<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 2, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
WHOLESALE AUTO RECEIVABLES CORPORATION
(ORIGINATOR OF THE TRUSTS DESCRIBED HEREIN)
DELAWARE
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
38-3082709
I.R.S. EMPLOYER
IDENTIFICATION NUMBER
CORPORATION TRUST CENTER
1209 ORANGE STREET
WILMINGTON, DELAWARE 19801
(302-658-7851)
------------------------
AGENT FOR SERVICE
JEROME B. VAN ORMAN JR., VICE PRESIDENT
WHOLESALE AUTO RECEIVABLES CORPORATION
3044 WEST GRAND BOULEVARD, DETROIT, MICHIGAN 48202 (313-556-1508)
WITH A COPY TO:
ROBERT L. SCHWARTZ, GENERAL COUNSEL
WHOLESALE AUTO RECEIVABLES CORPORATION
3031 WEST GRAND BOULEVARD, DETROIT, MICHIGAN 48202
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement as determined in
light of market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. X
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM
OF SECURITIES TO AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
BE REGISTERED REGISTERED PER UNIT(2) PRICE(1) REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Asset-Backed Term
Notes.............. $4,000,000,000 100% $4,000,000,000 $1,112,000
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of registration
fee.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
PURSUANT TO RULE 429 OF THE SECURITIES ACT OF 1933, THE PROSPECTUS WHICH IS
PART OF THIS REGISTRATION STATEMENT IS A COMBINED PROSPECTUS AND INCLUDES ALL
THE INFORMATION CURRENTLY REQUIRED IN A PROSPECTUS RELATING TO THE SECURITIES
COVERED BY REGISTRATION STATEMENT NO. 33-50323 PREVIOUSLY FILED BY THE
REGISTRANT.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
PROSPECTUS
SUBJECT TO COMPLETION, DATED JUNE 2, 1999
SUPERIOR WHOLESALE INVENTORY FINANCING TRUSTS
Asset Backed Term Notes
WHOLESALE AUTO RECEIVABLES CORPORATION
Seller
GENERAL MOTORS ACCEPTANCE CORPORATION
Servicer
YOU SHOULD CONSIDER
CAREFULLY THE RISK FACTORS
BEGINNING ON PAGE 6 IN THIS
PROSPECTUS.
The Term Notes of any
series represent
obligations of the related
Trust only. The Notes
issued by any Trust do not
represent obligations of or
interests in, and are not
guaranteed by Wholesale
Auto Receivables
Corporation, General Motors
Acceptance Corporation or
any of their affiliates.
This prospectus may be used
to offer and sell Term
Notes only if accompanied
by a prospectus supplement.
EACH TRUST--
- will issue one or more series of Term Notes,
which will be described in a prospectus
supplement;
- will own a revolving pool of wholesale
automotive receivables generated by a
portfolio of floor plan financing agreements
with retail automotive dealers; and
- will also issue one or more series of
Revolving Notes and one or more classes of
Certificates, but these Revolving Notes and
Certificates will not be sold under this
prospectus.
THE TERM NOTES--
- will represent indebtedness of the related
Trust;
- will be paid only from the assets of the
Trust and amounts on deposit in the related
Reserve Funds;
- will represent the right to payments in the
amounts and at the times described in the
related prospectus supplement; and
- will benefit from one or more forms of credit
enhancement.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED
THESE TERM NOTES OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
[ ], 1999
<PAGE> 3
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
We provide information to you about the Term Notes in two separate
documents:
(1) this prospectus, which provides general information and terms of
the Term Notes, some of which may not apply to a particular series of Term
Notes, including your series.
(2) the accompanying prospectus supplement, which will provide
information regarding the pool of receivables held by the Trust and will
specify the terms of your series of Term Notes.
IF THE TERMS OF YOUR SERIES OF TERM NOTES VARY BETWEEN THIS PROSPECTUS AND
THE PROSPECTUS SUPPLEMENT, YOU SHOULD RELY ON THE INFORMATION IN THE PROSPECTUS
SUPPLEMENT.
You should rely only on the information provided in this prospectus and the
accompanying prospectus supplement, including the information incorporated by
reference. We have not authorized anyone to provide you with other or different
information. We are not offering the Term Notes in any state where the offer is
not permitted. We do not claim that the information in this prospectus and the
accompanying prospectus supplement is accurate on any date other than the dates
stated on their respective covers.
You can find definitions of the capitalized terms used in this prospectus
under the caption "Glossary of Terms" which appears at the end of this
prospectus.
2
<PAGE> 4
SUMMARY OF TERMS
- This Summary of Terms highlights selected information from this document
and does not contain all of the information that you need to consider in
making your investment decision. To understand all of the terms of an
offering of the Term Notes, read this entire document and the
accompanying prospectus supplement carefully.
THE PARTIES
Issuer/Trust
Each Superior Wholesale Inventory Financing Trust will be a Delaware business
trust formed by the Seller and the Owner Trustee. The Trust will issue the Term
Notes. The Trust will operate under a Trust Sale and Servicing Agreement.
Seller
Wholesale Auto Receivables Corporation, a wholly-owned subsidiary of GMAC, will
be the Seller for the Trust.
Servicer
GMAC, a wholly-owned subsidiary of General Motors Corporation, will be the
Servicer for the Trust.
Indenture Trustee
The Indenture Trustee will be specified in the prospectus supplement.
Owner Trustee
The Owner Trustee will be specified in the prospectus supplement.
SECURITIES ISSUED BY A TRUST
Term Notes
Each Trust will issue one or more series of asset backed Term Notes. Each Trust
may issue additional Term Notes from time to time after the initial offering of
Term Notes. Each series of Term Notes will have a stated principal amount and
will pay interest at a specified rate or rates. Each series of Term Notes will
have its own interest rate, which may be fixed, variable, contingent or
adjustable or any combination of these characteristics. The prospectus
supplement will specify the interest rate or the method for determining the
interest rate.
Other Securities
Each Trust will also issue Revolving Notes and Certificates, but those
securities will not be offered or sold under this prospectus. We use the term
"NOTES" to mean the Term Notes and the Revolving Notes issued by a Trust. We use
the term "SECURITIES" to mean the Notes and the Certificates issued by a Trust.
Subordination
The Certificates will be subordinated to the Term Notes and the Revolving Notes.
Term Notes may be either senior or equal in priority to Revolving Notes.
Each Trust may also issue subordinated Term Notes, which would be subordinated
to all other classes of Term Notes and Revolving Notes. The relative priority of
the Term Notes, the Revolving Notes and the Certificates will be described in
the prospectus supplement.
PAYMENTS ON THE SECURITIES
Interest
The Trust will pay interest on the Term Notes monthly, or with such other
frequency as is specified in the prospectus supplement. The sources of funds
which the Trust will use to pay interest will be
3
<PAGE> 5
specified in the prospectus supplement. Typically, such sources will include:
- - interest collections on the Receivables
- - swap payments received by the Trust
- - servicer advances
- - available credit enhancement
Principal
Ordinarily, principal payments on Term Notes will occur on one or more planned
dates specified in the prospectus supplement. The sources of funds which the
Trust will use to pay principal will be specified in the prospectus supplement.
Typically, these sources will include:
- - all or a portion of the principal collections on the Receivables
- - servicer advances
- - interest collections remaining after interest payments
- - available credit enhancement
The prospectus supplement will also specify the manner in which the Trust will
apply available funds toward principal payments on the Term Notes. Among the
possible ways are the following:
- - a single targeted final payment date, on which all principal is repaid at once
- - a controlled amortization period, in which a predetermined amount of principal
is repaid on each planned payment date until all principal has been repaid
- - an index amortization period, in which the amount of principal that is repaid
is determined by reference to an index
However, it is possible that principal payments will begin earlier than the
planned date or dates specified in the prospectus supplement. Upon the
occurrence of an early amortization event, the Trust will apply all available
funds to the repayment of the outstanding principal and interest on the Term
Notes and the other Securities issued by the Trust (unless the prospectus
supplement provides that such funds will be set aside for the benefit of the
Term Notes but not paid until a later date). This type of event will likely
result in repayment of principal on the Term Notes earlier than the planned date
or dates.
ASSETS OF THE TRUST
The primary assets of each Trust will be a revolving pool of wholesale
receivables arising under floor plan financing agreements between GMAC and a
group of retail automotive dealers franchised by General Motors. These
agreements are lines of credit which dealers use to purchase their inventory of
new and used motor vehicles manufactured by General Motors and others. We refer
to the dealers' obligations under these agreements as "RECEIVABLES."
The Receivables in each Trust will be sold by GMAC to the Seller, and then by
the Seller to the Trust. The Trust will grant a security interest in the
Receivables and the other Trust property to the Indenture Trustee on behalf of
the Noteholders. The Trust property will also include:
- - Security interests in the collateral securing the dealers' obligation to pay
the Receivables, which will include vehicles and which may include parts
inventory, equipment, fixtures, service accounts, real estate and guarantees;
- - A basis swap or swaps;
- - Amounts held on deposit in any Reserve Fund established for the Trust or in
other trust accounts maintained for the Trust;
- - Any recourse GMAC has against the dealers under the floor plan financing
agreements;
- - Certain rights of the Seller under its purchase agreement with GMAC; and
4
<PAGE> 6
- - Any additional property, or exclusions of the foregoing types of property,
described in the prospectus supplement.
As new Receivables arise, they will ordinarily be transferred to the Trust on a
daily basis. At the same time, prior to the planned date on which funds will
first be set aside for payments on Term Notes, the Trust will ordinarily pay
principal collections on Receivables back to the Seller, or else the Trust will
apply the principal collections to pay down the principal balance on the
Revolving Notes. The Trust could also retain principal collections and invest
them in eligible investments, if sufficient new Receivables were not available.
However, if an event occurs with respect to the Term Notes that is specified in
the prospectus supplement to be a cash accumulation event, the Trust will retain
all or a substantial portion of principal collections, even though new
Receivables are available to the Trust. Rather than transfer these principal
collections to the Seller or use them to repay the Revolving Notes or other
series of Term Notes, the Trust will instead invest them in eligible investments
in a cash accumulation account dedicated to the Term Noteholders. The Trust will
continue to invest these funds in eligible investments until the planned date or
dates for repayment of the Term Notes, or until any sooner repayment following
the occurrence of an early amortization event that requires repayment of the
Term Notes.
SERVICING FEES
For each series of Notes, the Trust will pay the Servicer a set monthly fee as
compensation for servicing the Receivables.
TAX STATUS
In the opinion of Kirkland & Ellis, special tax counsel, the Term Notes will be
characterized as indebtedness for Federal income tax purposes.
Each Term Noteholder, by the acceptance of a Term Note, will agree to treat the
Term Notes as indebtedness for federal, state and local income and franchise tax
purposes.
See "Certain Federal Income Tax Consequences" and "State and Local Tax
Consequences" in this prospectus concerning the application of federal, state
and local tax laws.
ERISA CONSIDERATIONS
Subject to the considerations discussed under "ERISA Considerations," an
employee benefit plan subject to the Employee Retirement Income Security Act of
1974 may purchase the Term Notes and any subordinated Term Notes that a Trust
may issue. An employee benefit plan should consult with its counsel before
purchasing the Term Notes.
RATINGS
- - All Term Notes will be rated as investment grade securities by at least one
nationally recognized rating agency.
- - The prospectus supplement will describe any further required ratings for the
Term Notes.
- - We cannot assure you that a rating agency will maintain its rating if
circumstances change. If a rating agency changes its rating, no one has an
obligation to provide additional credit enhancement.
- - A Note rating is not a recommendation to buy the Term Notes. The rating
considers only the likelihood that the Trust will pay interest on time and
will ultimately pay principal. The rating does not consider either the Term
Notes' price, their suitability to a particular investor, or the timing of
principal payments.
5
<PAGE> 7
RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase the Securities.
RISK OF UNCOLLECTIBLE
RECEIVABLES DUE TO PRIORITY
OF
OTHER PARTIES' LIENS ON
RECEIVABLES GMAC and the Seller will file financing
statements with respect to each pool of
Receivables sold to a Trust. The financing
statements will perfect the security interests
of the Seller and the Trust in the pool of
Receivables. However, GMAC will serve as the
custodian of the Receivables and will not
physically segregate or mark the Receivables to
indicate that they have been sold to the Trust.
See "The Transfer and Servicing Agreements--Sale
and Assignment of Receivables and Collateral
Security" in this prospectus.
If another party purchases or takes a security
interest in the Receivables (1) for value, (2)
in the ordinary course of business and (3)
without actual knowledge of the Seller's or the
Trust's interest, that purchaser or secured
party will acquire an interest in the
Receivables superior to the Trust's interest. If
the proceeds of the sale or lease of a
previously secured vehicle include chattel paper
(such as most retail instalment contracts), then
a party who buys that chattel paper may have an
interest in the Receivable that is senior to the
Trust's interest. This may result in delay or
reduction of payments on the Term Notes. See
"Certain Legal Aspects--Transfer of Receivables"
in this prospectus.
RISK OF UNCOLLECTIBLE
RECEIVABLES DUE TO SALES OUT
OF
TRUST Dealers who purchase financed vehicles give GMAC
a security interest in those vehicles. When the
financed vehicle is sold or leased, GMAC's
security interest in the vehicle will generally
terminate. If the dealer who sold or leased the
vehicle fails to pay GMAC the amount owed on the
Receivable, that vehicle will no longer serve as
security for the Receivable. This may impair
GMAC's ability to collect the Receivable, in
which case you might experience reductions or
delays in payments on your Term Notes.
POSSIBLE REDUCTIONS AND
DELAYS IN PAYMENTS DUE TO
BANKRUPTCY OF GMAC If GMAC filed for bankruptcy under the federal
bankruptcy code or any state insolvency laws, a
court may (1) consolidate the assets and
liabilities of GMAC with those of the Seller,
(2) decide that the sale of the Receivables to
the Seller was not a "true sale" or (3) disallow
a transfer of Receivables prior to the
bankruptcy. Thus, the Receivables might become
part of GMAC's bankruptcy estate, in which case
you might experience reductions or delays in
payments on your Term Notes. In addition, tax or
other liens might have priority over the Trust's
interest. See "Certain Legal
6
<PAGE> 8
Aspects--Certain Matters Relating to Bankruptcy"
in this prospectus.
In addition, if GMAC or General Motors filed for
bankruptcy under the federal bankruptcy code or
any state insolvency laws, the GM-franchised
dealers who are obligated to make payments on
the Receivables might respond by delaying or
withholding payments on the Receivables, even
without legal or contractual justification. As a
result you might experience reductions or delays
in payments on your Term Notes.
THE TRUST IS DEPENDENT ON
GMAC TO GENERATE NEW
RECEIVABLES GMAC generates Receivables when GM-franchised
dealers finance their wholesale automobile
purchases through GMAC. GMAC has in the past
provided financial assistance to dealers,
including capital contributions in the form of
minority equity investments. The Trust depends
upon GMAC to generate new Receivables to meet
the Trust's obligations to pay interest and
principal on the Securities GMAC does not
guarantee that it will continue to generate
Receivables at historical rates. The following
events could negatively impact GMAC's ability to
generate new Receivables:
- A decline in the manufacture and sale of GM
automobiles and light trucks due to an
economic downturn, a labor disruption,
competitive pressure, or any other factors
- A change in GM's vehicle distribution
practices
- A change in dealer inventory management
practices
- A change in the interest rates charged by
GMAC to dealers
- A change in the amounts of the credit lines
offered by GMAC to dealers
- A change in the terms offered by GMAC to
dealers
- Defaults on accounts by dealers
- Termination of dealer franchises
- Dealers filing for bankruptcy
- A change in other financial support offered
by GMAC to dealers
- Seasonal fluctuations in the sale and leasing
of vehicles
To the extent that GMAC generates new
Receivables at a lower rate than it has done in
the past, you might
7
<PAGE> 9
experience reductions or delays in payments on
your Term Notes.
In the event of dealer franchise termination, GM
is obligated to repurchase most new vehicles
from the dealer. If GMAC or another creditor
forecloses on a dealer's property, GM has the
option, but not the obligation, to repurchase
the dealer's new, current model, undamaged
vehicles at invoice price. If GM exercises this
option, then the proceeds of the purchase will
generally be available to pay on the
Receivables.
THE TRUST'S SOURCE OF FUNDS
TO
MAKE PAYMENTS IS GENERALLY
LIMITED TO COLLECTIONS FROM
DEALERS The Trust's ability to make payments on the Term
Notes generally depends on collections from
dealers on the Receivables. The prospectus
supplement will describe past patterns of dealer
payments on similar Receivables. However, we do
not guarantee that dealers will pay on the
Receivables at the same rate as in the past or
in any particular pattern.
The timing of the sale and lease of vehicles is
uncertain. It depends on many economic and
social factors that are beyond the control of
GMAC, the Seller and the Trust. Sales incentive
programs and financing incentive programs of
General Motors and other vehicle manufacturers
also affect the sale and lease of vehicles.
If the dealers' ability to pay on the
Receivables declines for whatever reason, you
might experience reductions or delays in
payments on your Term Notes.
IN LIMITED CIRCUMSTANCES
GMAC MAY BE REQUIRED TO
REPURCHASE RECEIVABLES;
GMAC AND THE SELLER DO NOT
GUARANTEE PAYMENTS ON THE
RECEIVABLES OR THE TERM NOTES GMAC, the Seller and their respective affiliates
are generally not obligated to make any payments
to you with respect to your Term Notes and do
not guarantee payments on the Receivables or
your Term Notes. However, GMAC will make
representations and warranties with respect to
the characteristics of the Receivables and such
representations and warranties will then be
assigned to the Trust. If GMAC breaches the
representations and warranties, it may be
required to repurchase the applicable
Receivables from the Trust.
If GMAC fails to repurchase such Receivables,
you might experience reductions or delays in
payments on your Term Notes.
THE TRUST ASSETS ARE LIMITED
TO THE RECEIVABLES AND ANY
FORMS OF CREDIT ENHANCEMENT No Trust will have any significant assets or
sources of funds other than its Receivables, its
rights in any Reserve Fund, or other rights or
credit enhancements as specified in the related
prospectus supplement. The Term Notes will
represent interests in the related Trust only.
Except as described in the related prospectus
supplement, the Term Notes will not be insured
or
8
<PAGE> 10
guaranteed by GMAC, the Seller, the Trustee, any
of their affiliates or any other person or
entity.
You must rely primarily on payments on the
related Receivables and on the Reserve Fund for
repayment of your Term Notes. In addition, you
may have to look to the proceeds from the
repossession and sale of collateral which
secures defaulted Receivables and the proceeds
from any recourse against dealers under the
financing agreements. If these sources are
insufficient, you might experience reductions or
delays in payments on your Term Notes. See "The
Transfer and Servicing Agreements--Liquidity and
Credit Support" and "Certain Legal Aspects" in
this prospectus.
THE MARKET MAY BE LIMITED
FOR ANY RESALE OF THE TERM
NOTES The underwriters may assist in the resale of the
Term Notes, but they are not required to do so.
A secondary market for any Term Notes may not
develop. If a secondary market does develop, it
might not continue or it might not be
sufficiently liquid to allow you to resell any
of your Term Notes.
THE RATINGS ON THE TERM
NOTES ARE LIMITED IN SCOPE The Term Notes for each Trust will be issued
only if they receive the required rating. A
security rating is not a recommendation to buy,
sell or hold the Term Notes. The ratings may be
revised or withdrawn at any time. Ratings on the
Term Notes do not address the timing of
distributions of principal on the Term Notes
prior to the date specified in the prospectus
supplement as the rated final maturity date.
9
<PAGE> 11
THE SERVICER
GMAC, a wholly-owned subsidiary of General Motors, was incorporated in 1919
under the New York Banking Law relating to investment companies. GMAC
relinquished this status and became a Delaware corporation on January 1, 1998.
Operating directly and through subsidiaries and associated companies in which it
has equity investments, GMAC provides a wide variety of automotive financial
services to and through franchised General Motors dealers in many countries
throughout the world. Financial services 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 and investment services.
The principal business of GMAC and its subsidiaries is to finance the
acquisition and resale by franchised General Motors dealers of various new
automotive and nonautomotive products manufactured by General Motors or certain
of its subsidiaries and associates, and to acquire from such dealers, either
directly or indirectly, instalment obligations covering retail sales and leases
of new General Motors and other manufacturers' 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).
THE SELLER
Wholesale Auto Receivables Corporation (the "SELLER"), a wholly-owned
subsidiary of GMAC, was incorporated in the State of Delaware on November 24,
1992. The Seller is organized for the limited purposes of purchasing Receivables
from GMAC, transferring such Receivables to third parties, forming trusts and
engaging in related activities. The principal executive offices of the Seller
are located at Corporation Trust Center, 1209 Orange Street, Wilmington,
Delaware 19801 (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 voluntary or involuntary
application for relief by GMAC under the United States Bankruptcy Code or
similar applicable state laws ("INSOLVENCY LAWS") will result in consolidation
of the assets and liabilities of the Seller with those of GMAC. These steps
include the creation of the Seller as a separate, limited-purpose subsidiary
pursuant to a certificate of incorporation containing certain limitations
(including restrictions on the nature of the Seller's business and a restriction
on the Seller's ability to commence a voluntary case or proceeding under any
Insolvency Law without the unanimous affirmative vote of all of its directors).
Under certain circumstances, the Seller is required to have at least one
director who qualifies under its By-laws as an "Independent Director." 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.
10
<PAGE> 12
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:
- 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,
- Collections on such Receivables and
- 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" in this Prospectus.
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
11
<PAGE> 13
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 further
described herein and in the Prospectus Supplement related to any Term Notes
offered hereby. See "The Revolving Notes" and "The Certificates" in this
Prospectus. 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" in this
Prospectus. 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. All or a portion of
the Certificates may be retained by the Seller or its affiliates or may be sold
to third party investors that are unaffiliated with the Seller, GMAC and the
Trust.
THE OWNER TRUSTEE
The Owner Trustee for each Trust will be specified in the related
Prospectus Supplement. The Owner Trustee's liability in connection with the
issuance and sale of the Securities is limited solely to the express obligations
of such Owner Trustee set forth in the related Trust Agreement. An Owner Trustee
may resign at any time, in which event the Servicer, or its successor, will be
obligated to appoint a successor trustee. The Administrator of a Trust may also
remove the Owner Trustee if the Owner Trustee ceases to be eligible to continue
as Owner Trustee under the related Trust Agreement or if the Owner Trustee
becomes insolvent. In such circumstances, the Administrator will be obligated to
appoint a successor trustee. Any resignation or removal of an Owner Trustee and
appointment of a successor trustee will not become effective until acceptance of
the appointment by the successor trustee.
USE OF PROCEEDS
Unless otherwise provided in the related Prospectus Supplement, the net
proceeds to be received by the Seller from the sale of the Securities will be
applied 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
12
<PAGE> 14
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, 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:
- credit lines or accounts under which advances are made to finance
Vehicles and other vehicles (including medium and heavy duty trucks and
off-highway vehicles)
- credit lines or accounts under 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 Auction Vehicles. In states where demonstration cars must be titled,
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
from the manufacturer to the dealer (known as a "HOLDBACK") in varying amounts
as a percentage of the invoice price. Holdbacks 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
begins accruing on that receivable on or following the estimated delivery date
of the Vehicle to the dealer (which date is approximately concurrent with the
receipt of the 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 the Vehicle as set forth in
a used vehicle wholesale guide book 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). Used Vehicle receivables are
originated by GMAC on the date on which funds are actually advanced to a dealer.
13
<PAGE> 15
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 under the following circumstances:
- the dealer has exceeded the credit guidelines set by GMAC
- the dealer is experiencing financial difficulties
- the dealer is experiencing 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. Depending
on the size of the requested credit line and the financial profile of the
dealer, the local branch office transmits this recommendation with the requisite
documentation to the appropriate office. In some cases, the local branch office
may contact 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. Generally, a credit line for New Vehicles is
intended to be an amount sufficient to finance a 60-90 day supply and for Used
Vehicles is generally an amount sufficient to finance a 30-60 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,
14
<PAGE> 16
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
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" in this Prospectus.
DEALER PAYMENT TERMS
GMAC may demand payment of interest and principal on a floor plan loan at
virtually any time. However, unless GMAC terminates the credit line or the
dealer defaults, 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 (a) an appropriate term established for each
dealership based on risk and exposure of the account or (b) 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 , in most cases, to
the Prime Rate plus a designated spread above the Prime Rate. 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.
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" in this Prospectus.
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.
15
<PAGE> 17
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" in
this Prospectus.
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 generally reconciles a dealer's
physical inventory with its records of financed vehicles. Among other things,
audits are 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, and
- 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:
- an orderly liquidation in which the dealer voluntarily liquidates its
inventory through normal sales and leases to customers;
- a self-help or court-ordered seizure and sale of the dealer's inventory
by GMAC; or
- a voluntary surrender to GMAC and sale of the dealer's inventory.
16
<PAGE> 18
GMAC may sell such new vehicle inventories to the related motor vehicle
manufacturer, including under 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" in this Prospectus.
RELATIONSHIP OF THE DEALER FLOOR PLAN FINANCING BUSINESS TO GENERAL MOTORS
General Motors has historically provided financial assistance to General
Motors-franchised dealers from time to time, but has no obligation to do so.
This assistance may take the form of guarantees and agreements to repurchase
inventory. General Motors through various initiatives may also contribute
capital to some General Motors-franchised dealers in the form of an equity
investment in the dealership.
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. Under this program, General
Motors provides a subsidy to General Motors-franchised dealers to assist such
dealers in making interest payments to financing sources, including GMAC. This
program encourages 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 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.
17
<PAGE> 19
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 from 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 by GMAC to the related Dealers 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" in this Prospectus. 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 related 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.
The Seller will have the right 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" in this Prospectus. The
designation of Additional Accounts is subject to the condition, among other
things, that each such Additional Account must be an Eligible Account. Under the
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" in this Prospectus.
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, GMAC cannot assure that it 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.
18
<PAGE> 20
The amount of new Receivables generated in any month and monthly payment
rates on the Receivables may vary because of any of the following factors:
- 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 (including definition of terms)
are incorporated by reference as part of this summary.
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 Cedelbank 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"). 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" in this Prospectus.
19
<PAGE> 21
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 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. If the related
Prospectus Supplement so provides, specified Early Amortization Events may be
designated as a "CASH ACCUMULATION EVENT," in which case a "CASH ACCUMULATION
PERIOD" will commence. During any Cash Accumulation Period, allocated Principal
Collections will be invested in a cash accumulation account dedicated to the
holders of the series of Term Notes described in the Prospectus Supplement until
the planned date or dates for repayment of that series of Term Notes.
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
20
<PAGE> 22
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 (1)
principal payments with disproportionate, contingent, nominal or no interest
payment, or (2) 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:
(1) to correct or amplify the description of the collateral or add
additional collateral;
(2) to provide for the assumption of the Notes and the Indenture
obligations by a permitted successor to the Trust;
(3) to add additional covenants for the benefit of the related
Noteholders;
(4) to convey, transfer, assign, mortgage or pledge any property to or
with the Indenture Trustee;
(5) to cure any ambiguity or correct or supplement any provision in
the Indenture or in any supplemental indenture which may be inconsistent
with any other provision of the Indenture or of any supplemental indenture;
(6) 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;
(7) to modify, eliminate or add to the provisions of the Indenture in
order to comply with the Trust Indenture Act;
(8) to increase the Specified Maximum Revolver Balance (in accordance
with the conditions therefor in the related Trust Sale and Servicing
Agreement); and
(9) 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 (9) does not adversely affect in any material respect the interests
of any related Noteholder unless Noteholder consent is otherwise obtained
as described below.
21
<PAGE> 23
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:
(1) 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;
(2) impair the right to institute suit for the enforcement of certain
provisions of the Indenture regarding payment;
(3) reduce the percentage of the aggregate principal amount of the
outstanding Notes the consent of the holders of which is required for any
such supplemental indenture or the consent of the holders of which is
required for any waiver of compliance with certain provisions of the
Indenture or of certain defaults thereunder and their consequences as
provided for in the Indenture;
(4) modify 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;
(5) reduce the percentage of the aggregate outstanding principal
amount of the Notes the consent of the holders of which is required to
direct the Indenture Trustee to sell or liquidate the Trust Estate if the
proceeds of such sale would be insufficient to pay the principal amount and
accrued but unpaid interest on the outstanding Notes;
(6) decrease the percentage of the aggregate outstanding principal
amount of the Notes required to amend the sections of the Indenture which
specify the applicable percentage of aggregate outstanding principal amount
of the Notes necessary to amend the Indenture; or
(7) permit the creation of any lien ranking prior to or on a parity
with the lien of the Indenture with respect to any part of the 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:
(1) any failure to pay interest on the related Notes as and when the
same becomes due and payable, which failure continues unremedied for five
days;
(2) any failure (a) to make any required payment of principal on the
related Notes or (b) to observe or perform in any material respect any
other covenants or
22
<PAGE> 24
agreements in the Indenture, which failure in the case of a default under
this clause (2)(b) materially and adversely affects the rights of related
Noteholders, and which failure in either case continues for 30 days after
the giving of written notice of such failure (x) to the Trust 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;
(3) failure to pay the unpaid principal balance of any related series
of Notes by the respective Stated Final Payment Date for such series; and
(4) 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, the
Revolving Period will recommence in certain circumstances. See "The Transfer and
Servicing Agreements--Early Amortization Events" in this Prospectus.
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:
(1) collect amounts due or foreclose on Trust property,
(2) exercise remedies as a secured party,
(3) sell the related Trust Estate or
(4) 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:
(1) the holders of all the outstanding Notes of such Trust consent to
such sale,
(2) the proceeds of such sale are sufficient to pay in full the
principal of and the accrued interest on such outstanding Securities at the
date of such sale or
(3) 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
23
<PAGE> 25
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. 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:
(1) such holder previously has given to the Indenture Trustee written
notice of a continuing Event of Default,
(2) the holders of not less than 25% in aggregate principal amount of
the outstanding Notes, 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,
(3) such holder or holders have offered the Indenture Trustee
reasonable indemnity,
(4) the Indenture Trustee has for 60 days failed to institute such
proceeding and
(5) no direction inconsistent with such written request has been given
to the Indenture Trustee during such 60-day period by the holders of a
majority in aggregate principal amount of such outstanding Notes.
If an Event of Default occurs and is continuing with respect to any Trust
and if it is known to the Indenture Trustee, the Indenture Trustee will mail
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
24
<PAGE> 26
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,
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
(1) the entity formed by or surviving such consolidation or merger is
organized under the laws of the United States, any state or the District of
Columbia,
(2) such entity expressly assumes the Trust's obligation to make due
and punctual payments on the Notes and the performance or observance of
every agreement and covenant of the Trust under the Indenture,
(3) no Event of Default shall have occurred and be continuing
immediately after such merger or consolidation,
(4) 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
(5) 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"),
(1) sell, transfer, exchange or otherwise dispose of any of the assets
of the Trust,
(2) claim any credit on or make any deduction from the principal 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,
(3) dissolve or liquidate in whole or in part,
(4) permit the validity or effectiveness of the related Indenture to
be impaired or permit any person to be released from any covenants or
obligations with respect to the related Notes under such Indenture except
as may be expressly permitted thereby or
25
<PAGE> 27
(5) permit any lien, charge, excise, claim, security interest,
mortgage or other encumbrance to be created on or extend to or otherwise
arise upon or burden the 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,
(1) a brief report relating to its eligibility and qualification to
continue as Indenture Trustee under the related Indenture,
(2) any amounts advanced by it under the Indenture,
(3) the amount, interest rate and maturity date of certain
indebtedness owing by the Trust to the Indenture Trustee in its individual
capacity,
(4) the property and funds physically held by the Indenture Trustee as
such. and
(5) 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 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
26
<PAGE> 28
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:
(1) the amount, if any, of the distribution allocable to principal on
each series of Term Notes;
(2) the amount, if any, of the distribution allocable to interest on
each series of Term Notes;
(3) the aggregate outstanding principal balance for each series of
Term Notes, after giving effect to all payments reported under (1) above on
such date;
(4) the aggregate principal balance of the Revolving Notes and the
aggregate Certificate Balance;
(5) if applicable, the amount of outstanding Servicer Advances on such
date;
(6) 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;
(7) the interest rate applicable for the next Payment Date for any
series of Term Notes with variable or adjustable rates;
(8) the amount, if any, withdrawn from or credited to any Reserve
Fund;
(9) the accumulated interest shortfalls, if any, on each series or
class of Securities and the change in such amounts from the preceding
Payment Date;
(10) the Trust Charge-Offs allocated to each series or class of
Securities and the change in such amounts from the preceding Payment Date;
and
(11) 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 (1), (2) and (9) 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" in this
Prospectus.
BOOK-ENTRY REGISTRATION
The Depository Trust Company ("DTC") is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the New York UCC
and a
27
<PAGE> 29
"clearing agency" registered pursuant to Section 17A of the Exchange Act. DTC
was created to hold securities for its Participants and to facilitate the
clearance and settlement of securities transactions between Participants through
electronic book-entries, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks, trust
companies and clearing corporations. Indirect access to the DTC system also is
available to others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Participant, either
directly or indirectly ("INDIRECT PARTICIPANTS").
Unless otherwise specified in the related Prospectus Supplement, owners of
beneficial interest in Notes ("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.
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 Cedelbank or Euroclear in Europe if they
are participants of such systems, or indirectly through organizations which are
participants in such systems.
28
<PAGE> 30
Cedelbank and Euroclear will hold omnibus positions on behalf of their
participants through customers' securities accounts in Cedelbank's and
Euroclear's names on the books of their respective depositories which in turn
will hold such positions in customers' securities accounts in the depositories'
names on the books of DTC.
Transfers between Cedelbank Participants (as defined below) and Euroclear
Participants (as defined below) will occur in accordance with their respective
rules and operating procedures. Cross-market transfers between persons holding
directly or indirectly through DTC, on the one hand, and directly or indirectly
through Cedelbank Participants or Euroclear Participants, on the other hand,
will be effected in DTC in accordance with DTC rules on behalf of the relevant
European international clearing systems by its depositary. Cross-market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in such system in accordance
with its rules and procedures and within its established deadlines (European
time). The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to its
depositary to take action to effect final settlement on its behalf by delivering
or receiving securities in DTC, and making or receiving payment in accordance
with normal procedures for same-day funds settlement applicable to DTC.
Cedelbank Participants and Euroclear Participants may not deliver instructions
directly to the depositories.
Because of time-zone differences, credits of securities received in
Cedelbank or Euroclear as a result of a transaction with a Participant will be
made during subsequent securities settlement processing and dated the Business
Day following the DTC settlement date. Such credits or any transactions in such
securities settled during such processing will be reported to the relevant
Euroclear or Cedelbank Participants on such Business Day. Cash received in
Cedelbank or Euroclear as a result of sales of securities by or through a
Cedelbank Participant or a Euroclear Participant to a Participant will be
received with value on the DTC settlement date but will be available in the
relevant Cedelbank or Euroclear cash account only as of the Business Day
following settlement in DTC. For information with respect to tax documentation
procedures, see "Certain Federal Income Tax Consequences--Tax Characterization
and Treatment of Term Notes--Tax Consequences to Foreign Noteholders" in this
Prospectus.
Cedelbank is incorporated under the laws of Luxembourg as a professional
depository. Cedelbank holds securities for its participating organizations
("CEDELBANK PARTICIPANTS") and facilitates the clearance and settlement of
securities transactions between Cedelbank Participants through electronic
book-entry changes in accounts of Cedelbank Participants, thereby eliminating
the need for physical movement of certificates. Transactions may be settled in
Cedelbank in any of 28 currencies, including United States dollars. Cedelbank
provides to Cedelbank Participants, among other things, services for
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. Cedelbank interfaces with
domestic markets in several countries. As a professional depository, Cedelbank
is subject to regulation by the Luxembourg Monetary Institute. Cedelbank
Participants are recognized financial institutions around the world, including
underwriters, securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations and may include the Underwriters.
Indirect access to Cedelbank is also available to others, such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Cedelbank Participant, either directly or indirectly.
29
<PAGE> 31
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 Cedelbank or
Euroclear will be credited to the cash accounts of Cedelbank Participants or
Euroclear Participants in accordance with the relevant system's rules and
procedures, to the extent received by its depositary. Such distributions will be
subject to tax reporting in accordance with relevant United States tax laws and
regulations. See "Certain Federal Income Tax Consequences--Tax Characterization
and Treatment of Term Notes--Information Reporting and Backup Withholding" in
this Prospectus. Cedelbank or the Euroclear Operator, as the case may be, will
take any other action permitted to be taken by a Term Noteholder under the
Indenture or other Related Document on behalf of a Cedelbank Participant or
Euroclear Participant only in accordance with its relevant rules and procedures
and subject to its depositary's ability to effect such actions on its behalf
through DTC.
Although DTC, Cedelbank and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Term Notes among participants of
DTC, Cedelbank and Euroclear, they are under no obligation to perform or
continue to perform such procedures and such procedures may be discontinued at
any time.
30
<PAGE> 32
Except as required by law, neither the Administrator, the Owner Trustee nor
the Indenture Trustee will have any liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests of the
Notes or the Certificates of any series held by Cede, as nominee for DTC, by
Cedelbank or by Euroclear in Europe, or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
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
(1) 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,
(2) the Administrator, at its option, elects to terminate the
book-entry system through the Depository, or
(3) 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.
31
<PAGE> 33
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:
(1) allocated to the Seller in payment for Receivables purchased by
the Trust,
(2) allocated to the Revolver Distribution Account as a payment of
principal on the Revolving Notes, or
(3) 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, 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" in this Prospectus.
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 the
Seller, and the Revolving Note or an interest therein may be sold by GMAC or the
Seller in a private placement to a third-party investor. Thereafter, a Revolving
Note or an interest therein 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
32
<PAGE> 34
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. 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:
(1) 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,
(2) the Trust Sale and Servicing Agreement pursuant to which the Trust
will acquire those Receivables from the Seller and agree to the servicing
of the Receivables by the Servicer,
(3) the Trust Agreement pursuant to which the Trust will be created
and Certificates will be issued and
(4) 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 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
33
<PAGE> 35
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" in this Prospectus. 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" in this Prospectus.
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.
34
<PAGE> 36
REPRESENTATIONS AND WARRANTIES
In each Pooling and Servicing Agreement, GMAC will represent and warrant to
the Seller, among other things, that:
(1) 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
(2) 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 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,
(1) 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
(2) 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 (1) the principal amount thereof is adjusted downward
because of a rebate, refund, credit adjustment or billing error to the related
Dealer, or (2) 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 Trust Principal Collections 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.
35
<PAGE> 37
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:
(1) 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
(2) 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:
(1) 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
(2) 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 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
36
<PAGE> 38
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:
(1) each such Additional Account must be an Eligible Account;
(2) 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
(3) 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:
(1) 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;
37
<PAGE> 39
(2) 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
(3) 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.
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
38
<PAGE> 40
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
(1) a segregated account with an Eligible Institution or
(2) 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
(1) the corporate trust department of the related Indenture Trustee or
Owner Trustee, as applicable, or
(2) a depository institution organized under the laws of the United
States of America or any one of the states thereof or the District of
Columbia (or any domestic branch of a foreign bank),
(a) which has either (i) a long-term unsecured debt rating
acceptable to the Rating Agencies or (ii) a short-term unsecured debt
rating or certificate of deposit rating acceptable to the Rating
Agencies and (b) whose deposits are insured by the Federal Deposit
Insurance Corporation or any successor thereto.
Any other accounts to be established with respect to a Trust will be
described in the related Prospectus Supplement.
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, 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
39
<PAGE> 41
benefit until the Business Day immediately preceding the related Distribution
Date if at any time the following conditions are satisfied:
(1) GMAC is the Servicer,
(2) no Servicing Default has occurred and is continuing and
(3) GMAC either
(a) maintains a short-term debt rating of at least A-1 by Standard
& Poor's and P-1 by Moody's,
(b) 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
(c) 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.
Notwithstanding the foregoing, 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. The Prospectus Supplement may describe
additional circumstances under which daily deposits will be required.
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
40
<PAGE> 42
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
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.
41
<PAGE> 43
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 further 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 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.
42
<PAGE> 44
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,
43
<PAGE> 45
deposits or other remittances will be treated 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:
(1) 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;
(2) 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;
(3) 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;
(4) on any Distribution Date, the average of the Monthly Payment Rates
for the three preceding Collection Periods is less than 25%;
(5) the amount on deposit in the related Reserve Fund is less than the
Reserve Fund Required Amount on three consecutive Distribution Dates;
(6) 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
44
<PAGE> 46
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;
(7) 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;
(8) 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 20% of the
Daily Trust Balance (for purposes of this clause (8), General Motors
vehicles which are sold to daily rental car operations, repurchased
pursuant to General Motors repurchase agreements and subsequently sold at
auction to a General Motors- franchised dealer will not be considered to be
Used Vehicles);
(9) 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;
(10) 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));
(11) 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; and
(12) 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
45
<PAGE> 47
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 (6)
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 classes of
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
(1) 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
(2) 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 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
46
<PAGE> 48
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:
(1) in the Servicer's reasonable belief, no Early Amortization Event
will occur as a result of the change,
(2) 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
(3) 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 (a) the weighted average of the rates of interest
payable to related Securityholders and (b) the Monthly Servicing Fee for
the related period.
47
<PAGE> 49
The Servicer is not, however, precluded from 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:
(1) 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;
(2) 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;
(3) 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
(4) 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.
48
<PAGE> 50
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 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
49
<PAGE> 51
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:
(1) any failure by the Servicer to make any required distribution,
payment, transfer or deposit or to direct the related Indenture Trustee to
make any required distribution, which failure continues unremedied for five
Business Days after written notice from the Indenture Trustee or the Owner
Trustee is received by the Servicer or after discovery of such failure by
an officer of the Servicer;
(2) any failure by the Servicer 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;
(3) any representation, warranty or certification made by the Servicer
in such Trust Sale and Servicing Agreement or in any certificate delivered
pursuant thereto proves to have been incorrect when made and 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
(4) 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 (1) above for a period of
ten Business Days or under clauses (2) or (3) 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.
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
50
<PAGE> 52
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
51
<PAGE> 53
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.
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
(1) to cure any ambiguity,
(2) to correct or supplement any provision therein that may be
defective or inconsistent with any other provision therein,
(3) 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),
(4) 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
(5) 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
(1) 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,
52
<PAGE> 54
(2) adversely affect the rating of any series by any Rating Agency
without the consent of two-thirds of the principal amount of the
outstanding Notes or the Voting Interests of the outstanding Certificates,
as appropriate, of such series or
(3) reduce the aforesaid percentage required to consent to any such
amendment without the consent of such aforesaid percentage of
Securityholders.
INSOLVENCY EVENTS
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
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" in this Prospectus.
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
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
wilful 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, wilful 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
53
<PAGE> 55
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 earlier to
occur of
(1) 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, and
(2) 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.
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.
54
<PAGE> 56
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.
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 any such 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" in this Prospectus. 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.
55
<PAGE> 57
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 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 at least one director who qualifies under the
by-laws as "Independent
56
<PAGE> 58
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
57
<PAGE> 59
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 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 Code, existing and proposed Treasury regulations
thereunder, current administrative rulings, judicial decisions and other
applicable authorities. There are no cases or 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. 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 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 to the effect that the Notes will be treated as debt for federal income
tax purposes. The Seller, the Servicer and each Noteholder, by acquiring an
interest in a Note, will agree to treat the Notes as indebtedness for federal,
58
<PAGE> 60
state and local income and franchise tax purposes. See "Tax Characterization of
the Trust--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 Note and Certificates
for federal income tax purposes.
Treatment of Stated Interest. Based on the foregoing opinion, and assuming
the Notes are not issued with original issue discount ("OID"), the stated
interest on a Note will be taxable to a Noteholder as ordinary income when
received or accrued in accordance with such Noteholder's method of tax
accounting. Interest received on a Note may constitute "investment income" for
purposes of certain limitations of the Code concerning the deductibility of
investment interest expense.
Original Issue Discount. Except to the extent indicated in the related
Prospectus Supplement, no series of Notes will be issued with OID. In general,
OID is the excess of the "stated redemption price at maturity" of a debt
instrument over its "issue price," unless such excess falls within a statutorily
defined de minimis exception. A Note's "stated redemption price at maturity" is
the aggregate of all payments required to be made under the Note through
maturity except "qualified stated interest." "Qualified stated interest" is
generally interest that is unconditionally payable in cash or property (other
than debt instruments of the issuer) at fixed intervals of one year or less
during the entire term of the instrument at certain specified rates. The "issue
price" will be the first price at which a substantial amount of the Notes are
sold, excluding sales to bond holders, brokers or similar persons acting as
underwriters, placement agents or wholesalers.
If a Note were treated as being issued with OID, a Noteholder would be
required to include OID in income as interest over the term of the Note under a
constant yield method. In general, OID must be included in income in advance of
the receipt of cash representing that income. Thus, each cash distribution would
be treated as an amount already included in income (to the extent OID has
accrued as of the date of the interest distribution and is not allocated to
prior distributions), or as a repayment of principal. This treatment would have
no significant effect on Noteholders using the accrual method of accounting.
However, cash method Noteholders may be required to report income with respect
to the Notes in advance of the receipt of cash attributable to such income. Even
if a note has OID falling within the de minimis exception, the Noteholder must
include such OID in income proportionately as principal payments are made on
such Note.
A holder of a Note which has a fixed maturity date not more than one year
from the issue date of such Note (a "SHORT-TERM NOTE") will generally not be
required to include OID on the Note in income as it accrues, provided such
holder is not an accrual method taxpayer, a bank, a broker or dealer that holds
the Note as inventory, a regulated investment company or common trust fund, or
the beneficial owner of certain pass-through entities specified in the Code, or
provided such holder does not hold the instrument as part of a hedging
transaction, or as a stripped bond or stripped coupon. Instead, the holder of a
Short-Term Note would include the OID accrued on the Note in gross income upon a
sale or exchange of the Note or at maturity, or if such Note is payable in
installments, as principal is paid thereon. Such a holder would be required to
defer deductions for any interest expense on an obligation incurred to purchase
or carry the Short-Term Note to the extent it exceeds the sum of the interest
income, if any, and OID accrued on such Note. However, a holder may elect to
include OID in income as it accrues on all obligations having a maturity of one
year or less held by the holder in that taxable year or thereafter, in which
case the deferral rule of the preceding sentence will not apply. For purposes of
this paragraph, OID accrues on a Short- Term Note on a ratable (straight-line)
basis,
59
<PAGE> 61
unless the holder irrevocably elects (under regulations to be issued by the
Treasury Department) with respect to such obligation to apply a constant
interest method, using the holder's yield to maturity and daily compounding.
A holder who purchases a Note after the initial distribution thereof at a
discount that exceeds a statutorily defined de minimis amount will be subject to
the "market discount" rules of the Code, and a holder who purchases a Note at a
premium will be subject to the bond premium amortization rules of the Code.
Disposition of Notes. If a Noteholder sells a Note, the holder will
recognize gain or loss in an amount equal to the difference between the amount
realized on the sale and the holder's adjusted tax basis in the Note. The
adjusted tax basis of the Note to a particular Noteholder will equal the
holder's cost for the Note, increased by any OID and market discount previously
included by such Noteholder in income with respect to the Note and decreased by
any bond premium previously amortized and any principal payments previously
received by such Noteholder with respect to such Note. Any such gain or loss
will be capital gain or loss if the Note was held as a capital asset, except for
gain representing accrued interest or accrued market discount not previously
included in income. Capital gain or loss will be long-term if the Note was held
by the holder for more than one year and otherwise will be short-term. Any
capital losses realized generally may be used by a corporate taxpayer only to
offset capital gains, and by an individual taxpayer only to the extent of
capital gains plus $3,000 of other income.
Notes Subject to Contingencies. The United State federal income tax
consequences to a holder of the ownership and disposition of Notes that provide
for one or more contingent payments will vary depending on the exact terms of
the Notes and related factors. Such Notes may be subject to rules that differ
from the general rules discussed above. The United States federal income tax
consequences to a holder of Notes that provide for contingent payments will be
summarized in the applicable Prospectus Supplement.
Information Reporting and Backup Withholding. The Trustee will be required
to report annually to the IRS, and to each related Noteholder of record, the
amount of interest paid on the Notes (and the amount of interest withheld for
federal income taxes, if any) for each calendar year, except as to exempt
holders (generally, corporations, tax-exempt organizations, qualified pension
and profit-sharing trusts, individual retirement accounts, or nonresident aliens
who provide certification as to their status). Each holder will be required to
provide to the Trustee, under penalties of perjury, a certificate containing the
holder's name, address, correct federal taxpayer identification number and a
statement that the holder is not subject to backup withholding. Should a
nonexempt Noteholder fail to provide the required certification, the 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.
The IRS has issued new regulations governing the backup withholding and
information reporting requirements. The new regulations are generally effective
for payments made after December 31, 1999. Noteholders should consult their tax
advisors with respect to the impact, if any, of the new regulations.
Because the Seller will, 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.
60
<PAGE> 62
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 (1) 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 (2) 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. 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. The IRS has amended
the transition period relating to new regulations governing withholding, backup
withholding and information reporting requirements. Withholding certificates or
statements that are valid on December 31, 1999, may be treated as valid until
the earlier of its expiration or December 31, 2000. All existing certificates or
statements will cease to be effective after December 31, 2000.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a Term Note by a foreign person will be exempt from
United States federal income and withholding tax, provided that (1) the gain is
not effectively connected with the conduct of a trade or business in the United
States by the foreign person, and (2) in the case of a foreign individual, the
foreign person is not present in the United States for 183 days or more in the
taxable year.
If the interest, gain or income on a 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 relevant Prospectus Supplement 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
"check-the-box" Treasury regulations, the Trust will be treated as a division of
the Seller, and hence a disregarded entity for federal income tax purposes. In
other words, for federal income tax purposes, the Seller will be treated as the
owner of all the assets of the Trust and the obligor of all the
61
<PAGE> 63
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 federal income tax
purposes. Under the "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
62
<PAGE> 64
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 there is more than
one Certificateholder, 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 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
63
<PAGE> 65
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 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).
64
<PAGE> 66
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.
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
65
<PAGE> 67
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 generally 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 regimes potentially apply to different portions of this
transaction. Prospective investors are urged to consult with their 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 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
66
<PAGE> 68
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; PTCE 95-60. regarding transactions by
life insurance company general accounts; and PTCE 96-23, regarding transactions
affected by in-house asset managers.
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
67
<PAGE> 69
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.
Each Prospectus Supplement will either:
(1) 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
(2) 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.
WHERE YOU CAN FIND MORE INFORMATION
We filed a registration statement relating to the Securities (the
"REGISTRATION STATEMENT") with the Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended (the "SECURITIES ACT"). This
Prospectus is part of the Registration Statement, but the Registration Statement
includes additional information.
68
<PAGE> 70
The Servicer will file with the SEC all required annual, monthly and
special SEC reports and other information about the Trust.
You may read and copy any reports, statements or other information we file
at the SEC's public reference room in Washington, D.C. You can request copies of
these documents, upon payment of a duplicating fee, by writing to the SEC.
Please call the SEC at (800) SEC-0330 for further information on the operation
of the public reference rooms. Our SEC filings are also available to the public
on the SEC Internet site (http://www.sec.gov).
INCORPORATION BY REFERENCE
The SEC allows us to "incorporate by reference" information we file with
it, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this Prospectus. Information that we file later with the SEC will
automatically update the information in this Prospectus. In all cases, you
should rely on the later information over different information included in this
Prospectus or the accompanying Prospectus Supplement. We incorporate by
reference any future SEC reports and materials filed by or on behalf of the
Trust until we terminate our offering of the Certificates.
As a recipient of this Prospectus, you may request a copy of any document
we incorporate by reference, except exhibits to the documents (unless the
exhibits are specifically incorporated by reference), at no cost, by writing us
at: General Motors Acceptance Corporation, 3044 West Grand Boulevard, Detroit,
Michigan 48202.
69
<PAGE> 71
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 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 or others.
"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 (1) through (16) of the
definition of Eligible Receivable.
"Available Trust Interest" means, with respect to each Trust, for any
Distribution Date, the sum of (1) Trust Interest Collections, (2) Investment
Proceeds and (3) receipts under credit, liquidity and other enhancement
arrangements and other amounts available to
70
<PAGE> 72
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 (1) Trust Principal Collections for the related
Collection Period, (2) Additional Trust Principal and (3) 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."
"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 Accumulation Event" has the meaning set forth in "The Term Notes--
Principal and Interest on the Term Notes."
"Cash Accumulation Period" has the meaning set forth in "The Term Notes--
Principal and Interest on the Term Notes."
"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 at least 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.
"Cedelbank 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" means the Asset-Backed Certificates issued by the Trust.
"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
71
<PAGE> 73
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):
(1) the outstanding aggregate principal amount of the related Term
Notes on such date plus
(2) the outstanding Certificate Balance on such date plus
(3) the Net Revolver Balance for such date minus
(4) the Cash Collateral Amount for such date minus
(5) any amounts held on such date in a related Distribution Account,
Cash Accumulation Account or other account for payment of principal on the
Notes or distribution of Certificate Balance on the Certificates, minus,
(6) 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
72
<PAGE> 74
outstanding Available Receivables with respect to such Dealer or group of
affiliated Dealers to the extent, if any, of the excess of:
(1) the aggregate principal balance of all such Available Receivables
on such date over
(2) 1.0% (or such other percentage as may be set forth in the related
Prospectus Supplement) of the sum of (a) the Specified Maximum Revolver
Balance and (b) 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."
73
<PAGE> 75
"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:
(1) the payment in full of all outstanding Securities issued by such
Trust,
(2) the recommencement of the Revolving Period (if and to the extent
described herein or in the related Prospectus Supplement); and
(3) 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:
(1) 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;
(2) has been established by GMAC or General Motors;
(3) is maintained and serviced by GMAC;
(4) is not a Fleet Account; and
(5) 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):
(1) 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;
(2) 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;
(3) which is payable in United States dollars;
(4) 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
74
<PAGE> 76
interest therein and the related Vehicle Collateral Security (including any
proceeds thereof);
(5) which is advanced against a Vehicle;
(6) 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;
(7) 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;
(8) which was created in compliance in all material respects with all
requirements of law applicable thereto;
(9) 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);
(10) 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);
(11) 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;
(12) which, at the time of transfer thereof by GMAC to the Seller, 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 related
Dealer;
(13) 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;
(14) 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;
(15) which constitutes "chattel paper," an "account" or a "general
intangible" as defined in Article 9 of the UCC as in effect in the State of
Michigan;
(16) with respect to which the related Dealer has not postponed
principal payment pursuant to DPP (or any similar arrangement) or any
instalment payment program;
(17) which does not constitute a Dealer Overconcentration Receivable;
and
(18) 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 and is reassigned by the related Trust
to GMAC or the Seller pursuant to the related Transfer and Servicing
Agreements.
75
<PAGE> 77
"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:
(1) the aggregate principal balance of Available Receivables less the
aggregate principal balance of Dealer Overconcentration Receivables over
(2) the Maximum Pool Balance.
If, on any date, there exist Excess Available Receivables, those
Receivables constituting Excess Available Receivables shall be identified
pursuant to the related Trust Sale and Servicing Agreement.
"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 Delaware corporation,
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:
(1) 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, marshaling 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,
76
<PAGE> 78
(2) the consent by such entity to the appointment of a conservator,
receiver or liquidator in any insolvency, bankruptcy, readjustment of debt,
marshaling 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
(3) 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" means the Internal Revenue Service.
"Marine Accounts" means credit lines or accounts pursuant to which advances
are made to finance new and used boats and related items.
"Maximum Pool Balance" means, with respect to each Trust, the sum of
(1) the Maximum Revolver Balance,
(2) 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
(3) 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 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
77
<PAGE> 79
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 (1) the average daily balance of Daily Trust Invested Amount for the
related Collection Period and (2) 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 (1) the quotient obtained by dividing (a)
360 by (b) the actual number of days elapsed in such Collection Period and (2)
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 not Auction Vehicles, that generally have been driven
less than 200 miles and that are either (a) untitled or (b) titled solely for
purposes of state laws requiring demonstration vehicles to be titled.
"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" means the Term Notes and the Revolving Notes.
"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.
78
<PAGE> 80
"Payment Period" means, with respect to a series of 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 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.
"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, on any date in a semi-monthly period:
(1) when used to describe the interest rate borne by the Receivables,
the interest rate designated by GMAC as the effective "prime rate" for such
semi-monthly period, such description being based on the prime rate of
selected financial institutions as of the day preceding such semi-monthly
period; or
(2) when used with reference to the Basis Swaps, the interest rate
borne by the Receivables during the corresponding semi-monthly period in
the preceding calendar month.
"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, including the principal portion of Warranty Payments and
Administrative Purchase Payments.
"Prospectus Supplement" means a supplement to this Prospectus which
describes one or more series of Term Notes.
"PTCE" has the meaning set forth in "ERISA Considerations."
"PTP" has the meaning set forth in "Certain Federal Income Tax
Consequences--Tax Characterization of the Trust."
"PTP Regulations" has the meaning set forth in "Certain Federal Income Tax
Consequences--Tax Characterization of the Trust."
"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.
79
<PAGE> 81
"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" means the Asset-Backed Revolving Notes issued by the
Trust.
"Revolving Period" means, with respect to each Trust, the period commencing
on the Initial Cut-Off Date and continuing until the earlier of (1) the
commencement of an Early Amortization Period and (2) 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."
"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.
80
<PAGE> 82
"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" means Asset-Backed Term Notes issued by the Trust.
"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.
"Trust" means the one or more trusts which issue the Securities.
81
<PAGE> 83
"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.
82
<PAGE> 84
"Voting Interests" means, as of any date, the aggregate outstanding
Certificate Balance of all Certificates; provided, however, that if GMAC and its
affiliates own less than 100% of the Certificates, Certificates owned by GMAC,
the Trust or any affiliate of GMAC or the Trust (other than the Seller) shall be
disregarded and deemed not to be outstanding, except that, in determining
whether the Owner Trustee shall 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 shall 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 GMAC or the Trust (other
than the Seller).
"Warranty Payment" has the meaning set forth in "The Transfer and Servicing
Agreements--Representations and Warranties."
"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 (1) the commencement of an Early Amortization
Period and (2) 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.
83
<PAGE> 85
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses to be incurred in
connection with the offering of the Term Notes, other than underwriting
discounts and commissions, described in this Registration Statement:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $1,112,000
Fees and expenses of Trustee Printing Registration
Statement, Prospectus and other documents Accountants'
fees...................................................... 1,360,000
Rating Agencies' fees....................................... 2,000,000
Miscellaneous expenses...................................... 1,028,000
----------
Total..................................................... $5,500,000
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Wholesale Auto Receivables Corporation is incorporated under the laws of
Delaware. Section 145 of the Delaware General Corporation Law provides that a
Delaware corporation may indemnify any persons, including officers and
directors, who are, or are threatened to be made, parties to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of such
corporation, by reason of the fact that such person was an officer, director,
employee or agent of such corporation, or is or was serving at the request of
such corporation as a director, officer, employee or agent of another
corporation or enterprise). The indemnity may include expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding, provided such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the corporation's best interests
and, for criminal proceedings, had no reasonable cause to believe that his
conduct was illegal. A Delaware corporation may indemnify officers and directors
in an action by or in the right of the corporation under the same conditions,
except that no indemnification is permitted without judicial approval if the
officer or director is adjudged to be liable to the corporation. Where an
officer or director is successful on the merits or otherwise in the defense of
any action referred to above, the corporation must indemnify him against the
expenses which such officer or director actually and reasonably incurred.
Wholesale Auto Receivables Corporation's Certificate of Incorporation
provides, in effect, that, subject to certain limited exceptions, such
corporation will indemnify its officers and directors to the extent permitted by
Delaware General Corporation Law.
Certain controlling persons of the Registrant may also be entitled to
indemnification from General Motors Acceptance Corporation, the direct parent of
the Registrant. Under Section 145, General Motors Acceptance Corporation may or
shall, subject to various exceptions and limitations, indemnify its directors or
officers and may purchase and maintain insurance as follows:
(a) The Certificate of Incorporation, as amended, of General Motors
Acceptance Corporation provides that no director shall be personally liable
to General Motors Acceptance Corporation or its stockholders for monetary
damages for breach of
II-1
<PAGE> 86
fiduciary duty as a director, except for liability (i) for any breach of
the director's duty of loyalty to General Motors Acceptance Corporation or
its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174, or any successor provision thereto, of the Delaware
Corporation Law, or (iv) for any transaction from which the director
derived an improper personal benefit.
(b) Under Article VI of its By-Laws, General Motors Acceptance
Corporation shall indemnify and advance expenses to every director and
officer (and to such person's heirs, executors, administrators or other
legal representatives) in the manner and to the full extent permitted by
applicable law as it presently exists, or may hereafter be amended, against
any and all amounts (including judgments, fines, payments in settlement,
attorneys' fees and other expenses) reasonably incurred by or on behalf of
such person in connection with any threatened, pending or completed action,
suit or proceeding, whether civil, criminal administrative or investigative
(a "proceeding"), in which such director or officer was or is made or is
threatened to be made a party or is otherwise involved by reason of the
fact that such person is or was a director or officer of General Motors
Acceptance Corporation, or is or was serving at the request of General
Motors Acceptance Corporation as a director, officer, employee, fiduciary
or member of any other corporation, partnership, joint venture, trust,
organization or other enterprise. General Motors Acceptance Corporation
shall not be required to indemnify a person in connection with a proceeding
initiated by such person if the proceeding was not authorized by the Board
of Directors of General Motors Acceptance Corporation. General Motors
Acceptance Corporation shall pay the expenses of directors and officers
incurred in defending any proceeding in advance of its final disposition
("advancement of expenses"); provided, however, that the payment of
expenses incurred by a director or officer in advance of the final
disposition of the proceeding shall be made only upon receipt of an
undertaking by the director or officer to repay full amounts advanced if it
should be ultimately determined that the director or officer is not
entitled to be indemnified under Article VI of the By-Laws or otherwise. If
a claim for indemnification or advancement of expenses by an officer or
director under Article VI of the By-Laws is not paid in full within ninety
days after a written claim therefor has been received by General Motors
Acceptance Corporation, the claimant may file suit to recover the unpaid
amount of such claim, and if successful in whole or in part, shall be
entitled to the requested indemnification or advancement of expenses under
applicable law. The rights conferred on any person by Article VI of the
By-Laws shall not be exclusive of any other rights which such person may
have or hereafter acquire under any statute, provision of the Certificate
of Incorporation, By-Laws, agreement, vote of stockholders or disinterested
directors of General Motors Acceptance Corporation or otherwise. The
obligation, if any, of General Motors Acceptance Corporation to indemnify
any person who was or is serving at its request as a director, officer or
employee of another corporation, partnership, joint venture, trust,
organization or other enterprise shall be reduced by any amount such person
may collect as indemnification from such other corporation, partnership,
join venture, trust, organization or other enterprise.
As a subsidiary of General Motors Corporation, General Motors Acceptance
Corporation is insured against liabilities which it may incur by reason of the
foregoing provisions of the Delaware General Corporation Law and directors and
officers of General Motors Acceptance Corporation are insured against some
liabilities which might arise out
II-2
<PAGE> 87
of their employment and not be subject to indemnification under said General
Corporation Law.
Pursuant to resolutions adopted by the Board of Directors of General Motors
Corporation, General Motors Corporation, to the fullest extent permissible under
law, will indemnify, and has purchased insurance on behalf of, directors or
officers of the Company, or any of them, who incur or are threatened with
personal liability, including expenses, under Employee Retirement Income
Security Act of 1974 or any amendatory or comparable legislation or regulation
thereunder.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<C> <S>
**1.1 Form of Underwriting Agreement for the Term Notes
**4.1 Form of Indenture between the Trust and the Indenture
Trustee
*5.1 Opinion of Kirkland & Ellis with respect to legality
*8.1 Opinion of Kirkland & Ellis with respect to legality
*23.1 Consent of Kirkland & Ellis (included as part of Exhibit
5.1)
*25.1 Statement of Eligibility of the Trustee
**99.1 Form of Pooling and Servicing Agreement between General
Motors Acceptance Corporation and the Seller
**99.2 Form of Trust Sale and Servicing Agreement among the Trust,
the Seller and the Servicer
**99.3 Form of Trust Agreement between the Seller and the Owner
Trustee
**99.4 Form of Administration Agreement among the Servicer, the
Owner Trustee and the Indenture Trustee
**99.5 Form of Custodian Agreement between the Seller and the
Custodian
99.6 Form of Prospectus Supplement
**99.7 Certificate of Incorporation of the Seller
**99.8 By-laws of the Seller
</TABLE>
- -------------------------
* To be filed by amendment.
** Previously filed under registration no. 33-50323
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this registration statement;
II-3
<PAGE> 88
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in this registration statement
or any material change to such information in the registration
statement;
(2) That, for the purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes:
(1) For the purpose of determining any liability under the Securities
Act of 1993, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to file an application for the
purpose
of determining the eligibility of the Indenture Trustee to act under subsection
(a) of section 310 of the Trust Indenture Act ("Act") in accordance with the
rules and regulations prescribed by the Commission under section 305(b)(2) of
the Act.
II-4
<PAGE> 89
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing Form S-3 and has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Detroit, State of Michigan, on the 2nd day of June, 1999.
WHOLESALE AUTO RECEIVABLES CORPORATION
/s/ WILLIAM F. MUIR
--------------------------------------
(William F. Muir, Chairman of the
Board)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on June 2, 1999 by the following
persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ WILLIAM F. MUIR Chairman of the Board and Director
- ------------------------------------------------ (Principal Executive Officer)
(William F. Muir)
/s/ JOHN D. FINNEGAN President and Director (Principal
- ------------------------------------------------ Operating Officer)
(John D. Finnegan)
/s/ PAUL D. BULL Vice President and Director
- ------------------------------------------------
(Paul D. Bull)
/s/ JOHN E. GIBSON Vice President and Director
- ------------------------------------------------
(John E. Gibson)
/s/ DAVID C. WALKER Vice President and Director
- ------------------------------------------------
(David C. Walker)
/s/ JEROME B. VAN ORMAN JR. Vice President and Director
- ------------------------------------------------
(Jerome B. Van Orman Jr.)
/s/ DAVID J. BROPHY Director
- ------------------------------------------------
(David J. Brophy)
/s/ ROBERT D. KEMP JR. Director
- ------------------------------------------------
(Robert D. Kemp Jr.)
/s/ GERALD E. GROSS Comptroller
- ------------------------------------------------ (Principal Accounting Officer)
(Gerald E. Gross)
</TABLE>
II-5
<PAGE> 90
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
**1.1 Form of Underwriting Agreement for the Term Notes
**4.1 Form of Indenture between the Trust and the Indenture
Trustee
*5.1 Opinion of Kirkland & Ellis with respect to legality
*8.1 Opinion of Kirkland & Ellis with respect to legality
*23.1 Consent of Kirkland & Ellis (included as part of Exhibit
5.1)
*25.1 Statement of Eligibility of the Trustee
**99.1 Form of Pooling and Servicing Agreement between General
Motors Acceptance Corporation and the Seller
**99.2 Form of Trust Sale and Servicing Agreement among the Trust,
the Seller and the Servicer
**99.3 Form of Trust Agreement between the Seller and the Owner
Trustee
**99.4 Form of Administration Agreement among the Servicer, the
Owner Trustee and the Indenture Trustee
**99.5 Form of Custodian Agreement between the Seller and the
Custodian
99.6 Form of Prospectus Supplement
**99.7 Certificate of Incorporation of the Seller
**99.8 By-laws of the Seller
</TABLE>
- -------------------------
* To be filed by amendment.
** Previously filed under registration no. 33-50323
<PAGE> 1
YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-7 IN THIS
PROSPECTUS SUPPLEMENT AND PAGE 6 IN THE PROSPECTUS.
The information in this preliminary prospectus supplement is not complete and
may be changed. This preliminary prospectus supplement is not an offer
The 1999-A Term Notes represent obligations of the Trust only and do not
represent obligations of or interests in, and are not guaranteed to sell these
securities and we are not soliciting offers to buy these securities in any state
where the offer or sale is not permitted.
by, Wholesale Auto Receivables Corporation, General Motors Acceptance
Corporation or any of their affiliates.
This prospectus supplement may be used to offer and sell the Term Notes
only if accompanied by the prospectus.
EXHIBIT 99.6
SUBJECT TO COMPLETION, DATED JUNE 2, 1999
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED , 1999
SUPERIOR WHOLESALE INVENTORY FINANCING TRUST [ ]
[$ ] Floating Rate Asset Backed Term Notes, Series [ ]
WHOLESALE AUTO RECEIVABLES CORPORATION
Seller
GENERAL MOTORS ACCEPTANCE CORPORATION
Servicer
The Trust will issue [ ] Term Notes to the
public--
<TABLE>
<CAPTION>
<S> <C>
--------------------------------------------------------------
Principal amount [$ ]
--------------------------------------------------------------
Interest rate [One-Month] LIBOR plus %
annually
--------------------------------------------------------------
Targeted final payment date 200 Distribution Date
--------------------------------------------------------------
Price to public %
--------------------------------------------------------------
Underwriting discount %
--------------------------------------------------------------
Proceeds to seller [$ ]
--------------------------------------------------------------
</TABLE>
The Trust will also issue the following securities, which
are not offered hereby--
- [ ] Revolving Note, with a maximum revolver
balance of [$ ].
- Class [ ] Certificates, with a certificate
balance of [$ ].
CREDIT ENHANCEMENT
- Reserve Fund, with a deposit of [$ ].
- Cash Accumulation Reserve Fund, with a deposit of
[$ ].
- The Certificates are subordinated to all of the Notes.
This prospectus supplement and the accompanying prospectus relate only to the
offering of the [ ] Term Notes. The Revolving Note and the Certificates
are not offered under these documents.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED THAT THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS
IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
Underwriter
[NAME OF UNDERWRITER]
, 1999
<PAGE> 2
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We provide information to you about the [ ] Term Notes in two
separate documents:
(a) the prospectus, which provides general information and terms of
the Term Notes, some of which may not apply to a particular series of Term
Notes, including the [ ] Term Notes.
(b) this prospectus supplement, which will provide information
regarding the pool of contracts held by the Trust and will specify the
terms of the [ ] Term Notes.
IF THE TERMS OF THE [ ] TERM NOTES VARY BETWEEN THE PROSPECTUS AND
THIS PROSPECTUS SUPPLEMENT, YOU SHOULD RELY ON THE INFORMATION IN THIS
PROSPECTUS SUPPLEMENT.
You should rely only on the information provided in the accompanying
prospectus and this prospectus supplement, including the information
incorporated by reference. We have not authorized anyone to provide you with
other or different information. We are not offering the [ ] Term Notes
in any state where the offer is not permitted. We do not claim that the
information in the accompanying prospectus and this prospectus supplement is
accurate on any date other than the dates stated on their respective covers.
You can find a listing of the pages where certain capitalized terms used in
this prospectus supplement are defined under the caption "Index of Terms" which
appears at the end of this prospectus supplement. Certain capitalized terms used
but not defined in this prospectus supplement have the meanings assigned in the
prospectus.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
SUMMARY..................................................... S-2
RISK FACTORS................................................ S-7
THE TRUST................................................... S-8
THE U.S. PORTFOLIO.......................................... S-9
THE POOL OF ACCOUNTS........................................ S-12
THE [ ] TERM NOTES.................................. S-13
THE REVOLVING NOTES......................................... S-16
THE [ ] CERTIFICATES................................ S-18
THE TRANSFER AND SERVICING AGREEMENTS....................... S-20
ERISA CONSIDERATIONS........................................ S-46
CERTAIN FEDERAL INCOME TAX CONSEQUENCES..................... S-46
UNDERWRITING................................................ S-47
LEGAL OPINIONS.............................................. S-48
INDEX OF PRINCIPAL TERMS.................................... S-49
PROSPECTUS
SUMMARY OF TERMS............................................ 3
RISK FACTORS................................................ 6
THE SERVICER................................................ 10
THE SELLER.................................................. 10
THE TRUSTS.................................................. 11
USE OF PROCEEDS............................................. 12
THE DEALER FLOOR PLAN FINANCING BUSINESS.................... 12
THE ACCOUNTS................................................ 18
MATURITY AND PRINCIPAL CONSIDERATIONS....................... 18
THE TERM NOTES.............................................. 19
THE REVOLVING NOTES......................................... 32
THE CERTIFICATES............................................ 32
THE TRANSFER AND SERVICING AGREEMENTS....................... 33
CERTAIN LEGAL ASPECTS....................................... 55
CERTAIN FEDERAL INCOME TAX CONSEQUENCES..................... 58
STATE AND LOCAL TAX CONSEQUENCES............................ 66
ERISA CONSIDERATIONS........................................ 66
PLAN OF DISTRIBUTION........................................ 67
LEGAL OPINIONS.............................................. 68
WHERE YOU CAN FIND MORE INFORMATION......................... 68
INCORPORATION BY REFERENCE.................................. 69
GLOSSARY OF TERMS........................................... 70
</TABLE>
<PAGE> 4
SUMMARY OF TRANSACTION PARTIES*
<TABLE>
<S><C>
GENERAL MOTORS
ACCEPTANCE
CORPORATION
(Originator, Servicer
and Swap
Counterparty)
WHOLESALE
Servicer/ AUTO
Swap Counterparty RECEIVABLES
CORPORATION
(Seller)
SUPERIOR (Owner Trustee)
WHOLESALE
INVENTORY
FINANCING
TRUST __
(Issuer)
(Indenture Trustee)
[_______]
[____] TERM NOTES REVOLVING NOTE [_____] CERTIFICATES
(not offered hereby) (not offered hereby)
</TABLE>
(*) This chart provides only a simplified overview of the relations between the
key parties to the transaction. Refer to this prospectus supplement and the
prospectus for a further description.
S-1
<PAGE> 5
SUMMARY
- This Summary highlights selected information from this document and does
not contain all of the information that you need to consider in making
your investment decision. To understand the terms of this offering of the
[ ] Term Notes, carefully read this entire document and the
accompanying prospectus.
THE PARTIES
Issuer/Trust
Superior Wholesale Inventory Financing Trust , a Delaware business trust
formed by the Seller.
Seller
Wholesale Auto Receivables Corporation, a wholly-owned subsidiary of GMAC.
Servicer
GMAC, a wholly-owned subsidiary of General Motors Corporation.
Indenture Trustee
[ ]
Owner Trustee
[ ]
CAPITALIZATION OF THE TRUST
General
On the initial closing date, , , the Trust will issue the following
securities:
- - [$ ] Floating Rate Asset Backed Term Notes, Series [ ],
which we refer to as the "[ ] TERM NOTES." The [ ] Term Notes will
bear interest, payable monthly, at a rate equal to one-month LIBOR plus
[ ] basis points annually.
- - Floating Rate Asset Backed Revolving Note, Series [ ] with a maximum
revolver balance of [$ ], which we refer to as the "[ ]
REVOLVING NOTE."
- - [$ ] Floating Rate Asset Backed Certificates, Class
[ ], which we refer to as the "[ ] CERTIFICATES."
Only the [ ] Term Notes are offered hereby. The [ ] Revolving
Note and the [ ] Certificates will initially be retained by the Seller and
are not offered hereby. An interest in the [ ] Revolving Note will be sold
in a private placement.
The [ ] Term Notes will be registered in the name of the nominee for the
Depository Trust Company. You may hold your [ ] Term Notes through the
book-entry systems of DTC in the United States or Cedelbank or Euroclear in
Europe.
After the initial closing date, the Trust may issue from time to time additional
series of Term Notes and Revolving Notes and additional Certificates.
We use the term "Notes" to mean the [ ] Term Notes, the [ ]
Revolving Note issued on the initial closing date and any additional series of
Term Notes or Revolving Notes. We use the term "Securities" to mean the Notes,
the [ ] Certificates and any additional Certificates.
Subordination
The [ ] Certificates will be subordinated to all series of Notes. The
[ ] Certificates will receive no principal until the Notes are fully paid
or an allocation of principal sufficient to fully pay the Notes has been made.
The [ ] Revolving Note and the [ ] Term Notes will generally have
equal priority in
S-2
<PAGE> 6
payments, although the timing of payments may vary.
Basis Swaps
On the initial closing date, the Trust will enter into a basis swap for the
benefit of the [ ] Term Notes. The swap counterparty, GMAC, will pay to
the Trust on each distribution date, interest at a per annum rate of LIBOR plus
[ %]. The Trust will pay the swap counterparty interest at a per annum rate
equal to the prime rate. Only the net amount due by the Trust or by the swap
counterparty, as the case may be, will be remitted. The Trust will enter into
similar basis swaps with GMAC for the benefit of the [ ] Revolving Note
and the [ ] Certificates.
PAYMENTS ON THE [ ] TERM NOTES
Interest
- - The Trust will pay interest on the [ ] Term Notes monthly, on the [15th]
day of each month (or on the next business day), which we refer to as the
"DISTRIBUTION DATE." The first distribution date is [ , ].
- - The prospectus and this prospectus supplement describe how the available funds
are allocated to interest payments on the [ ] Term Notes and other
Securities.
- - The Trust will pay interest on the [ ] Term Notes based on the [actual
number of days] elapsed and a [360-day year]. Interest will accrue from and
including the initial closing date, or from and including the most recent
distribution date on which interest has been paid to but excluding the current
distribution date.
Principal Payments
- - We expect that the Trust will pay the entire principal balance of the
[ ] Term Notes on their targeted final payment date, which is the
distribution date in [ ] 200[ ].
- - Starting approximately five months before this targeted final payment date,
the Servicer will calculate the number of months in which the Trust will
allocate principal collections to the repayment of the [ ] Term Notes on
the targeted final payment date. We refer to this period as the "PAYMENT
PERIOD." The Trust will accumulate the allocated principal collections during
the payment period in an account for the [ ] Term Notes.
- - The Trust could make principal payments on the [ ] Term Notes sooner
than the targeted final payment date if a "RAPID AMORTIZATION EVENT" occurs.
The rapid amortization events for the [ ] Term Notes are:
- - General Motors, GMAC or the Seller becomes insolvent;
- - the [ ] Term Notes are not paid in full by their stated final payment
date;
- - the Trust or the Seller is required to register under the Investment Company
Act; and
- - the balance in the cash accumulation reserve fund declines below [$ ].
On each distribution date after the occurrence of a rapid amortization event,
the Trust will apply allocated principal collections and other available funds
to repay principal on the [ ] Term Notes.
- - It is also possible that the Trust will not repay the entire principal balance
of the [ ] Term Notes on or before the targeted final payment date. If
principal collections are slower than anticipated during the payment period,
then the payment of principal on the targeted final payment date could be
insufficient to repay all of the [ ] Term
S-3
<PAGE> 7
Notes' principal balance. In that case, allocable principal collections will
be applied to the repayment of principal on the [ ] Term Notes on
subsequent distribution dates.
- - All unpaid principal on the [ ] Term Notes will be due on the stated
final payment date, which is the distribution date in [ ] 200[ ].
Failure to pay the [ ] Term Notes in full on the stated final
payment date will result in an event of default and a rapid amortization
event.
- - The Servicer may repurchase all of the remaining receivables when:
- the daily Trust balance is equal to or less than [10%] of the highest sum,
at any time since the initial closing date, of the daily Trust balance plus
cash held by the Trust plus deposits in the cash accumulation account and
the Note distribution account, and
- either no Term Notes are outstanding or the wind down period is in effect.
CREDIT ENHANCEMENT AND LIQUIDITY
The [ ] Term Notes will be repaid primarily from principal and interest
collections on the receivables. In addition, there are several additional
sources from which funds will be available to pay principal and interest on the
[ ] Term Notes as well as other payments which the Trust must make,
including:
- - The basis swap for the [ ] Term Notes;
- - Any excess of the interest collected on the receivables over the interest and
basis swap expense of the Trust;
- - Advances by the Servicer to the Trust in some circumstances;
- - Subordination of payments on the Certificates to payments on the Notes;
- - Monies in the reserve fund; and
- - In some circumstances, monies in the cash accumulation reserve fund.
ASSETS OF THE TRUST
The primary assets of the Trust will be a revolving pool of receivables arising
under floor plan financing agreements between GMAC and a group of retail
automotive dealers franchised by General Motors. These agreements are lines of
credit which dealers use to purchase new and used motor vehicles manufactured or
distributed by General Motors and other motor vehicle manufacturers and
distributors. We refer to the dealers' obligations under these agreements as
"RECEIVABLES."
The receivables will be sold by GMAC to the Seller, and then by the Seller to
the Trust. The Trust will grant a security interest in the receivables and other
Trust property to the Indenture Trustee on behalf of the Noteholders. The Trust
property will also include:
- - Basis swaps for the [ ] Term Notes, the [ ] Revolving Note and the
[ ] Certificates;
- - Security interests in the collateral securing the dealers' obligation to pay
the receivables, which will include vehicles and may include parts inventory,
equipment, fixtures, service accounts, real estate and guarantees;
- - Amounts held on deposit in trust accounts maintained for the Trust;
- - Any recourse GMAC has against the dealers under the floor plan financing
agreements;
- - Certain rights of the Seller under its purchase agreement with GMAC; and
- - All rights of the Trust under its sale and servicing agreement with the
Seller.
S-4
<PAGE> 8
Revolving Pool
As new receivables arise, they will ordinarily be transferred to the Trust on a
daily basis. At the same time, prior to the date on which funds will first be
set aside for payments on the [ ] Term Notes, the Trust will ordinarily
use principal collections on the receivables to purchase new receivables from
the Seller or to pay down the principal balance on the [ ] Revolving Note.
The Trust could also retain principal collections and invest them in eligible
investments, if sufficient new receivables were not available.
Cash Accumulation
If a "CASH ACCUMULATION EVENT" occurs, the Trust will retain all of the
principal collections allocable to the [ ] Term Notes and will invest them
in eligible investments in a cash accumulation account dedicated to the
[ ] Term Notes. The Trust will continue to invest these funds in eligible
investments until the targeted final payment date for the [ ] Term Notes,
or until any sooner repayment following the occurrence of a rapid amortization
event. Cash accumulation events generally occur upon defaults under the
underlying transaction agreements and upon failure to satisfy various
performance tests or measurements on the pool of receivables (e.g., the payment
rate on the receivables, the composition of the receivables pool, the
characteristics of the receivables and the amount on deposit in the reserve
fund). Each of the early amortization events identified in the prospectus under
"The Transfer and Servicing Agreements--Early Amortization Events" is a cash
accumulation event, other than those which are rapid amortization events.
In addition, the termination of any basis swap identified in this prospectus
supplement is generally also a cash accumulation event.
RESERVE FUNDS
- - On the closing date, the Seller will deposit [$ ] in cash or eligible
investments into the reserve fund. If available, amounts will be added or
released on each distribution date to maintain the balance at a specified
reserve amount.
- - To the extent that funds from principal and interest collections on the
receivables and net receipts on the basis swaps are not sufficient to pay the
monthly servicing fee, net amounts under the basis swaps and to make required
distributions on the Notes, the Trust will withdraw cash from the reserve fund
for that purpose.
- - On any distribution date, after the Trust pays the monthly servicing fee and
makes all deposits or payments due on the Notes, the amount in the reserve
fund may exceed the specified reserve amount. If so, the Trust will pay the
excess to the Seller.
- - On the closing date, the Seller will deposit [$ ] in cash or eligible
investments into the cash accumulation reserve fund. This account will
supplement the funds available to pay interest on the [ ] Term Notes if
a cash accumulation event occurs. Amounts will be added or released on each
distribution date to maintain the balance at a specified reserve amount.
SERVICING FEES
The Trust will pay the Servicer a monthly [1%] per annum servicing fee as
compensation for servicing the receivables.
TAX STATUS
In the opinion of Kirkland & Ellis, special tax counsel, the [ ] Term
Notes will be characterized as indebtedness for Federal income tax purposes.
S-5
<PAGE> 9
Each Term Noteholder, by the acceptance of a [ ] Term Note, will agree to
treat the [ ] Term Notes as indebtedness for federal, state and local
income and franchise tax purposes.
ERISA CONSIDERATIONS
Subject to the considerations discussed under "ERISA Considerations," an
employee benefit plan subject to the Employee Retirement Income Security Act of
1974 may purchase the [ ] Term Notes. An employee benefit plan should
consult with its counsel before purchasing the [ ] Term Notes.
RATINGS
- - We will not issue the [ ] Term Notes unless they are rated in the
highest rating category for long-term obligations (i.e., "AAA") by at least
one nationally recognized rating agency.
- - We cannot assure you that a rating agency will maintain its rating if
circumstances change. If a rating agency changes its rating, no one has an
obligation to provide additional credit enhancement or restore the original
rating.
- - A rating is not a recommendation to buy the [ ] Term Notes. The rating
considers only the likelihood that the Trust will pay interest on time and
will ultimately pay principal. The rating does not consider either the
[ ] Term Notes' price, their suitability to a particular investor or the
timing of principal payments.
S-6
<PAGE> 10
RISK FACTORS
In addition to the risk factors on pages 6-9 of the prospectus, you should
consider the following risk factor in deciding whether to purchase the [ ]
Term Notes.
YEAR 2000 PROBLEM MAY AFFECT
COLLECTIONS AND DISTRIBUTIONS
OF RECEIPTS ON THE
RECEIVABLES We are aware of issues associated with the
programming code in existing computer systems as
the year 2000 approaches. The "year 2000
problem" is pervasive and complex; virtually
every computer operation will be affected in
some way by the rollover of the two digit year
value to 00. The issue is whether computer
systems will properly recognize date-sensitive
information when the year changes to 2000.
Systems that do not properly recognize this
information could generate erroneous data or
could fail.
We have been advised by each of the Servicer and
the Indenture Trustee to the extent applicable
to its services under the agreements to which it
is a party, that it is committed either to (1)
implement modifications to their respective
existing systems to the extent required to cause
them to be year 2000 ready or (2) acquire
computer systems that are year 2000 ready in
each case prior to January 1, 2000. However, we
have not made any independent investigation of
the computer systems of the Servicer or the
Indenture Trustee. In the event that computer
problems arise out of a failure of these efforts
to be completed on time, or in the event that
the computer systems of the Servicer or the
Indenture Trustee are not fully year 2000 ready,
the resulting disruptions in the collection or
distribution of receipts on the receivables
could materially and adversely affect your
investment.
S-7
<PAGE> 11
THE TRUST
The Issuer, Superior Wholesale Inventory Financing Trust [ ], is a
business trust formed under the laws of the State of Delaware. The Trust will be
established and operated pursuant to a Trust Agreement dated on or before
[ , ], (the "INITIAL CLOSING DATE").
The Trust will engage in only the following activities:
- acquire, hold and manage the Receivables and other assets of the
Trust;
- issue Securities;
- make payments on the Securities; and
- take any action necessary to fulfill the role of the Trust in
connection with the [ ] Term Notes, the [ ] Revolving
Note, the [ ] Certificates and any additional Securities issued
by the Trust.
The Trust's principal offices are in Wilmington, Delaware, in care of
[ ], as Owner Trustee, at the address listed under "--The
Owner Trustee" below.
CAPITALIZATION OF THE TRUST
The following table illustrates the capitalization of the Trust as of the
Initial Closing Date, as if the issuance of the [ ] Term Notes,
[ ] Revolving Note and [ ] Certificates had taken place on
such date and assuming the Specified Maximum Revolver Balance was borrowed on
such date under the [ ] Revolving Note:
<TABLE>
<S> <C>
[ ] Term Notes........................... $ [ ]
[ ] Revolving Note....................... [ ]
[ ] Certificates......................... [ ]
--------------
Total........................................... $ [ ]
==============
</TABLE>
The [ ] Certificates represent the equity of the Trust and will be
issued under the Trust Agreement. The [ ] Certificates will initially
be held by the Seller and are not being offered hereby.
THE OWNER TRUSTEE
[ ], a [ ] corporation, is the Owner Trustee
under the Trust Agreement (the "OWNER TRUSTEE"). Its principal offices are
located at [ ].
THE TRUST ESTATE
The property of the Trust (the "TRUST ESTATE") will include:
- the Seller's right, title and interest in, to and under
- the Eligible Receivables existing in the Accounts included in the Pool
of Accounts on [ ] (the "INITIAL CUT-OFF DATE")
S-8
<PAGE> 12
- the Eligible Receivables existing in any Additional Accounts added to
the Pool of Accounts on the related Additional Cut-Off Date
- the Eligible Receivables generated under each of the foregoing Accounts
from time to time thereafter so long as the Account is included in the
Pool of Accounts
- Collections on all the Eligible Receivables
- the related collateral security for the Eligible Receivables
- the Seller's rights and remedies under the Pooling and Servicing
Agreement associated with the Receivables transferred to the Trust;
- the initial Basis Swaps;
- the reserve funds, owned by the Seller and pledged to the Indenture
Trustee, including the Reserve Fund, the Cash Accumulation Reserve Fund
and the Certificate Reserve Fund, if any;
- the following accounts, including the amounts held therein:
- the Collection Account, including the Cash Collateral Amount
- the Cash Accumulation Account
- the distribution accounts for the Term Notes, Revolving Notes and
Certificates
- any other account hereafter established for the benefit of all holders
of Securities or for the benefit of a specific series
- any other Specified Support Arrangement or other assets transferred to
the Trust after the Initial Closing Date.
REINVESTMENT OF TRUST PRINCIPAL COLLECTIONS
Typically, the Trust will use all Trust Principal Collections to purchase
new Receivables or pay down the balance on the Revolving Notes. However, during
certain periods (e.g., during a Payment Period or Cash Accumulation Period for
the [ ] Term Notes), the Trust will accumulate Trust Principal
Collections and other available amounts allocated to Notes which have
accumulation provisions. The Trust will invest the accumulated amounts in
Eligible Investments to provide for repayment of principal on those Notes with
the accumulation provisions, such as the [ ] Term Notes, at their
Targeted Final Payment Dates. For a description of the application of principal
collections by the Trust in each of these periods, see "Transfer and Servicing
Agreements--Application of Principal Collections to the [ ] Term Notes"
in this Prospectus Supplement.
THE U.S. PORTFOLIO
GENERAL
As of [March 31, 1999], there were approximately [7,400] dealers with
active credit lines in the U.S. Portfolio and the total U.S. Portfolio (which
includes both owned receivables
S-9
<PAGE> 13
and serviced receivables) consisted of receivables with an aggregate principal
balance of approximately [$20.8] billion. GMAC is the primary source of floor
plan financing for General Motors-franchised dealers in the United States. In
the [first quarter of 1999], GMAC provided financing for approximately [66.9%]
of new factory sales to General Motors dealers in the United States.
As of [March 31, 1999], receivables with respect to New Vehicles
represented approximately [83%] of the aggregate principal amount of all
receivables in the U.S. Portfolio. Receivables with respect to Used Vehicles
represented approximately [9%] of the aggregate principal amount of all
receivables in the U.S. Portfolio. Other receivables (generally receivables with
respect to heavy-duty trucks, off-highway vehicles and marine units) represented
approximately [8%] of the aggregate principal amount of all receivables in the
U.S. Portfolio. As of [March 31, 1999], approximately [61%] of the Used Vehicles
in the U.S. Portfolio represented Auction Vehicles. As of [March 31, 1999], the
average Account in the U.S. Portfolio provided for credit lines for New Vehicles
and Used Vehicles of approximately [227] units and [49] units, respectively, and
the average principal balance of receivables thereunder was approximately [$2.6]
million and [$0.3] million, respectively.
In 1998, GMAC streamlined the billing process on its dealer incentive
programs. Rather than charge a spread over the Prime Rate and separately
distribute dealer incentives, dealers participating in the "Net Billing" program
are charged a spread that is reduced by any dealer incentives. As more dealers
participate in the Net Billing program, the spread over the Prime Rate charged
on the receivables is lower versus prior years. For the [three] months ended
[March 31, 1999], the weighted average spread over the Prime Rate charged to
dealers in the U.S. Portfolio was approximately [0.4%]. Certain dealers elect
not to participate in the Net Billing program and therefore continue to be
offered rebates under incentive programs. For the [three] months ended [March
31, 1999], the average annual rate of dealer credits on the U.S. Portfolio
ranged between [28] and [42] 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). We cannot assure you that the spread over the Prime Rate in the
future will be similar to historical experience.
As of [March 31, 1999], the aggregate principal amount financed with
respect to dealers assigned to "no credit" status was approximately [$7.2]
million or [0.04%] 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 certain 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
S-10
<PAGE> 14
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, might 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>
YEAR ENDED DECEMBER 31
THREE MONTHS ENDED ------------------------------------------------
MARCH 31, 1999 1998 1997 1996 1995
------------------ --------- --------- --------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Average Principal
Receivables
Balance(1).......... $19,510.4 $16,859.6 $18,276.0 $16,991.5 $17,559.4
Net Losses
(Recoveries)(2)..... $ 0.4 $ 11.8 $ (10.5) $ (8.1) $ 6.2
Net Losses
(Recoveries)/
Liquidations(3)..... 0.002% 0.014% (0.012)% (0.009)% 0.007%
Net Losses
(Recoveries)/Average
Principal
Receivables
Balance............. 0.008%(4) 0.070% (0.058)% (0.048)% 0.035%
</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.
(4) Annualized.
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.
S-11
<PAGE> 15
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>
YEAR ENDED DECEMBER 31
THREE MONTHS ENDED ----------------------------------
DAYS MARCH 31, 1999 1998 1997 1996 1995
---- ------------------ ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
1-120............................ 80.5% 90.2% 85.1% 82.2% 83.4%
121-180.......................... 12.9 4.9 8.0 9.0 7.0
181-270.......................... 4.9 2.9 3.5 5.0 5.0
Over 270......................... 1.7 2.0 3.4 3.8 4.6
</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. The payment
rates used below were calculated as set forth in the following equation:
<TABLE>
<S> <C> <C>
(principal collections during the period)
Payment Rate % = ------------------------------------------------------------
(ending principal balance of receivables for such period)
</TABLE>
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>
THREE MONTHS YEAR ENDED DECEMBER 31
ENDED ----------------------------------
MARCH 31, 1999 1998 1997 1996 1995
-------------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Highest Month........................ 47.6% 62.9% 54.2% 56.1% 51.4%
Lowest Month......................... 38.2 33.5 33.3 35.0 33.5
Average for the Months in the
Period............................. 42.1 47.3 43.3 45.1 42.1
</TABLE>
THE POOL OF ACCOUNTS
As of the close of business on [ , ], there were [1,024]
Accounts in the Pool of Accounts. As of [ , ], the average
principal balance of Receivables in such Accounts was approximately [$3.0]
million (approximately [82%] of which were Eligible Receivables) and the
weighted average spread over the Prime Rate charged to Dealers was approximately
[0.3%] for the month of [March 1999.] This spread over the Prime Rate does not
include rebates earned by Dealers under GMAC incentive programs that entitle
them to a credit based on interest charges. These credits do not affect the
spread over the Prime Rate earned by the Trust. As of [ , ], the
aggregate principal balance of Receivables under such Accounts was
[$ ] and, of such
S-12
<PAGE> 16
amount, [$ ] would qualify as Eligible Receivables (except for the
limit imposed by the Maximum Pool Balance).
GEOGRAPHIC DISTRIBUTION
The following table provides, as of [ , ], the geographic
distribution of the Accounts in the Pool of Accounts. As of the [ ,
], no other state accounted for more than [5.0%] of the principal amount of
Receivables outstanding in such Accounts.
GEOGRAPHIC DISTRIBUTION OF POOL ACCOUNTS RELATED TO THE TRUST
<TABLE>
<CAPTION>
PERCENTAGE OF
PERCENTAGE TOTAL
OF TOTAL NUMBER OF NUMBER OF
RECEIVABLES RECEIVABLES DEALER DEALER
STATE(1) OUTSTANDING OUTSTANDING ACCOUNTS ACCOUNTS
-------- ----------- ----------- --------- -------------
(THOUSANDS
OF DOLLARS)
<S> <C> <C> <C> <C>
[Illinois.........................
Texas.............................
Florida...........................
Michigan..........................
New York..........................
Georgia]..........................
</TABLE>
- -------------------------
(1) Based on Dealer address.
THE [ ] TERM NOTES
GENERAL
The [ ] 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. The Trust may issue
additional series of Term Notes after the Initial Closing Date. A copy of the
Indenture will be filed with the SEC following the issuance of the [ ]
Term Notes. The following summary describes certain terms of the [ ] 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 [ ] 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."
All distributions will be made on each Distribution Date to the holders of
the [ ] Term Notes of record as of the day preceding that Distribution
Date (or, if Definitive Term Notes are issued, as of the last day of the
preceding month).
S-13
<PAGE> 17
PAYMENTS OF INTEREST
Interest on the outstanding principal balance of the [ ] Term Notes
will accrue at the [ ] Term Note Interest Rate and will be payable on each
Distribution Date commencing [ ], 1999] (the "INITIAL DISTRIBUTION
DATE") until the [ ] Term Notes are paid in full. The "[ ] TERM NOTE
INTEREST RATE" will equal LIBOR plus [ %] per annum for each Distribution
Date.
Interest will accrue from and including the Initial Closing Date, or from
and including the most recent Distribution Date on which interest has been paid
to but excluding the current Distribution Date. Interest on the [ ] Term
Notes will be calculated on the basis of a year of 360 days and the actual
number of days occurring in the period for which interest is payable. Each
Distribution Date will be a Payment Date (as defined in the Prospectus) for the
[ ] Term Notes. Interest 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 [ ] Term Notes will have equal priority
with interest payments on other series of Term Notes, the [ ] Revolving
Note and other series of Revolving Notes and will be senior to distributions of
interest on the [ ] Certificates. Interest Collections will be applied to
make interest payments on the [ ] Term Notes as described under "The
Transfer and Servicing Agreement--Application of Interest Collections" in this
Prospectus Supplement.
"BUSINESS DAY" means 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, be closed.
"DISTRIBUTION DATE" means the 15th day of each month or, if any such date
is not a Business Day, the next Business Day, commencing [ , ].
"LIBOR" means, with respect to each Distribution Date, the rate for
deposits in U.S. Dollars for a period of one month which appears on the Dow
Jones Telerate Service Page 3750 as of 11:00 a.m., London time,
(x) for the [ ] Term Notes and the [ ] Certificates, on
the day that is two LIBOR Business Days prior to the Distribution Date
preceding such Distribution Date (or, for the Initial Distribution Date,
two LIBOR Business Days prior to the Initial Closing Date) and
(y) for the [ ] Revolving Note, on the day that is two LIBOR
Business Days prior to the first day of the related Collection Period (or,
for the Initial Distribution Date, two LIBOR Business Days prior to the
Initial Closing Date).
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
S-14
<PAGE> 18
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
[ ] Term Notes outstanding, the Certificate Balance of the [ ]
Certificates then outstanding or the aggregate principal amount of the
[ ] 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 [ ] Term Notes outstanding, the Certificate Balance of
the [ ] Certificates then outstanding or the aggregate principal amount
of the [ ] 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 PRINCIPAL
We expect that the Trust will pay the entire principal balance of the
[ ] Term Notes on the "[ ] TERM NOTE TARGETED FINAL PAYMENT DATE,"
which is the Distribution Date in [ ] 200[ ]. However, the Trust could
make principal payments sooner than the Targeted Final Payment Date if a Rapid
Amortization Event occurs. On each Distribution Date after the commencement of a
Rapid Amortization Period, the Trust will apply the portion of Available Trust
Principal allocated to the [ ] Term Notes and any funds held in the Cash
Accumulation Account and Note Distribution Subaccount to repay principal on the
[ ] Term Notes.
It is also possible that the Trust will not repay the entire principal
balance of the [ ] Term Notes on or before the Targeted Final Payment
Date. Starting on the [ ] 200[ ] Determination Date, the Servicer will
calculate the Required Payment Period Length to determine the date on which the
Trust will begin to accumulate principal collections for the purpose of repaying
principal of the [ ] Term Notes on their Targeted Final Payment Date. If
insufficient funds are accumulated during this period, then the payment of
principal on the Targeted Final Payment Date will be insufficient to repay all
of the 1999-A Term Note principal balance. If the [ ] Term Notes are not
paid in full on the Targeted Final Payment Date, on each Distribution Date
thereafter they will receive principal payments until paid in full or until
available funds are exhausted.
All unpaid principal on the [ ] Term Notes will be due on the
"[ ] TERM NOTE STATED FINAL PAYMENT DATE" for the [ ] Term
Notes, which is the Distribution Date in [ ] 200[ ]. Failure to pay the
[ ] Term Notes in full on their Stated Final Payment Date will result in
an event of default and an Early Amortization Event for the Trust and a Rapid
Amortization Event for the [ ] Term Notes.
S-15
<PAGE> 19
If the Servicer exercises its optional right to repurchase Receivables as
described in "The Transfer and Servicing Agreements--Optional Purchase by the
Servicer," then the proceeds of the repurchase will be treated as Trust
Principal Collections and Trust Interest Collections.
PRIORITY AMONG TERM NOTES
Payments of principal on the [ ] Term Notes will have at least
equal priority with payments of principal on other series of Term Notes that may
be issued from time to time by the Trust. Some series of Term Notes may also
have a Payment Period prior to the commencement of the Wind Down Period and may
have a Payment Period prior to, together with, or after the Payment Period for
the [ ] Term Notes.
DELIVERY OF NOTES
The [ ] Term Notes will be issued on or about the Initial Closing
Date in book entry form through the facilities of DTC, Cedelbank and the
Euroclear System against payment in immediately available funds. DTC has
informed its participants and other members of the financial community that it
has developed and is implementing a program to deal with the "Year 2000 problem"
so that its systems, as the same relate to the timely payment of distributions
(including principal and income payments) to securityholders, book-entry
deliveries, and settlement of trades with DTC, continue to function
appropriately.
THE REVOLVING NOTES
The Trust will issue the Revolving Notes under the Indenture. The following
summary describes certain terms of the Revolving Notes. 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 Revolving Notes, the Indenture and
the Prospectus. Where particular provisions or terms used in the Indenture are
referred to, the actual provisions, including definitions of terms, are
incorporated by reference as part of such summary.
On the Initial Closing Date, the Trust will issue the Floating Rate Asset
Backed Revolving Note, Series [ ]. References in this document to the
[ ] Revolving Note include all extensions and renewals thereof.
Initially, the Seller will retain the [ ] Revolving Note. It is expected
that the Seller will privately place an interest in the [ ] Revolving
Note on the Initial Closing Date.
PAYMENTS OF INTEREST
The Trust will pay interest on the [ ] Revolving Note at the
Revolver Interest Rate on each Distribution Date, commencing with the first
Distribution Date after the issuance of the [ ] Revolving Note. Other
series of Revolving Notes issued after the Initial Closing Date will be paid
interest in accordance with their terms, which may differ from the terms of the
[ ] Revolving Note. On each Distribution Date, interest will be
calculated based on the average daily Net Revolver Balance during the related
Collection Period. Interest on the [ ] Revolving Note accrued as of any
Distribution Date but not paid on such Distribution Date will be due on the next
Distribution Date.
S-16
<PAGE> 20
The "REVOLVER INTEREST RATE" for the [ ] Revolving Note issued on
the Initial Closing Date will be equal to, with respect to any Distribution
Date, the product of (1) 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 (2) LIBOR
plus [ %].
Payments of interest on the [ ] Revolving Note will have equal
priority to payments of interest on the Term Notes (including the [ ]
Term Notes) and will be senior in right of payment to distributions of interest
on the Certificates.
PAYMENTS OF PRINCIPAL AND ADDITIONAL BORROWINGS
The Trust may borrow funds under the [ ] Revolving Note during the
Revolving Period up to the Specified Maximum Revolver Balance. The holder of the
[ ] Revolving Note is under no obligation, however, to make advances
thereunder to the Trust. The "SPECIFIED MAXIMUM REVOLVER BALANCE" will initially
be [$ ] and may increase or decrease from time to time after the
Initial Closing Date as described in the Prospectus under "The Transfer and
Servicing Agreements--Additional Issuances; Changes in Specified Maximum
Revolver Balance." The Trust may issue additional series of Revolving Notes 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. The Trust will not borrow
additional funds under the Revolving Notes during the Wind Down Period or any
Early Amortization Period but may borrow funds during the Payment Period for the
[ ] Term Notes.
The Trust may pay principal on the Revolving Notes on a daily basis during
the Revolving Period, subject to the limitations described herein during the
Payment Period for the [ ] Term Notes and any other applicable
limitations during the Payment Period for any additional series of Term Notes.
During the Payment Period for the [ ] Term Notes, except for any series
of Revolving Notes then in a Payment Period, payments of principal on the
Revolving Notes may be made only after the [ ] Term Notes' Fully Funded
Date.
During the Revolving Period, payments of principal on the Revolving Notes
will be required to the extent set forth in the terms of such Revolving Notes.
The "[ ] REVOLVING NOTE TARGETED FINAL PAYMENT DATE" for the
[ ] Revolving Note to be issued on the Initial Closing Date will be the
Distribution Date in [ ] and the "[ ] REVOLVING NOTE STATED
FINAL PAYMENT DATE" for such [ ] Revolving Note will be the Distribution
Date in [ ] 200[ ]. The [ ] Revolving Note 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 preceding the then applicable Targeted Final Payment Date by
written notice from the affected holder thereof to the Indenture Trustee and the
Seller setting forth the new Targeted Final Payment Date; provided, that the
Targeted Final Payment Date may not occur during the Payment Period for any
series of Term Notes (or within two months thereafter) unless the holder of the
[ ] Revolving Note establishes such Targeted Final Payment Date by
notice to the Servicer delivered prior to the initial determination of the
payment period length for such series of Term Notes. The new Targeted Final
Payment Date must be a Payment Date on or prior to the then Stated
S-17
<PAGE> 21
Final Payment Date for the [ ] Revolving Note. Principal on the
[ ] Revolving Note will be due, to the extent of funds available for
such purpose, in three equal installments 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. These installments will be based on the outstanding balance as
of the last day of the Collection Period preceding the Collection Period related
to the first Distribution Date.
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 [ ] Term Notes will commence if,
among other things, any Revolving Note is not paid in full on its Stated Final
Payment Date.
THE [ ] CERTIFICATES
GENERAL
The Trust will issue the [ ] Certificates under the Trust Agreement,
a form of which the Seller has filed as an exhibit to the Registration Statement
of which this Prospectus Supplement forms a part. 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, including definitions of terms, 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 the [ ]
Certificates. Interest on the [ ] Certificates accrued as of any
Distribution Date but not distributed on a Distribution Date will be due on the
next Distribution Date.
The "CERTIFICATE RATE" for the [ ] Certificates issued on the Initial
Closing Date will be equal to, with respect to any Distribution Date, the
product of (1) 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)
LIBOR plus [ %].
Payments of interest on the Notes will be senior to distributions of
interest on the [ ] Certificates.
S-18
<PAGE> 22
CERTIFICATE BALANCE
Distributions will be made with respect to the Certificate Balance on the
[ ] Certificates after the Trust has paid each series of Term Notes and
Revolving Notes (including Notes issued after the Initial Closing Date) in full
or, with respect to each series of Term Notes for which principal is being
accumulated, the Fully Funded Date has occurred. The Stated Final Payment Date
for the [ ] Certificates will be on the Distribution Date in
[ ] 200[ ]. If the [ ] Certificates have not been paid in full
on or prior to such date, an Early Amortization Period for the Trust will
commence.
"CERTIFICATE BALANCE" means, as of any Distribution Date, with respect to
the [ ] Certificates (a) [$ ], plus (b) the principal amount
of [ ] Certificates issued after the Initial Closing Date,minus (c) all
distributions in respect of Certificate Balance of the [ ] 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 [ ]
Certificates, up to the Certificate Balance of the [ ] Certificates on
such Distribution Date calculated without regard to this clause (d). With
respect to any other class of Certificates, "Certificate Balance" means the
amount set forth in the terms of that class of Certificates. Any unreimbursed
Trust Charge-Offs applied to reduce the Certificate Balance will be applied
against each class of Certificates on that Distribution Date, pro rata on the
basis of the Certificate Balance of the Certificates of that class outstanding
on the preceding Distribution Date (calculated without reduction for any
unreimbursed Trust Charge-Offs).
ADDITIONAL ISSUANCES
From time to time after the Initial Closing Date, subject to the
satisfaction of specified 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 [ ]
Certificates.
OPTION TO SUBORDINATE
The Seller, which will be the initial holder of the [ ] Certificates,
has the option to split the [ ] Certificates into two or more classes and
to designate that the different classes have different priority levels in the
application of Remaining Interest Amounts.
CERTIFICATE RESERVE FUND
If, after the Initial Closing Date, Certificates are issued to a
non-affiliate of the Seller, the Trust may establish and maintain in the name of
the Owner Trustee, an Eligible Deposit Account for the benefit of the holders of
those Certificates (the "CERTIFICATE RESERVE FUND"). As of the Initial Closing
Date, no Certificate Reserve Fund will have been established. On repayment of
the entire outstanding principal balance of the Certificates, any funds
remaining on deposit in the Certificate Reserve Fund would be paid to the
Seller.
S-19
<PAGE> 23
THE TRANSFER AND SERVICING AGREEMENTS
The parties will enter into the Transfer and Servicing Agreements as of the
Initial Closing Date. The following summary describes the material terms of the
Transfer and Servicing Agreements. The Seller has filed forms of the Transfer
and Servicing Agreements as exhibits to the Registration Statement of which this
Prospectus Supplement is a part. The Transfer and Servicing Agreements will be
filed with the SEC 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, including
definitions of terms, are incorporated by reference as part of such summary.
APPLICATION OF INTEREST COLLECTIONS
For each Collection Period, the Trust will apply funds to pay interest and
other amounts on the related Distribution Date in the order and in the priority
of clauses (1), (2) and (3) below:
CLAUSE (1) For each Collection Period, the Trust will apply Trust Interest
Collections together with the other amounts comprising Available Trust Interest
for the related Distribution Date 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; and
(b) an amount equal to the Trust Interest Allocation for each series
of Notes will be made available to that series and applied in clause (2)
below.
CLAUSE (2) On each Distribution Date, the Trust will apply the amounts from
clause (1)(b), together with the funds specified below, to each series of Notes
as follows:
(A) FOR THE [ ] TERM NOTES:
(i) the Trust will make the following funds available:
(A) the [ ] Term Notes' Trust Interest Allocation;
(B) the net amount, if any, received by the Trust under the [ ]
Term Notes Basis Swap;
(C) all Note Distribution Subaccount Earnings in respect of the
[ ] Term Notes;
(D) all Cash Accumulation Account Earnings; and
(E) if the [ ] Term Notes are then in a Cash Accumulation
Period and if the amounts specified in the foregoing subclauses (A)
through (D) are less than the [ ] Term Notes Monthly Carrying Costs
for such Distribution Date, then the lesser of
(x) such shortfall,
(y) the Cash Accumulation Reserve Fund Release Amount and
S-20
<PAGE> 24
(z) the amount of funds on deposit in the Cash Accumulation
Reserve Fund will be made available.
The amounts made available pursuant to the foregoing clauses
(2)(a)(i)(A) through (E) will be the "[ ] TERM NOTES MONTHLY
AVAILABLE AMOUNT."
(ii) Next, the Trust will aggregate and apply the [ ] Term Notes
Monthly Available Amount as follows:
(A) first, the lesser of
(x) the [ ] Term Notes Monthly Available Amount and
(y) the net payment, if any, due from the Trust under the
[ ] Term Notes Basis Swap
will be paid in accordance with the terms of the [ ] Term Notes
Basis Swap; and
(B) second, the lesser of
(x) the [ ] Term Notes Monthly Available Amount remaining
after the application in subclause (A) and
(y) an amount equal to the [ ] Term Notes' Noteholders'
Interest for the related Distribution Date will be transferred to
the Note Distribution Account for payment of interest on the
[ ] Term Notes.
The amounts required to be paid pursuant to the foregoing clauses
(2)(a)(ii)(A)(y) and (B)(y) are the "[ ] TERM NOTES MONTHLY CARRYING
COSTS." Any shortfall of the [ ] Term Notes Monthly Available Amount
below the [ ] Term Notes Monthly Carrying Costs will be treated as a
Series Shortfall for the [ ] Term Notes. Any excess of the [ ]
Term Notes Monthly Available Amount over the [ ] Term Notes Monthly
Carrying Costs will be treated as Remaining Interest Amounts.
(B) FOR THE [ ] REVOLVING NOTE:
(i) the Trust will make the following funds available:
(A) the [ ] Revolving Note's Trust Interest Allocation; and
(B) the net amount, if any, received by the Trust under the [ ]
Revolving Note Basis Swap.
The amounts made available pursuant to the foregoing clauses
(2)(b)(i)(A) and (B) will be the "[ ] REVOLVING NOTE MONTHLY
AVAILABLE AMOUNT."
(ii) Next, the Trust will aggregate and apply the [ ] Revolving
Note Monthly Available Amount as follows:
(A) first, the lesser of (x) the [ ] Revolving Note Monthly
Available Amount and (y) the net payment, if any, due from the Trust
under the [ ] Revolving Note Basis Swap will be paid in accordance
with the terms of the [ ] Revolving Note Basis Swap; and
S-21
<PAGE> 25
(B) second, the lesser of (x) the [ ] Revolving Note Monthly
Available Amount remaining after the application in subclause (A) and
(y) an amount not to exceed the [ ] Revolving Note's Noteholders'
Interest for the related Distribution Date will be transferred to the
Note Distribution Account for payment of interest on the [ ]
Revolving Note.
The amounts required to be paid pursuant to the foregoing clauses
(2)(b)(ii)(A)(y) and (B)(y) are the "[ ] REVOLVING NOTE MONTHLY
CARRYING COSTS." Any shortfall of the [ ] Revolving Note Monthly
Available Amount below the [ ] Revolving Note Monthly Carrying Costs
will be treated as a Series Shortfall for the [ ] Revolving Note.
Any excess of the [ ] Revolving Note Monthly Available Amount over
the [ ] Revolving Note Monthly Carrying Costs will be treated as
Remaining Interest Amounts.
(C) FOR EACH OTHER SERIES OF NOTES, in accordance with the terms of
such series, the Trust will apply (x) the Trust Interest Allocation for
such series, (y) any amounts received from or owing under Specified Support
Arrangements in accordance with the terms of such series of Notes and (z)
if such series is a series of Term Notes, Note Distribution Subaccount
Earnings, if any, for such series to pay the monthly carrying costs for
such series of Term Notes. Shortfalls in such applications will be treated
as a Series Shortfall for such series and excess amounts will be treated as
Remaining Interest Amounts.
CLAUSE (3) On each Distribution Date, the Trust will aggregate the
Remaining Interest Amounts from all series of Notes and apply these funds in the
following order of priority:
(a) with respect to any series of Notes which has a Series Shortfall,
pro rata on the basis of the respective Series Shortfalls, an amount equal
to the Series Shortfall for that series of Notes for that Distribution
Date, will be transferred to the Note Distribution Account in respect of
such series or other applicable account for the payment of amounts owing
under the basis swap or in respect of interest on such Notes;
(b) an amount equal to the net payment, if any, due from the Trust
under the 1999-A Certificates Basis Swap and under any Basis Swap with
respect to any other class of Certificates will be paid in accordance with
each such Basis Swap;
(c) 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;
(d) an amount equal to any Reserve Fund Deposit Amount for such
Distribution Date will be deposited into the Reserve Fund;
(e) pro rata among the following amounts specified in (A) and (B) for
such Distribution Date, (A) an amount equal to the Cash Accumulation
Reserve Fund Deposit Amount will be deposited into the Cash Accumulation
Reserve Fund and (B) an amount equal to any deposit required under the
terms of any other Specified Support Arrangements will be deposited into
the account designated by the terms of such Specified Support Arrangement;
(f) an amount equal to the Aggregate Certificateholders' Interest for
such Distribution Date will be transferred to the Certificate Distribution
Account;
S-22
<PAGE> 26
(g) an amount equal to any Trust Defaulted Amount will be treated as
Additional Trust Principal on such Distribution Date;
(h) an amount equal to the aggregate amount of unreimbursed Trust
Charge-Offs will be treated as Additional Trust Principal on such
Distribution Date; and
(i) an amount equal to the Certificate Reserve Fund Deposit Amount for
such Distribution Date will be deposited into the Certificate Reserve Fund,
if any.
If Monthly Available Amounts are not sufficient to make all payments
required by clauses (1), (2) and (3), then the funds described below will
be applied in the following order:
first, if any Monthly Carrying Costs or any amounts specified in
clauses (3)(a),(b) and (c) above remain unpaid, then a "DEFICIENCY
AMOUNT" will exist, and 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 Remaining Interest Amounts applied as described above
on subsequent Distribution Dates and from releases from the Cash
Accumulation Reserve Fund as provided in "Cash Accumulation Reserve
Fund" in this Prospectus Supplement, and such Servicer Advances will be
applied to reduce such Deficiency Amount in the order set forth in
clauses (2) and (3); and
second, if any Monthly Carrying Costs or any amounts specified in
clauses (3)(a), (b), (c), (g) and (h) remain unpaid after the
application described in the preceding clause first, then an
"UNSATISFIED DEFICIENCY AMOUNT" will exist, and funds on deposit in the
Reserve Fund will be applied to reduce such Unsatisfied Deficiency
Amount in the order set forth in clauses (2) and (3), except that no
application of amounts from the Reserve Fund will be made for the
priorities in clauses (3)(d), (e), (f) or (i).
Remaining Interest Amounts 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,
the Cash Accumulation Reserve Fund and the Certificate Reserve Fund, if any.
To the extent that the full amount of the Trust Defaulted Amount has not
been treated as Additional Trust Principal pursuant to clause (3)(g) above, the
amount of the deficiency will be added to unreimbursed Trust Charge-Offs.
S-23
<PAGE> 27
[The chart below summarizes the way in which interest collections are
allocated to the [ ] Term Notes.]
APPLICATION OF INTEREST COLLECTIONS AND OTHER AMOUNTS (1)
<TABLE>
<S><C>
AVAILABLE TRUST INTEREST
= Interest Collections on Receivables
+ Shared Investment Proceeds
+ Recoveries on Defaulted Receivables
+ Net Payment to Trust (Certificate Basis Swap)
Step 1 pay Monthly Servicing Fee S R
Determine
Available
Amounts
[ ] TERM NOTES MONTHLY AVAILABLE AMOUNT
= allocated Available Trust Interest [ ] REVOLVING NOTE MONTHLY AVAILABLE Other
+ receipts on [ ] Term Notes Basis Swap AMOUNT Notes'
+ Note Distribution Subaccount Earnings = allocated Available Trust Interest monthly
+ Cash Accumulation Account Earnings + receipts on [ ] Revolving Note Basis Swap available
+ Cash Accumulation Reserve Fund amounts
pay [ ] Term Notes Basis Swap S R pay [ ] Revolving Note Basis Swap S R
pay Other
Notes' carrying
costs S R
Step 2 pay interest on [ ] Term Notes S R pay interest on 1999-RN1 Revolving Note S R
Pay Monthly
Carrying Costs
REMAINING INTEREST AMOUNTS
NOTES
(1) This chart provides only a
simplified overview of the application
pay Series Shortfalls on Notes S R of interest collections and other
amounts. Refer to the text which
accompanies this chart for a further
pay Certificate Basis Swap S R description.
S The Servicer may make a Servicer
reimburse Servicer Advances S R Advance to cover any shortfalls on
these payments resulting from
insufficient Available Trust Interest.
replenish Reserve Fund
Step 3
Pay Out R Amounts may be withdrawn from
Remaining the Reserve Fund to cover any
Interest shortfalls on these payments resulting
Amounts from insufficient Available Trust
replenish Cash Accumulation Reserve Fund Interest or Servicer Advances.
pay interest on Certificates
apply to Trust Defaulted Amount R
Add to Available Trust
apply to Trust Charge-Offs R Principal as Additional
Trust Principal
add to Certificate Reserve Fund
pay surplus to Seller
</TABLE>
S-24
<PAGE> 28
Certain Defined Terms
Following are definitions of certain terms used in "Application of Interest
Collections" above.
"AGGREGATE CERTIFICATEHOLDERS' INTEREST" means, for any Distribution Date,
an amount equal to the sum of (a) the Certificateholders' Interest for all
classes of Certificates for such Distribution Date and (b) the
Certificateholders' Interest Carryover Shortfall for the preceding Distribution
Date.
"AGGREGATE REVOLVER INTEREST" means, for any Distribution Date, the sum of
(a) the Revolver Interest for all series of Revolving Notes for such
Distribution Date and (b) the Revolver Interest Carryover Shortfall for the
preceding Distribution Date.
"AVAILABLE TRUST INTEREST" means, for any Distribution Date, the sum of
(1) Trust Interest Collections;
(2) Shared Investment Proceeds;
(3) the net amounts, if any, paid to the Trust under the [ ]
Certificates Basis Swap; and
(4) the portion of the purchase price to be included in Available
Trust Interest if the Servicer exercises its option to purchase the assets
of the Trust as described below under "Optional Purchase by the Servicer."
"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 losses and investment expenses with
respect to such funds.
"CASH ACCUMULATION RESERVE FUND DEPOSIT AMOUNT" means, for any Distribution
Date, the excess, if any, of the Cash Accumulation Reserve Fund Required Amount
over the amount on deposit in the Cash Accumulation Reserve Fund.
"CASH ACCUMULATION RESERVE FUND RELEASE AMOUNT" for a Distribution Date can
never be less than zero and is always equal to zero except during a Cash
Accumulation Period or a Rapid Amortization Period when it is calculated as
follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash Accumulation Reserve ( (CAB) X (LIBOR Rate) X (Actual Days) ) - (Interest Earned)
Fund Release Amount = -------------
360
</TABLE>
where:
"CAB" is the sum of (a) the daily average balance in the Cash
Accumulation Account and (b) the daily average balance in the Note
Distribution Subaccount in respect of the [ ] Term Notes prior to
any deposits or withdrawals in respect of principal into such accounts
on such Distribution Date; provided that earnings on such accounts
during the related Collection Period will be excluded from such
balances.
"LIBOR Rate" is the [ ] Term Note Interest Rate in effect for such
Distribution Date.
"Actual Days" is the actual numbers of days elapsed from and including
the prior Distribution Date to but excluding such Distribution Date.
S-25
<PAGE> 29
"Interest Earned" is the sum of the Cash Accumulation Account Earnings
and the Note Distribution Subaccount Earnings during the related
Collection Period.
"CASH ACCUMULATION RESERVE FUND REQUIRED AMOUNT" means, with respect to any
Determination Date, the sum of (1) the present value, discounted at [ %] per
annum, of the Monthly Mismatch Amounts for each Distribution Date following the
Distribution Date for which such calculation is being made to the Distribution
Date preceding the Targeted Final Payment Date for the [ ] Term Notes and
(2) [$ ].
"CERTIFICATEHOLDERS' INTEREST" means, for any Distribution Date, for any
class of Certificates, the product of (a) the Certificate Balance for such class
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 that class
issued since that prior Distribution Date and (b) the Certificate Rate for such
class for that 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.
"FULLY FUNDED DATE" means, with respect to a series of Notes, the day on
which:
(a) for the [ ] Term Notes,
(1) the sum of the amounts on deposit in the Cash Accumulation
Account plus the amount on deposit in the Note Distribution Subaccount
for the [ ] Term Notes for the payment of principal equals the
outstanding principal balance of the [ ] Term Notes or
(2) the [ ] Term Notes have been paid in full;
(b) for each other outstanding series of Term Notes,
(1) the outstanding principal balance of that series has been
reduced to zero,
(2) an amount equal to such principal balance has been set aside in
a segregated account for the benefit of such Notes or
(3) some other arrangement with respect to the repayment of
principal of such Notes has been made which is satisfactory to the
Rating Agencies; or
(c) for the Revolving Notes, the principal balance has been reduced to
zero and the Specified Maximum Revolver Balance has been reduced to zero.
"MONTHLY AVAILABLE AMOUNT" means, for any Distribution Date, the aggregate
of the [ ] Term Notes Monthly Available Amount, the [ ] Revolving
Note Monthly Available Amount and the comparable monthly available amounts for
each other series of Term Notes and Revolving Notes, if any.
"MONTHLY CARRYING COSTS" means, for any Distribution Date, the aggregate of
the [ ] Term Notes Monthly Carrying Costs, the [ ] Revolving Note
Monthly Carrying Costs and the comparable monthly carrying costs for each other
series of Term Notes and Revolving Notes, if any.
S-26
<PAGE> 30
The "MONTHLY MISMATCH AMOUNT" for a Distribution Date is calculated as
follows:
<TABLE>
<S> <C> <C> <C> <C>
(Mismatch Rate)
Monthly Mismatch Amount = (Term Note Balance) X ---------------
12
</TABLE>
where:
"Term Note Balance" is the outstanding principal balance on the 1999-A
Term Notes on the Distribution Date on which the Cash Accumulation
Reserve Fund Required Amount is being calculated (after distribution of
principal on that Distribution Date) and
"Mismatch Rate" is [ %].
"NOTEHOLDERS' INTEREST" means, for any Distribution Date,
(a) with respect to the [ ] Term Notes, the sum of
(1) the product of
(i) the outstanding principal balance of the [ ] 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 [ ] Term Note 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 Noteholders' Interest for the [ ]
Term Notes for the preceding Distribution Date over the amount that was
actually deposited in the Note Distribution Account on the preceding
Distribution Date for the payment of interest on the [ ] Term
Notes,
(b) with respect to any other series of Term Notes, the amount
required to be paid as, or set aside for payment of, interest on that
series of Term Notes on the Distribution Date under its terms (including
any interest payable as a result of shortfalls from prior Distribution
Dates) and
(c) with respect to any series of Revolving Notes, the sum of
(1) the Revolver Interest and
(2) the Revolver Interest Carryover Shortfall, in each case, for
that series of Revolving Notes for that Distribution Period.
"REMAINING INTEREST AMOUNTS" means, with respect to a series of Notes, each
of the amounts designated as Remaining Interest Amounts under clause (2) of
"Application of Interest Collections" above.
"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
S-27
<PAGE> 31
(after taking into account any withdrawals from the Reserve Fund on such
Distribution Date).
"RESERVE FUND REQUIRED AMOUNT" means,
(a) for any Distribution Date during the Revolving Period or Wind Down
Period, [ %] of the Maximum Pool Balance 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 Ratings Services, then
[ %]),
(b) for any Distribution Date during any Early Amortization Period
occurring prior to the Fully Funded Date for all series of Notes, [ %]
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 Rating
Services, then [ %]) and
(c) for any Distribution Date falling on or after the Fully Funded
Date for all series of Notes, zero.
"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 the series of Revolving Notes during the related Collection Period
and (b) the Revolver Interest Rate for the series of Revolving Notes for the
Distribution Date.
"REVOLVER INTEREST CARRYOVER SHORTFALL" means, for any Distribution Date,
the excess of (a) the Aggregate Revolver Interest for the Distribution Date over
(b) the amount that was actually deposited in the Revolver Distribution Account
on the Distribution Date in respect of Aggregate Revolver Interest.
"SERIES NET REVOLVER BALANCE" means, with respect to any series of
Revolving Notes, for any date, the aggregate outstanding principal balance under
the series of Revolving Notes minus any amounts on deposit in the Revolver
Distribution Account on that date for the payment of principal on that series of
Revolving Notes.
"SERIES SHORTFALL" means, for a series of Notes, each of the amounts
designated as a Series Shortfall above in clause (2) under "Application of
Interest Collections."
"SHARED INVESTMENT PROCEEDS" means all Investment Proceeds other than (A)
Cash Accumulation Account Earnings, (B) Note Distribution Subaccount Earnings
for the [ ] Term Notes, (C) Investment Proceeds from the Cash Accumulation
Reserve Fund and (D) Investment Proceeds from any other account established for
other series of Term Notes in which funds are accumulated to pay principal on
such Notes at designated times.
"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 Cash Accumulation Reserve Fund. Specified Support Arrangements for the
benefit of any series or classes of Securities, including those established in
connection with
S-28
<PAGE> 32
the issuance of any Securities after the Initial Closing Date, may not inure to
the benefit of other Securities (including the [ ] Term Notes) issued by the
Trust.
"TRUST INTEREST ALLOCATION" means, for any series of Notes, for any
Distribution Date, an amount equal to the product of (1) Available Trust
Interest less the amounts paid to the Servicer under clause 1(a) under the
"Application of Interest Collections" above and (2) the Trust Interest
Allocation Percentage for such series.
"TRUST INTEREST ALLOCATION PERCENTAGE" means, for any series of Notes, for
any Distribution Date, a fraction calculated as set forth in the following
equation:
<TABLE>
<S> <C> <C>
(UPB of Note Series)
Trust Interest Allocation Percentage = ------------------------------------------------------
(UPB of All Term Notes) + (UPB of All Revolving Notes)
</TABLE>
where:
"UPB of Note Series" is
(1) for a series of Term Notes, the Unaccumulated Principal Balance
for such series of Term Notes and
(2) for a series of Revolving Notes, the daily average outstanding
principal balance for such series of Revolving Notes during the related
Collection Period;
"UPB of All Term Notes" is the Unaccumulated Principal Balances of all
series of Term Notes then outstanding; and
"UPB of All Revolving Notes" is the daily average of the outstanding
principal balance of all Revolving Notes during the related Collection
Period.
"TRUST INTEREST COLLECTIONS" means, for any Distribution Date, an amount
equal to the sum of (1) the product of (a) the Trust Percentage and (b) Interest
Collections for the related Collection Period and (2) 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 the 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.
"UNACCUMULATED PRINCIPAL BALANCE" means, with respect to any series of Term
Notes as of a Distribution Date,
(1) the daily average of the outstanding principal balance of such
Term Notes during the related Collection Period minus
S-29
<PAGE> 33
(2) with respect to the [ ] Term Notes, the daily average during
the related Collection Period of the sum of
(a) the amount of funds on deposit in the Cash Accumulation Account
and
(b) the amount of funds on deposit in the Note Distribution Account
in respect of the outstanding principal balance of the [ ] Term
Notes or, with respect to other series of Term Notes, the daily average
of the amount of funds on deposit in any account during the related
Collection Period for which funds are accumulated to pay principal on
such series as specified under the terms of that series of Term Notes.
APPLICATION OF PRINCIPAL COLLECTIONS BY THE TRUST
There are three mutually exclusive time periods with respect to the Trust.
These time periods are the Revolving Period, the Wind Down Period and the Early
Amortization Period. The way in which each of these Trust level time periods is
relevant to and impacts on each series of Securities depends in part upon the
specific terms of that series. In addition, each series of Securities may have,
by their terms, additional time periods specific to that series which occur
within or across the time periods applicable to the Trust as a whole. See
"Application of Principal Collections to the [ ] Term Notes" below for a
description of the time periods which specifically apply to the [ ] Term
Notes.
REVOLVING PERIOD
During the Revolving Period, the Trust may, on a daily basis, use Trust
Principal Collections:
- to make payments of principal on the Revolving Notes;
- to purchase additional Eligible Receivables from the Seller;
- to the extent required to maintain the Daily Trust Balance equal to the
Daily Trust Invested Amount, to add to the Cash Collateral Amount; and
- to make principal payments or set asides on any series of Term Notes
which then requires Available Trust Principal to be retained or set
aside. No distributions of Certificate Balance will be made during the
Revolving Period.
During the Revolving Period, the Trust may also use the Cash Collateral
Amount for the purposes described in the first, second and fourth points above.
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 Revolving Period will terminate on the "SCHEDULED REVOLVING PERIOD
TERMINATION DATE," which will initially be [ , ]. The Scheduled
Revolving Period Termination Date will automatically be extended to the last day
of each succeeding month unless the Seller, prior to the then Scheduled
Revolving Period Termination Date, elects to cause such extension not to occur
(a "NON-EXTENSION ELECTION"). Unless a Non-Extension 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. The Seller
S-30
<PAGE> 34
cannot extend the Scheduled Revolving Period Termination Date beyond
[ , ] 200[ ] (the "FINAL REVOLVING PERIOD TERMINATION DATE").
In addition to a Non-Extension Election, the Seller may, at any time prior
to the then Scheduled Revolving Period Termination Date, affirmatively cause an
extension (an "AFFIRMATIVE EXTENSION") of 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, Non-Extension Elections and Affirmative Extensions. Any
Non-Extension Election or Affirmative Extension 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 will be obligated to provide notice to the Noteholders) and the Rating
Agencies. Assuming no Early Amortization Event has occurred, the Revolving
Period will terminate and the Wind Down Period will commence on the day
immediately following a Non-Extension Election.
If the Seller makes a Non-Extension Election, as a result of which 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 and is continuing. If an Early Amortization Event described in
subparagraphs (6), (8) or (10) under "The Transfer and Servicing
Agreements--Early Amortization Events" in the Prospectus has occurred the Seller
may nonetheless elect to so recommence the Revolving Period if the conditions
specified under "--Wind Down Period and Early Amortization
Period--Recommencement of Revolving Period" in this Prospectus Supplement are
satisfied.
Wind Down Period and Early Amortization Period
The Revolving Period will be followed by either the Wind Down Period or an
Early Amortization Period. These periods commence as follows:
- The Wind Down Period for the Trust will begin on the day 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 Transfer and
Servicing Agreements--Application of Principal Collections by the
Trust--Revolving Period," the recommencement of the Revolving Period.
- The 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" and below under "--Early Amortization Events."
During the Wind Down Period and during any Early Amortization Period, 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, on each Distribution Date, Trust Principal
Collections during the related
S-31
<PAGE> 35
Collection Period, together with other amounts comprising Available Trust
Principal, will be treated as follows:
first, such amounts 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 until the Fully Funded Date for each
such series, and
second, following the Fully Funded Date for all series of Notes, any such
remaining Available Trust Principal will be available for the payment of
the outstanding Certificate Balance on the Certificates or for any other
applications permitted by holders of Certificates.
Principal payments will be made on the Term Notes of each series (including
the [ ] Term Notes) and the Revolving Notes of each series as described in
"The [ ] Term Notes--Payment of Principal" and "The Revolving
Notes--Payments of Principal and Additional Borrowings" above. For additional
information on the application of Available Trust Principal in respect of the
1999-A Term Notes, see "The Transfer and Servicing Agreements--Application of
Principal Collections to the [ ] Term Notes--Cash Accumulation Period" and
"--Rapid Amortization Period" below.
Early Amortization Events. In addition to the Early Amortization Events set
forth in the Prospectus, an Early Amortization Event will occur if any of the
Basis Swaps terminate, except if such termination is for the limited reasons set
forth in "Basis Swaps" below. The "RESERVE FUND TRIGGER AMOUNT," which is a
component of the Early Amortization Event described in sub-paragraph (9) under
"The Transfer and Servicing Agreements--Early Amortization Events" in the
Prospectus, will equal [25%] of the Reserve Fund Required Amount.
Recommencement of Revolving Period. In limited circumstances the Seller may
elect to terminate an Early Amortization Period and recommence the Revolving
Period and any Payment Period prior to the Final Revolving Period Termination
Date. If an Early Amortization Event described in sub-paragraphs (6), (8) or
(10) under "The Transfer and Servicing Agreements--Early Amortization Events" in
the Prospectus has occurred (each of which is a Cash Accumulation Event for the
[ ] Term Notes), the Seller may 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 if:
- none of those Early Amortization Events has existed for three consecutive
months;
- the Final Revolving Period Termination Date has not occurred;
- the long-term debt obligations of GMAC are rated at least "Baa3" by
Moody's;
- the Reserve Fund Funding Condition is satisfied; and
- after giving effect to any Securities issued and any changes in the
Specified Maximum Revolver Balance on the date of the recommencement, the
quotient of (A) the outstanding Certificate Balance of all the
outstanding [ ] Certificates over (B) the Maximum Pool Balance equals
or exceeds the "SPECIFIED CERTIFICATE PERCENTAGE," which is [8.5%.]
S-32
<PAGE> 36
The "RESERVE FUND FUNDING CONDITION" will be satisfied on the date of
recommencement of the Revolving Period only if:
- the amount on deposit in the Reserve Fund equals or exceeds the Reserve
Fund Required Amount as of such date of recommencement;
- the amount on deposit in the Cash Accumulation Reserve Fund equals or
exceeds the Cash Accumulation Reserve Fund Required Amount as of such
date of recommencement; and
- the amount on deposit in the Certificate Reserve Fund equals or exceeds
the amount required to be on deposit in the Certificate Reserve Fund, if
any.
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.
APPLICATION OF PRINCIPAL COLLECTIONS TO THE [ ] TERM NOTES
OVERVIEW
There are three basic and mutually exclusive time periods with respect to
the [ ] Term Notes which determine how Trust Principal Collections and
principal payments on the [ ] Term Notes are handled by the Trust. These
periods are the Payment Period, the Cash Accumulation Period and the Rapid
Amortization Period. The Payment Period will begin one to four months prior to
the Targeted Final Payment Date on the [ ] Term Notes. The Cash Accumulation
Period will begin upon the occurrence of a Cash Accumulation Event. The Rapid
Amortization Period will begin upon the occurrence of a Rapid Amortization
Event.
The time periods with respect to the [ ] Term Notes co-exist with the
Trust time periods described above in "--Application of Principal Collections by
the Trust." If an Early Amortization Period occurs for the Trust, then it will
give rise to either a Cash Accumulation Period or Rapid Amortization Period for
the [ ] Term Notes. If the Wind Down Period commences for the Trust prior to
the Payment Period for the [ ] Term Notes, a Cash Accumulation Period for
the [ ] Term Notes will commence. If the Trust remains in its Revolving
Period, then the [ ] Term Notes will not have any separate time period until
the commencement of their Payment Period (unless a Rapid Amortization Event
which is not an Early Amortization Event occurs, in which case the [ ] Term
Notes will be in a Rapid Amortization Period at the same time that the Trust is
in the Revolving Period).
During the Payment Period and the Cash Accumulation Period, principal
collections on the Receivables allocated to the [ ] Term Notes are set aside
in accounts to repay principal on the [ ] Term Notes on the Targeted Final
Payment Date. In contrast, during a Rapid Amortization Period, the Trust will
pay out principal collections allocated to the [ ] Term Notes on each
Distribution Date occurring after such an event instead of retaining these
collections for distribution on the Targeted Final Payment Date.
S-33
<PAGE> 37
[The chart below summarizes the manner in which principal collections are
allocated to the [ ] Term Notes].
<TABLE>
<S><C>
AVAILABLE TRUST PRINCIPAL NOTE
= Principal Collections on Receivables owned by the Trust (1) This chart provides only a simplified overview of the
+ principal portion of Warranty & Administrative Payments application of principal collections to the Term Notes and
+ Additional Trust Principal from Remaining Interest Amounts other Notes. Refer to the text which accompanies this chart
+ Accumulated Cash Collateral Amount for a further description.
Application of
Time Periods for the Time Periods for Available Trust
Trust [ ] Term Notes Principal allocated to
[ ] Term Notes
Wind Down Cash Accumulation Accumulate in Cash
Yes Period in Effect? Yes Period in Effect? Yes Accumulation Account
No Yes No
Yes Early Amortization Rapid Amortization Yes Repay Principal Monthly
Period in Effect? Period in Effect?
No Yes No
Revolving Payment Period Yes Accumulate in Note Distribution
Period in Effect in Effect? Account
Yes No
Available Trust
Principal not
allocated to [ ]
Term Notes
Accumulate or pay out to
other series of Term Notes as Repay Revolving Add to Cash Collateral Purchase New
required Notes Amount Receivables
</TABLE>
S-34
<PAGE> 38
PAYMENT PERIOD
A Payment Period for a series of Notes occurs during the Revolving Period
for the Trust. 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. Each series
of Notes which is in a Payment Period will be allocated Available Trust
Principal equal to its Principal Allocation Percentage thereof. If 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 "--Application of
Principal Collections By the Trust--Revolving Period ". Upon the commencement of
a Payment Period for a series of Term Notes, the Servicer will establish a "NOTE
DISTRIBUTION SUBACCOUNT" (which account may be kept only on the books of the
Trust) in which to maintain all the funds deposited in the Note Distribution
Account in respect of principal for the series of Term Notes beginning its
Payment Period. Any Investment Proceeds in respect of funds in the Note
Distribution Subaccount ("NOTE DISTRIBUTION SUBACCOUNT EARNINGS") will be
applied as provided in the clause (2) under "Application of Interest
Collections" above.
The Payment Period for the [ ] Term Notes will commence no earlier
than [ ] 1, 200[ ] and no later than [ ] 1, 200[ ]. On the
Determination Date in [ ] 200[ ] and on each Determination Date
thereafter before the commencement of the Payment Period, the Servicer will
determine the appropriate date by calculating the Required Payment Period
Length, which is an estimation of the number of Collection Periods needed to set
aside funds for the repayment of the [ ] Term Notes on the Targeted Final
Payment Date. The Payment Period will commence with the first day of the
Collection Period which follows the first Determination Date on which the
Required Payment Period Length is equal to or greater than the number of full
Collection Periods remaining between such Determination Date and the Targeted
Final Payment Date.
The "REQUIRED PAYMENT PERIOD LENGTH," as of a Determination Date, is
calculated as follows (rounded up to the nearest whole integer):
<TABLE>
<S> <C>
(Outstanding Note Principal Balance)
Required Payment ------------------------------------------------------------
Period Length = (Recent Minimum Daily Trust Balance) X (Minimum Monthly
Payment Rate)
</TABLE>
where:
"Outstanding Note Principal Balance" is the outstanding principal
balance of all [ ] Term Notes and all other Notes with scheduled
Payment Periods during the Payment Period for the [ ] Term
Notes;
"Recent Minimum Daily Trust Balance" is the minimum expected Daily
Trust Balance during the period between such Determination Date and
[ ], 200[ ] as determined by the Servicer; and
"Minimum Monthly Payment Rate" is the minimum Monthly Payment Rate
during the twelve Collection Periods preceding such Determination Date.
On each day during the [ ] Term Notes' Payment Period, the
[ ] Term Notes will be allocated their Principal Allocation Percentage
of Available Trust Principal. These amounts will be deposited in the Note
Distribution Subaccount for the
S-35
<PAGE> 39
[ ] Term Notes until the Fully Funded Date for the [ ] Term
Notes has occurred and will be invested in Eligible Investments. The Trust will
use amounts in the [ ] Term Notes' Note Distribution Subaccount (other
than Investment Proceeds thereon) only to make principal payments on the
[ ] Term Notes. During a Payment Period for the [ ] Term Notes,
unless the Revolving Notes are then in a Payment Period, the Trust will not
repay principal under the Revolving Notes until the Fully Funded Date has
occurred for the series of Notes in that Payment Period, but the Trust may
purchase additional receivables by borrowing under the Revolving Notes. On the
Targeted Final Payment Date for the [ ] Term Notes, the Trust will pay
the outstanding principal balance of the [ ] Term Notes (or such lesser
amount as has been set aside for such purpose) and, to the extent not paid in
full on the Targeted Final Payment Date, on each Distribution Date thereafter
until so paid in full.
The terms of any series of Term Notes issued after the Initial Closing Date
with a Payment Period occurring, in whole or in part, during the Payment Period
for the [ ] Term Notes may provide for the Required Payment on such Term
Notes to be payable during the Payment Period for the [ ] Term Notes or
after the Fully Funded Date for the [ ] Term Notes.
If the [ ] Term Notes, any other series of Term Notes, or any
Revolving Notes are not paid in full on or prior to the applicable Stated Final
Payment Date, an Early Amortization Period for the Trust and a Rapid
Amortization Period for the [ ] Term Notes will commence.
As described under "The Transfer and Servicing Agreements--Collections" in
the Prospectus, in some circumstances the Servicer is permitted to make deposits
of Principal Collections and Interest Collections into the Collection Account on
each Distribution Date rather than on a daily basis. However, during a Payment
Period, Cash Accumulation Period or Rapid Amortization Period for the
[ ] Term Notes, the Servicer will be required to deposit Collections
into the Collection Account on a daily basis until the Fully Funded Date has
occurred with respect to the [ ] Term Notes.
CASH ACCUMULATION PERIOD
Each of the Early Amortization Events, except for Early Amortization Events
which are also Rapid Amortization Events, and the commencement of a Wind Down
Period for the Trust constitutes a "CASH ACCUMULATION EVENT" for the [ ]
Term Notes. If a Cash Accumulation Event occurs, a "CASH ACCUMULATION PERIOD"
will begin for the [ ] Term Notes and will end on the earliest of:
(1) the date on which the [ ] Term Notes are paid in full,
(2) the occurrence of a Rapid Amortization Event for the [ ]
Term Notes,
(3) the Trust Termination Date and
(4) under the limited circumstances described above under
"--Application of Principal Collections by the Trust--Revolving Period,"
the recommencement of the Revolving Period for the Trust.
On each day during a Cash Accumulation Period for the [ ] Term
Notes, the [ ] Term Notes will be allocated their Principal Allocation
Percentage of Available
S-36
<PAGE> 40
Trust Principal and such amounts will be deposited in the Cash Accumulation
Account for the [ ] Term Notes until the amount on deposit therein
equals the outstanding principal balance of the [ ] Term Notes. The Trust
will use amounts in the Cash Accumulation Account only to make principal
payments on the [ ] Term Notes. The Trust will retain any funds in the
Cash Accumulation Account, other than Cash Accumulation Account Earnings, in
excess of the total outstanding principal balance on the [ ] Term Notes in
the Cash Accumulation Account to make principal payments on subsequent
Distribution Dates. During a Cash Accumulation Period, the Trust will not borrow
additional funds under the Revolving Notes, nor will the Trust purchase
additional Receivables. On the Targeted Final Payment Date for the [ ]
Term Notes, the Trust will pay the outstanding principal balance of the
[ ] Term Notes, or such lesser amount as has been set aside for such
purpose, and, to the extent not paid in full on the Targeted Final Payment Date,
on each Distribution Date thereafter until so paid in full.
The "CASH ACCUMULATION ACCOUNT" is 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 [ ] Term Notes. Funds
in the Cash Accumulation Account will be invested in Eligible Investments. 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.
RAPID AMORTIZATION PERIOD
Each of the following constitute a "RAPID AMORTIZATION EVENT" for the
[ ] Term Notes:
(1) certain insolvency events relating to General Motors, the
Servicer, GMAC, or the Seller,
(2) failure to pay the outstanding principal balance of the Notes and
any Certificates by their Stated Final Payment Date,
(3) either the Trust or the Seller becomes required to register as an
"investment company" within the meaning of the Investment Company Act of
1940 and
(4) on any Distribution Date, the balance in the Cash Accumulation
Reserve Fund would be less than [ ] (after giving effect to all
withdrawals and additions on such Distribution Date).
Items (3) and (4) above are not Early Amortization Events for the Trust.
A "RAPID AMORTIZATION PERIOD" for the [ ] 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 [ ] Term Notes are paid in full and (b) the
Trust Termination Date.
On each day during a Rapid Amortization Period for the [ ] Term
Notes, the [ ] Term Notes will be allocated their Principal Allocation
Percentage of Available Trust Principal and such amounts will be deposited in
the Note Distribution Account for the [ ] Term Notes. All amounts so
allocated during a Rapid Amortization Period will be paid to the holders of the
[ ] Term Notes on the related Distribution Date.
S-37
<PAGE> 41
In addition, on the first Distribution Date during the Rapid Amortization
Period, any amounts in respect of principal in the Cash Accumulation Account or
the Note Distribution Account for the [ ] Term Notes will be paid to the
holders of the [ ] Term Notes.
CERTAIN DEFINED TERMS
"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.
"AVAILABLE TRUST PRINCIPAL" means
(a) for any day during a Collection Period, Trust Principal
Collections for such day minus any amounts paid on such day to the Servicer
as reimbursement for outstanding Servicer Liquidity Advances and
(b) on the Distribution Date related to such Collection Period, the
sum of
(1) Additional Trust Principal, if any, for such Distribution Date,
(2) the Cash Collateral Amount on such Distribution Date and
(3) if such Distribution Date is related to the Wind Down Period or
an Early Amortization Period for the Trust, and if the amount on deposit
in the Reserve Fund on such Distribution Date exceeds zero, the
Supplemental Principal Allocation for such current Distribution Date.
"DETERMINATION DATE" means the tenth day of each calendar month, or if such
tenth day is not a Business Day, the next succeeding Business Day.
"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
S-38
<PAGE> 42
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 or the Note Distribution Subaccount for the [ ] 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
(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.
"PRINCIPAL ALLOCATION PERCENTAGE" for a series of Notes (the "REFERENT
SERIES") which requires Available Trust Principal to be retained or set aside
during any period to fund principal payments with respect to the Referent Series
on any date, is calculated as follows:
(1) if such date does not relate to a Wind Down Period or an Early
Amortization Period for the Trust:
<TABLE>
<S> <C>
(Aggregate Principal Balance of Referent Series)
Principal Allocation Percentage --------------------------------------------------
for a Referent Series = (Sum of Aggregate Principal Balance for all
Referent Series)
</TABLE>
where:
"Aggregate Principal Balance of Referent Series" is
(A) with respect to any Referent Series of Term Notes, the
aggregate initial principal balance with respect to such Referent
Series or
(B) with respect to any Referent Series of Revolving Notes,
the outstanding principal balance of such Referent Series as of the
close of business on the day preceding the first day of the Payment
Period with respect to such series.
"Sum of Aggregate Principal Balance for all Referent Series" is the
sum of the "Aggregate Principal Balance of Referent Series" for each
series of Notes which is on that date a Referent Series
S-39
<PAGE> 43
(2) if such date relates to a Wind Down Period or an Early
Amortization Period for the Trust:
<TABLE>
<S> <C>
(Aggregate Principal Balance of Referent Series)
Principal Allocation Percentage --------------------------------------------------
for a Referent Series = (Sum of Aggregate Principal Balance for each
Series of Notes)
</TABLE>
where:
"Aggregate Principal Balance of Referent Series" is the aggregate
outstanding principal balance of the Referent Series then outstanding on
the last day of the Revolving Period
"Sum of Aggregate Principal Balance for each Series of Notes" is
the sum of the "Aggregate Principal Balance of Referent Series" for all
series then outstanding on the last day of the Revolving Period, except
for any series the principal balance of which has been fully paid or
provided for (calculated for this purpose as though each outstanding
series is a Referent Series on that date)
"REQUIRED PAYMENT" means, for any series of Term Notes other than the
[ ] Term Notes, the amount of principal, if any, required by the terms
of such Term Notes to be due and payable, or to be set aside in anticipation of
a future payment of principal, on any specified date or dates. The term
"Required Payment" is not used herein to describe amounts owing or required to
be set aside for the [ ] Term Notes.
"SERVICER LIQUIDITY ADVANCE" means, for any series of Term Notes the terms
of which provide for a Servicer Liquidity Advance, an advance by the Servicer to
the Trust made to the extent a required principal payment for any series of
Notes for any Distribution Date cannot otherwise 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. However, the Servicer can only
make Servicer Liquidity Advances to the extent that the Servicer, in its sole
discretion, expects to recover such advances from subsequent Trust Principal
Collections. Servicer Liquidity Advances with respect to a series of Term Notes
will be reimbursed (a) if Available Trust Principal is being set aside for that
series of Term Notes, out of that series' share of Available Trust Principal and
(b) if Available Trust Principal is not being set aside for 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 that series of Term Notes and
the denominator of which is the outstanding balance of all series of Notes as of
that date. The terms of the [ ] Term Notes do not provide for the Servicer
to make Servicer Liquidity Advances.
"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
(1) 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
S-40
<PAGE> 44
(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
(2) 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 (1)(B) or (2) for any day in such
Collection Period that occurred during the Revolving Period) and
(b) an amount equal to
(1) the Daily Trust Balance as of the termination of the Revolving
Period plus
(2) the Cash Collateral Amount on the last day of the Revolving
Period minus
(3) the Available Trust Principal for each Distribution Date from
and after the final Distribution Date for the Revolving Period through
but excluding that current Distribution Date minus
(4) 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 that current Distribution Date
minus
(5) Available Trust Principal for that current Distribution Date
(assuming the Supplemental Principal Allocation for such Distribution
Date was zero).
"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 that date.
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
[$ ]. The Reserve Fund is a "Reserve Fund" as contemplated by the
Prospectus. See "The Transfer and Servicing Agreements--Liquidity and Credit
Support--Reserve Fund" in the Prospectus.
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
funds are available as described above under "Application of Interest
Collections," will be deposited into the Reserve Fund.
S-41
<PAGE> 45
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 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 will be included in Available Trust Interest.
CASH ACCUMULATION RESERVE FUND
The Trust will establish and maintain in the name of the Indenture Trustee,
an Eligible Deposit Account for the benefit of the holders of the [ ]
Term Notes (the "CASH ACCUMULATION RESERVE FUND"). The Cash Accumulation Reserve
Fund will be fully funded in the amount of [$ ] on the Initial
Closing Date. The Cash Accumulation Reserve Fund is available for the payment of
interest on the [ ] Term Notes to the extent described under "The
Transfer and Servicing Agreements--Application of Interest Collections" in this
Prospectus Supplement. The [ ] Term Notes will not have any rights to
amounts on deposit in the Cash Accumulation Reserve Fund or interest income
thereon, except as described herein.
The Seller, in its sole discretion, may at any time make additional
deposits into the Cash Accumulation 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 Cash Accumulation Reserve Fund on any Distribution
Date is less than the Cash Accumulation Reserve Fund Required Amount for that
Distribution Date, the amount of such deficiency, to the extent available as
described above under "Application of Interest Collections," will be deposited
into the Cash Accumulation Reserve Fund.
On each Distribution Date, if the funds in the Cash Accumulation Reserve
Fund (after giving effect to all other distributions or allocations on that
Distribution Date) exceed the Cash Accumulation Reserve Fund Required Amount,
that excess will be distributed first to reimburse Servicer Advances and second
to the Seller. The Cash Accumulation Reserve Fund Required Amount will decline
on each Distribution Date as the [ ] Term Notes approach their Targeted
Final Payment Date. On repayment of
S-42
<PAGE> 46
the entire outstanding principal balance of the [ ] Term Notes, any funds
remaining on deposit in the Cash Accumulation Reserve Fund will be paid to the
Seller.
BASIS SWAPS
On the Initial Closing Date, the Trust will enter into a basis swap (a
"BASIS SWAP") with GMAC (in such capacity, the "BASIS SWAP COUNTERPARTY") with
respect to each of the following:
- the [ ] Term Notes (the "[ ] TERM NOTES BASIS SWAP")
- the [ ] Revolving Note (the "[ ] REVOLVING NOTE BASIS SWAP")
- the [ ] Certificates (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, as
described herein.
As set forth in the table below, for each 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 related Collection Period preceding
such Distribution Date, on the applicable Notional Amount shown in the following
table, at a rate equal to LIBOR, with respect to such Distribution Date, plus a
specified percentage 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 either the daily Term Notional Amount, the [ ]
Revolving Notional Amount or the [ ] Certificate Notional Amount at a per
annum rate equal to the Prime Rate for each day during such Collection Period
divided by [360.]
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
AMOUNT DUE FROM AMOUNT DUE
BASIS SWAP NOTIONAL AMOUNT SWAP COUNTERPARTY FROM THE TRUST
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------
[ ] Term Notes Term Notional LIBOR + [ %] Prime Rate
Basis Swap Amount
- ----------------------------------------------------------------------------------------
[ ] Revolving [ ] Revolving LIBOR + [ %] Prime Rate
Note Basis Swap Notional Amount
- ----------------------------------------------------------------------------------------
[ ] Certificate [ ] Certificate LIBOR + [ %] Prime Rate
Basis Swap Notional Amount
- ----------------------------------------------------------------------------------------
</TABLE>
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 clauses (2) and (3) of
"Application of Interest Collections" or will be included in "Available Trust
Interest," as defined above in "Application of Interest Collections--Certain
Defined Terms."
S-43
<PAGE> 47
Each Basis Swap will terminate if, among other things, either party
defaults in the payment of any amount due thereunder and if the Basis Swap
Counterparty becomes insolvent. The termination of any Basis Swap upon such
events will be an Early Amortization Event for the Trust and either a Cash
Accumulation Event or, in the case of an insolvency event, a Rapid Amortization
Event, for the [ ] Term Notes.
In some limited situations, 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 without the consent of holders
of the outstanding Notes or Certificates. These limited situations include:
(1) in connection with the issuance of additional Term Notes,
Revolving Notes or Certificates;
(2) a change in the Specified Maximum Revolver Balance or any Series
Specified Maximum Revolver Balance; or
(3) the payment in full of any series of Term Notes.
The Trust must satisfy the conditions set forth in the Trust Sale and Servicing
Agreement for such issuance or change, 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 outstanding Securities. See "The
Transfer and Servicing Agreements--Additional Issuances; Changes in Specified
Maximum Revolver Balance" in the Prospectus.
Certain Definitions
"[ ] CERTIFICATE NOTIONAL AMOUNT" for any day during a Collection
Period equals the outstanding Certificate Balance of the [ ] Certificates as
of the last day of that Collection Period, including after giving effect to
unreimbursed Trust Charge-Offs as of the close of business on the Distribution
Date during that Collection Period.
"[ ] REVOLVING NOTIONAL AMOUNT" for any day during a Collection Period
equals the outstanding principal balance of the [ ] Revolving Note as of
that day, including after giving effect to unreimbursed Trust Charge-Offs as of
the close of business on the Distribution Date during that Collection Period.
"TERM NOTIONAL AMOUNT" for any day during a Collection Period equals the
Unaccumulated Principal Balance of the [ ] Term Notes as of that day,
including after giving effect to unreimbursed Trust Charge-Offs as of the close
of business on the Distribution Date during that Collection Period.
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, and the funds on deposit in the Reserve Fund, the Cash Accumulation
Reserve Fund and the Certificate Reserve Fund. The Servicer may also make
Servicer Liquidity Advances with respect to additional series of Term Notes
issued hereafter if the terms of such additional Term Notes so provide. The
Servicer will also make Servicer Advances as described above. The Servicer will
not make Servicer Liquidity Advances for the [ ] Term Notes. Initially, no
Certificate Reserve Fund will be established for the [ ] Certificates. Other
credit,
S-44
<PAGE> 48
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 [ ] 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 clause (3) under "Application
of Interest Collections" above. To the extent that, for any Distribution Date,
the allocated Available Trust Interest does not cover the full amount of the
Trust Defaulted Amount through treatment of that Available Trust Interest as
Additional Trust Principal, that deficiency will constitute an unreimbursed
Trust Charge-Off. 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 and the Certificate
Reserve Fund, if any. 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. Interest payments on
Securities will be reduced to the extent unreimbursed Trust Charge-Offs are
applied against such Securities as of any Distribution Date.
If unreimbursed Trust Charge-Offs exceed the Certificate Balance
(calculated without reduction for Trust Charge-Offs) on the Stated Final Payment
Date for a series of Notes, then the Trust will not owe to the holders of the
[ ] Term Notes the portion of such excess that is allocable to the [ ]
Term Notes, and the amount of unreimbursed Trust Charge-Offs will be permanently
reduced by that allocation. Unreimbursed Trust Charge-Offs in excess of the
Certificate Balance (calculated without reduction for Trust Charge-Offs) will be
applied to the Notes on the basis of the Trust Interest Allocation Percentage of
the Notes then outstanding (calculated without reduction for Trust Charge-Offs).
OPTIONAL PURCHASE BY THE SERVICER
Notwithstanding anything in the Prospectus to the contrary, at any time
from and after the time that:
- the Daily Trust Balance is equal to or less than [10%] of the highest
sum, at any time since the Initial Closing Date, of the Daily Trust
Balance plus the Cash Collateral Amount plus amounts on deposit in the
Cash Accumulation Account and the Note Distribution Account; and
- either no Term Notes are outstanding or the Wind Down Period is in
effect,
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 (which price
will not be less than the outstanding
S-45
<PAGE> 49
principal balance and unpaid interest on all Notes). Such amount will be treated
as Trust Principal Collections received during such Collection Period to the
extent of the principal portion of the aggregate Administrative Purchase
Payments so paid, with the remainder being Trust Interest Collections.
TERMINATION
The "SPECIFIED TRUST TERMINATION DATE" is April 1, 20[ ].
ERISA CONSIDERATIONS
Although there is little guidance on the subject, the Seller believes that,
at the time of their issuance, the [ ] Term Notes would be treated as
indebtedness without substantial equity features for purposes of the Plan Assets
Regulation. The debt treatment of such [ ] Term Notes could change,
subsequent to their issuance, if the Issuer incurred losses. 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 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
[ ] Term Notes. Included among these exemptions are: Prohibited Transaction
Class Exemption ("PTCE") 96-23, regarding transactions affected by in-house
asset managers; PTCE 95-60, regarding investments by insurance company general
accounts; PTCE 90-1, regarding investments by insurance company pooled separate
accounts; PTCE 91-38 regarding investments by bank collective investment funds;
and PTCE 84-14, regarding transactions effected by "qualified professional asset
managers." For additional information regarding treatment of the [ ] Term
Notes under ERISA, see "ERISA Considerations" in the Prospectus.
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 [ ] Term Notes will constitute
indebtedness. Each Term Noteholder, by the acceptance of an [ ] Term Note,
will agree to treat the [ ] Term Notes as indebtedness for federal, state
and local income and franchise tax purposes.
All the [ ] Certificates issued on the Initial Closing Date will be
issued to the Seller. Accordingly, the Trust will be characterized as a division
of the Seller for U.S. federal income tax purposes. See "Certain Federal Income
Tax Consequences--Tax Characterization of the Trust" in the Prospectus. If the
Seller sells any of the [ ] Certificates or if the Trust issues additional
Certificates, this characterization may change. See "Certain Federal Income Tax
Consequences--Tax Characterization and Treatment of Certificates" in the
Prospectus.
See "Certain Federal Income Tax Consequences" and "State and Local Tax
Consequences" in the Prospectus.
S-46
<PAGE> 50
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Seller has agreed to sell to each of the Underwriters named
below, and each of the Underwriters has severally agreed to purchase from the
Seller, the principal amount of [ ] Term Notes set forth opposite its
name below:
AGGREGATE PRINCIPAL AMOUNT TO BE PURCHASED
<TABLE>
<CAPTION>
UNDERWRITER [ ] TERM NOTES
----------- -----------------
<S> <C>
...................................................... $
-----------------
Total............................................ $
=================
</TABLE>
The Seller has been advised by the Underwriters that the several
Underwriters propose initially to offer the 1999-A 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 the percentage set forth below
for the 1999-A Term Notes. The Underwriters may allow, and such dealers may
reallow to certain other dealers, a subsequent concession not in excess of the
percentage set forth below for the 1999-A Term Notes. After the initial public
offering, the public offering price and such concessions may be changed.
<TABLE>
<CAPTION>
SELLING
CONCESSION REALLOWANCE
---------- -----------
<S> <C> <C>
[ ] Term Notes....................................... [ %] [ %]
</TABLE>
The Underwriters may engage in over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids with respect to
the [ ] Term Notes in accordance with Regulation M under the Securities
Exchange Act of 1934. Over-allotment transactions involve syndicate sales in
excess of the offering size, which creates a syndicate short position.
Stabilizing transactions permit bids to purchase the [ ] Term Notes so
long as the stabilizing bids do not exceed a specified maximum. Syndicate
covering transactions involve purchases of the [ ] Term Notes in the open
market after the distribution has been completed in order to cover syndicate
short positions. Penalty bids permit the Underwriters to reclaim a selling
concession from a syndicate member when the [ ] Term Notes originally sold
by such syndicate member are purchased in a syndicate covering transaction. Such
over-allotment transactions, stabilizing transactions, syndicate covering
transactions and penalty bids may cause the prices of the [ ] Term Notes
to be higher than they would otherwise be in the absence of such transactions.
Neither the Seller nor any of the Underwriters represent that the Underwriters
will engage in any such transactions or that such transactions, once commenced,
will not be discontinued without notice at any time.
We will receive proceeds of approximately [$ ] from the sale of
the [ ] Term Notes, representing [ %] of the principal amount of the
[ ]
S-47
<PAGE> 51
Term Notes, after paying the underwriting discount of [$ ],
representing [ %] of the principal amount of the [ ] Term Notes.
Additional offering expenses are estimated to be [$ ].
LEGAL OPINIONS
In addition to the legal opinions described in the Prospectus, certain
legal matters relating to the [ ] Term Notes will be passed upon for the
Underwriters by Mayer, Brown & Platt. Mayer, Brown & Platt has from time to time
represented, and is currently representing, General Motors Corporation and
certain of its affiliates.
S-48
<PAGE> 52
INDEX OF PRINCIPAL TERMS
<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
[ ] Certificate Basis Swap............................ S-43
[ ] Certificate Notional Amount....................... S-44
[ ] Certificates...................................... S-2
[ ] Term Note Interest Rate........................... S-14
[ ] Term Notes........................................ S-2
[ ] Term Notes Basis Swap............................. S-43
[ ] Term Notes Monthly Available Amount............... S-20
[ ] Term Notes Monthly Carrying Costs................. S-21
[ ] Term Note Stated Final Payment Date............... S-15
[ ] Term Note Targeted Final Payment Date............. S-15
[ ] Revolving Note................................. S-2
[ ] Revolving Note Basis Swap...................... S-43
[ ] Revolving Note Monthly Available Amount........ S-21
[ ] Revolving Note Monthly Carrying Costs.......... S-22
[ ] Revolving Note Stated Final Payment Date....... S-17
[ ] Revolving Note Targeted Final Payment Date..... S-17
[ ] Revolving Notional Amount...................... S-44
Additional Trust Principal.................................. S-38
Affirmative Extension....................................... S-31
Aggregate Certificateholders' Interest...................... S-25
Aggregate Revolver Interest................................. S-25
Available Trust Interest.................................... S-25
Available Trust Principal................................... S-38
Average Principal Receivables Balance....................... S-11
Basis Swap.................................................. S-43
Basis Swap Counterparty..................................... S-43
Business Day................................................ S-14
Cash Accumulation Account................................... S-37
Cash Accumulation Account Earnings.......................... S-25
Cash Accumulation Event..................................... S-36
Cash Accumulation Period.................................... S-36
Cash Accumulation Reserve Fund Release Amount............... S-25
Cash Accumulation Reserve Fund.............................. S-42
Cash Accumulation Reserve Fund Deposit Amount............... S-25
Cash Accumulation Reserve Fund Required Amount.............. S-26
Certificate Balance......................................... S-19
Certificate Rate............................................ S-18
Certificate Reserve Fund.................................... S-19
Certificateholders' Interest................................ S-26
Certificateholders' Interest Carryover Shortfall............ S-26
Deficiency Amount........................................... S-23
Determination Date.......................................... S-38
Distribution Date........................................... S-14
Eligible Investments........................................ S-38
Final Revolving Period Termination Date..................... S-31
Fully Funded Date........................................... S-26
Indenture................................................... S-13
Indenture Trustee........................................... S-13
Initial Closing Date........................................ S-8
</TABLE>
S-49
<PAGE> 53
<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
Initial Cut-Off Date........................................ S-8
Initial Distribution Date................................... S-14
LIBOR....................................................... S-14
LIBOR Business Day.......................................... S-14
Monthly Available Amount.................................... S-26
Monthly Carrying Costs...................................... S-26
Monthly Mismatch Amount..................................... S-27
Net Losses.................................................. S-11
Non-Extension Election...................................... S-30
Note Distribution Subaccount................................ S-35
Note Distribution Subaccount Earnings....................... S-35
Noteholders' Interest....................................... S-27
Owner Trustee............................................... S-8
Principal Allocation Percentage............................. S-39
PTCE........................................................ S-46
Rapid Amortization Event.................................... S-37
Rapid Amortization Period................................... S-37
Reference Bank Rate......................................... S-14
Referent Series............................................. S-39
Remaining Interest Amounts.................................. S-27
Required Payment............................................ S-40
Required Payment Period Length.............................. S-35
Reserve Fund Deposit Amount................................. S-28
Reserve Fund Funding Condition.............................. S-33
Reserve Fund Required Amount................................ S-28
Reserve Fund Trigger Amount................................. S-32
Revolver Interest........................................... S-28
Revolver Interest Carryover Shortfall....................... S-28
Revolver Interest Rate...................................... S-16
Scheduled Revolving Period Termination Date................. S-30
Series Net Revolver Balance................................. S-28
Series Shortfall............................................ S-28
Servicer Advance............................................ S-23
Servicer Liquidity Advance.................................. S-40
Shared Investment Proceeds.................................. S-28
Specified Certificate Percentage............................ S-32
Specified Maximum Revolver Balance.......................... S-17
Specified Support Arrangement............................... S-28
Specified Trust Termination Date............................ S-46
Supplemental Principal Allocation........................... S-40
Term Notional Amount........................................ S-44
Trust Estate................................................ S-8
Trust Interest Allocation................................... S-29
Trust Interest Allocation Percentage........................ S-29
Trust Interest Collections.................................. S-29
Trust Percentage............................................ S-29
Trust Principal Collections................................. S-41
Unaccumulated Principal Balance............................. S-29
Unsatisfied Deficiency Amount............................... S-23
</TABLE>
S-50
<PAGE> 54
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE SELLER,
THE SERVICER OR THE UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
DO NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE
SECURITIES OFFERED HEREBY TO ANYONE IN ANY JURISDICTION IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM
IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT INFORMATION HEREIN OR
THEREIN IS CORRECT AS OF ANY TIME SINCE THE DATE OF THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS.
------------------
UNTIL [ ], [ ], ALL DEALERS EFFECTING TRANSACTIONS IN THE
NOTES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS SUPPLEMENT AND THE PROSPECTUS TO WHICH IT RELATES. THIS
DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
SUPERIOR WHOLESALE
INVENTORY FINANCING TRUST [ ]
[$ ]
FLOATING RATE ASSET BACKED TERM NOTES,
SERIES [ ]
WHOLESALE AUTO RECEIVABLES CORPORATION
SELLER
GENERAL MOTORS
ACCEPTANCE CORPORATION
SERVICER
------------------------------------
PROSPECTUS SUPPLEMENT
------------------------------------
UNDERWRITERS
- ------------------------------------------------------
- ------------------------------------------------------
