<PAGE> 1
Filed Pursuant to Rule 424B(5)
Registration No. 333-06039
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED FEBRUARY 24, 1999
CAPITAL AUTO RECEIVABLES ASSET TRUST 1999-1
$1,138,000,000 Asset Backed Notes
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 CERTIFICATES
(1) A-2 NOTES A-3 NOTES (1)
<S> <C> <C> <C> <C>
--------------------------------------------------------------------------------------
Principal Amount $1,352,200,000 $735,000,000 $403,000,000 $137,981,417.23
--------------------------------------------------------------------------------------
Interest Rate 5.364% 5.580% 5.680% 6.090%
--------------------------------------------------------------------------------------
Final Scheduled
Distribution Date May 2001 June 2002 August 2004 August 2004
--------------------------------------------------------------------------------------
Price to Public N/A 99.9823% 99.9936% N/A
--------------------------------------------------------------------------------------
Underwriting
Discount N/A 0.1750% 0.2500% N/A
--------------------------------------------------------------------------------------
Proceeds to Seller N/A 733,583,655 401,966,708 N/A
--------------------------------------------------------------------------------------
</TABLE>
(1) Not being offered hereby.
CREDIT ENHANCEMENT
- Reserve Account, with an initial deposit of
$19,711,360.63.
- The Certificates are subordinated to the Notes.
This prospectus supplement and the accompanying prospectus relate only to the
offering of the Class A-2 and the Class A-3 Notes. The Class A-1 Notes and the
Certificates 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
CREDIT SUISSE FIRST BOSTON MERRILL LYNCH & CO.
Co-Managers
BEAR, STEARNS & CO. INC.
J. P. MORGAN & CO.
LEHMAN BROTHERS
MORGAN STANLEY DEAN WITTER
SALOMON SMITH BARNEY
February 24, 1999
YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-6 IN THIS
PROSPECTUS SUPPLEMENT AND PAGE 3 IN THE PROSPECTUS.
The Notes represent obligations of the Trust only and 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 only if
accompanied by the prospectus.
<PAGE> 2
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We provide information to you about the Notes in two separate documents:
(a) the prospectus, which provides general information and terms of
the Notes, some of which may not apply to a particular series of Notes,
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.
IF THE TERMS OF YOUR SERIES OF NOTES 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 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 a listing of the pages where capitalized terms used in the
prospectus and this prospectus supplement are defined under the caption "Index
of Terms" which appears at the end of the prospectus.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
SUMMARY CHARTS.............................................. S-1
SUMMARY..................................................... S-3
RISK FACTORS................................................ S-6
THE TRUST................................................... S-7
THE RECEIVABLES POOL........................................ S-7
WEIGHTED AVERAGE LIFE OF THE SECURITIES..................... S-9
THE SERVICER................................................ S-13
THE NOTES................................................... S-14
THE CERTIFICATES............................................ S-15
THE TRANSFER AND SERVICING AGREEMENTS....................... S-16
ERISA CONSIDERATIONS........................................ S-22
CERTAIN FEDERAL INCOME TAX CONSEQUENCES..................... S-23
UNDERWRITING................................................ S-23
LEGAL OPINIONS.............................................. S-24
PROSPECTUS
RISK FACTORS................................................ 3
THE TRUSTS.................................................. 7
THE RECEIVABLES POOLS....................................... 8
WEIGHTED AVERAGE LIFE OF THE SECURITIES..................... 10
POOL FACTORS AND TRADING INFORMATION........................ 10
USE OF PROCEEDS............................................. 11
THE SELLER.................................................. 11
THE SERVICER................................................ 12
THE NOTES................................................... 12
THE CERTIFICATES............................................ 18
CERTAIN INFORMATION REGARDING THE SECURITIES................ 20
THE TRANSFER AND SERVICING AGREEMENTS....................... 25
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES.................... 39
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS................... 44
STATE AND LOCAL TAX CONSEQUENCES............................ 56
ERISA CONSIDERATIONS........................................ 56
PLAN OF DISTRIBUTION........................................ 57
LEGAL OPINIONS.............................................. 58
WHERE YOU CAN FIND MORE INFORMATION......................... 58
INCORPORATION BY REFERENCE.................................. 58
INDEX OF TERMS.............................................. -i-
</TABLE>
<PAGE> 4
SUMMARY OF TRANSACTIONS PARTIES [FLOW CHART]
S-1
<PAGE> 5
SUMMARY OF MONTHLY DEPOSITS TO AND WITHDRAWALS FROM ACCOUNTS* [FLOW CHART]
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
Notes, carefully read this entire document and the accompanying
prospectus.
THE PARTIES
Issuer
Capital Auto Receivables Asset Trust 1999-1, a Delaware business trust formed by
the Seller, will issue three classes of 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
GMAC, a wholly-owned subsidiary of General Motors Corporation, will be the
Servicer for the Trust.
Indenture Trustee
The First National Bank of Chicago.
Owner Trustee
Bankers Trust (Delaware).
THE NOTES
The Trust will issue the following classes of Notes:
<TABLE>
<CAPTION>
- ---------
AGGREGATE PRINCIPAL INTEREST
CLASS AMOUNT RATE
- -------------------------------------------------
<S> <C> <C>
A-1 $1,352,200,000 5.364%
- -------------------------------------------------
A-2 $735,000,000 5.580%
- -------------------------------------------------
A-3 $403,000,000 5.680%
- ---------
</TABLE>
The Class A-1 Notes will be sold in a private placement and are not offered
hereby. Only the Class A-2 Notes and the Class A-3 Notes are offered hereby.
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 April 15, 1999.
- - The prospectus and this prospectus supplement describe how the available funds
are allocated to interest payments.
- - The Trust will pay interest on the 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.
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 receivables 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.
S-3
<PAGE> 7
- - Notwithstanding the above, on each distribution date after an event of default
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. 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
repurchase all of the remaining receivables. If the Servicer repurchases the
receivables, the outstanding Class A-3 Notes will be redeemed at a price equal
to their remaining principal balance plus accrued and unpaid interest.
THE CERTIFICATES
The Trust will issue 6.090% asset backed Certificates with an aggregate initial
Certificate balance of $137,981,417.23. Payments with respect to the
Certificates will be made as described herein and are subordinated to payments
on the Notes as described herein. The Certificates will initially be held by the
Seller.
THE TRUST PROPERTY
The primary assets of the Trust will be a pool of fixed rate retail instalment
sales contracts used to finance the purchase of new cars and light trucks. We
refer to these contracts as "RECEIVABLES" and to the persons who financed their
purchases with these contracts as "OBLIGORS." Substantially all of the
receivables comprising the Trust property were acquired by GMAC under special
incentive rate financing programs designed to encourage purchases of new General
Motors vehicles. 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
certain exceptions described in the prospectus:
- - Monies received under the receivables on or after a cut-off date of February
1, 1999;
- - 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;
- - 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.
PRIORITY OF DISTRIBUTIONS
- - The Trust will distribute available funds in the following order of priority:
(1) servicing fee payments to the
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.
S-4
<PAGE> 8
RESERVE ACCOUNT
- - On the closing date, the Seller will deposit $19,711,360.63 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. 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 fee and to make
required distributions on the Notes and the Certificates, the Trust will
withdraw cash from the reserve account for such 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 the excess to the Seller.
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 retain any
late fees, prepayment charges and other administrative 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 to the
extent described in the prospectus.
TAX STATUS
In the opinion of Kirkland & Ellis, special tax counsel, 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.
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.
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-2 Notes and the Class A-3 Notes. An employee
benefit plan should consult with its counsel before purchasing the Notes. See
"ERISA Considerations" in the prospectus and this prospectus supplement.
RATINGS
- - We will not issue the Class A-2 Notes or the Class A-3 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 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. The rating considers only
the likelihood that the Trust will pay interest on time and will ultimately
pay principal. The rating does not consider either the Notes' price, their
suitability to a particular investor or the timing of principal payments.
S-5
<PAGE> 9
RISK FACTORS
In addition to the risk factors on page 3 of the prospectus, you should
consider the following risk factors in deciding whether to purchase the Notes.
RISK OF DELAYED PRINCIPAL
PAYMENT ON NOTES The Trust plans to pay principal on the Notes
monthly with the remaining principal balance due
on each Note on its applicable final scheduled
distribution date.
The Trust will pay principal only to the extent
that funds are available from collections on the
receivables and from the reserve account. If the
funds available from collections on the
receivables and from the reserve account 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.
YEAR 2000 PROBLEM MAY AFFECT
COLLECTIONS AND DISTRIBUTIONS
OF RECEIPTS ON THE
RECEIVABLES 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
cause a system to fail.
We have been advised by each of the Servicer and
the Indenture Trustee to the extent applicable
to its services under the agreements it is a
party to, that they are committed either to (1)
implement modifications to their respective
existing systems to the extent required to cause
them to be year 2000 ready or (2) acquire
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 Servicer, or the
Indenture Trustee. In the event that computer
problems arise out of a failure of such efforts
to be completed on time, or in the event that
the computer systems of the Servicer, or the
Indenture Trustee are not fully year 2000 ready,
the resulting disruptions in the collection or
distribution of receipts on the receivables
could materially and adversely affect your
investment.
S-6
<PAGE> 10
THE TRUST
The Issuer, Capital Auto Receivables Asset Trust 1999-1, 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 March
11, 1999 (the "CLOSING DATE").
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
Bankers Trust (Delaware), 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 Notes and Certificates had taken place on
such date:
<TABLE>
<S> <C>
Class A-1 5.364% Asset Backed Notes............ $1,352,200,000.00
Class A-2 5.580% Asset Backed Notes............ 735,000,000.00
Class A-3 5.680% Asset Backed Notes............ 403,000,000.00
Certificates................................... 137,981,417.23
-----------------
Total........................................ $2,628,181,417.23
=================
</TABLE>
The Certificates represent the equity of the Trust and will be issued under
the Trust Agreement. The Certificates will initially be held by the Seller and
are not being offered hereby.
THE OWNER TRUSTEE
Bankers Trust (Delaware) is the Owner Trustee under the Trust Agreement
(the "OWNER TRUSTEE"). Bankers Trust (Delaware) is a Delaware banking
corporation and a wholly-owned subsidiary of Bankers Trust Company, a New York
corporation. Its principal offices are located at 1011 Centre Rd., Suite 200,
Wilmington, Delaware 19805.
THE RECEIVABLES POOL
The Receivables to be included in the Receivables Pool related to the Notes
were selected from GMAC's portfolio based on several criteria, including that
each such Receivable:
- has a first payment due date on or after January 1, 1997;
- was originated on or after December 1, 1996;
- has an original term of 24 to 60 months;
S-7
<PAGE> 11
- provides for finance charges at an annual percentage rate with the range
specified in the second table below;
- as of February 1, 1999 (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."
All of the Receivables are Simple Interest Receivables and were secured by
new vehicles at the time of origination. Substantially all of the Receivables
comprising the Trust property were acquired by GMAC under special incentive rate
financing programs designed to encourage purchases of new General Motors
vehicles.
The following tables describe the Receivables Pool:
COMPOSITION OF THE RECEIVABLES POOL
<TABLE>
<S> <C>
Weighted Average Annual Percentage Rate of
Receivables(1)................................ 4.25%
Aggregate Amount Financed....................... $2,809,779,024.75
Number of Contracts in Pool..................... 191,498
Average Amount Financed......................... $14,672.63
Weighted Average Original Maturity.............. 53.94 months
Weighted Average Remaining Maturity (Range)..... 44.07 months (24 to 60 months)
</TABLE>
- -------------------------
(1) Based on weighting by current balance and remaining term of each Receivable.
DISTRIBUTION BY ANNUAL PERCENTAGE RATE OF THE RECEIVABLES POOL
<TABLE>
<CAPTION>
PERCENTAGE OF
ANNUAL PERCENTAGE NUMBER OF AGGREGATE AMOUNT
RATE RANGE CONTRACTS AMOUNT FINANCED FINANCED
----------------- --------- --------------- ----------------
<S> <C> <C> <C>
0.01% - 1.00%........................ 10,944 178,023,375 6.34%
1.01% - 2.00%........................ 18,952 253,307,090 9.01%
2.01% - 3.00%........................ 20,728 269,176,427 9.58%
3.01% - 4.00%........................ 76,362 1,067,747,619 38.00%
4.01% - 5.00%........................ 25,867 432,371,412 15.39%
5.01% - 6.00%........................ 32,605 511,761,754 18.21%
6.01% - 6.90%........................ 6,040 97,391,348 3.47%
------- -------------- -------
Total........................... 191,498 $2,809,779,025 100.00%
======= ============== =======
</TABLE>
The Receivables Pool includes Receivables originated in 46 states and the
District of Columbia. The following table sets forth the percentage of the
Aggregate Amount Financed
S-8
<PAGE> 12
in the states with the largest concentration of Receivables. No other state
accounts for more than 5.0% of the Aggregate Amount Financed.
<TABLE>
<CAPTION>
PERCENTAGE OF
AGGREGATE
STATE(1) AMOUNT FINANCED
-------- ---------------
<S> <C>
Texas............................................ 16.09%
Michigan......................................... 12.41%
Florida.......................................... 7.68%
Missouri......................................... 5.72%
Indiana.......................................... 5.34%
Wisconsin........................................ 5.32%
</TABLE>
- ------------
(1) Based on billing addresses of the obligors on the Receivables.
WEIGHTED AVERAGE LIFE OF THE SECURITIES
Additional information regarding the Notes can be found under "Weighted
Average Life of the Securities" in the Prospectus.
Prepayments on automotive receivables can be measured relative to a
prepayment standard or model. The model used in this Prospectus Supplement, the
Absolute Prepayment Model ("ABS"), represents an assumed rate of prepayment each
month relative to the original number of receivables in a pool of receivables.
ABS further assumes that all the receivables are the same size and amortize at
the same rate and that each receivable in each month of its life will either be
paid as scheduled or be prepaid in full. For example, in a pool of receivables
originally containing 10,000 receivables, a 1% ABS rate means that 100
receivables prepay each month. ABS does not purport to be a historical
description of prepayment experience or a prediction of the anticipated rate of
prepayment of any pool of receivables, including the Receivables.
As the rate of payment of principal of each class of Notes will depend on
the rate of payment (including prepayments) of the principal balance of the
Receivables, final payment of classes of Notes could occur significantly earlier
than the Final Scheduled Distribution Date for such Notes. Reinvestment risk
associated with early payment of the Notes will be borne exclusively by the
Noteholders.
The tables on pages S-11 and S-12 have been prepared on the basis of the
characteristics of the Receivables. The tables assume that:
(1) the Receivables prepay in full at the specified constant
percentage of ABS monthly, with no defaults, losses or repurchases,
(2) each scheduled monthly payment on the Receivables is made on the
last day of each month and each month has 30 days,
(3) payments on the Notes and distributions on the Certificates are
made on each Distribution Date (and each such date is assumed to be the
15th day of each applicable month),
(4) the balance in the Reserve Account on each Distribution Date is
equal to the Specified Reserve Account Balance,
S-9
<PAGE> 13
(5) the Servicer does not exercise its option to purchase the
Receivables,
(6) the Closing Date occurs on March 11, 1999 and
(7) the aggregated discounted present value of the nine hypothetical
pools as described below is adjusted to equal $2,628,181,417.23. The table
indicates the projected weighted average life of the Class A-2 Notes and
the Class A-3 Notes and sets forth the percent of the initial principal
amount of the Class A-2 and Class A-3 Notes that is projected to be
outstanding after each of the Distribution Dates shown at various constant
ABS percentages.
The tables also assume that the Receivables have been aggregated into nine
hypothetical pools with all of the Receivables within each such pool having the
following characteristics and that the level scheduled monthly payment for each
of the nine pools (which is based on its Aggregate Amount Financed, Weighted
Average APR, Weighted Average Original Term to Maturity and Weighted Average
Remaining Term to Maturity as of the Cutoff Date) will be such that each pool
will be fully amortized by the end of its remaining term to maturity.
<TABLE>
<CAPTION>
WEIGHTED AVERAGE WEIGHTED AVERAGE
WEIGHTED ORIGINAL TERM REMAINING TERM
AGGREGATE AMOUNT AVERAGE TO MATURITY TO MATURITY
POOL FINANCED APR (IN MONTHS) (IN MONTHS)
- ---- ---------------- -------- ---------------- ----------------
<S> <C> <C> <C> <C>
1 103,881,450.43 1.498% 36 34
2 118,324,532.47 1.447% 36 31
3 411,973,273.93 2.753% 42 29
4 88,675,112.82 2.963% 44 43
5 62,799,786.29 3.632% 48 43
6 906,762,022.54 4.347% 58 42
7 283,913,391.98 4.787% 59 58
8 259,340,211.97 4.808% 60 55
9 574,109,242.32 5.042% 60 51
</TABLE>
The actual characteristics and performance of the Receivables will differ
from the assumptions used in constructing the tables on pages S-11 and S-12. The
assumptions used are hypothetical and have been provided only to give a general
sense of how the principal cash flows might behave under varying prepayment
scenarios. For example, it is very unlikely that the Receivables will prepay at
a constant level of ABS until maturity or that all of the Receivables will
prepay at the same level of ABS. Moreover, the diverse terms of Receivables
within each of the nine hypothetical pools could produce slower or faster
principal distributions than indicated in the tables at the various constant
percentages of ABS specified, even if the original and remaining terms to
maturity of the Receivables are as assumed. Any difference between such
assumptions and the actual characteristics and performance of the Receivables,
or actual prepayment experience, will affect the percentages of initial balances
outstanding over time and the weighted average lives of the Notes.
S-10
<PAGE> 14
PERCENT OF INITIAL NOTE PRINCIPAL BALANCE AT VARIOUS ABS PERCENTAGES
<TABLE>
<CAPTION>
CLASS A-2 NOTES
--------------------------------------------------
DISTRIBUTION DATE 0.00% 0.50% 0.75% 1.00% 1.25% 1.50%
----------------- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Closing Date................................. 100 100 100 100 100 100
April 15, 1999............................... 100 100 100 100 100 100
May 15, 1999................................. 100 100 100 100 100 100
June 15, 1999................................ 100 100 100 100 100 100
July 15, 1999................................ 100 100 100 100 100 100
August 15, 1999.............................. 100 100 100 100 100 100
September 15, 1999........................... 100 100 100 100 100 100
October 15, 1999............................. 100 100 100 100 100 100
November 15, 1999............................ 100 100 100 100 100 100
December 15, 1999............................ 100 100 100 100 100 100
January 15, 2000............................. 100 100 100 100 100 100
February 15, 2000............................ 100 100 100 100 100 100
March 15, 2000............................... 100 100 100 100 100 100
April 15, 2000............................... 100 100 100 100 100 100
May 15, 2000................................. 100 100 100 100 100 100
June 15, 2000................................ 100 100 100 100 100 93
July 15, 2000................................ 100 100 100 100 96 83
August 15, 2000.............................. 100 100 100 99 87 74
September 15, 2000........................... 100 100 100 90 78 64
October 15, 2000............................. 100 100 93 81 69 55
November 15, 2000............................ 100 96 85 73 60 46
December 15, 2000............................ 100 88 76 64 51 38
January 15, 2001............................. 100 79 68 56 43 30
February 15, 2001............................ 91 71 59 48 35 22
March 15, 2001............................... 83 62 51 39 27 14
April 15, 2001............................... 74 54 43 32 19 7
May 15, 2001................................. 65 45 35 24 12 0
June 15, 2001................................ 56 37 27 16 5 0
July 15, 2001................................ 47 29 19 9 0 0
August 15, 2001.............................. 40 22 13 3 0 0
September 15, 2001........................... 33 16 7 0 0 0
October 15, 2001............................. 27 10 1 0 0 0
November 15, 2001............................ 20 4 0 0 0 0
December 15, 2001............................ 13 0 0 0 0 0
January 15, 2002............................. 7 0 0 0 0 0
February 15, 2002............................ 1 0 0 0 0 0
March 15, 2002............................... 0 0 0 0 0 0
April 15, 2002............................... 0 0 0 0 0 0
May 15, 2002................................. 0 0 0 0 0 0
June 15, 2002................................ 0 0 0 0 0 0
Weighted Average Life (years)(1)............. 2.39 2.19 2.07 1.96 1.83 1.70
</TABLE>
- -------------------------
(1) The weighted average life of a Note is determined by (a) multiplying the
amount of each principal payment on a Note by the number of years from the date
of the issuance of the Note to the related Distribution Date, (b) adding the
results, and (c) dividing the sum by the related initial principal amount of the
Note.
This table has been prepared based on the assumptions described on pages S-9 and
S-10 (including the assumptions regarding the characteristics and performance of
the Receivables which will differ from the actual characteristics and
performance thereof) and should be read in conjunction therewith.
S-11
<PAGE> 15
PERCENT OF INITIAL NOTE PRINCIPAL BALANCE AT VARIOUS ABS PERCENTAGES
<TABLE>
<CAPTION>
CLASS A-3 NOTES
--------------------------------------------------
DISTRIBUTION DATE 0.00% 0.50% 0.75% 1.00% 1.25% 1.50%
- --------------------------------------------- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Closing Date................................. 100 100 100 100 100 100
April 15, 1999............................... 100 100 100 100 100 100
May 15, 1999................................. 100 100 100 100 100 100
June 15, 1999................................ 100 100 100 100 100 100
July 15, 1999................................ 100 100 100 100 100 100
August 15, 1999.............................. 100 100 100 100 100 100
September 15, 1999........................... 100 100 100 100 100 100
October 15, 1999............................. 100 100 100 100 100 100
November 15, 1999............................ 100 100 100 100 100 100
December 15, 1999............................ 100 100 100 100 100 100
January 15, 2000............................. 100 100 100 100 100 100
February 15, 2000............................ 100 100 100 100 100 100
March 15, 2000............................... 100 100 100 100 100 100
April 15, 2000............................... 100 100 100 100 100 100
May 15, 2000................................. 100 100 100 100 100 100
June 15, 2000................................ 100 100 100 100 100 100
July 15, 2000................................ 100 100 100 100 100 100
August 15, 2000.............................. 100 100 100 100 100 100
September 15, 2000........................... 100 100 100 100 100 100
October 15, 2000............................. 100 100 100 100 100 100
November 15, 2000............................ 100 100 100 100 100 100
December 15, 2000............................ 100 100 100 100 100 100
January 15, 2001............................. 100 100 100 100 100 100
February 15, 2001............................ 100 100 100 100 100 100
March 15, 2001............................... 100 100 100 100 100 100
April 15, 2001............................... 100 100 100 100 100 100
May 15, 2001................................. 100 100 100 100 100 99
June 15, 2001................................ 100 100 100 100 100 86
July 15, 2001................................ 100 100 100 100 96 74
August 15, 2001.............................. 100 100 100 100 85 65
September 15, 2001........................... 100 100 100 94 75 55
October 15, 2001............................. 100 100 100 84 66 47
November 15, 2001............................ 100 100 91 75 57 39
December 15, 2001............................ 100 96 81 65 48 31
January 15, 2002............................. 100 86 72 57 41 24
February 15, 2002............................ 100 76 62 48 33 17
March 15, 2002............................... 90 66 53 40 26 11
April 15, 2002............................... 78 56 44 32 19 5
May 15, 2002................................. 66 46 35 24 12 0
June 15, 2002................................ 55 36 26 16 6 0
July 15, 2002................................ 43 26 18 9 0 0
August 15, 2002.............................. 31 17 9 2 0 0
September 15 , 2002.......................... 24 11 5 0 0 0
October 15, 2002............................. 19 7 1 0 0 0
November 15, 2002............................ 14 3 0 0 0 0
December 15, 2002............................ 8 0 0 0 0 0
January 15, 2003............................. 3 0 0 0 0 0
February 15, 2003............................ 0 0 0 0 0 0
March 15, 2003............................... 0 0 0 0 0 0
April 15, 2003............................... 0 0 0 0 0 0
May 15, 2003................................. 0 0 0 0 0 0
June 15, 2003................................ 0 0 0 0 0 0
July 15, 2003................................ 0 0 0 0 0 0
August 15, 2003.............................. 0 0 0 0 0 0
Weighted Average Life (years)(1)............. 3.37 3.20 3.09 2.97 2.81 2.64
</TABLE>
- -------------------------
(1) The weighted average life of a Note is determined by (a) multiplying the
amount of each principal payment on a Note by the number of years from the date
of the issuance of the Note to the related Distribution Date, (b) adding the
results, and (c) dividing the sum by the related initial principal amount of the
Note.
This table has been prepared based on the assumptions described on pages S-9 and
S-10 (including the assumptions regarding the characteristics and performance of
the Receivables which will differ from the actual characteristics and
performance thereof) and should be read in conjunction therewith.
S-12
<PAGE> 16
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>
NINE MONTHS
ENDED
SEPTEMBER 30 YEAR ENDED DECEMBER 31
------------------- --------------------------------
NEW AND USED 1998 1997 1997 1996 1995 1994
VEHICLE CONTRACTS ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Total Retail Contracts
Outstanding at End of the
Period (in thousands)........ 3,018 2,890 2,861 3,005 3,518 3,892
Average Daily Delinquency 31-60
Days......................... 2.66% 3.32% 3.24% 3.14% 2.75% 2.32%
61-90 Days................... 0.18 0.24 0.23 0.22 0.19 0.12
91 Days or More.............. 0.02 0.02 0.03 0.03 0.02 0.02
Percent of Portfolio with
Recourse to Dealers at End of
the Period................... 0.3% 0.6% 0.5% 0.9% 1.4% NA(3)
Repossessions as a Percent of
Average Number of Contracts
Outstanding.................. 2.48%(1) 3.27%(1) 3.21% 3.59% 3.07% 2.31%
Net Losses as a Percent of
Liquidations(2).............. 1.76% 2.56% 2.65% 2.65% 1.57% 0.96%
Net Losses as a Percent of
Average Receivables(2)....... 0.90%(1) 1.44%(1) 1.40% 1.58% 0.95% 0.57%
</TABLE>
- ------------
(1) Annualized rate.
(2) Percentages based on gross accounts receivable including unearned income.
(3) Information not available.
The net loss figures above reflect the fact that GMAC had recourse to
dealers on a portion of its retail instalment sale contracts. The percentage of
the Aggregate Amount Financed with recourse to dealers in the Receivables Pool
is 0.02%. 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.
S-13
<PAGE> 17
THE NOTES
GENERAL
The Notes will be issued pursuant to the terms of an Indenture to be dated
as of the Closing Date between the Trust and the Indenture Trustee (as amended
and supplemented from time to time, the "INDENTURE"), a form of which 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
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 such
summary. The First National Bank of Chicago, a national banking association,
will be the "INDENTURE TRUSTEE."
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...................... 5.364% May 2001
Class A-2 Notes...................... 5.580% June 2002
Class A-3 Notes...................... 5.680% August 2004
</TABLE>
PAYMENTS OF INTEREST
Interest on the unpaid principal balance of each class of Notes will accrue
at the applicable Interest Rate and will be paid monthly on each Distribution
Date. Interest payments on all classes of Notes will have the same priority
while interest on the Certificates will not be paid on any Distribution Date
until interest on the Notes has been paid in full.
Each Distribution Date will be a Payment Date, as described in the
Prospectus. "DISTRIBUTION DATE" means the 15th day of each month or, if any such
date is not a Business Day, the next succeeding Business Day, commencing April
15, 1999. 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, and for each class of Notes will be payable on each
Distribution Date in an amount equal to the Noteholders' Interest Distributable
Amount for such Distribution Date. Interest on the Class A-1 Notes, 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. 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-14
<PAGE> 18
PAYMENTS OF PRINCIPAL
On each Distribution Date, until the Notes are paid in full, the Trust will
pay principal on the Notes to the extent of the Principal Distributable Amount
for the related Monthly Period, 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, principal payments on the Notes will be made 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 such 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 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-3 Notes will be redeemed in whole, but not in part, on the
Distribution Date on which the Servicer exercises such option. The 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 Class A-3 Notes, plus accrued and unpaid interest
thereon.
DELIVERY OF NOTES
The Class A-2 Notes and Class A-3 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. 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.
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 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
S-15
<PAGE> 19
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 Agreement are referred to, the
actual provisions (including definitions of terms) are incorporated by reference
as part of such summary.
DISTRIBUTIONS OF INTEREST AND CERTIFICATE BALANCE
Interest. On each Distribution Date, commencing April 15, 1999, 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 such 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 August 2004 Distribution Date (the "FINAL SCHEDULED
DISTRIBUTION DATE"). If an Event of Default resulting from a payment default
occurs and the Notes are accelerated, no payments of interest on the
Certificates or any distribution with respect to Certificate Balance will be
made until the Notes are paid in full or the acceleration is rescinded. In such
event, amounts otherwise available to pay interest on the Certificates will be
available to make payments on the Notes. See "The Transfer and Servicing
Agreements--Distributions" and "--Reserve Account" in this Prospectus
Supplement.
Certificate Balance. No principal distributions will be made with respect
to Certificate Balance until the Notes have been paid in full. Thereafter, until
the Certificate Balance is reduced to zero, the entire Principal Distributable
Amount will be available to make distributions with respect to Certificate
Balance. 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. In addition, on and after any Distribution Date on which all of the
Notes have been paid in full, funds in the Reserve Account will be applied to
reduce the Certificate Balance to zero if, after giving effect to all
distributions to the Servicer (other than Additional Servicing), the Noteholders
and the Certificateholders on such 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" and "--Reserve Account"
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 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
S-16
<PAGE> 20
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
On each Distribution Date, the Servicer will be entitled to receive the
Total Servicing Fee, which consists of the Basic Servicing Fee for the related
Monthly Period, unpaid Basic Servicing Fees from prior Distribution Dates and
the Additional Servicing Fee for the related Monthly Period. In addition, the
Servicer will receive any Supplemental Servicing Fees and Investment Earnings.
The "BASIC SERVICING FEE RATE" will be 1%.
DISTRIBUTIONS
On or before each Distribution Date, the Servicer will transfer all
collections on the Receivables for the related Monthly Period (and, for the
initial Distribution Date, two Monthly Periods preceding such Distribution Date)
and all Prepayments to the Collection Account. On each Distribution Date, the
Indenture Trustee will cause collections made during such Monthly Period 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.
"AVAILABLE INTEREST" for a Distribution Date means the sum, with
respect to the related Monthly Period (and, for the initial Distribution
Date, with respect to the two Monthly Periods preceding such Distribution
Date), of: (1) that portion of all collections on the Receivables held by
the Trust (other than Liquidating Receivables) allocable to interest, (2)
proceeds ("LIQUIDATION PROCEEDS") of the liquidation of defaulted
Receivables ("LIQUIDATING RECEIVABLES"), to the extent allocable to
interest in accordance with the Servicer's customary servicing procedures,
(3) all Simple Interest Advances, and (4) 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.
"AVAILABLE PRINCIPAL" for a Distribution Date means the sum, with
respect to the related Monthly Period (and, for the initial Distribution
Date, with respect to the two Monthly Periods preceding such Distribution
Date), of: (1) that portion of all collections on the Receivables held by
the Trust (other than Liquidating Receivables) allocable to principal, (2)
Liquidation Proceeds to the extent allocable to principal in accordance
with the Servicer's customary servicing procedures, and (3) 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 such related Monthly Period.
S-17
<PAGE> 21
The Available Interest and the Available Principal on any Distribution Date
will exclude: (1) any Excess Simple Interest Collections, (2) 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" and (3) amounts
representing reimbursement for certain Liquidation Expenses.
Monthly Withdrawals and Deposits. On or before the tenth day of each
calendar month, or if such day is not a Business Day, the next succeeding
Business Day, with respect to the preceding Monthly Period and the related
Distribution Date, the Servicer will calculate the Total Available Amount, the
Available Interest, the Available Principal, the Total Servicing Fee, the
Aggregate Noteholders' Interest Distributable Amount, the Aggregate Noteholders'
Principal Distributable Amount, the Certificateholders' Interest Distributable
Amount, the Certificateholders' Principal Distributable Amount and certain other
items. Based on such 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;
(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 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; and
(6) the amount, if any, to be withdrawn from the Reserve Account and
paid to the Seller.
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 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
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 with respect to any Distribution Date as
specified in clause (5) above 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.
S-18
<PAGE> 22
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.
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 Aggregate Noteholders' Interest Distributable Amount;
(3) the Certificateholders' Interest Distributable Amount;
(4) the Aggregate Noteholders' Principal Distributable Amount; and
(5) 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 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 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.
Certain Defined Terms. As used in this Prospectus Supplement, the following
terms have the meanings set forth below.
"AGGREGATE DISCOUNTED PRINCIPAL BALANCE" means, as of any date, the
present value of all scheduled monthly payments on the Receivables (other
than Liquidating Receivables) which have not been received on or prior to
such date, discounted to such date at the Discount Rate.
"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 Noteholders' Principal
Distributable Amounts for all classes of Notes and the Noteholders'
Principal Carryover Shortfall as of the preceding Distribution Date.
S-19
<PAGE> 23
"CERTIFICATE BALANCE" means, initially, $137,981,417.23 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 34 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 (a) the lesser of (1) the
Certificateholders' Percentage of the Principal Distributable Amount and
(2) the Certificate Balance plus (b) any outstanding Certificateholders'
Principal Carryover Shortfall as of the close of the preceding Distribution
Date. In addition, on the August 2004 Distribution Date, the amount
required to be distributed to Certificateholders in respect of the
Certificate Balance will include the lesser of (a) any principal due and
remaining unpaid on each Simple Interest Receivable, in each case in the
Trust as of August 2004, and (b) the amount that is necessary (after giving
effect to the other amounts to be deposited in the Certificate Distribution
Account on such Distribution Date and allocable to payments in respect of
the Certificate Balance) to reduce the Certificate Balance to zero, in
either case 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 Servicer (other than Additional
Servicing), the Noteholders and the Certificateholders on such 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, Certificateholders' Principal Distributable Amount
shall include an amount equal to such Certificate Balance.
"DISCOUNT RATE" means 8.0% per annum.
S-20
<PAGE> 24
"INITIAL AGGREGATE DISCOUNTED PRINCIPAL BALANCE" means
$2,628,181,417.23.
"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)
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 34 and the denominator of which is
360).
"NOTEHOLDERS' PERCENTAGE" means 100% until the principal balance of
the Notes are paid in full, and zero thereafter.
"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, 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 Noteholders' Principal Distributable Amount for each class of Notes
having priority of payment over such class of Notes as described above
under "The Notes--Payments of Principal" and (2) the outstanding principal
balance of such class of Notes. In addition, on the Final Scheduled
Distribution Date for any class of Notes, the Noteholders' Principal
Distributable Amount for such 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 such Distribution Date and allocable to
payments of principal) to reduce the outstanding principal balance of such
class of Notes to zero.
"PASS THROUGH RATE" means, with respect to the Certificates, 6.090%
per annum.
"PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date, the excess of (1) the Aggregate Discounted Principal
Balance as of the close of business on the last day of the second Monthly
Period preceding such Distribution Date (or, in the case of the initial
Distribution Date, the excess of the Initial Aggregate Discounted Principal
Balance) over (2) the Aggregate Discounted Principal Balance as of the
close of business on the last day of the first Monthly Period preceding
such Distribution Date.
RESERVE ACCOUNT
Pursuant to the Trust Sale and Servicing Agreement, the Seller 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
$19,711,360.63, which equals 0.75% of the Initial Aggregate Discounted Principal
Balance. On each Distribution Date, amounts will be transferred from the
Collection Account to the Reserve Account and made available to make payments on
the Notes and the Certificates as described above under "The
Distributions--Monthly Withdrawals and Deposits."
S-21
<PAGE> 25
"SPECIFIED RESERVE ACCOUNT BALANCE" with respect to any Distribution
Date or the Closing Date means the lesser of (1) $19,711,360.63 and (2) the
remaining outstanding principal balance of the Notes and the Certificates
as of the close of business on the last day of the related Monthly Period.
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. Funds in the Reserve Account will be used to reduce the
Certificate Balance to zero in the circumstance described in "The
Certificates--Distributions of Interest and Certificate Balance--Certificate
Balance".
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
Although there is little guidance on the subject, the Seller believes that,
at the time of their issuance, the Class A-2 Notes and the Class A-3 Notes would
be treated as indebtedness without substantial equity features for purposes of
the Plan Assets Regulation. The debt treatment of such Notes could change,
subsequent to 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 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 Class A-2 Notes and Class A-3 Notes 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 ("PTCE") 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-2 Notes
and the Class A-3 Notes under ERISA, see "ERISA Considerations" in the
Prospectus.
S-22
<PAGE> 26
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-2 Notes and the Class A-3 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 the
Seller. Accordingly, the Trust will be characterized as a Tax Non-Entity and
hence a division of the Seller for federal income tax purposes. See "Certain
Federal Income Tax Considerations--Tax Non-Entity Certificates" in the
Prospectus. If the Seller sells less than all of the Certificates or if the
Trust issues additional Certificates, this characterization may change. See
"Certain Federal Income Tax Considerations--Tax Non-Entity 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 and Class A-3 Notes set forth
opposite its name below:
AGGREGATE PRINCIPAL AMOUNT TO BE PURCHASED
<TABLE>
<CAPTION>
UNDERWRITER CLASS A-2 NOTES CLASS A-3 NOTES TOTAL
----------- --------------- --------------- --------------
<S> <C> <C> <C>
Credit Suisse First Boston
Corporation...................... $294,000,000 $161,200,000 $ 455,200,000
Merrill Lynch, Pierce, Fenner &
Smith
Incorporated......... $294,000,000 $161,200,000 $ 455,200,000
Bear, Stearns & Co., Inc........... $ 29,400,000 $ 16,120,000 $ 45,520,000
J. P. Morgan Securities Inc........ $ 29,400,000 $ 16,120,000 $ 45,520,000
Lehman Brothers Inc................ $ 29,400,000 $ 16,120,000 $ 45,520,000
Morgan Stanley & Co.
Incorporated..................... $ 29,400,000 $ 16,120,000 $ 45,520,000
Salomon Smith Barney Inc........... $ 29,400,000 $ 16,120,000 $ 45,520,000
------------ ------------ --------------
Total......................... $735,000,000 $403,000,000 $1,138,000,000
============ ============ ==============
</TABLE>
The Seller has been advised by the Underwriters that the several
Underwriters propose initially to offer the Class A-2 Notes and the Class A-3
Notes 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 such class of Notes. The Underwriters may
allow, and such dealers may reallow to certain other dealers, a subsequent
concession not in excess of the percentage set forth below for each such 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-2 Notes......................................... 0.105% 0.080%
Class A-3 Notes......................................... 0.150% 0.125%
</TABLE>
S-23
<PAGE> 27
The Underwriters may engage in over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids with respect to
the Class A-2 Notes and the Class A-3 Notes in accordance with Regulation M
under the Securities Exchange Act of 1934 (the "EXCHANGE ACT"). 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-2 Notes and the Class A-3 Notes so long as the stabilizing
bids do not exceed a specified maximum. Syndicate covering transactions involve
purchases of the Class A-2 Notes and the Class A-3 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 Class A-2 Notes and the Class A-3 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
Class A-2 Notes and the Class A-3 Notes 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.
We will receive proceeds of approximately $1,135,550,363 from the sale of
the Class A-2 Notes and the Class A-3 Notes (representing 99.7847% of the
principal amount of each of the Class A-2 and Class A-3 Notes) after paying the
underwriting discount of $2,293,750 (representing 0.2016% of the principal
amount of each Class A-2 and A-3 Note). Additional offering expenses are
estimated to be $800,000.
LEGAL OPINIONS
In addition to the legal opinions described in the Prospectus, certain
legal matters relating to the Notes 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-24
<PAGE> 28
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 3 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 amounts on deposit in any related reserve
This prospectus may be used to 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.
FEBRUARY 24, 1999
<PAGE> 29
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
We provide information to you about the Notes or Certificates (collectively
called "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 a listing of the pages where capitalized terms used in this
prospectus and the prospectus supplement are defined under the caption "Index of
Terms" which appears at the end of this prospectus.
2
<PAGE> 30
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
3
<PAGE> 31
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 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
4
<PAGE> 32
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
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, 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. 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
5
<PAGE> 33
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.
6
<PAGE> 34
THE TRUSTS
With respect to each series of Securities, the Seller will establish a
separate Trust (a "TRUST") by selling and assigning the Trust Property to the
Trust in exchange for the related Securities. Each series of Securities will
include one or more classes of asset backed notes (the "NOTES") and one or more
classes of asset backed certificates (the "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 (a "RECEIVABLES POOL") of retail installment sales
contracts for new and used automobiles and light trucks (the
"RECEIVABLES"), all Scheduled Payments due thereunder on and after the
Cutoff Date to be specified in the Prospectus Supplement (the "CUTOFF
DATE") (in the case of Scheduled Interest Receivables) and all payments
received thereunder on and after the Cutoff Date (in the case of Simple
Interest Receivables), in each case exclusive of any amount allocable to
the premium for physical damage insurance force-placed by the Servicer,
(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 vehicles financed by the Receivables (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 will be a segregated trust account held by the
Indenture Trustee for the benefit of the holders of such related Securities.
Except as otherwise set forth in the related Prospectus Supplement, the
activities of each Trust will be limited to (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
7
<PAGE> 35
not be 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 Receivables Pool have been or will be acquired by
General Motors Acceptance Corporation ("GMAC") through its nationwide branch
system, directly or through General Motors Corporation ("GENERAL MOTORS"), from
automobile and light truck dealers pursuant to agreements with General Motors
dealers and dealerships affiliated with General Motors dealers. See "The Seller"
and "The Servicer" 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 Receivables Pool 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. The
"AMOUNT FINANCED" with respect to a Receivable will equal the aggregate amount
advanced toward the purchase price of the Financed Vehicle, including
accessories, insurance premiums, service and warranty contracts and other items
customarily financed as part of retail automobile instalment sale contracts and
8
<PAGE> 36
related costs. The Amount Financed does not include any amount allocable to the
premium for physical damage insurance covering the Financed Vehicle force-placed
by GMAC or, in the case of a Scheduled Interest Receivable, payments due from
the related obligor prior to the related Cutoff Date allocable to principal or,
in the case of a Simple Interest Receivable, payments received from the obligor
prior to the related Cutoff Date allocable to principal. The aggregate Amount
Financed under the Receivables held by a Trust (the "AGGREGATE AMOUNT FINANCED")
will be specified in the related Prospectus Supplement.
"SCHEDULED INTEREST RECEIVABLES" are Receivables pursuant to which the
payments due from the Obligors during any month (the "SCHEDULED PAYMENTS") are
allocated between finance charges and principal on a scheduled basis, without
regard to the period of time which has elapsed since the preceding payment was
made, using the actuarial method or the method known as the Rule of 78s or
sum-of-the-digits method. If an obligor elects to prepay a Scheduled Interest
Receivable in full, the obligor is entitled to a rebate of the portion of the
Scheduled Payments attributable to unearned finance charges. The amount of the
rebate is determined with reference to the contract type and applicable state
law. With minor variations based on state law, actuarial rebates are calculated
on the basis of a constant interest rate. Rebates calculated on a Rule of 78s or
sum-of-the-digits basis are smaller than the corresponding rebates under the
actuarial method. Scheduled Interest Receivables provide for Rule of 78s rebates
except in states that require the actuarial method. Distributions to Noteholders
and Certificateholders will not be affected by Rule of 78s rebates, because all
allocations with respect to Scheduled Interest Receivables for purposes of the
related Trust are made using the actuarial method. The portion of a Receivables
Pool which consists of Scheduled Interest Receivables will be specified in the
related Prospectus Supplement.
"SIMPLE INTEREST RECEIVABLES" are Receivables which provide for allocation
of payments between finance charges and principal based on the actual date on
which a payment is received. Late payments (or early payments) on a Simple
Interest Receivable may result in the obligor making a greater (or smaller)
number of payments than originally scheduled. The amount of any such additional
payments required to pay the outstanding principal balance in full generally
will not exceed the amount of an originally scheduled payment. If an obligor
elects to prepay a Simple Interest Receivable in full, the obligor will not
receive a rebate attributable to unearned finance charges. Instead, the obligor
is required to pay finance charges only to, but not including, the date of
prepayment. The amount of finance charges on a Simple Interest Receivable that
would have accrued from and after the date of prepayment if all monthly payments
had been made as scheduled will generally be greater than the rebate on a
Scheduled Interest Receivable that provides for a Rule of 78s rebate, and will
generally be equal to the rebate on a Scheduled Interest Receivable that
provides for an actuarial rebate. The portion of a Receivables Pool which
consists of Simple Interest Receivables will be specified in the related
Prospectus Supplement.
With respect to each Trust, the "AGGREGATE PRINCIPAL BALANCE," as of any
date, means the sum of the Principal Balances of all outstanding Receivables
(other than Liquidating Receivables) held by the Trust on such date. The
"PRINCIPAL BALANCE," as of any date with respect to any Receivable, is equal to
the Amount Financed minus the sum of either (a) in the case of a Scheduled
Interest Receivable, (1) that portion of all Scheduled Payments due on or prior
to such date allocable to principal, (2) that portion of any Warranty Payment or
Administrative Purchase Payment with respect to such Receivable allocable to
principal and (3) any Prepayment applied by the Servicer to reduce the Principal
Balance of such Receivable, or (b) in the case of a Simple Interest Receivable,
(1) that portion of all payments received on or prior to such date allocable to
principal and (2) that portion of any
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Warranty Payment or Administrative Purchase Payment with respect to such
Receivable allocable to principal.
Information with respect to each Receivables Pool will be set forth in the
related Prospectus Supplement, including, to the extent appropriate, the
composition, distribution by annual percentage rate ("APR"), states of
origination and portion of such Receivables Pool secured by new vehicles and by
used vehicles.
WEIGHTED AVERAGE LIFE OF THE SECURITIES
The weighted average life of 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
The "NOTE POOL FACTOR" for each class of Notes will be a seven-digit
decimal which the Servicer will compute prior to each distribution with respect
to such Notes indicating the remaining outstanding principal balance of such
Notes, as of the close of such date, as a fraction of the initial outstanding
principal balance of such Notes. The "CERTIFICATE POOL FACTOR" for each class of
Certificates will be a seven-digit decimal which the Servicer will compute prior
to each distribution with respect to such Certificates indicating the remaining
Certificate Balance as of the close of such date, as a fraction of the initial
Certificate Balance. Each Note Pool Factor and each Certificate Pool Factor will
initially be 1.0000000. Thereafter the Note Pool Factor and the Certificate Pool
Factor will decline to reflect reductions in the outstanding principal balance
of the Notes, 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 holder or holders of record of the Notes
(the "NOTEHOLDERS") will receive reports on or about each Payment Date
concerning payments received on the Receivables, the Aggregate Principal
Balance, each Note Pool Factor, and various other items of information.
Noteholders of record during any calendar year will be furnished information for
tax reporting purposes not later than the latest date permitted by law. See
"Certain Information Regarding the Securities--Reports to Securityholders."
Unless otherwise provided in the related Prospectus Supplement, with respect to
the Trust, the holder or holders of record of the Certificates (the
"CERTIFICATEHOLDERS") will receive reports on or
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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. (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. 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 ("INSOLVENCY LAWS") will result in consolidation
of the assets and liabilities of the Seller with those of GMAC. These steps
include the creation of the Seller as a separate, limited-purpose subsidiary
pursuant to a certificate of incorporation containing certain limitations
(including restrictions on the nature of the Seller's business and a restriction
on the Seller's ability to commence a voluntary case or proceeding under any
Insolvency Law without the unanimous affirmative vote of all of its directors).
Under certain circumstances, the Seller is required to have at least one
director who qualifies under its By-laws as an "Independent Director."
If, notwithstanding the foregoing measures, a court concluded that the
assets and liabilities of the Seller should be consolidated with the assets and
liabilities of GMAC in the event of the application of the federal bankruptcy
laws to GMAC, a filing were made under any Insolvency Law by or against the
Seller, or an attempt were made to litigate the consolidation issue, then delays
in distributions on the Notes and the Certificates (and possible reductions in
the amount of such distributions) could occur. See also "Certain Legal Aspects
of the Receivables--Sale of Receivables by GMAC" 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.
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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
Receivables Pool will be comparable to prior experience.
THE NOTES
GENERAL
With respect to each Trust, one or more classes of Notes will be issued
pursuant to the terms of an Indenture, a form of which has been filed as an
exhibit to the Registration Statement of which this Prospectus forms a part. The
following summary does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all of the provisions of the Notes
and the Indenture. Where particular provisions or terms used in the Indenture
are referred to, the actual provisions (including definitions of terms) are
incorporated by reference as part of this summary.
Unless otherwise specified in the related Prospectus Supplement, each class
of Notes will initially be represented by one or more Notes, in each case
registered in the name of the nominee of DTC (together with any successor
depository selected by the Trust, the "DEPOSITORY") (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
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form only. The Seller has been informed by DTC that DTC's nominee will be Cede.
Accordingly, Cede is expected to be the holder of record of the Notes. Unless
and until Definitive Notes are issued under the limited circumstances described
herein or in the related Prospectus Supplement, no Noteholder will be entitled
to receive a physical certificate representing a Note. All references herein to
actions by Noteholders refer to actions taken by DTC upon instructions from its
participating organizations (the "PARTICIPANTS"). All references herein to
distributions, notices, reports and statements to Noteholders refer to
distributions, notices, reports and statements to DTC or Cede, as the registered
holder of the Notes, as the case may be, for distribution to Noteholders in
accordance with DTC's procedures with respect thereto. See "Certain Information
Regarding the Securities--Book-Entry Registration" and "--Definitive Securities"
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 Notes ("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 dates specified for payments on any class of Notes in the related
Prospectus Supplement (each, a "PAYMENT DATE"). 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.
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
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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 (the "TRUST INDENTURE ACT"); 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 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 is 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
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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 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, the related Indenture Trustee may institute proceedings to
(a) collect amounts due or foreclose on Trust property, (b) exercise remedies as
a secured party, (c) sell the assets of the Trust or (d) elect to have the Trust
maintain possession of the assets of the Trust and continue to apply collections
on such Receivables as if there had been no declaration of acceleration. The
Indenture Trustee, however, is prohibited from selling the related Receivables
following an Event of Default, unless (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) (a) there has been a default in the
payment of interest or principal on the Notes, (b) the Indenture Trustee
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determines that the Receivables will not continue to provide sufficient funds on
an ongoing basis to make all payments on the Notes as such payments would have
become due if such obligations had not been declared due and payable and (c) 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) if such 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 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.
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.
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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 Indenture, the Transfer and Servicing Agreements or certain related
documents for such Trust (collectively, the "RELATED DOCUMENTS"), (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.
Except as specified in the related Prospectus Supplement, a Trust may
engage in any activity other than as specified under "The Trusts" above. No
Trust will incur, assume or guarantee any indebtedness other than indebtedness
incurred pursuant to the related Notes and the related Indenture or otherwise in
accordance with the Related Documents.
Annual Compliance Statement. Each Trust will be required to file annually
with the related Indenture Trustee a written statement as to the fulfillment of
its obligations under the Indenture.
Indenture Trustee's Annual Report. The Indenture Trustee will be required
to mail each year to all related Noteholders, to the extent required under the
Trust Indenture Act, a brief report relating to its eligibility and
qualification to continue as Indenture Trustee under the related Indenture, any
amounts advanced by it under the Indenture, the amount, interest rate and
maturity date of certain indebtedness owing by the Trust to the Indenture
Trustee in its individual capacity, the property and funds physically held by
the Indenture Trustee as such and any action taken by it that materially affects
the Notes and that has not been previously reported.
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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 (the "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.
Each class of Certificates to be sold by the Certificate Underwriters (as
defined in the related Prospectus Supplement) will initially be represented by a
single Certificate registered in the name of the Depository, except as set forth
below. Unless otherwise specified in the related Prospectus Supplement, 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. Accordingly, Cede 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
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the Participants and all references herein to distributions, notices, reports
and statements to Certificateholders refer to distributions, notices, reports
and statements to DTC or Cede, as the registered holder of the Certificates, as
the case may be, for distribution to Certificateholders in accordance with DTC's
procedures with respect thereto. See "Certain Information Regarding the
Securities--Book Entry Registration" and "--Definitive Securities" 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 dates specified in the related
Prospectus Supplement (each, a "DISTRIBUTION DATE") and will be made prior to
distributions with respect to Certificate Balance. A series may include one or
more classes of Certificates ("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 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.
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CERTAIN INFORMATION REGARDING THE SECURITIES
BOOK-ENTRY REGISTRATION
The Depository Trust Company ("DTC") is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the New York UCC
and a "clearing agency" registered pursuant to Section 17A of the Exchange Act.
DTC was created to hold securities for its Participants and to facilitate the
clearance and settlement of securities transactions between Participants through
electronic book-entries, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks, trust
companies and clearing corporations. Indirect access to the DTC system also is
available to others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Participant, either
directly or indirectly ("INDIRECT PARTICIPANTS").
A "SECURITYHOLDER," as used herein, shall mean a holder of a beneficial
interest in a book-entry security. Unless otherwise specified in the related
Prospectus Supplement, Securityholders that are not Participants or Indirect
Participants but desire to purchase, sell or otherwise transfer ownership of, or
other interests in, Securities may do so only through Participants and Indirect
Participants. In addition, Securityholders will receive all distributions of
principal and interest from the related Owner Trustee or Indenture Trustee, as
applicable (the "APPLICABLE TRUSTEE"), 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 Applicable Trustee to
Cede & Co. ("CEDE"), as nominee for DTC. DTC will forward such payments to its
Participants, which thereafter will forward them to Indirect Participants or
Securityholders. Except for the Seller, it is anticipated that the only
"Noteholder" and "Certificateholder" will be Cede, 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 Participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "RULES"), DTC is required to make book-entry transfers of
Securities among 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. Participants and Indirect 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 provide a mechanism by
which Securityholders will receive payments and will be able to transfer their
interests.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of
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 Participants to
whose accounts with DTC the Notes or Certificates are credited. DTC may take
conflicting actions with respect to other
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undivided interests to the extent that such actions are taken on behalf of
Participants whose holdings include such undivided interests.
In addition to holding Notes through 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 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 (as defined below) and Euroclear
Participants (as defined below) 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
("CEDELBANK PARTICIPANTS") and facilitates the clearance and 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
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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 ("EUROCLEAR PARTICIPANTS") and to clear and settle transactions
between Euroclear Participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities and
cash. Transactions may now be settled in any of 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), 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 (collectively, 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. 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 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.
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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 ("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 (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 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.
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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.
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.
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Within the prescribed period of time for tax reporting purposes after the
end of each calendar year during the term of the Trust, the trustees will mail
to each holder of a class of Securities who at any time during such calendar
year has been a securityholder, and received any payment thereon, a statement
containing certain information for the purposes of such securityholder's
preparation of federal income tax returns. As long as the holder of record of
the Securities is Cede, as nominee of DTC, beneficial owners of the Securities
will receive tax and other information from Participants and Indirect
Participants rather than from the trustees. See "Certain Federal Income Tax
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:
(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 (collectively, the
"TRANSFER AND SERVICING AGREEMENTS"). Forms of the Transfer and Servicing
Agreements have been filed as exhibits to the Registration Statement of
which this Prospectus forms a part. The Seller will provide a copy of the
Transfer and Servicing Agreements (without exhibits) upon request to a
holder of Securities described therein. This summary does not purport to be
complete and is subject to, and qualified in its entirety by reference to,
all of the provisions of the Transfer and Servicing Agreements. Where
particular provisions or terms used in the Transfer and Servicing
Agreements are referred to, the actual provisions (including definitions of
terms) are incorporated by reference as part of such summary.
SALE AND ASSIGNMENT OF RECEIVABLES
On the Closing Date specified in the related Prospectus Supplement (the
"CLOSING DATE"), GMAC will sell and assign to the Seller, without recourse, its
entire interest in the related Receivables, including its security interests in
the Financed Vehicles, pursuant to a Pooling and Servicing Agreement between
GMAC and the Seller (a "POOLING AND SERVICING AGREEMENT"). On the Closing Date,
the Seller will transfer and assign to the applicable 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 (a "TRUST SALE AND SERVICING AGREEMENT").
Each Receivable with respect to a Trust will be identified in a schedule which
will be on file at the locations set forth in an exhibit to the related Trust
Sale and Servicing Agreement (a "SCHEDULE OF RECEIVABLES"). The Trust will,
concurrently with such transfer and assignment,
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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 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 Receivable
(a "WARRANTY RECEIVABLE") from the Trust at a price equal to: (a) 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
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 (b) in the case of a Simple
Interest Receivable, the Amount Financed minus (1) that portion of all payments
received on or prior to the last day of the related Monthly Period allocable to
principal and (2) any Liquidation Proceeds with respect to such Receivable (to
the extent applied to reduce the Principal Balance of such Receivable) (in
either case, the "WARRANTY PAYMENT"). The Seller or GMAC, as applicable, will be
entitled
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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 the case of a Simple Interest Receivable) is
altered or such that the last Scheduled Payment (in the case of a Scheduled
Interest Receivable) or the last scheduled due date (in the case of a Simple
Interest Receivable) occurs after the final scheduled Distribution Date. As of
the last day of the second (or, if the Servicer so elects, the first) month
following the discovery by the Servicer, the Owner Trustee or the Indenture
Trustee of a breach of any covenant that materially and adversely affects any
Receivable and unless such breach is cured in all material respects, the
Servicer will, with respect to such Receivable (an "ADMINISTRATIVE RECEIVABLE"):
(1) in the case of a Scheduled Interest Receivable, (a) release all claims for
reimbursement of Scheduled Interest Advances made on such Receivable and (b)
purchase such Receivable from the Trust at a price equal to the sum of all
remaining Scheduled Payments on such Receivable plus an amount equal to any
reimbursements of outstanding Scheduled Interest Advances made to the Servicer
with respect to such Receivable from the proceeds of other Receivables, plus all
past due Scheduled Payments with respect to which a Scheduled Interest Advance
has not been made, minus the rebate that would be payable to the obligor on such
Receivable were the obligor to prepay such Receivable in full on such day; or
(2) in the case of a Simple Interest Receivable, purchase such Receivable from
the Trust at a price equal to the Amount Financed minus that portion of all
payments made on or prior to the last day of the related Monthly Period
allocable to principal (in either case, the "ADMINISTRATIVE PURCHASE PAYMENT").
The Servicer will be entitled to receive any amounts held by the Servicer or in
the Payment Ahead Servicing Account with respect to such Administrative
Receivable. This repurchase obligation constitutes the sole remedy available to
the Trust, the Indenture Trustee, the Owner Trustee, the Noteholders and the
Certificateholders for any such uncured breach.
Pursuant to each Trust Sale and Servicing Agreement, the Trust will agree
to GMAC acting as custodian to maintain possession, as the Trust's agent, of the
related retail instalment sale contracts and any other documents relating to the
Receivables. To assure uniform quality in servicing both the Receivables and
GMAC's own portfolio of receivables, as well as to facilitate servicing and save
administrative costs, the documents will not be physically segregated from other
similar documents that are in GMAC's possession or otherwise stamped or marked
to reflect the transfer to the related Trust so long as GMAC is the custodian of
such documents. However, Uniform Commercial Code ("UCC") financing statements
reflecting the sale and assignment of such Receivables to the Trust 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
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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 accounts, in the name of the Indenture Trustee on behalf of the related
Noteholders and the Certificateholders, into which all payments made on or with
respect to the related Receivables will be deposited (the "COLLECTION ACCOUNT").
The Servicer will establish and maintain with respect to each Trust an account,
in the name of the Indenture Trustee on behalf of the related Noteholders, in
which amounts released from the Collection Account and any Reserve Account or
other credit enhancement for payment to such Noteholders will be deposited and
from which all distributions to such Noteholders will be made (the "NOTE
DISTRIBUTION ACCOUNT"). The Servicer will establish and maintain with respect to
each Trust an account, in the name of the Owner Trustee on behalf of the related
Certificateholders, in which amounts released from the Collection Account and
any Reserve Account or other credit enhancement for distribution to such
Certificateholders will be deposited and from which all distributions to such
Certificateholders will be made (the "CERTIFICATE DISTRIBUTION ACCOUNT"). The
Servicer will establish for each Trust an additional account (the "PAYMENT AHEAD
SERVICING ACCOUNT") in the name of the Indenture Trustee, into which to the
extent required by the Trust Sale and Servicing Agreement, early payments by or
on behalf of obligors on Scheduled Interest Receivables which do not constitute
either Scheduled Payments or Prepayments will be deposited until such time as
payment becomes due. The Payment Ahead Servicing Account will not be property of
the related Trust. Unless otherwise provided in the related Prospectus
Supplement, the Payment Ahead Servicing Account will initially be maintained in
the trust department of the Indenture Trustee.
For any series, funds in the Collection Account, the Note Distribution
Account and any Reserve Account and other accounts identified as such in the
related Prospectus Supplement (collectively, the "DESIGNATED ACCOUNTS") will be
invested as provided in the Trust Sale and Servicing Agreement in Eligible
Investments. "ELIGIBLE INVESTMENTS" are generally limited to investments
acceptable to the rating agencies then rating the related Notes and Certificates
at the request of the Seller (the "RATING AGENCIES") as being consistent with
the rating of such Notes. Except as described below or in the related Prospectus
Supplement, Eligible Investments are limited to obligations or securities that
mature 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
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Account, net of losses and investment expenses (collectively, "INVESTMENT
EARNINGS"), will be payable to the Servicer.
The Designated Accounts will be maintained as Eligible Deposit Accounts.
"ELIGIBLE DEPOSIT ACCOUNT" means either (a) a segregated account with an
Eligible Institution or (b) a segregated trust account with the corporate trust
department of a depository institution organized under the laws of the United
States of America or any one of the states thereof or the District of Columbia
(or any domestic branch of a foreign bank), having corporate trust powers and
acting as trustee for funds deposited in such account, so long as any of the
securities of such depository institution have a credit rating from each Rating
Agency then rating such institution in one of its generic rating categories
which signifies investment grade. "ELIGIBLE INSTITUTION" means, with respect to
a Trust, (a) the corporate trust department of the related Indenture Trustee or
the Owner Trustee, as applicable, or (b) a depository institution organized
under the laws of the United States of America or any one of the states thereof
or the District of Columbia (or any domestic branch of a foreign bank), (1)
which has either (A) a long-term unsecured debt rating acceptable to the Rating
Agencies or (B) a short-term unsecured debt rating or certificate of deposit
rating acceptable to the Rating Agencies and (2) whose deposits are insured by
the Federal Deposit Insurance Corporation or any successor thereto.
Any other accounts to be established with respect to a Trust will be
described in the related Prospectus Supplement.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
With respect to each Trust, unless otherwise provided in the related
Prospectus Supplement, on each Distribution Date, the Servicer will receive a
servicing fee (the "BASIC SERVICING FEE") for the preceding Monthly Period equal
to one-twelfth of the Basic Servicing Fee Rate specified in the related
Prospectus Supplement multiplied by the Aggregate Principal Balance of all
Receivables held by such Trust as of the first day of such Monthly Period.
Unless otherwise specified in the related Prospectus Supplement, on each
Distribution Date, the Servicer will also receive with respect to each Trust an
additional amount (the "ADDITIONAL SERVICING") equal to the lesser of (1) the
amount by which (A) the amount equal to the aggregate amount of the Basic
Servicing Fee for such Distribution Date and all prior Distribution Dates
exceeds (B) the aggregate amount of Additional Servicing paid to the Servicer on
all prior Distribution Dates and (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 and payments to the Seller) exceeds the Specified
Reserve Account Balance. On each Distribution Date, the Servicer will be paid
the Basic Servicing Fee, any unpaid Basic Servicing Fees from all prior
Distribution Dates and the Additional Servicing (collectively, the "TOTAL
SERVICING FEE") to the extent of funds available therefor. 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, unless otherwise
provided in the related Prospectus Supplement, with respect to each Trust the
Servicer will be entitled to retain any late fees, prepayment charges or certain
similar fees and charges collected during a Monthly Period (the "SUPPLEMENTAL
SERVICING FEE") and any Investment Earnings during a Monthly Period.
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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 Receivables Pool
administrator, including making Monthly Advances, accounting for collections,
furnishing monthly and annual statements to the Owner Trustee and the Indenture
Trustee with respect to distributions and generating federal income tax
information for the Trust, the Certificateholders and the Noteholders. Such
amounts also will reimburse the Servicer for certain taxes, the fees of the
Owner Trustee and the Indenture Trustee, accounting fees, outside auditor fees,
data processing costs and other costs incurred in connection with administering
the Receivables Pool.
SERVICING PROCEDURES
The Servicer will make reasonable efforts to collect all payments due with
respect to the Receivables held by any Trust and will, consistent with the
related Pooling and Servicing Agreement and Trust Sale and Servicing Agreement,
follow such collection procedures as it follows with respect to comparable
automobile receivables that it services for itself or others. See "Certain Legal
Aspects of the Receivables" 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 an amount specified in the Pooling and Servicing Agreement
as an allowance for amounts charged to the account of the obligor, in keeping
with the Servicer's customary procedures, for refurbishing and disposition of
the Financed Vehicle and other out-of-pocket costs related to the liquidation
("LIQUIDATION EXPENSES").
COLLECTIONS
With respect to each Trust, the Servicer will deposit all payments on the
related Receivables received from obligors and all proceeds of Receivables
collected during each calendar month (each, a "MONTHLY PERIOD") into the related
Collection Account not later than two Business Days after receipt. However, at
any time that (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, the Servicer may retain such amounts until the related Distribution
Date. Pending deposit into the Collection Account, collections may be employed
by the Servicer at its own risk and for its own benefit and will not be
segregated from its own funds.
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Collections on a Scheduled Interest Receivable made during a Monthly Period
(other than an Administrative Receivable or a Warranty Receivable) which are not
late fees, prepayment charges or certain other similar fees or charges will be
applied first to any outstanding Scheduled Interest Advances made by the
Servicer with respect to such Receivable and then to the Scheduled Payment. Any
collections on such a Receivable remaining after such applications will be
considered an "EXCESS PAYMENT." Such Excess Payment will be held by the Servicer
(or, if the Servicer has not satisfied conditions (2) and (3) described in the
preceding paragraph, will be deposited in the Payment Ahead Servicing Account),
and will be deemed a "PAYMENT AHEAD," except as described in the following
sentence. If and to the extent that an Excess Payment (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 full or partial
prepayment of such Receivable (a "PREPAYMENT").
Collections made during a Monthly Period with respect to Simple Interest
Receivables (other than Administrative Receivables and Warranty Receivables)
which are not late fees or certain other similar fees or charges will be applied
first to the payment to the Servicer of Excess Simple Interest Collections, if
any, and next to principal and interest on all such Receivables. With respect to
a Monthly Period, "EXCESS SIMPLE INTEREST COLLECTIONS" represent the excess, if
any, of (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 advance an amount (a
"SCHEDULED INTEREST ADVANCE") equal to the amount of such shortfall. The
Servicer will be obligated to make a Scheduled Interest Advance only to the
extent that the Servicer, in its sole discretion, expects to recoup such advance
from subsequent collections or recoveries on any Receivable. The Servicer will
be reimbursed for any Scheduled Interest Advances with respect to a Receivable
from subsequent payments or collections relating to such Receivable. 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.
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Unless otherwise provided in the related Prospectus Supplement, with
respect to each Trust, as of the last day of each Monthly Period, the Servicer
will advance an amount (a "SIMPLE INTEREST ADVANCE" and, collectively with a
Scheduled Interest Advance, a "MONTHLY ADVANCE") equal to the excess, if any, of
(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.
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.
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The presence of a Reserve Account and other forms of credit enhancement is
intended to enhance the likelihood of receipt by the Noteholders and the
Certificateholders of the full amount of principal or Certificate Balance, as
the case may be, and interest due thereon and to decrease the likelihood that
the Noteholders and the Certificateholders will experience losses. Unless
otherwise specified in the related Prospectus Supplement, the credit enhancement
for a class of Securities will not provide protection against all risks of loss
and will not guarantee repayment of the entire principal balance or Certificate
Balance, as the case may be, and interest thereon. If losses occur which exceed
the amount covered by any credit enhancement or which are not covered by any
credit enhancement, securityholders will bear their allocable share of
deficiencies. In addition, if a form of credit enhancement covers more than one
series of Securities, securityholders of any such series will be subject to the
risk that such credit enhancement will be exhausted by the claims of
securityholders of other series.
Reserve Account. If so provided in the related Prospectus Supplement,
pursuant to the Trust Sale and Servicing Agreement, the Seller will establish
for a series an account, as specified in the related Prospectus Supplement (the
"RESERVE ACCOUNT"), which will be maintained with the Indenture Trustee.
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
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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 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.
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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 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
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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 DEFAULT" 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
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 (each, an "INSOLVENCY EVENT").
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
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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, 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
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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.
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
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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 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 (the "ADMINISTRATOR"), will enter
into an agreement (an "ADMINISTRATION AGREEMENT") with each Trust and the
related Indenture Trustee pursuant to which the Administrator will agree, to the
extent provided in such Administration Agreement, to provide the notices and to
perform other administrative obligations required by the related Indenture. With
respect to each Trust, 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,
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.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
SECURITY INTEREST IN VEHICLES
In all states in which the Receivables have been originated, retail
instalment sale contracts such as the Receivables evidence the credit sale of
automobiles and light trucks by dealers to purchasers. The contracts also
constitute personal property security agreements and include grants of security
interests in the vehicles under the UCC. Perfection of security interests in the
vehicles is generally governed by the motor vehicle registration laws of the
state in which the vehicle is located. In all states in which the Receivables
have been originated, a security interest in a vehicle is perfected by notation
of the secured party's lien on the vehicle's certificate of title.
With respect to each Trust, pursuant to the Pooling and Servicing
Agreement, GMAC will assign its security interest in the Financed Vehicles
securing the related Receivables to
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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.
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
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Code also grants priority to certain federal tax liens over the lien of a
secured party. The laws of certain states and federal law permit the
confiscation of motor vehicles by governmental authorities under certain
circumstances if used in unlawful activities, which may result in the loss of a
secured party's perfected security interest in the confiscated motor vehicle.
Under each Pooling and Servicing Agreement, GMAC will have represented to the
Seller that, as of the Closing Date, each Receivable is or will be secured by a
first perfected security interest in favor of GMAC in the Financed Vehicle. The
Seller will have assigned such representation, among others, to the Owner
Trustee pursuant to the related Trust Sale and Servicing Agreement. However,
liens for repairs or taxes, or the confiscation of a Financed Vehicle, could
arise at any time during the term of a Receivable. No notice will be given to
the Owner Trustee, the Indenture Trustee, the Noteholder or the
Certificateholder if such a lien or confiscation arises.
REPOSSESSION
In the event of default by vehicle purchasers, the holder of the retail
instalment sale contract has all the remedies of a secured party under the UCC,
except where specifically limited by other state laws. Among the UCC remedies,
the secured party has the right to perform self-help repossession unless such
act would constitute a breach of the peace. Self-help is the method employed by
the Servicer in most cases and is accomplished simply by retaking possession of
the financed vehicle. In the event of default by the obligor, some jurisdictions
require that the obligor be notified of the default and be given a time period
within which he may cure the default prior to repossession. Generally, the right
of reinstatement may be exercised on a limited number of occasions in any
one-year period. In cases where the obligor objects or raises a defense to
repossession, or if otherwise required by applicable state law, a court order
must be obtained from the appropriate state court, and the vehicle must then be
repossessed in accordance with that order. A secured party may be held
responsible for damages caused by a wrongful repossession of a vehicle.
NOTICE OF SALE; REDEMPTION RIGHTS
The UCC and other state laws require the secured party to provide the
obligor with reasonable notice of the date, time and place of any public sale
and/or the date after which any private sale of the collateral may be held. In
addition, a consent order between the Servicer and the Federal Trade Commission
("FTC REPOSSESSION CONSENT ORDER") imposes similar requirements 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
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defaulting obligor can be expected to have very little capital or sources of
income available following repossession. Therefore, in many cases, it may not be
useful to seek a deficiency judgment or, if one is obtained, it may be settled
at a significant discount.
Occasionally, after resale of a vehicle and payment of all expenses and all
indebtedness, there is a surplus of funds. In that case, the UCC requires the
creditor to remit the surplus to any holder of a lien with respect to the
vehicle or if no such lienholder exists or there are remaining funds, the UCC
and the FTC Repossession Consent Order require the creditor to remit the surplus
to the former owner of the vehicle.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon lenders and servicers involved in consumer
finance. These laws include the Truth-in-Lending Act, the Equal Credit
Opportunity Act, the Federal Trade Commission Act, the Fair Credit Reporting
Act, the Fair Debt Collection Procedures Act, the Magnuson-Moss Warranty Act,
the Federal Reserve Board's Regulations B and Z, the Soldiers' and Sailors'
Civil Relief Act of 1940, the Texas Consumer Credit Code, state adoptions of the
National Consumer Act and of the Uniform Consumer Credit Code (the "UCCC") and
state sales finance and other similar laws. Also, state laws impose finance
charge ceilings and other restrictions on consumer transactions and require
contract disclosures in addition to those required under federal law. These
requirements impose specific statutory liabilities upon creditors who fail to
comply with their provisions. In some cases, this liability could affect an
assignee's ability to enforce consumer finance contracts such as the Receivables
(or, if a seller with respect to a Receivable is not liable for indemnifying the
Trust as assignee of the Receivables from the Seller, failure to comply could
impose liability on an assignee in excess of the amount of the Receivable).
The so-called "Holder-in-Due-Course" Rule of the Federal Trade Commission
(the "FTC RULE"), the provisions of which are generally duplicated by the UCC,
other state statutes or the common law, has the effect of subjecting a seller in
a consumer credit transaction (and certain related creditors and their
assignees) to all claims and defenses which the obligor in the transaction could
assert against the seller. Liability under the FTC Rule is limited to the
amounts paid by the obligor under the contract and the holder of the contract
may also be unable to collect any balance remaining due thereunder from the
obligor.
Most of the Receivables will be subject to the requirements of the FTC
Rule. 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 UCC and related laws violate the due process
protections provided under the 14th
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Amendment to the Constitution of the United States. Courts have generally upheld
the notice provisions of the UCC and related laws as reasonable or have found
that the repossession and resale by the creditor do not involve sufficient state
action to afford constitutional protection to consumers.
Under each Pooling and Servicing Agreement, GMAC will represent to the
Seller that each Receivable complies with all requirements of law in all
material respects. The Seller will have assigned such representation, among
others, to the related Trust. Accordingly, if an obligor has a claim against the
Trust for violation of any law and such claim materially and adversely affects
the related Trust's interest in a Receivable, such violation 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.
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a secured party
to realize upon collateral or to enforce a deficiency judgment. For example, in
a Chapter 13 proceeding under the federal bankruptcy law, a court may prevent a
creditor from repossessing the Financed Vehicle, and, as part of the
rehabilitation plan, reduce the amount of the secured indebtedness to the market
value of the Financed Vehicle at the time of bankruptcy, leaving the creditor as
a general unsecured creditor for the remainder of the indebtedness. A bankruptcy
court may also reduce the monthly payments due under a contract or change the
rate of finance charge and time of repayment of the indebtedness.
TRANSFER OF VEHICLES
The Receivables prohibit the sale or transfer of a Financed Vehicle without
the Servicer's consent and permit the Servicer to accelerate the maturity of the
Receivable upon a sale or transfer without the Servicer's consent. The Servicer
will not consent to a sale or transfer and will require prepayment of the
Receivable. Although the Servicer, as agent of each Owner Trustee, may enter
into a transfer of equity agreement with the secondary purchaser for the purpose
of effecting the transfer of the vehicle, the new obligation will not be
included in the related Receivables Pool.
SALE OF RECEIVABLES BY GMAC
As described herein, the transaction of the Receivables that are being sold
by GMAC to the Seller and from the Seller to the Trust have been structured as,
and will be treated by the parties as, sales. 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.
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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 Internal Revenue Code of 1986, as amended (the "CODE"),
existing and proposed Treasury Regulations thereunder, current administrative
rulings, judicial decisions and other applicable authorities. There are no cases
or Internal Revenue Service ("IRS") rulings on similar transactions involving
both debt and equity interests issued by a trust with terms similar to those of
the Notes and the Certificates. As a result, there can be no assurance that the
IRS will not challenge the conclusions reached herein, and no ruling from the
IRS has been or will be sought on any of the issues discussed below.
Furthermore, legislative, judicial or administrative changes may occur, perhaps
with retroactive effect, which could affect the accuracy of the statements and
conclusions set forth herein as well as the tax consequences to Noteholders and
Certificateholders.
This discussion does not purport to deal with all aspects of federal income
taxation that may be relevant to the Noteholders and Certificateholders in light
of their personal investment circumstances nor, except for certain limited
discussions of particular topics, to 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 (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 (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 (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 herein as "TRUST
CERTIFICATES", Certificates (including Strip Certificates) and Strip Notes
issued by a Tax Partnership are referred to herein as "PARTNERSHIP
CERTIFICATES," and Certificates issued by a Tax Non-Entity are referred to
herein 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
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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. 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, Kirkland & Ellis, special tax counsel to the Seller ("TAX COUNSEL"),
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 original issue discount ("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
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.
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A holder of a Note which has a fixed maturity date not more than one year
from the issue date of such Note (a "SHORT-TERM NOTE") will generally not be
required to include OID on the Note in income as it accrues, provided such
holder is not an accrual method taxpayer, a bank, a broker or dealer that holds
the Note as inventory, a regulated investment company or common trust fund, or
the beneficial owner of certain pass-through entities specified in the Code, or
provided such holder does not hold the instrument as part of a hedging
transaction, or as a stripped bond or stripped coupon. Instead, the holder of a
Short-Term Note would include the 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 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.
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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 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 (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 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.
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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 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
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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 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.
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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 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.
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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 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.
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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 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 (as
defined in the related Prospectus Supplement) payable to the Partnership
Certificates for such month. If the Tax Partnership issues any Strip Notes or
Strip Certificates, it will also provide that the related Certificateholders
will be allocated taxable income of such Tax Partnership for each month in the
amounts described in the related Prospectus Supplement. All taxable income of
the Tax Partnership remaining after the allocations to the Certificateholders
will be allocated to the Seller. It is believed that the allocations to
Certificateholders will be valid under applicable Treasury Regulations, although
no assurance can be given that the IRS would not require a greater amount of
income to be allocated to Certificateholders. Moreover, even under the foregoing
method of allocation, Certificateholders may be allocated income equal to the
entire Pass Through Rate plus the other items described above, and holders of
Strip Notes or Strip Certificates may be allocated income equal to the amount
described in the related Prospectus Supplement, even though the related Tax
Partnership might not have sufficient cash to make current cash distributions of
such 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.
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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.
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
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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.
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.
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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 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
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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."
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 the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and Section 4975 of the Code prohibit a pension,
profit-sharing or other employee benefit plan, as well as individual retirement
accounts and certain types of Keogh Plans and certain collective investment
funds or insurance company general or separate accounts in which such plans and
accounts are invested (each a "BENEFIT PLAN"), from engaging in certain
transactions with persons that are "parties in interest" under ERISA or
"disqualified persons" under the Code with respect to such Benefit Plan. A
violation of these "prohibited transaction" rules may result in an excise tax or
other penalties and liabilities under ERISA and the Code for such persons. 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 a regulation issued by the United
States Department of Labor (the "PLAN ASSETS REGULATION"), the assets of the
Trust would be treated as plan assets of a Benefit Plan for the
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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
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 (each an "UNDERWRITING AGREEMENT") with respect to each Trust, the
Seller will agree to sell to each of the underwriters named therein and in the
related Prospectus Supplement, and each of such underwriters will severally
agree to purchase from the Seller, the principal amount of each class of
Securities of the related series set forth therein and in the related Prospectus
Supplement.
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.
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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 (the
"REGISTRATION STATEMENT") with the Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended (the "SECURITIES ACT"). 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
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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INDEX OF TERMS
Set forth below is a list of the defined terms used in this Prospectus and
the accompanying Prospectus Supplement and the pages on which the definitions of
such terms may be found herein.
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
ABS......................................................... S-9
Additional Servicing........................................ 29
Administration Agreement.................................... 39
Administrative Purchase Payment............................. 27
Administrative Receivable................................... 27
Administrator............................................... 39
Aggregate Amount Financed................................... S-8
Aggregate Discounted Principal Balance...................... S-19
Aggregate Noteholders' Interest Distributable Amount........ S-19
Aggregate Noteholders' Principal Distributable Amount....... S-19
Aggregate Principal Balance................................. 9
Amount Financed............................................. 8
Applicable Trustee.......................................... 20
APR......................................................... 10
Available Interest.......................................... S-17
Available Principal......................................... S-17
Basic Servicing Fee......................................... 29
Basic Servicing Fee Rate.................................... S-17
Benefit Plan................................................ 56
Business Day................................................ S-14
Cede........................................................ 20
Cedelbank Participants...................................... 21
Certificate Balance......................................... S-19
Certificate Distribution Account............................ 28
Certificate Pool Factor..................................... 10
Certificateholders.......................................... 10
Certificateholders' Interest Carryover Shortfall............ S-20
Certificateholders' Interest Distributable Amount........... S-20
Certificateholders' Monthly Interest Distributable Amount... S-20
Certificateholders' Percentage.............................. S-20
Certificateholders' Principal Carryover Shortfall........... S-20
Certificateholders' Principal Distributable Amount.......... S-20
Certificates................................................ 7
Closing Date................................................ S-7
Code........................................................ 44
Collection Account.......................................... 28
Cooperative................................................. 22
Cutoff Date................................................. S-8
Definitive Certificates..................................... 23
Definitive Notes............................................ 23
Definitive Securities....................................... 23
Depository.................................................. 12
Designated Accounts......................................... 28
Discount Rate............................................... S-21
Distribution Date........................................... S-14
DTC......................................................... 20
</TABLE>
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<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Eligible Deposit Account.................................... 29
Eligible Institution........................................ 29
Eligible Investments........................................ 28
ERISA....................................................... 56
Euroclear Operator.......................................... 22
Euroclear Participants...................................... 22
Events of Default........................................... 15
Excess Payment.............................................. 31
Excess Simple Interest Collections.......................... 31
Exchange Act................................................ S-24
Final Scheduled Distribution Date........................... S-16
Financed Vehicles........................................... 7
FTC Repossession Consent Order.............................. 41
FTC Rule.................................................... 42
General Motors.............................................. 8
GMAC........................................................ 8
Indenture................................................... S-14
Indenture Trustee........................................... S-14
Indirect Participants....................................... 20
Initial Aggregate Discounted Principal Balance.............. S-21
Insolvency Event............................................ 36
Insolvency Laws............................................. 11
Interest Rate............................................... S-14
Investment Earnings......................................... 29
IRS......................................................... 44
Liquidating Receivables..................................... S-17
Liquidation Expenses........................................ 30
Liquidation Proceeds........................................ S-17
Monthly Advance............................................. 32
Monthly Period.............................................. 30
Note Distribution Account................................... 28
Note Pool Factor............................................ 10
Noteholders................................................. 10
Noteholders' Interest Carryover Shortfall................... S-21
Noteholders' Interest Distributable Amount.................. S-21
Noteholders' Percentage..................................... S-21
Noteholders' Principal Carryover Shortfall.................. S-21
Noteholders' Principal Distributable Amount................. S-21
Notes....................................................... 7
OID......................................................... 45
Owner Trustee............................................... S-7
Participants................................................ 13
Partnership Certificates.................................... 44
Pass Through Rate........................................... S-21
Payment Ahead............................................... 31
Payment Ahead Servicing Account............................. 28
Payment Date................................................ 13
Plan Assets Regulation...................................... 56
Pooling and Servicing Agreement............................. 25
Prepayment.................................................. 31
Principal Balance........................................... 9
</TABLE>
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<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Principal Distributable Amount.............................. S-21
PTCE........................................................ S-22
Rating Agencies............................................. 28
Receivables................................................. 7
Receivables Pool............................................ 7
Registration Statement...................................... 58
Related Documents........................................... 17
Reserve Account............................................. 33
Rules....................................................... 20
Schedule of Receivables..................................... 25
Scheduled Interest Advance.................................. 31
Scheduled Interest Receivables.............................. 9
Scheduled Payments.......................................... 9
SEC......................................................... 58
Securities.................................................. 2
Securities Act.............................................. 58
Securityholder.............................................. 20
Seller...................................................... 11
Servicer Default............................................ 36
Short-Term Note............................................. 46
Simple Interest Advance..................................... 32
Simple Interest Receivables................................. 9
Specified Reserve Account Balance........................... S-22
Strip Certificates.......................................... 19
Strip Notes................................................. 13
Supplemental Servicing Fee.................................. 29
Tax Counsel................................................. 45
Tax Non-Entity.............................................. 44
Tax Non-Entity Certificates................................. 44
Tax Partnership............................................. 44
Tax Trust................................................... 44
Terms and Conditions........................................ 22
Total Available Amount...................................... S-17
Total Servicing Fee......................................... 29
Transfer and Servicing Agreements........................... 25
Trust....................................................... 7
Trust Agreement............................................. 18
Trust Certificates.......................................... 44
Trust Indenture Act......................................... 14
Trust Sale and Servicing Agreement.......................... 25
UCC......................................................... 27
UCCC........................................................ 42
Underwriting Agreement...................................... 57
Warranty Payment............................................ 26
Warranty Receivable......................................... 26
</TABLE>
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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 HEREIN OR
THEREIN IS CORRECT AS OF ANY TIME SINCE THE DATE OF THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS.
------------------
UNTIL MAY 25, 1999, 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.
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CAPITAL AUTO RECEIVABLES
ASSET TRUST 1999-1
$1,138,000,000
ASSET BACKED NOTES
CAPITAL AUTO RECEIVABLES, INC.
SELLER
GENERAL MOTORS
ACCEPTANCE CORPORATION
SERVICER
------------------------------------
PROSPECTUS SUPPLEMENT
------------------------------------
UNDERWRITERS
Joint Bookrunners
CREDIT SUISSE FIRST BOSTON
MERRILL LYNCH & CO.
Co-Managers
BEAR, STEARNS & CO. INC.
J.P. MORGAN & CO.
LEHMAN BROTHERS
MORGAN STANLEY DEAN WITTER
SALOMON SMITH BARNEY
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