<PAGE> 1
Rule 424(b)5
Registration Statement No. 33-50323
This Prospectus Supplement relates to an effective registration statement
under the Securities Act of 1933, and is subject to completion or
amendment. This Prospectus Supplement and the Prospectus shall not
constitute an offer to sell or the solicitation of an offer to buy nor
shall there be any sale of these securities in any state in which such
offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such state.
Subject to Completion
Preliminary Prospectus Supplement, Dated November 10, 1997
PROSPECTUS SUPPLEMENT
(To Prospectus dated November 10, 1997)
$500,000,000
Superior Wholesale Inventory Financing Trust IV
% Asset-Backed Term Notes, Series 1997-A
Wholesale Auto Receivables Corporation
Seller
General Motors Acceptance Corporation
Servicer
------------------------
The Superior Wholesale Inventory Financing Trust IV (the "Trust" or the
"Issuer") will be formed pursuant to a Trust Agreement, to be dated as of
, 1997 (the "Initial Closing Date"), between the Seller and
Chase Manhattan Bank Delaware, as Owner Trustee, and will issue % Asset-Backed
Term Notes, Series 1997-A (the "Offered Term Notes") in the aggregate original
principal amount of $500,000,000 pursuant to an Indenture, to be dated as of the
Initial Closing Date, between the Issuer and The Bank of New York, as Indenture
Trustee. On the Initial Closing Date, the Trust will also issue Series B Term
Notes, Initial Revolving Notes and Class A Certificates. The Trust may also from
time to time issue additional series of Term Notes and additional Certificates
and may increase the maximum balance of the Initial Revolving Notes and issue
additional series of Revolving Notes. Only the Offered Term Notes are offered
hereby.
Interest on the Offered Term Notes will generally be payable on the
fifteenth day of each month or, if any such day is not a Business Day, on the
next succeeding Business Day (each, a "Distribution Date") commencing December
15, 1997 (the "Initial Distribution Date"), and will accrue at a rate of % per
annum prior to the Targeted Final Payment Date for the Offered
(Continued on following page)
------------------------
PROSPECTIVE INVESTORS SHOULD CONSIDER AMONG OTHER THINGS THE INFORMATION SET
FORTH UNDER "RISK FACTORS" ON PAGE S-11 OF THIS PROSPECTUS SUPPLEMENT AND ON
PAGE 9 OF THE PROSPECTUS.
------------------------
PROCEEDS OF THE ASSETS OF THE TRUST AND LIMITED AMOUNTS ON DEPOSIT IN THE
RESERVE FUND ALONG WITH CERTAIN LIQUIDITY ARRANGEMENTS ARE THE SOLE SOURCES OF
PAYMENTS ON THE OFFERED TERM NOTES. THE OFFERED TERM NOTES DO NOT REPRESENT AN
INTEREST IN OR OBLIGATION OF, AND ARE NOT INSURED OR GUARANTEED BY, GENERAL
MOTORS ACCEPTANCE CORPORATION, WHOLESALE AUTO RECEIVABLES CORPORATION OR ANY OF
THEIR RESPECTIVE AFFILIATES.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT THE SELLER(1)
-------- ------------ -------------
<S> <C> <C> <C>
Per Offered Term Note....................................... % % %
Total....................................................... $ $ $
</TABLE>
- ------------
(1) Before deducting expenses, estimated to be $ .
------------------------
The Offered Term Notes are offered, subject to prior sale, and subject to
the Underwriter's right to reject orders in whole or in part. It is expected
that the Offered Term Notes will be delivered in book-entry form on or about the
Initial Closing Date, through the facilities of DTC, Cedel Bank, societe
anonyme, and the Euroclear System against payment therefor in immediately
available funds.
------------------------
MORGAN STANLEY DEAN WITTER
The date of this Prospectus Supplement is November , 1997.
<PAGE> 2
(Continued from previous page)
Term Notes. Unless a Rapid Amortization Period shall have commenced, no
principal payments will be made on the Offered Term Notes until the commencement
of the Index Amortization Period for the Offered Term Notes, with the first
principal payment on the Offered Term Notes scheduled for the Distribution Date
in November 1998. Principal payments will be made on the Offered Term Notes on
each Distribution Date thereafter in an amount generally expected to be equal to
the Index Amortization Amount for the Offered Term Notes. However, if a Rapid
Amortization Event occurs, principal payments on the Offered Term Notes will
commence and will not be limited to the Index Amortization Amount for the
Offered Term Notes. Other series of Term Notes that may be issued from time to
time by the Trust, including the Series B Term Notes, may require set asides or
payments of principal prior to or during the Index Amortization Period for the
Offered Term Notes. One or more series of Revolving Notes, including the Initial
Revolving Notes, may also require set asides or payments of principal prior to
or during the Index Amortization Period for the Offered Term Notes. During any
Wind Down Period or Early Amortization Period for the Trust, principal payments
on the Revolving Notes and all other series of Term Notes, including the Series
B Term Notes, will have equal priority (and will be made or set aside for
payment pro rata) with principal payments (or amounts set aside therefor) on the
Offered Term Notes. No distributions with respect to the Certificate Balance
will be made on any Certificates until all Notes are paid (or provided for) in
full and any Make-Whole Payment then owed to the Interest Rate Swap Counterparty
is paid. The Targeted Final Payment Date for the Offered Term Notes will be the
Distribution Date in November 2002, and the Stated Final Payment Date for the
Offered Term Notes will be the Distribution Date in November 2004.
The Trust's assets will include Receivables generated from time to time in
a portfolio of Accounts to finance Vehicles and Collections thereon, the Reserve
Fund, the Basis Swaps, the Interest Rate Swap, the Contingent Interest Rate
Swap, the Interest Rate Swap Guarantee, the Contingent Interest Rate Swap
Guarantee described herein and certain other property.
There is currently no secondary market for the Offered Term Notes. The
Underwriter expects to make a market in the Offered Term Notes, but is not
obligated to do so. There can be no assurance that a secondary market for the
Offered Term Notes will develop or, if it does develop, that it will continue.
The Offered Term Notes will not be listed on any securities exchange.
The Offered Term Notes initially will be represented by one or more term
notes registered in the name of Cede & Co., as nominee of DTC. The interests of
beneficial owners of the Offered Term Notes will be represented by book entries
on the records of DTC and participating members thereof. Definitive Offered Term
Notes will be available only under limited circumstances.
-------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE OFFERED TERM
NOTES. SPECIFICALLY, THE UNDERWRITER MAY OVERALLOT IN CONNECTION WITH THE
OFFERING, AND MAY BID FOR, AND PURCHASE, THE OFFERED TERM NOTES IN THE OPEN
MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION WITH
RESPECT TO THE OFFERING OF THE OFFERED TERM NOTES. ADDITIONAL INFORMATION IS
CONTAINED IN THE PROSPECTUS AND PURCHASERS ARE URGED TO READ BOTH THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF THE OFFERED TERM
NOTES MAY NOT BE CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
S-2
<PAGE> 3
SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus Supplement and in
the Prospectus. The Index of Principal Terms for this Prospectus Supplement
shows the location of capitalized terms defined in this Prospectus Supplement.
Certain capitalized terms used but not otherwise defined in this Prospectus
Supplement have the meanings assigned to such terms in the Prospectus.
ISSUER........................ Superior Wholesale Inventory Financing Trust
IV, to be formed by the Seller and the Owner
Trustee pursuant to the Trust Agreement.
SELLER........................ Wholesale Auto Receivables Corporation, a
wholly-owned subsidiary of General Motors
Acceptance Corporation.
SERVICER...................... General Motors Acceptance Corporation, a
wholly-owned subsidiary of General Motors
Corporation.
INDENTURE TRUSTEE............. The Bank of New York, as trustee under the
Indenture.
OWNER TRUSTEE................. Chase Manhattan Bank Delaware, as trustee under
the Trust Agreement.
CAPITALIZATION OF THE TRUST... On the Initial Closing Date, the Trust will
issue the Offered Term Notes, the Floating Rate
Asset-Backed Term Notes, Series 1997-B (the
"SERIES B TERM NOTES"), a Floating Rate
Asset-Backed Revolving Note, Series 1997-RN1
(the "SERIES 1997-RN1 REVOLVING NOTE"), a
Floating Rate Asset-Backed Revolving Note,
Series 1997-RN2 (the "SERIES 1997-RN2 REVOLVING
NOTE" and, together with the Series 1997-RN1
Revolving Note, the "INITIAL REVOLVING NOTES")
and Floating Rate Asset-Backed Certificates,
Class A (the "CLASS A CERTIFICATES"). Only the
Offered Term Notes are being offered hereby.
Subsequent to this offering, the Trust may
issue from time to time additional series of
Term Notes and additional series of Revolving
Notes (together with the Offered Term Notes,
the Series B Term Notes and the Initial
Revolving Notes, the "NOTES") and additional
Certificates (together with the Class A
Certificates and the Notes, the "SECURITIES").
THE OFFERED TERM NOTES........ The Trust will issue the Offered Term Notes in
the aggregate original principal amount of
$500,000,000.
THE TRUST..................... The Trust Estate will include (a) the Seller's
right, title and interest in, to and under (i)
the Eligible Receivables existing in the
Accounts included in the Pool of Accounts on
, 1997 (the "INITIAL CUT-OFF DATE") (or,
in the case of an Additional Account, the
related Additional Cut-Off Date) and the
Eligible Receivables generated under each such
Account from time to time thereafter so long as
such Account is included in the Pool of
Accounts, (ii) Collections on such Receivables
and (iii) the related Collateral Security, (b)
the Seller's rights and remedies under the
Pooling and Servicing Agreement associated with
the Receivables conveyed to the Trust, (c) the
Basis Swaps and the Interest Rate Swap, (d) the
Reserve Fund, and (e) certain accounts in the
name of the Indenture Trustee on behalf of the
holders of the related Securities. Under
certain circumstances, Accounts may be added or
removed from the Pool of Accounts.
S-3
<PAGE> 4
The Trust will commence its existence on the
Initial Closing Date. During the Revolving
Period for the Trust, Trust Principal
Collections which are not needed for set asides
or payments of principal on the Notes, or to be
held as the Cash Collateral Amount, will be
paid to the Seller to acquire new Receivables.
The Revolving Period for the Trust will
continue until (i) GMAC elects at any point
after September 30, 1998, not to extend the
Revolving Period, in which case a Wind Down
Period for the Trust will commence, (ii) the
Final Revolving Period Termination Date occurs
in which case a Wind Down Period for the Trust
will commence, or (iii) an Early Amortization
Event for the Trust occurs, in which case an
Early Amortization Period for the Trust will
commence.
During the Wind Down Period or an Early
Amortization Period for the Trust, the Trust
will no longer be permitted to acquire
Receivables from the Seller. Available Trust
Principal during such periods will be allocated
and paid or set aside in respect of Securities
issued by the Trust, rather than being paid to
the Seller to acquire new Receivables.
TERMS OF THE OFFERED TERM
NOTES......................... The principal terms of the Offered Term Notes
will be as follows:
A. PAYMENT DATES.............. Payments of interest on the Offered Term Notes
will be made on each Distribution Date,
commencing on the Initial Distribution Date.
Payments will be made to the holders of the
Offered Term Notes of record as of the day
immediately preceding such Distribution Date
(or, if Definitive Offered Term Notes are
issued, as of the last day of the preceding
month).
B. INTEREST................... Interest on the outstanding principal balance
of the Offered Term Notes will be payable on
each Distribution Date, commencing with the
Initial Distribution Date and, prior to the
Targeted Final Payment Date for the Offered
Term Notes, will accrue at a rate of % per
annum, calculated on the basis of a 360-day
year of twelve 30-day months (or, in the case
of the Initial Distribution Date, days
divided by 360 days). If the Offered Term Notes
are not paid in full on or prior to the
Targeted Final Payment Date for the Offered
Term Notes, from and after such Targeted Final
Payment Date, interest on the Offered Term
Notes will accrue at a rate of LIBOR plus
0.25%, calculated on the basis of a 360-day
year and the actual number of days elapsed from
and including the prior Distribution Date to
but excluding such Distribution Date. Interest
payments on the Offered Term Notes will be
derived from receipts on the Interest Rate
Swap, Available Trust Interest to the extent
described herein and, to the extent necessary
and available therefor, Servicer Advances and
withdrawals from the Reserve Fund.
C. PRINCIPAL.................. Unless a Rapid Amortization Period shall have
commenced, no principal payments will be made
on the Offered Term Notes until the
commencement of the Index Amortization Period
with respect to the Offered Term Notes. On each
Distribution Date relating to the Index
Amortization Period or a Rapid Amortization
Period for the Offered Term Notes, principal
payments will be made in an
S-4
<PAGE> 5
amount equal to the Required Payment for the
Offered Term Notes. The "REQUIRED PAYMENT" for
the Offered Term Notes will be determined as
follows: (a) for any Distribution Date prior to
the Targeted Final Payment Date for the Offered
Term Notes related to the Index Amortization
Period (which may coincide with a Cash
Accumulation Period for the Offered Term Notes
or the Wind Down Period or Early Amortization
Period for the Trust), (i) if the outstanding
principal balance of the Offered Term Notes
(after giving effect to any payments on such
Distribution Date) is greater than $50,000,000,
the Required Payment will be the Index
Amortization Amount for such Distribution Date,
or (ii) if the outstanding principal balance of
the Offered Term Notes (after giving effect to
any payments on such Distribution Date) is less
than or equal to $50,000,000, the Required
Payment will be the outstanding principal
balance of the Offered Term Notes for such
Distribution Date; provided, however, in either
case (i) or (ii), with respect to any
Distribution Date related to a Cash
Accumulation Period, such amount will not
exceed the sum of (x) the Principal Allocation
Percentage for the Offered Term Notes of
Available Trust Principal for such Distribution
Date and the related Collection Period and (y)
the amount of funds available in the Cash
Accumulation Account for the Offered Term Notes
on such Distribution Date; and (b) for any
Distribution Date related to a Rapid
Amortization Period or on or after the Targeted
Final Payment Date for the Offered Term Notes,
the Required Payment will be the sum of (i) the
Principal Allocation Percentage for the Offered
Term Notes of Available Trust Principal for
such Distribution Date and the related
Collection Period and (ii) the amount of funds
available in the Cash Accumulation Account for
the Offered Term Notes on such Distribution
Date, to the extent not included in (i). For
any Distribution Date prior to November 16,
1998, other than during a Rapid Amortization
Period, the Required Payment will be zero.
The "INDEX AMORTIZATION AMOUNT" for a
Distribution Date will be the product of (a)
the percentage (which will range from 0.037% to
22.000%) that corresponds on the Prepayment
Calculation Table set forth in Annex I attached
to this Prospectus Supplement with the PSA
Index Rate for such Distribution Date and (b)
the outstanding principal balance of the
Offered Term Notes as of the prior Distribution
Date (after giving effect to any payment of
principal on the Offered Term Notes on such
prior Distribution Date). The PSA Index Rate
(as defined herein) for a Distribution Date
generally is the rate that appears on page
"FMAC A018" of Bloomberg and that is titled
"Reference Collateral 30-year Gold 7.50, Issued
in 1995," which refers to the 30-year FHLMC
Gold 7.50% mortgage participation certificates
issued in calendar year 1995 (the "REFERENCE
COLLATERAL POOL"), under the column heading "1
MO" opposite the row "PSA," on the date (the
"INDEX AMORTIZATION DATE") that is the first
Business Day of the Collection Period in which
such Distribution Date occurs. See "The Offered
Term Notes -- Principal."
S-5
<PAGE> 6
The "TARGETED FINAL PAYMENT DATE" for the
Offered Term Notes will be the Distribution
Date in November 2002, and the "STATED FINAL
PAYMENT DATE" for the Offered Term Notes will
be the Distribution Date in November 2004. If
the Offered Term Notes have not been paid in
full on their Stated Final Payment Date, a
Rapid Amortization Period for the Offered Term
Notes and an Early Amortization Period for the
Trust will commence.
The payment of principal of the Offered Term
Notes is intended to occur in a manner that is
largely unaffected by whether the Trust is in
the Revolving Period, the Wind Down Period or
an Early Amortization Period (unless a Rapid
Amortization Period is also occurring).
D. INDEX AMORTIZATION
PERIOD........................ Unless a Rapid Amortization Period shall have
commenced, the "INDEX AMORTIZATION PERIOD" for
the Offered Term Notes will commence on October
1, 1998, and the first Distribution Date on
which a payment of principal will be made on
the Offered Term Notes will be on November 16,
1998. The Index Amortization Period will
continue until the earliest of (a) the
commencement of a Rapid Amortization Period for
the Offered Term Notes, (b) the date on which
all the outstanding Offered Term Notes are paid
in full and (c) the Stated Final Payment Date
for the Offered Term Notes. On each
Distribution Date relating to the Index
Amortization Period for the Offered Term Notes,
the Trust will make principal payments on the
Offered Term Notes in an amount equal to the
Required Payment for the Offered Term Notes for
such Distribution Date.
During the Index Amortization Period for the
Offered Term Notes, unless a Cash Accumulation
Period shall have commenced and be continuing,
no amount will be required to be set aside
during any Collection Period to fund the
Required Payment for the Offered Term Notes.
The sources of funds to make such Required
Payments will be borrowings under the Revolving
Notes, Servicer Liquidity Advances and proceeds
from the issuance of additional securities by
the Trust. The failure to pay the Required
Payment for the Offered Term Notes in full for
any Distribution Date during the Index
Amortization Period will be a Cash Accumulation
Event for the Offered Term Notes and an Early
Amortization Event for the Trust.
E. CASH ACCUMULATION PERIOD... A Cash Accumulation Period with respect to the
Offered Term Notes may occur within or prior to
the Index Amortization Period. Such a Cash
Accumulation Period will commence upon the
occurrence of a Cash Accumulation Event for the
Offered Term Notes and will end on the earliest
of (a) the date on which the Offered Term Notes
are paid in full, (b) the occurrence of a Rapid
Amortization Event for the Offered Term Notes,
(c) the Trust Termination Date, and (d) the
remediation of the Cash Accumulation Event and
the recommencement of the Revolving Period for
the Trust. On each day during a Cash
Accumulation Period for the Offered Term Notes,
the Offered Term Notes will be allocated their
Principal Allocation Percentage of Available
Trust Principal and such amounts will be
deposited in the Cash Accumulation
S-6
<PAGE> 7
Account for the Offered Term Notes (until the
amount on deposit therein equals the
outstanding principal balance of the Offered
Term Notes) and will be invested in Eligible
Investments. Amounts in the Cash Accumulation
Account, other than Cash Accumulation Account
Earnings, and any Make-Whole Payment received
by the Trust and the earnings thereon, will be
available solely to the Offered Term Notes to
make principal payments on subsequent
Distribution Dates. In contrast, any series of
Securities issued by the Trust that does not
have a cash accumulation arrangement, upon the
occurrence of any Early Amortization Event (as
well as the Offered Term Notes, upon the
occurrence of a Rapid Amortization Event), will
apply all Available Trust Principal allocated
to such series of Securities to the repayment
of principal on each Distribution Date
beginning with the Distribution Date related to
the Collection Period in which such Early
Amortization Event occurred.
Each of the Early Amortization Events for the
Trust and the commencement of a Wind Down
Period for the Trust will constitute a "CASH
ACCUMULATION EVENT" for the Offered Term Notes,
except (i) certain insolvency events relating
to General Motors, the Servicer, GMAC, or the
Seller, (ii) termination of the Interest Rate
Swap (which is not an Early Amortization Event
for the Trust), and (iii) the failure to pay
the outstanding principal balance of the Notes
or any other Certificates by their respective
Stated Final Payment Date. The preceding three
clauses will each constitute a "RAPID
AMORTIZATION EVENT" for the Offered Term Notes.
F. RAPID AMORTIZATION
PERIOD........................ A Rapid Amortization Period for the Offered
Term Notes will commence upon the occurrence of
a Rapid Amortization Event and will end on the
earlier of (a) the date on which the Offered
Term Notes are paid in full and (b) the Trust
Termination Date. On each day during a Rapid
Amortization Period for the Offered Term Notes,
the Offered Term Notes will be allocated their
Principal Allocation Percentage of Available
Trust Principal. All amounts so allocated on
any Distribution Date during a Rapid
Amortization Period will be paid to the holders
of the Offered Term Notes on the related
Distribution Date, together with any amounts in
the Cash Accumulation Account for the Offered
Term Notes on such Distribution Date.
G. INTEREST RATE SWAP......... On the Initial Closing Date, the Trust, solely
for the benefit of the Offered Term Notes, will
enter into (i) the Interest Rate Swap with AIG
Financial Products Corp., as the Interest Rate
Swap Counterparty, and (ii) a triparty
contingent assignment with the Interest Rate
Swap Counterparty and Morgan Stanley Capital
Services Inc., as the Contingent Interest Rate
Swap Counterparty, pursuant to which the
Contingent Interest Rate Swap Counterparty will
assume the obligations of the Interest Rate
Swap Counterparty upon the occurrence of
certain events. Also on the Initial Closing
Date, American International Group, Inc. will
guarantee amounts payable by the Interest Rate
Swap Counterparty under the Interest Rate Swap
and Morgan Stanley,
S-7
<PAGE> 8
Dean Witter, Discover & Co. will guarantee
amounts payable, if any, by the Contingent
Interest Rate Swap Counterparty under the
Interest Rate Swap.
The Interest Rate Swap is intended to allow the
Trust to receive interest at a rate equal to
the interest rate with respect to the Offered
Term Notes. Under the Interest Rate Swap, the
Trust will be obligated to pay solely out of
the Noteholders' Interest with respect to the
Offered Term Notes and Cash Accumulation
Account Earnings, a monthly interest rate which
is the lower of the LIBOR based rate or the
Assets Receivables Rate on a notional amount
equal to the outstanding principal balance of
the Offered Term Notes (the "FLOATING RATE SWAP
PAYMENT"), on the one hand, and the Trust will
have the right to receive, solely for the
benefit of the Offered Term Notes, a fixed rate
of interest (or after the Targeted Final
Payment Date for the Offered Term Notes, LIBOR
plus 0.25%) on a notional amount equal to the
outstanding principal balance of the Offered
Term Notes (the "FIXED RATE SWAP PAYMENT"), on
the other hand. The Interest Rate Swap
Counterparty will cover any principal losses
with respect to Eligible Investments on funds
in the Cash Accumulation Account.
OTHER SECURITIES ISSUED BY THE
TRUST:
A. THE SERIES B TERM NOTES.... The Trust will issue the Series B Term Notes on
the Initial Closing Date with an aggregate
original principal amount of $500,000,000.
Principal on the Series B Term Notes will be
due (to the extent of funds available for such
purpose) in three instalments on the three
consecutive Distribution Dates ending on the
April 2000 Distribution Date (the "SERIES B
TARGETED FINAL PAYMENT DATE"). If the Series B
Term Notes are not paid in full on the Series B
Targeted Final Payment Date, payments of
principal will be made on each Distribution
Date thereafter until so paid in full. To the
extent not previously paid, the entire
outstanding principal balance, if any, of the
Series B Term Notes will be payable on the
Distribution Date in April 2002 (the "SERIES B
STATED FINAL PAYMENT DATE"). The Series B Term
Notes may be prepaid, in whole or in part, at
any time during the Revolving Period for the
Trust, and such prepayment could occur in
connection with the issuance by the Trust of a
new series of Notes.
B. THE INITIAL REVOLVING
NOTES......................... The Specified Maximum Revolver Balance will
initially be $1,500,000,000 less the then
outstanding principal balance of the Offered
Term Notes. Such amount may be increased or
decreased, and additional series of Revolving
Notes (which may have different Revolver
Interest Rates, Targeted Final Payment Dates,
if any, and Stated Final Payment Dates) may be
issued from time to time as described herein
and in the Prospectus. No additional borrowings
may be made under the Revolving Notes during
the Wind Down Period or any Early Amortization
Period for the Trust or during the Revolving
Note Amortization Period for such Revolving
Notes.
C. THE CLASS A CERTIFICATES... The Trust will issue Class A Certificates on
the Initial Closing Date with an aggregate
initial Certificate Balance of $174,000,000.
S-8
<PAGE> 9
From time to time after the Initial Closing
Date, additional Certificates may be issued.
TRUST CREDIT AND LIQUIDITY
SUPPORT:
A. BASIS SWAPS................ On the Initial Closing Date, the Trust will
enter into five Basis Swaps with GMAC as the
Basis Swap Counterparty. Each Basis Swap is
intended to allow the Trust to receive interest
at a rate determined by reference to the index
upon which the rate of interest for the
applicable series of Notes or Certificates or
amounts payable under any related Specified
Support Arrangement is based. In each case, the
Trust will pay an interest rate determined by
reference to the Prime Rate, on the one hand,
and the Trust will receive a rate of interest
determined by reference to the applicable
index, on the other hand.
Under the Basis Swaps, on each Distribution
Date, the amount the Trust is obligated to pay
will be netted against the amount the Basis
Swap Counterparty is obligated to pay such that
only the net amount will be due from the Trust
or the Basis Swap Counterparty, as the case may
be.
The termination of a Basis Swap, except in
connection with the issuance of additional
Securities, the payment in full of any Term
Notes or a change in the Specified Maximum
Revolver Balance, will be a Cash Accumulation
Event for the Offered Term Notes and an Early
Amortization Event for the Trust.
B. OTHER CREDIT AND
LIQUIDITY SUPPORT............. The Reserve Fund will be created for the
benefit of the Trust and the holders of the
Notes. The Reserve Fund Initial Deposit to be
made by the Seller will equal $21,740,000. The
Seller may make additional deposits into the
Reserve Fund from time to time. The
Certificates will be subordinate to the Notes
(including the Offered Term Notes) to the
extent described herein. In addition, the
Servicer will make Servicer Advances and
Servicer Liquidity Advances in certain
circumstances.
TAX STATUS.................... In the opinion of Kirkland & Ellis, special tax
counsel to the Seller, for U.S. federal income
tax purposes, the Offered Term Notes will
constitute indebtedness. Each holder of Offered
Term Notes, by the acceptance of an Offered
Term Note, will agree to treat the Offered Term
Notes as indebtedness for federal, state and
local income and franchise tax purposes. See
"Certain Federal Income Tax Consequences."
ERISA CONSIDERATIONS.......... Subject to the considerations discussed under
"ERISA Considerations" in the Prospectus, the
Offered Term Notes are eligible for purchase by
employee benefit plans.
RATINGS....................... As a condition of issuance, the Offered Term
Notes will be rated in the highest rating
category by at least one nationally recognized
rating agency. The rating of the Offered Term
Notes is based in part on the credit ratings of
the Interest Rate Swap Counterparty, the
Interest Rate Swap Guarantor, the Contingent
Interest Rate Swap Counterparty and the
Contingent Interest Rate Swap Guarantor as well
as the terms of the Interest Rate Swap and the
S-9
<PAGE> 10
guarantees relating thereto and the anticipated
performance of the Receivables. There is no
assurance that a rating will not be lowered or
withdrawn by a rating agency if circumstances
so warrant. The rating of the Offered Term
Notes addresses the timely payment of interest
and the likelihood of payment of principal by
the Stated Final Payment Date. It does not
address the likelihood of timely payment of any
Index Amortization Amount or any other amount
of principal prior to the Stated Final Payment
Date. In the event that any rating initially
assigned to the Offered Term Notes is
subsequently lowered for any reason, no person
or entity is obligated to provide any
additional enhancement with respect to the
Offered Term Notes.
S-10
<PAGE> 11
RISK FACTORS
Maturity Assumptions and Early Payment Risks; Yield Considerations. Unless
a Rapid Amortization Event occurs, until the outstanding principal balance of
the Offered Term Notes is less than or equal to $50,000,000, the timing of
repayment of principal of the Offered Term Notes will vary according to the rate
of principal prepayments of the mortgage loans underlying the Reference
Collateral Pool (the "BASE MORTGAGE LOANS") and will be based upon the related
Monthly Amortization Rate, which may vary from 0.037% to 22.000%, and the other
factors described herein. The Monthly Amortization Rate is not intended to equal
the principal prepayment rate on the Base Mortgage Loans. The rate of principal
prepayments on the Reference Collateral Pool (as reflected in the PSA Index
Rate) will be influenced by a number of other factors, including changes in
interest rates, general economic conditions and, as a result of
"due-on-transfer" clauses, homeowner mobility, and will include prepayments and
liquidation resulting from default, casualty or condemnation and payments made
pursuant to any guaranty of payment by, or option to repurchase of, the Federal
Home Loan Mortgage Corporation. The rate of prepayments on mortgage loans has
fluctuated significantly in recent years, and variations in the rate of
principal repayment of the Offered Term Notes may be significant. The yield to
maturity rate for each of the Offered Term Notes will depend upon the purchase
price thereof and the rate of principal thereon. In general, the earlier the
payment of principal, the greater the effect on an investor's yield to maturity.
Generally, if the actual rate of prepayments on the Base Mortgage Loans, and
thus on the Offered Term Notes, is slower than the rate anticipated by an
investor who purchased Offered Term Notes at a discount, the actual yield to
such investor may be lower than such investor's anticipated yield. If the actual
rate of prepayments on the Base Mortgage Loans is faster than the rate
anticipated by an investor who purchased Offered Term Notes at a premium, the
actual yield to such investor also may be lower than such investor's anticipated
yield. In addition, the timing of changes in the rate of principal prepayments
on the Base Mortgage Loans (and, thus, the rate of payment of the Offered Term
Notes) also may significantly affect the yield to an investor, even if the
average rate of principal prepayments is consistent with such investor's
expectations. Similarly, during a Rapid Amortization Period (which, among other
things, occurs upon the termination of the Interest Rate Swap), principal
payments on the Offered Term Notes will not be limited to the Index Amortization
Amount. Investors must make their own decisions as to the appropriate
assumptions, including payment assumptions, to be used in deciding whether to
purchase the Offered Term Notes. In deciding whether to purchase the Offered
Term Notes, investors should satisfy themselves that they understand the
prepayment risk associated with mortgage securities and the Offered Term Notes.
In addition, an investor should purchase Offered Term Notes only after
performing an analysis of the Reference Collateral Pool based upon the
investor's own assumptions as to future rates of mortgage prepayments, the
effect of the Prepayment Calculation Table and the probability of and the
effects of a Rapid Amortization Event.
Reinvestment Risk. As described herein, the rate of principal repayment of
the Offered Term Notes depends on a number of factors, including the PSA Index
Rate (which in turn reflects the rate of prepayments on the Reference Collateral
Pool), the effect of the Prepayment Calculation Table and the probability of and
the effects of a Rapid Amortization Event. Accordingly, it is not possible to
predict the rate at which principal of the Offered Term Notes will be paid.
Moreover, since prevailing interest rates are subject to fluctuation, there can
be no assurance that investors in the Offered Term Notes will be able to
reinvest the payments thereon at yields equaling or exceeding the yield on such
Offered Term Notes. It is possible that yields on such reinvestments will be
lower, and may be significantly lower, than the yield on the Offered Term Notes.
Investors in the Offered Term Notes should consider the related reinvestment
risk in light of other investments that may be available to such investors.
Limited Sources of Funds for Repayment. During the Revolving Period for the
Trust unless a Rapid Amortization Event for the Offered Term Notes shall have
occurred, no amount will be required to be set aside during any Collection
Period to fund the Required Payment for the Offered Term Notes. In such event,
the sole source of funds to make payments of principal on the Offered Term Notes
will be borrowings under the Revolving Notes, Servicer Liquidity Advances and
proceeds from the issuance of additional securities by the Trust. Additional
borrowings under the Revolving Notes are subject to the approval of the holders
thereof, and no borrowings may be made under any Revolving Note during its
Revolving Note Amortization Period,
S-11
<PAGE> 12
which may coincide with a Distribution Date on which there is a Required Payment
for the Offered Term Notes. Since the Initial Revolving Notes have initial
Targeted Final Payment Dates prior to the Stated Final Payment Date for the
Offered Term Notes, there can be no assurance that one or more Revolving Notes
will be outstanding on each such Distribution Date as a source of funds to make
principal payments on the Offered Term Notes. The failure to pay the Required
Payment for the Offered Term Notes in full for any Distribution Date during the
Index Amortization Period for the Offered Term Notes will be a Cash Accumulation
Event for the Offered Term Notes and an Early Amortization Event for the Trust.
Relationship to Interest Rate Swap. Payments by the Interest Rate Swap
Counterparty will be utilized to help make interest payments on the Offered Term
Notes and to cover principal losses, if any, on Eligible Investments related to
the Cash Accumulation Account. The ability of the Trust to make such interest
payments will be particularly dependent on the Interest Rate Swap receipts in
periods in which LIBOR is substantially less than the interest rate on the
Offered Term Notes. On the other hand, in periods in which the interest rate on
the Offered Term Notes is less than the LIBOR-based obligation of the Trust on
the Interest Rate Swap, the Interest Rate Swap Counterparty will be entitled to
receive payments from the Trust. The Interest Rate Swap Counterparty's claim on
Trust assets allocated to pay such amounts will be senior to the right of the
Offered Term Noteholders to receive interest payments. Therefore, in the event
of a shortfall in Trust resources allocated to these uses, the Interest Rate
Swap Counterparty will be paid in full prior to any payment of interest on the
Offered Term Notes.
Potential Conflicts of Interest. The Principal Calculation Agent is the
Interest Rate Swap Counterparty and, accordingly, potential conflicts of
interest may exist between the Interest Rate Swap Counterparty and the holders
of Offered Term Notes. The Interest Rate Swap Counterparty is obligated to carry
out duties and functions as Principal Calculation Agent in good faith and using
its reasonable judgment.
THE TRUST
GENERAL
The Trust is a business trust to be formed under the laws of the State of
Delaware pursuant to a Trust Agreement dated as of the Initial Closing Date
between the Seller and the Owner Trustee, acting thereunder not in its
individual capacity but solely as trustee for the Trust (as amended and
supplemented from time to time, the "TRUST AGREEMENT"). After its formation, the
Trust will not engage in any activity other than (a) acquiring, holding and
managing the Receivables and other assets as contemplated herein and proceeds
thereof, (b) issuing the Securities, (c) making payments on the Securities and
(d) engaging in other activities that are necessary, suitable or convenient to
accomplish any of the foregoing or are incidental thereto or in connection
therewith.
The Certificates represent the equity of the Trust. The Seller will
initially retain all of the Class A Certificates to be issued on the Initial
Closing Date.
The Trust's principal offices will be located at 1201 Market Street,
Wilmington, Delaware 19801.
CAPITALIZATION OF THE TRUST
The following table illustrates the capitalization of the Trust as of the
Initial Closing Date, after giving effect to the sale of the Securities
contemplated hereby and assuming the Specified Maximum Revolver Balance was
borrowed on such date under the Initial Revolving Notes:
<TABLE>
<S> <C>
Offered Term Notes.......................................... $ 500,000,000
Series B Term Notes......................................... 500,000,000
Series 1997-RN1 Revolving Note.............................. 670,000,000
Series 1997-RN2 Revolving Note.............................. 330,000,000
Class A Certificates........................................ 174,000,000
--------------
Total.................................................. $2,174,000,000
==============
</TABLE>
The "SPECIFIED CERTIFICATE PERCENTAGE" will be 8.0%.
S-12
<PAGE> 13
THE OWNER TRUSTEE
Chase Manhattan Bank Delaware, a Delaware banking corporation, is the Owner
Trustee under the Trust Agreement. Its principal offices are located at 1201
Market Street, Wilmington, Delaware 19801.
THE TRUST
The property of the Trust (the "TRUST ESTATE") will include (a) the
Seller's right, title and interest in, to and under (i) the Eligible Receivables
existing in the Accounts included in the Pool of Accounts on the Initial Cut-Off
Date, (ii) the Eligible Receivables existing in the Additional Accounts included
in the Pool of Accounts on the related Additional Cut-Off Date, (iii) the
Eligible Receivables generated under each of the foregoing Accounts from time to
time thereafter so long as such Account is included in the Pool of Accounts,
(iv) Collections on all such Eligible Receivables and (v) the related collateral
Security for such Eligible Receivables; (b) the Seller's rights and remedies
under the Pooling and Servicing Agreement associated with the Receivables
transferred to the Trust; (c) each of the five initial Basis Swaps and any other
basis swaps entered into after the Initial Closing Date; (d) the following
accounts, including in each case the amounts held therein, (i) the Reserve Fund,
(ii) the Collection Account, (iii) the Cash Accumulation Account, (iv) for the
benefit of each series of Term Notes or Revolving Notes, the applicable Note
Distribution Account or Revolver Distribution Account, (v) for the benefit of
each series of Certificates, the applicable Certificate Distribution Account,
and (vi) any other account hereafter established for the benefit of all holders
of Securities or for the benefit of a specific series; (e) for the benefit of
the Offered Term Notes, the Interest Rate Swap Documents; and (f) any other
Specified Support Arrangement or other assets transferred to the Trust after the
Initial Closing Date.
Overview. There are three basic and mutually exclusive time periods for the
Trust: the Revolving Period, the Wind Down Period and an Early Amortization
Period. In addition, series of Securities issued by the Trust may have Payment
Periods during which Available Trust Principal allocated to such series of
Securities is paid to, or set aside for the benefit of, the holders of such
Securities. Payment Periods occur only during the Revolving Period.
Revolving Period. During the Revolving Period, the Trust may, on a daily
basis, use Trust Principal Collections (i) to make payments of principal on the
Revolving Notes, (ii) to purchase Receivables from the Seller, (iii) as part of
the Cash Collateral Amount, to the extent required to maintain the Daily Trust
Balance equal to the Daily Trust Invested Amount and (iv) to make principal
payments or set asides on any series of Notes which then requires Available
Trust Principal to be retained or set aside to fund such payments. No
distributions of Certificate Balance will be made during the Revolving Period.
During the Revolving Period, the Trust may issue from time to time, subject to
the conditions described in the Prospectus under "The Transfer and Servicing
Agreements -- Additional Issuances; Changes in Specified Maximum Revolver
Balance," additional series of Term Notes and Revolving Notes.
The "SCHEDULED REVOLVING PERIOD TERMINATION DATE" will initially be
September 30, 1998, and will be automatically extended to the last day of each
succeeding month (but not beyond July 31, 2002 (the "FINAL REVOLVING PERIOD
TERMINATION DATE")) unless the Seller, prior to the then Scheduled Revolving
Period Termination Date, elects to cause such extension not to occur. Unless
such election is made as described below, each such extension will become
effective as of the Business Day prior to the then Scheduled Revolving Period
Termination Date. In addition, the Seller may, at any time prior to the then
Scheduled Revolving Period Termination Date, elect to extend the Scheduled
Revolving Period Termination Date to the last day of any specified month (but
not beyond the Final Revolving Period Termination Date), subject thereafter to
further automatic extensions beyond the last day of such specified month as
described in the preceding two sentences. Each such election described in this
paragraph will be made by providing written notice to such effect to the
Servicer, the Owner Trustee (who will be obligated to provide notice to the
Certificateholders), the Indenture Trustee (who shall be obligated to provide
notice to the Noteholders and to the Interest Rate Swap Counterparty) and the
Rating Agencies. Assuming no Early Amortization Event has occurred, the
Revolving Period will terminate upon the occurrence of the then Scheduled
Revolving Period Termination Date and the Wind Down Period will commence on the
immediately following day.
S-13
<PAGE> 14
If an election is made by the Seller such that the Revolving Period
terminates and the Wind Down Period commences prior to the Final Revolving
Period Termination Date, the Seller may elect to recommence the Revolving Period
on any date prior to the date that is the earlier of (1) the one year
anniversary of the termination of the Revolving Period and (2) the Final
Revolving Period Termination Date, so long as no Early Amortization Event has
occurred or is continuing; provided that, if an Early Amortization Event
described in subparagraphs (f), (h) or (j) under "The Transfer and Servicing
Agreements -- Early Amortization Events" in the Prospectus has occurred (each of
which is a Cash Accumulation Event for the Offered Term Notes), the Seller may
nonetheless elect to so recommence the Revolving Period so long as the event
giving rise to such Early Amortization Event has not existed for three
consecutive months and no other Early Amortization Event has occurred which has
not been cured as set forth above and so long as the long-term debt obligations
of GMAC are rated at least "Baa3" by Moody's. In any event, no recommencement of
the Revolving Period may occur unless the amount in the Reserve Fund on the date
of the recommencement equals or exceeds the amount that was in the Reserve Fund
on the date of the commencement of the Wind Down Period, but in any event shall
not be less than the Reserve Fund Required Amount, and after giving effect to
all issuances of Securities and all changes in the Specified Maximum Revolver
Balance on the date of the commencement, the quotient of (A) the outstanding
Certificate Balance of all the outstanding Certificates divided by (B) the
Maximum Pool Balance equals or exceeds the Specified Certificate Percentage. Any
election to recommence the Revolving Period will be made by giving a notice as
described above.
Payment Periods. A Payment Period with respect to a series of Notes occurs
during the Revolving Period. If so specified with respect to such series of
Notes, Available Trust Principal will be used or set aside during such Payment
Period for the purpose of repaying the outstanding principal balance of such
Notes. No series of Notes will be allocated Available Trust Principal during its
Payment Period in excess of its Principal Allocation Percentage thereof. If (as
is the case for the Offered Term Notes) Trust Principal Collections will not be
set aside during the Payment Period to repay the outstanding principal balance,
then alternate sources of such repayment will be specified. Available Trust
Principal which is not applied for such purpose will be used for the other
purposes specified above under "The Trust -- Revolving Period."
Wind Down Period; Early Amortization Period. The Revolving Period will be
followed by either the Wind Down Period or an Early Amortization Period. During
a Wind Down Period or an Early Amortization Period for the Trust, the Trust will
no longer reinvest Trust Principal Collections in new Receivables, nor will it
make additional borrowings under any Revolving Notes or issue any additional
Securities. Instead, Available Trust Principal will be allocated to each series
of Notes in accordance with such series' Principal Allocation Percentage, and
such Available Trust Principal will be paid or set aside in respect of amounts
owed to such series.
Unless an Early Amortization Period has commenced and is continuing, the
Wind Down Period for the Trust will begin on the day immediately following the
Scheduled Revolving Period Termination Date and will continue until the earlier
of (a) the commencement of an Early Amortization Period, (b) the date on which
all outstanding Securities are paid in full and (c) under the limited
circumstances described above under "The Trust -- Revolving Period," the
recommencement of the Revolving Period.
An Early Amortization Period will commence upon the occurrence of an Early
Amortization Event (whether it occurs during the Revolving Period or the Wind
Down Period). The Early Amortization Events are set out in the Prospectus under
"The Transfer and Servicing Agreements -- Early Amortization Events."
THE U.S. PORTFOLIO
GENERAL
As of September 30, 1997, there were approximately 8,400 active credit
lines with dealers in the U.S. Portfolio and the total U.S. Portfolio (which
includes both owned receivables and serviced receivables) consisted of
receivables with an aggregate principal balance of approximately $16.4 billion.
GMAC is the primary source of floor plan financing for General Motors-franchised
dealers in the United States. In the third quarter of 1997, GMAC provided
financing for approximately 67.7% of new factory sales to General Motors dealers
in the United States.
S-14
<PAGE> 15
As of September 30, 1997, receivables with respect to New Vehicles
represented approximately 85% of the aggregate principal amount of all
receivables in the U.S. Portfolio; receivables with respect to Used Vehicles
represented approximately 8% of the aggregate principal amount of all
receivables in the U.S. Portfolio; and other receivables (generally receivables
with respect to heavy-duty trucks, off-highway vehicles and marine units)
represented approximately 7% of the aggregate principal amount of all
receivables in the U.S. Portfolio. As of September 30, 1997, approximately 55%
of the Used Vehicles in the U.S. Portfolio represented Auction Vehicles. As of
September 30, 1997, the average Account in the U.S. Portfolio provided for
credit lines for New Vehicles and Used Vehicles of approximately 212 units and
46 units, respectively, and the average aggregate principal balance of
receivables thereunder was approximately $2.0 million and $0.2 million,
respectively.
For the first nine months of 1997, the weighted average spread over the
Prime Rate charged to dealers in the U.S. Portfolio was approximately 0.8%. This
spread over the Prime Rate does not include the impact to many of these dealers
of a GMAC incentive program, which entitles them to a credit based on interest
charges. For the first nine months of 1997, the average annual rate of such
credit ranged between 40 and 66 basis points. The amount of any such credit is
applied to a participating dealer's interest charges on floor plan and other
loans, if any.
As of September 30, 1997, the aggregate principal amount financed with
respect to dealers assigned to "no credit" status was approximately $4.4 million
or 0.03% of the aggregate principal amount financed in the U.S. Portfolio.
LOSS EXPERIENCE
The following table sets forth GMAC's average principal balance of
receivables and loss experience for the U.S. Portfolio as a whole in each of the
periods shown. The U.S. Portfolio includes Fleet Accounts and other accounts
that are not Eligible Accounts as well as Accounts that meet the eligibility
criteria for inclusion in the Trust but were not selected. Thus, the Accounts
related to the Trust represent only a portion of the entire U.S. Portfolio and,
accordingly, actual loss experience with respect to such Accounts may be
different than that of the U.S. Portfolio as a whole. There can be no assurance
that the loss experience for Receivables in the future will be similar to the
historical experience set forth below. The following historical experience
reflects financial assistance and incentives provided, from time to time, by
General Motors and GMAC to General Motors-franchised dealers, including those
described in the Prospectus under "The Dealer Floor Plan Financing Business --
Relationship of the Dealer Floor Plan Financing Business to General Motors." If
General Motors or GMAC reduced or was unable or elected not to provide such
assistance or incentives, the loss experience of the U.S. Portfolio, including
the Accounts, may be adversely affected. See "Special Considerations --
Relationship of Each Trust to General Motors and GMAC" in the Prospectus.
LOSS EXPERIENCE FOR THE U.S. PORTFOLIO
<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED DECEMBER 31,
ENDED ---------------------------------------
SEPTEMBER 30, 1997 1996 1995 1994
------------------ ---- ---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Average Principal Receivables
Balance(1)............................. $19,359.2 $18,210.7 $18,227.5 $14,456.5
Net Losses (Recoveries)(2)............... $ 3.7 $ (8.1) $ 6.2 $ (1.2)
Net Losses
(Recoveries)/Liquidations(3)........... 0.006% (0.009)% 0.007% (0.001)%
Net Losses (Recoveries)/Average Principal
Receivables Balance.................... 0.019% (0.044)% 0.034% (0.008)%
</TABLE>
- -------------------------
(1) "AVERAGE PRINCIPAL RECEIVABLES BALANCE" is the average of the month-end
principal balances of receivables for each of the months during such period.
(2) "NET LOSSES" in any period are gross losses less recoveries for such period.
Recoveries include recoveries from collateral security in addition to
vehicles.
(3) Liquidations include all principal reductions.
S-15
<PAGE> 16
AGING EXPERIENCE
The following table provides the age distribution of the receivables for
all dealers in the U.S. Portfolio as a percentage of total principal balances of
receivables outstanding at the date indicated. The aging is based on the
receivable's interest commencement date. In addition, if a vehicle or the
related receivable is reclassified for any reason (e.g., if the dealer decides
to designate a new vehicle for use as a demonstration unit), the interest
commencement date will generally be the date of such reclassification. The
actual age distribution with respect to the Receivables related to any Trust may
be different because such Receivables will arise in Accounts representing only a
portion of the entire U.S. Portfolio. There can be no assurance that the aging
experience for receivables in the future will be similar to the historical
experience set forth below.
AGE DISTRIBUTION FOR THE U.S. PORTFOLIO
<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED DECEMBER 31,
ENDED --------------------------
DAYS SEPTEMBER 30, 1997 1996 1995 1994
---- ------------------ ---- ---- ----
<S> <C> <C> <C> <C>
1-120.............................................. 82.7% 82.2% 83.4% 86.3%
121-180............................................ 6.7 9.0 7.0 7.1
181-270............................................ 5.9 5.0 5.0 3.9
Over 270........................................... 4.7 3.8 4.6 2.7
</TABLE>
MONTHLY PAYMENT RATES
The following table sets forth the highest and lowest monthly payment rates
for the U.S. Portfolio during any month in the periods shown and the average of
the monthly payment rates for all months during the periods shown, in each case
calculated as the percentage equivalent of a fraction, the numerator of which is
the aggregate of all collections of principal during the period and the
denominator of which is the aggregate ending principal balance of receivables
for such period. There can be no assurance that the rate of principal
collections for the Accounts in the Pool of Accounts in the future will be
similar to the historical experience set forth below. The actual monthly payment
rates with respect to such Accounts may be different because, among other
reasons, such Accounts will represent only a portion of the entire U.S.
Portfolio.
MONTHLY PAYMENT RATES FOR THE U.S. PORTFOLIO
<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED DECEMBER 31,
ENDED --------------------------
SEPTEMBER 30, 1997 1996 1995 1994
------------------ ---- ---- ----
<S> <C> <C> <C> <C>
Highest Month...................................... 54.1% 56.1% 51.4% 62.0%
Lowest Month....................................... 35.9 35.0 33.5 41.4
Average for the Months in the Period............... 44.8 45.1 42.1 54.7
</TABLE>
THE POOL OF ACCOUNTS
As of the close of business on September 23, 1997 (the "POOL FORMATION
DATE"), there were 1,174 Accounts in the Pool of Accounts. As of the Pool
Formation Date, the average aggregate principal balance of Receivables in such
Accounts was approximately $2.3 million (approximately 83% of which were
Eligible Receivables) and the weighted average spread over the Prime Rate
charged to Dealers was approximately 1.1% for the month of September 1997. This
spread over Prime Rate does not include the impact to many of these dealers of a
GMAC incentive program, which entitles them to a credit based on interest
charges. As of the Pool Formation Date, the aggregate principal balance of
Receivables under such Accounts was $2,723,053,108.52 and, of such amount,
$2,268,943,082.64 would qualify as Eligible Receivables (except for the limit
imposed by the Maximum Pool Balance).
S-16
<PAGE> 17
GEOGRAPHIC DISTRIBUTION
The following table provides, as of the Pool Formation Date, the geographic
distribution of the Accounts in the Pool of Accounts (based on the address of
the Dealer). As of the Pool Formation Date, no other state accounted for more
than 4.7% of the principal amount of Receivables outstanding in such Accounts.
GEOGRAPHIC DISTRIBUTION OF POOL ACCOUNTS RELATED TO THE TRUST
<TABLE>
<CAPTION>
PERCENTAGE OF
PERCENTAGE OF TOTAL
TOTAL NUMBER OF NUMBER OF
RECEIVABLES RECEIVABLES DEALER DEALER
STATE OUTSTANDING OUTSTANDING ACCOUNTS ACCOUNTS
----- ----------- ------------- --------- -------------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Texas................................... $303,736 11.2% 90 7.7%
Illinois................................ 178,426 6.6 77 6.6
Florida................................. 152,073 5.6 58 4.9
New York................................ 143,965 5.3 71 6.0
Michigan................................ 130,114 4.8 48 4.1
</TABLE>
THE OFFERED TERM NOTES
GENERAL
The Offered Term Notes will be issued pursuant to the terms of an Indenture
to be dated as of the Initial 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. Additional series of Term Notes may be
issued by the Trust subsequent to the Initial Closing Date. A copy of the
Indenture will be available from the Seller upon request by holders of the Notes
and Certificates and will be filed with the Commission following the issuance of
the Offered Term Notes. The following summary describes certain terms of the
Offered Term 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 Offered Term Notes, the Indenture and the
Prospectus. Where particular provisions or terms used in the Indenture are
referred to, the actual provisions are incorporated by reference as part of such
summary. The Bank of New York, a New York banking corporation, will be the
Indenture Trustee.
INTEREST
Interest on the outstanding principal balance of the Offered Term Notes
will be payable on each Distribution Date commencing with the Initial
Distribution Date and, prior to the Targeted Final Payment Date for the Offered
Term Notes, will accrue at a rate of % per annum, calculated on the basis of a
360-day year of twelve 30-day months or, in the case of the Initial Distribution
Date, days divided by 360 days. If the Offered Term Notes are not paid in
full on the Targeted Final Payment Date for the Offered Term Notes, interest on
the Offered Term Notes will accrue from and after the Targeted Final Payment
Date for the Offered Term Notes at a rate of LIBOR plus 0.25%, calculated on the
basis of a 360-day year and the actual number of days elapsed from and including
the prior Distribution Date to but excluding such Distribution Date. The
interest rate in effect for the period with respect to which interest is
calculated for the Offered Term Notes is the "OFFERED TERM NOTES INTEREST RATE"
for such Distribution Date. Each Distribution Date will be a Payment Date (as
defined in the Prospectus) for the Offered Term Notes. Interest on the Offered
Term Notes accrued as of any Distribution Date, but not paid on such
Distribution Date, will be due on the next Distribution Date.
"LIBOR" means, with respect to each Distribution Date (other than the
Initial Distribution Date, for which LIBOR means %), the rate for deposits in
U.S. Dollars for a period of one month which appears on the Dow Jones Telerate
Service Page 3750 as of 11:00 a.m., London time, (x) for the Offered Term Notes,
S-17
<PAGE> 18
the Series B Term Notes, and the Class A Certificates, on the day that is two
LIBOR Business Days prior to the Distribution Date immediately preceding such
Distribution Date and (y) for the Series 1997-RN1 Revolving Note, on the day
that is two LIBOR Business Days prior to the first day of the related Collection
Period. A "LIBOR BUSINESS DAY" means any day other than a Saturday, Sunday or
any other day on which banks in London are required or authorized to be closed.
If such rate does not appear on such page (or such other page as may replace
that page on that service, or if such service is no longer offered, such other
service for displaying LIBOR or comparable rates as may be selected by the
Indenture Trustee after consultation with the Seller), the rate will be the
Reference Bank Rate. The "REFERENCE BANK RATE" will be determined on the basis
of the rates at which deposits in U.S. Dollars are offered by the reference
banks (which shall be four major banks that are engaged in transactions in the
London interbank market, selected by the Indenture Trustee after consultation
with the Seller) as of 11:00 a.m., London time, on the day that is two LIBOR
Business Days prior to the immediately preceding Distribution Date or prior to
the first day of the related Collection Period, as applicable, to prime banks in
the London interbank market for a period of one month in amounts approximately
equal to the principal balance of the Offered Term Notes outstanding, the
principal balance of the Series B Term Notes outstanding, the Certificate
Balance of the Certificates then outstanding or the aggregate principal amount
of the Series 1997-RN1 Revolving Note then outstanding, as applicable. The
Indenture Trustee will request the principal London office of each of the
reference banks to provide a quotation of its rate. If at least two such
quotations are provided, the rate will be the arithmetic mean of the quotations,
rounded upwards to the nearest one-sixteenth of one percent. If on any such date
fewer than two quotations are provided as requested, the rate will be the
arithmetic mean, rounded upwards to the nearest one-sixteenth of one percent, of
the rates quoted by one or more major banks in New York City, selected by the
Indenture Trustee after consultation with the Seller, as of 11:00 a.m., New York
City time, on such date to leading European banks for United States dollar
deposits for a period of one month in amounts approximately equal to the
principal balance of the Offered Term Notes outstanding, the principal balance
of the Series B Term Notes outstanding, the Certificate Balance of the
Certificates then outstanding or the aggregate principal amount of the Series
1997-RN1 Revolving Note then outstanding, as applicable. If no such quotation
can be obtained, the rate will be LIBOR for the prior Distribution Date.
Payments of interest on the Offered Term Notes will have the priority set
forth in "The Transfer and Servicing Agreements -- Interest Collections."
PRINCIPAL
Interest Only Period. Prior to November 16, 1998, no principal payments are
scheduled to be made on the Offered Term Notes. Principal payments will be made
prior to such date only if a Rapid Amortization Event occurs prior to such date.
Index Amortization Period. Principal payments on the Offered Term Notes are
scheduled to start on November 16, 1998, the first Distribution Date related to
the Index Amortization Period, which is scheduled to commence on October 1, 1998
and to continue until the earliest of the following dates: (i) the commencement
of a Rapid Amortization Period, (ii) the date on which all the outstanding
Offered Term Notes are paid in full and (c) the Stated Final Payment Date for
the Offered Term Notes. The commencement of an Index Amortization Period for the
Offered Term Notes also constitutes the commencement of a Payment Period for the
Offered Term Notes. Such Payment Period will terminate if (i) a Cash
Accumulation Period occurs for the Offered Term Notes (which also occurs within
or prior to the Index Amortization Period for the Offered Term Notes) or (ii) a
Rapid Amortization Period commences for the Offered Term Notes (which terminates
the Index Amortization Period for the Offered Term Notes). The Payment Period
may recommence in limited circumstances. Available Trust Principal is not
required to be retained or set aside to fund Required Payments for the Offered
Term Notes, unless a Cash Accumulation Event or Rapid Amortization Event occurs.
To the extent a Required Payment for the Offered Term Notes for any Distribution
Date cannot be made (after giving effect to all issuances of securities and
additional borrowings under the Revolving Notes on such Distribution Date, as
they are available), the Servicer will make an advance (a "SERVICER LIQUIDITY
ADVANCE") to the Trust, but only to the extent that the Servicer, in its sole
discretion, expects to recover such advance from subsequent Trust Principal
Collections. Servicer
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<PAGE> 19
Liquidity Advances will be reimbursed (a) if Available Trust Principal is being
set aside for the Offered Term Notes, out of such amounts and (b) if Available
Trust Principal is not being set aside for the Offered Term Notes, out of a
portion of Trust Principal Collections not to exceed a fraction the numerator of
which is the outstanding principal balance of the Offered Term Notes and the
denominator of which is the outstanding balance of all Notes as of such date.
The failure to pay the Required Payment for the Offered Term Notes in full for
any Distribution Date during the Index Amortization Period for the Offered Term
Notes will be an Early Amortization Event for the Trust and a Cash Accumulation
Event for the Offered Term Notes.
Other series of Notes issued from time to time by the Trust, including the
Series B Term Notes and the Initial Revolving Notes, may require set asides or
payments of principal prior to or during the Index Amortization Period for the
Offered Term Notes.
The Targeted Final Payment Date for the Offered Term Notes is the
Distribution Date in November, 2002, and the Stated Final Payment Date for the
Offered Term Notes is the Distribution Date in November, 2004. If the Offered
Term Notes are not paid in full on or prior to their Stated Final Payment Date,
an Early Amortization Period for the Trust and a Rapid Amortization Period for
the Offered Term Notes will commence.
Cash Accumulation Period. A Cash Accumulation Period for the Offered Term
Notes will commence upon the occurrence of a Cash Accumulation Event for the
Offered Term Notes and will end on the earliest of (a) the date on which the
Offered Term Notes are paid in full, (b) the occurrence of a Rapid Amortization
Event for the Offered Term Notes, (c) the Trust Termination Date and (d) under
the limited circumstances described herein, the recommencement of the Revolving
Period for the Trust.
On each day during a Cash Accumulation Period for the Offered Term Notes,
the Offered Term Notes will be allocated their Principal Allocation Percentage
of Available Trust Principal and such amounts will be deposited in the Cash
Accumulation Account for the Offered Term Notes (until the amount on deposit
therein equals the outstanding principal balance of the Offered Term Notes) and
will be invested in Eligible Investments. Amounts in the Cash Accumulation
Account (other than Cash Accumulation Account Earnings and any Make-Whole
Payments received by the Trust and the earnings thereon) will be available
solely to make principal payments on the Offered Term Notes. Amounts in the Cash
Accumulation Account, other than Cash Accumulation Account Earnings, in excess
of the Required Payment will be retained in the Cash Accumulation Account to
make principal payments on subsequent Distribution Dates. During the Cash
Accumulation Period for the Offered Term Notes, no additional borrowings may be
made under the Revolving Notes and no additional Receivables will be purchased
by the Trust.
Rapid Amortization Period. A Rapid Amortization Period for the Offered Term
Notes will commence upon the occurrence of a Rapid Amortization Event and will
end on the earliest of (a) the date on which the Offered Term Notes are paid in
full and (b) the Trust Termination Date. A "RAPID AMORTIZATION EVENT" for the
Offered Term Notes means any of (i) the failure to pay (or set aside for
payment) all amounts required to be paid as principal on the Notes or
distributed with respect to the Certificate Balance on the applicable Stated
Final Payment Date, (ii) certain insolvency events relating to General Motors,
GMAC, the Servicer, or the Seller, and (iii) the termination of the Interest
Rate Swap (which is not an Early Amortization Event for the Trust). On each day
during a Rapid Amortization Period for the Offered Term Notes, the Offered Term
Notes will be allocated their Principal Allocation Percentage of Available Trust
Principal and such amounts will be deposited in the Cash Accumulation Account
for the Offered Term Notes. All amounts so allocated during a Rapid Amortization
Period will be paid to the holders of the Offered Term Notes on the related
Distribution Date, together with any amounts in the Cash Accumulation Account
(other than Cash Accumulation Account Earnings and any Make-Whole Payments
received by the Trust and the earnings thereon) for the Offered Term Notes on
such Distribution Date. During a Rapid Amortization Period, other than as a
result of the termination of the Interest Rate Swap, no additional borrowings
may be made under the Revolving Notes and no additional Receivables will be
purchased by the Trust.
Charge-Offs. The outstanding principal balance of each series of Notes
(including the Offered Term Notes) will be reduced to the extent unreimbursed
Trust Charge-Offs exceed the Certificate Balance (calculated without reduction
for Trust Charge-Offs). Such excess will be applied to the Notes pro rata on the
S-19
<PAGE> 20
basis of the principal balances of the Notes then outstanding (calculated
without reduction for Trust Charge-Offs) and will reduce the amount of principal
and interest payable on each series of Notes. See "The Transfer and Servicing
Agreements -- Defaults and Charge-Offs."
PRIORITY AMONG NOTES
Payments of principal on the Offered Term Notes will have at least equal
priority with payments of principal on other series of Notes that may be issued
from time to time by the Trust, although some series of Notes may also require
set asides or payments of principal prior to, together with, or after the
Payment Period for the Offered Term Notes.
CERTAIN DEFINED TERMS
"AVAILABLE TRUST PRINCIPAL" means, for any day during the related
Collection Period, (a) Trust Principal Collections for such day minus any
amounts paid on such day to the Servicer as reimbursement for outstanding
Servicer Liquidity Advances and on the Distribution Date related to such
Collection Period, (b) Additional Trust Principal, if any, for such Distribution
Date, (c) the Cash Collateral Amount on such Distribution Date, and (d) for each
Distribution Date related to the Wind Down Period or an Early Amortization
Period for the Trust, if the amount on deposit in the Reserve Fund on such
Distribution Date exceeds zero, the Supplemental Principal Allocation for such
current Distribution Date.
"TRUST PRINCIPAL COLLECTIONS" means, for any date, the sum of (a) the
amount of Principal Collections on Receivables held by the Trust and (b) the
principal portion of all Warranty Payments and Administrative Purchase Payments,
if any, on such date.
"SUPPLEMENTAL PRINCIPAL ALLOCATION" means, for any Distribution Date
related to the Wind Down Period or an Early Amortization Period for the Trust,
an amount (not less than zero) equal to the lesser of (a) the excess, if any, of
(i) the product of (A) the percentage equivalent of a fraction (which will never
exceed 100%), the numerator of which is the Daily Trust Balance and the
denominator of which is the principal balance of all Receivables (including
Receivables owned by GMAC) in the Accounts included in the Pool of Accounts, in
each case, as of the termination of the Revolving Period, and (B) the aggregate
amount of Principal Collections on all Receivables (including Receivables held
by GMAC) in the Accounts in the Pool of Accounts for each day during the related
Collection Period over (ii) the aggregate amount of Trust Principal Collections
for each day during the related Collection Period (provided that no amount will
be included pursuant to clause (i)(B) or (ii) for any day in such Collection
Period that occurred during the Revolving Period) and (b) an amount equal to (i)
the Daily Trust Balance as of the termination of the Revolving Period plus (ii)
the Cash Collateral Amount on the last day of the Revolving Period minus (iii)
the Available Trust Principal for each Distribution Date from and after the
final Distribution Date for the Revolving Period through but excluding such
current Distribution Date minus (iv) the amount added to unreimbursed Trust
Charge-Offs on each Distribution Date from and after the final Distribution Date
for the Revolving Period through and including such current Distribution Date
minus (v) Available Trust Principal for such current Distribution Date (assuming
the Supplemental Principal Allocation for such Distribution Date was zero).
"CASH ACCUMULATION ACCOUNT" for the Offered Term Notes means an Eligible
Deposit Account established and maintained by the Servicer with the Indenture
Trustee, in the name of the Indenture Trustee, on behalf of the holders of the
Offered Term Notes. The Cash Accumulation Account will constitute a Designated
Account, but the Cash Accumulation Account Earnings will not constitute
Investment Proceeds for purposes of the definition of Available Trust Interest.
Cash Accumulation Account Earnings will be maintained in the Cash Accumulation
Account Earnings subaccount of the Cash Accumulation Account, together with any
earnings thereon. The amount of any Make-Whole Payment received by the Trust
will be maintained in the Make-Whole Payment subaccount of the Cash Accumulation
Account, together with any earnings thereon. Any amounts received by the Trust
from the Interest Rate Swap Counterparty with respect to losses of principal on
Eligible Investments in the Cash Accumulation Account for the Offered Term Notes
shall be deposited in the Cash Accumulation Account.
S-20
<PAGE> 21
"ADDITIONAL TRUST PRINCIPAL" means, for any Distribution Date, the amount,
if any, of Available Trust Interest and funds in the Reserve Fund applied to
cover the Trust Defaulted Amount or to cover unreimbursed Trust Charge-Offs on
such Distribution Date.
The "INDEX AMORTIZATION AMOUNT" for a Distribution Date for the Offered
Term Notes will be the product of (a) the percentage (the "MONTHLY AMORTIZATION
RATE") that corresponds on the table in Annex I attached to this Prospectus
Supplement with the PSA Index Rate for such Distribution Date and (b) the
outstanding principal balance of the Offered Term Notes as of the prior
Distribution Date (after giving effect to any payments of principal on the
Offered Term Notes on such prior Distribution Date). The Monthly Amortization
Rate will range from 0.037% to 22.000%.
"PRINCIPAL ALLOCATION PERCENTAGE," for a series of Notes (the "referent
series") which requires Available Trust Principal to be retained or set aside
during such period to fund principal payments with respect to the referent
series on any date, means the percentage equivalent of a fraction, (i) if such
date does not relate to a Wind Down Period or an Early Amortization Period for
the Trust, the numerator of which is (A) with respect to any series of Term
Notes, the aggregate initial principal balance with respect to such Series or
(B) with respect to any series of Revolving Notes, the outstanding principal
balance of such series as of the close of business on the day immediately
preceding the first day of the Payment Period with respect to such series and
the denominator of which is the sum of the amounts as determined pursuant to (A)
and (B) above for each such series of Notes, and (ii) if such date relates to a
Wind Down Period or an Early Amortization Period for the Trust, the numerator of
which is the outstanding principal balance of the referent series on the last
day of the Revolving Period and the denominator of which is the aggregate
outstanding principal balance of all series of Notes then outstanding on the
last day of the Revolving Period.
"ELIGIBLE INVESTMENTS" means book-entry securities, negotiable instruments
or securities represented by instruments in bearer or registered form which (at
the time made) evidence:
(a) direct obligations of, and obligations fully guaranteed as to
timely payment by, the United States of America;
(b) demand deposits, time deposits or certificates of deposit of any
depository institution or trust company incorporated under the laws of the
United States of America or any state thereof (or any domestic branch of a
foreign bank) and subject to supervision and examination by Federal or
State banking or depository institution authorities; provided, however,
that at any time of the investment or contractual commitment to invest
therein, the commercial paper or other short-term unsecured debt
obligations (other than such obligations the rating of which is based on
the credit of a Person other than such depository institution or trust
company) thereof shall have a credit rating from each of the Rating
Agencies then rating such obligations in the highest investment category
granted thereby;
(c) commercial paper having, at the time of the investment or
contractual commitment to invest therein, a rating from each of the Rating
Agencies then rating such commercial paper in the highest investment
category granted thereby;
(d) investments in money market or common trust funds having a rating
from each of the Rating Agencies then rating such funds in the highest
investment category granted thereby for money market funds (including funds
for which the Indenture Trustee or the Owner Trustee or any of their
respective affiliates is an investment manager or advisor, so long as such
fund shall have such rating, provided, however, that no funds in the Cash
Accumulation Account for the Offered Term Notes shall be invested in
Eligible Investments described in this clause (d));
(e) bankers' acceptances issued by any depository institution or trust
company referred to in clause (b) above;
(f) repurchase obligations with respect to any security that is a
direct obligation of, or fully guaranteed by, the United States of America
or any agency or instrumentality thereof the obligations of which are
backed by the full faith and credit of the United States of America, in
either case entered into with a Person with the Required Deposit Rating or
otherwise approved by the Rating Agencies; and
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<PAGE> 22
(g) any other investment permitted by each of the Rating Agencies,
in each case, other than as permitted by the Rating Agencies, maturing not later
than the Business Day immediately preceding the next Distribution Date.
The "PSA INDEX RATE" means, with respect to any Distribution Date (in the
following order of priority):
(i) the rate that appears as of 3:00 p.m. (New York City time) on the
related Amortization Amount Determination Date (as defined below) on the
Reference Bloomberg Page (as defined below) under the column heading "1 MO"
opposite the row "PSA";
(ii) if such rate does not appear on the Reference Bloomberg Page as
of 3:00 p.m. (New York City time) on such Amortization Amount Determination
Date, the Principal Calculation Agent will request FHLMC to provide a
quotation of the monthly prepayment speed (calculated according to the PSA
Standard Prepayment Model (as defined below)) for the Reference Collateral
Pool for the applicable month. If FHLMC provides such quotation, the PSA
Index Rate will be the quotation provided by FHLMC;
(iii) if the Principal Calculation Agent determines that FHLMC has not
provided such quotation by 5:00 p.m. on the second Business Day following
such Amortization Amount Determination Date, the Principal Calculation
Agent will request five major securities dealers selected by the Principal
Calculation Agent to provide a quotation of the monthly prepayment speed
(calculated according to the PSA Standard Prepayment Model) for the
Reference Collateral Pool for the applicable month. If only one quotation
is so provided, the PSA Index Rate will be the quotation so provided. If
two or three such quotations are so provided, then the PSA Index Rate will
be the arithmetic mean of such quotations (rounded to the nearest whole
integer) as determined by the Principal Calculation Agent. If four or five
such quotations are provided, the highest quotation (or, in the event of
equality, one of the highest) and lowest quotation (or, in the event of
equality, one of the lowest) will be eliminated and the PSA Index Rate will
be the arithmetic mean (rounded to the nearest whole integer) of the
remaining quotations as determined by the Principal Calculation Agent; and
(iv) if no such quotation is provided as requested in clause (iii)
above, then the PSA Index Rate will be the PSA Index Rate determined with
respect to the Distribution Date preceding the applicable Distribution Date
(or, in the case of the first Distribution Date for the payment of
principal of the Offered Term Notes, the monthly prepayment speed
(calculated according to the PSA Standard Prepayment Model) for the
Reference Collateral Pool obtained from the sources specified in clauses
(i) through (iii) above, in that order, with respect to the most recent
month for which such information is available.
"REFERENCE BLOOMBERG PAGE" means the display designated as page "FMAC A018"
and titled "Reference Collateral 30-year Gold 7.50, Issued in 1995" (or such
other page selected by the Principal Calculation Agent as may replace page FMAC
A018 for the purpose of displaying the monthly prepayment speed (calculated
based on the PSA Standard Prepayment Model) for the Reference Collateral Pool)
on the Bloomberg Financial Markets Service (or such other service selected by
the Principal Calculation Agent as may replace such service).
"PSA STANDARD PREPAYMENT MODEL" or "PSA" means the methodology set forth
under "Mortgage Prepayment Models -- The PSA Standard Prepayment Model" in the
"Uniform Practices for the Clearance and Settlement of Mortgage-Backed
Securities and Other Related Securities of the Public Securities Association."
The "AMORTIZATION AMOUNT DETERMINATION DATE" for any Distribution Date on
which a payment of principal on the Offered Term Notes is due will be the first
Business Day of the month in which such Distribution Date occurs.
The Principal Calculation Agent will notify the Servicer of the PSA Index
Rate for each Distribution Date promptly after its determination thereof.
The calculation of the PSA Index Rate, which involves numerous mortgage
pools, may differ among dealers and other market participants, which differences
may be significant. The Seller reserves the right,
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<PAGE> 23
exercisable by the Servicer in its sole discretion on behalf of the Seller, to
determine whether any modification in PSA methodology or in the timing or
procedures affecting publication or dissemination of the PSA prepayment rate for
the Reference Collateral Pool warrants an adjustment to the foregoing
calculation procedures, whereupon such procedures will be deemed to be amended
as so determined by the Servicer; provided that no change in such procedures
will be effective without the written consent of the Interest Rate Swap
Counterparty.
The "PRINCIPAL CALCULATION AGENT" shall mean the Interest Rate Swap
Counterparty under the Interest Rate Swap.
HISTORICAL PSA INDEX RATES
The table below sets forth historical values of the PSA Index Rate for the
Reference Collateral Pool (the 30-year FHLMC Gold 7.50% mortgage participation
certificates issued in calendar year 1995) since January 1995 as calculated by
the Underwriter.
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
January.................................................... NA 551 182
February................................................... NA 657 204
March...................................................... 42 1,030 175
April...................................................... 46 941 171
May........................................................ 142 576 189
June....................................................... 9 309 199
July....................................................... 87 261 198
August..................................................... 346 237 199
September.................................................. 662 218 224
October.................................................... 384 211 248
November................................................... 305 182 --
December................................................... 446 194 --
</TABLE>
The text and table above are included solely for informational purposes. It
is not intended to reflect the likely or anticipated prepayment experience of
the Reference Collateral Pool during any future periods. Investors must make
their own assumptions regarding the future prepayment experience of the
Reference Collateral Pool and the effect thereof on the rate of prepayment and
yield on the Offered Term Notes.
PRINCIPAL PAYMENT CONSIDERATIONS
The following table indicates the percentage of original principal amount
of the Offered Term Notes that would be outstanding after each of the dates
shown at various PSA Index Rates after application of the Prepayment Table and
the corresponding weighted average life of the Offered Term Notes. The table has
been prepared on the basis of the Additional Structuring Assumptions (as defined
below). The Base Mortgage Loans will not necessarily have the characteristics
assumed nor are the Base Mortgage Loans likely to prepay at a constant
percentage of PSA. Moreover, diverse remaining terms to maturity of the Base
Mortgage Loans could produce slower or faster principal payments than indicated
in the table at the specified PSA Index Rates, even if the weighted average
maturity of the Base Mortgage Loans is identical to the weighted average
maturity specified in the Additional Structuring Assumptions.
Unless otherwise specified, the information in the following table has been
prepared on the basis of the following assumptions (the "ADDITIONAL STRUCTURING
ASSUMPTIONS"):
- the Base Mortgage Loans prepay at the PSA Index Rates specified in the
related table;
- the issue date for the Offered Term Notes is the Initial Closing Date;
- the first payment of principal on the Offered Term Notes occurs on
November 16, 1998; and
- the principal payment on the Offered Term Notes on each Distribution Date
is the Index Amortization Amount, except that on and after the
Distribution Date on which the outstanding principal balance of
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<PAGE> 24
the Offered Term Notes declines to $50,000,000 or less (after applying
the Required Payment for such Distribution Date), principal payments will
no longer be limited to the Index Amortization Amount.
PERCENTAGE OF ORIGINAL PRINCIPAL AMOUNT OF OFFERED TERM NOTES OUTSTANDING
<TABLE>
<CAPTION>
PSA INDEX INITIAL AVERAGE
RATE (%) PERCENTAGE 11/15/98 11/15/99 11/15/00 11/15/01 11/15/02 LIFE
--------- ---------- -------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
100 and below................. 100.00% 99.96% 99.52% 99.08% 98.64% 0.00% 4.95
125........................... 100.00% 99.75% 96.80% 93.93% 91.15% 0.00% 4.75
135........................... 100.00% 98.40% 81.13% 66.88% 55.14% 0.00% 3.75
150........................... 100.00% 96.73% 64.88% 43.52% 29.19% 0.00% 2.95
175-275....................... 100.00% 93.13% 39.65% 16.88% 0.00% 0.00% 2.00
350........................... 100.00% 91.13% 29.89% 0.00% 0.00% 0.00% 1.75
500........................... 100.00% 87.33% 17.19% 0.00% 0.00% 0.00% 1.50
700 and up.................... 100.00% 78.00% 0.00% 0.00% 0.00% 0.00% 1.25
</TABLE>
THE SERIES B TERM NOTES
GENERAL
The Series B Term Notes will be issued pursuant to the Indenture. The
following summary describes certain terms of the Series B Term Notes. The
summary does not purport to be complete and is subject, and qualified in its
entirety by reference to, all of the provisions of the Series B Term Notes, the
Indenture and the Prospectus. Where particular provisions or terms used in the
Series B Term Notes or the Indenture are referred to, the actual provisions are
incorporated by reference as part of such summary.
On the Initial Closing Date, the Trust will issue Floating Rate
Asset-Backed Term Notes, Series 1997-B. References herein to such Series B Term
Notes include all extensions and renewals thereof. It is expected that the
Series B Term Notes will be initially held by GMAC.
INTEREST
Interest on the outstanding principal balance of the Series B Term Notes
will be payable on each Distribution Date commencing with the Initial
Distribution Date and will accrue at a rate of % per annum for the Initial
Distribution Date and at a rate of LIBOR plus 0. % per annum for each
Distribution Date thereafter (the "SERIES B INTEREST RATE"), calculated on the
basis of a year of 360 days for the actual number of days elapsed from and
including the prior Distribution Date (or, in the case of the Initial
Distribution Date, the Initial Closing Date) to but excluding such Distribution
Date. Interest on the Series B Term Notes accrued as of any Distribution Date
but not paid on such Distribution Date will be due on the next Distribution
Date.
Payments of interest on the Series B Term Notes will have the priority set
forth in "The Transfer and Servicing Agreements -- Interest Collections."
PRINCIPAL
The Series B Term Notes will have an aggregate original principal balance
of $500,000,000. During the Revolving Period, until the commencement of the
Payment Period for the Series B Term Notes, no payments of principal will be
made on the Series B Term Notes. Except as described herein and unless the Wind
Down Period or an Early Amortization Period for the Trust has commenced and is
continuing, the Payment Period for the Series B Term Notes will commence on
January 1, 2000. Principal on the Series B Term Notes will be due (to the extent
of the Series B Controlled Payment Amount) in three instalments on the three
consecutive Distribution Dates ending on the Series B Targeted Final Payment
Date. The Series B Term Notes may be prepaid, in whole or in part, at any time
during the Revolving Period for the Trust, and such prepayment could occur in
connection with the issuance by the Trust of a new series of Notes.
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<PAGE> 25
During each Collection Period in the Payment Period for the Series B Term
Notes, the Trust will be required to retain the Principal Allocation Percentage
for the Series B Term Notes of Available Trust Principal, until such time during
such Collection Period as the Trust has retained for such purpose an amount
equal to the Series B Controlled Payment Amount for the related Distribution
Date. The "SERIES B CONTROLLED PAYMENT AMOUNT" means, for any Distribution Date
occurring during the Payment Period for the Series B Term Notes, the excess, if
any, of (a) the product of (i) one-third of the outstanding principal balance of
the Series B Term Notes as of the first day of the Payment Period for the Series
B Term Notes and (ii) the number of Collection Periods that have occurred during
such Payment Period (including the Collection Period with respect to such
Distribution Date) over (b) the aggregate amount paid or set aside for payment
by the Trust in respect of principal on the Series B Term Notes as of the
preceding Distribution Date. On each related Distribution Date, all amounts so
set aside, together with the Principal Allocation Percentage for the Series B
Term Notes of the Available Trust Principal for such Distribution Date to the
extent necessary to satisfy the Series B Controlled Payment Amount for such
Distribution Date will be used by the Trust to make a principal payment on the
Series B Term Notes. To the extent the Series B Term Notes are not paid in full
on the Series B Targeted Final Payment Date, during each Collection Period
thereafter, the Trust will be required to retain the Principal Allocation
Percentage for the Series B Term Notes of Available Trust Principal up to the
then outstanding principal balance of the Series B Term Notes, and on each
related Distribution Date the Trust will make a principal payment on the Series
B Term Notes equal to the amount allocated to the Series B Term Notes during the
related Collection Period. The Series B Targeted Final Payment Date is the
Distribution Date in April 2000. The Series B Stated Final Payment Date is the
Distribution Date in April 2002.
An Early Amortization Period for the Trust and a Rapid Amortization Period
for the Offered Term Notes will commence if, among other things, the Series B
Term Notes are not paid in full on or prior to the Stated Final Payment Date for
the Series B Term Notes.
During the Wind Down Period or an Early Amortization Period for the Trust,
Available Trust Principal for any Collection Period and the related Distribution
Date will be allocated to the Series B Term Notes in accordance with their
Principal Allocation Percentage up to the outstanding principal balance of the
Series B Term Notes and will be paid on the Distribution Date related to such
Collection Period.
THE INITIAL REVOLVING NOTES
GENERAL
The Revolving Notes will be issued pursuant to the Indenture. The following
summary describes certain terms of the Revolving Notes. The summary does not
purport to be complete and is subject, and qualified in its entirety by
reference to, all of the provisions of the Revolving Notes, the Indenture and
the Prospectus. Where particular provisions or terms used in the Revolving Notes
or the Indenture are referred to, the actual provisions are incorporated by
reference as part of such summary.
On the Initial Closing Date, the Trust will issue the Floating Rate
Asset-Backed Revolving Note, Series 1997-RN1 and the Floating Rate Asset-Backed
Revolving Note, Series 1997-RN2. References herein to the Initial Revolving
Notes include all extensions and renewals thereof. It is expected that the
Initial Revolving Notes will be privately placed with an accredited investor on
the Initial Closing Date.
INTEREST
Interest on the outstanding principal balance of the Initial Revolving
Notes will accrue at the applicable Revolver Interest Rate. Interest on the
Series 1997-RN1 Revolving Note will be payable on each Distribution Date,
commencing with the Initial Distribution Date. Interest on the Series 1997-RN2
Revolving Note will be payable on the fifteenth day of January, April, July and
October (each a "1997-RN2 QUARTERLY DISTRIBUTION DATE"), or, if any such day is
not a Business Day, the next succeeding Business Day, commencing January 15,
1998, or under certain circumstances on each Distribution Date. On each
Distribution Date, interest will be calculated based on the average daily
applicable Series Net Revolver Balance during the related Collection
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Period. Interest accruing on the Series 1997-RN2 Revolving Note on each
Distribution Date which is not a 1997-RN2 Quarterly Distribution Date will not
be paid to the holders thereof on such Distribution Date, but will be held in
the Revolver Distribution Account until the next 1997-RN2 Quarterly Distribution
Date. Interest on the Initial Revolving Notes accrued as of any Distribution
Date or 1997-RN2 Quarterly Distribution Date, as applicable, but not paid on
such Distribution Date will be due on the next Distribution Date or 1997-RN2
Quarterly Distribution Date, as applicable.
The Revolver Interest Rate for the Series 1997-RN1 Revolving Note will be
equal to, with respect to any Distribution Date, the product of (i) a fraction,
the numerator of which is the number of days elapsed during the related
Collection Period (or, in the case of the Initial Distribution Date, from and
including the Initial Closing Date of the related Collection Period) and the
denominator of which is 360 and (ii) LIBOR plus %.
The Revolver Interest Rate for the Series 1997-RN2 Revolving Note will be
equal to, with respect to any Distribution Date, the product of (i) a fraction,
the numerator of which is the number of days elapsed during the related
Collection Period (or, in the case of the Initial Distribution Date, from and
including the Initial Closing Date of the related Collection Period) and the
denominator of which is 360 and (ii) 3-Month LIBOR plus %.
"3-MONTH LIBOR" means, with respect to each Distribution Date (other than
the November 1997, December 1997, and January 1998 Distribution Dates, for which
3-Month LIBOR means %), the rate for deposits in U.S. Dollars for a period
of three months which appears on the Dow Jones Telerate Service Page 3750 as of
11:00 a.m., London time, on the day that is two LIBOR Business Days prior to the
first day of the Collection Period in which the previous 1997-RN2 Quarterly
Distribution Date occurred (the "3-MONTH LIBOR REFERENCE DATE"). If such rate
does not appear on that page (or any other page that may replace that page on
that service, or if that service is no longer offered, any other service for
displaying 3-Month LIBOR or comparable rates as may be selected by the Indenture
Trustee after consultation with the Seller), the rate will be the 3-Month
Reference Bank Rate. For purposes of this paragraph, the "3-MONTH REFERENCE BANK
RATE" will be determined on the basis of the rates at which deposits in U.S.
Dollars are offered by the reference banks (which shall be four major banks that
are engaged in transactions in the London interbank market, selected by the
Indenture Trustee after consultation with the Seller) as of 11:00 a.m., London
time, on the 3-Month LIBOR Reference Date to prime banks in the London interbank
market for a period of three months in an amount approximately equal to the
aggregate principal amount of the Series 1997-RN2 Revolving Note then
outstanding. The Indenture Trustee will request the principal London Office of
each of the reference banks to provide a quotation of its rate. If at least two
such quotations are provided, the rate will be the arithmetic mean of the
quotations, rounded upwards to the nearest one-sixteenth of one percent. If on
any such date fewer than two quotations are provided as requested, the rate will
be the arithmetic mean, rounded upwards to the nearest one-sixteenth of one
percent, of the rates quoted by one or more major banks in New York City,
selected by the Indenture Trustee after consultation with the Seller, as of
11:00 a.m., New York City time, on such date to leading European banks for
United States Dollar deposits for a period of three months in an amount
approximately equal to the aggregate principal amount of the Series 1997-RN2
Revolving Note then outstanding. If no such quotation can be obtained, the rate
will be 3-Month LIBOR for the prior Distribution Date.
"SERIES NET REVOLVER BALANCE" means, with respect to any series of
Revolving Notes, for any date, the aggregate outstanding principal balance under
such series of Revolving Notes minus any amounts on deposit in the Revolver
Distribution Account on such date for the payment of principal on such series of
Revolving Notes.
PRINCIPAL
The "SPECIFIED MAXIMUM REVOLVER BALANCE" is the maximum aggregate amount of
borrowings that may be made under the Revolving Notes during the Revolving
Period and will initially be $1,500,000,000 less the then outstanding principal
balance of the Offered Term Notes and may be increased or decreased from time to
time after the Initial Closing Date as described in the Prospectus under "The
Transfer and Servicing
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Agreements -- Additional Issuances; Changes in Specified Maximum Revolver
Balance." The "SERIES SPECIFIED MAXIMUM REVOLVER BALANCE" for any Revolving Note
is the maximum aggregate amount of borrowings that may be made under such
Revolving Note. The Series Specified Maximum Revolver Balance for the Series
1997-RN1 Revolving Note will initially be $1,170,000,000 less the then
outstanding principal balance of the Offered Term Notes. The Series Specified
Maximum Revolver Balance for the Series 1997-RN2 Revolving Note will initially
be $330,000,000. The sum of the Series Specified Maximum Revolver Balance for
all outstanding series of Revolving Notes may not exceed the Specified Maximum
Revolver Balance and, subject to the Specified Maximum Revolver Balance, the
Series Specified Maximum Revolver Balance for any series of Revolving Notes may
be increased or decreased.
Additional series of Revolving Notes may be issued from time to time (with
different Revolver Interest Rates, Targeted Final Payment Dates, if any, and
Stated Final Payment Dates) subject to the Specified Maximum Revolver Balance.
In connection with the issuance of any such additional series, the Revolving
Notes outstanding on such date may be paid in full. No additional borrowings may
be made under the Revolving Notes during the Revolving Note Amortization Period
with respect to such Revolving Note, the Wind Down Period or any Early
Amortization Period for the Trust, but may be made, to the extent described
above, during the portion of the Index Amortization Period for the Offered Term
Notes that occurs during the Revolving Period or during a Rapid Amortization
Period for the Offered Term Notes as a result of the termination of the Interest
Rate Swap.
Payments of principal on any Revolving Note may be made, at the discretion
of the Seller, during the Revolving Period on a daily basis (i) if no series of
Notes then requires Available Trust Principal to be retained or set aside to
fund principal payments with respect thereto, out of all Available Trust
Principal, or (ii) if one or more series of Notes then requires Available Trust
Principal to be retained or set aside to fund principal payments with respect
thereto, out of any such series' Principal Allocation Percentage of Available
Trust Principal after the required set aside has been made. Principal payments
will be made on the Series 1997-RN1 Revolving Note prior to making principal
payments on the Series 1997-RN2 Revolving Note, except as described in the next
paragraph.
During the Revolving Period for the Trust, payments of principal on the
Revolving Notes will be required to the extent set forth in the terms of such
Revolving Notes. The Targeted Final Payment Date for the Initial Revolving Notes
will be the Distribution Date in January 1999, and the Stated Final Payment Date
for the Initial Revolving Notes will be the Distribution Date in November 2004.
The Initial Revolving Notes may be extended or renewed (and the Targeted Final
Payment Date adjusted accordingly) at any time prior to the last day of the
month related to the Payment Date that is the third Payment Date immediately
preceding the then applicable Targeted Final Payment Date by written notice from
the affected holders thereof to the Indenture Trustee and the Seller setting
forth the new Targeted Final Payment Date; provided that the new Targeted Final
Payment Date shall be a Payment Date on or prior to the then Stated Final
Payment Date for the Initial Revolving Notes. Principal on the Initial Revolving
Notes will be due (to the extent of funds available for such purpose) in up to
three instalments on the three consecutive Distribution Dates ending on the then
applicable Targeted Final Payment Date (which may be prior to the Scheduled
Revolving Period Termination Date) unless such Targeted Final Payment Date has
been extended to a date after the commencement of the Wind Down Period. Such
instalments will be based on the outstanding balance as of the last day of the
Collection Period immediately preceding the Collection Period related to the
first such Distribution Date. The "REVOLVING NOTE AMORTIZATION PERIOD" with
respect to any Revolving Note means the period, if any, from and including the
first day of the Collection Period related to the Distribution Date on which the
first of such instalments is to be paid until such Revolving Note is paid in
full and shall constitute a Payment Period for such Revolving Note for purposes
of the Trust.
During the Wind Down Period or an Early Amortization Period for the Trust,
Available Trust Principal for any Collection Period and the related Distribution
Date will be allocated to each series of Revolving Notes in accordance with
their respective Principal Allocation Percentages up to their respective
outstanding principal balances, and will be paid on the Distribution Date
related to such Collection Period. An Early Amortization Period for the Trust
and a Rapid Amortization Period for the Offered Term Notes will
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commence if, among other things, any Revolving Note is not paid in full on the
applicable Stated Final Payment Date.
THE CLASS A CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the terms of the Trust
Agreement, 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 Trust
Agreement will be filed with the Commission following the issuance of the Notes
and Certificates on the Initial Closing Date. The following summary describes
certain terms of the Certificates and the Trust Agreement. The summary does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, all of the provisions of the Certificates, the Trust Agreement and
the Prospectus. Where particular provisions or terms used in the Certificates
and the Trust Agreement are referred to, the actual provisions are incorporated
by reference as part of such summary.
INTEREST
Interest with respect to the Certificates will accrue at the applicable
Certificate Rate and will be payable on each Distribution Date, commencing with
the first Distribution Date after the issuance of such Certificates (the Initial
Distribution Date with respect to the Class A Certificates issued on the Initial
Closing Date). Interest on the Certificates accrued as of any Distribution Date
but not distributed on such Distribution Date will be due on the next
Distribution Date.
The Certificate Rate for the Class A Certificates will be equal to, with
respect to any Distribution Date, the product of (i) a fraction, the numerator
of which is the number of days elapsed from and including the prior Distribution
Date (or, in the case of the Initial Distribution Date, from and including the
Initial Closing Date) to but excluding such Distribution Date and the
denominator of which is 360 and (ii) LIBOR plus %.
Payments of interest on the Notes will be senior to distributions of
interest on the Certificates as described below under "The Transfer and
Servicing Agreements -- Interest Collections."
CERTIFICATE BALANCE
"CERTIFICATE BALANCE" means, as of any Distribution Date, (i) with respect
to the Class A Certificates (a) $174,000,000, plus (b) the principal amount of
Class A Certificates issued after the Initial Closing Date, minus (c) all
distributions in respect of Certificate Balance of the Class A Certificates
actually made on or prior to such date, minus (d) unreimbursed Trust Charge-Offs
on such Distribution Date (determined after giving effect to the application of
Available Trust Interest and other amounts available to reimburse Trust
Charge-Offs on such date as described below) allocated to the Class A
Certificates, up to the Certificate Balance of the Class A Certificates on such
Distribution Date calculated without regard to this clause (d), and (ii) with
respect to any other class of Certificates, the amount set forth as such
pursuant to the terms of such class of Certificates. Any unreimbursed Trust
Charge-Offs applied to reduce the Certificate Balance will be applied against
each class of Certificates on such Distribution Date, pro rata on the basis of
the Certificate Balance of the Certificates of such class outstanding on the
preceding Distribution Date (calculated without reduction for any unreimbursed
Trust Charge-Offs).
No distributions will be made with respect to the Certificate Balance on
any Certificates until all Term Notes, and all Revolving Notes (including Notes
issued after the Initial Closing Date) are paid (or provided for) in full and
any Make-Whole Payment then owed to the Interest Rate Swap Counterparty is paid.
The Stated Final Payment Date for the Class A Certificates will be on the
Distribution Date in November 2004. If the Class A Certificates have not been
paid in full on or prior to such date, an Early Amortization Period for the
Trust will commence.
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ADDITIONAL ISSUANCES
From time to time after the Initial Closing Date, subject to the
satisfaction of certain conditions, the Trust may issue additional Certificates.
See "The Transfer and Servicing Agreements -- Additional Issuances; Changes in
Specified Maximum Revolver Balance" in the Prospectus. The Certificate Rate for
additional classes of Certificates issued after the Initial Closing Date may be
different than the Certificate Rate for the Class A Certificates.
THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of 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 Supplement is a
part. A copy of the Transfer and Servicing Agreements will be available from the
Seller upon request to the holders of Securities. The Transfer and Servicing
Agreements will be filed with the Commission following the Initial Closing Date.
The summary does not purport to be complete and is subject to, and qualified in
its entirety by reference to, all of the provisions of the Transfer and
Servicing Agreements and the Prospectus. Where particular provisions or terms
used in the Transfer and Servicing Agreements are referred to, the actual
provisions are incorporated by reference as part of such summary.
INTEREST COLLECTIONS
Application of Interest Collections. For each Collection Period, Trust
Interest Collections together with the other amounts comprising Available Trust
Interest for the related Distribution Date and Servicer Advances and amounts on
deposit in the Reserve Fund (which are not available to cover Aggregate
Certificateholders' Interest) to the extent described below will be applied in
the following order of priority:
(a) an amount equal to the Monthly Servicing Fee for such Distribution
Date will be paid to the Servicer;
(b) the net amounts, if any, to be paid (or set aside for payment)
under the Basis Swaps and any other Specified Support Arrangement which has
not been designated as specific to any series of Securities (i.e., to be
paid out of the Available Trust Interest allocated to such series) will be
paid in accordance with the terms of such arrangements;
(c) pro rata between clauses (i) and (ii), on the basis of the
aggregate amounts specified in such clauses:
(i) an amount equal to the Aggregate Noteholders' Interest for such
Distribution Date will be allocated to the Term Notes with further
application pro rata among clauses (A), (B) and (C), on the basis of the
Noteholders' Interest under each such clause:
(A) with respect to the Offered Term Notes, the amount allocated
pursuant to the preceding clause (i) shall be applied as follows:
first, together with any amounts on deposit in the Cash Accumulation
Account Earnings subaccount of the Cash Accumulation Account on such
Distribution Date necessary to make such payment (but not in excess
of the LIBOR based rate on the Interest Rate Swap, applied to the
Cash Accumulation Account; any excess earnings will be used on
subsequent Distribution Dates to meet payments due on the basis of
the LIBOR-based rate), an amount equal to the net amount, if any, the
Trust is required to pay under the Interest Rate Swap (including
prior claims, but excluding any Make-Whole Payment) will be paid in
accordance with the terms thereof and second, together with the net
amount, if any, received under the Interest Rate Swap by the Trust,
including any Make-Whole Payment to the Trust (provided that any such
amount in excess of the amount necessary to satisfy the Interest
Payment Amount for the Offered Term Notes shall be placed in the
Make-Whole Payment subaccount of the Cash Accumulation Account), and
any amounts on deposit in the Make-Whole Payment subaccount of the
Cash Accumulation Account on such Distribution Date necessary to make
the Interest Payment Amount for the Offered Term Notes for such
Distribution Date (but not to exceed in the aggregate the Interest
Payment Amount
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for the Offered Term Notes) will be transferred to the Note
Distribution Account for payment of interest on the Offered Term
Notes,
(B) with respect to the Series B Term Notes, an amount equal to
the Noteholders' Interest for such Distribution Date will be
transferred to the Note Distribution Account for the payment of
interest on the Series B Term Notes, and
(C) unless otherwise provided for any other series of Term Notes
that has a Specified Support Arrangement designated as specific to
such series, with respect to any other Term Notes, an amount equal to
the Noteholders' Interest for such Term Notes for such Distribution
Date will be transferred to the Note Distribution Account for the
payment of interest on such Term Notes, and
(ii) an amount equal to the Aggregate Revolver Interest for such
Distribution Date will be transferred to the Revolver Distribution
Account;
(d) pro rata, with respect to any series of Notes, an amount equal to
the excess, if any, of (i) the Interest Payment Amount (plus, in the case
of any series of Term Notes that has a Specified Support Arrangement
designated as specific to such series and payable out of the Noteholder's
Interest for such series, the net amount, if any, to be paid under such
Specified Support Arrangement, plus any Make-Whole Payment or similar
payment) over (ii) the amount paid to such series of Notes (plus, if
applicable, such Specified Support Arrangement) pursuant to (c) above, in
each case for such series of Notes for such Distribution Date will be
transferred to the Note Distribution Account for the payment of interest on
such Notes;
(e) an amount equal to any Servicer Advances not previously reimbursed
will be paid to the Servicer (except as otherwise provided in the Transfer
and Servicing Agreements);
(f) an amount equal to any Reserve Fund Deposit Amount for such
Distribution Date will be deposited into the Reserve Fund;
(g) an amount equal to the Aggregate Certificateholders' Interest for
such Distribution Date will be transferred to the Certificate Distribution
Account;
(h) an amount equal to any Trust Defaulted Amount will be treated as
Additional Trust Principal on such Distribution Date; and
(i) an amount equal to the aggregate amount of unreimbursed Trust
Charge-Offs will be treated as Additional Trust Principal on such
Distribution Date.
Available Trust Interest for a Distribution Date not applied as described
above will generally be allocated and paid to the Seller as compensation for
making the initial deposit and any additional deposits into the Reserve Fund.
To the extent Available Trust Interest for a Distribution Date is not
sufficient to make all of the applications described in clauses (a) through (e)
above, there will be a Deficiency Amount. If there is a Deficiency Amount, the
Servicer will be obligated to make an advance (a "SERVICER ADVANCE") of such
amount to the Trust, but only to the extent that the Servicer, in its sole
discretion, expects to recover such advance from subsequent collections or
recoveries allocated to the Trust as described above. To the extent that the
Available Trust Interest for a Distribution Date plus the Servicer Advance, if
any, made for such Distribution Date are insufficient to make the full amount of
the applications described in clauses (a) through (e) and (h) above, there will
be an "UNSATISFIED DEFICIENCY AMOUNT." Amounts on deposit in the Reserve Fund
will be applied to reduce such Unsatisfied Deficiency Amount in the priorities
set forth above. To the extent that the full amount of the Trust Defaulted
Amount has not been treated as Additional Trust Principal pursuant to clause (h)
above, the amount of such deficiency will be added to unreimbursed Trust Charge-
Offs. See "Defaults and Charge-Offs" below.
Certain Defined Terms. Following are definitions of certain terms used in
"Application of Interest Collections" above.
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"TRUST INTEREST COLLECTIONS" means, for any Distribution Date, an amount
equal to the sum of (i) the product of (a) the Trust Percentage and (b) Interest
Collections for the related Collection Period and (ii) recoveries during the
related Collection Period on Eligible Receivables that have previously become
Defaulted Receivables. If, on any Distribution Date, the Servicer does not make
a Servicer Advance in the amount of the full Deficiency Amount, Trust Interest
Collections for such Distribution Date will be adjusted to give effect to the
actual percentage of Eligible Receivables in those Accounts in the Pool of
Accounts in which the full amount of interest due for the related Collection
Period was not collected. Such adjustment will not affect the amount of interest
allocated to the Trust with respect to the other Accounts in the Pool of
Accounts.
"TRUST PERCENTAGE" means, for any Distribution Date, the percentage
equivalent of a fraction (which will never exceed 100%), the numerator of which
is the average Daily Trust Balance during the related Collection Period and the
denominator of which is the average daily aggregate principal balance of all
Receivables (including Receivables owned by GMAC) in the Accounts included in
the Pool of Accounts during the related Collection Period.
"AVAILABLE TRUST INTEREST" means, for any Distribution Date, the sum of
Trust Interest Collections, Investment Proceeds (excluding Cash Accumulation
Account Earnings and earnings on the Cash Accumulation Account Earnings
subaccount and the Make-Whole Payment subaccount, which will be allocated to
such subaccounts), the net amounts, if any, paid to the Trust under the Basis
Swaps and any other Specified Support Arrangements which have not been
designated as specific to any series of Term Notes and, other than for purposes
of clauses (a) through (c) under "Interest Collections -- Application of
Interest Collections" above, any amount paid to the Trust under any Specified
Support Arrangement that has been designated as specific to any series of Term
Notes remaining after payment of the Interest Payment Amount for such Term Notes
for such Distribution Date. If the Servicer exercises its option to purchase the
assets of the Trust as described below under "Optional Purchase by the
Servicer," a portion of the price therefor will be included in Available Trust
Interest as described below.
"AGGREGATE NOTEHOLDERS' INTEREST" means, for any Distribution Date, the sum
of the Noteholders' Interest for all series of Term Notes.
"NOTEHOLDERS' INTEREST" means, for any Distribution Date, (a) with respect
to the Offered Term Notes, an amount equal to (i) the amount to be paid by the
Trust prior to netting but excluding any Make-Whole Payment or similar payment
under the Interest Rate Swap on such Distribution Date, or, if the Interest Rate
Swap is not then in effect, the amount that the Trust would have been required
to pay prior to netting (but excluding any Make-Whole Payment or similar
payment) under the Interest Rate Swap on such Distribution Date if the Interest
Rate Swap would have been in effect on such Distribution Date multiplied by (ii)
a fraction the numerator of which is the Unaccumulated Principal Balance of the
Offered Term Notes and the denominator of which is equal to clause (i) of the
definition of Unaccumulated Principal Balance of the Offered Term Notes, (b)
with respect to the Series B Term Notes, the Interest Payment Amount for the
Series B Term Notes on such Distribution Date, and (c) with respect to any other
series of Term Notes, the amount set forth as such pursuant to the terms of such
series Term Notes (which shall be, unless a Specified Support Arrangement is
designated for such series, the Interest Payment Amount for such series for such
Distribution Date).
"INTEREST PAYMENT AMOUNT" means, for any Distribution Date, (a) with
respect to the Offered Term Notes, the sum of (1) product of (i) the outstanding
principal balance of the Offered Term Notes on the last day of the related
Collection Period (or, in the case of the Initial Distribution Date, the
outstanding principal balance on the Initial Closing Date), (ii) the Offered
Term Note Interest Rate for such Distribution Date and (iii) one-twelfth (or, in
the case of any Distribution Date on which the Offered Term Note Interest Rate
is LIBOR based or the Initial Distribution Date, a fraction, the numerator of
which is the number of days elapsed from and including the prior Distribution
Date (or in the case of the Initial Distribution Date, the Initial Closing
Date), to but excluding such Distribution Date and the denominator of which is
360) and (2) the excess of the Interest Payment Amount for the Offered Term
Notes for the immediately preceding Distribution Date over the amount that was
actually deposited in the Note Distribution Account on such
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immediately preceding Distribution Date for the payment of interest on the
Offered Term Notes, (b) with respect to the Series B Term Notes, the sum of (1)
product of (i) the outstanding principal balance of the Series B Term Notes on
the last day of the related Collection Period (or, in the case of the Initial
Distribution Date, the outstanding principal balance on the Initial Closing
Date), (ii) the Series B Interest Rate for such Distribution Date and (iii) a
fraction, the numerator of which is the number of days elapsed from and
including the prior Distribution Date (or, in the case of the Initial
Distribution Date, from and including the Initial Closing Date) to but excluding
such Distribution Date and the denominator of which is 360) and (2) the excess
of the Interest Payment Amount for the Series B Term Notes for the immediately
preceding Distribution Date over the amount that was actually deposited in the
Note Distribution Account on such immediately preceding Distribution Date for
the payment of interest on the Series B Term Notes, (c) with respect to any
other series of Term Notes, the amount required to be paid as, or set aside for
payment of, interest on such series of Term Notes on such Distribution Date
pursuant to its terms (including any interest payable as a result of shortfalls
from prior Distribution Dates) and (d) with respect to any series of Revolving
Notes, the sum of (i) the Revolver Interest and (ii) the Revolver Interest
Carryover Shortfall, in each case, for such series of Revolving Notes for such
Distribution Period.
"AGGREGATE REVOLVER INTEREST" means, for any Distribution Date, the sum of
(a) the Revolver Interest for all series of Revolving Notes and (b) the Revolver
Interest Carryover Shortfall for the preceding Distribution Date.
"REVOLVER INTEREST" means, for any Distribution Date, for any series of
Revolving Notes, the product of (a) the average daily Series Net Revolver
Balance for such series of Revolving Notes during the related Collection Period
and (b) the Revolver Interest Rate for such series of Revolving Notes for such
Distribution Date.
"REVOLVER INTEREST CARRYOVER SHORTFALL" means, for any Distribution Date,
the excess of (a) the Aggregate Revolver Interest for such Distribution Date
over (b) the amount that was actually deposited in the Revolver Distribution
Account on such Distribution Date in respect of Aggregate Revolver Interest.
"SPECIFIED SUPPORT ARRANGEMENT" means any letter of credit, security bond,
cash collateral account, spread account, guaranteed rate agreement, maturity or
liquidity facility, tax protection agreement, interest rate swap agreement,
interest rate cap agreement, other derivative product or other arrangement to
provide liquidity or credit support for the benefit of holders of one or more
series or classes of Securities (other than the Reserve Fund), whether or not
such arrangement is an asset of the Trust, designated as such. As of the Initial
Closing Date, the Specified Support Arrangements will consist of the Basis Swaps
and the Interest Rate Swap. Specified Support Arrangements for the benefit of
any series or classes of Securities, including those established in connection
with the issuance of any Securities after the Initial Closing Date, may not
inure to the benefit of other Securities (including the Offered Term Notes)
issued by the Trust. The Interest Rate Swap is designated for and is for the
benefit of the Offered Term Notes only and is to be paid out of the Noteholders'
Interest for the Offered Term Notes as described herein. The Basis Swaps have
not been designated as specific to any series of Securities.
"AGGREGATE CERTIFICATEHOLDERS' INTEREST" means, for any Distribution Date,
an amount equal to the sum of (a) the Certificateholders' Interest for all
classes of Certificates and (b) the Certificateholders' Interest Carryover
Shortfall for the preceding Distribution Date.
"CERTIFICATEHOLDERS' INTEREST" means, for any Distribution Date, for any
class of Certificates, the product of (a) the Certificate Balance for such
series on the prior Distribution Date (or, in the case of the first Distribution
Date following the issuance of such class of Certificates, on the related
Closing Date) plus the initial Certificate Balance of any Certificates of such
class issued since such prior Distribution Date and (b) the Certificate Rate for
such Distribution Date.
"CERTIFICATEHOLDERS' INTEREST CARRYOVER SHORTFALL" means, for any
Distribution Date, the excess of (a) the Aggregate Certificateholders' Interest
for such Distribution Date over (b) the amount that was actually deposited in
the Certificate Distribution Account on such Distribution Date in respect of
Aggregate Certificateholders' Interest.
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"RESERVE FUND DEPOSIT AMOUNT" means, for any Distribution Date, the excess,
if any, of the Reserve Fund Required Amount over the amount on deposit in the
Reserve Fund.
"RESERVE FUND REQUIRED AMOUNT" means (a) for any Distribution Date related
to the Revolving Period or Wind Down Period, 1.0% of the Maximum Pool Balance
without giving effect to any reduction in the Maximum Pool Balance as a result
of any amounts on deposit in the Note Distribution Account as of such
Distribution Date (or if, as of such Distribution Date, the long-term debt
obligations of GMAC are rated less than "BBB-" by Standard & Poor's, then 2.0%)
and (b) for any Distribution Date related to any Early Amortization Period, 1.0%
of the Maximum Pool Balance as of the last day of the Revolving Period (or if,
as of the last day of the Revolving Period the long-term debt obligations of
GMAC are rated less than "BBB-" by Standard & Poor's, then 2.0%). The Reserve
Fund Required Amount may be adjusted as described below under "Reserve Fund."
PRINCIPAL COLLECTIONS
Revolving Period and Payment Period for Offered Term Notes. As described in
the Prospectus, on any date during the Revolving Period, including any Payment
Period for the Offered Term Notes, except to the extent otherwise provided
during the Payment Period for any other series of Term Notes or for required
principal payments on any Revolving Note, Trust Principal Collections will be
applied towards the purchase of additional Receivables from the Seller on such
date and will be paid to the Seller for such purpose; provided that the Cash
Collateral Amount will be held as described in the Prospectus under "The
Transfer and Servicing Agreements -- Principal Collections." During the Index
Amortization Period for the Offered Term Notes, unless a Cash Accumulation
Period is in effect, no amount will be required to be set aside during any
Collection Period to fund any Required Payments with respect to the Offered Term
Notes.
Wind Down Period and Early Amortization Period. During the Wind Down Period
and any Early Amortization Period, all Trust Principal Collections will be
retained by the Trust for application to principal payments on the Notes and
distributions with respect to the Certificate Balance on the Certificates. Such
amounts for any Collection Period will be deemed included in the Cash Collateral
Amount for purposes of calculating the Daily Trust Invested Amount during such
Collection Period. On each Distribution Date during the Wind Down Period and any
Early Amortization Period, Trust Principal Collections during the related
Collection Period, together with other amounts comprising Available Trust
Principal (including amounts in the Reserve Fund as described below), will first
be applied to or set aside for the payment of outstanding principal on the
Notes, second for the payment of any unpaid Make-Whole Payment owed to the
Interest Rate Swap Counterparty and third for the payment of the outstanding
Certificate Balance on the Certificates. Principal payments will be made on the
Term Notes of each series (including the Offered Term Notes and the Series B
Term Notes) and the Revolving Notes of each series as described in "The Offered
Term Notes -- Principal" above.
RESERVE FUND
The Reserve Fund will be an Eligible Deposit Account established and
maintained in the name of the Indenture Trustee for the benefit of the holders
of Notes. On the Initial Closing Date, the Reserve Fund will be funded with the
Reserve Fund Initial Deposit from the Seller in an amount equal to $21,740,000.
Additional amounts may be deposited in the Reserve Fund (and the formula for the
Reserve Fund Required Amount adjusted) in connection with the issuance of
additional series of Term Notes or changes in the Specified Maximum Revolver
Balance. In addition, the Seller, in its sole discretion, may at any time make
additional deposits into the Reserve Fund as described in the Prospectus under
"The Transfer and Servicing Agreements -- Liquidity and Credit Support --
Reserve Fund." The Seller is not obligated to make any such additional deposit
and there can be no assurance that any such additional deposit will be made.
If the amount in the Reserve Fund is less than the Reserve Fund Required
Amount for any Distribution Date, the amount of such deficiency, to the extent
available from Available Trust Interest, will be deposited into the Reserve Fund
as described above under "Application of Collections -- Interest Collections."
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Amounts on deposit in the Reserve Fund will be available to cover the
Unsatisfied Deficiency Amount on each Distribution Date as described above under
"Application of Collections -- Interest Collections." Amounts on deposit in the
Reserve Fund will be included in Available Trust Principal and applied to make
the final principal payments on the Notes and the final distributions with
respect to Certificate Balance on the Certificates during the Wind Down Period
and any Early Amortization Period if and to the extent that, after giving effect
to all other required applications of the Reserve Fund on such Distribution Date
and all other amounts to be applied as Available Trust Principal on such
Distribution Date, the application of the amount on deposit in the Reserve Fund
as Available Trust Principal will reduce the outstanding principal balance on
all Notes and the outstanding Certificate Balance with respect to all
Certificates to zero (after giving effect to the payment and distribution of all
amounts otherwise on deposit (or to be deposited) in the Distribution Accounts
on such Distribution Date).
If the amount in the Reserve Fund is more than the Reserve Fund Required
Amount for any Distribution Date, the amount of such excess (unless otherwise
agreed by the Seller) will be paid to the Seller as compensation for making the
Reserve Fund Initial Deposit and other deposits, if any, into the Reserve Fund.
On the Trust Termination Date, any funds remaining on deposit in the Reserve
Fund will be distributed to the Seller.
Any investment earnings (net of losses and investment expenses) with
respect to the Reserve Fund for a Collection Period will be Investment Proceeds
and included in Available Trust Interest.
BASIS SWAPS
On the Initial Closing Date, the Trust will enter into an interest rate
swap (each, a "BASIS SWAP" and collectively the "BASIS SWAPS") with GMAC (in
such capacity, the "BASIS SWAP COUNTERPARTY") with respect to each of the
following: (a) the Offered Term Notes (the "OFFERED TERM NOTES BASIS SWAP"), (b)
the Series B Term Notes (the "SERIES B TERM NOTES BASIS SWAP"), (c) the Series
1997-RN1 Revolving Note (the "SERIES 1997-RN1 BASIS SWAP"), (d) the Series
1997-RN2 Revolving Note (the "SERIES 1997-RN2 BASIS SWAP") and (e) the
Certificates issued on the Initial Closing Date (the "CERTIFICATE BASIS SWAP").
Each Basis Swap is intended to allow the Trust to receive interest at a rate
determined by reference to the index upon which the rate of interest for the
applicable series of Notes or Certificates or amounts payable under any related
Specified Support Arrangement is based. In each case, the Trust will pay an
interest rate determined by reference to the Prime Rate, on the one hand, and
the Trust will receive a rate of interest determined by reference to LIBOR or
3-Month LIBOR, as the case may be, on the other hand, as described herein.
In accordance with the terms of the Offered Term Notes Basis Swap, on each
Distribution Date, the Basis Swap Counterparty will be obligated to pay to the
Trust an amount equal to interest accrued during the Collection Period preceding
such Distribution Date, on the daily Term Notional Amount at a rate equal to
LIBOR, with respect to such Distribution Date, plus % for each day during such
Collection Period divided by 360. In exchange, on each Distribution Date, the
Trust will be obligated to pay to the Basis Swap Counterparty an amount equal to
interest accrued during such Collection Period, on the daily Term Notional
Amount at a per annum rate equal to the Prime Rate for each day during such
Collection Period divided by 360. The "TERM NOTIONAL AMOUNT" for any day during
a Collection Period will equal the Unaccumulated Principal Balance of the
Offered Term Notes as of such day including after giving effect to unreimbursed
Trust Charge-Offs as of the close of business on the Distribution Date during
such Collection Period.
In accordance with the terms of the Series B Term Notes Basis Swap, on each
Distribution Date, the Basis Swap Counterparty will be obligated to pay to the
Trust an amount equal to interest accrued during the Collection Period preceding
such Distribution Date, on the daily Series B Term Note Notional Amount at a
rate equal to LIBOR, with respect to such Distribution Date, plus % for each
day during such Collection Period divided by 360. In exchange, on such
Distribution Date, the Trust will be obligated to pay to the Basis Swap
Counterparty an amount equal to interest accrued during such Collection Period,
on the daily Series B Term Note Notional Amount at a per annum rate equal to the
Prime Rate for each day during such Collection Period divided by 360. The
"SERIES B TERM NOTE NOTIONAL AMOUNT" for any day during a Collection Period
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will equal the outstanding principal balance of the Series B Term Notes as of
such day, including after giving effect to unreimbursed Trust Charge-Offs as of
the close of business on the Distribution Date during such Collection Period.
In accordance with the terms of the Series 1997-RN1 Basis Swap, on each
Distribution Date, the Basis Swap Counterparty will be obligated to pay to the
Trust an amount equal to interest accrued during the Collection Period preceding
such Distribution Date, on the daily 1997-RN1 Notional Amount at a rate equal to
LIBOR, with respect to such Distribution Date, plus % for each day during such
Collection Period divided by 360. In exchange, on such Distribution Date, the
Trust will be obligated to pay to the Basis Swap Counterparty an amount equal to
interest accrued during such Collection Period, on the daily 1997-RN1 Notional
Amount at a per annum rate equal to the Prime Rate for each day during such
Collection Period divided by 360. The "1997-RN1 NOTIONAL AMOUNT" for any day
during a Collection Period will equal the outstanding principal balance of the
Series 1997-RN1 Revolving Note as of such day, including after giving effect to
unreimbursed Trust Charge-Offs as of the close of business on the Distribution
Date during such Collection Period.
In accordance with the terms of the Series 1997-RN2 Basis Swap, on each
Distribution Date, the Basis Swap Counterparty will be obligated to pay to the
Trust an amount equal to interest accrued during the Collection Period preceding
such Distribution Date, on the daily 1997-RN2 Notional Amount at a rate equal to
3-Month LIBOR, with respect to such Distribution Date, plus % for each day
during such Collection Period divided by 360. In exchange, on such Distribution
Date, the Trust will be obligated to pay to the Basis Swap Counterparty an
amount equal to interest accrued during such Collection Period, on the daily
1997-RN2 Notional Amount at a per annum rate equal to the Prime Rate for each
day during such Collection Period divided by 360. The "1997-RN2 NOTIONAL AMOUNT"
for any day during a Collection Period will equal the outstanding principal
balance of the Series 1997-RN2 Revolving Note as of such day, including after
giving effect to unreimbursed Trust Charge-Offs as of the close of business on
the Distribution Date during such Collection Period.
In accordance with the terms of the Certificate Basis Swap, on each
Distribution Date, the Basis Swap Counterparty will be obligated to pay to the
Trust an amount equal to interest accrued during the Collection Period preceding
such Distribution Date, on the daily Certificate Notional Amount at a rate equal
to LIBOR, with respect to such Distribution Date, plus % per annum for each
day during such Collection Period divided by 360. In exchange, on such
Distribution Date, the Trust will be obligated to pay to the Basis Swap
Counterparty an amount equal to interest accrued during such Collection Period,
on the daily Certificate Notional Amount at a per annum rate equal to the Prime
Rate for each day during such Collection Period divided by 360. The "CERTIFICATE
NOTIONAL AMOUNT" for any day during a Collection Period will equal the
outstanding Certificate Balance of the Class A Certificates as of the last day
of such Collection Period, including after giving effect to unreimbursed Trust
Charge-Offs as of the close of business on the Distribution Date during such
Collection Period.
Under the Basis Swaps, on each Distribution Date the amount the Trust is
obligated to pay will be netted against the amount the Basis Swap Counterparty
is obligated to pay such that only the net amount will be due from the Trust or
the Basis Swap Counterparty, as the case may be. Such amount will be payable out
of Available Trust Interest as described above in clause (b) of "Interest
Collections -- Application of Interest Collections" or will be included in
"Available Trust Interest," as defined above in "Interest Collections -- Certain
Defined Terms."
The Trust may, without causing an Early Amortization Event, terminate,
amend or modify the terms of any Basis Swap or enter into other Specified
Support Arrangements in connection with the issuance of additional Term Notes,
Revolving Notes or Certificates, a change in the Specified Maximum Revolver
Balance or any Series Specified Maximum Revolver Balance or the payment in full
of any series of Term Notes without the consent of holders of the outstanding
Notes or Certificates so long as the conditions set forth in the Trust Sale and
Servicing Agreement for such issuance or change are satisfied, including, in the
case of any such issuance or increase in the Specified Maximum Revolver Balance,
confirmation from each Rating Agency that such issuance or increase will not
result in a reduction or withdrawal of the rating of any
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outstanding Securities. See "The Transfer and Servicing Agreements -- Additional
Issuances; Changes in Specified Maximum Revolver Balance" in the Prospectus.
Each Basis Swap will terminate if, among other things, either party
defaults in the payment of any amount due thereunder and in the event of certain
events of bankruptcy, insolvency or receivership with respect to the Basis Swap
Counterparty. The termination of any Basis Swap upon any such event will be an
Early Amortization Event for the Trust and a Cash Accumulation Event for the
Offered Term Notes.
INTEREST RATE SWAP
On the Initial Closing Date, the Trust, solely for the benefit of the
Offered Term Notes, will enter into (i) an interest rate swap with AIG Financial
Products Corp. (in such capacity, the "INTEREST RATE SWAP COUNTERPARTY") with
respect to the Offered Term Notes (the "INTEREST RATE SWAP") and (ii) a triparty
contingent assignment (the "CONTINGENT INTEREST RATE SWAP") with the Interest
Rate Swap Counterparty and Morgan Stanley Capital Services Inc. (the "CONTINGENT
INTEREST RATE SWAP COUNTERPARTY"). Also on the Initial Closing Date, American
International Group, Inc. (the "INTEREST RATE SWAP GUARANTOR") will enter into a
guarantee (the "INTEREST RATE SWAP GUARANTEE") whereby the Interest Rate Swap
Guarantor will guarantee amounts payable by the Interest Rate Swap Counterparty
under the Interest Rate Swap and Morgan Stanley, Dean Witter, Discover & Co.
(the "CONTINGENT INTEREST RATE SWAP GUARANTOR") will enter into a guarantee (the
"CONTINGENT INTEREST RATE SWAP GUARANTEE") whereby the Contingent Interest Rate
Swap Guarantor will guarantee amounts payable, if any, by the Contingent
Interest Rate Swap Counterparty under the Interest Rate Swap. The Interest Rate
Swap, the Interest Rate Swap Guarantee, the Contingent Interest Rate Swap and
the Contingent Interest Rate Swap Guarantee (collectively, the "INTEREST RATE
SWAP DOCUMENTS") are intended to allow the Trust to receive interest at a rate
equal to the interest rate with respect to the Offered Term Notes. On each
Distribution Date, the Trust will pay, solely out of the Noteholders' Interest
with respect to the Offered Term Notes and Cash Accumulation Account Earnings, a
monthly interest rate determined by reference to the lower of the LIBOR based
rate or the Assets Receivables Rate on a notional amount equal to the
outstanding principal balance of the Offered Term Notes at the close of business
on the preceding Distribution Date or the Initial Closing Date, as the case may
be, on the one hand, and the Trust will receive solely for the benefit of the
Offered Term Notes a fixed rate of interest equal to % (or after the
Targeted Final Payment Date, LIBOR plus 0.25%) on a notional amount equal to the
outstanding principal balance of the Offered Term Notes at the close of business
on the preceding Distribution Date, on the other hand. The Interest Rate Swap
Counterparty will cover any principal losses with respect to Eligible
Investments on funds in the Cash Accumulation Account.
The "ASSETS RECEIVABLES RATE" means, for the Offered Term Notes for any
Distribution Date, the quotient (expressed as a percentage) of (i) the sum of
(a) the product of (1) the LIBOR-based rate applicable to the Interest Rate Swap
for such Distribution Date and (2) the Unaccumulated Principal Balance and (b)
the Cash Accumulation Account Earnings divided by (ii) the outstanding principal
balance of the Offered Term Notes as of the previous Distribution Date.
"CASH ACCUMULATION ACCOUNT EARNINGS" for a Distribution Date means
investment earnings during the related Collection Period on funds deposited in
the Cash Accumulation Account, net of investment expenses with respect to such
funds.
"UNACCUMULATED PRINCIPAL BALANCE" as of a Distribution Date means (i) the
daily average of the outstanding principal balance of the Offered Term Notes
(prior to any distributions of principal on such Distribution Date) minus (ii)
the daily average of the amount of funds on deposit in the Cash Accumulation
Account; during the related Collection Period.
Termination. The Interest Rate Swap will automatically terminate on the
occurrence of the earliest of the following: (a) the Stated Final Payment Date
for the Offered Term Notes, (b) the Distribution Date on which the outstanding
principal balance of the Offered Terms Notes is reduced to zero, (c) the date on
which, due to any adoption of or change in any applicable law, it becomes
unlawful for the Trust, the Interest Rate Swap Counterparty, the Contingent
Interest Rate Swap Counterparty, the Interest Rate Swap Guarantor or the
Contingent Interest Rate Swap Guarantor to perform its obligations under the
Interest Rate Swap, or
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(d) the date on which the Trust or the Interest Rate Swap Counterparty becomes
required to withhold or deduct for or on account of tax and the Interest Rate
Swap Counterparty. In the event of a payment default by the Trust that has not
been cured within the applicable period, the Interest Rate Swap Counterparty
will have the option to terminate the Interest Rate Swap in the event of a
payment default by the Trust that is not cured after giving the required notice
or (e) the date that is the appropriate number of days after a payment default
under the Interest Rate Swap by the Interest Rate Swap Counterparty (including
the Interest Rate Swap Guarantor, the Contingent Interest Rate Swap Counterparty
and the Contingent Interest Rate Swap Guarantor).
In the event a termination described in clause (c) or (d) above occurs, a
Make-Whole Payment may be due (i) to the Interest Rate Swap Counterparty by the
Trust out of funds that would otherwise be used to pay interest on the Offered
Term Notes or principal on the Certificates or (ii) to the Trust by the Interest
Rate Swap Counterparty. The amount of any such "MAKE-WHOLE PAYMENT" will be
based on the market value of the Interest Rate Swap computed on the basis of
market quotations of the cost of entering into swap transactions with the same
terms and conditions that would have the effect of preserving the respective
full payment obligations of the parties, in accordance with the procedures set
forth in the Interest Rate Swap. Any such termination payment could, if certain
factors have changed materially, be substantial. There will be no Make-Whole
Payment in the case of a Trust payment default to the Interest Rate Swap
Counterparty.
Replacement of the Interest Rate Swap Counterparty. Upon the occurrence of
a default by the Interest Rate Swap Counterparty, the Interest Rate Swap will
not terminate. Rather the Contingent Interest Rate Swap Counterparty will assume
all the rights and obligations of the Interest Rate Swap Counterparty and will
be the Interest Rate Swap Counterparty for all purposes of the Interest Rate
Swap and such payment default or other early termination event will be deemed
not to have occurred. In addition, if the Interest Rate Swap Guarantor's
long-term unsecured and unsubordinated debt rating is withdrawn or reduced below
"A" by Standard & Poor's or "A2" by Moody's, the Contingent Interest Rate Swap
Counterparty will continue as the Contingent Interest Rate Swap Counterparty and
will find a replacement for the Interest Rate Swap Counterparty rated at least
"A+" by Standard & Poor's or at least "A1" by Moody's if the effect of such
replacement would be to increase the rating on the Offered Term Notes.
Furthermore, if the Contingent Interest Rate Swap Counterparty has assumed the
role of Interest Rate Swap Counterparty, such new Interest Rate Swap
Counterparty will continue as the Interest Rate Swap Counterparty and will find
a new Contingent Interest Rate Swap Counterparty rated at least "A+" by Standard
& Poor's and at least "A1" by Moody's.
The Interest Rate Swap Counterparty may transfer the Interest Rate Swap to
another of the Interest Rate Swap Counterparty's affiliates, offices or branches
in the United States on ten Business Days' prior written notice; provided that
(i) if such transfer is to an entity other than the Interest Rate Swap
Guarantor, such notice shall be accompanied by a guarantee of the Interest Rate
Swap Guarantor of such transferee's obligations or by a written confirmation
from the Interest Rate Swap Guarantor, in either case in form and substance
reasonably satisfactory to the Indenture Trustee and the Servicer, that the
Interest Rate Swap Guarantee will apply to the obligations of such transferee
under the Interest Rate Swap, (ii) the Interest Rate Swap Counterparty delivers
an opinion of independent counsel of recognized standing, in form and substance
satisfactory to the Indenture Trustee and the Servicer, confirming that as at
such transfer the transferee will not, as a result of such transfer, be required
to withhold or deduct on account of tax under the Interest Rate Swap, (iii) a
termination event or event of default does not occur under the Interest Rate
Swap as a result of such transfer and (iv) certain other conditions are
satisfied in connection with such transfer.
In the event that the Contingent Interest Rate Swap Counterparty has
assumed the role of Interest Rate Swap Counterparty, the original Interest Rate
Swap Counterparty will have no further liabilities, obligations or duties under
the Interest Rate Swap and the guarantee of the Interest Rate Swap Guarantor
will cease to have effect.
THE FOLLOWING INFORMATION HAS BEEN SUPPLIED BY THE INTEREST RATE SWAP
COUNTERPARTY, THE INTEREST RATE SWAP GUARANTOR, THE CONTINGENT INTEREST RATE
SWAP COUNTERPARTY AND THE CONTINGENT INTEREST RATE SWAP GUARANTOR, AS
APPLICABLE, FOR INCLUSION IN THIS PROSPECTUS SUPPLEMENT. NO REPRESENTATION IS
MADE BY THE SELLER, THE SERVICER OR ANY OF THEIR AFFILIATES AS TO THE ACCURACY
OR COMPLETENESS OF SUCH INFORMATION. THE
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INTEREST RATE SWAP COUNTERPARTY, THE INTEREST RATE SWAP GUARANTOR, THE
CONTINGENT INTEREST RATE SWAP COUNTERPARTY AND THE CONTINGENT INTEREST RATE SWAP
GUARANTOR DISCLAIM RESPONSIBILITY FOR THE ACCURACY OR COMPLETENESS OF THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS, TAKEN AS A WHOLE.
The Interest Rate Swap Counterparty. AIG Financial Products Corp.
("AIGFPC") is a wholly owned subsidiary of American International Group, Inc.
("AIG"). AIGFPC and its subsidiaries (the "AIGFPC GROUP") conduct, primarily as
principal, an interest rate, currency and equity derivative products business.
The AIGFPC Group also enters into long-dated forward foreign exchange contracts,
option transactions, liquidity facilities, investment contracts and other
structured transactions and invests in a diversified portfolio of securities. In
the course of conducting its business, the AIGFPC Group also engages in a
variety of other related transactions.
The Interest Rate Swap Guarantor. AIG, a Delaware corporation, is a holding
company which through its subsidiaries is primarily engaged in a broad range of
insurance and insurance-related activities in the United States and abroad.
AIG's principal activities include both general and life insurance operations.
Other significant activities are financial services and agency and service fee
operations. As of June 30, 1997, the total assets of AIG (on a consolidated
basis) were $156.2 billion and the total capital funds of AIG (on a consolidated
basis) were $23.0 billion.
Reports, proxy statements and other information filed by AIG with the
Commission pursuant to the informational requirements of the Exchange Act can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C., 20549, and at the
following regional offices of the Commission: New York Regional Office, Suite
1300, 7 World Trade Center, New York, New York 10048; Los Angeles Regional
Office, 5670 Wilshire Boulevard, 11th Floor, Los Angeles, California 90036; and
Chicago Regional Office, Suite 1400, 500 West Madison Street, Chicago, Illinois
60661. Copies of such material can be obtained from the Public Reference Section
of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. In addition, the Commission maintains a Website that contains reports,
proxy statements and other information regarding reporting companies under the
Exchange Act, including AIG, at http://www.sec.gov. Such reports, proxy
statements and other information can also be inspected at the Information Center
of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
The Contingent Interest Rate Swap Counterparty. Morgan Stanley Capital
Services, Inc. ("MSCS"), a subsidiary of Morgan Stanley, Dean Witter, Discover &
Co. ("MSDWD"), commenced operation in August 1985. MSCS was established to
conduct, primarily as principal, an interest rate, currency and equity
derivatives products business. In the course of conducting its business, MSCS
also engages in a variety of other related transactions.
The Contingent Interest Rate Swap Guarantor. MSDWD is a global financial
services firm that has three primary businesses -- securities, asset management
and credit services. MSDWD is a combination of Dean Witter, Discover & Co.
("DEAN WITTER DISCOVER") and Morgan Stanley Group Inc. ("MORGAN STANLEY")
pursuant to a merger (the "MERGER") that was effected on May 31, 1997 in which
Morgan Stanley was merged with and into Dean Witter Discover. MSDWD conducts its
business from its head office in New York City, regional offices and branches
throughout the United States, and through 28 principal offices in 19 countries
outside the United States. Dean Witter Discover was incorporated under the laws
of the State of Delaware in 1981 and its predecessor companies date back to
1924. Morgan Stanley was incorporated under the laws of the State of Delaware in
1975 and its predecessor companies date back to 1935. MSDWD's principal
executive offices are at 1585 Broadway, New York, New York 10036, and its
telephone number is (212) 761-4000. As of August 31, 1997, the total assets of
MSDWD (on a consolidated basis) were $282.5 billion and total capital funds of
MSDWD (on a consolidated basis) were $33.4 billion.
Reports, proxy statements and other information filed by MSDWD with the
Commission pursuant to the informational requirements of the Exchange Act can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
following regional offices of the Commission: New York Regional Office, Suite
1300, 7 World Trade Center, New York, New York 10048; Los Angeles Regional
Office, 5670 Wilshire Boulevard, 11th Floor, Los Angeles, California
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90036; and Chicago Regional Office, Suite 1400, 500 West Madison Street,
Chicago, Illinois 60661. Copies of such material can be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. In addition, the Commission maintains a Website that
contains reports, proxy statements and other information regarding reporting
companies under the Exchange Act, including MSDWD, at http://www.sec.gov. Such
reports, proxy statements and other information can also be inspected at the
Information Center of the New York Stock Exchange, Inc., 20 Broad Street, New
York, New York 10005.
OTHER LIQUIDITY AND CREDIT SUPPORT
Distributions on the Certificates will be subordinated to payments on the
Notes to the extent described herein. The Trust property will include the Basis
Swaps, the Interest Rate Swap and the Reserve Fund Initial Deposit, which will
be made into the Reserve Fund on the Initial Closing Date. The Basis Swaps have
not been designated as specific to any series of Securities. The Interest Rate
Swap will be solely for the benefit of the Offered Term Notes. The Servicer will
also make Servicer Advances and Servicer Liquidity Advances as described above.
Other credit, liquidity and other enhancement arrangements may be established in
connection with the issuance of additional Securities or increases in the
Specified Maximum Revolver Balance. There can be no assurance that any such
arrangements will be for the benefit of the holders of Offered Term Notes.
DEFAULTS AND CHARGE-OFFS
For any Distribution Date, Available Trust Interest will be available to
cover the Trust Defaulted Amount as described in "Application of Collections --
Interest Collections" above. To the extent that, for any Distribution Date, the
full amount of the Trust Defaulted Amount has not been covered through treatment
as Additional Trust Principal as described above, such deficiency will
constitute Trust Charge-Offs. Unreimbursed Trust Charge-Offs will be covered on
any subsequent Distribution Date out of Available Trust Interest and, to the
extent available therefor, withdrawals from the Reserve Fund as described above.
For any date, unreimbursed Trust Charge-Offs will equal (subject to reduction as
described below) the aggregate Trust Charge-Offs for all prior Distribution
Dates unless and to the extent such Trust Charge-Offs have been so covered. The
Daily Trust Invested Amount is reduced by the amount of unreimbursed Trust
Charge-Offs and will therefore be reinstated to the extent any Trust Charge-Offs
are reimbursed. Unreimbursed Trust Charge-Offs will be applied first to reduce
the outstanding Certificate Balance of the Certificates and then to reduce the
outstanding principal balance of the Notes, pro rata on the basis of the
principal balances of such Notes. To the extent there are unreimbursed Trust
Charge-Offs in excess of the Certificate Balance (calculated without reduction
for Trust Charge-Offs) at the time the final principal payment on any Notes is
made, the principal amount payable on such Notes will be reduced (and
unreimbursed Trust Charge-Offs will be reduced accordingly). Interest payments
on Securities will be reduced to the extent unreimbursed Trust Charge-Offs are
applied against such Securities as of any Distribution Date.
OPTIONAL PURCHASE BY THE SERVICER
Notwithstanding anything in the Prospectus to the contrary, at any time
from and after the time the Daily Trust Balance is equal to or less than 10% of
the sum of the highest Daily Trust Balance plus the Cash Collateral Amount and
the Cash Accumulation Account at any time since the Initial Closing Date, if
there are no Term Notes then outstanding or during the Wind Down Period, the
Servicer may, at its option, purchase from the Trust, as of the last day of any
Collection Period, all remaining Receivables and other assets then held by the
Trust, at a price equal to the aggregate Administrative Purchase Payments for
such Receivables plus the appraised value of such other assets. Such amount will
be treated on the related Distribution Date as Additional Trust Principal to the
extent of the principal portion of the aggregate Administrative Purchase
Payments so paid, with the remainder being Available Trust Interest. See
"Interest Collections" above.
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EARLY AMORTIZATION EVENTS
In addition to the Early Amortization Events set forth in the Prospectus,
an Early Amortization Event will occur upon the termination of any Basis Swap or
certain events of bankruptcy, insolvency or receivership with respect to the
Basis Swap Counterparty or similar counterparty. The "RESERVE FUND TRIGGER
AMOUNT" will be equal to $10,000,000.
As described in subparagraph (f) under "The Transfer and Servicing
Agreements -- Early Amortization Events" in the Prospectus, the Seller may elect
in certain limited circumstances to terminate an Early Amortization Period and
recommence the Revolving Period and any Payment Period at any time prior to the
Final Revolving Period Termination Date. If an Early Amortization Event and a
Cash Accumulation Event described in sub-paragraphs (f), (h), or (j) under "The
Transfer and Servicing Agreements -- Early Amortization Events" in the
Prospectus has occurred, the Seller may nonetheless elect to end the Cash
Accumulation Period and Early Amortization Period and recommence the Revolving
Period within the one-year anniversary of the commencement of the Early
Amortization Period and the Cash Accumulation Period so long as the event giving
rise to such Early Amortization Event and Cash Accumulation Period has not
existed for three consecutive months, the Final Revolving Period Termination
Date has not occurred and the long-term debt obligations of GMAC are rated at
least "Baa3" by Moody's. Upon any such recommencement, funds in the Cash
Accumulation Account may be used to purchase additional Receivables, so long as
the Daily Trust Balance is equal to the Daily Trust Invested Amount. No ending
of the Early Amortization Period and recommencement of the Revolving Period and
ending of the Cash Accumulation Period may occur unless the amount in the
Reserve Fund on the date of recommencement shall equal or exceed the amount that
was in the Reserve Fund on the date of the commencement of the Early
Amortization Period and Cash Accumulation Period, but in any event it shall not
be less than the Reserve Fund Required Amount, and after giving effect to all
issuances of Securities and all changes in the Specified Maximum Revolver
Balance on the date of the commencement event, the quotient of (A) the
outstanding Certificate Balance of all the outstanding Certificates over (B) the
Maximum Pool Balance shall equal or exceed the Specified Certificate Percentage.
Neither the Revolving Period nor any Payment Period for the Trust may otherwise
be recommenced following the occurrence of an Early Amortization Event and the
Cash Accumulation Period may not be otherwise ended following the occurrence of
a Cash Accumulation Event. A Wind Down Period for the Trust and a Cash
Accumulation Period for the Offered Term Notes may also be terminated and the
Revolving Period for the Trust may recommence prior to the Final Revolving
Period Termination Date under certain circumstances. See "The Trust -- The
Trust."
TERMINATION
The "SPECIFIED TRUST TERMINATION DATE" is April 1, 2010.
ADMINISTRATOR
GMAC, in its capacity as Administrator, will provide notices and perform
other administrative obligations required by the Indenture with respect to the
Offered Term Notes to the extent provided in the Administration Agreement. Upon
the date the amount of funds in the Cash Accumulation Account equals the
outstanding principal balance of the Offered Term Notes, such functions with
respect to the Offered Term Notes will no longer be performed by GMAC and will
be performed by the Interest Rate Swap Counterparty.
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 Offered Term Notes will constitute
indebtedness. Each Offered Term Noteholder, by the acceptance of an Offered Term
Note, will agree to treat the Offered Term Notes as indebtedness for federal,
state and local income and franchise tax purposes.
All the Class A Certificates issued on the Closing Date will be issued to
the Seller. Accordingly, the Trust will be characterized as a division of the
Seller for federal income tax purposes. See "Certain Federal Income
S-40
<PAGE> 41
Tax Consequences -- Tax Characterization of Trust" in the Prospectus. If the
Seller sells the Certificates or the Trust issues additional Certificates, this
characterization may change. See "Certain Federal Income Tax Consequences -- Tax
Characterization of Trust" in the Prospectus.
See "Certain Federal Income Tax Consequences" and "State and Local Tax
Consequences" in the Prospectus.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "UNDERWRITING AGREEMENT"), the Seller has agreed to sell to Morgan Stanley
& Co. Incorporated (the "UNDERWRITER"), and the Underwriter has agreed to
purchase from the Seller, all of the Offered Term Notes.
In the Underwriting Agreement, the Underwriter has agreed, subject to the
terms and conditions set forth therein, to purchase all of the Offered Term
Notes offered hereby if any of the Offered Term Notes are purchased.
The Seller has been advised by the Underwriter that the Underwriter
proposes initially to offer the Offered Term 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 % of the Offered Term Note denominations.
The Underwriter may allow and such dealers may reallow a concession not in
excess of % of the Offered Term Note denominations to certain other dealers.
After the initial public offering, the public offering price and such
concessions may be changed.
Under certain high prepayment scenarios, the Underwriter has agreed to
reduce a portion of the Seller's expenses related to this transaction.
The Contingent Interest Rate Swap Counterparty and the Contingent Interest
Rate Swap Guarantor are both affiliates of the Underwriter.
The Underwriting Agreement provides that the Seller will indemnify the
Underwriter against certain liabilities, including liabilities under the
Securities Act or contribute to payments the Underwriter may be required to make
in respect thereof.
The Underwriter intends to make a secondary market in the Offered Term
Notes, but has no obligation to do so. There can be no assurance that a
secondary market for the Offered Term Notes will develop or, if it does develop,
that it will continue or that it will provide holders of the Offered Term Notes
with a sufficient level of liquidity of, or trading markets for, the Offered
Term Notes.
In order to facilitate the offering of the Offered Term Notes, the
Underwriter may engage in transactions that stabilize, maintain or otherwise
affect the price of the Offered Term Notes in accordance with Regulation M under
the Exchange Act. Specifically, the Underwriter may overallot in connection with
the offering, creating a short position in the Offered Term Notes for its own
account. In addition, to cover overallotments or to stabilize the price of the
Offered Term Notes, the Underwriter may bid for, and purchase, the Offered Term
Notes in the open market. These activities may cause the prices of the Offered
Term Notes to be higher than they would otherwise be in the absence of the these
activities. The Underwriter is not required to engage in these activities and
may end any of these activities at any time.
LEGAL OPINIONS
In addition to the legal opinions described in the Prospectus, certain
legal matters relating to the Offered Term Notes will be passed upon for the
Underwriter by Mayer, Brown & Platt. Mayer, Brown & Platt has from time to time
represented, and is currently representing, General Motors and certain of its
affiliates.
S-41
<PAGE> 42
INDEX OF PRINCIPAL TERMS
<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
1997-RN1 Notional Amount.................................... S-35
1997-RN2 Notional Amount.................................... S-35
1997-RN2 Quarterly Distribution Date........................ S-25
3-Month LIBOR............................................... S-26
3-Month LIBOR Reference Date................................ S-26
3-Month Reference Bank Rate................................. S-26
Additional Structuring Assumptions.......................... S-23
Additional Trust Principal.................................. S-21
Aggregate Certificateholders' Interest...................... S-32
Aggregate Noteholders' Interest............................. S-31
Aggregate Revolver Interest................................. S-32
AIG......................................................... S-38
AIGFPC...................................................... S-38
AIGFPC Group................................................ S-38
Amortization Amount Determination Date...................... S-22
Assets Receivables Rate..................................... S-36
Available Trust Interest.................................... S-31
Available Trust Principal................................... S-20
Average Principal Receivables Balance....................... S-15
Base Mortgage Loans......................................... S-11
Basis Swap.................................................. S-34
Basis Swap Counterparty..................................... S-34
Basis Swaps................................................. S-34
Cash Accumulation Account................................... S-20
Cash Accumulation Account Earnings.......................... S-36
Cash Accumulation Event..................................... S-7
Cash Accumulation Period.................................... S-6
Certificate Balance......................................... S-28
Certificate Basis Swap...................................... S-34
Certificate Notional Amount................................. S-35
Certificateholders' Interest................................ S-32
Certificateholders' Interest Carryover Shortfall............ S-32
Class A Certificates........................................ S-3
Contingent Interest Rate Swap............................... S-36
Contingent Interest Rate Swap Counterparty.................. S-36
Contingent Interest Rate Swap Guarantee..................... S-36
Contingent Interest Rate Swap Guarantor..................... S-36
Dean Witter Discover........................................ S-38
Distribution Date........................................... S-1
Eligible Investments........................................ S-21
Final Revolving Period Termination Date..................... S-13
Fixed Rate Swap Payment..................................... S-8
Floating Rate Swap Payment.................................. S-8
Indenture................................................... S-17
Indenture Trustee........................................... S-3
Index Amortization Amount................................... S-21
Index Amortization Date..................................... S-5
Index Amortization Period................................... S-6
Initial Closing Date........................................ S-1
Initial Cut-Off Date........................................ S-3
</TABLE>
S-42
<PAGE> 43
<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
Initial Distribution Date................................... S-1
Initial Revolving Notes..................................... S-3
Interest Payment Amount..................................... S-31
Interest Rate Swap.......................................... S-36
Interest Rate Swap Counterparty............................. S-36
Interest Rate Swap Documents................................ S-36
Interest Rate Swap Guarantee................................ S-36
Interest Rate Swap Guarantor................................ S-36
Issuer...................................................... S-1
LIBOR....................................................... S-17
LIBOR Business Day.......................................... S-18
Make-Whole Payment.......................................... S-37
Merger...................................................... S-38
Monthly Amortization Rate................................... S-21
Morgan Stanley.............................................. S-38
MSCS........................................................ S-38
MSDWD....................................................... S-38
Net Losses.................................................. S-15
Noteholders' Interest....................................... S-31
Notes....................................................... S-3
Offered Term Notes Basis Swap............................... S-34
Offered Term Notes Interest Rate............................ S-17
Offered Term Notes.......................................... S-1
Owner Trustee............................................... S-3
Pool Formation Date......................................... S-16
Principal Allocation Percentage............................. S-21
Principal Calculation Agent................................. S-23
PSA......................................................... S-22
PSA Index Rate.............................................. S-22
PSA Standard Prepayment Model............................... S-22
Rapid Amortization Event.................................... S-7
Rapid Amortization Period................................... S-7
Reference Bank Rate......................................... S-18
Reference Bloomberg Page.................................... S-22
Reference Collateral Pool................................... S-5
Required Payment............................................ S-5
Reserve Fund Deposit Amount................................. S-33
Reserve Fund Required Amount................................ S-33
Reserve Fund Trigger Amount................................. S-40
Revolver Interest........................................... S-32
Revolver Interest Carryover Shortfall....................... S-32
Revolving Note Amortization Period.......................... S-27
Scheduled Revolving Period Termination Date................. S-13
Securities.................................................. S-3
Seller...................................................... S-3
Series 1997-RN1 Basis Swap.................................. S-34
Series 1997-RN1 Revolving Note.............................. S-3
Series 1997-RN2 Basis Swap.................................. S-34
Series 1997-RN2 Revolving Note.............................. S-3
Series B Controlled Payment Amount.......................... S-25
Series B Interest Rate...................................... S-24
Series B Stated Final Payment Date.......................... S-8
</TABLE>
S-43
<PAGE> 44
<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
Series B Targeted Final Payment Date........................ S-8
Series B Term Note Notional Amount.......................... S-34
Series B Term Notes......................................... S-3
Series B Term Notes Basis Swap.............................. S-34
Series Net Revolver Balance................................. S-26
Series Specified Maximum Revolver Balance................... S-27
Servicer.................................................... S-3
Servicer Advance............................................ S-30
Servicer Liquidity Advance.................................. S-18
Specified Certificate Percentage............................ S-12
Specified Maximum Revolver Balance.......................... S-26
Specified Support Arrangement............................... S-32
Specified Trust Termination Date............................ S-40
Stated Final Payment Date................................... S-6
Supplemental Principal Allocation........................... S-20
Targeted Final Payment Date................................. S-6
Term Notional Amount........................................ S-34
Trust....................................................... S-1
Trust Agreement............................................. S-12
Trust Estate................................................ S-13
Trust Interest Collections.................................. S-31
Trust Percentage............................................ S-31
Trust Principal Collections................................. S-20
Unaccumulated Principal Balance............................. S-36
Underwriter................................................. S-41
Underwriting Agreement...................................... S-41
Unsatisfied Deficiency Amount............................... S-30
</TABLE>
S-44
<PAGE> 45
ANNEX I
PREPAYMENT CALCULATION TABLE
<TABLE>
<CAPTION>
MONTHLY
PSA INDEX AMORTIZATION
RATE (%) RATE (%)
- --------- ------------
<C> <S> <C>
100 and below 0.037
101 0.046
102 0.054
103 0.063
104 0.071
105 0.080
106 0.088
107 0.097
108 0.105
109 0.114
110 0.122
111 0.131
112 0.139
113 0.148
114 0.156
115 0.165
116 0.173
117 0.182
118 0.190
119 0.199
120 0.207
121 0.216
122 0.224
123 0.233
124 0.241
125 0.250
126 0.385
127 0.519
128 0.654
129 0.788
130 0.923
131 1.058
132 1.192
133 1.327
134 1.461
135 1.596
136 1.708
137 1.820
138 1.931
139 2.043
140 2.155
141 2.267
142 2.379
143 2.490
144 2.602
145 2.714
</TABLE>
<TABLE>
<CAPTION>
MONTHLY
PSA INDEX AMORTIZATION
RATE (%) RATE (%)
- --------- ------------
<C> <S> <C>
146 2.826
147 2.938
148 3.049
149 3.161
150 3.273
151 3.417
152 3.561
153 3.705
154 3.848
155 3.992
156 4.136
157 4.280
158 4.424
159 4.568
160 4.711
161 4.855
162 4.999
163 5.143
164 5.287
165 5.431
166 5.574
167 5.718
168 5.862
169 6.006
170 6.150
171 6.294
172 6.437
173 6.581
174 6.725
175 -275 6.869
276 6.896
277 6.922
278 6.949
279 6.976
280 7.003
281 7.029
282 7.056
283 7.083
284 7.109
285 7.136
286 7.163
287 7.189
288 7.216
289 7.243
290 7.270
291 7.296
</TABLE>
<TABLE>
<CAPTION>
MONTHLY
PSA INDEX AMORTIZATION
RATE (%) RATE (%)
- --------- ------------
<C> <S> <C>
292 7.323
293 7.350
294 7.376
295 7.403
296 7.430
297 7.457
298 7.483
299 7.510
300 7.537
301 7.563
302 7.590
303 7.617
304 7.643
305 7.670
306 7.697
307 7.724
308 7.750
309 7.777
310 7.804
311 7.830
312 7.857
313 7.884
314 7.911
315 7.937
316 7.964
317 7.991
318 8.017
319 8.044
320 8.071
321 8.098
322 8.124
323 8.151
324 8.178
325 8.204
326 8.231
327 8.258
328 8.284
329 8.311
330 8.338
331 8.365
332 8.391
333 8.418
334 8.445
335 8.471
336 8.498
337 8.525
</TABLE>
S-45
<PAGE> 46
ANNEX I
PREPAYMENT CALCULATION TABLE
<TABLE>
<CAPTION>
MONTHLY
PSA INDEX AMORTIZATION
RATE (%) RATE (%)
- --------- ------------
<C> <S> <C>
338 8.552
339 8.578
340 8.605
341 8.632
342 8.658
343 8.685
344 8.712
345 8.738
346 8.765
347 8.792
348 8.819
349 8.845
350 8.872
351 8.897
352 8.923
353 8.948
354 8.973
355 8.999
356 9.024
357 9.049
358 9.074
359 9.100
360 9.125
361 9.150
362 9.176
363 9.201
364 9.226
365 9.252
366 9.277
367 9.302
368 9.327
369 9.353
370 9.378
371 9.403
372 9.429
373 9.454
374 9.479
375 9.505
376 9.530
377 9.555
378 9.580
379 9.606
380 9.631
381 9.656
382 9.682
383 9.707
</TABLE>
<TABLE>
<CAPTION>
MONTHLY
PSA INDEX AMORTIZATION
RATE (%) RATE (%)
- --------- ------------
<C> <S> <C>
384 9.732
385 9.758
386 9.783
387 9.808
388 9.833
389 9.859
390 9.884
391 9.909
392 9.935
393 9.960
394 9.985
395 10.011
396 10.036
397 10.061
398 10.086
399 10.112
400 10.137
401 10.162
402 10.188
403 10.213
404 10.238
405 10.264
406 10.289
407 10.314
408 10.339
409 10.365
410 10.390
411 10.415
412 10.441
413 10.466
414 10.491
415 10.517
416 10.542
417 10.567
418 10.592
419 10.618
420 10.643
421 10.668
422 10.694
423 10.719
424 10.744
425 10.770
426 10.795
427 10.820
428 10.845
429 10.871
</TABLE>
<TABLE>
<CAPTION>
MONTHLY
PSA INDEX AMORTIZATION
RATE (%) RATE (%)
- --------- ------------
<C> <S> <C>
430 10.896
431 10.921
432 10.947
433 10.972
434 10.997
435 11.023
436 11.048
437 11.073
438 11.098
439 11.124
440 11.149
441 11.174
442 11.200
443 11.225
444 11.250
445 11.276
446 11.301
447 11.326
448 11.351
449 11.377
450 11.402
451 11.427
452 11.453
453 11.478
454 11.503
455 11.529
456 11.554
457 11.579
458 11.604
459 11.630
460 11.655
461 11.680
462 11.706
463 11.731
464 11.756
465 11.782
466 11.807
467 11.832
468 11.857
469 11.883
470 11.908
471 11.933
472 11.959
473 11.984
474 12.009
475 12.035
</TABLE>
S-46
<PAGE> 47
ANNEX I
PREPAYMENT CALCULATION TABLE
<TABLE>
<CAPTION>
MONTHLY
PSA INDEX AMORTIZATION
RATE (%) RATE (%)
- --------- ------------
<C> <S> <C>
476 12.060
477 12.085
478 12.110
479 12.136
480 12.161
481 12.186
482 12.212
483 12.237
484 12.262
485 12.288
486 12.313
487 12.338
488 12.363
489 12.389
490 12.414
491 12.439
492 12.465
493 12.490
494 12.515
495 12.541
496 12.566
497 12.591
498 12.616
499 12.642
500 12.667
501 12.714
502 12.760
503 12.807
504 12.854
505 12.900
506 12.947
507 12.994
508 13.040
509 13.087
510 13.134
511 13.180
512 13.227
513 13.274
514 13.320
515 13.367
516 13.414
517 13.460
518 13.507
519 13.554
520 13.600
521 13.647
</TABLE>
<TABLE>
<CAPTION>
MONTHLY
PSA INDEX AMORTIZATION
RATE (%) RATE (%)
- --------- ------------
<C> <S> <C>
522 13.694
523 13.740
524 13.787
525 13.834
526 13.880
527 13.927
528 13.974
529 14.020
530 14.067
531 14.114
532 14.160
533 14.207
534 14.254
535 14.300
536 14.347
537 14.394
538 14.440
539 14.487
540 14.534
541 14.580
542 14.627
543 14.674
544 14.720
545 14.767
546 14.814
547 14.860
548 14.907
549 14.954
550 15.000
551 15.047
552 15.094
553 15.140
554 15.187
555 15.234
556 15.280
557 15.327
558 15.374
559 15.420
560 15.467
561 15.514
562 15.560
563 15.607
564 15.654
565 15.700
566 15.747
567 15.794
</TABLE>
<TABLE>
<CAPTION>
MONTHLY
PSA INDEX AMORTIZATION
RATE (%) RATE (%)
- --------- ------------
<C> <S> <C>
568 15.840
569 15.887
570 15.934
571 15.980
572 16.027
573 16.074
574 16.120
575 16.167
576 16.214
577 16.260
578 16.307
579 16.354
580 16.400
581 16.447
582 16.494
583 16.540
584 16.587
585 16.634
586 16.680
587 16.727
588 16.774
589 16.820
590 16.867
591 16.914
592 16.960
593 17.007
594 17.054
595 17.100
596 17.147
597 17.194
598 17.240
599 17.287
600 17.334
601 17.380
602 17.427
603 17.473
604 17.520
605 17.567
606 17.613
607 17.660
608 17.707
609 17.753
610 17.800
611 17.847
612 17.893
613 17.940
</TABLE>
S-47
<PAGE> 48
ANNEX I
PREPAYMENT CALCULATION TABLE
<TABLE>
<CAPTION>
MONTHLY
PSA INDEX AMORTIZATION
RATE (%) RATE (%)
- --------- ------------
<C> <S> <C>
614 17.987
615 18.033
616 18.080
617 18.127
618 18.173
619 18.220
620 18.267
621 18.313
622 18.360
623 18.407
624 18.453
625 18.500
626 18.547
627 18.593
628 18.640
629 18.687
630 18.733
631 18.780
632 18.827
633 18.873
634 18.920
635 18.967
636 19.013
637 19.060
638 19.107
639 19.153
640 19.200
641 19.247
642 19.293
</TABLE>
<TABLE>
<CAPTION>
MONTHLY
PSA INDEX AMORTIZATION
RATE (%) RATE (%)
- --------- ------------
<C> <S> <C>
643 19.340
644 19.387
645 19.433
646 19.480
647 19.527
648 19.573
649 19.620
650 19.667
651 19.713
652 19.760
653 19.807
654 19.853
655 19.900
656 19.947
657 19.993
658 20.040
659 20.087
660 20.133
661 20.180
662 20.227
663 20.273
664 20.320
665 20.367
666 20.413
667 20.460
668 20.507
669 20.553
670 20.600
671 20.647
</TABLE>
<TABLE>
<CAPTION>
MONTHLY
PSA INDEX AMORTIZATION
RATE (%) RATE (%)
- --------- ------------
<C> <S> <C>
672 20.693
673 20.740
674 20.787
675 20.833
676 20.880
677 20.927
678 20.973
679 21.020
680 21.067
681 21.113
682 21.160
683 21.207
684 21.253
685 21.300
686 21.347
687 21.393
688 21.440
689 21.487
690 21.533
691 21.580
692 21.627
693 21.673
694 21.720
695 21.767
696 21.813
697 21.860
698 21.907
699 21.953
700 and up 22.000
</TABLE>
S-48
<PAGE> 49
PROSPECTUS
SUPERIOR WHOLESALE INVENTORY FINANCING TRUSTS
ASSET-BACKED TERM NOTES
------------------------
WHOLESALE AUTO RECEIVABLES CORPORATION
SELLER
------------------------
GENERAL MOTORS ACCEPTANCE CORPORATION
SERVICER
------------------------
The Asset-Backed Term Notes (the "TERM NOTES") described herein may be sold
from time to time in one or more series, in amounts, at prices and on terms to
be determined at the time of sale and to be set forth in a supplement to this
Prospectus (a "PROSPECTUS SUPPLEMENT").
The Term Notes will be issued by one or more trusts (each, a "TRUST"). The
property of each Trust will consist of a pool of wholesale receivables generated
from time to time in a portfolio of revolving financing arrangements with
dealers to finance inventories of automobiles and light trucks and collections
thereon and certain other property. Each Trust will be formed pursuant to a
Trust Agreement (the "TRUST AGREEMENT") to be entered into between Wholesale
Auto Receivables Corporation, as Seller (the "SELLER"), and the Owner Trustee
specified in the related Prospectus Supplement (the "OWNER TRUSTEE"). The Term
Notes of each Trust will be issued and secured pursuant to an Indenture (the
"INDENTURE") between such Trust and the Indenture Trustee specified in the
related Prospectus Supplement (the "INDENTURE TRUSTEE").
Each Trust will also issue Asset-Backed Certificates (the "CERTIFICATES")
and Asset-Backed Revolving Notes (the "REVOLVING NOTES," together with the Term
Notes, the "NOTES" and, collectively with the Term Notes and the Certificates,
the "SECURITIES"). Only the Term Notes will be offered by this Prospectus and
any related Prospectus Supplement. The Certificates will represent fractional
undivided interests in the related Trust.
Each series of Term Notes offered hereby will represent the right to receive
specified amounts of principal and interest in the manner described herein and
in the related Prospectus Supplement. Each series of Term Notes may have
different interest rates and different stated final payment dates. Each Trust
may issue one or more series of Term Notes entitled to principal payments with
disproportionate, contingent, nominal or no interest distributions, or entitled
to interest distributions with disproportionate, contingent, nominal or no
principal payments. Payments on the Term Notes and the Revolving Notes issued by
a Trust and distributions on the related Certificates will have the priorities
set forth in the related Prospectus Supplement. For each Trust, payments of
principal and interest on a series of Term Notes may be senior (other than in
circumstances related to the occurrence of an Event of Default) or equivalent to
the priority of payments on the related Revolving Notes. Payments on the Notes
will be senior in right of payment to distributions on the related Certificates
to the extent described herein and in the related Prospectus Supplement. At the
time of issuance, each series of Term Notes will be rated as investment grade
securities by at least one Rating Agency.
EXCEPT AS OTHERWISE PROVIDED IN THE RELATED PROSPECTUS SUPPLEMENT, THE ONLY
OBLIGATIONS OF THE SELLER OR OF GENERAL MOTORS ACCEPTANCE CORPORATION AS
ORIGINATOR OF RECEIVABLES WITH RESPECT TO ANY TRUST WILL BE PURSUANT TO CERTAIN
REPRESENTATIONS AND WARRANTIES MADE BY SUCH PARTIES. GENERAL MOTORS ACCEPTANCE
CORPORATION WILL BE THE SERVICER (THE "SERVICER") WITH RESPECT TO THE
RECEIVABLES OF ANY TRUST. EXCEPT AS OTHERWISE SET FORTH IN THE RELATED
PROSPECTUS SUPPLEMENT, THE OBLIGATIONS OF THE SERVICER WILL BE LIMITED TO ITS
CONTRACTUAL SERVICING OBLIGATIONS.
There is currently no secondary market for the Term Notes. There can be no
assurance that a secondary market for the Term Notes will develop or, if it does
develop, that it will continue. The Term Notes will not be listed on any
securities exchange.
PROSPECTIVE INVESTORS SHOULD CONSIDER AMONG OTHER THINGS THE INFORMATION
SET FORTH UNDER "RISK FACTORS" ON PAGE 9 OF THIS PROSPECTUS.
------------------------
EXCEPT AS OTHERWISE PROVIDED IN THE RELATED PROSPECTUS SUPPLEMENT, PROCEEDS OF
THE ASSETS OF EACH TRUST AND LIMITED AMOUNTS ON DEPOSIT IN THE RELATED RESERVE
FUND ARE THE SOLE SOURCES OF PAYMENTS ON THE TERM NOTES OF SUCH TRUST. THE TERM
NOTES DO NOT REPRESENT AN INTEREST IN OR OBLIGATION OF, AND ARE NOT INSURED OR
GUARANTEED BY, GENERAL MOTORS ACCEPTANCE CORPORATION, WHOLESALE AUTO RECEIVABLES
CORPORATION OR ANY OF THEIR RESPECTIVE AFFILIATES, EXCEPT TO THE EXTENT, IF ANY,
SET FORTH IN THE RELATED PROSPECTUS SUPPLEMENT.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
Retain this Prospectus for future reference. This Prospectus may not be used
to consummate sales of Term Notes offered hereby unless accompanied by a
Prospectus Supplement.
THE DATE OF THIS PROSPECTUS IS NOVEMBER , 1997.
<PAGE> 50
AVAILABLE INFORMATION
Wholesale Auto Receivables Corporation, as originator of each Trust, has
filed with the Securities and Exchange Commission (the "COMMISSION") a
Registration Statement (together with all amendments and exhibits thereto,
referred to herein as the "REGISTRATION STATEMENT") under the Securities Act,
with respect to the Term Notes offered pursuant to this Prospectus and the
related Prospectus Supplement. This Prospectus, which forms part of the
Registration Statement, does not contain all of the information contained in the
Registration Statement and is qualified in its entirety by reference to the
Registration Statement. The Registration Statement is available for inspection
without charge at the public reference facilities of the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices
of the Commission at Seven World Trade Center, 13th Floor, New York, New York
10048 and the Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Such material may also be accessed electronically by means
of the Commission's home page on the Internet at http://www.sec.gov. Copies of
such information can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington D.C. 20549, at prescribed
rates.
REPORTS TO TERM NOTEHOLDERS
Unless otherwise provided in the related Prospectus Supplement and unless
and until Definitive Term Notes have been issued under the limited circumstances
described herein, unaudited periodic reports concerning the Receivables held by
the Trust will be prepared by the Servicer and sent on behalf of each Trust only
to Cede, as nominee of The Depository Trust Company ("DTC") and the registered
holder of the Term Notes. See "The Term Notes -- Reports to Term Noteholders"
and "-- Book-Entry Registration." Such reports will not constitute financial
statements prepared in accordance with generally accepted accounting principles.
Each Trust will file with the Commission such periodic reports as are required
under the Exchange Act, and the rules and regulations of the Commission
thereunder, and any such reports filed prior to the termination of this offering
are hereby incorporated by reference into the Registration Statement of which
this Prospectus is a part. The Seller will provide, without charge, to each
person to whom this Prospectus is delivered, upon the written or oral request of
such person, a copy of any such document incorporated by reference herein, other
than exhibits to such documents not specifically described above. Requests
should be directed to the Seller, in care of General Motors Acceptance
Corporation, as Servicer, 3044 West Grand Boulevard, Detroit, Michigan 48202
(telephone number (313) 556-1281).
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed by the Servicer with respect to the
Trust pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the termination of the
offering of the Certificates shall be deemed to be incorporated by reference
into this Prospectus and to be part hereof. Any statement contained herein or in
a document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
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<PAGE> 51
PROSPECTUS SUMMARY
This Prospectus Summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and the Registration
Statement of which this Prospectus is a part and in the related Prospectus
Supplement to be prepared and delivered in connection with the offering of any
Term Notes. Reference is made to the Glossary of Terms for the definitions of
certain capitalized terms.
ISSUER........................ With respect to each series of Term Notes, the
Trust formed or to be formed by the Seller and
the Owner Trustee pursuant to the related Trust
Agreement.
SELLER........................ Wholesale Auto Receivables Corporation, a
wholly-owned subsidiary of General Motors
Acceptance Corporation.
SERVICER...................... General Motors Acceptance Corporation, a
wholly-owned subsidiary of General Motors
Corporation.
CAPITALIZATION OF THE TRUST... Each Trust will issue one or more classes of
Certificates, one or more series of Revolving
Notes and one or more series of Term Notes.
Only Term Notes are being offered pursuant to
this Prospectus and any related Prospectus
Supplement.
THE TERM NOTES................ With respect to each Trust, Term Notes will be
issued in one or more series pursuant to an
Indenture between such Trust and the Indenture
Trustee. Unless otherwise specified in the
related Prospectus Supplement, the Term Notes
will be available for purchase in denominations
of $1,000 and integral multiples thereof, and
will be available in book-entry form only.
Unless otherwise specified in the related
Prospectus Supplement, Term Noteholders will be
entitled to receive Definitive Term Notes only
in the limited circumstances described herein
or in the related Prospectus Supplement.
Unless otherwise specified in the related
Prospectus Supplement, each series of Term
Notes will have a stated principal amount and
will bear interest at a specified rate or
rates. Each series of Term Notes may have a
different Interest Rate, which may be fixed,
variable, contingent or adjustable, or any
combination of the foregoing. The related
Prospectus Supplement will specify the Interest
Rate for each series of Term Notes, or the
initial Interest Rate and the method for
determining subsequent changes in the Interest
Rate, and the amount, if any, of, or method for
determining, principal payments on each series
of Term Notes and the timing of any such
payments, including the related Targeted Final
Payment Date, if any, and related Stated Final
Payment Date.
Unless otherwise specified in the related
Prospectus Supplement, principal and interest
on all series of Term Notes issued by a Trust
will have the same priority of payment.
Payments of principal and interest on a series
of Term Notes may be senior (other than in
circumstances related to the occurrence of an
Event of Default) or equivalent to the priority
of payments on the related Revolving Notes as
described in the related Prospectus Supplement.
Payments of principal and interest on Notes
will be senior in right of payment to
distributions of Certificate Balance and
interest on the related Certificates to the
extent described herein and in the related
Prospectus Supplement.
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<PAGE> 52
Seller may offer Securities to the public or
other investors under a prospectus or other
disclosure document (a "DISCLOSURE DOCUMENT")
in transactions either registered under the Act
or exempt from registration thereunder,
directly or through one or more underwriters or
placement agents, in fixed-price offerings or
in negotiated transactions or otherwise.
CLEARANCE AND SETTLEMENT...... Unless otherwise provided in the related
Prospectus Supplement, Noteholders of each Term
Note offered hereby may elect to hold their
Term Notes through any of (i) DTC (in the
United States) or (ii) Cedel or Euroclear (in
Europe). Transfers within DTC, Cedel or
Euroclear, as the case may be, will be made in
accordance with the usual rules and operating
procedures of the relevant system. Cross-market
transfers between persons holding directly or
indirectly through DTC, on the one hand, and
counterparties holding directly or indirectly
through Cedel or Euroclear, on the other, will
be effected in DTC through the relevant
Depositaries of Cedel or Euroclear. See "The
Term Notes -- Book-Entry Registration."
THE REVOLVING NOTES........... With respect to each Trust, one or more series
of Revolving Notes will be issued pursuant to
the related Indenture from time to time. The
aggregate outstanding principal balance of the
Revolving Notes of a Trust may fluctuate on a
daily basis (up to the Maximum Revolver
Balance), in connection with, among other
things, fluctuations in the principal balance
of Receivables held by the Trust as payments of
principal on Receivables are received and new
Receivables arise in the related Accounts. Each
series of Revolving Notes may have a different
Revolver Interest Rate, Targeted Final Payment
Date (if any) and Stated Final Payment Date as
set forth in the related Prospectus Supplement.
THE CERTIFICATES.............. With respect to each Trust, Certificates will
be issued pursuant to a Trust Agreement between
the Seller and the Owner Trustee. The
Certificates will be issued in one or more
classes and will represent the equity interest
in the related Trust. Unless otherwise
specified in the related Prospectus Supplement,
the Certificates of each Trust will have a
stated Certificate Balance and will accrue
interest on such Certificate Balance at a
specified rate (which may vary by class of
Certificate). For each series of Term Notes,
the related Prospectus Supplement will specify,
for each class of Certificates then outstanding
or to be issued in connection with such Term
Notes, the Certificate Rate, or the initial
Certificate Rate and the method for determining
subsequent changes to the Certificate Rate, and
the amount of, or method for determining,
distributions with respect to the Certificate
Balance and the timing of such distributions,
including the related Stated Final Payment Date
(which will be the same for all classes of
Certificates).
THE TRUST ESTATE.............. Except as otherwise provided in the related
Prospectus Supplement, the property of each
Trust will include the Seller's right, title
and interest in, to and under (a) the Eligible
Receivables existing in the Accounts included
in the related Pool of Accounts on the related
Initial Cut-Off Date (or, in the case of an
Additional Account, the related Additional
Cut-Off Date) and the Eligible Receivables
generated in such Accounts from time to time
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<PAGE> 53
thereafter so long as such Accounts are
included in the related Pool of Accounts, (b)
Collections on such Receivables and (c) the
related Collateral Security. The Trust Estate
will also include the Seller's rights and
remedies under the related Pooling and
Servicing Agreement associated with the related
Eligible Receivables. In addition, the Trust
Estate may also include an interest rate swap
or swaps, funds on deposit in certain bank
accounts of such Trust and other forms of
liquidity, credit or other enhancement (some or
all of which may be for the benefit of only one
series or class of Securities) as set forth in
the related Prospectus Supplement. Under
certain circumstances, Accounts may be added to
or removed from the Pool of Accounts related to
a Trust. With respect to each Trust, the Trust
Estate and the Trust's rights under the related
Trust Sale and Servicing Agreement will be
assigned to the Indenture Trustee as collateral
for the related Notes.
THE ACCOUNTS.................. The Accounts are lines of credit represented by
revolving dealer floor plan financing
agreements extended or maintained by General
Motors Acceptance Corporation ("GMAC") to
retail dealers franchised by General Motors
Corporation ("GENERAL MOTORS") and affiliates
of such dealers to finance their inventories of
automobiles and other vehicles manufactured by
General Motors and other motor vehicle
manufacturers. See "The Dealer Floor Plan
Financing Business." With respect to each
Trust, the Accounts will be selected from all
Accounts in the U.S. Portfolio that are
Eligible Accounts.
THE RECEIVABLES............... The Receivables related to each Trust represent
rights to receive payments on loans made or to
be made under the related Accounts. The
aggregate amount of such Receivables will
fluctuate from day to day as new Receivables
are generated and as existing Receivables are
collected, charged-off as uncollectible or
otherwise adjusted or repurchased by GMAC. See
"The Accounts." In general, each Receivable
generated in an Account is secured by all
Vehicles owned by the related dealer and, in
some circumstances, by other collateral
security owned by such dealer. See "The Dealer
Floor Plan Financing Business" and "The
Transfer and Servicing Agreements --
Intercreditor Arrangements."
Only Receivables which represent rights to
receive payments on loans made to purchase
Vehicles will be Eligible Receivables for the
purposes of each Trust. The principal amount of
a loan in respect of a New Vehicle is equal to
the wholesale purchase price of the Vehicle and
is generally due upon the retail sale or lease
of the Vehicle. The principal amount of a loan
in respect of a Used Vehicle (other than an
Auction Vehicle or vehicle purchased from GMAC
directly) is up to 90% of the wholesale book
value and is generally due upon the earlier of
90 days from the date of the advance or the
retail sale/lease of the Vehicle. The
Receivables bear interest at an adjustable rate
as described herein. See "The Dealer Floor Plan
Financing Business."
RESERVE FUND; SERVICER
ADVANCES;
CREDIT AND LIQUIDITY
SUPPORT....................... Unless otherwise specified in the related
Prospectus Supplement, a Reserve Fund will be
created for each Trust with an initial deposit
by the Seller equal to the Reserve Fund Initial
Deposit set forth in
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the related Prospectus Supplement. In addition,
except as specified in the related Prospectus
Supplement, the Trust Estate of each Trust will
include one or more interest rate swaps and the
Servicer will agree to make Servicer Advances
to each Trust in certain circumstances. If and
to the extent specified in the related
Prospectus Supplement, additional credit,
liquidity and other enhancement arrangements
(including additional reserve funds) may be
entered into for the benefit of any class or
series of Securities. Unless otherwise
specified in the related Prospectus Supplement,
such arrangements will be limited and will not
provide protection against all risks of loss or
guarantee repayment in full of any Notes or any
amount of distributions on Certificates.
Arrangements for the benefit of any class or
series of Securities may not inure to the
benefit of other Securities issued by the
related Trust.
TRANSFER AND SERVICING
AGREEMENTS.................... With respect to each Trust, GMAC will enter
into a Pooling and Servicing Agreement with the
Seller, pursuant to which GMAC will sell the
Receivables described therein. The Seller in
turn will sell and assign such Receivables to
the Trust pursuant to a Trust Sale and
Servicing Agreement. With respect to each
Trust, the Servicer will agree to be
responsible for servicing, managing, and making
collections on all Receivables (including
Receivables not transferred to the Trust)
existing in the Accounts related to the Trust.
GMAC, as Custodian, will maintain custody of
the receivable files on behalf of the related
Trust. Each Trust will be created pursuant to a
Trust Agreement, and GMAC, as Administrator,
will undertake certain administrative duties
with respect to each Trust under an
Administration Agreement.
REVOLVING PERIOD.............. The Revolving Period for each Trust will be the
period beginning on the related Initial Cut-Off
Date and ending on the earlier of (a) the
commencement of an Early Amortization Period
and (b) the date specified as the Scheduled
Revolving Period Termination Date in the
related Prospectus Supplement. See "The
Transfer and Servicing Agreements -- Early
Amortization Events" and the related Prospectus
Supplement for a discussion of certain events
that might lead to the early termination of the
Revolving Period and, in certain limited
circumstances, the recommencement of the
Revolving Period. With respect to each Trust,
unless otherwise provided in the related
Prospectus Supplement and except as described
below for a series of Term Notes during its
Payment Period, during the Revolving Period, no
payments of principal will be made on the Term
Notes and no amounts will be set aside for such
purposes. If a series of Term Notes does not
provide for a Payment Period, no principal
payments will be made thereon (or funds set
aside therefor) prior to the Wind Down Period
or an Early Amortization Period. In addition,
one or more series of Revolving Notes for any
Trust may have a Targeted Final Payment Date or
otherwise require principal payments during the
related Revolving Period.
PAYMENT PERIODS............... One or more series of Term Notes may provide
for payments of principal (or the setting aside
of amounts for such purpose) prior to the Wind
Down Period for the related Trust, either as
the result of the occurrence of a Scheduled
Series Payment Period Commencement Date or as
the result of the occurrence of a Series
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<PAGE> 55
Early Payment Event. During any such Payment
Period, Available Trust Principal will be
allocated to the applicable series of Term
Notes, and principal payments will be made to
the holders thereof, in the amounts and at the
times set forth in the related Prospectus
Supplement. During the Payment Period for a
series of Term Notes, principal payments on the
related Revolving Notes will be permitted only
to the extent described in the related
Prospectus Supplement.
WIND DOWN PERIOD.............. Unless an Early Amortization Period has
commenced, the Wind Down Period with respect to
each Trust will begin on the day following the
related Scheduled Revolving Period Termination
Date and will continue until the earlier of (a)
the commencement of an Early Amortization
Period and (b) the date on which all Securities
have been paid in full. With respect to each
Trust, during the Wind Down Period, amounts of
Available Trust Principal will be set aside for
payments of principal on the Notes and
distributions with respect to the Certificate
Balance, and such payments and distributions
will be made, to the extent described in the
related Prospectus Supplement. Such amounts
may, to the extent described in the related
Prospectus Supplement, be limited for any
series of Term Notes to the related Controlled
Deposit Amount. In addition, unless otherwise
provided in the related Prospectus Supplement,
during the Wind Down Period with respect to
each Trust, no additional borrowings will be
made under the related Revolving Notes.
EARLY AMORTIZATION PERIOD..... With respect to each Trust, an Early
Amortization Period will commence upon the
occurrence of an Early Amortization Event and
will end on the earliest of (a) the payment in
full of the outstanding principal balance of
all of the Notes issued by the Trust and the
distribution of the entire related Certificate
Balance (less unreimbursed Trust Charge- Offs),
(b) the Trust Termination Date and (c) the
recommencement of the Revolving Period. With
respect to each Trust, when an Early
Amortization Period begins, the Revolving
Period and any then occurring Payment Periods
or the Wind Down Period, as the case may be,
will terminate, and Available Trust Principal
will thereafter be paid to the holders of the
related Securities to the extent described in
the related Prospectus Supplement on each
Distribution Date beginning with the
Distribution Date related to the Collection
Period in which such Early Amortization Period
commenced. If an Early Amortization Period
commences during a Payment Period or the Wind
Down Period, on the first Distribution Date for
such Early Amortization Period, amounts, if
any, on deposit in the Note Distribution
Account will be paid to the related holders to
the extent described in the related Prospectus
Supplement. The Controlled Deposit Amount, if
any, for a series of Term Notes will not apply
during any Early Amortization Period. See "The
Transfer and Servicing Agreements -- Early
Amortization Events."
SERVICING..................... The Servicer is responsible for servicing,
managing and making collections on the
Receivables (including Receivables not
transferred to the Trust) existing under the
Accounts related to each Trust and will deposit
the Trust's share of Collections thereon into
the related Collection Account as described
herein. See "The
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<PAGE> 56
Transfer and Servicing Agreements --
Collections." With respect to each Trust, the
Servicer is also responsible for determining,
and will report to each Trustee, the amounts to
be allocated and distributed to the related
Securityholders and to the Seller as described
herein. Unless otherwise specified in the
related Prospectus Supplement, the Servicer
will be entitled to receive from each Trust a
monthly fee for servicing the Receivables equal
to the product of (a) the average daily balance
of the Daily Trust Invested Amount for the
related Collection Period and (b) one-twelfth
of the Servicing Fee Rate.
INDENTURE TRUSTEE............. The Indenture Trustee specified in the related
Prospectus Supplement.
OWNER TRUSTEE................. The Owner Trustee specified in the related
Prospectus Supplement.
CERTAIN FEDERAL INCOME
TAX CONSEQUENCES.............. Upon the issuance of each series of Term Notes,
except as otherwise provided in the related
Prospectus Supplement, Kirkland & Ellis,
special tax counsel to the Seller, will deliver
an opinion to the effect that, for U.S. federal
income tax purposes, (a) the Term Notes will
constitute indebtedness and (b) the related
Trust will not be classified as an association
or a publicly traded partnership taxable as a
corporation. See "Certain Federal Income Tax
Consequences" and "State and Local Tax
Consequences" for additional information
concerning the application of U.S. federal,
state and local laws.
ERISA CONSIDERATIONS.......... Subject to the considerations discussed under
"ERISA Considerations" herein and unless
otherwise specified in the related Prospectus
Supplement, the Term Notes are eligible for
purchase by employee benefit plans.
RATINGS....................... At the time of issuance, all Term Notes will be
rated as investment grade securities by at
least one Rating Agency. Any other required
ratings for Term Notes will be set forth in the
related Prospectus Supplement. See "Risk
Factors -- Limited Nature of Ratings."
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RISK FACTORS
LIMITED LIQUIDITY
There is currently no market for the Term Notes. There can be no assurance
that a secondary market will develop or, if it does develop, that it will
provide holders with liquidity of investment or continue for the life of any
Term Notes.
LIMITED OBLIGATIONS
Each series of Term Notes will represent the right to receive payments of
principal and interest from the related Trust in the amounts and at the times
described herein and in the related Prospectus Supplement. Except as otherwise
set forth in the related Prospectus Supplement, the Term Notes will not
represent an interest in or obligation of General Motors, GMAC, the Servicer,
the Seller or any of their affiliates and the Term Notes will not be guaranteed
or insured by General Motors, GMAC, the Servicer, the Seller or any of their
affiliates. Except as otherwise set forth in the related Prospectus Supplement,
proceeds of the assets of a Trust (and any related liquidity, credit or other
enhancement arrangements not included as assets of such Trust) (other than any
such assets or arrangements which are solely for the benefit of other Securities
of such Trust) will be the sole source of payment on the Term Notes issued by
such Trust, and there will be no recourse to General Motors, GMAC, the Servicer,
the Seller or any other entity if such proceeds are insufficient or otherwise
unavailable to make all payments provided for under the Term Notes. Unless
otherwise provided in the related Prospectus Supplement, the only obligations of
the foregoing entities with respect to a Trust will be certain limited
obligations of GMAC, the Servicer and the Seller to repurchase certain
Receivables if specified representations, warranties and covenants in the
related Pooling and Servicing Agreement and the related Trust Sale and Servicing
Agreement are breached, to perform their other obligations set forth in the
related Transfer and Servicing Agreements, and, to the extent applicable, to
perform their obligations under any related liquidity, credit or other
enhancement arrangements. See "The Transfer and Servicing Agreements -- Sale and
Assignment of Receivables and Collateral Security." The Servicer will also make
Servicer Advances to each Trust unless otherwise described in the related
Prospectus Supplement.
RELATIONSHIP OF EACH TRUST TO GENERAL MOTORS AND GMAC
Each Trust and the Seller will be dependent on GMAC for the generation of
new Receivables. GMAC is the primary source of floor plan financing for General
Motors-franchised dealers in the United States. The ability of GMAC to generate
Receivables is in turn dependent to a large extent on the manufacture and sale
of automobiles and light trucks by General Motors, which, in turn, depends to a
large extent on the ability of dealers to sell and lease such automobiles and
light trucks to customers. There can be no assurance that GMAC will generate
Receivables at the same rate as receivables were generated in the past. In
addition, subject to certain limitations, GMAC will retain the ability to change
the terms of the Accounts, including the interest rate charged to dealers and
the amount of each dealer credit line. GMAC can also change its underwriting
procedures for extending credit. Finally, if GMAC were to cease acting as
Servicer, delays in processing payments on the Receivables and information in
respect thereof could occur and result in delays in payments and distributions
to the holders of the Securities.
In connection with the sale, transfer and assignment of Receivables by GMAC
to the Seller and the sale, transfer and assignment of Receivables by the Seller
to a Trust, GMAC will make representations and warranties with respect to the
characteristics of such Receivables and the Seller will represent and warrant
that it has taken no action which would cause the representations and warranties
of GMAC to be false in any material respect. Receivables with respect to which
such representations and warranties have been breached and not cured will be
reassigned to GMAC or the Seller, as the case may be, and related cash payments
will be required. See "The Transfer and Servicing Agreements -- Representations
and Warranties."
Under agreements between General Motors and General Motors-franchised
dealers, General Motors is obligated to repurchase certain New Vehicles from a
dealer upon franchise termination. In addition, in the event of a foreclosure
upon the property of a dealer (whether by GMAC or any other creditor of such
dealer), General Motors has the option, which it has typically exercised, to
purchase such dealer's new General
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Motors-manufactured vehicles at invoice price. The proceeds to a Dealer of such
purchases will generally be available for payments on the Receivables. See "The
Dealer Floor Plan Financing Business -- Dealer Status; Realization on Collateral
Security." General Motors has historically provided certain financial assistance
to General Motors-franchised dealerships from time to time, but has no
obligation to do so. In addition, the Motors Holding Division of General Motors
may also contribute capital to General Motors-franchised dealers in the form of
a minority equity investment in such dealerships, typically if an existing
dealer is starting a new franchise. If General Motors were unable, or elected
not, to exercise its purchase option or provide any such financial assistance to
Dealers or were unable to fulfill the terms of any such agreements with Dealers,
losses with respect to the Receivables would likely increase and fewer
Receivables may be generated. See "The Dealer Floor Plan Financing Business --
Relationship of the Dealer Floor Plan Financing Business to General Motors."
LIMITED SOURCE OF PAYMENTS
Payments on the Term Notes (as well as payments on the Revolving Notes and
distributions on the Certificates) are primarily payable from Collections on the
related Receivables. There can be no assurance that any particular pattern of
Dealer repayments will occur. Interest on the Receivables is generally payable
by Dealers monthly. The principal balance of Receivables relating to New
Vehicles is generally payable by Dealers upon the retail sale or lease of the
underlying Vehicle. GMAC generally requires that the principal balance of
receivables relating to Used Vehicles be paid upon the earlier of 90 days
(subject to extension to 180 days in the discretion of GMAC) from the date of
the advance or the retail sale or lease of the underlying Vehicle. The timing of
sales or leases of Vehicles is uncertain and is dependent on a number of
economic, social and other factors over which GMAC, the Seller and the Trusts
generally have no control. The timing of sales and leases of Vehicles is also
affected by sales incentive programs of General Motors and other motor vehicle
manufacturers, and financing incentive programs of GMAC and other financing
parties. Neither General Motors nor GMAC is under any obligation to establish or
maintain any incentive program. There can be no assurance that payments on
Receivables will be made in a timely manner or that there will be additional
Receivables created under any Accounts.
LIMITED LIQUIDITY AND CREDIT SUPPORT
With respect to each Trust, unless otherwise specified in the related
Prospectus Supplement, credit, liquidity and other enhancement arrangements will
include one or more interest rate swaps, Servicer Advances and amounts on
deposit in a Reserve Fund. In addition, with respect to each Trust, payments on
the Notes will be senior in right of payment to distributions on the related
Certificates to the extent described in the related Prospectus Supplement. Other
such arrangements, if any, for the benefit of any Securities will be described
in the related Prospectus Supplement. The presence of such arrangements is
intended to increase the likelihood of receipt by Securityholders of the full
amounts of principal or Certificate Balance, as the case may be, and interest
due thereon and to decrease the likelihood that Securityholders will experience
losses. Unless otherwise provided in the related Prospectus Supplement, such
arrangements for the benefit of any Securities will not provide protection
against all risk of loss and will not guarantee repayment of the entire
principal balance or Certificate Balance, as the case may be, and interest
thereon. With respect to each Trust, if losses occur which exceed the amount
covered by such arrangements, or which are not so covered, such losses will be
allocated among the Securities as described in the related Prospectus
Supplement.
ADDITIONAL ISSUANCES; THE REVOLVING NOTES
Each Trust may issue additional series of Term Notes (including Term Notes
with an earlier Targeted Final Payment Date (if any) and/or Stated Final Payment
Date) and additional Certificates from time to time without the consent of the
holders of the Securities of such Trust then outstanding. The issuance of
additional Securities may not change the terms of outstanding Securities or the
related Trust Sale and Servicing Agreement as applied to such outstanding
Securities, other than pursuant to an amendment permitted under the Trust Sale
and Servicing Agreement. See "The Transfer and Servicing Agreements --
Additional Issuances; Changes in Maximum Revolver Balance" and "-- Amendments."
Unless otherwise provided in the related Prospectus Supplement, with respect to
each Trust, so long as any series of Term Notes is outstanding, one condition,
among others, to the issuance by the Trust of additional Securities will be that
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each Rating Agency has advised the Indenture Trustee that the issuance of such
Securities will not result in the reduction or withdrawal of its then current
rating of such Term Notes. There can be no assurance, however, that the terms of
any other Securities issued by a Trust might not have an impact on the timing or
amount of payments or distributions received by the holders of other Securities
of such Trust.
The outstanding principal balance of Revolving Notes may change on a daily
basis and, upon the satisfaction of certain conditions, the Specified Maximum
Revolver Balance may be increased or decreased. The Trust may issue additional
series of Revolving Notes (subject to the Maximum Revolver Balance), with
different interest rates, Targeted Final Payment Date (if any) and Stated Final
Payment Dates. Certificates issued after the Initial Closing Date may bear
interest at a different rate than those issued on the Initial Closing Date.
OTHER INTERESTS IN THE RECEIVABLES AND COLLATERAL
There are certain limited circumstances under applicable law under which
subsequent transferees of a Receivable could have an interest in such Receivable
with priority over the Trust's interest in such Receivable. See "Certain Legal
Aspects -- Transfer of Receivables." In each Pooling and Servicing Agreement,
GMAC will represent and warrant to the Seller that the related Receivables have
been transferred free and clear of any lien, and in the related Trust Sale and
Servicing Agreement the Seller will represent and warrant to the Trust that the
Seller has taken no action to make such warranty false in any material respect.
Each of GMAC and the Seller will also covenant that it will not sell, pledge,
assign, transfer or grant any lien on any Receivable other than to the Seller or
to the Trust or as otherwise permitted by the Pooling and Servicing Agreement or
the Trust Sale and Servicing Agreement.
GMAC will represent and warrant in the Pooling and Servicing Agreement that
each Receivable sold to the Seller is secured by a first priority perfected
security interest in the related Vehicle. Generally, under applicable state
laws, a security interest in an automobile or light truck which secures
wholesale financing obligations may be perfected by the filing of UCC financing
statements. GMAC takes all actions it deems necessary under applicable state
laws to perfect GMAC's security interest in Vehicles. However, at the time a
Vehicle is sold or leased, GMAC's security interest in the Vehicle will
generally terminate. Therefore, if a Dealer fails to remit to GMAC amounts owed
with respect to any Vehicle that has been sold or leased, the related Receivable
will no longer be secured by such Vehicle, but will be secured by the proceeds
of such retail sale or lease and, to the extent applicable, other Collateral
Security.
The interests of the Seller and the related Trust in Collateral Security
other than Vehicles, if any, securing a Receivable will be subordinate to any
interests of GMAC therein arising in connection with indebtedness other than the
Receivables. See "The Transfer and Servicing Agreements -- Intercreditor
Arrangements."
CERTAIN MATTERS RELATING TO BANKRUPTCY
With respect to each Trust, the transfers of the related Receivables from
GMAC to the Seller and from the Seller to the Trust have been structured to be
treated as sales. In the event that GMAC or the Seller were to become a debtor
in a bankruptcy case and a creditor or trustee in bankruptcy of such debtor or
such debtor itself were to take the position that the transfer of the
Receivables should be recharacterized as a pledge of such Receivables to secure
a borrowing of such debtor, then delays in payments of Collections on the
Receivables to the Trust could occur and, if a court ruled in favor of any such
creditor, trustee in bankruptcy or debtor, reductions in the amount of such
payments could result. If the transfer of Receivables to the Seller or a Trust
were recharacterized as a pledge, then a tax or other similar lien on the
property of GMAC or the Seller might have priority over the interest of the
Seller or such Trust, respectively, in such Receivable. See "Certain Legal
Aspects -- Certain Matters Relating to Bankruptcy."
In addition, if GMAC or the Seller were to become a debtor in a bankruptcy
case and a creditor or trustee in bankruptcy of such debtor or such debtor
itself were to request a bankruptcy court to order that GMAC be substantively
consolidated with the Seller, delays and reductions in the amount of payments
and distributions on the Term Notes and other Securities could result.
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If certain events relating to the bankruptcy of General Motors, GMAC or the
Seller occur, then an Early Amortization Event will occur and, among other
things, additional Receivables will not be sold to the Trust and payments of
principal on the related Term Notes will (assuming no delays arise from that
proceeding) be made monthly and will not be limited by any Controlled Deposit
Amount. See "Certain Legal Aspects -- Certain Matters Relating to Bankruptcy."
Transfers made in certain specified transactions contemplated by the
Transfer and Servicing Agreements (including payments made with respect to
repurchases or reassignments of Receivables) may be recoverable by GMAC, the
Servicer or the Seller, as debtor in possession, or by a creditor or a trustee
in bankruptcy of GMAC, the Servicer or the Seller as preferential transfers from
GMAC, the Servicer or the Seller if such transfers are made within certain
periods prior to the filing of a bankruptcy case in respect of GMAC, the
Servicer or the Seller.
LIMITED NATURE OF RATINGS
At the time of issuance, all Term Notes will be rated as investment grade
securities by at least one Rating Agency. Any other required ratings for Term
Notes will be set forth in the related Prospectus Supplement. There is no
assurance that a rating, once given, will not be lowered or withdrawn by a
Rating Agency if circumstances so warrant. In the event that the rating
initially assigned to any series of Term Notes is subsequently lowered or
withdrawn for any reason, no person or entity is obligated to provide any
additional enhancement with respect to such series. The rating of any series
does not constitute a recommendation to buy the security, and such rating does
not address the price of such security or the suitability of such security to
the investor. The rating addresses the likelihood of ultimate payment of
principal and interest on the security, but does not address the timing of such
payments.
BOOK-ENTRY NOTES
The Term Notes initially will be represented by certificates registered in
the name of Cede, the nominee of DTC, and will not be registered in the names of
the Noteholders or their nominees. As a result, unless and until Definitive
Certificates are issued, Noteholders will not be recognized by the Trustee as
Noteholders, as that term is used in the Pooling and Servicing Agreement. Until
such time, Noteholders will only be able to exercise the rights of Noteholders
indirectly through DTC and its participating members (in the United States) or
Cedel or Euroclear (in Europe). See "The Term Notes -- Book-Entry Registration"
and "-- Definitive Term Notes" in the Prospectus.
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GENERAL MOTORS ACCEPTANCE CORPORATION
GMAC, a wholly-owned subsidiary of General Motors, was incorporated in 1919
under the New York Banking Law relating to investment companies. Operating
directly and through subsidiaries and associated companies in which it has
equity investments, GMAC provides a wide variety of automotive financial
services to and through franchised General Motors dealers in many countries
throughout the world. Financial services are also 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 and mortgage banking.
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).
WHOLESALE AUTO RECEIVABLES CORPORATION
Wholesale Auto Receivables Corporation was incorporated in the State of
Delaware on November 24, 1992, as a wholly-owned subsidiary of GMAC. The Seller
was organized for limited purposes, which include purchasing wholesale and other
receivables from GMAC and transferring such receivables to third parties and any
activities incidental or necessary thereto. The principal executive offices of
the Seller are located at Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware 19801 (Tel. No. 302-658-7581).
The Seller has taken steps in structuring the transactions contemplated
hereby that are intended to make it unlikely that the Seller will be subject to
a voluntary or involuntary petition for relief under the Insolvency Laws or that
the voluntary or involuntary petition for relief by GMAC under the Insolvency
Laws will result in consolidation of the assets and liabilities of the Seller
with those of GMAC. See "Certain Legal Aspects -- Certain Matters Relating to
Bankruptcy." 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. The Seller's certificate of incorporation also provides that a
unanimous affirmative vote of directors is required for the Seller to commence a
voluntary case or proceeding under any Insolvency Law. The Seller's by-laws
include a provision that, under certain circumstances, requires the Seller to
designate two directors who qualify under the by-laws as "Independent
Directors." In addition, under each Trust Agreement, the Trust (and the Owner
Trustee on its behalf) and the related Certificateholders and Certificate
Owners, by accepting the related Certificates (or an interest therein), 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 preceding under any federal or state bankruptcy or
similar law.
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THE TRUSTS
GENERAL; THE TRUST ESTATE
The Seller will establish each Trust by selling, transferring and assigning
to each Trust, without recourse, in exchange for the Securities to be issued on
the Initial Closing Date specified in the related Prospectus Supplement, the
Seller's right, title and interest in, to and under (a) the Eligible Receivables
existing in each of the Accounts in the related Pool of Accounts on the related
Initial Cut-Off Date and the Eligible Receivables generated in each Account in
the Pool of Accounts from time to time thereafter during the term of the Trust,
(b) Collections on such Receivables and (c) the related Collateral Security.
GMAC will retain the Receivables in the Accounts included in the related Pool of
Accounts that it does not transfer to the Seller and collections thereon
(together with any Receivables and collections thereon repurchased by GMAC from
the Seller or the Trust as described herein, the "RETAINED PROPERTY"). Under
each Trust Sale and Servicing Agreement, the Seller will also sell, transfer and
assign to the related Trust the Seller's rights and remedies under the related
Pooling and Servicing Agreement associated with the related Receivables. Unless
otherwise specified in the related Prospectus Supplement, the assets of each
Trust (the "TRUST ESTATE") will also include one or more interest rate swaps and
funds on deposit in certain bank accounts of the Trust.
Pursuant to each Trust Sale and Servicing Agreement, the Seller will have
the right (subject to certain limitations) from time to time to designate
Additional Accounts to be included in the related Pool of Accounts and from time
to time to designate certain Accounts to be removed from such Pool of Accounts.
Once an Account is so designated for removal, or if an Account ceases to be an
Eligible Account, the Receivables originated thereafter in such Account will not
be transferred to the Trust. See "The Transfer and Servicing Agreements --
Addition and Removal of Accounts."
With respect to each Trust and to the extent specified in the related
Prospectus Supplement, interest rate cap or swap agreements, cash collateral
accounts and other credit, liquidity and other enhancement arrangements may be
held by the Owner Trustee or the Indenture Trustee for the benefit of holders of
any Securities. Such items may be included as assets of a Trust or may be held
outside of a Trust. Arrangements for the benefit of holders of one series or
class of Securities of a Trust may not be available to the holders of other
series or classes of such Trust.
The principal offices of each Trust will be specified in the related
Prospectus Supplement.
CAPITALIZATION OF THE TRUST
With respect to each Trust, prior to the Initial Closing Date, the Trust
will have no assets or liabilities. No Trust is expected to engage in any
activities other than acquiring, managing and holding the related Receivables
and other assets contemplated herein and in the related Prospectus Supplement
and proceeds therefrom, issuing Securities and making payments and distributions
thereon and certain related activities. No Trust is expected to have any source
of capital other than its assets and any related credit, liquidity or other
enhancement arrangement.
With respect to each Trust, on the related Initial Closing Date, the Trust
is expected to issue one or more series of Term Notes, one or more series of
Revolving Notes and one or more classes of Certificates, all as more fully
described herein and in the Prospectus Supplement related to any Term Notes
offered hereby. See "The Revolving Notes" and "The Certificates." From time to
time thereafter, the Trust may issue additional series of Notes and additional
Certificates. See "The Transfer and Servicing Agreements -- Additional
Issuances; Changes in Maximum Revolver Balance." The pro forma capitalization of
a Trust at the time of the issuance of any Term Notes will be set forth in the
related Prospectus Supplement. The Certificates will represent the equity in
each Trust. The related Prospectus Supplement will set forth the portion of the
Certificates issued on (and, to the extent applicable, since) the related
Initial Closing Date retained or to be retained by the Seller or its affiliates.
Unless otherwise provided in the related Prospectus Supplement, the remaining
Certificates will be sold to third party investors that are expected to be
otherwise unaffiliated with the Seller, GMAC and the Trust.
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THE OWNER TRUSTEE
The Owner Trustee for each Trust will be specified in the related
Prospectus Supplement. The Owner Trustee's liability in connection with the
issuance and sale of the 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 Administrator will be obligated to
appoint a successor trustee. The Administrator of a Trust must 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. 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 and payment of all fees and expenses due to the
outgoing Owner Trustee.
USE OF PROCEEDS
Unless otherwise provided in the related Prospectus Supplement, the net
proceeds from the sale of the related Term Notes will be paid to the Seller and
the Seller will use such proceeds to purchase Receivables from GMAC.
THE DEALER FLOOR PLAN FINANCING BUSINESS
GENERAL
The Accounts are individual lines of credit represented by revolving dealer
floor plan financing agreements extended or maintained by GMAC to United States
dealers (such lines of credit for all such dealers are referred to collectively
as the "U.S. PORTFOLIO"). Funds loaned under such arrangements (known generally
as "wholesale" or "floor plan" financing) are used by dealers primarily to
finance new and used motor vehicles manufactured or distributed by General
Motors and other motor vehicle manufacturers and distributors pending sale or
lease to the ultimate customer. In general, each receivable generated in an
Account is secured by all vehicles owned by the related dealer and, in some
instances, by other collateral security owned by such dealer. GMAC services the
U.S. Portfolio through its administrative office located in Detroit, Michigan
and through a network of branch offices located throughout the United States.
General Motors vehicles for which GMAC provides wholesale financing include
vehicles manufactured under the Buick, Cadillac, Chevrolet, Geo, Oldsmobile,
Pontiac-GMC and Saturn trademarks. GMAC also extends credit to dealers
affiliated with General Motors dealers that operate franchises for other motor
vehicle manufacturers.
The U.S. Portfolio generally includes two types of credit lines or
accounts: (a) credit lines or accounts pursuant to which advances are made to
finance automobiles and light trucks (together, "VEHICLES") and other vehicles
(including medium and heavy duty trucks and off-highway vehicles); and (b)
credit lines or accounts pursuant to which advances may be made to finance
Vehicles intended for sale to fleet customers, generally in lots of more than 10
("FLEET ACCOUNTS"). For purposes of each Trust, Fleet Accounts are not Eligible
Accounts and, within an Eligible Account, an advance must be made against a
Vehicle and satisfy other criteria to be an Eligible Receivable.
GMAC categorizes the Vehicles it finances as New Vehicles, Used Vehicles or
Auction Vehicles. Currently, New Vehicles consist of Vehicles of any model year
that are untitled and generally have been driven less than 200 miles, excluding
any Vehicles purchased at a closed auction conducted by General Motors or others
("AUCTION VEHICLES"). In states where demonstration cars must be titled, the
Vehicles are generally considered New Vehicles if driven less than 200 miles.
Used Vehicles consist of Auction Vehicles and Vehicles of any model year which
have been previously titled (other than demonstration vehicles described above).
The categorization of New Vehicles, Used Vehicles and Auction Vehicles may
change in the future based on the practices and policies of GMAC.
CREATION OF RECEIVABLES
GMAC makes advances to dealers in the U.S. Portfolio in an amount equal to
100% of the wholesale invoice price of New Vehicles, which includes destination
and other miscellaneous charges and, with respect to Vehicles manufactured by
General Motors and certain other motor vehicle manufacturers, a price rebate
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from the manufacturer to the dealer (known as a "holdback") in varying amounts
as a percentage of the invoice price. Rebates on General Motors-manufactured
vehicles sold or leased by a dealer are generally returned to the dealer by
General Motors on a monthly or quarterly basis, depending on the dealer's
arrangements with General Motors. For purposes of each Trust, a receivable in
respect of a New Vehicle is originated by GMAC on the date on which interest
thereon commences accruing on such receivable on or following the estimated
delivery date of such Vehicle to the dealer (which date is approximately
concurrent with the receipt of such Vehicle by the dealer).
The amount advanced for a Used Vehicle (other than an Auction Vehicle) is
generally up to 90% of the wholesale book value for such Vehicle as set forth in
the National Automotive Dealers Association's Official Wholesale Used Car
Trade-In Guide for the region in which the Dealer is located. The amount
advanced for an Auction Vehicle is generally 100% of the auction purchase price
(including auction fees). Receivables in respect of Used Vehicles are originated
by GMAC on the date on which funds are actually advanced to a dealer.
Once a dealer has commenced the floor plan financing of Vehicles through
GMAC, GMAC will finance virtually all purchases of New Vehicles by such dealer
from the applicable manufacturer or distributor. GMAC's credit guidelines
require that advances to finance Used Vehicles be approved on a unit by unit
basis. GMAC may limit or cancel a dealer's floor plan financing arrangements at
its discretion, including circumstances in which such dealer has exceeded the
credit guidelines set by GMAC or is experiencing financial difficulties or a
general deterioration in its creditworthiness. See "Dealer Status; Realization
on Collateral Security" below.
CREDIT UNDERWRITING PROCESS
GMAC extends credit to dealers through established lines of credit. A
dealer requesting a new credit line must apply to a GMAC branch office. The
local branch office investigates the dealer by reviewing bank references and
credit reports (including, in the case of existing dealers, reports from the
dealer's current financing source) and evaluating marketing capabilities,
financing resources, credit requirements and the dealer's current state of
operations and management. The local branch office prepares a written
recommendation either approving or disapproving the dealer's request and,
depending on the size of the requested credit line and the financial profile of
the dealer, transmits such recommendation with the requisite documentation to
the appropriate office including, in some cases, GMAC's executive offices, for
final approval or disapproval. GMAC generally applies the same underwriting
standards for dealers franchised by General Motors as for dealers franchised by
other motor vehicle manufacturers.
Upon approval, a dealer executes financing agreements with GMAC and, in the
case of General Motors franchised dealers, General Motors. These agreements
evidence the debt and provide GMAC a security interest in the vehicles to be
financed and in certain other collateral. The Vehicles are required to be
insured against comprehensive loss or damage.
The size of a credit line offered to a dealer, which is expressed in terms
of number of vehicles or units, is based upon a number of factors, including the
dealer's sales record (or, in the case of a new dealership, expected annual
sales) and the dealer's net worth. Currently, a credit line for New Vehicles is
intended to be an amount sufficient to finance a 60-day supply and for Used
Vehicles is generally an amount sufficient to finance a 30-day supply. As
described below, the credit lines establish guidelines, not limits, which
dealers may exceed from time to time.
COLLATERAL SECURITY
GMAC takes a first priority perfected purchase money security interest in
the Vehicles it finances for a dealer. Generally, the security interest in the
Vehicle terminates, as a matter of law, at the time of its sale or lease by the
dealer to a retail customer and no longer secures the related receivable or the
credit line, except to the extent of the proceeds from such sale or lease. In
some instances, GMAC may take a security interest in, or a collateral assignment
of, other assets of a dealer, including parts inventory, real estate, fixtures,
tools, equipment, furniture, signs, funds held at GMAC and other receivables, as
security for such dealer's account. From time to time, GMAC also provides to
certain dealers financing in the form of working capital loans, real
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estate financing and equipment loans. In such instances, to secure such loans,
GMAC may take a security interest in assets of the dealer, including, in some
cases, Vehicles. GMAC, in its sole discretion, may realize upon Collateral
Security (other than Vehicles) for its own benefit in respect of such loans or
advances before such other Collateral Security can be realized upon for the
benefit of the related Trust and Securityholders. Because of the subordinate
position of the Trust in respect of such other Collateral Security, there is no
assurance that the Trust will realize any proceeds in respect of any such other
Collateral Security. See "The Transfer and Servicing Agreements -- Intercreditor
Arrangements."
DEALER PAYMENT TERMS
GMAC may demand payment of interest and principal on a floor plan loan at
virtually any time, but, absent termination of the credit line by GMAC or
default by the dealer, GMAC generally requires payment of principal in full of
the related loan upon the retail sale or lease of a New Vehicle and upon the
earlier of 90 days (subject to extension to 180 days in the discretion of GMAC)
from the date of the advance or the retail sale or lease of a Used Vehicle.
Interest on floor plan loans is generally payable monthly.
GMAC charges dealers interest at a floating rate equal to the Prime Rate
plus, in most cases, a designated spread above the Prime Rate. In general, the
spread is 0.8% for New and Used Vehicles, though the actual spread for each
dealer is based on, among other things, competitive factors, the amount and
status of the dealer's credit lines and various incentive programs. Currently,
one program, known as the Wholesale Incentive Program, permits a reduction of up
to 1.0% in the designated spread for New Vehicles.
In certain circumstances, under a policy known as Delayed Payment Privilege
("DPP"), GMAC may agree with a dealer not to require payment of principal
promptly upon the sale or lease of the vehicle to a customer. DPP receivables
principally arise from sales to fleet customers under Fleet Accounts. For
purposes of the Trust, Fleet Accounts are not Eligible Accounts, and thus such
DPP receivables will not be transferred to the Trust. In some cases, a dealer
will request DPP treatment for receivables originated in an account which is not
a Fleet Account. For purposes of the Trust, if a Receivable is subject to DPP
treatment at the time of its origination, such Receivable will not be an
Eligible Receivable and therefore will not be transferred to the Trust. If an
Eligible Receivable becomes subject to deferred payment after transfer to the
Trust, GMAC will be obligated to repurchase such Receivable (to the extent of
the principal payment so delayed) as described in "The Transfer and Servicing
Agreements -- Representations and Warranties."
From time to time, dealers maintain funds with GMAC, which are held for
such dealers for cash management, liquidity and working capital purposes. For
purposes of each Trust, the principal balance of Receivables with respect to any
Dealer on any date is the aggregate principal balance of Receivables net of any
amount so held by GMAC on such date.
BILLING AND COLLECTION PROCEDURES
A statement setting forth billing and related account information is
prepared by GMAC and distributed on a monthly basis to each dealer. Interest and
other non-principal charges are billed in arrears and are required to be paid
immediately upon receipt of the bill. Dealers remit payment directly to GMAC's
local operating offices.
DEALER MONITORING
GMAC monitors the level of borrowing under each dealer's account. Dealers
may exceed their stated credit lines from time to time. For example, a dealer
might, prior to a seasonal sales peak, purchase more vehicles than its existing
credit lines would otherwise permit. At any time that a dealer's balance exceeds
its stated credit line, GMAC, after evaluating such dealer's financial position,
may temporarily suspend the granting of additional credit, increase such
dealer's credit line or modify such dealer's credit category. See "Creation of
Receivables" above and "Dealer Status; Realization on Collateral Security."
Branch office personnel conduct audits of dealer vehicle inventories on a
regular basis. The timing of audits varies and no advance notice is given to the
audited dealer. Through the audit process, GMAC reconciles a dealer's physical
inventory with its records of financed vehicles. Among other things, audits are
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intended to determine whether a dealer has sold or leased vehicles without
repaying the related loans as required.
DEALER STATUS; REALIZATION ON COLLATERAL SECURITY
Each dealer is assigned a credit category of "satisfactory," "limited,"
"programmed" or "no credit" based on various factors, including retail
merchandising practices, retail and wholesale performance, financial outlook,
capital sufficiency and credit history (with GMAC and others). Circumstances
under which GMAC will classify a dealer in "no credit" status include a dealer's
failure to remit principal or interest payments when due, notifications of
liens, levies or attachments or a general deterioration of the dealer's
financial condition. When a dealer is assigned to no credit status, GMAC
generally will not make further advances to such dealer.
GMAC frequently attempts to work with dealers to resolve the circumstances
that lead to programmed and no credit status. If, however, such circumstances
are not resolved, any of the following may occur: (a) an orderly liquidation in
which the dealer voluntarily liquidates its inventory through normal sales and
leases to customers; (b) a self-help or court-ordered seizure and sale of the
dealer's inventory by GMAC; or (c) a voluntary surrender to GMAC and sale of the
dealer's inventory. GMAC may sell such new vehicle inventories to the related
motor vehicle manufacturer, including pursuant to agreements entered into at the
time the credit line was established. In addition, GMAC may work with dealers
and, in the case of General Motors-franchised dealers, General Motors, to find
third parties to purchase troubled dealerships. The proceeds of any such sale
will be available to the creditors of such dealership, including GMAC or, if
applicable, a Trust. Once liquidation has commenced, GMAC performs an analysis
of its position and writes off any amounts identified at such time as
uncollectible. Actual losses by GMAC may be more or less than the amounts
initially written off as uncollectible. See "The Transfer and Servicing
Agreements -- Intercreditor Arrangements."
RELATIONSHIP OF THE DEALER FLOOR PLAN FINANCING BUSINESS TO GENERAL MOTORS
General Motors has historically provided certain financial assistance to
General Motors-franchised dealers from time to time, but has no obligation to do
so. Such assistance may take the form of guarantees and agreements to repurchase
inventory. The Motors Holding Division of General Motors may also contribute
capital to certain General Motors-franchised dealers in the form of a minority
equity investment in the dealership, typically when a dealer is starting a new
franchise.
In addition, General Motors offers financial and sales incentives to
General Motors-franchised dealers through a number of programs. For example,
General Motors currently has a supplemental floor plan assistance program known
as the Wholesale Floor Plan Protection Program pursuant to which General Motors
provides a subsidy to General Motors-franchised dealers to assist such dealers
in making interest payments to financing sources, including GMAC, thereby
encouraging the purchase of an adequate supply of vehicles by the dealer to be
held in inventory.
The financial assistance and incentives provided by General Motors are for
the benefit of its dealers and do not relieve such dealers from their
obligations to GMAC. Such assistance and incentives are provided at the option
of General Motors, which may terminate any of such programs in whole or in part
at any time. If General Motors reduced or was unable, or elected not, to provide
such assistance or incentives, the timing and amounts of payments to GMAC in
respect of the U.S. Portfolio may be adversely affected. In addition, if a
dramatic disruption in the supply of General Motors-manufactured vehicles
occurred, the rate of sales of such vehicles would decrease and it is likely
that payment rates and the loss experience of the U.S. Portfolio would also be
adversely affected. A decrease in the rate of sales of General Motors
manufactured vehicles would also slow the addition of new Eligible Receivables
to the Trusts. Any such event may result in an Early Amortization Event with
respect to one or more Trusts.
Under agreements between General Motors and General Motors-franchised
dealers, General Motors has the obligation to repurchase certain New Vehicles in
dealer inventory at their invoice price less a specified margin upon franchise
termination. In most cases, General Motors repurchases only current year New
Vehicles that are undamaged and unmodified. General Motors also agrees to
repurchase from dealers, at the
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time of franchise termination, parts inventory at specified percentages of the
current list price. In addition, in the event of a foreclosure upon the property
of a dealer (whether by GMAC or another creditor of such dealer), General Motors
has the option, which it typically exercises, to purchase such dealer's new
General Motors-manufactured vehicles at invoice price.
LOSS AND AGING EXPERIENCE
Certain information regarding loss and aging experience for the receivables
in the U.S. Portfolio will be set forth in the related Prospectus Supplement.
Because the Accounts related to any Trust will represent only a portion of the
entire U.S. Portfolio, actual loss and aging experience with respect to the
Accounts related to any Trust may be different than such information. There can
be no assurance that the loss and aging experience of the receivables in the
U.S. Portfolio in the future will be similar to the historical loss and aging
experience as set forth in any Prospectus Supplement.
THE ACCOUNTS
The Receivables of any Trust are rights to receive payments on advances
made under the Accounts included in the Pool of Accounts for such Trust. The
initial Pool of Accounts related to any Trust will be selected from all of the
Accounts in the U.S. Portfolio that were Eligible Accounts as of the Initial
Cut-Off Date for such Trust. Eligible Accounts do not include Fleet Accounts.
Only Eligible Receivables will be transferred to the related Trust. See "The
Transfer and Servicing Agreements -- Sale and Assignment of Receivables and
Collateral Security." Certain information with respect to the Accounts initially
included in the Pool of Accounts for any Trust will be set forth in the related
Prospectus Supplement.
For each Trust, pursuant to the Trust Sale and Servicing Agreement, the
Seller will have the right (subject to certain limitations) to designate from
time to time Additional Accounts to be included in the Pool of Accounts and to
purchase from GMAC the Eligible Receivables then existing and thereafter arising
in such Account and to sell and assign such Receivables to the Trust. See "The
Transfer and Servicing Agreements -- Sale and Assignment of Receivables and
Collateral Security." The designation of Additional Accounts is subject to the
condition, among other things, that each such Additional Account must be an
Eligible Account. Under certain circumstances specified in the related Trust
Sale and Servicing Agreement, the Seller has the right to remove Accounts from
the Pool of Accounts. If an Account is so designated for removal or ceases to be
an Eligible Account, the Receivables originated thereafter in such Account will
not be transferred to the Trust. See "The Transfer and Servicing Agreements --
Addition and Removal of Accounts."
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MATURITY AND PRINCIPAL CONSIDERATIONS
Full amortization of any Term Notes by the applicable Targeted Final
Payment Date, if any, and the applicable Stated Final Payment Date depends on,
among other things, payments by Dealers on Receivables, and may not occur if
such payments are insufficient. Because the Receivables generally are not paid
prior to the ultimate sale or lease of the underlying Vehicle, the timing of
such payments is uncertain. In addition, there is no assurance that GMAC will
generate additional Receivables under the Accounts, that Additional Accounts
will be available or added to any Pool of Accounts or that any particular
pattern of Dealer payments will occur.
The amount of new Receivables generated in any month and monthly payment
rates on the Receivables may vary because of seasonal variations in vehicle
sales and inventory levels, retail incentive programs provided by vehicle
manufacturers, incentive programs provided by financing sources and various
other factors affecting vehicle sales generally. Certain historical information
concerning the monthly payment rates for the receivables in the U.S. Portfolio
will be set forth in each Prospectus Supplement. There can be no assurance that
the rate of principal collections on the Receivables in any Trust will be
comparable to prior experience.
Full amortization of any Term Notes by the applicable Targeted Final
Payment Date, if any, and the applicable Stated Final Payment Date may also be
affected by payment requirements for, and allocations to, other series of Term
Notes and the related Revolving Notes and Certificates.
THE TERM NOTES
GENERAL
With respect to each Trust, one or more series of Term 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 Term
Notes and the Indenture. Where particular provisions or terms used in the
Indenture are referred to, the actual provisions are incorporated by reference
as part of this summary. The Seller will provide a copy of the applicable
Indenture (without exhibits) upon request of a beneficial or record holder of
Term Notes issued thereunder.
Unless otherwise specified in the related Prospectus Supplement, each
series of Term Notes will initially be represented by one or more Term 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 Cedel or Euroclear (in Europe), except as set forth below. Unless
otherwise specified in the related Prospectus Supplement, Term Notes will be
available for purchase in denominations of $1,000 and integral multiples thereof
in book-entry form only. The Seller has been informed by DTC that DTC's nominee
will be Cede. Accordingly, Cede is expected to be the holder of record of the
Term Notes. Unless and until Definitive Term Notes are issued under the limited
circumstances described herein or in the related Prospectus Supplement, no Term
Noteholder will be entitled to receive a physical certificate representing a
Term Note. Unless otherwise indicated, all references herein to actions by Term
Noteholders refer to actions taken by DTC upon instructions from its
participating organizations ("PARTICIPANTS") and all references herein to
distributions, notices, reports and statements to Term Noteholders refer to
distributions, notices, reports and statements to DTC or Cede, as the registered
holder of the Term Notes, as the case may be, for distribution to Term
Noteholders in accordance with DTC's procedures with respect thereto. See
"Book-Entry Registration" and "Definitive Term Notes."
PRINCIPAL AND INTEREST ON THE TERM NOTES
The timing and priority of payment, seniority, Interest Rate, Targeted
Final Payment Date, if any, Stated Final Payment Date, Payment Period, if any,
and the amount of, or method for, determining payments of principal and interest
on a series of Term Notes will be described in the related Prospectus
Supplement. Interest payments on Term Notes will be made monthly, quarterly,
semi-annually or otherwise on Payment Dates as described in the related
Prospectus Supplement. With respect to each Trust, unless otherwise provided in
the related Prospectus Supplement and except for a series of Term Notes during
its Payment
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Period, if any, during the Revolving Period, no payments of principal will be
made on the Term Notes and no distributions of Certificate Balance will be made
with respect to the Certificates and no amounts will be set aside for such
purpose. During the Payment Period, if any, for a series of Term Notes,
Principal Collections and other amounts constituting Available Trust Principal
(which may include proceeds from the issuance of additional Securities) will be
allocated to principal payments thereon and paid as set forth in the related
Prospectus Supplement. Any such principal payments may be due in instalments
(and may be limited by a Controlled Deposit Amount) or may be due in a lump sum
payment. During the Wind Down Period and any Early Amortization Period,
Principal Collections and other amounts constituting Available Trust Principal
will be allocated to principal payments on the Notes and will be set aside for
such purpose as set forth in the related Prospectus Supplement. Unless otherwise
provided in the related Prospectus Supplement, during the Wind Down Period and
any Early Amortization Period, if and so long as there are any funds on deposit
in the related Reserve Fund, to the extent that it would result in more
principal collections being allocated to the Trust than otherwise, Principal
Collections will be allocated to the Trust pro rata, based on the aggregate
percentage of all the Receivables in the Accounts that are Eligible Receivables
as of the commencement of such Wind Down Period or Early Amortization Period
(or, if such Early Amortization Period commences during the Wind Down Period, as
of the commencement of the Wind Down Period). During the Wind Down Period, the
amount so allocated may, to the extent provided in the related Prospectus
Supplement, be limited by any applicable Controlled Deposit Amounts. If an Early
Amortization Period commences during any Payment Period or the Wind Down Period,
amounts on deposit in the Note Distribution Account, the Revolver Distribution
Account and the Certificate Distribution Account, if any, will be paid to
holders of Securities on the first Distribution Date for such Early Amortization
Period as described in the related Prospectus Supplement.
With respect to each Trust, unless otherwise specified in the related
Prospectus Supplement, principal and interest payments on all series of Term
Notes will have the same priority of payment. Payments of principal and interest
on a series of Term Notes may be senior (other than in circumstances related to
the occurrence of an Event of Default) or equivalent to the priority of payments
on the related Revolving Notes, as described in the related Prospectus
Supplement. To the extent specified in the related Prospectus Supplement,
payments of principal and interest on the Notes will be senior in priority of
payment to the distributions to be made on the related Certificates outstanding
from time to time. A series of Term Notes may be entitled to (a) principal
payments with disproportionate, contingent, nominal or no interest payment, or
(b) interest payments with disproportionate, contingent, nominal or no principal
payments ("STRIP NOTES"). Each series of Term Notes issued by a Trust may have a
different Interest Rate, which may be fixed, variable, contingent or adjustable
(and which may be zero for certain series of Strip Notes), or any combination of
the foregoing and a different Targeted Final Payment Date (if any) and Stated
Final Payment Date. The related Prospectus Supplement will specify the Interest
Rate for each series of Term Notes, or the initial Interest Rate and the method
for determining subsequent changes in the Interest Rate. One or more series of
Term Notes of a Trust may be redeemable under the circumstances and in the
manner specified in the related Prospectus Supplement. Unless otherwise
specified in the related Prospectus Supplement, payments of interest on the Term
Notes will be made prior to payments of principal thereon.
THE INDENTURE
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: (a) to correct or amplify the description of the
collateral or add additional collateral; (b) to provide for the assumption of
the Notes and the Indenture obligations by a permitted successor to the Trust;
(c) to add additional covenants for the benefit of the related Noteholders; (d)
to convey, transfer, assign, mortgage or pledge any property to or with the
Indenture Trustee; (e) 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 of any supplemental
indenture; (f) to provide for the acceptance of the appointment of a permitted
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; (g) to modify, eliminate or add to the provisions of
the Indenture in order to comply with the Trust Indenture Act; (h) to increase
the Specified Maximum Revolver Balance (in accordance with the
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conditions therefor in the related Trust Sale and Servicing Agreement); and (i)
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 the Indenture; provided that any action specified in this clause (i) does
not adversely affect in any material respect the interests of any related
Noteholder unless Noteholder consent is otherwise obtained as described below.
Modification of Indenture With Noteholder Consent. With respect to each
Trust, with the consent of the holders of a majority 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: (a) change the due date of any
instalment of principal of or interest on any Note or reduce the principal
amount thereof, the applicable interest rate or the redemption price with
respect thereto or change any place of payment where or the coin or currency in
which any Note or any interest thereon is payable or modify any of the
provisions of the Indenture in such manner as to affect the calculation of the
amount of any payment of interest or principal due on any Note on any Payment
Date; (b) impair the right to institute suit for the enforcement of certain
provisions of the Indenture regarding payment; (c) 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; (d) modify or alter the
provisions of the Indenture regarding the voting of Notes held by the related
Trust, any other obligor on the Notes, the Seller or an affiliate of any of
them; (e) reduce the percentage of the aggregate outstanding principal amount of
the Notes the consent of the holders of which is required to direct the
Indenture Trustee to sell or liquidate the Trust Estate if the proceeds of such
sale would be insufficient to pay the principal amount and accrued but unpaid
interest on the outstanding Notes; (f) 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 (g) 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 Trust Estate 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: (a) 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; (b) any failure (i) to make any required
payment of principal on the related Notes or (ii) 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 (b)(ii) 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 and the Seller (or the Servicer, as applicable) by the Indenture
Trustee or (y) to the Trust, 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; (c) failure to pay the unpaid principal balance of any
related series of Notes by the respective Stated Final Payment Date for such
series; and (d) certain events of bankruptcy, insolvency or receivership with
respect to the Trust. However, the amount of principal required to be paid to
Term 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 series of Term Notes will not result in the
occurrence of an Event of Default until the applicable Stated Final Payment
Date.
If an Event of Default should occur and be continuing with respect to the
Notes of any Trust, the related Indenture Trustee or the holders of a majority
in principal amount of such Notes then outstanding, voting together as a single
class, may declare the principal of such Notes to be immediately due and
payable. Such declaration will constitute an Early Amortization Event. Such
declaration may, under certain circumstances, be rescinded by the holders of a
majority in principal amount of such Notes then outstanding. In such event,
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the Revolving Period will recommence in certain circumstances. See "The Transfer
and Servicing Agreements -- Early Amortization Events."
If the Notes of any Trust 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 related Trust Estate or (d)
elect to have the Trust maintain possession of the Trust Estate and continue to
apply Collections as if there had been no declaration of acceleration (although
the Early Amortization Period commenced by such declaration will continue unless
such declaration is rescinded). The Indenture Trustee, however, is prohibited
from selling the Receivables held by the Trust following an Event of Default,
unless (x) the holders of all the outstanding Notes of such Trust consent to
such sale, (y) 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 (z) in certain cases, the Indenture Trustee determines that the
Trust Estate would not provide sufficient funds on an ongoing basis to make all
payments on the Notes as such payments would have become due if such obligations
had not been declared due and payable, and the Indenture Trustee obtains the
consent of the holders of a majority of the aggregate outstanding principal
amount of the Notes. Unless otherwise specified in the related Prospectus
Supplement, following a declaration that the Notes of a Trust are immediately
due and payable, (1) Noteholders will be entitled to pro rata repayment of
principal on the basis of their respective unpaid principal balances and (2)
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 related Indenture regarding the duties of
the Indenture Trustee, if an Event of Default occurs and is continuing with
respect to the Notes of any Trust, 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 Notes.
No holder of a Note will have the right to institute any proceeding with
respect to the related Indenture, unless (a) such holder previously has given to
the Indenture Trustee written notice of a continuing Event of Default, (b) the
holders of not less than 25% in aggregate principal amount of the outstanding
Notes, voting together as a single class, have made written request of the
Indenture Trustee to institute such proceeding in its own name as Indenture
Trustee, (c) such holder or holders have offered the Indenture Trustee
reasonable indemnity, (d) the Indenture Trustee has for 60 days failed to
institute such proceeding and (e) 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
notice of the Event of Default to each Noteholder of such Trust within 90 days
after it occurs. Except in the case of a failure to make any required payment of
principal 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 such notice is in the interests of the Noteholders.
In addition, the Indenture Trustee and each Noteholder and Note Owner, by
accepting a Note (or interest therein), will covenant that they will not, for a
period of one year and one day after the termination of the related Trust
Agreement, institute against the related Trust or Seller any bankruptcy,
reorganization or other proceeding under any federal or state bankruptcy or
similar law.
Neither the Indenture Trustee in its individual capacity 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,
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beneficiaries, agents, officers, directors, employees, affiliates, successors or
assigns 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 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, among other things (a)
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, (b)
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, (c) no Event of Default shall have
occurred and be continuing immediately after such merger or consolidation, (d)
the Trust has been advised that the ratings of the related Securities would not
be reduced or withdrawn by the Rating Agencies as a result of such merger or
consolidation and (e) the Trust has received an opinion of counsel to the effect
that such consolidation or merger would have no material adverse tax
consequences to the Trust or to any related holder of Securities.
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"), (a) sell,
transfer, exchange or otherwise dispose of any of the assets of the Trust, (b)
claim any credit on or make any deduction from the principal or 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,
(c) dissolve or liquidate in whole or in part, (d) 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 (e) 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
Trust Estate or any part thereof, or any interest therein or the proceeds
thereof.
Except as specified in the related Prospectus Supplement, no Trust may
engage in any activity other than as described above under "THE TRUSTS." No
Trust will incur, assume or guarantee any indebtedness other than indebtedness
incurred pursuant to the related Notes, the related Indenture, or otherwise in
accordance with the related Transfer and Servicing Agreements.
Annual Compliance Statement. Each Trust will be required to file annually
with the related Indenture Trustee a written statement as to the fulfillment of
its obligations under the Indenture.
Indenture Trustee's Annual Report. The Indenture Trustee will be required
to mail each year to all related Noteholders, to the extent required under the
Trust Indenture Act, a brief report relating to its eligibility and
qualification to continue as Indenture Trustee under the related Indenture, any
amounts advanced by it under the Indenture, the amount, interest rate and
maturity date of certain indebtedness owing by the Trust to the Indenture
Trustee in its individual capacity, the property and funds physically held by
the Indenture Trustee as such and any action taken by it that materially affects
the Notes and that has not been previously reported.
Satisfaction and Discharge of Indenture. The Indenture will be discharged
with respect to the Notes of any Trust upon the delivery of all such Notes to
the related Indenture Trustee for cancellation or, with certain limitations,
upon deposit of funds sufficient for the payment in full of all of such Notes
with the Indenture Trustee.
THE INDENTURE TRUSTEE
The Indenture Trustee for the Notes of a Trust 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, 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
will also be entitled to remove the Indenture Trustee and appoint a successor.
Any resignation or removal of the Indenture Trustee
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and appointment of a successor trustee does not become effective until
acceptance of the appointment by the successor trustee.
REPORTS TO TERM NOTEHOLDERS
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 Term Noteholders on such Payment Date. With respect to each series
(to the extent applicable), each such statement will include the following
information as to the Term Notes with respect to such Payment Date or the period
since the previous Payment Date, as applicable:
(a) the amount, if any, of the distribution allocable to principal on
each series of Term Notes;
(b) the amount, if any, of the distribution allocable to interest on
each series of Term Notes;
(c) the aggregate outstanding principal balance for each series of
Term Notes, after giving effect to all payments reported under (a) above on
such date;
(d) the aggregate principal balance of the Revolving Notes and the
aggregate Certificate Balance;
(e) if applicable, the amount of outstanding Servicer Advances on such
date;
(f) the amount of the Monthly Servicing Fee paid to the Servicer with
respect to the related Collection Period or Periods, as the case may be;
(g) the interest rate applicable for the next Payment Date for any
series of Term Notes with variable or adjustable rates;
(h) the amount, if any, withdrawn from or credited to any Reserve
Fund;
(i) the accumulated interest shortfalls, if any, on each series or
class of Securities and the change in such amounts from the preceding
Payment Date;
(j) the Trust Charge-Offs allocated to each series or class of
Securities and the change in such amounts from the preceding Payment Date;
and
(k) the balance of the Reserve Fund, if any, on such date, after
giving effect to changes therein on such date.
Each amount set forth pursuant to subclauses (a), (b) and (i) with respect
to Term Notes will be expressed as a dollar amount per $1,000 of the initial
principal balance of the Term Notes.
Within the prescribed period of time for tax reporting purposes after the
end of each calendar year during which any Term Notes are outstanding, the
Indenture Trustee will furnish (or cause to be furnished) to each person or
entity who at any time during the preceding calendar year was a holder of record
of a Term Note (initially Cede, as the nominee of DTC), and received any payment
thereon from the Trust, a statement containing certain information for the
purpose of assisting such Noteholders in the preparation of their federal income
tax returns. As long as the holder of record of the Term Notes is Cede, as
nominee of DTC, beneficial owners of Term Notes will receive tax and other
information from Participants and Indirect Participants rather than from the
Indenture Trustee. See "Certain Federal Income Tax Consequences."
BOOK-ENTRY REGISTRATION
DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered pursuant to Section 17A of the 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 is also
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").
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Unless otherwise specified in the related Prospectus Supplement, owners of
beneficial interest in Notes ("NOTE OWNERS") that are not Participants or
Indirect Participants but desire to purchase, sell or otherwise transfer
ownership of, or other interests in, Term Notes may do so only through
Participants and Indirect Participants. In addition, Term Note Owners will
receive all distributions of principal and interest through Participants. Under
a book-entry format, Term Note Owners may experience some delay in their receipt
of payments since such payments will be forwarded by the Indenture Trustee to
Cede, as nominee for DTC. DTC will forward such payments to Participants, which
thereafter will forward them to Indirect Participants or Term Note Owners. It is
anticipated that the only "Term Noteholder" of record will be Cede, as nominee
of DTC. Term Note Owners will not be recognized by the Indenture Trustee as Term
Noteholders, as such term is used in the Indenture, and Term Note Owners will be
permitted to exercise the rights of Term Noteholders 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
Term Notes among Participants on whose behalf it acts with respect to the Term
Notes and to receive and transmit payments of principal of, and interest on, the
Term Notes. Participants and Indirect Participants with which Term Note Owners
have accounts with respect to the Term Notes similarly are required to make
book-entry transfers and receive and transmit such payments on behalf of their
respective Term Note Owners. Accordingly, although Term Note Owners will not
possess Term Notes, the Rules provide a mechanism by which Term Note Owners will
receive payments and will be able to transfer their interests in Term Notes.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a holder to
pledge Term Notes to persons or entities that do not participate in the DTC
system, or to otherwise act with respect to such Term Notes, may be limited due
to the lack of a physical certificate for such Term Notes.
DTC has advised the Seller that it will take any action permitted to be
taken by a Term Noteholder under the Indenture or other Related Document only at
the direction of one or more Participants to whose accounts with DTC the Term
Notes are credited. DTC may take conflicting actions with respect to other
undivided interests to the extent that such actions are taken on behalf of
Participants whose holdings include such undivided interests.
Except as required by law, neither the Administrator 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 Term Notes of
any series held by Cede, as nominee for DTC, or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
In addition to holding Term Notes through Participants or Indirect
Participants of DTC in the United States as described above, holders of Term
Notes may hold their Term Notes through CEDEL or Euroclear in Europe if they are
participants of such systems, or indirectly through organizations which are
participants in such systems.
CEDEL and Euroclear will hold omnibus positions on behalf of their
participants through customers' securities accounts in CEDEL'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 CEDEL 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 CEDEL 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. CEDEL Participants and Euroclear
Participants may not deliver instructions directly to the depositaries.
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Because of time-zone differences, credits of securities received in CEDEL
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
CEDEL Participants on such Business Day. Cash received in CEDEL or Euroclear as
a result of sales of securities by or through a CEDEL Participant or a Euroclear
Participant to a Participant will be received with value on the DTC settlement
date but will be available in the relevant CEDEL or Euroclear cash account only
as of the Business Day following settlement in DTC. For information with respect
to tax documentation procedures, see "Certain Federal Income Tax Consequences --
Characterization and Treatment -- Tax Consequences to Foreign Noteholders."
CEDEL is incorporated under the laws of Luxembourg as a professional
depository. CEDEL holds securities for its participating organizations ("CEDEL
PARTICIPANTS") and facilitates the clearance and settlement of securities
transactions between CEDEL Participants through electronic book-entry changes in
accounts of CEDEL Participants, thereby eliminating the need for physical
movement of certificates. Transactions may be settled in CEDEL in any of 28
currencies, including United States dollars. CEDEL provides to CEDEL
Participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. CEDEL interfaces with domestic markets in several
countries. As a professional depository, CEDEL is subject to regulation by the
Luxembourg Monetary Institute. CEDEL Participants are recognized financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations and may include the Underwriters. Indirect access to CEDEL is also
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a CEDEL Participant,
either directly or indirectly.
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 Term Notes held through CEDEL or Euroclear
will be credited to the cash accounts of CEDEL Participants or Euroclear
Participants in accordance with the relevant system's rules and
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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 Consequences -- Characterization
and Treatment -- Information Reporting and Backup Withholding." CEDEL or the
Euroclear Operator, as the case may be, will take any other action permitted to
be taken by a Term Noteholder under the Indenture or other Related Document on
behalf of a CEDEL Participant or Euroclear Participant only in accordance with
its relevant rules and procedures and subject to its depositary's ability to
effect such actions on its behalf through DTC.
Although DTC, CEDEL and Euroclear have agreed to the foregoing procedures
in order to facilitate transfers of Term Notes among participants of DTC, CEDEL
and Euroclear, they are under no obligation to perform or continue to perform
such procedures and such procedures may be discontinued at any time.
DEFINITIVE TERM NOTES
Unless otherwise specified in the related Prospectus Supplement, Term Notes
will be issued in fully registered, certificated form ("DEFINITIVE TERM NOTES")
to Term Noteholders or their nominees, rather than to the Depository or its
nominee, only if (a) the Administrator advises the Indenture Trustee in writing
that the Depository is no longer willing or able to discharge properly its
responsibilities with respect to the Term Notes and the Trust is unable to
locate a qualified successor, (b) the Administrator, at its option, elects to
terminate the book-entry system through the Depository or (c) after the
occurrence of an Event of Default or a Servicing Default, Note Owners
representing beneficial interests aggregating at least a majority of the
outstanding principal amount of the related Term Notes advise the appropriate
trustee through the Depository in writing that the continuation of a book-entry
system through the Depository (or a successor thereto) is no longer in the best
interest of such Note Owners.
Upon the occurrence of any event described in the immediately preceding
paragraph, the Depository will notify the Note Owners and the Indenture Trustee
of such occurrence and of the availability of Definitive Term Notes. Upon
surrender by the Depository of the definitive certificates representing the Term
Notes and receipt of instructions for re-registration, the Indenture Trustee
will reissue the related Term Notes as Definitive Term Notes to holders thereof.
Payments of principal of, and interest on, the Definitive Term Notes will
thereafter be made in accordance with the procedures set forth in the Indenture
directly to holders of Definitive Term Notes in whose names the Definitive Term
Notes were registered at the close of business on the last day of the preceding
month. Such payments will be made by check mailed to the address of such holder
as it appears on the register maintained by the Indenture Trustee. The final
payment on any Definitive Term Note, however, will be made only upon
presentation and surrender of such Definitive Term Note at the office or agency
specified in the notice of final payment to the holders thereof.
Definitive Term Notes 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 Term Notes. 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.
THE REVOLVING NOTES
With respect to each Trust, one or more series of Revolving Notes will be
issued pursuant to the related Indenture on the Initial Closing Date and may be
issued from time to time thereafter. Each series of Revolving Notes may have a
different Revolver Interest Rate which may be fixed, variable, contingent,
adjustable or any combination of the foregoing, and a different Targeted Final
Payment Date (if any) and Stated Final Payment Date. With respect to each Trust,
the outstanding principal balance of the Revolving Notes may fluctuate on a
daily basis as Principal Collections on the related Receivables not needed for
principal payments or distributions on related Term Notes or Certificates are,
at the discretion of the Seller or as otherwise described herein, (a) allocated
to the Seller in payment for Receivables purchased by the Trust, (b) allocated
to the Revolver Distribution Account as a payment of principal on the Revolving
Notes or (c) retained as the Cash Collateral Amount. With respect to each Trust,
the Seller, at its option, may on any day increase the outstanding principal
balance of the Revolving Notes to fund purchases of Receivables,
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provided, however, that the Net Revolver Balance may not at any time exceed the
Maximum Revolver Balance. The Specified Maximum Revolver Balance for a Trust
will be set forth in the related Prospectus Supplement and may be increased or
decreased from time to time if certain conditions are satisfied. See "The
Transfer and Servicing Agreements -- Additional Issuances; Changes in Maximum
Revolver Balance."
Unless otherwise provided in the related Prospectus Supplement, no
additional borrowings will be permitted under any Revolving Note during the Wind
Down Period or any Early Amortization Period for the related Trust. Payments of
principal on Revolving Notes will be made in the amounts and priority, and at
the times, specified in the related Prospectus Supplement. One or more series of
Revolving Notes for any Trust may have a Targeted Final Payment Date (if any)
and Stated Final Payment Date or otherwise require principal payments during the
related Revolving Period and may provide for extensions and renewals under
certain circumstances. Each Revolving Note will initially be held by GMAC or
sold in a private placement to a third-party investor, and may be transferred in
whole or in part subject to certain conditions. Any additional borrowings under,
and principal payments on, the Revolving Notes will be allocated among all
outstanding Revolving Notes as determined by the Seller in its sole discretion
(subject to any agreements among the Seller and any holders of the Revolving
Notes). The Revolving Notes are not being offered pursuant to this Prospectus or
any related Prospectus Supplement.
THE CERTIFICATES
With respect to each Trust, the Certificates will be issued pursuant to the
terms of a Trust Agreement between the Seller and the Owner Trustee and will
represent the ownership interest in the Trust. Certificates will be issued on
the Initial Closing Date for a Trust and may be issued from time to time
thereafter. The Certificate Rate for the Certificates may be fixed, variable,
contingent, adjustable or any combination of the foregoing, and may vary by
class of Certificate. The related Prospectus Supplement will set forth the
amount of, or method for determining, distributions of the Certificate Balance
and the timing of such distributions, including the Stated Final Payment Date,
which will be the same for each class of Certificates related to each Trust.
Unless otherwise specified in the related Prospectus Supplement, principal and
interest payments on the Notes will be senior to distributions of Certificate
Balance and interest on the related Certificates. The Certificates are not being
offered pursuant to this Prospectus or any related Prospectus Supplement.
THE TRANSFER AND SERVICING AGREEMENTS
Except as otherwise specified in the related Prospectus Supplement, the
following summary describes certain terms of (a) the Pooling and Servicing
Agreement pursuant to which the Seller will purchase Eligible Receivables from
GMAC and the Servicer will agree to service all Receivables in the related
Accounts, (b) the Trust Sale and Servicing Agreement pursuant to which the Trust
will acquire the Receivables purchased by the Seller from the Seller and agree
to the servicing of the Receivables by the Servicer, (c) the Trust Agreement
pursuant to which the Trust will be created and Certificates will be issued and
(d) the Administration Agreement pursuant to which GMAC, as administrator, will
undertake certain administrative duties with respect to the Trust (collectively,
such agreements being referred to as the "TRANSFER AND SERVICING AGREEMENTS").
Forms of the Transfer and Servicing Agreements have been filed as exhibits to
the Registration Statement of which this Prospectus forms a part. The Seller
will provide a copy of the Transfer and Servicing Agreements (without exhibits)
upon request of a holder of Securities described therein. This 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 Transfer and Servicing Agreements.
Where particular provisions or terms used in the Transfer and Servicing
Agreements are referred to, the actual provisions are incorporated by reference
as part of such summary.
SALE AND ASSIGNMENT OF RECEIVABLES AND COLLATERAL SECURITY
GMAC will sell and assign to the Seller, without recourse, on the Initial
Closing Date, its entire interest in the Eligible Receivables under the Accounts
included in the related Pool of Accounts as of the Initial Cut-Off Date and, on
each date on which Receivables are originated in an Account in the related Pool
of Accounts (except as described below under "INSOLVENCY EVENTS"), its entire
interest in, all Eligible Receivables created
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on such date in the Accounts in the related Pool of Accounts and, in each case,
the related Collateral Security and the proceeds of all of the foregoing,
pursuant to a Pooling and Servicing Agreement between GMAC and the Seller. For
each Trust, on the Initial Closing Date and on each Receivables Purchase Date,
the Seller will transfer and assign to the applicable Trust, without recourse
(except as expressly provided therein), the Eligible Receivables and the other
assets purchased from GMAC on such date, pursuant to a Trust Sale and Servicing
Agreement among the Seller, the Servicer and the Trust. The Owner Trustee, on
behalf of the Trust, together with the Indenture Trustee with respect to the
Notes, concurrently with the initial transfer and assignment to the Trust, will
execute and deliver to the Seller the related Notes and the related Certificates
to be issued on the Initial Closing Date. Unless otherwise provided in the
related Prospectus Supplement, the Seller will sell the Securities and will
apply the net proceeds received from the sale of the Securities to the purchase
of the related Receivables from GMAC.
In each Pooling and Servicing Agreement, in connection with the sale of the
related Receivables to the Seller, GMAC will agree to indicate in its records
that the Eligible Receivables and Collateral Security have been sold to the
Seller, and that, upon the execution of a Trust Sale and Servicing Agreement,
the Seller has sold and assigned such property to the Trust. In addition, GMAC
will agree to provide a complete list to the Seller showing for each Account to
be included in the Pool of Accounts, as of the Initial Cut-Off Date, its account
number and the outstanding principal balance of Receivables that GMAC represents
are Eligible Receivables under such Account. In the related Trust Sale and
Servicing Agreement, the Trust will accept the designation of GMAC as custodian
to maintain possession, as the Trust's agent, of the documents relating to the
Receivables. GMAC will not deliver to the Seller, the Owner Trustee or the
Indenture Trustee any records or agreements relating to the Accounts or the
Receivables. To assure uniform quality in servicing both the Receivables related
to any Trust and the Servicer's own portfolio of receivables, as well as to
facilitate servicing and save administrative costs, the records and agreements
relating to the Accounts and Receivables related to any Trust will not be
segregated from those relating to other accounts and receivables of GMAC or
otherwise marked to reflect the sale of the Receivables therein to the Seller or
the subsequent sale to the related Trust. However, with respect to each Trust,
GMAC will file UCC financing statements with respect to the sale, transfer and
assignment of Receivables to the Seller and the Seller will file UCC financing
statements with respect to the sale, transfer and assignment of the Receivables
to such Trust. In addition, each Trust will file UCC financing statements with
respect to the security interest in the Trust's assets granted to the Indenture
Trustee under the Indenture to secure the Trust's obligations thereunder. See
"Certain Legal Aspects -- Transfer of Receivables." Because the documents
evidencing the Receivables will remain in GMAC's possession and will not be
stamped or otherwise marked to reflect the sale and assignment of the interests
in the Receivables to the Seller or the Trust, if a subsequent purchaser were
able to take possession of the Receivables without knowledge of the assignment
(and if the Receivables are deemed "chattel paper" under applicable law), the
Trust's interests in such Receivables could be defeated. See "Certain Legal
Aspects -- Transfer of Receivables."
With respect to each Trust, pursuant to the Trust Sale and Servicing
Agreement, as described in "Addition and Removal of Accounts" below, the Seller
has the right (subject to certain limitations) to designate from time to time
Additional Accounts to be included in the related Pool of Accounts. In respect
of any such designation, the Seller will purchase from GMAC the Eligible
Receivables in such Additional Accounts and GMAC will follow the procedures set
forth in the preceding paragraph, except that the list will show information for
such Additional Accounts as of the Additional Cut-Off Date.
REPRESENTATIONS AND WARRANTIES
In each Pooling and Servicing Agreement, GMAC will represent and warrant to
the Seller, among other things, that: (a) as of the Initial Cut-Off Date (or, in
the case of an Additional Account, as of the related Additional Cut-Off Date),
each Account (or Additional Account) included in the Pool of Accounts is an
Eligible Account; and (b) as of the Initial Cut-Off Date (or, in the case of an
Additional Account, as of the related Additional Cut-Off Date) and on each
Receivables Purchase Date each Receivable conveyed to the Seller on such date
that is identified as an Eligible Receivable is an Eligible Receivable.
In the related Trust Sale and Servicing Agreement, the Seller will assign
the representations and warranties of GMAC with respect to the Accounts and the
Receivables to the Trust, and will represent and
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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 Initial Cut-Off Date, each Additional Cut-Off Date and each Receivables
Purchase Date, as the case may be.
No later than two Business Days following the discovery by the Seller and
the Servicer of a breach of any representation or warranty of the Seller or GMAC
that materially and adversely affects the interests of the related Trust in any
Receivable or of any Receivable held by the Trust the payment of a portion or
all of which has been deferred pursuant to DPP, an instalment sales program or
similar arrangement (collectively, a "WARRANTY RECEIVABLE"), unless and to the
extent the breach is cured in all material respects, (a) if such breach or
deferral is a breach of a representation or warranty of GMAC, the Seller and the
Servicer will use reasonable efforts to enforce the obligation of GMAC under the
Pooling and Servicing Agreement to pay the related Warranty Payment (as defined
below) and repurchase such Receivable or (b) if such breach or deferral is a
breach of a representation or warranty of the Seller, the Seller will repurchase
such Receivable. Without limiting the generality of the foregoing, a Receivable
held by a Trust will not be an Eligible Receivable, and thus will be subject to
repurchase if and to the extent (i) the principal amount thereof is adjusted
downward because of a rebate, refund, credit adjustment or billing error to the
related Dealer or (ii) such Receivable was created in respect of a Vehicle that
was refused or returned by a Dealer. The price for any such repurchase by GMAC
or the Seller (the "WARRANTY PAYMENT") will be equal to the principal amount of
such Receivable (or in the case of a breach or deferral affecting less than the
entire principal amount of a Receivable, to the extent of the breach or
deferral) plus all accrued and unpaid interest thereon through the date of
purchase. The principal portion of the Warranty Payment will be treated as
Additional Trust Principal and the remainder will be included in Interest
Collections. All such Warranty Payments will be deposited into the related
Collection Account on the related Distribution Date. Such repurchase obligations
of the Seller and GMAC constitute the sole remedy available to the
Securityholders, the Indenture Trustee or the Owner Trustee for any such uncured
breach or deferral.
In each Pooling and Servicing Agreement, GMAC will also make
representations and warranties to the Seller to the effect that, among other
things, as of the closing date for the sale of any Securities: (a) GMAC is duly
incorporated and in good standing, it has the authority to consummate the
transactions contemplated by the Pooling and Servicing Agreement and the related
Transfer and Servicing Agreements and constitutes legal, valid and binding
obligations of GMAC; and (b) the transfer of the Receivables and the related
Vehicle Collateral Security, pursuant to the related Pooling and Servicing
Agreement constitutes a valid sale, transfer and assignment to the Seller of all
right, title and interest of GMAC therein, whether then existing or thereafter
created, and the proceeds thereof. If the breach of any of the representations
and warranties described in this paragraph results in the obligation of the
Seller under the related Trust Sale and Servicing Agreement to purchase the
Receivables and the related Collateral Security as described below, GMAC will be
obligated to repurchase such property for an amount equal to the Reassignment
Amount. In other circumstances in which the Seller is obligated under a Trust
Sale and Servicing Agreement to purchase such property, GMAC will not be
obligated to repurchase such property.
In each Trust Sale and Servicing Agreement, the Seller will also make
representations and warranties to the related Trust to the effect that, among
other things, as of the closing date for the sale of any Securities: (a) the
Seller is duly incorporated and in good standing, it has the authority to
consummate the transactions contemplated by the Trust Sale and Servicing
Agreement and the Trust Sale and Servicing Agreement constitutes a legal, valid
and binding agreement of the Seller; and (b) the transfer of the Receivables
pursuant to the Trust Sale and Servicing Agreement constitutes a valid sale,
transfer and assignment to the Trust of all right, title and the interest of the
Seller in such Receivables and the related Collateral Security, whether then
existing or thereafter created, and the proceeds thereof. With respect to each
Trust, if the breach of any of the representations and warranties described in
this paragraph has a material adverse effect on the interests of the
Securityholders, then any of the Indenture Trustee, the Owner Trustee or the
holders of the outstanding Securities evidencing not less than a majority of the
outstanding principal amount of the Notes and a majority of the Voting Interests
of all outstanding Certificates, by written notice to the Seller, may direct the
Seller to accept the reassignment of all Receivables and the related Collateral
Security within 60 days of such notice, or within such longer period specified
in such notice. The Seller will be obligated to accept such reassignment and pay
the Reassignment Amount on a Distribution Date occurring within such applicable
period. Such reassignment will not be required to be made, however, if at or
prior to the end of such applicable period, such
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representations and warranties are then true and correct in all material
respects and any material adverse effect caused by such breach has been cured.
With respect to each Trust, the payment of the Reassignment Amount for all
outstanding Securities will be considered as payment in full for all Receivables
and the related Collateral Security. The obligation of the Seller to pay the
Reassignment Amount as described above will constitute the sole remedy
respecting a breach of the representations and warranties available to the
Trust, the Securityholders, the Owner Trustee or Indenture Trustee. It is not
expected that the Seller will have significant assets other than its rights
under the Pooling and Servicing Agreement and the Trust Sale and Servicing
Agreement with respect to each Trust.
In each Pooling and Servicing Agreement, GMAC will covenant that, except
for the sale and conveyances under the Pooling and Servicing Agreement and the
interests created under the Trust Sale and Servicing Agreement or as otherwise
permitted therein, GMAC will not sell, pledge, assign or transfer any interest
in any Eligible Receivables or the related Vehicle Collateral Security subject
to such agreements to any other person or entity.
ADDITION AND REMOVAL OF ACCOUNTS
With respect to each Trust, and subject to the conditions described below,
under the Pooling and Servicing Agreement, GMAC may offer to designate, and the
Seller may request the designation of, additional Accounts to be included in the
Pool of Accounts and, under the Trust Sale and Servicing Agreement, the Seller
has the right to designate from time to time additional Accounts to be included
in the related Pool of Accounts. Unless otherwise specified in the related
Prospectus Supplement, the addition of any such Account to the related Pool of
Accounts (an "ADDITIONAL ACCOUNT") is subject to the following conditions, among
others: (a) each such Additional Account must be an Eligible Account; (b) the
Seller must represent and warrant that the inclusion of such Additional Accounts
in the related Pool of Accounts will not, in the reasonable belief of the
Seller, cause an Early Amortization Event to occur; and (c) unless otherwise set
forth in the related Prospectus Supplement, each Rating Agency must have
provided written confirmation that such addition will not result in a reduction
or withdrawal of the rating of any outstanding related Securities. On the
Addition Date for any Additional Account, all Eligible Receivables then in such
Account will be sold by GMAC to the Seller and will be transferred by the Seller
to the Trust.
With respect to each Trust, even though each Additional Account must be an
Eligible Account, Additional Accounts may not be of the same credit quality as
the initial Accounts because, among other things, such Accounts may not have
been part of the U.S. Portfolio on the Initial Cut-Off Date. Additional Accounts
may have been originated at a different time using credit criteria different
from those applied to the initial Accounts.
With respect to each Trust, upon the satisfaction of certain conditions
specified in the Trust Sale and Servicing Agreement, the Seller will have the
right to remove Accounts from the Pool of Accounts. To so remove Accounts, after
proper notice, the Seller (or the Servicer on its behalf) must, among other
things: (a) furnish to the Owner Trustee a list of the Accounts to be so removed
from the Pool of Accounts (the "SELECTED ACCOUNTS") specifying for each Selected
Account, its account number and the aggregate balance of Eligible Receivables in
such Account; (b) represent and warrant that the removal of the Selected
Accounts will not, in the reasonable belief of the Seller, result in the
occurrence of an Early Amortization Event; and (c) represent and warrant that
the Seller and the Servicer have not received notice from any Rating Agencies
that such removal will result in a reduction or withdrawal of the rating of any
of the outstanding related Securities. In addition, if an Account in the Pool of
Accounts ceases to be an Eligible Account, such Account will be deemed a
Selected Account on such date. In either case, Receivables arising thereafter in
the Selected Account will not be transferred to the Trust. Receivables in such
Account transferred to the Trust prior to such date and Collections thereon will
continue to be assets of the Trust. Unless otherwise provided in the related
Prospectus Supplement, the Servicer will allocate all Principal Collections on
Receivables in a Selected Account to the oldest Receivables in such Selected
Account. A Selected Account will be deemed removed from the Pool of Accounts on
the date on which the balance of all Receivables in such Account held by the
Trust becomes zero.
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BANK ACCOUNTS
With respect to each Trust, the Servicer will establish and maintain with
the related Indenture Trustee one or more accounts, in the name of the Indenture
Trustee on behalf of the holders of the related Securities, into which the
Trust's share of all payments made on or with respect to the Receivables in the
Accounts related to such Trust will be deposited (the "COLLECTION ACCOUNT").
With respect to each Trust, the Servicer will establish and maintain with the
related Indenture Trustee one or more accounts, in the name of the Indenture
Trustee, on behalf of the holders of the related Term Notes and on behalf of the
related Revolving Notes, in which amounts to be applied for payment to such
Noteholders will be deposited and from which all payments to such Noteholders
will be made (the "NOTE DISTRIBUTION ACCOUNT" and the "REVOLVER DISTRIBUTION
ACCOUNT," respectively). In addition, with respect to each Trust, the Servicer
will establish and maintain with the related Owner Trustee one or more accounts,
in the name of the Owner Trustee on behalf of the related Certificateholders, in
which amounts to be applied for distribution to such Certificateholders will be
deposited and from which all distributions to such Certificateholders will be
made (the "CERTIFICATE DISTRIBUTION ACCOUNT," and together with the Note
Distribution Account and the Revolver Distribution Account, the "DISTRIBUTION
ACCOUNTS").
With respect to each Trust, funds in the Collection Account, the Note
Distribution Account, the Revolver Distribution Account and the Reserve Fund, if
any, and other accounts identified as such in the related Prospectus Supplement
(collectively, the "DESIGNATED ACCOUNTS") and the Certificate Distribution
Account will be invested as provided in the Trust Sale and Servicing Agreement
in Eligible Investments. Eligible Investments will generally be limited to
investments acceptable to the Rating Agencies as being consistent with the
rating of the related Securities. Except as described below or in the related
Trust Sale and Servicing Agreement, Eligible Investments will be limited to
obligations or securities that mature on or before the next Distribution Date
or, in the case of the Note Distribution Account, the date of the next payment
with respect to the Term Notes. To the extent permitted by the Rating Agencies,
funds in any Reserve Fund and other cash collateral accounts, if any, may be
invested in related Term Notes that will not mature prior to the date of the
next payment or distribution with respect to such Term Notes. Except as
otherwise specified in the related Prospectus Supplement, such Term Notes may
only be sold prior to their maturity at a price equal to or greater than the
unpaid principal balance thereof if, following such sale, the amount on deposit
in any Reserve Fund would be less than the related Reserve Fund Required Amount
or other applicable limits, if any. Thus, the amount of cash in any Reserve Fund
at any time may be less than the balance of the Reserve Fund. If the amount
required to be withdrawn from the Reserve Fund to cover shortfalls in
Collections on the Receivables or otherwise (as provided in the related
Prospectus Supplement) exceeds the amount of cash in the Reserve Fund, a
temporary shortfall in the amounts available for distribution could result.
Except as otherwise specified in the related Prospectus Supplement, investment
earnings on funds deposited in the Designated Accounts and the Certificate
Distribution Account, net of losses and investment expenses, will be Investment
Proceeds and will be available for distribution as described in the related
Prospectus Supplement. References to amounts on deposit in any Designated
Account or the Certificate Distribution Account will not include the amount of
any Investment Proceeds.
The Designated Accounts and the Certificate Distribution Account 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
has a credit rating from each Rating Agency then rating such securities in one
of its generic rating categories which signifies investment grade. "ELIGIBLE
INSTITUTION" means, with respect to a Trust, either (a) the corporate trust
department of the related Indenture Trustee or Owner Trustee, as applicable, or
(b) a depository institution organized under the laws of the United States of
America or any one of the states thereof or the District of Columbia (or any
domestic branch of a foreign bank), (i) which has either (A) a long-term
unsecured debt rating acceptable to the Rating Agencies or (B) a short-term
unsecured debt rating or certificate of deposit rating acceptable to the Rating
Agencies and (ii) whose deposits are insured by the Federal Deposit Insurance
Corporation or any successor thereto.
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Any other accounts to be established with respect to a Trust will be
described in the related Prospectus Supplement.
COLLECTIONS
With respect to each Trust, the Servicer will deposit Principal Collections
and Interest Collections on the related Receivables into the related Collection
Account on a daily basis. However, except as otherwise described in the related
Prospectus Supplement, at any time that (a) GMAC is the Servicer, (b) no
Servicing Default has occurred and is continuing and (c) GMAC either (i)
maintains a short-term debt rating of at least A-1 by Standard & Poor's and P-1
by Moody's, (ii) arranges for and maintains a letter of credit or other form of
credit support or enhancement in respect of the Servicer's obligations to make
deposits of Collections on the related Receivables in such Collection Account
that is acceptable in form and substance to each Rating Agency or (iii)
otherwise obtains the written confirmation from each Rating Agency that the
failure by GMAC to make daily deposits will not result in a downgrade,
suspension or withdrawal of the rating of any of the outstanding related
Securities that it is then rating, then the Servicer need not deposit Principal
Collections and Interest Collections into the Collection Account on a daily
basis but may use all such Collections for its own benefit until the Business
Day immediately preceding the related Distribution Date; provided that the Cash
Collateral Amount for the last day of any Collection Period shall be deposited
into the Collection Account (to the extent not already on deposit therein) no
later than the second Business Day of the following Collection Period. On any
date on which Collections are deposited in the Collection Account for a Trust,
the Servicer will distribute directly to GMAC (on account of the Retained
Property) an amount equal to Principal Collections on the Receivables included
in the Retained Property. Whether or not the Servicer is then making daily
deposits of Collections, if, at any time, the amount on deposit in a Collection
Account exceeds the amount required to be so deposited, the Servicer will be
permitted to withdraw from such Collection Account and pay to the Seller or
GMAC, as applicable, the amount of such excess.
APPLICATION OF COLLECTIONS
Interest Collections. With respect to each Trust, except as set forth in
the related Prospectus Supplement, for each Collection Period, Trust Interest
Collections, receipts under credit, liquidity and other enhancement
arrangements, Servicer Advances, Investment Proceeds and amounts in the Reserve
Fund will be applied to make interest payments on the related Securities, pay
related Monthly Servicing Fees, make payments under credit, liquidity and other
enhancement arrangements, reimburse Servicer Advances and cover certain losses
on Defaulted Receivables, all as more fully set forth in the related Prospectus
Supplement. Unless otherwise provided in the related Prospectus Supplement,
Interest Collections in excess of Trust Interest Collections will be paid to
GMAC on account of the Retained Property.
Principal Collections.
Revolving Period. During the Revolving Period for a Trust and so long
as no series of related Term Notes is in a Payment Period, unless otherwise
provided in the related Prospectus Supplement, no amount is required to be
set aside to make principal payments on such Term Notes and distributions
of Certificate Balance on related Certificates. Accordingly, all Trust
Principal Collections and Additional Trust Principal on any date during the
Revolving Period (together with the Cash Collateral Amount from the prior
date) will be available subject to the Servicer's ability to recover
advances of principal, if any, for reinvestment in additional Receivables
to be purchased from the Seller and will be paid to the Seller to the
extent so reinvested, provided that such amounts will be held as the Cash
Collateral Amount to the extent necessary to ensure that the Daily Trust
Invested Amount for such date equals the Daily Trust Balance for such date.
Such determination will be made after giving effect to any payments of
principal (including required principal payments) on, or additional
borrowings under, the Revolving Notes on such date and all collections on,
and reinvestments in, Receivables and all issuances of Securities by the
Trust on such date. Unless otherwise provided in the related Prospectus
Supplement, Principal Collections in excess of Trust Principal Collections
will be paid to GMAC on account of the Retained Property.
Payment Periods. During the Payment Period for any series of Term
Notes of a Trust, Available Trust Principal will be allocated subject to
the Servicer's ability to recover advances of principal, if any, to such
series and available to make principal payments on such Term Notes to the
extent described in the
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related Prospectus Supplement. Principal payments on any such series of
Term Notes will be made in the amounts and at the times described in the
related Prospectus Supplement. Available Trust Principal not so allocated
to Term Notes will be applied as described above under "Revolving Period."
The Payment Period, if any, for a series of Term Notes will commence on the
first to occur of the related Scheduled Series Payment Period Commencement
Date and the Series Early Payment Event.
Early Amortization and Wind Down Periods. During an Early Amortization
Period or the Wind Down Period for any Trust, Trust Principal Collections
subject to the Servicer's ability to recover advances of principal, if any,
will be retained by the Trust and not paid to Seller to the extent required
to be set aside for the purpose of making payments of principal on the
related Notes and distributions with respect to Certificate Balance on the
related Certificates, all as more fully set forth in the related Prospectus
Supplement. Unless otherwise provided in the related Prospectus Supplement,
during any such period, no additional borrowings will be permitted under
the related Revolving Notes. For each Collection Period during an Early
Amortization Period or the Wind Down Period for a Trust, Trust Principal
Collections, together with other amounts, if any, comprising Available
Trust Principal, will be applied to make the required deposits into the
Note Distribution Account, the Revolver Distribution Account and the
Certificate Distribution Account. The relative priorities of such deposits
and the amounts required to be so deposited for any Distribution Date will
be set forth in the related Prospectus Supplement. Unless otherwise
provided in the related Prospectus Supplement, during the Wind Down Period
for a Trust, the amount to be so applied to payments on Securities will be
limited by the applicable Controlled Deposit Amount. During an Early
Amortization Period for a Trust, any such limit will not apply and, in
general, all Trust Principal Collections and other amounts constituting
Available Trust Principal will be available to make payments on the
Securities. Payments will be made on Securities during the Wind Down Period
and any Early Amortization Period to the extent, if any, described in the
related Prospectus Supplement. Unless otherwise provided in the related
Prospectus Supplement, Principal Collections in excess of Trust Principal
Collections will be paid to GMAC on account of the Retained Property.
SERVICER ADVANCES
The Servicer will make advances (each, a "SERVICER ADVANCE") to each Trust
to the extent and for the purposes set forth in the related Prospectus
Supplement. Unless otherwise provided, the Servicer will agree to make advances
to the extent that the Servicer, in its sole discretion, expects to recoup such
advances from subsequent Collections and other amounts available for such
purpose as described in the related Prospectus Supplement.
LIQUIDITY AND CREDIT SUPPORT
The amounts and types of credit, liquidity and other enhancement
arrangements and the provider thereof, if applicable, with respect to each Trust
will be set forth in the related Prospectus Supplement. If and to the extent
provided in the related Prospectus Supplement, such arrangements may be in the
form of reserve accounts, letters of credit, credit or liquidity facilities,
repurchase obligations, third party payments or other support, cash deposits or
such other arrangements as may be described in the related Prospectus Supplement
or any combination of two or more of the foregoing. In addition, Securities may
have the benefit of interest rate swaps, caps and floors and other derivative
products, all as more fully described in the related Prospectus Supplement. Such
arrangements may be for the benefit of one or more series or classes of
Securities or all Securities issued by a Trust as described in the related
Prospectus Supplement.
The presence of a Reserve Fund and other forms of liquidity and credit
support, if any, are intended to increase the likelihood of receipt by the
Securityholders that are to benefit from such arrangements of the full amount of
principal or Certificate Balance, as the case may be, and interest due thereon
and to decrease the likelihood that such Securityholders will experience losses.
Unless otherwise specified in the related Prospectus Supplement, such
arrangements 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 applicable arrangements or which are not so covered, Securityholders
will bear their allocable share of deficiencies as described herein and in the
related
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Prospectus Supplement. In addition, if an arrangement is for the benefit of more
than one series or class of Securities issued by a Trust, Securityholders of any
such series or class will be subject to the risk that such arrangement will be
exhausted by the claims of Securityholders of other series or classes.
Reserve Fund. If so provided in the related Prospectus Supplement, for each
Trust, there will be established and maintained in the name of the Indenture
Trustee for the benefit of the Securityholders a Reserve Fund. Such Reserve Fund
will be an Eligible Deposit Account and funds in any Reserve Fund will be
invested in Eligible Investments. Except as otherwise provided in the related
Prospectus Supplement, with respect to each Trust, any investment earnings (net
of losses and investment expenses) with respect to the related Reserve Fund will
be Investment Proceeds and will be available for distribution as described in
the related Prospectus Supplement. Amounts on deposit in any Reserve Fund (other
than Investment Proceeds) will be available to make payments and distributions
on related Securities, to cover any related Trust Defaulted Amounts and for
other purposes to the extent described in the related Prospectus Supplement. The
Reserve Fund Initial Deposit, if any, made by the Seller will be specified in
the related Prospectus Supplement. After the Initial Closing Date for any Trust,
the Seller may make additional deposits into any related Reserve Fund in
connection with the issuance of additional Securities or an increase in the
Specified Maximum Revolver Balance. In addition, during the term of any Trust,
the Seller will have the option to make an additional deposit into any related
Reserve Fund in an amount not in excess of 1% of the Maximum Pool Balance.
Available Trust Interest will also be available for deposit into any Reserve
Fund to the extent described in the related Prospectus Supplement. Unless
otherwise provided in the related Prospectus Supplement, with respect to each
Trust, amounts on deposit in the Reserve Fund will be paid to the Seller to the
extent such amounts exceed the Reserve Fund Required Amount set forth in the
related Prospectus Supplement or as otherwise agreed by the Seller, and on the
Trust Termination Date any funds remaining on deposit in the Reserve Fund will
be distributed to the Seller. Following distribution to the Seller of amounts
from the Reserve Fund, Securityholders will not have any rights in, or claims
to, such amounts.
DISTRIBUTIONS
With respect to each Trust, payments of principal and interest on the
related Term Notes and Revolving Notes and distributions with respect to
Certificate Balance and interest on the related Certificates will be made from
amounts deposited for such purpose into the Note Distribution Account, the
Revolver Distribution Account and the Certificate Distribution Account,
respectively, as described in the related Prospectus Supplement. The timing,
calculation, allocation, order, source, priorities and requirements for all
payments to each series of Noteholders and all distributions to
Certificateholders will be set forth in the related Prospectus Supplement.
Payments of principal on Notes and distributions in respect of Certificate
Balance will be subordinate to distributions in respect of interest, and
distributions in respect of the Certificates will be subordinate to payments on
the Notes, all as more fully described in the related Prospectus Supplement.
With respect to each Trust, unless otherwise specified in the related Prospectus
Supplement, payments of principal and interest on all series of Term Notes will
have the same priority of payment. Payments of principal and interest on Term
Notes may be senior (other than in circumstances related to the occurrence of an
Event of Default) or equivalent to payment on the related Revolving Notes, as
described in the related Prospectus Supplement.
NET DEPOSITS AND PAYMENTS
As an administrative convenience, the Servicer will be permitted to make
the deposit of Interest Collections, Principal Collections, Servicer Advances
and other amounts, for any Trust, including amounts relating to any credit,
liquidity or other enhancement arrangement, on any date net of distributions or
payments to be made to the Servicer on behalf of such Trust on such date. The
Servicer, however, will account to the Indenture Trustee, the Owner Trustee and
the Securityholders 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 and payments or distributions on any Securities are not required to be
made monthly, the Servicer may retain amounts allocable to the Securities or the
Distribution Accounts until the related Payment Date or Distribution Date.
Pending deposit into any such 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. In such cases, all distributions, deposits or other remittances
will be treated
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as having been distributed, deposited or remitted on the applicable Distribution
Date for purposes of determining other amounts required to be distributed,
deposited or otherwise remitted on such Distribution Date and other Distribution
Dates.
DEFAULTS AND CHARGE-OFFS
With respect to each Trust, the extent to which Trust Interest Collections,
funds in the related Reserve Fund and other amounts are available to cover the
Trust Defaulted Amount will be described in the related Prospectus Supplement.
Any Trust Defaulted Amount not so covered will constitute Trust Charge-Offs.
Trust Charge-Offs may be covered in subsequent periods, but only to the extent
described in the related Prospectus Supplement. Amounts not so covered will
reduce the principal amount of the Notes or the Certificate Balance, as the case
may be (which will reduce the Daily Trust Invested Amount) and will be allocated
among the Securities as set forth in the related Prospectus Supplement.
EARLY AMORTIZATION EVENTS
Unless otherwise provided in the related Prospectus Supplement, an "EARLY
AMORTIZATION EVENT" with respect to any Trust refers to any of the following
events:
(a) failure on the part of the Seller, GMAC or the Servicer to observe
or perform in any material respect any of its covenants or agreements set
forth in the related Pooling and Servicing Agreement or the related Trust
Sale and Servicing Agreement, as applicable, which failure continues
unremedied for a period of 60 days after written notice; provided, however,
that no Early Amortization Event will be deemed to exist if the Receivables
affected by such failure are repurchased by the Seller, GMAC or the
Servicer, as applicable, in accordance with the related Transfer and
Servicing Agreements;
(b) any representation or warranty made by GMAC in the related Pooling
and Servicing Agreement or by the Seller in the related Trust Sale and
Servicing Agreement or any information contained on the Schedule of
Accounts proves to have been incorrect in any material respect when made
and continues to be incorrect in any material respect for a period of 60
days after written notice and, as a result, the interests of the
Securityholders are materially and adversely affected; provided, however,
that no Early Amortization Event will be deemed to occur if the Receivables
relating to such representation or warranty are repurchased by GMAC or the
Seller, as applicable, in accordance with the related Transfer and
Servicing Agreements;
(c) failure to pay (or set aside for payment) all amounts required to
be paid as principal on the Notes or distributed with respect to
Certificate Balance on the applicable Stated Final Payment Date;
(d) on any Distribution Date, the average of the Monthly Payment Rates
for the three preceding Collection Periods is less than 25%;
(e) the amount on deposit in the related Reserve Fund is less than the
Reserve Fund Required Amount on three consecutive Distribution Dates;
(f) a notice setting forth one or more Events of Default under the
related Indenture and declaring the unpaid principal amount of the related
Notes immediately due and payable has been given pursuant to such
Indenture; provided, however, that if no other Early Amortization Event has
occurred and is continuing and so long as the Scheduled Revolving Period
Termination Date has not occurred, if the Seller so elects, the Early
Amortization Period resulting from such occurrence will terminate and the
Revolving Period will recommence if a notice rescinding such declaration is
given pursuant to such Indenture;
(g) the occurrence of certain events of bankruptcy, insolvency or
receivership relating to any of General Motors, the Servicer (or GMAC, if
it is not the Servicer) or the Seller;
(h) on any Distribution Date, as of the last day of the related
Collection Period, the aggregate principal balance of Receivables owned by
the Trust which were advanced against Used Vehicles exceeds 15% of the
Daily Trust Balance (for purposes of this clause (h), General Motors
vehicles which are sold to daily rental car operations, repurchased
pursuant to General Motors repurchase agreements and
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subsequently sold at auction to a General Motors-franchised dealer will not
be considered to be Used Vehicles);
(i) on any Distribution Date, the Reserve Fund Required Amount for
such Distribution Date exceeds the amount on deposit in the related Reserve
Fund by more than the Reserve Fund Trigger Amount as specified in the
related Prospectus Supplement;
(j) on any Distribution Date, the average Daily Trust Balance is less
than 75% of the sum of the average outstanding principal balance of the
related Term Notes and the average Certificate Balance (in each case, such
average being determined over the six Collection Periods immediately
preceding such Distribution Date (or, if shorter, the period from the
related Initial Closing Date through and including the last day of the
immediately preceding Collection Period));
(k) on any Distribution Date, as of the last day of each of the two
immediately preceding Collection Periods, the aggregate principal balance
of all related Available Receivables is less than 70% of the aggregate
principal balance of all Receivables (including Receivables owned by GMAC)
in the Accounts in the related Pool of Accounts;
(l) on the last day of any Collection Period the aggregate principal
balance of the related Eligible Receivables plus the Cash Collateral Amount
held in the related Collection Account equals less than the sum of the
aggregate outstanding principal balance of all related Notes plus the
aggregate outstanding Certificate Balance and such situation remains
unremedied on the tenth day of the following Collection Period; and
(m) any other Early Amortization Event set forth in the related
Prospectus Supplement.
Upon the occurrence of any event described above, except as described above
or in the related Prospectus Supplement, an Early Amortization Event with
respect to a Trust will be deemed to have occurred without any notice or other
action on the part of any other party. The Early Amortization Period will
commence as of the day on which the Early Amortization Event is deemed to occur.
During an Early Amortization Period for a Trust, Trust Principal Collections and
other amounts constituting Available Trust Principal will be allocated to
principal payments on the related Notes and distributions of Certificate Balance
on the related Certificates and will be paid as set forth in the related
Prospectus Supplement. No Controlled Deposit Amount will apply during any such
period. If an Early Amortization Period commences during a Payment Period or the
Wind Down Period, amounts, if any, on deposit in the Distribution Accounts will
be paid to Securityholders on the first Distribution Date for such Early
Amortization Period as described in the related Prospectus Supplement. Except as
otherwise described in the related Prospectus Supplement, no additional
borrowings may be made on the Revolving Notes during an Early Amortization
Period for the related Trust.
In certain circumstances, so long as the related Scheduled Revolving Period
Termination Date has not occurred, the Revolving Period may recommence following
the occurrence of an Early Amortization Event as described in subparagraph (f)
above or in the related Prospectus Supplement.
In addition to the consequences of an Early Amortization Event discussed
above, if an insolvency event occurs with respect to the Seller, the Receivables
of the Trust may be liquidated and the Trust terminated as described below in
"Insolvency Events."
ADDITIONAL ISSUANCES; CHANGES IN SPECIFIED MAXIMUM REVOLVER BALANCE
After the Initial Closing Date for a Trust, additional series of Term
Notes, additional series of Revolving Notes and additional Certificates may be
issued by the Trust from time to time and (whether or not additional Revolving
Notes are issued in connection therewith) the Specified Maximum Revolver Balance
may be increased or decreased without the consent of holders of the outstanding
Notes or Certificates, in each case upon the satisfaction of certain conditions
specified in the related Trust Sale and Servicing Agreement. Such conditions
include, among others, that (a) the Seller will have represented and warranted
that such issuance, increase or decrease will not, in the reasonable belief of
the Seller, cause an Early Amortization Event to occur, and that (b) after
giving effect to all issuances and all changes in the Specified Maximum Revolver
Balance, the outstanding Certificate Balance of all then outstanding
Certificates (less amounts held in the Certificate Distribution Account) as a
percentage of the Maximum Pool Balance equals or exceeds the Trust's
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Specified Certificate Percentage (in each case, as set forth in the related
Prospectus Supplement). Any such issuance or increase in the Specified Maximum
Revolver Balance is also subject to the condition that each Rating Agency
provide written confirmation that such issuance or increase will not result in a
reduction or withdrawal of the rating of any outstanding Securities. There is no
limit to the number of series of Term Notes that may be issued under the related
Trust Sale and Servicing Agreement or the related Indenture.
The Seller may offer any Securities under a Disclosure Document in
transactions either registered under the Act, or exempt from registration
thereunder, directly, through one or more underwriters or placement agents, in
fixed-price offerings or in negotiated transactions or otherwise. Any such
Securities may be issued in fully registered or book-entry form in minimum
denominations determined by the Seller.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
With respect to each Trust, unless otherwise provided in the related
Prospectus Supplement, as compensation for its servicing activities with respect
to the related Receivables, on each Distribution Date, the Servicer will receive
a servicing fee (the "MONTHLY SERVICING FEE") for the preceding Collection
Period equal to one-twelfth of the Servicing Fee Rate multiplied by the average
daily balance of the Daily Trust Invested Amount for such Collection Period. The
Monthly Servicing Fee will be payable to the Servicer solely to the extent
amounts are available for distribution therefor as described in the related
Prospectus Supplement.
The Monthly Servicing Fee associated with each Trust is intended to
compensate the Servicer for performing the functions of a third party servicer
of wholesale receivables as an agent for their beneficial owner, including,
without limitation, collecting and recording payments, communicating with
dealers, investigating payment delinquencies, evaluating the increase of credit
limits and maintaining records with respect to the Accounts and Receivables
arising thereunder. With respect to any Pool of Accounts, the Servicer will
service the Receivables included in the Retained Property as well as the
Receivables sold to the related Trust. The Monthly Servicing Fee will also
compensate the Servicer for managerial and custodial services performed by the
Servicer on behalf of the Trust, including accounting for collections,
furnishing monthly and annual statements to the Owner Trustee and the Indenture
Trustee with respect to payments and distributions, making Servicer Advances, if
any, providing assistance in any inspections of the documents and records
relating to the Accounts and Receivables by the Indenture Trustee and the Owner
Trustee pursuant to the related Trust Sale and Servicing Agreement, and
providing related data processing and reporting services for Securityholders and
on behalf of the Indenture Trustee and Owner Trustee. The Monthly Servicing Fee
will also serve to reimburse the Servicer for certain taxes (other than federal,
state and local income and franchise taxes, if any, of the Trust or the
Securityholders), the fees of the Owner Trustee and the Indenture Trustee,
accounting fees, outside auditor fees, data processing costs and other costs
incurred in connection with administering the Pool of Accounts.
SERVICING PROCEDURES
Pursuant to each Pooling and Servicing Agreement and related Trust Sale and
Servicing Agreement, the Servicer is responsible for servicing, collecting,
enforcing and administering the Receivables under the related Accounts in
accordance with customary and usual procedures for servicing its own portfolio
of revolving dealer floor plan lines of credit, except where the failure to so
act would not have a material adverse effect on the interests of the
Securityholders.
Pursuant to each Pooling and Servicing Agreement and the related Trust Sale
and Servicing Agreement, the Servicer may only modify the contractual terms of
the Accounts included in the related Pool of Accounts in general if (a) in the
Servicer's reasonable belief, no Early Amortization Event will occur as a result
of the change, (b) the change is made applicable to the comparable segment of
any similar portfolio of accounts serviced by the Servicer and not only to such
Accounts and (c) in the case of a reduction in the rate of finance charges on
the Receivables transferred to the Trust, the Servicer does not reasonably
expect that such reduction will, after considering amounts due and amounts
payable under any related interest rate swaps or caps or similar agreements and
Investment Proceeds for the related period, reduce the Net Receivables Rate
below the sum of (i) the weighted average of the rates of interest payable to
related Securityholders and (ii) the Monthly Servicing Fee for the related
period. The Servicer is not, however, precluded from
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renegotiating the contractual terms of agreements with Dealers on a case-by-case
basis in a manner consistent with its servicing guidelines.
SERVICER COVENANTS
In each Pooling and Servicing Agreement, the Servicer will agree that: (a)
it will maintain in effect all qualifications required in order to service the
Accounts included in the related Pool of Accounts and related Receivables and
will comply in all material respects with all requirements of law in connection
with servicing such Accounts and Receivables, except where the failure to
maintain such qualifications to comply with such requirements would not have a
material adverse effect on the related Securityholders of any outstanding
related series; (b) it will not permit any rescission or cancellation of
Receivables held by the Trust except as ordered by a court of competent
jurisdiction or other government authority; (c) it will do nothing to impair the
rights of the related Securityholders in the Receivables held by the Trust and
it will not reschedule, revise or defer payments due on any Receivable held by
the Trust, except in a manner consistent with its servicing guidelines or as
otherwise contemplated by the related Trust Sale and Servicing Agreement; and
(d) it will not permit any Receivable held by the Trust to become subject to any
right of set-off or any offsetting balance.
For each Trust, pursuant to the related Pooling and Servicing Agreement and
the related Trust Sale and Servicing Agreement, if the Seller or the Servicer
discovers, or receives written notice, that certain covenants of the Servicer
set forth therein have not been complied with in all material respects with
respect to any related Receivable transferred to the Trust or related Account
and such noncompliance has a material adverse effect on the interests of related
Securityholders in or under such Receivable or Account, the Servicer will
purchase such Receivable or all Receivables transferred to the Trust under such
Account (each, an "ADMINISTRATIVE RECEIVABLE"), as applicable. Such purchase
will be made no later than two Business Days (or such other period as may be
agreed by the applicable Trustee) following the discovery by the Servicer of
such noncompliance. With respect to each Administrative Receivable the Servicer
will be obligated to deposit into the related Collection Account on the date on
which such purchase is deemed to occur an amount (the "ADMINISTRATIVE PURCHASE
PAYMENT") equal to the principal amount of such Receivable plus accrued but
unpaid interest thereon through the date of such purchase. An Administrative
Purchase Payment will be included in Additional Trust Principal (to the extent
of the principal amount of the related Receivable) and Interest Collections (as
to the remainder of such amount). Any such purchase by the Servicer constitutes
the sole remedy available to the Securityholders, the Seller, the Owner Trustee,
the Indenture Trustee or the Trust, if such covenant or warranty of the Servicer
is not satisfied.
CERTAIN MATTERS REGARDING THE SERVICER
Each Trust Sale and Servicing Agreement will provide that the Servicer may
not resign from its obligations and duties as Servicer thereunder and under the
related Pooling and Servicing Agreement, except upon determination that the
Servicer'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 Servicer's servicing obligations and
duties under the related Transfer and Servicing Agreements.
Each Trust Sale and Servicing Agreement will further provide that neither
the Servicer nor any of its directors, officers, employees and agents will be
under any liability to the related Trust, Indenture Trustee, Owner Trustee or
any related Securityholders for taking any action or for refraining from taking
any action pursuant to the related Transfer and Servicing Agreements or for
errors in judgment; except that neither the Servicer nor any such person will be
protected against any liability that would otherwise be imposed by reason of
wilful misfeasance, bad faith or negligence (except errors in judgment) in the
performance of 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 related 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 under the applicable Transfer and Servicing
Agreements or by reason of reckless disregard of its obligations and duties
thereunder. 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
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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 Securityholders 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 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
Securityholders.
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 stock or
interest of which is owned, directly or indirectly, by General Motors and which
is otherwise servicing wholesale receivables, 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 the 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 the Trust Sale and
Servicing Agreement or Pooling and Servicing Agreement to any entity more than
50% of the voting stock or interest of which is owned, directly or indirectly,
by General Motors or to any entity that agrees to conduct such duties in
accordance with the Servicer's servicing guidelines and the Trust Sale and
Servicing Agreement. The Servicer may at any time perform specific duties as
Servicer through subcontractors who are in the business of servicing receivables
similar to the Receivables, provided that no such delegation will relieve the
Servicer of its responsibility with respect to such duties.
SERVICING DEFAULT
Except as otherwise provided in the related Prospectus Supplement, a
"SERVICING DEFAULT" under each Trust Sale and Servicing Agreement will consist
of: (a) 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; (b) any failure by the Servicer duly 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
Indenture or the related Trust Agreement, which failure materially and adversely
affects the rights of the Securityholders 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 and the Indenture
Trustee and the Owner Trustee by holders of Notes or Voting Interests, as
applicable, evidencing not less than 25% in principal amount of such outstanding
Notes or Voting Interests or after discovery of such failure by an officer of
the Servicer; (c) 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 such
inaccuracy has a material adverse effect on the rights of the related
Securityholders and such 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 (d) certain events of bankruptcy, insolvency or
receivership with respect to the Servicer.
Notwithstanding the foregoing, there will be no Servicing Default where a
Servicing Default would otherwise exist under clause (a) above for a period of
ten Business Days or under clauses (b) or (c) for a period of 60 days if the
delay or failure giving rise to such Servicing 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 with prompt notice of such failure or delay by it, together with
a description of its efforts to so perform its obligations.
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RIGHTS UPON SERVICING DEFAULT
As long as a Servicing 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 related Indenture has
been discharged with respect thereto, by the related Owner Trustee or
Certificateholders whose Certificates evidence not less than a majority of the
Voting Interests) may terminate all the rights and obligations of the Servicer
under such Trust Sale and Servicing Agreement and the related Pooling and
Servicing Agreement, whereupon such Indenture Trustee will succeed to all the
responsibilities, duties and liabilities of the Servicer under such agreements
and will be entitled to similar compensation arrangements. If, however, a
bankruptcy trustee or similar official has been appointed for the Servicer, and
no Servicing Default other than such appointment has occurred, such trustee or
official may have the power to prevent the Indenture Trustee or the
Securityholders from effecting a transfer of servicing. In the event that the
Indenture Trustee is unwilling or unable to so act, it may 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 who otherwise meets the eligibility
requirements set forth in such 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 the
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 Notes (or, if the Notes
have been paid in full and the related Indenture has been discharged with
respect thereto, by the Certificateholders whose Certificates evidence not less
than a majority of the Voting Interests), voting as a single class, may, on
behalf of all such Securityholders, 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 Servicing
Default in making any required distributions, payments, transfers or deposits in
accordance with the Trust Sale and Servicing Agreement. No such waiver will
impair the rights of the Indenture Trustee, the Owner Trustee, or the
Securityholders with respect to subsequent defaults.
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 Collection Period a
statement setting forth substantially the same information as is required to be
provided in the periodic reports to be provided to Securityholders on such date
under the Transfer and Servicing Agreements.
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 no later than
the first August 15 which is at least twelve months after the related Initial
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 statement, the
period from the Initial Closing Date to 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 no later than the first August 15 which is at least twelve
months after the related Initial Closing Date, a certificate signed by an
officer of the Servicer stating that the Servicer has fulfilled its obligations
under the Trust Sale and Servicing Agreement throughout the preceding twelve
months ended June 30 (or in the case of the first such certificate, the period
from the Initial Closing Date to June 30 of such year) or, if there has been a
default in the fulfillment of any such obligation, describing each such default.
The Servicer has agreed to give the Indenture Trustee and the Owner Trustee
notice of Servicing Defaults under the related Trust Sale and Servicing
Agreement.
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Copies of such statements and certificates may be obtained by
Securityholders by request in writing addressed to the applicable Indenture
Trustee or Owner Trustee.
AMENDMENTS
Each of the Transfer and Servicing Agreements may be amended by the parties
thereto without the consent of the related Securityholders (a) to cure any
ambiguity, (b) to correct or supplement any provision therein that may be
defective or inconsistent with any other provision therein, (c) to add or
supplement any credit, liquidity or other enhancement arrangement for the
benefit of any Securityholders (provided that if any such addition affects any
series or class of Securityholders differently than any other series or class of
Securityholders, then such addition will not, as evidenced by an opinion of
counsel, adversely affect in any material respect the interests of any series or
class of Securityholders), (d) to add to the covenants, restrictions or
obligations of the Seller, the Servicer, the Owner Trustee or the Indenture
Trustee for the benefit of Securityholders, or (e) to add, change or eliminate
any other provision 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 Securityholders. 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 Voting Interests 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
Securityholders, except that no such amendment may (a) increase or reduce in any
manner the amount of, or accelerate or delay the timing of, distributions or
payments that are required to be made on any Security without the consent of the
holder thereof, (b) adversely affect the rating of any series by any Rating
Agency without the consent of two-thirds of the principal amount of the
outstanding Notes or the Voting Interests of the outstanding Certificates, as
appropriate, of such series or (c) reduce the aforesaid percentage required to
consent to any such amendment without the consent of such aforesaid percentage
of Securityholders.
INSOLVENCY EVENTS
In addition to the consequences of an Early Amortization Event as described
above, if an Insolvency Event occurs with respect to the Seller, the Trust will
be terminated. In such event, the Trust will be liquidated as described below 90
days after the date of such Insolvency Event, unless, before the end of such
90-day period, the Owner Trustee shall have received written instructions from
each of the Certificateholders (other than the Seller and its affiliates) to the
effect that each such party disapproves of such liquidation. Promptly after the
occurrence of any Insolvency Event with respect to the Seller, notice thereof is
required to be given to Securityholders; except that any failure to give such
required notice will not prevent or delay termination of any Trust or
liquidation of the related assets. If no such instructions are received within
such 90-day period, the Owner Trustee will direct the Indenture Trustee promptly
to sell, liquidate or otherwise dispose of the assets of the Trust (other than
the Designated Accounts and the Certificate Distribution Account) in a
commercially reasonable manner and on commercially reasonable terms (which may
include continuing to hold the Receivables and receiving collections thereon).
The proceeds from any such sale, disposition or liquidation will be treated as
Collections on the related Receivables and deposited in the related Collection
Account. With respect to any Trust, if such proceeds, amounts on deposit in the
Reserve Fund, amounts available under other credit, liquidity or other
enhancement arrangements and amounts on deposit in the Designated Accounts and
the Certificate Distribution Account are not sufficient to pay all outstanding
Securities in full (including accrued and unpaid interest thereon),
Securityholders will incur a loss.
If pursuant to certain provisions of federal law GMAC becomes party to any
involuntary bankruptcy or similar proceeding (other than as a claimant), the
Seller will suspend its purchase of Receivables from GMAC under each Pooling and
Servicing Agreement. If GMAC or the Seller obtains an order approving the
continued sale of Receivables to the Seller on the same terms as, or on terms
that do not have a material adverse effect on Securityholders as compared to,
the terms in effect prior to the commencement of such proceeding, GMAC may
resume selling Receivables to the Seller. Receivables will be considered
transferred to the Seller only to the extent the purchase price therefor has
been paid in cash on the same Business Day. If such involuntary proceeding has
not been dismissed within 60 days of its filing, the Seller may not thereafter
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purchase Receivables from GMAC under any Pooling and Servicing Agreement and
thus, no additional Receivables will be transferred to any Trust. See "Certain
Legal Aspects."
Each Trust Agreement will provide that the Owner Trustee does not have the
power to commence a voluntary proceeding in bankruptcy relating to the related
Trust without the unanimous prior approval of all related Certificateholders
(including the Seller) and the delivery to the Owner Trustee by each such
Certificateholder (including the Seller) of a certificate certifying that each
such Certificateholder reasonably believes that such Trust is insolvent.
In each Trust Sale and Servicing Agreement, the Servicer and the Seller
will covenant that they will not, for a period of one year and one day after the
final distribution with respect to the related Notes and the related
Certificates to the Note Distribution Account or the Certificate Distribution
Account, as applicable, institute against the related Trust any bankruptcy,
reorganization or other proceeding under any federal or state bankruptcy or
similar law.
SELLER LIABILITY; INDEMNIFICATION
Under each Trust Agreement, the Seller will agree to be liable directly to
an injured party for the entire amount of any losses, claims, damages or
liabilities (other than those incurred by a Securityholder in the capacity of an
investor) arising out of or based on the arrangement created by the Trust
Agreement as though such arrangement created a partnership under the Delaware
Revised Uniform Limited Partnership Act in which the Seller were a general
partner.
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; provided,
however, that 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 and the Securityholders 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 (the "TRUST TERMINATION DATE") on the earliest to
occur of (a) the day following the Distribution Date on which all amounts
required to be paid to the related Securityholders pursuant to the related
Transfer and Servicing Agreements have been paid (or deposited in the related
Distribution Accounts) and the aggregate outstanding balance of the Revolving
Notes is zero, if the Seller elects to terminate the Trust at such time, (b) in
the event of certain insolvency events with respect to the Seller as described
above under "Insolvency Events" and (c) the Specified Trust Termination Date as
set forth in the related Prospectus Supplement. Upon termination of a Trust and
payment (or deposit to the Distribution Accounts) of all amounts to be paid to
Securityholders, the Receivables and all other assets of the Trust (other than
funds in the related Distribution Accounts for the final distributions to the
Securityholders and after distribution to GMAC from the Collection Account of
amounts on account of the Retained Property, if required) will be conveyed and
transferred to the Seller.
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OPTIONAL PURCHASE BY THE SERVICER
During the Wind Down Period and as otherwise set forth in the related
Prospectus Supplement, the Servicer (including any successor servicer) will be
permitted, at its option, to purchase from each Trust all remaining Receivables
and other assets to the extent provided in the related Prospectus Supplement.
INTERCREDITOR ARRANGEMENTS
The agreements governing the Accounts provide for a security interest in
favor of GMAC in the Vehicles related to Receivables thereunder. With respect to
the Receivables to be conveyed to the Trust, GMAC will represent in the related
Pooling and Servicing Agreement that the security interest in the related
Vehicles is a first priority perfected security interest. The security interest
in favor of GMAC in the Vehicles related to each Account in the related Pool of
Accounts will be assigned by GMAC to the Seller pursuant to each Pooling and
Servicing Agreement and assigned to the applicable Trust by the Seller pursuant
to the related Trust Sale and Servicing Agreement. In its other lending
activities, GMAC may have made capital loans, real estate loans or other loans
to Dealers that are also secured by a security interest in such Vehicles. In
each Pooling and Servicing Agreement, GMAC will agree that any security
interests in such Vehicles that it may have in respect of advances or loans to
Dealers other than the related Receivables shall be junior and subordinate to
the security interests therein granted in connection with the related
Receivables and that it will not realize on any such collateral in a manner
materially adverse to the Seller or any Trust and the Securityholders until the
Seller and the related Trust have been paid in full in respect of their
interests in the Receivables related to such Vehicles. In addition, in
connection with any such other loans or advances made by GMAC to a Dealer, GMAC
may also have a security interest in property constituting Collateral Security
other than Vehicles. In such cases, GMAC, in its sole discretion, may realize on
such other Collateral Security for its own benefit in respect of such loans or
advances before the Indenture Trustee, on behalf of any Trust, is permitted to
realize upon such other Collateral Security and the security interests of the
Indenture Trustee therein shall be junior and subordinate to the security
interests of GMAC granted in connection with such other loans and advances.
Because of the subordinate position of any Indenture Trustee in respect of such
other Collateral Security, there is no assurance that any Indenture Trustee will
realize any proceeds in respect of any such other Collateral Security.
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 related 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 a monthly
administration fee in an amount equal to $1,500, which fee will be paid by the
Servicer.
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CERTAIN LEGAL ASPECTS
TRANSFER OF RECEIVABLES
On the Initial Closing Date for any Trust, on each Addition Date and on
each Receivables Purchase Date, GMAC will sell, transfer and assign to the
Seller and the Seller will sell, transfer and assign the Eligible Receivables in
the Accounts included in the related Pool of Accounts to the Trust. In the
related Pooling and Servicing Agreement, GMAC will represent and warrant to the
Seller that the sale, transfer and assignment of such Receivables thereunder
constitutes a valid sale, transfer and assignment of all right, title and
interest of GMAC in and to such Receivables to the Seller. In the related Trust
Sale and Servicing Agreement, the Seller will represent and warrant to the Trust
that the Seller has taken no action to make such representations and warranties
false in any material respect and that the sale, transfer and assignment of such
Receivables thereunder constitutes a valid sale, transfer and assignment of all
right, title and interest of the Seller in and to such Receivables to the Trust.
Each of GMAC and the Seller will also covenant that it will not sell, pledge,
assign, transfer or grant any lien on such any Receivable other than to the
Seller or to the Trust, as applicable, or as otherwise contemplated by the
related Transfer and Servicing Agreements. For a discussion of the rights of
each Trust arising from these representations and warranties, see "The Transfer
and Servicing Agreements -- Representations and Warranties." To secure its
payment obligations under the Notes, pursuant to the Indenture, the Trust will
grant a security interest in such Receivables to the Indenture Trustee.
GMAC will represent in each Pooling and Servicing Agreement that the
Receivables to be conveyed to the Trust are either "chattel paper," "accounts"
or "general intangibles" for purposes of the UCC. If Receivables are deemed to
be chattel paper or accounts and the transfer thereof by GMAC to the Seller or
by the Seller to a Trust is deemed either to be a sale or to create a security
interest, the UCC will apply and the transferee must file an appropriate
financing statement or statements in order to perfect its interest therein. If
Receivables are deemed to be general intangibles and the transfer thereof by
GMAC to the Seller or by the Seller to a Trust is deemed to create a security
interest, the UCC will apply and the transferee must file an appropriate
financing statement or statements in order to perfect its interest therein. If
Receivables are deemed to be general intangibles and the transfer thereof is
deemed to be a sale, state law other than the UCC may determine the appropriate
steps to perfect such sale. Financing statements covering the Receivables to be
conveyed to the Trust will be filed under the UCC by both the Seller and each
related Trust to perfect and/or protect their respective interests in such
Receivables (to the extent such filings are required to so perfect and/or
protect such interests), and continuation statements will be filed as required
to continue the perfection of such interests. No filings will be made under any
state laws other than the UCC.
There are circumstances under the UCC and applicable federal law in which
certain limited subsequent transferees of a Receivable held by the Trust could
have an interest in such Receivable with priority over the Trust's interest in
such Receivable. A purchaser of chattel paper who gives new value and takes
possession of the instruments which evidence the chattel paper in the ordinary
course of such purchaser's business may, under certain circumstances, have
priority over the interest of the Trust in the chattel paper. If the transfer of
Receivables to the Seller or a Trust were recharacterized as a pledge, a tax or
other lien on property of GMAC or the Seller may also have priority over the
interest of the Trust in such Receivable. Further, cash collections on the
Receivables held by each Trust may, to the extent described above, be commingled
with the funds of GMAC as Servicer and amounts due to GMAC as the holder of the
Retained Property held by each Trust and, in the event of the bankruptcy of
GMAC, the Trust may not have a perfected interest in such collections.
GMAC will represent and warrant in the Pooling and Servicing Agreement that
each Receivable at the time of the sale to the Seller is secured by a first
priority perfected security interest in the related Vehicles. Generally, under
applicable state laws, a security interest in an automobile or light truck which
secures wholesale financing obligations may be perfected by the filing of UCC
financing statements. GMAC takes all actions it deems necessary under applicable
state laws to perfect GMAC's security interest in Vehicles. However, at the time
a Vehicle is sold or leased, GMAC's security interest in the Vehicle will
generally terminate. Therefore, if a Dealer fails to remit to GMAC amounts owed
with respect to any Vehicle that has been sold or leased, the related Receivable
will no longer be secured by such Vehicle, but will be secured by the proceeds
of such retail sale or lease and, to the extent applicable, other Collateral
Security. If the proceeds of such sale or lease include chattel paper (such as
most retail instalment contracts), certain limited
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subsequent transferees of that chattel paper could have an interest therein with
priority over the Trust's interest therein.
CERTAIN MATTERS RELATING TO BANKRUPTCY
The Seller's by-laws include a provision that, under certain circumstances,
requires the Seller to designate two directors who qualify under the by-laws as
"Independent Directors." The Seller's certificate of incorporation provides that
the Seller will not file a voluntary petition for relief under the Bankruptcy
Code without the unanimous affirmative vote of its directors. Pursuant to the
Transfer and Servicing Agreements, the Owner Trustee, the Indenture Trustee and
all Securityholders will covenant that they will not institute against the
Seller any bankruptcy, reorganization or other proceedings under any Insolvency
Laws until one year and one day after all Securities have been paid in full. In
addition, certain other steps will be taken to avoid the Seller's becoming a
debtor in a bankruptcy case. The Seller will agree not to file a voluntary
petition for relief under the Insolvency Laws so long as it is solvent and does
not foresee becoming insolvent, and GMAC, as the sole stockholder of the Seller,
will agree that it will not cause the Seller to file such a petition.
The transfers of Receivables from 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 U.S. 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 to become a debtor in a
bankruptcy case and a creditor or trustee in bankruptcy of such debtor or such
debtor itself were to apply this analysis or otherwise take the position that
the transfer of such Receivables from such debtor to the Seller or a Trust, as
the case may be, should be recharacterized as a pledge of such Receivables to
secure a borrowing by such debtor, then delays in receipt of Collections on such
Receivables to the related Trust and payments on the related Securities could
result or, should the court rule in favor of any such creditor, trustee in
bankruptcy or debtor, reductions in the amount of such payments could result.
In addition, in the event that GMAC or the Seller were to become a debtor
in a bankruptcy case and a creditor or trustee in bankruptcy of such debtor or
such debtor itself were to request a court to order that GMAC should be
substantively consolidated with the Seller, delays in payments on the Securities
could result. Should the bankruptcy court rule in favor of any such creditor,
trustee in bankruptcy or debtor, reductions in the amount of such payments could
result.
If General Motors, GMAC or the Seller were to become a debtor in a
bankruptcy case, an Early Amortization Event would occur. In such event, all
Trust Principal Collections would be applied to principal payments on related
Securities and Receivables arising in the related Accounts thereafter would no
longer be sold to the Seller and transferred to the related Trust. The
occurrence of certain events of bankruptcy, insolvency or receivership with
respect to the Servicer will also result in a Servicing Default. A trustee in
bankruptcy of the Servicer (including the Servicer as debtor in possession) may
have the power to prevent either the Indenture Trustee, the Owner Trustee or the
Securityholders from appointing a successor Servicer.
In addition, if any Transfer and Servicing Agreement is deemed an executory
contract under bankruptcy laws, a trustee in bankruptcy of any party to such
agreement (including such party as debtor in possession) may have the power to
assume (i.e., reaffirm) or reject such agreement. A party deciding whether to
assume or reject any such agreement would be given a reasonable period of time
to make such decision, perhaps even until the time of confirmation of the plan
of reorganization, which could result in delays in payments or distributions on
the related Securities.
Transfers made in certain isolated transactions contemplated by the
Transfer and Servicing Agreements (including payments made by GMAC or the Seller
with respect to repurchases or reassignments of Receivables and the transfers in
connection with the designation of Additional Accounts) may be recoverable by
GMAC or the Seller, as debtor in possession, or by a trustee in bankruptcy of
GMAC or the Seller, as a preferential transfer from GMAC or the Seller if such
transfers are made within certain periods prior to the filing of a bankruptcy
case in respect of GMAC or the Seller and certain other conditions are met.
In addition, application of federal bankruptcy and state debtor relief laws
to any Dealer could affect the interests of the related Trust and the related
Indenture Trustee in the Receivables of such Dealer if the enforcement of such
laws result in any Receivables conveyed to the Trust being written off as
uncollectible by
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the Servicer. Whether or not any such Receivables are written off as
uncollectible, delays in payments due on such Receivables could result.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
Set forth below is a discussion of the anticipated material United States
federal income tax consequences of the purchase, ownership and disposition of
the Term Notes and/or Certificates offered hereunder. 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 Term Notes, the Revolving 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 Term Noteholders.
This discussion does not purport to deal with all aspects of federal income
taxation that may be relevant to the holders of Term Notes in light of their
personal investment circumstances nor, except for certain limited discussions of
particular topics, to certain types of Noteholders 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 Term Notes in the initial
distribution thereof, who are citizens or residents of the United States,
including domestic corporations and partnerships, and who hold the Term Notes
and/or Certificates as "capital assets" within the meaning of Section 1221 of
the Code. Taxpayers and preparers of tax returns (including those filed by any
partnership or other issuer) should be aware that under applicable Treasury
regulations a provider of advice on specific issues of law is not considered an
income tax return preparer unless the advice is (i) given with respect to events
that have occurred at the time the advice is rendered and is not given with
respect to the consequences of contemplated actions and (ii) is directly
relevant to the determination of an entry on a tax return. Accordingly,
taxpayers should consult their own tax advisors and tax return preparers
regarding the preparation of any item on a tax return, even where the
anticipated tax treatment has been discussed herein. PROSPECTIVE INVESTORS
SHOULD CONSULT WITH THEIR TAX ADVISORS AS TO THE FEDERAL, STATE, LOCAL, FOREIGN
AND ANY OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF TERM NOTES.
TAX CHARACTERIZATION AND TREATMENT OF TERM NOTES
Characterization as Debt. With respect to each series of Term Notes (except
for Strip Notes and any series which is specifically identified as receiving
different tax treatment in the applicable Prospectus Supplement), Kirkland &
Ellis, special tax counsel to the Seller ("TAX COUNSEL"), will deliver its
opinion that, although no specific authority exists with respect to the
characterization for federal income tax purposes of securities having the same
terms as the Term Notes, based on the terms of the Term Notes, the transactions
relating to the Receivables as set forth herein, and the discussion below, the
Term Notes will be treated as debt for federal income tax purposes. The Seller,
the Servicer and each Noteholder, when acquiring an interest in a Term Note,
will agree to treat the Term Notes as indebtedness for federal, state and local
income and franchise tax purposes. See "Risks of Alternative Characterization"
below for a discussion of the potential federal income tax consequences to
Noteholders if the IRS were successful in challenging the characterization of
the Term Notes and the Certificates for federal income tax purposes.
Treatment of Stated Interest or OID. Except to the extent indicated in the
related Prospectus Supplement, no series of Term Notes will be issued with OID.
Based upon the foregoing opinion, the stated interest on each series of Term
Notes issued without OID will be taxable to a Noteholder as ordinary income when
received or accrued in accordance with such Noteholder's method of tax
accounting. A holder who purchases a Term Note after the initial distribution
thereof at a discount that exceeds a statutorily defined de
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minimis amount will be subject to the "market discount" rules of the Code, and a
holder who purchases a Term Note at a premium will be subject to the bond
premium amortization rules of the Code.
To the extent that any series of Term Notes is treated as being issued with
OID, a Noteholder will generally be subject to the following tax treatment. The
amount of OID on a Term Note will equal the excess, if any, of its "stated
redemption price at maturity" over its "issue price." Noteholders will generally
be required to include such OID in income for federal income tax purposes as it
accrues under the constant interest rate method described below, regardless of
whether their method of tax accounting is cash or accrual. Each Noteholder's tax
basis in his Term Notes will be increased by the amount of OID included in
income (less any interest payments actually received which do not constitute
"qualified stated interest", discussed below). Thus, each cash payment other
than payments of qualified stated interest (defined below) would be treated as
an amount already included in income (to the extent OID has accrued as of the
date of the 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 Term Notes in
advance of the receipt of cash attributable to such income.
Under a de minimis rule in the Code, as interpreted in the Treasury
Regulations, however, the foregoing rules will not apply and the amount of OID
with respect to a series of Term Notes will be considered to be zero if the
amount of OID is less than 0.25% of the stated redemption price at maturity of
the Term Notes multiplied by the weighted average life of the Term Notes.
Nonetheless, under the OID Regulations, the holder of a Term Note that has de
minimis OID would be required to include in income such de minimis OID as
principal payments are made in proportion to the ratio that each such principal
payment bears to the stated principal amount of such Term Note. For this
purpose, the weighted average life of the Term Note is computed as the sum of
the amounts for each payment under the Term Note determined by multiplying (i)
the number of complete years (rounding down for partial years) until each
payment included in the stated redemption price at maturity is expected to be
made by (ii) a fraction, the numerator of which is the amount of such payment
and the denominator of which is the total amount of payments included in the
stated redemption price at maturity of such Term Note.
The issue price of any series of Term Notes issued with OID will equal the
first offering price to the public at which a substantial amount of Term Notes
have been sold. The "stated redemption price at maturity" of such Term Notes
will equal their stated principal amount at maturity plus all payments of
interest other than "qualified stated interest." Qualified stated interest is
interest that is payable unconditionally in cash or in property (other than debt
instruments of the issuer) at least annually at a single fixed rate. The terms
of each series of Term Notes will determine whether and to what extent such
series will pay qualified stated interest. If a series of Term Notes does not
pay qualified stated interest, the stated redemption price at maturity of such
Term Notes will equal their stated principal amount at maturity plus all
interest payments.
The amount of OID accruing with respect to a series of Term Notes will be
determined for each "accrual period." Under the OID Regulations, an accrual
period is an interval of time no longer than one year at the beginning or end of
which a scheduled payment of principal or interest occurs. The amount of OID
accruing during any accrual period will generally equal the "adjusted issue
price" of the Term Notes at the beginning of that accrual period, multiplied by
the "yield to maturity" of the Term Notes (and adjusted for the length of the
accrual period). The yield to maturity of the Term Notes is the discount rate
that, when used in computing the present value of all principal and interest
payments to be made under the Term Notes, produces an amount equal to the issue
price of the Term Notes. The adjusted issue price of the Term Notes at the
beginning of the first accrual period equals their issue price. At the beginning
of each subsequent accrual period, the adjusted issue price of the Term Notes
will equal their adjusted issue price at the beginning of the preceding accrual
period, plus the amount of OID allocable to the preceding accrual period, minus
any payments of principal or interest (other than qualified stated interest)
made during the preceding accrual period.
The amount of OID accruing during any accrual period will be allocated
ratably to each day in the period (the "DAILY PORTION"). In any taxable year,
the amount of such OID a holder of Term Notes must include in income will equal
the sum of the Daily Portions of the OID allocated to the days during the
taxable year on
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which the holder held the Term Notes. In general, under these rules, the amount
of OID required to be included in income will increase with each successive
accrual period.
Under the OID Regulations, even if a series of Term Notes generally pays
qualified stated interest, it is possible that it would be viewed as having a de
minimis amount of OID if the first accrual period is longer than subsequent
accrual periods. If a series of Term Notes were issued with de minimis OID,
under the OID Regulations a holder is directed to include any de minimis OID in
income as and when principal payments are made. The amount of OID includible at
the time of any principal payment equals the total amount of OID on the Term
Note multiplied by a fraction, the numerator of which is the amount of the
principal payment and the denominator of which is the stated principal amount of
the Term Note.
A holder of a Note that has a fixed maturity date of not more than one year
from the issue date of such Note (a "SHORT-TERM NOTE") may be subject to special
rules. An accrual method holder of a Short-Term Note (and certain cash method
holders, including regulated investment companies, as set forth in Section 1281
of the Code) generally will be required to report interest income as interest
accrues on a straight-line basis over each interest period. Other cash method
holders of a Short-Term Note will, in general, be required to report interest
income only when interest is paid (or, if earlier, upon the taxable disposition
of the Short-Term Note). However, any such cash method holder may be required to
defer a portion of any interest expense otherwise deductible on indebtedness
incurred to purchase or carry the Short-Term Note until the taxable disposition
of the Short-Term Note. Any cash method taxpayer may elect under Section 1282 of
the Code to accrue interest income on all debt obligations with a term of one
year or less, in which case the taxpayer would include interest on the
Short-Term Note in income as it accrues, but would not be subject to the
interest expense deferral rule referred to in the preceding sentence. Certain
other special rules apply if a Short-Term Note is purchased for more or less
than its principal amount.
As an alternative to all of the above treatments, under the OID Regulations
accrual method holders may elect to include in gross income all interest with
respect to a Term Note, including stated interest, acquisition discount, OID, de
minimis OID, market discount, de minimis market discount, and unstated interest,
as adjusted by any amortizable bond premium or acquisition premium, using the
constant yield method described above.
Disposition of Term Notes. Upon the sale, exchange or redemption of a Term
Note, the holder will recognize gain or loss in an amount equal to the
difference between the amount realized on the sale, exchange or redemption
(except to the extent such amount is attributable to accrued and unpaid
interest) and the holder's adjusted tax basis in the Term Note. The adjusted tax
basis of the Term Note to a particular Noteholder will equal the holder's cost
for the Term Note, increased by any OID, market discount and gain previously
included by such Noteholder in income with respect to the Term Note, and
decreased by any bond premium previously amortized and any principal payments
previously received by such Noteholder with respect to such Term Note. Subject
to the market discount rules of the Code, any such gain or loss will be capital
gain or loss if the Term Note was held as a capital asset, except for any gain
representing accrued interest. If the Term Notes are held by the holder for more
than eighteen months, the holder is eligible for the lowest capital gains rates
(10% or 20% depending upon the income tax bracket such holder is in during the
taxable year of the sale). If the Term Notes are held by the holder for more
than one year but not more than eighteen months, the holder is eligible for
capital gains rates of 28% or 15% (again depending upon the income tax bracket
such holder is in during the taxable year of sale). If the Term Notes are held
for less than one year, the capital gain or loss will be short-term and
generally subject to ordinary income tax rates. Under current law, any asset
acquired after January 1, 2001 and held for five years is eligible for an 18%
capital gains rate. A taxpayer who acquires property prior to January 1, 2001
can elect to treat such property as acquired on January 1, 2001 if such taxpayer
takes into income any positive difference between the property's value on
January 1, 2001 and the holder' basis in such property. The holder will not be
able to recognize a loss from such election. The five-year holding period
requirement will then begin on January 2, 2001. Certain low income taxpayers may
be able to receive an 8% capital gains rate for assets held for more than five
years if sold after January 1, 2001, regardless of the acquisition date. 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.
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Information Reporting and Backup Withholding. The Trustee will be required
to report annually to the IRS, and to each Noteholder of record, the amount of
interest paid on each series of Term 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, and nonresident
aliens who provide certification as to their status). Each holder (other than
holders who are not subject to the reporting requirements) will be required to
provide to the Trustee, under penalties of perjury, a certificate containing the
holder's correct name, address, 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 verification, the Trustee will
be required to withhold, from interest otherwise payable to the holder, 31% of
such interest and remit the withheld amount to the IRS as a credit against the
holder's federal income tax liability.
Because the Seller will for federal income tax purposes treat all Term
Notes as indebtedness issued by a Trust characterized as either a partnership or
a division of whichever entity owns all of the Certificates, the Seller will not
comply with the tax reporting requirements that would apply under any
alternative characterization of a Trust.
Tax Consequences to Foreign Noteholders. If interest paid (or accrued) to a
Noteholder who is a nonresident alien, foreign corporation or other non-United
States person (a "foreign person") is not effectively connected with the conduct
of a trade or business within the United States by the foreign person, the
interest generally will be considered "portfolio interest", and generally will
not be subject to United States federal income tax and withholding tax, provided
that the foreign person (i) is not actually or constructively a "10 percent
shareholder" of the applicable Trust or the Seller (including a holder of 10% of
the outstanding Certificates of such trust) or a "controlled foreign
corporation" with respect to which such Trust or the Seller is a "related
person" within the meaning of the Code and (ii) provides an appropriate
statement, signed under penalties of perjury, certifying that the beneficial
owner of the Term 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 Trustee within 30 days of such change. The
statement generally must be provided in the year a payment occurs or in either
of the two preceding years. If such interest were not portfolio interest, then
it would be subject to United States federal income and withholding tax at a
rate of 30 percent, unless such tax were reduced or eliminated pursuant to an
applicable tax treaty.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a Term Note by a foreign person will be exempt from
United States federal income and withholding tax, provided that (i) the gain is
not effectively connected with the conduct of a trade or business in the United
States by the foreign person and (ii) in the case of an individual foreign
person, the foreign person is not present in the United States for 183 days or
more in the taxable year.
If the interest, gain or income on a Term 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.
TAX CHARACTERIZATION OF THE TRUST
Depending upon whether Certificates are owned by one or more persons, the
Trust will be treated as a partnership or a division of Seller for federal
income tax purposes. The Supplemental Prospectus will specify the treatment of
the Trust for federal income tax purposes.
If the Trust issues Certificates only to the Seller, the equity of the
Trust will be wholly-owned by the Seller. In this case, under the new
"check-the-box" Treasury Regulations, the Trust will be treated as a division of
the Seller 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
Trust and the obligor of all the liabilities of the Trust. Accordingly, the
Trust would not be liable for any federal income taxes as it would be deemed not
to exist for
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federal income tax purposes. Under new "check-the-box" Treasury Regulations,
unless it is treated as a trust for federal income tax purposes, an
unincorporated domestic entity with more than one equity owner is automatically
classified as a partnership for federal income tax purposes. Because it is a
business trust, the Trust will not qualify as a trust for federal income tax
purposes, and accordingly, if Certificates are sold or issued in any manner
which results in there being more than one Certificateholder, the Trust will be
treated as a 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 each Trust as a 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 Term
Notes and the Revolving Notes being debt of such partnership. However, the
proper characterization of the arrangement involving the Certificates, the
Seller and the Servicer is not clear because there is no authority on
transactions closely comparable to that contemplated herein.
Risk of Alternative Characterization. If a Trust were an association
taxable as a corporation for federal income tax purposes, it 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
applicable Notes and Certificates (and Certificateholders could be liable for
any such tax that is unpaid by such Trust). However, upon the issuance of each
series of Certificates, Tax Counsel will deliver its opinion that such Trust
will not be classified as an association taxable as a corporation.
Under the Code and certain Treasury Regulations (the "PTP Regulations") a
partnership may be classified as a publicly traded partnership ("PTP") if equity
interests therein are traded on an "established securities market," or are
"readily tradeable" on a "secondary market" or its "substantial equivalent." For
federal income tax purposes, a PTP is taxable as a corporation. This generally
has the effect of materially reducing the PTP's net income. However, the Trust
will comply with certain safe harbors available under the PTP Regulations to
avoid PTP characterization. Furthermore, the Trust, even if it were classified
as a PTP, would avoid taxation as a corporation if 90% or more of its annual
income constituted "qualifying income" not derived in the conduct of a
"financial business"; it is, unclear, however, whether the Trust's income would
be so classified.
TAX CHARACTERIZATION AND TREATMENT OF CERTIFICATES
If Certificates are issued to more than one person, the Seller and the
Owner Trustee have agreed, and each Certificateholder will agree by accepting a
Certificate (or a beneficial interest therein), to treat the Trust as a
partnership for purposes of federal and state income tax, franchise tax and any
other tax measured in whole or in part by income, with the assets of the
partnership being the assets held by the Trust, the partners of the partnership
being the Certificateholders (including the Seller), and the Term Notes being
debt of the partnership. However, the proper characterization of the arrangement
involving the Trust, the Certificates, the Seller and the Owner Trustee is not
clear because there is no authority on transactions closely comparable to that
contemplated herein.
Although, in the opinion of Tax Counsel, the Trust will not be an
association or PTP taxable as a corporation, because of the lack of cases or
rulings on similar transactions, as discussed above, a variety of alternative
characterizations are possible in addition to the position that the Certificates
represent equity interests in a partnership. For example, because the
Certificates have certain features characteristic of debt, the Certificates
might be considered debt of the Seller or of the Trust. Any such
characterization would not, however, result in materially adverse tax
consequences to Certificateholders as compared to the consequences from
treatment of the Certificates as equity in a partnership, as described below.
The following section ("Partnership Taxation") assumes that more than one
Certificate has been issued by the Trust, and accordingly, that the Certificates
represent equity interests in a partnership.
PARTNERSHIP TAXATION
As a partnership, the Trust will not be subject to federal income tax, but
each Certificateholder will be required to take into account such holder's
allocated share of income, gains, losses, deductions and credits of
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the Trust. The Trust's income will consist primarily of interest and finance
charges earned on Receivables (including appropriate adjustments for market
discount, original issue discount, and bond premium), amounts received on the
Basis Swap, and any gain upon collection or disposition of Receivables. The
Trust's deductions will consist primarily of interest accruing with respect to
the Notes, servicing and other fees, amounts paid on the Basis Swap, and losses
or deductions upon collection or disposition of 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 the Trust, the Trust Agreement and other Related Documents). The Trust
Agreement will provide that taxable income of the Trust will be allocated to the
Certificateholders for each Collection Period equal to the sum of (1) interest
distributable on the Certificates on the Distribution Date related to such
Collection Period and (2) any Trust income attributable to discount on the
Receivables that corresponds to any excess of the Certificate Balance of the
Certificates over their initial issue price. No additional taxable income will
be allocated to the Certificateholders. It is believed that this allocation 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, there can be no assurance that the net amount
of income so allocated will equal the amount distributed on the Certificates.
Thus, cash method holders may in effect be required to report income from the
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 Certificates at different times.
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 Trust.
Additionally, if the Trust were deemed to be engaged in a trade or business
for purposes of Section 512 of the Code, all of the taxable income allocated to
a Certificateholder that is a pension or profit sharing plan or other tax-exempt
entity (including an individual retirement account) would constitute "unrelated
business taxable income" generally taxable to such a holder under the Code. In
any event, most of the income allocated to such Certificateholders will be
taxable under the rules applicable to unrelated debt financed income.
An individual taxpayer may generally deduct miscellaneous itemized
deductions (which do not include interest expenses) only to the extent they
exceed two percent of adjusted gross income, and in addition, certain other
limitations may apply. Those limitations would apply to an individual
Certificateholder's share of expenses of the Trust (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 the Trust.
The Trust 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, the Trust
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 none of the Receivables were or
will be originated with original issue discount ("OID"), and therefore, the
Trust should not have OID income. However, the purchase price paid by the 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 discount, as the case may be. (As indicated above,
the Trust will make this calculation on an aggregate basis, but might be
required to recompute it on a Receivable by Receivable basis).
The Trust will make an election that will result in any market discount on
the Receivables being included in income currently as such discount accrues over
the life of the 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, the Trust will be
deemed to terminate for federal income tax purposes if 50% or more of the
capital and profits interests in the Trust are sold or exchanged within a
12-month period. If such a termination occurs, the Trust will be considered to
contribute all of its assets to a new entity classified as a partnership for
federal income tax purposes (the "New Trust") in exchange for all the interests
in the New Trust. Immediately thereafter, the Trust will be deemed to distribute
the interests in the New Trust to the purchasing Certificateholder and all
remaining Certificateholders in proportion to their interests in the Trust in
liquidation of the Trust. The Trust may not comply with certain
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technical requirements that might apply when such a constructive termination
occurs. As a result, the Trust may be subject to certain tax penalties and may
incur additional expenses if it is required to comply with those requirements.
Furthermore, the Trust might not be able to comply due to lack of information.
Disposition of Certificates. Generally, capital gain or loss will be
recognized on a sale of Certificates in an amount equal to the difference
between the amount realized and the seller's tax basis in the Certificates sold.
A Certificateholder's tax basis in a Certificate will generally equal the amount
paid for such Certificate increased by his share of Trust income (includible in
his income) and decreased by any distributions received with respect to such
Certificate. In addition, both tax basis in a Certificate and the amount
realized on a sale of a Certificate would include the holder's share of the Term
Notes and certain other liabilities of the Trust. A holder acquiring
Certificates at different prices likely will be required to maintain a single
aggregate adjusted tax basis in such Certificates and, upon sale or other
disposition of some of the Certificates, allocate a pro rata portion of such
aggregate tax basis to the Certificates sold (rather than maintaining a separate
tax basis in each Certificate for purposes of computing gain or loss on a sale
of that Certificate).
Any gain on the sale of a Certificate attributable to the holder's share of
unrecognized accrued market discount on the Receivables would generally be
treated as ordinary income to the holder and would give rise to special tax
reporting requirements. The Trust does not expect to have any other assets that
would give rise to such special reporting requirements. Thus, to avoid those
special reporting requirements, the Trust will elect to include market discount
in income as it accrues.
If a Certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the Certificates that exceeds the aggregate
cash distributions with respect thereto, such excess will generally give rise to
a capital loss upon the retirement or disposition of the Certificates.
Allocations Between Transferors and Transferees. In general, the Trust'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 Certificate Balance of the Certificates owned by them as of
the first Record Date following the end of such month. As a result, a holder
purchasing Certificates may be allocated tax items (which will affect its tax
liability and tax basis) attributable to periods before the 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 the Trust might be reallocated among the Certificateholders. The Trustee is
authorized to revise the Trust'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
Certificates at a profit (loss), the purchasing Certificateholder will have a
higher (lower) basis in the Certificates than the selling Certificateholder had.
The tax basis of the Trust's assets would not be adjusted to reflect that higher
(or lower) basis unless the Trust 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, the Trust will not make such election. As a
result, Certificateholders might be allocated a greater or lesser amount of
Trust income than would be appropriate based on their own purchase price for
Certificates.
Administrative Matters. The Owner Trustee is required to maintain the books
of the Trust. Such books will be maintained on an accrual basis and the fiscal
year of the Trust 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 the Trust and will report each Certificateholder's allocable share of
items of Trust income and expense to holders and the IRS on Schedule K-1. The
Trust will provide the Schedule K-1 information to nominees that fail to provide
the Trust with the information statement described below and such nominees will
be required to forward such information to the beneficial owners of the
Certificates. Generally, holders must file tax returns that are consistent with
the information return filed by the Trust or be subject to penalties unless the
holder notifies the IRS of all such inconsistencies.
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Under Code Section 6031, any person that holds Certificates as a nominee at
any time during a calendar year is required to furnish the Trust with a
statement containing certain information on the nominee, the beneficial owners
and the Certificates so held. Such information includes (i) the name, address
and taxpayer identification number of the nominee and (ii) as to each beneficial
owner (x) the name, address and taxpayer identification number of such person,
(y) whether such person is a United States person, a tax-exempt entity or a
foreign government, an international organization, or any wholly-owned agency or
instrumentality of either of the foregoing and (z) certain information on
Certificates that were held, bought or sold on behalf of such person throughout
the year. In addition, brokers and financial institutions that hold Certificates
through a nominee are required to furnish directly to the Trust information as
to themselves and their ownership of Certificates. A clearing agency registered
under Section 17A of the Exchange Act is not required to furnish any such
information statement to the Trust. The information referred to above for any
calendar year must be furnished to the Trust on or before the following January
31. Nominees, brokers and financial institutions that fail to provide the Trust
with the information described above may be subject to penalties.
The Seller, as the tax matters partner, will be responsible for
representing the Trust in any dispute with the IRS. The Code provides for
administrative examination of a partnership as if the partnership were a
separate and distinct taxpayer. Generally, the statute of limitations for
partnership items does not expire before three years after the date on which the
partnership information return is filed. Any adverse determination following an
audit of the return of the Trust 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 Trust. An adjustment could
also result in an audit of a Certificateholder's returns and adjustments of
items not related to the income and losses of the Trust.
Tax Consequences in Foreign Certificateholders. It is not clear whether the
Trust would be considered to be engaged in a trade or business for purposes of
federal withholding taxes with respect to non-U.S. persons because there is no
clear authority dealing with that issue under facts substantially similar to
those described herein. Although it is not expected that the Trust would be
engaged in a trade or business for such purposes, the Trust will withhold as if
it were so engaged in order to protect the Trust from possible adverse
consequences of a failure to withhold. The Trust expects to withhold on the
portion of its taxable income that is allocable to foreign Certificateholders
pursuant to Code Section 1446, as if such income were effectively connected to a
U.S. trade or business, at a rate of 35% for foreign holders that are taxable as
corporations and 39.6% for all other foreign holders. Subsequent adoption of
Treasury regulations or the issuance of other administrative pronouncements may
require the Trust to change its withholding procedures. In determining a
holder's nonforeign status, the Trust may rely on IRS Form W-8, IRS Form W-9 or
the holder's certification of nonforeign status signed under penalties of
perjury.
Each foreign holder might be required to file a U.S. individual or
corporate income tax return (including, in the case of a corporation, the branch
profits tax) on its share of the Trust's income. Each foreign holder must obtain
a taxpayer identification number from the IRS and submit that number to the
Trust 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 Trust, taking the
position that no taxes were due because the Trust 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 the Certificates and proceeds
from the sale of the Certificates will be subject to a "backup" withholding tax
of 31% if, in general, the Certificateholder fails to comply with certain
identification procedures unless the holder is an exempt recipient under
applicable provisions of the Code.
STATE AND LOCAL TAX CONSEQUENCES
The above discussion does not address the tax treatment of any series of
Term Notes or the holders thereof 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
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regimes potentially apply to different portions of this transaction. Prospective
investors are urged to consult with their own tax advisors regarding the state
and local tax treatment of the applicable Trust as well as any state and local
tax consequences to them of purchasing, holding and disposing of Term Notes.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and Section 4975 of the Code prohibit a pension,
profit-sharing or other employee benefit plan, as well as individual retirement
accounts and certain types of Keogh Plans (each a "BENEFIT PLAN"), from engaging
in certain transactions with persons that are "parties in interest" under ERISA
or "disqualified persons" under the Code with respect to such Benefit Plan. A
violation of these "prohibited transaction" rules may result in an excise tax or
other penalties and liabilities under ERISA and the Code for such persons.
Certain transactions involving the Trust might be deemed to constitute
prohibited transactions under ERISA and the Code with respect to a Benefit Plan
that purchased Term Notes if assets of the Trust were deemed to be assets of the
Benefit Plan. Under a regulation issued by the United States Department of Labor
(the "PLAN ASSETS REGULATION"), the assets of the Trust would be treated as plan
assets of a Benefit Plan for the purposes of 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. Unless otherwise provided in the
related Prospectus Supplement, although there is little guidance on the subject,
the Seller believes the Term Notes of each Trust would be treated as
indebtedness without substantial equity features for purposes of the Plan Assets
Regulation. Other exceptions, if any, from application of the Plan Assets
Regulation available with respect to any Term Notes will be discussed in the
related Prospectus Supplement.
However, without regard to whether Term Notes are treated as an equity
interest for such purposes, the acquisition or holding of Term Notes by or on
behalf of 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. Certain exemptions from the prohibited
transaction rules could be applicable to the purchase and holding of Term 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") 90-1, regarding investments by
insurance company pooled separate accounts; PTCE 91-38 regarding investments by
bank collective investment funds; PTCE 84-14, regarding transactions effected by
qualified professional asset managers; and PTCE 95-60 regarding transactions by
life insurance company general accounts.
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 Term Notes should consult its
tax and/or legal advisors regarding whether the assets of the related 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 an underwriting agreement (each,
an "UNDERWRITING AGREEMENT") with respect to each series of Term Notes offered
thereby, 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 Term Notes
set forth therein and in the related Prospectus Supplement.
In each Underwriting Agreement, the underwriters will agree, subject to the
terms and conditions set forth therein, to purchase all the Term Notes described
therein which are offered hereby and by the related Prospectus Supplement if any
of such Term Notes 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.
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Each Prospectus Supplement will either (i) set forth the price at which
each series of Term Notes 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 Term Notes or (ii) specify that such Term Notes 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
Term Notes, the public offering price and such concessions may be changed.
The extent, if any, to which the closing of the sale of any series of Term
Notes is conditioned upon the closing of any other series of Securities will be
set forth in the related Prospectus Supplement.
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.
The place and time of delivery for the Term Notes in respect of which this
Prospectus is delivered will be set forth in the related Prospectus Supplement.
LEGAL OPINIONS
Certain legal matters relating to the Term Notes 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 each Trust, the Seller 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 each Trust, the Seller and the Servicer by
Kirkland & Ellis.
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GLOSSARY OF TERMS
This Glossary of Terms does not purport to be complete and is subject to,
and is qualified in its entirety by reference to, the related Transfer and
Servicing Agreements, forms of which are filed as an exhibit to the Registration
Statement of which this Prospectus is a part. Certain capitalized terms used but
not defined in the Prospectus or this Glossary of Terms are defined in the
related Prospectus Supplement. References to the singular include references to
the plural and vice versa.
"Account" means an individual line of credit or related lines of credit
represented by a revolving dealer floor plan financing agreement extended or
maintained by GMAC to a United States corporation or other entity or person
engaged generally in the business of purchasing Vehicles from a manufacturer or
distributor thereof and holding such Vehicles for sale or lease in the ordinary
course of business.
"Addition Date" means, with respect to each Trust and any Additional
Account, the date on which such Account is added to the Pool of Accounts.
"Additional Account" means, with respect to each Trust, any Account
designated by the Seller from time to time after the related Initial Cut-Off
Date to be included in the related Pool of Accounts, as described in "The
Transfer and Servicing Agreements -- Addition and Removal of Accounts."
"Additional Cut-Off Date" means, with respect to each Trust and any
Additional Account, the date specified as such in a written notice provided by
the Servicer to the Seller.
"Additional Trust Principal" means, for any date, the sum of the principal
portion of Warranty Payments and Administrative Purchase Payments, amounts
applied to cover the Trust Defaulted Amount and other amounts, all as more fully
described in the related Prospectus Supplement.
"Administration Agreement" means, with respect to each Trust, the
Administration Agreement, dated as of the Initial Closing Date, among GMAC, as
Administrator, the Trust and the related Indenture Trustee, as amended and
supplemented from time to time.
"Administrative Purchase Payment" has the meaning set forth in "The
Transfer and Servicing Agreements -- Servicer Covenants."
"Administrative Receivable" has the meaning set forth in "The Transfer and
Servicing Agreements -- Servicer Covenants."
"Administrator" has the meaning set forth in "The Transfer and Servicing
Agreements -- Administration Agreement."
"Auction Vehicles" means, under GMAC's current practices and policies,
vehicles purchased at a closed auction conducted by General Motors.
"Available Receivable" means, with respect to each Trust, unless otherwise
provided in the related Prospectus Supplement, a Receivable that is identified
by GMAC as satisfying the criteria set forth in clauses (a) through (p) of the
definition of Eligible Receivable.
"Available Trust Interest" means, with respect to each Trust, for any
Distribution Date, the sum of Trust Interest Collections, Investment Proceeds,
receipts under credit, liquidity and other enhancement arrangements and other
amounts available to make interest payments on Securities and pay other amounts,
all as more fully described in the related Prospectus Supplement.
"Available Trust Principal" means, with respect to each Trust, for any
Distribution Date, the sum of Trust Principal Collections for the related
Collection Period, Additional Trust Principal, receipts under credit, liquidity
and other enhancement arrangements and other amounts available to make payments
of principal on the Notes and distributions with respect to Certificate Balance
on the Certificates, all as more fully described in the related Prospectus
Supplement.
"Bankruptcy Code" means Title 11 of the United States Code, as amended.
"Benefit Plan" has the meaning set forth in "ERISA Considerations."
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"Business Day" means, unless otherwise provided in the related Prospectus
Supplement, any day other than a Saturday, Sunday or any other day on which
banks in New York, New York or Detroit, Michigan may, or are required to, remain
closed.
"Cash Collateral Amount" means, with respect to each Trust as of any date,
the amount of cash that is required to be held on behalf of such Trust in order
to ensure that the Daily Trust Balance equals the Daily Trust Invested Amount as
described under "The Transfer and Servicing Agreements -- Application of
Collections -- Principal Collections."
"Cede" means CEDE & Co., the nominee of DTC and initially the sole owner of
record of the Term Notes.
"CEDEL Participants" has the meaning set forth in "The Term
Notes -- Book-Entry Registration."
"Certificate Balance" means, at any time, with respect to each Trust, the
outstanding principal amount of the related Certificates as described in the
related Prospectus Supplement.
"Certificate Distribution Account" has the meaning set forth in "The
Transfer and Servicing Agreements -- Bank Accounts."
"Certificate Rate" means, for any Distribution Date and with respect to any
class of Certificates, the Certificate Rate specified in the related Prospectus
Supplement.
"Certificateholders" means, with respect to each Trust, unless the context
otherwise requires, the holders of record of the Certificates.
"Certificates" has the meaning set forth on the cover page hereto.
"Code" means the Internal Revenue Code of 1986, as amended, and the
Treasury Regulations promulgated thereunder.
"Collateral Security" means, with respect to an Account included in the
Pool of Accounts and Receivables arising in such Account, all collateral
security granted to secure the obligations of the related Dealer in connection
therewith and any proceeds therefrom, including all Vehicle Collateral Security
and, to the extent applicable, other motor vehicles, parts inventory, equipment,
fixtures, service accounts, realty and guarantees.
"Collection Account" has the meaning set forth in "The Transfer and
Servicing Agreements -- Bank Accounts."
"Collection Period," including "related Collection Period," means, with
respect to any Distribution Date, the calendar month preceding the month in
which such Distribution Date occurs.
"Collections" means Interest Collections and Principal Collections.
"Commission" means the Securities and Exchange Commission.
"Controlled Deposit Amount" means, with respect to any Trust or any series
or class of Securities, on any date, the amount set forth or determined as
described in the related Prospectus Supplement, which amount limits the amount
of Principal Collections that may be applied to make principal payments on the
Notes or distributions of Certificate Balance (or be set aside for such
purpose).
"Cooperative" has the meaning set forth in "The Term Notes -- Book-Entry
Registration."
"Daily Portion" has the meaning set forth in "Certain Federal Income Tax
Consequences -- Characterization and Treatment."
"Daily Trust Balance" means, with respect to each Trust, for any date, the
aggregate principal balance of all Receivables held by the Trust on such date.
"Daily Trust Invested Amount" means, with respect to each Trust, for any
date during a Collection Period, an amount equal to (without duplication) (i)
the outstanding aggregate principal amount of the related Term Notes on such
date plus (ii) the outstanding Certificate Balance on such date plus (iii) the
Net Revolver Balance for such date minus (iv) the Cash Collateral Amount for
such date minus (v) any amounts
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held on such date in a related Distribution Account for payment of principal on
the Notes or distribution of Certificate Balance on the Certificates minus (vi)
the amount of unreimbursed Trust Charge-Offs as of such date.
"Dealer" means, with respect to each Trust, any corporation, entity or
other person the Receivables of which are included in the Trust.
"Dealer Overconcentration Receivables" means, for any date, with respect to
any Dealer or group of affiliated Dealers (as determined in accordance with the
Servicer's standard procedures for identifying and tracking accounts of
affiliated dealers), the outstanding Available Receivables with respect to such
Dealer or group of affiliated Dealers to the extent, if any, of the excess of
(a) the aggregate principal balance of all such Available Receivables on such
date over (b) 1.0% (or such other percentage as may be set forth in the related
Prospectus Supplement) of the sum of (i) the Specified Maximum Revolver Balance
and (ii) the aggregate principal balance of all outstanding Term Notes as of
such date or, if applicable, as of the commencement of any then occurring Early
Amortization Period, Wind Down Period or Payment Period. If, on any date, there
exist Dealer Overconcentration Receivables with respect to a Dealer or group of
affiliated Dealers, those Receivables constituting Dealer Overconcentration
Receivables shall be identified pursuant to the procedures set forth in the
related Trust Sale and Servicing Agreement.
"Defaulted Receivables" means, with respect to each Trust, for any
Distribution Date, all Receivables held by the Trust that were charged-off as
uncollectible during the related Collection Period, other than any such
Receivables that are subject to repurchase by the Seller or GMAC or purchase by
the Servicer on such Distribution Date (unless certain events of bankruptcy,
insolvency or receivership have occurred with respect to the Seller, GMAC or the
Servicer, as the case may be, in which event Defaulted Receivables will include
the principal amount of such otherwise excluded Receivables).
"Definitive Term Notes" has the meaning set forth in "The Term Notes --
Definitive Term Notes."
"Depository" has the meaning set forth in "The Term Notes -- General."
"Designated Accounts" has the meaning set forth in "The Transfer and
Servicing Agreements -- Bank Accounts."
"Disclosure Document" has the meaning set forth in "Prospectus Summary --
The Term Notes."
"Distribution Accounts" has the meaning set forth in "The Transfer and
Servicing Agreements -- Bank Accounts."
"Distribution Date" means, with respect to each Trust, the fifteenth day of
each calendar month or, if any such day is not a Business Day, the next
succeeding Business Day, beginning on the Initial Distribution Date specified in
the related Prospectus Supplement.
"DPP" has the meaning set forth in "The Dealer Floor Plan Financing
Business -- Dealer Payment Terms."
"DTC" means The Depository Trust Company, the initial Depository.
"Early Amortization Event" has the meaning set forth in "The Transfer and
Servicing Agreements -- Early Amortization Events."
"Early Amortization Period" means, with respect to any Trust, the period
commencing on the day on which an Early Amortization Event with respect to such
Trust is deemed to have occurred, and ending on the first to occur of (a) the
payment in full of all outstanding Securities issued by such Trust, (b) the
recommencement of the Revolving Period (if and to the extent described herein or
in the related Prospectus Supplement) and (c) the Trust Termination Date. A
Distribution Date is for an Early Amortization Period if the last day of the
related Collection Period occurred during an Early Amortization Period.
"Eligible Account" means, with respect to any Trust, an Account which, as
of the date of determination thereof: (a) is in favor of an entity or person
that is not subject to voluntary or involuntary liquidation, that is not
classified in "programmed" or "no credit" status and in which General Motors or
an affiliate does not have a more than 20% equity interest; (b) has been
established by GMAC or General Motors; (c) is maintained
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and serviced by GMAC; (d) is not a Fleet Account; and (e) satisfies the other
criteria, if any, set forth in the related Prospectus Supplement.
"Eligible Deposit Account" has the meaning set forth in "The Transfer and
Servicing Agreements -- Bank Accounts."
"Eligible Institution" has the meaning set forth in "the Transfer and
Servicing Agreements -- Bank Accounts."
"Eligible Investments" has the meaning set forth in "The Transfer and
Servicing Agreements -- Bank Accounts."
"Eligible Receivable" means, with respect to any date, a Receivable (except
as otherwise provided in the related Prospectus Supplement): (a) which was
originated by GMAC in the ordinary course of business or which was originated by
General Motors in the ordinary course of business and acquired by GMAC; (b)
which arose under an Account that was an Eligible Account (and not a Selected
Account) at the time of the transfer of such Receivable from GMAC to the Seller;
(c) which is payable in United States dollars; (d) to which GMAC had good and
marketable title immediately prior to the transfer thereof by GMAC to the Seller
and which has been the subject of a valid transfer and assignment from GMAC to
the Seller of all of GMAC's right, title and interest therein and the related
Vehicle Collateral Security (including any proceeds thereof); (e) which is
advanced against a Vehicle; (f) which at the time of the transfer thereof by
GMAC to the Seller is secured by a first priority perfected security interest in
the Vehicle related thereto; (g) with respect to which all consents, licenses
and approvals of any governmental authority in connection with the transfer
thereof to the Seller and to the Trust have been obtained and are in full force
and effect; (h) which was created in compliance in all material respects with
all requirements of law applicable thereto; (i) as to which, at all times
following the transfer of such Receivable to the Trust, the Trust has either a
first priority perfected security interest or good and marketable title thereto,
free and clear of all liens (other than liens permitted pursuant to the related
Trust Sale and Servicing Agreement); (j) which has been the subject of a valid
transfer and assignment from the Seller to the Trust of all the Seller's right,
title and interest therein and the related Vehicle Collateral Security
(including any proceeds thereof); (k) which is the legal, valid, binding and
assignable payment obligation of the Dealer relating thereto, enforceable
against such Dealer in accordance with its terms, except as such enforceability
may be limited by the Insolvency Laws; (l) which is not subject to any valid
right of rescission, setoff or any other defense (including defenses arising out
of violations of usury laws) of the Dealer; (m) as to which, at the time of the
transfer thereof to the Trust, GMAC and the Seller have satisfied in all
material respects all their respective obligations with respect to such
Receivable required to be satisfied at such time; (n) as to which, at the time
of the transfer thereof to the Trust, neither GMAC nor the Seller has taken or
failed to take any action that would impair the rights of the Trust or the
Securityholders therein; (o) which constitutes "chattel paper," an "account" or
a "general intangible" as defined in Article 9 of the UCC; (p) with respect to
which the Dealer has not postponed principal payment pursuant to DPP (or any
similar arrangement) or any instalment payment program; (q) which does not
constitute a Dealer Overconcentration Receivable; and (r) which does not
constitute an Excess Available Receivable. Notwithstanding the foregoing, any
other Receivable identified by GMAC as an Eligible Receivable will also be
deemed an Eligible Receivable unless and until such Receivable is thereafter
determined not to satisfy the eligibility criteria set forth above.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Euroclear Operator" has the meaning set forth in "The Term Notes --
Book-Entry Registration."
"Euroclear Participants" has the meaning set forth in "The Term Notes --
Book-Entry Registration."
"Event of Default" has the meaning set forth in "The Term Notes -- The
Indenture -- Events of Default; Rights upon Events of Default."
"Excess Available Receivables" means, with respect to each Trust, for any
date, Available Receivables to the extent, if any, of the excess of (a) the
aggregate principal balance of Available Receivables less the aggregate
principal balance of Dealer Overconcentration Receivables over (b) the Maximum
Pool Balance. If, on any date, there exists Excess Available Receivables, those
Receivables constituting Excess Available Receivables shall be identified
pursuant to the related Trust Sale and Servicing Agreement.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fleet Accounts" has the meaning set forth in "The Dealer Floor Plan
Financing Business -- General."
"General Motors" means General Motors Corporation, a Delaware corporation.
"GMAC" means General Motors Acceptance Corporation, a corporation
incorporated under the New York Banking Law relating to investment companies,
and a wholly-owned subsidiary of General Motors Corporation.
"Indenture" means, with respect to each Trust, the Indenture dated as of
the related Initial Closing Date between the Trust and the related Indenture
Trustee, as amended and supplemented from time to time.
"Indenture Trustee" means, with respect to each Trust, the Indenture
Trustee specified in the related Prospectus Supplement.
"Indirect Participants" has the meaning set forth in "The Term Notes --
Book-Entry Registration."
"Initial Closing Date" means, with respect to each Trust, the date
specified as such in the Prospectus Supplement relating to the first series of
Term Notes issued by such Trust.
"Initial Cut-Off Date" means, with respect to each Trust, the date
specified as such in the Prospectus Supplement relating to the first series of
Term Notes issued by such Trust.
"Insolvency Event" means, with respect to a specified entity, (a) the entry
of a decree or order by a court, agency or supervisory authority having
jurisdiction in the premises for the appointment of a conservator, receiver,
trustee or liquidator for such entity, in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings, or for the
winding-up or liquidation of such entity's affairs, and the continuance of any
such decree or order unstayed and in effect for a period of 90 consecutive days,
(b) the consent by such entity to the appointment of a conservator, receiver or
liquidator in any insolvency, bankruptcy, readjustment of debt, marshalling of
assets and liabilities or similar proceedings of or relating to such entity or
of or relating to substantially all of such entity's property, or (c) such
entity shall admit in writing its inability to pay its debts generally as they
become due, file a petition to take advantage of any applicable insolvency,
bankruptcy or reorganization statute, make an assignment for the benefit of its
creditors or voluntarily suspend payment of its obligations.
"Insolvency Laws" means the Bankruptcy Code and similar applicable federal
or state laws.
"Interest Collections" means, with respect to any Trust, for any Collection
Period, collections received during such Collection Period on the Receivables
existing under the Accounts in the related Pool of Accounts that the Servicer
attributes to interest pursuant to its servicing guidelines, including
Administrative Purchase Payments and Warranty Payments in excess of the
principal portion thereof.
"Interest Rate" means for any Payment Date and for any series of Term
Notes, the rate or rates of interest on such series of Term Notes as specified
in the related Prospectus Supplement.
"Investment Proceeds" means, with respect to any Trust, for any
Distribution Date, investment earnings on funds deposited in Designated Accounts
and the Certificate Distribution Account, net of losses and investment expenses,
during the related Collection Period.
"IRS" has the meaning set forth in "Certain Federal Income Tax Consequences
- -- General."
"Maximum Pool Balance" means, with respect to each Trust, the sum of (a)
the Maximum Revolver Balance, (b) the aggregate outstanding principal balance of
all Term Notes (after giving effect to any amounts on deposit in the Note
Distribution Account for payments of principal) and (c) the aggregate
outstanding Certificate Balance of all Certificates (after giving effect to any
amounts on deposit in the Certificate Distribution Account for distributions
with respect to Certificate Balance).
"Maximum Revolver Balance" means, with respect to each Trust, at any time,
the Specified Maximum Revolver Balance set forth in the related Prospectus
Supplement, as such amount may be increased or decreased from time to time in
accordance with the related Trust Sale and Servicing Agreement; provided that at
any time that additional borrowings may not be made under the Revolving Notes
(including, if
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applicable, during the Wind Down Period or an Early Amortization Period),
Maximum Revolver Balance shall mean the Net Revolver Balance.
"Monthly Payment Rate" means, for any Collection Period, the percentage
obtained by dividing Principal Collections for such Collection Period by the
average daily aggregate principal balance of all Receivables included in the
Accounts in the Pool of Accounts during such Collection Period.
"Monthly Servicing Fee" means, with respect to each Trust, unless otherwise
provided in the related Prospectus Supplement, for any Distribution Date, the
product of (a) the average daily balance of Daily Trust Invested Amount for the
related Collection Period and (b) one-twelfth of the Servicing Fee Rate.
"Moody's" means Moody's Investors Service, Inc.
"Net Receivables Rate" means, with respect to each Trust, unless otherwise
provided in the related Prospectus Supplement, with respect to any Collection
Period, a rate equal to the product of (a) the quotient obtained by dividing (i)
360 by (ii) the actual number of days elapsed in such Collection Period and (b)
the percentage equivalent of a fraction, the numerator of which is the amount of
Trust Interest Collections for the immediately preceding Collection Period,
after subtracting therefrom the Trust Defaulted Amount for the Distribution Date
related to such immediately preceding Collection Period, and the denominator of
which is the average Daily Trust Balance for such immediately preceding
Collection Period.
"Net Revolver Balance" means, with respect to each Trust, for any date, the
aggregate outstanding principal balance under the Revolving Notes minus any
amounts on deposit in the related Revolver Distribution Account on such date for
the payment of principal.
"New Vehicles" means, under GMAC's current practices and policies, vehicles
of any model year that are untitled and that generally have been driven less
than 200 miles and that are not Auction Vehicles; provided, however, that
vehicles that are titled solely for purposes of state laws requiring
demonstration vehicles to be titled generally will be considered New Vehicles if
driven less than 200 miles.
"Note Distribution Account" has the meaning set forth in "The Transfer and
Servicing Agreements -- Bank Accounts."
"Note Owners" has the meaning set forth in "The Term Notes -- Book-Entry
Registration."
"Noteholders" means, unless the context otherwise requires, the holders of
record of the Term Notes and Revolving Notes.
"Notes" has the meaning set forth on the cover page hereto.
"OID" has the meaning set forth in "Certain Federal Income Tax Consequences
- -- General."
"OID Regulations" has the meaning set forth in "Certain Federal Income Tax
Consequences -- General."
"Owner Trustee" means, with respect to each Trust, the Owner Trustee
specified in the related Prospectus Supplement.
"Participants" has the meaning set forth in "The Term Notes -- General."
"Payment Date" means, with respect to a series of Notes, each date
specified for payment of interest or principal on the Notes in the related
Prospectus Supplement. With respect to a series of Notes providing for monthly
payment of interest or principal, Payment Date means a Distribution Date.
"Payment Period" means, with respect to a series of Term Notes, the period,
if any, described in the related Prospectus Supplement during which any amounts
will be set aside and/or paid as principal on such Term Notes prior to the Wind
Down Period or an Early Amortization Period.
"Plan Assets Regulation" has the meaning set forth in "ERISA
Considerations."
"Pool of Accounts" means, with respect to each Trust, at any time, all
Accounts identified on the Schedule of Accounts as amended and supplemented from
time to time pursuant to the related Pooling and Servicing Agreement and Trust
Sale and Servicing Agreement.
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"Pooling and Servicing Agreement" means, with respect to each Trust, the
Pooling and Servicing Agreement dated as of the related Initial Closing Date
between GMAC and the Seller, as amended and supplemented from time to time.
"Prime Rate" means the interest rate designated as the "prime rate" as in
effect on the last day of the preceding semi-monthly period by certain financial
institutions selected by GMAC.
"Principal Collections" means, with respect to any Trust, for any date or
any period, collections received on such date or during such period, as
applicable, on the Receivables existing under the Accounts in the related Pool
of Accounts that the Servicer attributes to principal pursuant to its servicing
guidelines.
"Prospectus Supplement" has the meaning set forth on the cover page hereto.
"PTCE" has the meaning set forth in "ERISA Considerations."
"Rating Agencies" means, with respect to any Securities and the related
Trust at any time, the nationally recognized statistical rating organizations
that are requested by the Seller to rate such Securities and that are rating
such Securities on such date.
"Reassignment Amount" means, for any Distribution Date, after giving effect
to any allocations, withdrawals and deposits otherwise to be made on such
Distribution Date, the sum of the Daily Trust Invested Amount (which, for such
purpose, will be calculated without reduction for the Cash Collateral Amount)
and accrued but unpaid interest on all outstanding Securities to the extent not
previously distributed to Securityholders.
"Receivable" means, at any time, the right to receive payment on a loan
made under an Account included in the Pool of Accounts.
"Receivables Purchase Date" means, with respect to each Trust, unless
otherwise provided in the related Prospectus Supplement, each Business Day
during the related Revolving Period on which Eligible Receivables are created in
any Account then included in the related Pool of Accounts, except as described
under "The Transfer and Servicing Agreements -- Insolvency Events."
"Registration Statement" has the meaning set forth in "Available
Information."
"Related Documents" has the meaning set forth in "The Term Notes -- The
Indenture -- Certain Covenants."
"Reserve Fund" means, with respect to each Trust, an Eligible Deposit
Account maintained for the benefit of the Trust and the Securityholders as
described in "The Transfer and Servicing Agreements -- Liquidity and Credit
Support."
"Reserve Fund Initial Deposit" means, with respect to each Trust, the
amount, if any, specified in the related Prospectus Supplement.
"Reserve Fund Required Amount" means, with respect to each Trust, the
amount, if any, specified in the related Prospectus Supplement.
"Retained Property" has the meaning set forth in "The Trusts -- General;
The Trust Estate."
"Revolver Distribution Account" has the meaning set forth in "The Transfer
and Servicing Agreements -- Bank Accounts."
"Revolver Interest Rate" means for any Distribution Date and for any series
of Revolving Notes, the rate or rates of interest on such Revolving Notes.
"Revolving Notes" has the meaning set forth on the cover page hereto.
"Revolving Period" means, with respect to each Trust, the period commencing
on the Initial Cut-Off Date and continuing until the earlier of (a) the
commencement of an Early Amortization Period and (b) the Scheduled Revolving
Period Termination Date. The Revolving Period for a Trust may recommence in
certain limited circumstances as described herein or in the related Prospectus
Supplement.
"Rules" has the meaning set forth in "The Term Notes -- Book-Entry
Registration."
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<PAGE> 113
"Schedule of Accounts" means the list of the Accounts included in the Pool
of Accounts, as such list may be amended and supplemented from time to time.
"Scheduled Revolving Period Termination Date" means, with respect to each
Trust, the date specified in the related Prospectus Supplement.
"Scheduled Series Payment Period Commencement Date" means, with respect to
any series of Term Notes with a Payment Period, the date specified as such in
the related Prospectus Supplement.
"Securities" means, with respect to each Trust, the Term Notes, the
Revolving Notes and the Certificates issued or to be issued by such Trust.
"Securities Act" means the Securities Act of 1933, as amended.
"Securityholders" means the Noteholders and the Certificateholders.
"Selected Accounts" has the meaning set forth in the "The Transfer and
Servicing Agreements -- Addition and Removal of Accounts."
"Seller" means Wholesale Auto Receivables Corporation, a Delaware
corporation.
"Series Early Payment Event" means with respect to any series of Term Notes
with a Payment Period, an event specified in the related Prospectus Supplement
as commencing the related Payment Period.
"Servicer" means initially GMAC, in its capacity as Servicer under the
Transfer and Servicing Agreements, or any successor Servicer.
"Servicer Advance" means, with respect to each Trust, for any Distribution
Date, the amount, if any, advanced by the Servicer to cover interest shortfalls,
all as more fully described in the related Prospectus Supplement.
"Servicing Default" means any of the events described in "The Transfer and
Servicing Agreements -- Servicing Default."
"Servicing Fee Rate" means, with respect to each Trust, 1% unless otherwise
set forth in any related Prospectus Supplement.
"Short Term Note" has the meaning set forth in "Certain Federal Income Tax
Consequences -- Characterization and Treatment."
"Standard & Poor's" means Standard & Poor's Ratings Services.
"Stated Final Payment Date" means, with respect to any series of Notes or
Certificates, the date set forth as such in the related Prospectus Supplement,
on which date the final payment on such Notes or final distribution on such
Certificates is due.
"Strip Notes" has the meaning set forth in "The Term Notes -- Principal and
Interest on the Term Notes."
"Targeted Final Payment Date" means, with respect to any series of Notes,
the date, if any, specified in the related Prospectus Supplement on which all
principal is scheduled to be paid as principal on such series of Notes, to the
extent not previously paid.
"Tax Counsel" has the meaning set forth in "Certain Federal Income Tax
Consequences -- Characterization and Treatment."
"Term Noteholders" means the holders of record of the Term Notes.
"Term Notes" has the meaning set forth on the cover page hereto.
"Terms and Conditions" has the meaning set forth in "The Term Notes --
Book-Entry Registration."
"Transfer and Servicing Agreements" means, with respect to each Trust, the
Pooling and Servicing Agreement, the Trust Sale and Servicing Agreement, the
Trust Agreement and the Administration Agreement.
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<PAGE> 114
"Trust" has the meaning set forth on the cover page hereto.
"Trust Agreement" means, with respect to each Trust, the Trust Agreement,
dated as of the Initial Closing Date, between the Seller and the Owner Trustee,
as amended and supplemented from time to time.
"Trust Charge-Offs" means, with respect to each Trust, for any Distribution
Date, the amount of the Trust Defaulted Amount for such Distribution Date that
is not covered through the application of Trust Interest Collections and funds
in the Reserve Fund or otherwise. As of any date, unreimbursed Trust Charge-Offs
will equal the aggregate Trust Charge-Offs for all prior Distribution Dates
unless and to the extent such Trust Charge-Offs have been covered or otherwise
reduced as described in the related Prospectus Supplement.
"Trust Defaulted Amount" means, with respect to each Trust, for any
Distribution Date, an amount (not less than zero) equal to the principal amount
of all Defaulted Receivables.
"Trust Estate" has the meaning set forth in "The Trusts -- General; The
Trust Estate."
"Trust Indenture Act" means, the Trust Indenture Act of 1939, as amended.
"Trust Interest Collections" means, with respect to each Trust, Interest
Collections for the related Collection Period attributable to the Receivables
held by such Trust, as more fully described herein and in the related Prospectus
Supplement.
"Trust Principal Collections" means, with respect to each Trust, Principal
Collections for the related Collection Period attributable to the Receivables
held by such Trust, as more fully described herein and in the related Prospectus
Supplement.
"Trust Sale and Servicing Agreement" means, with respect to each Trust, the
Trust Sale and Servicing Agreement, dated as of the related Initial Cut-Off
Date, among the Servicer, the Seller and the Trust, as amended and supplemented
from time to time.
"Trust Termination Date" has the meaning set forth in "The Transfer and
Servicing Agreements -- Termination."
"U.S. Portfolio" has the meaning set forth in "The Dealer Floor Plan
Financing Business -- General."
"UCC" means the Uniform Commercial Code as in effect in Delaware, Michigan
or New York, and as may be amended from time to time.
"Underwriting Agreement" has the meaning set forth in "Plan of
Distribution."
"Used Vehicles" means, under GMAC's current practices and policies, Auction
Vehicles and vehicles which have been previously titled; provided, however, that
vehicles that are titled solely for purposes of state laws requiring
demonstration vehicles to be titled will not be considered Used Vehicles.
"Vehicle Collateral Security" means, with respect to an Account and the
Receivables arising under such Account, the security interest in the Vehicles of
the related Dealer granted to secure the obligations of such Dealer in
connection therewith and any proceeds therefrom.
"Vehicles" means automobiles and light trucks.
"Voting Interests" means, as of any date, the aggregate outstanding
Certificate Balance of all Certificates; provided, however, that Certificates
owned by GMAC or the Trust or any affiliate of either of them (other than the
Seller) will be disregarded and deemed not to be outstanding, except that, in
determining whether the Owner Trustee will be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only
Certificates that the Owner Trustee knows to be so owned will be so disregarded.
Certificates so owned that have been pledged in good faith may be regarded as
outstanding if the pledgee establishes to the satisfaction of the Owner Trustee
the pledgor's right so to act with respect to such Certificates and that the
pledgee is not GMAC or the Trust or any affiliate of either of them (other than
the Seller).
"Warranty Payment" has the meaning set forth in "The Transfer and Servicing
Agreements -- Representations and Warranties."
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<PAGE> 115
"Warranty Receivable" has the meaning set forth in "The Transfer and
Servicing Agreements -- Representations and Warranties."
"Wind Down Period" means, with respect to each Trust, the period commencing
on the day immediately after the Scheduled Revolving Period Termination Date and
continuing until the earlier of (a) the commencement of an Early Amortization
Period and (b) the date on which all of the related Securities have been paid in
full. The first Distribution Date for a Wind Down Period will be the
Distribution Date following the first Collection Period included in such Wind
Down Period.
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<PAGE> 116
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
UNDERWRITER. 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.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Summary................................... S-3
Risk Factors.............................. S-11
The Trust................................. S-12
The U.S. Portfolio........................ S-14
The Pool of Accounts...................... S-16
The Offered Term Notes.................... S-17
Principal Payment Considerations.......... S-23
The Series B Term Notes................... S-24
The Initial Revolving Notes............... S-25
The Class A Certificates.................. S-28
The Transfer and Servicing Agreements..... S-29
Certain Federal Income Tax Consequences... S-40
Underwriting.............................. S-41
Legal Opinions............................ S-41
Index of Principal Terms.................. S-42
Annex I (Prepayment Calculation Table).... S-45
PROSPECTUS
Available Information..................... 2
Reports to Term Noteholders............... 2
Incorporation of Certain Documents by
Reference............................... 2
Prospectus Summary........................ 3
Risk Factors.............................. 9
General Motors Acceptance Corporation..... 13
Wholesale Auto Receivables Corporation.... 13
The Trusts................................ 14
Use of Proceeds........................... 15
The Dealer Floor Plan Financing
Business................................ 15
The Accounts.............................. 19
Maturity and Principal Considerations..... 20
The Term Notes............................ 20
The Revolving Notes....................... 28
The Certificates.......................... 29
The Transfer and Servicing Agreements..... 29
Certain Legal Aspects..................... 46
Certain Federal Income Tax Consequences... 48
State and Local Tax Consequences.......... 55
ERISA Considerations...................... 56
Plan of Distribution...................... 56
Legal Opinions............................ 57
Glossary of Terms......................... 58
</TABLE>
UNTIL FEBRUARY , 1998, ALL DEALERS EFFECTING TRANSACTIONS IN THE OFFERED TERM
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.
$500,000,000
Superior Wholesale
Inventory Financing
Trust IV
% Asset-Backed
Term Notes,
Series 1997-A
Wholesale Auto
Receivables
Corporation
Seller
General Motors
Acceptance
Corporation
Servicer
Morgan Stanley Dean Witter
Prospectus Supplement
Dated November , 1997
