initial Class A Certificate Balance, reduced by
all distributions of Class A Principal Distributable Amounts actually made to
Class A Certificateholders.
"Class A Distributable Amount" means, with respect to any series of
certificates, on any Distribution Date, the sum of (1) the Class A Principal
Distributable Amount and (2) the Class A Interest Distributable Amount.
"Class A Interest Distributable Amount" means, with respect to any series
of certificates, on any Distribution Date, one month's interest at the Pass
Through Rate on the Class A Certificate Balance as of the last day of the
related Monthly Period.
"Class A Pool Factor" means, for any series of certificates, a seven-digit
decimal figure computed by the servicer prior to each distribution equal to the
remaining Class A Certificate Balance as of the close of such date divided by
the initial Class A Certificate Balance of such series.
"Class A Principal Carryover Shortfall" means, with respect to a series of
certificates, as of the close of any Distribution Date, the excess, if any, of
(1) the Class A Principal Distributable Amount for such Distribution Date plus
any outstanding Class A Principal Carryover Shortfall from the preceding
Distribution Date minus (2) the amount of principal that the holders of the
Class A Certificates actually received on such current Distribution Date.
"Class A Principal Distributable Amount" means, with respect to any series
of certificates, on any Distribution Date, the Class A Percentage of (1) the
principal portion of all Scheduled Payments with respect to the related Monthly
Period on Scheduled Interest Receivables held by the related trust (other than
Liquidating Receivables) and the principal portion of all payments received by
the trustee during the related Monthly Period on Simple Interest Receivables
held by the related trust (other than Liquidating Receivables), (2) the
principal portion of all Prepayments received during the related Monthly Period
(except to the extent included in (1) above) and (3) the Principal Balance of
each receivable that the servicer became obligated to purchase, the seller
became obligated to repurchase or that became a Liquidating Receivable during
the related Monthly Period (except to the extent included in (1) or (2) above).
"Class B Certificate Balance" means, with respect to any series of
certificates, initially, the Class B Percentage of the Aggregate Amount Financed
and, thereafter, will equal such initial Class B Certificate Balance, reduced by
(1) all distributions of Class B Principal Distributable Amounts actually made
to Class B Certificateholders (or deposited on or prior to such date in the
Subordination Spread Account, not including the initial deposit therein), (2)
the Class A Principal Carryover Shortfall as of the preceding Distribution Date
and (3) any shortfalls from prior Distribution Dates in principal distributions
to the Class B Certificateholders.
"Class B Distributable Amount" means, with respect to any series of
certificates, on any Distribution Date, the sum of (1) the Class B Principal
Distributable Amount and (2) the Class B Interest Distributable Amount.
"Class B Interest Distributable Amount" means, with respect to any series
of certificates, on any Distribution Date, an amount equal to the sum of (1) one
month's interest at the Pass
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Through Rate on the Class B Certificate Balance as of the last day of the
related Monthly Period, (2) all Surplus Interest with respect to receivables
held by the related trust (less Additional Servicing payable on such
Distribution Date), and (3) all Prepayment Surplus with respect to Scheduled
Interest Receivables held by the related trust to which a Prepayment is to be
applied, net of one month's interest at the applicable Pass Through Rate on the
aggregate Principal Balance of such Scheduled Interest Receivables as of the
first day of the related Monthly Period.
"Class B Principal Distributable Amount" means, with respect to any series
of certificates, on any Distribution Date, the Class B Percentage of (1) the
principal portion of all Scheduled Payments with respect to the related Monthly
Period on Scheduled Interest Receivables held by the related Trust (other than
Liquidating Receivables) and the principal portion of all payments received by
the trustee during the related Monthly Period on Simple Interest Receivables
held by the related trust (other than Liquidating Receivables), (2) the
principal portion of all Prepayments received during the related Monthly Period
(except to the extent included in (1) above) and (3) the Principal Balance of
each receivable that the servicer became obligated to purchase, the seller
became obligated to repurchase or that became a Liquidating Receivable during
the related Monthly Period (except to the extent included in (1) or (2) above).
"Code" means the Internal Revenue Code of 1986, as amended.
"Collection Account" means, with respect to each series of certificates,
the account designated as such, established and maintained pursuant to the
applicable Agreement.
"Cutoff Date" means, for each series, a date specified in the applicable
prospectus supplement.
"Delinquency Percentage" means, with respect to a series of certificates
and any Monthly Period, the ratio of all outstanding receivables which are 61
days or more delinquent as of the last day of such Monthly Period, determined in
accordance with the servicer's normal practices, divided by the number of
outstanding receivables on the last day of such Monthly Period.
"Distribution Date" means, with respect to a Monthly Period, the 15th day
of the next succeeding calendar month, or if such 15th day is not a business
day, the next succeeding business day.
"Events of Default" has the meaning set forth in "The Certificates-Events
of Default."
"Excess Payment" means, with respect to a Scheduled Interest Receivable,
the portion of a payment on such receivable in excess of the Scheduled Payment
thereon which are not late fees, prepayment charges or other fees or charges.
"Excess Simple Interest Collections" means, with respect to a Monthly
Period, the excess, if any, of (1) all payments received during the related
Monthly Period on all Simple Interest Receivables to the extent allocable to
interest minus (2) the amount of interest that would be due during such Monthly
Period on all Simple Interest Receivables held by such trust, assuming that the
payment on each such receivable was received on its respective due date.
"FTC Repossession Consent Order" means a consent order between the servicer
and the Federal Trade Commission.
"General Motors" means General Motors Corporation, a Delaware corporation.
"GMAC" means General Motors Acceptance Corporation, a Delaware corporation.
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"Liquidation Expenses" means an amount specified in the related 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 a
financed vehicle and other out-of-pocket costs related to liquidation.
"Liquidating Receivable" means a receivable as to which the servicer (1)
has reasonably determined, in accordance with its customary servicing
procedures, that eventual payment of amounts owing on such receivable is
unlikely, or (2) has repossessed and disposed of the financed vehicle.
"Liquidation Proceeds" means, with respect to a Liquidating Receivable, all
amounts realized with respect to such receivable, net of amounts that are
required to be refunded to the obligor on such receivable.
"Monthly Advance" means, with respect to any trust, as of the last day of
each Monthly Period, either a Scheduled Interest Advance or a Simple Interest
Advance, or both, as applicable, in respect of the related Monthly Period.
"Monthly Period" means, with respect to a Distribution Date, the calendar
month preceding the month in which such Distribution Date occurs.
"OID" means original issue discount.
"Payment Ahead" means, with respect to a Scheduled Interest Receivable, any
Excess Payment (not representing prepayment in full of such receivable) that is
of an amount such that the sum of such Excess Payment (together with any
unapplied Payments Ahead) is equal to or less than three times the Scheduled
Payment.
"Payment Ahead Servicing Account" means, with respect to each series of
certificates, the account designated as such, established and maintained
pursuant to the Agreement.
"Prepayment" means any Excess Payment other than a Payment Ahead.
"Prepayment Surplus" means, with respect to a series of certificates, on
any Distribution Date on which a Prepayment is to be applied with respect to a
Scheduled Interest Receivable, that portion of such Prepayment, net of any
rebate to the obligor of the portion of the Scheduled Payments attributable to
unearned finance charges, which is not allocable to principal.
"Principal Balance" means, as of any day, with respect to any receivable,
an amount equal to the Amount Financed minus the sum of either:
(1) in the case of a Scheduled Interest Receivable:
(A) that portion of all Scheduled Payments due on or prior to such
date allocable to principal;
(B) that portion of any Warranty Payment or Administrative Purchase
Payment with respect to such receivable allocable to principal; and
(C) any Prepayment applied by the servicer to reduce the Principal
Balance of such receivable; or
(2) in the case of a Simple Interest Receivable:
(A) that portion of all payments received on or prior to such date
allocable to principal; and
(B) that portion of any Warranty Payment or Administrative Purchase
Payment with respect to such receivable allocable to principal.
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"Record Date" means, with respect to any Distribution Date, the close of
business on the date immediately preceding such Distribution Date, or if
definitive certificates are issued, the last day of the preceding Monthly
Period.
"Restricted Group" means the seller, the underwriters, the trustee, the
servicer or any obligor with respect to the receivables included in the related
trust constituting more than 5% of the aggregate unamortized principal balance
of the assets in such trust or any affiliate of such parties.
"Scheduled Interest Advance" means, with respect to a Scheduled Interest
Receivable, the amount, as of the last day of the related Monthly Period, by
which the amount the Scheduled Payment exceeds the amount of Payments Ahead not
previously applied to such receivable and any amounts received by an obligor in
respect of such Scheduled Payment.
"Scheduled Interest Receivable": means any receivable pursuant to which 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.
"Scheduled Payment" means, with respect to a Scheduled Interest Receivable,
the payment set forth in such receivable due from the obligor during any month.
"Securities Act" means the Securities Act of 1933, as amended.
"Simple Interest Advance" means, with respect to all Simple Interest
Receivables held by a trust, unless otherwise provided in the related prospectus
supplement, as of the last day of each Monthly Period, an amount equal to the
excess of (i) the amount of interest that would be due during such Monthly
Period on all Simple Interest Receivables held by the related 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 related trust to the extent allocable to
interest.
"Simple Interest Receivable" means any receivable under which the portion
of each monthly payment allocated between finance charges and principal is based
on the actual date on which a payment is received.
"Specified Subordination Spread Account Balance" means, with respect to a
series of certificates, the meaning set forth in "The Certificates-Subordination
of the Class B Certificates; Subordination Spread Account."
"Supplemental Servicing Fee" means, with respect to a series of
certificates and any Distribution Date, all late fees, prepayment charges and
certain similar fees and charges collected during the Monthly Period plus any
interest earned during the Monthly Period on deposits in the related Collection
Account and Payment Ahead Servicing Account.
"Surplus Interest" means, with respect to a series of certificates, on any
Distribution Date, the product of (1) in the case of a Scheduled Interest
Receivable, the interest portion of the Scheduled Payment on such receivable or,
in the case of a Simple Interest Receivable, the amount of interest that would
be due during such Monthly Period on such receivable assuming that such payment
was received on its due date multiplied by (2) the remainder of (A) one minus
(B) a fraction, the numerator of which equals the sum of the applicable Pass
Through Rate and the Basic Servicing Fee Rate and the denominator of which
equals the APR on such receivable.
"Tax Counsel" means Kirkland & Ellis, as special counsel to the Seller.
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"Total Available Amount" means, with respect to each series of
certificates, on each Distribution Date, the sum of the Available Interest and
the Available Principal.
"Total Servicing Fee" means, with respect to a series of certificates and
any Distribution Date, the sum of the Basic Servicing Fee for such Distribution
Date, any unpaid Basic Servicing Fee for all prior Distribution Dates and
Additional Servicing for such Distribution Date.
"Warranty Payment" means, with respect to a Warranty Receivable:
(1) in the case of a Scheduled Interest Receivable, the sum of:
(A) 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;
(B) plus all outstanding Scheduled Interest Advances on such
receivable; and
(C) 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 the sum of:
(A) 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
(B) any Liquidation Proceeds with respect to such receivable
previously received (to the extent applied to reduce the Principal
Balance of such receivable; or
(2) in the case of a Simple Interest Receivable, the Amount Financed
minus the sum of:
(A) that portion of all payments received on or prior to the last
day of the related Monthly Period allocable to principal; and
(B) any Liquidation Proceeds with respect to such receivable
previously received (to the extent applied to reduce the Principal
Balance of such receivable.
"Warranty Receivable" means a receivable which must be repurchased by
either the seller or GMAC as a result of a breach of any representation or
warranty with respect to such receivable which materially and adversely affects
the interests of the certificateholders of any series in such receivable.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY
THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
VERSION 3
PROSPECTUS
CAPITAL AUTO RECEIVABLES ASSET TRUSTS
Asset Backed Notes
Asset Backed Certificates
CAPITAL AUTO RECEIVABLES, INC.
Seller
GENERAL MOTORS ACCEPTANCE CORPORATION
Servicer
<TABLE>
<S> <C>
THE TRUSTS--
The notes of any series
represent obligations of the - A new trust will be formed to issue each series of
related trust only. The securities.
certificates of any series
represent the beneficial - The assets of each trust will be:
interest in the related trust
only. The notes and - a pool of non-recourse secured notes secured by new
certificates issued by any and used automobile and light duty truck leases and
trust do not represent the related leased vehicles and all moneys received
obligations of or interests in, with respect to the secured notes on and after the
and are not guaranteed by, cutoff date, including:
Capital Auto Receivables, Inc.,
GMAC or any of their - proceeds from a termination value insurance policy
affiliates. Neither the notes for the leases and the leased vehicles securing the
nor certificates owned by the secured notes;
trust are insured or guaranteed
by any governmental agency. - proceeds from any other insurance policies,
guarantees and similar obligations relating to the
This prospectus may be used to leases and leased vehicles securing the secured
offer and sell any securities notes; and
only if accompanied by the
related prospectus supplement. - security interests in payments under the leases and
amounts received upon the sale or transfer of the
related leased vehicles; and
- assets related to the secured notes, including
security interests in the related leases and leased
vehicles.
THE SECURITIES--
- will represent indebtedness of the related trust, in
the case of notes, or beneficial interests in the
related trust, in the case of certificates;
- will be paid only from the assets of the related
trust and amounts on deposit in any related reserve
account;
- will represent the right to payments in the amounts
and at the times described in the related prospectus
supplement;
- may benefit from one or more forms of credit
enhancement; and
- will be issued as part of a designated series, which
will include one or more classes of notes and may
include one or more classes of certificates.
</TABLE>
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED THAT THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS ,
<PAGE> 115
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
We provide information to you about the securities in two separate
documents:
(a) this prospectus, which provides general information and terms of
the securities, some of which may not apply to a particular series of
securities, including your series.
(b) the accompanying prospectus supplement, which will provide
information regarding the pool of secured notes, including the leases and
leased vehicles securing the secured notes, held by the trust and which
will specify the terms of your series of securities.
IF THE TERMS OF YOUR SERIES OF SECURITIES VARY BETWEEN THIS PROSPECTUS AND
THE ACCOMPANYING PROSPECTUS SUPPLEMENT, YOU SHOULD RELY ON THE INFORMATION IN
THE ACCOMPANYING PROSPECTUS SUPPLEMENT.
You should rely only on the information provided in this prospectus and the
accompanying prospectus supplement, including the information incorporated by
reference. We have not authorized anyone to provide you with other or different
information. We are not offering the securities in any state where their offer
or sale is not permitted. We do not claim that the information in this
prospectus and the accompanying prospectus supplement is accurate on any date
other than the dates stated on their respective covers.
We include cross references in this prospectus to captions under which you
can find additional, related discussions.
In this prospectus, "we," "us" and "our" refer to the seller, Capital Auto
Receivables, Inc.
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THE TRUSTS
FORMATION OF TRUSTS
For each series of securities, we will establish a separate trust under a
trust agreement by selling and assigning the trust property to the trust in
exchange for these securities. Each series of securities will include one or
more classes of asset backed notes and one or more classes of asset backed
certificates. The related prospectus supplement will specify which classes of
notes and certificates included in each series will be offered to investors.
TRUST PROPERTY
The property of each trust will include:
- the secured notes and all moneys received with respect to the secured
notes on or after the cutoff date, including:
- proceeds from a termination value insurance policy for the leases and
leased vehicles securing the secured notes;
- proceeds from other insurance policies, guarantees and similar
obligations relating to the leases and the leased vehicles securing the
secured notes; and
- security interests in payments under the leases and amounts received
upon the sale or transfer of the related leased vehicles;
- assets related to the secured notes, including liens upon, and security
interests in, the related leases and leased vehicles;
- any instrument or document relating to the secured notes; and
- any proceeds of the foregoing property.
The indenture trustee may hold for the benefit of the securityholders a
reserve account or other form of credit enhancement as specified in the
prospectus supplement. 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 the related securities. See "The Transfer and Servicing
Agreements--Credit Enhancement" in this prospectus.
The activities of each trust will be limited to:
- acquiring, managing and holding the related secured notes and the other
assets of the trust and the related proceeds;
- issuing the related securities and making payments and distributions on
them; and
- engaging in other activities that are necessary, suitable or convenient
to accomplish any of the foregoing or are incidental or connected with
these activities.
The secured note servicer will continue to service the secured notes held
by each trust and will receive fees for its services. See "The Transfer and
Servicing Agreements--Servicing Compensation and Payment of Expenses" in this
prospectus.
CAPITALIZATION OF EACH TRUST
Prior to the initial issuance of any series of securities, the related
trust will not have any assets or liabilities. No trust is expected to have any
source of capital other than its assets and any related credit, liquidity or
other enhancement arrangement.
It is expected that each trust will issue one or more series of notes, and
one or more classes of certificates on the initial closing date for that trust,
all as further described in this prospectus and in the related prospectus
supplement. From time to time after a trust's initial
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closing date, that trust may issue additional series of notes and additional
classes of certificates as further described in this prospectus. The pro forma
capitalization of a trust at the time of the issuance of any securities will be
set forth in the related prospectus supplement. The certificates issued by a
trust will represent the equity in that trust. The related prospectus supplement
will set forth the portion of the certificates issued on, and, if applicable,
since, the related initial closing date. All or a portion of the certificates
may be retained by us or our affiliates or may be sold to third party investors
that are not affiliated with us, GMAC or any of the trusts.
The principal office of each trust will be specified in the related
prospectus supplement.
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 securities is limited solely to the express obligations
of that 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 owner 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 these circumstances, the administrator will be
obligated to appoint a successor owner trustee. Any resignation or removal of an
owner trustee and appointment of a successor owner trustee will not become
effective until acceptance of the appointment by the successor owner trustee.
THE SELLER
Capital Auto Receivables, Inc. is a wholly-owned subsidiary of GMAC, was
incorporated in the State of Delaware on November 6, 1992 and will be the seller
to each trust under this prospectus and the related prospectus supplement. We
are organized for the limited purposes of purchasing receivables, such as the
secured notes, from GMAC, transferring these receivables to third parties,
forming trusts and engaging in related activities. Our principal executive
offices are located at Corporation Trust Center, 1209 Orange Street, Wilmington,
Delaware 19801.
We have taken steps in structuring the transactions contemplated in this
prospectus and any related prospectus supplement that are intended to make it
unlikely that the voluntary or involuntary application for relief by GMAC under
the U.S. Bankruptcy Code or state insolvency laws, will result in consolidation
of our assets and liabilities with those of GMAC. These steps include our
creation as a separate, limited-purpose subsidiary under a certificate of
incorporation containing certain limitations, including restrictions on the
nature of our business and a restriction on our ability to commence a voluntary
case or proceeding under any insolvency law without the unanimous affirmative
vote of all of our directors. Under circumstances described in our by-laws, we
are required to have at least one director who qualifies under our by-laws as an
"Independent Director."
If, despite the foregoing measures, a court concluded that our assets and
liabilities 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 us, 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 the distributions,
could occur.
We may sell in private placements or other transactions certain securities
issued by a trust that will not be offered by this prospectus or the related
prospectus supplement. We may
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also retain all or a portion of any class of certificates or one or more series
of notes issued by each trust as described in the related prospectus supplement.
THE SERVICER
General Motors Acceptance Corporation acts as both the lease servicer and
the secured note servicer.
GMAC, a wholly-owned subsidiary of General Motors, was incorporated in 1919
under the New York Banking Law relating to investment companies. GMAC
relinquished this status and became a Delaware corporation on January 1, 1998.
GMAC, operating directly and through subsidiaries and associated companies in
which it has equity investments, provides a wide variety of automotive financial
services to and through franchised General Motors dealers in many countries
throughout the world. GMAC also offers financial services 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, commercial finance and investment services.
The principal business of GMAC 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 those dealers, either directly or indirectly,
installment obligations covering retail sales and leases of new General Motors
products as well as used units of any make. In addition, GMAC finances new
products of other manufacturers and leases motor vehicles and certain types of
capital equipment.
GMAC has its principal office at 767 Fifth Avenue, New York, New York 10153
and its telephone number is (212) 418-6120. GMAC has administrative offices at
3044 West Grand Boulevard, Detroit, Michigan 48202 and its telephone number is
(313) 556-5000.
VEHICLE ASSET UNIVERSAL LEASING TRUST
In 1996, GMAC created Vehicle Asset Universal Leasing Trust, known as
VAULT, a Delaware business trust, to act as a nominee on the certificates of
title to vehicles titled in various states. VAULT has no operations, and its
sole purpose is to act as a repository of titles to vehicles purchased by its
trust beneficiaries. VAULT is named as the nominee for the beneficial owner of
the leased vehicle on the certificate of title for each leased vehicle that
secures a secured note. GMAC and Central Originating Lease Trust, known as COLT,
are the current beneficiaries of VAULT and the beneficial owners of the leased
vehicles owned by VAULT. As nominee, VAULT holds only legal title to the leased
vehicles. The beneficial owner retains all rights and obligations related to the
leased vehicles.
CENTRAL ORIGINATING LEASE TRUST
COLT is a Delaware business trust formed on March 15, 1996, which acquires
vehicles and related consumer leases from General Motors Corporation franchised
dealers. COLT finances these acquisitions through the issuance of secured notes
and equity certificates. Each secured note was or will be issued to GMAC by
COLT. Each secured note represents 96.90% of the purchase price of a lease and
leased vehicle, and COLT's equity certificates represent the remaining 3.1%.
Other entities, which will be described in a prospectus supplement, may be
formed to issue secured notes in the future.
Each secured note is non-recourse to COLT and is secured by, among other
things, a security interest in the related lease and leased vehicle and the
termination value insurance described in "The Transfer and Servicing
Agreements--Credit Enhancement--Termination Value Insurance" in this prospectus.
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THE POOLS OF SECURED NOTES
GMAC has or will acquire the secured notes in each pool from COLT or
another special purpose Delaware business trust to be identified in a prospectus
supplement. Each secured note is non-recourse and is secured by a first priority
perfected lien on a lease and leased vehicle, and related assets.
The lease assets securing the secured notes have been or will be originated
by participating dealers in accordance with GMAC's underwriting requirements
established for itself and COLT. The lease assets have been or will be acquired
in accordance with GMAC's underwriting standards in the ordinary course of
business, which evaluate the prospective lessee's ability to pay and
creditworthiness, as well as the value of the vehicle to be financed. GMAC's
underwriting standards also generally require physical damage insurance to be
maintained on each leased vehicle.
The lease assets to be included in the pool securing a pool of secured
notes will be selected using several criteria, which consist of those criteria
described in "Description of Auto Lease Business--Auto Lease Criteria" in this
prospectus and any other criteria set forth in the related prospectus
supplement.
Upon direction of the origination agent, GMAC will fund approximately
96.90% of the acquisition price of the related lease asset by acquiring a
secured note of COLT, which bears interest at a fixed rate.
TERMS OF THE SECURED NOTES
Each secured note is secured by a first priority lien upon and security
interest in the related lease and leased vehicle, all proceeds generated from
that lease and leased vehicle, including insurance proceeds and other rights
with respect to that lease and leased vehicle under the termination value
insurance policy, and rights under any other insurance policies, any guarantees
or similar obligations relating to that lease and leased vehicle or its
proceeds. The termination value insurance policy provides for specified payments
on the lease after sale or transfer of the related leased vehicle. The sole
source for payment of each secured note is the related lease collateral
described above and any other funds that may from time to time be pledged to
secure the payment of the secured note.
Interest on the secured note accrues from and including the issue date of
the secured note, to but not including each installment date on the secured
note, in an amount equal to one-twelfth of the annual rate specified in the
secured note, multiplied by the unpaid principal balance of the secured note on
the preceding installment date or, in the case of the first installment date, on
the issue date of the secured note. If the amount due on an installment date is
less than the amount of interest accrued and unpaid as of the installment date,
the difference will be added to principal on that installment date. Any
installment that is unpaid on the installment date will likewise be added to
principal and will thereafter bear interest at the interest rate of the secured
note as of the installment date on which it is due, but only if that installment
remains unpaid after the 15th day of the calendar month following the month in
which the installment date occurs. Any installment due on a secured note on any
installment date will be applied as though received on that installment date to
the extent that the amount has been paid on or before the 15th day of the
calendar month following the month in which the installment date occurs.
Each secured note will be non-recourse to COLT and any other assets of COLT
or its equity holders. No holder of a secured note will have any claim, remedy
or right to proceed against COLT, the owner trustee of COLT or any equity holder
for the payment of any deficiency or any other amount owing on account of the
indebtedness evidenced by the
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secured note. The holder also agrees to look solely to the collateral for that
secured note, including its rights under the termination value insurance and
available amounts on deposit in the termination reserve account, and any other
property mortgaged, pledged, assigned or otherwise given or provided as security
for the secured note in payment of the indebtedness thereunder. However, nothing
limits, restricts or impairs any right of the holder of a secured note to
accelerate the maturity of the secured note upon default, subject to any grace
periods, to bring suit and obtain a judgment against COLT on the secured note,
except that the sole recourse for any such judgment is limited to the lease
collateral and any other security for the secured note, to enforce the security
interest of the holder or otherwise realize upon the collateral securing the
secured note, including its rights under the termination value insurance and
available amounts on deposit in the termination reserve account, or any other
property mortgaged, pledged, assigned or otherwise granted as security to secure
the obligations represented by the secured note.
No secured note will be issued (1) in a principal amount that exceeds
96.90% of the initial discounted balance of the lease described below that the
secured note is financing or (2) with an interest rate greater than an annual
rate, expressed as a percentage, equal to the market lease purchase rate
described below, minus the fees for the servicer, the origination agent and a
provider of termination value insurance to be described in the prospectus
supplement. The terms of each secured note will provide for a payment schedule
such that the outstanding principal balance of the secured note will, in no
event, on any date after the lease purchase date, exceed the difference between
(1) the stipulated market value described below of the related lease as of the
date of calculation, and (2) 3.1% of the initial discounted balance of the
related lease. GMAC, as lease servicer, calculates the initial discounted
balance of each lease as described below under "GMAC's Responsibilities as
Origination Agent and Lease Servicer."
Each holder of a secured note, by its acceptance of the secured note,
agrees that it will not, prior to the date which is one year and one day after
the payment in full of the secured note and any other obligations of or interest
in COLT, petition or otherwise cause COLT to invoke the process of any court or
governmental authority for the purpose of commencing or sustaining a case
against COLT under any federal or state bankruptcy, insolvency, reorganization
or similar law or appointing a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar official of COLT or any substantial
part of its property, or ordering the winding up or liquidation of the affairs
of COLT.
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
The primary sources of payment on each secured note are:
- payments due on the underlying lease and the proceeds of sale of the
leased vehicle at lease termination; and
- termination value insurance and a termination reserve account, which
provide coverage of losses in the event of any deficiency in the amount
of proceeds of sale of the leased vehicle at lease termination.
As a result, we will provide in each prospectus supplement information
concerning the composition of the pool of secured notes being sold to us,
information concerning the leases and leased vehicles securing the secured notes
and information concerning GMAC's experience in the United States pertaining to
delinquencies on leases of automobiles and light trucks and repossessions and
net loss information relating to its entire leased vehicle portfolio, including
leases that GMAC services but does not own. We cannot assure you that the
performance of any pool of secured notes or the delinquency, repossession and
net loss
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experience on any portfolio of leases and leased vehicles will be comparable to
prior experience.
GMAC'S RESPONSIBILITIES AS ORIGINATION AGENT AND LEASE SERVICER
GMAC is both the origination agent and the lease servicer for COLT and
receives fees for these services. GMAC, as origination agent under the lease
origination agreement, performs the following services for COLT:
- identifying automobile and light truck leases originated by General
Motors dealers and dealerships affiliated with General Motors and the
related leased vehicles that satisfy the criteria contained in the COLT
Origination Agreement and advising COLT of the leases and leased vehicles
available for purchase;
- negotiating purchases of leases and leased vehicles by COLT from the
dealers; and
- instructing the dealers to cause a certificate of title with respect to
each leased vehicle to be issued to COLT in the name of VAULT or its
designee as nominee for COLT.
GMAC also acts as the servicer for the leases and leased vehicles securing
the secured notes. GMAC, as lease servicer, is responsible for:
- ensuring COLT's compliance with all state and federal laws, tax and
otherwise, as beneficial owner and lessor of motor vehicles;
- maintaining records of the investments in leased vehicles; and
- reporting tax and other matters for the leased vehicles.
GMAC, as lease servicer, calculates the initial discounted balance of a
lease as of the date a lease is purchased. It equals the present value of all
scheduled cash flows for the lease asset, assuming that the lease residual is
paid one month after the scheduled lease end date, discounted at an interest
rate equal to the market lease purchase rate that is in effect on the lease
purchase date.
As lease servicer, GMAC calculates the stipulated market value of each
lease asset. The stipulated market value of each lease asset as of any date of
calculation is the aggregate present value of:
- each monthly payment due after the date of calculation discounted from
the payment date in the month in which the scheduled date of payment is
due back to the date of calculation; and
- residual value of the related vehicle discounted from the payment date in
the month following the month in which the scheduled lease end date
occurs back to the date of calculation;
in each case at a discount rate equal to the market lease purchase rate for
that lease.
The market lease purchase rate for any lease securing a secured note is the
discount rate used by GMAC, as origination agent, to calculate the initial
discounted balance and the stipulated market value for that lease. The market
lease purchase rate is:
- a rate of discount not lower than the lowest rate at which the lease
servicer holds itself out to dealers located in the competitive market
area as being willing to purchase leases for the lease servicer's own
account of the same vehicle make, model and lease term, without premium
or discount; and
- equal to the sum of (1) the product of the interest rate on the secured
note and 96.90%, (2) the product of the fixed rate of interest each year
used for each lease and related leased vehicle to calculate the payments
made by COLT to the swap provider
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relating to the COLT certificates and 3.10%, and (3) the basic fees for
the lease servicer, the origination agent and the termination value
insurance provider.
DESCRIPTION OF AUTO LEASE BUSINESS
UNDERWRITING OF MOTOR VEHICLE LEASES
GMAC leases automobiles and light trucks under its SmartLease plan to
retail customers through General Motors dealerships, non-General Motors
dealerships owned or financially controlled by General Motors dealerships and
affiliated leasing companies. Under the SmartLease plan, GMAC, either for itself
or as origination agent for COLT or others, purchases leases originated by its
nationwide branch system from automobile and light truck dealers under
agreements with General Motors dealers. Dealers are not responsible for the
customer's performance during the lease period nor for the value of the vehicle
at the scheduled lease end date. General Motors may elect to sponsor retail
leasing programs by supporting special lease rates and/or guaranteeing residual
values in excess of published residual guide books used by GMAC.
The leased vehicles are new and used automobiles and light trucks. The
lessees are either businesses or individuals who met GMAC's underwriting
standards at the time of the origination of the lease. Because GMAC's
underwriting standards may change over time, the leases from time to time may
have differing credit quality and the credit quality of the leases in a later
year may not be the same as the credit quality of the leases in a prior year.
The leases have been originated by participating dealers in accordance with
GMAC's requirements under dealer agreements, and have been acquired in
accordance with GMAC's underwriting standards.
Dealers forward completed credit applications, which include the terms of
the lease and essential information on the applicant, to one of GMAC's branches.
Applications are then processed through GMAC's internal credit evaluation
process, which includes obtaining credit bureau reports, checking the applicant
against GMAC files on both open and closed accounts and checking for recent
denials of credit. An applicant's credit is also analyzed through the use of
GMAC's proprietary credit- scoring model, which assists GMAC's credit analysts
with making credit-granting decisions. The credit-scoring model is periodically
reviewed and updated based on historical information and current trends.
Once the lease agreement, title application, insurance form, odometer
statement and various other forms have been completed by the General Motors
dealer, GMAC or COLT directs the dealer to title the vehicle in the name of
VAULT, as its nominee, and to record a lien in favor of GMAC as holder of the
related secured note on the vehicle's certificate of title. The dealer sends the
appropriate paperwork to the GMAC branch. The branch then enters essential
information into the centralized database after which billing statements are
automatically generated and mailed monthly to the lessee. Four processing
centers, located in Chicago, Charlotte, Los Angeles and Dallas, are responsible
for the processing of monthly payments, while the GMAC branches take charge of
all collection efforts.
Prior to transferring possession of a vehicle to a lessee, the dealer must:
- collect the first monthly payment, including a refundable security
deposit unless the lessee qualifies for SmartLease Lease Loyalty Program,
in which case both may be waived;
- verify that the lessee has purchased at least the minimum physical damage
and public liability insurance coverage; and
- ensure that all required license fees, registration fees and up-front
taxes are paid.
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Some fees and taxes may be included in the lessee's monthly payment,
including acquisition fees and documentation expenses. The dealer is responsible
for titling and registering the vehicle, unless the applicable state's motor
vehicle department permits or requires the lessee to submit the title and
registration documentation.
Each lease and related leased vehicle is purchased by GMAC, COLT or another
purchaser from the dealer for its "capitalized cost," which may exceed the
manufacturer's suggested retail price. The capitalized cost represents the
present value of the monthly payments due on a lease and the residual value
discounted at an implied lease rate. The leases provide for equal monthly
payments, and the monthly payments on leases are generally due on the same date
of each month.
Each lease agreement provides that the lessor may terminate the lease and
retake the vehicle if the lessee defaults. Events of default under the lease
agreement include, but are not limited to, the occurrence of the following:
- the lessee fails to make a payment when due;
- the lessee fails to maintain required insurance coverages;
- the lessee allows a person who is an excluded or restricted driver under
the insurance coverage to operate the vehicle;
- the lessee fails to maintain or repair the vehicle as required by the
lease agreement;
- the lessee violates the transfer of interest provisions of the lease
agreement;
- the lessee breaks any agreements in the lease and that breach
significantly impairs the prospect of payment, performance or realization
of the lessor's interest in the vehicle;
- the lessee made a material misrepresentation on his or her lease
agreement; or
- the lessee does any other act that is a default under a lease contract
under applicable law.
Upon default, the lessor may terminate the lease agreement and the lessee
is responsible for any payments otherwise required upon early termination of the
lease.
Each lease agreement may be terminated by the lessee at any time before its
scheduled lease end date. If a lease agreement is terminated early, the lessee
must return the vehicle to GMAC or to any reasonable address GMAC designates and
complete an odometer disclosure statement. The lessee will owe an amount equal
to the total unpaid monthly payments, less unearned lease charges, plus any
unpaid fees and taxes and charges for excess mileage and excess wear and use, to
the extent not offset by the excess of the vehicle's sales price over the
residual value of the vehicle, all as stated in the lease agreement. Each lease
agreement provides that the lessee may obtain from an independent third party a
professional appraisal of the vehicle's wholesale value that could be realized
at sale. The appraised value will be binding and used as the sales price when
determining whether or not there is any surplus.
All of the leases are closed-end leases. Under a closed-end lease, at the
end of its term, if the lessee does not elect to purchase the vehicle by
exercise of the purchase option contained in the lease agreement, the lessee is
required to return the vehicle to GMAC or any reasonable address GMAC
designates. Upon receipt of a returned vehicle, the dealer will complete an
inspection of the vehicle. As with an early termination by the lessee, the
lessee must complete an odometer disclosure statement and pay for excess
mileage, excessive wear and use and other items that may be due under the lease.
The lessee may exercise the purchase option under the lease agreement at
the scheduled termination of the lease by paying the purchase price stated in
the lease agreement. The purchase price in the lease agreement is equal to or
greater than an estimate of the fair market
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wholesale value of the vehicle at the scheduled end of the lease made when the
lease was executed.
RESIDUAL VALUES
GMAC conducts a broad market analysis of different factors that may affect
the residual values of the General Motors vehicles that it leases for itself or
for COLT, including:
- historical lease portfolio performance, including the wholesale value
performance of terminating leases, vehicle return rates and gain/loss
performance;
- current used vehicle market conditions and transaction prices;
- future product and price information from General Motors and other
manufacturers when available; and
- published residual value percentages from the Automotive Lease Guide and
from other lessors. The Automotive Lease Guide is an independent
publisher of vehicle residual value percentages and is frequently used
for comparison purposes by the vehicle leasing industry.
GMAC prepares residual value tables based in part on the results of the
market analysis described above and distributes them to its branches and
franchised dealers quarterly. The table provides residual value percentages for
each new vehicle available from General Motors for lease terms of 12 through 60
months in three month increments. If a term and corresponding residual value
percentage are not published, the dealer will interpolate the number by
averaging the nearest published data above and below the desired term. These
residual value tables may also set residuals that are higher than the residual
value suggested by the market analysis described above if GMAC or the applicable
General Motors manufacturing division considers a higher than market residual
appropriate to encourage consumers to lease vehicles. If the General Motors
division sets a higher than market residual, it will typically reimburse GMAC
for [the difference between the higher residual and a market residual]. If GMAC,
as origination agent for COLT, originates a lease that has a residual value that
is greater than the residual value for the make and model published by the
Automotive Lease Guide at the scheduled lease end date for the lease, then GMAC,
as origination agent, will reimburse the termination value insurer for its
coverage of any deficiency in proceeds of sale of the leased vehicle.
The maximum allowable residual value with respect to a new leased vehicle
is calculated by adding the sum of:
(1) the product of the appropriate residual value percentage from the
most recent quarterly table prepared by GMAC, multiplied by the total of:
(a) the manufacturer's suggested retail price for the base vehicle;
plus
(b) the manufacturer's suggested retail price for manufacturer
installed optional equipment; plus
(c) the difference between the total manufacturer's suggested
retail price of each individual option contained in a value package and
the discounted price of the value package; plus
(2) an amount equal to the residual value of specified GMAC-approved
dealer installed optional equipment based on the Automotive Lease Guide.
The sum of (1) and (2) is called the manufacturer's suggested retail price.
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INSURANCE REQUIRED TO BE MAINTAINED BY LESSEES
Each lease requires the lessee to maintain automobile bodily injury and
property damage liability insurance that must name VAULT as an additional
insured. Each lease further requires the lessee to maintain (all risks)
comprehensive and collision insurance covering damage to the leased vehicle and
naming VAULT as loss payee.
AUTO LEASE CRITERIA
GMAC, COLT or other purchasers purchase new and used leases and related
vehicles from General Motors dealers under a supplemental dealer agreement. Each
lease and related leased vehicle included as collateral for the secured notes
must meet the following eligibility criteria:
- the leased vehicle is a General Motors automobile or light truck;
- the lease has an original scheduled term of 12 to 48 months;
- the capitalized cost of the lease ranges from $0 to $200,000;
- the lease is not a single payment lease;
- the related dealer originated the lease in its ordinary course of
business;
- the lease provides for level monthly payments;
- the lease complies with applicable federal, state and local laws;
- the lease represents a binding obligation of the lessee;
- the related dealer has good title in and to the lease and the amounts due
under it;
- the related dealer has good title to the leased vehicle;
- the lease is in force and not terminated;
- the lessee is not in default under the lease;
- the lessee maintains physical damage and liability insurance policies;
- the lease and leased vehicle are legally assigned to the purchaser;
- the related dealer is located in the United States;
- the lease is originated within 30 days of the lease purchase date; and
- the related lessee pays all costs relating to taxes, insurance and
maintenance for the leased vehicle.
An origination agreement with GMAC establishes the criteria that GMAC, as
origination agent, uses in identifying lease assets included in the collateral
for the secured notes.
SERVICING OF MOTOR VEHICLE LEASES
GMAC has established operational procedures, which are modified from time
to time, for handling lease accounts that become delinquent. As servicer, GMAC
handles lease accounts included in the collateral for the secured notes that
become delinquent in the same manner as it handles its own lease accounts.
GMAC considers a lease to be past due when a lessee fails to pay at least
$25 of a scheduled monthly payment within 30 days after the due date. GMAC
employs a behavioral scoring method of collection, which statistically analyzes
past performance data to predict future payment behavior, which is used as the
basis for determining when to begin collection efforts with respect to past due
accounts.
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Generally, GMAC makes every commercially reasonable effort to preserve a
lease as a performing lease. GMAC has implemented behavioral scoring for the
purposes of improving its servicing efforts, including management of individual
lease performance and collection results. However, if a delinquency cannot be
satisfactorily resolved, the decision to repossess a leased vehicle generally
will be made before a payment is more than 40 days past due. Lessees are
typically notified of repossession on the day it is repossessed or within two
days after repossession, and are informed of any right they may have under
applicable state law to redeem their vehicles.
In some situations a lessee may become delinquent and is willing but unable
to bring the related account current. In this situation, at the discretion of
the lease servicer, but subject to specific guidelines, one or more payments
under the relevant lease may be deferred, provided that the lessee pays a
deferral fee. The deferral fees relating to the leases will be treated as
additional servicing compensation. If the lease servicer agrees to defer lease
payments, it must make advances on the deferred lease as though the lease
payments had not been deferred.
Occasionally, a lessee requests an extension of a lease contract for one or
more months during the period of time between the original specified maturity of
the lease and the time at which the lessee negotiates a new lease with respect
to a different vehicle. The lease servicer may extend the performance of the
lessee's obligations in accordance with the lease servicer's own procedures on
comparable automobile leases that it services for itself or others. If the lease
servicer extends performance on the lease, it will be obligated to make advances
on the extended lease and leased vehicle as though the lease servicer had not
extended the lease.
VEHICLE DISPOSITION PROCESS
Leased vehicles may be returned to GMAC rather than being purchased by the
lessee or a dealer at maturity or upon early termination, or may be repossessed
upon default. Concurrently, GMAC disposes of off-lease vehicles primarily
through regional automobile auctions. However, GMAC has recently instituted a
program in which selected off-lease vehicles are offered at set prices to
General Motors dealers, as applicable, through an Internet site. The prices for
vehicles offered through the Internet program are set by GMAC to approximate the
prices GMAC would expect to receive at auction and may be higher or lower than
the residual value of the leased vehicle. The primary objectives of the Internet
sales program are to reduce the time between vehicle return and ultimate
disposition and to broaden the number of prospective buyers.
Off-lease vehicles are returned to a General Motors dealer who is
responsible for reporting the return to the relevant GMAC branch and to provide
a completed GMAC approved vehicle condition checklist. The GMAC branch arranges
for transportation of the vehicle to an auction site. Based upon the vehicle
condition checklist prepared by the dealer, the GMAC branch will determine
whether to arrange for a third-party inspection of the leased vehicle at the
auction site. In addition, GMAC maintains a representative at each auction site
who also may order an inspection, if necessary. If an inspection is necessary
and the inspection determines that there is excess wear and tear, the lessee is
responsible for payment of these charges.
GMAC will make repairs and refurbishments to a vehicle only if the
refurbishment or repairs are reasonably expected to increase the net proceeds
received on disposition. Generally, this practice results in only a limited
amount of basic repairs, for example, the replacement of a battery, and
refurbishment, typically not more than an ordinary "detailing," being performed.
The return of any security deposit to a lessee will be net of any appropriate
charges for these costs and for excess mileage charges. However, GMAC does not
always require a security deposit under its leases.
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In most cases, vehicles are transported to the auction site within
approximately 10 days of GMAC receiving notice that the vehicle has been
returned to a dealer, and the disposition of the vehicle at auction typically
occurs within approximately four weeks thereafter. However, various
circumstances can cause these periods to be longer than the norm. For example,
the failure of a dealer to report in a timely manner the return of a vehicle,
the bankruptcy of a lessee, a delay in obtaining title documentation or the
decision to send a vehicle to a more distant auction site may delay sale of the
vehicle beyond the typical time frame. In addition, the GMAC sales
representative may decide to delay the sale of a vehicle if the bids received at
auction are not sufficient.
GMAC disposes of the majority of its off-lease vehicles, not purchased at
termination, through official General Motors auctions which are open to General
Motors dealers only. Although a GMAC branch will typically send vehicles to the
same regional auction site(s), occasionally vehicles are sent to a more distant
location if a higher auction price is reasonably expected to be obtained after
taking into account any increased transportation costs. Currently, the auctions
typically receive a fixed fee per vehicle for their services in addition to the
costs of any transportation, repairs and refurbishment performed by them. GMAC
estimates that the average expenses associated with auction sales range from
$150 to $300 per vehicle.
The GMAC sales representative at the auction site, in coordination with
GMAC headquarters staff, is responsible for handling GMAC's decisions with
respect to the vehicles sold at the auction, including arranging for
inspections, authorizing the approved repairs and refurbishment and determining
whether bids received at auction should be accepted.
VEHICLE MAINTENANCE; EXCESS WEAR AND TEAR AND EXCESS MILEAGE
Each lease provides that the lessee is responsible for all maintenance,
repair, service and operating expenses of the leased vehicle. In addition, the
lessee is responsible under the related lease for all damage to the leased
vehicle and for its loss, seizure or theft. At the scheduled maturity date of
the lease, if the lessee does not purchase the leased vehicle, the lease
requires the lessee to pay GMAC the estimated cost to repair any damage to the
vehicle that is deemed to be "excessive wear and use." Excessive wear and use
generally includes items such as inoperative mechanical and electrical parts,
damage to the body, lights, trim or paint, and missing equipment, parts and
accessories, and similar items.
Each lease also specifies a selected mileage level per year, which is one
of the factors taken into account by GMAC in establishing the residual value for
a leased vehicle. If the lessee does not purchase the leased vehicle at the end
of the lease term, the lease requires the lessee to pay GMAC an excess mileage
charge, ranging from $0.15-$0.20 for each mile the vehicle has been driven in
excess of the selected mileage level.
WEIGHTED AVERAGE LIFE OF THE SECURITIES
The primary source of payment on a pool of secured notes will be the leases
and leased vehicles securing that pool. As a result, the weighted average life
of the securities issued by any trust will generally be influenced by the rate
at which the leases securing that pool terminate, causing a prepayment on the
related secured notes. All of the leases are terminable at any time without
penalty to the lessee. The rate of early termination of automotive leases is
influenced by a variety of economic, social and other factors, including the
fact that a lessee generally may not sell or transfer the leased vehicle without
the consent of the lease servicer.
Early payment in full of a lease will occur upon an early termination of
that lease. Although early terminations are primarily caused by the early return
or purchase of leased
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vehicles by lessees, early termination may also include liquidation due to a
default under the lease.
In addition, payments made by the lease servicer as a result of a purchase
by the lease servicer of the lease from COLT due to a breach of a representation
or warranty of the lease servicer under the lease origination agreement will be
treated by the lease servicer as an early termination of the lease.
Upon early termination of the underlying lease, the related secured note
will be prepaid in full on the next distribution date, regardless of the stated
maturity of the secured note. A secured note may also be paid in full prior to
maturity as a result of a repurchase by the secured note servicer due to a
breach of a representation or warranty under the secured note pooling and
servicing agreement or by us due to a breach of a representation or warranty
under the secured note trust sale and servicing agreement.
Any reinvestment risk resulting from prepayment of secured notes will be
borne entirely by the holders of securities.
If there is a partial prepayment on a lease, these amounts will not be
applied to prepay the related secured note. Instead, the lease servicer will
retain these amounts and apply them to pay principal and interest on the related
secured note as these amounts become due and payable until that lease is
terminated and the secured note is due and payable in full.
All of the leases securing the secured notes have been or will be acquired
from dealers using GMAC's underwriting standards. We can make no assurance that
the leases securing the secured notes will experience the same rate of early
termination or default as GMAC's historical early termination or loss experience
with respect to leases in its serviced portfolio. Moreover, there can be no
assurance that the lease servicer will make an advance or, if made, that the
advance will be sufficient to pay in full any series of notes or class of
certificates on the final scheduled distribution date for that series or class.
If the lease servicer does not make an advance, the secured note servicer is
required to make an advance. The termination value insurer may also be required
to make advances if not made by the lease servicer, to the extent described in
the prospectus supplement. However, there can be no assurance that either of
these advances will be made or, if made, will be sufficient to pay in full any
series of notes or class of certificates on the targeted maturity date for that
series or class. Therefore, any series or class of securities issued by a trust
may mature significantly later than its targeted maturity date.
USE OF PROCEEDS
We will use the net proceeds from the sale of the securities to purchase
secured notes from GMAC unless otherwise provided in the related prospectus
supplement.
THE NOTES
GENERAL
With respect to each trust, one or more classes of notes will be issued
under 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 related
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.
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Unless otherwise specified in the related prospectus supplement, each class
of notes issued by a trust will initially be represented by one or more notes,
in each case registered in the name of the nominee of DTC, in the United States,
or Cedelbank or Euroclear, in Europe, 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 in
book-entry form only. We have 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 in this prospectus or in the related prospectus supplement, no
noteholder will be entitled to receive a physical certificate representing a
note. All references in this prospectus to actions by noteholders refer to
actions taken by DTC upon instructions from its participating organizations. All
references in this prospectus 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 "Information Regarding the Securities--Book-Entry Registration" and
"--Definitive Securities" in this prospectus.
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 on
them. A series may include one or more classes of notes called strip notes,
entitled to (1) principal payments with disproportionate, nominal or no interest
payments or (2) 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 subsequent 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
on notes of all classes within a series of notes in respect of interest will
have the same priority. Under certain circumstances, the amount available for
those 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. In that case, each affected class of noteholders will
receive their ratable share, based upon the aggregate amount of interest due to
that 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 this prospectus.
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 of principal and interest, of each 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 that
class. Notes legally and/or beneficially owned by us or our affiliates will be
entitled to equal and proportionate benefits
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under the related indenture, except that those notes that are both legally and
beneficially owned by us or our affiliates will be deemed not to be outstanding
for the purpose of determining whether the requisite percentage of noteholders
have given any request, demand, authorization, direction, notice, consent or
other action under the related documents. If more than one class of notes in a
series is issued and the rights of the classes are different with respect to
voting on any matters, including giving any request, demand, authorization,
direction, notice, consent or other action under the related documents, those
rights will be described in the related prospectus supplement.
THE INDENTURE
A form of indenture has been filed as an exhibit to the registration
statement of which this prospectus forms a part. We will provide a copy of the
applicable indenture (without exhibits) upon request to a holder of notes issued
under that indenture.
Modification of Indenture Without Noteholder Consent. Each trust and
related indenture trustee (on behalf of that trust) may, without consent of the
related noteholders, enter into one or more supplemental indentures for any of
the following purposes:
- to correct or amplify the description of the collateral or add additional
collateral;
- to provide for the assumption of the notes and the indenture obligations
by a permitted successor to the trust;
- to add additional covenants for the benefit of the related noteholders;
- to convey, transfer, assign, mortgage or pledge any property to or with
the indenture trustee;
- to cure any ambiguity or correct or supplement any provision in the
indenture or in any supplemental indenture that may be inconsistent with
any other provision of the indenture or any supplemental indenture or in
any other related document;
- 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
will be necessary and permitted to facilitate the administration by more
than one indenture trustee;
- to modify, eliminate or add to the provisions of the indenture in order
to comply with the Trust Indenture Act of 1939, as amended; and
- 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 that indenture; provided that any action specified in
this clause will 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, unless otherwise specified in the related prospectus supplement, with the
consent of the holders of a majority in principal amount of the outstanding
notes affected, 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.
The supplemental indenture may not be modified or amended without the
consent of the holder of each outstanding related note affected to:
- change the due date of any installment of principal of or interest on any
note or reduce the principal amount, the interest rate specified or the
redemption price with respect to any note or change any place of payment
where, or the coin or currency in which, any note or any interest is
payable or modify any of the provisions of the indenture in a
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manner as to affect the calculation of the amount of any payment of
interest or principal due on any note on any payment date;
- impair the right to institute suit for the enforcement of certain
provisions of the indenture regarding payment;
- reduce the percentage of the aggregate principal amount of the
outstanding notes the consent of the holders of which is required for any
supplemental indenture to become effective 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 under it and their consequences
as provided for in the indenture;
- modify any of the provisions of the indenture regarding the voting of
notes held by us, the related trust, any other obligor on the notes, or
any affiliate of any of them;
- reduce the percentage of the aggregate outstanding principal amount of
the notes the consent of the holders of which is required to direct the
indenture trustee to sell or liquidate the assets of the related trust if
the proceeds of the sale would be insufficient to pay the principal
amount and accrued but unpaid interest on the outstanding notes;
- 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
- permit the creation of any lien ranking prior to or on a parity with the
lien of the indenture with respect to any part of the assets of the trust
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, each of
the following will be an event of default under the indenture:
- except as provided in the next item below, 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;
- any failure (1) to make any required payment of principal on the related
notes or (2) 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 the immediately preceding clause 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 that
failure (x) to the trust, to us or the servicer, as applicable, by the
indenture trustee or (y) to us 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;
- failure to pay the unpaid principal balance of any related class of notes
on or prior to the final scheduled payment date for that class; and
- certain events of bankruptcy, insolvency or receivership with respect to
the trust indicating its insolvency, reorganization under 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 therefor 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
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occurrence of an event of default unless that class of notes has a final
scheduled payment date, and then not until the final scheduled payment date for
that class of notes.
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 those notes then outstanding may declare the principal of
those notes to be immediately due and payable. That declaration may, under
certain circumstances, be rescinded by the holders of a majority in principal
amount of those notes then outstanding.
Unless otherwise specified in the related prospectus supplement, if the
notes of any series are declared due and payable on account of an event of
default, the related indenture trustee may institute proceedings to:
- collect amounts due or foreclose on trust property;
- exercise remedies as a secured party;
- sell the assets of the related trust; or
- select to have the trust maintain possession of the assets of the trust
and continue to apply collections on the related secured notes as if
there had been no declaration of acceleration.
The indenture trustee, however, is prohibited from selling the related
secured notes following an event of default, unless:
- the holders of all the outstanding related notes consent to the sale;
- the proceeds of the sale are sufficient to pay in full the principal of
and the accrued interest on the outstanding related securities at the
date of the sale; or
- there has been a default in the payment of interest or principal on the
related notes, the indenture trustee determines that the secured notes
will not continue to provide sufficient funds on an ongoing basis to make
all payments on the related notes as these payments would have become due
if these 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 related notes.
Unless otherwise specified in the related prospectus supplement, following
a declaration upon an event of default that the notes are immediately due and
payable, (1) noteholders will be entitled to ratable repayment of principal on
the basis of their respective unpaid principal balances and (2) if that event of
default resulted from a payment default, repayment in full of the accrued
interest on and unpaid principal balances of the notes will be made prior to any
further distribution of interest on the related 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 related 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 those 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 that
request. Subject to the provisions for indemnification and certain limitations
contained in the indenture, the holders of a majority in aggregate principal
amount of the outstanding notes of a trust, voting together as a single class,
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 aggregate principal amount of those notes then outstanding, voting
together as a single class, may, in certain cases, waive any default with
respect thereto, except a default in the payment
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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 those 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:
- that holder previously has given to the indenture trustee written notice
of a continuing event of default;
- the holders of not less than 25% in aggregate principal amount of the
outstanding notes of the series, voting together as a single class, have
made written request of the indenture trustee to institute a proceeding
in its own name as indenture trustee;
- those holder or holders have offered the indenture trustee reasonable
indemnity;
- the indenture trustee has for 60 days failed to institute a proceeding;
and
- no direction inconsistent with that written request has been given to the
indenture trustee during the 60-day period by the holders of a majority
in aggregate principal amount of those outstanding notes.
If an event of default occurs and is continuing with respect to any trust
and if it is known to the indenture trustee, the indenture trustee will mail to
each noteholder of that trust notice of the event of default within 90 days
after it occurs. Except in the case of a failure to make any required payment of
principal of or interest on any note, the indenture trustee may withhold the
notice beyond that 90-day period if and so long as it determines in good faith
that withholding the notice is in the interests of noteholders.
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 termination of the related trust agreement,
institute against the related trust or us, any bankruptcy, reorganization or
other proceeding under any federal or state bankruptcy or similar law.
Neither the indenture trustee nor the owner trustee in their individual
capacities, nor any holder of a certificate including, without limitation, us,
nor any of their or our 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 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:
- the entity formed by or surviving the consolidation or merger is
organized under the laws of the United States, any state or the District
of Columbia;
- the entity expressly assumes the trust's obligation to make due and
punctual payments on the notes and the performance or observance of every
agreement and covenant of the trust under the indenture;
- no event of default has occurred and is continuing immediately after the
merger or consolidation;
- 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 rating the notes or certificates as a result of the
merger or consolidation;
- any action necessary to maintain the lien and security interest created
by the related indenture has been taken; and
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- the trust has received an opinion of counsel to the effect that the
consolidation or merger would have no material adverse tax consequence to
the trust or to any related noteholder or certificateholder.
No trust will, except as expressly permitted by the related indenture, the
transfer and servicing agreements or related documents for that trust:
- sell, transfer, exchange or otherwise dispose of any of the assets of the
trust;
- 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 Internal Revenue Code or applicable state law) or assert any
claim against any present or former holder of the notes because of the
payment of taxes levied or assessed upon the trust;
- dissolve or liquidate in whole or in part;
- 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 the indenture except
as may be expressly permitted by the indenture; or
- 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 of it, or any interest or
proceeds of it.
Except as specified in the related prospectus supplement, a trust may not
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 under the related notes and indenture or otherwise in accordance with
the related documents for that trust.
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.
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 those notes or, with certain limitations, upon
deposit with the indenture trustee of funds sufficient for the payment in full
of all of those 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 that time as all
payments in respect of certificate balance and interest due to the
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 indenture trustee. The trust may also remove the indenture
trustee if the indenture trustee ceases to be eligible to continue under the
indenture or if the indenture trustee becomes insolvent or otherwise becomes
incapable of acting. In those circumstances, the trust will be obligated to
appoint a successor indenture
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trustee. The holders of a majority of the aggregate principal amount of the
outstanding notes 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 indenture trustee does not become effective until
acceptance of the appointment by the successor indenture trustee.
THE CERTIFICATES
GENERAL
With respect to each trust, one or more classes of certificates may be
issued under 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 certificates issued by each trust may be offered by this prospectus and the
related prospectus supplement or may be sold in transactions exempt from
registration under the Securities Act of 1933 or retained by us or our
affiliates. 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 related 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 will
initially be represented by a single certificate registered in the name of the
nominee of DTC, except as set forth below. We have been informed by DTC that
DTC's nominee will be Cede. Accordingly, Cede is expected to be the holder of
record of any offered certificates that are not retained by us. Unless otherwise
specified in the related prospectus supplement, any certificates offered under
any prospectus supplement will be available for purchase in minimum
denominations of $25,000 and integral multiples of $1,000 in excess of that
amount in book-entry form only and resales or other transfers of the
certificates will not be permitted in amounts of less than $25,000. Unless and
until definitive certificates are issued under the limited circumstances
described in this prospectus or in the related prospectus supplement, no
certificateholder, other than us, will be entitled to receive a physical
certificate representing a certificate. In that case, all references in this
prospectus to actions by certificateholders refer to actions taken by DTC upon
instructions from the participants and all references in this prospectus 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. Certificates owned by us
or our affiliates will be entitled to equal and proportionate benefits under the
trust agreement, except that, unless all those certificates are owned by us and
our affiliates, those certificates will be deemed not to be outstanding for
purposes of determining whether the requisite percentage of certificateholders
have given any request, demand, authorization, direction, notice, consent or
other action under the related agreements, other than commencement by the trust
of a voluntary proceeding in bankruptcy as described in "The Transfer and
Servicing Agreements--Insolvency Events."
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 us any bankruptcy,
reorganization or other proceeding under any federal or state bankruptcy or
similar law.
DISTRIBUTIONS OF INTEREST AND CERTIFICATE BALANCE
The timing and priority of distributions, seniority, allocations of loss,
pass-through rate and amount or method of determining distributions with respect
to certificate balance and
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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
called a distribution date, and will be made prior to distributions with respect
to certificate balance. A series may include one or more classes of certificates
called strip certificates entitled to (1) distributions in respect of
certificate balance with disproportionate, nominal or no interest distributions,
or (2) 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 certificates, 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 that 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 of that principal, of each class will
be as set forth in the related prospectus supplement.
INFORMATION REGARDING THE SECURITIES
BOOK-ENTRY REGISTRATION
Unless otherwise specified in the related prospectus supplement, each class
of securities offered by this prospectus will be represented by one or more
certificates registered in the name of Cede, as nominee of the Depository Trust
Company. Unless otherwise specified in the related prospectus supplement,
securityholders may hold beneficial interests in securities through the DTC, in
the United States, or Cedelbank or the Euroclear System, in Europe or Asia,
directly if they are participants of those systems, or indirectly through
organizations which are participants in those systems.
No securityholder will be entitled to receive a certificate representing
that person's interest in the securities, except as set forth below. Unless and
until securities of a class are issued in fully registered certificated form,
known as definitive securities, under the limited circumstances described below,
all references in this prospectus to actions by noteholders, certificateholders
or securityholders will refer to actions taken by DTC upon instructions from DTC
participants, and all references in this prospectus to distributions, notices,
reports and statements to noteholders, certificateholders or securityholders
will refer to distributions, notices, reports and statements to Cede, as the
registered holder of the securities, for distribution to securityholders in
accordance with DTC procedures. As such, it is anticipated that the only
noteholder, certificateholder or securityholder will be Cede, as nominee of DTC.
Securityholders will not be recognized by the related trustee as noteholders,
certificateholders or securityholders as those terms will be used in the
relevant agreements, and securityholders will only be permitted to exercise the
rights of holders of securities of the related class indirectly through DTC and
DTC participants, as further described below.
The Depository Trust Company is a limited purpose trust company organized
under the laws of the State of New York, a "banking organization" within the
meanings of New York
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Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code and a "clearing
agency" registered under Section 17A of the Exchange Act. DTC was created to
hold securities for its participating members and to facilitate the clearance
and settlement of securities transactions between DTC participants through
electronic book-entries, eliminating the need for physical movement of
certificates. DTC participants include securities brokers and dealers, banks,
trust companies and clearing corporations which may include underwriters, agents
or dealers with respect to securities of any class or series. 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
DTC participant, either directly or indirectly known as indirect participants.
A securityholder, as used in this prospectus, will mean a holder of a
beneficial interest in a book-entry security. Unless otherwise specified in the
related prospectus supplement, securityholders that are not DTC participants or
indirect participants but desire to purchase, sell or otherwise transfer
ownership of, or other interests in, securities may do so only through DTC
participants and indirect participants.
Because DTC can only act on behalf of DTC participants, who in turn act on
behalf of indirect participants and certain banks, the ability of
securityholders to pledge securities to persons or entities that do not
participate in the DTC system, or to otherwise act with respect to those
securityholders may be limited due to the lack of a physical certificate for the
securities.
The information in the section concerning DTC and DTC's book-entry system
has been obtained from sources that we believe to be reliable, but for which we
assume no responsibility for the accuracy.
DTC participants will receive a credit for the securities on DTC's records.
The ownership interest of each securityholder will in turn be recorded on
respective records of the DTC participants and indirect participants.
Securityholders will not receive written confirmation from DTC of their
purchase, but securityholders are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their
holdings, from the DTC participant or indirect participant through which the
securityholder entered into the transaction. Transfers of ownership interests in
the securities of any class will be accomplished by entries made on the books of
DTC participants acting on behalf of securityholders.
To facilitate subsequent transfers, all securities deposited by DTC
participants with DTC will be registered in the name of Cede, a nominee of DTC.
The deposit of securities with DTC and their registration in the name of Cede
will effect no change in beneficial ownership. DTC will have no knowledge of the
actual securityholders and its records will reflect only the identity of the DTC
participants to whose accounts such securities are credited, which may or may
not be the securityholders. DTC participants and indirect participants will
remain responsible for keeping account of their holdings on behalf of their
customers. While the securities of a series are held in book-entry form,
securityholders will not have access to the list of securityholders of that
series, which may impede the ability of securityholders to communicate with each
other.
Conveyance of notices and other communications by DTC to DTC participants,
by DTC participants to indirect participants and by DTC participants and
indirect participants to securityholders will be governed by arrangements among
them, subject to any statutory or regulatory requirements as may be in effect
from time to time.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among DTC
participants on whose
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behalf it acts with respect to the securities and is required to receive and
transmit payments of principal of and interest on the securities. DTC
participants and indirect participants with which securityholders have accounts
with respect to the securities similarly are required to make book-entry
transfers and receive and transmit the payments on behalf of their respective
securityholders.
DTC's practice is to credit DTC participants' accounts on each distribution
date in accordance with their respective holdings shown on its records, unless
DTC has reason to believe that it will not receive payment on that distribution
date. Payments by DTC participants and indirect participants to securityholders
will be governed by standing instructions and customary practices, as is the
case with securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of that DTC
participant and not of DTC, the related indenture trustee or owner trustee, or
any paying agent appointed by them, and our responsibility or that of the
servicer, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of principal of and interest on each class of
securities to DTC will be the responsibility of the related indenture trustee or
trustee, or any paying agent, disbursement of those payments to DTC participants
will be the responsibility of DTC and disbursement of payments to the related
securityholders will be the responsibility of DTC participants and indirect
participants of DTC. As a result, under the book-entry format, securityholders
may experience some delay in their receipt of payments. DTC will forward those
payments to its DTC participants which thereafter will forward them to indirect
participants or securityholders.
DTC has advised us that it will take any action permitted to be taken by a
securityholder only at the direction of one or more DTC participants to whose
account with DTC the securities are credited. Additionally, DTC has advised us
that it will take such actions with respect to specified percentages of the
securityholders' interest only at the direction of and on behalf of DTC
participants whose holdings include undivided interests that satisfy such
specified percentages. DTC may take conflicting actions with respect to other
undivided interests to the extent that actions are taken on behalf of DTC
participants whose holdings include those undivided interests.
Neither DTC nor Cede will consent or vote with respect to the securities.
Under its usual procedures, DTC will mail an "Omnibus Proxy" to the related
indenture trustee or trustee as soon as possible after any applicable record
date for the consent or vote. The Omnibus Proxy will assign Cede's consenting or
voting rights to those DTC participants to whose accounts the related securities
are credited on that record date. The record date will be identified in a
listing attached to the Omnibus Proxy.
In addition to holding notes through DTC participants or indirect
participants of DTC in the United States as described above, holders of
book-entry notes may hold their notes through Cedelbank or Euroclear in Europe
if they are participants of those systems, or indirectly through organizations
which are participants in them.
Cedelbank and Euroclear will hold omnibus positions on behalf of their
participants through customers' securities accounts in Cedelbank's and
Euroclear's names on the books of their respective depositaries which in turn
will hold those positions in customers' securities accounts in the depositaries'
names on the books of DTC.
Transfers between Cedelbank participants and Euroclear participants will
occur in accordance with their respective rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly through
DTC, on the one hand, and directly or indirectly through Cedelbank participants
or Euroclear participants, on the other hand, will be effected in DTC in
accordance with DTC rules on behalf of the relevant European
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international clearing systems by its depositary. Cross- market transactions
will require delivery of instructions to the relevant European international
clearing system by the counterparty in that system in accordance with its rules
and procedures and within its established deadlines (European time). The
relevant European international clearing system will, if the transaction meets
its settlement requirements, deliver instructions to its depositary to take
action to effect final settlement on its behalf by delivering or receiving
securities in DTC, and making or receiving payment in accordance with normal
procedures for same-day funds settlement applicable to DTC. Cedelbank
participants and Euroclear participants may not deliver instructions directly to
the depositaries.
Because of time-zone differences, credits of securities received in
Cedelbank or Euroclear as a result of a transaction with a participant will be
made during subsequent securities settlement processing and dated the business
day following the DTC settlement date. Those credits or any transactions in
those securities settled during processing will be reported to the relevant
Euroclear or Cedelbank participants on that business day. Cash received in
Cedelbank or Euroclear as a result of sales of securities by or through a
Cedelbank participant or a Euroclear participant to a DTC participant will be
received with value on the DTC settlement date but will be available in the
relevant Cedelbank or Euroclear cash account only as of the business day
following settlement in DTC. For information with respect to tax documentation
procedures, see "Federal Income Tax Considerations--The Notes--Tax Consequences
to Foreign Noteholders" in this prospectus.
Cedelbank is incorporated under the laws of Luxembourg as a professional
depository. Cedelbank holds securities for its participating organizations known
as Cedelbank participants and facilitates the clearance and settlement of
securities transactions between Cedelbank participants through electronic
book-entry changes in accounts of Cedelbank participants, eliminating the need
for physical movement of certificates. Transactions may be settled in Cedelbank
in any of 28 currencies, including United States dollars. Cedelbank provides to
Cedelbank participants, among other things, services for safekeeping,
administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. Cedelbank interfaces with domestic markets
in several countries. As a professional depository, Cedelbank is subject to
regulation by the Luxembourg Monetary Institute. Cedelbank participants are
recognized financial institutions around the world, including underwriters,
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations and may include the underwriters. Indirect
access to Cedelbank is also available to others, such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Cedelbank participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for participants of
Euroclear and to clear and settle transactions between those Euroclear
participants through simultaneous electronic book-entry delivery against
payment, eliminating the need for physical movement of certificates and any risk
from lack of simultaneous transfers of securities and cash. Transactions may now
be settled in any of 29 currencies, including United States dollars. Euroclear
includes various other services, including securities lending and borrowing and
interfaces with domestic markets in several countries generally similar to the
arrangements for cross-market transfers with DTC described above. Euroclear is
operated by the Brussels, Belgium office of Morgan Guaranty Trust Company of New
York, the Euroclear Operator, under contract with Euro-clear Clearance Systems
S.C., a Belgian cooperative corporation, the Cooperative. All operations are
conducted by the Euroclear Operator, and all Euroclear securities clearance
accounts and Euroclear cash accounts are accounts with the Euroclear Operator,
not the Cooperative. The Cooperative establishes policy for Euroclear on behalf
of Euroclear participants. Euroclear participants include banks (including
central banks),
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securities brokers and dealers and other professional financial intermediaries
and may include the underwriters. Indirect access to Euroclear is also available
to other firms that clear through or maintain a custodial relationship with a
Euroclear participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and the applicable Belgian
law, referred to collectively as the "Terms and Conditions." The Terms and
Conditions govern transfers of securities and cash with Euroclear, withdrawals
of securities and cash from Euroclear, and receipts of payments with respect to
securities in Euroclear. All securities in Euroclear are held on a fungible
basis without attribution of specific certificates to specific securities
clearance accounts. The Euroclear Operator acts under the Terms and Conditions
only on behalf of Euroclear participants, and has no record of or relationship
with persons holding through Euroclear participants.
Distributions with respect to notes held through Cedelbank or Euroclear
will be credited to the cash accounts of Cedelbank participants or Euroclear
participants in accordance with the relevant system's rules and procedures, to
the extent received by its depositary. These distributions will be subject to
tax reporting in accordance with relevant United States tax laws and
regulations. Cedelbank or the Euroclear Operator, as the case may be, will take
any other action permitted to be taken by a noteholder under the indenture or
other related document on behalf of a Cedelbank participant or Euroclear
participant only in accordance with its relevant rules and procedures and
subject to its depositary's ability to effect such actions on its behalf through
DTC.
Although DTC, Cedelbank and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of notes among participants of DTC,
Cedelbank and Euroclear, they are under no obligation to perform or continue to
perform those procedures and they may be discontinued at any time.
Except as required by law, neither the trust, us, the servicer, 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, by Cedelbank or by Euroclear in Europe, or for
maintaining, supervising or reviewing any records relating to the beneficial
ownership interests.
DEFINITIVE SECURITIES
Unless otherwise specified in the related prospectus supplement, any notes
and certificates originally issued in book-entry form 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:
- 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 those securities and the
trust is unable to locate a qualified successor;
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- the administrator or trustee or us, at its or our option, elects to
terminate the book-entry system through DTC; or
- after the occurrence of an event of default or a servicer default,
holders representing at least a majority of the outstanding principal
amount of those 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
those 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 will 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 securities representing the securities
and receipt of instructions for re-registration, the appropriate trustee will
reissue these securities as definitive notes or definitive certificates, as the
case may be, to the holders.
Distributions of principal of, and interest on, the definitive securities
will 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. Those
distributions will be made by check mailed to the address of the 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 the definitive security at the office or
agency specified in the notice of final distribution to the holders of that
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 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 that 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. Each statement to
be delivered to noteholders will include the information set forth below as to
the notes with respect to the payment date or the period since the previous
payment date on those notes, as applicable. Each statement to be delivered to
certificateholders will include the information set forth below as to the
certificates with respect to that distribution date or the period since the
previous distribution date, as applicable:
- the amount of the distribution allocable to principal of each class of
the notes and to the certificate balance of each class of certificates;
- the amount of the distribution allocable to interest on or with respect
to each class of securities;
- the aggregate secured note value as of the close of business on the
preceding distribution date and as of the current distribution date, and
the principal distributable amount for that distribution date;
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- 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
principal payments on that date;
- the amount of outstanding secured note servicer advances on that date;
- the amount of the total servicing fee paid to the secured note servicer
for the prior month or months, as the case may be;
- the interest rate or pass-through rate for the next period for any class
of notes or certificates with variable or adjustable rates;
- the amount, if any, distributed to noteholders and certificateholders
from amounts on deposit in the reserve account or from other forms of
credit enhancement;
- the balance of the reserve account, if any, on that date, after giving
effect to changes to it on that date;
- the aggregate stipulated market value of the lease assets securing the
secured notes; the auction turn-in rate and the residual realization
ratio for the leases held by [COLT]; and
- the percentage coverage then being applied to each lease asset to
determine the amount of available termination value insurance, the base
amount of termination value insurance and the maximum amount of
termination value insurance then available for all the lease assets held
by COLT and the percentage of all the lease assets represented by the
lease assets securing the secured notes.
Each amount under the first, second, seventh, ninth and tenth item listed
above 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 related trustees
will mail to each holder of a class of securities who at any time during that
calendar year has been a securityholder, and received any payment on the
securities, a statement containing certain information for the purposes of that
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 DTC participants rather than from the trustees.
THE TRANSFER AND SERVICING AGREEMENTS
Except as otherwise specified in the related prospectus supplement, the
following summary describes certain terms of:
(1) the secured note pooling and servicing agreement under which we
will purchase secured notes from GMAC and the servicer for the secured
notes will agree to service the secured notes;
(2) the secured note trust sale and servicing agreement under which a
trust will acquire the secured notes from us and agree to the servicing of
those secured notes by the secured note servicer;
(3) the trust agreement under which the trust will be created and
certificates of the trust will be issued; and
(4) the administration agreement under which GMAC will undertake
administrative duties with respect to the trust.
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These agreements are referred to as 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. We will
provide a copy of the transfer and servicing agreements, without exhibits, to
holders of securities upon written request to: General Motors Acceptance
Corporation, 3044 West Grand Boulevard, Detroit, Michigan 48202. 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 this summary.
SALE AND ASSIGNMENT OF SECURED NOTES
On the closing date specified in the related prospectus supplement, GMAC
will sell and assign to us, without recourse, its entire interest in a pool of
secured notes, including its security interests in the related leases and leased
vehicles, under a secured note pooling and servicing agreement. On the closing
date, we will transfer and assign to the applicable trust, without recourse, our
entire interest in the related secured notes, including our security interests
in the related leases and leased vehicles, under a secured note trust sale and
servicing agreement between us, the secured note servicer and the trust. Each
secured note in a trust will be identified in a schedule that will be on file at
the locations set forth in an exhibit to the related secured note trust sale and
servicing agreement. The trust will, concurrently with the transfer and
assignment, execute and deliver the related notes and certificates to us in
exchange for the secured notes. Except as set forth in the related prospectus
supplement, we will sell the related securities offered by this prospectus which
may or may not include all securities of a series, to the underwriters named in
the related prospectus supplement.
In each secured note pooling and servicing agreement, GMAC will represent
and warrant to us, among other things, that:
- each secured note was originated to fund a portion of the purchase price
of the related lease; has or will create a valid, binding and enforceable
first priority security interest in favor of GMAC in the related lease
which is assignable by GMAC to us; contains customary and enforceable
provisions so as to render the rights and remedies of the holder of the
secured note adequate for realization against the collateral of the
benefits of the security; and will yield interest at the rate established
in the secured note;
- each related lease represents the genuine, legal, valid and binding
payment obligation in writing of the related lessee, enforceable by the
holder in accordance with terms of the lease, except as enforceability
may be limited by bankruptcy, insolvency, reorganization or similar laws
affecting the enforcement of creditors' rights in general and by equity,
regardless of whether the enforceability is considered in a proceeding in
equity or at law;
- no related lease has been satisfied, subordinated, canceled, terminated
or rescinded;
- there has been no default, breach, violation or event permitting a lessor
to terminate under the terms of any related lease, and no event has
occurred and is continuing that with notice or the lapse of time or both
would constitute a default, breach, violation or event permitting the
lessor to terminate under the terms of any lease, and none of the dealer,
the origination agent or GMAC, as servicer, has waived any of these
rights;
- each related lessee is required to maintain physical damage and liability
insurance policies of the type that the origination agent requires in
accordance with its customary underwriting standards for the purchase of
automotive leases;
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- no related lease was originated in, or is subject to the laws of, any
jurisdiction the laws of which would make the sale, transfer and
assignment of that lease unlawful;
- each related lease is underwritten in substantial conformance with
underwriting guidelines applied to similar leases originated by the
origination agent for its own account and on behalf of the issuer of the
secured notes;
- the dealer selling each related lease is located in the United States and
each related lessee has a billing address located in the United States;
- each related lease is a triple net lease that requires the related
lessee, or another person other than the owner of the related leased
vehicle to pay all costs relating to taxes, insurance and maintenance
with respect to the related leased vehicle;
- each leased vehicle which secures a secured note is a new automobile or
light truck manufactured by or for General Motors, or is a used
automobile or light truck manufactured by or for General Motors, provided
that the number of used vehicles as of any date of determination is no
greater than 10% of the number of all vehicles securing secured notes;
- no right of rescission, setoff, counterclaim or defense has been asserted
or threatened with respect to any related lease;
- there are, to the best of GMAC's knowledge, no liens or claims which have
been filed for work, labor or materials affecting any related leased
vehicle;
- all UCC and other filings and/or actions necessary in any jurisdiction to
give us and GMAC a first priority perfected ownership or security
interest, as the case may be, in the secured notes and in the leases and
leased vehicles have been made;
- there is only one original executed copy of each related lease;
- the lowest lease rate of any related lease is 0%; and
- each related lease has a monthly payment that is due in the calendar
month following the calendar month in which it was purchased from the
dealer.
In the secured note trust sale and servicing agreement, we will assign
these representations and warranties to the trust. We will also represent and
warrant to the trust that we have taken no action that would cause GMAC's
representations and warranties to be false in any material respect.
If any of the above representations and warranties with respect to any
secured note or related lease or leased vehicle that materially and adversely
affects the interests of the related securityholders are breached, we will
repurchase, or will enforce the obligation of GMAC under the secured note
pooling and servicing agreement to repurchase, the secured note from the
noteholder as of the last day of the second collection period following the
discovery of the breach unless we or GMAC cure the breach in all material
respects. The repurchase will be the sole remedy for any breach. If this occurs,
we will pay an amount equal to the remaining unpaid principal balance of the
secured note, together with all accrued and unpaid interest on the secured note
to the date of payment.
In each secured note trust sale and servicing agreement, the secured note
servicer will covenant that:
- it will not impair the rights of the noteholders; and
- it will not create or permit to exist any lien on any secured note that
arises from any act of the secured note servicer or with respect to which
the servicer has any payment liability.
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As of the last day of the second, or, if the secured note servicer so
elects, the first, month after discovery by the secured note servicer, the owner
trustee or the indenture trustee of a breach of any of the covenants set forth
above that materially and adversely affects any secured note, unless the breach
is cured in all material respects, the secured note servicer will, for each
affected secured note, pay an amount equal to the remaining unpaid principal
balance of the secured note, together with all accrued and unpaid interest on
the secured note to the date of payment, plus, as of the payment date, all
unpaid out-of-pocket expenses reasonably incurred in connection with the
collection of amounts due under the secured note. This repurchase obligation
constitutes the sole remedy available to the trust, the indenture trustee, the
owner trustee, the noteholders and the certificateholders for any uncured
breach.
In the lease origination agreement, GMAC, as origination agent for COLT,
makes representations and warranties as to the leases and leased vehicles
acquired by COLT. As of the second payment date following the discovery of any
breach of these representations and warranties that materially and adversely
affects the interests of the COLT certificateholders or noteholders, GMAC as
origination agent will purchase the lease and leased vehicle from COLT unless
GMAC cures the breach. This purchase will be the sole remedy available against
the origination agent for any breach. GMAC will pay an amount to purchase the
lease and leased vehicle equal to the total claim for that lease asset net of
any outstanding amounts advanced by the lease servicer. The total claim on a
lease asset equals the sum of:
- the stipulated market value of the lease asset;
- the unpaid amount of any monthly payment that is due and payable;
- all outstanding advances by the lease servicer on the lease asset;
- to the extent not included above, any accrued and unpaid (1) interest on
the related secured note, (2) lease servicing fees, (3) termination value
fees, (4) the fixed rate swap payment to the swap provider for COLT and
(5) basic origination fees; and
- all unpaid out-of-pocket expenses reasonably incurred to collect amounts
due under the lease or to sell the related leased vehicle.
The total claim on a lease asset advanced by GMAC as origination agent must
defray all the costs and expenses related to the lease asset, including fees of
the lease servicer, the termination value insurer and the origination agent as
well as principal and interest on the COLT certificates and the related secured
note.
In the lease servicing agreement, the lease servicer has made the following
covenants, among others:
- it will not release the interest of VAULT in any leased vehicle;
- it will not impair the rights of the COLT certificateholders or
noteholders; and
- it may, in accordance with its normal procedures with respect to
comparable automotive leases that it services for itself or others,
accept amended performance of the lessee's obligations under the lease,
provided that the lease servicer makes advances on that lease and leased
vehicle as though it had not been modified.
As of the second payment date following discovery of a breach of any of
these covenants, the lease servicer will purchase from COLT any lease and leased
vehicle materially and adversely affected by a breach, unless the lease servicer
cures the breach in all material respects. The lease servicer's repurchase will
be the sole remedy for any breach. The lease servicer will pay an amount for the
repurchase of the lease and leased vehicle equal to the total claim for that
lease asset as described above. Under the lease trust sale and servicing
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agreement, these payments of the total claim on lease assets will, in part,
provide collections on the secured notes.
Under each secured note trust sale and servicing agreement, GMAC will act
as custodian to maintain custody and control, as the trust's agent, of the
related secured notes while in electronic form, and any other documents relating
to the secured notes. The secured notes are intended to be issued in electronic
form. However, if the secured notes are issued in definitive form, COLT will
agree that COLT will follow the instructions of the indenture trustee as to the
secured notes and will deliver possession of any and all secured notes in
definitive form to the indenture trustee (or to a custodian as the indenture
trustee directs). Uniform Commercial Code financing statements reflecting the
sale and assignment of the secured notes to the trust and the pledge of the
secured notes by the trust to the indenture trustee will be filed, and the
servicer's accounting records and computer files will reflect that sale and
assignment.
ADDITIONAL SALES OF SECURED NOTES
In addition to secured notes that we buy from GMAC on a closing date as
described above, we may also buy secured notes from GMAC to transfer to a trust
on one or more later dates for that trust under a separate purchase agreement.
We would buy those receivables on substantially the same terms as under the
pooling and servicing agreement for the initial closing. We would then sell
secured notes that we have bought from GMAC to a trustee, for the benefit of one
of the trusts, pursuant to a sale and servicing agreement. On the initial
closing date, the trust will apply the net proceeds received from the sale of
its notes and certificates to pay us for the related secured notes being sold,
and, to the extent specified in the related prospectus supplement, to make a
deposit in a pre-funding account and initial deposits in other trust accounts.
If there is a pre-funding account, then we will buy additional secured notes
from GMAC, and sell them to the trust from time to time during a pre-funding
period, as described further in the related prospectus supplement. If we receive
a tax opinion confirming the tax status of the trust, we may also sell
additional secured notes to a trust at a later closing date and, concurrently,
with this sale, execute and deliver additional notes and certificates of the
trust to fund the purchase of the additional secured notes.
ACCOUNTS
With respect to each trust, the secured note servicer will establish and
maintain the following accounts:
- a collection account or 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 secured notes will be
deposited;
- a note distribution 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 the noteholders will be deposited and from which all
distributions to the noteholders will be made; and
- a certificate distribution 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 the certificateholders will be deposited
and from which all distributions to those certificateholders will be
made.
For any series of securities, funds in the collection account, the note
distribution account and any reserve account and other accounts designated as
such in the related prospectus supplement will be invested as provided in the
secured note trust sale and servicing agreement
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in eligible investments. Eligible investments are generally limited to
investments acceptable to the rating agencies then rating the related notes and
certificates. Except as described below or in the related prospectus supplement,
eligible investments are limited to obligations or securities that mature no
later than the business day preceding the next distribution date or, in the case
of the note distribution account, the next payment date for the notes. To the
extent permitted by the rating agencies then rating the notes and certificates,
funds in any reserve account may be invested in related notes that will not
mature prior to the next payment date with respect to the notes. Except as
otherwise specified in the related prospectus supplement, these notes will not
be sold to meet any shortfalls unless they are sold at a price equal to or
greater than their unpaid principal balance if, following the sale, the amount
on deposit in the reserve account would be less than the required reserve
account balance. Thus, the amount of cash in any reserve account at any time may
be less than the required balance of the reserve account. If the amount required
to be withdrawn from any reserve account to cover shortfalls in collections on
the secured notes (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 trust accounts, net of losses and investment expenses,
will be payable to the secured note servicer.
Each of the trust accounts must be either:
- a segregated account with an eligible institution; or
- 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 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 that account, so long as any of
the securities of the depository institution have a credit rating from
each rating agency then rating that institution in one of its generic
rating categories which signifies investment grade.
Eligible institution means, with respect to a trust:
- the corporate trust department of the related indenture trustee or the
owner trustee, as applicable, or
- a depository institution organized under the laws of the United States of
America or any one of the states or the District of Columbia (or any
domestic branch of a foreign bank), (1) which has either a long-term
unsecured debt rating acceptable to the rating agencies then rating the
notes and certificates or a short-term unsecured debt rating or
certificate of deposit rating acceptable to those rating agencies and (2)
whose deposits are insured by the Federal Deposit Insurance Corporation
or any successor.
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
Servicing of Secured Notes. With respect to each trust, unless otherwise
provided in the related prospectus supplement, on each distribution date in a
calendar month, the servicer of the secured notes will receive a basic servicing
fee for the preceding month equal to one-twelfth of the basic servicing fee rate
specified in the related prospectus supplement multiplied by the aggregate
principal balance of all secured notes held by that trust as of the first day of
that month. Unless otherwise specified in the related prospectus supplement, on
each distribution date, the secured note servicer will also receive with respect
to each trust an
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additional servicing amount equal to the lesser of (1) the amount by which (A)
the sum of the basic servicing fee for that distribution date and all prior
distribution dates exceeds (B) additional servicing amounts paid to the secured
note servicer on all prior distribution dates and (2) the amount by which the
amount on deposit in the reserve account on that distribution date (after giving
effect to all deposits, withdrawals and payments affecting that reserve account
other than the additional servicing amounts and payments to us) exceeds the
required reserve account balance. On each distribution date, the secured note
servicer will be paid the basic servicing fee, any unpaid basic servicing fees
from all prior distribution dates and the additional servicing amount to the
extent funds are available. Unless otherwise provided in the prospectus
supplement, all servicing fees for each month, together with any portion of
servicing fees that remains unpaid from prior distribution dates, may be paid at
the beginning of that month out of collections for that month. 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 month and any
investment earnings on funds deposited in the trust accounts during a month.
The foregoing amounts with respect to each trust are intended to compensate
the secured note servicer for performing the functions of a third party servicer
of secured notes as an agent for their beneficial owner, including:
- collecting and posting all payments;
- investigating delinquencies;
- accounting for collections and furnishing monthly and annual statements
to us and any other person designated in the secured note trust sale and
servicing agreement with respect to distributions;
- generating federal income tax information;
- giving, on a timely basis, any required notices or instructions to us or
the custodian; and
- performing the other duties specified in the secured note trust sale and
servicing agreement or in any other transaction document.
These amounts also will reimburse the secured note servicer for 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 pool of secured notes.
Servicing of Underlying Leases and Leased Vehicles. In addition to the
servicing of the pool of secured notes, GMAC also acts as servicer for the
related leases and leased vehicles under a lease asset servicing agreement with
COLT. GMAC will agree under each secured note trust sale and servicing agreement
that we and the trust are third-party beneficiaries of the lease asset servicing
agreement and may enforce GMAC's obligations under the lease asset servicing
agreement as if we and the trust had been signatories to it.
Under the lease asset servicing agreement, GMAC will receive a monthly
basic servicing fee equal to one-twelfth of 1.75% of the then stipulated market
value of each lease asset. GMAC will also receive a supplemental servicing fee
in the form of all investment earnings and any late fees, prepayment charges and
other administrative fees and expenses or similar charges, and other proceeds
from terminated lease assets. On each distribution date, GMAC will receive the
basic servicing fee and the supplemental servicing fee out of collections from
the leases and related leased vehicles.
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GMAC will be entitled to receive all supplemental servicing fees when and
as paid without any obligation to COLT, the owner trustee or the owner of any
program account, and it will not have any obligation to deposit that amount in
any program account.
The lease servicing fees described above are intended to compensate GMAC
for performing the function of a third-party servicer of leases and leased
vehicles, including:
- collection and posting of all payments;
- responding to inquiries of lessees;
- investigating delinquencies;
- sending payment coupons to lessees;
- reporting tax information to lessees;
- policing the vehicles;
- monitoring the status of insurance policies with respect to the lessees
and the vehicles;
- accounting for collections and furnishing monthly and annual statements
with respect to distributions; and
- performing the other duties specified in the lease asset servicing
agreement or in any other related document.
These amounts will also reimburse GMAC for its expenses incurred in
connection with it responsibilities under the lease servicing agreement and
other lease documents for taxes, the fees of various transaction parties
relating to the creation of the secured notes, accounting fees, outside auditor
fees, data processing costs and other costs incurred in connection with
administering the leases and the leased vehicles.
COLLECTIONS
With respect to each trust, the secured note servicer will deposit all
payments received on the related secured notes and all proceeds of these secured
notes collected during each calendar month into the related collection account
not later than two business days after receipt. However, at any time that (1)
GMAC is the secured note servicer, (2) there exists no servicer default and (3)
either (A) the short-term unsecured debt of the secured note servicer is rated
at least "A-1" by Standard & Poor's and "P-1" by Moody's, or (B) certain
arrangements are made which are acceptable to the rating agencies, the secured
note servicer may retain those amounts until the related distribution date.
Pending deposit into the collection account, collections may be employed by the
secured note servicer at its own risk and for its own benefit and will not be
segregated from its own funds.
The lease servicer will retain any partial prepayment on a lease that it
receives prior to its scheduled payment date other than a prepayment in full
received in connection with early termination of a lease. The lease servicer
will include the partial prepayment in distributions to the related secured note
on the distribution date after the scheduled payment date for the lease with
respect to which the partial payment was made.
To the extent the lease servicer retains partial prepayments as described
above and advances payments as described below, on each distribution date each
secured note will receive a distribution that reflects either (a) the payment
that was due on the related lease in the previous month or (b) payment in full
of the remaining lease obligation, which will result in the full prepayment of
the related secured note.
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SERVICER ADVANCES
Secured Note Servicer Advances. The secured note servicer for each trust
will make an advance in the amount equal to any shortfalls of collections on the
secured notes as of the last day of each month, for each secured note other than
those which have been repurchased due to a breach of a representation, warranty
or covenant. The secured note servicer will deposit any advances on each
distribution date.
The secured note servicer will be obligated to make an advance on a secured
note only to the extent that (1) the secured note servicer, in its sole
discretion, has reasonably determined that that advance will be recoverable from
later collections or recoveries on that secured note, and (2) the lease servicer
has failed to make the advances required under the lease asset servicing
agreement as described below.
Subject to the release of its claim for reimbursement, the secured note
servicer will be reimbursed for outstanding servicer advances with respect to a
secured note from later payments received on that secured note. On any
distribution date when the secured note servicer determines that it will not
recover any outstanding servicer advances on any secured note from collections
and recoveries on that secured note, the trust will reimburse the secured note
servicer from any collections and recoveries from other secured notes held by
the trust at the time outstanding servicer advances were made.
Lease Servicer Advances. The lease servicer will make an advance under the
lease asset servicing agreement to cover shortfalls of collections on the leases
and leased vehicles.
As of the last day of each month, for each lease asset other than a lease
asset that has been repurchased due to a breach of a representation, warranty or
covenant, if there is a shortfall in the monthly payment on that lease asset,
after
- application of payments ahead on the lease assets applied in the current
month;
- allocation of amounts paid when the lessee pays less than the full amount
required or pays an amount to reimburse an outstanding advance; or
- if the lease terminated or expired during the prior month and, as of the
end of that month, there is a shortfall in disposition proceeds received
that are needed to reduce the total claim on that lease asset to zero,
then the lease servicer will advance an amount equal to that shortfall or
remaining balance, as the case may be, plus, in the case of a remaining balance,
any unpaid interest. The lease servicer will deposit any advances on each
distribution date.
The lease servicer will be obligated to make an advance on a lease asset
only:
- to the extent that the lease servicer, in its sole discretion, has
reasonably determined that that advance will be recoverable from later
collections or recoveries on that lease asset or from the termination
value insurance or available amounts on deposit in the termination
reserve account; or
- the lease servicer has agreed to accept extended or modified performance
from the lessee.
Subject to the release of its claim for reimbursement, the trust will
reimburse the lease servicer for outstanding advances on a lease asset from the
following sources:
- later payments by or on behalf of the lessee on that lease asset;
- collections of disposition proceeds with respect to that lease asset; and
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- any other collections and recoveries, including any amounts that may be
collected from the dealer on that lease asset if that lease asset
terminates prior to its scheduled lease end date and the lease rate
exceeds the market lease purchase rate.
At such time as the lease servicer determines that it will not recover any
outstanding advances on any lease asset from collections and recoveries on that
lease asset, the trust will reimburse the lease servicer from any collections
and recoveries from other lease assets securing the secured notes held by the
same holder at the time outstanding advances were made.
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) on the notes and distributions in respect of certificate balance
and interest (or, where applicable, of certificate balance or interest only) on
the certificates 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. The
secured note value and the principal distributable amount will be defined in the
related prospectus supplement.
With respect to each trust, on each payment date and distribution date,
collections on the secured notes 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 that 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
of those arrangements, 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; or
- third party insurance payments or other support, cash advances or
deposits or other arrangements, including interest rate or other swaps,
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.
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The presence of any 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 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. If losses occur that exceed the
amount covered by any credit enhancement or that 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
credit enhancement will be exhausted by the claims of securityholders of other
series.
Reserve Account. If provided in the related prospectus supplement, under
the secured note trust sale and servicing agreement, we will establish for a
series a reserve account, as specified in the related prospectus supplement,
which will be maintained with the indenture trustee for a specific trust.
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, we will fund the reserve account with an initial deposit
on the closing date in the amount set forth in the related prospectus
supplement. To the extent, if any, described in the related prospectus
supplement, the amount on deposit in the reserve account will be increased on
each distribution date after the closing date up to the required reserve account
balance described in the related prospectus supplement by depositing the amount
of collections on the related secured notes remaining on each such distribution
date after the payment of the total servicing fee payable to the secured note
servicer and the distributions and allocations to the noteholders and the
certificateholders required on that date. Unless otherwise provided in the
related prospectus supplement or agreed by us, amounts on deposit in the reserve
account after payments to noteholders, certificateholders and the secured note
servicer may be paid to us to the extent that those amounts exceed the required
reserve account balance. Upon any distribution to us of amounts from the reserve
account, neither the noteholders nor the certificateholders will have any rights
in, or claims to, those amounts.
Termination Reserve Account. COLT has established a termination reserve
account, which has been established for the benefit of all secured note holders
and which provides credit enhancement for all the pools of secured notes
financing the lease assets. The termination reserve account provides protection
to the holders of the secured notes if the total proceeds received after
termination of a lease are insufficient to pay in full the principal amount of,
and accrued and unpaid interest on, the related secured note. Termination occurs
on any lease asset when the lease servicer reasonably determines that it has
received all amounts that it will be able to collect on that lease asset, other
than from the termination reserve account and the termination value insurer. In
order to determine the amounts to be deposited in or withdrawn from the
termination reserve account, the lease servicer determines on a monthly basis
the total proceeds received on each lease and leased vehicle that is a
terminating lease asset, which consist of:
- for each lease for which termination occurred in a prior month, all
amounts received with respect to that lease and leased vehicle prior to
or during the month in which lease termination occurred to the extent not
applied in a previous month, including all
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insurance proceeds, all monthly payments and all disposition proceeds for
that lease and leased vehicle; and
- for each lease for which termination occurred in any of the three months
prior to the prior month, all amounts received with respect to that lease
and leased vehicle during the prior month.
Total proceeds do not include any excess proceeds when a lease is prepaid
early and any amounts payable to the lessee and/or any other person as required
by law.
The lease servicer then determines on a lease-by-lease basis the amount by
which the total amounts outstanding with respect to a lease and leased vehicle,
which includes the principal amount plus accrued and unpaid interest on the
related secured note, either exceeds the total proceeds for that lease and
leased vehicle or is less than the total proceeds for that lease and leased
vehicle. The lease servicer then calculates for all the leases in each pool of
secured notes the total amount of this excess or deficiency for that pool of
leases. Any excess from a pool of leases securing a pool of secured notes is
either transferred by the lease servicer to the termination reserve account or
used by the lease servicer to pay unpaid fees owing to the insurer under the
termination value insurance as described in a prospectus supplement. If there is
a deficiency in any pool of leases securing a pool of secured notes, the lease
servicer applies funds in the termination reserve account proportionately to all
the pools with deficiencies. In this way, any excesses in any pool of leases
securing a pool of secured notes are available to cover any deficiencies in any
other pool of leases securing a pool of secured notes.
If there are insufficient funds in the termination reserve account to pay
all deficiencies in each pool of leases securing a pool of secured notes, the
lease servicer calculates the amount of this deficiency on a lease-by-lease
basis after the allocations described above. Subject to the limitations of the
termination value insurance described in the prospectus supplement, the lease
servicer will then turn to the termination value insurer to obtain payment of
the remaining deficiency.
Termination Value Insurance. A termination value insurer or insurers will
provide termination value insurance for all secured notes and certificates
issued by COLT. The identity of the termination value insurer and the terms of,
and risks associated with, the termination value insurance for a pool of secured
notes will be described in the prospectus supplement.
NET DEPOSITS
As an administrative convenience during months when the secured note
servicer is permitted to hold payments on secured notes until the related
distribution date, the secured note servicer may also deposit collections, and
any payments received upon the repurchase of any secured note, for any trust for
or with respect to that month net of distributions to be made to the secured
note servicer for that trust for that month. The secured note 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 secured note servicer is not required to
remit collections on a daily basis, the secured note 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, these collections may be employed by the secured note
servicer at its own risk and for its own benefit and will not be segregated from
its own funds. On each payment date, we, the secured note servicer, the
indenture trustee and the owner trustee will make all distributions, deposits
and other remittances with respect to the notes or the note distribution
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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 month for purposes of determining other amounts required
to be distributed, deposited or otherwise remitted on that distribution date.
STATEMENTS TO TRUSTEES AND TRUST
Prior to each payment date and distribution date, with respect to each
trust the secured note servicer will provide to the indenture trustee and the
owner trustee as of the close of business on the last day of the preceding month
a statement setting forth substantially the same information as is required to
be provided in the periodic reports provided to securityholders on the date
described under "Information Regarding the Securities--Reports to
Securityholders" in this prospectus.
EVIDENCE AS TO COMPLIANCE
Each secured note 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 secured note 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 that year) with certain standards
relating to the servicing of the secured notes, the secured note servicer's
accounting records and computer files with respect to the secured notes and
certain other matters.
Each secured note 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
secured note servicer stating that the secured note servicer has fulfilled its
obligations under the secured note trust sale and servicing agreement and the
secured note pooling 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 June 30 of that year, or, if there has been a default
in the fulfillment of any such obligation, describing each default. The
certificate may be provided as a single certificate making the required
statements as to more than one secured note trust sale and servicing agreement.
Copies of these statements and certificates may be obtained by
securityholders by a request in writing addressed to the applicable indenture
trustee or owner trustee.
In each secured note trust sale and servicing agreement, we 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 default by
the secured note servicer. In addition, we 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
default by the secured note servicer.
MATTERS REGARDING THE SECURED NOTE SERVICER
Each secured note trust sale and servicing agreement will provide that GMAC
may not resign from its obligations and duties as secured note servicer
thereunder and under the secured note pooling and servicing agreement, except
upon determination that GMAC's performance of those duties is no longer
permissible under applicable law. That resignation will not become effective
until the related indenture trustee or a successor secured note
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servicer has assumed GMAC's servicing obligations and duties under the related
transfer and servicing agreements.
Each secured note trust sale and servicing agreement will further provide
that, except as specifically provided otherwise, neither the secured note
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 under the related transfer and servicing agreements or the related
indenture or for errors in judgment. Neither the secured note 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 secured note servicer's duties thereunder
or by reason of reckless disregard of its obligations and duties thereunder.
Each secured note trust sale and servicing agreement will further provide that
the secured note 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 that trustee's wilful
misfeasance, bad faith or negligence, except errors in judgment, in the
performance of that 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 secured note trust sale
and servicing agreement will provide that the secured note servicer is under no
obligation to appear in, prosecute or defend any legal action that is not
incidental to the secured note 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 secured note 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 and the interests of the noteholders and the
certificateholders under the agreements. In that 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 secured note servicer will
be entitled to be reimbursed out of the related collection account. Any
indemnification or reimbursement will reduce the amount otherwise available for
distribution to the noteholders and the certificateholders.
Under the circumstances specified in each secured note trust sale and
servicing agreement, any entity into which the secured note servicer may be
merged or consolidated, or any entity resulting from any merger or consolidation
to which the secured note servicer is a party, or any entity succeeding to the
business of the secured note servicer or, with respect to its obligations as
secured note 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 secured note servicer under
the secured note trust sale and servicing agreement and the secured note pooling
and servicing agreement, will be the successor of the secured note servicer
under that secured note trust sale and servicing agreement and the secured note
pooling and servicing agreement. So long as GMAC acts as secured note servicer,
the servicer may at any time subcontract any duties as secured note servicer
under any secured note trust sale and servicing agreement and the secured note
pooling and servicing agreement to any entity in which more than 50% of the
voting interests are owned, directly or indirectly, by General Motors or to any
entity that agrees to conduct those duties in accordance with the secured note
servicer's servicing guidelines and the secured note trust sale and servicing
agreement. The secured note servicer may at any time perform specific duties as
secured note servicer through subcontractors who are in the business of
servicing secured notes similar to the secured notes, provided that delegation
will not relieve the secured note servicer of its responsibility with respect to
those duties.
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SECURED NOTE SERVICER DEFAULT
Except as otherwise provided in the related prospectus supplement, a
default by the secured note servicer under each secured note trust sale and
servicing agreement will consist of:
- any failure by the secured note servicer to make any required
distribution, payment, transfer or deposit or to direct the related
indenture trustee to make any required distribution, 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 that failure by an officer of the secured note
servicer;
- any failure by the secured note servicer to observe or perform in any
material respect any other covenant or agreement in the secured note
trust sale and servicing agreement, the related secured note 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 that failure to the
secured note servicer by the indenture trustee or the owner trustee or to
the secured note servicer, 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 the certificate
balance or after discovery of that failure by an officer of the secured
note servicer;
- any representation, warranty or certification made by the secured note
servicer in the secured note trust sale and servicing agreement or in any
certificate delivered pursuant thereto proves to have been incorrect when
made and which has a material adverse effect on the rights of the related
securityholders and which effect continues unremedied for a period of 60
days after the giving of written notice of it to the secured note
servicer by the indenture trustee or the owner trustee; or
- certain events of bankruptcy, insolvency or receivership with respect to
the secured note servicer by the secured note servicer indicating its
insolvency, reorganization under bankruptcy proceedings, or inability to
pay its obligations.
Notwithstanding the foregoing, there will be no default by the secured note
servicer where the default would otherwise exist under the first item above for
a period of ten business days or under the second or third items for a period of
60 days if the delay or failure giving rise to the default was caused by an act
of God or other similar occurrence. Upon the occurrence of any of those events,
the secured note 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
secured note pooling and servicing agreement and the secured note trust sale and
servicing agreement and the secured note servicer will provide us, the indenture
trustee, the owner trustee, and the securityholders prompt notice of that
failure or delay by it, together with a description of its efforts to so perform
its obligations.
RIGHTS UPON SECURED NOTE SERVICER DEFAULT
As long as a default by the secured note servicer under a secured note
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
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certificates owned by us, the trust, GMAC or any of our or their affiliates, may
terminate all the rights and obligations of the secured note servicer under the
secured note trust sale and servicing agreement and the related secured note
pooling and servicing agreement, at which time the indenture trustee will
succeed to all the responsibilities, duties and liabilities of the secured note
servicer under those agreements and will be entitled to similar compensation
arrangements. If, however, a bankruptcy trustee or similar official has been
appointed for the secured note servicer, and no default by the secured note
servicer other than that appointment has occurred, the bankruptcy trustee or
official may have the power to prevent the indenture trustee or the noteholders
from effecting a transfer of servicing. If the indenture trustee is unwilling to
so act, it may, and if it is unable to so act, it will 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 loans or leases and which satisfies the other criteria set forth
in the secured note trust sale and servicing agreement. The indenture trustee
may make those arrangements for compensation to be paid, which in no event may
be greater than the servicing compensation to the secured note servicer under
the secured note 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, if all of
the notes have been paid in full, holders of the related certificates whose
certificates evidence not less than a majority of the outstanding certificate
balance may, on behalf of all those noteholders and certificateholders, waive
any default by the secured note servicer in the performance of its obligations
under the secured note pooling and servicing agreement and the secured note
trust sale and servicing agreement and its consequences, except a default by the
secured note servicer in making any required deposits to or payments from any of
the trust accounts or the certificate distribution account in accordance with
the secured note trust sale and servicing agreement. That waiver will not impair
those noteholders' or certificateholders' rights with respect to subsequent
defaults.
AMENDMENT
Each secured note pooling and servicing agreement, secured note trust sale
and servicing agreement, and trust agreement may be amended by the parties to
the agreements without the consent of the related noteholders or
certificateholders:
- to cure any ambiguity;
- to correct or supplement any provision therein that may be defective or
inconsistent with any other provision in the agreement or in any other
related agreement;
- to add or supplement any credit, liquidity or other enhancement
arrangement 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 that 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;
- to add to our covenants, restrictions or obligations or those of the
secured note servicer, the owner trustee or the indenture trustee; or
- to add, change or eliminate any other provisions of any of these
agreements 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.
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Each of these agreements may also be amended by the parties with the
consent of the holders of at least a majority in principal amount of the then
outstanding notes and the holders of the 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 the agreement
or of modifying in any manner the rights of the noteholders or
certificateholders.
No amendment may:
- increase or reduce in any manner the amount of, or accelerate or delay
the timing of, distributions of payments that are required to be made on,
or change any interest rate, any pass through rate or the required
reserve account balance of, to any note or certificate without the
consent of the holder;
- adversely affect the rating of any series by any rating agency then
rating the notes or certificates without the consent of two-thirds of the
principal amount of the outstanding notes or the voting interests of the
outstanding certificates, as appropriate, of that series; or
- reduce the stated percentage required of noteholders or
certificateholders to consent to any of the amendments set forth above
without the consent of all of the noteholders or certificateholders, as
the case may be.
INSOLVENCY EVENTS
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 certificateholders, including
us. Under no circumstance will the owner trustee commence any such proceeding
prior to the date that is one year and one day after the termination of the
trust. In the secured note trust sale and servicing agreement, we and the
secured note servicer will agree that we will not, for a period of one year and
one day after the final distribution on the related notes and certificates,
institute against the related trust any bankruptcy, reorganization or other
proceeding under any federal or state bankruptcy or similar law.
CERTIFICATEHOLDER LIABILITY; INDEMNIFICATION
Under each trust agreement, certificateholders will be entitled to the same
limitation of personal liability extended to stockholders of for profit
corporations under the Delaware General Corporation Law.
Each secured note trust sale and servicing agreement will provide that the
secured note servicer will indemnify the indenture trustee and the owner trustee
from and against any loss, liability, expense, damage or cost arising out of or
incurred in connection with the acceptance or performance of its duties under
the transaction documents, including any judgment, award, settlement, reasonable
attorneys' fees and other costs or expenses incurred in connection with the
defense of any actual or threatened action, proceeding or claim. Neither the
indenture trustee nor owner trustee will be so indemnified if those acts or
omissions or alleged acts or omissions constitute willful misfeasance bad faith
or negligence by the indenture trustee or the owner trustee, as applicable. In
addition, the secured note servicer will indemnify the trust, the indenture
trustee, the owner trustee, the noteholders and the certificateholders against
losses arising out of the negligence, willful misfeasance or bad faith of the
servicer in the performance of its duties under the transaction documents or by
reason of its reckless disregard of its obligations and duties set forth in the
agreements. The secured note servicer will also indemnify those parties against
any taxes that may be asserted against them with respect to the transactions
contemplated in the secured note trust sale and servicing
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agreement, other than taxes with respect to the sale of secured notes or
securities, the ownership of secured notes or the receipt of payments on
securities or other compensation.
TERMINATION
Each trust will terminate upon the final distribution 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 secured
note trust sale and servicing agreement, including in the case of the exercise
by the secured note servicer of its repurchase option described below. Upon
termination of the trust and payment or deposit 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 us.
Unless otherwise provided in the related prospectus supplement, in order to
avoid excessive administrative expense, the secured note servicer, or its
successor, will be permitted at its option to purchase from each trust, as of
the last day of any month, if the then outstanding aggregate principal balance
of the secured notes held by the trust is 10% or less of the initial aggregate
principal balance of secured notes, all remaining secured notes and other trust
assets at a price equal to the aggregate principal amount outstanding on those
secured notes, plus accrued and unpaid interest on the secured notes to the date
of that payment, plus the appraised value of any other property held as part of
the trust. This amount will in no event be less than the sum of the outstanding
notes and certificates plus accrued and unpaid interest on them. As further
described in the related prospectus supplement, any related outstanding notes
will be redeemed at the same time. Then, the distribution to the
certificateholders of all amounts required to be distributed to them under 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 the
noteholder's note at an office or agency of the indenture trustee specified in
the notice of redemption or the 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, will enter into an administration
agreement with each trust and the related indenture trustee under which the
administrator will agree, to the extent provided in the administration
agreement, to provide the notices and to perform other administrative
obligations required by the related indenture. With respect to each trust,
unless otherwise specified in the prospectus supplement, as compensation for the
performance of the administrator's obligations under the administration
agreement and as reimbursement for its related expenses, the administrator will
be entitled to an administration fee in an amount equal to $1,500 per month. The
servicer will pay the administration fee.
LEGAL ASPECTS OF THE SECURED NOTES AND
THE LEASES SECURING THE SECURED NOTES
LIMITED SCOPE OF DISCUSSION
Although GMAC originates all leases in California, Illinois, Michigan, New
York and Pennsylvania, in some instances the lessees may live in other states at
the time of origination or may move to another state after the time of
origination. Consequently, the leased vehicles securing the secured notes may be
operated and registered in states other than California, Illinois, Michigan, New
York and Pennsylvania and the related certificates of title may be
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recorded in those other states. The following is a discussion of certain legal
aspects of the leases and leased vehicles securing the secured notes and does
not purport to address the laws of every state in which a leased vehicle may be
operated or registered or in which title may be recorded.
INSOLVENCY RELATED MATTERS
Although no assurance can be given, we believe that in the unlikely event
of a bankruptcy of GMAC, the secured notes would not be treated as part of
GMAC's bankruptcy estate. In addition, we have taken steps in structuring the
transactions contemplated in this prospectus that are intended to make it
unlikely that the voluntary or involuntary application for relief by GMAC under
any insolvency laws will result in consolidation of our assets and liabilities,
those of VAULT, the owner of the leases and leased vehicles securing the secured
notes or the trust with those of GMAC. Delays and possible reductions in
payments on the notes and certificates could occur if:
- a court concluded that our assets and liabilities, or those of COLT, the
beneficial owner of the leases and leased vehicles securing the secured
notes, or the trust should be consolidated with those of GMAC in the
event of the application of applicable insolvency laws to GMAC;
- a filing were made under any insolvency law by or against us, VAULT, the
owner of the leases and leased vehicles securing the secured notes, or
the trust; or
- an attempt were made to litigate any of the foregoing issues.
Any perfected security interest of the indenture trustee in all or part of
the property of the trust could be subordinate to claims of any trustee in
bankruptcy or debtor-in-possession in the event of our bankruptcy prior to any
perfection of the transfer of the assets transferred by us to the trust under
the secured note trust sale and servicing agreement.
SECURITY INTEREST IN SECURED NOTES AND LEASES AND LEASED VEHICLES THAT SECURE
THE SECURED NOTES
With respect to each trust, the indenture trustee will be the holder of a
first priority security interest in the secured notes for the benefit of the
holders of the notes and, to the extent provided in the indenture, the
certificates. Each secured note is secured by a first priority security interest
in the underlying lease and leased vehicle, running to the benefit of the holder
of the secured note. The parties to the transaction will take the following
steps to effect the perfection of these security interests.
Security Interests in the Secured Notes. The secured notes are issued by
COLT to GMAC in electronic form only, as an administrative convenience, and,
unless otherwise provided in a prospectus supplement, will not exist in
definitive form. Although it is not anticipated that the secured notes will ever
be in definitive form, COLT is obligated to deliver secured notes in definitive
form upon the request of the holder of the secured notes, including the
indenture trustee. Until secured notes are released from the lien of the
indenture, COLT will agree to deliver secured notes in definitive form only upon
the direction of the indenture trustee. The indenture trustee will perfect its
security interest in the secured notes assuming that they may be either in
electronic or definitive form and, under the UCC, considered to be "chattel
paper," "uncertificated or certificated securities," "instruments," "accounts"
or "general intangibles."
We will perfect our ownership interest in the secured notes by GMAC's sale
of the secured notes to us and by COLT's consent and acknowledgment to us that
it recognizes us as the purchaser of the secured notes. We will also perfect our
interest by filing a UCC-1
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financing statement with the appropriate state authorities in the jurisdictions
in which the principal places of business of GMAC are located, Michigan and New
York.
The trust will perfect its ownership/security interest in the secured notes
by our transfer of the secured notes to the trust and by COLT's consent and
acknowledgment to the trust that it recognizes the trust as the transferee of
the secured notes. The trust will also perfect its interest by filing a UCC-1
financing statement with the appropriate state authorities in the jurisdictions
in which our principal places of business are located, Delaware, Michigan and
New York.
The indenture trustee will perfect its security interest in the secured
notes both by filing a UCC-1 financing statement with the appropriate state
authorities in the jurisdiction in which the principal place of business of the
trust is located, in this case Delaware, and by having control of the secured
notes through an agreement with COLT under which COLT will consent to and
acknowledge the granting of the first priority security interest in the secured
notes to the indenture trustee and will agree that, if definitive secured notes
are issued, COLT will follow the instructions of the indenture trustee as to the
secured notes and will deliver possession of the secured notes to the indenture
trustee (or to a custodian as the indenture trustee directs). In addition, this
grant will be reflected on COLT's books and records. By taking these steps, the
secured notes will have been effectively transferred to the indenture trustee
and the indenture trustee will have perfected its security interest in the
secured notes if the transfer of the secured notes is considered the transfer or
sale of an interest in chattel paper, uncertificated or certificated securities
or instruments, or the transfer of an interest in general intangibles, under the
UCC. If the transfer of the secured notes from GMAC to us is considered the sale
of a general intangible, UCC perfection requirements would not govern that
transfer. However, the sale of an interest in general intangibles under New York
[, Michigan and Delaware] common law will not require that any other action be
taken to transfer a perfected ownership interest in the secured notes.
Under the UCC, a successor holder of secured debt will maintain the
original holder's valid lien on the collateral securing that debt. Therefore, to
the extent that GMAC has a valid lien on the underlying leases and leased
vehicles securing the secured notes, the indenture trustee, as pledgee and
successor holder of the debt evidenced by the secured notes, will maintain
GMAC's lien on this collateral.
GMAC's security interest in the leases and leased vehicles securing the
secured notes will, moreover, be assigned and transferred by GMAC to us, by us
to the trust, and by the trust to the indenture trustee at the same time as the
interests in the related secured notes are transferred. As a precautionary step,
the UCC-1 financing statements referred to in the second through fourth
paragraphs of this section will include GMAC's lien as additional collateral
covered by these financing statements.
Security Interest in the Leases Securing the Secured Notes. Under the UCC,
the leases securing the secured notes are chattel paper. GMAC as lienholder
perfects its security interest in the leases both by filing a UCC-1 financing
statement against COLT in Delaware, the jurisdiction in which COLT's principal
place of business is located, as well as in California, Illinois, Michigan, New
York and Pennsylvania, the states where COLT leases vehicles, and by taking
possession of the leases.
Security Interest in the Leased Vehicles Securing the Secured Notes. Legal
title to the leased vehicles securing the secured notes is held by VAULT, as
nominee for COLT. As COLT's nominee, VAULT consents to COLT's grant of a
security interest in the leased vehicles. Under the UCC, the filing of a
financial statement is not required to perfect a security interest in property
subject to certificate of title statutes covering automobiles, unless
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the automobiles are considered to be inventory held for sale by a debtor who is
in the business of selling goods of that kind. Since it is unclear whether or
not COLT is in the business of selling automobiles, GMAC as lienholder perfects
its security interest in the leased vehicles, both by being designated as the
first lienholder on each vehicle certificate of title and by filing against
VAULT in the jurisdictions in which the principal places of business of VAULT
are located, Delaware, New York and Michigan, and against COLT in Delaware, the
jurisdiction in which COLT's principal place of business is located, as well as
in California, Illinois, Michigan, New York and Pennsylvania, the states where
COLT leases vehicles.
Limitations on Indenture Trustee's Lien. Various liens could be imposed
upon the leased vehicles, that, by operation of law, would take priority over
GMAC's and therefore, the indenture trustee's interest in these assets. These
liens could include mechanics', repairmen's and garagemen's liens and certain
liens for personal property taxes, in each case arising with respect to a
particular leased vehicle. In addition, the laws of certain states and federal
law permit governmental authorities to confiscate vehicles under certain
circumstances if they are used in unlawful activities, which may result in the
loss of a secured party's perfected security interest in the confiscated
vehicle. These liens, or the confiscation of a leased vehicle, could arise at
any time during the term of the lease, and without notice being given to the
owner trustee, the indenture trustee, the noteholders or certificateholders.
In addition, any perfected security interest of the indenture trustee in
all or part of the property of the trust could be subordinate to claims of any
trustee in bankruptcy or debtor in possession in the event of a bankruptcy of
GMAC or us prior to any perfection of the transfer of the assets transferred by
us to the trust under the secured note trust sale and servicing agreement.
REPOSSESSION OF LEASED VEHICLES SECURING THE SECURED NOTES
In the event that a default by a lessee of a leased vehicle securing a
secured note has not been cured within a certain period of time after notice,
the lease servicer will ordinarily retake possession of that leased vehicle.
Some jurisdictions require that the lessee be notified of the default and be
given a time period within which to cure the default prior to repossession.
Generally, this right to cure may be exercised on a limited number of occasions
in any one-year period. In these jurisdictions, if the lessee objects or raises
a defense to repossession, an order must be obtained from the appropriate state
court, and the vehicle must then be repossessed in accordance with that order.
Other jurisdictions, including California, Illinois, Michigan, New York and
Pennsylvania, permit repossession without notice to the lessee, but only if the
repossession can be accomplished peacefully. If a breach of the peace cannot be
avoided, judicial action is required, and the lessor typically must seek a writ
of possession or replevin in a state court action or pursue other judicial
action to repossess that leased vehicle.
After the lease servicer has repossessed a leased vehicle, it may provide
the lessee with a period of time within which to cure the default under the
lease. If by the end of that period the default has not been cured, the lease
servicer will attempt to sell the leased vehicle. As a result of those delays,
the net charged-off vehicle proceeds may be less than the remaining amounts due
under the lease at the time of default by the lessee.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of sale of the leased vehicles generally will be applied first
to the expenses of the sale and repossession and then to the satisfaction of
amounts due under the related lease. While some states impose prohibitions or
limitations on deficiency judgments, including California, Illinois, Michigan,
New York and Pennsylvania if the net proceeds from sale do not cover the full
amount of amounts due under the related lease, a deficiency judgment can
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be sought in those states, including California, Illinois, Michigan, New York
and Pennsylvania that do not prohibit directly or limit those judgments. In some
states, however, including California, a lessee may be allowed an offsetting
recovery for any amount not recovered at sale because the terms of the sale were
not commercially reasonable. In any event, the deficiency judgment would be a
personal judgment against the lessee for the shortfall, and a defaulting lessee
might have little capital or sources of income available following repossession.
Therefore, in many cases, it may not be useful to seek a deficiency judgment.
Because it is a personal judgment against a lessee who may have few if any
assets remaining after the repossession, even if one is obtained, it may be
settled at a significant discount or it may be impossible to collect all or any
portion of it.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon lessors and servicers involved in consumer
leasing. The federal Consumer Leasing Act of 1976 and Regulation M, issued by
the Board of Governors of the Federal Reserve System, for example, require that
a number of disclosures be made at the time a vehicle is leased, including,
among other things, all amounts due at the time of origination of the lease, a
description of the lessee's liability at the end of the lease term, the amount
of any periodic payments, the circumstances under which the lessee may terminate
the lease prior to the end of the lease term and the capitalized cost of the
vehicle and a warning regarding possible charges for early termination.
California, Illinois, Michigan, New York and Pennsylvania have adopted Article
2A of the Uniform Commercial Code, which provides protection to lessees through
certain implied warranties and the right to cancel a lease contract relating to
defective goods. In addition, California enacted a comprehensive vehicle leasing
statute that, among other things, regulates the disclosures to be made at the
time a vehicle is leased. Courts have applied general equitable principles in
litigation relating to repossession and deficiency balances. These equitable
principles may have the effect of relieving a lessee from some or all of the
legal consequences of a default.
In several cases, consumers have asserted that the self-help remedies of
lessors violate the due process protection provided under the Fourteenth
Amendment to the Constitution of the United States. Courts have generally found
that repossession and resale by the creditor do not involve sufficient state
action to afford constitutional protection to consumers.
California, Illinois, Michigan, New York and Pennsylvania have adopted
so-called "Lemon Laws" providing redress to consumers who purchase or lease a
vehicle which remains out of conformance with its manufacturer's warranty after
a specified number of attempts to correct a problem or after a specific time
period. A successful claim under a Lemon Law with respect to a leased vehicle
could result in, among other things, the termination of the related lease and/or
the refunding to the related lessee of some portion of the payments paid by
them.
Under each secured note pooling and servicing agreement, GMAC will
represent to us that each lease complies with all requirements of law in all
material respects. We will assign that representation, among others, to the
related trust under each secured note trust sale and servicing agreement.
Accordingly, if a lessee has a claim against the trust for violation of any law
and that claim materially and adversely affects the related trust's interest in
a secured note, this violation may create an obligation to repurchase the
secured note unless the breach is cured in all material respects.
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
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with or affect the ability of a secured party to enforce its rights under an
automobile or light truck lease. For example, if a lessee commences a bankruptcy
proceedings, the lessor's receipt of related payments due under the lease is
likely to be delayed. In addition, a lessee who commences bankruptcy proceedings
might be able to assign the lease to another party even though the lease
prohibits assignment.
FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
The following is a summary of the material United States federal income tax
considerations relevant to the purchase, ownership and disposition of the notes
and certificates. This summary is based upon current provisions of the Internal
Revenue Code of 1986, existing and proposed Treasury Regulations under the Code
and published rulings and court decisions. There are no cases or Internal
Revenue Service rulings on similar transactions involving both debt and equity
interests issued by a trust with terms similar to those of the notes and
certificates. As a result, there can be no assurance that the IRS will not
challenge the conclusions reached in this summary, and no ruling from the IRS
has been or will be sought on any of the issues discussed below. Furthermore,
the current tax laws and the current regulations, rulings and court decisions
may be changed, possibly retroactively. If changes occur, the accuracy of the
statements and conclusions set forth in this summary, as well as the tax
consequences to noteholders and certificateholders could be affected.
Mayer, Brown & Platt has prepared or reviewed the statements under the
heading "Federal Income Tax Considerations" and is of the opinion that these
statements discuss all material federal income tax consequences to investors
generally of the purchase, ownership and disposition of the notes and
certificates. However, the following discussion does not discuss the unique tax
consequences of the purchase, ownership and disposition of the notes and
certificates by investors that are given special treatment under the federal
income tax laws, including:
- banks and thrifts;
- insurance companies;
- regulated investment companies;
- dealers in securities;
- holders that will hold the offered certificates as a position in a
"straddle" for tax purposes or as a part of a "synthetic security,"
"conversion transaction" or other integrated investment comprised of the
offered certificates and one or more other investments;
- foreign investors;
- trusts and estates; and
- pass-through entities, the equityholders of which are any of the above.
Additionally, the discussion regarding the notes and certificates is
limited to the federal income tax consequences to the initial investors and not
to a purchaser in the secondary market, to investors who are citizens or
residents of the United States, and to investors who hold the notes or
certificates as "capital assets" within the meaning of Section 1221 of the Code.
We recommend that prospective investors consult with their own tax advisors
about the federal, state, local, foreign and any other tax consequences to them
of the purchase, ownership and disposition of the notes and certificates.
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The following discussion addresses notes and certificates falling into four
general categories:
- 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 secured notes;
- certificates representing interests in a trust that the seller, the
servicer and the applicable certificateholders will agree to treat as
equity interests in a grantor trust;
- certificates including strip certificates and strip notes, representing
interests in a trust which the seller, the servicer and the applicable
holders will agree to treat as equity interests in a tax partnership; and
- certificates, all of which are owned by the seller, representing
interests in a trust which the seller and the servicer will agree to
treat as a division of the seller and hence disregarded as a tax
non-entity, in each case for purposes of federal, state and local income
and franchise taxes.
Certificates issued by a tax trust are referred to as trust certificates,
certificates (including strip certificates) and strip notes issued by a tax
partnership are referred to as partnership certificates, and certificates issued
by a tax non-entity are referred to as tax non-entity certificates. The
prospectus supplement for each series of certificates will indicate whether the
related trust fund is a tax trust, tax partnership or tax non-entity. Because
the seller will treat each tax trust as a grantor trust, each tax partnership as
a partnership, and each tax non-entity as a division of seller, 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, tax partnership or tax non-entity. For purposes of this discussion,
references to a noteholder are to the beneficial owner of a note, and references
to a certificateholder or a holder are to the beneficial owner of a trust
certificate, partnership certificate or tax non-entity certificate, as the
context may require.
THE NOTES
Characterization as Debt. For 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 the
notes are issued by a tax trust or a tax partnership or a tax nonentity, Mayer,
Brown & Platt, special tax counsel to the seller, will deliver its opinion to
the effect that the 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," "Partnership Certificates--Classification of
Partnerships and Partnership Certificates" or "Tax Non-Entity
Certificates--Classification of Tax Non-Entity and Tax Non-Entity
Certificates"for a discussion of the potential federal income tax consequences
to you if the IRS were successful in challenging the characterization of a tax
trust, a tax partnership or a tax non-entity, as applicable, for federal income
tax purposes.
Treatment of Stated Interest. Based on the opinion that the notes will be
treated as debt, and assuming the notes are not issued with original issue
discount, the stated interest on a note will be taxable to a you as ordinary
income when received or accrued in accordance with your method of tax
accounting. Interest received on a note may constitute "investment income"
subject to certain limitations of the Internal Revenue Code on the deductibility
of investment interest expense.
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Original Issue Discount. Unless indicated in the related prospectus
supplement, no series of notes will be issued with original issue discount. In
general, original issue discount is the excess of the stated redemption price at
maturity of a debt instrument over its issue price, unless that excess falls
within a statutorily defined de minimis exception. A note's stated redemption
price at maturity is the aggregate of all payments required to be made under the
note through maturity except qualified stated interest. Qualified stated
interest is generally interest that is unconditionally payable in cash or
property other than debt instruments of the issuer, at fixed intervals of one
year or less during the entire term of the instrument at certain specified
rates. The issue price will be the first price at which a substantial amount of
the notes are sold, excluding sales to bond holders, brokers or similar persons
acting as underwriters, placement agents or wholesalers.
If a note were treated as being issued with original issue discount, a you
would be required to include original issue discount in income as interest over
the term of the note under a constant yield method. In general, original issue
discount 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 original issue discount 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 you if you use the accrual method of accounting.
However, if you use the cash method, you may be required to report income on the
notes in advance of the receipt of cash attributable to that income. Even if a
note has original issue discount falling within the de minimis exception you
must include original issue discount in income proportionately as principal
payments are made on the note.
If you hold a note with a fixed maturity date not more than one year from
the issue date of that note, you will generally not be required to include
original issue discount on the note in income as it accrues, provided that you
are 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 Internal
Revenue Code, or provided that you do not hold the instrument as part of a
hedging transaction, or as a stripped bond or stripped coupon. Instead, if you
hold a short-term note, you would include the original issue discount accrued on
the note in gross income upon a sale or exchange of the note or at maturity, or
if the note is payable in installments, as principal is paid on the note. You
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 the expense
exceeds the sum of the interest income, if any, and original issue discount
accrued on the note. However, you may elect to include original issue discount
in income as it accrues on all obligations having a maturity of one year or less
that you hold in that taxable year or thereafter, in which case the deferral
rule of the preceding sentence will not apply. For purposes of this paragraph,
original issue discount accrues on a short-term note on a ratable, straight-line
basis, unless you irrevocably elect, under regulations to be issued by the
Treasury Department to apply a constant interest method to the note, using the
your yield to maturity and daily compounding.
If you purchase a note after its initial distribution at a discount that
exceeds a statutorily defined de minimis amount, you will be subject to the
market discount rules of the Internal Revenue Code, and if you purchase a note
at a premium, you will be subject to the bond premium amortization rules of the
Internal Revenue Code.
Disposition of Notes. If you sell a note, you will recognize gain or loss
in an amount equal to the difference between the amount realized on the sale and
your adjusted tax basis in the note. Your adjusted tax basis in the note will
equal your cost for the note, increased by any original issue discount and
market discount previously included in your income with respect to
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the note and decreased by any bond premium previously amortized and any
principal payments previously received by you on the note. Your gain or loss
will be capital gain or loss if you held the note as a capital asset, except for
gain representing accrued interest or accrued market discount not previously
included in income. Capital gain or loss will be long-term if you held the note
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.
Information Reporting and Backup Withholding. Each tax trust, tax
partnership and tax nonentity will be required to report annually to the IRS,
and to each related noteholder of record, the amount of interest paid on the
notes, 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.
You will be required to provide to the related tax trust, tax partnership or tax
non-entity, under penalties of perjury, a certificate containing your name,
address, correct federal taxpayer identification number and a statement that you
are not subject to backup withholding. If you are a nonexempt noteholder and you
fail to provide the required certification, the tax trust, tax partnership or
tax nonentity will be required to withhold, from interest otherwise payable to
you, 31% of that interest and remit the withheld amount to the IRS as a credit
against your federal income tax liability.
The IRS has issued new regulations governing the backup withholding and
information reporting requirements. The new regulations are generally effective
for payments made after December 31, 2000. You should consult your tax advisors
about the impact, if any, of the new regulations.
Because the seller will treat each tax trust as a grantor trust, each tax
partnership as a partnership, each tax non-entity as a division of the seller
and all notes, except strip notes and any other series of notes specifically
identified as receiving different tax treatment 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, tax partnership or tax non-entity.
Tax Consequence 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:
- is not actually or constructively a 10% percent shareholder of a related
tax trust, tax partnership or the seller, including a holder of 10% of
the applicable outstanding certificates, or a controlled foreign
corporation with which the related tax trust, tax partnership or the
seller is a related person within the meaning of the Internal Revenue
Code, and
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- 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
inform the related tax trust or tax partnership within 30 days of the change. If
the interest were not portfolio interest or if applicable certification
requirements were not satisfied, then it would be subject to United States
federal income and withholding tax at a rate of 30% unless reduced or eliminated
under an applicable tax treaty. The IRS has amended the transition period
relating to new regulations governing backup withholding and information
reporting requirements. All existing withholding certificates or statements will
cease to be effective after December 31, 2000.
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:
- the gain is not effectively connected with the conduct of a trade or
business in the United States by the foreign person; and
- in the case of a foreign individual, 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%
of its effectively connected earnings and profits within the meaning of the
Internal Revenue Code for the taxable year, as adjusted for certain items,
unless it qualifies for a lower rate under an applicable tax treaty.
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 Internal Revenue Code. For each
series, the seller will express in the trust agreement and on the trust
certificates and you will agree by your purchase of trust certificates the
intent that, for federal, state and local income and franchise tax purposes, the
trust certificates will represent an equity interest in the tax trust.
Although tax counsel will opine that each tax trust should properly be
characterized as a grantor trust for federal income tax purposes, this 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
tax trust is not a grantor trust, the 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 that trust certificates as partners could
differ from the income reportable by the holders of trust certificates as
grantors of a grantor trust. However, it is not expected that these differences
would be material. 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. If the IRS were to contend successfully
that a tax trust is an association taxable as a corporation for federal income
tax purposes, the tax trust would be subject to federal and state income tax at
corporate rates on the income
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from the secured notes, reduced by deductions, including interest on any notes
unless the notes were treated as an equity interest. See "Partnership
Certificates--Classification of Partnerships and Partnership Certificates"
below.
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, this 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.
Grantor Trust Treatment. As a grantor trust, a tax trust will not be
subject to federal income tax. Subject to the discussion below under "Treatment
of Fees or Payment," in tax counsel's opinion that, as a certificateholder, you
will be required to report on your federal income tax return your pro rata share
of the entire income from the secured notes and any other property in the
related tax trust for the period during which you own a trust certificate,
including interest or finance charges earned on the secured notes and any gain
or loss upon collection or disposition of the secured notes, in accordance with
your method of accounting. If you use the cash method of accounting, you should
take into account your pro rata share of income as and when received by the
owner trustee. If you use an accrual method of accounting, you should take into
account your 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 you that is allocable to principal on the secured notes will
represent a recovery of capital, which will reduce the tax basis of your
undivided interest in the secured notes. In computing your federal income tax
liability, you will be entitled to deduct, consistent with your method of
accounting, your pro rata share of interest paid on any related notes,
reasonable servicing fees, and other fees paid or incurred by the related tax
trust. If you are an individual, estate or trust, the deduction for your pro
rata share of fees will be allowed only to the extent that all of your
miscellaneous itemized deductions, including the fees, exceed 2% of your
adjusted gross income. Because the servicer will not report to
certificateholders the amount of income or deductions attributable to
miscellaneous charges, you may effectively underreport your net taxable income.
See "Treatment of Fees or Payments" below for a discussion of other possible
consequences if amounts paid to the servicer exceed reasonable compensation for
services rendered.
Treatment of Fees or Payments. It is expected that income will be reported
to you on the assumption that the certificateholders collectively own a 100%
interest in all of the principal and interest derived from the related secured
notes. However, a portion of the amounts paid to the servicer or the seller may
exceed reasonable fees for services. 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 secured notes 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
on certain secured notes. As a result, those secured notes may be treated as
stripped bonds within the meaning of the Internal Revenue Code.
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If the secured notes are characterized as stripped bonds, the income of the
related tax trust allocable to you would not include the portion of the interest
on the secured notes treated as having been retained by the servicer or the
seller, as the case may be, and the tax trust's deductions would be limited to
reasonable servicing fees, interest paid on any related notes and other fees. In
addition, you would not be subject to the market discount and premium rules
discussed below with respect to the stripped secured notes, but instead would be
subject to the original issue discount rules of the Internal Revenue Code.
However, if the price at which you were deemed to have acquired a stripped
secured note is less than the remaining principal balance of the secured note by
an amount which is less than a statutorily defined de minimis amount, the
secured note would not be treated as having original issue discount. In general,
it appears that the amount of original issue discount on a secured note 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 secured
note, 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 original issue discount was de minimis under
this rule, the actual amount of discount on a secured note would be includible
in income as principal payments are received on the secured note.
If the original issue discount on a secured note were not treated as de
minimis, you would be required to include any original issue discount in income
as it accrues, regardless of when cash payments are received, using a method
reflecting a constant yield on the secured notes. It is possible that the IRS
could assert that a prepayment assumption should be used in computing the yield
of a stripped secured note. If a stripped secured note is deemed to be acquired
by you at a significant discount, a prepayment assumption could accelerate your
accrual of income.
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 secured notes. The likely effect
of this recharacterization would be to increase your current taxable income.
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 secured notes (as
discussed above). You should be treated as purchasing an interest in each
secured note 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 secured notes and other property in proportion to their fair market values
at the time of your purchase of the trust certificate.
It is believed that the secured notes were not and will not be issued with
original issue discount; therefore, a tax trust should not have original issue
discount income. However, the purchase price paid by the tax trust for the
secured notes may be greater or less than the remaining principal balance of the
secured notes at the time of purchase. If so, the secured notes will have been
acquired at a premium or market discount, as the case may be. The market
discount on a secured note 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 your share of
unrecognized accrued market discount on the related secured notes would
generally be treated as ordinary income to you. Moreover, if you acquire a trust
certificate representing an interest in secured notes acquired at a market
discount, you 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 you dispose of the trust
certificate in a taxable transaction. Instead of recognizing market discount, if
any, upon a disposition of trust certificates and
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deferring any applicable interest expense, you 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.
In the event that a secured note is treated as purchased at a premium, for
instance, the allocable portion of your purchase price for the related trust
certificate exceeds the remaining principal balance of the secured note, the
premium will be amortizable by you as an offset to interest income, with a
corresponding reduction in basis, under a constant yield method over the term of
the secured note if you make an election. This election would apply to all debt
instruments you hold during the year in which the election is made and to all
debt instruments acquired thereafter.
Disposition of Trust Certificates. You will generally be required to
recognize a capital gain or loss on a sale of trust certificates in an amount
equal to the difference between the amount realized and your tax basis in the
trust certificates sold. Your tax basis in a trust certificate will generally
equal your cost increased by any original issue discount and market discount
previously included in income, and decreased by any bond premium previously
amortized and by the amount of principal payments previously received on the
secured notes held by the related tax trust. Any gain on the sale of a trust
certificate attributable to your share of unrecognized accrued market discount
on the related secured notes would generally be treated as ordinary income to
you, unless make the special election described under discount and premium
above.
If you are 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, that 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, you fail to comply with
certain identification procedures, unless you are an exempt recipient under
applicable provisions of the Internal Revenue Code.
Tax Consequences to Foreign Trust Certificateholders. Interest attributable
to secured notes which is received by a Certificateholder which is a foreign
person will generally not be subject to the normal 30% withholding tax imposed
on these payments, provided that the certificateholder is not engaged in a trade
or business in the United States and that the certificateholder fulfills certain
certification requirements discussed above under "The Notes--Tax Consequences to
Foreign Noteholders" above.
PARTNERSHIP CERTIFICATES
Classification of Partnerships and Partnership Certificates. For each
series of certificates identified in the related prospectus supplement as
partnership certificates, the seller and the servicer will agree, and you will
agree by your purchase of 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 the 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 the 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 in this
prospectus.
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If the tax partnership were classified as an association taxable as a
corporation for federal income tax purposes, that tax partnership would be
subject to corporate income tax. Any corporate income tax could materially
reduce or eliminate cash that would otherwise be distributable on the
partnership certificates, and you could be liable for any tax that is unpaid by
the tax partnership. However, upon the issuance of each series of partnership
certificates, tax counsel will deliver its opinion generally to the effect that
the tax partnership will not be classified as an association taxable as a
corporation.
Even if a tax partnership were not classified as 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 the 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 that partnership, certain holders could suffer adverse
consequences. For example, certain 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 described above, any characterization would not result in
materially adverse tax consequences to you 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. A tax partnership will not be subject to federal
income tax, but you will be required to separately take into account your
allocated share of income, gains, losses, deductions and credits of the tax
partnership. The tax partnership's income will consist primarily of interest and
finance charges earned on the related secured notes, including appropriate
adjustments for market discount, original issue discount, and bond premium, and
any gain upon collection or disposition of the secured notes. The tax
partnership's deductions will consist primarily of interest paid or accrued on
any related notes, servicing and other fees, and losses or deductions upon
collection or disposition of the related secured notes.
The tax items of a partnership are allocable to the partners in accordance
with the Internal Revenue Code, Treasury Regulations and the partnership
agreement for 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 their allocable share of the sum of:
- the pass through rate on the related partnership certificates for the
month;
- an amount equivalent to interest that accrues during such month on
amounts previously due on the partnership certificates but not yet
distributed;
- any tax partnership income attributable to discount on the related
secured notes that corresponds to any excess of the principal amount of
the partnership certificates over their initial issue price; and
- any prepayment surplus as defined in the related prospectus supplement,
payable to the partnership certificates for that month.
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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 the 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 you will be allocated to the seller. It is
believed that the allocations to you 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 you. Moreover, even under the method
of allocation provided above, you 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
that amount. Thus, cash basis holders will in effect be required to report
income from the partnership certificates on the accrual method. 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, you may be required to
report on your tax returns taxable income that is greater or less than the
amount reported to you 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 that holder under the Internal
Revenue 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, certain additional 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 the holder being taxed on an amount of income that exceeds the
amount of cash actually distributed to the holder over the life of the tax
partnership.
Each tax partnership intends to make all tax calculations relating to
income and allocations to you on an aggregate basis. If the IRS were to require
that the calculations be made separately for each secured note, a tax
partnership might be required to incur additional expense but it is believed
that there would not be a material adverse effect on you.
Discount and Premium. It is believed that the secured notes were not and
will not be issued with original issue discount and, therefore, that a tax
partnership should not have original issue discount income. However, the
purchase price paid by the tax partnership for the related secured notes may be
greater or less than the remaining principal balance of the secured notes at the
time of purchase. If so, the secured notes will have been acquired at a premium
or market 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 secured note by secured note basis.
Each tax partnership will make an election that will result in any market
discount on the related secured notes being included in income currently as the
discount accrues over the life of the secured notes. As indicated above, a
portion of the market discount income will be allocated to you.
Section 708 Termination. Under Section 708 of the Internal Revenue 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 the tax partnership are sold
or exchanged within a 12-month period. If a termination occurs, a tax
partnership will be considered to contribute all of its assets to a new
partnership followed by a liquidation of the original tax partnership. A tax
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partnership will not comply with certain technical requirements that might apply
when a constructive termination occurs. As a result, the 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. You will generally be required to recognize a
capital gain or loss on a sale of partnership certificates in an amount equal to
the difference between the amount realized and your tax basis in the partnership
certificates sold. Your tax basis in a partnership certificate will generally
equal your cost increased by your share of the related tax partnership's income,
includible in on the income, for the current and prior taxable years and
decreased by any distributions received on the partnership certificate. In
addition, both tax basis in the partnership certificates and the amount realized
on a sale of a partnership certificate would include on the share of any related
notes and other liabilities of the tax partnership. If you acquire partnership
certificates of the same series at different prices, you may be required to
maintain a single aggregate adjusted tax basis in the partnership certificates,
and, upon a sale or other disposition of some of the partnership certificates,
allocate a pro rata portion of the 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.
If you are 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 on the partnership certificates that 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 that month. As a
result, when you purchase a partnership certificate you may be allocated tax
items which will affect your tax liability and tax basis for periods before your
actual purchase of partnership certificates.
The use of 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
owner 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 for greater (less) than its adjusted basis, 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 the tax partnership were to file an election under Section
754 of the Internal Revenue 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 this election. As a result, you might be allocated a
greater or lesser amount of tax partnership income than would be based on your
own purchase price for partnership certificates.
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Administrative Matters. For each tax partnership, the related owner trustee
is required to keep or have kept complete and accurate books of that tax
partnership. Those 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,
on IRS Form 1065 with the IRS for each taxable year of the tax partnership and
will report your allocable share of items of tax partnership income and expense
to you and to the IRS on Schedule K-1. 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. Each tax partnership will provide the Schedule K-1
information to nominees that fail to provide the tax partnership with the
information referenced in the preceding sentence and those nominees will be
required to forward that information to the beneficial owners of the related
partnership certificates. Generally, you must file tax returns that are
consistent with the information return filed by the related tax partnership or
be subject to penalties unless you notify the IRS of all inconsistencies.
The seller, as the tax matters partner for each tax partnership, will be
responsible for representing you in any dispute with the IRS. The Internal
Revenue 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 your return and,
under certain circumstances, you 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 your returns and adjustments of items not related to
the income and losses of the related tax partnership.
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-United States persons because there is no clear authority regarding that
issue under facts substantially similar to those described in this prospectus.
Although it is not expected that any tax partnership would be engaged in a trade
or business in the United States for these purposes, the tax partnership will
withhold as if it were so engaged in order to protect the 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 as if the income were effectively
connected to a United States trade or business, at a rate of 35% for foreign
holders that are taxable as corporations and 39.6% for all other foreign
holders. In determining a holder's nonforeign status, a tax partnership may
generally rely on the holder's certification of nonforeign status signed under
penalties of perjury.
Each foreign holder might be required to file a United States 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 or on new Form W-8 BEN 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 for taxes withheld by the related tax partnership, taking
the position that no taxes were due because the 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.
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Backup Withholding. Distributions made on any partnership certificates and
proceeds from the sale of those partnership certificates will be subject to a
"backup" withholding tax of 31% if, as discussed above with respect to the
notes, you fail to comply with certain identification procedures, unless you are
an exempt recipient under applicable provisions of the Internal Revenue Code.
TAX NON-ENTITY CERTIFICATES
Classification of Tax Non-Entity and Tax Non-Entity Certificates. For
certificates identified in the related prospectus supplement as tax non-entity
certificates and which are entirely owned by the seller, the seller and the
servicer will agree, under the check-the-box Treasury Regulations, to treat the
tax non-entity as a division of the seller, and hence a disregarded entity, for
federal income tax purposes. In other words, for federal income tax purposes,
the seller will be treated as the owner of all the assets of the tax non-entity
and the obligor of all the liabilities of the tax non-entity. Under the
check-the-box Treasury Regulations, unless it is treated as a tax trust for
federal income tax purposes, an unincorporated domestic entity with more than
one equity owner is automatically classified as a tax partnership for federal
income tax purposes. If the trust is classified as a tax nonentity when all its
equity interests are wholly-owned by the seller and if certificates are then
sold or issued in any manner which results in there being more than one
certificateholder, the trust will be treated as a tax partnership.
If certificates are issued to more than one person, the seller and the
servicer will agree, and the applicable certificateholders will agree by their
purchase, to treat the trust as a tax partnership for purposes of federal, state
and local income and franchise tax purposes, with the partners of that
partnership being the certificateholders, including the seller, and the notes
being debt of that partnership.
Risks of Alternative Characterization. If a tax non-entity were an
association or a publicly traded partnership taxable as a corporation for
federal income tax purposes, it would be subject to corporate income tax as
discussed above under "Partnership Certificates--Classification of Partnerships
and Partnership Certificates."
STATE AND LOCAL TAX CONSEQUENCES
The above discussion does not address the tax treatment of any tax trust,
tax partnership, tax non-entity, 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 secured notes will
take place throughout the United States and, therefore, many different tax
regimes potentially apply to different portions of these transactions. We
recommend that prospective investors consult their tax advisors regarding the
state and local tax treatment of any tax trust, tax partnership or tax
non-entity 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, and Section 4975 of the Internal Revenue Code prohibit a pension,
profit-sharing or other employee benefit plan, as well as individual retirement
accounts and certain types of Keogh Plans and certain collective investment
funds or insurance company general or separate accounts in which such plans and
accounts are invested, from engaging in certain transactions with persons that
are "parties in interest" under ERISA or "disqualified persons" under the
Internal Revenue Code with respect to the benefit plan. A violation of these
"prohibited transaction" rules may result in an excise tax or other penalties
and liabilities under ERISA
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and the Internal Revenue Code for such persons. The acquisition or holding of
securities by a benefit plan could be considered to give rise to a prohibited
transaction if we, the servicer, the related trust or any respective affiliates
is or becomes a party in interest or a disqualified person with respect to such
benefit plan.
In addition, certain transactions involving the trust might be deemed to
constitute prohibited transactions under ERISA and the Internal Revenue 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 the plan assets
regulation issued by the United States Department of Labor, the assets of the
trust would be treated as plan assets of a benefit plan for the purposes of
ERISA and the Internal Revenue 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 and refer to the applicable prospectus supplement
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 with respect to each trust, we will agree to sell to each of the
underwriters named in each underwriting agreement and in the related prospectus
supplement, and each of those underwriters will severally agree to purchase from
us, the principal amount of each class of securities of the related series set
forth in the underwriting agreement and in the related prospectus supplement.
In each underwriting agreement, the several underwriters will agree,
subject to the terms and conditions set forth in the agreement, to purchase all
the securities described in it which are offered by the prospectus 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:
- set forth the price at which each class of securities being offered by
the prospectus supplement will be offered to the public and any
concessions that may be offered to certain dealers participating in the
offering of such securities; or
- 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 we will indemnify the
underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.
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The indenture trustee may, from time to time, invest the funds in the
designated accounts in eligible investments acquired from the underwriters or
from us.
Under each underwriting agreement, except as otherwise provided in the
related prospectus supplement, the closing of the sale of any class of
securities subject to the underwriting agreement will be conditioned on the
closing of the sale of all other such classes of securities of that series.
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 by Robert L. Schwartz, Esq., our General Counsel and Assistant
General Counsel of GMAC, and by Mayer, Brown & Platt, our special counsel and
special counsel to each trust and GMAC. Mr. Schwartz owns shares of each of the
classes of General Motors common stock and has options to purchase shares of
General Motors common stock. Mayer, Brown & Platt will pass upon certain federal
income tax matters for us, GMAC and each trust.
WHERE YOU CAN FIND MORE INFORMATION
We filed a registration statement relating to the securities with the
Securities and Exchange Commission under the Securities Act of 1933, as amended.
This prospectus is part of the registration statement, but the registration
statement includes additional information.
The servicer will file with the SEC all required annual, monthly and
special SEC reports and other information about the trust.
You may read and copy any reports, statements or other information we file
at the SEC's public reference room in Washington, D.C. You can request copies of
these documents, upon payment of a duplicating fee, by writing to the SEC.
Please call the SEC at (800) SEC-0330 for further information on the operation
of the public reference rooms. Our SEC filings are also available to the public
on the SEC Internet site (http://www.sec.gov).
The SEC allows us to "incorporate by reference" information we file with
it, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this prospectus. Information that we file later with the SEC will
automatically update the information in this prospectus. In all cases, you
should rely on the later information over different information included in this
prospectus or the accompanying prospectus supplement. We incorporate by
reference any future SEC reports and materials filed by or on behalf of the
trust until we terminate our offering.
As a recipient of this prospectus, you may request a copy of any document
we incorporate by reference, except exhibits to the documents, unless the
exhibits are specifically incorporated by reference, at no cost, by writing us
at:
General Motors Acceptance
Corporation
3044 West Grand Boulevard
Detroit, Michigan 48202
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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 securities, other than underwriting
discounts and commissions, described in this Registration Statement:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $
Printing and engraving costs................................
Legal fees..................................................
Trustee fees and expenses...................................
Accountant's fees...........................................
Rating Agencies' fees.......................................
Miscellaneous expenses......................................
------
Total............................................. $
======
</TABLE>
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 direct parent of the Registrant. Under
Section 145, General Motors Acceptance Corporation may or shall,
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subject to various exceptions and limitations, indemnify its directors or
officers and may purchase and maintain insurance as follows:
(a) The Certificate of Incorporation, as amended, of General Motors
Acceptance Corporation provides that no director shall be personally liable
to General Motors Acceptance Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability
(i) for any breach of the director's duty of loyalty to General Motors
Acceptance Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174, or any successor provision
thereto, of the Delaware Corporation Law, or (iv) for any transaction from
which the director derived an improper personal benefit.
(b) Under Article VI of its By-Laws, General Motors Acceptance
Corporation shall indemnify and advance expenses to every director and
officer (and to such person's heirs, executors, administrators or other
legal representatives) in the manner and to the full extent permitted by
applicable law as it presently exists, or may hereafter be amended, against
any and all amounts (including judgments, fines, payments in settlement,
attorneys' fees and other expenses) reasonably incurred by or on behalf of
such person in connection with any threatened, pending or completed action,
suit or proceeding, whether civil, criminal administrative or investigative
(a "proceeding"), in which such director or officer was or is made or is
threatened to be made a party or is otherwise involved by reason of the
fact that such person is or was a director or officer of General Motors
Acceptance Corporation, or is or was serving at the request of General
Motors Acceptance Corporation as a director, officer, employee, fiduciary
or member of any other corporation, partnership, joint venture, trust,
organization or other enterprise. General Motors Acceptance Corporation
shall not be required to indemnify a person in connection with a proceeding
initiated by such person if the proceeding was not authorized by the Board
of Directors of General Motors Acceptance Corporation. General Motors
Acceptance Corporation shall pay the expenses of directors and officers
incurred in defending any proceeding in advance of its final disposition
("advancement of expenses"); provided, however, that the payment of
expenses incurred by a director or officer in advance of the final
disposition of the proceeding shall be made only upon receipt of an
undertaking by the director or officer to repay full amounts advanced if it
should be ultimately determined that the director or officer is not
entitled to be indemnified under Article VI of the By-Laws or otherwise. If
a claim for indemnification or advancement of expenses by an officer or
director under Article VI of the By-Laws is not paid in full within ninety
days after a written claim therefor has been received by General Motors
Acceptance Corporation, the claimant may file suit to recover the unpaid
amount of such claim, and if successful in whole or in part, shall be
entitled to the requested indemnification or advancement of expenses under
applicable law. The rights conferred on any person by Article VI of the
By-Laws shall not be exclusive of any other rights which such person may
have or hereafter acquire under any statute, provision of the Certificate
of Incorporation, By-Laws, agreement, vote of stockholders or disinterested
directors of General Motors Acceptance Corporation or otherwise. The
obligation, if any, of General Motors Acceptance Corporation to indemnify
any person who was or is serving at its request as a director, officer or
employee of another corporation, partnership, joint venture, trust,
organization or other enterprise shall be reduced by any amount such person
may collect as indemnification from such other corporation, partnership,
joint venture, trust, organization or other enterprise.
II-2
<PAGE> 181
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 Delaware General Corporation 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 General Corporation Law.
Pursuant to resolutions adopted by the Board of Directors of General Motors
Corporation, General Motors Corporation, 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.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
A list of exhibits filed herewith or incorporated by reference is contained
in the Exhibit Index which is incorporated herein by reference.
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 this registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if total dollar
volume of securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in this registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in the registration statement.
(2) That, for the purposes 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.
II-3
<PAGE> 182
(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, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes:
(1) For the purpose of determining any liability under the Securities
Act of 1993, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
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-4
<PAGE> 183
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 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 22nd day of December, 1999.
CAPITAL AUTO RECEIVABLES, INC.
/s/ WILLIAM F. MUIR
------------------------------------
William F. Muir
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on December 22, 1999 by the
following persons in the capacities indicated.
/s/ WILLIAM F. MUIR
------------------------------------
William F. Muir
Chairman of the Board
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ WILLIAM F. MUIR Chairman of the Board and Director
- - -----------------------------------------------------
William F. Muir
/s/ JOHN D. FINNEGAN President and Director
- - -----------------------------------------------------
John D. Finnegan
/s/ PAUL D. BULL Vice President and Director
- - -----------------------------------------------------
Paul D. Bull
/s/ JOHN E. GIBSON Vice President and Director
- - -----------------------------------------------------
John E. Gibson
/s/ JEROME B. VAN ORMAN, JR. Vice President and Director
- - -----------------------------------------------------
Jerome B. Van Orman, Jr.
/s/ DAVID C. WALKER Vice President and Director
- - -----------------------------------------------------
David C. Walker
/s/ JOHN RAKOLTA, JR. Director
- - -----------------------------------------------------
John Rakolta, Jr.
/s/ RICHARD E. DAMMAN Director
- - -----------------------------------------------------
Richard E. Damman
/s/ GERALD E. GROSS Comptroller
- - -----------------------------------------------------
Gerald E. Gross
By: /s/ GERALD E. GROSS
- - -----------------------------------------------------
Gerald E. Gross
Attorney-in-Fact
</TABLE>
II-5
<PAGE> 184
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 Form S-1 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 22nd day of December, 1999.
LEASE AUTO RECEIVABLES, INC., AS
GENERAL PARTNER OF CORRAL, L.P., A
CERTIFICATEHOLDER OF CENTRAL
ORIGINATING LEASE TRUST
/s/ WILLIAM F. MUIR
------------------------------------
William F. Muir
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on December 22, 1999 by the
following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ WILLIAM F. MUIR Chairman of the Board and Director
- - -----------------------------------------------------
William F. Muir
/s/ JOHN D. FINNEGAN President and Director
- - -----------------------------------------------------
John D. Finnegan
/s/ PAUL D. BULL Vice President and Director
- - -----------------------------------------------------
Paul D. Bull
/s/ JOHN E. GIBSON Vice President and Director
- - -----------------------------------------------------
John E. Gibson
/s/ JEROME B. VAN ORMAN, JR. Vice President and Director
- - -----------------------------------------------------
Jerome B. Van Orman, Jr.
/s/ DAVID C. WALKER Vice President and Director
- - -----------------------------------------------------
David C. Walker
/s/ GUNTHER DUFEY Director
- - -----------------------------------------------------
Gunther Dufey
/s/ RICHARD E. DAMMAN Director
- - -----------------------------------------------------
Richard E. Damman
/s/ GERALD E. GROSS Comptroller
- - -----------------------------------------------------
Gerald E. Gross
By: /s/ GERALD E. GROSS
- - -----------------------------------------------------
Gerald E. Gross
Attorney-in-Fact
</TABLE>
II-6
<PAGE> 185
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
INDEX DESCRIPTION
- - ------- -----------
<C> <S>
1.1 Form of Underwriting Agreement for the Grantor Trust
Certificates (incorporated by reference to Registrant from
Registration Statement File No. 333-06039, dated June 14,
1996).
1.2 Form of Underwriting Agreement for the Owner Trust Notes and
Certificates (incorporated by reference to Registrant from
Registration Statement File No. 333-06039, dated June 14,
1996).
1.3 Form of Underwriting Agreement for the Secured Notes.*
3.1 Articles of Incorporation (incorporated by reference to
Registrant from Registration Statement File No. 33-49169,
dated November 15, 1993) and Amended and Restated By-laws of
Capital Auto Receivables, Inc. (incorporated by reference to
Registrant from Registration Statement File No. 333-06039,
dated June 14, 1996).
3.2 Amended and Restated Declaration of Trust, dated as of March
15, 1996 by Bankers Trust (Delaware) and acknowledged,
accepted and agreed to by Corral, L.P.*
4.1 Form of Indenture between the Trust and the Indenture
Trustee (incorporated by reference to Registrant from
Registration Statement File No. 333-06039, dated June 14,
1996).
4.2 Form of Owner Trust Pooling and Servicing Agreement between
GMAC and the Seller (Version 1) (incorporated by reference
to Registrant from Registration Statement File No.
333-06039, dated June 14, 1996).
4.3 GMAC Grantor Trusts Standard Terms and Conditions of
Agreement Effective June 1, 1996 (incorporated by reference
to Registrant from Registration Statement File No.
333-06039, dated June 14, 1996).
4.4 Form of Grantor Trust Pooling and Servicing Agreement
between GMAC and the Seller (Version 2) (incorporated by
reference to Registrant from Registration Statement File No.
333-06039, dated June 14, 1996).
4.5 Form of Trust Agreement between the Seller and the Owner
Trustee (incorporated by reference to Registrant from
Registration Statement File No. 333-06039, dated June 14,
1996).
4.6 Form of Secured Note Indenture between the Trust and the
Indenture Trustee.*
5.1 Opinion of Kirkland & Ellis with respect to legality of
Grantor Trust Certificates and Owner Trust Notes and
Certificates (incorporated by reference to Registrant from
Registration Statement File No. 333-06039, dated June 14,
1996).
5.2 Opinion of Mayer, Brown & Platt with respect to legality of
Secured Notes.*
8.1 Opinion of Kirkland & Ellis with respect to tax matters of
Grantor Trust Certificates and Owner Trust Notes and
Certificates (incorporated by reference to Registrant from
Registration Statement File No. 333-06039, dated June 14,
1996).
8.2 Opinion of Mayer, Brown & Platt with respect to tax matters
of Secured Notes.*
10.1 Form of Purchase Agreement between GMAC and the Seller
(incorporated by reference to Registrant from Registration
Statement File No. 333-06039, dated June 14, 1996).
23.1 Consent of Kirkland & Ellis (included as part of Exhibit
5.1).
23.2 Consent of Mayer, Brown & Platt (included as part of Exhibit
5.2).*
24.1 Power of Attorney.
</TABLE>
<PAGE> 186
<TABLE>
<CAPTION>
EXHIBIT
INDEX DESCRIPTION
- - ------- -----------
<C> <S>
25.1 Statement of Eligibility of the Trustee for the Owner
Trustee Notes and Certificates (incorporated by reference to
Registrant from Form 8-K, File No. 33-49307, dated November
12, 1993).
25.2 Statement of Eligibility of the Secured Note Trustee.*
99.1 Form of Owner Trust Prospectus Supplement (Version 1).
99.2 Form of Trust Sale and Servicing Agreement among the Trust,
the Seller and the Servicer (incorporated by reference to
Registrant from Registration Statement File No. 333-06039,
dated June 14, 1996).
99.3 Form of Custodian Agreement (incorporated by reference to
Registrant from Registration Statement File No. 33-49307,
dated January 23, 1993).
99.4 Form of Administration Agreement among the Servicer, the
Owner Trustee and the Indenture Trustee (incorporated by
reference to Registrant from Registration Statement File No.
33-49307, dated January 23, 1993).
99.5 Form of Grantor Trust Prospectus Supplement (Version 2).
99.6 Form of Secured Note Pooling and Servicing Agreement between
GMAC and the Seller.*
99.7 Form of Secured Note Trust Sale and Servicing Agreement
between the Trust, the Seller and GMAC.*
99.8 Form of Secured Note Trust Agreement between the Seller and
the Owner Trustee.*
99.9 Form of Secured Note Administration Agreement between GMAC,
the Owner Trustee and the Indenture Trustee.*
99.10 Form of Secured Note Custodian Agreement between the Seller
and the Custodian.*
99.11 Form of Secured Note Prospectus Supplement (Version 3).
</TABLE>
- - -------------------------
* To be filed by amendment.
<PAGE> 1
POWER OF ATTORNEY
The undersigned, being a director or officer or both of Lease Auto
Receivables, Inc., hereby constitutes and appoints Gerald E. Gross, David C.
Walker and Robert L. Schwartz, and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities (including his capacity as director and/or officer of Lease Auto
Receivables, Inc.), to sign an appropriate Registration Statement covering
securities and any or all amendments (including post-effective amendments) to
such Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this power of
attorney has been executed by the undersigned on December 22, 1999.
<TABLE>
<S> <C>
/s/ PAUL D. BULL /s/ GERALD E. GROSS
- - ---------------------------------------- ----------------------------------------
Paul D. Bull Gerald E. Gross
/s/ RICHARD E. DAMMAN /s/ WILLIAM F. MUIR
- - ---------------------------------------- ----------------------------------------
Richard E. Damman William F. Muir
/s/ GUNTER DUFEY /s/ JEROME B. VAN ORMAN, JR.
- - ---------------------------------------- ----------------------------------------
Gunter Dufey Jerome B. Van Orman, Jr.
/s/ JOHN D. FINNEGAN /s/ DAVID C. WALKER
- - ---------------------------------------- ----------------------------------------
John D. Finnegan David C. Walker
/s/ JOHN D. GIBSON
- - ----------------------------------------
John D. Gibson
</TABLE>
<PAGE> 2
POWER OF ATTORNEY
The undersigned, being a director or officer or both of Capital Auto
Receivables, Inc., hereby constitutes and appoints Gerald E. Gross, David C.
Walker and Robert L. Schwartz, and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities (including his capacity as director and/or officer of Wholesale Auto
Receivables Corporation), to sign a Registration Statement on Form S-3 covering
Asset Backed Notes and Certificates to be sold by Capital Auto Receivables, Inc.
and any or all amendments (including post-effective amendments) to such
Registration Statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this power of
attorney has been executed by the undersigned on December 22, 1999.
<TABLE>
<S> <C>
/s/ PAUL D. BULL /s/ WILLIAM F. MUIR
- - ---------------------------------------- ----------------------------------------
Paul D. Bull William F. Muir
/s/ RICHARD E. DAMMAN /s/ JOHN RAKOLTA, JR.
- - ---------------------------------------- ----------------------------------------
Richard E. Damman John Rakolta, Jr.
/s/ JOHN D. FINNEGAN /s/ JEROME B. VAN ORMAN, JR.
- - ---------------------------------------- ----------------------------------------
John D. Finnegan Jerome B. Van Orman, Jr.
/s/ JOHN D. GIBSON /s/ DAVID C. WALKER
- - ---------------------------------------- ----------------------------------------
John D. Gibson David C. Walker
/s/ GERALD E. GROSS
- - ----------------------------------------
Gerald E. Gross
</TABLE>
<PAGE> 1
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THE SECURITIES UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE
NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR
SALE IS NOT PERMITTED.
YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE IN THIS
PROSPECTUS SUPPLEMENT AND PAGE IN THE PROSPECTUS.
The notes represent obligations of the trust only. The certificates represent
interests in the trust only. The notes and the certificates do not represent
obligations of or interests in, and are not guaranteed by, Capital Auto
Receivables, Inc., General Motors Acceptance Corporation or any of their
affiliates.
This prospectus supplement may be used to offer and sell the notes and the
certificates only if accompanied by the prospectus.
SUBJECT TO COMPLETION, DATED ,
VERSION 1
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED ,
CAPITAL AUTO RECEIVABLES ASSET TRUST -
$ Asset Backed Notes, Class A
$ Asset Backed Certificates
CAPITAL AUTO RECEIVABLES, INC.
Seller
GENERAL MOTORS ACCEPTANCE CORPORATION
Servicer
The trust will issue the following classes of notes and
certificates:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
CLASS A NOTES
------------------------------------- INITIAL
A-1 VARIABLE
NOTES A-2 A-3 A-4 A-5 PAY CERTIF-
(1) NOTES NOTES NOTES NOTES TERM NOTE(1) ICATES
<S> <C> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------
Principal Amount
--------------------------------------------------------------------------------------
One Month
LIBOR
Interest Rate Plus
--------------------------------------------------------------------------------------
Targeted Final
Distribution Date N/A N/A
--------------------------------------------------------------------------------------
Final Scheduled
Distribution Date
--------------------------------------------------------------------------------------
Price to Public N/A N/A
--------------------------------------------------------------------------------------
Underwriting
Discount N/A N/A
--------------------------------------------------------------------------------------
Proceeds to seller N/A N/A
--------------------------------------------------------------------------------------
</TABLE>
(1) Not being offered hereby.
CREDIT ENHANCEMENT
- Reserve Account, with an initial deposit of
$ .
- The certificates are subordinated to the notes.
This prospectus supplement and the accompanying prospectus relate only to the
offering of the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes, the
Class A-5 Notes and the certificates. The seller will retain certificates with
an initial certificate balance of $ . The Class A-1 Notes and the
Variable Pay Term Notes are not offered under these documents.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED THAT THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS
IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
Joint Bookrunners
- - ----------------------------------------
-------------------------------------
Co-Managers
- - ---------------------------------------
------------------------------------------------------------
--------------------------------------
[Date]
<PAGE> 2
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We provide information to you about the notes and the certificates in two
separate documents:
(a) the prospectus, which provides general information and terms of
the notes and the certificates, some of which may not apply to a particular
series of notes or certificates, including your series.
(b) this prospectus supplement, which will provide information
regarding the pool of contracts held by the trust and will specify the
terms of your series of notes or certificates.
IF THE TERMS OF YOUR SERIES OF NOTES OR CERTIFICATES VARY BETWEEN THE
PROSPECTUS AND THIS PROSPECTUS SUPPLEMENT, YOU SHOULD RELY ON THE INFORMATION IN
THIS PROSPECTUS SUPPLEMENT.
You should rely only on the information provided in the accompanying
prospectus and this prospectus supplement, including the information
incorporated by reference. We have not authorized anyone to provide you with
other or different information. We are not offering the notes or the
certificates offered hereby in any state where the offer is not permitted. We do
not claim that the information in the accompanying prospectus and this
prospectus supplement is accurate on any date other than the dates stated on
their respective covers.
You can find definitions of the capitalized terms used in this prospectus
supplement in the "Glossary of Terms to Prospectus Supplement" which appears at
the end of this prospectus supplement and in the "Glossary of Terms to
Prospectus" which appears at the end of the prospectus.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUPPLEMENT
SUMMARY OF TRANSACTION PARTIES.............................. S-1
SUMMARY OF MONTHLY DEPOSITS TO AND WITHDRAWALS FROM
ACCOUNTS.................................................. S-2
SUMMARY..................................................... S-3
RISK FACTORS................................................ S-9
THE TRUST................................................... S-12
THE RECEIVABLES POOL........................................ S-12
THE NOTES................................................... S-15
THE CERTIFICATES............................................ S-19
THE TRANSFER AND SERVICING AGREEMENTS....................... S-20
ERISA CONSIDERATIONS........................................ S-26
CERTAIN FEDERAL INCOME TAX CONSEQUENCES..................... S-27
UNDERWRITING................................................ S-27
LEGAL OPINIONS.............................................. S-28
GLOSSARY OF TERMS TO PROSPECTUS SUPPLEMENT.................. S-29
PROSPECTUS
RISK FACTORS................................................ 3
THE TRUSTS.................................................. 6
THE RECEIVABLES POOLS....................................... 7
WEIGHTED AVERAGE LIFE OF THE SECURITIES..................... 8
POOL FACTORS AND TRADING INFORMATION........................ 8
USE OF PROCEEDS............................................. 9
THE SELLER.................................................. 9
THE SERVICER................................................ 10
THE NOTES................................................... 10
THE CERTIFICATES............................................ 17
CERTAIN INFORMATION REGARDING THE SECURITIES................ 19
THE TRANSFER AND SERVICING AGREEMENTS....................... 24
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES.................... 38
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS................... 42
STATE AND LOCAL TAX CONSEQUENCES............................ 55
ERISA CONSIDERATIONS........................................ 55
PLAN OF DISTRIBUTION........................................ 55
LEGAL OPINIONS.............................................. 56
WHERE YOU CAN FIND MORE INFORMATION......................... 56
INCORPORATION BY REFERENCE.................................. 57
GLOSSARY OF TERMS TO PROSPECTUS............................. 58
</TABLE>
<PAGE> 4
SUMMARY OF TRANSACTION PARTIES*
<TABLE>
<S><C>
GENERAL MOTORS
ACCEPTANCE
CORPORATION
(Originator and
Servicer)
Servicer CAPITAL AUTO
RECEIVABLES, INC.
(Seller)
(Owner Trustee)
CAPITAL AUTO
RECEIVABLES
ASSET TRUST ___-_
(Issuer)
(Indenture Trustee)
CLASS A-2 NOTES, VARIABLE PAY
CLASS A-1 NOTES CLASS A-3 NOTES, TERM NOTES CERTIFICATES
(not offered hereby) CLASS A-4 NOTES (not offered hereby)
AND CLASS A-5
NOTES
</TABLE>
*This chart provides only a simplified overview of the relations between the
key parties to the transaction. Refer to this prospectus supplement and the
prospectus for a further description.
S-1
<PAGE> 5
Summary of Monthly Deposits to and Withdrawals from Accounts*
<TABLE>
<S><C>
Servicer Payments on Obligors on
Receivables Receivables
Principal & Interest on
Receivables
Servicer Advances
Reimbursements of
Servicer Advances
Warranty &
Administrative Payments
Total Servicing Fees
Deposits to Reserve
Account
Collections Account Reserve Account
Withdrawals from
Reserve Account
Interest & Payments on Excess Funds from
Principal Certificates Reserve Account
Note Certificate
Distribution Distribution Seller
Account Account
Interest & Payments on
Principal Certificates
*This chart provides only a simplified overview
Noteholders Certificate of the monthly flow of funds. Refer to this
Holders prospectus supplement and the prospectus
for a further description.
</TABLE>
S-2
<PAGE> 6
SUMMARY
- This Summary highlights selected information from this document and does
not contain all of the information that you need to consider in making
your investment decision. To understand the terms of this offering of the
Class A Notes and the certificates, carefully read this entire document
and the accompanying prospectus.
THE PARTIES
Issuer
Capital Auto Receivables Asset Trust - , a Delaware business
trust formed by the seller, will issue five classes of Class A Notes, up to six
classes of Variable Pay Term Notes and a class of certificates.
Seller
Capital Auto Receivables, Inc., a wholly-owned subsidiary of GMAC, will be the
seller to the trust.
Servicer
General Motors Acceptance Corporation, which we refer to as GMAC, a wholly-
owned subsidiary of General Motors Corporation, will be the servicer for the
trust.
Indenture Trustee
- - ----------------------------------------------- ,
Owner Trustee
- - ----------------------------------------------- .
THE NOTES
Class A Notes
The trust will issue the following Class A Notes:
<TABLE>
- - ---------
AGGREGATE PRINCIPAL INTEREST
CLASS AMOUNT RATE
- - -------------------------------------------------
<S> <C> <C>
A-1 $ %
- - -------------------------------------------------
A-2 $ %
- - -------------------------------------------------
A-3 $ %
- - -------------------------------------------------
A-4 $ %
- - -------------------------------------------------
A-5 $ %
- - -------------------------------------------------
</TABLE>
Only the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes and the Class
A-5 Notes are offered hereby. The Class A-1 Notes will be sold in a private
placement and are not offered hereby.
Variable Pay Term Notes
- - - At the time of issuance of the Class A Notes, the trust will issue a Variable
Pay Term Note in an initial principal amount of $ . The initial
Variable Pay Term Note will bear interest at a floating rate of one-month
LIBOR plus %, except as described below. The seller will sell a 100%
participation interest in the initial Variable Pay Term Note in a private
placement. We are not offering any interest in the initial Variable Pay Term
Note hereby.
- - - The trust will be able to issue additional Variable Pay Term Notes on the
targeted final distribution date for each class of the Class A Notes. If
issued, the proceeds will be available to make payments of principal on that
targeted final distribution date.
- - - Any additional Variable Pay Term Notes will bear interest at a floating rate
based on one-month LIBOR, except as described below. The spread over LIBOR for
each additional Variable Pay Term Note will be determined at the time of
issuance based on market conditions but will not exceed %.
- - - If the interest rate swap described below is terminated, the interest rate on
the Variable Pay Term Notes will automatically become a fixed rate of %
per annum, which is the fixed rate payable by the trust under the interest
rate swap.
- - - With respect to each targeted final distribution date for a class of Class A
Notes, subject to the conditions to issuing additional Variable Pay Term Notes
described below, the seller will agree to offer to a commercial paper facility
administered by GMAC the right to purchase a 100% participation
S-3
<PAGE> 7
interest in additional Variable Pay Term Notes such that the proceeds received
by the trust, together with collections on the receivables, will be sufficient
to pay that class of Class A Notes in full on that targeted final distribution
date. Neither this commercial paper facility nor any other person or entity is
obligated to purchase an interest in any additional Variable Pay Term Notes.
As a result, we cannot assure you that any additional Variable Pay Term Notes
will be sold or that the proceeds from any sale of Variable Pay Term Notes
will be sufficient to pay a class of Class A Notes in full on its targeted
final distribution date.
- - - If sufficient Variable Pay Term Notes are not sold on the targeted final
distribution date for any class of Class A Notes, then it is unlikely that the
full principal amount of that class of Class A Notes will be paid on its
targeted final distribution date.
- - - The principal amount of the Variable Pay Term Notes that we may issue on any
targeted final distribution date is limited. After giving effect to the
issuance of Variable Pay Term Notes and all payments on the notes and the
certificates on any targeted final distribution date, the total principal
amount of notes and certificates outstanding cannot exceed the total principal
balance of the receivables held by the trust on the last day of the prior
month.
- - - We may not issue additional Variable Pay Term Notes if the interest rate swap
is terminated or an event of default under the indenture governing the notes
has occurred and is continuing.
Interest Payments
- - - The trust will pay interest on the notes monthly, on the 15th day of each
month, or on the next business day, which we refer to as the distribution
date. The first distribution date is , .
- - - The prospectus and this prospectus supplement describe how the available funds
are allocated to interest payments.
- - - The trust will pay interest on all the Class A Notes that we are offering
under this prospectus supplement based on a 360-day year consisting of twelve
30-day months.
- - - Interest payments on all Class A Notes and all Variable Pay Term Notes will
have the same priority.
Principal Payments
- - - In general, the trust will not make payments of principal on any class of
Class A Notes until its targeted final distribution date. On the targeted
final distribution date for each class of Class A Notes, the trust will pay,
to the extent of available funds, the entire outstanding principal balance of
that class of Class A Notes.
- - - Amounts available to pay principal on the notes on each distribution date that
is not a targeted final distribution date for any Class A Notes will be
applied to make principal payments on the Variable Pay Term Notes. On each
distribution date, except after the notes have been accelerated following an
event of default as described below, distributions with respect to certificate
balance on the certificates will also be made.
- - - The amount available to make principal payments on each distribution date will
be based on the amount of collections and defaults on the receivables during
the prior month. On the targeted final distribution date for a class of Class
A Notes, the proceeds from the issuance of additional Variable Pay Term Notes,
if any, will also be available to make principal payments. The prospectus and
this prospectus supplement describe how the available funds are allocated to
principal payments.
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<PAGE> 8
- - - If any class of Class A Notes is not paid in full on its targeted final
distribution date, on each distribution date thereafter, until that class of
Class A Notes is paid in full, amounts available to make principal payments on
the notes will be applied to that class of Class A Notes and the Variable Pay
Term Notes pro rata. If on two consecutive targeted final distribution dates
the corresponding targeted classes of Class A Notes are not paid in full or in
the event the interest rate swap is terminated, on each distribution date
thereafter, amounts available to make principal payments on the notes will be
applied to the Class A Notes and the Variable Pay Term Notes pro rata. In such
event, payments on the Class A Notes will be made sequentially, so that no
principal payments will be made on any class of Class A Notes until all Class
A Notes with a lower numerical designation have been paid in full. For
example, the Class A-2 Notes will be paid in full before any payments are made
on the Class A-3 Notes and the Class A-3 Notes will be paid in full before any
payments are made on the Class A-4 Notes.
- - - The failure of the trust to pay any class of Class A Notes in full on its
targeted final distribution date will not constitute an event of default.
- - - On each distribution date after an event of default occurs and the notes are
accelerated, until the time when all events of default have been cured or
waived as provided in the indenture, principal payments on each class of the
Class A Notes and the Variable Pay Term Notes will be made ratably to all
noteholders, based on the outstanding principal balance of each class of
notes.
- - - All unpaid principal on a class of notes will be due on the final scheduled
distribution date for that class. Failure to pay a class of notes in full on
its final scheduled distribution date will result in an event of default.
- - - When the total principal balance of the receivables declines to less than 10%
of the total amount financed under the receivables, the servicer may purchase
all of the remaining receivables. If the servicer purchases the receivables,
the outstanding Class A-5 Notes, if any, and Variable Pay Term Notes will be
redeemed at a price equal to their remaining principal balance plus accrued
and unpaid interest.
THE CERTIFICATES
- - - The trust will issue certificates with an aggregate initial certificate
balance of $ .
- - - The seller will initially retain certificates with an initial certificate
balance of $ .
Interest Payments
- - - The trust will pay interest on the certificates on each distribution date.
- - - The certificates will bear interest at % per annum.
- - - The prospectus and this prospectus supplement describe how the available funds
are allocated to interest payments.
- - - The trust will pay interest on the certificates based on a 360-day year
consisting of twelve 30-day months.
Certificate Balance
- - - On each distribution date, except after the notes have been accelerated
following an event of default as described below, a pro rata portion, based on
the outstanding amount of notes and certificates, of the amount available to
make principal payments will be applied to make distributions with respect to
certificate balance.
Subordination
- - - If an event of default occurs and the notes are accelerated, no payments of
interest on the certificates or distributions with respect to certificate
balance will be made until the notes are paid in full or the acceleration is
rescinded.
S-5
<PAGE> 9
Early Retirement of the Certificates
- - - When the total principal balance of the receivables declines to 10% or less of
the total amount financed under the receivables, the servicer may purchase all
of the remaining receivables. If the servicer purchases the receivables, the
outstanding certificates, if any, will be redeemed at a price equal to the
remaining certificate balance plus accrued and unpaid interest.
THE TRUST PROPERTY
The primary assets of the trust will be a pool of fixed rate retail installment
sales contracts used to finance the purchase of new and used cars and light
trucks. We refer to these contracts as "receivables" and to the persons who
financed their purchases with these contracts as "obligors." The receivables in
the trust will be sold by GMAC to the seller, and then by the seller to the
trust. The trust will grant a security interest in the receivables and the other
trust property to the indenture trustee on behalf of the noteholders. The trust
property will also include, with other specific exceptions described in the
prospectus:
- - - Monies received under the receivables on or after a cut-off date of
;
- - - Amounts held on deposit in trust accounts maintained for the trust;
- - - Security interests in the vehicles financed by the receivables;
- - - Any recourse GMAC has against the dealers from which it purchased the
receivables;
- - - Any proceeds from claims on insurance policies covering the financed vehicles;
- - - An interest rate swap;
- - - Specified rights of the seller under its purchase agreement with GMAC; and
- - - All rights of the trust under the related transfer agreement with the seller.
The aggregate principal balance of the receivables on the cut-off date was
$ .
PRIORITY OF DISTRIBUTIONS
- - - The trust will distribute available funds in the following order of priority:
- servicing fee payments to the servicer;
- net amount payable, if any, to the swap counterparty described below;
- interest on the notes;
- interest on the certificates;
- principal on the notes;
- principal on the certificates; and
- deposits into the reserve account.
- - - If an event of default occurs and the notes are accelerated, the trust will
pay each class of the Class A Notes and the Variable Pay Term Notes in full,
on a pro rata basis, before making any interest payments on the certificates
or any payments with respect to the certificate balance until all events of
default have been cured or waived as provided in the indenture.
RESERVE ACCOUNT
- - - On the closing date, the seller will deposit $ in cash or eligible
investments into the reserve account. Collections on the receivables, to the
extent available for such purpose, will be added to the reserve account on
each distribution date if the reserve account balance is below a specified
reserve amount. The specified reserve amount will increase so long as any
funds are held in the Accumulation Account described below. See "The Transfer
and Servicing Agreements--Reserve Account" in this prospectus supplement.
- - - To the extent that funds from principal and interest collections on the
receivables are not sufficient to pay the basic servicing fees, to pay the net
amount, if any, due to the swap counterparty and to make required
distributions on the notes and the certificates, the trust will withdraw cash
from the reserve account for those purposes. Amounts on deposit in the reserve
account will not be available,
S-6
<PAGE> 10
however, on the targeted final distribution date for any class of Class A
Notes to the extent that the proceeds, if any, from the sale of additional
Variable Pay Term Notes together with collections on the receivables are
insufficient to pay that class of Class A Notes in full.
- - - On any distribution date, after the trust pays the total servicing fee and the
swap counterparty and makes all required distributions on the notes and the
certificates, the amount in the reserve account may exceed the specified
reserve amount. If so, the trust will pay the excess to the seller.
INTEREST RATE SWAP
- - - On the closing date, the trust will enter into an interest rate swap with
, as swap counterparty. will guarantee the
obligations of the swap counterparty under the interest rate swap.
- - - Under the interest rate swap, the trust will receive payments at a rate
determined by reference to LIBOR, which is the basis for determining the
amount of interest due on the Variable Pay Term Notes.
- - - Under the interest rate swap, on each distribution date, the trust will be
obligated to pay to the swap counterparty a fixed monthly rate on a notional
amount equal to the aggregate outstanding balance of all Variable Pay Term
Notes. The swap counterparty will be obligated to pay to the trust a floating
interest rate based on LIBOR on the same notional amount.
- - - Under the interest rate swap, the amount that the trust is obligated to pay to
the swap counterparty will be netted against the amount that the swap
counterparty is obligated to pay the trust. Only the net amount payable will
be due from the trust or the swap counterparty, as applicable.
- - - If the interest rate swap is terminated, the interest rate on the Variable Pay
Term Notes will automatically become a fixed rate equal to the fixed rate
payable by the trust under the interest rate swap and the trust will no longer
be permitted to issue Variable Pay Term Notes. See "The Transfer and Servicing
Agreements--Interest Rate Swap" in this prospectus supplement for additional
information.
SERVICING FEES
The trust will pay the servicer a monthly basic 1% servicing fee as compensation
for servicing the receivables. The servicer will also be entitled to any late
fees, prepayment charges and other adminis-trative fees and expenses collected
during the related month and investment earnings on trust accounts. The trust
will also pay the servicer an additional monthly servicing fee of up to 1% to
the extent described in the prospectus.
TAX STATUS
In the opinion of Kirkland & Ellis, special tax counsel, (1) the Class A Notes
will be characterized as indebtedness for federal income tax purposes and (2)
the trust will not be taxable as an association or publicly traded partnership
taxable as a corporation, but instead should be classified as a grantor trust
for federal income tax purposes. The certificates should therefore be trust
certificates representing equity interests in the trust.
Each noteholder, by the acceptance of a note, will agree to treat the notes as
indebtedness for federal, state and local income and franchise tax purposes.
Each certificateholder, by the acceptance of a trust certificate, will agree to
treat the trust certificates as equity interests in the trust for federal, state
and local income and franchise tax purposes.
See "Certain Federal Income Tax Considerations" and "State and Local Tax
Consequences" in the prospectus concerning the application of federal, state and
local tax laws.
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<PAGE> 11
ERISA CONSIDERATIONS
Subject to the considerations discussed under "ERISA Considerations," an
employee benefit plan subject to the Employee Retirement Income Security Act of
1974 may purchase the Class A Notes. An employee benefit plan should consult
with its counsel before purchasing the notes.
Subject to the considerations discussed under "ERISA Considerations," the
certificates may not be acquired by any employee benefit plan subject to ERISA
or by an individual retirement account.
See "ERISA Considerations" in the prospectus and this prospectus supplement.
RATINGS
- - - We will not issue the Class A Notes offered hereby unless they are rated in
the highest rating category for long-term obligations (i.e., "AAA") by at
least one nationally recognized rating agency.
- - - We will not issue the certificates unless they are rated in the "A" category
for long-term obligations or its equivalent by at least one nationally
recognized rating agency.
- - - We cannot assure you that a rating agency will maintain its rating if
circumstances change. If a rating agency changes its rating, no one has an
obligation to provide additional credit enhancement or restore the original
rating.
- - - A rating is not a recommendation to buy the Class A Notes or the certificates.
The rating considers only the likelihood that the trust will pay interest on
time and will ultimately pay principal in full or make full distri-butions of
certificate balance. The rating does not consider the prices of the Class A
Notes or the certificates, their suitability to a particular investor or the
timing of principal payments or distributions of certificate balance. In
particular, the rating does not address whether any class of Class A Notes
will be paid in full on its targeted final distribution date.
S-8
<PAGE> 12
RISK FACTORS
In addition to the risk factors on page of the prospectus, you
should consider the following risk factors in deciding whether to purchase the
notes.
FAILURE TO SELL ADDITIONAL
VARIABLE PAY TERM NOTES WILL
RESULT IN CLASS A NOTES NOT
BEING PAID IN FULL ON THEIR
TARGETED FINAL DISTRIBUTION
DATES The trust's ability to pay the full principal
amount of any class of Class A Notes on its
targeted final distribution date will depend on
whether the trust is able to sell an additional
Variable Pay Term Note on that targeted final
distribution date and the amount of proceeds, if
any, generated from that sale. If the trust does
not generate sufficient proceeds, it is unlikely
that the full principal amount of a class of
Class A Notes will be paid on its targeted final
distribution date. Furthermore, if on two
consecutive targeted final distribution dates
the corresponding targeted classes of Class A
Notes are not paid in full or in the event the
interest rate swap is terminated, on each
subsequent distribution date, principal payments
will be made on the Class A Notes sequentially,
so that principal payments will be made on each
class of Class A Notes after all classes of
Class A Notes with a lower numerical designation
have been paid in full, regardless of the
targeted final distribution date for that class.
Although the seller will agree to offer the
right to purchase a 100% participation interest
in the Variable Pay Term Note that may be issued
on any targeted final distribution date to a
commercial paper facility administered by GMAC,
neither that facility, nor any other person or
entity, is obligated to purchase any additional
Variable Pay Term Note or any interest therein.
Furthermore, neither the seller, the servicer
nor any other person is obligated to identify
any other potential purchasers. In addition, the
spread over LIBOR for additional Variable Pay
Term Notes is limited to %. Accordingly, we
cannot assure you that any additional Variable
Pay Term Notes will be sold or that the proceeds
from any sale of Variable Pay Term Notes will be
sufficient to pay a class of Class A Notes in
full on its targeted final distribution date.
You will bear all reinvestment risk resulting
from payments on the Class A Notes being made
before or after their respective targeted final
payment dates.
DISTRIBUTIONS ON THE
CERTIFICATES ARE SUBORDINATED
IN PRIORITY TO PAYMENTS
ON THE NOTES
Distributions on the certificates will be
subordinated in priority to the notes as
described herein. If an event of default occurs
and the notes are accelerated, no payments of
interest on the certificates or distributions
with respect to certificate balance will be made
until the notes are paid in full or the
acceleration is rescinded. In this event,
amounts otherwise available to make
S-9
<PAGE> 13
payments on the certificates will be available
to make payments on the notes. See "The Transfer
and Servicing Agreements--Distributions" in this
prospectus supplement.
PAYMENTS ON THE NOTES AND THE
CERTIFICATES DEPEND ON
COLLECTIONS ON THE
RECEIVABLES The trust's ability to make principal payments
on the notes and distributions with respect to
the certificate balance will depend on the
amount of collections on the receivables and the
amount of receivables that default. If there are
insufficient funds to pay the entire amount due
on any class of securities, you may experience
delays and/or reductions in principal payments
on your notes or distributions with respect to
the certificate balance on your certificates.
INTEREST RATE SWAP RISK The trust has entered into the interest rate
swap because the receivables owned by the trust
bear interest at a fixed rate while the Variable
Pay Term Notes will generally bear interest at a
floating rate based on one-month LIBOR. The
trust will use payments made by the swap
counterparty to help make interest payments on
the notes and the certificates. If the interest
rate swap is terminated, the interest rate on
the Variable Pay Term Notes will automatically
become fixed at the fixed rate payable by the
trust under the interest rate swap.
During those periods in which the floating
LIBOR-based rate payable by the swap
counterparty is substantially greater than the
fixed rate payable by the trust, the trust will
be more dependent on receiving payments from the
swap counterparty in order to make payments on
the notes and the certificates. If the swap
counterparty fails to pay the net amount due,
you may experience delays and/or reductions in
the interest and principal payments on your
notes and in the interest payments and
distributions with respect to certificate
balance on your certificates.
On the other hand, during those periods in which
the floating rate payable by the swap
counterparty is less than the fixed rate payable
by the trust, the trust will be obligated to
make payments to the swap counterparty. The swap
counterparty will have a claim on the assets of
the trust for the net amount due, if any, to the
swap counterparty under the interest rate swap.
The swap counterparty's claim will be higher in
priority than payments on the notes and the
certificates. On any distribution date, if there
are not enough funds in the trust to pay all of
the trust's obligations for that distribution
date, the swap counterparty will receive full
payment of the net amount due under the interest
rate swap before you receive payments on your
notes or
S-10
<PAGE> 14
certificates. If there is a shortage of funds
available on any distribution date, you may
experience delays and/or reductions in interest
and principal payments on your notes and in the
interest payments and distributions with respect
to certificate balance on your certificates.
In addition, in the event of the termination of
the interest rate swap, a termination payment
may be due to the swap counterparty. Any such
payment would be made by the trust out of funds
that would otherwise be available to make
payments on the notes and the certificates and
would be paid from available funds pari passu
with payments of interest on the notes. The
amount of any such termination payment may be
based on the market value of the interest rate
swap. Any such termination payment could, if
market interest rates and other conditions have
changed materially, be substantial. In such
event, you may experience delays and/or
reductions in interest and principal payments on
your notes and in the interest payments and
distributions with respect to certificate
balance on your certificates.
The obligations of the swap counterparty under
the interest rate swap are unsecured. However,
in the event that the swap counterparty's
long-term senior unsecured debt or commercial
paper of the swap counterparty guarantor ceases
to be rated at a level acceptable to the rating
agencies, the swap counterparty will be
obligated to take the actions specified in the
interest rate swap as described below in "The
Transfer and Servicing Agreements--Interest Rate
Swap".
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<PAGE> 15
THE TRUST
The Issuer, Capital Auto Receivables Asset Trust
- , is a business trust formed under the laws of
the State of Delaware. The trust will be established and operated pursuant to a
trust agreement dated on or before the Closing Date of ,
, which is the date the trust initially issues the securities.
The trust will engage in only the following activities:
- Acquire, hold and manage the receivables and other assets of the
trust;
- Issue securities;
- Make payments on the securities; and
- Take any action necessary to fulfill the role of the trust in
connection with the notes and the certificates.
The trust's principal offices are in Wilmington, Delaware, in care of
, as owner trustee, at the address listed in "--The Owner
Trustee" below.
CAPITALIZATION OF THE TRUST
The following table illustrates the capitalization of the trust as of
, , the Cutoff Date, as if the
issuance of the Class A Notes, the initial Variable Pay Term Note and the
certificates had taken place on such date:
<TABLE>
<S> <C> <C>
Class A-1 % Asset Backed Notes............ $ --
Class A-2 % Asset Backed Notes............ $ --
Class A-3 % Asset Backed Notes............ $ --
Class A-4 % Asset Backed Notes............ $ --
Class A-5 % Asset Backed Notes............ $ --
Variable Pay Term Floating Rate Asset Backed
Note......................................... $ --
% Asset Backed Certificates............... $ --
-----------------
Total................................ $ --
=================
</TABLE>
The Class A-1 Notes and the Variable Pay Term Notes are not being offered
hereby. The certificates represent the equity of the trust and will be issued
under the trust agreement. The seller will initially hold certificates with an
aggregate initial balance of $ .
THE OWNER TRUSTEE
is the owner trustee under the trust agreement.
is a banking corporation and a wholly-owned
subsidiary of , a corporation. Its principal
offices are located at .
THE RECEIVABLES POOL
The receivables to be included in the pool of receivables related to the
notes were selected from GMAC's portfolio based on several criteria, including
that each receivable:
- has a first payment due date on or after ;
- was originated on or after ;
- has an original term of to months;
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<PAGE> 16
- provides for finance charges at an annual percentage rate within the
range specified in the second table below;
- as of , , which we refer to
as the CUTOFF DATE, was not more than 29 days past due; and
- satisfies the other criteria set forth in the prospectus under "The
Receivables Pools."
Scheduled Interest Receivables represent % of the Aggregate Principal
Balance as of the Cutoff Date. The balance of the receivables are Simple
Interest Receivables. Receivables representing % of the Aggregate Principal
Balance as of the Cutoff Date were secured by new vehicles at the time of
origination. The balance of the receivables was secured by used vehicles at the
time of origination.
The following tables describe the receivables pool:
COMPOSITION OF THE RECEIVABLES POOL
<TABLE>
<S> <C>
Weighted Average Annual Percentage Rate of
Receivables(1)......................................
Aggregate Amount Financed...........................
Number of Contracts in Pool.........................
Average Amount Financed.............................
Weighted Average Original Maturity (2).............. months
Weighted Average Remaining Maturity (Range)......... months ( to months)
</TABLE>
- - ------------
(1) Based on weighting by current balance and remaining term of each receivable.
(2) Based on weighting by original principal balance of each receivable.
DISTRIBUTION BY ANNUAL PERCENTAGE RATE OF THE RECEIVABLES POOL
<TABLE>
<CAPTION>
PERCENTAGE OF
ANNUAL PERCENTAGE NUMBER OF AGGREGATE AGGREGATE AMOUNT
RATE RANGE CONTRACTS AMOUNT FINANCED FINANCED
----------------- --------- --------------- ----------------
<S> <C> <C> <C>
6.00% to 7.00%....................... %
7.01% to 8.00%.......................
8.01% to 9.00%.......................
9.01% to 10.00%......................
10.01% to 11.00%.....................
11.01% to 12.00%.....................
12.01% to 13.00%.....................
13.01% to 14.00%.....................
14.01% to 15.00%.....................
15.01% to 16.00%.....................
16.01% to 17.00%.....................
17.01% to 18.00%.....................
18.01% to 19.00%.....................
19.01% to 20.00%.....................
Total...........................
</TABLE>
The pool of receivables includes receivables originated in
states and the District of Columbia. The following table sets forth the
percentage of the Aggregate Amount
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<PAGE> 17
Financed in the states with the largest concentration of receivables. No other
state accounts for more than % of the Aggregate Amount Financed.
<TABLE>
<CAPTION>
PERCENTAGE OF
AGGREGATE
STATE(1) AMOUNT FINANCED
-------- ---------------
<S> <C>
Texas............................................
California.......................................
Florida..........................................
Michigan.........................................
Georgia..........................................
Louisiana........................................
</TABLE>
- - ------------
(1) Based on billing addresses of the obligors on the receivables.
THE SERVICER
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
The following table shows GMAC's experience in the United States for:
(1) delinquencies on new and used retail car and light truck
receivables,
(2) repossessions and
(3) net losses relating to GMAC's entire vehicle portfolio (including
receivables previously sold by GMAC which it continues to service).
There can be no assurance that the delinquency, repossession and net loss
experience on the receivables will be comparable to that set forth below.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30 YEAR ENDED DECEMBER 31
NEW AND USED ------------------- --------------------------------
VEHICLE CONTRACTS 1999 1998 1998 1997 1996 1995
----------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Total Retail Contracts
Outstanding at End of the
Period (in thousands)........ 3,060 2,985 2,981 2,861 3,005 3,518
Average Daily Delinquency
31-60 Days..................... 2.24% 2.62% 2.66% 3.24% 3.14% 2.75%
61-90 Days..................... 0.15 0.16 0.18 0.23 0.22 0.19
91 Days or More................ 0.02 0.02 0.02 0.03 0.03 0.02
Repossessions as a Percent of
Average Number of Contracts
Outstanding.................. 2.16%(1) 2.54%(1) 2.48% 3.21% 3.59% 3.07%
Net Losses as a Percent of
Liquidations (2)............. 1.12% 1.77% 1.70% 2.30% 2.35% 1.40%
Net Losses as a Percent of
Average Receivables (2)...... 0.60%(1) 0.92%(1) 0.83% 1.31% 1.45% 0.89%
</TABLE>
- - ------------
(1) Annualized rate.
(2) Percentages based on gross accounts receivable including unearned income.
The net loss figures above reflect the fact that GMAC had recourse against
dealers on a portion of its retail installment sale contracts. For each period
above, this was less than %
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<PAGE> 18
of the portfolio at the end of the period. The percentage of the Aggregate
Amount Financed in the pool of receivables with recourse to dealers is less than
%. GMAC applies the same underwriting standards to the purchase of
contracts without regard to whether dealer recourse is provided. Based on its
experience, GMAC believes that there is no material difference between the rates
of delinquency and repossession on contracts with recourse against dealers as
compared to contracts without recourse against dealers. However, the net loss
experience of contracts without recourse against dealers is higher than that of
contracts with recourse against dealers because, under its recourse obligation,
the dealer is responsible to GMAC for payment of the unpaid balance of the
contract, provided GMAC retakes the car from the obligor and returns it to the
dealer within a specified time.
THE NOTES
GENERAL
The notes will be issued pursuant to the terms of an indenture, which may
be amended and supplemented from time to time, to be dated as of the Closing
Date between the trust and the indenture trustee. The form of the indenture has
been filed as an exhibit to the registration statement of which this prospectus
supplement forms a part. A copy of the indenture will be available to holders of
notes from the seller upon request and will be filed with the SEC following the
initial issuance of the notes. The following summary describes certain terms of
the notes and the indenture. The 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, the indenture and the prospectus. 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 the
summary. , a , will be the indenture trustee.
The Class A Notes. The Interest Rate, the Targeted Final Distribution Date
and the Final Scheduled Distribution Date for each class of the Class A Notes
are as set forth on the cover page to this prospectus supplement.
The Variable Pay Term Notes. All Variable Pay Term Notes will have the same
Final Scheduled Distribution Date set forth on the cover page to this prospectus
supplement. All Variable Pay Term Notes will bear interest at a floating rate
equal to LIBOR plus a margin not to exceed %, except as described below.
For the Variable Pay Term Note issued on the Closing Date, the Interest Rate
will be LIBOR plus %. If the Interest Rate Swap is terminated, the Interest
Rate on the Variable Pay Term Notes will automatically become fixed at %
per annum, which is the fixed rate payable by the trust under the Interest Rate
Swap. See "--Issuance of Additional Variable Pay Term Notes" below.
With respect to each Distribution Date other than the initial Distribution
Date, LIBOR will be the rate for deposits in U.S. Dollars for a period of one
month which appears on the Dow Jones Telerate Service Page 3750 as of 11:00
a.m., London time, on the day that is two LIBOR Business Days (i.e., any day
other than a Saturday, Sunday or any other day on which banks in London are
required or authorized to be closed) prior to the preceding Distribution Date
and, in the case of the initial Distribution Date, %. If that rate does not
appear on the Dow Jones Telerate Service Page 3750 (or any other page as may
replace that page on that service, or if that service is no longer offered, any
other service for displaying LIBOR or comparable rates as may be selected by the
indenture trustee after consultation with the seller), then LIBOR will be the
Reference Bank Rate.
The Reference Bank Rate is, for any Distribution Date, a rate determined on
the basis of the rates at which deposits in U.S. Dollars are offered by the
reference banks (which will be
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four major banks that are engaged in transactions in the London interbank
market, selected by the indenture trustee after consultation with the seller) as
of 11:00 a.m., London time, on the day that is two LIBOR Business Days prior to
the immediately preceding Distribution Date to prime banks in the London
interbank market for a period of one month, in amounts approximately equal to
the principal amount of the Variable Pay Term Notes then outstanding. The
indenture trustee will request the principal London office of each of the
reference banks to provide a quotation of its rate. If at least two quotations
are provided, the rate will be the arithmetic mean of the quotations, rounded
upwards to the nearest one-sixteenth of one percent. If on that date fewer than
two quotations are provided as requested, the rate will be the arithmetic mean,
rounded upwards to the nearest one-sixteenth of one percent, of the rates quoted
by one or more major banks in New York City, selected by the indenture trustee
after consultation with the seller, as of 11:00 a.m., New York City time, on
that date to leading European banks for United States dollar deposits for a
period of one month in amounts approximately equal to the principal amount of
any class of Variable Pay Term Notes then outstanding. If no quotation can be
obtained, then LIBOR will be the rate from the prior Distribution Date.
PAYMENTS OF INTEREST
Interest on the unpaid principal balance of each class of the Class A Notes
and the Variable Pay Term Notes will accrue at the applicable Interest Rate and
will be paid monthly on each Distribution Date. Interest payments on all Class A
Notes and Variable Pay Term Notes will have the same priority while interest on
the certificates will not be paid on any Distribution Date until interest on the
Class A Notes and the Variable Pay Term Notes has been paid in full.
Distribution Dates are the 15th day of each month, or if that date is not a
Business Day, the next succeeding Business Day, commencing ,
. Each Distribution Date will be a Payment Date as described in the
prospectus. Interest will accrue on the Class A Notes from and including the
Closing Date. For each class of the Class A Notes and the Variable Pay Term
Notes, interest will be payable on each Distribution Date in an amount equal to
the Noteholders' Interest Distributable Amount for that Distribution Date.
Interest on the Class A-1 Notes and the Variable Pay Term Notes will be
calculated on the basis of actual days elapsed during the period for which
interest is payable and a 360-day year. Interest on all other Class A Notes will
be calculated on the basis of a 360-day year consisting of twelve 30-day months.
Failure to pay the full Noteholders' Interest Distributable Amount on any class
of notes on any Distribution Date will constitute an Event of Default under the
indenture after a five-day grace period.
PAYMENTS OF PRINCIPAL
In general, no payments will be made on any class of the Class A Notes
until its Targeted Final Distribution Date. On the Targeted Final Distribution
Date for each class of Class A Notes, the trust will pay, to the extent of
available funds, the entire outstanding principal balance of that class of Class
A Notes. Amounts available to pay principal on the notes on each Distribution
Date that is not a Targeted Final Distribution Date will be applied to make
principal payments on the Variable Pay Term Notes to the extent of the
outstanding principal balance of the Variable Pay Term Notes. If and to the
extent the amount available to pay principal on the notes exceeds the
outstanding principal balance of the Variable Pay Term Notes, this excess will
be deposited into an account which we refer to as the Accumulation Account.
Amounts on deposit in the Accumulation Account will be available on the next
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succeeding Targeted Final Distribution Date to pay principal on the Class A
Notes. The Accumulation Account will be a Designated Account.
If any class of Class A Notes is not paid in full on its Targeted Final
Distribution Date, on each Distribution Date thereafter, until that class of
Class A Notes is paid in full, amounts available to make principal payments on
the notes will be applied to that class of Class A Notes and the Variable Pay
Term Notes pro rata based on their outstanding principal balances. If on two
consecutive Targeted Final Distribution Dates the corresponding targeted classes
of Class A Notes are not paid in full or in the event the Interest Rate Swap is
terminated, on each Distribution Date thereafter, amounts available to make
principal payments on the notes will be applied to the Class A Notes and the
Variable Pay Term Notes pro rata. In such event, payments on the Class A Notes
will be made sequentially, such that no principal payments will be made on any
class of Class A Notes until all Class A Notes with a lower numerical
designation have been paid in full. Thus, in such event, on each Distribution
Date, the Class A Notes would be paid as follows:
- First, the Class A-1 Notes until paid in full,
- Second, the Class A-2 Notes until paid in full,
- Third, the Class A-3 Notes until paid in full,
- Fourth, the Class A-4 Notes until paid in full, and
- Fifth, the Class A-5 Notes until paid in full.
It is unlikely that there will be sufficient funds to pay a class of Class
A Notes on its Targeted Final Distribution Date if the trust is not able to
generate sufficient proceeds from the sale of additional Variable Pay Term Notes
on that Targeted Final Distribution Date. See "--Issuance of Additional Variable
Pay Term Notes" below.
Except as provided below, principal payments to be made on the Variable Pay
Term Notes will be applied to the Variable Pay Term Notes in the order in which
they were issued, such that the earliest issued Variable Pay Term Notes will be
paid in full before any principal payments are made on later issued Variable Pay
Term Notes.
Notwithstanding the above, at any time that the principal balance of the
Class A Notes and the Variable Pay Term Notes has been declared due and payable
following the occurrence of an Event of Default, principal payments on each
class of the Class A Notes and the Variable Pay Term Notes will be made ratably
to all noteholders on each Distribution Date, based on the outstanding principal
balance of that class of notes until all Events of Default have been cured or
waived as provided in the indenture.
Although failure to pay the full principal amount of a class of notes on
the applicable Final Scheduled Distribution Date will be an Event of Default,
failure to pay a class of notes on the applicable Targeted Final Distribution
Date will not result in an Event of Default.
REDEMPTION
If the servicer exercises its option to purchase the receivables when the
Aggregate Principal Balance of the receivables on the last day of any Monthly
Period has declined to 10% or less of the Aggregate Amount Financed, then the
outstanding Class A-5 Notes, if any, and the Variable Pay Term Notes will be
redeemed in whole, but not in part, on the Distribution Date on which the
servicer exercises this option. The servicer's option is described in the
prospectus under "The Transfer and Servicing Agreements--Termination."
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The redemption price will be equal to the unpaid principal amount of the Class
A-5 Notes and the Variable Pay Term Notes, plus accrued and unpaid interest
thereon.
ISSUANCE OF ADDITIONAL VARIABLE PAY TERM NOTES
On the Closing Date, the trust will issue a Variable Pay Term Note in an
initial principal amount of $ . The trust will be able to issue
additional Variable Pay Term Notes on the Targeted Final Distribution Date for
each class of the Class A Notes and use the proceeds to make payments of
principal on that Targeted Final Distribution Date. Additional Variable Pay Term
Notes issued after the Closing Date will have an Interest Rate equal to LIBOR
plus a margin; provided, however, that in no event will such margin over LIBOR
exceed %, subject to adjustment to a fixed rate as described above. The
Interest Rate will be determined at the time of issuance and will reflect then
current market conditions. The Variable Pay Term Notes issued on each Targeted
Final Distribution Date will constitute a separate class of Variable Pay Term
Notes.
The trust may issue Variable Pay Term Notes on any Targeted Final
Distribution Date only if all of the following conditions are satisfied:
- after giving effect to the issuance of such Variable Pay Term Notes and
all payments of principal on the notes and payments with respect to the
Certificate Balance on that Targeted Final Distribution Date, the sum of
the outstanding principal balance of the notes plus the Certificate
Balance cannot exceed the Aggregate Principal Balance of the receivables
on the last day of the month immediately preceding that Targeted Final
Distribution Date;
- the Interest Rate Swap must be in full force and effect, and
- no Event of Default shall have occurred and be continuing.
The Variable Pay Term Notes are not being offered hereby. A 100%
participation interest in the initial Variable Pay Term Note will be sold in a
private placement. Subject to the conditions set forth above, the seller will
agree to offer to a commercial paper facility administered by GMAC the right to
purchase a 100% participation interest in the Variable Pay Term Notes that may
be issued on the Targeted Final Distribution Date for a class of Class A Notes
such that the Total Note Principal Payment Amount will be sufficient to pay such
class of Class A Notes in full on such Targeted Final Distribution Date.
However, neither that commercial paper facility nor any other person or entity
is obligated to purchase an interest in any Variable Pay Term Notes and neither
the seller, the servicer nor any other person or entity is obligated to identify
any other prospective purchasers. As a result, we cannot assure that any
additional Variable Pay Term Notes will be sold or that the proceeds from any
sale of Variable Pay Term Notes will be sufficient to pay a class of Class A
Notes in full on its Targeted Final Distribution Date. See " Risk
Factors--Failure to Sell Additional Variable Pay Term Notes Will Result in Class
A Notes Not Being Paid In Full on Their Targeted Final Distribution Dates."
If, on a Targeted Final Distribution Date for any class of Class A Notes,
the seller has a binding agreement for the sale of an interest in the Variable
Pay Term Notes but the servicer determines that the proceeds from that sale will
not be received on that Targeted Final Distribution Date in time to make
payments on the notes on that Targeted Final Distribution Date, the servicer
may, in its sole discretion, make a liquidity advance to the trust in an amount
equal to these proceeds if it determines, in its sole discretion, that it has
received reasonable assurances from the purchaser of an interest in the Variable
Pay Term Notes to the effect that the full amount of the proceeds will be
delivered to the trust later on that
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Targeted Final Distribution Date or within two Business Days thereafter. If the
servicer makes a liquidity advance to the trust, it will be immediately
reimbursed for the advance upon receipt by the trust of the purchase price for
the additional Variable Pay Term Notes or an interest therein. If the purchase
price for the interest in the additional Variable Pay Term Notes is not paid
within two Business Days after the Targeted Final Distribution Date, the
servicer will have the right to be reimbursed out of collections on the
receivables as and when received.
PARITY OF NOTES
Interest payments on all classes of Class A Notes and Variable Pay Term
Notes will have the same priority. Under certain circumstances, the amount
available to make these payments could be less than the amount of interest
payable on the notes on any Distribution Date, in which case each class of
noteholders will receive their ratable share (based upon the aggregate amount of
interest due to that class of noteholders on such Distribution Date) of the
aggregate amount available to be distributed in respect of interest on the
notes. See "The Transfer and Servicing Agreements--Distributions" and "--Reserve
Account."
Principal payments on the notes will be made as described above. If an
Event of Default occurs as a result of which the principal balances of the Class
A Notes and the Variable Pay Term Notes are declared immediately due and
payable, each class of notes will be entitled to ratable repayment of principal
on each Distribution Date, based on the outstanding principal balance of the
notes until all Events of Default have been cured or waived as provided in the
indenture.
ADDITIONAL INDENTURE MATTERS
As set forth in the prospectus under the caption "The Notes--The
Indenture--Events of Default; Rights Upon Event of Default," the indenture
trustee may sell the trust's assets following an Event of Default only if
certain conditions are satisfied. With respect to an Event of Default resulting
from a breach by the trust of the covenants in the indenture, the consent from
the holders of all the outstanding notes must be accompanied by the consent of
the holders of all the outstanding certificates.
DELIVERY OF NOTES
The Class A Notes will be issued on or about the Closing Date in book entry
form through the facilities of the DTC, Cedelbank and the Euroclear System
against payment in immediately available funds.
THE CERTIFICATES
GENERAL
The trust will issue the certificates pursuant to the terms of a trust
agreement, a form of which the seller has filed as an exhibit to the
registration statement of which this prospectus supplement forms a part. A copy
of the trust agreement will be available to holders of certificates from the
seller upon request and will be filed with the SEC following the initial
issuance of the notes and the certificates. The following summary describes
certain terms of the certificates and the trust agreement. The 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, the trust agreement and
the prospectus. Where particular provisions or terms used in the trust
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agreement are referred to, the actual provisions (including definitions of
terms) are incorporated by reference as part of such summary.
INTEREST
On each Distribution Date, interest will be distributed to
certificateholders at the Pass Through Rate with respect to the Certificate
Balance. Any Certificateholders' Interest Distributable Amount with respect to a
Distribution Date which is not distributed on such Distribution Date will be
distributed on the next Distribution Date. Interest will accrue from and
including the Closing Date and will be payable on each Distribution Date in an
amount equal to the Certificateholders' Interest Distributable Amount for that
Distribution Date. Interest with respect to the certificates will be calculated
on the basis of a 360-day year consisting of twelve 30-day months.
CERTIFICATE BALANCE
On each Distribution Date, the Certificateholders' Percentage of the
Principal Distributable Amount will be available to make distributions with
respect to Certificate Balance. The Final Scheduled Distribution Date for the
certificates will occur on the Distribution Date.
SUBORDINATION TO THE NOTES
Notwithstanding the above, if an Event of Default occurs, and the notes are
accelerated, no payments of interest on the certificates or distributions with
respect to Certificate Balance will be made until the notes are paid in full or
the acceleration is rescinded. In this event, amounts otherwise available to
make payments on the certificates will be available to make payments on the
notes. See "The Transfer and Servicing Agreements--Distributions" in this
prospectus supplement.
EARLY RETIREMENT OF THE CERTIFICATES
If the servicer exercises its option to purchase the receivables when the
Aggregate Principal Balance declines to 10% or less of the Aggregate Amount
Financed, certificateholders will receive an amount in respect of the
certificates equal to the Certificate Balance together with accrued interest at
the Pass Through Rate. This distribution will effect early retirement of the
certificates. See "The Transfer and Servicing Agreements--Termination" in the
prospectus.
THE TRANSFER AND SERVICING AGREEMENTS
The parties will enter into the Transfer and Servicing Agreements, as of
the Closing Date. See "The Transfer and Servicing Agreements" in the prospectus.
The following summary describes certain terms of the Transfer and Servicing
Agreements. The seller has filed forms of the Transfer and Servicing Agreements
as exhibits to the registration statement of which this prospectus supplement
forms a part. A copy of the Transfer and Servicing Agreements will be available
to holders of notes from the seller upon request. The 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 and the
prospectus. 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.
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SERVICING COMPENSATION AND PAYMENT OF EXPENSES
On each Distribution Date, the servicer will be entitled to receive the
Total Servicing Fee as described in the prospectus under "The Transfer and
Servicing Agreements-- Servicing Compensation and Payment of Expenses." The
Basic Servicing Fee Rate will be 1%. In addition, the servicer will be entitled
to retain any late fees, prepayment charges or certain similar fees and charges
collected during a Monthly Period and any investment earnings on trust accounts
during a Monthly Period.
DISTRIBUTIONS
On or before each Distribution Date, the servicer will transfer all
collections on the receivables for the prior month (and, for the initial
Distribution Date, two months preceding such Distribution Date) and all
Prepayments to the Collection Account. On each Distribution Date, the indenture
trustee will cause collections made during the prior month which constitute
Payments Ahead to be transferred from the Collection Account to the servicer or
to the Payment Ahead Servicing Account, if required.
The indenture trustee will make distributions to the Note Distribution
Account and the Certificate Distribution Account out of the amounts on deposit
in the Collection Account. The amount to be distributed to the Note Distribution
Account and Certificate Distribution Account will be determined in the manner
described below.
Determination of Available Amounts. The Total Available Amount for a
Distribution Date will be the sum of the Available Interest and the Available
Principal, and all cash or other immediately available funds on deposit in the
Reserve Account immediately prior to such Distribution Date plus (1) on the
Targeted Final Distribution Date for any class of Class A Notes, any Variable
Pay Term Notes Issuance Proceeds and the Accumulation Amount and (2) on the
first Distribution Date after the notes have been declared due and payable
following the occurrence of an Event of Default and on the first Distribution
Date after the termination of the Interest Rate Swap, the Accumulation Amount.
Monthly Withdrawals and Deposits. On or before the tenth day of each
calendar month, or if that day is not a Business Day, the next succeeding
Business Day, with respect to the prior month and the related Distribution Date,
the servicer will calculate the Total Available Amount, the Available Interest,
the Available Principal, any expected Variable Pay Term Notes Issuance Proceeds,
the Accumulation Amount, the Total Servicing Fee, the Total Note Principal
Payment Amount, the Aggregate Noteholders' Interest Distributable Amount, the
Aggregate Noteholders' Principal Distributable Amount, the Certificateholders'
Interest Distributable Amount, the Certificateholders' Principal Distributable
Amount, the net amount, if any, payable by the trust under the Interest Rate
Swap and certain other items. Based on these calculations, the servicer will
deliver to the indenture trustee a certificate specifying such amounts and
instructing the indenture trustee to make withdrawals, deposits and payments of
the following amounts on such Distribution Date:
(1) the amount, if any, to be withdrawn from the Reserve Account and
deposited in the Collection Account;
(2) the amount to be withdrawn from the Collection Account and paid to
the servicer in respect of the Total Servicing Fee for such Distribution
Date and the net amount, if any, to be paid under the Interest Rate Swap to
the Swap Counterparty for such Distribution Date;
(3) the amounts to be withdrawn from the Collection Account in respect
of the Aggregate Noteholders' Interest Distributable Amount and the
Aggregate Noteholders'
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Principal Distributable Amount and deposited in the Note Distribution
Account for payment to noteholders on such Distribution Date;
(4) the amounts to be withdrawn from the Collection Account in respect
of the Certificateholders' Interest Distributable Amount and the
Certificateholders' Principal Distributable Amount and deposited in the
Certificate Distribution Account for distribution to certificateholders on
such Distribution Date;
(5) the amount, if any, to be withdrawn from the Collection Account
and deposited in the Reserve Account;
(6) the amount, if any, to be withdrawn from the Reserve Account and
paid to the seller;
(7) the amount, if any, to be withdrawn from the Collection Account
and deposited in the Accumulation Account; and
(8) the amount, if any, to be withdrawn from the Accumulation Account
and deposited in the Collection Account.
The amount, if any, to be withdrawn from the Reserve Account and deposited
to the Collection Account as specified in clause (1) above with respect to any
Distribution Date will be the lesser of:
(X) the amount of cash or other immediately available funds therein on
such Distribution Date and
(Y) the amount, if any, by which:
(A) the sum of the Total Servicing Fee, the Aggregate Noteholders'
Interest Distributable Amount, the Certificateholders' Interest
Distributable Amount, the Aggregate Noteholders' Principal Distributable
Amount, the net amount, if any, payable by the trust under the Interest
Rate Swap and the Certificateholders' Principal Distributable Amount
exceeds
(B) the Available Interest and the Available Principal for such
Distribution Date.
The amount, if any, to be withdrawn from the Collection Account and
deposited in the Reserve Account as specified in clause (5) above with respect
to any Distribution Date will equal the amount, if any, by which:
(X) the Available Interest and the Available Principal for such
Distribution Date exceeds
(Y) the amount described in subclause (A) of clause (Y) of the
preceding paragraph.
The amount, if any, to be withdrawn from the Reserve Account and paid to
the seller as specified in clause (6) above with respect to any Distribution
Date will equal the amount, if any, by which the amount on deposit in the
Reserve Account after all other deposits (including the deposit pursuant to
clause (5) above) and withdrawals on such Distribution Date exceeds the
Specified Reserve Account Balance for such date.
The amount, if any, to be withdrawn from the Collection Account and
deposited in the Accumulation Account as specified in clause (7) above with
respect to any Distribution Date that is not a Targeted Final Distribution Date
for a class of Class A Notes will be, except as described in the following
sentence, the amount, if any, by which (x) the Noteholders'
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Percentage of the Principal Distributable Amount for that Distribution Date
exceeds (y) the outstanding principal balance of the Variable Pay Term Notes as
of the open of business on that Distribution Date. No funds will be withdrawn
from the Collection Account and deposited in the Accumulation Account on any
Distribution Date that is a Targeted Final Distribution Date for a class of
Class A Notes, any Distribution Date during a Sequential Amortization Period or
any Distribution Date after the notes have been accelerated following the
occurrence of an Event of Default until all Events of Default have been cured or
waived as provided in the indenture.
The amount, if any to be withdrawn from the Accumulation Account and
deposited in the Collection Account as specified in clause (8) above will be the
Accumulation Amount, if any:
(A) on each Distribution Date that is a Targeted Final Distribution
Date for a class of Class A Notes,
(B) on the first Distribution Date during a Sequential Amortization
Period, or
(C) on the first Distribution Date after the notes have been declared
due and payable following the occurrence of an Event of Default. In all
other cases, no amounts will be transferred from the Accumulation Account
to the Collection Account.
On each Distribution Date, all amounts on deposit in the Note Distribution
Account will be distributed to the noteholders and all amounts on deposit in the
Certificate Distribution Account will be distributed to the certificateholders,
in each case as described herein.
Priorities for Withdrawals from Collection Account. Withdrawals of funds
from the Collection Account on a Distribution Date for application as described
in clauses (2), (3) and (4) under "--Distributions--Monthly Withdrawals and
Deposits" above will be made only to the extent of the Total Available Amount
allocated to such application for such Distribution Date. In calculating the
amounts which can be withdrawn from the Collection Account and applied as
specified in such clauses (2), (3) and (4), the servicer will allocate the Total
Available Amount in the following order of priority:
(1) the Total Servicing Fee;
(2) the net amount, if any, to be paid under the Interest Rate Swap to
the Swap Counterparty;
(3) the Aggregate Noteholders' Interest Distributable Amount;
(4) the Certificateholders' Interest Distributable Amount;
(5) the Aggregate Noteholders' Principal Distributable Amount; and
(6) the Certificateholders' Principal Distributable Amount.
Notwithstanding the foregoing, at any time that all classes of notes have
not been paid in full and the principal balance of the notes has been declared
due and payable following the occurrence of an Event of Default under the
indenture, until the time when the notes have been paid in full or the
declaration has been rescinded and any continuing Events of Default have been
cured or waived pursuant to the indenture, no amounts will be deposited in or
distributed to the Certificate Distribution Account. Any such amounts otherwise
distributable to the Certificate Distribution Account will be deposited instead
into the Note Distribution Account for payments on the notes as described
herein.
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RESERVE ACCOUNT
Pursuant to the Trust Sale and Servicing Agreement, the trust will
establish the Reserve Account with the indenture trustee. The Reserve Account
will be funded by an initial deposit by the seller on the Closing Date of
$ , which equals % of the Initial Aggregate Principal Balance.
On each Distribution Date, amounts in the Reserve Account will be available to
make payments on the notes and the certificates as described above under "The
Distributions--Monthly Withdrawals and Deposits."
If the amount on deposit in the Reserve Account on any Distribution Date,
after giving effect to all other deposits, including the deposit described in
clause (5) under "The Distributions--Monthly Withdrawals and Deposits", and
withdrawals therefrom on such Distribution Date, is greater than the Specified
Reserve Account Balance for such Distribution Date, the servicer will instruct
the indenture trustee to distribute the amount of the excess to the seller. 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.
INTEREST RATE SWAP
On the Closing Date, the trust will enter into an Interest Rate Swap with
, as the Swap Counterparty. The obligations of the Swap
Counterparty under the Interest Rate Swap will be guaranteed by ,
as the Swap Counterparty Guarantor. As of the date hereof, the long-term debt
obligations of the Swap Counterparty Guarantor are rated "AAA" by Standard &
Poor's Ratings Services and "Aa1" by Moody's Investors Service, Inc.
Under the Interest Rate Swap, the trust will receive payments at a rate
determined by reference to LIBOR, which is the basis for determining the amount
of interest due on the Variable Pay Term Notes. Under the Interest Rate Swap,
with respect to each Distribution Date, (1) the trust will be obligated to pay
to the Swap Counterparty a fixed monthly interest rate of % on a notional
amount equal to the outstanding principal balance on the Variable Pay Term Notes
and (2) the Swap Counterparty will be obligated to pay to the trust a floating
interest rate of LIBOR plus % on a notional amount equal to the outstanding
principal balance on the Variable Pay Term Notes.
With respect to each Distribution Date, the amount the trust is obligated
to pay will be netted against the amount the Swap Counterparty is obligated to
pay under the Interest Rate Swap. Only the net amount will be due from the trust
or the Swap Counterparty, as applicable.
Upon the occurrence of the events of default and termination events
specified in the Interest Rate Swap, the non-defaulting party or non-affected
party may elect to terminate the Interest Rate Swap. These events include
failure to make payments due under the Interest Rate Swap, the occurrence of
certain bankruptcy and insolvency events and other customary events. The trust
will also be deemed to be in default for such purpose if:
(1) there is an Event of Default resulting from a payment default or a
bankruptcy or insolvency event with respect to the trust and the notes are
declared due in full;
(2) the notes are declared due in full following an Event of Default
resulting from a covenant default under the indenture and the holders of
all of the outstanding notes and certificates consent to the sale by the
indenture trustee of the trust's assets; or
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(3) an amendment to the Transfer and Servicing Agreements or the
indenture is made without the consent of the Swap Counterparty and such
amendment materially and adversely affects the Swap Counterparty.
If the Interest Rate Swap terminates, a Sequential Amortization Period will
commence and the trust will not be permitted to issue any additional Variable
Pay Term Notes. In addition, in such event, the Interest Rate on all outstanding
Variable Pay Term Notes will automatically be adjusted to a fixed rate of %,
which is the fixed rate payable by the trust under the Interest Rate Swap.
In addition, in the event of the termination of the Interest Rate Swap, a
termination payment may be due (1) to the Swap Counterparty by the trust out of
funds that would otherwise be available to make payments on the notes and the
certificates or (2) to the trust by the Swap Counterparty. Any termination
payments due by the trust will be paid from available funds pari passu with
payments of interest on the notes. The amount of any such termination payment
may be based on market quotations of the cost of entering into a similar swap
transaction or such other method as may be required under the Interest Rate
Swap, in each case, in accordance with the procedures set forth in the Interest
Rate Swap. Any such termination payment could, if market interest rates and
other conditions have changed materially, be substantial. Under the terms of the
Interest Rate Swap, the non-defaulting party is not obligated to make a
termination payment otherwise due in the event of termination following the
occurrence of an event of default.
The obligations of the trust under the Interest Rate Swap are secured under
the indenture. The obligations of the Swap Counterparty under the Interest Rate
Swap are unsecured. However, in the event that the Swap Counterparty Guarantor's
long-term senior unsecured debt or commercial paper ceases to be rated at a
level acceptable to the rating agencies, under the Interest Rate Swap, the Swap
Counterparty will be obligated, within 30 calendar days of the date on which the
Swap Counterparty Guarantor's ratings fall below the required ratings, either to
(A) post collateral or establish other arrangements to secure its obligations
under the Interest Rate Swap or (B) arrange for a substitute swap counterparty
to assume the rights and obligations of the Swap Counterparty under the Interest
Rate Swap, in either case so that the ratings of the notes are maintained or, if
applicable, restored to their level immediately prior to the change in the
ratings of the Swap Counterparty Guarantor's debt giving rise to such
obligation. If the Swap Counterparty fails to take either of these actions, the
trust will be entitled to terminate its interest rate swap with the Swap
Counterparty and to claim from the Swap Counterparty a termination payment as
described above. Such termination and replacement will not constitute a
termination of the Interest Rate Swap for purposes of the second preceding
paragraph.
The Swap Counterparty will have the right to consent to amendments under
the indenture and the Transfer and Servicing Agreements, other than amendments
that do not materially and adversely affect the interests of the Swap
Counterparty.
The Swap Counterparty is a wholly-owned subsidiary of . The
Swap Counterparty is a dealer in interest rate and cross-currency swaps and
other derivative products in all major currencies from its offices or affiliates
in . Its offices are located at and its telephone
number is ( ) .
The Swap Counterparty Guarantor is a wholly-owned subsidiary of
and is engaged in the business of .
The information in the preceding three paragraphs has been provided by the
Swap Counterparty for use in this prospectus supplement. Except for the
foregoing three
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<PAGE> 29
paragraphs, the Swap Counterparty, the Swap Counterparty Guarantor and their
respective affiliates have not prepared and do not accept responsibility for
this prospectus or this prospectus supplement. No representation is made by the
servicer, the seller or any of their affiliates as to the accuracy or
completeness of such information.
TERMINATION
Following payment in full of the securities and payment of all liabilities
of the trust in accordance with applicable law, any remaining assets in the
trust and any remaining amount in the Reserve Account will be distributed to the
seller.
ERISA CONSIDERATIONS
THE NOTES
Although there is little guidance on the subject, the seller believes that,
at the time of their issuance, the Class A Notes offered hereby would be treated
as indebtedness without substantial equity features for purposes of the United
States Department of Labor's plan assets regulations. The debt treatment of the
Class A Notes offered hereby could change, subsequent to their issuance, if the
Issuer incurred losses. However, without regard to whether the Class A Notes are
treated as an equity interest for such purposes, the acquisition or holding of
such notes by or on behalf of a Benefit Plan could be considered to give rise to
a prohibited transaction if the seller, the trust or any of their respective
affiliates is or becomes a party in interest or a disqualified person with
respect to such Benefit Plan. Certain exemptions from the prohibited transaction
rules could be applicable to the purchase and holding of the Class A Notes
offered hereby by a Benefit Plan depending on the type and circumstances of the
plan fiduciary making the decision to acquire such notes. Included among these
exemptions are: Prohibited Transaction Class Exemption 96-23, regarding
transactions affected by in-house asset managers; PTCE 95-60, regarding
investments by insurance company general accounts; PTCE 90-1, regarding
investments by insurance company pooled separate accounts; PTCE 91-38, regarding
investments by bank collective investment funds; and PTCE 84-14, regarding
transactions effected by "qualified professional asset managers." For additional
information regarding treatment of the Class A Notes under ERISA, see "ERISA
Considerations" in the prospectus.
THE CERTIFICATES
The certificates may not be acquired by:
(1) an employee benefit plan (as defined in Section 3(3) of ERISA)
that is subject to the provisions of Title I of ERISA,
(2) a plan described in Section 4975(e)(1) of the Code or
(3) any entity whose underlying assets include plan assets by reason
of a plan's investment in the entity.
By its acceptance of a certificate, each certificateholder will be deemed to
have represented and warranted that it is not subject to the foregoing
limitation. For additional information regarding treatment of the certificates
under ERISA, see "ERISA Considerations" in the prospectus.
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<PAGE> 30
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Kirkland & Ellis, special tax counsel to the seller, for
U.S. federal income tax purposes, the Class A Notes offered hereby will
constitute indebtedness. Each noteholder, by the acceptance of a note, will
agree to treat the notes as indebtedness for federal, state and local income and
franchise tax purposes.
In the opinion of Kirkland & Ellis, the trust will not be taxable as an
association or publicly traded partnership taxable as a corporation, but should
be classified as a grantor trust for federal income tax purposes. If the
Internal Revenue Service were to contend successfully that the trust is not a
grantor trust, the trust should be classified for federal income tax purposes as
a partnership which is not taxable as a corporation. Each certificateholder, by
the acceptance of a Trust Certificate, will agree to treat the Trust
Certificates as equity interests in the trust for federal, state and local
income and franchise tax purposes. Certificateholders generally must report
their respective allocable shares of all income earned on the receivables and,
subject to certain limitations on individuals, estates and trusts, may deduct
their respective allocable shares of interest paid on the notes and reasonable
servicing and other fees. See "Certain Federal Income Tax Considerations--Trust
Certificates" in the prospectus.
See "Certain Federal Income Tax Considerations" and "State and Local Tax
Consequences" in the prospectus.
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting
agreement, the seller has agreed to sell to each of the underwriters named
below, and each of the underwriters has severally agreed to purchase from the
seller, the principal amount of Class A-2 Notes, Class A-3 Notes, Class A-4
Notes and Class A-5 Notes and the certificates set forth opposite its name
below:
AGGREGATE PRINCIPAL AMOUNT TO BE PURCHASED
<TABLE>
<CAPTION>
CLASS A-2 CLASS A-3 CLASS A-4 CLASS A-5
UNDERWRITER NOTES NOTES NOTES NOTES CERTIFICATES TOTAL
----------- --------- --------- --------- --------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Total................
</TABLE>
The seller has been advised by the underwriters that the several
underwriters propose initially to offer the Class A-2 Notes, the Class A-3
Notes, the Class A-4 Notes and the Class A-5 Notes and the certificates to the
public at the prices set forth on the cover page hereof, and to certain dealers
at such prices less a selling concession not in excess of the percentage set
forth below for each class of notes and the certificates. The underwriters may
allow, and such dealers may reallow to certain other dealers, a subsequent
concession not in
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<PAGE> 31
excess of the percentage set forth below for each class of notes and the
certificates. After the initial public offering, the public offering price and
such concessions may be changed.
<TABLE>
<CAPTION>
SELLING CONCESSION REALLOWANCE
------------------ -----------
<S> <C> <C>
Class A-2 Notes.................................... -- --
Class A-3 Notes.................................... -- --
Class A-4 Notes.................................... -- --
Class A-5 Notes.................................... -- --
Certificates....................................... -- --
</TABLE>
The underwriters may engage in over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids with respect to
the Class A Notes and the certificates in accordance with Regulation M under the
Securities Exchange Act of 1934. Over-allotment transactions involve syndicate
sales in excess of the offering size, which creates a syndicate short position.
Stabilizing transactions permit bids to purchase the Class A Notes or the
certificates so long as the stabilizing bids do not exceed a specified maximum.
Syndicate covering transactions involve purchases of the Class A Notes or the
certificates in the open market after the distribution has been completed in
order to cover syndicate short positions. Penalty bids permit the underwriters
to reclaim a selling concession from a syndicate member when the Class A Notes
or the certificates originally sold by such syndicate member are purchased in a
syndicate covering transaction. Such over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids may cause the
prices of the Class A Notes or the certificates to be higher than they would
otherwise be in the absence of such transactions. Neither the seller nor any of
the underwriters represent that the underwriters will engage in any such
transactions or that such transactions, once commenced, will not be discontinued
without notice at any time.
The seller will receive aggregate proceeds of approximately $ from
the sale of the Class A Notes described above (representing % of the
principal amount of such Class A Notes) and approximately $ from the sale
of the certificates (representing % of the aggregate initial Certificate
Balance) after paying the aggregate underwriting discount of $ on such
Class A Notes (representing % of the principal amount of such Class A Notes)
and an aggregate underwriting discount of $ on the certificates
(representing % of the aggregate initial Certificate Balance, excluding the
amount retained by the seller). Additional offering expenses are estimated to be
$ .
LEGAL OPINIONS
In addition to the legal opinions described in the prospectus, certain
legal matters relating to the notes and the certificates will be passed upon for
the underwriters by Mayer, Brown & Platt. Mayer, Brown & Platt has from time to
time represented, and is currently representing, General Motors Corporation and
certain of its affiliates.
S-28
<PAGE> 32
GLOSSARY OF TERMS TO PROSPECTUS SUPPLEMENT
This Glossary of Terms to Prospectus Supplement is not complete and is
qualified in its entirety by reference to the Related Documents, forms of which
are filed as an exhibit to the registration statement of which this prospectus
supplement is a part. References to the singular include references to the
plural and vice versa.
"Accumulation Account" means the account designated as such, established
and maintained pursuant to the Trust Sale and Servicing Agreement.
"Accumulation Amount" means, for any Distribution Date, the aggregate
amount deposited into the Accumulation Account prior to such Distribution Date
and not previously applied to make payments on the notes. On any Distribution
Date which is a Targeted Final Distribution Date for a class of Class A Notes,
except during a Sequential Amortization Period or after the notes have been
declared due and payable following an Event of Default until all Events of
Default have been cured or waived as provided in the indenture, the Accumulation
Amount, together with the Noteholders' Percentage of the Principal Distributable
Amount for such Distribution Date and the expected Variable Pay Term Notes
Issuance Proceeds, may not exceed the outstanding principal balance of that
class of Class A Notes and the Variable Pay Term Notes as of the opening of
business on that Distribution Date.
"Aggregate Amount Financed" means $ .
"Aggregate Noteholders' Interest Distributable Amount" means, with respect
to any Distribution Date, the sum of (1) the Noteholders' Interest Distributable
Amounts for all classes of notes and (2) the Noteholders' Interest Carryover
Shortfall as of the preceding Distribution Date.
"Aggregate Noteholders' Principal Distributable Amount" means, with respect
to any Distribution Date the sum of the (1) Noteholders' Principal Distributable
Amounts for all classes of notes and (2) the Noteholders' Principal Carryover
Shortfall as of the preceding Distribution Date.
"Available Interest" means, for a Distribution Date, the difference, with
respect to the related Monthly Period (or, for the initial Distribution Date,
the two Monthly Periods proceeding such Distribution Date), of:
(A) the sum, with respect to the related Monthly Period, of :
(1) that portion of all collections on the receivables held by the
trust (other than Liquidating Receivables) allocable to interest or
Prepayment Surplus (including, in the case of Scheduled Interest
Receivables, the interest portion of existing Payments Ahead being
applied in such Monthly Period but excluding Excess Payments made during
such Monthly Period that are treated as Payments Ahead),
(2) Liquidation Proceeds, Liquidating Receivables, to the extent
allocable to interest in accordance with the servicer's customary
servicing procedures,
(3) all Simple Interest Advances,
(4) all Scheduled Interest Advances to the extent allocable to
interest,
(5) the net amount paid by the Swap Counterparty, if any, to the
trust pursuant to the Interest Rate Swap, and
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<PAGE> 33
(6) the Warranty Payment or the Administrative Purchase Payment for
each receivable that the seller repurchased or the servicer purchased
during such Monthly Period, to the extent allocable to accrued interest
thereon; and
minus,
(B) the sum, with respect to the related Monthly Period, of:
(1) any Excess Simple Interest Collections,
(2) amounts received on any Scheduled Interest Receivable (other
than a Liquidating Receivable) to the extent that the servicer has
previously made an unreimbursed Scheduled Interest Advance,
(3) Liquidation Proceeds with respect to Simple Interest
Receivables paid to the servicer to reimburse outstanding Simple
Interest Advances as described in the prospectus under "The Transfer and
Servicing Agreements--Monthly Advances,"
(4) Liquidation Proceeds with respect to Scheduled Interest
Receivables to the extent of any unreimbursed Scheduled Interest
Advances, and
(5) liquidation expenses as 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 the
refurbishing and disposition of the financed vehicle and other
out-of-pocket costs related to the liquidation.
"Available Principal" means for a Distribution Date, the difference, with
respect to the related Monthly Period (or, for the initial Distribution Date,
the two Monthly Periods proceeding such Distribution Date), of:
(A) the sum, with respect to the related Monthly Period, of:
(1) that portion of all collections on the receivables held by the
trust (other than Liquidating Receivables) allocable to principal
(including, in the case of Scheduled Interest Receivables, the principal
portion of Prepayments and existing Payments Ahead being applied in such
Monthly Period but excluding Excess Payments made during such Monthly
Period that are treated as Payments Ahead),
(2) Liquidation Proceeds to the extent allocable to principal in
accordance with the servicer's customary servicing procedures,
(3) all Scheduled Interest Advances to the extent allocable to
principal, and
(4) to the extent allocable to principal, the Warranty Payment or
the Administrative Purchase Payment for each receivable that the seller
repurchased or the servicer purchased during the related Monthly Period;
and
minus,
(B) the sum, with respect to the related Monthly Period, of:
(1) any Excess Simple Interest Collections,
(2) amounts received on any Scheduled Interest Receivable (other
than a Liquidating Receivable) to the extent that the servicer has
previously made an unreimbursed Scheduled Interest Advance,
(3) Liquidation Proceeds with respect to Simple Interest
Receivables paid to the servicer to reimburse outstanding Simple
Interest Advances as described in the prospectus under "The Transfer and
Servicing Agreements--Monthly Advances,"
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<PAGE> 34
(4) Liquidation Proceeds with respect to Scheduled Interest
Receivables to the extent of any unreimbursed Scheduled Interest
Advances, and
(5) liquidation expenses as 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 the
refurbishing and disposition of the financed vehicle and other
out-of-pocket costs related to the liquidation.
"Basic Servicing Fee Rate" means 1% per annum.
"Certificate Balance" means, initially, $ and, on any Distribution
Date thereafter, will equal the initial Certificate Balance, reduced by (1) all
distributions in respect of Certificate Balance actually made on or prior to
such date to certificateholders, (2) the Noteholders' Principal Carryover
Shortfall as of the close of the preceding Distribution Date and (3) the
Certificateholders' Principal Carryover Shortfall as of the close of the
preceding Distribution Date.
"Certificateholders' Interest Carryover Shortfall" means, as of the close
of any Distribution Date, the excess of the Certificateholders' Interest
Distributable Amount for such Distribution Date over the amount that was
actually deposited in the Certificate Distribution Account on such Distribution
Date in respect of interest on the certificates.
"Certificateholders' Interest Distributable Amount" means, with respect to
any Distribution Date, the sum of:
(1) the Certificateholders' Monthly Interest Distributable Amount for
such Distribution Date and
(2) the Certificateholders' Interest Carryover Shortfall as of the
close of the preceding Distribution Date.
"Certificateholders' Monthly Interest Distributable Amount" means, with
respect to any Distribution Date, interest equal to one-twelfth of the Pass
Through Rate multiplied by the Certificate Balance as of the close of the
preceding Distribution Date (or, in the case of the first Distribution Date,
interest at the Pass Through Rate multiplied by a fraction, the numerator of
which is and the denominator of which is 360 multiplied by the initial
Certificate Balance).
"Certificateholders' Percentage" means, with respect to any Distribution
Date, 100% minus the Noteholders' Percentage.
"Certificateholders' Principal Carryover Shortfall" means, as of the close
of any Distribution Date, the excess of the Certificateholders' Principal
Distributable Amount for such Distribution Date over the amount that was
actually deposited in the Certificate Distribution Account on such current
Distribution Date in respect of Certificate Balance.
"Certificateholders' Principal Distributable Amount" means, with respect to
any Distribution Date, the sum of (1) the lesser of (A) the Certificateholders'
Percentage of the Principal Distributable Amount and (B) the Certificate Balance
plus (2) any outstanding Certificateholders' Principal Carryover Shortfall as of
the close of the preceding Distribution Date.
"Class A Notes" means, collectively, the Class A-1 Notes, the Class A-2
Notes, the Class A-3 Notes, the Class A-4 Notes and the Class A-5 Notes.
"Class A-1 Notes" means the Class A-1 % Asset Backed Notes issued by
the trust.
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<PAGE> 35
"Class A-2 Notes" means the Class A-2 % Asset Backed Notes issued by
the trust.
"Class A-3 Notes" means the Class A-3 % Asset Backed Notes issued by
the trust.
"Class A-4 Notes" means the Class A-4 % Asset Backed Notes issued by
the trust.
"Class A-5 Notes" means the Class A-5 % Asset Backed Notes issued by
the trust.
"Class A Percentage" means, for a Distribution Date, the percentage equal
to a fraction, the numerator of which is the outstanding principal balance of
the Class A Notes and the denominator of which is the sum of the outstanding
principal balance of the Class A Notes plus the outstanding principal balance of
the Variable Pay Term Notes, in each case at the close of the immediately
preceding Distribution Date (or, in the case of the first Distribution Date, the
Closing Date).
"Closing Date" means , 200 .
"Cutoff Date" means , 200 .
"Distribution Date" means the fifteenth day of each calendar month or, if
that day is not a Business Day, the next succeeding Business Day, beginning with
the first Distribution Date on , .
"Final Schedule Distribution Date" means the final scheduled distribution
date, if any, for each class of notes and for the certificates set forth on the
front cover pages of this prospectus supplement.
"Initial Aggregate Principal Balance" means $ .
"Interest Rate" means the interest rate for each class of notes and for the
certificates set forth on the front cover pages of this prospectus supplement.
"Interest Rate Swap" means the interest rate swap between the trust and the
Swap Counterparty.
"LIBOR" means, with respect to each Distribution Date other than the
initial Distribution Date, the rate for deposits in U.S. Dollars for a period of
one month which appears on the Dow Jones Telerate Service Page 3750 as of 11:00
a.m., London time, on the day that is two LIBOR Business Days prior to the
preceding Distribution Date and, in the case of the initial Distribution Date,
%. If that rate does not appear on the Dow Jones Telerate Service Page 3750
(or any other page as may replace that page on that service, or if that service
is no longer offered, any other service for displaying LIBOR or comparable rates
as may be selected by the indenture trustee after consultation with the seller),
then LIBOR will be the Reference Bank Rate.
"LIBOR Business Day" means any day other than a Saturday, Sunday or any
other day on which banks in London are required or authorized to be closed.
"Noteholders' Interest Carryover Shortfall" means, as of the close of any
Distribution Date, the excess of the Aggregate Noteholders' Interest
Distributable Amount for such Distribution Date over the amount that was
actually deposited in the Note Distribution Account on such Distribution Date in
respect of interest.
"Noteholders' Interest Distributable Amount" means, with respect to any
class of notes and any Distribution Date, the product of (1) the outstanding
principal balance of such class of notes as of the close of the preceding
Distribution Date (or, in the case of the first Distribution Date, the
outstanding principal balance on the Closing Date) and (2) in the case of (A)
the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes and the Class A-5
S-32
<PAGE> 36
Notes, one-twelfth of the Interest Rate for such class (or, in the case of the
first Distribution Date, the Interest Rate for such class multiplied by a
fraction, the numerator of which is and the denominator of which is
360) and (B) the Class A-1 Notes and each class of the Variable Pay Term Notes,
the product of the Interest Rate for such class for such Distribution Date and a
fraction, the numerator of which is the number of days elapsed from and
including the prior Distribution Date (or, in the case of the first Distribution
Date, from and including the Closing Date), to but excluding that Distribution
Date and the denominator of which is 360.
"Noteholders' Percentage" means, as of any Distribution Date, the
percentage equal to a fraction, the numerator of which is the outstanding
principal balance of the notes and the denominator of which is the sum of the
outstanding principal balance of the notes and the Certificate Balance, in each
case as of the close of the preceding Distribution Date.
"Noteholders' Principal Carryover Shortfall" means, as of the close of any
Distribution Date, the excess of the Aggregate Noteholders' Principal
Distributable Amount for such Distribution Date over the amount that was
actually deposited in the Note Distribution Account on such current Distribution
Date in respect of principal.
"Noteholders' Principal Distributable Amount" means:
For the Class A Notes,
(1) Except during a Sequential Amortization Period
(A) a class of Class A Notes on its Targeted Final Distribution
Date, the Noteholders' Principal Distributable Amount for that class of
Class A Notes is the lesser of
(X) the outstanding principal balance of that class as of the
close of the immediately preceding Distribution Date and
(Y) the Total Note Principal Payment Amount.
(B) If the Distribution Date is not a Targeted Final Distribution
Date for any class of Class A Notes, the Noteholders' Principal
Distributable Amount for a class of Class A Notes is zero.
(2) During a Sequential Amortization Period, the Noteholders'
Principal Distributable Amount for a Distribution Date for a class of Class
A Notes is the lesser of
(A) the outstanding principal balance of that class as of the close
of the immediately preceding Distribution Date and
(B) the remainder of
(X) the Class A Percentage of the Noteholders' Principal
Distributable Amount minus
(Y) the outstanding principal balance for each class of Class
A Notes with a lower numerical designation as of the close of the
immediately preceding Distribution Date.
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<PAGE> 37
For the Variable Pay Term Notes,
(1) Except during a Sequential Amortization Period:
(A) If the Distribution Date is a Targeted Final Distribution Date
for a class of Class A Notes, the Noteholders' Principal Distributable
Amount for the Variable Pay Term Notes is the remainder of
(X) the Total Note Principal Payment Amount minus
(Y) the Noteholders' Principal Distributable Amount for that
class of Class A Notes on that Distribution Date determined as
described above
but in no event more than the outstanding principal balance of the
Variable Pay Term Notes as of the close of the immediately
preceding Distribution Date.
(B) If the Distribution Date is not a Targeted Final Distribution
Date for a class of Class A Notes, the Noteholders' Principal
Distributable Amount for the Variable Pay Term Notes is the lesser of
(X) the outstanding principal balance of the Variable Pay Term
Notes as of the close of the immediately preceding Distribution
Date and
(Y) the Noteholders' Percentage of the Principal Distributable
Amount for that Distribution Date.
(2) During a Sequential Amortization Period, the Noteholders'
Principal Distributable Amount for the Variable Pay Term Notes on a
Distribution Date is the lesser of
(A) the outstanding principal balance of the Variable Pay Term
Notes as of the close of the immediately preceding Distribution Date and
(B) the Variable Pay Term Percentage of the Noteholders' Percentage
of the Principal Distributable Amount.
Notwithstanding the foregoing, on the Final Scheduled Distribution Date for
any class of Class A Notes or Variable Pay Term Notes, the Noteholders'
Principal Distributable Amount for that class will equal the outstanding
principal balance of that class as of the close of the immediately preceding
Distribution Date.
"Pass Through Rate" means, with respect to the certificates, % per
annum.
"Principal Distributable Amount" means, with respect to any Distribution
Date, the sum of (1) the principal portion of all Scheduled Payments due with
respect to the related Monthly Period on Scheduled Interest Receivables held by
the trust (other than Liquidating Receivables) and the principal portion of all
payments received by the trust during the related Monthly Period on Simple
Interest Receivables held by the trust (other than Liquidating Receivables), (2)
the principal portion of all Prepayments received during the related Monthly
Period (except to the extent included in (1) above) and (3) the Principal
Balance of each receivable that the servicer became obligated or elected to
purchase, the seller became obligated to repurchase or that became a Liquidating
Receivable during the related Monthly Period (except to the extent included in
(1) or (2) above). For purposes of the foregoing, references to the related
Monthly Period shall include, for the initial Distribution Date, the two Monthly
Periods preceding such Distribution Date.
"Reference Bank Rate" means, for any Distribution Date, a rate determined
on the basis of the rates at which deposits in U.S. Dollars are offered by the
reference banks (which will be
S-34
<PAGE> 38
four major banks that are engaged in transactions in the London interbank
market, selected by the indenture trustee after consultation with the seller) as
of 11:00 a.m., London time, on the day that is two LIBOR Business Days prior to
the immediately preceding Distribution Date to prime banks in the London
interbank market for a period of one month, in amounts approximately equal to
the principal amount of the Variable Pay Term Notes then outstanding. The
indenture trustee will request the principal London office of each of the
reference banks to provide a quotation of its rate. If at least two quotations
are provided, the rate will be the arithmetic mean of the quotations, rounded
upwards to the nearest one-sixteenth of one percent. If on that date fewer than
two quotations are provided as requested, the rate will be the arithmetic mean,
rounded upwards to the nearest one-sixteenth of one percent, of the rates quoted
by one or more major banks in New York City, selected by the indenture trustee
after consultation with the seller, as of 11:00 a.m., New York City time, on
that date to leading European banks for United States dollar deposits for a
period of one month in amounts approximately equal to the principal amount of
any class of Variable Pay Term Notes then outstanding. If no quotation can be
obtained, then LIBOR will be the rate from the prior Distribution Date.
"Reserve Account" means the account designated as such, established and
maintained pursuant to the Trust Sale and Servicing Agreement.
"Sequential Amortization Period" means the period commencing on a
Sequential Amortization Commencement Date and, if such Sequential Amortization
Commencement Date occurred as a result of the failure to pay a class of Class A
Notes in full on its Targeted Final Distribution Date, ending on the
Distribution Date on which such class of Class A Notes is paid in full so long
as such Distribution Date occurs prior to the Targeted Final Distribution Date
for the class of Class A Notes with the next highest numerical designation;
provided that a Sequential Amortization Period shall not so terminate if the
failure to so pay a class of Class A Notes in full on its Targeted Final
Distribution Date follows a failure to pay the class of Class A Notes with the
next lowest numerical designation on its Targeted Final Distribution Date.
"Sequential Amortization Commencement Date" means (1) the Targeted Final
Distribution Date for a class of Class A Notes if the principal amount of that
class is not paid in full on that Targeted Final Distribution Date, unless that
Targeted Final Distribution Date occurs during a Sequential Amortization Period,
or (2) the first Distribution Date following the date on which the Interest Rate
Swap is terminated.
"Specified Reserve Account Balance" means, with respect to any Distribution
Date, the sum of
(1) the greater of
(A) % of the outstanding principal balance of the notes and
the certificates as of the close of business on such Distribution Date
(after giving effect to all payments and distributions to be made on
such Distribution Date); and
(B) ,
but in no event more than the outstanding principal balance of the
notes and the certificates as of the close of business on such
Distribution Date (after giving effect to all payments and distributions
to be made on such Distribution Date);
plus,
(2) in each case, if a deposit is to be made into the Accumulation
Account on such Distribution Date or was made on any prior Distribution
Date, the product of
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<PAGE> 39
(A) the Accumulation Amount on such Distribution Date (after giving
effect to all deposits and withdrawals from the Accumulation Account on
such Distribution Date)
multiplied by
(B) the number of Distribution Dates after such Distribution Date
through and including the next Distribution Date that is a Targeted
Final Distribution Date for any class of Class A Notes divided by 12
multiplied by
(C) LIBOR for such Distribution Date minus %.
"Swap Counterparty Guarantor" means , the swap counterparty
guarantor.
"Swap Counterparty" means , the swap counterparty.
"Targeted Final Distribution Date" means the targeted final distribution
date for each class of notes and for the certificates set forth on the front
cover pages of this prospectus supplement.
"Total Available Amount" means, with respect to a Distribution Date, the
sum of the Available Interest and the Available Principal, and all cash or other
immediately available funds on deposit in the Reserve Account immediately prior
to such Distribution Date plus (1) on the Targeted Final Distribution Date for
any class of Class A Notes, any Variable Pay Term Notes Issuance Proceeds and
the Accumulation Amount and (2) on the first Distribution Date after the notes
have been declared due and payable following the occurrence of an Event of
Default and on the first Distribution Date after the termination of the Interest
Rate Swap, the Accumulation Amount.
"Total Note Principal Payment Amount" means, for any Distribution Date, the
sum of
- - - the Noteholders' Percentage of the Principal Distributable Amount plus
- the Variable Pay Term Notes Issuance Proceeds, if any, plus
- the Accumulation Amount, if any.
"Variable Pay Term Notes" means the Variable Pay Term Floating Rate Asset
Backed Notes issued by the Trust.
"Variable Pay Term Notes Issuance Proceeds" means, for any Distribution
Date, the proceeds to the trust from the issuance of Variable Pay Term Notes on
that Distribution Date.
"Variable Pay Term Percentage" means, for any Distribution Date, 100% minus
the for that Distribution Date.
S-36
<PAGE> 40
- - ------------------------------------------------------
- - ------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE SELLER,
THE SERVICER OR THE UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
DO NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE
SECURITIES OFFERED HEREBY TO ANYONE IN ANY JURISDICTION IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM
IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT INFORMATION HEREIN OR
THEREIN IS CORRECT AS OF ANY TIME SINCE THE DATE OF THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS.
------------------
UNTIL , , ALL DEALERS EFFECTING TRANSACTIONS IN
THE NOTES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS SUPPLEMENT AND THE PROSPECTUS TO WHICH IT RELATES. THIS
DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- - ------------------------------------------------------
- - ------------------------------------------------------
- - ------------------------------------------------------
- - ------------------------------------------------------
CAPITAL AUTO RECEIVABLES
ASSET TRUST -
$--
ASSET BACKED NOTES
$--
ASSET BACKED CERTIFICATES
CAPITAL AUTO RECEIVABLES, INC.
SELLER
GENERAL MOTORS
ACCEPTANCE CORPORATION
SERVICER
------------------------------------
PROSPECTUS SUPPLEMENT
------------------------------------
UNDERWRITERS
Joint Bookrunners
Co-Managers
- - ------------------------------------------------------
- - ------------------------------------------------------
<PAGE> 1
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THE SECURITIES UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND WE
ARE NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE
THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED .
VERSION 2
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED , 199
GMAC -- GRANTOR TRUST
$ % Asset Backed Certificates, Class A
CAPITAL AUTO RECEIVABLES, INC.
Seller
GENERAL MOTORS ACCEPTANCE CORPORATION
Servicer
CONSIDER CAREFULLY THE RISK
FACTORS BEGINNING ON PAGE
IN THIS PROSPECTUS
SUPPLEMENT AND THE RISK
FACTORS BEGINNING ON PAGE
IN THE PROSPECTUS.
The certificates represent
the beneficial interest in
the related trust only. The
certificates issued by any
trust do not represent
interests in, and are not
guaranteed by Capital Auto
Receivables, Inc., GMAC, or
any of their affiliates
This prospectus supplement
may be used to offer and
sell any certificates only
if accompanied by the
prospectus.
THE CLASS A CERTIFICATES
The trust will issue Class A Certificates as
follows:
<TABLE>
<CAPTION>
% $
<S> <C> <C>
Principal Amount
Price to Public(1)
Underwriting Discount
Proceeds to Seller
</TABLE>
(1) Plus accrued interest, if any, from
.
Principal and interest on the Class A
Certificates will be payable on each monthly
Distribution Date. Interest will begin accruing
on , 199 . The first Distribution Date
will be .
CREDIT ENHANCEMENT
$ in principal amount of Class B
Certificates, which are subordinated to the
Class A Certificates.
Subordination Spread Account, with an initial balance of $ , which
will increase to at least $ .
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED
THESE CERTIFICATES OR DETERMINED THAT THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
[Underwriters]
, 199
<PAGE> 2
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We provide information to you about the Class A Certificates in two
separate documents:
(a) the accompanying prospectus, which provides general information.
(b) this prospectus supplement, which will describe the specific terms
of your Class A Certificates and the specific meanings that certain terms
will have.
IF THE TERMS OF THE CLASS A CERTIFICATES VARY BETWEEN THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION IN THIS
PROSPECTUS SUPPLEMENT.
You should rely only on the information provided in this prospectus
supplement and the accompanying prospectus, including the information
incorporated by reference. We have not authorized anyone to provide you with
other or different information. We are not offering the Class A Certificates in
any state where the offer is not permitted. We do not claim that the information
in this prospectus supplement and the accompanying prospectus is accurate on any
date other than the dates stated on their respective covers.
The following Table of Contents and the Table of Contents in the
accompanying prospectus provide the pages on which these captions are located.
Capitalized terms used in this prospectus supplement are defined under the
caption "Glossary of Terms" beginning on page in the accompanying prospectus.
S-2
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
THE CERTIFICATES............................................ S-4
THE RECEIVABLES POOL........................................ S-4
ERISA CONSIDERATIONS........................................ S-7
UNDERWRITING................................................ S-7
LEGAL OPINIONS.............................................. S-7
PROSPECTUS
PROSPECTUS SUMMARY.......................................... 3
RISK FACTORS................................................ 6
THE TRUSTS.................................................. 9
THE RECEIVABLES............................................. 10
WEIGHTED AVERAGE LIFE OF THE CERTIFICATES................... 11
CLASS A POOL FACTOR AND TRADING INFORMATION................. 11
USE OF PROCEEDS............................................. 11
THE SELLER.................................................. 12
THE SERVICER................................................ 12
THE CERTIFICATES............................................ 13
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES.................... 28
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS................... 32
ERISA CONSIDERATIONS........................................ 35
PLAN OF DISTRIBUTION........................................ 37
LEGAL OPINIONS.............................................. 38
REPORTS TO CERTIFICATEHOLDERS............................... 38
WHERE YOU CAN FIND MORE INFORMATION......................... 38
INCORPORATION BY REFERENCE.................................. 38
GLOSSARY OF TERMS........................................... 40
</TABLE>
S-3
<PAGE> 4
THE CERTIFICATES
The GMAC 19 - Grantor Trust will issue a series of certificates
consisting of two classes, entitled % Asset Backed Certificates, Class A and
% Asset Backed Certificates, Class B. We are not offering the Class B
Certificates for sale; initially, Capital Auto Receivables, Inc. will own them.
We have set forth below certain specific information about the Class A
Certificates and the GMAC 19 - Grantor Trust. You can only understand this
information by reading the accompanying prospectus. The prospectus provides the
context in which the following terms are used.
<TABLE>
<S> <C>
GENERAL
Aggregate Amount Financed................................... $
Cutoff Date................................................. , 19
Closing Date................................................ , 19
Trustee
Basic Servicing Fee Rate.................................... %
Final Distribution Date..................................... , 20
CERTIFICATE TERMS
Class A Percentage.......................................... %
Class B Percentage.......................................... %
Initial Class A Certificate Balance......................... $
Initial Class B Certificate Balance......................... $
Pass Through Rate........................................... %
Subordinations
Subordination Initial Deposit............................... $
Minimum Subordination Spread Amount......................... $
Maximum Subordination Spread Amount......................... $
Specified Subordination Percentage Trigger.................. %
Subordination Spread Amount................................. $
SUBORDINATION SPREAD TRIGGER................................ $
</TABLE>
THE RECEIVABLES POOL
The receivables to be included in the pool of receivables related to this
series of certificates were selected from GMAC's portfolio based on several
criteria, including that each such receivable:
- has a first payment due date on or after , 19 ;
- has an original term of to 60 months;
- provides for finance charges at an annual percentage rate with the range
specified in the second following table;
- as of the Cutoff Date, was not more than 29 days past due; and
- satisfies the other criteria set forth in the prospectus under "The
Receivables."
As of the Cutoff Date, Scheduled Interest Receivables represented
approximately % of the pool of receivables by Aggregate [Amount Financed],
with the remainder being Simple Interest Receivables.
Approximately % of the Aggregate [Amount Financed] of the receivables,
constituting % of the number of receivables, as of the Cutoff Date, represent
receivables
S-4
<PAGE> 5
secured by new vehicles. The remainder are secured by used vehicles. The
following tables describe the pool of receivables:
COMPOSITION OF THE POOL OF RECEIVABLES
<TABLE>
<S> <C> <C>
Weighted Average Annual Percentage Rate of Receivables...... --%
Aggregate Amount Financed................................... $ --
Number of Contracts in Pool................................. --
Average Amount Financed..................................... $ --
Weighted Average Original Maturity.......................... months
Weighted Average Remaining Maturity......................... months
Schedule Weighted Average Life(1)........................... months
</TABLE>
- - -------------------------
(1) Based on Scheduled Payments due on and after the Cutoff Date and assuming
that no prepayments on the receivables are made and that all payments on
Simple Interest Receivables are received on their respective due dates.
DISTRIBUTION BY ANNUAL PERCENTAGE RATE OF THE POOL OF RECEIVABLES
<TABLE>
<CAPTION>
PERCENTAGE OF
ANNUAL PERCENTAGE NUMBER OF AGGREGATE AMOUNT
RATE RANGE CONTRACTS AMOUNT FINANCED FINANCED
----------------- --------- --------------- ----------------
<S> <C> <C> <C>
6.00% to 7.00%....................... $ %
7.01 to 8.00.........................
8.01 to 9.00.........................
9.01 to 10.00........................
10.01 to 11.00.......................
11.01 to 12.00.......................
12.01 to 13.00.......................
13.01 to 14.00.......................
14.01 to 15.00.......................
15.01 to 16.00.......................
16.01 to 17.00.......................
17.01 to 18.00.......................
18.01 to 19.00.......................
19.01 to 20.00.......................
TOTAL...................... 100.0%
======= ============== =======
</TABLE>
The pool of receivables includes receivables originated in 46 states and
the District of Columbia. The following table sets forth the percentage of the
Aggregate Amount Financed
S-5
<PAGE> 6
in the states with the largest concentration of receivables. No other state
accounts for more than % of the Aggregate Amount Financed.
<TABLE>
<CAPTION>
PERCENTAGE OF
AGGREGATE
STATE(1) AMOUNT FINANCED
-------- ---------------
<S> <C>
.................................. --%
.................................. --%
.................................. --%
.................................. --%
.................................. --%
</TABLE>
- - -------------------------
(1) Based on billing address of the obligors on the Receivables.
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
The following table shows GMAC's experience in the United States for (1)
delinquency on new and used retail car and light truck receivables, (2)
repossessions and (3) net losses relating to GMAC's entire vehicle portfolio
(including receivables previously sold by GMAC which it continues to service).
There can be no assurance that the delinquency, repossession and net loss
experience on the pool of receivables will be similar to GMAC's historical
experience set forth below.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------------------
1997 1996 1995 1994 1993
NEW AND USED VEHICLE CONTRACTS ---- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Total Retail Contracts Outstanding at
End of the Period (in thousands)...... -- 3,005 3,518 3,892 4,589
Average Daily Delinquency
31-60 Days.............................. % 3.14% 2.75% 2.32% 2.35%
61-90 Days.............................. 0.22 0.19 0.12 0.11
91 Days or More......................... 0.03 0.02 0.02 0.02
Percent of Portfolio with Recourse to
Dealers at End of the Period.......... % 1.9% 2.4% 3.6% 4.1%
Repossessions as a Percent of Average
Number of Contracts Outstanding....... % 3.59% 3.07% 2.31% 2.17%
Net Losses as a Percent of Liquidations
(1)................................... % 2.64% 1.57% 0.96% 1.03%
Net Losses as a Percent of Average
Receivables (1)....................... % 1.58% 0.95% 0.57% 0.64%
</TABLE>
- - -------------------------
(1) Percentages based on gross accounts receivable including unearned income.
The net loss figures above reflect the fact that GMAC had recourse to
dealers on a portion of its retail installment sale contracts. The percentage of
the Aggregate Amount Financed with recourse to dealers in the pool of
receivables is %. GMAC applies the same underwriting standards to the
purchase of contracts without regard to whether dealer recourse is provided.
Based on its experience, GMAC believes that there is no material difference
between the rates of delinquency and repossession on contracts with recourse
against dealers as compared to contracts without recourse against dealers.
However, the net loss experience of contracts without recourse against dealers
is higher than that of contracts with recourse against dealers because, under
its recourse obligation, the dealer is
S-6
<PAGE> 7
responsible to GMAC for payment of the unpaid balance of the contract, provided
GMAC retakes the car from the obligor and returns it to the dealer within a
specified time.
ERISA CONSIDERATIONS
The exemption described in the prospectus under the caption "ERISA
Considerations" refers to the exemption granted to [Prohibited
Transaction Exemption ; Exemption Application No. ;
Fed. Reg. ( )].
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement,
the seller has agreed to sell to each of the underwriters named below, and each
of the underwriters, for whom is acting as representative, has
severally agreed to purchase from the seller, the principal amount of Class A
Certificates set forth opposite its name below:
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL
AMOUNT OF
CLASS A CERTIFICATES
UNDERWRITERS TO BE PURCHASED
------------ --------------------
<S> <C>
$
Total............................................. $
</TABLE>
The seller has been advised by the representative that the several
underwriters propose initially to offer the Class A Certificates to the public
at the price set forth on the cover page hereof, and to certain dealers at such
price less a concession not in excess of 0. % of the Class A Certificate
denominations. The underwriters may allow and such dealers may reallow a
concession not in excess of 0. % of the Class A Certificate denominations to
certain other dealers. After the initial public offering, the public offering
price and such concessions may be changed.
The underwriters may engage in over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids with respect to
the Class A Certificates in accordance with Regulation M under the Securities
Exchange Act of 1934. Over-allotment transactions involve syndicate sales in
excess of the offering size, which creates a syndicate short position.
Stabilizing transactions permit bids to purchase the Class A Certificates so
long as the stabilizing bids do not exceed a specified maximum. Syndicate
covering transactions involve purchases of the Class A Certificates in the open
market after the distribution has been completed in order to cover syndicate
short positions. Penalty bids permit the underwriters to reclaim a selling
concession from a syndicate member when the Class A Certificates originally sold
by such syndicate member are purchased in a syndicate covering transaction.
Suchover-allotment transactions, stabilizing transactions, syndicate covering
transactions and penalty bids may cause the prices of the Class A Certificates
to be higher than they would otherwise be in the absence of such transactions.
Neither the seller nor any of the underwriters represent that the underwriters
will engage in any such transactions or that such transactions, once commenced,
will not be discontinued without notice at any time.
LEGAL OPINIONS
In addition to the legal opinions described in the prospectus, certain
legal matters relating to the certificates will be passed upon for the
underwriters by Mayer, Brown & Platt. Mayer, Brown & Platt has from time to time
represented, and is currently representing, General Motors Corporation and
certain of its affiliates.
-------------------------
S-7
<PAGE> 8
Until , 19 , all dealers effecting transactions in the
Class A Certificates, whether or not participating in this distribution, may be
required to deliver a prospectus supplement and the prospectus to which it
relates. This delivery requirement is in addition to the obligation of dealers
to deliver a prospectus supplement and prospectus when acting as underwriters
and with respect to their unsold allotments or subscriptions.
$
GMAC 199 - GRANTOR TRUST
% ASSET BACKED
CERTIFICATES, CLASS A
CAPITAL AUTO RECEIVABLES, INC.
SELLER
GENERAL MOTORS ACCEPTANCE CORPORATION
SERVICER
-------------------------------------
PROSPECTUS SUPPLEMENT
-------------------------------------
, 199
48
<PAGE> 1
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THE SECURITIES UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE
NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER
OR SALE IS NOT PERMITTED.
YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S- IN THIS
PROSPECTUS SUPPLEMENT.
The notes represent obligations of the trust only. The certificates represent
interests in the trust only. The notes and certificates do not represent
obligations of or interests in, and are not guaranteed by, Capital Auto
Receivables, Inc., General Motors Acceptance Corporation or any of their
affiliates.
This prospectus supplement may be used to offer and sell notes and certificates
only if accompanied by the prospectus.
VERSION 3
SUBJECT TO COMPLETION, DATED ,
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED ,
CAPITAL AUTO RECEIVABLES ASSET TRUST -SN[1]
$ Asset Backed Notes
[$ Asset Backed Certificates]
CAPITAL AUTO RECEIVABLES, INC.
Seller
GENERAL MOTORS ACCEPTANCE CORPORATION
Servicer
The trust will issue the following classes of notes and
certificates:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
CLASS A NOTES
--------------------------------------------
A-1 NOTES A-2 NOTES A-3 NOTES CERTIFICATES
<S> <C> <C> <C> <C>
--------------------------------------------------------------------------------------
Principal Amount
--------------------------------------------------------------------------------------
Interest Rate
--------------------------------------------------------------------------------------
Final Scheduled
Distribution Date
--------------------------------------------------------------------------------------
Price to Public
--------------------------------------------------------------------------------------
Underwriting
Discount
--------------------------------------------------------------------------------------
Proceeds to Seller
--------------------------------------------------------------------------------------
</TABLE>
CREDIT ENHANCEMENT
- [Reserve Account]
- Certificates Subordinated
- Termination Value Insurance
This prospectus supplement and the accompanying prospectus relate only to the
offering of the [Class A-1,] Class A-2 and Class A-3 notes [and the
certificates]. [The Class A-1 notes [and the certificates] are not offered under
these documents.]
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED THAT THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Underwriters
<PAGE> 2
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We provide information to you about the notes and certificates in two
separate documents:
(a) the accompanying prospectus, which provides general information
and terms of the securities, some of which may not apply to a particular
series of securities, including your series.
(b) this prospectus supplement, which will provide information
regarding the pool of secured notes, including the leases and leased
vehicles securing the secured notes, held by the trust and specify the
terms of your series of securities.
IF THE TERMS OF YOUR SERIES OF SECURITIES VARY BETWEEN THE PROSPECTUS AND
THIS PROSPECTUS SUPPLEMENT, YOU SHOULD RELY ON THE INFORMATION IN THIS
PROSPECTUS SUPPLEMENT.
You should rely only on the information provided in the accompanying
prospectus and this prospectus supplement, including the information
incorporated by reference. We have not authorized anyone to provide you with
other or different information. We are not offering the securities in any state
where their offer is not permitted. We do not claim that the information in the
accompanying prospectus and this prospectus supplement is accurate on any date
other than the dates stated on their respective covers.
We include cross references in this prospectus supplement to captions under
which you can find additional, related discussions. The following table of
contents provides the pages at which these captions are located.
In this prospectus supplement, "we," "us" and "our" refer to the seller,
Capital Auto Receivables, Inc.
The definitions of many of the terms used in this prospectus supplement are
contained in the "Glossary" at the end of this prospectus supplement.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
SUMMARY CHARTS.............................................. S-1
SUMMARY OF TERMS............................................ S-3
RISK FACTORS................................................ S-8
THE TRUST................................................... S-16
THE POOL OF SECURED NOTES................................... S-16
TERMINATION VALUE INSURANCE................................. S-21
THE TERMINATION VALUE INSURER............................... S-23
WEIGHTED AVERAGE LIFE OF THE SECURITIES..................... S-25
RESIDUAL VALUES............................................. S-35
THE NOTES................................................... S-36
THE CERTIFICATES............................................ S-37
THE TRANSFER AND SERVICING AGREEMENTS....................... S-38
ERISA CONSIDERATIONS........................................ S-41
FEDERAL INCOME TAX CONSEQUENCES............................. S-42
PLAN OF DISTRIBUTION........................................ S-42
LEGAL OPINIONS.............................................. S-43
GLOSSARY.................................................... S-44
PROSPECTUS
THE TRUSTS.................................................. 3
THE OWNER TRUSTEE........................................... 4
THE SELLER.................................................. 4
THE SERVICER................................................ 5
THE POOLS OF SECURED NOTES.................................. 6
DESCRIPTION OF AUTO LEASE BUSINESS.......................... 9
SERVICING OF MOTOR VEHICLE LEASES........................... 12
WEIGHTED AVERAGE LIFE OF THE SECURITIES..................... 14
USE OF PROCEEDS............................................. 15
THE NOTES................................................... 15
THE CERTIFICATES............................................ 22
INFORMATION REGARDING THE SECURITIES........................ 23
THE TRANSFER AND SERVICING AGREEMENTS....................... 29
LEGAL ASPECTS OF THE SECURED NOTES AND THE LEASES SECURING
THE SECURED NOTES......................................... 46
FEDERAL INCOME TAX CONSIDERATIONS........................... 51
STATE AND LOCAL TAX CONSEQUENCES............................ 63
ERISA CONSIDERATIONS........................................ 63
PLAN OF DISTRIBUTION........................................ 64
LEGAL OPINIONS.............................................. 65
WHERE YOU CAN FIND MORE INFORMATION......................... 65
</TABLE>
<PAGE> 4
SUMMARY OF TRANSACTIONS PARTIES [FLOW CHART]
S-1
<PAGE> 5
[FLOW CHART]
S-2
<PAGE> 6
SUMMARY OF TERMS
The following summary highlights selected information from this document
and provides a general overview of relevant terms of the securities. To
understand all of the terms of this offering, you should read carefully this
prospectus supplement and the accompanying prospectus.
THE PARTIES
Issuer or Trust
Capital Auto Receivables Asset Trust -SN[1], a Delaware business trust
formed by the Seller.
Seller
Capital Auto Receivables, Inc. or CARI, a wholly-owned subsidiary of General
Motors Acceptance Corporation.
Servicer
General Motors Acceptance Corporation or GMAC, a wholly-owned subsidiary of
General Motors Corporation.
Owner Trustee
Indenture Trustee
Termination Value Insurer
National Union Fire Insurance Company of Pittsburgh, Pa., known as NUFI, a
wholly-owned subsidiary of American International Group, Inc. NUFI currently has
a financial strength rating of "AAA" by Standard & Poor's Ratings Services and
"Aaa" by Moody's Investors Service Inc.
THE NOTES
The trust will issue the following classes of notes:
<TABLE>
<CAPTION>
- - -------------------------------------------------
AGGREGATE PRINCIPAL INTEREST
CLASS AMOUNT RATE
- - -------------------------------------------------
<S> <C> <C>
A-1 $
- - -------------------------------------------------
A-2 $
- - -------------------------------------------------
A-3 $
- - -------------------------------------------------
</TABLE>
Interest Payments
The trust will pay interest on the notes monthly, on the 15th day of each month
(or on the next business day), which we refer to as the distribution date. The
first distribution date is , .
The trust will pay interest on the Class A-1 notes based on a [360-day year and
the actual days elapsed in the related accrual period] and the Class A-2 and
Class A-3 notes based on a [360-day year consisting of twelve 30- day months].
Interest payments on all classes of notes will have the same priority.
The prospectus and this prospectus supplement describe how the available funds
are allocated to interest payments.
Principal Payments
The trust will pay principal on the notes monthly on each distribution date.
The trust will make principal payments based on the amount of collections and
defaults on the secured notes during the prior month. The prospectus and this
prospectus supplement describe how the available funds are allocated to
principal payments.
Principal payments on the notes will be made in the order of priority listed
below. On each distribution date, except as described below, the trust will
distribute all of the funds available to pay principal:
(1) to the Class A-1 notes, until the Class A-1 notes are paid in full;
(2) to the Class A-2 notes, until the Class A-2 notes are paid in full; and
(3) to the Class A-3 notes, until the Class A-3 notes are paid in full.
Notwithstanding the above, on each distribution date after an event of default
S-3
<PAGE> 7
occurs and the notes are accelerated, principal payments on the notes will be
made ratably to all noteholders, based on the outstanding principal balance of
the notes.
All unpaid principal on a class of notes will be due on the final scheduled
distribution date for that class set forth on the cover of this prospectus
supplement. [Failure to pay a class of notes in full on its final scheduled
distribution date will result in an event of default.]
When the total principal balance of the secured notes declines to less than 10%
of the initial value of the secured notes, the secured note servicer may
repurchase all of the remaining secured notes. If the secured note servicer
repurchases the secured notes, the outstanding notes will be redeemed at a price
equal to their remaining principal balance plus accrued and unpaid interest.
THE CERTIFICATES
The trust will issue % asset backed certificates with an aggregate initial
certificate balance of $ . Payments with respect to the certificates
will be made as described in this prospectus supplement and are subordinated to
payments on the notes to the extent described in this prospectus supplement.
[We will initially retain the certificates.] [We will initially retain
certificates with an initial certificate balance of $ .]
THE TRUST PROPERTY
The primary assets of the trust will consist of a pool of non-recourse secured
notes currently owned by GMAC. Each secured note is secured by a first priority
perfected security interest in a new or used General Motors automobile or light
truck and a related lease. The terms of each lease must meet specified
requirements. Each lease and related leased vehicle was originated by GMAC, as
origination agent for Central Originating Lease Trust, known as COLT. A lease
and related leased vehicle is also referred to as a lease asset. COLT is a
special purpose Delaware business trust formed for the purpose of acquiring
leases and leased vehicles. COLT finances the acquisition of leases and leased
vehicles in the ordinary course of business by issuing these non-recourse
secured notes to GMAC.
On or before the date the securities of a series are issued, GMAC will sell a
pool of secured notes to us under a secured note pooling and servicing
agreement. We will, in turn, sell them to the trust under a secured note trust
sale and servicing agreement. The secured notes to be sold by GMAC to us and by
us to the trust will be selected based on criteria specified in the secured note
pooling and servicing agreement. The trust will use collections on the secured
notes to pay interest and principal to holders of each class of securities. The
trust will grant a security interest in the secured notes and other trust
property to the indenture trustee on behalf of the noteholders.
The property of the trust will include:
- - - the secured notes and all moneys received on the secured notes on or after the
cutoff date of , , including:
- - - proceeds from the termination value insurance policy relating to the leases
and leased vehicles securing the secured notes;
- - - proceeds from other insurance policies, guarantees and similar obligations
relating to the leases and leased vehicles securing the secured notes; and
- - - security interests in payments under leases and amounts received upon the sale
or transfer of the related leased vehicles;
- - - assets related to the secured notes, including security interests in the
related leases and leased vehicles;
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<PAGE> 8
- - - specified rights we have under the secured note pooling and servicing
agreement with GMAC; and
- - - all rights of the trust under the secured note trust sale and servicing
agreement with us.
The aggregate principal balance of the secured notes as of the cutoff date was
$ .
PRIORITY OF DISTRIBUTIONS
The trust will distribute available funds in the following order of priority:
(1) servicing fee payments and prior advances to the secured note servicer;
(2) interest on the notes;
(3) interest on the certificates;
(4) principal on the notes;
(5) principal on the certificates; and
[(6) deposits into the reserve account.]
If an event of default resulting from a payment default occurs and the notes are
accelerated, the trust will pay the notes in full before making any interest
payments on the certificates or any payments with respect to the certificate
balance.
CREDIT ENHANCEMENT
Termination Value Insurance
The property of the trust includes its rights as holder of the secured notes to
proceeds of termination value insurance for the leases and leased vehicles
securing the secured notes. NUFI currently provides this insurance. The
termination value insurance provides 100% loss coverage, subject to an overall
cap for all lease assets held by COLT, on each lease and leased vehicle securing
the secured notes held by the trust, if there is a deficiency in proceeds of
sale of a leased vehicle when the lease terminates. These deficiencies may be
caused by a lease default or the lease servicer's failure to obtain the full
residual value of the leased vehicle at lease termination.
As of , , the maximum amount of termination value insurance
available on all lease assets held by COLT was $ , representing %
of all the lease assets held by COLT. As of , , there were
$ lease assets securing the secured notes, which represents % of
all the lease assets held by COLT that benefit from the termination value
insurance.
[Reserve Account
On the closing date, we will deposit $ in cash or eligible investments
into the reserve account. Additional amounts will be added on each distribution
date if the account falls below a specified reserve amount.
To the extent that funds from principal and interest collections on the secured
notes are not sufficient to pay the basic servicing fee and to make required
distributions on the notes and the certificates, the trust will withdraw cash
from the reserve account for that purpose.
On any distribution date, after the trust pays the total servicing fee and makes
all deposits or payments due on the notes and the certificates, the amount in
the reserve account may exceed the specified reserve amount. If so, the trust
will pay us the excess.]
Termination Reserve Account
All pools of secured notes, including the secured notes sold to the trust, also
benefit from a termination reserve account, which covers deficiencies on the
sale of leased vehicles when the leases terminate. The termination reserve
account also provides a source of funds to pay NUFI's fees as termination value
insurer or for reimbursement of termination payments made by NUFI if NUFI has
not received them from lease collections. The termination reserve account is
funded by excess proceeds, if any, from the sale of leased vehicles when the
leases terminate.
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Subordination
Payments on the certificates issued by the trust will be subordinated to
payments on the notes to the extent described in this prospectus supplement and,
thus, provide credit enhancement for the notes. In addition, the notes and
certificates offered under this prospectus supplement benefit from the
subordination of payments on the equity certificates issued by COLT to payments
on the related secured notes that secure the notes and certificates offered
under this prospectus supplement.
The COLT equity certificateholders will not receive any interest or principal
payments with respect to a particular lease and leased vehicle if there is a
default in payment or interest or principal on the secured note relating to that
lease and leased vehicle. Such a payment default may arise if any funds in the
termination reserve account are depleted and the limits of the termination value
insurance are reached. 96.90% of the stipulated market value of each lease and
leased vehicle securing a secured note is funded at origination by secured
notes. The remaining 3.10% is funded by COLT equity certificates.
SERVICING AND SERVICING FEES
GMAC will act as servicer of the secured notes for the trust. In that capacity,
GMAC will handle all collections, administer defaults and delinquencies and
otherwise service the secured notes. The trust will pay GMAC, as secured note
servicer, a monthly fee equal to one-twelfth of [0.25%] of the total value of
the secured notes as of the first day of the preceding month. As secured note
servicer, GMAC will also receive additional servicing compensation in the form
of investment earnings.
GMAC also services the leases and leased vehicles securing the secured notes. As
lease servicer, GMAC receives a basic servicing fee and a supplemental servicing
fee on each distribution date out of collections on the lease assets. These
amounts are paid by COLT, as the owner of the leases and related leased
vehicles, and not from trust assets. The basic servicing fee is equal to
one-twelfth of 1.75% of the then-stipulated market value of each lease asset.
TAX STATUS
In the opinion of Mayer, Brown & Platt, special tax counsel, the [Class A-1
notes,] the Class A-2 notes and the Class A-3 notes will be characterized as
indebtedness for federal income tax purposes. Each noteholder, by the acceptance
of a note, will agree to treat the notes as indebtedness for federal, state and
local income and franchise tax purposes.
[In the opinion of Mayer, Brown & Platt, special tax counsel, the trust will not
be taxable as an association or publicly traded partnership taxable as a
corporation, but instead should be classified as a grantor trust for federal
income tax purposes. The certificates should therefore be trust certificates
representing equity interests in the trust.]
[Each certificateholder, by the acceptance of a trust certificate, will agree to
treat the trust certificates as equity interests in the trust for federal, state
and local income and franchise tax purposes.]
ERISA CONSIDERATIONS
Subject to the considerations discussed under "ERISA Considerations," an
employee benefit plan subject to the Employee Retirement Income Security Act of
1974 may purchase the notes. An employee benefit plan should consult with its
counsel before purchasing the notes.
Subject to the considerations discussed under "ERISA Considerations," the
certificates may not be acquired by any employee benefit plan subject to ERISA
or by an individual retirement account.
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<PAGE> 10
RATINGS
We will not issue the notes unless they are rated in the highest rating category
for long-term obligations (i.e., "AAA") by at least one nationally recognized
rating agency.
[We will not issue the certificates unless they are rated at least in the "AA"
category for long-term obligations or its equivalent by at least one nationally
recognized rating agency.]
We cannot assure you that a rating agency will maintain its rating if
circumstances change. If a rating agency changes its rating, no one has an
obligation to provide additional credit enhancement or restore the original
rating.
A rating is not a recommendation to buy the notes [or certificates]. The rating
considers only the likelihood that the trust will pay interest on time and will
ultimately pay principal in full [or make full distributions of certificate
balance]. The rating does not consider the prices of the notes [or the
certificates], their suitability to a particular investor or the timing of
principal payments [or distributions of certificate balance]. [In particular,
the rating does not address whether any notes [or certificates] will be paid in
full on their final scheduled distribution date.]
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<PAGE> 11
RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase the securities offered by this prospectus supplement.
FINAL PAYMENT ON A SECURED
NOTE IS DEPENDENT ON SALE
PROCEEDS AT TERMINATION OF
THE
RELATED LEASE The primary source of payment on each secured
note is the lease and leased vehicle securing
that secured note. If the net sale proceeds
from the leased vehicle received upon
termination of the lease are less than: (1) the
residual value established by GMAC, as
origination agent for COLT, when the lease was
originated, (2) amounts in the termination
reserve account and (3) proceeds from the
termination value insurance, there may be
insufficient funds to pay the secured note in
full. The trust, as the holder of the secured
notes, will benefit from the termination value
insurance and the termination reserve account
described in the prospectus and this prospectus
supplement.
GMAC's per unit loss rate on leases such as
those which secure the secured notes is a
function of the residual value stated in the
lease contract and the market value and net
sale proceeds received for the related leased
vehicle upon its sale. GMAC, as origination
agent for COLT, establishes the residual value
at the time of lease origination based on
instructions GMAC provides to dealers. Residual
value represents the estimated wholesale market
value of the leased vehicle at the end of the
lease term, as adjusted by any GM or GMAC
programs in effect from time to time designed
to encourage the lease of vehicles. For a
description of how GMAC sets residual values,
see "Description of Auto Lease
Business--Residual Values" in the prospectus.
We can make no assurance as to how closely the
residual value of a leased vehicle securing a
secured note established at lease origination,
will approximate the fair market value or net
sale proceeds received upon the sale of that
leased vehicle. We expect that, in general, if
the market value exceeds the residual value,
the lessee or the originating dealer is likely
to purchase the leased vehicle rather than
return it to GMAC. Conversely, if the market
value is less than the residual value stated in
the lease, the leased vehicle is generally more
likely to be returned to GMAC which would
result in a loss on the sale of that leased
vehicle.
YOUR PAYMENTS MAY BE
AFFECTED BY LEASES AND LEASED
VEHICLES SECURING SECURED
NOTES NOT PURCHASED BY THE
TRUST The amount that NUFI must pay under the
termination value insurance for claims on the
leases and leased vehicles securing the secured
notes sold to the trust will depend on the
amount of losses incurred on all the leases and
leased vehicles that secure all the secured
notes outstanding from time to time, whether or
not the
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<PAGE> 12
secured notes are owned by the trust. When a
loss is incurred on a lease in a pool of leases
and leased vehicles securing a pool of secured
notes, claims are paid, first, from gains on
other leases and leased vehicles in that pool
and, second, from gains on any leases and
leased vehicles owned by COLT and securing
other secured notes. Then any funds available
in the termination reserve account, which
support all the secured notes issued by COLT,
pay unpaid claims on all the pools of leases
and leased vehicles based on a proportionate
allocation among all the pools. Finally, unpaid
claims on all pools of leases and leased
vehicles are paid by the termination value
insurer under the termination value insurance
based on a proportionate allocation of its then
outstanding commitment among all the pools of
leases and leased vehicles securing secured
notes. Later recoveries, if any, on leases and
leased vehicles for which claims have been made
against the termination value insurance will be
allocated to reinstate the termination value
insurer's commitment under the termination
value insurance. Thus, the performance of
leases and leased vehicles in pools other than
the pool underlying the secured notes held by
the trust could negatively affect the pool of
leases and leased vehicles underlying the
secured notes held by the trust. If (1) losses
on lease terminations exhaust funds in the
termination reserve account and coverage under
the termination value insurance, and (2) these
losses create shortfalls on the secured notes
held by the trust, and (3) these shortfalls
exceed amounts [on deposit in the reserve
account for this transaction] and, in the case
of notes, otherwise payable to
certificateholders, you will experience
reductions in payments on your securities.
FAILURE TO COMPLY WITH
CONSUMER PROTECTION LAWS
GOVERNING THE LEASES SECURING
THE SECURED NOTES COUPLED
WITH OUR LIMITED OBLIGATIONS
COULD REDUCE OR DELAY
PAYMENTS ON YOUR SECURITIES Numerous federal and state consumer protection
laws, including the federal Consumer Leasing
Act of 1976 and Regulation M promulgated by the
Board of Governors of the Federal Reserve
System, impose requirements on lessors and
servicers of retail lease contracts of the type
that secure each secured note. In addition,
many states have enacted comprehensive vehicle
leasing statutes that, among other things,
regulate disclosures to be made at the time a
vehicle is leased. Failure to comply with these
requirements may give rise to liabilities on
the part of the lessor, and enforcement of the
leases by the lessor may be subject to set-off
as a result of noncompliance. Many states have
adopted "Lemon Laws" that provide vehicle
users, including lessees such as those leasing
the leased vehicles securing the secured notes,
rights in respect of
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<PAGE> 13
substandard vehicles. A successful claim under
a Lemon Law could result in, among other
things, the termination of the lease of a
substandard leased vehicle and/or could require
the refund of all or a portion of payments
previously paid on it.
We, GMAC and our affiliates are generally not
obligated to make any payments to you with
respect to your securities and do not guarantee
payments on the secured notes or your
securities. However, GMAC, as seller of the
secured notes, will make representations and
warranties to us with respect to the
characteristics of the secured notes, including
that the leases securing the secured notes
comply in all material respects with all
requirements of law. These representations and
warranties will then be assigned by us to the
trust. If GMAC breaches those representations
and warranties, it may be required to
repurchase any affected secured notes from the
trust. If GMAC fails to repurchase such secured
notes, you might experience reductions and/or
delays in payments on your securities.
PRINCIPAL ON YOUR SECURITIES
MAY BE RETURNED SOONER OR
LATER THAN EXPECTED Events that could result in principal being
paid on your securities later than expected
include:
- delinquencies or losses on the leases and
leased vehicles securing the secured notes,
which are not covered by a lease servicer
advance or termination value insurance;
- slower than expected early terminations of
the leases securing the secured notes; or
- extensions or deferrals on leases securing
the secured notes, which are not covered by a
lease servicer advance or termination value
insurance.
Events that could result in principal being
paid on your securities sooner than expected
include:
- higher than expected defaults on the leases
and leased vehicles securing the secured
notes, which are covered by termination value
insurance; or
- faster than expected early terminations on
the leases securing the secured notes,
including early terminations that result in
termination payments under the termination
value insurance.
Although the lease servicer is obligated to
make advances as described in "The Transfer and
Servicing Agreements-Servicer Advances-Lease
Servicer Advances" in the prospectus, we can
make no assurances as to whether the lease
servicer will make an advance or, if an advance
is made, whether that advance will be
sufficient to reduce the outstanding principal
balance on
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<PAGE> 14
the notes or certificates to zero by the
expected maturity date for your securities. The
rate at which payments may be made on your
securities will be affected by the payment,
early termination, liquidation and extension
experience of the leases and leased vehicles
securing the secured notes, which cannot be
predicted.
Early termination of the leases securing the
secured notes may occur at any time without
penalty. In addition, early termination may
occur as a result of defaults or from proceeds
of credit life, disability or physical damage
insurance. A partial prepayment on a lease
securing a secured note will be retained by the
lease servicer until these payments would
otherwise be due and, thus, will not affect the
timing of principal payments on the notes and
certificates. We or GMAC may also be required
to repurchase or purchase secured notes from
the trust in specified circumstances. The
secured note servicer has the right to purchase
all remaining secured notes from the trust
under its optional purchase right.
Each secured note prepayment, lease early
termination, or repurchase or purchase
described above will shorten the average life
of your securities. A variety of unpredictable
economic, social and other factors influence
early termination rates. You will bear all
reinvestment risk resulting from a faster or
slower rate of prepayment in full or repurchase
of the secured notes held by the trust.
THE LIMITED NATURE OF THE
TRUST ASSETS COULD REDUCE OR
DELAY PAYMENTS ON YOUR
SECURITIES The trust will not have any significant assets
or sources of funds other than its secured
notes[, its rights in the reserve account] and
its rights as a holder of the secured notes in
the termination value insurance and any
proceeds of the termination reserve account,
all as specified in the prospectus and this
prospectus supplement. The securities will not
be insured or guaranteed by us, GMAC, the owner
trustee, the indenture trustee, any of their or
our affiliates or any other person or entity.
You must rely on payments on the secured [notes
and on the reserve account] for repayment of
your securities.
In addition, with respect to any defaults in
lease payments on the leases securing the
secured notes, which include recovery of the
residual value of the related leased vehicles,
you may have to look to the related lessees and
the proceeds from the repossession and sale of
the related leased vehicles. If these proceeds
are insufficient to repay the secured notes
securing your securities, you will need to look
to any funds in the
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<PAGE> 15
termination reserve account and the termination
value insurance, which enhance all the leases
and leased vehicles securing all pools of
secured notes. The trust, as the holder of the
secured notes, will have the benefit of any
funds in the termination reserve account and
the termination value insurance described in
the prospectus and this prospectus supplement.
The amounts payable under the termination value
insurance and from any amounts in the
termination reserve account will depend on the
amount of losses incurred on all pools of
leases and leased vehicles that secure secured
notes, whether or not these secured notes are
sold to the trust. However, if deficiencies
under all secured notes exhaust any funds in
the termination reserve account and coverage
under the termination value insurance, and
these deficiencies exceed [amounts on deposit
in the reserve account for this transaction
and], in the case of notes, amounts otherwise
payable to certificateholders, you might
experience reductions in payments on your
securities.
A RATINGS DOWNGRADE OF THE
TERMINATION VALUE INSURER
COULD CAUSE A RATINGS
DOWNGRADE ON YOUR SECURITIES.
A FAILURE TO PAY BY THE
TERMINATION VALUE INSURER
COULD DELAY OR REDUCE
PAYMENT ON YOUR SECURITIES NUFI will be the termination value insurer for
all secured notes issued on or before the
cutoff date, including those owned by the
trust. NUFI's termination payments are intended
to protect each holder of secured notes from
termination value risk and credit losses on the
underlying leases and leased vehicles subject
to an aggregate loss limit. The financial
strength rating of NUFI is currently "AAA" by
Standard & Poor's Ratings Services and "Aaa" by
Moody's Investors Service, Inc. If NUFI's
rating is downgraded, there is no requirement
that we find another termination value insurer
or that NUFI provide cash collateral to fund
its commitment. In this situation, there could
be a downgrade of the rating on your
securities. In addition, if NUFI fails to make
required termination payments, there could be a
shortfall or delay in payments on your
securities.
THE POSSIBLE BANKRUPTCY OF
GMAC COULD REDUCE OR DELAY
PAYMENTS ON YOUR SECURITIES If GMAC were to file for bankruptcy under the
federal bankruptcy code or any state insolvency
laws, a court could, (1) consolidate our assets
and liabilities with those of GMAC, (2) decide
that the sale of the secured notes to us was
not a "true sale" or (3) disallow a transfer of
secured notes prior to the bankruptcy. However,
in the opinion of Mayer, Brown & Platt, our
special counsel, in a properly presented and
decided case, a court will not take these
actions. Thus, the secured notes might become
part of GMAC's bankruptcy estate, in which case
you might experience reductions and/or delays
in payments on your securities.
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<PAGE> 16
THE ABSENCE OF A SECONDARY
MARKET COULD LIMIT YOUR
ABILITY TO RESELL YOUR
SECURITIES The underwriters may assist in the resale of
securities, but they are not required to do so.
A secondary market for any securities may not
develop. If a secondary market does develop, it
might not continue or it might not be
sufficiently liquid to allow you to resell any
of your securities.
THE RATINGS OF THE SECURITIES
MAY BE REVISED OR WITHDRAWN The securities will be issued only if they
receive the required rating. A rating is not a
recommendation to buy, sell or hold the
securities. The ratings may be revised or
withdrawn at any time. Ratings on the
securities do not address the timing of
distributions of principal on the securities
prior to their applicable final scheduled
distribution date. If a rating agency changes
its rating on your securities, no one has an
obligation to provide additional credit
enhancement or restore the original rating.
COMPUTER PROGRAM PROBLEMS
BEGINNING IN THE YEAR 2000
COULD RESULT IN PAYMENT
DELAYS ON YOUR SECURITIES We are aware of issues associated with the
programming code in existing computer systems
as the year 2000 approaches. The "year 2000
problem" is pervasive and complex. Virtually
every computer operation will be affected in
some way by the rollover of the two digit year
value to 00. The issue is whether computer
systems will properly recognize date-sensitive
information when the year changes to 2000.
Systems that do not properly recognize such
information could generate erroneous data or
could fail.
We have been advised by the secured note
servicer, the lease servicer and the indenture
trustee to the extent applicable to its
services under the agreements that they are a
party to, that it is committed either to (1)
implementing modifications to its existing
systems to the extent required to cause them to
be year 2000 ready or (2) acquiring computer
systems that are year 2000 ready, in each case
prior to January 1, 2000. However, we have not
made any independent investigation of the
computer systems of the secured note servicer,
the lease servicer or the indenture trustee. If
computer problems arise out of a failure of
these efforts to be completed on time, or if
the computer systems of either servicer or the
indenture trustee are not fully year 2000
ready, the resulting disruptions in the
collection or distribution of receipts on the
secured notes could materially and adversely
affect your investment.
The management of DTC is aware that some
computer applications, systems and the like for
processing data that are dependent upon
calendar dates--including dates before, on and
after January 1, 2000--may encounter year 2000
problems. DTC has informed its participants and
other members of the financial community that
it
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<PAGE> 17
has developed and is implementing a program so
that its systems, as they relate to the timely
payment of distributions to securityholders,
book-entry deliveries and settlement of trades
within DTC, continue to function appropriately.
This program includes a technical assessment
and a remediation plan, each of which is
complete. DTC's plan also includes a testing
phase, which is expected to be completed within
appropriate time frames.
However, DTC's ability to perform properly its
services is also dependent on other parties,
including issuers and their agents, as well as
third party vendors from whom DTC licenses
software and hardware, and third party vendors
on whom DTC relies for information or the
provision of services, including
telecommunication and electrical utility
service providers, among others. DTC has
informed its participants and other members of
the financial community that it is contacting,
and will continue to contact, third party
vendors from whom DTC acquires services to
impress upon them the importance of their
services being year 2000 compliant, and to
determine the extent of their efforts for Year
2000 remediation, and, as appropriate, testing,
of their services. In addition, DTC is in the
process of developing contingency plans as it
deems appropriate.
According to DTC, the foregoing information
with respect to DTC has been provided to its
participants and other members of the financial
community for informational purposes only and
is not intended to serve as a representation,
warranty or contract modification of any kind.
THE GEOGRAPHIC CONCENTRATION
OF THE LEASES SECURING THE
SECURED NOTES COULD RESULT IN
LOSSES OR PAYMENT DELAYS ON
YOUR SECURITIES As of , , %,
%, %, % and % of the leases
securing the secured notes, based on
outstanding principal balance, related to
lessees with mailing addresses in California,
Illinois, Michigan, New York, and Pennsylvania,
respectively. As a result of this geographic
concentration, economic conditions, legislative
changes or other factors affecting these states
could have a significant effect on the
delinquency, credit loss or repossession
experience of the leases and leased vehicles
securing the secured notes and could adversely
affect the timing of payments on your
securities.
PAYMENTS ON YOUR NOTES
DEPEND ON COLLECTIONS ON THE
SECURED NOTES The trust plans to pay principal on the notes
monthly with the remaining principal balance
due on each note on its final scheduled
distribution date.
The trust will pay principal only to the extent
that funds are available from collections on
the secured notes and from the reserve account.
If the funds available from
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<PAGE> 18
collections on the secured notes and from the
[reserve account and] certificates are
insufficient to pay the entire principal amount
due on any class of notes you may experience
delays and/or reductions in principal payments
on your notes.
THE FAILURE TO MAKE PRINCIPAL
PAYMENTS ON YOUR SECURITIES
WILL GENERALLY NOT RESULT IN
AN EVENT OF DEFAULT [UNTIL
THE
FINAL SCHEDULED DISTRIBUTION
DATE] You should be aware that the amount of
principal required to be paid to you prior to
the final scheduled distribution date for a
series of notes or class of certificates
generally will be limited to amounts available
for those purposes. [Therefore, the failure to
pay principal of a series of notes or class of
certificates generally will not result in the
occurrence of an event of default under the
indenture or trust agreement until the final
scheduled distribution date for the series of
notes or class of certificates.]
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<PAGE> 19
THE TRUST
The issuer, Capital Auto Receivables Asset Trust -SN[1], is
a business trust formed under the laws of the State of Delaware. The trust will
be established and operated pursuant to a trust agreement dated on or before the
closing date of , .
The trust will engage in only the following activities:
- acquiring, managing and holding the secured notes and other assets of
the trust and the related proceeds;
- issuing the notes and certificates;
- making payments on the notes and certificates; and
- engaging in any other activities that are necessary, suitable or
convenient to accomplish any of the foregoing or are incidental or
connected with these activities.
The trust's principal offices are in , , in care of
, as owner trustee, at the address listed in "--The Owner Trustee"
below.
CAPITALIZATION OF THE TRUST
The following table illustrates the capitalization of the trust as of the
cutoff date of , , as if the issuance of the notes and
certificates had taken place on that date:
<TABLE>
<S> <C>
Class A-1 % Asset Backed Notes............. $
Class A-2 % Asset Backed Notes.............
Class A-3 % Asset Backed Notes.............
% Asset Backed Certificates...............
-----------------
Total........................................ $
=================
</TABLE>
[The Class A - notes are not being offered by this prospectus
supplement.]
The certificates represent the equity of the trust and will be issued under
the trust agreement. [We will initially hold the certificates and they are not
being offered by this prospectus supplement.] [The seller will initially hold
certificates with an aggregate initial balance of $ .]
THE OWNER TRUSTEE
is the owner trustee under the trust agreement.
is a [describe]. Its principal offices are located at
.
THE POOL OF SECURED NOTES
The secured notes to be sold to the trust will be selected from the secured
notes held by GMAC based on several criteria, including that each secured note:
- is secured by a new [or used] General Motors automobile or light truck
and a lease related to the vehicle;
- has an original scheduled maturity date of 12 to [48] months after
issuance;
- has a first payment due date on or after , ; and
- bears interest at an annual percentage rate between % and %.
The lease assets securing the secured notes will satisfy the criteria set
forth in the prospectus under "Description of Auto Lease Business-Auto Lease
Criteria."
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<PAGE> 20
COMPOSITION OF THE POOL OF SECURED NOTES
In the following table, the weighted numbers, average interest rate and
average original number of monthly payments of the secured notes are weighted by
outstanding principal balance of secured notes as of the cutoff date. The
average and range of outstanding principal balance of secured notes and the
weighted average and range of interest rates are determined without giving
effect to discounting for calculation of secured note values of those secured
notes. The average and range of original residual values of the leases securing
the secured notes and percentage of the leases for new and used vehicles are
determined without giving effect to discounting for calculation of the
stipulated market value of those leases.
<TABLE>
<S> <C>
Aggregate Secured Note Value as of Cutoff Date......
Number of Secured Notes.............................
Average Secured Note Value as of Cutoff Date........
Range of Original Secured Note Values of Secured
Notes.............................................
Weighted Average Interest Rate......................
Range of Interest Rates.............................
Weighted Average Original Number of Monthly
Payments..........................................
Range of Original Number of Monthly Payments........
Weighted Average Remaining Number of Monthly
Payments..........................................
Range of Remaining Number of Monthly Payments.......
Average Original Residual Value of Leases...........
Range of Original Residual Values of Leases.........
Aggregate of Residual Values of Leases as a
Percentage of Aggregate Stipulated Market Value of
Leases as of Cutoff Date..........................
Percentage of Leases for New Vehicles (by Stipulated
Market Value).....................................
Percentage of Leases for Used Vehicles (by
Stipulated Market Value)..........................
</TABLE>
S-17
<PAGE> 21
DISTRIBUTION OF THE SECURED NOTES BY INTEREST RATE
The following table illustrates the distribution of the secured notes as of
the cutoff date of , by interest rate. These percentages may not
add to 100.00% due to rounding.
<TABLE>
<CAPTION>
PERCENTAGE
OF AGGREGATE
PERCENTAGE OF CUTOFF DATE CUTOFF DATE
NUMBER OF NUMBER OF SECURED SECURED
INTEREST RATE RANGE SECURED NOTES SECURED NOTES NOTE VALUE NOTE VALUE
------------------- ------------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Less than 2.00%................
2.00% to 2.99%.................
3.00% to 3.99%.................
4.00% to 4.99%.................
5.00% to 5.99%.................
6.00% to 6.99%.................
7.00% to 7.99%.................
8.00% to 8.99%.................
9.00% to 9.99%.................
10.00% to 10.99%...............
11.00% to 11.99%...............
12.00% to 12.99%...............
13.00% to 13.99%...............
------ ---- -------- ----
Total.....................
====== ==== ======== ====
</TABLE>
DISTRIBUTION OF THE SECURED NOTES BY MATURITY
The following table illustrates the distribution of the secured notes as of
the cutoff date of , by year of maturity. These percentages may
not add to 100.00% due to rounding.
<TABLE>
<CAPTION>
PERCENTAGE OF
CUTOFF DATE CUTOFF DATE
PERCENTAGE OF AGGREGATE AGGREGATE
YEARS OF NUMBER OF NUMBER OF SECURED SECURED NOTE
MATURITY SECURED NOTES SECURED NOTES NOTE VALUE VALUE
-------- ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
2000.......................
2001.......................
2002.......................
2003.......................
2004.......................
Total.................
</TABLE>
S-18
<PAGE> 22
DISTRIBUTION BY STATE OF LEASES SECURING THE SECURED NOTES
The state of origination of a lease securing a secured note is based on the
dealer's location. These percentages may not add to 100.00% due to rounding.
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER NUMBER
OF LEASES OF LEASES CUTOFF DATE PERCENTAGE OF
SECURING THE SECURING THE AGGREGATE AGGREGATE CUTOFF
STATE OF SECURED SECURED STIPULATED DATE STIPULATED
ORIGINATION NOTES NOTES MARKET VALUE MARKET VALUE
----------- ------------ ------------- ------------ ----------------
<S> <C> <C> <C> <C>
California.................
New York...................
Pennsylvania...............
Michigan...................
Illinois...................
Total....................
</TABLE>
DISTRIBUTION OF LEASES SECURING THE SECURED NOTES BY VEHICLE MAKE
<TABLE>
<CAPTION>
NUMBER PERCENTAGE OF PERCENTAGE OF
OF LEASES NUMBER OF CUTOFF DATE CUTOFF DATE
SECURING THE LEASES SECURING AGGREGATE AGGREGATE
BREAKDOWN BY SECURED THE SECURED STIPULATED STIPULATED
VEHICLE MAKE NOTES NOTES MARKET VALUE MARKET VALUE
------------ ------------ --------------- ------------ -------------
<S> <C> <C> <C> <C>
Buick......................
Cadillac...................
Chevrolet..................
Oldsmobile.................
Pontiac....................
GMC Truck..................
Saturn.....................
Total.................
</TABLE>
DISTRIBUTION OF LEASES SECURING THE SECURED NOTES BY VEHICLE TYPE
<TABLE>
<CAPTION>
PERCENTAGE
NUMBER PERCENTAGE OF CUTOFF
OF LEASES OF NUMBER OF CUTOFF DATE DATE
SECURING LEASES SECURING AGGREGATE AGGREGATE
BREAKDOWN BY THE SECURED THE SECURED STIPULATED STIPULATED
VEHICLE TYPE NOTES NOTES MARKET VALUE MARKET VALUE
------------ ----------- --------------- ------------ ------------
<S> <C> <C> <C> <C>
Cars & Minivans.............
Light Trucks & Sport........
Utility Vehicles............
</TABLE>
S-19
<PAGE> 23
DISTRIBUTION OF LEASES SECURING THE SECURED NOTES BY ORIGINAL TERM
The following table reflects the distribution of the leases securing the
secured notes as of the cutoff date by original term stated in months. The
numbers are weighted by the cutoff date stipulated market value of the leases.
The weighted average residual value is stated as a percentage of original
capitalized cost. The percentages may not add to 100.00% due to rounding.
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE OF
NUMBER OF NUMBER CUTOFF DATE CUTOFF DATE
OF LEASES OF LEASES AGGREGATE AGGREGATE ORIGINAL WEIGHTED
ORIGINAL SECURING THE SECURING THE STIPULATED STIPULATED CAPITALIZED AVERAGE
TERM SECURED NOTES SECURED NOTES MARKET VALUE MARKET VALUE COST RESIDUAL VALUE
- - --------------------- ------------- ------------- ------------ ------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
to
to
to
to
to
Total
<CAPTION>
WEIGHTED
AVERAGE
IMPLICIT RATE WEIGHTED WEIGHTED
OF LEASES AVERAGE AVERAGE
ORIGINAL SECURING THE ORIGINAL REMAINING
TERM SECURED NOTES TERM TERM
- - --------------------- ------------- -------- ---------
<S> <C> <C> <C>
to
to
to
to
to
Total
</TABLE>
S-20
<PAGE> 24
TERMINATION VALUE INSURANCE
National Union Fire Insurance Company of Pittsburgh, Pa., known as NUFI, is
a wholly-owned subsidiary of American International Group, Inc. and currently is
the sole provider of termination value insurance for the leases and leased
vehicles securing the secured notes.
The termination value insurance provided by NUFI provides 100% loss
coverage, subject to an overall cap for all leases and leased vehicles held by
COLT, on each lease and leased vehicle securing each secured note, including
each secured note held by the trust. Termination payments cover losses, whether
caused by a lease default or the lease servicer's failure to obtain the full
residual value of the leased vehicle at lease termination. The termination value
insurance protects each secured note from termination value risk and credit
losses, subject to an aggregate loss limit that is currently 17% of the
aggregate initial discounted balance of the leases securing all the secured
notes, whether or not held by the trust. This percentage is subject to
adjustment as more fully described below.
NUFI must make a termination payment for each lease that terminates in any
month. This monthly termination payment equals the amount of the deficiency on
each lease asset in all pools of leases securing secured notes remaining after
allocation of any gains on other lease assets that have terminated and
withdrawals from any funds available in the termination reserve account. NUFI
must deposit the monthly termination payment into the collection accounts for
the secured notes and certificates as specified by the lease servicer. If the
funds needed to cover unpaid amounts outstanding are more than NUFI's
commitment, holders of the secured notes will only receive their pro rata share
of this termination payment.
NUFI's obligation to make monthly termination payments is limited to the
TVA commitment amount. The TVA commitment amount is the lesser of:
(1) the TVA commitment amount as of the preceding distribution date,
plus
(a) for each lease asset acquired during the previous month, the
product of (i) the then applicable TVA percentage of that lease asset
and (ii) the initial discounted balance of that lease asset, minus
(b) if the result would not be below $150,000,000, for each lease
for which termination occurred in the previous month, and each lease
asset purchased by the lease servicer or origination agent during the
previous month, the product of (i) the TVA percentage of that lease
asset and (ii) the initial discounted balance of that lease asset,
adjusted by
(c) the monthly TVA adjustment amount; and
(2) the TVA base amount.
The TVA base amount is the overall cap on NUFI's commitment. On any
distribution date, the TVA base amount is the greater of:
(1) for all lease assets owned by COLT as of the last day of the
previous month, excluding any lease assets for which termination occurred
in any prior month, the product of (a) the TVA percentage for each lease
asset and (b) the initial discounted balance of that lease asset; and
(2) $150,000,000.
The TVA base amount as of , was $ or % of the
aggregate initial discounted balance of the leases.
S-21
<PAGE> 25
The TVA percentage with respect to any lease asset is the greatest of:
(1) 12%;
(2) at the time COLT acquires the lease asset, 15% or the percentage,
if any, most recently permitted or required by Standard & Poor's to confirm
its rating on the COLT certificates or by Moody's so as not to withdraw,
suspend or downgrade its rating on the COLT certificates;
(3) for all leases, 16% if the auction turn-in rate exceeds 30% but is
35% or less, and 17% if the auction turn-in rate exceeds 35% but is 40% or
less; and
(4) for all leases, the percentage as a result of which Standard &
Poor's and Moody's have not withdrawn, suspended or downgraded their
ratings of the COLT certificates if specified credit enhancement events
have occurred or the auction turn-in rate exceeds 40%, and the termination
value insurer and the holders of COLT certificates evidencing not less than
two-thirds of the voting interests have approved that percentage in writing
within 30 days.
The TVA percentage in clauses (3) and (4) above may return to the lower
levels described in clauses (1) and (2) above if the triggers in clauses (3) and
(4) have not been breached for 12 consecutive months.
The TVA percentage as of , was [17%]. The auction turn-in
rate is calculated each month by the lease servicer as described below under
"Residual Values."
The monthly TVA adjustment amount for any distribution date adds or
subtracts the amount calculated as follows:
(1) any excesses on terminating lease assets where the TVA percentage
of the initial discounted balance of the lease asset exceeds the
termination payment, minus
(2) any deficiencies on terminating lease assets where the termination
payment exceeds the TVA percentage of the initial discounted balance of
that lease asset, plus
(3) all amounts received by NUFI from later recoveries on the lease
assets, withdrawals from the termination reserve account, and any payments
by the origination agent to NUFI to compensate for originating lease assets
that have residual values above the estimated market value. The initial
discounted balance of a lease is calculated as described in the prospectus
under "The Pools of Secured Notes--GMAC's Responsibilities as Origination
Agent and Lease Servicer."
Any amounts recovered by the lease servicer or by COLT on any lease for
which NUFI made a termination payment, including excess wear and tear and excess
mileage charges, after the end of the month during which termination occurred,
that are included in the total proceeds received on that lease will be paid to
NUFI to the extent of the termination payment NUFI made on that lease. If,
however, NUFI fails to comply with its obligations, these recoveries will
instead be deposited into the termination reserve account.
If, on any distribution date, the lease servicer fails to make an advance
when there is a shortfall in the monthly payment on any lease, or when
termination results in a remaining unpaid balance, and funds are not available
from other sources, NUFI will, upon notice from the lease servicer, pay the
amount of the advance not paid by the lease servicer.
Each month, GMAC as lease servicer submits a report to NUFI containing
information on all leases and leased vehicles GMAC as origination agent acquired
for COLT during the previous month. The lease servicer must submit a monthly
loss information report for all terminating leases for which termination
occurred in the previous month. As lease servicer and origination agent for
COLT, GMAC must enroll each leased vehicle with NUFI in order
S-22
<PAGE> 26
for the vehicle to obtain insurance coverage. NUFI is not responsible for any
losses caused by the lease servicer's failure to enroll a leased vehicle in
accordance with the terms of the termination value insurance.
A termination value fee is paid to NUFI on each lease asset, without claim
to the holders of secured notes. This fee is paid on a monthly basis so long as
funds are available out of collections on leases and leased vehicles and any
excess of proceeds received on leases and leased vehicles after lease
termination. Any unpaid fees to NUFI will be paid on the first distribution date
when funds in the secured note collection accounts are available.
COMPOSITION OF COLT'S ENTIRE PORTFOLIO OF SECURED NOTES AND LEASE ASSETS
As described above, the termination value insurance provides loss coverage
on all leases and leased vehicles held by COLT, including the leases and leased
vehicles securing the secured notes held by the trust. In the following table,
the weighted numbers, average interest rate and average original number of
monthly payments of the secured notes are weighted by outstanding principal
balance of secured notes as of the cutoff date. The average and range of
outstanding principal balance of secured notes and the weighted average and
range of interest rates are determined without giving effect to discounting for
calculation of secured note values of those secured notes. The average and range
of original residual values of the leases securing the secured notes and
percentage of the leases for new and used vehicles are determined without giving
effect to discounting for calculation of the stipulated market value of those
leases.
<TABLE>
<S> <C>
Aggregate Secured Note Value as of Cutoff Date..............
Number of Secured Notes.....................................
Average Secured Note Value as of Cutoff Date................
Range of Original Secured Note Values of Secured Notes......
Weighted Average Interest Rate..............................
Range of Interest Rates.....................................
Weighted Average Original Number of Monthly Payments........
Range of Original Number of Monthly Payments................
Weighted Average Remaining Number of Monthly Payments.......
Range of Remaining Number of Monthly Payments...............
Average Original Residual Value of Leases...................
Range of Original Residual Values of Leases.................
Aggregate of Residual Values of Leases as a Percentage of...
Aggregate Stipulated Market Value of Leases as of Cutoff
Date...................................................
Percentage of Leases for New Vehicles (by Stipulated........
Market Value)..........................................
Percentage of Leases for Used Vehicles (by Stipulated.......
Market Value)..........................................
</TABLE>
The distribution of COLT's entire portfolio of leases by state of
origination is: California %, Illinois %, Michigan %, New York
% and Pennsylvania %. The distribution of COLT's entire portfolio of
leases by vehicle make, calculated on the basis of the number of leases, is:
Buick %, Cadillac %, Chevrolet %, Oldsmobile %, Pontiac
%, GM Truck % and Saturn %.
THE TERMINATION VALUE INSURER
The following information has been supplied by the termination value
insurer for inclusion in this prospectus supplement. No representation is made
by the seller, the servicer or any of their affiliates as to the accuracy or
completeness of this information. The
S-23
<PAGE> 27
termination value insurer disclaims responsibility for the accuracy or
completeness of this prospectus supplement and the prospectus, other than the
information contained in this section.
The termination value insurer is an insurance company incorporated under
the laws of the State of and is wholly owned by American
International Group, Inc., a publicly-held holding company incorporated under
the laws of the State of Delaware. Through its subsidiaries, American
International Group is primarily engaged in a broad range of insurance and
insurance-related activities and financial services in the United States and
abroad. American International Group's principal activities include both general
and life insurance operations. Other significant activities are financial
services and agency and service fee operations. The termination value insurance
is an obligation of NUFI and not of American International Group or any other
affiliate of American International Group. NUFI is located at 70 Pine Street,
New York, New York 10270 and its telephone number is (212) 770-7000.
For the fiscal quarter ended September 30, 1999, NUFI had total admitted
assets of approximately $ million, total liabilities of approximately $
million and a capital and surplus account of approximately $ million, in each
case as reported on a statutory accounting basis (which varies from generally
accepted accounting principles in certain respects) in accordance with
guidelines established by the National Association of Insurance Commissioners.
As of the date of this prospectus supplement, NUFI was rated "Aaa" by Moody's
and "AAA" by Standard & Poor's for financial strength.
NUFI files annual statements with the insurance departments of the State of
and other states in which it is eligible to write insurance.
Copies of the annual statement of NUFI for the year ended December 31, 1998 are
available on request from the indenture trustee.
[Under its current overall reinsurance arrangements, NUFI reinsures
approximately % of its business with . NUFI also has ceded
additional reinsurance of its obligations under the termination value insurance
to . As a result of these reinsurance arrangements, which do not
relieve NUFI from its direct obligations under the termination value insurance
to make termination payments the termination value insurance will be reinsured
by . Neither the indenture trustee on behalf of the noteholders
nor COLT will have rights against as a result of these
reinsurance arrangements.]
[For the fiscal quarter ended September 30, 1999, had total
assets of approximately $ billion, total liabilities of approximately $
billion and a capital and surplus account of approximately $ billion, in each
case as reported on a statutory accounting basis (which varies from generally
accepted accounting principles in certain respects) in accordance with the
guidelines established by the National Association of Insurance Commissioners.
As of the date of this prospectus supplement, was rated "Aaa" by Moody's
and "AAA" by Standard & Poor's for financial strength.]
[American International Group and NUFI have entered into a support
agreement. Under the support agreement, American International Group has agreed
that American International Group will cause NUFI to maintain a policyholders'
surplus of not less than $ million or such greater amount as will suffice to
enable NUFI to perform its obligations under any policy issued by it. The
support agreement also provides that if NUFI needs funds not otherwise available
to make timely payment of its obligations under policies issued by it or
otherwise, American International Group will provide these funds at the request
of NUFI. The support agreement is not a direct or indirect guarantee by American
International Group to any person of any obligation of NUFI. American
International Group may terminate the
S-24
<PAGE> 28
support agreement only under circumstances in which NUFI attains a "AAA"
financial strength rating by Standard & Poor's (or, if Standard & Poor's does
not make such a rating available, an equivalent rating from another nationally
recognized statistical rating organization) without the support agreement only
if American International Group fails to meet its obligations thereunder on
demand.]
For the fiscal quarter ended September 30, 1999, American International
Group had total assets of approximately $ billion, total capital funds of
approximately $ billion and net income of approximately $ billion, in each
case as reported on a consolidated basis in accordance with generally accepted
accounting principles.
American International Group files reports, proxy statements and other
information with the SEC. You may read and copy any documents that American
International Group files at the public reference facilities maintained by the
SEC at 450 Fifth Street, N.W., Washington D.C., 20549, and at the following
regional offices of the SEC:
- New York Regional Office, Suite 1300, 7 World Trade Center, New York, New
York 10048;
- Los Angeles Regional Office, 5670 Wilshire Boulevard, 11th Floor, Los
Angeles, California 90036; and
- Chicago Regional Office, Suite 1400, 500 West Madison Street, Chicago,
Illinois 60661.
You may obtain copies of these materials from the Public Reference Section of
the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In
addition, the SEC maintains a website that contains reports, proxy statements
and other information regarding reporting companies including American
International Group, at http://www.sec.gov. These reports, proxy statements and
other information can be inspected at the Information Center of the New York
Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
WEIGHTED AVERAGE LIFE OF THE SECURITIES
Additional information regarding the notes can be found under "Weighted
Average Life of the Securities" in the prospectus.
The weighted average life of the notes [and certificates] will depend on
the rate of principal payments on the secured notes, which in turn will depend,
among other things, on the rate of early termination on the leases securing the
secured notes. Early terminations on motor vehicle leases may be measured
relative to a prepayment standard or model. The prepayment model used for the
leases is based on a prepayment assumption expressed in terms of percentages of
ABS. ABS refers to a prepayment model that assumes a constant percentage of the
original number of leases in a pool prepay each month. However, as used in this
prospectus supplement, a 100% prepayment assumption assumes that, based on the
assumptions below, the original balance of a lease will prepay as follows:
(1) % ABS for the first months of the life of the lease;
(2) % ABS for the through month of the life of the lease;
(3) % ABS for the through month of the life of the lease;
(4) % ABS for the through month of the life of the lease;
(5) % ABS for the through month of the life of the lease;
(6) % ABS for the through month of the life of the lease; and
(7) % ABS following the month of the life of the lease until the
balance of the lease has been paid in full.
S-25
<PAGE> 29
The tables below were prepared on the basis of certain assumptions,
including that:
- all scheduled payments on the leases securing the secured notes are
timely received, no lease is ever delinquent and all payments on the
secured notes are timely made;
- no leases are purchased by the lease servicer as a result of a breach of
a representation or warranty under the lease origination agreement;
- there are no losses on the secured notes;
- the secured note servicer does not exercise its option to purchase the
secured notes;
- distributions of principal of and interest on the notes [and
certificates] are made on the 15th day of each month whether or not the
day is a business day;
- the basic servicing fee and the secured note servicing fee are [1.75%]
and [0.25%] per annum, respectively;
- each early termination of a lease results in prepayment of the entire
balance of the related secured note;
- the schedule of the declining secured note values for the secured notes
is as set forth as the last table, and assumes no early terminations of
leases; and
- the leases securing the secured notes have months of
seasoning.
ASSUMED CHARACTERISTICS
Because payments on the leases and thus the secured notes will differ from
those used in preparing the following tables, distributions of principal of the
notes [and certificates] may be made earlier or later than as set forth in the
tables. You are urged to make your investment decisions on a basis that includes
their determination as to anticipated prepayment rates under a variety of the
assumptions discussed herein.
Based on the foregoing assumptions, the following tables indicate the
resulting weighted average lives of the notes [and certificates] and set forth
the initial note [and certificate] balances that would be outstanding after each
of the dates shown at the indicated percentages of the early termination model.
S-26
<PAGE> 30
PERCENTAGE OF CLASS A-1 NOTE BALANCE OUTSTANDING TO MATURITY
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION
-----------------------------------
DISTRIBUTION DATE 0% 50% 100% 150% 200%
- - ----------------- --- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial......................................... 100 100 100 100 100
2/15/00.........................................
3/15/00.........................................
4/15/00.........................................
5/15/00.........................................
6/15/00.........................................
7/15/00.........................................
8/15/00.........................................
9/15/00.........................................
10/15/00........................................
11/15/00........................................
12/15/00........................................
1/15/01.........................................
2/15/01.........................................
3/15/01.........................................
4/15/01.........................................
5/15/01.........................................
6/15/01.........................................
7/15/01.........................................
8/15/01.........................................
9/15/01.........................................
10/15/01........................................
11/15/01........................................
12/15/01........................................
1/15/02.........................................
2/15/02.........................................
3/15/02.........................................
4/15/02.........................................
5/15/02.........................................
6/15/02.........................................
7/15/02.........................................
8/15/02.........................................
9/15/02.........................................
Weighted Average Life to Maturity (years).......
Weighted Average Life to Call (years)...........
--- --- --- --- ---
</TABLE>
- The weighted average life of the Class A-1 notes is determined by (a)
multiplying the amount of each distribution in reduction of principal
balance by the number of years from the closing date to the date
indicated, (b) adding the results and (c) dividing the sum by the
aggregate distributions in reduction of principal balance referred to in
clause (a).
- The weighted average life to call assumes that the secured note servicer
exercises its option to purchase the secured notes.
S-27
<PAGE> 31
PERCENTAGE OF CLASS A-2 NOTE BALANCE OUTSTANDING TO MATURITY
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION
-----------------------------------
DISTRIBUTION DATE 0% 50% 100% 150% 200%
- - ----------------- --- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial......................................... 100 100 100 100 100
2/15/00.........................................
3/15/00.........................................
4/15/00.........................................
5/15/00.........................................
6/15/00.........................................
7/15/00.........................................
8/15/00.........................................
9/15/00.........................................
10/15/00........................................
11/15/00........................................
12/15/00........................................
1/15/01.........................................
2/15/01.........................................
3/15/01.........................................
4/15/01.........................................
5/15/01.........................................
6/15/01.........................................
7/15/01.........................................
8/15/01.........................................
9/15/01.........................................
10/15/01........................................
11/15/01........................................
12/15/01........................................
1/15/02.........................................
2/15/02.........................................
3/15/02.........................................
4/15/02.........................................
5/15/02.........................................
6/15/02.........................................
7/15/02.........................................
8/15/02.........................................
9/15/02.........................................
Weighted Average Life to Maturity (years).......
Weighted Average Life to Call (years)...........
--- --- --- --- ---
</TABLE>
- The weighted average life of the Class A-2 notes is determined by (a)
multiplying the amount of each distribution in reduction of principal
balance by the number of years from the closing date to the date
indicated, (b) adding the results and (c) dividing the sum by the
aggregate distributions in reduction of principal balance referred to in
clause (a).
- The weighted average life to call assumes that the secured note servicer
exercises its option to purchase the secured notes.
S-28
<PAGE> 32
PERCENTAGE OF CLASS A-3 NOTE BALANCE OUTSTANDING TO MATURITY
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION
-----------------------------------
DISTRIBUTION DATE 0% 50% 100% 150% 200%
- - ----------------- --- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial......................................... 100 100 100 100 100
2/15/00.........................................
3/15/00.........................................
4/15/00.........................................
5/15/00.........................................
6/15/00.........................................
7/15/00.........................................
8/15/00.........................................
9/15/00.........................................
10/15/00........................................
11/15/00........................................
12/15/00........................................
1/15/01.........................................
2/15/01.........................................
3/15/01.........................................
4/15/01.........................................
5/15/01.........................................
6/15/01.........................................
7/15/01.........................................
8/15/01.........................................
9/15/01.........................................
10/15/01........................................
11/15/01........................................
12/15/01........................................
1/15/02.........................................
2/15/02.........................................
3/15/02.........................................
4/15/02.........................................
5/15/02.........................................
6/15/02.........................................
7/15/02.........................................
8/15/02.........................................
9/15/02.........................................
Weighted Average Life to Maturity (years).......
Weighted Average Life to Call (years)...........
--- --- --- --- ---
</TABLE>
- The weighted average life of the Class A-3 notes is determined by (a)
multiplying the amount of each distribution in reduction of principal
balance by the number of years from the closing date to the date
indicated, (b) adding the results and (c) dividing the sum by the
aggregate distributions in reduction of principal balance referred to in
clause (a).
- The weighted average life to call assumes that the secured note servicer
exercises its option to purchase the secured notes.
S-29
<PAGE> 33
[PERCENTAGE OF CERTIFICATE BALANCE REMAINING TO MATURITY
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION
-----------------------------------
DISTRIBUTION DATE 0% 50% 100% 150% 200%
- - ----------------- --- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial......................................... 100 100 100 100 100
2/15/00.........................................
3/15/00.........................................
4/15/00.........................................
5/15/00.........................................
6/15/00.........................................
7/15/00.........................................
8/15/00.........................................
9/15/00.........................................
10/15/00........................................
11/15/00........................................
12/15/00........................................
1/15/01.........................................
2/15/01.........................................
3/15/01.........................................
4/15/01.........................................
5/15/01.........................................
6/15/01.........................................
7/15/01.........................................
8/15/01.........................................
9/15/01.........................................
10/15/01........................................
11/15/01........................................
12/15/01........................................
1/15/02.........................................
2/15/02.........................................
3/15/02.........................................
4/15/02.........................................
5/15/02.........................................
6/15/02.........................................
7/15/02.........................................
8/15/02.........................................
9/15/02.........................................
Weighted Average Life to Maturity (years).......
Weighted Average Life to Call (years)...........
--- --- --- --- ---
</TABLE>
- The weighted average life of the certificates is determined by (a)
multiplying the amount of each distribution in reduction of principal
balance by the number of years from the closing date to the date
indicated, (b) adding the results and (c) dividing the sum by the
aggregate distributions in reduction of principal balance referred to in
clause (a).
- The weighted average life to call assumes that the secured note servicer
exercises its option to purchase the secured notes.]
S-30
<PAGE> 34
SCHEDULE OF DECLINING SECURED NOTE VALUES
<TABLE>
<CAPTION>
MONTHLY PERIOD BEGINNING SECURED NOTE VALUE BALANCE
- - -------------- ------------------------------------
<S> <C>
07/01/99.......................................
08/01/99.......................................
09/01/99.......................................
10/01/99.......................................
11/01/99.......................................
12/01/99.......................................
01/01/00.......................................
02/01/00.......................................
03/01/00.......................................
04/01/00.......................................
05/01/00.......................................
06/01/00.......................................
07/01/00.......................................
08/01/00.......................................
09/01/00.......................................
10/01/00.......................................
11/01/00.......................................
12/01/00.......................................
01/01/01.......................................
02/01/01.......................................
03/01/01.......................................
04/01/01.......................................
05/01/01.......................................
06/01/01.......................................
07/01/01.......................................
08/01/01.......................................
09/01/01.......................................
10/01/01.......................................
11/01/01.......................................
12/01/01.......................................
01/01/02.......................................
02/01/02.......................................
03/01/02.......................................
04/01/02.......................................
05/01/02.......................................
06/01/02.......................................
07/01/02.......................................
08/01/02.......................................
09/01/02.......................................
10/01/02.......................................
11/01/02.......................................
12/01/02.......................................
01/01/03.......................................
02/01/03.......................................
03/01/03.......................................
</TABLE>
S-31
<PAGE> 35
THE POOL OF LEASES SECURING THE SECURED NOTES
DELINQUENCY, REPOSSESSION AND LOSS DATA ON GMAC LEASES OF THE TYPE SECURING THE
SECURED NOTES
The following tables set forth delinquency, repossession and loss data with
respect to the entire portfolio of retail automobile and light duty truck leases
owned or serviced by GMAC, including leases originated in California, Illinois,
Michigan, New York and Pennsylvania, as of and for the periods shown. These
leases are of the type securing the secured notes.
The data presented in the following tables are for illustrative purposes
only. Delinquency, repossession and loss experience may be influenced by a
variety of economic, social, geographic and other factors beyond the control of
GMAC which may adversely affect the experience of the portfolio. There is no
assurance that GMAC's delinquency, repossession and loss experience with respect
to its automobile and light truck retail closed-end leases and the related
leased vehicles in the future, or the experience with respect to the leases and
leased vehicles securing the secured notes, will be similar to that set forth
below.
ENTIRE GMAC LEASE PORTFOLIO
RETAIL VEHICLE LEASE DELINQUENCY INFORMATION
($ IN THOUSANDS)
The dollar amount of leases outstanding in this table is based on the [sum
of all principal amounts outstanding under finance leases and] net investment in
leased assets under operating leases originated by GMAC in the United States,
inclusive of the residual values of the related leased vehicles. The percent
delinquent excludes leases the related lessees of which are bankrupt or have
commenced bankruptcy proceedings. As of September 30, 1999, approximately
leases in GMAC's portfolio involving bankrupt lessees were delinquent for at
least 60 days. The period of delinquency in this table is based on the number of
days payments are contractually past due. The table includes leases originated
by GMAC as origination agent for COLT beginning in May 1997.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30 YEAR ENDED DECEMBER 31
---------------- ------------------------------------
1999 1998 1998 1997 1996 1995
LEASES ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Dollar Amount of Leases
Outstanding...................
Number of Leases................
Percent Delinquent
31-60 Days....................
61-90 Days....................
91 Days or more...............
</TABLE>
S-32
<PAGE> 36
ENTIRE GMAC LEASE PORTFOLIO
RETAIL VEHICLE LEASE REPOSSESSION AND LOSS EXPERIENCE
($ IN THOUSANDS, EXCEPT AS NOTED)
The ending dollar amount of net leases outstanding in this table is based
on the [sum of all principal amounts outstanding under finance lease contracts
and] net investment in leased assets under operating leases originated by GMAC
in the United States, inclusive of the residual values of the related leased
vehicles. In this table, average net leases outstanding is calculated as the
average of the [sum of all principal amounts outstanding under finance leases
and] net investment in operating leases as of the beginning and the end of the
indicated period. The net and average net repossession losses include expenses
incurred to dispose of vehicles and are net of recoveries. The table includes
leases originated by GMAC as origination agent for COLT beginning in May 1997.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30 YEAR ENDED DECEMBER 31
------------ ------------------------------------
1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ending Number of Leases...........
Outstanding.....................
Average Number of Leases..........
Outstanding.....................
Ending Dollar Amount of Net
Leases.......................
Outstanding..................
Average Dollar Amount of Net....
Leases Outstanding.........
Repossessions:
Number of Repossessions.........
Number of Repossessions as a....
Percentage of Ending
Number.....................
Leases Outstanding...........
Number of Repossessions as a....
Percentage of Average
Leases.....................
Outstanding..................
Losses:
Average Net Repossession Loss
per..........................
Liquidated Lease (1).........
Net Repossession Losses as a....
Percentage of Average Net....
Leases Outstanding...........
</TABLE>
- - ------------
(1) Dollars not in thousands.
S-33
<PAGE> 37
ENTIRE GMAC LEASE PORTFOLIO
RESIDUAL VALUE LOSS EXPERIENCE
To the extent that average terms vary over time, the residual value loss
experience for the periods in this table may not be fully comparable. The number
of returned vehicles sold by GMAC is based on matured leases. The full term
ratio is defined as the number of returned vehicles sold during a specified
period as a percentage of the number of leases that, as of their origination
date, were scheduled to terminate during that period. The auction turn-in rate
is defined as the number of returned vehicles that were not purchased by the
lessee or the dealer at their scheduled lease end date in any three consecutive
months as compared to the number of leases that terminated during the same three
months. Total losses on returned vehicles sold by GMAC include expenses incurred
to dispose of vehicles but exclude certain amounts received after the sale and
disposition of the vehicle. The losses as a percentage of residual values of
returned vehicles is the ratio of total losses on returned vehicles sold by GMAC
during the stated period over their residual values. The losses as a percentage
of residual values of scheduled terminations is the ratio of total losses on
returned vehicles sold by GMAC during the stated period over the residual values
of all vehicles under leases scheduled to terminate during the stated period
expressed as a percentage. The dollar amounts are in thousands except for total
losses.
GMAC estimates that, of the retail automobile and light truck leases in its
portfolio that were scheduled to mature during fiscal years 1997 and 1998,
approximately % and %, respectively, terminated more than 30 days
prior to maturity as a result of voluntary early terminations under which the
leased vehicles were purchased by the related lessees or dealers or were
repossessed due to default by the lessees under the leases.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30 YEAR ENDED DECEMBER 31
------------ ------------------------------------
1999 1998 1998 1997 1996 1995 1994
LEASES ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Total Number of Leases Scheduled
to Terminate......................
Number of Returned Vehicles Sold
by GMAC.........................
Full Term Ratio...................
Auction Turn-In Rate..............
Total Losses on Returned
Vehicles Sold by GMAC......
Average Loss Per Returned Vehicle
Sold by GMAC(1).................
Losses as a Percentage of Residual
Values of Returned Vehicles Sold
by GMAC.........................
Losses as a Percentage of Residual
Values of Scheduled
Terminations....................
</TABLE>
S-34
<PAGE> 38
RESIDUAL VALUES
GMAC sets residual values for the General Motors vehicles that it leases
for itself or for COLT. See "Description of Auto Lease Business--Residual
Values" in the prospectus. The average residual value percentage of leases
originated by GMAC has decreased since 1997.
GMAC as origination agent, monitors the auction turn-in rate for COLT. The
auction turn-in rate is the number of leased vehicles returned on their
scheduled lease end date that were not purchased by a lessee or dealer in any
three consecutive months as compared to the number of leases that terminated
during the same three months. The auction turn-in rate will be affected by a
variety of factors, including the state of the new and used car markets and the
average duration of the leases. As the auction turn-in rate increases, so does
the TVA percentage, which in turn increases the coverage available for lease
assets under the termination value insurance. See "Termination Value Insurance"
above.
GMAC estimates that, during the period from ,
through , , the auction turn-in rate for
leases included in its owned and serviced portfolio was approximately % for
leases with an original term of months or less, % for leases with an
original term of months, and % for leases with an original term of
months. As of , , approximately % of leases
had an original lease term of months or less, whereas for the fiscal [year]
[quarter] ended , , approximately % of the leases
in GMAC's entire portfolio had an original lease term of months or less.
The auction turn-in rate for the entire portfolio of leases originated by
GMAC has increased during the fiscal [year] [quarter] ended ,
as compared to previous years. The auction turn-in rate for GMAC's
portfolio of leases for the fiscal [year] [quarter] ended ,
was approximately %.
GMAC also monitors the residual realization ratio for COLT, which is the
ratio of the aggregate amount realized upon sale of all leased vehicles that
terminated at their scheduled lease end dates in three consecutive months to the
aggregate residual values for those leased vehicles. GMAC estimates that, during
the period from , through ,
, the residual realization ratio for leases included in its owned
and serviced portfolio was approximately % for leases with an original term
of months or less, % for leases with an original term of months,
and % for leases with an original term of months.
The residual realization ratio for the entire portfolio of leases
originated by GMAC has [increased] [decreased] during the fiscal [year]
[quarter] ended , as compared to previous years. The
residual realization ratio for GMAC's portfolio of leases for the fiscal [year]
[quarter] ended , was approximately %.
GMAC's per unit losses on vehicle disposal have increased on average for
its portfolio of leases for the fiscal [year] [quarter] ended [ ,
], as compared to GMAC's fiscal year ended December 31, 1998, primarily as
a result of [describe]. Per unit loss rates may also be affected by the amount
and types of accessories or installed optional equipment included on leased
vehicles. Although per unit loss rates are typically the result of a combination
of factors, to the extent certain types of optional equipment depreciate more
quickly than the value attributable to the base leased vehicle, a leased vehicle
having a greater portion of its overall manufacturer's suggested retail price
attributable to optional equipment will experience a relatively higher level of
loss. In 1998, GMAC implemented a new residual value setting policy for new
General Motors vehicles that separately calculates the residual value applicable
to the base vehicle and the residual vehicle applicable to specified optional
accessories and optional equipment. This historical loss experience does not
reflect financial
S-35
<PAGE> 39
assistance and incentives provided, from time to time, by General Motors and
GMAC to General Motors dealers.
We can make no assurance that per unit losses on the leased vehicles
securing the secured notes will reflect GMAC's historical experience for its
entire lease portfolio and will not increase further.
THE NOTES
GENERAL
The notes will be issued under an indenture to be dated as of the closing
date between the trust and the indenture trustee. We have filed a form of the
indenture as an exhibit to the registration statement of which this prospectus
supplement is a part. We will make available a copy of the indenture to holders
of notes upon request and it will be filed with the SEC after the issuance of
the notes. The following summary describes some of the terms of the notes and
the indenture. The 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, the indenture and the accompanying prospectus. 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. will be the
indenture trustee. Each distribution date for the notes will constitute a
payment date for purposes of the prospectus.
The interest rate and the final scheduled distribution date for each class
of notes will be as set forth below.
<TABLE>
<CAPTION>
INTEREST RATE FINAL SCHEDULED
(PER ANNUM) DISTRIBUTION DATE
------------- -----------------
<S> <C> <C>
Class A-1 Notes...................... %
Class A-2 Notes...................... %
Class A-3 Notes...................... %
</TABLE>
PAYMENTS OF INTEREST
Interest on the unpaid principal balance of each class of notes will accrue
at the applicable interest rate from and including the previous distribution
date to but excluding the current distribution date. The trust will pay interest
each month on the distribution date. Interest payments on all classes of notes
will have the same priority. Interest on the certificates will not be paid on
any distribution date until the trust has paid interest on the notes in full.
The distribution date will be the 15th day of each month or, if that date
is not a business day, the next business day, commencing , . A
business day is any day other than a Saturday, Sunday or any other day on which
banks in New York, New York, Detroit, Michigan, or Chicago, Illinois may, or are
required to, remain closed. Interest will accrue from and including the closing
date. The trust will pay interest for each class of notes on each distribution
date in an amount equal to the Noteholders' Interest Distributable Amount for
that distribution date. Interest on the Class A-1 notes will be calculated on
the basis of [a 360-day year and the actual days elapsed in the related accrual
period]. Interest on the Class A-2 notes and the Class A-3 notes will be
calculated on the basis of [a 360-day year consisting of twelve 30- day months]
[actual days elapsed in the related accrual period]. Failure to pay the full
Noteholders' Interest Distributable Amount on any class of notes on any
distribution date will constitute an event of default under the indenture after
a five-day grace period.
S-36
<PAGE> 40
PAYMENTS OF PRINCIPAL
On each distribution date, until the trust pays the notes in full, the
trust will pay principal on the notes to the extent of the Principal
Distributable Amount for the previous month, in the following priority:
(1) first, to the Class A-1 notes, until the Class A-1 notes are paid
in full;
(2) second, to the Class A-2 notes, until the Class A-2 notes are paid
in full; and
(3) third, to the Class A-3 notes, until the Class A-3 notes are paid
in full.
Notwithstanding the above, at any time that the principal balance of the
notes has been declared due and payable following the occurrence of an event of
default, until such time as all events of default have been cured or waived as
provided in the indenture, the trust will pay principal payments on the notes
ratably to all noteholders on each distribution date, based on the outstanding
principal balance of the notes.
The remaining outstanding principal amount of each class of notes will be
due in full on the final scheduled distribution date for that class. Failure to
pay a class of notes in full on or prior to the applicable final scheduled
distribution date will result in an event of default.
REDEMPTION
If the secured note servicer exercises its option to purchase the secured
notes when the Aggregate Secured Note Value on the last day of any month has
declined to 10% or less of the initial Aggregate Secured Note Value, then the
outstanding notes will be redeemed in whole, but not in part, on the
distribution date as of which the secured note servicer exercises its option.
The secured note servicer's option is described in the prospectus under "The
Transfer and Servicing Agreements--Termination." The redemption price will be
equal to the unpaid principal amount of the notes, plus accrued and unpaid
interest.
DELIVERY OF NOTES
The notes will be issued on or about the closing date in book entry form
through the facilities of DTC, Cedelbank and the Euroclear System against
payment in immediately available funds. DTC has informed its participants and
other members of the financial community that it has developed and is
implementing a program to deal with the "Year 2000 problem" so that its systems,
as the same relate to the timely payment of distributions, including principal
and income payments, to securityholders, book-entry deliveries, and settlement
of trades with DTC, continue to function appropriately. See "Information
Regarding the Securities--Book-Entry Registration" in the prospectus.
THE CERTIFICATES
GENERAL
The trust will issue the certificates under a trust agreement. We have
filed a form of the trust agreement as an exhibit to the registration statement
of which this prospectus supplement is a part. A copy of the trust agreement
will be filed with the SEC after the issuance of the notes and the certificates.
The following summary describes some of the terms of the certificates and the
trust agreement. The 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, the trust agreement and the accompanying prospectus. 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.
S-37
<PAGE> 41
DISTRIBUTIONS OF INTEREST AND CERTIFICATE BALANCE
Interest. On each distribution date, commencing ,
, the trust will distribute interest to certificateholders for
the related accrual period at the pass-through rate on the certificates with
respect to the Certificate Balance. The pass-through rate for the certificates
is %. Any Certificateholders' Interest Distributable Amount for a
distribution date that the trust does not distribute on that distribution date
will be distributed on the next distribution date. Interest will accrue from and
including the closing date and the trust will pay on each distribution date an
amount equal to the Certificateholders' Interest Distributable Amount for that
distribution date. Interest with respect to the certificates will be calculated
on the basis of a 360-day year consisting of twelve 30-day months. The final
scheduled distribution date for the certificates will occur on the
distribution date. Payments of interest on the certificates will
be subordinated to payments of interest on the notes [but will not be
subordinated to payments of principal on the notes]. If an event of default
resulting from a payment default occurs and the notes are accelerated, the trust
will not make payments of interest on the certificates or any distributions on
the Certificate Balance until the notes are paid in full or the acceleration is
rescinded. See "The Transfer and Servicing Agreements--Distributions" in this
prospectus supplement.
Certificate Balance. The trust will not make principal distributions on the
Certificate Balance until the notes have been paid in full. After full payment
of the notes, until the Certificate Balance is reduced to zero, the trust will
make the entire Principal Distributable Amount available to make distributions
on the Certificate Balance. If the secured note servicer exercises its option to
purchase the secured notes when the Aggregate Secured Note Value declines to 10%
or less of the initial Aggregate Secured Note Value, certificateholders will
receive an amount equal to the Certificate Balance together with accrued
interest at the pass through rate on the certificates. This distribution will
effect an early retirement of the certificates. In addition, on and after any
distribution date on which the trust pays all of the notes in full, funds in the
reserve account will be applied to reduce the Certificate Balance to zero if,
after giving effect to all required distributions to the secured note servicer,
the noteholders and the certificateholders on that distribution date, the amount
on deposit in the reserve account is equal to or greater than the Certificate
Balance. See "The Transfer and Servicing Agreements--Distributions" in this
prospectus supplement.
THE TRANSFER AND SERVICING AGREEMENTS
The parties will enter into the transfer and servicing agreements as of the
closing date. See "The Transfer and Servicing Agreements" in the prospectus. The
following summary describes some of the terms of the transfer and servicing
agreements. We have filed forms of the transfer and servicing agreements as
exhibits to the registration statement of which this prospectus supplement forms
a part. We will make available a copy of the transfer and servicing agreements
to holders of notes upon request. The 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 and the accompanying
prospectus. 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.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Compensation for Servicing the Secured Notes. GMAC will act as servicer of
the secured notes for the trust. As secured note servicer, GMAC will handle all
collections, administer defaults and delinquencies and otherwise service the
secured notes. On each
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<PAGE> 42
distribution date, the trust will pay GMAC, as secured note servicer, the total
servicing fee for servicing the secured notes, which consists of a basic
servicing fee for the previous month and unpaid basic servicing fees from prior
distribution dates. As secured note servicer, GMAC will also receive additional
servicing compensation in the form of investment earnings. The basic monthly
servicing fee rate for servicing the secured notes is one-twelfth of [0.25%] of
the total value of the secured notes as of the first day of the preceding month.
See "The Transfer and Servicing Agreements--Servicing Compensation and Payment
of Expenses--Servicing of Secured Notes" in the prospectus.
Compensation for Servicing the Leases and Leased Vehicles Securing the
Secured Notes. GMAC also acts as servicer of the leases and leased vehicles
securing the secured notes. In that capacity, GMAC will receive a basic
servicing fee and a supplemental servicing fee on each distribution date out of
collections on the lease assets. These amounts are paid by COLT, as owner of the
leases and related leased vehicles, and not from trust assets. The basic
servicing fee paid to the lease servicer is equal to one-twelfth of 1.75% of the
then-stipulated market value of each lease asset. As lease servicer, GMAC also
receives a supplemental servicing fee, which includes investment earnings and
any late fees, prepayment charges and other administrative fees and expenses or
similar charges, and certain other proceeds from lease assets that have
terminated. See "The Transfer and Servicing Agreements--Servicing Compensation
and Payment of Expenses--Servicing of Underlying Leases and Leased Vehicles" in
the prospectus.
DISTRIBUTIONS
On or before each distribution date, the secured note servicer will
transfer all collections on the secured notes for the prior month (and, for the
initial distribution date, [describe]) to the collection account. The indenture
trustee will make distributions to the note distribution account and the
certificate distribution account out of the amounts on deposit in the collection
account. The amounts to be distributed to the note distribution account and the
certificate distribution account will be determined in the manner described
below.
Determination of Total Available Amounts. The "TOTAL AVAILABLE AMOUNT"for a
distribution date will be the sum of the Available Amount and all cash or other
immediately available funds on deposit in the reserve account immediately prior
to that distribution date.
"AVAILABLE AMOUNT" for a distribution date means the sum, for the
prior month (and, for the initial distribution date, [describe]), of:
(1) all collections on the secured notes held by the trust;
(2) all secured note servicer advances; and
(3) payments for each secured note that we repurchased or the
secured note servicer purchased during the prior month.
Monthly Withdrawals and Deposits. On or before the tenth day of each
calendar month, or if that day is not a business day, the next business day, the
secured note servicer will calculate, for the preceding month and the current
distribution date, the Total Available Amount, the Available Amount, the total
servicing fee for the secured note servicer, the Aggregate Noteholders' Interest
Distributable Amount, the Aggregate Noteholders' Principal Distributable Amount,
the Certificateholders' Interest Distributable Amount, the Certificateholders'
Principal Distributable Amount and other items. Based on those calculations, the
secured note servicer will deliver to the indenture trustee a certificate
specifying such amounts
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<PAGE> 43
and instructing the indenture trustee to make withdrawals, deposits and payments
of the following amounts on the distribution date:
[(1) the amount, if any, to be withdrawn from the reserve account and
deposited in the collection account;]
(2) the amount to be withdrawn from the collection account and paid to
the secured note servicer in respect of its total servicing fee
for that distribution date;
(3) the amounts to be withdrawn from the collection account in respect
of the Aggregate Noteholders' Interest Distributable Amount and
the Aggregate Noteholders' Principal Distributable Amount and
deposited in the note distribution account for payment to
noteholders on that distribution date;
(4) the amounts to be withdrawn from the collection account in respect
of the Certificateholders' Interest Distributable Amount and the
Certificateholders' Principal Distributable Amount and deposited
in the certificate distribution account for distribution to
certificateholders on that distribution date;
[(5) the amount, if any, to be withdrawn from the collection account
and deposited in the reserve account; and]
[(6) the amount, if any, to be withdrawn from the reserve account and
paid to us.]
The amount, if any, to be withdrawn from the reserve account and deposited
to the collection account with respect to any distribution date as specified in
clause (1) above will be the lesser of (x) the amount of cash or other
immediately available funds in the reserve account on that distribution date and
(y) the amount, if any, by which (a) the sum of the total servicing fee, the
Aggregate Noteholders' Interest Distributable Amount, the Certificateholders'
Interest Distributable Amount, the Aggregate Noteholders' Principal
Distributable Amount and the Certificateholders' Principal Distributable Amount
for that distribution date exceeds (b) the Available Amount for that
distribution date.
The amount, if any, to be withdrawn from the collection account and
deposited in the reserve account with respect to any distribution date as
specified in clause (5) above will equal the amount, if any, by which (x) the
Available Amount for that distribution date exceeds (y) the amount described in
subclause (a) of clause (y) of the preceding paragraph.
The amount, if any, to be withdrawn from the reserve account and paid to us
as specified in clause (6) above with respect to any distribution date will
equal the amount, if any, by which the amount on deposit in the reserve account
after taking into account all other deposits, including the deposit pursuant to
clause (5) above, if any, and withdrawals on that distribution date exceeds the
required reserve account balance for that distribution date.
On each distribution date, all amounts on deposit in the note distribution
account will be distributed to the noteholders and all amounts on deposit in the
certificate distribution account will be distributed to the certificateholders,
in each case as described in this prospectus supplement.
Priorities for Withdrawals from Collection Account. Withdrawals of funds
from the collection account on a distribution date for application as described
in clauses (2), (3) and (4) under "--Distributions--Monthly Withdrawals and
Deposits" above will be made only to the extent of the Total Available Amount
allocated to such application for that distribution date. In calculating the
amounts which can be withdrawn from the collection account and
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applied as specified in clauses (2), (3) and (4), the secured note servicer will
allocate the Total Available Amount in the following order of priority:
(1) the total servicing fee and prior secured note servicer advances;
(2) any overdue interest on the notes and then the Aggregate
Noteholders' Interest Distributable Amount for such distribution
date;
(3) any overdue interest on the certificates and then the
Certificateholders' Interest Distributable Amount for such
distribution date;
(4) the Aggregate Noteholders' Principal Distributable Amount; and
(5) the Certificateholders' Principal Distributable Amount.
At any time that all classes of notes have not been paid in full and the
principal balance of the notes has been declared due and payable following the
occurrence of an event of default under the indenture [resulting from a payment
default], until such time as the notes have been paid in full or the declaration
has been rescinded and any continuing events of default resulting from a payment
default have been cured or waived pursuant to the indenture, no amounts will be
deposited in or distributed to the certificate distribution account. Any amounts
otherwise distributable to the certificate distribution account will be
deposited instead into the note distribution account for payments on the notes
as described in this prospectus supplement.
TERMINATION OF THE TRUST
After payment in full of the notes and payment of all liabilities of the
trust in accordance with applicable law, any remaining assets in the trust and
any remaining amount in the reserve account will be distributed to us.
ERISA CONSIDERATIONS
THE NOTES
Although there is little guidance on the subject, we believe that, at the
time of their issuance, the notes would be treated as indebtedness without
substantial equity features for purposes of the Plan Assets Regulation. The debt
treatment of the notes could change, after their issuance, if the issuer
incurred losses. However, without regard to whether notes are treated as an
equity interest for such purposes, the acquisition or holding of notes by or on
behalf of a benefit plan could be considered to give rise to a prohibited
transaction if we, the trust or any of our respective affiliates are, is or
becomes a "party in interest" or a disqualified person with respect to that
benefit plan. Certain exemptions from the prohibited transaction rules could be
applicable to the purchase and holding of the notes by a benefit plan depending
on the type and circumstances of the plan fiduciary making the decision to
acquire the notes. Included among these exemptions are: Prohibited Transaction
Class Exemption 96-23, regarding transactions affected by in-house asset
managers; PTCE 95-60, regarding investments by insurance company general
accounts; PTCE 90-1, regarding investments by insurance company pooled separate
accounts; PTCE 91-38, regarding investments by bank collective investment funds;
and PTCE 84-14, regarding transactions effected by "qualified professional asset
managers." For additional information regarding treatment of the notes under
ERISA, see "ERISA Considerations" in the prospectus.
[THE CERTIFICATES
The certificates may not be acquired by (a) an employee benefit plan, as
defined in Section 3(3) of ERISA, that is subject to the provisions of Title I
of ERISA, (b) a plan described in Section 4975(e) (1) of the Code or (c) any
entity whose underlying assets
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include plan assets by reason of a plan's investment in the entity. By its
acceptance of a certificate, each certificateholder will be deemed to have
represented and warranted that it is not subject to the foregoing limitation.
For additional information regarding treatment of the certificates under ERISA,
see "ERISA Considerations" in the prospectus.]
FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Mayer, Brown & Platt, our special tax counsel, for U.S.
federal income tax purposes, the notes will constitute indebtedness. Each
noteholder, by the acceptance of a note, will agree to treat the notes as
indebtedness for federal, state and local income and franchise tax purposes.
[All the certificates issued on the closing date will be issued to us.
Accordingly, the trust will be characterized as a tax non-entity and hence a
division of us for federal income tax purposes. See "Federal Income Tax
Considerations--Tax Non-Entity Certificates" in the prospectus.] If we sell less
than all of the certificates or if the trust issues additional certificates,
this characterization may change.]
[In the opinion of Mayer, Brown & Platt, the trust will not be taxable as
an association or publicly traded partnership taxable as a corporation, but
should be classified as a grantor trust for federal income tax purposes. If the
Internal Revenue Service were to contend successfully that the trust is not a
grantor trust, the trust should be classified for federal income tax purposes as
a partnership which is not taxable as a corporation. Each certificateholder, by
the acceptance of a trust certificate, will agree to treat the trust
certificates as equity interests in the trust for federal, state and local
income and franchise tax purposes. Certificateholders generally must report
their respective allocable shares of all income earned on the secured notes and,
subject to certain limitations on individuals, estates and trusts, may deduct
their respective allocable shares of interest paid on the notes and reasonable
servicing and other fees.]
See "Federal Income Tax Considerations" and "State and Local Tax
Consequences" in the prospectus.
PLAN OF DISTRIBUTION
Under the terms and conditions set forth in the underwriting agreement, the
issuer has agreed to sell to each of the underwriters named below, and each of
the underwriters has severally agreed to purchase from the issuer, the principal
amount of notes set forth opposite its name below:
AGGREGATE PRINCIPAL AMOUNT OF NOTES TO BE PURCHASED
<TABLE>
<CAPTION>
UNDERWRITER CLASS A-1 NOTES CLASS A-2 NOTES CLASS A-3 NOTES
----------- --------------- --------------- ---------------
<S> <C> <C> <C>
Total......................... $ $ $
======= ======= =======
</TABLE>
We have been advised by the underwriters that the several underwriters
propose initially to offer the notes to the public at the prices set forth on
the cover page of this prospectus supplement, and to certain dealers at these
prices less a selling concession not in excess of the percentage set forth below
for each class of notes. The underwriters may allow, and such dealers may
reallow to certain other dealers, a subsequent concession not in excess of the
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percentage set forth below for each class of notes. After the initial public
offering, the public offering price and such concessions may be changed.
<TABLE>
<CAPTION>
SELLING
CONCESSION REALLOWANCE
---------- -----------
<S> <C> <C>
Class A-1 Notes......................................... % %
Class A-2 Notes......................................... % %
Class A-3 Notes......................................... % %
</TABLE>
The underwriters may engage in over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids with respect to
the notes in accordance with Regulation M under the Securities Exchange Act of
1934. Over-allotment transactions involve syndicate sales in excess of the
offering size, which creates a syndicate short position. Stabilizing
transactions permit bids to purchase the notes so long as the stabilizing bids
do not exceed a specified maximum. Syndicate covering transactions involve
purchases of the notes in the open market after the distribution has been
completed in order to cover syndicate short positions. Penalty bids permit the
underwriters to reclaim a selling concession from a syndicate member when the
notes originally sold by such syndicate member are purchased in a syndicate
covering transaction. Such over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids may cause the
prices of the notes to be higher than they would otherwise be in the absence of
such transactions. Neither the issuer nor any of the underwriters represent that
the underwriters will engage in any such transactions or that such transactions,
once commenced, will not be discontinued without notice at any time.
We will receive proceeds of approximately $ from the sale of the
notes (representing % of the principal amount of each note) after paying
the underwriting discount of $ (representing % of the principal
amount of each note). Additional offering expenses are estimated to be
$ .
LEGAL OPINIONS
In addition to the legal opinions described in the prospectus, certain
legal matters relating to the notes and certificates will be passed upon for the
underwriters by Brown & Wood LLP. Brown & Wood LLP has from time to time
represented, and is currently representing, General Motors Corporation and
certain of its affiliates in matters not related to the offering of the
securities.
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GLOSSARY
The following are definitions of terms used in this prospectus supplement:
"AGGREGATE NOTEHOLDERS' INTEREST DISTRIBUTABLE AMOUNT" means, with respect
to any distribution date, the sum of the Noteholders' Interest Distributable
Amounts for all classes of notes for that distribution date.
"AGGREGATE NOTEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect
to any distribution date, the sum of the Noteholders' Principal Distributable
Amounts for all classes of notes for that distribution date.
"AGGREGATE SECURED NOTE VALUE" means, as of any date, the sum of the
Secured Note Values for all the secured notes in the pool of secured notes held
by the trust.
"CERTIFICATE BALANCE" means, initially, $ and, on each
distribution date, will equal the initial Certificate Balance, reduced by all
distributions in respect of the Certificate Balance actually made on or prior to
that date to certificateholders.
"CERTIFICATEHOLDERS' INTEREST DISTRIBUTABLE AMOUNT" means, with respect to
any distribution date, interest equal to one-twelfth of the pass through rate on
the certificates multiplied by the certificate balance as of the close of the
preceding distribution date (or, in the case of the first distribution date,
interest at the pass through rate multiplied by a fraction, the numerator of
which is and the denominator of which is 360 multiplied by the
initial certificate balance).
"CERTIFICATEHOLDERS' PERCENTAGE" means, with respect to any distribution
date, 100% minus the Noteholders' Percentage.
"CERTIFICATEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to
any distribution date, the lesser of (1) the Certificateholders' Percentage of
the Principal Distributable Amount and (2) the Certificate Balance. In addition,
on the distribution date, the amount required to be distributed
to certificateholders in respect of the Certificate Balance will include the
amount that is necessary, after giving effect to the other amounts to be
deposited in the certificate distribution account on the distribution date and
allocable to payments in respect of the Certificate Balance, to reduce the
Certificate Balance to zero, after giving effect to any required distribution of
the Aggregate Noteholders' Principal Distributable Amount to the note
distribution account. In addition, on any distribution date on which, after
giving effect to all distributions to the secured note servicer (other than
additional servicing), the noteholders and the certificateholders on the
distribution date, (1) the outstanding principal balance of the notes is zero
and (2) the amount on deposit in the reserve account is equal to or greater than
the Certificate Balance, the Certificateholders' Principal Distributable Amount
will include an amount equal to that Certificate Balance.
"DISCOUNT RATE" means the sum of the highest rate of interest on any series
of notes [or class of certificates] issued under this prospectus supplement,
plus 0.25%.
"MONTHLY SCHEDULED INSTALLMENT" means, with respect to each secured note,
as of any date of determination, any of the remaining monthly installment of
principal and interest or interest alone payable to the holder of the secured
note from the date of determination to the Stated Maturity as set forth in the
payment schedule on the secured note.
"NOTEHOLDERS' INTEREST DISTRIBUTABLE AMOUNT" means, with respect to any
class of notes and any distribution date, the product of (1) the outstanding
principal balance of such class of notes as of the close of the preceding
distribution date [(or, in the case of the first distribution date, the
outstanding principal balance on the closing date)] and (2) one-twelfth of the
interest rate for that class (or, in the case of the first distribution date,
the interest rate for
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such class multiplied by a fraction, the numerator of which is
and the denominator of which is 360).
"NOTEHOLDERS' PERCENTAGE" means 100% until the principal balance of the
notes is paid in full, and zero after payment of the principal balance of the
notes.
"NOTEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to a
class of notes on a distribution date, the lesser of (1) the remainder of (A)
the Noteholders' Percentage of the Principal Distributable Amount minus (B) the
outstanding principal balance for each class of notes having priority of payment
over that class of notes as described above under "The Notes -- Payments of
Principal" and (2) the outstanding principal balance of that class of notes as
of the close of the preceding distribution date. In addition, on the final
scheduled distribution date for any class of notes, the Noteholders' Principal
Distributable Amount for that class of notes will also include the amount that
is necessary, after giving effect to the other amounts to be deposited in the
note distribution account on the distribution date and allocable to payments of
principal, to reduce the outstanding principal balance of that class of notes to
zero.
"PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any distribution
date, an amount equal to the difference between (a) the sum of the Secured Note
Values for all of the secured notes as of the close of business on the previous
distribution date (or, with respect to the initial distribution date, the
closing date) and (b) the sum of the Secured Note Values for all of the secured
notes as of that distribution date.
"SECURED NOTE VALUE" means, with respect to each secured note, as of the
cutoff date of , and each distribution date, the lesser
of (a) the principal balance of the secured note and (b) the sum of the present
value of each Monthly Scheduled Installment of the secured note due thereafter,
discounted from the distribution date on which each Monthly Scheduled
Installment is due and payable to the date of determination, at a rate equal to
the Discount Rate (after giving effect to all payments due on the secured note
on that date).
"STATED MATURITY" means the date specified in the secured note as the fixed
date on which the principal of, and interest on, the secured note is due and
payable.
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NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE SELLER,
THE SERVICER OR THE UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
DO NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE
SECURITIES OFFERED HEREBY TO ANYONE IN ANY JURISDICTION IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM
IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT INFORMATION IN THOSE
DOCUMENTS IS CORRECT AS OF ANY TIME SINCE THE DATE OF THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS.
------------------
UNTIL , , ALL DEALERS EFFECTING TRANSACTIONS IN THESE
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS SUPPLEMENT AND THE PROSPECTUS TO WHICH IT RELATES. THIS
DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
CAPITAL AUTO RECEIVABLES
ASSET TRUST - SN[1]
$
ASSET BACKED NOTES
[$
ASSET BACKED CERTIFICATES]
CAPITAL AUTO RECEIVABLES, INC.
SELLER
GENERAL MOTORS
ACCEPTANCE CORPORATION
SERVICER
------------------------------------
PROSPECTUS SUPPLEMENT
------------------------------------
UNDERWRITERS
