AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 25, 2002
REGISTRATION NO. 333-75464
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
PRE-EFFECTIVE AMENDMENT NO. 1
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CAPITAL AUTO RECEIVABLES, INC.
(Originator of the Trusts Described Herein)
(Exact name of Registrant as Specified in its Charter)
-------------------------
<Table>
DELAWARE 38-3082892
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</Table>
<Table>
JEROME B. VAN ORMAN, JR.
CORPORATION TRUST CENTER CAPITAL AUTO RECEIVABLES, INC.
1209 ORANGE STREET 200 RENAISSANCE CENTER
WILMINGTON, DELAWARE 19801 DETROIT, MICHIGAN 48265
(302-658-7851) (313-665-6266)
(Address, including zip code, and telephone (Name, address, including zip code, and
number, including area code, of principal telephone number,
executive offices of Registrant) including area code, of agent for service)
</Table>
-------------------------
WITH A COPY TO:
RICHARD V. KENT, ESQ.
GENERAL COUNSEL
CAPITAL AUTO RECEIVABLES, INC.
200 RENAISSANCE CENTER
DETROIT, MICHIGAN 48265
-------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: from time
to time after the effective date of this Registration Statement as determined in
light of market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend
reinvestment plans, check the following box. X
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<Table>
<Caption>
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE
- ---------------------------------------------------------------------------------------------------------------------------
Asset Backed Securities............................... $1,000,000 100% $1,000,000 $239
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Estimated solely for the purpose of calculating the registration fee.
(2)$239 has been previously paid.
(3)$22,027,582,621.58 aggregate principal amount of Asset Backed Securities
registered by the Registrant under the Registrant's Registration Statement on
Form S-3, File No. 333-93431 (the "Prior Registration Statement") are
consolidated in this Registration Statement pursuant to Rule 429. All
registration fees in connection with such unsold amount of Asset Backed
Securities have been previously paid by the Registrant under the Prior
Registration Statement. The amount of unsold Asset Backed Securities eligible
to be sold under the Prior Registration Statement shall be carried forward to
this Registration Statement and shall be offset against the Registrant's
Prior Registration Statement pursuant to Rule 457(p) for use only in
connection with offerings of Asset Backed Securities. Accordingly, the total
amount registered under this Registration Statement as so consolidated as of
the date of this filing is $22,028,582,621.58.
-------------------------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 25, 2002
REGISTRATION NO. 333-75464-01
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
PRE-EFFECTIVE AMENDMENT NO. 1
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CENTRAL ORIGINATING LEASE TRUST*
(Exact name of Registrant as Specified in its Charter)
*Patent Pending
------------------------
<Table>
DELAWARE 38-3278697
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</Table>
<Table>
C/O LEASE AUTO RECEIVABLES, INC.
CORPORATION TRUST CENTER JEROME B. VAN ORMAN, JR.
1209 ORANGE STREET LEASE AUTO RECEIVABLES, INC.
WILMINGTON, DELAWARE 19801 200 RENAISSANCE CENTER
(302-658-7851) DETROIT, MICHIGAN 48265
(Address, including zip code, and telephone number, (313-665-6266)
including (Name, address, including zip code, and telephone
area code, of principal executive offices of number,
Registrant) including area code, of agent for service)
</Table>
------------------------
WITH A COPY TO:
RICHARD V. KENT, ESQ.
GENERAL COUNSEL
LEASE AUTO RECEIVABLES, INC.
200 RENAISSANCE CENTER
DETROIT, MICHIGAN 48265
------------------------
Approximate date of commencement of proposed sale to the public: from time
to time after the effective date of this Registration Statement as determined in
light of market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<Table>
<Caption>
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE(2)
- --------------------------------------------------------------------------------------------------------------------------------
Secured Notes..................................... $1,000,000 -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) A separate registration statement on Form S-3 (No. 333-75464) registering
asset backed securities is being concurrently filed under which a
registration fee of $239 has been previously paid. No additional
consideration will be paid by the purchasers of the asset backed securities
for the secured notes, which are pledged as security for the asset backed
securities.
------------------------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EXPLANATORY NOTE
This registration statement contains three forms of prospectus relating to
the offering of:
- asset backed notes and/or asset backed certificates secured by loan
receivables by various Capital Auto Receivables Asset Trusts created from
time to time by Capital Auto Receivables, Inc., with that form of
prospectus identified on the outside front cover page as the "Version 1,
Preliminary Owner Trust Prospectus Form;"
- asset backed certificates by various Grantor Trusts secured by loan
receivables created from time to time by Capital Auto Receivables, Inc.,
with that form of prospectus identified on the outside front cover page
as "Version 2, Preliminary Grantor Trust Prospectus Form;"
- asset backed notes and/or asset backed certificates secured by secured
notes by various Capital Auto Receivables Asset Trusts created from time
to time by Capital Auto Receivables, Inc., with that form of prospectus
identified on the outside front cover page as "Version 3, Preliminary
Secured Note Prospectus Form;" and
three forms of prospectus supplement relating to the offering of:
- particular series of asset backed notes and/or classes of asset backed
certificates secured by loan receivables, with that form of prospectus
supplement identified on the outside front cover page as the "Version 1,
Preliminary Owner Trust Prospectus Supplement Form;"
- particular classes of asset backed certificates secured by loan
receivables, with that form of prospectus supplement identified on the
outside front cover page as "Version 2, Preliminary Grantor Trust
Prospectus Supplement Form;" and
- particular series of asset backed notes and/or classes of asset backed
certificates secured by secured notes, with that form of prospectus
supplement identified on the outside front cover page as "Version 3,
Preliminary Secured Note Prospectus Supplement Form."
Each prospectus supplement form relates only to the securities described
therein.
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THE SECURITIES UNTIL THE REGISTRATION
YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-5 IN THIS
PROSPECTUS SUPPLEMENT AND PAGE 2 IN THE PROSPECTUS.
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND
The notes represent obligations of the trust only. The certificates represent
interests in the trust only. The notes and the certificates do not represent WE
ARE NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER
OR SALE IS NOT PERMITTED.
obligations of or interests in, and are not guaranteed by, Capital Auto
Receivables, Inc., General Motors Acceptance Corporation or any of their
affiliates.
This prospectus supplement may be used to offer and sell the notes and the
certificates only if accompanied by the prospectus.
SUBJECT TO COMPLETION, DATED ,
VERSION 1
PRELIMINARY OWNER
TRUST PROSPECTUS
SUPPLEMENT FORM
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED ,
CAPITAL AUTO RECEIVABLES ASSET TRUST -ISSUER
$________ Asset Backed Notes, Class A
$________ Asset Backed Certificates
CAPITAL AUTO RECEIVABLES, INC.
Seller
GENERAL MOTORS ACCEPTANCE CORPORATION
Servicer
The trust is offering the following classes of notes and
certificates by this prospectus supplement and the
prospectus:
<Table>
<Caption>
-----------------------------------------------------------------------------------------
CLASS A NOTES
---------------------------------------
A-2 A-3 A-4 A-5 CERTIFICATES
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
Principal amount
-----------------------------------------------------------------------------------------
Interest rate
-----------------------------------------------------------------------------------------
Targeted final distribution date N/A
-----------------------------------------------------------------------------------------
Final scheduled distribution date
-----------------------------------------------------------------------------------------
Price to public
-----------------------------------------------------------------------------------------
Underwriting discount
-----------------------------------------------------------------------------------------
Proceeds to seller
-----------------------------------------------------------------------------------------
</Table>
CREDIT ENHANCEMENT AND LIQUIDITY
- Reserve account, with an initial deposit of
$________.
- The certificates are subordinated to the notes.
- The trust's ability to pay principal on the applicable
targeted final payment date on the Class A Notes is
dependent on its ability to obtain an incremental
advance under the variable pay revolving note in the
future as described in this prospectus supplement.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus supplement is , .
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We provide information to you about the notes and the certificates in two
separate documents:
(a) the prospectus, which provides general information and terms of
the notes and the certificates, some of which may not apply to a particular
series of notes or certificates, including your series.
(b) this prospectus supplement, which will provide information
regarding the pool of contracts held by the trust and will specify the
terms of your series of notes or certificates.
You should rely only on the information provided in the accompanying
prospectus and this prospectus supplement, including the information
incorporated by reference. We have not authorized anyone to provide you with
other or different information. We are not offering the notes or the
certificates in any state where the offer is not permitted.
You can find definitions of the capitalized terms used in this prospectus
supplement in the "Glossary of Terms to Prospectus Supplement" which appears at
the end of this prospectus supplement and in the "Glossary of Terms to
Prospectus" which appears at the end of the prospectus.
TABLE OF CONTENTS
<Table>
PROSPECTUS SUPPLEMENT
SUMMARY..................................................... S-1
RISK FACTORS................................................ S-5
THE TRUST................................................... S-9
Capitalization of the Trust............................... S-9
The Owner Trustee......................................... S-9
THE RECEIVABLES POOL........................................ S-10
Composition of The Receivables Pool....................... S-10
THE SERVICER................................................ S-11
Delinquencies, Repossessions and Net Losses............... S-11
THE NOTES................................................... S-12
Payments of Interest...................................... S-13
Payments of Principal..................................... S-14
Redemption................................................ S-15
Incremental Advances under the Variable Pay Revolving
Note................................................... S-15
Parity of Notes........................................... S-16
Additional Indenture Matters.............................. S-17
Delivery of Notes......................................... S-17
THE CERTIFICATES............................................ S-17
Interest.................................................. S-17
Certificate Balance....................................... S-18
Subordination to the Notes................................ S-18
Early Retirement of the Certificates...................... S-18
THE TRANSFER AND SERVICING AGREEMENTS....................... S-18
Servicing Compensation and Payment of Expenses............ S-18
Distributions............................................. S-19
Reserve Account........................................... S-24
Interest Rate Swap........................................ S-24
Termination............................................... S-26
ERISA CONSIDERATIONS........................................ S-26
FEDERAL INCOME TAX CONSEQUENCES............................. S-27
UNDERWRITING................................................ S-27
LEGAL OPINIONS.............................................. S-29
GLOSSARY OF TERMS TO PROSPECTUS SUPPLEMENT.................. S-30
PROSPECTUS
RISK FACTORS................................................ 2
THE TRUSTS.................................................. 6
The Owner Trustee......................................... 7
THE RECEIVABLES POOLS....................................... 7
WEIGHTED AVERAGE LIFE OF THE SECURITIES..................... 9
POOL FACTORS AND TRADING INFORMATION........................ 9
USE OF PROCEEDS............................................. 10
THE SELLER.................................................. 10
THE SERVICER................................................ 11
Delinquencies, Repossessions and Net Losses............... 11
THE NOTES................................................... 11
Principal and Interest on the Notes....................... 12
The Indenture............................................. 13
The Indenture Trustee..................................... 18
THE CERTIFICATES............................................ 19
Distributions of Interest and Certificate Balance......... 19
</Table>
<Table>
BOOK ENTRY REGISTRATION;
REPORTS TO SECURITYHOLDERS................................ 20
Book-Entry Registration................................... 20
Definitive Securities..................................... 23
Reports to Securityholders................................ 24
THE TRANSFER AND SERVICING AGREEMENTS....................... 25
Sale and Assignment of Receivables........................ 26
Additional Sales of Receivables........................... 27
Accounts.................................................. 28
Servicing Compensation and Payment of Expenses............ 29
Servicing Procedures...................................... 30
Collections............................................... 31
Monthly Advances.......................................... 32
Distributions............................................. 33
Credit Enhancement........................................ 33
Net Deposits.............................................. 34
Statements to Trustees and Trust.......................... 35
Evidence as to Compliance................................. 35
Changes to Servicer; Servicer Indemnification and
Proceedings............................................ 35
Servicer Default.......................................... 37
Rights upon Servicer Default.............................. 37
Waiver of Past Defaults................................... 38
Amendment................................................. 38
Insolvency Event.......................................... 39
Certificateholder Liability Indemnification............... 39
Termination............................................... 40
Administration Agreement.................................. 40
LEGAL ASPECTS OF THE RECEIVABLES............................ 41
Security Interest in Vehicles............................. 41
Repossession.............................................. 42
Notice of Sale; Redemption Rights......................... 42
Deficiency Judgments and Excess Proceeds.................. 43
Consumer Protection Laws.................................. 43
Other Limitations......................................... 44
Transfer of Vehicles...................................... 44
Sale of Receivables by GMAC............................... 45
FEDERAL INCOME TAX CONSEQUENCES............................. 45
The Notes................................................. 46
Trust Certificates........................................ 49
Partnership Certificates.................................. 53
Tax Non-Entity Certificates............................... 58
STATE AND LOCAL TAX CONSEQUENCES............................ 58
ERISA CONSIDERATIONS........................................ 59
PLAN OF DISTRIBUTION........................................ 62
LEGAL OPINIONS.............................................. 63
WHERE YOU CAN FIND MORE INFORMATION......................... 63
INCORPORATION BY REFERENCE.................................. 63
GLOSSARY OF TERMS TO PROSPECTUS............................. 64
</Table>
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 material terms of this offering of the
Class A Notes and the certificates, carefully read this entire document and the
accompanying prospectus.
THE PARTIES
Issuer
Capital Auto Receivables Asset Trust ____________ - ____ . The trust is the
issuer of the offered notes and certificates.
Seller
Capital Auto Receivables, Inc. will be the seller to the trust.
Servicer
General Motors Acceptance Corporation will be the servicer for the trust.
Indenture Trustee
- ----------------------------------------------- ,
Owner Trustee
- ----------------------------------------------- .
THE NOTES
Class A Notes
- - The trust will offer the four classes of notes listed on the cover page of
this prospectus supplement.
- - The trust will also issue Class A-1 Notes. These notes are not being offered
under this prospectus supplement. These notes will instead be sold in a
private placement.
Variable Pay Revolving Notes
- - The trust will also issue a variable pay revolving note concurrently with the
Class A Notes. The variable pay revolving note is not being offered under this
prospectus supplement. The note will instead be sold in a private placement to
a commercial paper facility administered by General Motors Acceptance
Corporation. The seller will request incremental advances under the variable
pay revolving note on the targeted final distribution date for each class of
the Class A Notes.
Interest Payments
- - The trust will pay interest on the Class A Notes monthly on each distribution
date based on a 360-day year consisting of twelve 30-day months.
Principal Payments
- - In general, the trust will not make payments of principal on any class of
Class A Notes until its targeted final distribution date. On the targeted
final distribution date for each class of Class A Notes, the trust will pay,
to the extent of available funds, the entire outstanding principal balance of
that class of Class A Notes.
- - Generally, on each distribution date that is not a targeted final distribution
date for any Class A Notes, the trust will make principal payments on the
variable pay revolving note and distributions on the certificates.
- - On the targeted final distribution date for a class of Class A Notes,
principal payments will be made on the Class A Notes from the amount of
collections and defaults on the receivables during the prior month and from
the proceeds from any incremental advances under the variable pay revolving
note.
- - The trust's ability to make principal payments on a class of Class A Notes on
a targeted final distribution date is, therefore, dependent on the trust's
ability to obtain incremental advances under the variable pay revolving note.
- - The failure of the trust to pay any class of Class A Notes in full on its
targeted
S-1
final distribution date alone will not constitute an event of default.
However, if any class of Class A Notes is not paid in full on its targeted
final distribution date, thereafter, amounts available to make principal
payments on the notes will be applied to that class of Class A Notes and the
variable pay revolving note ratably based on the outstanding principal balance
of each class of notes.
- - If more than one class of Class A Notes is not paid in full or in the event
the interest rate swap on the variable pay revolving note is terminated, on
each distribution date thereafter, amounts available to make principal
payments on the notes will be applied to the Class A Notes and the variable
pay revolving note ratably based on the outstanding principal balance of the
Class A Notes as a group and the variable pay revolving note. The amount
available for the payment of principal on the Class A Notes as a group will be
applied to pay the Class A Notes in sequential priority; that is, the Class
A-1 Notes will be paid in full before any payments are made on the Class A-2
Notes and the Class A-2 Notes will be paid in full before any payments are
made on the Class A-3 Notes, etc.
- - The failure of the trust to pay any class of Class A Notes in full on its
final scheduled distribution date will constitute an event of default.
- - On each distribution date after an event of default occurs and the notes are
accelerated, until the time when all events of default have been cured or
waived as provided in the indenture, principal payments on each class of the
Class A Notes and the variable pay revolving note will be made ratably to all
noteholders, based on the outstanding principal balance of each class of
notes.
- - When the total principal balance of the receivables declines to less than 10%
of the total amount financed under the receivables, the servicer may purchase
all of the remaining receivables. If the servicer purchases the receivables,
the outstanding [Class A-5 Notes], if any, and variable pay revolving note
will be redeemed at a price equal to their remaining principal balance plus
accrued and unpaid interest.
THE CERTIFICATES
The trust will offer certificates with an aggregate initial certificate balance
of $ ________ .
The seller will initially retain certificates with an initial certificate
balance of $ ________ .
Interest Payments
- - The trust will pay interest on the certificates monthly on each distribution
date based on a 360-day year consisting of twelve 30-day months.
Certificate Balance
- - On each distribution date, except after the notes have been accelerated
following an event of default, a pro rata portion, based on the outstanding
amount of notes and certificates, of the amount available to make principal
payments will be applied to make distributions on the certificate balance.
Subordination
- - If an event of default occurs and the notes are accelerated, no payments of
interest on the certificates or distributions on the certificate balance will
be made until the notes are paid in full or the acceleration is rescinded.
Early Retirement of the Certificates
- - When the total principal balance of the receivables declines to 10% or less of
the total amount financed under the receivables, the servicer may purchase all
of the remaining receivables. If the servicer purchases the receivables, the
outstanding certificates, if any, will be redeemed at a price equal to the
S-2
remaining certificate balance plus accrued and unpaid interest.
THE RECEIVABLES
The primary assets of the trust will be a pool of fixed rate retail instalment
sales contracts used to finance the purchase of new and used cars and light
trucks. We refer to these contracts as "receivables" and to the persons who
financed their purchases with these contracts as "obligors."
The receivables in the trust will be sold by GMAC to the seller, and then by the
seller to the trust. The trust will grant a security interest in the receivables
and the other trust property to the indenture trustee on behalf of the
noteholders.
The aggregate principal balance of the receivables on the cutoff date was
$ ________ .
PRIORITY OF DISTRIBUTIONS
The trust will distribute available funds in the following order of priority:
- servicing fee payments to the servicer;
- net amount payable, if any, to the swap counterparty under the interest
rate swap;
- interest on the notes;
- interest on the certificates;
- principal on the notes;
- principal on the certificates; and
- deposits into the reserve account.
If an event of default occurs and the notes are accelerated, the trust will pay
each class of the Class A Notes and the variable pay revolving note in full, on
a pro rata basis, before making any interest payments on the certificates or any
payments on the certificate balance until all events of default have been cured
or waived as provided in the indenture.
RESERVE ACCOUNT
On the closing date, the seller will deposit $ ________ in cash or eligible
investments into the reserve account. Collections on the receivables, to the
extent available, will be added to the reserve account on each distribution date
if the reserve account balance is below a specified reserve amount.
To the extent that funds from principal and interest collections on the
receivables are not sufficient to pay the basic servicing fees, to pay the net
amount, if any, due to the swap counterparty and to make required distributions
on the notes and the certificates, the trust will withdraw cash from the reserve
account for those purposes. Amounts on deposit in the reserve account will not
be available, however, on the targeted final distribution date for any class of
Class A Notes to the extent that the proceeds, if any, from incremental advances
on the variable pay revolving note together with collections on the receivables
are insufficient to pay that class of Class A Notes in full.
On any distribution date, the amount in the reserve account may exceed the
specified reserve amount. If so, the trust will pay the excess to the seller.
SERVICING FEES
The trust will pay the servicer a monthly basic 1% servicing fee as compensation
for servicing the receivables. The servicer will also be entitled to any late
fees, prepayment charges and other administrative fees and expenses collected
during the month and investment earnings on trust accounts. The trust will also
pay the servicer an additional monthly servicing fee of up to 1% as described in
the prospectus.
S-3
TAX STATUS
Kirkland & Ellis, special tax counsel, has delivered its opinion that
(1) the Class A Notes will be characterized as indebtedness for federal income
tax purposes and
(2) the trust will not be taxable as an association or publicly traded
partnership taxable as a corporation, but instead will be classified as a
grantor trust for federal income tax purposes.
Each noteholder, by the acceptance of a note, will agree to treat the notes as
indebtedness for federal, state and local income and franchise tax purposes.
Each certificateholder, by the acceptance of a trust certificate, will agree to
treat the trust certificates as equity interests in the trust for federal, state
and local income and franchise tax purposes. See "Federal Income Tax
Consequences."
ERISA CONSIDERATIONS
Subject to the restrictions and considerations discussed under "ERISA
Considerations," in this prospectus supplement and in the prospectus, an
employee benefit plan subject to the Employee Retirement Income Security Act of
1974 may purchase the Class A Notes and the certificates. We suggest that an
employee benefit plan and any other retirement plan or arrangement, and any
entity deemed to hold "plan assets" of any employee benefit plan or other plan,
consult with its counsel before purchasing the notes or the certificates.
RATINGS
We will not issue the Class A Notes offered by this prospectus supplement and
the prospectus unless they are rated in the highest rating category for
long-term obligations by at least one nationally recognized rating agency.
We will not issue the certificates unless they are rated in the "A" category for
long-term obligations or its equivalent by at least one nationally recognized
rating agency.
S-4
RISK FACTORS
In addition to the risk factors on page of the prospectus, you
should consider the following risk factors in deciding whether to purchase the
notes or the certificates.
THE FAILURE TO RECEIVE
INCREMENTAL ADVANCES UNDER
THE VARIABLE PAY REVOLVING
NOTE WILL RESULT IN THE CLASS
A NOTES NOT BEING PAID IN
FULL ON THEIR TARGETED FINAL
DISTRIBUTION DATES As described further in "The Notes--Payments of
Principal" the trust's ability to pay the full
principal amount of any class of Class A Notes
on its targeted final distribution date will
depend on the ability of the trust to obtain an
incremental advance under the variable pay
revolving note on that targeted final
distribution date.
A 100% participation interest in the initial
variable pay revolving note will be sold in a
private placement to a commercial paper facility
administered by GMAC. The seller will request
that the commercial paper facility make an
incremental advance with respect to the initial
variable pay revolving note on each targeted
final distribution date. If the commercial paper
facility elects not to make such an incremental
advance, the seller will use reasonable efforts
to sell one or more additional variable pay
revolving notes to additional purchasers and to
obtain an incremental advance thereunder.
However, neither the commercial paper facility
administered by GMAC nor any other person or
entity is obligated to make any incremental
advance with respect to any variable pay
revolving note and neither the seller, the
servicer nor any other person or entity is
obligated to identify any other prospective
purchasers. Accordingly, we cannot assure you
that any incremental advances will be available
on the targeted final distribution date for a
class of Class A Notes, in which case the trust
will not have sufficient funds to pay that class
of Class A Notes in full on that date.
You will bear all reinvestment risk resulting
from payments on the Class A Notes being made
before or after their respective targeted final
distribution dates.
DISTRIBUTIONS ON THE
CERTIFICATES ARE SUBORDINATED
IN
PRIORITY TO PAYMENTS ON THE
NOTES Distributions on the certificates will be
subordinated in priority to the notes as
described in this prospectus supplement. If an
event of default occurs and the notes are
accelerated, no payments of interest on the
certificates or distributions on the certificate
balance will be made until the notes are paid in
full or the acceleration is rescinded. In this
event, amounts otherwise available to make
payments on the certificates will be available
to make payments on the notes. See "The Transfer
and Servicing Agreements--Distributions" in this
prospectus supplement.
S-5
PAYMENTS ON THE NOTES AND THE
CERTIFICATES DEPEND ON
COLLECTIONS ON THE
RECEIVABLES The trust's ability to make principal payments
on the notes and distributions on the
certificate balance will depend on the amount of
collections on the receivables and the amount of
receivables that default. If there are
insufficient funds to pay the entire amount due
on any class of securities, you may experience
delays and/or reductions in principal payments
on your notes or distributions on the
certificate balance on your certificates.
FAILURE BY THE SWAP
COUNTERPARTY TO MAKE
PAYMENTS TO THE TRUST AND THE
SENIORITY OF PAYMENTS OWED TO
THE SWAP COUNTERPARTY COULD
REDUCE OR DELAY PAYMENTS ON
THE NOTES AND THE
CERTIFICATES As described further in the "The Transfer and
Servicing Agreements--Interest Rate Swap," the
trust has entered into the interest rate swap
because the receivables owned by the trust bear
interest at a fixed rate while the variable pay
revolving note will generally bear interest at a
floating rate based on one-month LIBOR.
If the floating LIBOR-based rate payable by the
swap counterparty is substantially greater than
the fixed rate payable by the trust, the trust
will be more dependent on receiving payments
from the swap counterparty in order to make
payments on the notes and the certificates. In
addition, the obligations of the swap
counterparty under the interest rate swap are
unsecured. If the swap counterparty fails to pay
the net amount due, you may experience delays
and/or reductions in the interest and principal
payments on your notes and in the interest
payments and distributions on the certificate
balance on your certificates.
If the floating rate payable by the swap
counterparty is less than the fixed rate payable
by the trust, the trust will be obligated to
make payments to the swap counterparty. The swap
counterparty will have a claim on the assets of
the trust for the net amount due, if any, to the
swap counterparty under the interest rate swap.
The swap counterparty's claim will be higher in
priority than payments on the notes and the
certificates. If there is a shortage of funds
available on any distribution date, you may
experience delays and/or reductions in interest
and principal payments on your notes and in the
interest payments and distributions on the
certificate balance on your certificates.
In addition, in the event of the termination of
the interest rate swap, a termination payment
may be due to the swap counterparty. The payment
to the swap counterparty would be made by the
trust out of funds that would otherwise be
available to make payments on the notes and the
certificates and would be paid from available
funds pari passu with payments of interest on
the notes. The amount of the termination payment
may
S-6
be based on the market value of the interest
rate swap. The termination payment could, if
market interest rates and other conditions have
changed materially, be substantial. In that
event, you may experience delays and/or
reductions in interest and principal payments on
your notes and in the interest payments and
distributions on the certificate balance on your
certificates.
[A HIGH RATE OF PAYMENTS ON
THE RECEIVABLES ON, OR A
DECREASE IN THE AVAILABILITY
OF,
RECEIVABLES DURING THE
REVOLVING PERIOD COULD
SHORTEN THE AVERAGE LIFE OF
THE
SECURITIES If provided for in the accompanying prospectus
supplement, the securities will have a
revolving period. During a revolving
period, the trust will not make payments of
principal to you. Instead, the trust will
reinvest payments on receivables [of principal
[, prepayments and proceeds from repurchases] in
additional pools of receivables. These
reinvestments will lengthen the average life of
the securities. However, an unexpectedly high
rate of payments on the receivables during the
revolving period and/or a significant decline in
the number of suitable receivables available for
purchase by the trust could affect the ability
of the trust to make reinvestments. The lower
the rate of reinvestment, the shorter the
average life of the securities could be.
A variety of unpredictable economic, social and
other factors influence payment rates and the
availability of suitable receivables.]
S-7
SUMMARY OF TRANSACTIONS PARTIES* [FLOW CHART]
S-8
THE TRUST
The Issuer, Capital Auto Receivables Asset Trust
____________ - ____________ , is a [business trust] [common law trust] formed
under the laws of the State of Delaware. The trust will be established and
operated pursuant to a trust agreement dated on or before the closing date of
____________ , ____________ , which is the date the trust initially issues the
securities.
The trust will engage in only the following activities:
- Acquire, hold and manage the receivables and other assets of the
trust;
- Issue securities;
- Make payments on the securities; and
- Take any action necessary to fulfill the role of the trust in
connection with the notes and the certificates.
The trust's principal offices are in Wilmington, Delaware, in care of
____________ , as owner trustee, at the address listed in "--The Owner Trustee"
below.
CAPITALIZATION OF THE TRUST
The following table illustrates the capitalization of the trust as of
____________ ____________ , ____________ , the cutoff date, as if the
issuance of the Class A Notes, the Variable Pay Revolving Note and the
certificates had taken place on that date:
<Table>
Class A-1 % Asset Backed Notes............ $ --
Class A-2 % Asset Backed Notes............ $ --
Class A-3 % Asset Backed Notes............ $ --
Class A-4 % Asset Backed Notes............ $ --
Class A-5 % Asset Backed Notes............ $ --
Floating Rate Variable Pay Asset Backed
Revolving Note............................... $ --
% Asset Backed Certificates............... $ --
-----------------
Total................................ $ --
=================
</Table>
The Class A-1 Notes and the Variable Pay Revolving Note are not being
offered by this prospectus supplement and the prospectus. The certificates
represent the equity of the trust and will be issued under the trust agreement.
The seller will initially hold certificates with an aggregate initial balance of
$ .
THE OWNER TRUSTEE
is the owner trustee under the trust agreement.
is a banking corporation and a wholly-owned
subsidiary of , a corporation. Its principal
offices are located at .
S-9
THE RECEIVABLES POOL
The receivables to be included in the pool of receivables securing the
notes were selected from GMAC's portfolio based on several criteria, including
that each receivable:
- is secured by a new or used vehicle;
- was originated in the United States;
- provides for level monthly payments which may vary from one another by no
more than $5;
- will amortize the Amount Financed over its original term to maturity;
- has been or will be acquired by GMAC in the ordinary course of business;
- has a first payment due date on or after ;
- was originated on or after ;
- has an original term of to months;
- provides for finance charges at an annual percentage rate within the
range specified in the second table below; and
- as of , , which we refer to as the cutoff date, the
receivable was not considered past due, that is, the scheduled payments
due on that receivable in excess of $25 have been received within 30 days
of the scheduled payment date.
Scheduled Interest Receivables represent % of the Aggregate Principal
Balance as of the cutoff date. The balance of the receivables are Simple
Interest Receivables. Receivables representing % of the Aggregate Principal
Balance as of the cutoff date were secured by new vehicles at the time of
origination. The balance of the receivables was secured by used vehicles at the
time of origination. The receivables in the pool of receivables on the closing
date will be the same receivables which comprised the pool of receivables on the
cutoff date.
The following tables describe the receivables pool as of the cutoff date:
COMPOSITION OF THE RECEIVABLES POOL
<Table>
Weighted Average Annual Percentage Rate of
Receivables.......................................
Aggregate Amount Financed........................... $
Number of Contracts in Pool.........................
Average Amount Financed............................. $
Weighted Average Original Maturity.................. months
Weighted Average Remaining Maturity (Range)......... months ( to months)
</Table>
The Weighted Average Annual Percentage Rate of Receivables in the above
table is based on weighting by current balance and remaining term of each
receivable. The Weighted Average Original Maturity in the above table is based
on weighting by original principal balance of each receivable.
S-10
DISTRIBUTION BY ANNUAL PERCENTAGE RATE OF THE RECEIVABLES POOL
<Table>
<Caption>
PERCENTAGE OF
ANNUAL PERCENTAGE NUMBER OF AGGREGATE AGGREGATE AMOUNT
RATE RANGE CONTRACTS AMOUNT FINANCED FINANCED
----------------- --------- --------------- ----------------
6.00% to 7.00%....................... $ %
7.01% to 8.00%.......................
8.01% to 9.00%.......................
9.01% to 10.00%......................
10.01% to 11.00%.....................
11.01% to 12.00%.....................
12.01% to 13.00%.....................
13.01% to 14.00%.....................
14.01% to 15.00%.....................
15.01% to 16.00%.....................
16.01% to 17.00%.....................
17.01% to 18.00%.....................
18.01% to 19.00%.....................
19.01% to 20.00%.....................
-------- -------- ------
Total........................... $ 100.00%
======== ======== ======
</Table>
The pool of receivables includes receivables originated in
states and the District of Columbia. The following table sets forth the
percentage of the Aggregate Amount Financed in the states with the largest
concentration of receivables. No other state accounts for more than 5% of the
Aggregate Amount Financed. The following breakdown by state is based on the
billing address of the obligor on the receivables.
<Table>
<Caption>
PERCENTAGE OF
AGGREGATE
STATE AMOUNT FINANCED
----- ---------------
</Table>
THE SERVICER
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
The following table shows GMAC's experience in the United States for:
(1) delinquencies on new and used retail car and light truck
receivables,
(2) repossessions and
(3) net losses relating to GMAC's entire vehicle portfolio (including
receivables previously sold by GMAC which it continues to service.
S-11
The servicer believes that delinquencies, repossessions and net losses have
decreased during the periods set forth below due to tightened credit standards
and continued collection efforts. Fluctuation in delinquencies, repossession and
losses generally follow trends in the overall economic environment and may be
affected by such factors as:
- increased competition for obligors,
- the supply and demand for automobiles, light trucks and sport utility
vehicles,
- rising consumer debt burden per household and
- increases in personal bankruptcies.
The credit enhancement for the trust has been designed to mitigate the
impact to noteholders and certificateholders of increases in delinquencies and
losses.
There can be no assurance that the delinquency, repossession and net loss
experience on the receivables will be comparable to that set forth below or that
the factors described above will remain applicable.
<Table>
<Caption>
NINE MONTHS
ENDED
SEPTEMBER 30 YEAR ENDED DECEMBER 31
NEW AND USED ---------------- -------------------------------------------------
VEHICLE CONTRACTS 2001 2000 2000 1999 1998 1997 1996
----------------- ----- ----- ----- ----- ----- ----- -----
Total Retail Contracts
Outstanding at End of the
Period (in thousands).......... 3,615 3,306 3,412 3,120 2,981 2,861 3,005
Average Daily Delinquency
31-60 Days....................... 1.94% 1.89% 1.92% 2.18% 2.66% 3.24% 3.14%
61-90 Days....................... 0.18 0.14 0.15 0.14 0.18 0.23 0.22
91 Days or More.................. 0.02 0.01 0.01 0.02 0.02 0.03 0.03
Repossessions as a Percent of
Average Number of Contracts
Outstanding.................... 1.85% 1.82% 1.84% 2.07% 2.48% 3.21% 3.59%
Net Losses as a Percent of
Liquidations................... 1.28% 1.07% 1.16% 1.12% 1.70% 2.30% 2.35%
Net Losses as a Percent of
Average Receivables............ 0.64% 0.54% 0.58% 0.58% 0.83% 1.31% 1.45%
</Table>
The servicer's current practice is generally to write off receivables which
are more than 90 days past due. Also, the "Net Losses as a Percent of
Liquidations" and the "Net Losses as a Percent of Average Receivables"
percentages in the preceding table are based on gross accounts receivable
including unearned income and "Repossessions as a Percent of Average Number of
Contracts Outstanding" and "Net Losses as a Percent of Average Receivables" for
the nine months ended September 30, 2001 and 2000 are reported as annualized
rates.
THE NOTES
The notes will be issued pursuant to the terms of an indenture, which may
be amended and supplemented from time to time, to be dated as of the closing
date between the trust and the indenture trustee. A sample indenture was filed
as an exhibit to the registration statement of which this prospectus supplement
forms a part, but the sample indenture does not describe the specific terms of
the offered notes. A copy of the actual indenture under which the notes are
issued will be available to holders of notes from the seller upon request and
will be filed with the SEC following the initial issuance of the notes. The
following summary, when read in conjunction with the section titled "The Notes"
in the prospectus, describes the material
S-12
terms of the notes and the indenture. Where particular provisions or terms used
in the indenture are referred to, the actual provisions, including definitions
of terms, are incorporated by reference as part of the summary. ,
a , will be the indenture trustee.
All payments on the notes will be made on the fifteenth day of each
calendar month or, if that day is not a business day, the next succeeding
business day, beginning on __________ , __________ . We refer to these dates
as "distribution dates."
The Class A Notes. The interest rate, the Targeted Final Distribution Date
and the Final Scheduled Distribution Date for the offered Class A Notes are as
set forth on the cover page to this prospectus supplement. The corresponding
information for the Class A-1 Notes is set forth in the following table:
<Table>
<Caption>
CLASS A-1 NOTES
---------------
Principal amount......................................
Interest rate.........................................
Targeted final distribution date......................
Final scheduled distribution date.....................
</Table>
The Variable Pay Revolving Note. The initial Variable Pay Revolving Note
and any subsequently issued Variable Pay Revolving Note will each have the same
Final Scheduled Distribution Date. The initial Variable Pay Revolving Note will
bear interest at a floating rate equal to LIBOR plus %. Any subsequently
issued Variable Pay Revolving Note will bear interest at a floating rate equal
to LIBOR plus a margin not to exceed %. The interest rate will be
determined at the time of issuance and will reflect then current market
conditions. However, if the interest rate swap is terminated, the interest rate
on the Variable Pay Revolving Note will automatically become fixed at % per
annum, which is the fixed rate payable by the trust under the interest rate
swap. See "--Incremental Advances under the Variable Pay Revolving Note" below.
For each distribution date other than the initial distribution date, LIBOR
will be the rate for deposits in U.S. Dollars for a period of one month which
appears on the Telerate Service Page 3750 as of 11:00 a.m., London time, on the
day that is two LIBOR Business Days prior to the preceding distribution date
and, in the case of the initial distribution date, %. If that rate does not
appear on the Telerate Service Page 3750 -- or any other page as may replace
that page on that service, or if that service is no longer offered, any other
service for displaying LIBOR or comparable rates as may be selected by the
indenture trustee after consultation with the seller -- then LIBOR will be the
Reference Bank Rate.
PAYMENTS OF INTEREST
Interest on the unpaid principal balance of each class of the Class A Notes
and the Variable Pay Revolving Note will accrue at the applicable interest rate
and will be paid monthly on each distribution date. Interest on the certificates
will not be paid on any distribution date until interest on the Class A Notes
and the Variable Pay Revolving Note has been paid in full.
Each distribution date will be a payment date as described in the
prospectus. Interest will accrue on the Class A Notes from and including the
closing date. For each class of the Class A Notes and the Variable Pay Revolving
Note, interest will be payable on each distribution date in an amount equal to
the Noteholders' Interest Distributable Amount for
S-13
that distribution date. Interest on the Variable Pay Revolving Note will be
calculated on the basis of actual days elapsed during the period for which
interest is payable and a 360-day year. Interest on Class A Notes will be
calculated on the basis of a 360-day year consisting of twelve 30-day months.
Failure to pay the full Noteholders' Interest Distributable Amount on any class
of notes on any distribution date will constitute an Event of Default under the
indenture after a five-day grace period.
PAYMENTS OF PRINCIPAL
In general, no payments will be made on any class of the Class A Notes
until its Targeted Final Distribution Date. On the Targeted Final Distribution
Date for each class of Class A Notes, the trust will pay, to the extent of
available funds, the entire outstanding principal balance of that class of Class
A Notes. The Noteholders' Principal Distributable Amount on each distribution
date that is not a Targeted Final Distribution Date will be applied to make
principal payments on the Variable Pay Revolving Note to the extent of the
outstanding principal balance of the Variable Pay Revolving Note. If and to the
extent the amount available to pay principal on the notes exceeds the
outstanding principal balance of the Variable Pay Revolving Note, this excess
will be deposited into an account which we refer to as the Accumulation Account.
Amounts on deposit in the Accumulation Account will be available on the next
succeeding Targeted Final Distribution Date to pay principal on the Class A
Notes. The Accumulation Account will be a Designated Account.
If any class of Class A Notes is not paid in full on its Targeted Final
Distribution Date, on each distribution date thereafter, until that class of
Class A Notes is paid in full, the Noteholders' Principal Distributable Amount
will be applied to that class of Class A Notes and the Variable Pay Revolving
Note pro rata based on their outstanding principal balances. If on two
consecutive Targeted Final Distribution Dates the corresponding targeted classes
of Class A Notes are not paid in full or in the event the interest rate swap is
terminated, on each distribution date thereafter, amounts available to make
principal payments on the notes will be applied to the Class A Notes and the
Variable Pay Revolving Note pro rata. In that event, payments on the Class A
Notes will be made sequentially so that no principal payments will be made on
any class of Class A Notes until all Class A Notes with a lower numerical
designation have been paid in full. Thus, in that event, on each distribution
date, the Class A Notes would be paid as follows:
- First, the Class A-1 Notes until paid in full,
- Second, the Class A-2 Notes until paid in full,
- Third, the Class A-3 Notes until paid in full,
- Fourth, the Class A-4 Notes until paid in full, and
- Fifth, the Class A-5 Notes until paid in full.
It is unlikely that there will be sufficient funds to pay a class of Class
A Notes on its Targeted Final Distribution Date if the trust is not able to
obtain an incremental advance under the Variable Pay Revolving Note on that
Targeted Final Distribution Date. See "--Incremental Advances under the Variable
Pay Revolving Note" below.
Except as provided below, if more than one Variable Pay Revolving Note is
issued, principal payments to be made on the Variable Pay Revolving Notes will
be applied to the Variable Pay Revolving Notes in the order in which they were
issued, so that the earliest
S-14
issued Variable Pay Revolving Notes will be paid in full before any principal
payments are made on later issued Variable Pay Revolving Notes.
At any time that the principal balance of the Class A Notes and the
Variable Pay Revolving Note has been declared due and payable following the
occurrence of an Event of Default, principal payments on each class of the Class
A Notes and the Variable Pay Revolving Note will be made ratably to all
noteholders on each distribution date, based on the outstanding principal
balance of that class of notes until all Events of Default have been cured or
waived as provided in the indenture.
Although failure to pay the full principal amount of a class of notes on
the applicable Final Scheduled Distribution Date will be an Event of Default,
failure to pay a class of notes on the applicable Targeted Final Distribution
Date will not result in an Event of Default.
REDEMPTION
If the servicer exercises its option to purchase the receivables when the
Aggregate Principal Balance of the receivables on the last day of any monthly
period has declined to 10% or less of the Aggregate Amount Financed, then the
outstanding [Class A-5 Notes], if any, and the Variable Pay Revolving Note will
be redeemed in whole, but not in part, on the distribution date on which the
servicer exercises this option. The servicer's option is described in the
prospectus under "The Transfer and Servicing Agreements--Termination." The
redemption price will be equal to the unpaid principal amount of the Class A-5
Notes and the Variable Pay Revolving Note, plus accrued and unpaid interest
thereon.
INCREMENTAL ADVANCES UNDER THE VARIABLE PAY REVOLVING NOTE
On the closing date, the trust will issue the initial Variable Pay
Revolving Note in an initial principal amount of $ . The seller
will seek to obtain incremental advances under the Variable Pay Revolving Note
on the Targeted Final Distribution Date for each class of the Class A Notes and
the seller will direct the trust to use the incremental advance to make payments
of principal on that Targeted Final Distribution Date.
The term "incremental advance" is used herein to refer to each amount
advanced under any Variable Pay Revolving Note, other than the initial principal
amount of the initial Variable Pay Revolving Note. The amount of each
incremental advance will be added to the outstanding principal balance of the
applicable Variable Pay Revolving Note. For ease of reference, we use the term
"the Variable Pay Revolving Note" to refer collectively to the initial Variable
Pay Revolving Note and any subsequently issued Variable Pay Revolving Note,
unless the context otherwise requires.
The seller will obtain an incremental advance under the Variable Pay
Revolving Note on any Targeted Final Distribution Date if all of the following
conditions are satisfied and if, as described in the next paragraph, one or more
persons agree to make an incremental advance:
- the aggregate amount of the incremental advance plus the amount of
available funds is sufficient to pay in full the outstanding principal
balance of the targeted class of Class A Notes;
- after giving effect to the incremental advance under the Variable Pay
Revolving Note and all payments of principal on the notes and payments on
the Certificate Balance on that Targeted Final Distribution Date, the sum
of the outstanding principal balance of the notes plus the Certificate
Balance cannot exceed the Aggregate Principal Balance
S-15
of the receivables on the last day of the month immediately preceding
that Targeted Final Distribution Date;
- the interest rate swap must be in full force and effect, and
- no Event of Default shall have occurred and be continuing.
No Variable Pay Revolving Note is being offered by this prospectus
supplement and the prospectus. A 100% participation interest in the initial
Variable Pay Revolving Note will be sold in a private placement to a commercial
paper facility administered by GMAC. If the foregoing conditions have been
satisfied, the seller will request that the commercial paper facility make an
incremental advance with respect to the initial Variable Pay Revolving Note on
each Targeted Final Distribution Date. If the commercial paper facility elects
not to make such an incremental advance, the seller will use reasonable efforts
to sell one or more additional Variable Pay Revolving Notes to additional
purchasers and to obtain an incremental advance thereunder. However, neither the
commercial paper facility administered by GMAC nor any other person or entity is
obligated to make any incremental advance with respect to any Variable Pay
Revolving Note and neither the seller, the servicer nor any other person or
entity is obligated to identify any other prospective purchasers. As a result,
we cannot assure you that any incremental advances will be available on the
Targeted Final Distribution Date for a class of Class A Notes, in which case the
trust will not have sufficient funds to pay that class of Class A Notes in full
on that Targeted Final Distribution Date. If a class of Class A Notes is not
paid in full on its Targeted Final Distribution Date, on each distribution date
thereafter, until that class of Class A Notes is paid in full, amounts available
to make principal payments on the notes will be applied to that class of Class A
Notes and the Variable Pay Revolving Note pro rata based on their outstanding
principal balance as set forth above in "--Payments of Principal." See "Risk
Factors--Failure to Receive Incremental Advances under the Variable Pay
Revolving Note Will Result in Class A Notes Not Being Paid In Full on Their
Targeted Final Distribution Dates."
If, on a Targeted Final Distribution Date for any class of Class A Notes,
the seller has a binding agreement for an incremental advance under the Variable
Pay Revolving Notes but the servicer determines that the proceeds from that
incremental advance will not be received on that Targeted Final Distribution
Date in time to make payments on the notes on that Targeted Final Distribution
Date, the servicer may, in its sole discretion, make a liquidity advance to the
trust in an amount equal to these proceeds if it determines, in its sole
discretion, that it has received reasonable assurances to the effect that the
full amount of the necessary proceeds will be delivered to the trust later on
that Targeted Final Distribution Date or within two Business Days thereafter. If
the servicer makes a liquidity advance to the trust, it will be immediately
reimbursed for the advance upon receipt by the trust of the incremental advance
under the Variable Pay Revolving Note. If the incremental advance under the
Variable Pay Revolving Note is not made within two Business Days after the
Targeted Final Distribution Date, the servicer will have the right to be
reimbursed out of collections on the receivables as and when received.
PARITY OF NOTES
Interest payments on all classes of Class A Notes and the Variable Pay
Revolving Note will have the same priority. Under some circumstances, the amount
available to make these payments could be less than the amount of interest
payable on the notes on any distribution date, in which case each class of
noteholders will receive their ratable share of the aggregate amount available
to be distributed in respect of interest on the notes. Each class' ratable share
of the aggregate amount available will be based upon the aggregate amount of
interest due to
S-16
that class of noteholders on that distribution date. See "The Transfer and
Servicing Agreements--Distributions" and "--Reserve Account."
Principal payments on the notes will be made as described above under "The
Notes -- Payments of Principal." If an Event of Default occurs as a result of
which the principal balances of the Class A Notes and the Variable Pay Revolving
Note are declared immediately due and payable, each class of notes will be
entitled to ratable repayment of principal on each distribution date, based on
the outstanding principal balance of the notes until all Events of Default have
been cured or waived as provided in the indenture.
ADDITIONAL INDENTURE MATTERS
As set forth in the prospectus under the caption "The Notes--The
Indenture--Events of Default; Rights Upon Event of Default," the indenture
trustee may sell the trust's assets following an Event of Default only if
specified conditions are satisfied. For an Event of Default resulting from a
breach by the trust of the covenants in the indenture, the consent from the
holders of all the outstanding notes must be accompanied by the consent of the
holders of all the outstanding certificates.
DELIVERY OF NOTES
The Class A Notes will be issued on or about the closing date in book entry
form through the facilities of the DTC, Clearstream and the Euroclear System
against payment in immediately available funds.
THE CERTIFICATES
The trust will issue the certificates pursuant to the terms of a trust
agreement, a form of which the seller has filed as an exhibit to the
registration statement of which this prospectus supplement forms a part. A copy
of the trust agreement will be available to holders of certificates from the
seller upon request and will be filed with the SEC following the initial
issuance of the notes and the certificates. The following summary, when read in
conjunction with the section titled "The Certificates" in the prospectus,
describes the material terms of the certificates and the trust agreement. Where
particular provisions or terms used in the trust agreement are referred to, the
actual provisions, including definitions of terms, are incorporated by reference
as part of the summary.
All payments on the certificates will be made on the distribution dates
referred to above under the "The Notes" in this prospectus supplement.
INTEREST
On each distribution date, interest will be distributed to
certificateholders at the Pass Through Rate on the Certificate Balance. Any
Certificateholders' Interest Distributable Amount on a distribution date which
is not distributed on a distribution date will be distributed on the next
distribution date. Interest will accrue from and including the closing date and
will be payable on each distribution date in an amount equal to the
Certificateholders' Interest Distributable Amount for that distribution date.
Interest on the certificates will be calculated on the basis of a 360-day year
consisting of twelve 30-day months.
S-17
CERTIFICATE BALANCE
On each distribution date, the Certificateholders' Percentage of the
Principal Distributable Amount will be available to make distributions on the
Certificate Balance. The Final Scheduled Distribution Date for the certificates
will occur on the distribution date in [ 20 ].
SUBORDINATION TO THE NOTES
Notwithstanding the above, if an Event of Default occurs, and the notes are
accelerated, no payments of interest on the certificates or distributions on the
Certificate Balance will be made until the notes are paid in full or the
acceleration is rescinded. In this event, amounts otherwise available to make
payments on the certificates will be available to make payments on the notes.
See "The Transfer and Servicing Agreements--Distributions" in this prospectus
supplement.
EARLY RETIREMENT OF THE CERTIFICATES
If the servicer exercises its option to purchase the receivables when the
Aggregate Principal Balance declines to 10% or less of the Aggregate Amount
Financed, certificateholders will receive an amount in respect of the
certificates equal to the Certificate Balance together with accrued interest at
the Pass Through Rate. This distribution will effect early retirement of the
certificates. See "The Transfer and Servicing Agreements--Termination" in the
prospectus.
THE TRANSFER AND SERVICING AGREEMENTS
The parties will enter into the Transfer and Servicing Agreements as of the
closing date. See "The Transfer and Servicing Agreements" in the prospectus. The
seller has filed sample forms of the Transfer and Servicing Agreements as
exhibits to the registration statement of which this prospectus supplement forms
a part, but the sample agreements do not describe the specific terms of the
offered notes. A copy of the actual Transfer and Servicing Agreements for the
offered notes will be available to holders of notes from the seller upon request
and will be filed with the SEC following the initial issuance of the notes and
the certificates. The following summary, when read in conjunction with the
section titled "The Transfer and Servicing Agreements" in the prospectus,
describes the material terms of the notes and the indenture. 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 the summary.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
On each distribution date, the servicer will be entitled to receive the
Total Servicing Fee as described in the prospectus under "The Transfer and
Servicing Agreements--Servicing Compensation and Payment of Expenses." The Basic
Servicing Fee Rate will be 1%. In addition, the servicer will be entitled to
retain any late fees, prepayment charges or similar fees and charges collected
during a monthly period and any investment earnings on trust accounts during a
monthly period.
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DISTRIBUTIONS
On or before each distribution date, the servicer will transfer all
collections on the receivables for the prior month -- or since the cutoff date
in the case of the initial distribution date and all Prepayments to the
Collection Account. On each distribution date, the indenture trustee will cause
collections made during the prior month which constitute Payments Ahead to be
transferred from the Collection Account to the servicer or to the Payment Ahead
Servicing Account, if required. See the chart titled "Summary of Monthly
Deposits and Withdrawals from Accounts" which appears after Risk Factors in this
prospectus supplement for a summary of the monthly distributions. This summary
chart provides only a simplified overview of the monthly flow of funds.
Therefore, you should also read the text of this prospectus supplement to
understand the monthly flow of funds.
The indenture trustee will make distributions to the Note Distribution
Account and the Certificate Distribution Account out of the amounts on deposit
in the Collection Account. The amount to be distributed to the Note Distribution
Account and Certificate Distribution Account will be determined in the manner
described below.
Determination of Available Amounts. The Total Available Amount for a
distribution date will be the sum of:
(1) the Available Interest;
(2) the Available Principal;
(3) all cash or other immediately available funds on deposit in the
reserve account immediately prior to the distribution date;
(4) on the Targeted Final Distribution Date for any class of Class A
Notes, the amount of any incremental advance under the Variable Pay
Revolving Note and the Accumulation Amount for that distribution date; and
(5) on the first distribution date after the notes have been declared
due and payable following the occurrence of an Event of Default and on the
first distribution date after the termination of the interest rate swap,
the Accumulation Amount.
Monthly Withdrawals and Deposits. On or before the tenth day of each
calendar month, or if that day is not a Business Day, the next succeeding
Business Day, the servicer will calculate the following amounts, among others:
Based on activity during the prior monthly period:
- the Total Available Amount
- the Available Interest
- the Available Principal
- any expected incremental advance under the Variable Pay Revolving Note
- the Accumulation Amount
- the Total Servicing Fee
- the Total Note Principal Payment Amount
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Amounts owing on the upcoming distribution date:
- the Aggregate Noteholders' Interest Distributable Amount
- the Aggregate Noteholders' Principal Distributable Amount
- the Certificateholders' Interest Distributable Amount
- the Certificateholders' Principal Distributable Amount
- the net amount, if any, payable by the trust under the interest rate swap
Based on these calculations, the servicer will deliver to the indenture trustee
a certificate specifying these amounts and instructing the indenture trustee to
make withdrawals, deposits and payments of the following amounts on that
distribution date:
(1) the amount, if any, to be withdrawn from the reserve account and
deposited in the Collection Account;
(2) the amount to be withdrawn from the Collection Account and paid to
the servicer in respect of the Total Servicing Fee for that distribution
date and the net amount, if any, to be paid under the interest rate swap to
the swap counterparty for that distribution date;
(3) the amounts to be withdrawn from the Collection Account in respect
of the Aggregate Noteholders' Interest Distributable Amount and the
Aggregate Noteholders' Principal Distributable Amount and deposited in the
Note Distribution Account for payment to noteholders on that distribution
date;
(4) the amounts to be withdrawn from the Collection Account in respect
of the Certificateholders' Interest Distributable Amount and the
Certificateholders' Principal Distributable Amount and deposited in the
Certificate Distribution Account for distribution to certificateholders on
that Distribution Date;
(5) the amount, if any, to be withdrawn from the Collection Account
and deposited in the reserve account;
(6) the amount, if any, to be withdrawn from the reserve account and
paid to the seller;
(7) the amount, if any, to be withdrawn from the Collection Account
and deposited in the Accumulation Account; and
(8) the amount, if any, to be withdrawn from the Accumulation Account
and deposited in the Collection Account.
The amount, if any, to be withdrawn from the reserve account and deposited
to the Collection Account as specified in clause (1) above on any distribution
date will be the lesser of:
(X) the amount of cash or other immediately available funds in the
reserve account on that distribution date and
(Y) the amount, if any, by which:
(A) the sum of the Total Servicing Fee, the Aggregate Noteholders'
Interest Distributable Amount, the Certificateholders' Interest
Distributable Amount, the
S-20
Aggregate Noteholders' Principal Distributable Amount, the net amount,
if any, payable by the trust under the interest rate swap and the
Certificateholders' Principal Distributable Amount exceeds
(B) the Available Interest and the Available Principal for that
distribution date.
The amount, if any, to be withdrawn from the Collection Account and
deposited in the reserve account as specified in clause (5) above on any
distribution date will equal the amount, if any, by which:
(X) the Total Available Amount for that distribution date exceeds
(Y) the amount described in subclause (A) of clause (Y) of the
preceding paragraph.
The amount, if any, to be withdrawn from the reserve account and paid to
the seller as specified in clause (6) above on any distribution date will equal
the amount, if any, by which the amount on deposit in the reserve account after
all other deposits -- including the deposit pursuant to clause (5) above -- and
withdrawals on that distribution date exceeds the Specified Reserve Account
Balance for that date.
The amount, if any, to be withdrawn from the Collection Account and
deposited in the Accumulation Account as specified in clause (7) above on any
distribution date that is not a Targeted Final Distribution Date for a class of
Class A Notes will be, except as described in the following sentence, the
amount, if any, by which (x) the Noteholders' Percentage of the Principal
Distributable Amount for that distribution date exceeds (y) the outstanding
principal balance of the Variable Pay Revolving Note as of the open of business
on that distribution date. No funds will be withdrawn from the Collection
Account and deposited in the Accumulation Account on any distribution date that
is a Targeted Final Distribution Date for a class of Class A Notes, any
distribution date during a Sequential Amortization Period or any distribution
date after the notes have been accelerated following the occurrence of an Event
of Default until all Events of Default have been cured or waived as provided in
the indenture.
The amount, if any to be withdrawn from the Accumulation Account and
deposited in the Collection Account as specified in clause (8) above will be the
Accumulation Amount, if any:
(A) on each distribution date that is a Targeted Final Distribution
Date for a class of Class A Notes,
(B) on the first distribution date during a Sequential Amortization
Period, or
(C) on the first distribution date after the notes have been declared
due and payable following the occurrence of an Event of Default. In all
other cases, no amounts will be transferred from the Accumulation Account
to the Collection Account.
On each distribution date, all amounts on deposit in the Note Distribution
Account will be distributed to the noteholders and all amounts on deposit in the
Certificate Distribution Account will be distributed to the certificateholders,
in each case as described in this prospectus supplement and in the prospectus.
Priorities for Withdrawals from Collection Account. Withdrawals of funds
from the Collection Account on a distribution date for application as described
in clauses (2), (3) and
S-21
(4) under "--Distributions--Monthly Withdrawals and Deposits" above will be made
only to the extent of the Total Available Amount allocated to that application
for such distribution date. In calculating the amounts which can be withdrawn
from the Collection Account and applied as specified in clauses (2), (3) and
(4), the servicer will allocate the Total Available Amount in the following
order of priority:
(1) the Total Servicing Fee;
(2) the net amount, if any, to be paid under the interest rate swap to
the swap counterparty;
(3) the Aggregate Noteholders' Interest Distributable Amount;
(4) the Certificateholders' Interest Distributable Amount;
(5) the Aggregate Noteholders' Principal Distributable Amount; and
(6) the Certificateholders' Principal Distributable Amount.
Notwithstanding the foregoing, at any time that all classes of notes have
not been paid in full and the principal balance of the notes has been declared
due and payable following the occurrence of an Event of Default under the
indenture, until the time when the notes have been paid in full or the
declaration has been rescinded and any continuing Events of Default have been
cured or waived pursuant to the indenture, no amounts will be deposited in or
distributed to the Certificate Distribution Account. Any of these amounts
otherwise distributable to the Certificate Distribution Account will be
deposited instead into the Note Distribution Account for payments on the notes
as described in this prospectus supplement and in the prospectus.
S-22
[SUMMARY OF MONTHLY DEPOSITS TO AND WITHDRAWALS FROM ACCOUNTS* FLOWCHART]
S-23
RESERVE ACCOUNT
Pursuant to the Trust Sale and Servicing Agreement, the trust will
establish the reserve account with the indenture trustee. The reserve account
will be funded by an initial deposit by the seller on the closing date of
$ , which equals % of the Initial Aggregate Principal Balance.
On each distribution date, amounts in the reserve account will be available to
make payments on the notes and the certificates as described above under "The
Distributions--Monthly Withdrawals and Deposits."
If the amount on deposit in the reserve account on any distribution date,
after giving effect to all other deposits, including the deposit described in
clause (5) under "The Distributions--Monthly Withdrawals and Deposits", and
withdrawals therefrom on that distribution date, is greater than the Specified
Reserve Account Balance for that distribution date, the servicer will instruct
the indenture trustee to distribute the amount of the excess to the seller. Upon
any distribution to the seller of amounts from the reserve account, neither the
noteholders nor the certificateholders will have any rights in, or claims to,
those amounts.
INTEREST RATE SWAP
On the closing date, the trust will enter into an interest rate swap with
, as the swap counterparty. [The obligations of the swap
counterparty under the interest rate swap will be guaranteed by ,
as the swap counterparty guarantor. As of the date hereof, the long-term debt
obligations of the swap counterparty guarantor are rated "AAA" by Standard &
Poor's Ratings Services and "Aa1" by Moody's Investors Service, Inc.]
Under the interest rate swap, the trust will receive payments at a rate
determined by reference to LIBOR, which is the basis for determining the amount
of interest due on the Variable Pay Revolving Note. Under the interest rate
swap, on each distribution date, (1) the trust will be obligated to pay to the
swap counterparty a fixed monthly interest rate of % on a notional amount
equal to the outstanding principal balance on the Variable Pay Revolving Note
and (2) the swap counterparty will be obligated to pay to the trust a floating
interest rate of LIBOR plus % on a notional amount equal to the outstanding
principal balance on the Variable Pay Revolving Note.
On the business day preceding each distribution date, the amount the trust
is obligated to pay will be netted against the amount the swap counterparty is
obligated to pay under the interest rate swap. Only the net amount will be due
from the trust or the swap counterparty, as applicable.
Upon the occurrence of the events of default and termination events
specified in the interest rate swap, the non-defaulting party or non-affected
party may elect to terminate the interest rate swap. These events include
failure to make payments due under the interest rate swap, the occurrence of
bankruptcy and insolvency events and other customary events. The trust will also
be deemed to be in default for that purpose if:
(1) there is an Event of Default resulting from a payment default or a
bankruptcy or insolvency event with respect to the trust and the notes are
declared due in full;
(2) the notes are declared due in full following an Event of Default
resulting from a covenant default under the indenture and the holders of
all of the outstanding notes and certificates consent to the sale by the
indenture trustee of the trust's assets; or
S-24
(3) an amendment to the Transfer and Servicing Agreements or the
indenture is made without the consent of the swap counterparty and the
amendment materially and adversely affects the swap counterparty.
If the interest rate swap terminates, a Sequential Amortization Period will
commence and the trust will not be permitted to obtain incremental advances
under the Variable Pay Revolving Note. In addition, in that event, the interest
rate on the outstanding balance of the Variable Pay Revolving Note will
automatically be adjusted to a fixed rate of %, which is the fixed rate
payable by the trust under the interest rate swap.
In addition, in the event of the termination of the interest rate swap, a
termination payment may be due (1) to the swap counterparty by the trust out of
funds that would otherwise be available to make payments on the notes and the
certificates or (2) to the trust by the swap counterparty. Any termination
payments due by the trust will be paid from available funds pari passu with
payments of interest on the notes. The amount of the termination payment may be
based on market quotations of the cost of entering into a similar swap
transaction or other method as may be required under the interest rate swap, in
each case, in accordance with the procedures set forth in the interest rate
swap. The termination payment could, if market interest rates and other
conditions have changed materially, be substantial. Under the terms of the
interest rate swap, the non-defaulting party is not obligated to make a
termination payment otherwise due in the event of termination following the
occurrence of an event of default.
The obligations of the trust under the interest rate swap are secured under
the indenture. The obligations of the swap counterparty under the interest rate
swap are unsecured. However, in the event that the swap counterparty
[guarantor]'s long-term senior unsecured debt or commercial paper ceases to be
rated at a level acceptable to the rating agencies, under the interest rate
swap, the swap counterparty will be obligated, within 30 calendar days of the
date on which the swap counterparty [guarantor]'s ratings fall below the
required ratings, either to (A) post collateral or establish other arrangements
to secure its obligations under the interest rate swap or (B) arrange for a
substitute swap counterparty to assume the rights and obligations of the swap
counterparty under the interest rate swap, in either case so that the ratings of
the notes are maintained or, if applicable, restored to their level immediately
prior to the change in the ratings of the swap counterparty [guarantor]'s debt
giving rise to the obligation. If the swap counterparty fails to take either of
these actions, the trust will be entitled to terminate its interest rate swap
with the swap counterparty and to claim from the swap counterparty the
termination payment described in this section of the prospectus supplement. This
termination and replacement will not constitute a termination of the interest
rate swap for purposes of the second preceding paragraph.
The swap counterparty will have the right to consent to amendments under
the indenture and the Transfer and Servicing Agreements, other than amendments
that do not materially and adversely affect the interests of the swap
counterparty.
The swap counterparty is a wholly-owned subsidiary of . The
swap counterparty is a dealer in interest rate and cross-currency swaps and
other derivative products in all major currencies from its offices or affiliates
in . Its offices are located at and its telephone
number is ( ) .
[The swap counterparty guarantor is a wholly-owned subsidiary of
and is engaged in the business of .]
S-25
The information in the preceding three paragraphs has been provided by the
swap counterparty for use in this prospectus supplement. Except for the
foregoing three paragraphs, the swap counterparty, the swap counterparty
guarantor and their respective affiliates have not prepared and do not accept
responsibility for this prospectus or this prospectus supplement.
TERMINATION
Following payment in full of the securities and payment of all liabilities
of the trust in accordance with applicable law, any remaining assets in the
trust and any remaining amount in the reserve account will be distributed to the
seller.
ERISA CONSIDERATIONS
[any ERISA considerations and investor representations applicable for a
series will be explained in this section]
S-26
FEDERAL INCOME TAX CONSEQUENCES
Kirkland & Ellis, special tax counsel to the seller, has delivered its
opinion for U.S. federal income tax purposes, that the Class A Notes offered by
this prospectus supplement and the prospectus will constitute indebtedness. Each
noteholder, by the acceptance of a note, will agree to treat the notes as
indebtedness for federal, state and local income and franchise tax purposes.
Kirkland & Ellis has delivered its opinion that the trust will not be
taxable as an association or publicly traded partnership taxable as a
corporation, but will be classified as a grantor trust for federal income tax
purposes. If the Internal Revenue Service were to contend successfully that the
trust is not a grantor trust, the trust should be classified for federal income
tax purposes as a partnership which is not taxable as a corporation. Each
certificateholder, by the acceptance of a Trust Certificate, will agree to treat
the Trust Certificates as equity interests in the trust for federal, state and
local income and franchise tax purposes. Certificateholders generally must
report their respective allocable shares of all income earned on the receivables
and, subject to limitations on individuals, estates and trusts, may deduct their
respective allocable shares of interest paid on the notes and reasonable
servicing and other fees. See "Federal Income Tax Consequences--Trust
Certificates" in the prospectus.
See "Federal Income Tax Consequences" and "State and Local Tax
Consequences" in the prospectus.
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting
agreement, the seller has agreed to sell to each of the underwriters named
below, and each of the underwriters has severally agreed to purchase from the
seller, the principal amount of Class A-2 Notes, Class A-3 Notes, Class A-4
Notes and Class A-5 Notes and the certificates set forth opposite its name
below:
AGGREGATE PRINCIPAL AMOUNT TO BE PURCHASED
<Table>
<Caption>
CLASS A-2 CLASS A-3 CLASS A-4 CLASS A-5
UNDERWRITER NOTES NOTES NOTES NOTES CERTIFICATES TOTAL
----------- --------- --------- --------- --------- ------------ --------
Total................
</Table>
and are responsible for jointly leading and managing
the offering of the notes and certificates.
The seller has been advised by the underwriters that the several
underwriters propose initially to offer the Class A-2 Notes, the Class A-3
Notes, the Class A-4 Notes and the Class A-5 Notes and the certificates to the
public at the prices set forth on the cover page hereof, and to dealers at these
prices less a selling concession not in excess of the percentage set forth below
for each class of notes and the certificates. The underwriters may allow, and
S-27
these dealers may reallow to other dealers, a subsequent concession not in
excess of the percentage set forth below for each class of notes and the
certificates. After the initial public offering, the public offering price and
these concessions may be changed.
<Table>
<Caption>
SELLING CONCESSION REALLOWANCE
------------------ -----------
Class A-2 Notes.................................... -- --
Class A-3 Notes.................................... -- --
Class A-4 Notes.................................... -- --
Class A-5 Notes.................................... -- --
Certificates....................................... -- --
</Table>
The underwriters may engage in over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids for the Class A
Notes and the certificates in accordance with Regulation M under the Securities
Exchange Act of 1934.
Over-allotment transactions involve short sales by the underwriters of the
Class A Notes or the certificates. Short sales involve the sale by the
underwriters of a greater number of Class A Notes or certificates than they are
required to purchase in the offering. This creates a syndicate short position
and the need to engage in syndicate covering transactions to close out the
syndicate short position. Short sales may be in the form of "covered" short
sales or "naked" short sales.
Covered short sales are sales made in an amount not greater than the
underwriters' over-allotment option to purchase additional Class A Notes or
certificates in the offering. The underwriters may close out any covered short
position by either exercising their over-allotment option or purchasing Class A
Notes or certificates in the open market. In determining the source of Class A
Notes or certificates to close out the covered short position, the underwriters
will consider, among other things, the price of the Class A Notes or
certificates available for purchase in the open market as compared to the price
at which they may purchase Class A Notes or certificates through the
over-allotment option.
Naked short sales are sales in excess of the over-allotment option. The
underwriters must close out any naked short position by purchasing Class A Notes
or certificates in the open market. A naked short position is more likely to be
created if the underwriters are concerned that there may be downward pressure on
the price of the Class A Notes or certificates in the open market after pricing
that could adversely affect investors who purchase in the offering.
Syndicate covering transactions involve purchases of the Class A Notes or
the certificates in the open market after the distribution has been completed in
order to cover syndicate short positions.
Penalty bids permit the underwriters to reclaim a selling concession from a
syndicate member when the Class A Notes or the certificates originally sold by
that syndicate member are purchased in a syndicate covering transaction.
Similar to other purchase transactions, over-allotment transactions,
stabilizing transactions, syndicate covering transactions and penalty bids may
cause the prices of the Class A Notes or the certificates to be higher than they
would otherwise be in the absence of these transactions, and may also have the
potential effect of preventing or retarding a decline in the market value of the
notes or the certificates. Neither the seller nor any of the underwriters
represent that the underwriters will engage in any of these transactions or that
these transactions, once commenced, will not be discontinued without notice at
any time.
S-28
The following chart sets forth information on the aggregate proceeds to the
seller from the sale of the Class A Notes and the certificates.
<Table>
<Caption>
PROCEEDS TO THE SELLER
PROCEEDS TO AS PERCENT OF
THE SELLER INITIAL AGGREGATE PRINCIPAL
IN DOLLARS AMOUNT OR CERTIFICATE BALANCE
----------- -----------------------------
Sale of the Class A Notes....................... $ %
Sale of the Certificates........................
Underwriting Discount...........................
Additional Offering Expenses....................
Net Proceeds....................................
</Table>
LEGAL OPINIONS
In addition to the legal opinions described in the prospectus, specified
matters relating to the transaction 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 its affiliates.
S-29
GLOSSARY OF TERMS TO PROSPECTUS SUPPLEMENT
The following are definitions of terms used in this prospectus supplement.
References to the singular form of defined terms in this prospectus supplement
include references to the plural and vice versa.
"Accumulation Account" means the account so designated, established and
maintained pursuant to the Trust Sale and Servicing Agreement.
"Accumulation Amount" means, for any distribution date, the aggregate
amount deposited into the Accumulation Account prior to that distribution date
and not previously applied to make payments on the notes. On any distribution
date which is a Targeted Final Distribution Date for a class of Class A Notes,
except during a Sequential Amortization Period or after the notes have been
declared due and payable following an Event of Default until all Events of
Default have been cured or waived as provided in the indenture, the Accumulation
Amount, together with the Noteholders' Percentage of the Principal Distributable
Amount for that distribution date and the expected amount of any incremental
advance under the Variable Pay Revolving Note, may not exceed the outstanding
principal balance of that class of Class A Notes and the Variable Pay Revolving
Note as of the opening of business on that distribution date.
"Aggregate Amount Financed" means $ .
"Aggregate Noteholders' Interest Distributable Amount" means, for any
distribution date, the sum of (1) the Noteholders' Interest Distributable
Amounts for all classes of notes and (2) the Noteholders' Interest Carryover
Shortfall as of the preceding distribution date.
"Aggregate Noteholders' Principal Distributable Amount" means, for any
distribution date the sum of the (1) Noteholders' Principal Distributable
Amounts for all classes of notes and (2) the Noteholders' Principal Carryover
Shortfall as of the preceding distribution date.
"Available Interest" means, for a distribution date, the difference, for
the prior monthly period, of:
(A) the sum, for that monthly period, of :
(1) that portion of all collections on the receivables held by the
trust, other than Liquidating Receivables, allocable to interest or
Prepayment Surplus, including, in the case of Scheduled Interest
Receivables, the interest portion of existing Payments Ahead being
applied in that monthly period but excluding Excess Payments made during
that monthly period that are treated as Payments Ahead,
(2) Liquidation Proceeds, to the extent allocable to interest in
accordance with the servicer's customary servicing procedures,
(3) all Simple Interest Advances,
(4) all Scheduled Interest Advances to the extent allocable to
interest,
(5) the net amount paid by the swap counterparty, if any, to the
trust pursuant to the interest rate swap, and
(6) the Warranty Payment or the Administrative Purchase Payment for
each receivable that the seller repurchased or the servicer purchased
during that monthly period, to the extent allocable to accrued interest
thereon;
S-30
minus,
(B) the sum, for that monthly period, of:
(1) any Excess Simple Interest Collections,
(2) amounts received on any Scheduled Interest Receivable, other
than a Liquidating Receivable, to the extent that the servicer has
previously made an unreimbursed Scheduled Interest Advance,
(3) Liquidation Proceeds from Simple Interest Receivables paid to
the servicer to reimburse outstanding Simple Interest Advances as
described in the prospectus under "The Transfer and Servicing
Agreements--Monthly Advances,"
(4) Liquidation Proceeds from Scheduled Interest Receivables to the
extent of any unreimbursed Scheduled Interest Advances, and
(5) liquidation expenses as specified in the Pooling and Servicing
Agreement as an allowance for amounts charged to the account of the
obligor, in keeping with the servicer's customary procedures, for the
refurbishing and disposition of the financed vehicle and other
out-of-pocket costs incurred in the liquidation.
For purposes of this definition, references to the prior monthly period shall
include, for the initial distribution date, the period since the cutoff date.
"Available Principal" means for a distribution date, the difference, for
the prior monthly period, of:
(A) the sum, for that monthly period, of:
(1) that portion of all collections on the receivables held by the
trust, other than Liquidating Receivables, allocable to principal,
including, in the case of Scheduled Interest Receivables, the principal
portion of Prepayments and existing Payments Ahead being applied in that
monthly period but excluding Excess Payments made during that monthly
period that are treated as Payments Ahead,
(2) Liquidation Proceeds to the extent allocable to principal in
accordance with the servicer's customary servicing procedures,
(3) all Scheduled Interest Advances to the extent allocable to
principal, and
(4) to the extent allocable to principal, the Warranty Payment or
the Administrative Purchase Payment for each receivable that the seller
repurchased or the servicer purchased during that monthly period;
minus,
(B) the sum, for that monthly period, of:
(1) any Excess Simple Interest Collections,
(2) amounts received on any Scheduled Interest Receivable, other
than a Liquidating Receivable, to the extent that the servicer has
previously made an unreimbursed Scheduled Interest Advance,
(3) Liquidation Proceeds from Simple Interest Receivables paid to
the servicer to reimburse outstanding Simple Interest Advances as
described in the prospectus under "The Transfer and Servicing
Agreements--Monthly Advances,"
S-31
(4) Liquidation Proceeds from Scheduled Interest Receivables to the
extent of any unreimbursed Scheduled Interest Advances, and
(5) liquidation expenses as specified in the Pooling and Servicing
Agreement as an allowance for amounts charged to the account of the
obligor, in keeping with the servicer's customary procedures, for the
refurbishing and disposition of the financed vehicle and other
out-of-pocket costs incurred in the liquidation.
For purposes of this definition, references to the prior monthly period
shall include, for the initial distribution date, the period since the cutoff
date.
"Basic Servicing Fee Rate" means 1% per annum.
"Certificate Balance" means, initially, $ and, on any distribution
date thereafter, will equal the initial Certificate Balance, reduced by
(1) all distributions in respect of Certificate Balance actually made on or
prior to that date to certificateholders,
(2) the Noteholders' Principal Carryover Shortfall as of the close of the
preceding distribution date and
(3) the Certificateholders' Principal Carryover Shortfall as of the close
of the preceding distribution date.
"Certificateholders' Interest Carryover Shortfall" means, as of the close
of any distribution date, the excess of the Certificateholders' Interest
Distributable Amount for that distribution date over the amount that was
actually deposited in the Certificate Distribution Account on that distribution
date in respect of interest on the certificates.
"Certificateholders' Interest Distributable Amount" means, for any
distribution date, the sum of:
(1) the Certificateholders' Monthly Interest Distributable Amount for
that distribution date
(2) the Certificateholders' Interest Carryover Shortfall as of the
close of the preceding distribution date and
(3) one month's interest at the Pass Through Rate on the sum of (a)
any outstanding Noteholders' Principal Carryover Shortfall and (b) any
outstanding Certificateholders' Principal Carryover Shortfall as of the
close of business on the preceding Distribution Date.
"Certificateholders' Monthly Interest Distributable Amount" means, for any
distribution date, interest equal to one-twelfth of the Pass Through Rate
multiplied by the Certificate Balance as of the close of the preceding
distribution date, or, in the case of the first distribution date, interest at
the Pass Through Rate multiplied by a fraction, the numerator of which is
and the denominator of which is 360 multiplied by the initial Certificate
Balance.
"Certificateholders' Percentage" means, for any distribution date, 100%
minus the Noteholders' Percentage.
"Certificateholders' Principal Carryover Shortfall" means, as of the close
of any distribution date, the excess of the Certificateholders' Principal
Distributable Amount for that distribution date over the amount that was
actually deposited in the Certificate Distribution Account on that distribution
date in respect of Certificate Balance.
S-32
"Certificateholders' Principal Distributable Amount" means, for any
distribution date, the sum of (1) the lesser of (A) the Certificateholders'
Percentage of the Principal Distributable Amount and (B) the Certificate Balance
plus (2) any outstanding Certificateholders' Principal Carryover Shortfall as of
the close of the preceding distribution date.
"Class A Notes" means, collectively, the Class A-1 Notes, the Class A-2
Notes, the Class A-3 Notes, the Class A-4 Notes and the Class A-5 Notes.
"Class A-1 Notes" means the Class A-1 % Asset Backed Notes issued by
the trust.
"Class A-2 Notes" means the Class A-2 % Asset Backed Notes issued by
the trust.
"Class A-3 Notes" means the Class A-3 % Asset Backed Notes issued by
the trust.
"Class A-4 Notes" means the Class A-4 % Asset Backed Notes issued by
the trust.
"Class A-5 Notes" means the Class A-5 % Asset Backed Notes issued by
the trust.
"Class A Percentage" means, for a distribution date, the percentage equal
to a fraction, the numerator of which is the outstanding principal balance of
the Class A Notes and the denominator of which is the sum of the outstanding
principal balance of the Class A Notes plus the outstanding principal balance of
the Variable Pay Revolving Note, in each case at the close of the immediately
preceding distribution date (or, in the case of the first distribution date, the
closing date).
"Final Scheduled Distribution Date" means the final scheduled distribution
date, if any, for each class of notes and for the certificates set forth on the
front cover pages of this prospectus supplement.
"Initial Aggregate Principal Balance" means $ .
"Noteholders' Interest Carryover Shortfall" means, as of the close of any
distribution date, the excess of the Aggregate Noteholders' Interest
Distributable Amount for that distribution date over the amount that was
actually deposited in the Note Distribution Account on that distribution date in
respect of interest.
"Noteholders' Interest Distributable Amount" means, for any class of notes
and any distribution date, the product of (1) the outstanding principal balance
of that class of notes as of the close of the preceding distribution date (or,
in the case of the first distribution date, the outstanding principal balance on
the closing date), and (2) in the case of (A) the Class A-2 Notes, the Class A-3
Notes, the Class A-4 Notes and the Class A-5 Notes, one-twelfth of the interest
rate for that class, or, in the case of the first distribution date, the
interest rate for that class multiplied by a fraction, the numerator of which is
and the denominator of which is 360, and (B) the Class A-1 Notes and
each class of the Variable Pay Revolving Note, the product of the interest rate
for that class for that distribution date and a fraction, the numerator of which
is the number of days elapsed from and including the prior distribution date
(or, in the case of the first distribution date, from and including the closing
date), to but excluding that distribution date and the denominator of which is
360.
"Noteholders' Percentage" means, as of any distribution date, the
percentage equal to a fraction, the numerator of which is the outstanding
principal balance of the notes and the denominator of which is the sum of the
outstanding principal balance of the notes and the Certificate Balance, in each
case as of the close of the preceding distribution date.
"Noteholders' Principal Carryover Shortfall" means, as of the close of any
distribution date, the excess of the Aggregate Noteholders' Principal
Distributable Amount for that
S-33
distribution date over the amount that was actually deposited in the Note
Distribution Account on that distribution date in respect of principal.
"Noteholders' Principal Distributable Amount" means:
For the Class A Notes,
(1) Except during a Sequential Amortization Period
(A) a class of Class A Notes on its Targeted Final Distribution
Date, the Noteholders' Principal Distributable Amount for that class of
Class A Notes is the lesser of
(X) the outstanding principal balance of that class as of the
close of the immediately preceding distribution date and
(Y) the Total Note Principal Payment Amount.
(B) If the distribution date is not a Targeted Final Distribution
Date for any class of Class A Notes, the Noteholders' Principal
Distributable Amount for a class of Class A Notes is zero.
(2) During a Sequential Amortization Period, the Noteholders'
Principal Distributable Amount for a distribution date for a class of Class
A Notes is the lesser of
(A) the outstanding principal balance of that class as of the close
of the immediately preceding distribution date and
(B) the remainder of
(X) the Class A Percentage of the Noteholders' Principal
Distributable Amount minus
(Y) the outstanding principal balance for each class of Class
A Notes with a lower numerical designation as of the close of the
immediately preceding distribution date.
For the Variable Pay Revolving Note,
(1) Except during a Sequential Amortization Period:
(A) If the distribution date is a Targeted Final Distribution Date
for a class of Class A Notes, the Noteholders' Principal Distributable
Amount for the Variable Pay Revolving Note is the remainder of
(X) the Total Note Principal Payment Amount minus
(Y) the Noteholders' Principal Distributable Amount for that
class of Class A Notes on that distribution date determined as
described in this definition
but in no event more than the outstanding principal balance of the
Variable Pay Revolving Note as of the close of the immediately
preceding distribution date.
(B) If the distribution date is not a Targeted Final Distribution
Date for a class of Class A Notes, the Noteholders' Principal
Distributable Amount for the Variable Pay Revolving Note is the lesser
of
(X) the outstanding principal balance of the Variable Pay
Revolving Note as of the close of the immediately preceding
distribution date and
S-34
(Y) the Noteholders' Percentage of the Principal Distributable
Amount for that distribution date.
(2) During a Sequential Amortization Period, the Noteholders'
Principal Distributable Amount for the Variable Pay Revolving Note on a
distribution date is the lesser of
(A) the outstanding principal balance of the Variable Pay Revolving
Note as of the close of the immediately preceding distribution date and
(B) the Variable Pay Revolving Percentage of the Noteholders'
Percentage of the Principal Distributable Amount.
Notwithstanding the foregoing, on the Final Scheduled Distribution Date for any
class of Class A Notes or Variable Pay Revolving Notes, the Noteholders'
Principal Distributable Amount for that class will equal the outstanding
principal balance of that class as of the close of the immediately preceding
distribution date.
"Pass Through Rate" means, for the certificates, % per annum.
"Principal Distributable Amount" means, for any distribution date, the sum
of
(1) the principal portion of all Scheduled Payments due for the prior
monthly period on Scheduled Interest Receivables held by the trust, other than
Liquidating Receivables, and the principal portion of all payments received by
the trust during the prior monthly period on Simple Interest Receivables held by
the trust, other than Liquidating Receivables,
(2) the principal portion of all Prepayments received during the prior
monthly period, except to the extent included in (1) above, and
(3) the Principal Balance of each receivable that the servicer became
obligated or elected to purchase, the seller became obligated to repurchase or
that became a Liquidating Receivable during the prior monthly period, except to
the extent included in (1) or (2) above. For purposes of this definition,
references to the prior monthly period shall include, for the initial
distribution date, the period since the cutoff date.
"Reference Bank Rate" means, for any distribution date, a rate determined
on the basis of the rates at which deposits in U.S. Dollars are offered by
reference banks as of 11:00 a.m., London time, on the day that is two LIBOR
Business Days prior to the immediately preceding distribution date to prime
banks in the London interbank market for a period of one month, in amounts
approximately equal to the principal amount of the Variable Pay Revolving Note
then outstanding. The reference banks will be four major banks that are engaged
in transactions in the London interbank market, selected by the indenture
trustee after consultation with the seller. The indenture trustee will request
the principal London office of each of the reference banks to provide a
quotation of its rate. If at least two quotations are provided, the rate will be
the arithmetic mean of the quotations, rounded upwards to the nearest
one-sixteenth of one percent. If on that date fewer than two quotations are
provided as requested, the rate will be the arithmetic mean, rounded upwards to
the nearest one-sixteenth of one percent, of the rates quoted by one or more
major banks in New York City, selected by the indenture trustee after
consultation with the seller, as of 11:00 a.m., New York City time, on that date
to leading European banks for United States dollar deposits for a period of one
month in amounts approximately equal to the principal amount of the Variable Pay
Revolving Note then outstanding. If no quotation can be obtained, then LIBOR
will be the rate from the prior distribution date.
S-35
"Sequential Amortization Period" means the period commencing on a
Sequential Amortization Commencement Date and, if that Sequential Amortization
Commencement Date occurred as a result of the failure to pay a class of Class A
Notes in full on its Targeted Final Distribution Date, ending on the
distribution date on which that class of Class A Notes is paid in full so long
as that distribution date occurs prior to the Targeted Final Distribution Date
for the class of Class A Notes with the next highest numerical designation;
provided that a Sequential Amortization Period shall not so terminate if the
failure to so pay a class of Class A Notes in full on its Targeted Final
Distribution Date follows a failure to pay the class of Class A Notes with the
next lowest numerical designation on its Targeted Final Distribution Date.
"Sequential Amortization Commencement Date" means (1) the Targeted Final
Distribution Date for a class of Class A Notes if the principal amount of that
class is not paid in full on that Targeted Final Distribution Date, unless that
Targeted Final Distribution Date occurs during a Sequential Amortization Period,
or (2) the first distribution date following the date on which the interest rate
swap is terminated.
"Specified Reserve Account Balance" means, for any distribution date, the
sum of
(1) the greater of
(A) % of the outstanding principal balance of the notes and
the certificates as of the close of business on that distribution date
(after giving effect to all payments and distributions to be made on
that distribution date); and
(B) ,
but in no event more than the outstanding principal balance of the
notes and the certificates as of the close of business on that
distribution date (after giving effect to all payments and distributions
to be made on that distribution date);
plus,
(2) in each case, if a deposit is to be made into the Accumulation
Account on that distribution date or was made on any prior distribution
date, the product of
(A) the Accumulation Amount on that distribution date (after giving
effect to all deposits and withdrawals from the Accumulation Account on
that distribution date),
multiplied by
(B) the number of distribution dates after that distribution date
through and including the next distribution date that is a Targeted
Final Distribution Date for any class of Class A Notes divided by 12
multiplied by
(C) the fixed rate payable by the trust on the interest rate swap
minus 2.50%.
"Targeted Final Distribution Date" means the targeted final distribution
date for each class of notes and for the certificates set forth on the front
cover pages of this prospectus supplement.
"Total Available Amount" means, for a distribution date, the sum of the
Available Interest and the Available Principal, and all cash or other
immediately available funds on deposit in the reserve account immediately prior
to that distribution date plus (1) on the Targeted Final Distribution Date for
any class of Class A Notes, the amount of any incremental advance under the
Variable Pay Revolving Notes and the Accumulation Amount and (2) on the first
distribution date after the notes have been declared due and payable
S-36
following the occurrence of an Event of Default and on the first distribution
date after the termination of the interest rate swap, the Accumulation Amount.
"Total Note Principal Payment Amount" means, for any distribution date, the
sum of
- the Noteholders' Percentage of the Principal Distributable Amount plus
- the amount of any incremental advance under the Variable Pay Revolving
Note, if any, plus
- the Accumulation Amount, if any.
"Variable Pay Revolving Percentage" means, for any distribution date, 100%
minus the Class A Percentage for that distribution date.
S-37
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
VERSION 1
PRELIMINARY
OWNER TRUST
PROSPECTUS
FORM
PROSPECTUS
CAPITAL AUTO RECEIVABLES ASSET TRUSTS
Asset Backed Notes
Asset Backed Certificates
CAPITAL AUTO RECEIVABLES, INC.
Seller
GENERAL MOTORS ACCEPTANCE CORPORATION
Servicer
<Table>
THE TRUSTS--
YOU SHOULD CONSIDER CAREFULLY - We will form a new trust to issue each series of
THE RISK FACTORS BEGINNING ON securities.
PAGE 2 IN THIS PROSPECTUS. - The primary assets of each trust will be a pool
of fixed rate retail motor vehicle instalment
The notes of any series sales contracts, including security interests in
represent obligations of the the automobiles and light trucks financed under
trust that issued those notes those contracts.
only. The certificates of any THE SECURITIES--
series represent the beneficial - will represent indebtedness of the trust that
interest in the trust that issued those securities, in the case of notes, or
issued those notes only. The beneficial interests in the trust that issued
certificates and notes issued those securities, in the case of certificates;
by any trust do not represent - will be paid only from the assets of the trust
obligations of or interests in, that issued those securities and other available
and are not guaranteed by funds, including amounts on deposit in any
Capital Auto Receivables, Inc., reserve account for that trust;
GMAC or any of their - will represent the right to payments in the
affiliates. amounts and at the times described in the
accompanying prospectus supplement;
This prospectus may be used to - may benefit from one or more forms of credit
offer and sell any securities enhancement; and
only if accompanied by the - will be issued as part of a designated series,
accompanying prospectus which will include one or more classes of notes
supplement. and may include one or more classes of
certificates.
</Table>
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS ,
RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase the securities.
LACK OF FIRST PRIORITY LIENS
ON
FINANCED VEHICLES OR
RECEIVABLES COULD MAKE THE
RECEIVABLES UNCOLLECTIBLE AND
REDUCE OR DELAY PAYMENTS ON
THE SECURITIES If the security interests in the financed
vehicles as described in "Legal Aspects of the
Receivables -- Security Interest in Vehicles"
are not properly perfected, the interests of
the seller, the trust and the indenture trustee
in the financed vehicles would be subordinate
to, among others, the following:
(1) bankruptcy trustee of the obligor,
(2) subsequent purchaser of the financed
vehicle and
(3) holder of a perfected security
interest.
The trust and the indenture trustee may not be
able to collect on a defaulted receivable in
the absence of a perfected security interest in
a vehicle financed by the receivable.
Even if the trust and the indenture trustee has
a perfected security interest in the financed
vehicles, events could jeopardize that
interest, such as:
(1) fraud or forgery by the vehicle owner,
(2) negligence or fraud by the servicer,
(3) mistakes by government agencies and
(4) liens for repairs or unpaid taxes.
See "Legal Aspects of the Receivables--Security
Interest in Vehicles" in this prospectus.
GMAC, the seller and the indenture trustee will
file financing statements for each pool of
receivables sold to a trust. The financing
statements will perfect the security interests
of the seller, the trust and the indenture
trustee in the pool of receivables. However,
GMAC will serve as the custodian of the
receivables and will not physically segregate
or mark the receivables to indicate that they
have been sold to the seller, sold by the
seller to the trust or pledged by the trust to
the indenture trustee. See "The Transfer and
Servicing Agreements--Sale and Assignment of
Receivables" in this prospectus.
If another party purchases or takes a security
interest in the receivables
(1) for value,
(2) in the ordinary course of business and
2
(3) without actual knowledge of the
seller's, the trust's or the indenture
trustee's interest, that purchaser or secured
party will acquire an interest in the
receivables superior to the trust's and the
indenture trustee's interest.
GMAC'S BANKRUPTCY COULD
REDUCE OR DELAY PAYMENTS ON
THE SECURITIES 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.
If the receivables became part of GMAC's
bankruptcy estate, you might experience
reductions and/or delays in payments on your
securities.
See "Legal Aspects of the Receivables--Sales of
Receivables by GMAC" in this prospectus.
PREPAYMENTS ON AND
REPURCHASES OF THE
RECEIVABLES
COULD SHORTEN THE AVERAGE
LIFE
OF THE SECURITIES Obligors may prepay the receivables in full or
in part at any time. In addition, the
receivables may be prepaid as a result of
defaults or from credit life, disability or
physical damage insurance. Also, GMAC or the
seller may be required to repurchase
receivables from a trust in specified
circumstances, and the servicer may have the
right to purchase all remaining receivables
from a trust pursuant to its optional purchase
right.
A prepayment, repurchase, purchase or
liquidation of the receivables could shorten
the average life of the securities secured by
those receivables. A variety of unpredictable
economic, social and other factors influence
prepayment rates.
You will bear all reinvestment risk resulting
from a faster or slower rate of prepayment,
repurchase or extension of the receivables held
by your trust, unless otherwise provided in the
prospectus supplement for that trust.
LIMITED ENFORCEABILITY OF THE
RECEIVABLES COULD REDUCE OR
DELAY PAYMENTS ON THE
SECURITIES Federal and state consumer protection laws
regulate the creation and enforcement of
consumer loans such as the receivables.
Specific statutory liabilities are imposed upon
creditors who fail to comply with these
regulatory provisions. In some cases, this
liability could affect an assignee's ability to
enforce secured loans such as the receivables.
If an obligor had a claim for violation of
these laws prior to the respective cutoff date,
GMAC must repurchase the receivable unless the
breach is
3
cured. If GMAC fails to repurchase the
receivable, you might experience reductions
and/or delays in payments on your securities.
See "Legal Aspects of the Receivables--Consumer
Protection Laws" in this prospectus.
GMAC AND THE SELLER HAVE
LIMITED OBLIGATIONS TO THE
TRUST AND THEY WILL NOT
MAKE PAYMENTS ON THE
SECURITIES GMAC, the seller and their respective
affiliates are generally not obligated to make
any payments to you on your securities and do
not guarantee payments on the receivables or
your notes or certificates. However, GMAC will
make representations and warranties regarding
the characteristics of the receivables and
these 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 the receivables,
you might experience reductions and/or delays
in payments on your securities. See "The
Transfer and Servicing Agreements--Sale and
Assignment of Receivables" in this prospectus.
THE ASSETS OF EACH TRUST ARE
LIMITED AND ARE THE ONLY
SOURCE OF PAYMENT FOR THE
SECURITIES No trust will have any significant assets or
sources of funds other than its receivables,
its rights in any reserve account or other
rights or credit enhancements as are specified
in the prospectus supplement for that trust.
The securities will only represent interests in
the trust from which they were issued. Except
as described in the accompanying prospectus
supplement, the securities will not be insured
or guaranteed by GMAC, the seller, the owner
trustee, the indenture trustee, any of their
affiliates or any other person or entity. You
must rely primarily on payments on the
receivables which secure your securities and on
the reserve account for repayment of your
securities. In addition, for defaulted
receivables, you may have to look to the
obligors on those receivables and the proceeds
from the repossession and sale of financed
vehicles which secure defaulted receivables. If
these sources are insufficient, you may receive
payments late or not receive back your full
principal investment or all interest due to
you. See "The Transfer and Servicing
Agreements--Distributions," "--Credit
Enhancement" and "Legal Aspects of the
Receivables" in this prospectus.
THE ABSENCE OF A LIQUID
MARKET FOR THE SECURITIES
WOULD LIMIT YOUR ABILITY TO
RESELL THE SECURITIES The underwriters may assist in the resale of
securities, but they are not required to do so.
A secondary market for any securities may not
develop. If a secondary market does develop, it
might not continue or it might not be
sufficiently liquid to allow you to resell any
of your securities.
4
THE RATINGS FOR THE
SECURITIES
ARE LIMITED IN SCOPE, MAY
NOT CONTINUE TO BE ISSUED AND
DO NOT CONSIDER THE
SUITABILITY OF THE SECURITIES
FOR
YOU The securities for each trust will be issued
only if they receive the required rating. A
security rating is not a recommendation to buy,
sell or hold the securities. The rating
considers only the likelihood that the trust
will pay interest on time and will ultimately
pay principal in full or make full
distributions of certificate balance. Ratings
on the securities do not address the timing of
distributions of principal on the securities
prior to their applicable final scheduled
payment date. The ratings do not consider the
prices of the securities or their suitability
to a particular investor. The ratings may be
revised or withdrawn at any time. If a rating
agency changes its rating or withdraws its
rating, no one has an obligation to provide
additional credit enhancement or to restore the
original rating.
5
THE TRUSTS
For each series of securities, the seller will establish a separate trust
by selling and assigning the trust property described below to the trust in
exchange for the securities issued by the trust. Each series of securities will
include one or more classes of asset backed notes and one or more classes of
asset backed certificates. The prospectus supplement for a trust will specify
which classes of notes and certificates included in each series will be offered
to investors.
The trust property of each trust will include:
- a pool of retail instalment sales contracts for new and used
automobiles and light trucks, all Scheduled Payments due thereunder on
and after the cutoff date or dates to be specified in the prospectus
supplement, in the case of Scheduled Interest Receivables, and all
payments received thereunder on and after the cutoff date or dates, in
the case of Simple Interest Receivables, in each case exclusive of any
amount allocable to the premium for physical damage insurance
force-placed by the servicer;
- amounts and investments of those amounts as from time to time may be
held in separate trust accounts established and maintained pursuant to
the Trust Sale and Servicing Agreement for that trust and the proceeds
of those accounts;
- security interests in the financed vehicles and, to the extent
permitted by law, any accessions thereto;
- any recourse against dealers on the receivables;
- except for those receivables originated in Wisconsin, the right to
proceeds of credit life, credit disability, physical damage or other
insurance policies covering the financed vehicles; and
- specified rights of the seller under the Pooling and Servicing
Agreement for that trust.
To the extent specified in the prospectus supplement for the trust, a
reserve account or other form of credit enhancement may be held by the owner
trustee or the indenture trustee for the benefit of the holders of the trust's
securities. The reserve account, if any, for a series of securities may not be
included in the property of the issuing trust but may instead be a segregated
trust account held by the indenture trustee for the benefit of the holders of
the trust's securities.
Except as otherwise set forth in the accompanying prospectus supplement,
the activities of each trust will be limited to:
- acquiring, managing and holding the receivables and the other assets
of the trust and proceeds from those assets,
- issuing securities and making payments and distributions on them and
- engaging in other activities that are necessary, suitable or
convenient to accomplish any of the foregoing or are incidental to or
connected with these activities.
6
The servicer will continue to service the receivables held by each trust
and will receive fees for these services. See "The Transfer and Servicing
Agreements--Servicing Compensation and Payment of Expenses" in this prospectus.
To facilitate the servicing of the receivables, the trust will authorize GMAC,
as Custodian, to retain physical possession of the receivables held by each
trust and other documents relating thereto as custodian for the trust. Due to
the administrative burden and expense, the certificates of title to the financed
vehicles will not be amended to reflect the sale and assignment of the security
interest in the financed vehicles to the seller or the trust or the pledge of
these security interests by the trust to the indenture trustee. In the absence
of an amendment, the trust and the indenture trustee may not have a perfected
security interest in the financed vehicles in all states. None of the trust, the
indenture trustee nor the owner trustee will be responsible for the legality,
validity or enforceability of any security interest in any financed vehicle. See
"Legal Aspects of the Receivables" and "The Transfer and Servicing
Agreements--Sale and Assignment of Receivables" in this prospectus.
The principal offices of each trust will be specified in the accompanying
prospectus supplement.
THE OWNER TRUSTEE
The owner trustee for each trust will be specified in the accompanying
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 the owner trustee set forth in the trust agreement governing that trust. 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 trust agreement or if the owner
trustee becomes insolvent. In these circumstances, the administrator will be
obligated to appoint a successor trustee. Any resignation or removal of an owner
trustee and appointment of a successor trustee will not become effective until
acceptance of the appointment by the successor trustee.
THE RECEIVABLES POOLS
The receivables in each pool of receivables have been or will be acquired
by General Motors Acceptance Corporation through its nationwide branch system,
directly or through General Motors Corporation, from automobile and light truck
dealers pursuant to agreements with General Motors dealers and dealerships
affiliated with General Motors dealers. See "The Seller" and "The Servicer" in
this prospectus.
The receivables have been or will be originated by participating dealers in
accordance with GMAC's requirements under the dealer agreements. The receivables
have been or will be acquired in accordance with GMAC's underwriting standards
in the ordinary course of business. These underwriting standards evaluate
purchases based on among other things, the following criteria:
- the prospective purchaser's prior experience with GMAC,
- the length of time the prospective purchaser's credit has been reported,
- the type of credit the prospective purchaser established,
7
- the asset value of the vehicle and the prospective purchaser's amount of
equity in the vehicle,
- the term of the receivable, and
- the prospective purchaser's overall creditworthiness and ability to pay.
GMAC's standards also require physical damage insurance to be maintained on
each financed vehicle.
The receivables to be held by each trust will be selected from GMAC's
portfolio for inclusion in a pool of receivables by the criteria set forth in
the accompanying prospectus supplement.
Each receivable is classified as either a Scheduled Interest Receivable or
a Simple Interest Receivable. If an obligor elects to prepay a Scheduled
Interest Receivable in full, the obligor is entitled to a rebate of the portion
of the Scheduled Payments attributable to unearned finance charges. The amount
of the rebate is determined with reference to the contract type and applicable
state law. With minor variations based on state law, actuarial rebates are
calculated on the basis of a constant interest rate. Rebates calculated on a
Rule of 78s or sum-of-the-digits basis are smaller than the corresponding
rebates under the actuarial method. Scheduled Interest Receivables provide for
Rule of 78s rebates except in states that require the actuarial method.
Distributions to noteholders and certificateholders will not be affected by Rule
of 78s rebates, because all allocations on Scheduled Interest Receivables are
made using the actuarial method. The portion of a pool of receivables which
initially consists of Scheduled Interest Receivables will be specified in the
accompanying prospectus supplement.
Payments pursuant to a Simple Interest Receivable are allocated between
finance charges and principal based on the actual date on which a payment is
received. Late payments, or early payments, on a Simple Interest Receivable may
result in the obligor making a greater -- or smaller -- number of payments than
originally scheduled. The amount of additional payments required to pay the
outstanding principal balance in full generally will not exceed the amount of an
originally scheduled payment. If an obligor elects to prepay a Simple Interest
Receivable in full, the obligor will not receive a rebate attributable to
unearned finance charges. Instead, the obligor is required to pay finance
charges only to, but not including, the date of prepayment. The amount of
finance charges on a Simple Interest Receivable that would have accrued from and
after the date of prepayment if all monthly payments had been made as scheduled
will generally be greater than the rebate on a Scheduled Interest Receivable
that provides for a Rule of 78s rebate, and will generally be equal to the
rebate on a Scheduled Interest Receivable that provides for an actuarial rebate.
The portion of a pool of receivables which consists of Simple Interest
Receivables will be specified in the accompanying prospectus supplement.
Information for each pool of receivables will be set forth in the
accompanying prospectus supplement, including, to the extent appropriate, the
composition, distribution by APR, states of origination and portion of the pool
of receivables secured by new vehicles and by used vehicles.
8
WEIGHTED AVERAGE LIFE OF THE SECURITIES
The weighted average life of the securities will generally be influenced by
the rate at which the principal balances of the receivables securing the
securities are paid, which payment may be in the form of scheduled amortization
or prepayments. For this purpose, the term "prepayment" includes charge-offs,
liquidations due to defaults and repurchases by the seller or GMAC pursuant to
the Trust Sale and Servicing Agreement, as well as receipt of proceeds from
credit life and casualty insurance policies. All of the receivables are
prepayable at any time without penalty to the obligor. The rate of prepayment of
automotive receivables is influenced by a variety of economic, social and other
factors, including the fact that an obligor generally may not sell or transfer
the financed vehicle securing a receivable without the consent of the servicer.
Any reinvestment risk resulting from prepayment of receivables will be borne
entirely by the holders of securities. See also "Legal Aspects of the
Receivables--Transfer of Vehicles" in this prospectus.
If provided for in the accompanying prospectus supplement, the weighted
average life of the securities will also be influenced by the ability of the
trust to reinvest collections on the receivables during the Revolving Period.
The ability of the trust to reinvest those proceeds will be influenced by the
availability of suitable receivables for the trust to purchase and the rate at
which the principal balances of the receivables are paid.
A variety of unpredictable economic, social and other factors influence
collection rates and the availability of suitable receivables. You will bear all
reinvestment risk resulting from a faster or slower rate of reinvestment in
receivables by the trust, unless otherwise provided in the prospectus supplement
for that trust.
POOL FACTORS AND TRADING INFORMATION
Each Note Pool Factor and each Certificate Pool Factor will initially be
1.0000000. Thereafter the Note Pool Factor and the Certificate Pool Factor will
decline to reflect reductions in the outstanding principal balance of the notes,
or the reduction of the Certificate Balance of the certificates, as the case may
be. A noteholder's portion of the aggregate outstanding principal balance of a
class of notes is the product of:
(1) the original denomination of the noteholder's note and
(2) the note pool factor.
A certificateholder's portion of the aggregate outstanding Certificate
Balance for a class of certificates is the product of (A) the original
denomination of the certificateholder's certificate and (B) the Certificate Pool
Factor.
For each trust, the noteholders will receive reports on or about each
payment date concerning payments received on the receivables, the Aggregate
Principal Balance, each Note Pool Factor and various other items of information.
Noteholders of record during any calendar year will be furnished information for
tax reporting purposes not later than the latest date permitted by law. See
"Book Entry Registration, Reports to Securityholders--Reports to
Securityholders." Unless otherwise provided in the accompanying prospectus
supplement, for each trust, the certificateholders will receive reports on or
about each distribution date concerning payments received on the receivables,
the Aggregate Principal Balance, each Certificate Pool Factor and various other
items of information. Certificateholders of record during any calendar year will
be furnished information for tax reporting purposes not later
9
than the latest date permitted by law. See "Book Entry Registration; Reports to
Securityholders--Reports to Securityholders" in this prospectus.
USE OF PROCEEDS
Unless otherwise provided in the accompanying prospectus supplement, the
net proceeds to be received by the seller from the sale of the securities of a
given series will be applied to the purchase of the receivables from GMAC.
THE SELLER
Capital Auto Receivables, Inc., a wholly-owned subsidiary of GMAC, was
incorporated in the State of Delaware on November 6, 1992. The seller is
organized for the limited purposes of purchasing receivables from GMAC,
transferring the receivables to third parties, forming trusts and engaging in
similar activities. The principal executive offices of the seller are located at
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801.
GMAC Auto Receivables Corporation, a wholly-owned subsidiary of GMAC
incorporated in the State of Delaware on November 16, 1990, was merged with and
into the seller on February 22, 1996. It also was organized for the limited
purposes of purchasing receivables from GMAC, transferring the receivables to
third parties, forming trusts and engaging in related activities.
The seller has taken steps in structuring the transactions contemplated by
the prospectus that are intended to make it unlikely that the voluntary or
involuntary application for relief by GMAC under the United States Bankruptcy
Code or similar applicable state laws will result in consolidation of the assets
and liabilities of the seller with those of GMAC. These steps include the
creation of the seller as a separate, limited-purpose subsidiary pursuant to a
certificate of incorporation containing various limitations. These limitations
include restrictions on the nature of the seller's business and a restriction on
the seller's ability to commence a voluntary case or proceeding under the United
States Bankruptcy Code or similar applicable state laws without the unanimous
affirmative vote of all of its directors. Under some circumstances, the seller
is required to have at least one director who qualifies under its By-laws as an
"Independent Director."
If, notwithstanding the foregoing measures, a court concluded that the
assets and liabilities of the seller should be consolidated with the assets and
liabilities of GMAC in the event of the application of the federal bankruptcy
laws to GMAC, a filing were made under the United States Bankruptcy Code or
similar applicable state laws by or against the seller, or an attempt were made
to litigate the consolidation issue, then delays in distributions on the notes
and the certificates, and possible reductions in the amount of these
distributions, could occur. See also "Legal Aspects of the Receivables--Sale of
Receivables by GMAC" in this prospectus.
Securities issued by a trust may be sold by the seller in private
placements or other transactions and will not be offered by this prospectus and
by the accompanying prospectus supplement. The seller may also retain all or a
portion of the certificates or of one or more classes of notes issued by each
trust as described in the accompanying prospectus supplement.
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THE SERVICER
GMAC, a wholly-owned subsidiary of General Motors, was incorporated in 1919
under the New York Banking Law relating to investment companies. GMAC
relinquished this status and became a Delaware corporation on January 1, 1998.
Operating directly and through subsidiaries and associated companies in which it
has equity investments, GMAC provides a wide variety of automotive financial
services to and through franchised General Motors dealers in many countries
throughout the world. Financial services also are offered to other dealerships
in which General Motors dealers have an interest and to the customers of those
dealerships. Other financial services offered by GMAC or its subsidiaries
include insurance, mortgage banking and investment services.
The principal business of GMAC and its subsidiaries is to finance the
acquisition and resale by franchised General Motors dealers of various new
automotive and nonautomotive products manufactured by General Motors or its
subsidiaries and associates, and to acquire from these dealers, either directly
or indirectly, instalment obligations covering retail sales and leases of new
General Motors products as well as used units of any make. In addition, new
products of other manufacturers are financed. GMAC also leases motor vehicles
and 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 200 Renaissance
Center, Detroit, Michigan 48265, Tel. No. 313-556-5000.
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
The accompanying prospectus supplement sets forth information concerning
GMAC's experience in the United States pertaining to delinquencies on new and
used retail automobile and light truck receivables and repossessions and net
loss information relating to its entire vehicle portfolio, including receivables
previously sold which GMAC continues to service. There can be no assurance that
the delinquency, repossession and net loss experience on any pool of receivables
will be comparable to prior experience.
THE NOTES
For each trust, one or more classes of notes will be issued pursuant to the
terms of an indenture, a form of which has been filed as an exhibit to the
registration statement of which this prospectus forms a part. The following
summary, together with the related description in the accompanying prospectus
supplement, describes the material terms of the form of notes and the form of
indenture. Where particular provisions or terms used in the indenture are
referred to, the actual provisions, including definitions of terms, are
incorporated by reference as part of this summary. The prospectus supplement may
contain additional information relating to a specific indenture and the series
issued pursuant to that indenture.
Unless otherwise specified in the accompanying prospectus supplement, each
class of notes will initially be represented by one or more notes, in each case
registered in the name of the nominee of DTC, in the United States, or
Clearstream or Euroclear, in Europe, except as set forth below. Unless otherwise
specified in the accompanying prospectus supplement, notes will be available for
purchase in denominations of $1,000 and integral multiples of $1,000 in
book-entry form only. The seller has been informed by DTC that DTC's nominee
will be Cede & Co. Accordingly, Cede & Co. is expected to be the holder of
record of the notes.
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Unless and until definitive notes are issued under the limited circumstances
described in this prospectus or in the accompanying prospectus supplement, no
noteholder will be entitled to receive a physical certificate representing a
note. All references in this prospectus to actions by noteholders refer to
actions taken by DTC upon instructions from its participating organizations. All
references in this prospectus to distributions, notices, reports and statements
to noteholders refer to distributions, notices, reports and statements to DTC or
Cede & Co., as the registered holder of the notes, as the case may be, for
distribution to noteholders in accordance with DTC's procedures with respect
thereto. See "Book-Entry Registration; Reports to Securityholders--Book-Entry
Registration" and "--Definitive Securities" in this prospectus.
PRINCIPAL AND INTEREST ON THE NOTES
The timing and priority of payment, seniority, allocations of loss,
interest rate and amount of or method of determining payments of principal and
interest on the notes will be described in the accompanying prospectus
supplement. The right of holders of any class of notes to receive payments of
principal and interest may be senior or subordinate to the rights of holders of
any other class or classes of notes in the series, as described in the
accompanying prospectus supplement. Unless otherwise provided in the
accompanying prospectus supplement, payments of interest on the notes will be
made prior to payments of principal thereon. A series may include one or more
classes of Strip Notes entitled to (1) principal payments with disproportionate,
nominal or no interest payment or (2) interest payments with disproportionate,
nominal or no principal payments. Each class of notes may have a different
interest rate, which may be a fixed, variable or adjustable interest rate, and
which may be zero for specified classes of Strip Notes, or any combination of
the foregoing. The accompanying prospectus supplement will specify the interest
rate for each class of notes, or the initial interest rate and the method for
determining the interest rate. One or more classes of notes of a series may be
redeemable under the circumstances specified in the accompanying prospectus
supplement.
Unless otherwise specified in the accompanying prospectus supplement,
payments to noteholders of all classes within a series in respect of interest
will have the same priority. Under some circumstances, the amount available for
these payments could be less than the amount of interest payable on the notes on
any of the payment dates specified for any class of notes in the accompanying
prospectus supplement. In that case, each class of noteholders will receive
their ratable share, based upon the aggregate amount of interest due to that
class of noteholders, of the aggregate amount available to be distributed in
respect of interest on the notes. See "The Transfer and Servicing
Agreements--Distributions" and "--Credit Enhancement" in this prospectus.
In the case of a series of notes which includes two or more classes of
notes, the sequential order and priority of payment in respect of principal and
interest, and any schedule or formula or other provisions applicable to the
determination thereof, of each class will be set forth in the accompanying
prospectus supplement. Unless otherwise specified in the accompanying prospectus
supplement, payments in respect of principal and interest of any class of notes
will be made on a pro rata basis among all of the notes of that class. Notes
legally and/or beneficially owned by the seller or its affiliates will be
entitled to equal and proportionate benefits under the indenture, except that
notes that are both legally and beneficially owned by the seller or its
affiliates will be deemed not to be outstanding for the purpose of determining
whether the requisite percentage of noteholders have given any request, demand,
authorization, direction, notice, consent or other action under the Related
Documents. If more than one
12
class of notes in a series is issued and the rights of the classes are different
regarding voting on any matters, including giving any request, demand,
authorization, direction, notice, consent or other action under the Related
Documents, these rights will be described in the accompanying prospectus
supplement.
If an Event of Default occurs and is continuing for any trust and if it is
known to the indenture trustee, the indenture trustee will mail to each
noteholder of that trust notice of the Event of Default within 90 days after it
occurs. Except in the case of a failure to make any required payment of
principal or of interest on any note, the indenture trustee may withhold the
notice beyond the 90-day period if and so long as it determines in good faith
that withholding the notice is in the interests of noteholders.
THE INDENTURE
A form of indenture has been filed as an exhibit to the registration
statement of which this prospectus forms a part. The seller will provide a copy
of the applicable indenture, without exhibits, upon request to a holder of notes
issued thereunder. The following summary, together with the related description
in the accompanying prospectus supplement, describes the material terms of the
form of indenture.
Modification of Indenture Without Noteholder Consent. Each trust and
indenture trustee, on behalf of that trust, may, without consent of the
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 noteholders;
(4) to convey, transfer, assign, mortgage or pledge any property to or
with the indenture trustee;
(5) to cure any ambiguity or correct or supplement any provision in
the indenture or in any supplemental indenture which may be inconsistent
with any other provision of the indenture or in any supplemental indenture
or in any other Related Document;
(6) to provide for the acceptance of the appointment of a successor
indenture trustee or to add to or change any of the provisions of the
indenture as shall be necessary and permitted to facilitate the
administration by more than one trustee;
(7) to modify, eliminate or add to the provisions of the indenture in
order to comply with the Trust Indenture Act of 1939, as amended; and
(8) to add any provisions to, change in any manner, or eliminate any
of the provisions of, the indenture or modify in any manner the rights of
noteholders under that indenture; provided that any action specified in
this clause (8) shall not, as evidenced by an opinion of counsel, adversely
affect in any material respect the interests of any of that trust's other
noteholders unless noteholder consent is otherwise obtained as described in
the next section of this prospectus.
13
Modification of Indenture With Noteholder Consent. For each trust, unless
otherwise specified in the accompanying prospectus supplement, 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 indenture, or modify in
any manner the rights of the noteholders with the consent of the holders of a
majority in principal amount of the outstanding notes to be affected.
Without the consent of the holder of each outstanding note which would be
affected, 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 of any note, the interest rate
specified thereon or the redemption price with respect thereto or change
any place of payment where or the coin or currency in which any note or any
interest thereon is payable or modify any of the provisions of the
indenture in a 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
specified provisions of the indenture regarding payment of principal or
interest on any note;
(3) reduce the percentage of the aggregate principal amount of the
outstanding notes the consent of the holders of which is required for any
supplemental indenture or the consent of the holders of which is required
for any waiver of compliance with specified provisions of the indenture or
of specified defaults thereunder and their consequences as provided for in
the indenture;
(4) modify any of the provisions of the indenture regarding the voting
of notes held by the trust, any other obligor on the notes, the seller or
an affiliate of any of them;
(5) reduce the percentage of the aggregate outstanding principal
amount of the notes the consent of the holders of which is required to
direct the indenture trustee to sell or liquidate the assets of the trust
if the proceeds of that sale would be insufficient to pay the principal
amount and accrued but unpaid interest on the outstanding notes;
(6) decrease the percentage of the aggregate principal amount of the
notes required to amend the sections of the indenture which specify the
applicable percentage of aggregate principal amount of the notes necessary
to amend the indenture; or
(7) permit the creation of any lien ranking prior to or on a parity
with the lien of the indenture on any part of the assets of the trust or,
except as otherwise permitted or contemplated in the indenture, terminate
the lien of the indenture on that 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. For each trust, unless
otherwise specified in the accompanying prospectus supplement, Events of Default
under the indenture will consist of:
(1) any failure to pay interest on the notes as and when the same
becomes due and payable, which failure continues unremedied for five days;
(2) except as provided in clause (3), any failure (A) to make any
required payment of principal on the notes or (B) to observe or perform in
any material respect any other covenants or agreements in the indenture,
which failure in the case of a default under clause (2)(B) materially and
adversely affects the rights of noteholders, and
14
which failure in either case continues for 30 days after the giving of
written notice of the failure (X) to the trust, to the seller or the
servicer, as applicable, by the indenture trustee or (Y) to the seller or
the servicer, as applicable, and the indenture trustee by the holders of
not less than 25% of the principal amount of the notes;
(3) failure to pay the unpaid principal balance of any class of notes
on or prior to the respective final scheduled payment date for that class;
and
(4) events of bankruptcy, insolvency or receivership for the trust
indicating its insolvency, reorganization pursuant to bankruptcy
proceedings or inability to pay its obligations.
However, the amount of principal required to be paid to noteholders under
the indenture governing a class of notes will generally be limited to amounts
available to be deposited in the Note Distribution Account.
Therefore, unless otherwise specified in the accompanying prospectus
supplement, the failure to pay principal on a class of notes generally will not
result in the occurrence of an Event of Default unless that class of notes has a
final scheduled payment date, and then not until the occurrence of the final
scheduled payment date for that class of notes.
If an Event of Default should occur and be continuing for the notes of any
series, the indenture trustee or holders of a majority in principal amount of
the notes then outstanding may declare the principal of the notes to be
immediately due and payable. This declaration may, under specified
circumstances, be rescinded by the holders of a majority in principal amount of
the notes then outstanding.
Unless otherwise specified in the accompanying prospectus supplement, if
the notes of any series are declared due and payable following an Event of
Default with respect thereto, in lieu of the trust maintaining possession of the
assets of the trust and continuing to apply collections on the receivables as if
there had been no declaration of acceleration, the indenture trustee may:
(1) institute proceedings to collect amounts due on foreclosed
property,
(2) exercise remedies as a secured party or
(3) sell the assets of the trust.
In that event, any money or property collected by the indenture trustee
shall be applied:
(1) first to the indenture trustee for fees, expenses and
indemnification due to it under the indenture and not paid, if any,
(2) next to the owner trustee for amounts due, not including amounts
due for payments to the certificateholders, under the Related Documents and
(3) the remainder to the Collection Account for distribution pursuant
to the Related Documents.
15
The indenture trustee, however, is prohibited from selling the receivables
following an Event of Default, unless:
(1) the holders of all the outstanding notes consent to the sale,
(2) the proceeds of the sale are sufficient to pay in full the
principal of and the accrued interest on the outstanding securities at the
date of the sale or
(3) (X) there has been a default in the payment of interest or
principal on the notes,
(Y) the indenture trustee determines that the receivables will not
continue to provide sufficient funds on an ongoing basis to make all
payments on the notes as the payments would have become due if the
obligations had not been declared due and payable and
(Z) the indenture trustee obtains the consent of the holders of a
majority of the aggregate outstanding amount of the notes.
Unless otherwise specified in the accompanying prospectus supplement
following a declaration upon an Event of Default that the notes are immediately
due and payable, (X) noteholders will be entitled to ratable repayment of
principal on the basis of their respective unpaid principal balances and (Y)
repayment in full of the accrued interest on and unpaid principal balances of
the notes will be made prior to any further distribution of interest on the
certificates or in respect of the Certificate Balance.
Subject to the provisions of the indenture relating to the duties of the
indenture trustee, if an Event of Default occurs and is continuing with respect
to a series of notes, the indenture trustee will be under no obligation to
exercise any of the rights or powers under the indenture at the request or
direction of any of the holders of those notes, if the indenture trustee
reasonably believes it will not be adequately indemnified against the costs,
expenses and liabilities which might be incurred by it in complying with the
request. Subject to the provisions for indemnification and to limitations
contained in the indenture, the holders of a majority in aggregate principal
amount of the outstanding notes of a trust, voting together as a single class
will have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the indenture trustee and the holders of
a majority in aggregate principal amount of those notes then outstanding voting
together as a single class, may, in specified 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 those
outstanding notes.
No holder of a note of any series will have the right to institute any
proceeding regarding the indenture governing their notes, unless:
(1) the holder previously has given to the indenture trustee written
notice of a continuing Event of Default,
(2) the holders of not less than 25% in aggregate principal amount of
the outstanding notes of a trust voting together as a single class have
made written request of the indenture trustee to institute the proceeding
in its own name as indenture trustee,
(3) the holder or holders have offered the indenture trustee
reasonable indemnity,
(4) the indenture trustee has for 60 days failed to institute the
proceeding and
16
(5) no direction inconsistent with the written request has been given
to the indenture trustee during the 60-day period by the holders of a
majority in aggregate principal amount of those outstanding notes.
If an Event of Default occurs and is continuing regarding any trust and if
it is known to the indenture trustee, the indenture trustee will mail to each
noteholder of that trust notice of the Event of Default within 90 days after it
occurs. Except in the case of a failure to make any required payment of
principal of or interest on any note, the indenture trustee may withhold the
notice beyond the 90-day period if and so long as it determines in good faith
that withholding the notice is in the interests of noteholders.
In addition, each indenture trustee and the noteholders for that trust, by
accepting the notes, will covenant that they will not, for a period of one year
and one day after the termination of the trust agreement for that trust,
institute against the trust or seller, any bankruptcy, reorganization or other
proceeding under any federal or state bankruptcy or similar law.
Neither the indenture trustee nor the owner trustee in its individual
capacity, nor any holder of a certificate including, without limitation, the
seller, nor any of their respective owners, beneficiaries, agents, officers,
directors, employees, affiliates, or any successors or assigns of the indenture
trustee or the owner trustee will, in the absence of an express agreement to the
contrary, be personally liable for the payment of the principal of or interest
on the notes or for the agreements of the trust contained in the indenture.
Material Covenants. Each indenture provides that the trust it binds may not
consolidate with or merge into any other entity, unless:
(1) the entity formed by or surviving the consolidation or merger is
organized under the laws of the United States, any state or the District of
Columbia,
(2) the entity expressly assumes the trust's obligation to make due
and punctual payments on the notes and the performance or observance of
every agreement and covenant of the trust under the indenture,
(3) no Event of Default has occurred and is continuing immediately
after the merger or consolidation,
(4) the trust has been advised that the rating of the notes or
certificates then in effect would not be reduced or withdrawn by the rating
agencies as a result of the merger or consolidation,
(5) any action necessary to maintain the lien and security interest
created by the indenture has been taken and
(6) the trust has received an opinion of counsel to the effect that
the consolidation or merger would have no material adverse tax consequence
to the trust or to any noteholder or certificateholder.
Each trust will not, among other things, except as expressly permitted by
the Related Documents:
(1) sell, transfer, exchange or otherwise dispose of any of the assets
of the trust,
(2) claim any credit on or make any deduction from the principal and
interest payable in respect of the notes, other than amounts withheld under
the Internal Revenue
17
Code or applicable state law, or assert any claim against any present or
former holder of the notes because of the payment of taxes levied or
assessed upon the trust,
(3) dissolve or liquidate in whole or in part,
(4) permit the validity or effectiveness of the indenture to be
impaired or permit any person to be released from any covenants or
obligations regarding the notes under the indenture except as may be
expressly permitted by the indenture or
(5) permit any lien, charge, excise, claim, security interest,
mortgage or other encumbrance to be created on or extend to or otherwise
arise upon or burden the assets of the trust or any part of its assets, or
any interest in its assets or the proceeds thereof.
Except as specified in the accompanying prospectus supplement, a trust may
not engage in any activity other than as specified under "The Trusts" above. No
trust will incur, assume or guarantee any indebtedness other than indebtedness
incurred pursuant to the notes it issues and the indenture which binds it or
otherwise in accordance with the Related Documents.
Annual Compliance Statement. Each trust will be required to file annually
with the indenture trustee for that trust a written statement as to the
fulfillment of its obligations under the indenture.
Indenture Trustee's Annual Report. The indenture trustee for each trust
will be required to mail each year to all noteholders for that trust, to the
extent required under the Trust Indenture Act, a brief report relating to its
eligibility and qualification to continue as indenture trustee under the trust's
indenture, any amounts advanced by it under the indenture, the amount, interest
rate and maturity date of some types of indebtedness owing by the trust to the
indenture trustee in its individual capacity, the property and funds physically
held by the indenture trustee and any action taken by it that materially affects
the notes and that has not been previously reported.
Satisfaction and Discharge of Indenture. The indenture for each trust will
be discharged for notes upon the delivery to the trust's indenture trustee for
cancellation of all of the trust's notes or, subject to limitations, upon
deposit with the indenture trustee of funds sufficient for the payment in full
of all notes. The indenture trustee will continue to act as indenture trustee
under the indenture and the Trust Sale and Servicing Agreement for the benefit
of certificateholders until all payments in respect of Certificate Balance and
interest due to the certificateholders have been paid in full.
THE INDENTURE TRUSTEE
The indenture trustee for a series of notes will be specified in the
accompanying 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 indenture trustee
under the indenture or if the indenture trustee becomes insolvent or otherwise
becomes incapable of acting. In these circumstances, the trust will be obligated
to appoint a successor trustee. The holders of a majority of the aggregate
principal amount of the outstanding notes outstanding also have the right to
remove the indenture trustee and appoint a successor. Any resignation or removal
of the indenture trustee and appointment of a successor trustee does not become
effective until acceptance of the appointment by the successor trustee.
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THE CERTIFICATES
For each trust, one or more classes of certificates may be issued pursuant
to the terms of a trust agreement, a form of which has been filed as an exhibit
to the registration statement of which this prospectus forms a part. The
certificates issued by each trust may be offered by this prospectus and the
accompanying prospectus supplement or may be sold in transactions exempt from
registration under the Securities Act or retained by the seller or its
affiliates. The following summary, together with the related description in the
accompanying prospectus supplement, describes the material terms of the
certificates and the trust agreement. Where particular provisions or terms used
in the trust agreement are referred to, the actual provisions, including
definitions of terms, are incorporated by reference as part of this summary.
Each class of certificates to be sold by the certificate underwriters, as
specified in the accompanying prospectus supplement, will initially be
represented by a single certificate registered in the name of the DTC, except as
set forth below. Unless otherwise specified in the accompanying prospectus
supplement, any certificates offered under the accompanying prospectus
supplement will be available for purchase in minimum denominations of $20,000
and integral multiples of $1,000 in excess thereof in book-entry form only and
resales or other transfers of the certificates will not be permitted in amounts
of less than $20,000. The seller has been informed by DTC that DTC's nominee
will be Cede & Co. Accordingly, Cede & Co. is expected to be the holder of
record of any offered certificates that are not retained by the seller. Unless
and until definitive certificates are issued under the limited circumstances
described in this prospectus or in the accompanying prospectus supplement, no
certificateholder, other than the seller, will be entitled to receive a physical
certificate representing a certificate. In that case, all references in this
prospectus to actions by certificateholders refer to actions taken by DTC upon
instructions from the DTC participants and all references in this prospectus to
distributions, notices, reports and statements to certificateholders refer to
distributions, notices, reports and statements to DTC or Cede & Co., as the
registered holder of the certificates, as the case may be, for distribution to
certificateholders in accordance with DTC's procedures with respect thereto. See
"Book Entry Registration; Reports to Securityholders--Book Entry Registration"
and "--Definitive Securities" in this prospectus. Certificates owned by the
seller or its affiliates will be entitled to equal and proportionate benefits
under the trust agreement, except that, unless all certificates are owned by the
seller and its affiliates, the certificates will be deemed not to be outstanding
for purposes of determining whether the requisite percentage of
certificateholders have given any request, demand, authorization, direction,
notice, consent or other action under the Related Documents other than
commencement by the trust of a voluntary proceeding in bankruptcy as described
in "The Transfer and Servicing Agreements--Insolvency Event."
Under the trust agreement, the trust, and the owner trustee on its behalf,
and its certificateholders, by accepting the certificates, will covenant that
they will not, for a period of one year and one day after the termination of the
trust agreement, institute against the seller any bankruptcy, reorganization or
other proceeding under any federal or state bankruptcy or similar law.
DISTRIBUTIONS OF INTEREST AND CERTIFICATE BALANCE
The timing and priority of distributions, seniority, allocations of loss,
Pass Through Rate and amount of or method of determining distributions on the
Certificate Balance and interest, or, where applicable, on the Certificate
Balance only or interest only, on the certificates of any
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series will be described in the accompanying prospectus supplement.
Distributions of interest on the certificates will be made on the distribution
dates specified in the accompanying prospectus supplement and will be made prior
to distributions on the Certificate Balance. A series may include one or more
classes of Strip Certificates, entitled to (1) distributions in respect of
Certificate Balance with disproportionate, nominal or no interest distributions,
or (2) interest distributions, with disproportionate, nominal or no
distributions in respect of Certificate Balance. Each class of certificates may
have a different Pass Through Rate, which may be a fixed, variable or adjustable
Pass Through Rate, and which may be zero for specified classes of Strip
Certificates, or any combination of the foregoing. The accompanying prospectus
supplement will specify the Pass Through Rate for each class of certificate, or
the initial Pass Through Rate and the method for determining the Pass Through
Rate. Unless otherwise specified in the accompanying prospectus supplement,
interest on the certificates will be calculated on the basis of a 360-day year
consisting of twelve 30-day months. Distributions in respect of the certificates
will be subordinate to payments in respect of the notes as more fully described
in the accompanying prospectus supplement. Distributions in respect of
Certificate Balance of any class of certificates will be made on a pro rata
basis among all of the certificateholders of that class.
In the case of a series of certificates which includes two or more classes
of certificates, the timing, sequential order, priority of payment or amount of
distributions in respect of principal, and any schedule or formula or other
provisions applicable to the determination thereof, of each class shall be as
set forth in the accompanying prospectus supplement.
BOOK ENTRY REGISTRATION; REPORTS TO SECURITYHOLDERS
BOOK-ENTRY REGISTRATION
The Depository Trust Company is a limited purpose trust company organized
under the laws of the State of New York, a member of the Federal Reserve System,
a "clearing corporation" within the meaning of the New York Uniform Commercial
Code and a "clearing agency" registered pursuant to Section 17A of the Exchange
Act. DTC was created to hold securities for its DTC participants and to
facilitate the clearance and settlement of securities transactions between DTC
participants through electronic book-entries to eliminate the need for the
physical movement of certificates. DTC participants include securities brokers
and dealers, banks, trust companies and clearing corporations. Indirect access
to the DTC system also is available to indirect DTC participants such as banks,
brokers, dealers and trust companies, that clear through or maintain a custodial
relationship with a DTC participant, either directly or indirectly.
Unless otherwise specified in the accompanying prospectus supplement,
securityholders that are not DTC participants or indirect DTC participants but
desire to purchase, sell or otherwise transfer ownership of, or other interests
in, securities may do so only through DTC participants and indirect DTC
participants. In addition, securityholders will receive all distributions of
principal and interest from the owner trustee or indenture trustee, as
applicable, through DTC participants. Under a book-entry format, securityholders
may experience some delay in their receipt of payments since these payments will
be forwarded by the owner trustee or indenture trustee, as applicable, to Cede &
Co. , as nominee for DTC. DTC will forward these payments to its DTC
participants, which thereafter will forward them to indirect DTC participants or
securityholders. Except for the seller, it is anticipated that the only
noteholder and certificateholder will be Cede & Co., as nominee of DTC.
Securityholders will not be recognized by the trustee as noteholders or
certificateholders, as that
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term is used in the trust agreement and indenture, as applicable, and
securityholders will be permitted to exercise the rights of securityholders only
indirectly through DTC and its DTC participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers of securities among
DTC participants on whose behalf it acts and to receive and transmit payments of
principal of, and interest on, the securities. DTC participants and indirect DTC
participants with which securityholders have accounts relating to the securities
similarly are required to make book-entry transfers and receive and transmit
these payments on behalf of their respective securityholders. Accordingly,
although securityholders will not possess securities, the rules, regulations and
procedures creating and affecting DTC and its operations provide a mechanism by
which securityholders will receive payments and will be able to transfer their
interests.
Because DTC can only act on behalf of DTC participants, who in turn act on
behalf of indirect DTC participants and certain banks, the ability of
securityholders to pledge securities to persons or entities that do not
participate in the DTC system or to otherwise act with respect to the securities
may be limited due to the lack of a physical certificate for the securities.
DTC has advised the seller that it will take any action permitted to be
taken by a noteholder under the associated indenture or a certificateholder
under the associated trust agreement only at the direction of one or more DTC
participants to whose accounts with DTC the notes or certificates are credited.
DTC may take conflicting actions relating to other undivided interests to the
extent that these actions are taken on behalf of DTC participants whose holdings
include these undivided interests.
In addition to holding notes through DTC participants or indirect DTC
participants of DTC in the United States as described above, holders of
book-entry notes may hold their notes through Clearstream or Euroclear in Europe
if they are participants of these systems, or indirectly through organizations
which are participants in these systems.
Clearstream and Euroclear will hold omnibus positions on behalf of their
participants through customers' securities accounts in Clearstream's and
Euroclear's names on the books of their respective depositaries which in turn
will hold these positions in customers' securities accounts in the depositaries'
names on the books of DTC.
Transfers between Clearstream participants and Euroclear participants will
occur in accordance with their respective rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly through
DTC, on the one hand, and directly or indirectly through Clearstream
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 that system in accordance with its rules and
procedures and within its established deadlines based upon 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. Clearstream
participants and Euroclear participants may not deliver instructions directly to
the depositaries.
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Because of time-zone differences, credits of securities received in
Clearstream 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. These credits or any transactions in
these securities settled during the processing will be reported to the relevant
Euroclear or Clearstream participants on that Business Day. Cash received in
Clearstream or Euroclear as a result of sales of securities by or through a
Clearstream participant or a Euroclear participant to a DTC participant will be
received with value on the DTC settlement date but will be available in the
relevant Clearstream or Euroclear cash account only as of the Business Day
following settlement in DTC. For information on tax documentation procedures,
see "Federal Income Tax Consequences--Characterization and Treatment--Tax
Considerations to Foreign Noteholders" in this prospectus.
Clearstream Banking, S.A. is incorporated under the laws of Luxembourg as a
professional depository. Clearstream holds securities for its participating
organizations and facilitates the clearance and settlement of securities
transactions between Clearstream participants through electronic book-entry
changes in accounts of Clearstream participants to eliminate the need for the
physical movement of certificates. Transactions may be settled in Clearstream in
any of 28 currencies, including United States dollars. Clearstream provides to
Clearstream participants, among other things, services for safekeeping,
administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. Clearstream interfaces with domestic
markets in several countries. As a professional depository, Clearstream is
subject to regulation by the Luxembourg Monetary Institute. Clearstream
participants are recognized financial institutions around the world, including
underwriters, securities brokers and dealers, banks, trust companies, clearing
corporations and other organizations and may include the underwriters. Indirect
access to Clearstream is also available to others, like banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Clearstream participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for participants of
Euroclear and to clear and settle transactions between Euroclear participants
through simultaneous electronic book-entry delivery against payment to eliminate
the need for the physical movement of certificates and any risk from lack of
simultaneous transfers of securities and cash. 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. The Euroclear system is owned
by Euroclear Clearance System Public Limited Company and operated through a
license agreement by Euroclear Bank S.A./N.V., a bank incorporated under the
laws of the Kingdom of Belgium, the Euroclear Operator. 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 regulated and examined by the Belgium Banking and
Finance Commission and the National Bank of Belgium.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
Operating Procedures of the Euroclear System and the applicable Belgian law.
These laws and procedures govern transfers of securities and cash with
Euroclear, withdrawals of securities and cash from Euroclear, and receipts of
payments for securities in Euroclear. All securities in Euroclear are held on a
fungible basis without attribution of specific certificates to specific
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securities clearance accounts. The Euroclear Operator acts under these laws and
procedures only on behalf of Euroclear participants, and has no record of or
relationship with persons holding through Euroclear participants.
Distributions on notes held through Clearstream or Euroclear will be
credited to the cash accounts of Clearstream participants or Euroclear
participants in accordance with the relevant system's rules and procedures, to
the extent received by its depositary. These distributions will be subject to
tax reporting in accordance with relevant United States tax laws and
regulations. See "Federal Income Tax Consequences--Characterization and
Treatment--Information Reporting and Backup Withholding" in this prospectus.
Clearstream or the Euroclear Operator, as the case may be, will take any other
action permitted to be taken by a noteholder under the indenture or other
Related Document on behalf of a Clearstream participant or Euroclear participant
only in accordance with its relevant rules and procedures and subject to its
depositary's ability to effect these actions on its behalf through DTC.
Although DTC, Clearstream and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of notes among participants of DTC,
Clearstream and Euroclear, they are under no obligation to perform or continue
to perform these procedures and these procedures may be discontinued at any
time.
Except as required by law, neither the trust, the seller, the servicer, the
administrator, the owner trustee nor the indenture trustee will have any
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests of the notes or the certificates of any series
held by Cede, as nominee for DTC, by Clearstream or by Euroclear in Europe, or
for maintaining, supervising or reviewing any records relating to these
beneficial ownership interests.
DEFINITIVE SECURITIES
Unless otherwise specified in the accompanying prospectus supplement, any
notes and certificates originally issued in book-entry form will be issued in
fully registered, certificated form as definitive notes or definitive
certificates, as the case may be, to noteholders, certificateholders or their
respective nominees, rather than to DTC or its nominee, only if:
(1) the associated administrator advises the appropriate trustee in
writing that DTC is no longer willing or able to discharge properly its
responsibilities as depository for these securities and the trust is unable
to locate a qualified successor,
(2) the administrator, at its option, elects to terminate the
book-entry system through DTC or
(3) after the occurrence of an Event of Default or a Servicer Default,
holders representing at least a majority of the outstanding principal
amount of these securities advise the appropriate trustee through DTC in
writing that the continuation of a book-entry system through DTC, or a
successor thereto, is no longer in the best interest of the holders of
these securities.
Upon the occurrence of any event described in the immediately preceding
paragraph, the appropriate trustee will be required to notify DTC of the
availability of definitive notes or definitive certificates, as the case may be.
DTC shall notify all the note owners or certificate owners, as applicable, of
the availability of definitive notes or definitive certificates, as the case may
be. Upon surrender by DTC of the definitive certificates representing the
securities and
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receipt of instructions for re-registration, the appropriate trustee will
reissue these securities as definitive notes or definitive certificates, as the
case may be, to holders thereof.
Distributions of principal of, and interest on, the definitive securities
will thereafter be made in accordance with the procedures set forth in the
associated indenture or associated trust agreement, as applicable, directly to
holders of definitive securities in whose names the definitive securities were
registered at the close of business on the last day of the preceding monthly
period. These distributions will be made by check mailed to the address of that
holder as it appears on the register maintained by the indenture trustee or
owner trustee, as applicable. The final payment on any definitive security,
however, will be made only upon presentation and surrender of the definitive
security at the office or agency specified in the notice of final distribution
to the holders of that class.
Definitive securities will be transferable and exchangeable at the offices
of the appropriate trustee or of a registrar named in a notice delivered to
holders of definitive securities. No service charge will be imposed for any
registration of transfer or exchange, but the appropriate trustee may require
payment of a sum sufficient to cover any tax or other governmental charge
imposed in connection with the transfer or exchange.
REPORTS TO SECURITYHOLDERS
For 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
noteholders on that payment date and on or prior to each distribution date, the
servicer will prepare and provide to the owner trustee a statement to be
delivered to the certificateholders. Each statement to be delivered to
noteholders will include the information set forth below as to the notes for
that payment date or the period since the previous payment date on those notes,
as applicable. Each statement to be delivered to certificateholders will include
the information set forth below as to the certificates for that distribution
date or the period since the previous distribution date, as applicable:
(1) the amount of the distribution allocable to principal of each
class of the notes and to the Certificate Balance of each class of
certificates;
(2) the amount of the distribution allocable to interest on or for
each class of securities;
(3) the Aggregate Principal Balance as of the close of business on the
last day of the preceding monthly period;
(4) the aggregate outstanding principal balance and the Note Pool
Factor for each class of notes, and the Certificate Balance and the
Certificate Pool Factor for each class of certificates, each after giving
effect to all payments reported under (1) above and to all reinvestments
reported under (12) below on that date;
(5) the aggregate amount in the Payment Ahead Servicing Account or on
deposit with the servicer as Payments Ahead and the change in that amount
from the previous statement, as the case may be;
(6) the amount of outstanding Monthly Advances on that date;
(7) the amount of the Total Servicing Fee paid to the servicer for the
prior monthly period or periods, as the case may be;
(8) the interest rate or Pass Through Rate for the next period for any
class of notes or certificates with variable or adjustable rates;
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(9) the amount, if any, distributed to noteholders and
certificateholders from amounts on deposit in the reserve account or from
other forms of credit enhancement;
(10) the Noteholders' Interest Carryover Shortfall, the Noteholders'
Principal Carryover Shortfall, the Certificateholders' Interest Carryover
Shortfall and the Certificateholders' Principal Carryover Shortfall, each
as defined in the accompanying prospectus supplement, if any, and the
change in these amounts from the preceding statement;
(11) the balance of the reserve account, if any, on that date, after
giving effect to changes in that reserve account on that date; and
(12) the amount, if any, reinvested in additional receivables during
the Revolving Period, if any.
Each amount set forth pursuant to subclauses (1), (2), (7), (9) and (10)
for notes or certificates will be expressed as a dollar amount per $1,000 of the
initial principal balance of the notes or the initial Certificate Balance, as
applicable.
Within the prescribed period of time for tax reporting purposes after the
end of each calendar year during the term of the trust, the trustees will mail
to each holder of a class of securities who at any time during that calendar
year has been a securityholder, and received any payment thereon, a statement
containing information for the purposes of that securityholder's preparation of
federal income tax returns. As long as the holder of record of the securities is
Cede & Co., as nominee of DTC, beneficial owners of the securities will receive
tax and other information from DTC participants and indirect DTC participants
rather than from the trustees. See "Federal Income Tax Consequences" in this
prospectus.
THE TRANSFER AND SERVICING AGREEMENTS
Except as otherwise specified in the accompanying prospectus supplement,
the following summary describes the material terms of the Transfer and Servicing
Agreements relating to each trust consisting of:
(1) the Pooling and Servicing Agreement pursuant to which the seller
will purchase receivables from GMAC, the servicer will agree to service the
receivables, and GMAC, as Custodian, will agree to act as custodian for the
documents evidencing the receivables,
(2) the Trust Sale and Servicing Agreement pursuant to which a trust
will acquire the receivables from the seller and agree to the servicing of
the receivables by the servicer and the appointment of GMAC as Custodian,
(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 will undertake
administrative duties for the trust.
Forms of the Transfer and Servicing Agreements in the above list have been
filed as exhibits to the registration statement of which this prospectus forms a
part. The seller will provide a copy of the Transfer and Servicing Agreements,
without exhibits, upon request to a holder of securities described in the
Transfer and Servicing Agreements. Where particular provisions or terms used in
the Transfer and Servicing Agreements are referred to, the actual provisions,
including definitions of terms, are incorporated by reference as part of the
summary.
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SALE AND ASSIGNMENT OF RECEIVABLES
GMAC will sell and assign to the seller, without recourse, its entire
interest in the receivables, including its security interests in the financed
vehicles, pursuant to a Pooling and Servicing Agreement between GMAC and the
seller. The seller will transfer and assign to the applicable trust, without
recourse, its entire interest in the receivables, including its security
interests in the financed vehicles, pursuant to a Trust Sale and Servicing
Agreement among the seller, the servicer and the trust. Each receivable of a
trust will be identified in a schedule which will be on file at the locations
set forth in an exhibit to the associated Trust Sale and Servicing Agreement.
The trust will, concurrently with the transfer and assignment, execute and
deliver the trust's notes and certificates to the seller in exchange for the
receivables. Except as set forth in the accompanying prospectus supplement, the
seller will sell the securities offered by this prospectus and the accompanying
prospectus supplement, which may or may not include all securities of a series,
to the respective underwriters set forth in the accompanying prospectus
supplement. See "Plan of Distribution" in this prospectus.
The accompanying prospectus supplement will provide the terms, conditions
and manner under which additional receivables will be sold by GMAC to the seller
and by the seller to the trust during the Revolving Period, if any.
In each Pooling and Servicing Agreement, GMAC will represent and warrant to
the seller, among other things, that:
- the information provided in the schedule of receivables exhibit to
the Trust Sale and Servicing Agreement is correct in all material
respects;
- the obligor on each receivable is required to maintain physical
damage insurance covering the financed vehicle in accordance with
GMAC's normal requirements;
- as of the respective sale date, to the best of its knowledge, the
receivables are free and clear of all filed security interests,
liens, charges and encumbrances on account of work, labor or
materials other than tax liens and other liens that arise by
operation of law and no offsets, defenses or counterclaims have been
asserted or threatened;
- as of the respective sale date, each receivable is or will be
secured by a first perfected security interest in favor of GMAC in
the financed vehicle; and
- each receivable, at the time it was originated complied, and as of
the respective sale date complies, in all material respects with
applicable federal and state laws, including, without limitation,
consumer credit, truth-in-lending, equal credit opportunity and
disclosure laws.
In the Trust Sale and Servicing Agreement, the seller will assign the
representations and warranties of GMAC, as set forth above, to the trust, and
will represent and warrant to the trust that the seller has taken no action
which would cause the representations and warranties of GMAC to be false in any
material respect as of the respective sale date.
As of the last day of the second, or, if the seller elects, the first,
month following the discovery by the seller, the servicer, the owner trustee or
the indenture trustee of a breach of any representation or warranty of the
seller or GMAC that materially and adversely affects the interests of the
securityholders in any receivable, the seller, unless the breach is cured in all
material respects, will repurchase or, will enforce the obligation of GMAC under
the Pooling and Servicing Agreement to repurchase the Warranty Receivable from
the trust at a
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price equal to the Warranty Payment. The seller or GMAC, as applicable, will be
entitled to receive any amounts held by the servicer or in the Payment Ahead
Servicing Account for that Warranty Receivable. The repurchase obligation
constitutes the sole remedy available to the trust, the noteholders, the
indenture trustee, the certificateholders or the owner trustee for any uncured
breaches.
In each Pooling and Servicing Agreement, the servicer will covenant that:
- except as contemplated in that Agreement, the servicer will not
release any financed vehicle from the security interest securing the
receivable,
- the servicer will do nothing to impair the rights of the indenture
trustee, the owner trustee, the noteholders or the
certificateholders in the receivables and
- the servicer will not amend or otherwise modify any receivable so
that the Amount Financed, the APR, the total number of Scheduled
Payments, in the case of a Scheduled Interest Receivable, or the
number of originally scheduled due dates, in the case of a Simple
Interest Receivable, is altered or so that the last Scheduled
Payment, in the case of a Scheduled Interest Receivable, or the last
scheduled due date, in the case of a Simple Interest Receivable,
occurs after the final scheduled distribution date.
As of the last day of the second, or, if the servicer so elects, the first,
month following the discovery by the servicer, the owner trustee or the
indenture trustee of a breach of any covenant that materially and adversely
affects any receivable and unless the breach is cured in all material respects,
the servicer will make an Administrative Purchase Payment for the Administrative
Receivable. The servicer will be entitled to receive any amounts held by the
servicer or in the Payment Ahead Servicing Account for the Administrative
Receivable. This repurchase obligation constitutes the sole remedy available to
the trust, the indenture trustee, the owner trustee, the noteholders and the
certificateholders for any uncured breaches.
Pursuant to each Trust Sale and Servicing Agreement, the trust will agree
to GMAC acting as custodian to maintain possession, as the trust's agent, of the
retail instalment sale contracts and any other documents relating to the
receivables. To assure uniform quality in servicing both the receivables and
GMAC's own portfolio of receivables, as well as to facilitate servicing and save
administrative costs, the documents will not be physically segregated from other
similar documents that are in GMAC's possession nor will the documents be
stamped or marked to reflect the transfer to the trust so long as GMAC is the
custodian of these documents. However, Uniform Commercial Code financing
statements reflecting the sale and assignment of the receivables to the trust
and the pledge by the trust to the indenture trustee will be filed, and the
servicer's accounting records and computer files will reflect the sale and
assignment. Because the receivables will remain in the possession of GMAC, as
Custodian, and will not be stamped or otherwise marked to reflect the assignment
to the trust or the pledge to the indenture trustee, if a subsequent purchaser
were able to take physical possession of the receivables without knowledge of
the assignment, the trust's and the indenture trustee's interests in the
receivables could be defeated.
ADDITIONAL SALES OF RECEIVABLES
In addition to receivables that we buy from GMAC on a closing date as
described above in this subsection, we may also buy receivables from GMAC to
transfer to a trust on one or more later dates for that trust under a separate
purchase agreement. We would buy those receivables on substantially the same
terms as under the pooling and servicing agreement for
27
the initial closing. We would then sell receivables that we have bought from
GMAC to a trustee, for the benefit of one of the trusts, pursuant to a sale and
servicing agreement. On the initial closing date, the trust will apply the net
proceeds received from the sale of its notes and certificates to pay us for the
receivables that are being sold to that trust, and, to the extent specified in
the accompanying prospectus supplement, to make a deposit in a additional
funding account and initial deposits in other trust accounts. If there is a
additional funding account, then we will buy additional receivables from GMAC,
and sell them to the trust from time to time during a additional funding period,
as described further in the related prospectus supplement. If we receive a tax
opinion confirming the tax status of the trust, we may also sell additional
receivables to a trust at a later closing date and, concurrently, with this
sale, execute and deliver additional notes and certificates of the trust to fund
the purchase of the additional receivables.
ACCOUNTS
For each trust, the servicer will establish and maintain the following
accounts:
- one or more Collection Accounts, in the name of the indenture trustee on
behalf of the noteholders and the certificateholders, into which all
payments made on or for the receivables will be deposited,
- a Note Distribution Account, in the name of the indenture trustee on
behalf of the noteholders, in which amounts released from the Collection
Account and any reserve account or other credit enhancement for payment
to the noteholders will be deposited and from which all distributions to
the noteholders will be made,
- a Certificate Distribution Account, in the name of the owner trustee on
behalf of the certificateholders, in which amounts released from the
Collection Account and any reserve account or other credit enhancement
for distribution to the certificateholders will be deposited and from
which all distributions to the certificateholders will be made, and
- a Payment Ahead Servicing Account which will not be property of the
trust, in the name of the indenture trustee, into which to the extent
required by the Trust Sale and Servicing Agreement, early payments by or
on behalf of obligors on Scheduled Interest Receivables which do not
constitute either Scheduled Payments or Prepayments will be deposited
until payment becomes due.
- any other accounts to be established with respect to securities of the
trust will be described in the accompanying prospectus supplement.
Unless otherwise provided in the accompanying prospectus supplement, the
Payment Ahead Servicing Account will initially be maintained in the trust
department of the indenture trustee.
For any series, funds in the Designated Accounts will be invested as
provided in the Trust Sale and Servicing Agreement in Eligible Investments.
Eligible Investments for a trust are generally limited to investments acceptable
to the rating agencies then rating that trust's notes and certificates at the
request of the seller as being consistent with the rating of the notes. Except
as described in this section of this prospectus or in the accompanying
prospectus supplement. Eligible Investments are limited to obligations or
securities that mature no later than the business day preceding the next
distribution date or, in the case of the Note Distribution Account, the next
payment date for the notes. To the extent permitted by the
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rating agencies, funds in any reserve account may be invested in the trust's
notes that will not mature prior to the next payment date for the notes. Except
as otherwise specified in the accompanying prospectus supplement, the notes will
not be sold to meet any shortfalls unless they are sold at a price equal to or
greater than the unpaid principal balance of the notes if, following the sale,
the amount on deposit in the reserve account would be less than the Specified
Reserve Account Balance for that reserve account. Thus, the amount of cash in
any reserve account at any time may be less than the balance of the reserve
account. If the amount required to be withdrawn from any reserve account to
cover shortfalls in collections on the receivables, as provided in the
accompanying prospectus supplement, exceeds the amount of cash in the reserve
account, a temporary shortfall in the amounts distributed to the noteholders or
certificateholders could result, which could, in turn, increase the average life
of the notes or the certificates. Except as otherwise specified in the
accompanying prospectus supplement, investment earnings on funds deposited in
the Designated Accounts and the Payment Ahead Servicing Account, net of losses
and investment expenses, will be payable to the servicer.
The Designated Accounts will be maintained in either of two types of
accounts. The first type of account is a segregated account with an eligible
institution. The institutions which are eligible are:
(1) the corporate trust department of the indenture trustee or the
owner trustee, as applicable, or
(2) a depository institution organized under the laws of the United
States of America or any one of the states thereof or the District of
Columbia, or any domestic branch of a foreign bank, as long as that
depository institution:
(A) has either (X) a long-term unsecured debt rating acceptable to
the rating agencies or (Y) a short-term unsecured debt rating or
certificate of deposit rating acceptable to the rating agencies and
(B) has its deposits insured by the Federal Deposit Insurance
Corporation or any successor thereto.
The second type of account is a segregated trust account with the corporate
trust department of a depository institution organized under the laws of the
United States of America or any one of the states thereof or the District of
Columbia, or any domestic branch of a foreign bank. This depository institution
must have corporate trust powers and act as trustee for funds deposited in the
account and the securities of that depository institution must have a credit
rating from each rating agency then rating that institution in one of its
generic rating categories which signifies investment grade.
Any other accounts to be established for a trust will be described in the
accompanying prospectus supplement.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
For each trust, unless otherwise provided in the accompanying prospectus
supplement, on each distribution date, the servicer will receive a Total
Servicing Fee equal to the following:
- a basic servicing fee for the prior month equal to one-twelfth of the
Basic Servicing Fee Rate specified in the accompanying prospectus supplement
multiplied by the Aggregate Principal Balance of all receivables held by the
trust as of the first day of that monthly period
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- an additional servicing fee equal to the lesser of:
(1) the amount by which
(A) the amount equal to the aggregate amount of the basic servicing
fees for that distribution date and all prior distribution dates exceeds
(B) the aggregate amount of additional servicing fees paid to the
servicer on all prior distribution dates and
(2) the amount by which the amount on deposit in the reserve account
on that distribution date, after giving effect to all deposits, withdrawals
and payments affecting any reserve account other than the additional
servicing fees and payments to the seller, exceeds the Specified Reserve
Account Balance
- any unpaid basic servicing fees from all prior distribution dates and the
additional servicing fees to the extent of funds available therefor.
Unless otherwise provided in the prospectus supplement, the Total Servicing
Fee for each monthly period and any portion of the Total Servicing Fee that
remains unpaid from prior distribution dates may be paid at the beginning of
that monthly period out of collections for that monthly period. In addition,
unless otherwise provided in the accompanying prospectus supplement, for each
trust, the servicer will be entitled to retain any late fees, prepayment charges
or similar fees and charges collected during a monthly period and any investment
earnings on trust accounts during a monthly period.
The foregoing amounts for each trust are intended to compensate the
servicer for performing the functions of a third party servicer of automobile
receivables as an agent for their beneficial owner, including:
- collecting and posting all payments,
- responding to inquiries of obligors on the receivables,
- investigating delinquencies,
- sending payment coupons to obligors,
- reporting tax information to obligors, and
- policing the collateral.
These amounts will also compensate the servicer for its services as the
pool of receivables administrator, including making Monthly Advances, accounting
for collections, furnishing monthly and annual statements to the owner trustee
and the indenture trustee for distributions and generating federal income tax
information for the trust, the certificateholders and the noteholders. These
amounts also will reimburse the servicer for taxes, the fees of the owner
trustee and the indenture trustee, accounting fees, outside auditor fees, data
processing costs and other costs incurred in connection with administering the
pool of receivables.
SERVICING PROCEDURES
The servicer will make reasonable efforts to collect all payments due on
the receivables held by any trust and will, consistent with the accompanying
Pooling and Servicing Agreement and Trust Sale and Servicing Agreement, follow
the collection procedures it
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follows for comparable automobile receivables that it services for itself or
others. See "Legal Aspects of the Receivables" in this prospectus. The servicer
is authorized to grant rebates, adjustments or extensions on a receivable.
However, if that modification of a receivable alters the Amount Financed, the
APR, the total number of Scheduled Payments, in the case of a Scheduled Interest
Receivable, or the number of originally scheduled due dates, in the case of a
Simple Interest Receivable, so the last Scheduled Payment, in the case of a
Scheduled Interest Receivable, or the last scheduled due date, in the case of a
Simple Interest Receivable, occurs after the final scheduled distribution date,
the servicer will be obligated to purchase that receivable.
If the servicer determines that eventual payment in full of a receivable is
unlikely, the servicer will follow its normal practices and procedures to
realize upon the receivable, including the repossession and disposition of the
financed vehicle securing the receivable at a public or private sale, or the
taking of any other action permitted by applicable law. The servicer will be
entitled to receive its liquidation expenses as specified in the Pooling and
Servicing Agreement as an allowance for amounts charged to the account of the
obligor, in keeping with the servicer's customary procedures, for refurbishing
and disposition of the financed vehicle and other out-of-pocket costs incurred
in the liquidation.
COLLECTIONS
For each trust, the servicer will deposit all payments on the receivables
received from obligors and all proceeds of receivables collected during each
monthly period into the Collection Account not later than two Business Days
after receipt. However, the servicer may retain these amounts until the
distribution date at any time that:
(1) GMAC is the servicer;
(2) there exists no Servicer Default; and
(3) either:
(A) the short-term unsecured debt of the servicer is rated at least
A-1 by Standard & Poor's Ratings Services and P-1 by Moody's Investors
Service, Inc., or
(B) arrangements are made which are acceptable to the rating
agencies.
Pending deposit into the Collection Account, collections may be employed by
the servicer at its own risk and for its own benefit and will not be segregated
from its own funds.
Collections on a Scheduled Interest Receivable made during a monthly period
other than an Administrative Receivable or a Warranty Receivable, which are not
late fees, prepayment charges or other similar fees or charges will be applied
first to any outstanding Scheduled Interest Advances made by the servicer on
that receivable and then to the Scheduled Payment. Any Excess Payment will be
held by the servicer, or, if the servicer has not satisfied conditions (2) and
(3) described in the second preceding paragraph, will be deposited in the
Payment Ahead Servicing Account, and will be treated as a Payment Ahead, except
as described in the following sentence. If and to the extent that an Excess
Payment (1) together with any unapplied payments ahead exceeds the sum of three
Scheduled Payments, or (2) constitutes, either alone or together with any
previous unapplied payments ahead, full prepayment, then that portion of the
Excess Payment shall not be deemed a payment ahead and shall instead be applied
as a full or partial Prepayment.
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Collections made during a monthly period on Simple Interest Receivables,
other than Administrative Receivables and Warranty Receivables, which are not
late fees or other similar fees or charges will be applied first to the payment
to the servicer of Excess Simple Interest Collections, if any, and next to
principal and interest on all of these receivables. Excess Simple Interest
Collections represent the excess, if any, of:
(1) all payments received during the monthly period on all Simple
Interest Receivables held by the trust to the extent allocable to interest
over
(2) the amount of interest that would be due during the monthly period
on all Simple Interest Receivables held by the trust, assuming that the
payment on that receivable was received on its respective due date.
Collections on Administrative Receivables and Warranty Receivables,
including Administrative Purchase Payments and Warranty Payments, will generally
be applied in the manner described in the preceding two paragraphs, except that
unapplied Payments Ahead on a Scheduled Interest Receivable will be made to the
servicer or the seller, as applicable, and Administrative Purchase Payments and
Warranty Payments on a Simple Interest Receivable will not be applied to Excess
Simple Interest Collections.
MONTHLY ADVANCES
Unless otherwise provided in the accompanying prospectus supplement, if the
full Scheduled Payment due on a Scheduled Interest Receivable is not received by
the end of the month in which it is due, whether as the result of any extension
granted to the obligor or otherwise, the amount of Payments Ahead, if any, not
previously applied to that receivable will be applied by the servicer to the
extent of the shortfall and the Payments Ahead will be reduced accordingly. If
any shortfall remains, the servicer will make a Scheduled Interest Advance equal
to the amount of that shortfall. The servicer will be obligated to make a
Scheduled Interest Advance only to the extent that the servicer, in its sole
discretion, expects to recoup the advance from subsequent collections or
recoveries on any receivable. The servicer will be reimbursed for any Scheduled
Interest Advances on a receivable from subsequent payments or collections
relating to that receivable. At the time the servicer determines that Scheduled
Interest Advances will not be recoverable from payments on that receivable, the
servicer will be entitled to recoup its Scheduled Interest Advances from
collections from other receivables.
Unless otherwise provided in the accompanying prospectus supplement, for
each trust, as of the last day of each monthly period, the servicer will make a
Simple Interest Advance equal to the excess, if any, of (1) the amount of
interest that would be due during that monthly period on all Simple Interest
Receivables held by the trust assuming that the payment on each receivable was
received on its respective due date over (2) all payments received during that
monthly period on all Simple Interest Receivables held by the trust to the
extent allocable to interest. In addition, for each trust, the servicer will be
paid, to the extent all previously made Simple Interest Advances exceed all
Excess Simple Interest Collections previously paid to the servicer, all
Liquidation Proceeds realized on Simple Interest Receivables allocable to
accrued and unpaid interest thereon, but not including interest for the then
current monthly period. Unless otherwise provided in the accompanying prospectus
supplement, the servicer will not make any advance on principal on any Simple
Interest Receivable.
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DISTRIBUTIONS
For each trust, beginning on the payment date or distribution date, as
applicable, specified in the accompanying prospectus supplement, distributions
of principal and interest on the notes, if any, and distributions in respect of
Certificate Balance and interest on the certificates, if any, will be made by
the indenture trustee or the owner trustee, as applicable, to the noteholders
and the certificateholders. The trustee will make distributions to the
noteholders and certificateholders of record on the Record Date. The timing,
calculation, allocation, order, source, priorities of and requirements for all
payments to each class of noteholders and all distributions to each class of
certificateholders will be set forth in the accompanying prospectus supplement.
For each trust, on each payment date and distribution date, collections on
the receivables will be transferred from the Collection Account to the Note
Distribution Account and the Certificate Distribution Account for distribution
to noteholders and certificateholders as and to the extent described in the
accompanying prospectus supplement. Credit enhancement, like a reserve account,
will be available to cover any shortfalls in the amount available for
distribution on that date to the extent specified in the accompanying prospectus
supplement. Distributions in respect of principal and Certificate Balance will
be subordinate to distributions in respect of interest, and distributions in
respect of the certificates will be subordinate to payments in respect of the
notes, as more fully described in the accompanying prospectus supplement.
CREDIT ENHANCEMENT
The amounts and types of credit enhancement arrangements and the provider
of credit enforcement arrangements, if applicable, for each class of securities
will be set forth in the accompanying prospectus supplement. If and to the
extent provided in the accompanying prospectus supplement, credit enhancement
may be in the form of:
- subordination of one or more classes of securities
- reserve or other cash collateral accounts
- overcollateralization,
- letters of credit, credit or liquidity facilities
- repurchase obligations
- interest rates, currency or credit derivatives
- third party payments or other support
- cash advances or deposits or
- any variation of or combination of two or more of the foregoing
If specified in the applicable prospectus supplement, credit enhancement
for a series of securities may cover one or more other series of securities.
The presence of a reserve account and other forms of credit enhancement is
intended to enhance the likelihood of receipt by the noteholders and the
certificateholders of the full amount of principal or Certificate Balance, as
the case may be, and interest due thereon and to decrease the likelihood that
the noteholders and the certificateholders will experience
33
losses. Unless otherwise specified in the accompanying prospectus supplement,
the credit enhancement for a class of securities will not provide protection
against all risks of loss and will not guarantee repayment of the entire
principal balance or Certificate Balance, as the case may be, and interest
thereon. If losses occur which exceed the amount covered by any credit
enhancement or which are not covered by any credit enhancement, securityholders
will bear their allocable share of deficiencies. In addition, if a form of
credit enhancement covers more than one series of securities, securityholders
will be subject to the risk that credit enhancement will be exhausted by the
claims of securityholders of other series.
Reserve Account. If so provided in the accompanying prospectus supplement,
pursuant to the Trust Sale and Servicing Agreement, the seller will establish
for a series a reserve account which will be maintained with the indenture
trustee.
Unless otherwise provided in the accompanying prospectus supplement, the
reserve account will not be included in the property of its associated trust but
will be a segregated trust account held by the indenture trustee for the benefit
of noteholders and certificateholders. Unless otherwise provided in the
accompanying prospectus supplement, the reserve account will be funded by an
initial deposit by the seller on the closing date in the amount set forth in the
accompanying prospectus supplement. To the extent, if any, described in the
accompanying prospectus supplement, the amount on deposit in the reserve account
will be increased on each distribution date thereafter up to the Specified
Reserve Account Balance, as defined in the accompanying prospectus supplement,
by the deposit in the reserve account of the amount of collections on the
receivables remaining on each distribution date after the payment of the Total
Servicing Fee and the distributions and allocations to the noteholders and the
certificateholders required on that date. Unless otherwise provided in the
accompanying prospectus supplement or agreed by the seller, amounts on deposit
in the reserve account after payments to noteholders, certificateholders and the
servicer may be paid to the seller to the extent that these amounts exceed the
Specified Reserve Account Balance. Upon any distribution to the seller of
amounts from the reserve account, neither the noteholders nor the
certificateholders will have any rights in, or claims to, these amounts.
NET DEPOSITS
As an administrative convenience, during monthly periods in which the
servicer is permitted to hold payments on receivables until the distribution
date, the servicer will also be permitted to make the deposit of collections,
aggregate Monthly Advances, Warranty Purchase Payments and Administrative
Purchase Payments for any trust monthly period net of distributions to be made
to the servicer for the trust for that monthly period. Similarly, the servicer
may cause to be made a single, net transfer from the Collection Account to the
Payment Ahead Servicing Account, or vice versa. The servicer, however, will
account to the indenture trustee, the owner trustee, the noteholders and the
certificateholders for each trust as if all deposits, distributions and
transfers were made individually. In addition, in connection with any trust at
any time that the servicer is not required to remit collections on a daily
basis, the servicer may retain collections allocable to the notes or the Note
Distribution Account until the payment date, and pending deposit into the
Collection Account or the Note Distribution Account, the collections may be
employed by the servicer at its own risk and for its own benefit and will not be
segregated from its own funds. On each payment date, the servicer, the seller,
the indenture trustee and the owner trustee will make all distributions,
deposits and other remittances on the notes or the Note Distribution Account of
a trust for the periods since the previous distribution was to have been made.
If payment dates do not coincide with distribution dates, all distributions,
deposits or other remittances made on a
34
payment date will be treated as having been distributed, deposited or remitted
on the distribution date for the applicable monthly period for purposes of
determining other amounts required to be distributed, deposited or otherwise
remitted on that distribution date.
STATEMENTS TO TRUSTEES AND TRUST
Prior to each payment date and distribution date, for each trust, the
servicer will provide to the indenture trustee and the owner trustee as of the
close of business on the last day of the preceding monthly period a statement
setting forth substantially the same information as is required to be provided
in the periodic reports provided to securityholders on that date described under
"Book Entry Registration; Reports to Securityholders--Reports to
Securityholders" in this prospectus.
EVIDENCE AS TO COMPLIANCE
Each Trust Sale and Servicing Agreement will provide that a firm of
independent public accountants will furnish to the owner trustee and the
indenture trustee on or before August 15 of each year, beginning the first
August 15 which is at least twelve months after the 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 of these certificates, the period from the closing
date to the June 30 of that year, with standards relating to the servicing of
the receivables, the servicer's accounting records and computer files relating
to those receivables and other specified matters.
Each Trust Sale and Servicing Agreement will also provide for delivery to
the owner trustee and the indenture trustee, on or before August 15 of each
year, beginning the first August 15 which is at least twelve months after the
closing date, of a certificate signed by an officer of the servicer stating that
the servicer has fulfilled its obligations under the Trust Sale and Servicing
Agreement and the Pooling and Servicing Agreement throughout the preceding
twelve months ended June 30, or in the case of the first of these certificates,
the period from the closing date to the June 30 of that year, or, if there has
been a default in the fulfillment of an obligation, describing each default. The
certificate may be provided as a single certificate making the required
statements as to more than one Trust Sale and Servicing Agreement.
Copies of the statements and certificates may be obtained by
securityholders by a request in writing addressed to the applicable indenture
trustee or owner trustee.
In each Trust Sale and Servicing Agreement, the seller will agree to give
the indenture trustee and the owner trustee notice of any event which with the
giving of notice or the lapse of time, or both, would become a Servicer Default.
In addition, the seller will agree to give the indenture trustee, the owner
trustee and the trust notice of specified covenant breaches which with the
giving of notice or lapse of time, or both, would constitute a Servicer Default.
CHANGES TO SERVICER; SERVICER INDEMNIFICATION AND PROCEEDINGS
Each Trust Sale and Servicing Agreement will provide that GMAC may not
resign from its obligations and duties as servicer under the Trust Sale and
Servicing Agreement and under the Pooling and Servicing Agreement, except upon
determination that GMAC's performance of these duties is no longer permissible
under applicable law. No resignation will become effective until the indenture
trustee or a successor servicer has assumed GMAC's servicing obligations and
duties under the Transfer and Servicing Agreements.
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Each Trust Sale and Servicing Agreement will further provide that, except
as specifically provided otherwise, neither the servicer nor any of its
directors, officers, employees and agents will be under any liability to the
trust or the noteholders or certificateholders for taking any action or for
refraining from taking any action pursuant to the Transfer and Servicing
Agreements or the indenture or for errors in judgment. Neither the servicer nor
any of these persons will be protected against any liability that would
otherwise be imposed by reason of wilful misfeasance, bad faith or
negligence -- except errors in judgment -- in the performance of the servicer's
duties under the Trust Sale and Servicing Agreement or by reason of reckless
disregard of its obligations and duties thereunder. Each Trust Sale and
Servicing Agreement will further provide that the servicer and its directors,
officers, employees and agents will be reimbursed by the indenture trustee or
the owner trustee for any contractual damages, liability or expense incurred by
reason of that trustee's wilful misfeasance, bad faith or negligence -- except
errors in judgment -- in the performance of that trustee's duties under the
Trust Sale and Servicing Agreement or by reason of reckless disregard of its
obligations and duties under the Trust Sale and Servicing Agreement or under the
trust agreement or the indenture. In addition, each Trust Sale and Servicing
Agreement will provide that the servicer is under no obligation to appear in,
prosecute or defend any legal action that is not incidental to the servicer's
servicing responsibilities under the 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 Transfer and Servicing Agreements and the rights and
duties of the parties thereto and the interests of the noteholders and the
certificateholders thereunder. If the servicer undertakes any action, the legal
expenses and costs of the action and any liability resulting therefrom will be
expenses, costs and liabilities of the trust, and the servicer will be entitled
to be reimbursed out of the Collection Account. Any indemnification or
reimbursement will reduce the amount otherwise available for distribution to the
noteholders and the certificateholders.
Under the circumstances specified in each 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, for its
obligations as servicer, any entity 50% or more of the voting interests of which
are owned, directly or indirectly, by General Motors, which entity in each of
the foregoing cases assumes the obligations of the servicer under the Trust Sale
and Servicing Agreement and the Pooling and Servicing Agreement, will be the
successor of the servicer under such Trust Sale and Servicing Agreement and the
Pooling and Servicing Agreement. So long as GMAC acts as servicer, the servicer
may at any time subcontract any duties as servicer under any Trust Sale and
Servicing Agreement and the Pooling and Servicing Agreement to any entity in
which more than 50% of the voting interests are owned, directly or indirectly,
by General Motors or to any entity that agrees to conduct these duties in
accordance with the servicer's servicing guidelines and the Trust Sale and
Servicing Agreement. The servicer may at any time perform specific duties as
servicer through subcontractors who are in the business of servicing receivables
similar to the receivables, provided that no delegation will relieve the
servicer of its responsibility for these duties.
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SERVICER DEFAULT
Except as otherwise provided in the accompanying prospectus supplement,
Servicer Defaults under each Trust Sale and Servicing Agreement will consist of:
(1) any failure by the servicer to make any required distribution,
payment, transfer or deposit or to direct the 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 the failure by an officer
of the servicer;
(2) any failure by the servicer to observe or perform in any material
respect any other covenant or agreement in the Trust Sale and Servicing
Agreement, the Pooling and Servicing Agreement, the trust agreement or the
indenture, which failure materially and adversely affects the rights of the
noteholders or the certificateholders and which continues unremedied for 90
days after the giving of written notice of the failure to the servicer by
the indenture trustee or the owner trustee or to the servicer, the
indenture trustee and the owner trustee by holders of notes or
certificates, as applicable, evidencing not less than 25% in principal
amount of the outstanding notes or of the Certificate Balance or after
discovery of the failure by an officer of the servicer;
(3) any representation, warranty or certification made by the servicer
in the Trust Sale and Servicing Agreement or in any certificate required to
be delivered under the Trust Sale and Servicing Agreement proves to have
been incorrect when made and which has a material adverse effect on the
rights of the securityholders and which effect continues unremedied for a
period of 60 days after the giving of written notice thereof to the
servicer by the indenture trustee or the owner trustee; or
(4) events of bankruptcy, insolvency or receivership of the servicer
or actions by the servicer indicating its insolvency, reorganization
pursuant to bankruptcy proceedings, or inability to pay its obligations.
Notwithstanding the foregoing, there will be no Servicer Default where a
Servicer Default would otherwise exist under clause (1) above for a period of
ten Business Days or under clause (2) or (3) for a period of 60 days if the
delay or failure giving rise to the Servicer Default was caused by an act of God
or other similar occurrence. Upon the occurrence of any of these events, the
servicer will not be relieved from using its best efforts to perform its
obligations in a timely manner in accordance with the terms of the Pooling and
Servicing Agreement and the Trust Sale and Servicing Agreement and the servicer
will provide the indenture trustee, the owner trustee, the seller and the
securityholders prompt notice of the failure or delay by it, together with a
description of its efforts to so perform its obligations.
RIGHTS UPON SERVICER DEFAULT
As long as a Servicer Default under a Trust Sale and Servicing Agreement
remains unremedied, the indenture trustee or holders of notes evidencing not
less than a majority in principal amount of the then outstanding notes may
terminate all the rights and obligations of the servicer under the Trust Sale
and Servicing Agreement and the Pooling and Servicing Agreement. If the notes
have been paid in full and the indenture has been discharged with respect
thereto, the owner trustee or the holders of certificates evidencing not less
than a majority of the aggregate outstanding Certificate Balance of all
certificates other than certificates owned by the trust, the seller, GMAC or any
of their affiliates may effect the termination of the servicer's rights and
obligations. In either case, upon the termination of the
37
rights and obligations of the servicer, the indenture trustee will succeed to
all the responsibilities, duties and liabilities of the servicer under the
agreements and will be entitled to similar compensation arrangements. If,
however, a bankruptcy trustee or similar official has been appointed for the
servicer, and no Servicer Default other than the appointment has occurred, the
trustee or official may have the power to prevent the indenture trustee or the
noteholders from effecting a transfer of servicing. If the indenture trustee is
unwilling to so act, it may, and if it is unable to so act, it will appoint, or
petition a court of competent jurisdiction for the appointment of, a successor
with a net worth of at least $100,000,000 and whose regular business includes
the servicing of automotive receivables and which satisfies the other criteria
set forth in the Trust Sale and Servicing Agreement. The indenture trustee may
make 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
For each trust, the holders of notes evidencing at least a majority in
principal amount of the then outstanding notes -- or if all of the notes have
been paid in full, holders of the certificates whose certificates evidence not
less than a majority of the outstanding Certificate Balance -- may, on behalf of
all the noteholders and certificateholders, waive any default by the servicer in
the performance of its obligations under the Pooling and Servicing Agreement and
the Trust Sale and Servicing Agreement and its consequences. However, the
holders cannot waive a Servicer Default in making any required deposits to or
payments from any of the Designated Accounts or the Certificate Distribution
Account in accordance with the Trust Sale and Servicing Agreement. No waiver
will impair the noteholders' or certificateholders' rights regarding subsequent
defaults.
AMENDMENT
Each of the Transfer and Servicing Agreements may be amended by the parties
thereto without the consent of the noteholders or certificateholders:
- to cure any ambiguity,
- to correct or supplement any provision of those agreements that may
be defective or inconsistent with any other provision of those agreements
or in any other Related Document,
- to add or supplement any credit, liquidity or other enhancement
arrangement for the benefit of noteholders or certificateholders, provided
that, if any addition affects any class of noteholders or
certificateholders differently than any other class of noteholders or
certificateholders, then addition will not, as evidenced by an opinion of
counsel, adversely affect in any material respect the interests of any
class of noteholders or certificateholders,
- to add to the covenants, restrictions or obligations of the seller,
the servicer, the owner trustee or the indenture trustee or
- to add, change or eliminate any other provisions of those agreements
in any manner that will not, as evidenced by an opinion of counsel,
adversely affect in any material respect the interests of the noteholders
or the certificateholders.
Each agreement may also be amended by the parties thereto with the consent
of the holders of at least a majority in principal amount of the then
outstanding notes and the holders
38
of the certificates evidencing at least a majority of the Certificate Balance
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of the agreement or of modifying in any manner
the rights of the noteholders or certificateholders. No amendment may:
(1) increase or reduce in any manner the amount of, or accelerate or
delay the timing of, distributions of payments that are required to be made
on any note or certificate without the consent of the holder thereof, any
interest rate, any Pass Through Rate or the Specified Reserve Account
Balance,
(2) adversely affect the rating of any series by any rating agency
without the consent of two-thirds of the principal amount of the
outstanding notes or the Voting Interests of the outstanding certificates,
as appropriate, of the series, or
(3) reduce the percentage required of noteholders or
certificateholders to consent to any amendment without the consent of all
of the noteholders or certificateholders, as the case may be.
INSOLVENCY EVENT
Each trust agreement will provide that the owner trustee does not have the
power to commence a voluntary proceeding in bankruptcy relating to the trust
without the unanimous prior approval of all certificateholders, including the
seller; provided, however, that under no circumstance will the owner trustee
commence any proceeding prior to the date that is one year and one day after the
termination of the trust. In the Trust Sale and Servicing Agreement, the
servicer and the seller will covenant that they will not, for a period of one
year and one day after the final distribution for the notes and the certificates
to the Note Distribution Account or the Certificate Distribution Account, as
applicable, institute against the trust any bankruptcy, reorganization or other
proceeding under any federal or state bankruptcy or similar law.
CERTIFICATEHOLDER LIABILITY; INDEMNIFICATION
Under each trust agreement, certificateholders will be entitled to the same
limitation of personal liability extended to stockholders of for profit
corporations under the Delaware General Corporation Law.
Each Trust Sale and Servicing Agreement provides that the servicer will
indemnify the indenture trustee and the owner trustee from and against any loss,
liability, expense, damage or cost arising out of or incurred in connection with
the acceptance or performance of its duties pursuant to the Transfer and
Servicing Agreements, including any judgment, award, settlement, reasonable
attorneys' fees and other costs or expenses incurred in connection with the
defense of any actual or threatened action, proceeding or claim. Neither the
indenture trustee nor owner trustee will be so indemnified if the acts or
omissions or alleged acts or omissions constitute willful misfeasance bad faith
or negligence by the indenture trustee or the owner trustee, as applicable. In
addition, the servicer will indemnify the trust, the indenture trustee, the
owner trustee, the noteholders and the certificateholders against losses arising
out of the negligence, willful misfeasance or bad faith of the servicer in the
performance of its duties under the Transfer and Servicing Agreements and the
indenture or by reason of its reckless disregard of its obligations and duties
thereunder. The servicer will also indemnify the parties against any taxes that
may be asserted against the parties for the transactions contemplated in the
Trust Sale and Servicing Agreement, other than taxes on the sale of
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receivables or securities, the ownership of receivables or the receipt of
payments on securities or other compensation.
TERMINATION
Each trust will terminate upon the final distribution by the indenture
trustee and the owner trustee of all monies and other property of the trust in
accordance with the terms of the trust agreement, the indenture and the Trust
Sale and Servicing Agreement, including in the case of the exercise by the
servicer of its repurchase option as described in this section of this
prospectus. Upon termination of the trust and payment or deposit into the Note
Distribution Account and the Certificate Distribution Account of all amounts to
be paid to the securityholders, any remaining assets of the trust and any
amounts remaining on deposit in the reserve account will be paid to the seller.
Unless otherwise provided in the accompanying prospectus supplement, in
order to avoid excessive administrative expense, if the outstanding Aggregate
Principal Balance of the receivables held by a trust is 10% or less of the
Aggregate Amount Financed, the servicer, or its successor, will be permitted to
purchase from that trust all remaining receivables and other trust assets. This
purchase is at the option of the servicer, or its successor, and would occur as
of the last day of any monthly period. The purchase price paid by the servicer,
or its successor, would be equal to the aggregate Administrative Purchase
Payments for these receivables plus the appraised value of any other property
held as part of the trust. However, in no event may this purchase price be less
than the sum of the unpaid principal of the outstanding notes and the unpaid
balance of the certificates plus accrued and unpaid interest thereon, and
determined as of the end of that monthly period. Furthermore, the certificate
balance will not be reduced for losses for purposes of the servicer's purchase.
As further described in the accompanying prospectus supplement, any outstanding
notes will be redeemed concurrently therewith and the subsequent distribution to
certificateholders of all amounts required to be distributed to them pursuant to
the trust agreement will effect early retirement of the certificates. The
indenture trustee will give written notice of redemption to each noteholder of
record and the owner trustee will give written notice of termination to each
certificateholder of record. The final distribution to any noteholder or
certificateholder will be made only upon surrender and cancellation of that
noteholder's note at an office or agency of the indenture trustee specified in
the notice of redemption or that certificateholder's certificate at an office or
agency of the owner trustee specified in the notice of termination.
ADMINISTRATION AGREEMENT
GMAC, in its capacity as administrator, will enter into an administration
agreement with each trust and the indenture trustee pursuant to which GMAC, as
administrator, will agree, to the extent provided in the administration
agreement, to provide the notices and to perform other administrative
obligations required by the indenture. For each trust, unless otherwise
specified in the prospectus supplement, as compensation for the performance of
the administrator's obligations under the administration agreement and as
reimbursement for its expenses thereto, GMAC, as administrator, will be entitled
to an administration fee in an amount equal to $1,500 per month. The servicer
will pay the administration fee.
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LEGAL ASPECTS OF THE RECEIVABLES
SECURITY INTEREST IN VEHICLES
In all states in which the receivables have been originated, retail
instalment sale contracts such as the receivables evidence the credit sale of
automobiles and light trucks by dealers to purchasers. The contracts also
constitute personal property security agreements and include grants of security
interests in the vehicles under the Uniform Commercial Code. Perfection of
security interests in the vehicles is generally governed by the motor vehicle
registration laws of the state in which the vehicle is located. In all states in
which the receivables have been originated, a security interest in a vehicle is
perfected by notation of the secured party's lien on the vehicle's certificate
of title.
For each trust, pursuant to the Pooling and Servicing Agreement, GMAC will
assign its security interest in the financed vehicles securing the receivables
to the seller and pursuant to the Trust Sale and Servicing Agreement, the seller
will assign its security interest in the financed vehicles securing the
receivables to the trust and the trust will pledge its interest to the indenture
trustee. However, because of the administrative burden and expense, no
certificate of title will be amended to identify the trust as the new secured
party relating to a financed vehicle or the interest of the indenture trustee in
the financed vehicle. Also, GMAC will continue to hold any certificates of title
relating to the vehicles in its possession as custodian for the seller and trust
pursuant to a custodian agreement entered into pursuant to the Pooling and
Servicing Agreement and Trust Sale and Servicing Agreement. See "The Transfer
and Servicing Agreements--Sale and Assignment of Receivables" in this
prospectus.
In most states, an assignment of the nature of the assignment contained in
each of the Pooling and Servicing Agreement and the Trust Sale and Servicing
Agreement is an effective conveyance of a security interest without amendment of
any lien noted on a vehicle's certificate of title, and the assignee succeeds by
the assignment to the assignor's rights as secured party. In the absence of
fraud or forgery by the vehicle owner or GMAC or administrative error by state
or local agencies, in most states the notation of GMAC's lien on the
certificates of title will be sufficient to protect the trust against the rights
of subsequent purchasers of a financed vehicle from an obligor or subsequent
lenders to an obligor who take a security interest in a financed vehicle. If
there are any financed vehicles as to which GMAC failed to obtain a perfected
security interest, its security interest would be subordinate to, among others,
subsequent purchasers of the financed vehicles and holders of perfected security
interests. This failure, however, would constitute a breach of the warranties of
GMAC under the Pooling and Servicing Agreement and, if the interests of the
securityholders in the receivable are materially and adversely affected, would
create an obligation of GMAC to repurchase that receivable unless the breach is
cured. Similarly, the security interest of the trust in the vehicle could be
defeated through fraud or negligence and, because the trust is not identified as
the secured party on the certificate of title, by the bankruptcy petition of the
obligor.
Under the laws of most states, the perfected security interest in a vehicle
would continue for four months after a vehicle is moved to a state other than
the state in which it is initially registered and thereafter until the vehicle
owner re-registers the vehicle in the new state. A majority of states generally
require surrender of a certificate of title to re-register a vehicle.
Accordingly, a secured party must surrender possession if it holds the
certificate of title to the vehicle or, in the case of vehicles registered in
states providing for the notation of a lien on the certificate of title but not
possession by the secured party, the secured party would receive notice of
surrender of the certificate of title from the state department of motor
vehicles.
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Thus, the secured party would have the opportunity to re-perfect its security
interest in the vehicles in the state of relocation. In states that do not
require surrender of a certificate of title for registration of a motor vehicle,
re-registration could defeat perfection. In the ordinary course of servicing
receivables, the servicer takes steps to effect re-perfection upon receipt of
notice of re-registration or information from the obligors as to relocation.
Similarly, when an obligor sells a vehicle, the servicer must surrender
possession of the certificate of title or will receive notice as a result of its
lien noted thereon and accordingly will have an opportunity to require
satisfaction of the receivable before release of the lien. Under each Pooling
and Servicing Agreement, the servicer is obligated to take appropriate steps, at
the servicer's expense, to maintain perfection of security interests in the
financed vehicles.
Under the laws of most states, liens for repairs performed on a motor
vehicle and liens for unpaid taxes take priority over even a perfected security
interest in a financed vehicle. The Internal Revenue Code also grants priority
to some federal tax liens over the lien of a secured party. The laws of some
states and federal law permit the confiscation of motor vehicles by governmental
authorities under some circumstances if used in unlawful activities, which may
result in the loss of a secured party's perfected security interest in the
confiscated motor vehicle. Under each Pooling and Servicing Agreement, GMAC will
have represented to the seller that, as of the respective sale date, each
receivable is or will be secured by a first perfected security interest in favor
of GMAC in the financed vehicle. The seller will have assigned the
representation, among others, to the owner trustee pursuant to the Trust Sale
and Servicing Agreement. However, liens for repairs or taxes, or the
confiscation of a financed vehicle, could arise at any time during the term of a
receivable. No notice will be given to the owner trustee, the indenture trustee,
the noteholder or the certificateholder if a lien or confiscation arises.
REPOSSESSION
In the event of default by vehicle purchasers, the holder of the retail
instalment sale contract has all the remedies of a secured party under the
Uniform Commercial Code, except where specifically limited by other state laws.
Among the Uniform Commercial Code remedies, the secured party has the right to
perform self-help repossession unless the act would constitute a breach of the
peace. Self-help is the method employed by the servicer in most cases and is
accomplished simply by retaking possession of the financed vehicle. In the event
of default by the obligor, some jurisdictions require that the obligor be
notified of the default and be given a time period within which he may cure the
default prior to repossession. Generally, the right of reinstatement may be
exercised on a limited number of occasions in any one-year period. In cases
where the obligor objects or raises a defense to repossession, or if otherwise
required by applicable state law, a court order must be obtained from the
appropriate state court, and the vehicle must then be repossessed in accordance
with that order. A secured party may be held responsible for damages caused by a
wrongful repossession of a vehicle.
NOTICE OF SALE; REDEMPTION RIGHTS
The Uniform Commercial Code and other state laws require the secured party
to provide the obligor with reasonable notice of the date, time and place of any
public sale and/or the date after which any private sale of the collateral may
be held. In addition, a consent order between the servicer and the Federal Trade
Commission imposes similar requirements for the giving of notice for any sale.
The obligor has the right to redeem the collateral prior to actual sale by
paying the secured party the unpaid principal balance of the obligation plus
reasonable
42
expenses for repossessing, holding and preparing the collateral for disposition
and arranging for its sale, plus, in some jurisdictions, reasonable attorneys'
fees, or, in some states, by payment of delinquent instalments or the unpaid
balance.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of the financed vehicles generally will be applied
first to the expenses of resale and repossession and then to the satisfaction of
the indebtedness. In many instances, the remaining principal amount of the
indebtedness will exceed the proceeds. While some states impose prohibitions or
limitations on deficiency judgments if the net proceeds from resale do not cover
the full amount of the indebtedness, a deficiency judgment can be sought in
those states that do not prohibit or limit these judgments. However, the
deficiency judgment would be a personal judgment against the obligor for the
shortfall, and a defaulting obligor can be expected to have very little capital
or sources of income available following repossession. Therefore, in many cases,
it may not be useful to seek a deficiency judgment or, if one is obtained, it
may be settled at a significant discount.
Occasionally, after resale of a vehicle and payment of all expenses and all
indebtedness, there is a surplus of funds. In that case, the Uniform Commercial
Code requires the creditor to remit the surplus to any holder of a lien on the
vehicle or if no lienholder exists or there are remaining funds, the Uniform
Commercial Code and a consent order between the servicer and the Federal Trade
Commission require the creditor to remit the surplus to the former owner of the
vehicle.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and regulations impose
substantial requirements upon lenders and servicers involved in consumer
finance. These laws include the Truth-in-Lending Act, the Equal Credit
Opportunity Act, the Federal Trade Commission Act, the Fair Credit Reporting
Act, the Fair Debt Collection Procedures Act, the Magnuson-Moss Warranty Act,
the Federal Reserve Board's Regulations B and Z, the Soldiers' and Sailors'
Civil Relief Act of 1940, the Texas Consumer Credit Code, state adoptions of the
National Consumer Act and of the Uniform Consumer Credit Code and state sales
finance and other similar laws. Also, state laws impose finance charge ceilings
and other restrictions on consumer transactions and require contract disclosures
in addition to those required under federal law. These requirements impose
specific statutory liabilities upon creditors who fail to comply with their
provisions. In some cases, this liability could affect an assignee's ability to
enforce consumer finance contracts, including the receivables. If a seller of
receivables is not liable for indemnifying the trust as assignee of the
receivables from the seller, failure to comply could impose liability on an
assignee in excess of the amount of the receivable.
The so-called "holder-in-due-course rule" of the Federal Trade Commission,
the provisions of which are generally duplicated by the Uniform Commercial Code,
other state statutes or the common law, has the effect of subjecting a seller in
a consumer credit transaction, and some creditors and their assignees, to all
claims and defenses which the obligor in the transaction could assert against
the seller. Liability under the holder-in-due-course rule is limited to the
amounts paid by the obligor under the contract and the holder of the contract
may also be unable to collect any balance remaining due thereunder from the
obligor.
Most of the receivables will be subject to the requirements of the
holder-in-due-course rule. The trust, as holder of the receivables, will be
subject to any claims or defenses that the
43
purchaser of the financed vehicle may assert against the seller of the financed
vehicle. These claims are limited to a maximum liability equal to the amounts
paid by the obligor on the receivable. If an obligor were successful in
asserting these claims or defenses, these claims or defenses would constitute a
breach of GMAC's warranties under the Pooling and Servicing Agreement and may
create an obligation of GMAC to repurchase the receivable unless the breach is
cured in all material respects. See "The Transfer and Servicing Agreements--Sale
and Assignment of Receivables" in this prospectus.
Courts have imposed general equitable principles upon secured parties
pursuing repossession and litigation involving deficiency balances. These
equitable principles may have the effect of relieving an obligor from some or
all of the legal consequences of a default.
In several cases, consumers have asserted that the self-help remedies of
secured parties under the Uniform Commercial Code and laws violate the due
process protections provided under the 14th Amendment to the Constitution of the
United States. Courts have generally upheld the notice provisions of the Uniform
Commercial Code and laws as reasonable or have found that the repossession and
resale by the creditor do not involve sufficient state action to afford
constitutional protection to consumers.
Under each Pooling and Servicing Agreement, GMAC will represent to the
seller that each receivable complies with all requirements of law in all
material respects. The seller will have assigned the representation, among
others, to the trust. Accordingly, if an obligor has a claim against the trust
for violation of any law and that claim materially and adversely affects the
trust's interest in a receivable, the violation may create an obligation to
repurchase the receivable unless the breach is cured in all material respects.
See "The Transfer and Servicing Agreements--Sale and Assignment of the
Receivables" in this prospectus.
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and state
laws, may interfere with or affect the ability of a secured party to realize
upon collateral or to enforce a deficiency judgment. For example, in a Chapter
13 proceeding under the federal bankruptcy law, a court may prevent a creditor
from repossessing the financed vehicle, and, as part of the rehabilitation plan,
reduce the amount of the secured indebtedness to the market value of the
financed vehicle at the time of bankruptcy, leaving the creditor as a general
unsecured creditor for the remainder of the indebtedness. A bankruptcy court may
also reduce the monthly payments due under a contract or change the rate of
finance charge and time of repayment of the indebtedness.
TRANSFER OF VEHICLES
The receivables prohibit the sale or transfer of a financed vehicle without
the servicer's consent and permit the servicer to accelerate the maturity of the
receivable upon a sale or transfer without the servicer's consent. The servicer
will not consent to a sale or transfer and will require prepayment of the
receivable. Although the servicer, as agent of each owner trustee, may enter
into a transfer of equity agreement with the secondary purchaser for the purpose
of effecting the transfer of the vehicle, the new obligation will not be
included in the pool of receivables.
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SALE OF RECEIVABLES BY GMAC
As described in this prospectus, the transaction of the receivables that
are being sold by GMAC to the seller and from the seller to the trust have been
structured as, and will be treated by the parties as, sales. In 1993, the United
States Court of Appeals for the Tenth Circuit found that accounts sold prior to
a bankruptcy should be treated as property of the bankruptcy estate. In the
event that GMAC or the seller were a debtor in a bankruptcy proceeding and the
bankruptcy court applied this analysis, delays or reductions in receipt of
collections on the receivables to the trust and distributions on the securities
to securityholders could occur.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the material federal income tax consequences of
the purchase, ownership and disposition of the notes and the certificates of any
series, to the extent it relates to matters of law or legal conclusions with
respect thereto, represents the opinion of Tax Counsel to each Tax Trust, Tax
Partnership or Tax Non-Entity with respect to the related series on the material
matters associated with such consequences, subject to the qualifications set
forth in this prospectus and the accompanying prospectus supplement. This
discussion is based upon current provisions of the Internal Revenue Code,
existing and proposed Treasury Regulations thereunder, current administrative
rulings, judicial decisions and other applicable authorities. There are no cases
or Internal Revenue Service rulings on similar transactions involving both debt
and equity interests issued by a trust with terms similar to those of the notes
and the certificates. As a result, there can be no assurance that the IRS will
not challenge the conclusions reached in this prospectus, 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 in this prospectus as well as the tax consequences to
noteholders and certificateholders.
The following discussion does not purport to deal with all aspects of
federal income taxation that may be relevant to the noteholders and
certificateholders in light of their personal investment circumstances nor,
except for limited discussions of particular topics, to holders subject to
special treatment under the federal income tax laws, e.g., financial
institutions, broker-dealers, life insurance companies and tax-exempt
organizations. This information is directed to prospective purchasers who
purchase notes or certificates in the initial distribution thereof, who are
citizens or residents of the United States, including domestic corporations and
partnerships, and who hold the notes or certificates as "capital assets" within
the meaning of Section 1221 of the Internal Revenue Code. WE SUGGEST THAT
PROSPECTIVE INVESTORS CONSULT WITH THEIR TAX ADVISORS AS TO THE FEDERAL, STATE,
LOCAL, FOREIGN AND ANY OTHER TAX CONSIDERATIONS TO THEM OF THE PURCHASE,
OWNERSHIP AND DISPOSITION OF NOTES OR CERTIFICATES.
The following discussion addresses notes and certificates falling into four
general categories:
(1) notes other than Strip Notes or any other series of notes
specifically identified as receiving different tax treatment in the
accompanying prospectus supplement, which the seller, the servicer and the
noteholders will agree to treat as indebtedness secured by the receivables,
45
(2) certificates representing interests in a trust which the seller,
the servicer and the applicable certificateholders will agree to treat as
equity interests in a grantor trust,
(3) certificates including Strip Certificates -- and Strip Notes,
representing interests in a trust which the seller, the servicer and the
applicable holders will agree to treat as equity interests in a
partnership, and
(4) certificates, all of which are owned by the seller, representing
interests in a trust which the seller and the servicer will agree to treat
as a division of the seller and hence disregarded as a separate entity, in
each case for purposes of federal, state and local income and franchise
taxes.
The prospectus supplement for each series of certificates will indicate
whether the associated trust is a Tax Trust, Tax Partnership or Tax Non-Entity.
Because the seller will treat each Tax Trust as a grantor trust, each Tax
Partnership as a partnership, and each Tax Non-Entity as a division of seller,
for federal income tax purposes, the seller will not comply with the tax
reporting requirements that would apply under any alternative characterizations
of a Tax Trust, Tax Partnership or Tax Non-Entity. For purposes of this
discussion, references to a "holder" are to the beneficial owner of a note,
Trust Certificate, Partnership Certificate or Tax Non-Entity Certificate, as the
context may require.
THE NOTES
The following discussion of the material federal income tax consequences of
the purchase, ownership and disposition of the notes of any series regardless of
whether the notes are issued by a Tax Trust, Tax Partnership or Tax Non-Entity,
except for Strip Notes and any other series of notes which is specifically
identified as receiving different tax treatment in the related prospectus
supplement, to the extent it relates to matters of law or legal conclusions with
respect thereto, represents the opinion of Tax Counsel with respect to the
related series of notes on the material matters associated with those
consequences, subject to the qualifications set forth in this prospectus and the
accompanying prospectus supplement. In addition, Tax Counsel has prepared or
reviewed the statements in this prospectus under the heading "Federal Income Tax
Consequences--The Notes," and is of the opinion that such statements are correct
in all material respects. Such statements are intended as an explanatory
discussion of the related tax matters affecting prospective investors generally,
but do not purport to furnish information in the level of detail or with the
attention to a prospective investor's specific tax circumstances that would be
provided by a prospective investor's own tax advisor.
Characterization as Debt. For each series of notes, except for Strip Notes
and any series which is specifically identified as receiving different tax
treatment in the accompanying prospectus supplement, regardless of whether the
notes are issued by a Tax Trust or a Tax Partnership or a Tax Non-Entity, prior
to the sale of each series of notes, Tax Counsel will deliver its opinion to the
effect that the notes will be treated as debt for federal income tax purposes.
The seller, the servicer and each noteholder, by acquiring an interest in a
note, will agree to treat the notes as indebtedness for federal, state and local
income and franchise tax purposes. See "Trust Certificates--Classification of
Trusts and Trust Certificates", "Partnership Certificates--Classification of
Partnerships and Partnership Certificates" or "Tax Non-Entity
Certificates--Classification of Tax Non-Entity and Tax Non-Entity Certificates"
for a discussion of the potential federal income tax consequences for
noteholders if the IRS were successful in challenging the characterization of a
Tax Trust, a Tax Partnership or a Tax Non-Entity, as applicable, for federal
income tax purposes.
46
Treatment of Stated Interest. Assuming the notes are treated as debt for
federal income tax purposes and are not issued with OID, the stated interest on
a note will be taxable to a noteholder as ordinary income when received or
accrued in accordance with the noteholder's method of tax accounting. Interest
received on a note may constitute "investment income" for purposes of some
limitations of the Internal Revenue Code concerning the deductibility of
investment interest expense.
Original Issue Discount. Except to the extent indicated in the accompanying
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 that excess falls within a statutorily
defined de minimis exception. A note's "stated redemption price at maturity" is
the aggregate of all payments required to be made under the note through
maturity except "qualified stated interest." Qualified stated interest is
generally interest that is unconditionally payable in cash or property, other
than debt instruments of the issuer, at fixed intervals of one year or less
during the entire term of the instrument at 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 on the notes
in advance of the receipt of cash attributable to that income. Even if a note
has OID falling within the de minimis exception, the noteholder must include
that OID in income proportionately as principal payments are made on that note.
A holder of a Short-Term Note which has a fixed maturity date not more than
one year from the issue date of that note will generally not be required to
include OID on the Short-Term Note in income as it accrues, provided the holder
of the note 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 pass-through entities specified in the Internal
Revenue Code, or provided the 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 note is payable
in installments, as principal is paid thereon. A holder of a Short-Term Note
would be required to defer deductions for any interest expense on an obligation
incurred to purchase or carry the note to the extent it exceeds the sum of the
interest income, if any, and OID accrued on the note. However, a holder may
elect to include OID in income as it accrues on all obligations having a
maturity of one year or less held by the holder in that taxable year or
thereafter, in which case the deferral rule of the preceding sentence will not
apply. For purposes of this paragraph, OID accrues on a Short-Term Note on a
ratable, straight-line basis, unless the holder irrevocably elects, under
regulations to be issued by the Treasury Department, to apply a constant
interest method to such obligation, 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"
47
rules of the Internal Revenue Code, and a holder who purchases a note at a
premium will be subject to the bond premium amortization rules of the Internal
Revenue 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 the noteholder in income from the note and decreased by any bond
premium previously amortized and any principal payments previously received by
the noteholder on the note. Any gain or loss will be capital gain or loss if the
note was held as a capital asset, except for gain representing accrued interest
or accrued market discount not previously included in income. Capital gain or
loss will be long-term if the note was held by the holder for more than one year
and otherwise will be short-term. Any capital losses realized generally may be
used by a corporate taxpayer only to offset capital gains, and by an individual
taxpayer only to the extent of capital gains plus $3,000 of other income.
Information Reporting and Backup Withholding. Each Tax Trust, Tax
Partnership and Tax Non-Entity will be required to report annually to the IRS,
and to each 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 which are 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 Tax Trust,
Tax Partnership or Tax Non-Entity, under penalties of perjury, a certificate
containing the holder's name, address, correct federal taxpayer identification
number and a statement that the holder is not subject to backup withholding. If
a nonexempt noteholder fails to provide the required certification, the Tax
Trust, Tax Partnership or Tax Non-Entity will be required to withhold, from
interest otherwise payable to the holder, 31% of that 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.
Because the seller will treat each Tax Trust as a grantor trust, each Tax
Partnership as a partnership, each Tax Non-Entity as a division of the seller
and all notes, except Strip Notes and any other series of notes specifically
identified as receiving different tax treatment in the accompanying prospectus
supplement, as indebtedness for federal income tax purposes, the seller will not
comply with the tax reporting requirements that would apply under any
alternative characterizations of a Tax Trust, Tax Partnership or Tax Non-Entity.
Tax Consequence to Foreign Noteholders. If interest paid or accrued to a
noteholder who is a Foreign Person is not effectively connected with the conduct
of a trade or business within the United States by the Foreign Person, the
interest generally will be considered "portfolio interest," and generally will
not be subject to United States federal income tax and withholding tax, as long
as the Foreign Person:
(1) is not actually or constructively a "10 percent shareholder" of a
Tax Trust, Tax Partnership or the seller, including a holder of 10 percent
of the applicable outstanding certificates, or a "controlled foreign
corporation" with respect to which the Tax Trust, Tax Partnership or the
seller is a "related person" within the meaning of the Internal Revenue
Code, and
(2) provides an appropriate statement, signed under penalties of
perjury, certifying that the beneficial owner of the note is a Foreign
Person and providing that Foreign
48
Person's name and address. If the information provided in this statement
changes, the Foreign Person must so inform the Tax Trust or Tax Partnership
within 30 days of change.
If the interest were not portfolio interest or if applicable certification
requirements were not satisfied, then it would be subject to United States
federal income and withholding tax at a rate of 30 percent unless reduced or
eliminated pursuant to an applicable tax treaty. The IRS has issued new
regulations governing backup withholding and information reporting requirements.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a note by a Foreign Person will be exempt from United
States federal income and withholding tax, provided that
(1) the gain is not effectively connected with the conduct of a trade
or business in the United States by the Foreign Person, and
(2) in the case of a foreign individual, the Foreign Person is not
present in the United States for 183 days or more in the taxable year.
If the interest, gain or income on a note held by a Foreign Person is
effectively connected with the conduct of a trade or business in the United
States by the Foreign Person, the holder, although exempt from the withholding
tax previously discussed if an appropriate statement is furnished, generally
will be subject to United States Federal income tax on the interest, gain or
income at regular federal income tax rates. In addition, if the Foreign Person
is a foreign corporation, it may be subject to a branch profits tax equal to 30
percent of its "effectively connected earnings and profits" within the meaning
of the Internal Revenue Code for the taxable year, as adjusted for specified
items, unless it qualifies for a lower rate under an applicable tax treaty.
TRUST CERTIFICATES
The following discussion of the material federal income tax consequences of
the purchase, ownership and disposition of the certificates of any series
identified in the accompanying prospectus supplement as Trust Certificates, to
the extent it relates to matters of law or legal conclusions with respect
thereto, represents the opinion of Tax Counsel with respect to the related
series of Trust Certificates on the material matters associated with those
consequences, subject to the qualifications set forth in this prospectus and the
accompanying prospectus supplement. In addition, Tax Counsel has prepared or
reviewed the statements in this prospectus under the heading "Federal Income Tax
Consequences -- Trust Certificates," and is of the opinion that such statements
are correct in all material respects. Such statements are intended as an
explanatory discussion of the related tax matters affecting prospective
investors generally, but do not purport to furnish information in the level of
detail or with the attention to a prospective investor's specific tax
circumstances that would be provided by a prospective investor's own tax
advisor.
Classification of Trusts and Trust Certificates. For each series of
certificates identified in the accompanying prospectus supplement as Trust
Certificates, prior to the sale of each series of Trust Certificates. Tax
Counsel will deliver its opinion to the effect that the Tax Trust will not be
taxable as an association or publicly traded partnership taxable as a
corporation, but will be classified as a grantor trust under Sections 671
through 679 of the Internal Revenue Code. For each series of Trust Certificates,
the seller and the certificateholders will express in the trust agreement and on
the Trust Certificates their intent that, for federal, state and local
49
income and franchise tax purposes, the Trust Certificates will represent an
equity interest in the Tax Trust.
Although Tax Counsel has opined that each Tax Trust will properly be
characterized as a grantor trust for federal income tax purposes, there are no
cases or IRS rulings on similar transactions that opinion is not binding on the
IRS or the courts and no assurance can be given that this characterization would
prevail. If the IRS were to contend successfully that any Tax Trust is not a
grantor trust, the Tax Trust will be classified for federal income tax purposes
as a partnership which is not taxable as a corporation. The income reportable by
the holders of Trust Certificates as partners could differ from the income
reportable by the holders of Trust Certificates as grantors of a grantor trust.
However, it is not expected that differences would be material. If a Tax Trust
were classified for federal income tax purposes as a partnership, the IRS might
contend that it is a "publicly traded partnership" taxable as a corporation. If
the IRS were to contend successfully that a Tax Trust is an association taxable
as a corporation for federal income tax purposes, such Tax Trust would be
subject to federal and state income tax at corporate rates on the income from
the receivables, reduced by deductions, including interest on any notes unless
the notes were treated as an equity interest. See "Partnership
Certificates--Classification of Partnerships and Partnership Certificates"
below.
Despite Tax Counsel's opinion that a Tax Trust will be classified as a
grantor trust, the lack of cases or IRS rulings on similar transactions, as
discussed above, permits a variety of alternative characterizations in addition
to the position to be taken that the Trust Certificates represent equity
interests in a grantor trust. For example, because Trust Certificates will have
some features characteristic of debt, the Trust Certificates might be considered
indebtedness of a Tax Trust, the seller or the Issuer. Except as described
above, any such characterization would not result in materially adverse tax
consequences to certificateholders as compared to the consequences from
treatment of Trust Certificates as equity in a trust, described below. The
following discussion assumes that Trust Certificates represent equity interests
in a grantor trust.
Grantor Trust Treatment. As a grantor trust, a Tax Trust will not be
subject to federal income tax. Subject to the discussion below under "Treatment
of Fees or Payment," in Tax Counsel's opinion each certificateholder will be
required to report on its federal income tax return its pro rata share of the
entire income from the receivables and any other property in the Tax Trust for
the period during which it owns a Trust Certificate, including interest or
finance charges earned on the receivables and any gain or loss upon collection
or disposition of the receivables, in accordance with the certificateholder's
method of accounting. A certificateholder using the cash method of accounting
will generally take into account its pro rata share of income as and when
received by the owner trustee. A certificateholder using an accrual method of
accounting will generally take into account its pro rata share of income as it
accrues or is received by the owner trustee, whichever is earlier.
Assuming that the market discount rules do not apply, the portion of each
payment to a certificateholder that is allocable to principal on the receivables
will represent a recovery of capital, which will reduce the tax basis of the
certificateholder's undivided interest in the receivables. In computing its
federal income tax liability, a certificateholder will be entitled to deduct,
consistent with its method of accounting, its pro rata share of interest paid on
any notes, reasonable servicing fees, and other fees paid or incurred by the Tax
Trust. If a certificateholder is an individual, estate or trust, the deduction
for the certificateholder's pro rata share of such fees will be allowed only to
the extent that all of such certificateholder's miscellaneous itemized
deductions, including servicing and other fees, exceed 2% of the
50
certificateholder's adjusted gross income. Because the servicer will not report
to certificateholders the amount of income or deductions attributable to
miscellaneous charges, a certificateholder may effectively underreport its net
taxable income. See "Treatment of Fees or Payments" below for a discussion of
other possible consequences if amounts paid to the servicer exceed reasonable
compensation for services rendered.
Treatment of Fees or Payments. It is expected that income will be reported
to certificateholders on the assumption that the certificateholders own a 100%
interest in all of the principal and interest derived from the receivables.
However, a portion of the amounts paid to the servicer or the seller may exceed
reasonable fees for services. There are no authoritative guidelines, for federal
income tax purposes, as to the maximum amount of compensation that may be
considered reasonable for servicing the receivables or performing other
services, in the context of this or similar transactions; accordingly, Tax
Counsel is unable to give an opinion on this issue. If amounts paid to the
servicer or the seller exceed reasonable compensation for services provided, the
servicer or the seller or both may be viewed as having retained, for federal
income tax purposes, an ownership interest in a portion of each interest payment
or certain receivables. As a result, such receivables may be treated as
"stripped bonds" within the meaning of the Internal Revenue Code.
To the extent that the receivables are characterized as "stripped bonds,"
the income of the Tax Trust allocable to certificateholders would not include
the portion of the interest on the receivables treated as having been retained
by the servicer or the seller, as the case may be, and the Tax Trust's
deductions would be limited to reasonable servicing fees, interest paid on any
notes and other fees. In addition, a certificateholder would not be subject to
the market discount and premium rules discussed below with respect to the
stripped receivables, but instead would be subject to the OID rules of the
Internal Revenue Code. However, if the price at which a certificateholder were
deemed to have acquired a stripped receivable is less than the remaining
principal balance of the receivable by an amount which is less than a
statutorily defined de minimis amount, the receivable would not be treated as
having OID. In general, it appears that the amount of OID on a receivable
treated as a "stripped bond" will be de minimis if it is less than 1/4 of 1% for
each full year remaining after the purchase date until the final maturity of the
receivable, although the IRS could take the position that the weighted average
maturity date, rather than the final maturity date, should be used in performing
this calculation. If the amount of OID was de minimis under this rule, the
actual amount of discount on a receivable would be includible in income as
principal payments are received on the receivable.
If the OID on a receivable were not treated as de minimis, a
certificateholder would be required to include any OID in income as it accrues,
regardless of when cash payments are received, using a method reflecting a
constant yield on the receivables. It is possible that the IRS could assert that
a prepayment assumption should be used in computing the yield of a stripped
receivable. If a stripped receivable is deemed to be acquired by a
certificateholder at a significant discount, the use of a prepayment assumption
could accelerate the accrual of income by a certificateholder.
It is also possible that any fees deemed to be excessive could be
recharacterized as deferred purchase price payable to the seller by
certificateholders in exchange for the receivables. The likely effect of such
recharacterization would be to increase current taxable income to a
certificateholder.
Discount And Premium. The following discussion generally assumes that the
fees and other amounts payable to the servicer and the seller will not be
recharacterized as being
51
retained ownership interests in the receivables, as discussed above. A purchaser
of a Trust Certificate should be treated as purchasing an interest in each
receivable and any other property in the Tax Trust at a price determined by
allocating the purchase price paid for the Trust Certificate among the
receivables and other property in proportion to their fair market values at the
time of purchase of the Trust Certificate.
It is believed that the receivables were not and will not be issued with
OID; therefore, a Tax Trust should not have OID income. However, the purchase
price paid by the Tax Trust for the receivables may be greater or less than the
remaining principal balance of the receivables at the time of purchase. If so,
the receivables will have been acquired at a premium or market discount, as the
case may be. The market discount on a receivable will be considered to be zero
if it is less than the statutorily defined de minimis amount.
Any gain on the sale of a Trust Certificate attributable to the holder's
share of unrecognized accrued market discount on the receivables would generally
be treated as ordinary income to the holder. Moreover, a holder who acquires a
Trust Certificate representing an interest in receivables acquired at a market
discount may be required to defer a portion of any interest expense otherwise
deductible on indebtedness incurred or maintained to purchase or carry the Trust
Certificate until the holder disposes of the Trust Certificate in a taxable
transaction. Instead of recognizing market discount, if any, upon a disposition
of Trust Certificates and deferring any applicable interest expense, a holder
may elect to include market discount in income currently as the discount
accrues. The current inclusion election, once made, applies to all market
discount obligations acquired on or after the first day of the first taxable
year to which the election applies, and may not be revoked without the consent
of the IRS.
In the event that a receivable is treated as purchased at a premium, that
is, the allocable portion of the certificateholder's purchase price for the
Trust Certificate exceeds the remaining principal balance of the receivable, the
premium will be amortizable by a certificateholder as an offset to interest
income, with a corresponding reduction in basis, under a constant yield method
over the term of the receivable if the certificateholder makes an election. Any
such election will apply to all debt instruments held by the certificateholder
during the year in which the election is made and to all debt instruments
acquired thereafter.
Disposition of Trust Certificates. Generally, capital gain or loss will be
recognized on a sale of Trust Certificates in an amount equal to the difference
between the amount realized and the seller's tax basis in the Trust Certificates
sold. A certificateholder's tax basis in a Trust Certificate will generally
equal his cost increased by any OID and market discount previously included in
income, and decreased by any bond premium previously amortized and by the amount
of principal payments previously received on the receivables held by the Tax
Trust. Any gain on the sale of a Trust Certificate attributable to the holder's
share of unrecognized accrued market discount on the receivables would generally
be treated as ordinary income to the certificateholder, unless the
certificateholder makes the special election described under "Discount and
Premium" above.
If a certificateholder is required to recognize an aggregate amount of
income, not including income attributable to disallowed itemized deductions
described above, over the life of the Trust Certificates that exceeds the
aggregate cash distributions, that excess will generally give rise to a capital
loss upon the retirement of the Trust Certificates.
Backup Withholding. Distributions made on Trust Certificates and proceeds
from the sale of the certificates will be subject to a "backup" withholding tax
of 31% if, as discussed
52
above in connection with the notes, the certificateholder fails to comply with
identification procedures, unless the holder is an exempt recipient under
applicable provisions of the Internal Revenue Code.
Tax Consequences to Foreign Trust Certificateholders. Interest attributable
to receivables which is received by a certificateholder which is a Foreign
Person will generally not be subject to the normal 30% withholding tax imposed
on those payments, provided that such certificateholder is not engaged in a
trade or business in the United States and that such certificateholder fulfills
the certification requirements discussed above under "The Notes--Tax
Consequences to Foreign Noteholders."
PARTNERSHIP CERTIFICATES
The following discussion of the material federal income tax consequences of
the purchase, ownership and disposition of the certificates of any series
identified in the accompanying prospectus supplement as Partnership
Certificates, to the extent it relates to matters of law or legal conclusions
with respect thereto, represents the opinion of Tax Counsel with respect to the
related series of Partnership Certificates on the material matters associated
with those consequences, subject to the qualifications set forth in this
prospectus and the accompanying prospectus supplement. In addition, Tax Counsel
has prepared or reviewed the statements in this prospectus under the heading
"Federal Income Tax Consequences--Partnership Certificates," and is of the
opinion that such statements are correct in all material respects. Such
statements are intended as an explanatory discussion of the related tax matters
affecting prospective investors generally, but do not purport to furnish
information in the level of detail or with the attention to a prospective
investor's specific tax circumstances that would be provided by a prospective
investor's own tax advisor.
Classification of Partnerships and Partnership Certificates. For each
series of certificates identified in the accompanying prospectus supplement as
Partnership Certificates, the seller and the servicer will agree, and the
certificateholders will agree by their purchase of the Partnership Certificates,
to treat the Tax Partnership as a partnership for purposes of federal, state and
local income and franchise tax purposes, with the partners of the Partnership
being the certificateholders and the seller, in its capacity as recipient of
distributions from the reserve account, and any notes being debt of such Tax
Partnership. However, the proper characterization of the arrangement involving
the Tax Partnership, the Partnership Certificates, the seller and the servicer
is not clear because there is no authority on transactions closely comparable to
that contemplated in this prospectus and accompanying prospectus supplement.
If the Tax Partnership were classified as an association taxable as a
corporation for federal income tax purposes, the Tax Partnership would be
subject to corporate income tax. Any corporate income tax could materially
reduce or eliminate cash that would otherwise be distributable on the
Partnership Certificates and certificateholders could be liable for any the tax
that is unpaid by the Tax Partnership. However, prior to the sale of each series
of Partnership Certificates, Tax Counsel will deliver its opinion that the Tax
Partnership will not be classified as an association taxable as a corporation.
Even if a Tax Partnership were not classified as an association taxable as
a corporation, it would be subject to corporate income tax if it were a
"publicly traded partnership" taxable as a corporation. However, in the opinion
of Tax Counsel, even if the Tax Partnership were treated as a publicly traded
partnership, it would not be taxable as a corporation because it would meet
qualifying income tests. Nonetheless, if a Tax Partnership were treated as a
53
publicly traded partnership and the Partnership Certificates were treated as
equity interests in such a partnership, some holders could suffer adverse
consequences. For example, some holders might be subject to limitations on their
ability to deduct their share of the Tax Partnership's expenses.
Despite Tax Counsel's opinion that a Tax Partnership will be classified as
a partnership and not as an association or publicly traded partnership taxable
as a corporation, the lack of cases or rulings on similar transactions, as
discussed above, permits a variety of alternative characterizations in addition
to the position to be taken that the Partnership Certificates represent equity
interests in a partnership. For example, because the Partnership Certificates
will have some features characteristic of debt, the Partnership Certificates
might be considered indebtedness of the Tax Partnership, the seller or the
Issuer. However, in Tax Counsel's opinion, any such characterization would not
result in materially adverse tax consequences to certificateholders as compared
to the consequences from treatment of the Partnership Certificates as equity in
a partnership, described below. Indeed, classification of the certificates as
indebtedness would result in favorable tax consequences to certain holders,
particularly foreign persons. Nonetheless, because Tax Counsel believes that it
is more likely that Partnership Certificates will be treated as equity in
partnership, and the parties will treat the certificates as representing
partnership equity, the following discussion assumes that the Partnership
Certificates represent equity interests in a partnership.
Partnership Taxation. A Tax Partnership will not be subject to federal
income tax, but each certificateholder will be required to separately take into
account such holder's allocated share of income, gains, losses, deductions and
credits of the Tax Partnership. The Tax Partnership's income will consist
primarily of interest and finance charges earned on the receivables, including
appropriate adjustments for market discount, OID, and bond premium, and any gain
upon collection or disposition of the receivables. The Tax Partnership's
deductions will consist primarily of interest paid or accrued on any notes,
servicing and other fees, and losses or deductions upon collection or
disposition of the receivables.
The tax items of a partnership are allocable to the partners in accordance
with the Internal Revenue Code, Treasury Regulations and the partnership
agreement and, for any series of Partnership Certificates, the trust agreement
and related documents. Each trust agreement for a Tax Partnership will provide
that the certificateholders will be allocated taxable income of the Tax
Partnership for each month equal to their allocable share of the sum of:
(1) the Pass Through Rate on the Partnership Certificates for such
month;
(2) an amount equivalent to interest that accrues during that month on
amounts previously due on such Partnership Certificates but not yet
distributed;
(3) any Tax Partnership income attributable to discount on the
receivables that corresponds to any excess of the principal amount of the
Partnership Certificates over their initial issue price; and
(4) any Prepayment Surplus payable to the Partnership Certificates for
that month.
In addition, each trust agreement for a Tax Partnership will provide that
the certificateholders will be allocated their allocable share for each month of
the entire amount of interest expense paid by the Tax Partnership on any notes.
If the Tax Partnership issues any Strip Notes or Strip Certificates, it will
also provide that the certificateholders will be allocated taxable income of
such Tax Partnership for each month in the amounts described in the
54
accompanying prospectus supplement. All taxable income of the Tax Partnership
remaining after the allocations to the certificateholders will be allocated to
the seller. It is believed that the allocations to certificateholders will be
valid under applicable Treasury Regulations, although no assurance can be given
that the IRS would not require a greater amount of income to be allocated to
certificateholders. Moreover, even under the foregoing method of allocation,
certificateholders may be allocated income equal to the entire Pass Through Rate
plus the other items described above, and holders of Strip Notes or Strip
Certificates may be allocated income equal to the amount described in the
accompanying prospectus supplement, even though the Tax Partnership might not
have sufficient cash to make current cash distributions of such amount. Thus,
cash basis holders will in effect be required to report income from the
Partnership Certificates on the accrual method. In addition, because tax
allocations and tax reporting will be done on a uniform basis for all
certificateholders but certificateholders may be purchasing Partnership
Certificates at different times and at different prices, certificateholders may
be required to report on their tax returns taxable income that is greater or
less than the amount reported to them by the Tax Partnership.
Additionally, all of the taxable income allocated to a certificateholder
that is a pension, profit sharing or employee benefit plan or other tax-exempt
entity, including an individual retirement account, will constitute "unrelated
business taxable income" generally taxable to such a holder under the Internal
Revenue Code.
An individual taxpayer may generally deduct miscellaneous itemized
deductions, which do not include interest expense, only to the extent they
exceed two percent of adjusted gross income, and, additional limitations may
apply. Those limitations would apply to an individual certificateholder's share
of expenses of a Tax Partnership, including fees to the servicer, and might
result in the holder being taxed on an amount of income that exceeds the amount
of cash actually distributed to such holder over the life of such Tax
Partnership.
Each Tax Partnership intends to make all tax calculations relating to
income and allocations to certificateholders on an aggregate basis. If the IRS
were to require that calculations be made separately for each receivable, a Tax
Partnership might be required to incur additional expense but it is believed
that there would not be a material adverse effect on certificateholders.
Discount and Premium. It is believed that the receivables were not and will
not be issued with OID and, therefore, that a Tax Partnership should not have
OID income. However, the purchase price paid by the Tax Partnership for the
receivables may be greater or less than the remaining principal balance of the
receivables at the time of purchase. If so, the receivables will have been
acquired at a premium or market discount, as the case may be. As indicated
above, each Tax Partnership will make this calculation on an aggregate basis,
but might be required to recompute it on a receivable by receivable basis.
Each Tax Partnership will make an election that will result in any market
discount on the receivables being included in income currently as such discount
accrues over the life of the receivables. As indicated above, a portion of the
market discount income will be allocated to certificateholders.
Section 708 Termination. Under Section 708 of the Internal Revenue Code, a
Tax Partnership will be deemed to terminate for federal income tax purposes if
50% or more of the capital and profits interests in such Tax Partnership are
sold or exchanged within a 12-month period. If a termination occurs, a Tax
Partnership will be considered to contribute all of its assets to a new
partnership followed by a liquidation of the original Tax Partnership. A Tax
55
Partnership will not comply with the technical requirements that might apply
when such a constructive termination occurs. As a result, the Tax Partnership
may be subject to tax penalties and may incur additional expenses if it is
required to comply with those requirements. Furthermore, a Tax Partnership might
not be able to comply due to lack of data.
Disposition of Certificates. Generally, capital gain or loss will be
recognized on a sale of Partnership Certificates in an amount equal to the
difference between the amount realized and the seller's tax basis in the
Partnership Certificates sold. A certificateholder's tax basis in a Partnership
Certificate will generally equal his cost increased by his share of the Tax
Partnership's income, includible in his income, for the current and prior
taxable years and decreased by any distributions received on such Partnership
Certificate. In addition, both tax basis in the Partnership Certificates and the
amount realized on a sale of a Partnership Certificate would include the
holder's share of any notes and other liabilities of the Tax Partnership. A
holder acquiring Partnership Certificates of the same series at different prices
may be required to maintain a single aggregate adjusted tax basis in the
Partnership Certificates, and, upon a sale or other disposition of some of the
Partnership Certificates, allocate a pro rata portion of the aggregate tax basis
to the Partnership Certificates sold, rather than maintaining a separate tax
basis in each Partnership Certificate for purposes of computing gain or loss on
a sale of that Partnership Certificate.
If a certificateholder is required to recognize an aggregate amount of
income not including income attributable to disallowed itemized deductions
described above over the life of the Partnership Certificates that exceeds the
aggregate cash distributions on the Partnership Certificates, that excess will
generally give rise to a capital loss upon the retirement of the Partnership
Certificates.
Allocations Between Transferors and Transferees. In general, each Tax
Partnership's taxable income and losses will be determined monthly and the tax
items for a particular calendar month will be apportioned among the
certificateholders in proportion to the principal amount of the Partnership
Certificates or a fractional share of the Strip Notes or Strip Certificates
owned by them as of the first record date following the end of the month. As a
result, a holder purchasing Partnership Certificates may be allocated tax items,
which will affect its tax liability and tax basis, attributable to periods
before its actual purchase.
The use of a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed or only applies to transfers
of less than all of the partner's interest, taxable income or losses of a Tax
Partnership might be reallocated among the certificateholders. The owner trustee
is authorized to revise a Tax Partnership's method of allocation between
transferors and transferees to conform to a method permitted by future
regulations.
Section 754 Election. In the event that a certificateholder sells its
Partnership Certificate for greater or less than its adjusted basis therefor,
the purchasing certificateholder will have a higher or lower basis, as the case
may be, in the Partnership Certificates than the selling certificateholder had.
The tax basis of the Tax Partnership's assets will not be adjusted to reflect
that higher or lower basis unless the Tax Partnership were to file an election
under Section 754 of the Internal Revenue Code. In order to avoid the
administrative complexities that would be involved in keeping accurate
accounting records, as well as potentially onerous information reporting
requirements, a Tax Partnership will not make such an election. As a result,
certificateholders might be allocated a greater or lesser amount of Tax
Partnership income than would be based on their own purchase price for
Partnership Certificates.
56
Administrative Matters. For each Tax Partnership, the owner trustee is
required to maintain complete and accurate books of such Tax Partnership. Such
books will be maintained for financial reporting and tax purposes on an accrual
basis and the fiscal year of each Tax Partnership will be the calendar year. The
owner trustee will file a partnership information return, IRS Form 1065, with
the IRS for each taxable year of the Tax Partnership and will report each
certificateholder's allocable share of items of Tax Partnership income and
expense to holders and the IRS on Schedule K-1. Any person that holds
Partnership Certificates as a nominee at any time during a calendar year is
required to furnish the Tax Partnership with a statement containing information
on the nominee, the beneficial owners and the Partnership Certificates so held.
Each Tax Partnership will provide the Schedule K-1 information to nominees that
fail to provide the Tax Partnership with the information referenced in the
preceding sentence and such nominees will be required to forward such
information to the beneficial owners of the Partnership Certificates. Generally,
holders must file tax returns that are consistent with the information return
filed by the Tax Partnership or be subject to penalties unless the holder
notifies the IRS of all such inconsistencies.
The seller, as the tax matters partner for each Tax Partnership, will be
responsible for representing the certificateholders in any dispute with the IRS.
The Internal Revenue Code provides for administrative examination of a
partnership as if the partnership were a separate taxpayer. Generally, the
statute of limitations for partnership items does not expire until three years
after the date on which the partnership information return is filed or deemed
filed. Any adverse determination following an audit of the return of a Tax
Partnership by the appropriate taxing authorities could result in an adjustment
of the returns of the certificateholders and, under some circumstances, a
certificateholder may be precluded from separately litigating a proposed
adjustment to the items of the Tax Partnership. An adjustment could result in an
audit of a certificateholder's returns and adjustments of items not related to
the income and losses of the Tax Partnership.
Tax Consequences to Foreign Certificateholders. It is not clear whether any
Tax Partnership would be considered to be engaged in a trade or business in the
United States for purposes of federal withholding taxes with respect to
non-United States persons because there is no clear authority on that issue
under facts substantially similar to those described in this prospectus and the
accompanying prospectus supplement. Although it is not expected that any Tax
Partnership would be engaged in a trade or business in the United States for
those purposes, each Tax Partnership will withhold as if it were so engaged in
order to protect the Tax Partnership from possible adverse consequences of a
failure to withhold. It is expected that each Tax Partnership will withhold on
the portion of its taxable income that is allocable to foreign
certificateholders as if such income were effectively connected to a United
States trade or business, at a rate of 35% for foreign holders that are taxable
as corporations and 39.6% for all other foreign holders. In determining a
holder's nonforeign status, a Tax Partnership may generally rely on the holder's
certification of nonforeign status signed under penalties of perjury.
Each foreign holder might be required to file a United States individual or
corporate income tax return and pay tax, including, in the case of a
corporation, the branch profits tax, on its share of the Tax Partnership's
income. Each foreign holder must obtain a taxpayer identification number from
the IRS and submit that number to the Tax Partnership on Form W-8 in order to
assure appropriate crediting of the taxes withheld. A foreign holder generally
would be entitled to file with the IRS a claim for refund for taxes withheld by
the Tax Partnership, taking the position that no taxes were due because the Tax
Partnership was
57
not engaged in a U.S. trade or business. However, the IRS may assert that the
tax liability should be based on gross income, and no assurance can be given as
to the appropriate amount of tax liability.
Backup Withholding. Distributions made on any Partnership Certificates and
proceeds from the sale of such Partnership Certificates will be subject to a
"backup" withholding tax of 31% if, as discussed above in connection with the
notes, the certificateholder fails to comply with identification procedures,
unless the holder is an exempt recipient under applicable provisions of the
Internal Revenue Code.
TAX NON-ENTITY CERTIFICATES
Classification of Tax Non-Entity and Tax Non-Entity Certificates. For each
series of certificates identified in the accompanying prospectus supplement as
Tax Non-Entity Certificates and which are entirely owned by the seller, the
seller and the servicer will agree, pursuant to the "check-the-box" Treasury
Regulations, to treat the Tax Non-Entity as a division of the seller, and hence
a disregarded entity, for federal income tax purposes. In other words, for
federal income tax purposes, the seller will be treated as the owner of all the
assets of the Tax Non-Entity and the obligor of all the liabilities of the Tax
Non-Entity. Under the "check-the-box" Treasury Regulations, unless it is treated
as a Tax Trust for federal income tax purposes, an unincorporated domestic
entity with more than one equity owner is automatically classified as a Tax
Partnership for federal income tax purposes. If the trust is classified as a Tax
Non-Entity when all its equity interests are wholly-owned by the seller and if
certificates are then sold or issued in any manner which results in there being
more than one certificateholder, the trust will be treated as a Tax Partnership.
If certificates are issued to more than one person, the seller and the
servicer will agree, and the certificateholders will agree by their purchase, to
treat the trust as a Tax Partnership for purposes of federal, state and local
income and franchise tax purposes, with the partners of such partnership being
the certificateholders, including the seller, and the notes being debt of such
partnership.
Risks of Alternative Characterization. If a Tax Non-Entity were an
association or a "publicly traded partnership" taxable as a corporation for
federal income tax purposes, it would be subject to corporate income tax as
discussed above under "Partnership Certificates--Classification of Partnerships
and Partnership Certificates."
STATE AND LOCAL TAX CONSEQUENCES
The above discussion does not address the tax treatment of any Tax Trust,
Tax Partnership, Tax Non-Entity, notes, certificates, noteholders or
certificateholders under any state or local tax laws. The activities to be
undertaken by the servicer in servicing and collecting the receivables will take
place throughout the United States and, therefore, many different tax regimes
potentially apply to different portions of these transactions. Prospective
investors are urged to consult with their tax advisors regarding the state and
local tax treatment of any Tax Trust, Tax Partnership or Tax Non-Entity as well
as any state and local tax consequences for them of purchasing, holding and
disposing of notes or certificates.
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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 specified types of Keogh Plans and collective investment funds or
insurance company general or separate accounts in which these plans and accounts
are invested (we refer to each of these as a "benefit plan") from engaging in
specified transactions with persons that are "parties in interest" under ERISA
or "disqualified persons" under the Code with respect to that 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 these persons. The
acquisition or holding of securities by a benefit plan could be considered to
give rise to a prohibited transaction if the seller, the servicer, the related
trust or any of their respective affiliates is or becomes a party in interest or
a disqualified person with respect to that benefit plan. Employee benefit plans
that are governmental plans as defined in Section 3(32) of ERISA and specified
church plans as defined in Section 3(33) of ERISA are not subject to ERISA
requirements.
EXEMPTION APPLICABLE TO DEBT INSTRUMENTS
Transactions involving the trust might be deemed to constitute prohibited
transactions under ERISA and the Code with respect to a benefit plan that
purchased securities if assets of the trust were deemed to be assets of the
benefit plan. Under a regulation issued by the U.S. Department of Labor (the
"plan asset 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 applied. An equity interest
is defined under the plan assets regulation as an interest other than an
instrument that is treated as indebtedness under applicable local law and that
has no substantial equity features. It is likely that the certificates will be
treated as an equity interest for these purposes. For additional information
regarding the equity or debt treatment of notes, see "ERISA Considerations" in
the prospectus supplement. Subject to the restrictions in the following
paragraph, notes that are debt instruments will be available for purchase by
benefit plans.
Without regard to whether the notes are treated as debt under the plan
asset regulation, the acquisition or holding of notes by or on behalf of a
benefit plan could be considered to give rise to a prohibited transaction if the
servicer, the seller, the trust or any of our respective affiliates is or
becomes a party in interest or a disqualified person with respect to that
benefit plan. Exemptions from the prohibited transaction rules could apply to
the purchase and holding of the notes by a benefit plan depending on the type
and circumstances of the plan fiduciary making the decision to acquire the
notes. These exemptions include: Prohibited Transaction Class Exemption 96-23,
regarding transactions effected by "in-house asset managers"; PTCE 95-60,
regarding investments by insurance company general accounts; PTCE 91-38,
regarding investments by bank collective investment funds; PTCE 90-1, regarding
investments by insurance company pooled separate accounts; and PTCE 84-14,
regarding transactions effected by "qualified professional asset managers."
We suggest that a fiduciary considering the purchase of notes on behalf of
a benefit plan consult with its ERISA advisors and refer to the prospectus
supplement regarding whether the assets of the trust would be considered plan
assets, the possibility of exemptive relief from the prohibited transaction
rules and other issues and their potential consequences.
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UNDERWRITER EXEMPTION
Both notes and certificates may be eligible for relief from prohibited
transaction rules of ERISA and the plan assets regulation in reliance on
administrative exemptions granted by the Department of Labor to specified
underwriters. The underwriter's exemption provides relief with respect to the
initial purchase, holding and subsequent resale by benefit plans of pass-
through securities or securities denominated as debt instruments that represent
interests in an investment pool for which the underwriter is the sole
underwriter or the co-manager of an underwriting syndicate and that consist of
specified secured receivables, loans and other obligations that meet the
conditions and requirements of the underwriter's exemption. The receivables
covered by the underwriter's exemption include motor vehicle leases such as
those securing the secured notes that secure the notes and certificates offered
by this prospectus. The exemption defines a qualified motor vehicle lease as a
motor vehicle lease where (a) the issuer owns or holds a security interest in
the lease, (b) the issuer owns or holds a security interest in the leased motor
vehicle and (c) the issuer's security interest in the leased motor vehicle is at
least as protective of the issuer's rights as the issuer would receive under a
motor vehicle installment contract.
The underwriter's exemption will apply only if specific conditions are met.
Among the conditions that must be satisfied for the underwriter's exemption to
apply to the acquisition of the notes or certificates by a benefit plan are the
following:
(1) The acquisition of notes or certificates by a benefit plan is on
terms, including the price, that are at least as favorable to the benefit
plan as they would be in an arm's-length transaction with an unrelated
party;
(2) The notes or certificates acquired by the benefit plan have
received a rating at the time of such acquisition that is in one of the
four highest generic rating categories from S&P, Moody's or Fitch, Inc.;
(3) The sum of all payments made to the underwriter in connection with
the distribution of the notes or certificates represents not more than
reasonable compensation for underwriting the notes or certificates. The sum
of all payments made to and retained by us pursuant to the sale of the
receivables to the trust represents not more than the fair market value of
the receivables. The sum of all payments made to and retained by the
servicer represents not more than reasonable compensation for the
servicer's services as servicer under the related agreements and
reimbursement of the servicer's reasonable expenses in connection with
these services;
(4) The trustee is a substantial financial institution and is not an
"affiliate," as defined in the exemption, of any other member of the
"restricted group," which consists of the underwriter, the trustee, the
seller, the servicer, any subservicer, any obligor with respect to motor
vehicle installment obligations constituting more than 5% of the aggregate
unamortized principal balance of the assets of the trust as of the date of
initial issuance of the notes or certificates and any affiliate of these
parties;
(5) The benefit plan investing in the notes or certificates is an
"accredited investor" as defined in Rule 501(a)(1) of Regulation D of the
SEC under the Securities Act; and
(6) The trust satisfies the following requirements:
(a) the corpus of the trust consists solely of assets of the type
which have been included in other investment pools,
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(b) securities in these other investment pools have been rated in
one of the four highest generic rating categories of one of the rating
agencies specified above for at least one year prior to the benefit
plan's acquisition of the notes or certificates, and
(c) securities evidencing interests in these other investment pools
have been purchased by investors other than benefit plans for at least
one year prior to any benefit plan's acquisition of the notes or
certificates.
(7) The legal document establishing the trust contains restrictions
necessary to ensure that the assets of the trust may not be reached by
creditors of the seller in the event of its bankruptcy or insolvency, the
transfer and servicing agreement prohibits all parties from filing an
involuntary bankruptcy or insolvency petition against the trust and a true
sale opinion is issued in connection with the transfer of assets to the
trust.
Some transactions are not covered by the underwriter's exemption or any
other exemption. The underwriter's exemption does not exempt the acquisition and
holding of securities by benefit plans sponsored by the seller, the
underwriters, the owner trustee, the servicer or any "obligor" (as defined in
the exemption) with respect to receivables included in the trust constituting
more than 5% of the aggregate unamortized principal balance of the assets in the
restricted group. Moreover, the exemptive relief from the
self-dealing/conflict-of-interest prohibited transaction rules of ERISA is
available for other benefit plans only if, among other requirements:
- a benefit plan's investment in the notes or certificates does not exceed
25% of all of the notes or certificates outstanding at the time of the
acquisition;
- immediately after the acquisition, no more than 25% of the assets of a
benefit plan with respect to which the person who has discretionary
authority to render investment advice are invested in securities
representing an interest in a trust containing assets sold or serviced by
the same entity; and
- in the case of the acquisition of notes or certificates in connection
with their initial issuance, at least 50% of such securities are acquired
by persons independent of the restricted group and at least 50% of the
aggregate interest in the related trust is acquired by persons
independent of the restricted group.
The underwriter's exemption will also apply to transactions in connection
with the servicing, management and operation of the trust, provided that, in
addition to the general requirements described above, (a) these transactions are
carried out in accordance with the terms of a binding pooling and servicing
agreement and (b) the pooling and servicing agreement is provided to, or
described in all material respects in the prospectus provided to, investing
benefit plans before the plans purchase the notes or certificates issued by the
trust. All transactions relating to the servicing, management and operations of
the trust will be carried out in accordance with the trust agreement, indenture
and transfer and servicing agreements, which will be described in all material
respects in this prospectus and the prospectus supplement.
Each prospective purchaser of notes or certificates in reliance on the
underwriter's exemption should consider the possibility that the rating of a
note or certificate may change during the period that note or certificate is
held. If the rating were to decline below BBB-, the note or certificate could no
longer be transferred to a plan in reliance on the exemption.
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For more information, including whether an underwriter's exemption is
likely to provide relief for a particular class of notes or certificates, see
"ERISA Considerations" in the prospectus supplement. If you are a benefit plan
fiduciary considering the purchase of the notes or certificates, you should
consult with your counsel with respect to whether the trust will be deemed to
hold plan assets and the applicability of an underwriter's exemption or another
exemption from the prohibited transaction rules and determine on your own
whether all conditions have been satisfied and whether the notes or certificates
are an appropriate investment for a benefit plan under ERISA and the Code.
PLAN OF DISTRIBUTION
On the terms and conditions set forth in one or more underwriting
agreements for each trust, the seller will agree to sell to each of the
underwriters named in the underwriting agreements and in the accompanying
prospectus supplement, and each of the underwriters will severally agree to
purchase from the seller, the principal amount of each class of securities of
the series set forth in the underwriting agreements and in the accompanying
prospectus supplement.
In each underwriting agreement, the several underwriters will agree,
subject to the terms and conditions set forth in the underwriting agreements, to
purchase all the securities described in the underwriting agreements which are
offered by this prospectus and by the accompanying prospectus supplement if any
of these securities are purchased. In the event of a default by any underwriter,
each underwriting agreement will provide that, in some circumstances, purchase
commitments of the nondefaulting underwriters may be increased or the
underwriting agreement may be terminated.
Each prospectus supplement will either;
(1) set forth the price at which each class of securities being
offered will be offered to the public and any concessions that may be
offered to dealers participating in the offering of these securities or
(2) specify that the securities are to be resold by the underwriters
in negotiated transactions at varying prices to be determined at the time
of the sale.
After the initial public offering of any securities, the public offering
price and the concessions may be changed.
Each underwriting agreement will provide that the seller will indemnify the
underwriters against specified liabilities, including liabilities under the
Securities Act.
The indenture trustee may, from time to time, invest the funds in the
Designated Accounts in Eligible Investments acquired from the underwriters.
Under each underwriting agreement, except as otherwise provided in the
accompanying prospectus supplement, the closing of the sale of any class of
securities subject thereto will be conditioned on the closing of the sale of all
other classes.
The place and time of delivery for the securities in respect of which this
prospectus is delivered will be set forth in the accompanying prospectus
supplement.
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LEGAL OPINIONS
Specified legal matters relating to the notes and the certificates will be
passed upon for each trust, the seller and GMAC by Robert L. Schwartz, General
Counsel of the seller and Assistant General Counsel of GMAC, and by Kirkland &
Ellis, special counsel to the seller, each trust and GMAC. Mr. Schwartz owns
shares of both classes of General Motors common stock and has options to
purchase shares of General Motors common stock, $1 2/3 par value. Specified
federal income tax matters will be passed upon for GMAC, each trust and the
seller by Kirkland & Ellis.
WHERE YOU CAN FIND MORE INFORMATION
We filed a registration statement relating to the securities with the
Securities and Exchange Commission under the Securities Act of 1933, as amended.
This prospectus is part of the registration statement, but the registration
statement includes additional information.
The servicer will file with the SEC all required annual, monthly and
special SEC reports and other information about the trust.
You may read and copy any reports, statements or other information we file
at the SEC's public reference room in Washington, D.C. You can request copies of
these documents, upon payment of a duplicating fee, by writing to the SEC.
Please call the SEC at (800) SEC-0330 for further information on the operation
of the public reference rooms. Our SEC filings are also available to the public
on the SEC Internet site, http://www.sec.gov.
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 not specifically
incorporated by reference, at no cost, by writing us at: General Motors
Acceptance Corporation, 200 Renaissance Center, Detroit, Michigan 48265.
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GLOSSARY OF TERMS TO PROSPECTUS
The following are definitions of terms used in this prospectus. References
to the singular form of defined terms in this prospectus include references to
the plural and vice versa.
"Administrative Purchase Payment" means, for any Administrative Receivable:
(1) in the case of a Scheduled Interest Receivable, a release of all
claims for reimbursement of Scheduled Interest Advances made on the
receivable plus the sum of
(A) all remaining Scheduled Payments on the receivable,
(B) an amount equal to any reimbursements of outstanding Scheduled
Interest Advances made to the servicer on the receivable from the
proceeds of other receivables, and
(C) all past due Scheduled Payments for which a Scheduled Interest
Advance has not been made, less the rebate that would be payable to the
obligor on the receivable were the obligor to prepay the receivable in
full on that day.
(2) in the case of a Simple Interest Receivable, a payment equal to
the Amount Financed less that portion of all payments made on or prior to
the last day of the prior monthly period allocable to principal.
"Administrative Receivable" means a receivable which the servicer is
required to purchase as a result of a breach of a covenant which materially and
adversely affects any receivable held by a trust pursuant to the Pooling and
Servicing Agreement or which the servicer has elected to repurchase pursuant to
the Trust Sale and Servicing Agreement.
"Aggregate Amount Financed" means the aggregate Amount Financed under the
receivables held by a trust as specified in the accompanying prospectus
supplement.
"Aggregate Principal Balance" means for each trust as of any date, the sum
of the Principal Balances of all outstanding receivables, other than Liquidating
Receivables, held by the trust that date.
"Amount Financed" means, for a receivable, the aggregate amount advanced
toward the purchase price of the financed vehicle, including accessories,
insurance premiums, service and warranty contracts and other items customarily
financed as part of retail automobile instalment sale contracts and related
costs less:
(1) (A) in the case of a Scheduled Interest Receivable, payments due
from the obligor prior to the cutoff date allocable to principal and
(B) in the case of a Simple Interest Receivable, payments received
from the obligor prior to the cutoff date allocable to principal; and
(2) any amount allocable to the premium for physical damage insurance
covering the financed vehicle force-placed by GMAC.
"APR" means, for a receivable, the annual percentage rate.
"Basic Servicing Fee Rate" means, for a trust, the Basic Servicing Fee Rate
specified in the accompanying prospectus supplement.
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"Benefit Plan" means a pension, profit-sharing or other employee benefit
plan, and individual retirement accounts and some types of Keogh Plans and some
collective investment funds or insurance company general or separate accounts in
which the plans and accounts are invested.
"Business Day" means any day other than a Saturday, Sunday or any other day
on which banks in New York, New York, Detroit, Michigan or Chicago, Illinois
may, or are required to, remain closed.
"Certificate Distribution Account" means any account so designated and
established and maintained pursuant to the Trust Sale and Servicing Agreement.
"Certificate Pool Factor" means, for each class of Certificates, a
seven-digit decimal which the servicer will compute prior to each distribution
on the certificates indicating the remaining certificate balance as of the close
of that date, as a fraction of the initial certificate balance.
"Collection Account" means any account so designated, and established
pursuant to the Trust Sale and Servicing Agreement.
"Designated Accounts" means the Collection Account, the Note Distribution
Account, and any reserve account and other accounts so identified in the
accompanying prospectus supplement and for which the funds on deposit are
invested in Eligible Investments.
"Distribution Date" means the date or dates specified in the accompanying
prospectus supplement on which the trust makes payments on the notes and the
certificates.
"Eligible Investments" means generally investments (1) which are acceptable
to the rating agencies as being consistent with the rating of the notes and (2)
that mature no later than the business day preceding the next distribution date
or payment date.
"Events of Default" has the meaning, unless otherwise set forth in the
prospectus supplement, set forth in "The Notes--The Indenture--Events of
Default; Rights Upon Events of Default."
"Excess Payment" means, for a Scheduled Interest Receivable, the portion of
a payment on the receivable in excess of the Scheduled Payment thereon which is
not late fees, prepayment charges or other similar fees or charges.
"Excess Simple Interest Collections" means, for a monthly period, the
excess, if any, of (1) all payments received during that monthly period on all
Simple Interest Receivables held by the trust to the extent allocable to
interest over (2) the amount of interest that would be due during that monthly
period on all Simple Interest Receivables held by the trust, assuming that the
payment on each such receivable was received on its respective due date.
"Foreign Person" means a nonresident alien, foreign corporation or other
non-United States person.
"General Motors" means General Motors Corporation.
"Liquidation Proceeds" means, for a Liquidating Receivable, all amounts
realized for that receivable, net of amounts that are required to be refunded to
the obligor on that receivable.
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"Liquidating Receivables" means a receivable as to which the servicer has:
(1) reasonably determined, in accordance with customary servicing
procedures, that eventual payment of amounts owing on that receivable is
unlikely, or
(2) repossessed and disposed of the financed vehicle.
"Monthly Advance" means, for a trust, as of the last day of the monthly
period, either a Scheduled Interest Advance or a Simple Interest Advance, or
both, as applicable, in respect of the prior monthly period.
"Note Distribution Account" means any account so designated and established
and maintained pursuant to the Trust Sale and Servicing Agreement.
"Note Pool Factor" means, for each class of notes, a seven-digit decimal
which the servicer will compute prior to each distribution for the notes
indicating the remaining outstanding principal balance of the notes, as of the
close of the distribution date, as a fraction of the initial outstanding
principal balance of the notes.
"Partnership Certificates" means certificates, including Strip
Certificates, and Strip Notes issued by a Tax Partnership. References to a
holder of these certificates shall be to the beneficial owner thereof.
"Payment Ahead" means, for a Scheduled Interest Receivable, any Excess
Payment, not representing prepayment in full of the receivable, that is of an
amount so that the sum of the Excess Payment, together with any unapplied
Payments Ahead, is equal to or less than three times the Scheduled Payment.
"Payment Ahead Servicing Account" means any account so designated and
maintained pursuant to the Trust Sale and Servicing Agreement.
"Pooling and Servicing Agreement" means, for each trust, the Pooling and
Servicing Agreement dated as of the closing date between GMAC and the seller, as
amended and supplemented from time to time.
"Prepayments" means Excess Payments other than a Payment Ahead.
"Prepayment Surplus" means, on any distribution date on which a Prepayment
is to be applied for a Scheduled Interest Receivable, that portion of the
Prepayment, net of any rebate to the obligor of the portion of the Scheduled
Payments attributable to unearned finance charges, which is not allocable to
principal.
"Principal Balance" means, as of any date for any receivable, the Amount
Financed minus the sum of either:
(1) in the case of a Scheduled Interest Receivable,
(A) that portion of all Scheduled Payments due on or prior to that
date allocable to principal,
(B) that portion of any Warranty Payment or Administrative Purchase
Payment for that receivable allocable to principal and
(C) any Prepayment applied by the servicer to reduce the Principal
Balance of that receivable, or
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(2) in the case of a Simple Interest Receivable,
(A) that portion of all payments received on or prior to that date
allocable to principal and
(B) that portion of any Warranty Payment or Administrative Purchase
Payment for that receivable allocable to principal.
"Related Documents" means the indenture, the Transfer and Servicing
Agreements and other similar and associated documents for a trust.
"Record Date" means, for any distribution date, the close of business on
the date immediately preceding the distribution date, or if definitive
securities are issued, the last day of the preceding monthly period.
"Revolving Period" means the time specified in the accompanying prospectus
supplement during which the trust will reinvest collections in additional
receivables rather than distributing collections to you. The Revolving Period
may not be longer than one year from the date of an issuance of a series of
securities.
"Scheduled Interest Advance" means, for a Scheduled Interest Receivable,
the amount, as of the last day of the monthly period, by which the amount of the
Scheduled Payment exceeds the amount of the Payments Ahead not previously
applied to that receivable and any amounts received by an obligor in respect of
that Scheduled Payment.
"Scheduled Interest Receivables" means receivables pursuant to which the
payments due from the obligors during any month are allocated between finance
charges and principal on a scheduled basis, without regard to the period of time
which has elapsed since the preceding payment was made, using the actuarial
method.
"Scheduled Payment" means, for a Scheduled Interest Receivable, the payment
set forth in that receivable due from the obligor during any month.
"Securities Act" means the Securities Act of 1933, as amended.
"Servicer Default" has the meaning set forth in "The Transfer and Servicing
Agreements--Servicer Defaults."
"Short-Term Note" means a note which has a fixed maturity date not more
than one year from the issue date of that note.
"Simple Interest Advance" means, unless otherwise provided in the
accompanying prospectus supplement, as of the last day of each monthly period,
the amount advanced by the servicer equal to the excess, if any, of
(1) the amount of interest that would be due during that monthly
period on all Simple Interest Receivables held by the trust assuming that
the payment on each receivable was received on its respective due date over
(2) all payments received during that monthly period on all Simple
Interest Receivables held by the trust to the extent allocable to interest.
"Simple Interest Receivables" means receivables which provide for the
allocation of payments between finance charges and principal based on the actual
date on which a payment is received.
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"Strip Certificates" means one or more classes of certificates entitled to
disproportionate, nominal or no distributions of Certificate Balance or
interest.
"Strip Notes" means one or more classes of notes entitled to
disproportionate, nominal or no distributions of principal or interest.
"Tax Counsel" means Kirkland & Ellis, as special tax counsel to the seller.
"Tax Non-Entity" means a trust in which all of the certificates of that
trust which are owned by the seller, and the seller and the servicer agree to
treat the trust as a division of the seller and hence disregarded as a separate
entity for purposes of federal, state and local income and franchise taxes.
"Tax Non-Entity Certificates" means certificates issued by a Tax
Non-Entity. References to a holder of these certificates shall be to the
beneficial owner thereof.
"Tax Partnership" means a trust in which the seller, the servicer and the
applicable holders agree to treat certificates, including Strip Certificates,
and Strip Notes as equity interests in a partnership for purposes of federal,
state and local income and franchise taxes.
"Tax Trust" means a trust in which the seller, the servicer and the
applicable certificateholders agree to treat the certificates of the trust as
equity interests in a grantor trust for purposes of federal, state and local
income and franchise taxes.
"Total Servicing Fee" has the meaning set forth in "The Transfer and
Servicing Agreements--Servicing Compensation and Payment of Expenses."
"Transfer and Servicing Agreements" means, for each trust, the Pooling and
Servicing Agreement, the Trust Sale and Servicing Agreement, the trust agreement
and the administration agreement.
"Trust Certificates" means certificates issued by a Tax Trust. References
to a holder of these certificates shall be to the beneficial owner thereof.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
"Trust Sale and Servicing Agreement" means, for each trust, the Trust Sale
and Servicing Agreement, dated as of the closing date, among the servicer, the
seller and the trust, as amended and supplemented from time to time.
"Warranty Payment" means, for a Warranty Receivable:
(1) in the case of a Scheduled Interest Receivable, the sum of:
(A) all remaining Scheduled Payments on that receivable, plus all
past due Scheduled Payments for which a Scheduled Interest Advance has
not been made, plus all outstanding Scheduled Interest Advances on that
receivable, plus
(B) an amount equal to any reimbursements of outstanding Scheduled
Interest Advances made to the servicer for that such receivable from the
proceeds of other receivables,
minus the sum of:
(A) the rebate that would be payable to the obligor on that
receivable were the obligor to prepay that receivable in full on that
day; and
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(B) any Liquidation Proceeds for that receivable previously
received, to the extent applied to reduce the Principal Balance of that
receivable; or
(2) in the case of a Simple Interest Receivable, the Amount Financed
minus the sum of:
(A) that portion of all payments received on or prior to the last
day of the prior monthly period allocable to principal; and
(B) any Liquidation Proceeds for that receivable, to the extent
applied to reduce the Principal Balance of that receivable.
"Warranty Receivable" means a receivable which must be repurchased by
either the trust or GMAC as a result of a breach of a representation or warranty
for that receivable which materially and adversely affects the interests of any
securityholder in that receivable.
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NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS AND, IF GIVEN OR MADE, THAT INFORMATION OR THOSE
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 BY THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS TO ANYONE IN
ANY JURISDICTION IN WHICH THE PERSON MAKING THAT 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 UNDER THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT INFORMATION IN THOSE
DOCUMENTS IS CORRECT AS OF ANY TIME SINCE THE DATE OF THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS.
------------------
UNTIL , , ALL DEALERS EFFECTING TRANSACTIONS IN
THE NOTES OR THE CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS SUPPLEMENT AND THE
ASSOCIATED PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN
ACTING AS UNDERWRITERS FOR THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
CAPITAL AUTO RECEIVABLES
ASSET TRUST -
ISSUER
$--
ASSET BACKED NOTES
$--
ASSET BACKED CERTIFICATES
CAPITAL AUTO RECEIVABLES, INC.
SELLER
GENERAL MOTORS
ACCEPTANCE CORPORATION
SERVICER
------------------------------------
PROSPECTUS SUPPLEMENT
------------------------------------
UNDERWRITERS
- ------------------------------------------------------
- ------------------------------------------------------
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
VERSION 2
SUBJECT TO COMPLETION, DATED .
PRELIMINARY
GRANTOR TRUST
PROSPECTUS
SUPPLEMENT FORM
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED , 20
GMAC 20 -- GRANTOR TRUST
$______ % Asset Backed Certificates, Class A
CAPITAL AUTO RECEIVABLES, INC.
Seller
GENERAL MOTORS ACCEPTANCE CORPORATION
Servicer
You should consider
carefully the risk factors
beginning on page 5 in the
prospectus.
The certificates represent
the beneficial interest in
the trust only. The
certificates issued by any
trust do not represent
interests in, and are not
guaranteed by, Capital Auto
Receivables, Inc., GMAC, or
any of their affiliates
This prospectus supplement
may be used to offer and
sell any certificates only
if accompanied by the
prospectus.
THE CLASS A CERTIFICATES
The trust is offering the following Class A
Certificates by this prospectus supplement and
the prospectus:
<Table>
<Caption>
% $
Principal amount
Price to public
[plus accrued interest, if any, from
]
Underwriting discount
Proceeds to seller
</Table>
Principal and interest on the Class A
Certificates will be payable on each monthly
distribution date. Interest will begin accruing
on , 20 . The first distribution date
will be , 20 .
CREDIT ENHANCEMENT
- $ in principal amount of Class B
Certificates, which are subordinated to the
Class A Certificates.
- Subordination spread account, with an initial
balance of $ , which will increase to
at least $ .
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE CERTIFICATES OR DETERMINED IF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
[Underwriters]
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We provide information to you about the Class A Certificates in two
separate documents:
(a) the accompanying prospectus, which provides general information,
and
(b) this prospectus supplement, which will describe the specific terms
of your Class A Certificates and the specific meanings that certain terms
will have.
You should rely only on the information provided in this prospectus
supplement and the accompanying prospectus, including the information
incorporated by reference. We have not authorized anyone to provide you with
other or different information. We are not offering the Class A Certificates in
any state where the offer is not permitted.
The following Table of Contents and the Table of Contents in the
accompanying prospectus provide the pages on which these captions are located.
Capitalized terms used in this prospectus supplement are defined under the
caption "Glossary of Terms" which appears at the end of the accompanying
prospectus.
S-2
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
PROSPECTUS SUPPLEMENT
THE CERTIFICATES............................................ S-5
THE RECEIVABLES POOL........................................ S-5
THE SERVICER................................................ S-7
ERISA CONSIDERATIONS........................................ S-8
FEDERAL INCOME TAX CONSEQUENCES............................. S-8
UNDERWRITING................................................ S-9
LEGAL OPINIONS.............................................. S-10
PROSPECTUS
SUMMARY..................................................... 2
RISK FACTORS................................................ 5
THE TRUSTS.................................................. 8
THE RECEIVABLES POOLS....................................... 9
WEIGHTED AVERAGE LIFE OF THE CERTIFICATES................... 10
CLASS A POOL FACTOR AND TRADING INFORMATION................. 10
USE OF PROCEEDS............................................. 11
THE SELLER.................................................. 11
THE SERVICER................................................ 12
THE CERTIFICATES............................................ 12
Book-Entry Registration................................... 13
Definitive Certificates................................... 14
Sale and Assignment of Receivables and Warranties
Thereon................................................ 15
Accounts.................................................. 17
Collections............................................... 17
Monthly Advances.......................................... 18
Distributions............................................. 19
Subordination of the Class B Certificates; Subordination
Spread Account......................................... 20
Servicing Compensation and Payment of Expenses............ 23
Servicing Procedures...................................... 24
Reports to Class A Certificateholders..................... 25
Evidence as to Compliance................................. 26
Changes to Servicer; Servicer Indemnification and
Proceedings............................................ 26
Servicer Default.......................................... 27
Rights Upon Servicer Default.............................. 28
Waiver of Past Defaults................................... 28
Amendment................................................. 28
Termination............................................... 29
Duties of the Trustee..................................... 29
The Trustee............................................... 30
LEGAL ASPECTS OF THE RECEIVABLES............................ 31
Security Interest in Vehicles............................. 31
Repossession.............................................. 32
Notice of Sale; Redemption Rights......................... 32
Deficiency Judgments and Excess Proceeds.................. 33
Consumer Protection Laws.................................. 33
Other Limitations......................................... 34
Transfers of Vehicles..................................... 34
</Table>
S-3
<Table>
<Caption>
PAGE
----
FEDERAL INCOME TAX CONSEQUENCES............................. 34
Tax Status Of The Trust................................... 35
Income Of Certificate Owners.............................. 35
Backup Withholding........................................ 38
ERISA CONSIDERATIONS........................................ 38
PLAN OF DISTRIBUTION........................................ 41
LEGAL OPINIONS.............................................. 42
REPORTS TO CERTIFICATEHOLDERS............................... 42
WHERE YOU CAN FIND MORE INFORMATION......................... 42
INCORPORATION BY REFERENCE.................................. 42
GLOSSARY OF TERMS........................................... 43
</Table>
S-4
THE CERTIFICATES
The GMAC 20 - Grantor Trust will issue a series of certificates
consisting of two classes, entitled % Asset Backed Certificates, Class A and
% Asset Backed Certificates, Class B. We are not offering the Class B
Certificates for sale. Initially, Capital Auto Receivables, Inc. will own the
Class B Certificates.
We have set forth below some specific information about the Class A
Certificates and the GMAC 20 - Grantor Trust. You can only understand this
information by reading the accompanying prospectus. The prospectus provides the
context in which the following terms are used.
<Table>
Aggregate Amount Financed................................... $
Cutoff Date................................................. , 20
Closing Date................................................ , 20
Trustee
Basic Servicing Fee Rate.................................... %
Final Distribution Date..................................... , 20
CERTIFICATE TERMS
Class A Percentage.......................................... %
Class B Percentage.......................................... %
Initial Class A Certificate Balance......................... $
Initial Class B Certificate Balance......................... $
Pass Through Rate........................................... %
Subordinations
Subordination Initial Deposit............................... $
Minimum Subordination Spread Amount......................... $
Maximum Subordination Spread Amount......................... $
Specified Subordination Percentage Trigger.................. %
Subordination Spread Amount................................. $
SUBORDINATION SPREAD TRIGGER................................ $
</Table>
THE RECEIVABLES POOL
The receivables to be included in the pool of receivables securing this
series of certificates were selected from GMAC's portfolio based on several
criteria, including that each such receivable:
- is secured by a new or used vehicle;
- was originated in the United States;
- provides for level monthly payments which may vary from one another by no
more than $5;
- will fully amortize the Amount Financed over its original term to
maturity;
- has been or will be acquired by GMAC in the ordinary course of business;
- has a first payment due date on or after , 20 ;
- has an original term of to 60 months;
- provides for finance charges at an annual percentage rate with the range
specified in the second following table; and
S-5
- as of the cutoff date, was not considered past due, that is, the
scheduled payments due on that receivable in excess of $25 have been
received within 30 days of the scheduled payment date.
As of the cutoff date, Scheduled Interest Receivables represented
approximately
- ---% of the pool of receivables by Aggregate Amount Financed, with the remainder
being Simple Interest Receivables.
Approximately
--------% of the Aggregate Amount Financed of the receivables, constituting
- ---% of the number of receivables, as of the cutoff date, represent receivables
secured by new vehicles. The remainder are secured by used vehicles. The
receivables in the pool of receivables on the closing date will be the same
receivables which comprised the pool of receivables on the cutoff date. The
following tables describe the pool of receivables as of the cutoff date:
COMPOSITION OF THE POOL OF RECEIVABLES
<Table>
Weighted Average Annual Percentage Rate of Receivables......
------------%
Aggregate Amount Financed...................................
$ ------------
Number of Contracts in Pool.................................
------------
Average Amount Financed.....................................
$ ------------
Weighted Average Original Maturity..........................
----- months
Weighted Average Remaining Maturity.........................
----- months
Scheduled Weighted Average Life.............................
----- months
</Table>
The Scheduled Weighted Average Life in the above table is based on
scheduled payments due on and after the cutoff date and assuming that no
prepayments on the receivables are made and that all payments on Simple Interest
Receivables are received on their respective due dates.
DISTRIBUTION BY ANNUAL PERCENTAGE RATE OF THE POOL OF RECEIVABLES
<Table>
<Caption>
PERCENTAGE OF
ANNUAL PERCENTAGE NUMBER OF AGGREGATE AMOUNT
RATE RANGE CONTRACTS AMOUNT FINANCED FINANCED
----------------- --------- --------------- ----------------
6.00% to 7.00%....................... $ %
7.01 to 8.00.........................
8.01 to 9.00.........................
9.01 to 10.00........................
10.01 to 11.00.......................
11.01 to 12.00.......................
12.01 to 13.00.......................
13.01 to 14.00.......................
14.01 to 15.00.......................
15.01 to 16.00.......................
16.01 to 17.00.......................
17.01 to 18.00.......................
18.01 to 19.00.......................
19.01 to 20.00.......................
------- -------------- -------
TOTAL...................... 100.0%
======= ============== =======
</Table>
S-6
The pool of receivables includes receivables originated in states and the
District of Columbia. The following table sets forth the percentage of the
Aggregate Amount Financed in the states with the largest concentration of
receivables. No other state accounts for more than 5% of the Aggregate Amount
Financed. The following breakdown by state is based on the billing address of
the obligor on the receivable.
<Table>
<Caption>
PERCENTAGE OF
AGGREGATE
STATE AMOUNT FINANCED
----- ---------------
.................................. --%
.................................. --%
.................................. --%
.................................. --%
.................................. --%
</Table>
THE SERVICER
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
The following table shows GMAC's experience in the United States for:
- delinquency on new and used retail car and light truck receivables,
- repossessions, and
- net losses relating to GMAC's entire vehicle portfolio, including
receivables previously sold by GMAC which it continues to service.
The Servicer believes that delinquencies, repossessions and net losses have
decreased during the periods set forth below due to tightened credit standards
and continued collection efforts. Fluctuations in delinquencies, repossessions
and losses generally follow trends in the overall economic environment and may
be affected by such factors as:
- increased competition for obligors,
- the supply and demand for automobiles, light trucks and sport utility
vehicles,
- rising consumer debt burden per household, and
- increases in personal bankruptcies.
The credit enhancement for the trust has been designed to mitigate the
impact to certificateholders of increases in delinquencies, repossessions and
losses.
S-7
There can be no assurance that the delinquency, repossession and net loss
experience on the pool of receivables will be similar to GMAC's historical
experience set forth below or that the factors described above will remain
applicable.
<Table>
<Caption>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30 DECEMBER 31
-------------- -------------------------------------------
NEW AND USED VEHICLE 2001 2000 2000 1999 1998 1997 1996
CONTRACTS ----- ----- ----- ----- ----- ----- -----
Total Retail Contracts
Outstanding at End of the
Period (in thousands)....... 3,615 3,306 3,412 3,120 2,981 2,861 3,005
Average Daily Delinquency
31-60 Days.................... 1.94% 1.89% 1.92% 2.18% 2.66% 3.24% 3.14%
61-90 Days.................... 0.18 0.14% 0.15 0.14 0.18 0.23 0.22
91 Days or More............... 0.02 0.01% 0.01 0.02 0.02 0.03 0.03
Repossessions as a Percent of
Average Number of Contracts
Outstanding................. 1.85% 1.82% 1.84% 2.07% 2.48% 3.21% 3.59%
Net Losses as a Percent of
Liquidations (1)............ 1.28% 1.07% 1.16% 1.12% 1.70% 2.30% 2.35%
Net Losses as a Percent of
Average Receivables......... 0.64% 0.54% 0.58% 0.58% 0.83% 1.31% 1.45%
</Table>
The Servicer's current practice generally is to write off receivables which
are more than 90 days past due. Also, the "Net Losses as a Percent of
Liquidations" and the "Net Losses as a Percent of Average Receivables"
percentages in the preceding table are based on gross accounts receivable
including unearned income and "Repossessions as a Percent of Average Number of
Contracts Outstanding" and "Net Losses as a Percent of Average Receivables" for
the nine months ended September 30, 2001 and 2000 are reported as annualized
rates.
The net loss figures above reflect the fact that GMAC had recourse to
dealers on a portion of its retail instalment sale contracts. For each period
above, this was less than 1.5% of the portfolio at the end of the period. The
percentage of the Aggregate Amount Financed in the pool of receivables with
recourse to dealers is less than 1%. GMAC applies the same underwriting
standards to the purchase of contracts without regard to whether dealer recourse
is provided. Based on its experience, GMAC believes that there is no material
difference between the rates of delinquency and repossession on contracts with
recourse against dealers as compared to contracts without recourse against
dealers. However, the net loss experience of contracts without recourse against
dealers is higher than that of contracts with recourse against dealers because,
under its recourse obligation, the dealer is responsible to GMAC for payment of
the unpaid balance of the contract, provided GMAC retakes the car from the
obligor and returns it to the dealer within a specified time.
ERISA CONSIDERATIONS
The exemption described in the prospectus under the caption "ERISA
Considerations" refers to the exemption granted to [Prohibited
Transaction Exemption ; Exemption Application No. ;
Fed. Reg. ( )].
FEDERAL INCOME TAX CONSEQUENCES
Kirkland & Ellis, special tax counsel to the seller, has delivered its
opinion that the trust will be taxable as a grantor trust and not as an
association or publicly traded partnership taxable as a corporation for federal
income tax purposes. Subject to the discussion in the prospectus under "Federal
Income Tax Consequences--Income of Certificate Owners--
S-8
Treatment of Fees or Payments," each Class A Certificate Owner will be treated
as an owner of a pro rata undivided interest in the applicable Class A
Percentage of the ordinary income and corpus portions of the trust. See "Federal
Income Tax Consequences--Tax Status of Trust" in the prospectus.
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement,
the seller has agreed to sell to each of the underwriters named below, and each
of the underwriters, for whom is acting as representative, has
severally agreed to purchase from the seller, the principal amount of Class A
Certificates set forth opposite its name below:
<Table>
<Caption>
AGGREGATE PRINCIPAL
AMOUNT OF
CLASS A CERTIFICATES
UNDERWRITERS TO BE PURCHASED
------------ --------------------
$
--------
Total............................................. $
========
</Table>
The seller has been advised by the representative that the several
underwriters propose initially to offer the Class A Certificates to the public
at the price set forth on the cover page hereof, and to dealers at these price
less a concession not in excess of 0. % of the Class A Certificate
denominations. The underwriters may allow and these dealers may reallow a
concession not in excess of 0. % of the Class A Certificate denominations to
certain other dealers. After the initial public offering, the public offering
price and these concessions may be changed.
The underwriters may engage in over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids for the Class A
Certificates in accordance with Regulation M under the Securities Exchange Act
of 1934.
Over-allotment transactions involve short sales by the underwriters of the
Class A Certificates. Short sales involve the sale by the underwriters of a
greater number of Class A Certificates then they are required to purchase in the
offering. This creates a syndicate short position and the need to engage in
syndicate covering transactions to close out the syndicate short position. Short
sales may be in the form of "covered" short sales or "naked" short sales.
Covered short sales are sales made in an amount not greater than the
underwriters' over-allotment option to purchase additional Class A Certificates
in the offering. The underwriters may close out any covered short position by
either exercising their over-allotment option or purchasing Class A Certificates
in the open market. In determining the source of Class A Certificates to close
out the covered short position, the underwriters will consider, among other
things, the price of Class A Certificates available for purchase in the open
market as compared to the price at which they may purchase Class A Certificates
through the over-allotment option.
Naked short sales are sales in excess of the over-allotment option. The
underwriters must close out any naked short position by purchasing Class A
Certificates in the open market. A naked short position is more likely to be
created if the underwriters are concerned that there may be downward pressure on
the price of the Class A Certificates in the open market after pricing that
could adversely affect investors who purchase in the offering.
Syndicate covering transactions involve purchases of the Class A
Certificates in the open market after the distribution has been completed in
order to cover syndicate short positions.
S-9
Penalty bids permit the underwriters to reclaim a selling concession from a
syndicate member when the Class A Certificates originally sold by that syndicate
member are purchased in a syndicate covering transaction.
Similar to other purchase transaction, over-allotment transactions,
stabilizing transactions, syndicate covering transactions and penalty bids may
cause the prices of the Class A Certificates to be higher than they would
otherwise be in the absence of these transactions, and may also have the
potential effect of preventing or retarding a decline in the market value of the
Class A Certificates. Neither the seller nor any of the underwriters represent
that the underwriters will engage in any of these transactions or that these
transactions, once commenced, will not be discontinued without notice at any
time.
LEGAL OPINIONS
In addition to the legal opinions described in the prospectus, specified
matters relating to the transaction 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 its affiliates.
-------------------------
S-10
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
VERSION 2
PRELIMINARY
GRANTOR TRUST
PROSPECTUS FORM
PROSPECTUS
GMAC GRANTOR TRUSTS
Asset Backed Certificates, Class A
CAPITAL AUTO RECEIVABLES, INC.
Seller
GENERAL MOTORS ACCEPTANCE CORPORATION
Servicer
<Table>
THE TRUSTS--
YOU SHOULD CONSIDER CAREFULLY
THE RISK FACTORS BEGINNING ON - We will form a new trust to issue each series of
PAGE 5 IN THIS PROSPECTUS. certificates. Each series will include two
classes of certificates, the Class A Certificates
The certificates of any series and the Class B Certificates. We will sell only
represent the beneficial the Class A Certificates with this prospectus.
interest in the trust that
issued those certificates only. - The primary assets of each trust will be a pool
The certificates issued by any of fixed rate retail motor vehicle instalment sales
trust do not represent contracts, including security interests in the
obligations of or interests in, automobiles and light trucks financed under those
and are not guaranteed by contracts.
Capital Auto Receivables, Inc.,
GMAC, or any of their THE CLASS A CERTIFICATES ISSUED BY A TRUST--
respective affiliates.
- will represent the right to payments of principal
This prospectus may be used to and interest on a monthly basis;
offer and sell any certificates
only if accompanied by the - will be paid only from the assets of the trust
accompanying prospectus that issued the Class A Certificates and amounts on
supplement. deposit in the subordination spread account for
that trust; and
- will be senior to the Class B Certificates issued
by the trust.
</Table>
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE CLASS A CERTIFICATES OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 20
SUMMARY
- This prospectus summary highlights selected information from this
document and does not contain all of the information that you need to
consider in making your investment decision. To understand the material
terms of an offering of the certificates, read carefully this entire
document and the accompanying prospectus supplement.
THE PARTIES
Issuer
The parties will create a separate trust to issue each series of certificates.
The trust will operate under a pooling and servicing agreement.
Seller
Capital Auto Receivables, Inc. will be the seller for each trust.
Servicer
General Motors Acceptance Corporation will be the servicer for each trust.
Trustee
Each prospectus supplement will specify the trustee for each trust.
THE OFFERED CERTIFICATES
We will describe in the accompanying prospectus supplement the Class A
Certificates that we are offering. Each trust will issue two classes of
asset-backed certificates, the Class A Certificates and the Class B
Certificates. The Class B Certificates will not be offered under the
accompanying prospectus supplement.
Interest Payments
- - The trustee will pay interest on the Class A Certificates at the Pass Through
Rate, which is an interest rate that will be specified in the accompanying
prospectus supplement.
- - The trustee will pay interest monthly, on the distribution date, which will be
the 15th day of each month or the next following business day.
- - The trustee will pay interest on the distribution date only if funds are
available. This prospectus describes how the available funds are allocated to
interest payments.
- - Interest and principal payments on the Class B Certificates will be
subordinated to interest payments on the Class A Certificates. This prospectus
describes the extent of the subordination.
Principal Payments
- - The trustee will make a monthly principal payment on the Class A Certificates
on each distribution date.
- - The trustee will make principal payments from the amount of principal received
during the month prior to the distribution date. The trustee will make
principal payments only to the extent that funds are available.
- - The trustee will generally pay principal proportionately to the holders of
Class A Certificates and Class B Certificates. The principal payments will be
based on each certificateholder's percentage interest in the trust.
- - Principal payments on the Class B Certificates will be subordinated to
principal and interest payments on the Class A Certificates. This prospectus
describes the extent of the subordination.
Subordination of Class B Certificates
On each distribution date:
- - The trustee will make each monthly interest payment to the Class B
Certificateholders only after the trustee pays the full amount of interest
owed that month on the Class A Certificates.
- - The trustee will make each monthly principal payment to the Class B
Certificateholders only after the trustee pays the full amount of interest and
2
principal owed that month on the Class A Certificates.
Certificate Ratings
We will not issue Class A Certificates unless they are rated in the highest
rating category by at least one nationally recognized rating agency.
THE RECEIVABLES
The primary assets of each trust will be a pool of fixed-rate retail instalment
sales contracts used to finance new and used car and light truck purchases. We
refer to these contracts as " receivables" and to the persons who financed their
purchases with these contracts as "obligors." The receivables in each trust will
be sold by GMAC to the seller, and then by the seller to the trust.
There are two different types of receivables in each trust: Scheduled Interest
Receivables and Simple Interest Receivables. The way that payments are allocated
between principal and interest varies depending on the type of receivable. This
prospectus provides more information on the different types of receivables.
SUBORDINATION SPREAD ACCOUNT
The seller will maintain for the benefit of each trust a subordination spread
account that is separate from the trust. The subordination spread account
enhances the likelihood that the Class A Certificateholders will receive the
full amount of principal and interest that is owed to them.
The seller will fund the subordination spread account as follows:
- - On the closing date, the seller will make an initial deposit in the
subordination spread account.
- - On each distribution date, the subordination spread account will receive funds
that would have been allocated to the Class B Certificates, until its balance
reaches the specified subordination spread account balance.
- - The amount in the subordination spread account will have a set maximum and
minimum. Both of these amounts are stated in the accompanying prospectus
supplement.
- - Generally, the specified subordination spread account balance will be the
minimum amount required. However, certain events relating to the collection of
receivables may cause the trustee to increase the specified subordination
spread account balance. See "The Certificates-- Subordination of the Class B
Certificates; Subordination Spread Account" in this prospectus.
ADVANCES
The servicer will advance monthly payments to the trustee to compensate for
untimely payments. The terms of the advance will vary depending on the type of
receivable.
- - For Scheduled Interest Receivables, the servicer will advance to the trustee
the portion of each receivable that was due but unpaid as of the end of the
month when due. The trust must reimburse the servicer for the advance. The
servicer is obligated to advance the payment only to the extent that the
servicer expects to recover the advanced amount through later collections and
payments on the receivables.
- - For Simple Interest Receivables, the servicer will advance to the trustee any
aggregate interest shortfall that results from obligors paying on dates other
than the due dates. The trustee will pay to the servicer any surplus interest
that results from obligors paying on dates other than due dates.
3
SERVICING FEES
For each series of certificates, the trustee will pay the servicer a set monthly
fee as compensation for servicing the receivables. The trustee will also pay the
servicer any late fees, prepayment charges and other administrative fees and
expenses collected during the month. The trustee will also pay the servicer
additional servicing fees.
OPTIONAL REPURCHASE
The servicer may purchase all of the property of the trust when the aggregate
principal balance of receivables falls below 10% of the aggregate amount
financed of receivables. Any repurchase would result in the payment of the
unpaid balance of the Class A Certificates plus accrued and unpaid interest
thereon.
TAX STATUS
In the opinion of Kirkland & Ellis, special tax counsel to the seller, each
trust will be classified for Federal income tax purposes as a grantor trust and
not as an association taxable as a corporation. Certificate owners must report
their respective allocable shares of income earned on trust assets. Subject to
certain limitations applicable to individuals, estates and trusts, certificate
owners may deduct their respective allocable shares of reasonable servicing and
other fees. We suggest that individuals consult with their tax advisors to
determine the federal, state, local and other tax consequences of the purchase,
ownership and disposition of the Class A Certificates.
ERISA CONSIDERATIONS
Subject to the considerations discussed under "ERISA Considerations," an
employee benefit plan subject to the Employee Retirement Income Security Act of
1974, as amended, may purchase the Class A Certificates. We suggest that an
employee benefit plan consult with its counsel before purchasing the Class A
Certificates.
4
RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase Class A Certificates.
LACK OF FIRST PRIORITY LIENS
ON
FINANCED VEHICLES OR
RECEIVABLES COULD MAKE THE
RECEIVABLES UNCOLLECTIBLE AND
REDUCE OR DELAY PAYMENTS ON
THE CERTIFICATES If the security interests in the financed
vehicles as described in "Legal Aspects of the
Receivables--Security Interest in Vehicles" are
not properly perfected, the interests of the
seller and the trust in the financed vehicles
would be subordinate to, among others, the
following:
- A bankruptcy trustee of the obligor
- A subsequent purchaser of the financed
vehicle
- A holder of a perfected security interest
The trust may not be able to collect on a
defaulted receivable in the absence of a
perfected security interest in the vehicle
financed by the receivable.
Even if the trust has a perfected security
interest in the financed vehicles, events could
jeopardize that interest, such as:
- Fraud or forgery by the vehicle owner
- Negligence or fraud by the servicer
- Mistakes by government agencies
- Liens for repairs or unpaid taxes
See "Legal Aspects of the Receivables--Security
Interest in Vehicles" in this prospectus.
GMAC and the seller will file financing
statements for each pool of receivables sold to
a trust. The financing statements will perfect
the security interests of the seller and the
trust in the pool of receivables. However, GMAC
will serve as the custodian of the receivables
and will not physically segregate or mark the
receivables to indicate that they have been
sold to the trust. See "The Certificates--Sale
and Assignment of Receivables and Warranties
Thereon" in this prospectus.
If another party purchases or takes a security
interest in the receivables:
(1) for value,
(2) in the ordinary course of business, and
(3) without actual knowledge of the seller's or
the trust's interest,
5
that purchaser or secured party will
acquire an interest in the receivables
superior to the trust's interest.
GMAC'S BANKRUPTCY COULD
REDUCE OR DELAY PAYMENTS ON
THE CERTIFICATES If GMAC filed for bankruptcy under the federal
bankruptcy code or any state insolvency laws, a
court may:
- consolidate the assets and liabilities of
GMAC with those of the seller,
- decide that the sale of the receivables to
the seller was not a "true sale" or
- disallow a transfer of receivables prior to
the bankruptcy.
If the receivables became part of GMAC's
bankruptcy estate, you might experience
reductions and/or delays in payments on your
certificates. See "Legal Aspects of the
Receivables--Other Limitations" in this
prospectus.
PREPAYMENTS ON AND
REPURCHASE OF THE RECEIVABLES
COULD SHORTEN THE AVERAGE
LIFE
OF THE CERTIFICATES Obligors may prepay the receivables in full or
in part. In addition, the receivables may be
prepaid as a result of defaults or from credit
life, disability or physical damage insurance.
Also, GMAC or the seller may be required to
repurchase receivables from a trust in
specified circumstances, and GMAC may have the
right to purchase all remaining receivables
from a trust pursuant to its optional purchase
right. See "The Certificates--Sale and
Assignment of Receivables and Warranties
Thereon" and "--Termination" in this
prospectus.
Each prepayment, repurchase, purchase or
liquidation of the receivables will shorten the
average life of the Class A Certificates. A
variety of unpredictable economic, social and
other factors influence prepayment rates.
You will bear all reinvestment risk resulting
from a faster or slower rate of prepayment,
repurchase or extension of the receivables held
by your trust unless otherwise provided in the
prospectus supplement for that trust.
LIMITED ENFORCEABILITY OF THE
RECEIVABLES COULD REDUCE OR
DELAY PAYMENTS ON THE
CERTIFICATES Federal and state consumer protection laws
regulate the creation and enforcement of
consumer loans such as the receivables.
Specific statutory liabilities are imposed upon
creditors who fail to comply with these
regulatory provisions. In some cases, this
liability could affect an assignee's ability to
enforce secured loans such as the receivables.
If an obligor had a claim against the trustee
for violation of these laws prior to the cutoff
date, GMAC must repurchase the receivable
unless the breach is cured. If GMAC fails to
repurchase the receivable, you might experience
reductions and/or delays in payments on your
6
certificates. See "Legal Aspects of the
Receivables--Consumer Protection Laws" in this
prospectus.
GMAC AND THE SELLER HAVE
LIMITED OBLIGATIONS TO THE
TRUST AND THEY WILL NOT
MAKE PAYMENTS ON THE
CERTIFICATES GMAC, the seller, and their respective
affiliates are generally not obligated to make
any payments to you on your certificates and do
not guarantee payments on the receivables or
your certificates. However, GMAC will make
representations and warranties regarding the
characteristics of the receivables and these
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 the receivables,
you might experience reductions and/or delays
in payments on your certificates. See "The
Certificates--Sale and Assignment of
Receivables and Warranties Thereon" in this
prospectus.
THE ASSETS OF EACH TRUST ARE
LIMITED AND ARE THE ONLY
SOURCE OF PAYMENT FOR THE
CERTIFICATES No trust will have any significant assets or
sources of funds other than its receivables and
its rights in the subordination spread account.
The Class A Certificates will only represent
interests in the trust from which they were
issued. Except as described in the accompanying
prospectus supplement, the Class A Certificates
will not be insured or guaranteed by GMAC, the
seller, the trustee, any of their affiliates or
any other person or entity. You must rely
primarily on payments on the receivables in the
trust and on the subordination spread account
for repayment of your Class A Certificates. If
those sources are insufficient, you may receive
payments late or not receive back your full
principal investment.
THE ABSENCE OF A SECONDARY
MARKET COULD LIMIT YOUR
ABILITY TO RESELL YOUR
CERTIFICATES The underwriters for a series may assist in the
resale of Class A Certificates, but they are not
required to do so. A secondary market for any
certificates may not develop. If a secondary
market does develop, it might not continue or it
might not be sufficiently liquid to allow you to
resell any of your Class A Certificates.
THE RATINGS FOR THE
CERTIFICATES
ARE LIMITED IN SCOPE, MAY
NOT CONTINUE TO BE ISSUED AND
DO NOT CONSIDER THE
SUITABILITY OF THE
CERTIFICATES
FOR YOU The Class A Certificates for each trust will be
issued only if they receive the required
rating. A security rating is not a
recommendation to buy, sell or hold the
certificates. The ratings consider only the
likelihood that the trust will pay interest on
time and will ultimately make full
distributions of the certificate balance.
Ratings on the Class A Certificates do not
address the timing of distributions of
principal on the Class A Certificates prior to
the applicable final distribution date. The
ratings do not consider the prices of the Class
A Certificates or their suitability for a
particular investor. The ratings may be revised
or withdrawn at any time.
7
THE TRUSTS
For each series of certificates, the seller will establish a separate
grantor trust by selling and assigning the trust property to the trust in
exchange for the certificates issued by the trust.
The property of each trust will include:
- a pool of retail instalment sales contracts for new and used
automobiles and light trucks, all scheduled payments due thereunder
on and after the cutoff date in the case of Scheduled Interest
Receivables and all payments received thereunder on or after the
cutoff date, in the case of Simple Interest Receivables, in each
case exclusive of any amount allocable to the premium for physical
damage insurance force-placed by the servicer;
- such amounts as from time to time may be held in separate trust
accounts established and maintained pursuant to the Agreement for
that trust and the proceeds of those accounts;
- security interests in the financed vehicles consisting of new and
used automobiles and light trucks and, to the extent permitted by
law, any accessions thereto;
- any recourse against dealers on the receivables;
- except for those receivables originated in Wisconsin, the right to
proceeds of credit life, credit disability, physical damage or other
insurance policies covering the financed vehicles; and
- specified rights of the seller under the purchase agreement for that
trust.
The Subordination Spread Account for a series of certificates will not be
included in the property of the issuing trust but will be a segregated trust
account held by the trustee for the benefit of the holders of the trust's
certificates.
Except as otherwise set forth in the accompanying prospectus supplement,
the activities of each trust will be limited to:
- acquiring, managing and holding receivables and the other assets of
the trust and the proceeds from those assets;
- issuing certificates and making payments and distributions on them;
and
- engaging in other activities that are necessary, convenient or
advisable to accomplish any of the foregoing or are incidental or
connected with these activities.
The servicer will continue to service the receivables held by each trust
and will receive fees for these services. See "The Certificates--Servicing
Compensation and Payment of Expenses" in this prospectus. To facilitate the
servicing of the receivables, the trustee will authorize General Motors
Acceptance Corporation, as custodian to retain physical possession of the
receivables held by each trust and other documents relating thereto as custodian
for the trustee. Due to the administrative burden and expense, the certificates
of title to the financed vehicles will not be amended to reflect the sale and
assignment of the security interest in the financed vehicles to the trustee. In
the absence of an amendment, the trustee may not have a perfected security
interest in the financed vehicles in all states. The trustee will not be
responsible for the legality, validity or enforceability of any security
interest in any financed
8
vehicle. See "Legal Aspects of the Receivables," "The Certificates--Sale and
Assignment of Receivables and Warranties Thereon" and "The Certificates--Duties
of the Trustee" in this prospectus.
If the protection provided to the Class A Certificateholders by the
subordination of the Class B Certificates issued by a trust and by the
Subordination Spread Account established for that trust is insufficient, the
Class A Certificateholders would have to look principally to the obligors on the
receivables, the proceeds from the repossession and sale of financed vehicles
which secure defaulted receivables and the proceeds from any recourse against
dealers relating to such receivables. Some factors, including the trustee's not
having perfected security interests in the financed vehicles in all states, may
affect the ability to repossess and sell the collateral securing the
receivables, and may reduce the proceeds to be distributed to
certificateholders. See "The Certificates--Subordination of the Class B
Certificates; Subordination Spread Account" and "Legal Aspects of the
Receivables" in this prospectus.
The principal offices of each trust will be specified in the accompanying
prospectus supplement.
THE RECEIVABLES POOLS
The receivables in each pool of receivables have been or will be acquired
by GMAC through its nationwide branch system, directly or through General Motors
from automobile and light truck dealers pursuant to agreements with General
Motors dealers and dealerships affiliated with General Motors dealers. See "The
Servicer" in this prospectus.
The receivables have been or will be originated by participating dealers in
accordance with GMAC's requirements under the dealer agreements. The receivables
have been or will be acquired in accordance with GMAC's underwriting standards
in the ordinary course of business. These underwriting standards evaluate
purchasers based on, among others, the following criteria:
- the prospective purchaser's prior experience with GMAC,
- the length of time the prospective purchaser's credit has been
reported,
- the type of credit the prospective purchaser has established,
- the asset value of the vehicle and the prospective purchaser's
amount of equity in the vehicle,
- the term of the receivables, and
- the prospective purchaser's overall ability to pay and
creditworthiness.
GMAC's standards also require physical damage insurance to be maintained on
each financed vehicle.
The receivables to be held by each trust will be selected from GMAC's
portfolio for inclusion in a pool of receivables by the criteria set forth in
the accompanying prospectus supplement.
Each receivable is classified as either a Scheduled Interest Receivable or
a Simple Interest Receivable. If an obligor elects to prepay a Scheduled
Interest Receivable in full, the obligor is entitled to a rebate of the portion
of monthly scheduled payments attributable to
9
unearned finance charges. The amount of the rebate is determined with reference
to the contract type and applicable state law. With minor variations based on
state law, actuarial rebates are calculated on the basis of a constant interest
rate. Rebates calculated on a Rule of 78s or sum-of-the-digits basis are smaller
than the corresponding rebates under the actuarial method. Scheduled Interest
Receivables provide for Rule of 78s rebates except in states that require the
actuarial method. Distributions to Class A Certificateholders will not be
affected by Rule of 78s rebates because all allocations on Scheduled Interest
Receivables are made using the actuarial method. The portion of a pool of
receivables which consists of Scheduled Interest Receivables will be specified
in the accompanying prospectus supplement.
Payments pursuant to a Simple Interest Receivable are allocated between
finance charges and principal based on the actual date on which a payment is
received. Late payments, or early payments, on a Simple Interest Receivable may
result in the obligor making a greater- or smaller- number of payments than
originally scheduled. The amount of additional payments required to pay the
outstanding principal balance in full generally will not exceed the amount of
any originally scheduled payment. If an obligor elects to prepay a Simple
Interest Receivable in full, the obligor will not receive a rebate attributable
to unearned finance charges. Instead, the obligor is required to pay finance
charges only to, but not including, the date of prepayment. The amount of
finance charges on a Simple Interest Receivable that would have accrued from and
after the date of prepayment if all monthly payments had been made as scheduled
will generally be greater than the rebate on a Scheduled Interest Receivable
that provides for a Rule of 78s rebate, and will generally be equal to the
rebate on a Scheduled Interest Receivable that provides for an actuarial rebate.
The portion of a pool of receivables which consists of Simple Interest
Receivables will be specified in the accompanying prospectus supplement.
Information for each pool of receivables will be set forth in the
accompanying prospectus supplement, including, to the extent appropriate, the
composition, distribution by APR, states of origination and portion of the pool
of receivables secured by new vehicles and by used vehicles.
WEIGHTED AVERAGE LIFE OF THE CERTIFICATES
The weighted average life of certificates will generally be influenced by
the rate at which the principal balances of the receivables securing the
certificates are paid, which payment may be in the form of scheduled
amortization or prepayments. For this purpose, the term prepayment includes
charge-offs, liquidations due to defaults and repurchases by the seller or GMAC
pursuant to the agreement under which the receivables are sold to the trust as
well as receipt of proceeds from credit life and casualty insurance policies.
All of the receivables are prepayable at any time without penalty to the
obligor. The rate of prepayment of automotive receivables is influenced by a
variety of economic, social and other factors, including the fact that an
obligor generally may not sell or transfer the financed vehicle securing a
receivable without the consent of the servicer. Any reinvestment risk resulting
from prepayments of receivables will be borne entirely by the
certificateholders. See also "Legal Aspects of the Receivables--Transfers of
Vehicles" in this prospectus.
CLASS A POOL FACTOR AND TRADING INFORMATION
The Class A Pool Factor for each series will initially be 1.0000000.
Thereafter, the Class A Pool Factor will decline to reflect reductions in the
Class A Certificate Balance. The
10
amount of a Class A Certificateholder's pro rata share of the Class A
Certificate Balance can be determined by multiplying the original denomination
of the holder's certificate by the then current Class A Pool Factor.
Unless otherwise provided in the accompanying prospectus supplement, for
each trust, the certificateholders will receive reports on or about each
distribution date concerning payments received on the receivables, the Aggregate
Principal Balance, each Class A Pool Factor and various other items of
information concerning the trust relating to the certificates.
Certificateholders of record during any calendar year will be furnished
information for tax reporting purposes not later than the latest date permitted
by law. See "The Certificates--Statements to Class A Certificateholders" in this
prospectus.
USE OF PROCEEDS
Unless otherwise provided in the accompanying prospectus supplement, the
net proceeds to be received by the seller from the sale of the certificates will
be applied to the purchase of receivables from GMAC.
THE SELLER
The seller, a wholly-owned subsidiary of GMAC, was incorporated in the
State of Delaware on November 6, 1992. The seller is organized for the limited
purposes of purchasing receivables from GMAC, transferring the receivables to
third parties, forming trusts and engaging in similar activities. The principal
executive offices of the seller are located at Corporation Trust Center, 1209
Orange Street, Wilmington, Delaware 19801.
GMAC Auto Receivables Corporation, a wholly-owned subsidiary of GMAC,
incorporated in the State of Delaware on November 16, 1990 was merged with and
into the seller on February 22, 1996. It also was organized for the limited
purpose of purchasing receivables from GMAC, transferring the receivables to
third parties, forming trusts and engaging in similar activities.
The seller has taken steps in structuring the transactions contemplated by
this prospectus that are intended to make it unlikely that the voluntary or
involuntary application for relief by GMAC under the United States Bankruptcy
Code or similar applicable state laws will result in consolidation of the assets
and liabilities of the seller with those of GMAC. These steps include the
creation of the seller as a separate, limited-purpose subsidiary pursuant to a
certificate of incorporation containing various limitations. These limitations
include 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 some circumstances, the seller is required to have at least one director
who qualifies under its By-laws as "Independent Directors."
If, notwithstanding the foregoing measures, a court concluded that the
assets and liabilities of the seller should be consolidated with the assets and
liabilities of GMAC in the event of the application of the federal bankruptcy
laws to GMAC, a filing were made under any Insolvency Law by or against the
seller, or an attempt were made to litigate the consolidation issue, then delays
in distributions on the certificates, and possible reductions in the amount of
these distributions, could occur. See also "Legal Aspects of the Receivables--
Other Limitations" in this prospectus.
11
THE SERVICER
GMAC was incorporated in 1919 under the New York Banking Law relating to
investment companies. GMAC relinquished this status and became a Delaware
corporation on January 1, 1998. GMAC is a wholly-owned subsidiary of General
Motors. Operating directly and through subsidiaries and associated companies in
which it has equity investments, GMAC provides a wide variety of automotive
financial services to and through franchised General Motors dealers in many
countries throughout the world. Financial services also are offered to other
dealerships in which General Motors dealers have an interest and to the
customers of those dealerships. Other financial services offered by GMAC or its
subsidiaries include insurance, mortgage banking, and investment services.
The principal business of GMAC and its subsidiaries is to finance the
acquisition and resale by franchised General Motors dealers of various new
automotive and nonautomotive products manufactured by General Motors or its
subsidiaries and associates, and to acquire from these dealers, either directly
or indirectly, instalment obligations covering retail sales and leases of new
General Motors products as well as used units of any make. In addition, new
products of other manufacturers are financed. GMAC also leases motor vehicles
and 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 200 Renaissance
Center, Detroit, Michigan 48265, Tel. No. 313-556-5000.
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
The accompanying prospectus supplement sets forth information concerning
GMAC's experience in the United States pertaining to delinquencies on new and
used retail automobile and light truck receivables and repossessions and net
loss information relating to its entire vehicle portfolio, including receivables
previously sold which GMAC continues to service. There can be no assurance that
the delinquency, repossession and net loss experience on any pool of receivables
will be comparable to prior experience.
THE CERTIFICATES
Each trust will issue a series of certificates consisting of two classes:
the Class A Certificates and the Class B Certificates. Each series of
certificates will be issued pursuant to an Agreement to be entered into between
the seller, the servicer and the trustee. A sample Agreement was filed as an
exhibit to the registration statement of which this prospectus is a part, but
the sample Agreement does not describe the specific terms of the Certificates. A
copy of the actual Agreement under which the certificates are issued will be
available to holders of the certificates from the seller upon request and will
be filed with the SEC following the initial issuance of the certificates.
Citations to the relevant sections of the form of Agreement as filed appear
below in parentheses. The following summary describes the material provisions of
the certificates and the form of Agreement. Where particular provisions or terms
used in an Agreement are referred to, the actual provisions, including
definitions of terms, are incorporated by reference as part of this summary. The
prospectus supplement may contain additional information relating to a specific
Agreement and the series issued pursuant to that Agreement.
12
The Class A Certificates will be offered for purchase in fully registered
form in minimum denominations of $1,000 and integral multiples of $1,000. Unless
otherwise provided in the accompanying prospectus supplement, the certificates
will initially be represented by physical certificates registered in the name of
the nominee of DTC, except as provided below. The seller has been informed by
DTC that DTC's nominee will be Cede & Co. Accordingly, Cede & Co. is expected to
be the Class A Certificateholder. Unless and until definitive certificates are
issued under the limited circumstances described in this prospectus or in the
accompanying prospectus supplement, no Certificate Owner will be entitled to
receive a certificate representing such person's interest in such Class A
Certificates. All references in this prospectus to actions by Class A
Certificateholders refer to actions taken by DTC upon instructions from DTC
participants. All references in this prospectus to distributions, notices,
reports and statements to Class A Certificateholders refer to distributions,
notices, reports and statements to DTC or Cede & Co., as the registered holder
of such Class A Certificates, as the case may be, for distribution to
Certificate Owners in accordance with DTC procedures. (Sections 5.01 and 5.08).
See "Book-Entry Registration" in this prospectus.
The certificates will evidence interests in the trust created pursuant to
the applicable Agreement. The Class A Certificates will evidence in the
aggregate an undivided ownership interest of the Class A Percentage of that
trust and the Class B Certificates will evidence in the aggregate an undivided
ownership interest of the Class B Percentage of that trust. (Section 5.03).
BOOK-ENTRY REGISTRATION
The Depository Trust Company is a limited purpose trust company organized
under the laws of the State of New York, a member of the Federal Reserve System,
a "clearing corporation" within the meaning of the New York Uniform Commercial
Code and a "clearing agency" registered pursuant to Section 17A of the
Securities Exchange Act of 1934, as amended. DTC was created to hold securities
for its participants and to facilitate the clearance and settlement of
securities transactions between DTC participants through electronic book-entries
to eliminate the need for the physical movement of certificates. DTC
participants include securities brokers and dealers, banks, trust companies and
clearing corporations. Indirect access to the DTC system also is available to
indirect DTC participants such as banks, brokers, dealers, and trust companies
that clear through or maintain a custodial relationship with a DTC participant,
either directly or indirectly.
Unless otherwise specified in the accompanying prospectus supplement,
Certificate Owners that are not DTC participants or indirect DTC participants
but desire to purchase, sell or otherwise transfer ownership of, or other
interests in, Class A Certificates may do so only through DTC participants and
indirect DTC participants. In addition, Certificate Owners will receive all
distributions of principal of and interest on the Class A Certificates from the
trustee through DTC and its Participants. Under a book-entry format, Certificate
Owners may experience some delay in their receipt of payments since these
payments will be forwarded by the trustee to Cede & Co., as nominee for DTC. DTC
will forward these payments to its Participants, which thereafter will forward
them to indirect DTC participants or Certificate Owners. Certificate Owners will
not be recognized by the trustee as Class A Certificateholders, as that term is
used in each Agreement, and Certificate Owners will be permitted to exercise the
rights of Class A Certificateholders only indirectly through DTC and its DTC
participants.
13
Under the DTC rules, DTC is required to make book-entry transfers of Class
A Certificates among DTC participants on whose behalf it acts and to receive and
transmit payments of principal of, and interest on, the Class A Certificates.
DTC participants and indirect DTC participants with which Certificate Owners
have accounts relating to the Class A Certificates similarly are required to
make book-entry transfers and receive and transmit these payments on behalf of
their respective Certificate Owners. Accordingly, although Class A Certificate
Owners will not possess Class A Certificates, the DTC rules provide a mechanism
by which Certificate Owners will receive payments and will be able to transfer
their interests.
Because DTC can only act on behalf of DTC participants, who in turn act on
behalf of indirect DTC participants and certain banks, the ability of a
Certificate Owner to pledge Class A Certificates to persons or entities that do
not participate in the DTC system, or otherwise act with respect to the Class A
Certificates, may be limited due to the lack of physical certificates for the
Class A Certificates.
DTC has advised the seller that it will take any action permitted to be
taken by a Class A Certificateholder under the associated Agreement only at the
direction of one or more DTC participants to whose accounts with DTC the Class A
Certificates are credited. DTC may take conflicting actions relating to other
undivided interests to the extent that these actions are taken on behalf of DTC
participants whose holdings include these undivided interests.
Except as required by law, neither the seller nor the trustee will have any
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests of the Class A Certificates of any series held
by Cede & Co., as nominee for DTC, or for maintaining, supervising or reviewing
any records relating to these beneficial ownership interests.
DEFINITIVE CERTIFICATES
Unless otherwise provided in the accompanying prospectus supplement, the
Class A Certificates will be issued in fully registered, certificated form to
Certificate Owners or their nominees, rather than to DTC or its nominee, only if
(i): (1) the seller advises the trustee in writing that DTC is no longer willing
or able to discharge properly its responsibilities as Depository for the Class A
Certificates and the seller is unable to locate a qualified successor, (2) the
seller, at its option, advises the trustee in writing that it elects to
terminate the book-entry system through DTC, or (3) after the occurrence of a
Servicer Default for any series, Certificate Owners representing at least a
majority of the voting interests of the Class A Certificates of the series
advise the trustee through DTC in writing that the continuation of a book-entry
system through DTC, or its successor, is no longer in the best interests of the
Certificate Owners. The "voting interests" of the Class A Certificates will be
allocated among the Class A Certificate Owners in accordance with the Class A
Certificate Balance represented thereby; except that in some circumstances any
Class A Certificates held by the seller, the servicer or any of their respective
affiliates shall be excluded from such determination.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the trustee is required to notify DTC of the availability
of definitive certificates. DTC shall notify all Class A Certificateholders of
availability of definitive certificates. Upon surrender by DTC of the Class A
Certificates and receipt of instructions for re-registration, the trustee will
reissue the Class A Certificates as definitive certificates, and after the
14
reissuance, the trustee will recognize the holders of such definitive
certificates as Class A Certificateholders under the Agreement for that trust.
(Section 5.10).
Distribution of principal of and interest on the Class A Certificates will
be made by the trustee directly to holders of definitive certificates in
accordance with the procedures set forth in this prospectus and in the
associated Agreement for that trust. Distributions of principal of, and interest
on, each distribution date will be made to holders in whose names such
definitive certificates were registered at the close of business on the last day
of the related monthly period. The final payment on any Class A Certificate,
including both definitive certificates and Class A Certificates registered in
the name of Cede & Co., will be made only upon presentation and surrender of the
Class A Certificate at the office or agency specified in the notice of final
distribution to certificateholders. (Sections 5.10 and 10.01).
Definitive certificates will be transferable and exchangeable at the
offices of the trustee or of a registrar named in a notice delivered to holder
of definitive certificates. No service charge will be imposed for any
registration of transfer or exchange, but the trustee may require payment of a
sum sufficient to cover any tax or other governmental charge imposed in
connection with the transfer or exchange. (Section 5.03).
SALE AND ASSIGNMENT OF RECEIVABLES AND WARRANTIES THEREON
On or prior to a closing date, pursuant to a purchase agreement, GMAC will
sell and assign to the seller, without recourse, its entire interest in the
receivables, including the security interests in the financed vehicles, the
proceeds from certain insurance policies and the proceeds from recourse against
dealers relating to the receivables to be transferred. On the closing date, the
seller will sell and assign to the trustee, without recourse, the seller's
entire interest in the receivables, including the security interests in the
financed vehicles, the proceeds from certain insurance policies and the proceeds
from recourse against dealers relating to such receivables. (Section 2.01). Each
receivable of a trust will be identified in a schedule which will be on file at
the locations set forth in an exhibit to the associated purchase agreement and
the associated Agreement. The trustee will, concurrently with the sale and
assignment, authenticate and deliver the certificates to the seller in exchange
for the receivables. (Section 5.02). The seller will sell the Class A
Certificates to the underwriters specified in the accompanying prospectus
supplement. See "Underwriting" in this prospectus.
In each purchase agreement, GMAC will represent and warrant to the seller,
among other things, that:
- the information set forth in the schedule of receivables exhibit to
the purchase agreement is correct in all material respects;
- the obligor on each receivable is required to maintain physical
damage insurance covering the financed vehicle in accordance with
GMAC's normal requirements;
- as of the closing date, to the best of its knowledge, the
receivables are free and clear of all filed security interests,
liens, charges and encumbrances on account of work, labor or
materials--other than tax liens and other liens that arise by
operation of law--and no offsets, defenses or counterclaims have
been asserted or threatened;
- as of the closing date, each receivable is or will be secured by a
first perfected security interest in favor of GMAC in the financed
vehicle; and
15
- each receivable, at the time it was originated complied, and on the
closing date complies, in all material respects with applicable
state and federal laws, including, without limitation, consumer
credit, truth-in-lending, equal credit opportunity and disclosure
laws.
In the Agreement, the seller will assign the representations and warranties
of the servicer, as set forth above, to the trust, and will represent and
warrant to the trust that the seller has taken no action which would cause the
representations and warranties of the servicer to be false in any material
respect as of the closing date.
As of the last day of the second or, if the seller so elects, the first,
month following the discovery by the seller, the servicer or the trustee of a
breach of any representation or warranty of the seller or the servicer that
materially and adversely affects the interests of the certificateholders in any
receivable, the seller, unless the breach is cured in all material respects,
will repurchase--or will enforce the obligation of GMAC under the related
purchase agreement to repurchase--such Warranty Receivable from the trust at a
price equal to the Warranty Payment. The seller or GMAC, as applicable, will be
entitled to receive any amounts held by the servicer or in the Payment Ahead
Servicing Account for that Warranty Receivable. This repurchase obligation
constitutes the sole remedy available to certificateholders or the trustee for
any uncured breaches. (Sections 2.04 and 2.05).
In each Agreement, the servicer will covenant that:
- except as contemplated in that Agreement, the servicer will not
release any financed vehicle from the security interest securing the
receivable;
- the servicer will do nothing to impair the rights of trustee or the
certificateholders in the receivables; and
- the servicer will not amend or otherwise modify any receivable so
that the Amount Financed, the APR, the total number of scheduled
payments, in the case of a Scheduled Interest Receivable, or the
number of originally scheduled due dates, in the case of a Simple
Interest Receivable, is altered or such that the last scheduled
payment in the case of a Scheduled Interest Receivable, or the last
scheduled due date, in the case of a Simple Interest Receivable,
occurs after the final scheduled distribution date.
As of the last day of the second or, if the servicer so elects, the first,
month following the discovery by the servicer or the trustee of a breach of any
covenant that materially and adversely affects any receivable and unless the
breach is cured in all material respects, the servicer will make an
Administrative Purchase Payment for the Administrative Receivable. The servicer
will be entitled to receive any amounts held by the servicer or in the Payment
Ahead Servicing Account for the Administrative Receivable. This repurchase
obligation constitutes the sole remedy available to certificateholders or the
trustee for any uncured breaches. (Sections 3.07 and 3.08).
Pursuant to each Agreement, the trustee will agree to GMAC acting as
custodian to maintain possession, as the trust's agent, of the retail instalment
sale contracts and any other documents relating to the receivables (Section
2.02). To assure uniform quality in servicing both the receivables and GMAC's
own portfolio of receivables, as well as to facilitate servicing and save
administrative costs, the documents will not be physically segregated from other
similar documents that are in GMAC's possession. Nor will the documents be
stamped or marked to reflect the transfer to the trust so long as GMAC is the
custodian of these
16
documents. However, Uniform Commercial Code financing statements reflecting the
sale and assignment of the receivables to the trust will be filed, and GMAC's
accounting records and computer files will reflect the sale and assignment.
Because these receivables will remain in possession of GMAC as custodian, and
will not be stamped or otherwise marked to reflect such assignment to the trust,
if a subsequent purchaser were able to take physical possession of the
receivables without knowledge of the assignment, the trust's interest in the
receivables could be defeated. See "Legal Aspects of the Receivables--Security
Interest in Vehicles" in this prospectus.
ACCOUNTS
For each trust, the servicer will establish and maintain the following
accounts:
- a Collection Account in the name of the trustee on behalf of the
certificateholders into which certain payments made on or for the
receivables will be deposited;
- a Certificate Account in the name of the trustee on behalf of the
certificateholders from which all distributions relating to the
receivables and the certificates will be made; and
- a Payment Ahead Servicing Account, which will not be property of the
trust, in the name of the trustee, into which, to the extent
required by the applicable Agreement, early payments by or on behalf
of obligors on a Scheduled Interest Receivable which do not
constitute either scheduled payments or Prepayments will be
deposited until such time as the payment falls due.
Each Collection Account and each Payment Ahead Servicing Account will be
maintained with the trustee so long as:
- the trustee's short-term unsecured debt obligations have a rating of
P-1 by Moody's Investors Service, Inc., a rating of A-1+ by Standard
& Poor's Ratings Services and, if rated by Fitch, Inc., a rating of
F-1+ by Fitch, Inc.; or
- such accounts are maintained in the trust department of the trustee.
If the short-term unsecured debt obligations of the trustee do not have the
ratings set forth above, the servicer will, with the trustee's assistance as
necessary, cause any Collection Account and any Payment Ahead Servicing Account
to be moved to a bank whose short-term unsecured debt obligations have the
necessary rating or moved to the trust department of the trustee. Unless
otherwise provided in the accompanying prospectus supplement, each Collection
Account, Payment Ahead Servicing Account and Certificate Account will initially
be maintained in the trust department of the trustee. (Section 4.01).
COLLECTIONS
For each trust, the servicer will deposit all payments on the receivables
received from obligors and all proceeds of such receivables collected during
each monthly period into the Collection Account for that trust not later than
two business days after receipt. However, the servicer may retain these amounts
until the distribution date at any time that:
(1) GMAC is the servicer;
(2) there exists no Servicer Default; and
17
(3) either:
(A) the short-term unsecured debt of the servicer is rated at least
A-1 by Standard & Poor's Ratings Services and P-1 by Moody's Investors
Service, Inc. or
(B) certain arrangements are made which are acceptable to the
relevant rating agency or agencies.
Pending deposit into the Collection Account, collections may be employed by
the servicer at its own risk and for its own benefit and will not be segregated
from its own funds. (Section 4.02).
Collections on a Scheduled Interest Receivable held by any trust made
during a monthly period, other than an Administrative Receivable or a Warranty
Receivable, which are not late fees, prepayment charges or other similar fees or
charges will be applied first to any outstanding Scheduled Interest Advances
made by the servicer on that receivable and then to the scheduled payment. Any
Excess Payment will be held by the servicer or, if the servicer has not
satisfied conditions (1), (2) and (3)described in the second preceding
paragraph, will be deposited in the Payment Ahead Servicing Account, and will be
treated as a Payment Ahead, except as described in the following sentence. If
and to the extent that an Excess Payment (1) together with any unapplied
Payments Ahead, exceeds the sum of three scheduled payments or (2) constitutes,
either alone or together with any previous unapplied Payments Ahead, full
prepayment, then that portion of the Excess Payment shall not be deemed a
Payment Ahead and shall instead be applied as a Prepayment. (Section 4.03(a)).
Collections made during a monthly period on Simple Interest Receivables
held by any trust, other than Administrative Receivables or Warranty
Receivables, which are not late fees or other similar fees or charges will be
applied first to the payment to the servicer of Excess Simple Interest
Collections, if any, and next to principal and interest on all of these
receivables. (Section 4.03(b)). Excess Simple Interest Collections represent the
excess, if any, of (1) all payments received during the monthly period on all
Simple Interest Receivables held by the trust to the extent allocable to
interest over (2) the amount of interest that would be due during the monthly
period on all Simple Interest Receivables held by the trust, assuming that the
payment on that receivable was received on its respective due date.
Collections on Administrative Receivables and Warranty Receivables,
including Administrative Purchase Payments and Warranty Payments will generally
be applied in the manner described in the preceding two paragraphs, except that
unapplied Payments Ahead on a Scheduled Interest Receivable will be made to the
servicer or the seller, as applicable, and Administrative Purchase Payments and
Warranty Payments on a Simple Interest Receivable will not be applied to Excess
Simple Interest Collections. (Section 4.03(c)).
MONTHLY ADVANCES
Unless otherwise provided in the accompanying prospectus supplement, if the
full scheduled payment due on a Scheduled Interest Receivable held by any trust
is not received by the end of the month in which it is due, whether as the
result of any extension granted to the obligor or otherwise, the amount of
Payments Ahead, if any, not previously applied to that receivable will be
applied by the servicer to the extent of the shortfall and the Payments Ahead
will be reduced accordingly. If any shortfall remains, the servicer will make a
Scheduled Interest Advance equal to the amount of that shortfall. The servicer
will be obligated to make a Scheduled Interest Advance only to the extent that
the servicer, in its sole discretion, expects to recoup the Advance, from
subsequent collections or recoveries on any
18
Scheduled Interest Receivable. The servicer will be reimbursed for any such
Scheduled Interest Advances from subsequent payments or collections relating to
such Scheduled Interest Receivable. Upon the determination that reimbursement
from the preceding sources is unlikely, the servicer will be entitled to recoup
its Scheduled Interest Advance from collections from other receivables. (Section
4.04(a)).
Unless otherwise provided in the accompanying prospectus supplement, for
each trust, as of the last day of each monthly period, the servicer will make a
Simple Interest Advance equal to the excess, if any, of
(1) the amount of interest that would be due during that monthly period on
all Simple Interest Receivables held by the trust assuming that the payment on
each receivable was received on its respective due date over
(2) all payments received during that monthly period on all Simple Interest
Receivables held by the trust to the extent allocable to interest.
Any Excess Simple Interest Collections will be paid to the servicer. In
addition, for each trust, the servicer will be paid, to the extent all
previously made Simple Interest Advances exceed all Excess Simple Interest
Collections previously paid to the servicer, all Liquidation Proceeds realized
on Simple Interest Receivables allocable to accrued and unpaid interest thereon,
but not including interest for the then current monthly period. Unless otherwise
provided in the accompanying prospectus supplement, the servicer will not make
any advance on principal on any Simple Interest Receivable. (Section 4.04(b)).
DISTRIBUTIONS
For each trust, on or before each distribution date, the servicer or the
trustee, as the case may be, will transfer collections on the receivables for
the monthly period and all Prepayments to the Certificate Account. On each
distribution date starting on the date identified in the accompanying prospectus
supplement, the trustee will cause collections made during the monthly period
which constitute Payments Ahead to be transferred from the Certificate Account
to the servicer or to the Payment Ahead Servicing Account, if required.
(Sections 4.01 and 4.06).
The trustee will make distributions to the Class A Certificateholders of
record at the close of business on the Record Date out of the amounts on deposit
in the Certificate Account for the trust. The amount to be distributed to the
certificateholders will be determined in the manner described below. Prior to
each distribution date, the servicer will calculate the amount to be distributed
to certificateholders.
The holders of the Class A Certificates will receive on each distribution
date, to the extent of available funds, an amount equal to the sum of the
related Class A Distributable Amount and any outstanding Class A Interest
Carryover Shortfall and Class A Principal Carryover Shortfall, each as defined
in the Glossary. On each distribution date on which the sum of the Class A
Interest Distributable Amount and any outstanding Class A Interest Carryover
Shortfall from the preceding distribution date exceeds the related Class A
Percentage of the Available Interest after payment of the Total Servicing Fee
including any unpaid Total Servicing Fees related to prior monthly periods the
Class A Certificateholders will be entitled to receive such excess:
- first, from the related Class B Percentage of such Available Interest,
19
- second, if such amounts are insufficient, from amounts on deposit in the
Subordination Spread Account, and
- third, if such amounts are insufficient, from the Class B Percentage of
the Available Principal. (Section 4.06).
For each series of certificates, on each distribution date on which the sum
of the Class A Principal Distributable Amount and any outstanding Class A
Principal Carryover Shortfall from the preceding distribution date exceeds the
Class A Percentage of the Available Principal on that distribution date, the
Class A Certificateholders will be entitled to receive such excess:
- first, from the related Class B Percentage of the Available Principal,
- second, if such amounts are insufficient, from amounts on deposit in the
Subordination Spread Account, and
- third, if such amounts are insufficient, from any remaining Available
Interest. (Section 4.06).
The holders of the Class B Certificates will be entitled to receive on any
distribution date an amount equal to the sum of the related Class B Interest
Distributable Amount and the Class B Principal Distributable Amount and any
shortfalls from prior distribution dates in payments to the Class B
Certificateholders, after giving effect to (1) amounts required to pay the
related Total Servicing Fee payable to the servicer on such distribution date,
and (2) any amounts required to be distributed to the holders of Class A
Certificates pursuant to the subordination of the rights of the holders of such
Class B Certificates. (Section 4.06).
SUBORDINATION OF THE CLASS B CERTIFICATES; SUBORDINATION SPREAD ACCOUNT
The rights of the Class B Certificateholders to receive distributions
relating to the receivables held by the trust will be subordinated to the rights
of the Class A Certificateholders of that series in the event of defaults and
delinquencies on these receivables as provided in the Agreement. The protection
afforded to the Class A Certificateholders will be effected both by the
preferential right of the Class A Certificateholders to receive current
distributions relating to the receivables held by the trust and by the
establishment of a Subordination Spread Account. Each Subordination Spread
Account will be created with an initial deposit by the seller of the applicable
Subordination Initial Deposit and will thereafter be increased by deposits of
amounts otherwise distributable to the Class B Certificateholders of that series
until the amount in such Subordination Spread Account reaches an amount equal to
the applicable Specified Subordination Spread Account Balance. Thereafter,
amounts otherwise distributable to the Class B Certificateholders will be
deposited in the Subordination Spread Account to the extent necessary to
maintain the amount in such Subordination Spread Account at the applicable
Specified Subordination Spread Account Balance. (Section 4.07).
The Specified Subordination Spread Account Balance, for each series of
certificates, on any distribution date, will be the Minimum Subordination Spread
Amount, except that, unless otherwise provided in the accompanying prospectus
supplement, if on any distribution date (1) the average of the Charge-off Rates
for the preceding three months exceeds 2.0% or (2) the average of the
Delinquency Percentages for the preceding three months exceeds 1.5%, then the
Specified Subordination Spread Account Balance for such distribution date will
be an amount equal to a specified percentage of the aggregate Principal Balance.
Such specified
20
percentage shall be determined by deducting the following fraction, expressed as
a percentage of: (A) 1 minus (B) a fraction, the numerator of which is the Class
A Certificate Balance and the denominator of which is the aggregate Principal
Balance. Notwithstanding the foregoing, except as described below, in no event
will any Specified Subordination Spread Account Balance be more than the Maximum
Subordination Spread Amount or less than the Minimum Subordination Spread
Amount. As of any distribution date, the amount of funds actually on deposit in
any Subordination Spread Account may, in certain circumstances, be less than the
applicable Specified Subordination Spread Account Balance. Finally, on any
distribution date on which the Class A Certificate Balance is equal to or less
than the Subordination Spread Trigger, as defined in the accompanying prospectus
supplement, after giving effect to distributions on such distribution date, the
Specified Subordination Spread Account Balance will be the greater of the
applicable balance determined as described above or the Trigger Subordination
Spread Amount, as defined in the accompanying prospectus supplement.
A Subordination Spread Account will not be a part of or otherwise
includable in the trust and will be a segregated trust account held by the
trustee. On each distribution date, for each series of certificates, (1) if the
amounts on deposit in the related Subordination Spread Account are less than the
Specified Subordination Spread Account Balance for such distribution date, the
trustee will, after payment of any amounts required to be distributed to holders
of the Class A Certificates and the payment of the Total Servicing Fee due for
the related monthly period, withdraw from the Certificate Account and deposit in
the Subordination Spread Account the amount remaining in the Certificate Account
that would otherwise be distributed to the holders of the Class B Certificates,
or such lesser portion thereof as is sufficient to bring the amount in that
Subordination Spread Account up to that Specified Subordination Spread Account
Balance and (2) if the amount on deposit in the related Subordination Spread
Account on that distribution date, after giving effect to all deposits or
withdrawals therefrom on that distribution date, is greater than the applicable
Specified Subordination Spread Account Balance for such distribution date, the
trustee will release and distribute any such excess to the holders of the Class
B Certificates. After distribution to the Class B Certificateholders, the Class
A Certificateholders of the series will have no further rights in, or claims to,
these amounts. (Section 4.07).
Amounts held from time to time in each Subordination Spread Account will
continue to be held for the benefit of holders of the certificates. Funds in
each Subordination Spread Account will be invested as provided in the Agreement.
The holders of the Class B Certificates will be entitled to receive all
investment earnings on amounts in the Subordination Spread Account. Investment
income on amounts in any Subordination Spread Account will not be available for
distribution to the holders of the Class A Certificates or otherwise subject to
any claims or rights of the holders of the Class A Certificates. (Section 4.07).
If on any distribution date the holders of the Class A Certificates do not
receive the sum of the related Class A Distributable Amount, Class A Interest
Carryover Shortfall and Class A Principal Carryover Shortfall for that
distribution date, after giving effect to any amounts applied to such deficiency
which were withdrawn from the related Subordination Spread Account or withheld
from the related Class B Distributable Amount, the holders of the Class B
Certificates of that series will not receive any portion of the Total Available
Amount.
The subordination of the Class B Certificates and the Subordination Spread
Account for a trust is intended to enhance the likelihood of receipt by the
Class A Certificateholders of the
21
full amount of principal and interest on the receivables held by the trust due
them and to decrease the likelihood that the Class A Certificateholders will
experience losses. However, in some circumstances, a Subordination Spread
Account could be depleted and shortfalls could result.
So long as specified conditions are satisfied, the servicer is permitted
for administrative convenience to deposit in each Certificate Account only the
net amount distributable to certificateholders on the distribution date.
(Section 4.08). Similarly, the seller is entitled to net its payment obligations
to the trustee against any amounts distributable on the related Class B
Certificates on any distribution date. The amounts available for distribution to
certificateholders as described above could be reduced if indemnification or
reimbursement payments were required to be made from the Certificate Account for
the trust as described under "Monthly Advances," "Changes to Servicer; Servicer
Indemnification and Proceedings" and "The Trustee" in this prospectus.
22
The following chart sets forth an example of the application of the
foregoing provisions to a hypothetical monthly distribution:
<Table>
September 1-September 30............... Monthly Period. The servicer receives
payments and other proceeds in respect
of the receivables.
October 10............................. The tenth calendar day of the month. On
or before this date the servicer
notifies the trustee of, among other
things, the amounts to be distributed
on the distribution date.
October 14............................. Record Date. Distributions on the
distribution date are made to
certificateholders of record at the
close of business on this date. If
definitive certificates are issued, the
Record Date will be September 30.
October 15............................. Distribution Date. On or before this
date, the seller and the servicer or
the trustee make the required
remittances and transfers to the
Collection Account and the Certificate
Account in immediately available funds,
and the trustee pays the Total
Servicing Fee, distributes to holders
of the Class A and Class B Certificates
amounts payable in respect of the
certificates and remits amounts to the
Subordination Spread Account, if
required.
</Table>
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
For each trust, unless otherwise provided in the accompanying prospectus
supplement, the servicer will receive a Total Servicing Fee for each monthly
period equal to the following:
- a basic servicing fee for the prior month equal to one-twelfth of the
Basic Servicing Fee Rate specified in the accompanying prospectus
supplement multiplied by the aggregate Principal Balance of all
receivables held by the trust as of the last day of the preceding monthly
period,
- an additional servicing fee equal to the lesser of:
(1) the amount by which:
(A) the aggregate amount of the basic servicing fees for that
distribution date and all prior distribution dates exceeds
(B) the aggregate amount of additional servicing fees paid to the
servicer on all prior distribution dates, and
(2) the amount, if any, by which:
(A) the sum of Available Interest and Available Principal for that
distribution date exceeds
(B) the sum, without duplication, of (x) all amounts required to be
distributed on the Class A Certificates and the Class B
Certificates on that
23
distribution date, (y) the basic servicing fee paid on that
distribution date and any unpaid basic servicing fees from all
prior distribution dates and (z) the amount, if any, deposited
into the Subordination Spread Account on such distribution
date.
- any unpaid basic servicing fees from all prior distribution dates and the
additional servicing fees, to the extent of funds available therefor.
Unless otherwise provided in the prospectus supplement, the Total Servicing
Fee for each monthly period (together with any portion of the Total Servicing
Fee that remains unpaid from prior distribution dates) may be paid at the
beginning of that monthly period out of collections for such Monthly Period. In
addition, for each trust, the servicer will be entitled to retain the
Supplemental Servicing Fee, representing any late fees, prepayment charges or
certain similar fees and charges collected during the monthly period, plus any
interest earned during the monthly period on deposits in the related Collection
Account and Payment Ahead Servicing Account for the series.
The Total Servicing Fee and the Supplemental Servicing Fee for each series
of certificates is intended to compensate the servicer for performing the
functions of a third party servicer of automobile receivables as an agent for
their beneficial owner, including:
- collecting and posting all payments,
- responding to inquiries of obligors on the receivables,
- investigating delinquencies,
- sending payment coupons to obligors,
- reporting tax information to obligors,
- paying costs of collections and
- policing the collateral.
These amounts will also compensate the servicer for its services as the
receivables pool administrator, including making Monthly Advances, accounting
for collections, furnishing monthly and annual statements to the trustee for
distributions and generating federal income tax information for the trust. These
amounts also will reimburse the servicer for taxes, the trustee's fees,
accounting fees, outside auditor fees, data processing costs and other costs
incurred in connection with administering the pool of receivables relating to a
trust. (Section 3.09).
SERVICING PROCEDURES
The servicer will make reasonable efforts to collect all payments due on
the receivables held by any trust and will, consistent with accompanying
Agreement, follow the collection procedures it follows for comparable automotive
receivables that it services for itself or others. (Section 3.02). See "Legal
Aspects of the Receivables" in this prospectus. The servicer is authorized to
grant rebates, adjustments or extensions on a receivable subject to some
restrictions on amending or modifying receivables, as described under "The
Certificates--Sale and Assignment of Receivables and Warranties Thereon" in this
prospectus. (Sections 3.02 and 3.07).
24
If the servicer determines that eventual payment in full of a receivable is
unlikely, the servicer will follow its normal practices and procedures to
realize upon such receivable, including the repossession and disposition of the
financed vehicle securing such receivable at a public or private sale, or the
taking of any other action permitted by applicable law. (Section 3.04). The
servicer will be entitled to receive Liquidation Expenses as an allowance for
amounts charged to the account of the obligor, in keeping with the servicer's
customary procedures, for refurbishing and disposition of the financed vehicle
and other out-of-pocket costs incurred in the liquidation. (Section 3.04).
REPORTS TO CLASS A CERTIFICATEHOLDERS
For each series of certificates, on each distribution date, the trustee
will include with each distribution to each Class A Certificateholder, which
will be Cede & Co. as the nominee for DTC unless definitive certificates are
issued under the limited circumstances described in this prospectus, a statement
setting forth the following information with respect to the prior monthly
period, to the extent applicable (Section 4.09(a)):
(1) the amount of the distribution allocable to principal;
(2) the amount of the distribution allocable to interest;
(3) the aggregate Principal Balance as of the close of business on the
last day of the prior monthly period;
(4) the amount of the Total Servicing Fee paid to the servicer for the
prior monthly period and the certificateholder's Class A Percentage of the
Total Servicing Fee;
(5) the amount of the Class A Interest Carryover Shortfall and Class A
Principal Carryover Shortfall, if any, on that distribution date and the
change in those amounts from the prior distribution date;
(6) the Class A Pool Factor on that distribution date after giving
effect to payments allocated to principal reported under (1) above;
(7) the amount otherwise distributable to the Class B
Certificateholders that is distributed to Class A Certificateholders on
that distribution date;
(8) the balance of the Subordination Spread Account on that
distribution date, after giving effect to distributions made on that
distribution date, and the change in such balance from that of the prior
distribution date;
(9) the aggregate amount in the Payment Ahead Servicing Account or on
deposit with the servicer as Payments Ahead and the change in such amount
from the previous distribution date; and
(10) the amount of Monthly Advances on that distribution date.
Each amount set forth pursuant to subclauses (1), (2), (4) and (5) above
will be expressed as a dollar amount per $1,000 of original principal balance of
a Class A Certificate.
Within the prescribed period of time for tax reporting purposes after the
end of each calendar year during the term of each Agreement, the trustee will
mail to each person who at any time during that calendar year will have been a
Class A Certificateholder, a statement containing the sum of the amounts
described in (1), (2), (4) and (5) above for the purposes
25
of that Class A Certificateholder's preparation of federal income tax returns.
(Section 4.09(b)). See "Federal Income Tax Consequences" in this prospectus.
EVIDENCE AS TO COMPLIANCE
Each Agreement will provide that a firm of independent accountants will
furnish to the trustee on or before August 15 of each year, beginning the first
August 15 which is at least twelve months after the closing date, a statement as
to compliance by the servicer during the preceding twelve months ended June 30
with standards relating to the servicing of the receivables held by the trust,
the servicer's accounting records and computer files relating to those
receivables and specified other matters. (Section 3.12).
Each Agreement will also provide for delivery to the trustee, on or before
August 15 of each year, beginning the first August 15 which is at least twelve
months after the closing date, of a certificate signed by an officer of the
servicer stating that the servicer has fulfilled its obligations under the
Agreement throughout the preceding twelve months ended June 30 or, if there has
been a default in the fulfillment of an obligation, describing each default. The
certificate may be provided as a single certificate making the required
statements as to more than one Agreement. (Section 3.11).
Copies of the statements and certificates may be obtained by
certificateholders by a request in writing to the trustee addressed to the
Corporate Trust Office. (Section 3.11(a)).
In each Agreement, the seller will agree to give the trustee notice of any
event which with the giving of notice or the lapse of time, or both, would
become a Servicer Default as defined in Section 8.01 of each Agreement. In
addition, the seller will agree to give the trustee and the trust notice of
specified covenant breaches which with the giving of notice or lapse of time, or
both, would become a Servicer Default. (Section 3.11(b)).
CHANGES TO SERVICER; SERVICER INDEMNIFICATION AND PROCEEDINGS
Each Agreement will provide that GMAC may not resign from its obligations
and duties as the servicer under that Agreement, except upon determination that
GMAC's performance of these duties is no longer permissible under applicable
law. No resignation will become effective until the trustee or a successor
servicer has assumed GMAC's servicing obligations and duties under the
Agreement. (Section 7.05).
Each Agreement will further provide that neither the servicer nor any of
its directors, officers, employees and agents will be under any liability to the
trust or the certificateholders for taking any action or for refraining from
taking any action pursuant to the Agreement or for errors in judgment. Neither
the servicer nor any of these persons will be protected against any liability
that would otherwise be imposed by reason of wilful misfeasance, bad faith or
negligence--except errors in judgment--in the performance of the servicer's
duties thereunder or by reason of reckless disregard of its obligations and
duties thereunder. Each Agreement will further provide that the servicer and its
directors, officers, employees and agents will be reimbursed by the trustee for
any contractual damages, liability or expense incurred by reason of the
trustee's wilful misfeasance, bad faith or negligence--except errors in
judgment--in the performance of the trustee's duties under the Agreement or by
reason of reckless disregard of its obligations and duties under the Agreement.
In addition, each Agreement will provide that the servicer is under no
obligation to appear in, prosecute or defend any legal action that is not
incidental to the servicer's servicing responsibilities under the Agreement and
that, in its opinion, may cause it to incur any expense or liability. The
26
servicer may, however, undertake any reasonable action that it may deem
necessary or desirable in respect of the Agreement and the rights and duties of
the parties thereto and the interests of the certificateholders thereunder. If
the Servicer undertakes any action, the legal expenses and costs of the action
and any liability resulting therefrom will be expenses, costs and liabilities of
the trust, and the servicer will be entitled to be reimbursed out of the
Certificate Account. Any such indemnification or reimbursement will reduce the
amount otherwise available for distribution to certificateholders. (Section
7.03).
Under the circumstances specified in each Agreement, any entity into which
the servicer or the seller, as the case may be, may be merged or consolidated,
or any entity resulting from any merger, conversion or consolidation to which
the servicer or the seller, as the case may be, is a party, or any entity
succeeding to the business of the servicer or the seller, as the case may be or
for its obligations as servicer, any entity 50% or more of the voting interests
of which are owned, directly or indirectly, by General Motors, which entity in
each of the foregoing cases assumes the obligations of the servicer or the
seller, as the case may be, will be the successor of the servicer or the seller,
as the case may be, under each Agreement. (Sections 6.02 and 7.02). The servicer
may at any time subcontract any duties as servicer under any Agreement to any
entity more than 50% of the voting interests of which are owned, directly or
indirectly, by General Motors. The servicer may at any time perform specific
duties as servicer through subcontractors who are in the business of servicing
receivables similar to the receivables, provided that no delegation will relieve
the servicer of its responsibility for these duties. (Section 7.04).
SERVICER DEFAULT
Except as otherwise provided in the accompanying prospectus supplement,
Servicer Defaults under each Agreement will consist of:
(1) any failure by the servicer to make any required distribution,
payment, transfer or deposit or to direct the trustee to make any required
distribution, which failure continues unremedied for five business days
after receipt by the servicer of notice of the failure from the trustee or
discovery of the failure by an officer of the servicer;
(2) any failure by the seller or the servicer to observe or perform in
any material respect any other of its covenants or agreements in the
Agreement which failure materially and adversely affects the rights of
certificateholders and which continues unremedied for 90 days after the
giving of written notice of the failure to the seller, by the trustee or to
the seller and the trustee by the holders of Class A Certificates
evidencing not less than 25% of the voting interests thereof;
(3) any representation, warranty or certification made by the servicer
in the Agreement or in any certificate required to be delivered under the
Agreement proves to have been incorrect when made and which has a material
adverse effect on the rights of the Securityholders and which effect
continues unremedied for a period of 60 days after the giving of written
notice thereof to the servicer by the trustee; or
(4) events of bankruptcy insolvency or receivership of the servicer.
(Section 8.01).
Notwithstanding the foregoing, there will be no Servicer Default where a
Servicer Default would otherwise exist under clause (1) above for a period of
ten Business Days or under clause (2) for a period of 60 days if the delay or
failure giving rise to the Servicer Default was caused by an act of God or other
similar occurrence. Upon the occurrence of any of these events, the servicer
will not be relieved from using reasonable efforts to perform its
27
obligations in a timely manner in accordance with the terms of the Agreement and
the servicer will provide the trustee, the seller and the certificateholders
prompt notice of the failure or delay by it, together with a description of its
efforts to so perform its obligations.
RIGHTS UPON SERVICER DEFAULT
As long as a Servicer Default under an Agreement remains unremedied, the
trustee or holders of Class A Certificates evidencing at least a majority of the
voting interests of the Class A Certificates may terminate all of the rights and
obligations of the servicer under an Agreement. If the rights and obligations of
the servicer are terminated, the trustee will succeed to all the
responsibilities, duties and liabilities of the servicer under the Agreement and
will be entitled to similar compensation arrangements. If, however, a bankruptcy
trustee or similar official has been appointed for the servicer, and no Servicer
Default other than the appointment has occurred, the trustee or official may
have the power to prevent the trustee or the certificateholders from effecting a
transfer of servicing. If the trustee is unwilling to act, then it may and if it
is unable to so act, it shall appoint, or petition a court of competent
jurisdiction for the appointment of, a successor having a net worth of at least
$100,000,000 and whose regular business includes the servicing of automobile
receivables and which satisfies the other criteria set forth in the Agreement.
The trustee and such successor may agree upon the servicing compensation to be
paid, which in no event may be greater than the servicing compensation to the
servicer under the Agreement. (Sections 8.02 and 8.03).
WAIVER OF PAST DEFAULTS
For each trust, the holders of Class A Certificates evidencing at least a
majority of the voting interests of the Class A Certificates may waive any
default by the servicer in the performance of its obligations under the
Agreement and its consequences. However, the holders of Class A Certificates
cannot waive a default in making any required deposits to or payments from the
Collection Account or Certificate Account in accordance with the Agreement. No
waiver will impair the rights of the trustee or the certificateholders regarding
subsequent defaults. (Section 8.05).
AMENDMENT
Each Agreement may be amended by the seller, the servicer and the trustee
without the consent of the Class A Certificateholders:
- to cure any ambiguity;
- to correct or supplement any provision of the Agreement that may be
defective or inconsistent with any other provision of the Agreement;
- to add or supplement any credit, liquidity or other enhancement
arrangement for the benefit of certificateholders;
- to add to the covenants, restrictions or obligations of the seller,
the servicer or the trustee for the benefit of certificateholders;
or
- to add, change or eliminate any other provisions of the Agreement in
any manner that will not, as evidenced by an opinion of counsel,
adversely affect in any material respect the interests of the
certificateholders.
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Each Agreement may also be amended by parties thereto with the consent of
the holders of certificates evidencing at least a majority of the voting
interests of each class of certificates for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of the
Agreement or of modifying in any manner the rights of certificateholders. No
amendment may:
- increase or reduce in any manner the amount of, or accelerate or
delay the timing of, distributions of payments that are required to
be made on any related certificate, the applicable Pass Through Rate
or the applicable Specified Subordination Spread Account Balance;
- adversely affect the rating by any rating agency of the certificates
without the consent of holders of certificates evidencing at least
two-thirds of the voting interests of the outstanding certificates;
or
- reduce the aforesaid percentage required of certificateholders to
consent to any amendment without the consent of all
certificateholders. (Section 11.01).
TERMINATION
For each trust, the respective obligations of the seller, the servicer and
the trustee created by each Agreement will terminate upon the distribution to
the certificateholders of all amounts required to be distributed to them
pursuant to that Agreement. In order to avoid excessive administrative expense,
the servicer, or its successor, is permitted at its option to purchase from each
trust, as of the last day of any monthly period as of which the aggregate
Principal Balance of all receivables held by that trust is equal to or less than
10% of the Aggregate Amount Financed, all remaining receivables and other trust
assets. This purchase is at the option of the servicer, or its successor, and
would occur as of the last day of any monthly period. This purchase price paid
by the servicer, or its successor, would be equal to the aggregate
Administrative Purchase Payments for these receivables plus the appraised value
of any other property held as part of such trust less Liquidation Expenses.
However, in no event may this purchase price be less than the unpaid balance of
the certificates plus accrued and unpaid interest thereon, as determined as of
the end of that monthly period. Exercise of this right and the subsequent
distribution to certificateholders of all amounts required to be distributed to
them pursuant to the Agreement will effect early retirement of these
certificates. The trustee will give written notice of termination to each
certificateholder of record. The final distribution to any certificateholder
will be made only upon surrender and cancellation of that certificateholder's
certificate at an office or agency of the trustee specified in the notice of
termination. (Sections 10.01 and 10.02).
DUTIES OF THE TRUSTEE
The trustee will make no representations as to the validity or sufficiency
of any Agreement, the certificates or any receivables or documents. The trustee
will not be accountable for the use or application by the seller or the servicer
of any funds paid to the seller or the servicer in respect of the certificates
or the receivables, or the investment of any monies by the servicer before
monies are deposited into the related Certificate Account. The trustee will not
independently verify any receivables. If no Servicer Default has occurred, the
trustee will be required to perform only those duties specifically required of
it under the applicable Agreement. Generally, those duties will be limited to
the receipt of the various certificates, reports or other instruments required
to be furnished to the trustee, in which case
29
it will only be required to examine them to determine whether they conform to
the requirements of the Agreement. (Sections 9.01 and 9.05).
THE TRUSTEE
The accompanying prospectus supplement will specify the entity that will be
the trustee for each trust. The trustee and any of its affiliates may hold
certificates in their own names. In addition, for the purpose of meeting the
legal requirements of certain local jurisdictions, the trustee, with the consent
of the servicer, will have the power to appoint co-trustees or separate trustees
of all or any part of each trust. If co-trustees or separate trustees are
appointed, all rights, powers, duties and obligations conferred or imposed upon
the trustee by an Agreement will be conferred or imposed upon the trustee and
the separate trustee or co-trustee jointly, or, in any jurisdiction in which the
trustee will be incompetent or unqualified to perform certain acts, singly upon
the separate trustee or co-trustee who will exercise and perform such rights,
powers, duties and obligations solely at the direction of the trustee. (Section
9.12).
The trustee will be under no obligation to exercise any of the trusts or
powers vested in it by an Agreement or to make any investigation of matters
arising under an Agreement. The trustee will also be under no obligation to
institute, conduct or defend any litigation under, or in relation to, an
Agreement at the request, order or direction of any of the certificateholders,
unless such certificateholders have offered to the trustee reasonable security
or indemnity against the costs, expenses and liabilities which may be incurred
in connection with any investigation or litigation. (Section 9.04). No
certificateholder will have any right under an Agreement to institute any
proceeding relating to an Agreement, unless that holder previously has given to
the trustee written notice of default and unless the holders of Class A
Certificates evidencing not less than 25% of the voting interests of the series
have made written request upon the trustee to institute the proceeding in its
own name as trustee under an Agreement and have offered to the trustee
reasonable indemnity and the trustee for 30 days has neglected or refused to
institute any proceedings. (Section 11.03).
The trustee may give notice of its intent to resign at any time, in which
event the servicer will be obligated to appoint a successor trustee. The
servicer may also remove the trustee if the trustee ceases to be eligible to
continue as the trustee under the Agreement or if the trustee becomes insolvent
or unable to act. In these circumstances, the servicer will be obligated to
appoint a successor trustee. Any resignation or removal of the trustee and
appointment of a successor trustee will not become effective until acceptance of
the appointment by the successor trustee. (Section 9.09).
Each Agreement will provide that the servicer will pay the trustee's fees.
(Section 9.07). Each Agreement will further provide that the trustee will be
entitled to indemnification by the servicer for, and will be held harmless
against, any loss, liability or expense incurred by the trustee in the
acceptance or performance of its duties under the Agreement. The trustee will
not be indemnified against any loss, liability or expense incurred by the
trustee through its own wilful misfeasance, bad faith or negligence, other than
errors in judgment, or by reason of a breach of any of its representations or
warranties set forth in the Agreement. (Sections 6.01, 7.01 and 9.07). Any
indemnification of the trustee by a trust will reduce the amount otherwise
available for distribution to certificateholders.
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LEGAL ASPECTS OF THE RECEIVABLES
SECURITY INTEREST IN VEHICLES
In all states in which the receivables are originated, retail instalment
sale contracts such as the receivables evidence the credit sale of automobiles
and light trucks by dealers to purchasers. The contracts also will constitute
personal property security agreements and include grants of security interests
in the vehicles under the Uniform Commercial Code. Perfection of security
interests in the vehicles is generally governed by the motor vehicle
registration laws of the state in which the vehicle is located. In all states in
which the receivables are originated, a security interest in a vehicle is
perfected by notation of the secured party's lien on the vehicle's certificate
of title.
For each trust, pursuant to the purchase agreement for each trust, GMAC
will assign its security interest in the financed vehicles securing the
receivables to the seller and the seller will assign its security interest in
the financed vehicles securing the receivables to the trust. However, because of
the administrative burden and expense, no certificate of title will be amended
to identify the trust as the new secured party in the financed vehicle. Also,
the servicer will continue to hold any certificates of title relating to the
vehicles in its possession as custodian for the seller and the trustee pursuant
to the Custodian Agreement. See "The Certificates--Sale and Assignment of
Receivables and Warranties Thereon" in this prospectus.
In most states, an assignment of the nature contained in each purchase
agreement and Agreement is an effective conveyance of a security interest
without amendment of any lien noted on a vehicle's certificate of title, and the
assignee succeeds by the assignment to the assignor's rights as secured party.
In the absence of fraud or forgery by the vehicle owner or GMAC or
administrative error by state or local agencies, in most states the notation of
the servicer's lien on the certificates of title will be sufficient to protect
the trust against the rights of subsequent purchasers of a financed vehicle from
an obligor or subsequent lenders to an obligor who take a security interest in a
financed vehicle. If there are any financed vehicles as to which GMAC failed to
obtain a perfected security interest, its security interest would be subordinate
to, among others, subsequent purchasers of the financed vehicles and holders of
perfected security interests. This failure, however, would constitute a breach
of GMAC's warranties under the purchase agreement and, if the interests of the
certificateholders in the receivable are materially and adversely affected,
would create an obligation of GMAC to repurchase that receivable unless the
breach is cured. See "The Certificates--Sale and Assignment of Receivables and
Warranties Thereon" in this prospectus. Similarly, the security interest of the
trust in the vehicle could be defeated through fraud or negligence and, because
the trust is not identified as the secured party on the certificate of title, by
the bankruptcy petition of the obligor.
Under the laws of most states, the perfected security interest in a vehicle
would continue for four months after a vehicle is moved to a state other than
the state in which it is initially registered and thereafter until the vehicle
owner re-registers the vehicle in the new state. A majority of states generally
require surrender of a certificate of title to re-register a vehicle.
Accordingly, a secured party must surrender possession if it holds the
certificate of title to the vehicle or, in the case of vehicles registered in
states providing for the notation of a lien on the certificate of title but not
possession by the secured party, the secured party would receive notice of
surrender if the security interest is noted on the certificate of title. Thus,
the secured party would have the opportunity to re-perfect its security interest
in the vehicles in the state of relocation. In states that do not require
surrender of a certificate of title for registration of a
31
motor vehicle, re-registration could defeat perfection. In the ordinary course
of servicing receivables, the servicer takes steps to effect re-perfection upon
receipt of notice of re-registration or information from the obligor as to
relocation. Similarly, when an obligor sells a vehicle, the servicer must
surrender possession of the certificate of title or will receive notice as a
result of its lien noted thereon and accordingly will have an opportunity to
require satisfaction of the receivable before release of the lien. Under each
Agreement, the servicer will be obligated to take appropriate steps, at the
servicer's expense, to maintain perfection of security interests in the financed
vehicles.
Under the laws of most states, liens for repairs performed on a motor
vehicle and liens for unpaid taxes take priority over even a perfected security
interest in a financed vehicle. The Internal Revenue Code also grants priority
to some federal tax liens over the lien of a secured party. The laws of some
states and federal law permit the confiscation of motor vehicles by governmental
authorities under some circumstances if used in unlawful activities, which may
result in the loss of a secured party's perfected security interest in the
confiscated motor vehicle. Under each Agreement, GMAC will have represented to
the seller that, as of the closing date, each receivable is or will be secured
by a first perfected security interest in favor of GMAC in the financed vehicle.
The seller will have assigned the representation, among others, to the trust
pursuant to the Agreement. However, liens for repairs or taxes, or the
confiscation of a financed vehicle, could arise at any time during the term of a
receivable. No notice will be given to the trustee or certificateholders if a
lien or confiscation arises.
REPOSSESSION
In the event of default by vehicle purchasers, the holder of the retail
instalment sale contract has all the remedies of a secured party under the
Uniform Commercial Code, except where specifically limited by other state laws.
Among Uniform Commercial Code remedies, the secured party has the right to
perform self-help repossession unless the act would constitute a breach of the
peace. Self-help is the method employed by the servicer in most cases and is
accomplished simply by taking possession of the financed vehicle. In the event
of default by the obligor, some jurisdictions require that the obligor be
notified of the default and be given a time period within which the obligor may
cure the default prior to repossession. Generally, this right of reinstatement
may be exercised on a limited number of occasions in any one-year period. In
cases where the obligor objects or raises a defense to repossession, or if
otherwise required by applicable state law, a court order must be obtained from
the appropriate state court and the vehicle must then be repossessed in
accordance with that order. A secured party may be held responsible for damages
caused by a wrongful repossession of a vehicle.
NOTICE OF SALE; REDEMPTION RIGHTS
The Uniform Commercial Code and other state laws require the secured party
to provide the obligor with reasonable notice of the date, time and place of any
public sale and/or the date after which any private sale of the collateral may
be held. In addition, the FTC Repossession Consent Order imposes similar
requirements for the giving of notice for any sale. The obligor has the right to
redeem the collateral prior to actual sale by paying the secured party the
unpaid principal balance of the obligation plus reasonable expenses for
repossessing, holding and preparing the collateral for disposition and arranging
for its sale, plus, in some jurisdictions, reasonable attorneys' fees, or, in
some states, by payment of delinquent installments or the unpaid balance.
32
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of the financed vehicles generally will be applied
first to the expenses of resale and repossession and then to the satisfaction of
the indebtedness. In many instances, the remaining principal amount of the
indebtedness will exceed the proceeds. While some states impose prohibitions or
limitations on deficiency judgments if the net proceeds from resale do not cover
the full amount of the indebtedness, a deficiency judgment can be sought in
those states that do not prohibit or limit these judgments. However, the
deficiency judgment would be a personal judgment against the obligor for the
shortfall, and a defaulting obligor can be expected to have very little capital
or sources of income available following repossession. Therefore, in many cases,
it may not be useful to seek a deficiency judgment or, if one is obtained, it
may be settled at a significant discount.
Occasionally, after resale of a vehicle and payment of all expenses and all
indebtedness, there is a surplus of funds. In that case, the Uniform Commercial
Code requires the creditor to remit the surplus to any holder of a lien on the
vehicle or if no lienholder exists or there are remaining funds, the Uniform
Commercial Code and the FTC Repossession Consent Order require the creditor to
remit the surplus to the former owner of the vehicle.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and regulations impose
substantial requirements upon lenders and servicers involved in consumer
finance. These laws include the Truth-in-Lending Act, the Equal Credit
Opportunity Act, the Federal Trade Commission Act, the Fair Credit Reporting
Act, the Fair Debt Collection Practices Act, the Magnuson-Moss Warranty Act, the
Federal Reserve Board's Regulations B and Z, the Soldiers' and Sailors' Civil
Relief Act of 1940, the Texas Consumer Credit Code, state adaptations of the
National Consumer Act and of the Uniform Consumer Credit Code and state sales
finance and other similar laws. Also, state laws impose finance charge ceilings
and other restrictions on consumer transactions and require contract disclosures
in addition to those required under federal law. These requirements impose
specific statutory liabilities upon creditors who fail to comply with their
provisions. In some cases, this liability could affect an assignee's ability to
enforce consumer finance contracts, including the receivables. If a seller of a
receivable is not liable for indemnifying the related trust as assignee of the
receivables from the seller, failure to comply could impose liability on an
assignee in excess of the amount of the receivable.
The so called "holder-in-due-course" rule of the Federal Trade Commission,
the provisions of which are generally duplicated by the Uniform Commercial Code,
other state statutes or the common law, has the effect of subjecting a seller in
a consumer credit transaction, and some related creditors and their assignees,
to all claims and defenses which the obligor in the transaction could assert
against the seller. Liability under the holder-in-due-course rule is limited to
the amounts paid by an obligor under the contract, and the holder of the
contract may also be unable to collect any balance remaining due under the
contract from the obligor.
Most of the receivables held by any trust will be subject to the
requirements of the holder-in-due-course rule. Accordingly, the trustee, as
holder of the receivables, will be subject to any claims or defenses that the
purchaser of the financed vehicle may assert against the seller of the financed
vehicle. These claims are limited to a maximum liability equal to the amounts
paid by the obligor on the receivable. If an obligor were successful in
asserting these claims or defenses, these claims or defenses would constitute a
breach of GMAC's warranties under the applicable Agreement and may create an
obligation of GMAC to repurchase the
33
receivables unless the breach is cured in all material respects. See "The
Certificates--Sale and Assignment of the Receivables and Warranties Thereon" in
this prospectus.
Courts have imposed general equitable principles upon secured parties
pursuing repossession and litigation involving deficiency balances. These
equitable principles may have the effect of relieving an obligor from some or
all of the legal consequences of a default.
In several cases, consumers have asserted that the self-help remedies of
secured parties under the Uniform Commercial Code and laws violate the due
process protections provided under the 14th Amendment to the Constitution of the
United States. Courts have generally upheld the notice provisions of the Uniform
Commercial Code and laws as reasonable or have found that the repossession and
resale by the creditor does not involve sufficient state action to afford
constitutional protection to consumers.
Under each purchase agreement, GMAC will represent to the seller that each
receivable complies with all requirements of law in all material respects. The
seller will assign the representation, among others, to the trust. Accordingly,
if an obligor has a claim against the trust for violation of any law and that
claim materially and adversely affects the trust's interest in a receivable, the
violation may constitute a breach and would create an obligation of GMAC to
repurchase the receivable unless the breach is cured in all material respects.
See "The Certificates--Sale and Assignment of the Receivables and Warranties
Thereon" in this prospectus.
OTHER LIMITATIONS
In addition to laws limiting or prohibiting deficiency judgments, numerous
other statutory provisions, including federal bankruptcy laws and state laws,
may interfere with or affect the ability of a secured party to realize upon
collateral or to enforce a deficiency judgment. For example, in a Chapter 13
proceeding under the federal bankruptcy law, a court may prevent a creditor from
repossessing the financed vehicle, and, as part of the rehabilitation plan,
reduce the amount of the secured indebtedness to the market value of the
financed vehicle at the time of bankruptcy, leaving the creditor as a general
unsecured creditor for the remainder of the indebtedness. A bankruptcy court may
also reduce the monthly payments due under a contract or change the rate of
finance charge and time of repayment of the indebtedness.
TRANSFERS OF VEHICLES
The receivables prohibit the sale or transfer of a financed vehicle without
the servicer's consent and will permit the servicer to accelerate the maturity
of the receivable upon a sale or transfer without the servicer's consent. The
servicer will not consent to a sale or transfer and will require prepayment of
the receivable. Although the servicer, as agent of the trustee, may enter into a
transfer of equity agreement with the secondary purchaser for the purpose of
effecting the transfer of the vehicle, the new obligation will not be included
in the pool of receivables.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the material federal income tax consequences of
the purchase, ownership and disposition of the Class A Certificates, to the
extent it relates to matters of law or legal conclusions with respect thereto,
represents the opinion of Tax Counsel
34
to each trust with respect to the related Class A Certificates on the material
matters associated with such consequences, subject to the qualifications set
forth in this prospectus and the accompanying prospectus supplement. In
addition, Tax Counsel has prepared or reviewed the statements in this prospectus
under the heading "Federal Income Tax Consequences," and is of the opinion that
such statements are correct in all material respects. Such statements are
intended as an explanatory discussion of the related tax matters affecting Class
A Certificateholders generally, but do not purport to furnish information in the
level of detail or with the attention to a Class A Certificateholder's specific
tax circumstances that would be provided by a Class A Certificateholder's own
tax advisor. This discussion is based upon current provisions of the Code,
existing and proposed Treasury Regulations under the Code, current
administrative rulings, judicial decisions and other applicable authorities.
There are no cases or IRS rulings on similar transactions involving equity
interests issued by a trust with terms similar to those of the Class A
Certificates. As a result, there can be no assurance that the IRS will not
challenge the conclusions reached in this prospectus, 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 in this prospectus as well as the tax consequences to
Class A Certificate Owners.
The following discussion does not purport to deal with all aspects of
federal income taxation that may be relevant to the Class A Certificate Owners
in light of their personal investment circumstances nor, except for certain
limited discussions of particular topics, to holders subject to special
treatment under the federal income tax laws, e.g., financial institutions,
broker-dealers, life insurance companies and tax-exempt organizations.
Additionally, this information is directed to prospective purchasers who
purchase Class A Certificates in the initial distribution, who are citizens or
residents of the United States, including domestic corporations and
partnerships, and who hold the Class A Certificates as "capital assets" within
the meaning of Section 1221 of the Code. We suggest that you consult with your
tax advisors as to the federal, state, local, foreign and any other tax
consequences to them of the purchase, ownership and disposition of Class A
Certificates.
TAX STATUS OF THE TRUST
In the opinion of Tax Counsel, each trust will be classified as a grantor
trust and not as an association taxable as a corporation for federal income tax
purposes. Subject to the discussion below under "Treatment of Fees or Payments,"
each Class A Certificate Owner will be treated as the owner of a pro rata
undivided interest in the applicable Class A Percentage of the ordinary income
and corpus portions of the applicable trust.
INCOME OF CERTIFICATE OWNERS
Subject to the discussion below under "Treatment of Fees or Payments," in
the opinion of Tax Counsel, each Class A Certificate Owner will be required to
report on its federal income tax return, in a manner consistent with its method
of accounting, its pro rata share of the applicable Class A Percentage of the
entire income from the receivables and any other property in the trust for the
period during which it owns a Class A Certificate, including interest or finance
charges earned on the receivables held by the trust and any gain or loss upon
collection or disposition of the receivables. A Class A Certificate Owner using
the cash method of accounting should take into account its pro rata share of
income as and when received by the trustee. A Class A Certificate Owner using an
accrual method of accounting
35
should take into account its pro rata share of income as it accrues or is
received by the trustee, whichever is earlier.
Assuming the market discount rules do not apply to the receivables, the
portion of each monthly payment to a Class A Certificate Owner that is allocable
to principal will represent a recovery of capital, which will reduce the tax
basis of the Class A Certificate Owner's undivided interest in the receivables.
In computing its federal income tax liability, a Class A Certificate Owner
generally will be entitled to deduct, consistent with its method of accounting,
its pro rata share of reasonable servicing fees and other fees paid or incurred
by the applicable trust as provided in Section 162 or 212 of the Code. However,
if a Class A Certificate Owner is an individual, estate or trust, the deduction
for its pro rata share of such fees will be subject to certain limitations.
In particular, the deduction, taken together with all of such person's
other miscellaneous itemized deductions, will be allowed, for regular tax
purposes, only to the extent that all of such person's miscellaneous itemized
deductions, including such person's share of such fees, exceed 2% of such
person's adjusted gross income, including any income from the certificates. In
addition, in the case of Class A Certificate Owners who are individuals certain
otherwise allowable itemized deductions will be reduced, but not by more than
80%, by an amount equal to 3% of the Class A Certificate Owner's adjusted gross
income in excess of a statutorily defined threshold.
The deduction will not be allowed for alternative minimum tax purposes.
Because the trustee will not report to Class A Certificate Owners the amount of
income or deductions attributable to the Surplus Interest, Supplemental
Servicing Fee or Prepayment Surplus, a Class A Certificate Owner who is an
individual, estate or trust may effectively underreport its net taxable income.
See "Treatment of Fees and Payments" below for a discussion of other possible
consequences if amounts paid to the servicer exceed reasonable compensation for
services rendered.
TREATMENT OF FEES OR PAYMENTS. It is expected that income will be reported
to Class A Certificate Owners on the assumption that the Class A Certificate
Owners own a 100% interest in the applicable Class A Percentage of all of the
principal and interest derived from the related receivables. However, a portion
of the amounts paid to the servicer or the seller may exceed reasonable fees for
services rendered. There are no authoritative guidelines, for federal income tax
purposes, as to the maximum amount of compensation that may be considered
reasonable for servicing the receivables or performing other services in the
context of this or similar transactions; accordingly, Tax Counsel is unable to
give an opinion on this issue. If amounts paid to the servicer or the seller
exceed reasonable compensation for services provided, the servicer or the seller
or both may be viewed as having retained, for federal income tax purposes, an
ownership interest in a portion of each interest payment on some receivables. As
a result, these receivables may be treated as "stripped bonds" within the
meaning of the Code.
To the extent that the receivables are characterized as "stripped bonds,"
the income of the trust allocable to Class A Certificate Owner would not include
the portion of the interest on the receivables treated as having been retained
by the servicer or the seller, as the case may be, and the trust's deductions
would be limited to reasonable servicing fees and other fees. In addition, a
Class A Certificate Owner purchasing certificates in the initial distribution
thereof would not be subject to the market discount and premium rules discussed
below relating to stripped receivables, but instead would be subject to the OID
rules of the Code.
36
If the price at which a Class A Certificate Owner were deemed to have
acquired a receivable is less than the remaining principal balance of that
receivable by an amount which is less than a statutorily defined de minimis
amount, the receivable would not be treated as having OID. In general, it
appears that the amount of OID on a receivable will be de minimis if it is less
than 1/4 of 1% for each full year remaining after the purchase date until the
final maturity of the receivable, although the IRS could take the position that
the weighted average maturity date, rather than the final maturity date, should
be used in performing this calculation. If the amount of OID is de minimis under
this rule, the actual amount of OID on the receivable would be includable in
income as principal payments are received on the receivable.
If the OID on a receivable were not treated as de minimis, a Class A
Certificate Owner would be required to include any such OID in income as it
accrues, regardless of when cash payments are received, using a method
reflecting a constant yield on the receivables. Moreover, the IRS could assert
that a prepayment assumption should be used in computing the yield to maturity
of a receivable. If a receivable is deemed to be acquired by a Class A
Certificate Owner at a significant discount, the use of a prepayment assumption
could accelerate the accrual of income by a Class A Certificate Owner. No
representation is made, nor is Tax Counsel able to give an opinion, that the
receivable will prepay at any particular rate. It is also possible that any fees
deemed to be excessive could be recharacterized as deferred purchase price
payable to the seller by Class A Certificate Owners in exchange for the
receivables. The likely effect of such recharacterization would be to increase
current taxable income to a Class A Certificate Owner.
Discount Premium. The following discussion generally assumes that the fees
and other amounts payable to the servicer and the seller will not be
recharacterized as being retained ownership interests in the receivables, as
discussed above. A purchaser of a Class A Certificate should be treated as
purchasing an interest in each receivable and any other property in the trust at
a price determined by allocating the purchase price paid for the Class A
Certificate among the receivables and other property in proportion to their fair
market values of the time of purchase of the Class A Certificate. It is believed
that the receivables were not and will not be issued with OID, and, therefore, a
trust should not have OID income. However, the purchase price paid by a trust
for the receivables may be greater or less than the remaining principal balance
of the receivables to be sold to that trust at the time of purchase. If so, the
receivables will have been acquired at a premium or market discount, as the case
may be. The market discount on a receivable will be considered to be zero if it
is less than the statutorily defined de minimis amount.
Any gain on the sale of a Class A Certificate attributable to the Class A
Certificate Owner's share of unrecognized accrued market discount on the
receivables would generally be treated as ordinary income to the holder and
would give rise to special tax reporting requirements. Moreover, a holder who
acquires a Class A Certificate representing an interest in receivables acquired
at a market discount may be required to defer a portion of any interest expense
otherwise deductible on indebtedness incurred or maintained to purchase or carry
the Class A Certificate until the holder disposes of the Class A Certificate in
a taxable transaction. Instead of recognizing market discount, if any, upon a
disposition of a Class A Certificate and deferring any applicable interest
expense, a holder may elect to include market discount in income currently as
the discount accrues. The current inclusion election, once made, applies to all
market discount obligations acquired on or after the first day of the first
taxable year to which the election applies and may not be revoked without the
consent of the IRS.
37
In the event that a receivable held by any trust is treated as purchased at
a premium, the premium will be amortizable by a Class A Certificate Owner as an
offset to interest income, with a corresponding reduction in the Class A
Certificate Owner's basis, under a constant yield method over the term of the
receivable if an election under Section 171 of the Code is made. Any election
under Section 171 of the Code will apply to all debt instruments held by the
Class A Certificate Owner during the year in which the election is made and to
all debt instruments acquired thereafter.
SALE OF A CLASS A CERTIFICATE. Generally, capital gain or loss will be
recognized on a sale of Class A Certificates in an amount equal to the
difference between the amount realized and the seller's tax basis in the Class A
Certificates sold. A Class A Certificate Owner's tax basis in a Class A
Certificate will generally equal the seller's cost increased by any OID or
market discount previously included in income, and decreased by any bond premium
previously amortized and by the amount of principal payments previously received
on the receivables held by the trust. Any gain on the sale of a Class A
Certificate attributable to the holder's share of unrecognized accrued market
discount on the receivables would generally be treated as ordinary income to the
Class A Certificate Owner, unless the Class A Certificate Owner makes the
special election described under "Discount and Premium" above.
If a Class A Certificate Owner is required to recognize an aggregate amount
of income, not including income attributable to disallowed itemized deductions
described above, over the life of the Class A Certificates that exceeds the
aggregate cash distributions, that excess will generally give rise to a capital
loss upon the retirement of the Class A Certificates.
BACKUP WITHHOLDING
Payments made on Class A Certificates and proceeds from the sale of Class A
Certificates will not be subject to a "backup" withholding tax of 31% unless, in
general, the Class A Certificate Owner fails to comply with certain reporting
procedures and is not an exempt recipient under applicable provisions of the
Code.
ERISA CONSIDERATIONS
Section 406 of ERISA and Section 4975 of the Code prohibit a pension,
profit-sharing or other employee benefit plan, as well as individual retirement
accounts and specified types of Keogh Plans and collective investment funds or
insurance company general or separate accounts in which these plans and accounts
are invested (we refer to each of these as a "benefit plan") from engaging in
specified transactions with persons that are "parties in interest" under ERISA
or "disqualified persons" under the Code with respect to that 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 these persons. The
acquisition or holding of securities by a benefit plan could be considered to
give rise to a prohibited transaction if the seller, the servicer, the related
trust or any of their respective affiliates is or becomes a party in interest or
a disqualified person with respect to that benefit plan.
In addition, transactions involving the trust might be deemed to constitute
prohibited transactions under ERISA and the Code with respect to a benefit plan
that purchased securities if assets of the trust were deemed to be assets of the
benefit plan. Under a regulation issued by the U.S. Department of Labor, the
assets of the trust would be treated as plan assets of a benefit plan for the
purposes of ERISA and the Code only if the benefit plan acquired an "equity
interest" in the trust and none of the exceptions contained in the plan assets
regulation
38
applied. An equity interest is defined under the plan assets regulation as an
interest other than an instrument that is treated as indebtedness under
applicable local law and that has no substantial equity features. It is likely
that the Class A Certificates will be treated as an equity interest for these
purposes.
Employee benefit plans that are governmental plans as defined in Section
3(32) of ERISA and specified church plans as defined in Section 3(33) of ERISA
are not subject to ERISA requirements.
UNDERWRITER EXEMPTION
The Class A Certificates may be eligible for relief from specified
prohibited transaction and conflict of interest rules of ERISA in reliance on
administrative exemptions granted by the Department of Labor to specified
underwriters. The underwriter's exemption provides relief from specified
prohibited transaction and conflict-of-interest rules of ERISA with respect to
the initial purchase, holding and subsequent resale by benefit plans of
pass-through securities or securities denominated as debt instruments that
represent interests in an investment pool for which the underwriter is the sole
underwriter or the co-manager of an underwriting syndicate and that consist of
specified secured receivables, loans and other obligations that meet the
conditions and requirements of the underwriter's exemption. The receivables
covered by the underwriter's exemption include motor vehicle installment
obligations such as those securing the Class A Certificates offered by this
prospectus.
The underwriter's exemption will apply only if specific conditions are met.
Among the conditions that must be satisfied for the underwriter's exemption to
apply to the acquisition of the Class A Certificates by a benefit plan are the
following:
(1) The acquisition of the Class A Certificates by a benefit plan is
on terms, including the price, that are at least as favorable to the
benefit plan as they would be in an arm's-length transaction with an
unrelated party;
(2) The Class A Certificates acquired by the benefit plan have
received a rating at the time of such acquisition that is in one of the
four highest generic rating categories from S&P, Moody's or Fitch, Inc.;
(3) The sum of all payments made to the underwriter in connection with
the distribution of the Class A Certificates represents not more than
reasonable compensation for underwriting the Class A Certificates. The sum
of all payments made to and retained by us pursuant to the sale of the
receivables to the trust represents not more than the fair market value of
the receivables. The sum of all payments made to and retained by the
servicer represents not more than reasonable compensation for the
servicer's services as servicer under the related agreements and
reimbursement of the servicer's reasonable expenses in connection with
these services;
(4) The trustee is a substantial financial institution and is not an
"affiliate," as defined in the exemption, of any other member of the
"restricted group," which consists of the underwriter, the trustee, the
seller, the servicer, any subservicer, any obligor with respect to motor
vehicle installment obligations constituting more than 5% of the aggregate
unamortized principal balance of the assets of the trust as of the date of
initial issuance of the Class A Certificates and any affiliate of these
parties;
39
(5) The benefit plan investing in the Class A Certificates is an
"accredited investor" as defined in Rule 501(a)(1) of Regulation D of the
SEC under the Securities Act; and
(6) The trust satisfies the following requirements:
(a) the corpus of the trust consists solely of assets of the type
which have been included in other investment pools,
(b) securities in these other investment pools have been rated in
one of the four highest generic rating categories of one of the rating
agencies specified above for at least one year prior to the benefit
plan's acquisition of the Class A Certificates, and
(c) securities evidencing interests in these other investment pools
have been purchased by investors other than benefit plans for at least
one year prior to any benefit plan's acquisition of the Class A
Certificates.
(7) The legal document establishing the trust contains restrictions
necessary to ensure that the assets of the trust may not be reached by
creditors of the seller in the event of its bankruptcy or insolvency, the
transfer and servicing agreement prohibits all parties from filing an
involuntary bankruptcy or insolvency petition against the trust and a true
sale opinion is issued in connection with the transfer of assets to the
trust.
Some transactions are not covered by the underwriter's exemption or any
other exemption. The underwriter's exemption does not exempt the acquisition and
holding of securities by benefit plans sponsored by the seller, the
underwriters, the owner trustee, the servicer or any "obligor" (as defined in
the exemption) with respect to receivables included in the trust constituting
more than 5% of the aggregate unamortized principal balance of the assets in the
restricted group. Moreover, the exemptive relief from the
self-dealing/conflict-of-interest prohibited transaction rules of ERISA is
available for other benefit plans only if, among other requirements:
- a benefit plan's investment in the Class A Certificates does not exceed
25% of all of the Class A Certificates outstanding at the time of the
acquisition;
- immediately after the acquisition, no more than 25% of the assets of a
benefit plan with respect to which the person who has discretionary
authority to render investment advice are invested in securities
representing an interest in a trust containing assets sold or serviced by
the same entity; and
- in the case of the acquisition of Class A Certificates in connection with
their initial issuance, at least 50% of such securities are acquired by
persons independent of the restricted group and at least 50% of the
aggregate interest in the related trust is acquired by persons
independent of the restricted group.
The underwriter's exemption will also apply to transactions in connection
with the servicing, management and operation of the trust, provided that, in
addition to the general requirements described above, (a) these transactions are
carried out in accordance with the terms of a binding pooling and servicing
agreement and (b) the pooling and servicing agreement is provided to, or
described in all material respects in the prospectus provided to, investing
benefit plans before the plans purchase the Class A Certificates issued by the
trust. All transactions relating to the servicing, management and operations of
the trust will be carried out in accordance with the trust agreement, indenture
and transfer and servicing
40
agreements, which will be described in all material respects in this prospectus
and the prospectus supplement.
Each prospective purchaser of Class A Certificates in reliance on the
underwriter's exemption should consider the possibility that the rating of a
note or certificate may change during the period that note or certificate is
held. If the rating were to decline below BBB-, the note or certificate could no
longer be transferred to a plan in reliance on the exemption.
For more information, including whether an underwriter's exemption is
likely to provide relief for a particular class of Class A Certificates, see
"ERISA Considerations" in the prospectus supplement. If you are a benefit plan
fiduciary considering the purchase of the Class A Certificates, you should
consult with your counsel with respect to whether the trust will be deemed to
hold plan assets and the applicability of an underwriter's exemption or another
exemption from the prohibited transaction rules and determine on your own
whether all conditions have been satisfied and whether the Class A Certificates
are an appropriate investment for a benefit plan under ERISA and the Code.
PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement for each
series of certificates, the seller will agree to sell to each of the
underwriters named in the underwriting agreement and in the accompanying
prospectus supplement, and each of the underwriters will severally agree to
purchase from the seller, the principal amount of Class A Certificates set forth
in the underwriting agreement and in the accompanying prospectus supplement.
In each underwriting agreement, the several underwriters will agree,
subject to the terms and conditions set forth in the underwriting agreement, to
purchase all the Class A Certificates described in the underwriting agreement
which are offered by this prospectus and by the accompanying prospectus
supplement if any of the Class A Certificates are purchased. In the event of a
default by any underwriter, each underwriting agreement will provide that, in
some circumstances, purchase commitments of the nondefaulting underwriters may
be increased or the underwriting agreement may be terminated.
Each prospectus supplement will either:
(1) set forth the price at which the Class A Certificates being offered
will be offered to the public and any concessions that may be offered to dealers
participating in the offering of these certificates or
(2) specify that the Class A Certificates are to be resold by the
underwriter in negotiated transactions at varying prices to be determined at the
time of the sale. After the initial public offering of any certificates, the
public offering price and the concessions may be changed.
Each underwriting agreement will provide that the seller will indemnify the
related underwriters against specified liabilities, including liabilities under
the Securities Act.
The place and time of delivery for the certificates in respect of which
this prospectus is delivered will be set forth in the accompanying prospectus
supplement. The trustee may, from time to time, invest the funds in the
Designated Accounts in eligible investments acquired from the underwriters.
41
LEGAL OPINIONS
Specified legal matters relating to the certificates will be passed upon
for the seller and the servicer by Robert L. Schwartz, General Counsel of the
seller and Assistant General Counsel of GMAC, and by Kirkland & Ellis, special
counsel to the seller and the servicer. Mr. Schwartz owns shares of both classes
of General Motors common stocks and has options to purchase shares of General
Motors common stock, $1 2/3 par value. Specified federal income tax matters will
be passed upon for the seller by Kirkland & Ellis.
REPORTS TO CERTIFICATEHOLDERS
The servicer will prepare monthly reports that will contain information
about the trust. The financial information contained in the reports will not be
prepared in accordance with generally accepted accounting principles. Unless and
until definitive certificates are issued, the reports will be sent to Cede & Co.
which is the nominee of The Depository Trust Company and the registered holder
of the certificates. No financial reports will be sent to you. See "Description
of the Certificates--Book Entry Registration" "--Reports to Class A
Certificateholders" and "--Evidence as to Compliance" in this prospectus.
WHERE YOU CAN FIND MORE INFORMATION
We filed a registration statement relating to the certificates with the
SEC. This prospectus is part of the registration statement, but the registration
statement includes additional information.
The servicer will file with the SEC all required annual, monthly and
special SEC reports and other information about the trust.
You may read and copy any reports, statements or other information we file
at the SEC's public reference room in Washington, D.C. You can request copies of
these documents, upon payment of a duplicating fee, by writing to the SEC.
Please call the SEC at (800) SEC-0330 for further information on the operation
of the public reference rooms. Our SEC filings are also available to the public
on the SEC Internet site, http://www.sec.gov.
INCORPORATION BY REFERENCE
The SEC allows us to "incorporate by reference" information we file with
it, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this prospectus. Information that we file later with the SEC will
automatically update the information in this prospectus. In all cases, you
should rely on the later information over different information included in this
prospectus or the accompanying prospectus supplement. We incorporate by
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 not specifically
incorporated by reference, at no cost, by writing us at: General Motors
Acceptance Corporation, 200 Renaissance Center, Detroit, Michigan 48265.
------------------------
42
GLOSSARY OF TERMS
The following are definitions of terms used in this prospectus. References
to the singular form of defined terms in this prospectus include references to
the plural and vice versa:
"Administrative Purchase Payment" means, for any Administrative Receivable:
(1) in the case of a Scheduled Interest Receivable, a release of all
claims for reimbursement of Scheduled Interest Advances made on the
receivable plus a payment equal to the sum of
(A) the scheduled payments on the receivable;
(B) an amount equal to any reimbursement of outstanding Scheduled
Interest Advances made to the servicer with respect to that receivable
from the proceeds of other receivables; and
(C) all past due scheduled payments for which a Scheduled Interest
Advance has not been made less the rebate that would be payable to the
obligor on the receivable were the obligor to prepay the receivable in
full on that day; or
(2) in the case of a Simple Interest Receivable, a payment equal to
the Amount Financed minus that portion of all payments made on or prior to
the last day of the prior monthly period allocable to principal.
"Administrative Receivable" means a receivable which the servicer is
required to purchase as a result of a breach of a covenant which materially and
adversely affects any receivable held by a trust.
"Agreement" means, for each series of certificates, the Pooling and
Servicing Agreement which incorporates the GMAC Grantor Trust Standard Terms and
Conditions.
"Aggregate Amount Financed" means the aggregate Amount Financed under the
receivables held by a trust as specified in the accompanying prospectus
supplement.
"Aggregate Net Losses" means, for a series of certificates and any monthly
period, an amount equal to the aggregate Principal Balance of all receivables
newly designated during that monthly period as Liquidating Receivables minus
Liquidation Proceeds collected during that monthly period for all Liquidating
Receivables.
"Amount Financed" means, for a receivable, the aggregate amount advanced
under the receivable toward the purchase price of the financed vehicle,
including accessories, insurance premiums, service and warranty contracts and
other items customarily financed as part of retail automobile instalment sale
contracts and related costs less:
(1) (A) in the case of a Scheduled Interest Receivable, payments due
from the obligor prior to the cutoff date allocable to principal; and
(B) in the case of a Simple Interest Receivable, payments received
from the obligor prior to the cutoff date allocable to principal; and
(2) any amount allocable to the premium for physical damage insurance
covering the financed vehicle force-placed by the servicer.
"APR" means, for a receivable, the annual percentage rate.
43
"Available Interest" means, for each series of certificates, on a
distribution date, an amount equal to the sum of the following amounts for that
monthly period:
(1) that portion of all collections on the receivables held by the
trust, other than Liquidating Receivables, allocable to interest or
Prepayment Surplus and including, in the case of Scheduled Interest
Receivables, the interest portion of existing Payments Ahead being applied
in that monthly period but excluding Excess Payments made during that
monthly period that are treated as Payments Ahead;
(2) Liquidation Proceeds, to the extent allocable to interest in
accordance with the servicer's customary servicing procedures;
(3) all Simple Interest Advances;
(4) all Scheduled Interest Advances to the extent allocable to
interest; and
(5) the Warranty Payment or the Administrative Purchase Payment of
each receivable that the seller repurchased or the servicer purchased
during that monthly period, to the extent allocable to accrued interest or
Prepayment Surplus thereon
less an amount equal to the sum of the following amounts for that monthly
period:
(1) all amounts received on any Scheduled Interest Receivable, other
than a Liquidating Receivable, to the extent that the servicer has
previously made an unreimbursed Scheduled Interest Advance;
(2) Liquidation Proceeds with respect to Scheduled Interest
Receivables to the extent of any unreimbursed Scheduled Interest Advances;
(3) any Excess Simple Interest Collections;
(4) Liquidation Proceeds with respect to Simple Interest Receivables
paid to the Servicer; and
(5) amounts representing reimbursement for certain Liquidation
Expenses.
For purposes of this definition, references to the prior monthly period
shall include, for the initial distribution date, the period since the cutoff
date.
"Available Principal" means, for each series of certificates, on any
distribution date, an amount equal to the sum of the following amounts for that
monthly period:
(1) that portion of all collections on the receivables held by the
trust, other than Liquidating Receivables, allocable to principal,
including, in the case of Scheduled Interest Receivables, the principal
portion of Prepayments and existing Payments Ahead being applied in that
monthly period but excluding Excess Payments made during that monthly
period that are treated as Payments Ahead;
(2) Liquidation Proceeds to the extent allocable to principal in
accordance with the Servicer's customary servicing procedures;
(3) all Scheduled Interest Advances to the extent allocable to
principal; and
(4) to the extent allocable to principal, the Warranty Payment or the
Administrative Purchase Payment received for each receivable that the
seller repurchased or the servicer purchased during that monthly period
44
less an amount equal to the sum, for that monthly period:
(1) all amounts received on any Scheduled Interest Receivable, other
than a Liquidating Receivable, to the extent that the servicer has
previously made an unreimbursed Scheduled Interest Advance;
(2) Liquidation Proceeds from Scheduled Interest Receivables to the
extent of any unreimbursed Scheduled Interest Advances;
(3) any Excess Simple Interest Collections;
(4) Liquidation Proceeds from Simple Interest Receivables paid to the
servicer; and
(5) amounts representing reimbursement for certain Liquidation
Expenses.
For purposes of this definition, references to the prior monthly period
shall include, for the initial distribution date, the period since the cutoff
date.
"Benefit Plan" means a pension, profit-sharing or other employee benefit
plan and individual retirement accounts and some types of Keogh Plans and some
collective investment funds or insurance company general or separate accounts in
which the plans and accounts are invested.
"Certificate Account" means, for each series of certificates, the account
so designated, established and maintained pursuant to the Agreement.
"Certificate Owner" means, for a book-entry certificate, the person who is
the beneficial owner of such book-entry certificate, as reflected on the books
of the clearing agency or on the books of a person maintaining an account with
such clearing agency.
"Charge-off Rate" means, for a series of certificates and any monthly
period, an amount equal to the Aggregate Net Losses for the receivables held by
the trust expressed, on an annualized basis, as a percentage of the average of
(1) the aggregate Principal Balance on the last day of the monthly period
preceding that monthly period and (2) the aggregate Principal Balance on the
last day of that monthly period.
"Class A Interest Carryover Shortfall" means, for a series of certificates,
as of the close of any distribution date, the excess, if any, of (1) the Class A
Interest Distributable Amount for that distribution date plus any outstanding
Class A Interest Carryover Shortfall from the preceding distribution date, to
the extent permitted by law, at the applicable Pass Through Rate from that
preceding distribution date through the current distribution date minus (2) the
amount of interest that the holders of the Class A Certificates actually
received on the current distribution date.
"Class A Certificate Balance" means, for any series of certificates,
initially, the Class A Percentage of the Aggregate Amount Financed and,
thereafter, will equal the initial Class A Certificate Balance, reduced by all
distributions of Class A Principal Distributable Amounts actually made to Class
A Certificateholders.
"Class A Distributable Amount" means, for any series of certificates, on
any distribution date, the sum of (1) the Class A Principal Distributable Amount
and (2) the Class A Interest Distributable Amount.
45
"Class A Interest Distributable Amount" means, for any series of
certificates, on any distribution date, one month's interest at the Pass Through
Rate on the Class A Certificate Balance as of the last day of the related
monthly period.
"Class A Pool Factor" means, for any series of certificates, a seven-digit
decimal figure computed by the servicer prior to each distribution equal to the
remaining Class A Certificate Balance as of the close of that date divided by
the initial Class A Certificate Balance of that series.
"Class A Principal Carryover Shortfall" means, for a series of
certificates, as of the close of any distribution date, the excess, if any, of
(1) the Class A Principal Distributable Amount for that distribution date plus
any outstanding Class A Principal Carryover Shortfall from the preceding
distribution date minus (2) the amount of principal that the holders of the
Class A Certificates actually received on the current distribution date.
"Class A Principal Distributable Amount" means, for any series of
certificates, on any distribution date, the Class A Percentage of (1) the
principal portion of all Scheduled Payments for that monthly period on Scheduled
Interest Receivables held by the trust, other than Liquidating Receivables, and
the principal portion of all payments received by the trustee during that
monthly period on Simple Interest Receivables held by the trust, other than
Liquidating Receivables, (2) the principal portion of all Prepayments received
during that monthly period -- except to the extent included in (1) above -- and
(3) the Principal Balance of each receivable that the servicer became obligated
to purchase, the seller became obligated to repurchase or that became a
Liquidating Receivable during that monthly period -- except to the extent
included in (1) or (2) above.
"Class B Certificate Balance" means, for any series of certificates,
initially, the Class B Percentage of the Aggregate Amount Financed and,
thereafter, will equal such initial Class B Certificate Balance, reduced by (1)
all distributions of Class B Principal Distributable Amounts actually made to
Class B Certificateholders, or deposited on or prior to such date in the
subordination spread account, not including the initial deposit, (2) the Class A
Principal Carryover Shortfall as of the preceding distribution date and (3) any
shortfalls from prior distribution dates in principal distributions to the Class
B Certificateholders.
"Class B Distributable Amount" means, for any series of certificates, on
any distribution date, the sum of (1) the Class B Principal Distributable Amount
and (2) the Class B Interest Distributable Amount.
"Class B Interest Distributable Amount" means, for any series of
certificates, on any distribution date, an amount equal to the sum of (1) one
month's interest at the Pass Through Rate on the Class B Certificate Balance as
of the last day of the monthly period, (2) all Surplus Interest with respect to
receivables held by the trust, less Additional Servicing payable on that
distribution date), and (3) all Prepayment Surplus with respect to Scheduled
Interest Receivables held by the trust to which a Prepayment is to be applied,
net of one month's interest at the applicable Pass Through Rate on the aggregate
Principal Balance of such Scheduled Interest Receivables as of the first day of
the monthly period.
"Class B Principal Distributable Amount" means, for any series of
certificates, on any distribution date, the Class B Percentage of (1) the
principal portion of all scheduled payments with respect to the related monthly
period on Scheduled Interest Receivables held by the trust, other than
Liquidating Receivables, and the principal portion of all payments received by
the trustee during the related monthly period on Simple Interest Receivables
held by the trust, other than Liquidating Receivables, (2) the principal portion
of all Prepayments
46
received during the related monthly period -- except to the extent included in
(1) above -- and (3) the Principal Balance of each receivable that the servicer
became obligated to purchase, the seller became obligated to repurchase or that
became a Liquidating Receivable during the related monthly period -- except to
the extent included in (1) or (2) above.
"Collection Account" means, for each series of certificates, the account so
designated, established and maintained pursuant to the applicable Agreement.
"Delinquency Percentage" means, for a series of certificates and any
monthly period, the ratio of all outstanding receivables which are 61 days or
more delinquent as of the last day of that monthly period, determined in
accordance with the servicer's normal practices, divided by the number of
outstanding receivables on the last day of that monthly period.
"Distribution Date" means, for a monthly period, the 15th day of the next
succeeding calendar month, or if the 15th day is not a business day, the next
succeeding business day.
"Excess Payment" means, for a Scheduled Interest Receivable, the portion of
a payment on the receivable in excess of the scheduled payment thereon which are
not late fees, prepayment charges or other fees or charges.
"Excess Simple Interest Collections" means, for a monthly period, the
excess, if any, of (1) all payments received during that monthly period on all
Simple Interest Receivables to the extent allocable to interest minus (2) the
amount of interest that would be due during that monthly period on all Simple
Interest Receivables held by the trust, assuming that the payment on each
receivable was received on its respective due date.
"FTC Repossession Consent Order" means a consent order between the servicer
and the Federal Trade Commission.
"General Motors" means General Motors Corporation, a Delaware corporation.
"Liquidation Expenses" means an amount specified in the Agreement as an
allowance for amounts charged to the account of the obligor, in keeping with the
servicer's customary procedures, for refurbishing and disposition of a financed
vehicle and other out-of-pocket costs related to liquidation.
"Liquidating Receivable" means a receivable as to which the servicer has:
(1) reasonably determined, in accordance with its customary servicing
procedures, that eventual payment of amounts owing on that receivable is
unlikely, or
(2) repossessed and disposed of the financed vehicle.
"Liquidation Proceeds" means, for a Liquidating Receivable, all amounts
realized for that receivable, net of amounts that are required to be refunded to
the obligor on that receivable.
"Monthly Advance" means, for any trust, as of the last day of each monthly
period, either a Scheduled Interest Advance or a Simple Interest Advance, or
both, as applicable, in respect of the prior monthly period.
"Payment Ahead" means, for a Scheduled Interest Receivable, any Excess
Payment, not representing prepayment in full of the receivable, that is of an
amount so that the sum of the Excess Payment, together with any unapplied
Payments Ahead, is equal to or less than three times the scheduled payment.
47
"Payment Ahead Servicing Account" means, for each series of certificates,
the account so designated, established and maintained pursuant to the Agreement.
"Prepayment" means any Excess Payment other than a Payment Ahead.
"Prepayment Surplus" means, for a series of certificates, on any
distribution date on which a Prepayment is to be applied for a Scheduled
Interest Receivable, that portion of such Prepayment, net of any rebate to the
obligor of the portion of the scheduled payments attributable to unearned
finance charges, which is not allocable to principal.
"Principal Balance" means, as of any day, for any receivable, an amount
equal to the Amount Financed minus the sum of either:
(1) in the case of a Scheduled Interest Receivable:
- that portion of all scheduled payments due on or prior to that
date allocable to principal;
- that portion of any Warranty Payment or Administrative Purchase
Payment for that receivable allocable to principal; and
- any Prepayment applied by the servicer to reduce the Principal
Balance of that receivable; or
(2) in the case of a Simple Interest Receivable:
- that portion of all payments received on or prior to that date
allocable to principal; and
- that portion of any Warranty Payment or Administrative Purchase
Payment for that receivable allocable to principal.
"Record Date" means, for any distribution date, the close of business on
the date immediately preceding distribution date, or if definitive certificates
are issued, the last day of the preceding monthly period.
"Restricted Group" means the seller, the underwriters, the trustee, the
servicer or any obligor with respect to the receivables included in the related
trust constituting more than 5% of the aggregate unamortized principal balance
of the assets in the trust or any affiliate of these parties.
"Scheduled Interest Advance" means, for a Scheduled Interest Receivable,
the amount, as of the last day of the monthly period, by which the amount the
scheduled payment exceeds the amount of Payments Ahead not previously applied to
that receivable and any amounts received by an obligor in respect of that
scheduled payment.
"Scheduled Interest Receivable" means any receivable pursuant to which the
scheduled payments are allocated between finance charges and principal on a
scheduled basis, without regard to the period of time which has elapsed since
the preceding payment was made, using the actuarial method.
"Securities Act" means the Securities Act of 1933, as amended.
"Servicer Default" has the meaning set forth in "The
Certificates -- Servicer Default."
48
"Simple Interest Advance" means, for all Simple Interest Receivables held
by a trust, unless otherwise provided in the accompanying prospectus supplement,
as of the last day of each monthly period, an amount equal to the excess, if
any, of: (1) the amount of interest that would be due during that monthly period
on all Simple Interest Receivables held by the trust assuming that the payment
on each receivable was received on its respective due date over (2) all payments
received during that Monthly Period on all Simple Interest Receivables held by
the trust to the extent allocable to interest.
"Simple Interest Receivable" means any receivable under which the portion
of each monthly payment allocated between finance charges and principal is based
on the actual date on which a payment is received.
"Specified Subordination Spread Account Balance" means, for a series of
certificates, the meaning set forth in "The Certificates-Subordination of the
Class B Certificates; Subordination Spread Account."
"Supplemental Servicing Fee" means, for a series of certificates and any
distribution date, all late fees, prepayment charges and certain similar fees
and charges collected during the monthly period plus any interest earned during
the monthly period on deposits in the related Collection Account and Payment
Ahead Servicing Account.
"Surplus Interest" means, for a series of certificates, on any distribution
date, the product of (1) in the case of a Scheduled Interest Receivable, the
interest portion of the scheduled payment on that receivable or, in the case of
a Simple Interest Receivable, the amount of interest that would be due during
that monthly period on the receivable assuming that the payment was received on
its due date multiplied by (2) the remainder of (A) one minus (B) a fraction,
the numerator of which equals the sum of the applicable Pass Through Rate and
the Basic Servicing Fee Rate and the denominator of which equals the APR on the
receivable.
"Tax Counsel" means Kirkland & Ellis, as special counsel to the Seller.
"Total Available Amount" means, for each series of certificates, on each
distribution date, the sum of the Available Interest and the Available
Principal.
"Total Servicing Fee" has the meaning set forth in "The
Certificates -- Servicing Compensation and Payment of Expenses."
"Warranty Payment" means, for a Warranty Receivable:
(1) in the case of a Scheduled Interest Receivable, the sum of:
(A) all remaining scheduled payments on that receivable, plus all
past due scheduled payments for which a Scheduled Interest Advance has
not been made; plus
(B) all outstanding Scheduled Interest Advances on that receivable;
plus
(C) an amount equal to any reimbursements of outstanding Scheduled
Interest Advances made to the servicer for that such receivable from the
proceeds of other receivables, minus the sum of:
(A) the rebate that would be payable to the obligor on that
receivable were the obligor to prepay that receivable in full on that
day; and
49
(B) any Liquidation Proceeds for that receivable previously
received (to the extent applied to reduce the Principal Balance of that
receivable; or
(2) in the case of a Simple Interest Receivable, the Amount Financed
minus the sum of:
(A) that portion of all payments received on or prior to the last
day of the prior monthly period allocable to principal; and
(B) any Liquidation Proceeds for that receivable previously
received (to the extent applied to reduce the Principal Balance of that
receivable.
"Warranty Receivable" means a receivable which must be repurchased by
either the seller or GMAC as a result of a breach of any representation or
warranty for that receivable which materially and adversely affects the
interests of the certificateholders of any series in that receivable.
50
------------------------------------------------------
------------------------------------------------------
NO DEALER, SALESPERSON 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, THAT INFORMATION OR THOSE
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
CERTIFICATES OFFERED BY THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS TO ANYONE
IN ANY JURISDICTION IN WHICH THE PERSON MAKING THAT OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE AN OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS NOR ANY SALE MADE UNDER THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT INFORMATION IN THOSE
DOCUMENTS IS CORRECT AS OF ANY TIME SINCE THE DATE OF THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS.
------------------
UNTIL ____________________, 20 , ALL DEALERS EFFECTING TRANSACTIONS IN THE
CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS SUPPLEMENT AND THE ASSOCIATED PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
SUPPLEMENT AND PROSPECTUS WHEN ACTING AS UNDERWRITERS AND FOR THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
GMAC 20 -
GRANTOR TRUST
ISSUER
$
%
ASSET BACKED CERTIFICATES,
CLASS A
CAPITAL AUTO RECEIVABLES, INC.
SELLER
GENERAL MOTORS
ACCEPTANCE CORPORATION
SERVICER
------------------------------------
PROSPECTUS SUPPLEMENT
------------------------------------
UNDERWRITERS
------------------------------------------------------
------------------------------------------------------
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THE SECURITIES UNTIL THE REGISTRATION STATEMENT
YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-11 IN THIS
PROSPECTUS SUPPLEMENT.
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
The notes represent obligations of the trust only. The certificates represent
interests in the trust only. The notes and certificates do not represent
obligations of or interests in, and are not guaranteed by, Capital Auto
Receivables, Inc., General Motors Acceptance Corporation or any of their
affiliates.
This prospectus supplement may be used to offer and sell notes and certificates
only if accompanied by the prospectus.
VERSION 3
PRELIMINARY SECURED NOTE
PROSPECTUS SUPPLEMENT FORM
SUBJECT TO COMPLETION, DATED ,
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED ,
$ Asset Backed Notes
[$ Asset Backed Certificates]
CAPITAL AUTO RECEIVABLES ASSET TRUST -SN[1]
Issuer
CAPITAL AUTO RECEIVABLES, INC.
Seller
GENERAL MOTORS ACCEPTANCE CORPORATION
Servicer
The seller is offering the following classes of notes and
certificates:
<Table>
<Caption>
--------------------------------------------------------------------------
CLASS A NOTES
------------------------------------
A-1 NOTES A-2 NOTES A-3 NOTES CERTIFICATES
--------------------------------------------------------------------------
Principal Amount
--------------------------------------------------------------------------
Interest Rate
--------------------------------------------------------------------------
Final Scheduled
Distribution Date
--------------------------------------------------------------------------
Price to Public
--------------------------------------------------------------------------
Underwriting
Discount
--------------------------------------------------------------------------
Proceeds to Seller
--------------------------------------------------------------------------
</Table>
CREDIT ENHANCEMENT
- [Reserve Account]
- Certificates Subordinated
- Termination Value Insurance
The primary assets of the trust will consist of a pool of non-recourse secured
notes. Each secured note has a security interest in a new or used automobile or
light truck and a lease of that automobile or light truck.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED THAT THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
____________, ____
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We provide information to you about the notes and certificates in two
separate documents:
(a) the accompanying prospectus, which provides general information
and terms of the securities, some of which may not apply to a particular
series of securities, including your series.
(b) this prospectus supplement, which will provide information
regarding the pool of secured notes, including the leases and leased
vehicles securing the secured notes, held by the trust and specify the
terms of your series of securities.
You should rely only on the information provided in the accompanying
prospectus and this prospectus supplement, including the information
incorporated by reference. We have not authorized anyone to provide you with
other or different information. We are not offering the securities in any state
where their offer is not permitted.
We include cross references in this prospectus supplement to captions under
which you can find additional, related discussions. The following table of
contents provides the pages at which these captions are located.
In this prospectus supplement, "we," "us" and "our" refer to the seller,
Capital Auto Receivables, Inc.
The definitions of many of the terms used in this prospectus supplement are
contained in the "Glossary" at the end of this prospectus supplement.
S-2
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
PROSPECTUS SUPPLEMENT
SUMMARY..................................................... S-6
RISK FACTORS................................................ S-11
SUMMARY OF TRANSACTION PARTIES.............................. S-18
THE TRUST................................................... S-19
Capitalization of the Trust............................... S-19
The Owner Trustee......................................... S-19
THE POOL OF SECURED NOTES................................... S-19
Composition of the Pool of Secured Notes.................. S-21
Distribution of Secured Notes by Interest Rate............ S-22
Distribution of Secured Notes by Maturity................. S-22
Distribution by State of Leases Securing the Secured
Notes.................................................. S-22
Distribution of Leases Securing the Secured Notes by
Vehicle Make........................................... S-23
Distribution of Leases Securing the Secured Notes by
Vehicle Type........................................... S-23
Distribution of Leases Securing the Secured Notes by
Original Term.......................................... S-24
TERMINATION VALUE INSURANCE................................. S-25
Composition of COLT's Entire Portfolio of Secured Notes
and Lease Assets....................................... S-27
THE TERMINATION VALUE INSURER............................... S-28
WEIGHTED AVERAGE LIFE OF THE SECURITIES..................... S-30
Assumed Characteristics................................... S-31
Percentage of Class A-1 Note Balance Outstanding to
Maturity............................................... S-32
Percentage of Class A-2 Note Balance Outstanding to
Maturity............................................... S-33
Percentage of Class A-3 Note Balance Outstanding to
Maturity............................................... S-34
Percentage of Certificate Balance Remaining to Maturity... S-35
Schedule of Declining Secured Note Values................. S-36
THE POOL OF LEASES SECURING THE SECURED NOTES............... S-37
RESIDUAL VALUES............................................. S-42
THE NOTES................................................... S-43
Payments of Interest...................................... S-43
Payments of Principal..................................... S-44
Redemption................................................ S-44
Delivery of Notes......................................... S-44
THE CERTIFICATES............................................ S-45
Distributions of Interest and Certificate Balance......... S-45
THE TRANSFER AND SERVICING AGREEMENTS....................... S-45
Servicing Compensation and Payment of Expenses............ S-46
Summary of Monthly Deposits and Withdrawals from
Accounts............................................... S-47
Distributions............................................. S-48
Termination of the Trust.................................. S-50
ERISA CONSIDERATIONS........................................ S-50
FEDERAL INCOME TAX CONSEQUENCES............................. S-50
PLAN OF DISTRIBUTION........................................ S-50
LEGAL OPINIONS.............................................. S-52
GLOSSARY.................................................... S-53
</Table>
S-3
<Table>
<Caption>
PAGE
----
PROSPECTUS
THE TRUSTS.................................................. 2
Formation of Trusts....................................... 2
Trust Property............................................ 2
Capitalization of Each Trust.............................. 2
THE OWNER TRUSTEE........................................... 3
THE SELLER.................................................. 3
THE SERVICER................................................ 4
Vehicle Asset Universal Leasing Trust..................... 4
Central Originating Lease Trust........................... 5
THE POOLS OF SECURED NOTES.................................. 5
Terms of the Secured Notes................................ 5
Delinquencies, Repossessions and Net Losses............... 7
GMAC's Responsibilities as COLT Agent and Lease
Servicer............................................... 8
DESCRIPTION OF AUTO LEASE BUSINESS.......................... 9
Underwriting of Motor Vehicle Leases...................... 9
Residual Values........................................... 11
Insurance Required to be Maintained By Lessees............ 12
Auto Lease Criteria for COLT's Lease Program.............. 12
SERVICING OF MOTOR VEHICLE LEASES........................... 13
Vehicle Disposition Process............................... 14
Vehicle Maintenance; Excess Wear and Tear and Excess
Mileage................................................ 15
WEIGHTED AVERAGE LIFE OF THE SECURITIES..................... 15
USE OF PROCEEDS............................................. 17
THE NOTES................................................... 17
Book-Entry Registration of the Notes...................... 17
Principal and Interest on the Notes....................... 17
The Indenture............................................. 18
The Indenture Trustee..................................... 24
THE CERTIFICATES............................................ 24
Book-Entry Registration of the Certificates............... 24
Distributions of Interest and Certificate Balance......... 25
BOOK-ENTRY REGISTRATION; REPORTS TO SECURITYHOLDERS......... 26
Book-Entry Registration................................... 26
Definitive Securities..................................... 30
Reports to Securityholders................................ 31
THE TRANSFER AND SERVICING AGREEMENTS....................... 32
Sale and Assignment of Secured Notes...................... 33
Additional Sales of Secured Notes......................... 36
Accounts.................................................. 36
Servicing Compensation and Payment of Expenses............ 38
Collections............................................... 39
Servicer Advances......................................... 40
Distributions............................................. 41
Credit Enhancement........................................ 42
Net Deposits.............................................. 44
Statements to Trustees and Trust.......................... 44
Evidence as to Compliance................................. 45
</Table>
S-4
<Table>
<Caption>
PAGE
----
Matters Regarding the Secured Note Servicer............... 45
Secured Note Servicer Default............................. 46
Rights Upon Secured Note Servicer Default................. 47
Waiver of Past Defaults................................... 48
Amendment................................................. 48
Insolvency Events......................................... 49
Certificateholder Liability; Indemnification.............. 49
Termination............................................... 50
Administration Agreement.................................. 50
LEGAL ASPECTS OF THE SECURED NOTES AND THE LEASES SECURING
THE SECURED NOTES......................................... 50
Insolvency Related Matters................................ 50
Security Interest in Secured Notes and Leases and Leased
Vehicles that Secure the Secured Notes................. 51
Repossession of Leased Vehicles Securing the Secured
Notes.................................................. 53
Deficiency Judgments and Excess Proceeds.................. 53
Consumer Protection Laws.................................. 54
Other Limitations......................................... 54
FEDERAL INCOME TAX CONSEQUENCES............................. 55
The Notes................................................. 56
Trust Certificates........................................ 60
Partnership Certificates.................................. 63
Tax Non-Entity Certificates............................... 68
STATE AND LOCAL TAX CONSEQUENCES............................ 69
ERISA CONSIDERATIONS........................................ 69
Exemption Applicable to Debt Instruments.................. 69
Underwriter Exemption..................................... 70
PLAN OF DISTRIBUTION........................................ 72
LEGAL OPINIONS.............................................. 73
WHERE YOU CAN FIND MORE INFORMATION......................... 73
</Table>
S-5
SUMMARY
The following summary highlights selected information from this document
and provides a general overview of relevant terms of the securities. To
understand all of the terms of this offering, you should read carefully this
prospectus supplement and the accompanying prospectus.
THE PARTIES
Issuer or Trust
Capital Auto Receivables Asset Trust -SN[1]. The trust is the issuer of the
offered notes [and certificates].
Seller
Capital Auto Receivables, Inc. or CARI, a wholly-owned subsidiary of General
Motors Acceptance Corporation.
Servicer
General Motors Acceptance Corporation or GMAC, a wholly-owned subsidiary of
General Motors Corporation.
Owner Trustee
Indenture Trustee
Termination Value Insurer
[ ], known as the Termination Value Insurer, provides insurance
coverage for the leases and leased vehicles securing the secured notes when the
leases terminate. The Termination Value Insurer currently has a financial
strength rating of "AAA" by Standard & Poor's Ratings Services and "Aaa" by
Moody's Investors Service, Inc. The termination value insurance policy provided
by the Termination Value Insurer provides 100% loss coverage, subject to an
overall cap for all lease assets held by COLT, on the lease assets securing each
secured note, including each secured note held by the trust. The parameters of
the termination value insurance policy are described under "Termination Value
Insurance."
Origination Trust
Central Originating Lease Trust or COLT. COLT acquires leases and leased
vehicles financed in part by issuing non-recourse secured notes to GMAC. Each
secured note has a security interest in a new or used General Motors automobile
or light truck and a lease of that automobile or light truck. The offered
securities are secured by a pool of these secured notes sold by GMAC to CARI.
THE NOTES
The seller will offer the [three] classes of notes listed on the cover page of
this prospectus supplement. [The Class A-1 notes [and the certificates] are not
offered under this prospectus supplement.]
Interest Payments
The trust will pay interest on the notes monthly, on the 15th day of each month
or on the next business day, which we refer to as the distribution date. The
first distribution date is , .
The trust will pay interest on the Class A-1 notes based on a [360-day year and
the actual days elapsed in the accrual period]. The trust will pay interest on
the Class A-2 and Class A-3 notes based on a [360-day year consisting of twelve
30- day months].
Interest payments on all classes of notes will have the same priority.
The prospectus and this prospectus supplement describe how the available funds
are allocated to interest payments.
S-6
Principal Payments
The trust will pay principal on the notes monthly on each distribution date.
The trust will make principal payments based on the amount of collections and
defaults on the secured notes during the prior month. The prospectus and this
prospectus supplement describe how the available funds are allocated to
principal payments.
Principal payments on the notes will be made in the order of priority listed
below. On each distribution date, except in the situation presented in the
following paragraph, the trust will distribute all of the funds available to pay
principal:
(1) to the Class A-1 notes, until the Class A-1 notes are paid in full;
(2) to the Class A-2 notes, until the Class A-2 notes are paid in full; and
(3) to the Class A-3 notes, until the Class A-3 notes are paid in full.
Notwithstanding these principal payment rules, on each distribution date after
an event of default occurs and the notes are accelerated, principal payments on
the notes will be made ratably to all noteholders, based on the outstanding
principal balance of the notes.
All unpaid principal on a class of notes will be due on the final scheduled
distribution date for that class set forth on the cover of this prospectus
supplement. [Failure to pay a class of notes in full on its final scheduled
distribution date will result in an event of default.]
When the total principal balance of the secured notes declines to less than 10%
of the initial value of the secured notes, the secured note servicer may
repurchase all of the remaining secured notes. If the secured note servicer
repurchases the secured notes, the outstanding notes will be redeemed at a price
equal to their remaining principal balance plus accrued and unpaid interest.
THE CERTIFICATES
The trust will issue % asset backed certificates with an aggregate initial
certificate balance of $ . Payments on the certificates will be made as
described in this prospectus supplement and are subordinated to payments on the
notes to the extent described in this prospectus supplement.
[We will initially retain the certificates.] [We will initially retain
certificates with an initial certificate balance of $ .]
THE TRUST PROPERTY
The primary assets of the trust will consist of a pool of non-recourse secured
notes issued by COLT to GMAC. Each secured note is secured by a first priority
perfected security interest in a new or used General Motors automobile or light
truck and a lease. The terms of each lease must meet specified requirements.
Each lease and leased vehicle was originated for COLT. COLT is a trust which was
formed for the purpose of acquiring leases and leased vehicles. COLT finances
the acquisition of leases and leased vehicles in the ordinary course of business
by issuing these non-recourse secured notes to GMAC.
On or before the date the securities of a series are issued, GMAC will sell a
pool of secured notes to us under a secured note pooling and servicing
agreement. We will, in turn, sell them to the trust under a secured note trust
sale and servicing agreement. The secured notes to be sold by GMAC to us and by
us to the trust will be selected based on criteria specified in the secured note
pooling and servicing agreement. The trust will grant a security interest in the
secured notes and other
S-7
trust property to the indenture trustee on behalf of the noteholders.
The property of the trust will include:
- - the secured notes and all moneys received on the secured notes on or after the
cutoff date of , , including:
- - proceeds from the termination value insurance policy relating to the leases
and leased vehicles securing the secured notes;
- - proceeds from other insurance policies, guarantees and similar obligations
relating to the leases and leased vehicles; and
- - security interests in the leases and leased vehicles securing the secured
notes, including payments under leases and amounts received upon sale of
leased vehicles;
- - specified rights we have under the secured note pooling and servicing
agreement with GMAC; and
- - all rights of the trust under the secured note trust sale and servicing
agreement with us.
The aggregate principal balance of the secured notes as of the cutoff date was
$ .
PRIORITY OF DISTRIBUTIONS
The trust will distribute available funds in the following order of priority:
(1) servicing fee payments and prior advances to the secured note servicer;
(2) interest on the notes;
(3) interest on the certificates;
(4) principal on the notes;
(5) principal on the certificates; and
[(6) deposits into the reserve account.]
If an event of default resulting from a payment default occurs and the notes are
accelerated, the trust will pay the notes in full before making any payments on
the certificates.
CREDIT ENHANCEMENT
Termination Value Insurance
The property of the trust includes its rights as holder of the secured notes to
proceeds of termination value insurance for the leases and leased vehicles
securing the secured notes. The Termination Value Insurer currently provides
this insurance. The termination value insurance provides 100% loss coverage,
subject to an overall cap for all lease assets held by COLT. The insurance
covers each lease and leased vehicle securing the secured notes if there is a
deficiency in proceeds of sale of a leased vehicle when the lease terminates.
These deficiencies may be caused by a lease default or the lease servicer's
failure to obtain the full residual value of the leased vehicle at lease
termination.
The parameters of the termination value insurance policy are described under
"Termination Value Insurance."
As of , , the maximum amount of termination value insurance
available on all lease assets held by COLT was $ , representing %
of all the lease assets held by COLT. As of , , there were
$ lease assets securing the secured notes, which represents % of
all the lease assets held by COLT that benefit from the termination value
insurance.
[Reserve Account
On the closing date, we will deposit $ in cash or eligible investments
into the reserve account. Additional amounts will be added on each distribution
date if the account falls below a specified reserve amount.
S-8
To the extent that funds from principal and interest collections on the secured
notes are not sufficient to pay the basic servicing fee and to make required
distributions on the notes and the certificates, the trust will withdraw cash
from the reserve account for that purpose.
On any distribution date, after the trust pays the total servicing fee and makes
all deposits or payments due on the notes and the certificates, the amount in
the reserve account may exceed the specified reserve amount. If so, the trust
will pay us the excess.]
Termination Reserve Account
The termination reserve account is funded by excess proceeds, if any, from the
sale of leased vehicles when the leases terminate.
All pools of secured notes, including the secured notes sold to the trust, also
benefit from a termination reserve account. This reserve account covers
deficiencies on the sale of leased vehicles when the leases terminate. The
termination reserve account also provides a source of funds to pay the
Termination Value Insurer's fees as termination value insurer or for
reimbursement of termination payments made by the Termination Value Insurer if
the Termination Value Insurer has not received them from lease collections.
Subordination
Payments on the certificates issued by the trust will be subordinated to
payments on the notes to the extent described in this prospectus supplement and,
thus, provide credit enhancement for the notes. In addition, the notes and
certificates offered under this prospectus supplement benefit from the
subordination of payments on the equity certificates issued by COLT to payments
on the secured notes that secure the notes and certificates offered under this
prospectus supplement.
The COLT equity certificateholders will not receive any interest or principal
payments from a particular lease and leased vehicle if there is a default in
payment of interest or principal on the secured note relating to that lease and
leased vehicle. This payment default may arise if any funds in the termination
reserve account are depleted and the limits of the termination value insurance
are reached. 3.10% of the stipulated market value of each lease and leased
vehicle securing a secured note is funded at origination by COLT equity
certificates.
SERVICING AND SERVICING FEES
GMAC will act as servicer of the secured notes for the trust. The trust will pay
GMAC, as secured note servicer, a monthly fee equal to one-twelfth of [0.25%] of
the total value of the secured notes as of the first day of the preceding month.
GMAC also services the leases and leased vehicles securing the secured notes. As
lease servicer, GMAC receives a basic servicing fee and a supplemental servicing
fee on each distribution date. These amounts are paid by COLT, as the owner of
the leases and leased vehicles, and not from trust assets. The basic servicing
fee is equal to one-twelfth of 1.75% of the then-stipulated market value of each
lease and leased vehicle.
TAX STATUS
Mayer, Brown & Platt, special tax counsel, has delivered its opinion that the
[Class A-1 notes,] the Class A-2 notes and the Class A-3 notes will be
characterized as indebtedness for federal income tax purposes. Each noteholder,
by the acceptance of a note, will agree to treat the notes as indebtedness for
federal, state and local income and franchise tax purposes.
S-9
[In the opinion of Mayer, Brown & Platt, special tax counsel, the trust will not
be taxable as an association or publicly traded partnership taxable as a
corporation, but instead will be classified as a grantor trust for federal
income tax purposes. The certificates should therefore be trust certificates
representing equity interests in the trust. As a result, certificateholders
generally will report their allocable share of income earned on the secured
notes and, subject to limitations, may deduct their allocable share of interest
paid on the secured notes and reasonable servicing and other fees.]
[Each certificateholder, by the acceptance of a trust certificate, will agree to
treat the trust certificates as equity interests in the trust for federal, state
and local income and franchise tax purposes.]
ERISA CONSIDERATIONS
Subject to the restrictions and considerations discussed under "ERISA
Considerations," in this prospectus supplement and in the prospectus, an
employee benefit plan subject to the Employee Retirement Income Security Act of
1974 may purchase the notes [and the certificates]. An employee benefit plan and
any other retirement plan or arrangement, and any entity deemed to hold "plan
assets" of any employee benefit plan or other plan should consult with its
counsel before purchasing the notes [or certificates].
RATINGS
We will not issue the notes unless they are rated in the highest rating category
for long-term obligations -i.e., "AAA"- by at least one nationally recognized
rating agency.
[We will not issue the certificates unless they are rated at least in the "AA"
category for long-term obligations or its equivalent by at least one nationally
recognized rating agency.]
We cannot assure you that a rating agency will maintain its rating if
circumstances change. If a rating agency changes its rating, no one has an
obligation to provide additional credit enhancement or restore the original
rating.
S-10
RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase the securities offered by this prospectus supplement.
FINAL PAYMENT ON A SECURED
NOTE IS DEPENDENT ON SALE
PROCEEDS AT TERMINATION OF
THE
LEASE The primary source of payment on each secured
note is the lease and leased vehicle securing
that secured note. During the term of the lease
for a leased vehicle, COLT will make payments
on the secured note with the proceeds of
monthly lease payments it receives for that
leased vehicle. At the end of the lease term,
COLT expects that the net proceeds it receives
from the sale of that leased vehicle, together
with termination value insurance proceeds and
other credit enhancement, will be sufficient to
fully repay the secured note. If the net sale
proceeds from the leased vehicle received upon
termination of the lease are less than:
(1) the residual value established by GMAC, as
agent for COLT, when the lease was
originated,
(2) amounts in the termination reserve account
and
(3) proceeds from the termination value
insurance,
there may be insufficient funds to pay the
secured note in full.
GMAC's per unit loss rate on leases like those
which secure the secured notes is a function of
the residual value stated in the lease contract
and the market value and net sale proceeds
received for the leased vehicle upon its sale.
GMAC, as agent for COLT, establishes the
residual value at the time of lease origination
based on instructions GMAC provides to dealers.
Residual value represents the estimated
wholesale market value of the leased vehicle at
the end of the lease term, as adjusted by any
GM or GMAC programs in effect from time to time
designed to encourage the lease of vehicles.
For a description of how GMAC sets residual
values, see "Description of Auto Lease
Business--Residual Values" in the prospectus.
We can make no assurance as to how closely the
residual value of a leased vehicle established
at lease origination will approximate the fair
market value or net sale proceeds received upon
the sale of that leased vehicle. We expect
that, in general, if the market value exceeds
the residual value, the lessee or the
originating dealer is likely to purchase the
leased vehicle rather than return it to GMAC.
Conversely, if the market value is less than
the residual value stated in the lease, the
leased vehicle is generally more likely to be
returned to GMAC, which would result in a loss
on the sale of that leased vehicle.
S-11
YOUR PAYMENTS MAY BE
AFFECTED BY LEASES AND LEASED
VEHICLES SECURING SECURED
NOTES NOT PURCHASED BY THE
TRUST The amount that the Termination Value Insurer
must pay under the termination value insurance
for claims on the leases and leased vehicles
securing the secured notes sold to the trust
will depend on the amount of losses incurred on
all the leases and leased vehicles that secure
all the secured notes, whether or not the
secured notes are owned by the trust. When a
loss is incurred on a lease in a pool of leases
and leased vehicles securing a pool of secured
notes, claims are paid, first, from gains on
other leases and leased vehicles in that pool
and, second, from gains on any leases and
leased vehicles owned by COLT and securing
other secured notes. Then any funds available
in the termination reserve account, which
support all the secured notes issued by COLT,
pay unpaid claims on all the pools of leases
and leased vehicles based on a proportionate
allocation among all the pools. Finally, unpaid
claims on all pools of leases and leased
vehicles are paid by the termination value
insurer under the termination value insurance
based on a proportionate allocation of its then
outstanding commitment among all the pools of
leases and leased vehicles securing secured
notes. Later recoveries, if any, on leases and
leased vehicles for which claims have been made
against the termination value insurance will be
allocated to reinstate the termination value
insurer's commitment under the termination
value insurance. Thus, the performance of
leases and leased vehicles in pools other than
the pool underlying the secured notes held by
the trust could negatively affect the pool of
leases and leased vehicles underlying the
secured notes held by the trust. If:
(1) losses on lease terminations exhaust funds
in the termination reserve account and
coverage under the termination value
insurance, and
(2) these losses create shortfalls on the
secured notes held by the trust, and
(3) these shortfalls exceed amounts [on deposit
in the reserve account for this
transaction] and, in the case of notes,
otherwise payable to certificateholders,
you will experience reductions in payments on
your securities.
S-12
FAILURE TO COMPLY WITH
CONSUMER PROTECTION LAWS
GOVERNING THE LEASES SECURING
THE SECURED NOTES COUPLED
WITH OUR LIMITED OBLIGATIONS
COULD REDUCE OR DELAY
PAYMENTS ON YOUR SECURITIES Numerous federal and state consumer protection
laws, including the federal Consumer Leasing
Act of 1976 and Regulation M promulgated by the
Board of Governors of the Federal Reserve
System, impose requirements on lessors and
servicers of retail lease contracts of the type
that secure each secured note. In addition,
many states have enacted comprehensive vehicle
leasing statutes that, among other things,
regulate disclosures to be made at the time a
vehicle is leased. Failure to comply with these
requirements may give rise to liabilities on
the part of the lessor, and enforcement of the
leases by the lessor may be subject to set-off
as a result of noncompliance. Many states have
adopted "Lemon Laws" that provide vehicle
users, including lessees like those leasing the
leased vehicles securing the secured notes,
rights in respect of substandard vehicles. A
successful claim under a Lemon Law could result
in, among other things, the termination of the
lease of a substandard leased vehicle and/or
could require the refund of all or a portion of
payments previously paid on it.
We, GMAC and our affiliates are generally not
obligated to make any payments to you on your
securities and do not guarantee payments on the
secured notes or your securities. However,
GMAC, as seller of the secured notes, will make
representations and warranties to us regarding
the characteristics of the secured notes,
including that the leases securing the secured
notes comply in all material respects with all
requirements of law. These representations and
warranties will then be assigned by us to the
trust. If GMAC breaches those representations
and warranties, it may be required to
repurchase any affected secured notes from the
trust. If GMAC fails to repurchase those
secured notes, you might experience reductions
and/or delays in payments on your securities.
PRINCIPAL ON YOUR SECURITIES
MAY BE RETURNED SOONER OR
LATER THAN EXPECTED Events that could result in principal being
paid on your securities later than expected
include:
- delinquencies or losses on the leases and
leased vehicles securing the secured notes,
which are not covered by a lease servicer
advance or termination value insurance;
- slower than expected early terminations of
the leases securing the secured notes; or
- extensions or deferrals on leases securing
the secured notes, which are not covered by a
lease servicer advance or termination value
insurance.
S-13
Events that could result in principal being
paid on your securities sooner than expected
include:
- higher than expected defaults on the leases
and leased vehicles securing the secured
notes, which are covered by termination value
insurance; or
- faster than expected early terminations on
the leases securing the secured notes,
including early terminations that result in
termination payments under the termination
value insurance.
The lease servicer is obligated to make
advances as described in "The Transfer and
Servicing Agreements-Servicer Advances-Lease
Servicer Advances" in the prospectus. However,
we can make no assurances as to whether the
lease servicer will make an advance or, if an
advance is made, whether that advance will be
sufficient to reduce the outstanding principal
balance on the notes or certificates to zero by
the expected maturity date for your securities.
The rate at which payments may be made on your
securities will be affected by the payment,
early termination, liquidation and extension
experience of the leases and leased vehicles
securing the secured notes, which cannot be
predicted.
Early termination of the leases securing the
secured notes may occur at any time without
penalty. In addition, early termination may
occur as a result of defaults or from proceeds
of credit life, disability or physical damage
insurance. A partial prepayment on a lease
securing a secured note will be retained by the
lease servicer until these payments would
otherwise be due and, thus, will not affect the
timing of principal payments on the notes and
certificates. We or GMAC may also be required
to repurchase or purchase secured notes from
the trust in specified circumstances. The
secured note servicer also has the right to
purchase all remaining secured notes from the
trust under its optional purchase right.
Each secured note prepayment, lease early
termination, or repurchase or purchase
described above in the preceding paragraph will
shorten the average life of your securities. A
variety of unpredictable economic, social and
other factors influence early termination
rates. You will bear all reinvestment risk
resulting from a faster or slower rate of
prepayment in full or repurchase of the secured
notes held by the trust.
S-14
THE LIMITED NATURE OF THE
TRUST ASSETS COULD REDUCE OR
DELAY PAYMENTS ON YOUR
SECURITIES The trust will not have any significant assets
or sources of funds other than its secured
notes[, its rights in the reserve account] and
its rights as a holder of the secured notes in
the termination value insurance and any
proceeds of the termination reserve account.
The securities will not be insured or
guaranteed by us, GMAC, the owner trustee, the
indenture trustee, any of their or our
affiliates or any other person or entity. You
must rely on payments on the secured notes [and
on the reserve account] for repayment of your
securities.
In addition, if defaults in lease payments on
the leases securing the secured notes occur,
which include failure to recover the entire
residual value of the leased vehicles, you may
have to look to the lessees and the proceeds
from the repossession and sale of the leased
vehicles. If these proceeds are insufficient to
repay the secured notes securing your
securities, you will need to look to any funds
in the termination reserve account and the
termination value insurance, which enhance all
the leases and leased vehicles securing all
pools of secured notes. The amounts payable
under the termination value insurance and from
any amounts in the termination reserve account
will depend on the amount of losses incurred on
all pools of leases and leased vehicles that
secure the secured notes, whether or not these
secured notes are sold to the trust. If
deficiencies under all secured notes exhaust
any funds in the termination reserve account
and coverage under the termination value
insurance, and these deficiencies exceed
[amounts on deposit in the reserve account for
this transaction and], in the case of notes,
amounts otherwise payable to
certificateholders, you might experience
reductions in payments on your securities.
A RATINGS DOWNGRADE OF THE
TERMINATION VALUE INSURER
COULD CAUSE A RATINGS
DOWNGRADE ON YOUR SECURITIES;
A FAILURE TO PAY BY THE
TERMINATION VALUE INSURER
COULD DELAY OR REDUCE
PAYMENT ON YOUR SECURITIES [ ] will be the termination
value insurer for all secured notes issued on
or before the cutoff date, including those
owned by the trust. The Termination Value
Insurer's termination payments are intended to
protect each holder of secured notes from
residual value risk and credit losses on the
underlying leases and leased vehicles subject
to an aggregate loss limit. The financial
strength rating of the Termination Value
Insurer is currently "AAA" by Standard & Poor's
Ratings Services and "Aaa" by Moody's Investors
Service, Inc. If the Termination Value
Insurer's rating is downgraded, there is no
requirement that we find another termination
value insurer or that the Termination Value
Insurer provide cash collateral to fund its
commitment. In this situation, there could be a
downgrade of the rating on your securities. In
addition, if the
S-15
Termination Value Insurer fails to make
required termination payments, there could be a
shortfall or delay in payments on your
securities.
THE POSSIBLE BANKRUPTCY OF
GMAC COULD REDUCE OR DELAY
PAYMENTS ON YOUR SECURITIES If GMAC were to file for bankruptcy under the
federal bankruptcy code or any state insolvency
laws, a court could;
(1) consolidate our assets and liabilities with
those of GMAC,
(2) decide that the sale of the secured notes
to us was not a "true sale" or
(3) disallow a transfer of secured notes prior
to the bankruptcy.
However, in the opinion of Mayer, Brown &
Platt, our special counsel, in a properly
presented and decided case, a court will not
take these actions. If the secured notes became
part of GMAC's bankruptcy estate, you might
experience reductions and/or delays in payments
on your securities.
THE ABSENCE OF A SECONDARY
MARKET COULD LIMIT YOUR
ABILITY TO RESELL YOUR
SECURITIES The underwriters may assist in the resale of
securities, but they are not required to do so.
A secondary market for any securities may not
develop. If a secondary market does develop, it
might not continue or it might not be
sufficiently liquid to allow you to resell any
of your securities.
THE RATINGS OF THE SECURITIES
MAY BE REVISED OR WITHDRAWN The securities will be issued only if they
receive the required rating. A rating is not a
recommendation to buy, sell or hold the
securities. The ratings may be revised or
withdrawn at any time. The rating considers
only the likelihood that the trust will pay
interest on time and will ultimately pay
principal in full [or make full distributions
of certificate balance]. Ratings on the
securities do not address the timing of
distributions of principal on the securities
prior to their applicable final scheduled
distribution date. Nor do ratings consider the
prices of securities or their suitability for a
particular investor. If a rating agency changes
its rating on your securities, no one has an
obligation to provide additional credit
enhancement or restore the original rating.
THE GEOGRAPHIC CONCENTRATION
OF THE LEASES SECURING THE
SECURED NOTES COULD RESULT IN
LOSSES OR PAYMENT DELAYS ON
YOUR SECURITIES As of , , %,
%, %, % and % of the leases
securing the secured notes, based on
outstanding principal balance, are related to
lessees with mailing addresses in California,
Illinois, Michigan, New York, and Pennsylvania,
respectively. As a result of this geographic
concentration, economic conditions, legislative
changes or other
S-16
factors affecting these states could have a
significant effect on the delinquency, credit
loss or repossession experience of the leases
and leased vehicles securing the secured notes
and could adversely affect the timing of
payments on your securities.
PAYMENTS ON YOUR NOTES
DEPEND ON COLLECTIONS ON THE
SECURED NOTES The trust plans to pay principal on the notes
monthly with the remaining principal balance
due on each note on its final scheduled
distribution date.
The trust will pay principal only to the extent
that funds are available from collections on
the secured notes [and from the reserve
account]. If the funds available from
collections on the secured notes and from the
[reserve account and] certificates are
insufficient to pay the entire principal amount
due on any class of notes, you may experience
delays and/or reductions in principal payments
on your notes.
THE FAILURE TO MAKE PRINCIPAL
PAYMENTS ON YOUR SECURITIES
WILL GENERALLY NOT RESULT IN
AN EVENT OF DEFAULT [UNTIL
THE
FINAL SCHEDULED DISTRIBUTION
DATE] You should be aware that the amount of
principal required to be paid to you prior to
the final scheduled distribution date for a
series of notes or class of certificates
generally will be limited to amounts available
for those purposes. [Therefore, the failure to
pay principal of a series of notes or class of
certificates generally will not result in the
occurrence of an event of default under the
indenture or trust agreement until the final
scheduled distribution date for the series of
notes or class of certificates.]
[A HIGH RATE OF PAYMENTS ON
THE SECURED NOTES, ON, OR A
DECREASE IN THE AVAILABILITY
OF,
SECURED NOTES DURING THE
REVOLVING PERIOD COULD
SHORTEN THE AVERAGE LIFE OF
THE
SECURITIES If provided for in the accompanying prospectus
supplement, the securities will have a
revolving period. During a revolving
period, the trust will not make payments of
principal to you. Instead, the trust will
reinvest payments on secured notes [of
principal [, prepayments and proceeds from
repurchases] in additional pools of secured
notes. These reinvestments will lengthen the
average life of the securities. However, an
unexpectedly high rate of payments on the
secured notes during the revolving period
and/or a significant decline in the number of
suitable secured notes available for purchase
by the trust could affect the ability of the
trust to make reinvestments. The lower the rate
of reinvestment, the shorter the average life
of the securities could be.
A variety of unpredictable economic, social and
other factors influence payment rates and the
availability of suitable secured notes.]
S-17
SUMMARY OF TRANSACTIONS PARTIES [FLOW CHART]
S-18
THE TRUST
The issuer, Capital Auto Receivables Asset Trust -SN[1], is
a business trust formed under the laws of the State of Delaware. The trust will
be established and operated pursuant to a trust agreement dated on or before the
closing date of , .
The trust will engage in only the following activities:
- acquiring, managing and holding the secured notes and other assets of
the trust and the proceeds from those assets;
- issuing the notes and certificates;
- making payments on the notes and certificates; and
- engaging in any other activities that are necessary, suitable or
convenient to accomplish any of the foregoing or are incidental or
connected with these activities.
The trust's principal offices are in , , in care of
, as owner trustee, at the address listed in "--The Owner Trustee"
below.
CAPITALIZATION OF THE TRUST
The following table illustrates the capitalization of the trust as of the
cutoff date of , , as if the issuance of the notes and
certificates had taken place on that date:
<Table>
Class A-1 % Asset Backed Notes............. $
Class A-2 % Asset Backed Notes.............
Class A-3 % Asset Backed Notes.............
% Asset Backed Certificates...............
-----------------
Total........................................ $
=================
</Table>
The certificates represent the equity of the trust and will be issued under
the trust agreement. [We will initially hold the certificates and they are not
being offered by this prospectus supplement.] [The seller will initially hold
certificates with an aggregate initial balance of $ .]
THE OWNER TRUSTEE
is the owner trustee under the trust agreement.
is a [describe]. Its principal offices are located at
.
THE POOL OF SECURED NOTES
The secured notes to be sold to the trust will be selected from the secured
notes held by GMAC based on several criteria, including that each secured note:
- is secured by a new [or used] automobile or light truck and a lease
related to the vehicle;
- has an original scheduled maturity date of 12 to [48] months after
issuance;
- has a first payment due date on or after , ; and
- bears interest at an annual percentage rate between % and %.
S-19
GMAC, COLT or other purchasers purchase new and used leases and vehicles
from General Motors dealers under a supplemental dealer agreement. Each lease
and leased vehicle included by COLT as collateral for the secured notes must
meet the following eligibility criteria:
- the leased vehicle is a automobile or light truck;
- the lease has an original scheduled term of 12 to 48 months;
- the capitalized cost of the lease ranges from $0 to $200,000;
- the lease is not a single payment lease;
- the dealer originated the lease in its ordinary course of business;
- the lease provides for level monthly payments;
- the lease complies with applicable federal, state and local laws;
- the lease represents a binding obligation of the lessee;
- the dealer has good title in and to the lease and the amounts due under
it;
- the dealer has good title to the leased vehicle;
- the lease is in force and not terminated;
- the lessee is not in default under the lease;
- the lessee maintains physical damage and liability insurance policies;
- the lease and leased vehicle are legally assigned to the purchaser;
- the dealer is located in the United States;
- the lease is originated within 30 days of the lease purchase date; and
- the lessee pays all costs relating to taxes, insurance and maintenance
for the leased vehicle.
S-20
The following tables describe the secured note pool and the lease assets
securing the secured notes as of the cutoff date.
COMPOSITION OF THE POOL OF SECURED NOTES
In the following table, the weighted numbers, average interest rates, and
average original number of monthly payments of the secured notes are weighted by
outstanding principal balance of secured notes as of the cutoff date. The
average and range of outstanding principal balance of secured notes and the
weighted average and range of interest rates are determined without giving
effect to discounting for calculation of secured note values of those secured
notes. The average and range of original residual values of the leases securing
the secured notes and percentage of the leases for new and used vehicles are
determined without giving effect to discounting for calculation of the
stipulated market value of those leases.
<Table>
Aggregate Secured Note Value as of Cutoff Date......
Number of Secured Notes.............................
Average Secured Note Value as of Cutoff Date........
Range of Original Secured Note Values of Secured
Notes.............................................
Weighted Average Interest Rate......................
Range of Interest Rates.............................
Weighted Average Original Number of Monthly
Payments..........................................
Range of Original Number of Monthly Payments........
Weighted Average Remaining Number of Monthly
Payments..........................................
Range of Remaining Number of Monthly Payments.......
Average Original Residual Value of Leases...........
Range of Original Residual Values of Leases.........
Aggregate of Residual Values of Leases as a
Percentage of Aggregate Stipulated Market Value of
Leases as of Cutoff Date..........................
Percentage of Leases for New Vehicles by stipulated
market value......................................
Percentage of Leases for Used Vehicles by stipulated
market value......................................
</Table>
S-21
DISTRIBUTION OF THE SECURED NOTES BY INTEREST RATE
The following table illustrates the distribution of the secured notes as of
the cutoff date of , by interest rate. These percentages may not
add to 100.00% due to rounding.
<Table>
<Caption>
PERCENTAGE
PERCENTAGE OF AGGREGATE OF AGGREGATE
NUMBER OF NUMBER OF SECURED SECURED
INTEREST RATE RANGE SECURED NOTES SECURED NOTES NOTE VALUE NOTE VALUE
------------------- ------------- ------------- ---------- ------------
Less than 2.00%.................
2.00% to 2.99%..................
3.00% to 3.99%..................
4.00% to 4.99%..................
5.00% to 5.99%..................
6.00% to 6.99%..................
7.00% to 7.99%..................
8.00% to 8.99%..................
9.00% to 9.99%..................
10.00% to 10.99%................
11.00% to 11.99%................
12.00% to 12.99%................
13.00% to 13.99%................
------ ---- -------- ----
Total......................
====== ==== ======== ====
</Table>
DISTRIBUTION OF THE SECURED NOTES BY MATURITY
The following table illustrates the distribution of the secured notes as of
the cutoff date of , by year of maturity. These percentages may
not add to 100.00% due to rounding.
<Table>
<Caption>
PERCENTAGE OF
PERCENTAGE OF AGGREGATE AGGREGATE
YEARS OF NUMBER OF NUMBER OF SECURED SECURED NOTE
MATURITY SECURED NOTES SECURED NOTES NOTE VALUE VALUE
-------- ------------- ------------- ---------- -------------
2000........................
2001........................
2002........................
2003........................
2004........................
Total..................
</Table>
DISTRIBUTION BY STATE OF LEASES SECURING THE SECURED NOTES AS OF CUTOFF DATE
The state of origination of a lease securing a secured note is based on the
dealer's location. The following table sets forth the percentage of the
Aggregate Stipulated Market Value in the states with the largest concentrations
of lease assets securing the secured notes. No other state accounts for more
than 5% of the Aggregate Stipulated Market Value. The
S-22
following breakdown by state is based on the state where the leased vehicle
securing the secured note is registered. These percentages may not add to
100.00% due to rounding.
<Table>
<Caption>
PERCENTAGE OF
NUMBER NUMBER
OF LEASES OF LEASES PERCENTAGE OF
SECURING THE SECURING THE AGGREGATE AGGREGATE
STATE OF SECURED SECURED STIPULATED STIPULATED
REGISTRATION NOTES NOTES MARKET VALUE MARKET VALUE
------------ ------------ ------------- ------------ ----------------
</Table>
DISTRIBUTION OF LEASES SECURING THE SECURED NOTES BY VEHICLE MAKE AS OF CUTOFF
DATE
<Table>
<Caption>
NUMBER PERCENTAGE OF
OF LEASES NUMBER OF PERCENTAGE OF
SECURING THE LEASES SECURING AGGREGATE AGGREGATE
BREAKDOWN BY SECURED THE SECURED STIPULATED STIPULATED
VEHICLE MAKE NOTES NOTES MARKET VALUE MARKET VALUE
------------ ------------ --------------- ------------ -------------
Buick......................
Cadillac...................
Chevrolet..................
Oldsmobile.................
Pontiac....................
GMC Truck..................
Saturn.....................
Total.................
</Table>
DISTRIBUTION OF LEASES SECURING THE SECURED NOTES BY VEHICLE TYPE AS OF CUTOFF
DATE
<Table>
<Caption>
NUMBER PERCENTAGE
OF LEASES OF NUMBER OF PERCENTAGE
SECURING LEASES SECURING AGGREGATE OF AGGREGATE
BREAKDOWN BY THE SECURED THE SECURED STIPULATED STIPULATED
VEHICLE TYPE NOTES NOTES MARKET VALUE MARKET VALUE
------------ ----------- --------------- ------------ ------------
Cars & Minivans.............
Light Trucks & Sport........
Utility Vehicles............
</Table>
S-23
DISTRIBUTION OF LEASES SECURING THE SECURED NOTES BY ORIGINAL TERM
The following table reflects the distribution of the leases securing the
secured notes as of the cutoff date by original term stated in months. The
numbers are weighted by the cutoff date stipulated market value of the leases.
The weighted average residual value is stated as a percentage of original
capitalized cost. The percentages may not add to 100.00% due to rounding.
<Table>
<Caption>
PERCENTAGE
NUMBER OF NUMBER PERCENTAGE OF
OF LEASES OF LEASES AGGREGATE AGGREGATE ORIGINAL WEIGHTED
ORIGINAL SECURING THE SECURING THE STIPULATED STIPULATED CAPITALIZED AVERAGE
TERM SECURED NOTES SECURED NOTES MARKET VALUE MARKET VALUE COST RESIDUAL VALUE
- --------------------- ------------- ------------- ------------ ------------- ----------- --------------
to
to
to
to
to
Total
<Caption>
WEIGHTED
AVERAGE
IMPLICIT RATE WEIGHTED WEIGHTED
OF LEASES AVERAGE AVERAGE
ORIGINAL SECURING THE ORIGINAL REMAINING
TERM SECURED NOTES TERM TERM
- --------------------- ------------- -------- ---------
to
to
to
to
to
Total
</Table>
S-24
TERMINATION VALUE INSURANCE
[ , a ,] is currently the sole provider of
termination value insurance for the leases and leased vehicles securing the
secured notes. A lease and a leased vehicle are also referred to in this
prospectus supplement as a lease asset.
[The termination value insurance provided by the Termination Value Insurer
provides 100% loss coverage, subject to an overall cap for all lease assets held
by COLT, on the lease assets securing each secured note, including each secured
note held by the trust. Termination payments cover losses, whether caused by a
lease default or the lease servicer's failure to obtain the full residual value
of the leased vehicle at lease termination. The termination value insurance
protects each secured note from termination value risk and credit losses,
subject to an aggregate loss limit that is currently [17%] of the aggregate
initial discounted balance of the leases securing all the secured notes, whether
or not held by the trust. This percentage is subject to adjustment as more fully
described below in this section.]
[The Termination Value Insurer must make a termination payment for each
lease that terminates in any month. This monthly termination payment equals the
amount of the deficiency on each lease asset in all pools of leases securing
secured notes remaining after allocation of any gains on other lease assets that
have terminated and withdrawals from any funds available in the termination
reserve account. The Termination Value Insurer must deposit the monthly
termination payment into the collection accounts for the secured notes and
certificates as specified by the lease servicer. If the funds needed to cover
unpaid amounts outstanding are more than the Termination Value Insurer's
commitment, holders of the secured notes will only receive their pro rata share
of this termination payment.]
[The Termination Value Insurer's obligation to make monthly termination
payments is limited to the Termination Value commitment amount. The Termination
Value commitment amount is the lesser of:
(1) the Termination Value commitment amount as of the preceding
distribution date, plus
(a) for each lease asset acquired during the previous month, the
product of (x) the then applicable Termination Value percentage of that
lease asset and (y) the initial discounted balance of that lease asset,
minus
(b) if the result would not be below $150,000,000, for each lease
for which termination occurred in the previous month, and each lease
asset purchased by GMAC, as the lease servicer or agent for COLT, during
the previous month, the product of (i) the Termination Value percentage
of that lease asset and (ii) the initial discounted balance of that
lease asset, adjusted by
(c) the monthly Termination Value adjustment amount; and
(2) the Termination Value base amount.]
[The Termination Value base amount is the overall cap on the Termination
Value Insurer's commitment. On any distribution date, the Termination Value base
amount is the greater of:
(1) for all lease assets owned by COLT as of the last day of the
previous month, excluding any lease assets for which termination occurred
in any prior month, the
S-25
product of (a) the Termination Value percentage for each lease asset and
(b) the initial discounted balance of that lease asset; and
(2) $150,000,000.]
[The Termination Value base amount as of , was $ or
% of the aggregate initial discounted balance of the leases.]
[The Termination Value percentage for any lease asset is the greatest of:
(1) 12%;
(2) at the time COLT acquires the lease asset, 15% or the percentage,
if any, most recently permitted or required by Standard & Poor's to confirm
its rating on the COLT certificates or by Moody's so as not to withdraw,
suspend or downgrade its rating on the COLT certificates;
(3) for all leases, 16% if the auction turn-in rate exceeds 30% but is
35% or less, and 17% if the auction turn-in rate exceeds 35% but is 40% or
less; and
(4) for all leases, the percentage as a result of which Standard &
Poor's and Moody's have not withdrawn, suspended or downgraded their
ratings of the COLT certificates if specified credit enhancement events
have occurred or the auction turn-in rate exceeds 40%, and the termination
value insurer and the holders of COLT certificates evidencing not less than
two-thirds of the voting interests have approved that percentage in writing
within 30 days.]
[The Termination Value percentage in clauses (3) and (4) above may return
to the lower levels described in clauses (1) and (2) above if the triggers in
clauses (3) and (4) have not been breached for 12 consecutive months.]
[The Termination Value percentage as of , was [17%]. The
auction turn-in rate is calculated each month by the lease servicer as described
below under "Residual Values."]
[The monthly Termination Value adjustment amount for any distribution date
adds or subtracts the amount calculated as follows:
(1) any excesses on terminating lease assets where the Termination
Value percentage of the initial discounted balance of the lease asset
exceeds the termination payment, minus
(2) any deficiencies on terminating lease assets where the termination
payment exceeds the Termination Value percentage of the initial discounted
balance of that lease asset, plus
(3) all amounts received by the Termination Value Insurer from later
recoveries on the lease assets, withdrawals from the termination reserve
account, and any payments by GMAC, as agent for COLT, to the Termination
Value Insurer to compensate for originating lease assets that have residual
values above the estimated market value. The initial discounted balance of
a lease is calculated as described in the prospectus under "The Pools of
Secured Notes--GMAC's Responsibilities as COLT Agent and Lease Servicer."]
S-26
[Any amounts recovered by the lease servicer or by COLT on any lease for
which the Termination Value Insurer made a termination payment, including excess
wear and tear and excess mileage charges, after the end of the month during
which termination occurred, that are included in the total proceeds received on
that lease will be paid to the Termination Value Insurer to the extent of the
termination payment the Termination Value Insurer made on that lease. If,
however, the Termination Value Insurer fails to comply with its obligations,
these recoveries will instead be deposited into the termination reserve
account.]
[If, on any distribution date, the lease servicer fails to make an advance
when there is a shortfall in the monthly payment on any lease, or when
termination results in a remaining unpaid balance, and funds are not available
from other sources, the Termination Value Insurer will, upon notice from the
lease servicer, pay the amount of the advance not paid by the lease servicer.]
[Each month, GMAC as lease servicer submits a report to the Termination
Value Insurer containing information on all leases and leased vehicles GMAC as
agent acquired for COLT during the previous month. The lease servicer must
submit a monthly loss information report for all terminating leases for which
termination occurred in the previous month. As lease servicer and agent for
COLT, GMAC must enroll each leased vehicle with the Termination Value Insurer in
order for the vehicle to obtain insurance coverage. The Termination Value
Insurer is not responsible for any losses caused by the lease servicer's failure
to enroll a leased vehicle in accordance with the terms of the termination value
insurance.]
[A termination value fee is paid to the Termination Value Insurer on each
lease asset, without claim to the holders of secured notes. This fee is paid on
a monthly basis so long as funds are available out of collections on leases and
leased vehicles and any excess of proceeds received on leases and leased
vehicles after lease termination. Any unpaid fees to the Termination Value
Insurer will be paid on the first distribution date when funds in the secured
note collection accounts are available.]
COMPOSITION OF COLT'S ENTIRE PORTFOLIO OF SECURED NOTES AND LEASE ASSETS
As described above in the immediately preceding subsection, the termination
value insurance provides loss coverage on all leases and leased vehicles held by
COLT, including the leases and leased vehicles securing the secured notes held
by the trust. In the following table, the weighted numbers, average interest
rate and average original number of monthly payments of the secured notes are
weighted by outstanding principal balance of secured notes as of the cutoff
date. The average and range of outstanding principal balance of secured notes
and the weighted average and range of interest rates are determined without
giving effect to discounting for calculation of secured note values of those
secured notes. The average and range of original residual values of the leases
securing the secured notes and percentage of the leases for new and used
vehicles are determined without giving effect to discounting for calculation of
the stipulated market value of those leases.
<Table>
Aggregate Secured Note Value as of Cutoff Date..............
Number of Secured Notes.....................................
Average Secured Note Value as of Cutoff Date................
Range of Original Secured Note Values of Secured Notes......
Weighted Average Interest Rate..............................
Range of Interest Rates.....................................
Weighted Average Original Number of Monthly Payments........
</Table>
S-27
<Table>
Range of Original Number of Monthly Payments................
Weighted Average Remaining Number of Monthly Payments.......
Range of Remaining Number of Monthly Payments...............
Average Original Residual Value of Leases...................
Range of Original Residual Values of Leases.................
Aggregate of Residual Values of Leases as a Percentage of...
Aggregate Stipulated Market Value of Leases as of Cutoff
Date...................................................
Percentage of Leases for New Vehicles (by Stipulated........
Market Value)..........................................
Percentage of Leases for Used Vehicles (by Stipulated.......
Market Value)..........................................
</Table>
The distribution of COLT's entire portfolio of leases by state of
origination is: %. The distribution of COLT's entire portfolio of leases by
vehicle make, calculated on the basis of the number of leases, is: Buick %,
Cadillac %, Chevrolet %, Oldsmobile %, Pontiac %, GM Truck
% and Saturn %.
Information regarding delinquencies and loss experience for the entire
portfolio of secured notes either owned or serviced by GMAC is also contained
under "The Pool of Leases Securing the Secured Notes" below.
Information regarding delinquencies, repossession and loss experience and
residual value loss experience for COLT's entire portfolio of leases and leased
vehicles is contained under "The Pool of Leases Securing the Secured Notes"
below.
THE TERMINATION VALUE INSURER
The following information has been supplied by the Termination Value
Insurer for inclusion in this prospectus supplement. Although the information
has been prepared from sources that we believe to be reliable, we have made no
independent investigation of its accuracy or completeness. The Termination Value
Insurer disclaims responsibility for the accuracy or completeness of this
prospectus supplement and the prospectus, other than the information contained
in this section.
The Termination Value Insurer is an insurance company incorporated under
the laws of the State of . The Termination Value Insurer is
located at [ ] and
its telephone number is [ ].
S-28
[ALTERNATIVE A: The tables below present selected financial information of
the Termination Value Insurer determined in accordance with generally accepted
accounting principles.]
[ALTERNATIVE B: The tables below present selected financial information of
the Termination Value Insurer determined in accordance with statutory accounting
practices prescribed or permitted by insurance regulatory authorities, which
vary from generally accepted accounting principles in certain respects. [Discuss
material differences between statutory accounting principles and generally
accepted accounting principles, including comparative discussion.]]
[ALTERNATIVE B: ONLY TO BE USED WHEN SELECTED FINANCIAL INFORMATION IS NOT
AVAILABLE ON A GAAP BASIS]
SUMMARY BALANCE SHEET
<Table>
<Caption>
NINE MONTHS
ENDED
SEPTEMBER 30 YEAR ENDED DECEMBER 31
----------------------- ---------------------------------
2000 1999 1999 1998 1997
----------- --------- --------- --------- ---------
(UNAUDITED) (AUDITED) (AUDITED) (AUDITED) (AUDITED)
(IN MILLIONS)
Current Assets....................
Noncurrent Assets.................
Deduct: Non-Admitted Assets.......
Admitted Assets...................
Current Liabilities...............
Noncurrent Liabilities............
Total Liabilities.................
Capital and Surplus...............
</Table>
SUMMARY STATEMENT OF INCOME
<Table>
<Caption>
NINE MONTHS
ENDED
SEPTEMBER 30 YEAR ENDED DECEMBER 31
----------------------- ---------------------------------
2000 1999 1999 1998 1997
----------- --------- --------- --------- ---------
(UNAUDITED) (AUDITED) (AUDITED) (AUDITED) (AUDITED)
(IN MILLIONS)
Gross Revenues....................
Costs and Expenses................
Income (or Loss) Before
Extraordinary Items and
Cumulative Effect of a Change
in Accounting Principles.....
Net Income (or Loss)..............
</Table>
As of the date of this prospectus supplement, the Termination Value Insurer
was rated "Aaa" by Moody's and "AAA" by Standard & Poor's for financial
strength.
The Termination Value Insurer files annual statements with the insurance
departments of the State of and other states in which it is
eligible to write insurance. Copies
S-29
of the annual statement of the Termination Value Insurer for the year ended
December 31, 1999 are available on request from the indenture trustee.
[The Termination Value Insurer files reports, proxy statements and other
information with the SEC. You may read and copy any documents that the
Termination Value Insurer files at the public reference facilities maintained by
the SEC at 450 Fifth Street, N.W., Washington, D.C., 20549, and at the following
regional offices of the SEC:
- New York Regional Office, Suite 1300, 7 World Trade Center, New York, New
York 10048;
- Los Angeles Regional Office, 5670 Wilshire Boulevard, 11th Floor, Los
Angeles, California 90036; and
- Chicago Regional Office, Suite 1400, 500 West Madison Street, Chicago,
Illinois 60661.
You may obtain copies of these materials from the Public Reference Section of
the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In
addition, the SEC maintains a website that contains reports, proxy statements
and other information regarding reporting companies including the Termination
Value Insurer, at http://www.sec.gov. These reports, proxy statements and other
information can be inspected at the Information Center of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005.]
WEIGHTED AVERAGE LIFE OF THE SECURITIES
Additional information regarding the notes can be found under "Weighted
Average Life of the Securities" in the prospectus.
The weighted average life of the notes [and certificates] will depend on
the rate of principal payments on the secured notes, which in turn will depend,
among other things, on the rate of early termination on the leases securing the
secured notes. Early terminations on motor vehicle leases may be measured
relative to a prepayment standard or model. The prepayment model used for the
leases is based on a prepayment assumption expressed in terms of percentages of
ABS. ABS refers to a prepayment model that assumes a constant percentage of the
original number of leases in a pool prepay each month. However, as used in this
prospectus supplement, a 100% prepayment assumption assumes that, based on the
assumptions below, the original balance of a lease will prepay as follows:
(1) % ABS for the first months of the life of the lease;
(2) % ABS for the through month of the life of the lease;
(3) % ABS for the through month of the life of the lease;
(4) % ABS for the through month of the life of the lease;
(5) % ABS for the through month of the life of the lease;
(6) % ABS for the through month of the life of the lease; and
(7) % ABS following the month of the life of the lease until the
balance of the lease has been paid in full.
S-30
The tables below were prepared on the basis of certain assumptions,
including that:
- all scheduled payments on the leases securing the secured notes are
timely received, no lease is ever delinquent and all payments on the
secured notes are timely made;
- no leases are purchased by the lease servicer as a result of a breach of
a representation or warranty under the lease origination agreement;
- there are no losses on the secured notes;
- the secured note servicer does not exercise its option to purchase the
secured notes;
- distributions of principal of and interest on the notes [and
certificates] are made on the 15th day of each month whether or not the
day is a business day;
- the basic servicing fee and the secured note servicing fee are [1.75%]
and [0.25%] per annum, respectively;
- each early termination of a lease results in prepayment of the entire
balance of the secured note related to that lease;
- the schedule of the declining secured note values for the secured notes
is as set forth as the last table, and assumes no early terminations of
leases; and
- the leases securing the secured notes have months of
seasoning.
ASSUMED CHARACTERISTICS
Because payments on the leases and thus the secured notes will differ from
those used in preparing the following tables, distributions of principal of the
notes [and certificates] may be made earlier or later than as set forth in the
tables. You are urged to make your investment decisions on a basis that includes
their determination as to anticipated prepayment rates under a variety of the
assumptions discussed in this prospectus supplement.
Based on the foregoing assumptions, the following tables indicate the
resulting weighted average lives of the notes [and certificates] and set forth
the initial note [and certificate] balances that would be outstanding after each
of the dates shown at the indicated percentages of the early termination model.
S-31
PERCENTAGE OF CLASS A-1 NOTE BALANCE OUTSTANDING TO MATURITY
<Table>
<Caption>
PREPAYMENT ASSUMPTION
-----------------------------------
DISTRIBUTION DATE 0% 50% 100% 150% 200%
----------------- --- ---- ---- ---- ----
Initial......................................... 100 100 100 100 100
4/15/01.........................................
5/15/01.........................................
6/15/01.........................................
7/15/01.........................................
8/15/01.........................................
9/15/01.........................................
10/15/01........................................
11/15/01........................................
12/15/01........................................
1/15/02.........................................
2/15/02.........................................
3/15/02.........................................
4/15/02.........................................
5/15/02.........................................
6/15/02.........................................
7/15/02.........................................
8/15/02.........................................
9/15/02.........................................
Weighted Average Life to Maturity (years).......
Weighted Average Life to Call (years)...........
--- --- --- --- ---
</Table>
- The weighted average life of the Class A-1 notes is determined by (a)
multiplying the amount of each distribution in reduction of principal
balance by the number of years from the closing date to the date
indicated, (b) adding the results and (c) dividing the sum by the
aggregate distributions in reduction of principal balance referred to in
clause (a).
- The weighted average life to call assumes that the secured note servicer
exercises its option to purchase the secured notes.
S-32
PERCENTAGE OF CLASS A-2 NOTE BALANCE OUTSTANDING TO MATURITY
<Table>
<Caption>
PREPAYMENT ASSUMPTION
-----------------------------------
DISTRIBUTION DATE 0% 50% 100% 150% 200%
----------------- --- ---- ---- ---- ----
Initial......................................... 100 100 100 100 100
4/15/01.........................................
5/15/01.........................................
6/15/01.........................................
7/15/01.........................................
8/15/01.........................................
9/15/01.........................................
10/15/01........................................
11/15/01........................................
12/15/01........................................
1/15/02.........................................
2/15/02.........................................
3/15/02.........................................
4/15/02.........................................
5/15/02.........................................
6/15/02.........................................
7/15/02.........................................
8/15/02.........................................
9/15/02.........................................
Weighted Average Life to Maturity (years).......
Weighted Average Life to Call (years)...........
--- --- --- --- ---
</Table>
- The weighted average life of the Class A-2 notes is determined by (a)
multiplying the amount of each distribution in reduction of principal
balance by the number of years from the closing date to the date
indicated, (b) adding the results and (c) dividing the sum by the
aggregate distributions in reduction of principal balance referred to in
clause (a).
- The weighted average life to call assumes that the secured note servicer
exercises its option to purchase the secured notes.
S-33
PERCENTAGE OF CLASS A-3 NOTE BALANCE OUTSTANDING TO MATURITY
<Table>
<Caption>
PREPAYMENT ASSUMPTION
-----------------------------------
DISTRIBUTION DATE 0% 50% 100% 150% 200%
----------------- --- ---- ---- ---- ----
Initial......................................... 100 100 100 100 100
4/15/01.........................................
5/15/01.........................................
6/15/01.........................................
7/15/01.........................................
8/15/01.........................................
9/15/01.........................................
10/15/01........................................
11/15/01........................................
12/15/01........................................
1/15/02.........................................
2/15/02.........................................
3/15/02.........................................
4/15/02.........................................
5/15/02.........................................
6/15/02.........................................
7/15/02.........................................
8/15/02.........................................
9/15/02.........................................
Weighted Average Life to Maturity (years).......
Weighted Average Life to Call (years)...........
--- --- --- --- ---
</Table>
- The weighted average life of the Class A-3 notes is determined by (a)
multiplying the amount of each distribution in reduction of principal
balance by the number of years from the closing date to the date
indicated, (b) adding the results and (c) dividing the sum by the
aggregate distributions in reduction of principal balance referred to in
clause (a).
- The weighted average life to call assumes that the secured note servicer
exercises its option to purchase the secured notes.
S-34
[PERCENTAGE OF CERTIFICATE BALANCE REMAINING TO MATURITY
<Table>
<Caption>
PREPAYMENT ASSUMPTION
-----------------------------------
DISTRIBUTION DATE 0% 50% 100% 150% 200%
----------------- --- ---- ---- ---- ----
Initial......................................... 100 100 100 100 100
4/15/01.........................................
5/15/01.........................................
6/15/01.........................................
7/15/01.........................................
8/15/01.........................................
9/15/01.........................................
10/15/01........................................
11/15/01........................................
12/15/01........................................
1/15/02.........................................
2/15/02.........................................
3/15/02.........................................
4/15/02.........................................
5/15/02.........................................
6/15/02.........................................
7/15/02.........................................
8/15/02.........................................
9/15/02.........................................
Weighted Average Life to Maturity (years).......
Weighted Average Life to Call (years)...........
--- --- --- --- ---
</Table>
- The weighted average life of the certificates is determined by (a)
multiplying the amount of each distribution in reduction of principal
balance by the number of years from the closing date to the date
indicated, (b) adding the results and (c) dividing the sum by the
aggregate distributions in reduction of principal balance referred to in
clause (a).
- The weighted average life to call assumes that the secured note servicer
exercises its option to purchase the secured notes.]
S-35
SCHEDULE OF DECLINING SECURED NOTE VALUES
<Table>
<Caption>
MONTHLY PERIOD BEGINNING SECURED NOTE VALUE BALANCE
-------------- ------------------------------------
07/01/99.......................................
08/01/99.......................................
09/01/99.......................................
10/01/99.......................................
11/01/99.......................................
12/01/99.......................................
01/01/00.......................................
02/01/00.......................................
03/01/00.......................................
04/01/00.......................................
05/01/00.......................................
06/01/00.......................................
07/01/00.......................................
08/01/00.......................................
09/01/00.......................................
10/01/00.......................................
11/01/00.......................................
12/01/00.......................................
01/01/01.......................................
02/01/01.......................................
03/01/01.......................................
04/01/01.......................................
05/01/01.......................................
06/01/01.......................................
07/01/01.......................................
08/01/01.......................................
09/01/01.......................................
10/01/01.......................................
11/01/01.......................................
12/01/01.......................................
01/01/02.......................................
02/01/02.......................................
03/01/02.......................................
04/01/02.......................................
05/01/02.......................................
06/01/02.......................................
07/01/02.......................................
08/01/02.......................................
09/01/02.......................................
10/01/02.......................................
11/01/02.......................................
12/01/02.......................................
01/01/03.......................................
02/01/03.......................................
03/01/03.......................................
</Table>
S-36
THE POOL OF LEASES SECURING THE SECURED NOTES
DELINQUENCY, REPOSSESSION AND LOSS DATA ON GMAC AND COLT LEASES OF THE TYPE
SECURING THE SECURED NOTES
The following tables set forth delinquency, repossession and loss data for
the entire portfolio of retail automobile and light duty truck leases owned or
serviced by GMAC, including leases originated by COLT, and the entire portfolio
of retail automobile and light duty truck leases owned by COLT, as of and for
the periods shown. These leases are of the type securing the secured notes.
The Servicer believes that delinquency, repossession and loss experience
may be influenced by a variety of economic, social, geographic and other factors
beyond the control of GMAC or COLT which may adversely affect the experience of
the portfolios. There is no assurance that GMAC's or COLT's delinquency,
repossession and loss experience for its automobile and light truck retail
closed-end leases and the leased vehicles in the future, or the experience for
the leases and leased vehicles securing the secured notes, will be similar to
that set forth below or that the factors described above will remain applicable.
ENTIRE GMAC LEASE PORTFOLIO
RETAIL VEHICLE LEASE DELINQUENCY INFORMATION
($ IN THOUSANDS)
The dollar amount of leases outstanding in this table is based on the [sum
of all principal amounts outstanding under finance leases and] net investment in
leased assets under operating leases originated for GMAC in the United States,
inclusive of the residual values of the leased vehicles. The period of
delinquency in this table is based on the number of days payments are
contractually past due. The table includes leases originated for COLT beginning
in May 1997. The percent delinquent excludes leases the lessees of which are
bankrupt or have commenced bankruptcy proceedings. If these leases were
included, the aggregate percent delinquent in all three categories for the year
ended December 31, 2000 would have been 2.50% and for the six months ended June
30, 2001 would have been 2.32%. We do not have similar information for
measurement periods prior to December 31, 2000 but do not believe that this
bankruptcy information would have been materially different from that for the
measurement period ending December 31, 2000.
<Table>
<Caption>
SIX MONTHS ENDED
JUNE 30 YEAR ENDED DECEMBER 31
--------------------- ---------------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
LEASES --------- --------- --------- --------- --------- --------- ---------
Dollar Amount of
Leases Outstanding
(in billions)....... $ 30.6 $ 32.3 $ 31.6 $ 29.5 $ 23.0 $ 20.2 $ 19.4
Number of Leases...... 1,744,798 1,756,200 1,775,644 1,565,229 1,198,814 1,065,808 1,051,258
Percent Delinquent
31-60 Days.......... 1.51% 1.21% 1.77% 1.37% 1.46% 1.51% 1.72%
61-90 Days.......... 0.10 0.06 0.13 0.08 0.09 0.09 0.12
91 Days or more..... 0.01 0.01 0.01 0.02 0.02 0.02 0.02
</Table>
S-37
ENTIRE COLT LEASE PORTFOLIO
RETAIL VEHICLE LEASE DELINQUENCY INFORMATION
($ IN THOUSANDS)
The dollar amount of leases outstanding in this table is based on the net
investment in leased assets under leases originated for COLT in the United
States, inclusive of the residual values of the leased vehicles. The period of
delinquency in this table is based on the number of days payments are
contractually past due. Delinquencies shown do not include the effect of lease
servicer advances or any other credit enhancement. COLT began originating leases
in May 1997. The information required to calculate the percent delinquent for
the measurement periods ending December 31, 1997 and 1998 is not available, but
we do not believe that the percent delinquent information for these measurement
periods for COLT would be materially different from the GMAC percent delinquent
information for the same measurement periods. The percent delinquent excludes
leases the lessees of which are bankrupt or have commenced bankruptcy
proceedings. If these leases were included, the aggregate percent delinquent in
all three categories for the year ended December 31, 2000 would have been 2.14%
and for the six months ended June 30, 2001 would have been 2.09%. We do not have
similar information for measurement periods prior to December 31, 2000 but do
not believe that this bankruptcy information would have been materially
different from that for the measurement period ending December 31, 2000. When
used in the table below, a dash means that the information is not available.
<Table>
<Caption>
SIX MONTHS
ENDED JUNE 30 YEAR ENDED DECEMBER 31
-------------------- -----------------------------------------
2001 2000 2000 1999 1998 1997
LEASES -------- -------- -------- -------- ------- ------
Dollar Amount of Leases
Outstanding (in
billions)............... $ 7.6 $ 6.7 $ 7.3 $ 5.1 $ 1.7 $ 0.2
Number of Leases.......... 426,997 357,881 406,758 261,950 82,858 7,084
Percent Delinquent
31-60 Days.............. 1.42% 1.01% 1.58% 1.14% -- --
61-90 Days.............. 0.08 0.05 0.10 0.05 -- --
91 Days or more......... 0.01 0.01 0.01 0.00 -- --
</Table>
S-38
ENTIRE GMAC LEASE PORTFOLIO
RETAIL VEHICLE LEASE REPOSSESSION AND LOSS EXPERIENCE
($ IN THOUSANDS, EXCEPT AS NOTED)
The ending dollar amount of net leases outstanding in this table is based
on the [sum of all principal amounts outstanding under finance lease contracts
and] net investment in leased assets under operating leases originated for GMAC
in the United States, inclusive of the residual values of the leased vehicles.
In this table, average net leases outstanding is calculated as the average of
the [sum of all principal amounts outstanding under finance leases and] net
investment in operating leases as of the beginning and the end of the indicated
period. The net and average net repossession losses include expenses incurred to
dispose of vehicles and are net of recoveries. Residual risk sharing is a
program under which General Motors and GMAC share residual value losses. The
benefits of the payments to GMAC by General Motors under this program are not
reflected in the table. The table includes leases originated for COLT beginning
in May 1997.
<Table>
<Caption>
SIX MONTHS
ENDED JUNE 30 YEAR ENDED DECEMBER 31
--------------------- ---------------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
--------- --------- --------- --------- --------- --------- ---------
Ending Number of Leases
Outstanding.................... 1,744,798 1,756,200 1,775,644 1,565,229 1,198,814 1,065,808 1,051,258
Average Number of Leases
Outstanding.................... 1,767,296 1,677,079 1,725,167 1,370,707 1,146,225 1,055,535 1,018,451
Ending Dollar Amount of Net
Leases Outstanding (in
billions)...................... $30.6 $32.3 $31.6 $29.5 $23.0 $20.2 $19.4
Average Dollar Amount of Net
Leases Outstanding (in
billions)...................... $31.0 $31.4 $31.7 $26.2 $21.9 $19.7 $18.7
Repossessions:
Number of Repossessions........ 13,533 9,015 21,300 15,108 14,880 19,884 20,724
Number of Repossessions as a
Percentage of Ending Number
Leases Outstanding........... 1.55% 1.03% 1.20% 0.97% 1.24% 1.87% 1.97%
Number of Repossessions as a
Percentage of Average Leases
Outstanding.................. 1.53% 1.08% 1.23% 1.10% 1.30% 1.88% 2.03%
Losses:
Average Net Repossession Loss
per Liquidated Lease (Dollars
not in thousands)............ (3,834) (3,600) (3,789) (3,094) (2,884) (3,274) (3,270)
Net Repossession Losses as a
Percentage of Average Net
Leases Outstanding........... 0.31% 0.20% 0.23% 0.17% 0.20% 0.34% 0.34%
</Table>
S-39
ENTIRE COLT LEASE PORTFOLIO
RETAIL VEHICLE LEASE REPOSSESSION AND LOSS EXPERIENCE
($ IN THOUSANDS, EXCEPT AS NOTED)
The ending dollar amount of net leases outstanding in this table is based
on the net investment in leased assets under operating leases originated for
COLT in the United States, inclusive of the residual values of the leased
vehicles. In this table, the average number of leases outstanding for the year
ended December 31, 2000 is an average of the number of leases outstanding as of
the end of each month during the year. For the years ended prior to 2000, the
average number of leases is an average of the number of leases outstanding as of
the beginning and the end of the indicated period. The average net leases
outstanding is calculated as the average of the net investment in operating
leases as of the beginning and the end of the indicated period. The net and
average net repossession losses include expenses incurred to dispose of vehicles
and are net of recoveries. Losses shown do not include the effect of lease
servicer advances or any other credit enhancement. COLT began originating leases
in May 1997.
<Table>
<Caption>
SIX MONTHS ENDED
JUNE 30 YEAR ENDED DECEMBER 31
------------------ ----------------------------------
2001 2000 2000 1999 1998 1997
-------- ------- ------- ------- ------ -----
Ending Number of Leases Outstanding.... 426,997 357,881 406,758 261,950 82,858 7,084
Average Number of Leases Outstanding... 418,234 311,488 349,547 172,404 44,971 3,542
Ending Dollar Amount of Net Leases
Outstanding (in billions).......... $7.6 $6.7 $7.3 $5.1 $1.7 $0.2
Average Dollar Amount of Net Leases
Outstanding (in billions).......... $7.5 $6.1 $6.5 $3.4 $0.9 $0.04
Repossessions:
Number of Repossessions.............. 2,426 1,111 3,002 1,032 137 0
Number of Repossessions as a
Percentage of Ending Number Leases
Outstanding........................ 1.14% 0.62% 0.74% 0.39% 0.17% 0
Number of Repossessions as a
Percentage of Average Leases
Outstanding........................ 1.16% 0.71% 0.86% 0.60% 0.30% 0
Losses:
Average Net Repossession Loss per
Liquidated Lease (Dollars not in
thousands)......................... (3,918) (4,064) (4,122) (4,149) (4,396) 0
Net Repossession Losses as a
Percentage of Average Net Leases
Outstanding........................ 0.21% 0.13% 0.16% 0.09% 0.04% 0
</Table>
S-40
RESIDUAL VALUE LOSS EXPERIENCE
To the extent that average terms vary over time, the residual value loss
experience for the periods in the following two tables may not be fully
comparable. The number of returned vehicles sold by GMAC and COLT is based on
matured leases. The full term ratio is defined as the number of returned
vehicles sold during a specified period as a percentage of the number of leases
that, as of their origination date, were scheduled to terminate during that
period. [The auction turn-in rate is defined as the number of returned vehicles
that were not purchased by the lessee or the dealer at their scheduled lease end
date in any measurement period as compared to the number of leases that
terminated during the same measurement period.] Total losses on returned
vehicles sold at auction by GMAC and COLT include expenses incurred to dispose
of vehicles but exclude certain amounts received after the sale and disposition
of the vehicle. The losses as a percentage of residual values of returned
vehicles is the ratio of total losses on returned vehicles sold by GMAC and COLT
during the stated period over their residual values. The losses as a percentage
of residual values of scheduled terminations is the ratio of total losses on
returned vehicles sold by GMAC and COLT during the stated period over the
residual values of all vehicles under leases scheduled to terminate during the
stated period expressed as a percentage. The dollar amounts are in thousands
except for total losses.
ENTIRE GMAC LEASE PORTFOLIO
<Table>
<Caption>
SIX MONTHS
ENDED JUNE 30 YEAR ENDED DECEMBER 31
------------------- ----------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
LEASES -------- -------- -------- -------- -------- -------- --------
Total Number of Leases
Scheduled to Terminate.... 300,027 249,403 439,806 385,252 482,428 418,179 352,695
Number of Returned Vehicles
Sold by GMAC.............. 136,157 112,809 217,981 196,384 251,225 211,953 202,473
Full Term Ratio............. 45.4% 45.2% 49.6% 51.0% 52.1% 50.7% 57.4%
Auction Turn-In Rate
Total Losses on Returned
Vehicles Scheduled to
Terminate Sold by GMAC
(000's)............... (320,349) (216,817) (468,256) (309,286) (336,292) (205,662) (112,245)
Average Loss Per Returned
Vehicle Scheduled to
Terminate Sold by GMAC.... (2,353) (1,922) (2,148) (1,575) (1,339) (970) (554)
Losses as a % of Residual
Values of Returned
Vehicles Scheduled to
Terminate................. (14.32) (10.33) (11.84) (9.20) (7.47) (5.99) (3.23)
</Table>
S-41
ENTIRE COLT LEASE PORTFOLIO
<Table>
<Caption>
SIX MONTHS
ENDED JUNE 30 YEAR ENDED DECEMBER 31
----------------- ---------------------------------
2001 2000 2000 1999 1998 1997
LEASES ------- ------- ------- ------- ------ ----
Total Number of Leases Scheduled to
Terminate........................... 36,822 15,751 29,543 3,992 950 0
Number of Returned Vehicles Sold by
COLT................................ 16,691 7,963 15,094 2,214 247 0
Full Term Ratio....................... 45.3% 50.6% 51.1% 55.5% 26.0% --
Auction Turn-In Rate.................. --
Total Losses on Returned Vehicles
Scheduled to Terminate Sold by
GMAC (000's)................... (37,274) (12,731) (30,201) (5,348) (611) --
Average Loss Per Returned Vehicle
Scheduled to Terminate Sold by
GMAC................................ (2,233) (1,599) (2,001) (2,415) (2,474) --
Losses as a % of Residual Values of
Returned Vehicles Scheduled to
Terminate........................... (13.24) (8.15) (10.22) (9.33) (8.42) --
</Table>
There have been no delinquencies or losses on the secured notes for the
periods presented in the tables above for COLT.
RESIDUAL VALUES
GMAC sets residual values for the General Motors vehicles that it leases
for itself or for COLT. See "Description of Auto Lease Business--Residual
Values" in the prospectus. The average residual value percentage of leases
originated for GMAC has decreased since 1997.
GMAC, as agent for COLT, monitors the auction turn-in rate for COLT. The
auction turn-in rate is [the number of leased vehicles returned on their
scheduled lease end date that were not purchased by a lessee or dealer in any
measurement period as compared to the number of leases that terminated during
the same measurement period.] The auction turn-in rate will be affected by a
variety of factors, including the state of the new and used car markets and the
average duration of the leases. As the auction turn-in rate increases, so does
the Termination Value percentage up to its cap of %, which in turn
increases the coverage available for lease assets under the termination value
insurance. See "Termination Value Insurance" above.
[GMAC estimates that, during the period from ,
through , , the auction turn-in rate for
leases included in its owned and serviced portfolio was approximately % for
leases with an original term of months or less, % for leases with an
original term of months, and % for leases with an original term of
months. As of , , approximately % of leases
had an original lease term of months or less, whereas for the fiscal [year]
[quarter] ended , , approximately % of the leases
in GMAC's entire portfolio had an original lease term of months or less.]
[The auction turn-in rate for the entire portfolio of leases originated for
GMAC has increased during the fiscal [year] [quarter] ended ,
as compared to previous years. The auction turn-in rate for GMAC's
portfolio of leases for the fiscal [year] [quarter] ended ,
was approximately %.]
S-42
GMAC also monitors the residual realization ratio for COLT, [which is the
ratio of the aggregate amount realized upon sale of all leased vehicles that
terminated at their scheduled lease end dates in three consecutive months to the
aggregate residual values for those leased vehicles. GMAC estimates that, during
the period from , through ,
, the residual realization ratio for leases included in its owned
and serviced portfolio was approximately % for leases with an original term
of months or less, % for leases with an original term of months,
and % for leases with an original term of months.
The residual realization ratio for the entire portfolio of leases
originated for GMAC has [increased] [decreased] during the fiscal [year]
[quarter] ended , as compared to previous years. The
residual realization ratio for GMAC's portfolio of leases for the fiscal [year]
[quarter] ended , was approximately %.
GMAC's per unit losses on vehicle disposal have increased on average for
its portfolio of leases for the fiscal [year] [quarter] ended [ ,
], as compared to GMAC's fiscal year ended December 31, 1999, primarily as
a result of [describe]. Per unit loss rates may also be affected by the amount
and types of accessories or installed optional equipment included on leased
vehicles. Although per unit loss rates are typically the result of a combination
of factors, to the extent certain types of optional equipment depreciate more
quickly than the value attributable to the base leased vehicle, a leased vehicle
having a greater portion of its overall manufacturer's suggested retail price
attributable to optional equipment will experience a relatively higher level of
loss. In 1998, GMAC implemented a new residual value setting policy for new
General Motors vehicles that separately calculates the residual value applicable
to the base vehicle and the residual vehicle applicable to specified optional
accessories and optional equipment. This historical loss experience does not
reflect financial assistance and incentives provided, from time to time, by
General Motors and GMAC to General Motors dealers.
We can make no assurance that per unit losses on the leased vehicles
securing the secured notes will reflect GMAC's historical experience for its
entire lease portfolio and will not increase further.
THE NOTES
The notes will be issued under an indenture to be dated as of the closing
date between the trust and the indenture trustee. We have filed a form of the
indenture as an exhibit to the registration statement of which this prospectus
supplement is a part. We will make available a copy of the indenture to holders
of notes upon request and it will be filed with the SEC after the issuance of
the notes. The following summary, together with the related description in the
prospectus, describes the material terms of the notes and the indenture. Where
particular provisions or terms used in the indenture are referred to, the actual
provisions, including definitions of terms, are incorporated by reference as
part of this summary. will be the
indenture trustee. Each distribution date for the notes will constitute a
payment date for purposes of the prospectus.
PAYMENTS OF INTEREST
Interest on the unpaid principal balance of each class of notes will accrue
at the applicable interest rate from and including the previous distribution
date to but excluding the current distribution date. The trust will pay interest
each month on the distribution date.
S-43
Interest on the certificates will not be paid on any distribution date until the
trust has paid interest on the notes in full.
Distribution dates will only be on business days. A business day is any day
other than a Saturday, Sunday or any other day on which banks in New York, New
York, Detroit, Michigan, or Chicago, Illinois may, or are required to, remain
closed. Interest will accrue from and including the closing date. The trust will
pay interest for each class of notes on each distribution date in an amount
equal to the Noteholders' Interest Distributable Amount for that distribution
date. Interest on the Class A-1 notes will be calculated on the basis of [a
360-day year and the actual days elapsed in the accrual period]. Interest on the
Class A-2 notes and the Class A-3 notes will be calculated on the basis of [a
360-day year consisting of twelve 30- day months] [actual days elapsed in the
accrual period]. Failure to pay the full Noteholders' Interest Distributable
Amount on any class of notes on any distribution date will constitute an event
of default under the indenture after a five-day grace period.
PAYMENTS OF PRINCIPAL
On each distribution date, until the trust pays the notes in full, the
trust will pay principal on the notes to the extent of the Principal
Distributable Amount for the previous month, in the following priority:
(1) first, to the Class A-1 notes, until the Class A-1 notes are paid
in full;
(2) second, to the Class A-2 notes, until the Class A-2 notes are paid
in full; and
(3) third, to the Class A-3 notes, until the Class A-3 notes are paid
in full.
Notwithstanding the above, at any time that the principal balance of the
notes has been declared due and payable following the occurrence of an event of
default, until all events of default have been cured or waived as provided in
the indenture, the trust will pay principal payments on the notes ratably to all
noteholders on each distribution date, based on the outstanding principal
balance of the notes.
The remaining outstanding principal amount of each class of notes will be
due in full on the final scheduled distribution date for that class. Failure to
pay a class of notes in full on or prior to the applicable final scheduled
distribution date will result in an event of default.
REDEMPTION
If the secured note servicer exercises its option to purchase the secured
notes when the Aggregate Secured Note Value on the last day of any month has
declined to 10% or less of the initial Aggregate Secured Note Value, then the
outstanding notes will be redeemed in whole, but not in part, on the
distribution date as of which the secured note servicer exercises its option.
The secured note servicer's option is described in the prospectus under "The
Transfer and Servicing Agreements--Termination." The redemption price will be
equal to the unpaid principal amount of the notes, plus accrued and unpaid
interest.
DELIVERY OF NOTES
The notes will be issued on or about the closing date in book entry form
through the facilities of DTC, Clearstream and the Euroclear System against
payment in immediately available funds. See "Book-Entry Registration; Reports to
Securityholders--Book-Entry Registration" in the prospectus.
S-44
THE CERTIFICATES
The trust will issue the certificates under a trust agreement. We have
filed a form of the trust agreement as an exhibit to the registration statement
of which this prospectus supplement is a part. A copy of the trust agreement
will be filed with the SEC after the issuance of the notes and the certificates.
The following summary describes some of the terms of the certificates and the
trust agreement. The summary, together with the related description in the
prospectus, describes the material terms of the certificates and the trust
agreement. Where particular provisions or terms used in the trust agreement are
referred to, the actual provisions, including definitions of terms, are
incorporated by reference as part of this summary.
DISTRIBUTIONS OF INTEREST AND CERTIFICATE BALANCE
Interest. On each distribution date, commencing ,
, the trust will distribute interest to certificateholders for
the related accrual period at the pass-through rate on the certificates with
respect to the Certificate Balance. The pass-through rate for the certificates
is %. Any Certificateholders' Interest Distributable Amount for a
distribution date that the trust does not distribute on that distribution date
will be distributed on the next distribution date. Interest will accrue from and
including the closing date and the trust will pay on each distribution date an
amount equal to the Certificateholders' Interest Distributable Amount for that
distribution date. Interest with respect to the certificates will be calculated
on the basis of a 360-day year consisting of twelve 30-day months. The final
scheduled distribution date for the certificates will occur on the
distribution date. Payments of interest on the certificates will
be subordinated to payments of interest on the notes [but will not be
subordinated to payments of principal on the notes]. If an event of default
resulting from a payment default occurs and the notes are accelerated, the trust
will not make payments of interest on the certificates or any distributions on
the Certificate Balance until the notes are paid in full or the acceleration is
rescinded. See "The Transfer and Servicing Agreements--Distributions" in this
prospectus supplement.
Certificate Balance. The trust will not make principal distributions on the
Certificate Balance until the notes have been paid in full. After full payment
of the notes, until the Certificate Balance is reduced to zero, the trust will
make the entire Principal Distributable Amount available to make distributions
on the Certificate Balance. If the secured note servicer exercises its option to
purchase the secured notes when the Aggregate Secured Note Value declines to 10%
or less of the initial Aggregate Secured Note Value, certificateholders will
receive an amount equal to the Certificate Balance together with accrued
interest at the pass through rate on the certificates. This distribution will
effect an early retirement of the certificates. In addition, on and after any
distribution date on which the trust pays all of the notes in full, funds in the
reserve account will be applied to reduce the Certificate Balance to zero if,
after giving effect to all required distributions to the secured note servicer,
the noteholders and the certificateholders on that distribution date, the amount
on deposit in the reserve account is equal to or greater than the Certificate
Balance. See "The Transfer and Servicing Agreements--Distributions" in this
prospectus supplement.
THE TRANSFER AND SERVICING AGREEMENTS
The parties will enter into the transfer and servicing agreements as of the
closing date. See "The Transfer and Servicing Agreements" in the prospectus. We
have filed forms of the transfer and servicing agreements as exhibits to the
registration statement of which this
S-45
prospectus supplement forms a part. We will make available a copy of the
transfer and servicing agreements to holders of notes upon request. The
following summary, together with the related description in the prospectus,
describes the material terms of the transfer and servicing agreements. Where
particular provisions or terms used in the transfer and servicing agreements are
referred to, the actual provisions, including definitions of terms, are
incorporated by reference as part of this summary.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Compensation for Servicing the Secured Notes. GMAC will act as servicer of
the secured notes for the trust. As secured note servicer, GMAC will handle all
collections, administer defaults and delinquencies and otherwise service the
secured notes. On each distribution date, the trust will pay GMAC, as secured
note servicer, the total servicing fee for servicing the secured notes, which
consists of a basic servicing fee for the previous month and unpaid basic
servicing fees from prior distribution dates. As secured note servicer, GMAC
will also receive additional servicing compensation in the form of investment
earnings. The basic monthly servicing fee rate for servicing the secured notes
is one-twelfth of [0.25%] of the total value of the secured notes as of the
first day of the preceding month. See "The Transfer and Servicing
Agreements--Servicing Compensation and Payment of Expenses--Servicing of Secured
Notes" in the prospectus.
Compensation for Servicing the Leases and Leased Vehicles Securing the
Secured Notes. GMAC also acts as servicer of the leases and leased vehicles
securing the secured notes. In that capacity, GMAC will receive a basic
servicing fee and a supplemental servicing fee on each distribution date out of
collections on the lease assets. These amounts are paid by COLT, as owner of the
leases and related leased vehicles, and not from trust assets. The basic
servicing fee paid to the lease servicer is equal to one-twelfth of 1.75% of the
then-stipulated market value of each lease asset. As lease servicer, GMAC also
receives a supplemental servicing fee, which includes investment earnings and
any late fees, prepayment charges and other administrative fees and expenses or
similar charges, and certain other proceeds from lease assets that have
terminated. See "The Transfer and Servicing Agreements--Servicing Compensation
and Payment of Expenses--Servicing of Underlying Leases and Leased Vehicles" in
the prospectus.
S-46
[SUMMARY OF MONTHLY DEPOSITS TO AND WITHDRAWALS FROM ACCOUNTS* FLOW CHART]
S-47
DISTRIBUTIONS
On or before each distribution date, the secured note servicer will
transfer all collections on the secured notes for the prior month, and, for the
initial distribution date, [describe], to the collection account. The indenture
trustee will make distributions to the note distribution account and the
certificate distribution account out of the amounts on deposit in the collection
account. The amounts to be distributed to the note distribution account and the
certificate distribution account will be determined in the manner described
below in this subsection.
Determination of Total Available Amounts. The "Total Available Amount" for
a distribution date will be the sum of the Available Amount and all cash or
other immediately available funds on deposit in the reserve account immediately
prior to that distribution date.
"Available Amount" for a distribution date means the sum, for the
prior month, and, for the initial distribution date, [describe], of:
(1) all collections on the secured notes held by the trust;
(2) all secured note servicer advances; and
(3) payments for each secured note that we repurchased or the
secured note servicer purchased during the prior month.
Monthly Withdrawals and Deposits. On or before the tenth day of each
calendar month, or if that day is not a business day, the next business day, the
secured note servicer will calculate, for the preceding month and the current
distribution date, the Total Available Amount, the Available Amount, the total
servicing fee for the secured note servicer, the Aggregate Noteholders' Interest
Distributable Amount, the Aggregate Noteholders' Principal Distributable Amount,
the Certificateholders' Interest Distributable Amount, the Certificateholders'
Principal Distributable Amount and other items. Based on those calculations, the
secured note servicer will deliver to the indenture trustee a certificate
specifying those amounts and instructing the indenture trustee to make
withdrawals, deposits and payments of the following amounts on the distribution
date:
[(1) the amount, if any, to be withdrawn from the reserve account and
deposited in the collection account;]
(2) the amount to be withdrawn from the collection account and paid to
the secured note servicer in respect of its total servicing fee
for that distribution date;
(3) the amounts to be withdrawn from the collection account in respect
of the Aggregate Noteholders' Interest Distributable Amount and
the Aggregate Noteholders' Principal Distributable Amount and
deposited in the note distribution account for payment to
noteholders on that distribution date;
(4) the amounts to be withdrawn from the collection account in respect
of the Certificateholders' Interest Distributable Amount and the
Certificateholders' Principal Distributable Amount and deposited
in the certificate distribution account for distribution to
certificateholders on that distribution date;
[(5) the amount, if any, to be withdrawn from the collection account
and deposited in the reserve account; and]
[(6) the amount, if any, to be withdrawn from the reserve account and
paid to us.]
S-48
The amount, if any, to be withdrawn from the reserve account and deposited
to the collection account for any distribution date as specified in clause (1)
above will be the lesser of (x) the amount of cash or other immediately
available funds in the reserve account on that distribution date and (y) the
amount, if any, by which (a) the sum of the total servicing fee, the Aggregate
Noteholders' Interest Distributable Amount, the Certificateholders' Interest
Distributable Amount, the Aggregate Noteholders' Principal Distributable Amount
and the Certificateholders' Principal Distributable Amount for that distribution
date exceeds (b) the Available Amount for that distribution date.
The amount, if any, to be withdrawn from the collection account and
deposited in the reserve account for any distribution date as specified in
clause (5) above will equal the amount, if any, by which (x) the Available
Amount for that distribution date exceeds (y) the amount described in subclause
(a) of clause (y) of the preceding paragraph.
The amount, if any, to be withdrawn from the reserve account and paid to us
as specified in clause (6) above for any distribution date will equal the
amount, if any, by which the amount on deposit in the reserve account after
taking into account all other deposits, including the deposit pursuant to clause
(5) above, if any, and withdrawals on that distribution date exceeds the
required reserve account balance for that distribution date.
On each distribution date, all amounts on deposit in the note distribution
account will be distributed to the noteholders and all amounts on deposit in the
certificate distribution account will be distributed to the certificateholders,
in each case as described in this prospectus supplement.
Priorities for Withdrawals from Collection Account. Withdrawals of funds
from the collection account on a distribution date for application as described
in clauses (2), (3) and (4) under "--Distributions--Monthly Withdrawals and
Deposits" above will be made only to the extent of the Total Available Amount
allocated to that application for that distribution date. In calculating the
amounts which can be withdrawn from the collection account and applied as
specified in clauses (2), (3) and (4), the secured note servicer will allocate
the Total Available Amount in the following order of priority:
(1) the total servicing fee and prior secured note servicer advances;
(2) any overdue interest on the notes and then the Aggregate
Noteholders' Interest Distributable Amount for that distribution
date;
(3) any overdue interest on the certificates and then the
Certificateholders' Interest Distributable Amount for that
distribution date;
(4) the Aggregate Noteholders' Principal Distributable Amount; and
(5) the Certificateholders' Principal Distributable Amount.
At any time that all classes of notes have not been paid in full and the
principal balance of the notes has been declared due and payable following the
occurrence of an event of default under the indenture [resulting from a payment
default], until the notes have been paid in full or the declaration has been
rescinded and any continuing events of default resulting from a payment default
have been cured or waived pursuant to the indenture, no amounts will be
deposited in or distributed to the certificate distribution account. Any amounts
otherwise distributable to the certificate distribution account will be
deposited instead into the note distribution account for payments on the notes
as described in this prospectus supplement.
S-49
TERMINATION OF THE TRUST
After payment in full of the notes and payment of all liabilities of the
trust in accordance with applicable law, any remaining assets in the trust and
any remaining amount in the reserve account will be distributed to us.
ERISA CONSIDERATIONS
[Any ERISA considerations and transfer representations applicable for a
series will be explained in this section]
FEDERAL INCOME TAX CONSEQUENCES
Mayer, Brown & Platt, our special tax counsel, has delivered its opinion
that for U.S. federal income tax purposes the notes will constitute
indebtedness. Each noteholder, by the acceptance of a note, will agree to treat
the notes as indebtedness for federal, state and local income and franchise tax
purposes.
[All the certificates issued on the closing date will be issued to us.
Accordingly, the trust will be characterized as a tax non-entity and hence a
division of us for federal income tax purposes. See "Federal Income Tax
Consequences--Tax Non-Entity Certificates" in the prospectus.] If we sell less
than all of the certificates or if the trust issues additional certificates,
this characterization may change. See "Federal Income Tax Consequences--Trust
Certificates" and "--Partnership Certificates."]
[Mayer, Brown & Platt, has delivered its opinion that the trust will not be
taxable as an association or publicly traded partnership taxable as a
corporation, but will be classified as a grantor trust for federal income tax
purposes. If the Internal Revenue Service were to contend successfully that the
trust is not a grantor trust, the trust should be classified for federal income
tax purposes as a partnership which is not taxable as a corporation. Each
certificateholder, by the acceptance of a trust certificate, will agree to treat
the trust certificates as equity interests in the trust for federal, state and
local income and franchise tax purposes. Certificateholders generally must
report their respective allocable shares of all income earned on the secured
notes and, subject to certain limitations on individuals, estates and trusts,
may deduct their respective allocable shares of interest paid on the secured
notes and reasonable servicing and other fees.]
See "Federal Income Tax Consequences" and "State and Local Tax
Consequences" in the prospectus.
PLAN OF DISTRIBUTION
Under the terms and conditions set forth in the underwriting agreement, the
issuer has agreed to sell to each of the underwriters named below, and each of
the underwriters has
S-50
severally agreed to purchase from the issuer, the principal amount of notes and
the certificates set forth opposite its name below:
AGGREGATE PRINCIPAL AMOUNT OF NOTES AND CERTIFICATES TO BE PURCHASED
<Table>
<Caption>
UNDERWRITER CLASS A-1 NOTES CLASS A-2 NOTES CLASS A-3 NOTES CERTIFICATES
----------- --------------- --------------- --------------- ------------
Total.............. $ $ $ $
======= ======= ======= =======
</Table>
[ ] and [ ] are responsible for jointly leading
and managing the offering of the notes and certificates.
We have been advised by the underwriters that the several underwriters
propose initially to offer the notes and the certificates to the public at the
prices set forth on the cover page of this prospectus supplement, and to certain
dealers at these prices less a selling concession not in excess of the
percentage set forth below for each class of notes or for the certificates. The
underwriters may allow, and those dealers may reallow to certain other dealers,
a subsequent concession not in excess of the percentage set forth below for each
class of notes or for the certificates. After the initial public offering, the
public offering price and those concessions may be changed.
[Initially, the certificates will be retained by CARI or an affiliate of
CARI. After the initial public offering of the notes, CARI or its affiliates may
sell the certificates in a public offering or in a transaction exempt from
registration under the Securities Act of 1933.]
<Table>
<Caption>
SELLING
CONCESSION REALLOWANCE
---------- -----------
Class A-1 Notes......................................... % %
Class A-2 Notes......................................... % %
Class A-3 Notes......................................... % %
Certificates............................................ % %
</Table>
The underwriters may engage in over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids for the notes and
certificates in accordance with Regulation M under the Securities Exchange Act
of 1934. Over-allotment transactions involve short sales by the underwriters of
the notes or the certificates. Short sales involve the sale by the underwriters
of a greater number of notes or certificates than they are required to purchase
in the offering. This creates a syndicate short position and the need to engage
in syndicate covering transactions to close out the syndicate short position.
Short sales may be in the form of "covered" short sales or "naked" short sales.
Covered short sales are sales made in an amount not greater than the
underwriters over-allotment option to purchase additional notes or certificates
in the offering. The underwriters may close out any covered short position by
either exercising their over-allotment option or purchasing notes or
certificates in the open market. In determining the source of notes or
certificates to close out the covered short position, the underwriters will
consider, among other things, the price of notes or certificates available for
purchase in the open market as compared to the price at which they may purchase
notes or certificates through the over-allotment option.
S-51
Naked short sales are sales in excess of the over-allotment option. The
underwriters must close out any naked short position by purchasing notes or
certificates in the open market. A naked short position is more likely to be
created if the underwriters are concerned that there may be downward pressure on
the price of the notes or certificates in the open market after pricing that
could adversely affect investors who purchase in the offering.
Syndicate covering transactions involve purchases of the notes or
certificates in the open market after the distribution has been completed in
order to cover syndicate short positions.
Penalty bids permit the underwriters to reclaim a selling concession from a
syndicate member when the notes or certificates originally sold by that
syndicate member are purchased in a syndicate covering transaction.
Similar to other purchase transactions, over-allotment transactions,
stabilizing transactions, syndicate covering transactions and penalty bids may
cause the prices of the notes or certificates to be higher than they would
otherwise be in the absence of those transactions, and may also have the
potential effect of preventing or retarding a decline in the market value of the
notes or the certificates. Neither the issuer nor any of the underwriters
represent that the underwriters will engage in any of those transactions or that
those transactions, once commenced, will not be discontinued without notice at
any time.
We will receive proceeds of approximately $ from the sale of the
notes, which represents % of the principal amount of each note, after
paying the underwriting discount of $ , which represents % of the
principal amount of each note. [We will receive proceeds of approximately
$ from the sale of the certificates, which represents % of the principal
amount of each certificate, after paying the underwriting discount of $ ,
which represents % of the principal amount of each certificate.] 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 transaction will be passed upon for the
underwriters by . has from time to time represented, and
is currently representing, General Motors Corporation and certain of its
affiliates in matters not related to the offering of the securities.
S-52
GLOSSARY
The following are definitions of terms used in this prospectus supplement:
"AGGREGATE NOTEHOLDERS' INTEREST DISTRIBUTABLE AMOUNT" means, for any
distribution date, the sum of the Noteholders' Interest Distributable Amounts
for all classes of notes for that distribution date.
"AGGREGATE NOTEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT" means, for any
distribution date, the sum of the Noteholders' Principal Distributable Amounts
for all classes of notes for that distribution date.
"AGGREGATE SECURED NOTE VALUE" means, as of any date, the sum of the
Secured Note Values for all the secured notes in the pool of secured notes held
by the trust.
"CERTIFICATE BALANCE" means, initially, $ and, on each
distribution date, will equal the initial Certificate Balance, reduced by all
distributions in respect of the Certificate Balance actually made on or prior to
that date to certificateholders.
"CERTIFICATEHOLDERS' INTEREST DISTRIBUTABLE AMOUNT" means, for any
distribution date, interest equal to one-twelfth of the pass through rate on the
certificates multiplied by the certificate balance as of the close of the
preceding distribution date, or, in the case of the first distribution date,
interest at the pass through rate multiplied by a fraction, the numerator of
which is and the denominator of which is 360 multiplied by the
initial certificate balance.
"CERTIFICATEHOLDERS' PERCENTAGE" means, for any distribution date, 100%
minus the Noteholders' Percentage.
"CERTIFICATEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT" means, for any
distribution date, the lesser of (1) the Certificateholders' Percentage of the
Principal Distributable Amount and (2) the Certificate Balance. In addition, on
the distribution date, the amount required to be distributed to
certificateholders in respect of the Certificate Balance will include the amount
that is necessary, after giving effect to the other amounts to be deposited in
the certificate distribution account on the distribution date and allocable to
payments in respect of the Certificate Balance, to reduce the Certificate
Balance to zero, after giving effect to any required distribution of the
Aggregate Noteholders' Principal Distributable Amount to the note distribution
account. In addition, on any distribution date on which, after giving effect to
all distributions to the secured note servicer other than additional servicing,
the noteholders and the certificateholders on the distribution date, (1) the
outstanding principal balance of the notes is zero and (2) the amount on deposit
in the reserve account is equal to or greater than the Certificate Balance, the
Certificateholders' Principal Distributable Amount will include an amount equal
to that Certificate Balance.
"DISCOUNT RATE" means the sum of the highest rate of interest on any series
of notes [or class of certificates] issued under this prospectus supplement,
plus 0.25%.
"MONTHLY SCHEDULED INSTALLMENT" means, for each secured note, as of any
date of determination, any of the remaining monthly installment of principal and
interest or interest alone payable to the holder of the secured note from the
date of determination to the Stated Maturity as set forth in the payment
schedule on the secured note.
"NOTEHOLDERS' INTEREST DISTRIBUTABLE AMOUNT" means, for any class of notes
and any distribution date, the product of (1) the outstanding principal balance
of such class of notes as
S-53
of the close of the preceding distribution date [, or, in the case of the first
distribution date, the outstanding principal balance on the closing date,] and
(2) one-twelfth of the interest rate for that class, or, in the case of the
first distribution date, the interest rate for such class multiplied by a
fraction, the numerator of which is and the denominator of which
is 360.
"NOTEHOLDERS' PERCENTAGE" means 100% until the principal balance of the
notes is paid in full, and zero after payment of the principal balance of the
notes.
"NOTEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to a
class of notes on a distribution date, the lesser of (1) the remainder of (A)
the Noteholders' Percentage of the Principal Distributable Amount minus (B) the
outstanding principal balance for each class of notes having priority of payment
over that class of notes as described above under "The Notes -- Payments of
Principal" and (2) the outstanding principal balance of that class of notes as
of the close of the preceding distribution date. In addition, on the final
scheduled distribution date for any class of notes, the Noteholders' Principal
Distributable Amount for that class of notes will also include the amount that
is necessary, after giving effect to the other amounts to be deposited in the
note distribution account on the distribution date and allocable to payments of
principal, to reduce the outstanding principal balance of that class of notes to
zero.
"PRINCIPAL DISTRIBUTABLE AMOUNT" means, for any distribution date, an
amount equal to the difference between (a) the sum of the Secured Note Values
for all of the secured notes as of the close of business on the previous
distribution date, or, for the initial distribution date, the closing date, and
(b) the sum of the Secured Note Values for all of the secured notes as of that
distribution date.
"SECURED NOTE VALUE" means, for each secured note, as of the cutoff date of
, and each distribution date, the lesser of (a) the
principal balance of the secured note and (b) the sum of the present value of
each Monthly Scheduled Installment of the secured note due thereafter,
discounted from the distribution date on which each Monthly Scheduled
Installment is due and payable to the date of determination, at a rate equal to
the Discount Rate, after giving effect to all payments due on the secured note
on that date.
"STATED MATURITY" means the date specified in the secured note as the fixed
date on which the principal of, and interest on, the secured note is due and
payable.
S-54
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
VERSION 3
PRELIMINARY SECURED NOTE
PROSPECTUS FORM
PROSPECTUS
CAPITAL AUTO RECEIVABLES ASSET TRUSTS
Asset Backed Notes
Asset Backed Certificates
CAPITAL AUTO RECEIVABLES, INC.
Seller
GENERAL MOTORS ACCEPTANCE CORPORATION
Servicer
<Table>
THE TRUSTS--
The notes of any series
represent obligations of the - A new trust will be formed to issue each
trust that issued those notes series of securities.
only. The certificates of any
series represent the beneficial - The assets of each trust will be:
interest in the trust that
issued those certificates only. - a pool of non-recourse secured notes
The notes and certificates secured by new and used automobile and light
issued by any trust do not duty truck leases and the leased vehicles
represent obligations of or and all moneys received with respect to the
interests in, and are not secured notes on and after the cutoff date
guaranteed by, Capital Auto or dates, including:
Receivables, Inc., GMAC or any
of their affiliates. Neither - proceeds from a termination value insurance
the notes nor certificates policy for the leases and the leased vehicles
owned by the trust are insured securing the secured notes;
or guaranteed by any
governmental agency. - proceeds from any other insurance policies,
guarantees and similar obligations relating
This prospectus may be used to to the leases and leased vehicles securing
offer and sell any securities the secured notes; and
only if accompanied by the
accompanying prospectus - security interests in payments under the
supplement. leases and amounts received upon the sale or
transfer of the leased vehicles; and
- assets related to the secured notes,
including security interests in the leases
and leased vehicles.
THE SECURITIES--
- will represent indebtedness of the trust
that issued those securities, in the case of
notes, or beneficial interests in the trust
that issued those securities, in the case
of certificates;
- will be paid only from the assets of the
trust that issued those securities and
amounts on deposit in any reserve account
for that trust;
- will represent the right to payments in the
amounts and at the times described in the
accompanying prospectus supplement;
- may benefit from one or more forms of
credit enhancement; and
- will be issued as part of a designated
series, which will include one or more
classes of notes and may include one or
more classes of certificates.
</Table>
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED THAT THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS ,
THE TRUSTS
FORMATION OF TRUSTS
For each series of securities, we will establish a separate trust under a
trust agreement by selling and assigning the trust property to the trust in
exchange for these securities. Each series of securities will include one or
more classes of asset backed notes and one or more classes of asset backed
certificates. The accompanying prospectus supplement will specify which classes
of notes and certificates included in each series will be offered to investors.
TRUST PROPERTY
The property of each trust will include:
- the secured notes and all moneys received from the secured notes on or
after the cutoff date or dates, including:
- proceeds from a termination value insurance policy for the leases and
leased vehicles securing the secured notes;
- proceeds from other insurance policies, guarantees and similar
obligations relating to the leases and the leased vehicles securing the
secured notes; and
- security interests in payments under the leases and amounts received
upon the sale or transfer of the leased vehicles;
- assets related to the secured notes, including liens upon, and security
interests in, the leases and leased vehicles;
- any instrument or document relating to the secured notes; and
- any proceeds of the foregoing property.
The indenture trustee may hold for the benefit of the securityholders a
reserve account or other form of credit enhancement as specified in the
prospectus supplement. The reserve account, if any, for a series of securities
may not be included in the property of the trust that issued that series of
securities but will be a segregated trust account held by the indenture trustee
for the benefit of the holders of those securities. See "The Transfer and
Servicing Agreements--Credit Enhancement" in this prospectus.
The activities of each trust will be limited to:
- acquiring, managing and holding secured notes and the other assets of the
trust and the proceeds from those assets;
- issuing securities and making payments and distributions on them; and
- engaging in other activities that are necessary, suitable or convenient
to accomplish any of the foregoing or are incidental or connected with
these activities.
The secured note servicer will continue to service the secured notes held
by each trust and will receive fees for its services. See "The Transfer and
Servicing Agreements--Servicing Compensation and Payment of Expenses" in this
prospectus.
CAPITALIZATION OF EACH TRUST
Prior to the initial issuance of any series of securities, the trust that
issued that series of securities will not have any assets or liabilities. No
trust is expected to have any source of capital other than its assets and any
credit, liquidity or other enhancement arrangement established for that trust.
It is expected that each trust will issue one or more series of notes, and
one or more classes of certificates on the initial closing date for that trust,
all as further described in this
2
prospectus and in the accompanying prospectus supplement. From time to time
after a trust's initial closing date, that trust may issue additional series of
notes and additional classes of certificates as further described in this
prospectus. The pro forma capitalization of a trust at the time of the issuance
of any securities will be set forth in the accompanying prospectus supplement.
The certificates issued by a trust will represent the equity in that trust. The
related prospectus supplement will set forth the portion of the certificates
issued on, and, if applicable, since, the initial closing date. All or a portion
of the certificates may be retained by us or our affiliates or may be sold to
third party investors that are not affiliated with us, GMAC or any of the
trusts.
The principal office of each trust will be specified in the accompanying
prospectus supplement.
THE OWNER TRUSTEE
The owner trustee for each trust will be specified in the accompanying
prospectus supplement. The owner trustee's liability in connection with the
issuance and sale of the securities is limited solely to the express obligations
of that owner trustee set forth in the trust agreement for that trust. An owner
trustee may resign at any time, in which event the servicer, or its successor,
will be obligated to appoint a successor owner trustee. The administrator of a
trust may also remove the owner trustee if the owner trustee ceases to be
eligible to continue as owner trustee under the trust agreement for that trust
or if the owner trustee becomes insolvent. In these circumstances, the
administrator will be obligated to appoint a successor owner trustee. Any
resignation or removal of an owner trustee and appointment of a successor owner
trustee will not become effective until acceptance of the appointment by the
successor owner trustee.
THE SELLER
Capital Auto Receivables, Inc. is a wholly-owned subsidiary of GMAC, was
incorporated in the State of Delaware on November 6, 1992 and will be the seller
to each trust under this prospectus and the accompanying prospectus supplement.
We are organized for the limited purposes of purchasing receivables, such as the
secured notes, from GMAC, transferring these receivables to third parties,
forming trusts and engaging in related activities. Our principal executive
offices are located at Corporation Trust Center, 1209 Orange Street, Wilmington,
Delaware 19801.
We have taken steps in structuring the transactions contemplated in this
prospectus and any related prospectus supplement that are intended to make it
unlikely that the voluntary or involuntary application for relief by GMAC under
the U.S. Bankruptcy Code or state insolvency laws, will result in consolidation
of our assets and liabilities with those of GMAC. These steps include our
creation as a separate, limited-purpose subsidiary under a certificate of
incorporation containing certain limitations, including restrictions on the
nature of our business and a restriction on our ability to commence a voluntary
case or proceeding under any insolvency law without the unanimous affirmative
vote of all of our directors. Under circumstances described in our by-laws, we
are required to have at least one director who qualifies under our by-laws as an
"Independent Director."
If, despite the foregoing measures, a court concluded that our assets and
liabilities should be consolidated with the assets and liabilities of GMAC in
the event of the application of the
3
federal bankruptcy laws to GMAC, a filing were made under any insolvency law by
or against us, or an attempt were made to litigate the consolidation issue, then
delays in distributions on the notes and the certificates, and possible
reductions in the amount of the distributions, could occur.
We may sell additional securities issued by the trust or another trust in
private placements or other transactions that will not be offered by this
prospectus or the accompanying prospectus supplement. We may also retain all or
a portion of any class of certificates or one or more series of notes issued by
each trust as described in the accompanying prospectus supplement.
THE SERVICER
General Motors Acceptance Corporation acts as both the lease servicer and
the secured note servicer.
GMAC, a wholly-owned subsidiary of General Motors, was incorporated in 1919
under the New York Banking Law relating to investment companies. GMAC
relinquished this status and became a Delaware corporation on January 1, 1998.
GMAC, operating directly and through subsidiaries and associated companies in
which it has equity investments, provides a wide variety of automotive financial
services to and through franchised General Motors dealers in many countries
throughout the world. GMAC also offers financial services to other dealerships
in which General Motors dealers have an interest and to the customers of those
dealerships. Other financial services offered by GMAC or its subsidiaries
include insurance, mortgage banking, commercial finance and investment services.
The principal business of GMAC is to finance the acquisition and resale by
franchised General Motors dealers of various new automotive and nonautomotive
products manufactured by General Motors or certain of its subsidiaries and
associates, and to acquire from those dealers, either directly or indirectly,
instalment obligations covering retail sales and leases of new General Motors
products as well as used units of any make. In addition, GMAC finances new
products of other manufacturers and leases motor vehicles and certain types of
capital equipment.
GMAC has its principal office at 767 Fifth Avenue, New York, New York 10153
and its telephone number is (212) 418-6120. GMAC has administrative offices at
200 Renaissance Center, Detroit, Michigan 48265 and its telephone number is
(313) 556-5000.
VEHICLE ASSET UNIVERSAL LEASING TRUST
In 1996, GMAC created Vehicle Asset Universal Leasing Trust, known as
VAULT, a Delaware business trust, to act as a nominee on the certificates of
title to vehicles titled in various states. VAULT has no operations, and its
sole purpose is to act as a repository of titles to vehicles purchased by its
trust beneficiaries. VAULT is named as the nominee for the beneficial owner of
the leased vehicle on the certificate of title for each leased vehicle that
secures a secured note. GMAC and Central Originating Lease Trust, known as COLT,
are the current beneficiaries of VAULT and the beneficial owners of the leased
vehicles owned by VAULT. As nominee, VAULT holds only legal title to the leased
vehicles. The beneficial owner retains all rights and obligations related to the
leased vehicles.
4
CENTRAL ORIGINATING LEASE TRUST
COLT is a special purpose Delaware business trust formed on March 15, 1996,
which acquires vehicles and related consumer leases from General Motors
Corporation franchised dealers. COLT finances these acquisitions through the
issuance of secured notes and equity certificates. Each secured note was or will
be issued to GMAC by COLT. Each secured note represents 96.9% of the purchase
price of a lease and leased vehicle, and COLT's equity certificates represent
the remaining 3.1%. Other entities, which will be described in a prospectus
supplement, may be formed to issue secured notes in the future.
Each secured note is non-recourse to COLT and is secured by, among other
things, a security interest in the lease and leased vehicle and the termination
value insurance described in "The Transfer and Servicing Agreements--Credit
Enhancement--Termination Value Insurance" in this prospectus.
THE POOLS OF SECURED NOTES
GMAC has or will acquire the secured notes in each pool from COLT or
another special purpose Delaware business trust to be identified in a prospectus
supplement. Each secured note is non-recourse and is secured by a first priority
perfected lien on a lease and leased vehicle, and related assets.
The lease assets securing the secured notes have been or will be originated
by participating dealers in accordance with GMAC's underwriting requirements
established for itself and COLT. The lease assets have been or will be acquired
in accordance with GMAC's underwriting standards in the ordinary course of
business, which evaluate the prospective lessee's ability to pay and
creditworthiness, as well as the value of the vehicle to be financed. GMAC's
underwriting standards also generally require physical damage insurance to be
maintained on each leased vehicle.
The lease assets to be included in the pool securing a pool of secured
notes will be selected using several criteria, which consist of those criteria
described in "Description of Auto Lease Business--Auto Lease Criteria for COLT's
Lease Program" in this prospectus and any other criteria set forth in the
accompanying prospectus supplement.
Upon direction of GMAC as agent for COLT, GMAC will fund approximately
96.9% of the acquisition price of the lease asset by acquiring a secured note of
COLT, which bears interest at a fixed rate.
TERMS OF THE SECURED NOTES
The following summary, together with the related description in the
accompanying prospectus supplement, describes the material terms of the secured
notes and the Master Terms of Secured Notes incorporated into each secured note.
Where particular provisions or terms used in the secured notes or the Master
Terms of Secured Notes are referred to, the actual provisions, including
definitions of terms, are incorporated by reference as part of this summary.
Each secured note is secured by a first priority lien upon and security
interest in a lease and leased vehicle, all proceeds generated from that lease
and leased vehicle, including insurance proceeds and other rights related to
that lease and leased vehicle under the termination value insurance policy, and
rights under any guarantees or similar obligations relating to that lease and
leased vehicle or its proceeds. The termination value insurance policy provides
for specified payments on the lease after sale or transfer of the leased
vehicle. The sole source for payment of each secured note is the lease
collateral described in this
5
paragraph and any other funds that may from time to time be pledged to secure
the payment of the secured note.
No secured note will be issued in a principal amount that exceeds 96.9% of
the initial discounted balance of the lease that the secured note is financing
or with an interest rate greater than an annual rate, expressed as a percentage,
equal to the market lease purchase rate, minus the fees for GMAC, as the lease
servicer and agent for COLT, and the fees for a provider of termination value
insurance to be described in the prospectus supplement. The terms of each
secured note will provide for a payment schedule such that the outstanding
principal balance of the secured note will, in no event, on any date after the
lease purchase date, exceed the difference between the stipulated market value
of the lease as of the date of calculation, and 3.1% of the initial discounted
balance of the lease. GMAC, as lease servicer, calculates the initial discounted
balance, the market lease purchase rate and the stipulated market value of each
lease as described below under "GMAC's Responsibilities as COLT Agent and Lease
Servicer."
Interest on the secured note accrues from and including the issue date of
the secured note, to but excluding each installment date on the secured note, in
an amount equal to one-twelfth of the annual rate specified in the secured note,
multiplied by the unpaid principal balance of the secured note on the preceding
installment date or, in the case of the first installment date, on the issue
date of the secured note. If the amount due on an installment date is less than
the amount of interest accrued and unpaid as of the installment date, the
difference will be added to principal on that installment date. Any installment
that is unpaid on the installment date will likewise be added to principal and
will thereafter bear interest at the interest rate of the secured note as of the
installment date on which it is due, but only if that installment remains unpaid
after the 15th day of the calendar month following the month in which the
installment date occurs. Any installment due on a secured note on any
installment date will be applied as though received on that installment date to
the extent that the amount has been paid on or before the 15th day of the
calendar month following the month in which the installment date occurs.
Each secured note will be non-recourse to COLT and any other assets of COLT
or its equity holders. No holder of a secured note will have any claim, remedy
or right to proceed against COLT, the owner trustee of COLT or any equity holder
for the payment of any deficiency or any other amount owing on account of the
indebtedness evidenced by the secured note. The holder also agrees to look
solely to the collateral for that secured note, including its rights under the
termination value insurance and available amounts on deposit in the termination
reserve account, and any other property pledged as security for the secured note
in payment of the indebtedness thereunder. However, nothing limits any right of
the holder of a secured note to accelerate the maturity of the secured note upon
default, subject to any grace periods, to bring suit and obtain a judgment
against COLT on the secured note, except that the sole recourse for that
judgment is limited to the lease collateral and any other security for the
secured note, to enforce the security interest of the holder or otherwise
realize upon the collateral securing the secured note, including its rights
under the termination value insurance and available amounts on deposit in the
termination reserve account, or any other property pledged as security to secure
the obligations represented by the secured note.
A default occurs under a secured note if: (1) COLT fails to pay any amount
payable under the secured note on or before the 15th day of the calendar month
following the month in which the installment date for that amount occurs; or (2)
COLT becomes bankrupt. If COLT becomes bankrupt, the secured notes accelerate
immediately. If any other default occurs, the owner of the secured note or
, acting as indenture trustee for the
6
owner, may accelerate the secured note with written notice. Upon acceleration,
all unpaid principal and interest becomes immediately due and payable.
After acceleration, proceeds of the collateral for the secured note will be
applied to pay the following amounts in the following priority:
(1) To the owner of the secured note, unpaid principal and accrued
interest on the secured note;
(2) To the owner of the secured note, any other amounts due to it
under the secured note and under the Master Terms of Secured Notes; and
(3) To the termination value insurance provider, to the extent of any
payment made by it under the termination value insurance or otherwise with
respect to the secured note or the Collateral.
Is a default under a secured note occurs and is continuing and if it is
known to the indenture trustee for the secured note, the indenture trustee will
mail to the owner of the secured note notice of the default within 90 days after
it occurs. Except in the case of a failure to make any required payment of
principal of or interest on a secured note, the indenture trustee for the
secured note may withhold the notice beyond that 90-day period if and so long as
it determines in good faith that withholding the notice is in the interests of
the owner of the secured note.
The indenture trustee for the secured notes will be required to mail each
year to the owner of the secured notes, to the extent required under the Trust
Indenture Act and the Master Terms of Secured Notes, a brief report relating to
its eligibility and qualification to continue as indenture trustee under the
indenture for that trust, any amounts advanced by it under the secured note, the
amount, interest rate and maturity date of indebtedness owing by COLT to the
indenture trustee in its individual capacity, the property and funds physically
held by the indenture trustee for the secured notes and any action taken by it
that materially affects the secured notes and that has not been previously
reported.
Each secured note will be discharged upon the delivery to the indenture
trustee for the secured note for cancellation of the secured note or, with
certain limitations, upon deposit with the indenture trustee of funds sufficient
for the payment in full of the secured note.
Each holder of a secured note, by its acceptance of the secured note,
agrees that it will not, prior to the date which is one year and one day after
the payment in full of the secured note and any other obligations of or interest
in COLT, petition or otherwise cause COLT to invoke the process of any court or
governmental authority for the purpose of commencing or sustaining a case
against COLT under any federal or state bankruptcy, insolvency, reorganization
or similar law or appointing a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar official of COLT or any substantial
part of its property, or ordering the winding up or liquidation of the affairs
of COLT.
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
The primary sources of payment on each secured note are:
- payments due on the underlying lease and the proceeds of sale of the
leased vehicle at lease termination; and
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- termination value insurance and a termination reserve account, which
provide coverage of losses in the event of any deficiency in the amount
of proceeds of sale of the leased vehicle at lease termination.
As a result, we will provide in each prospectus supplement information
concerning the composition of the pool of secured notes being sold to us,
information concerning the leases and leased vehicles securing the secured notes
and information concerning GMAC's experience in the United States pertaining to
delinquencies on leases of automobiles and light trucks and repossessions and
net loss information relating to its entire leased vehicle portfolio, including
leases that GMAC services but does not own. We cannot assure you that the
performance of any pool of secured notes or the delinquency, repossession and
net loss experience on any portfolio of leases and leased vehicles will be
comparable to prior experience.
GMAC'S RESPONSIBILITIES AS COLT AGENT AND LEASE SERVICER
GMAC is both the agent and the lease servicer for COLT and receives fees
for these services. GMAC, as agent under the lease origination agreement,
performs the following services for COLT:
- identifying automobile and light truck leases originated by General
Motors dealers and dealerships affiliated with General Motors and the
related leased vehicles that satisfy the criteria contained in the COLT
Origination Agreement and advising COLT of the leases and leased vehicles
available for purchase;
- negotiating purchases of leases and leased vehicles by COLT from the
dealers; and
- instructing the dealers to cause a certificate of title for each leased
vehicle to be issued to COLT in the name of VAULT or its designee as
nominee for COLT.
GMAC also acts as the servicer for the leases and leased vehicles securing
the secured notes. GMAC, as lease servicer, is responsible for:
- ensuring COLT's compliance with all state and federal laws, tax and
otherwise, as beneficial owner and lessor of motor vehicles;
- maintaining records of the investments in leased vehicles; and
- reporting tax and other matters for the leased vehicles.
GMAC, as lease servicer, calculates the initial discounted balance of a
lease as of the date a lease is purchased. It equals the present value of all
scheduled cash flows for the lease asset, assuming that the lease residual is
paid one month after the scheduled lease end date, discounted at an interest
rate equal to the market lease purchase rate that is in effect on the lease
purchase date.
As lease servicer, GMAC calculates the stipulated market value of each
lease asset. The stipulated market value of each lease asset as of any date of
calculation is the aggregate present value of:
- each monthly payment due after the date of calculation discounted from
the payment date in the month in which the scheduled date of payment is
due back to the date of calculation; and
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- residual value of the vehicle discounted from the payment date in the
month following the month in which the scheduled lease end date occurs
back to the date of calculation;
in each case at a discount rate equal to the market lease purchase rate for
that lease.
The market lease purchase rate for any lease securing a secured note is the
discount rate used by GMAC, as agent for COLT, to calculate the initial
discounted balance and the stipulated market value for that lease. The market
lease purchase rate is:
- a rate of discount not lower than the lowest rate at which the lease
servicer holds itself out to dealers located in the competitive market
area as being willing to purchase leases for the lease servicer's own
account of the same vehicle make, model and lease term, without premium
or discount; and
- equal to the sum of
(1) the product of the interest rate on the secured note and 96.9%,
(2) the product of the fixed rate of interest each year used for each
lease and leased vehicle to calculate the payments made by COLT to
the swap provider relating to the COLT certificates and 3.1%, and
(3) the basic fees for GMAC, as the lease servicer and the agent for
COLT, and the basic fees for the termination value insurance
provider.
DESCRIPTION OF AUTO LEASE BUSINESS
UNDERWRITING OF MOTOR VEHICLE LEASES
GMAC leases automobiles and light trucks under its SmartLease plan to
retail customers through General Motors dealerships, non-General Motors
dealerships owned or financially controlled by General Motors dealerships and
affiliated leasing companies. Under the SmartLease plan, GMAC, either for itself
or as agent for COLT or others, purchases leases originated by its nationwide
branch system from automobile and light truck dealers under agreements with
General Motors dealers. Dealers are not responsible for the customer's
performance during the lease period nor for the value of the vehicle at the
scheduled lease end date. General Motors may elect to sponsor retail leasing
programs by supporting special lease rates and/or guaranteeing residual values
in excess of published residual guide books used by GMAC.
The leased vehicles are new and used automobiles and light trucks. The
lessees are either businesses or individuals who met GMAC's underwriting
standards at the time of the origination of the lease. Because GMAC's
underwriting standards may change over time, the leases from time to time may
have differing credit quality and the credit quality of the leases in a later
year may not be the same as the credit quality of the leases in a prior year.
The leases have been originated by participating dealers in accordance with
GMAC's requirements under dealer agreements, and have been acquired in
accordance with GMAC's underwriting standards. The underwriting criteria that
GMAC, as agent for COLT, must satisfy for COLT's lease program is described
under "--Auto Lease Criteria for COLT's Lease Program" below.
9
Dealers forward completed credit applications, which include the terms of
the lease and essential information on the applicant, to one of GMAC's branches.
Applications are then processed through GMAC's internal credit evaluation
process, which includes obtaining credit bureau reports, checking the applicant
against GMAC files on both open and closed accounts and checking for recent
denials of credit. An applicant's credit is also analyzed through the use of
GMAC's proprietary credit- scoring model, which assists GMAC's credit analysts
with making credit-granting decisions. The credit-scoring model is periodically
reviewed and updated based on historical information and current trends.
Once the lease agreement, title application, insurance form, odometer
statement and various other forms have been completed by the General Motors
dealer, GMAC or COLT directs the dealer to title the vehicle in the name of
VAULT, as its nominee, and to record a lien in favor of GMAC as holder of the
related secured note on the vehicle's certificate of title. The dealer sends the
appropriate paperwork to the GMAC branch. The branch then enters essential
information into the centralized database after which billing statements are
automatically generated and mailed monthly to the lessee. Four processing
centers, located in Chicago, Charlotte, Los Angeles and Dallas, are responsible
for the processing of monthly payments, while the GMAC branches take charge of
all collection efforts.
Prior to transferring possession of a vehicle to a lessee, the dealer must:
- collect the first monthly payment, including a refundable security
deposit unless the lessee qualifies for SmartLease Lease Loyalty Program,
in which case both may be waived;
- verify that the lessee has purchased at least the minimum physical damage
and public liability insurance coverage; and
- ensure that all required license fees, registration fees and up-front
taxes are paid.
Some fees and taxes may be included in the lessee's monthly payment,
including acquisition fees and documentation expenses. The dealer is responsible
for titling and registering the vehicle, unless the applicable state's motor
vehicle department permits or requires the lessee to submit the title and
registration documentation.
Each lease and leased vehicle is purchased by GMAC, COLT or another
purchaser from the dealer for its "capitalized cost," which may exceed the
manufacturer's suggested retail price. The capitalized cost represents the
present value of the monthly payments due on a lease and the residual value
discounted at an implied lease rate. The leases provide for equal monthly
payments, and the monthly payments on leases are generally due on the same date
of each month.
Each lease agreement provides that the lessor may terminate the lease and
retake the vehicle if the lessee defaults. Events of default under the lease
agreement include, but are not limited to, the occurrence of the following:
- the lessee fails to make a payment when due;
- the lessee fails to maintain required insurance coverages;
- the lessee allows a person who is an excluded or restricted driver under
the insurance coverage to operate the vehicle;
- the lessee fails to maintain or repair the vehicle as required by the
lease agreement;
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- the lessee violates the transfer of interest provisions of the lease
agreement;
- the lessee breaks any agreements in the lease and that breach
significantly impairs the prospect of payment, performance or realization
of the lessor's interest in the vehicle;
- the lessee made a material misrepresentation on his or her lease
agreement; or
- the lessee does any other act that is a default under a lease contract
under applicable law.
Upon default, the lessor may terminate the lease agreement and the lessee
is responsible for any payments otherwise required upon early termination of the
lease.
Each lease agreement may be terminated by the lessee at any time before its
scheduled lease end date. If a lease agreement is terminated early, the lessee
must return the vehicle to GMAC or to any reasonable address GMAC designates and
complete an odometer disclosure statement. The lessee will owe an amount equal
to the total unpaid monthly payments, less unearned lease charges, plus any
unpaid fees and taxes and charges for excess mileage and excess wear and use, to
the extent not offset by the excess of the vehicle's sales price over the
residual value of the vehicle, all as stated in the lease agreement. Each lease
agreement provides that the lessee may obtain from an independent third party a
professional appraisal of the vehicle's wholesale value that could be realized
at sale. The appraised value will be binding and used as the sales price when
determining whether or not there is any surplus.
All of the leases are closed-end leases. Under a closed-end lease, at the
end of its term, if the lessee does not elect to purchase the vehicle by
exercise of the purchase option contained in the lease agreement, the lessee is
required to return the vehicle to GMAC or any reasonable address GMAC
designates. Upon receipt of a returned vehicle, the dealer will complete an
inspection of the vehicle. As with an early termination by the lessee, the
lessee must complete an odometer disclosure statement and pay for excess
mileage, excessive wear and use and other items that may be due under the lease.
The lessee may exercise the purchase option under the lease agreement at
the scheduled termination of the lease by paying the purchase price stated in
the lease agreement. The purchase price in the lease agreement is equal to or
greater than an estimate of the fair market wholesale value of the vehicle at
the scheduled end of the lease made when the lease was executed.
RESIDUAL VALUES
GMAC conducts a broad market analysis of different factors that may affect
the residual values of the vehicles that it leases for itself or for COLT,
including:
- historical lease portfolio performance, including the wholesale value
performance of terminating leases, vehicle return rates and gain/loss
performance;
- current used vehicle market conditions and transaction prices;
- future product and price information from General Motors and other
manufacturers when available; and
- published residual value percentages from the Automotive Lease Guide and
from other lessors. The Automotive Lease Guide is an independent
publisher of vehicle
11
residual value percentages and is frequently used for comparison purposes
by the vehicle leasing industry.
GMAC routinely prepares residual value tables based in part on the results
of the market analysis described above under "Underwriting of Motor Vehicle
Leases" and distributes them to its branches and franchised dealers. The table
provides residual value percentages for each new vehicle available from General
Motors for lease terms of 12 through 60 months in three month increments. If a
term and corresponding residual value percentage are not published, the dealer
will interpolate the number by averaging the nearest published data above and
below the desired term. These residual value tables may also set residuals that
are higher than the residual value suggested by the market analysis described
above if GMAC or the applicable General Motors manufacturing division considers
a higher than market residual appropriate to encourage consumers to lease
vehicles. If the General Motors division sets a higher than market residual, it
will typically reimburse GMAC for its portion of the increased residual support.
If GMAC, as agent for COLT, purchases a lease that has a residual value that is
greater than the residual value for the make and model published by the
Automotive Lease Guide at the scheduled lease end date for the lease, then GMAC,
as agent for COLT, will reimburse the termination value insurer for its coverage
of any deficiency in proceeds of sale of the leased vehicle.
The maximum allowable residual value for a new leased vehicle is calculated
by adding the sum of:
(1) the product of the appropriate residual value percentage from the
most recent quarterly table prepared by GMAC, multiplied by the total of:
(a) the manufacturer's suggested retail price for the base vehicle;
plus
(b) the manufacturer's suggested retail price for manufacturer
installed optional equipment; plus
(c) the difference between the total manufacturer's suggested
retail price of each individual option contained in a value package and
the discounted price of the value package; plus
(2) an amount equal to the residual value of specified GMAC-approved
dealer installed optional equipment based on the Automotive Lease Guide.
The sum of (1) and (2) is called the manufacturer's suggested retail price.
INSURANCE REQUIRED TO BE MAINTAINED BY LESSEES
Each lease requires the lessee to maintain automobile bodily injury and
property damage liability insurance that must name VAULT as an additional
insured. Each lease further requires the lessee to maintain all risks
comprehensive and collision insurance covering damage to the leased vehicle and
naming VAULT as loss payee.
AUTO LEASE CRITERIA FOR COLT'S LEASE PROGRAM
GMAC, COLT or other purchasers purchase new and used leases and vehicles
from General Motors dealers under a supplemental dealer agreement. Each lease
and leased
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vehicle included by COLT as collateral for the secured notes must meet the
following eligibility criteria:
- the leased vehicle is a automobile or light truck;
- the lease has an original scheduled term of 12 to 48 months;
- the capitalized cost of the lease ranges from $0 to $200,000;
- the lease is not a single payment lease;
- the dealer originated the lease in its ordinary course of business;
- the lease provides for level monthly payments;
- the lease complies with applicable federal, state and local laws;
- the lease represents a binding obligation of the lessee;
- the dealer has good title in and to the lease and the amounts due under
it;
- the dealer has good title to the leased vehicle;
- the lease is in force and not terminated;
- the lessee is not in default under the lease;
- the lessee maintains physical damage and liability insurance policies;
- the lease and leased vehicle are legally assigned to the purchaser;
- the dealer is located in the United States;
- the lease is originated within 30 days of the lease purchase date; and
- the lessee pays all costs relating to taxes, insurance and maintenance
for the leased vehicle.
An origination agreement with GMAC establishes the underwriting criteria
described above that GMAC, as agent for COLT, uses in identifying lease assets
included in the collateral for the secured notes. These criteria cannot be
amended by GMAC or COLT without the consent of the termination value insurance
provider, the rating agencies then rating the COLT certificates and, in some
cases, two-thirds of the voting interests held by the COLT certificateholders.
SERVICING OF MOTOR VEHICLE LEASES
GMAC has established operational procedures, which are modified from time
to time, for handling lease accounts that become delinquent. As servicer, GMAC
handles lease accounts included in the collateral for the secured notes that
become delinquent in the same manner as it handles its own lease accounts.
GMAC considers a lease to be past due when a lessee fails to pay at least
$25 of a scheduled monthly payment within 30 days after the due date.
Generally, GMAC makes every commercially reasonable effort to preserve a
lease as a performing lease. However, if a delinquency cannot be satisfactorily
resolved, the decision to
13
repossess a leased vehicle generally will be made before a payment is more than
40 days past due. Lessees are typically notified of repossession on the day it
is repossessed or within two days after repossession, and are informed of any
right they may have under applicable state law to redeem their vehicles.
In some situations a lessee may become delinquent and is willing but unable
to bring its account current. In this situation, at the discretion of the lease
servicer, but subject to specific guidelines, one or more payments under the
relevant lease may be deferred, provided that the lessee pays a deferral fee.
The deferral fees relating to the leases will be treated as additional servicing
compensation. If the lease servicer agrees to defer lease payments, it must make
advances on the deferred lease as though the lease payments had not been
deferred.
Occasionally, a lessee requests an extension of a lease contract for one or
more months during the period of time between the original specified maturity of
the lease and the time at which the lessee negotiates a new lease for a
different vehicle. The lease servicer may extend the performance of the lessee's
obligations in accordance with the lease servicer's own procedures on comparable
automobile leases that it services for itself or others. If the lease servicer
extends performance on the lease, it will be obligated to make advances on the
extended lease and leased vehicle as though the lease servicer had not extended
the lease.
VEHICLE DISPOSITION PROCESS
Leased vehicles may be returned to GMAC rather than being purchased by the
lessee or a dealer at maturity or upon early termination, or may be repossessed
upon default. Concurrently, GMAC disposes of off-lease vehicles primarily
through regional automobile auctions. However, GMAC has instituted a program in
which selected off-lease vehicles are offered at set prices to General Motors
dealers, as applicable, through an Internet site. The prices for vehicles
offered through the Internet program are set by GMAC to approximate the prices
GMAC would expect to receive at auction and may be higher or lower than the
residual value of the leased vehicle. The primary objectives of the Internet
sales program are to reduce the time between vehicle return and ultimate
disposition and to broaden the number of prospective buyers.
Off-lease vehicles are returned to a General Motors dealer who is
responsible for reporting the return to the relevant GMAC branch and to provide
a completed GMAC approved vehicle condition checklist. The GMAC branch arranges
for transportation of the vehicle to an auction site. Based upon the vehicle
condition checklist prepared by the dealer, the GMAC branch will determine
whether to arrange for a third-party inspection of the leased vehicle at the
auction site. In addition, GMAC maintains a representative at each auction site
who also may order an inspection, if necessary. If an inspection is necessary
and the inspection determines that there is excess wear and tear, the lessee is
responsible for payment of these charges.
GMAC will make repairs and refurbishments to a vehicle only if the
refurbishment or repairs are reasonably expected to increase the net proceeds
received on disposition. Generally, this practice results in only a limited
amount of basic repairs, for example, the replacement of a battery, and
refurbishment, typically not more than an ordinary "detailing," being performed.
The return of any security deposit to a lessee will be net of any appropriate
charges for these costs and for excess mileage charges. However, GMAC does not
always require a security deposit under its leases.
14
In most cases, vehicles are transported to the auction site within
approximately 10 days of GMAC receiving notice that the vehicle has been
returned to a dealer, and the disposition of the vehicle at auction typically
occurs within approximately four weeks thereafter. However, various
circumstances can cause these periods to be longer than the norm. For example,
the failure of a dealer to report in a timely manner the return of a vehicle,
the bankruptcy of a lessee, a delay in obtaining title documentation or the
decision to send a vehicle to a more distant auction site may delay sale of the
vehicle beyond the typical time frame. In addition, the GMAC sales
representative may decide to delay the sale of a vehicle if the bids received at
auction are not sufficient.
GMAC disposes of the majority of its off-lease vehicles, not purchased at
termination, through official General Motors auctions which are open to General
Motors dealers only. Although a GMAC branch will typically send vehicles to the
same regional auction site(s), occasionally vehicles are sent to a more distant
location if a higher auction price is reasonably expected to be obtained after
taking into account any increased transportation costs. Currently, the auctions
typically receive a fixed fee per vehicle for their services in addition to the
costs of any transportation, repairs and refurbishment performed by them. GMAC
estimates that the average expenses associated with auction sales range from
$150 to $300 per vehicle.
The GMAC sales representative at the auction site, in coordination with
GMAC headquarters staff, is responsible for handling GMAC's decisions for the
vehicles sold at the auction, including arranging for inspections, authorizing
the approved repairs and refurbishment and determining whether bids received at
auction should be accepted.
VEHICLE MAINTENANCE; EXCESS WEAR AND TEAR AND EXCESS MILEAGE
Each lease provides that the lessee is responsible for all maintenance,
repair, service and operating expenses of the leased vehicle. In addition, the
lessee is responsible under the lease for all damage to the leased vehicle and
for its loss, seizure or theft. At the scheduled maturity date of the lease, if
the lessee does not purchase the leased vehicle, the lease requires the lessee
to pay GMAC the estimated cost to repair any damage to the vehicle that is
deemed to be "excessive wear and use." Excessive wear and use generally includes
items like inoperative mechanical and electrical parts, damage to the body,
lights, trim or paint, and missing equipment, parts and accessories, and similar
items.
Each lease also specifies a selected mileage level per year, which is one
of the factors taken into account by GMAC in establishing the residual value for
a leased vehicle. If the lessee does not purchase the leased vehicle at the end
of the lease term, the lease requires the lessee to pay GMAC an excess mileage
charge, ranging from $0.15-$0.20 for each mile the vehicle has been driven in
excess of the selected mileage level.
WEIGHTED AVERAGE LIFE OF THE SECURITIES
The primary source of payment on a pool of secured notes will be the leases
and leased vehicles securing that pool. As a result, the weighted average life
of the securities issued by any trust will generally be influenced by the rate
at which the leases securing that pool terminate, causing a prepayment on the
secured notes owned by that trust. All of the leases are terminable at any time
without penalty to the lessee. The rate of early termination of automotive
leases is influenced by a variety of economic, social and other factors,
including
15
the fact that a lessee generally may not sell or transfer the leased vehicle
without the consent of the lease servicer.
Early payment in full of a lease will occur upon an early termination of
that lease. Although early terminations are primarily caused by the early return
or purchase of leased vehicles by lessees, early termination may also include
liquidation due to a default under the lease.
In addition, payments made by the lease servicer as a result of a purchase
by the lease servicer of the lease from COLT due to a breach of a representation
or warranty of the lease servicer under the lease origination agreement will be
treated by the lease servicer as an early termination of the lease.
Upon early termination of the underlying lease the secured note related to
that lease will be prepaid in full on the next distribution date, regardless of
the stated maturity of the secured note. A secured note may also be paid in full
prior to maturity as a result of a repurchase by the secured note servicer due
to a breach of a representation or warranty under the secured note pooling and
servicing agreement or by us due to a breach of a representation or warranty
under the secured note trust sale and servicing agreement.
Any reinvestment risk resulting from prepayment of secured notes will be
borne entirely by the holders of securities.
If provided for in the accompanying prospectus supplement, the weighted
average life of the securities will also be influenced by the ability of the
trust to reinvest payments received by the trust on the secured notes during a
revolving period. The ability of the trust to reinvest those payments will be
influenced by the availability of suitable additional secured notes for the
trust to purchase and the rate at which the principal balances of the secured
notes are paid.
A variety of unpredictable economic, social and other factors influence
payment rates and the availability of suitable secured notes. You will bear all
reinvestment risk resulting from a faster or slower rate of investment in
secured notes by the trust, unless otherwise provided in the prospectus
supplement for that trust.
If there is a partial prepayment on a lease, these amounts will not be
applied to prepay the secured note related to that lease. Instead, the lease
servicer will retain these amounts and apply them to pay principal and interest
on the secured note related to that lease as these amounts become due and
payable until that lease is terminated and the secured note is due and payable
in full.
All of the leases securing the secured notes have been or will be acquired
from dealers using GMAC's underwriting standards. We can make no assurance that
the leases securing the secured notes will experience the same rate of early
termination or default as GMAC's historical early termination or loss experience
for leases in its serviced portfolio. Moreover, there can be no assurance that
the lease servicer will make an advance or, if made, that the advance will be
sufficient to pay in full any series of notes or class of certificates on the
final scheduled distribution date for that series or class. If the lease
servicer does not make an advance, the secured note servicer is required to make
an advance. The termination value insurer may also be required to make advances
if not made by the lease servicer, to the extent described in the prospectus
supplement. However, there can be no assurance that either of these advances
will be made or, if made, will be sufficient to pay in full any series of notes
or class of certificates on the targeted maturity date for that series or class.
Therefore, any series or class of securities issued by a trust may mature
significantly later than its targeted maturity date.
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USE OF PROCEEDS
We will use the net proceeds from the sale of the securities to purchase
secured notes from GMAC unless otherwise provided in the related prospectus
supplement.
THE NOTES
With respect to each trust, one or more classes of notes will be issued
under the terms of an indenture, a form of which has been filed as an exhibit to
the registration statement of which this prospectus forms a part. The following
summary describes the material terms of the notes and the indenture but does not
purport to be complete and is subject to, and is qualified by reference to, all
of the provisions of the notes and the indenture. Where particular provisions or
terms used in the indenture are referred to, the actual provisions, including
definitions of terms, are incorporated by reference as part of this summary.
BOOK-ENTRY REGISTRATION OF THE NOTES
Unless otherwise specified in the related prospectus supplement, each class
of notes issued by a trust will initially be represented by one or more notes,
in each case registered in the name of the nominee of DTC, in the United States,
or Clearstream or Euroclear, in Europe, except as set forth below. Unless
otherwise specified in the related prospectus supplement, notes will be
available for purchase in denominations of $1,000 and integral multiples in
book-entry form only. We have been informed by DTC that DTC's nominee will be
Cede. Accordingly, Cede is expected to be the holder of record of the notes.
Unless and until definitive notes are issued under the limited circumstances
described in this prospectus or in the accompanying prospectus supplement, no
noteholder will be entitled to receive a physical certificate representing a
note. All references in this prospectus to actions by noteholders refer to
actions taken by DTC upon instructions from its participating organizations. All
references in this prospectus to distributions, notices, reports and statements
to noteholders refer to distributions, notices, reports and statements to DTC or
Cede, as the registered holder of the notes, as the case may be, for
distribution to noteholders in accordance with DTC's procedures with respect
thereto. See "Book-Entry Registration; Reports to Securityholders --Book-Entry
Registration" and "--Definitive Securities" in this prospectus.
PRINCIPAL AND INTEREST ON THE NOTES
The timing and priority of payment, seniority, allocations of loss,
interest rate and amount of or method of determining payments of principal and
interest on the notes will be described in the accompanying prospectus
supplement. The right of holders of any class of notes to receive payments of
principal and interest may be senior or subordinate to the rights of holders of
any other class or classes of notes in the series, as described in the
accompanying prospectus supplement. Unless otherwise provided in the
accompanying prospectus supplement, payments of interest on the notes will be
made prior to payments of principal on them. A series may include one or more
classes of notes called strip notes, entitled to
(1) principal payments with disproportionate, nominal or no interest
payments or
(2) interest payments with disproportionate, nominal or no principal
payments.
17
Each class of notes may have a different interest rate, which may be a
fixed, variable or adjustable interest rate or any combination of the foregoing.
The interest rate on certain classes of strip notes may be zero. The prospectus
supplement will specify the interest rate for each class of notes, or the
initial interest rate and the method for determining the subsequent interest
rate. One or more classes of notes of a series may be redeemable under the
circumstances specified in the accompanying prospectus supplement.
Unless otherwise specified in the related prospectus supplement, payments
on notes of all classes within a series of notes in respect of interest will
have the same priority. Under some circumstances, the amount available for those
payments could be less than the amount of interest payable on the notes on any
of the dates specified for payments on any class of notes in the accompanying
prospectus supplement. In that case, each affected class of noteholders will
receive their ratable share, based upon the aggregate amount of interest due to
that class of noteholders, of the aggregate amount available to be distributed
in respect of interest on the notes. See "The Transfer and Servicing
Agreements--Distributions" and "--Credit Enhancement" in this prospectus.
In the case of a series of notes which includes two or more classes of
notes, the sequential order and priority of payment in respect of principal and
interest, and any schedule or formula or other provisions applicable to the
determination of principal and interest, of each class will be set forth in the
accompanying prospectus supplement. Unless otherwise specified in the
accompanying prospectus supplement, payments in respect of principal and
interest of any class of notes will be made on a pro rata basis among all of the
notes of that class. Notes legally and/or beneficially owned by us or our
affiliates will be entitled to equal and proportionate benefits under the
indenture, except that those notes that are both legally and beneficially owned
by us or our affiliates will be deemed not to be outstanding for the purpose of
determining whether the requisite percentage of noteholders have given any
request, demand, authorization, direction, notice, consent or other action under
the related documents. If more than one class of notes in a series is issued by
a trust and the voting rights of the classes are different on any matters,
including giving any request, demand, authorization, direction, notice, consent
or other action under the documents for that trust, those rights will be
described in the accompanying prospectus supplement.
If an event of default occurs and is continuing for any trust and if it is
known to the indenture trustee, the indenture trustee will mail to each
noteholder of that trust notice of the event of default within 90 days after it
occurs. Except in the case of a failure to make any required payment of
principal of or interest on any note, the indenture trustee may withhold the
notice beyond that 90-day period if and so long as it determines in good faith
that withholding the notice is in the interests of noteholders.
THE INDENTURE
A form of indenture has been filed as an exhibit to the registration
statement of which this prospectus forms a part. We will provide a copy of the
applicable indenture without exhibits upon request to a holder of notes issued
under that indenture. The following summary, together with the related
description in the accompanying prospectus supplement, describes the material
terms of the indenture.
18
Modification of Indenture Without Noteholder Consent. Each trust and
indenture trustee for that trust, on behalf of that trust, may, without consent
of the noteholders of that trust, enter into one or more supplemental indentures
for any of the following purposes:
- to correct or amplify the description of the collateral or add additional
collateral;
- to provide for the assumption of the notes and the indenture obligations
by a permitted successor to the trust;
- to add additional covenants for the benefit of the noteholders;
- to convey, transfer, assign, mortgage or pledge any property to or with
the indenture trustee;
- to cure any ambiguity or correct or supplement any provision in the
indenture or in any supplemental indenture that may be inconsistent with
any other provision of the indenture or any supplemental indenture or in
any other document for that trust;
- to provide for the acceptance of the appointment of a successor indenture
trustee or to add to or change any of the provisions of the indenture as
will be necessary and permitted to facilitate the administration by more
than one indenture trustee;
- to modify, eliminate or add to the provisions of the indenture in order
to comply with the Trust Indenture Act of 1939, as amended; and
- to add any provisions to, change in any manner, or eliminate any of the
provisions of, the indenture or modify in any manner the rights of
noteholders under that indenture; provided that any action specified in
this clause will not, as evidenced by an opinion of counsel, adversely
affect in any material respect the interests of any noteholder of that
trust unless noteholder consent is otherwise obtained as described in
this subsection.
Modification of Indenture With Noteholder Consent. Unless otherwise
specified in the accompanying prospectus supplement, with the consent of the
holders of a majority in principal amount of the outstanding notes affected,
each trust and the indenture trustee may execute a supplemental indenture to add
provisions to, change in any manner or eliminate any provisions of, the
indenture for that trust, or modify in any manner the rights of the noteholders
of that trust.
The supplemental indenture may not be modified or amended without the
consent of the holder of each outstanding note of that trust affected to:
- change the due date of any installment of principal of or interest on any
note or reduce the principal amount, the interest rate specified or the
redemption price for any note or change any place of payment where, or
the coin or currency in which, any note or any interest is payable or
modify any of the provisions of the indenture in a manner as to affect
the calculation of the amount of any payment of interest or principal due
on any note on any payment date;
- impair the right to institute suit for the enforcement of certain
provisions of the indenture regarding payment of principal of or interest
on any note;
- reduce the percentage of the aggregate principal amount of the
outstanding notes the consent of the holders of which is required for any
supplemental indenture to become effective or the consent of the holders
of which is required for any waiver of
19
compliance with certain provisions of the indenture or of certain
defaults under it and their consequences as provided for in the
indenture;
- modify any of the provisions of the indenture regarding the voting of
notes held by us, the trust that issued those notes, any other obligor on
the notes, or any affiliate of any of them;
- reduce the percentage of the aggregate outstanding principal amount of
the notes the consent of the holders of which is required to direct the
indenture trustee to sell or liquidate the assets of the trust that
issued those notes if the proceeds of the sale would be insufficient to
pay the principal amount and accrued but unpaid interest on the
outstanding notes;
- decrease the percentage of the aggregate principal amount of the notes
required to amend the sections of the indenture which specify the
applicable percentage of aggregate principal amount of the notes
necessary to amend the indenture; or
- permit the creation of any lien ranking prior to or on a parity with the
lien of the indenture on any part of the assets of the trust or, except
as otherwise permitted or contemplated in the indenture, terminate the
lien of the indenture on any of the 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. For each trust, unless
otherwise specified in the accompanying prospectus supplement, each of the
following will be an event of default under the indenture:
- except as provided in the next item below, any failure to pay interest on
the notes issued by that trust as and when the same becomes due and
payable, which failure continues unremedied for five days;
- any failure (1) to make any required payment of principal on the notes
issued by that trust or (2) to observe or perform in any material respect
any other covenants or agreements in the indenture, which failure in the
case of a default under the immediately preceding clause materially and
adversely affects the rights of noteholders of that trust, and which
failure in either case continues for 30 days after the giving of written
notice of that failure (x) to the trust, to us or the servicer, as
applicable, by the indenture trustee or (y) to us or the servicer, as
applicable, and the indenture trustee by the holders of not less than 25%
of the principal amount of the notes issued by that trust;
- failure to pay the unpaid principal balance of any class of notes issued
by that trust on or prior to the final scheduled payment date for that
class; and
- certain events of bankruptcy, insolvency or receivership of the trust
indicating its insolvency, reorganization under bankruptcy proceedings or
inability to pay its obligations.
However, the amount of principal required to be paid to noteholders under
the indenture will generally be limited to amounts available to be deposited
therefor in the note distribution account. Therefore, unless otherwise specified
in the accompanying prospectus supplement, the failure to pay principal on a
class of notes generally will not result in the occurrence of an event of
default unless that class of notes has a final scheduled payment date, and then
not until the final scheduled payment date for that class of notes.
20
If an event of default should occur and be continuing for the notes of any
series, the indenture trustee or holders of a majority in principal amount of
those notes then outstanding may declare the principal of those notes to be
immediately due and payable. That declaration may, under certain circumstances,
be rescinded by the holders of a majority in principal amount of those notes
then outstanding.
Unless otherwise specified in the accompanying prospectus supplement, if
the notes of any series are declared due and payable on account of an event of
default, the indenture trustee may institute proceedings to:
- collect amounts due or foreclose on trust property;
- exercise remedies as a secured party;
- sell the assets of the trust that issued the notes; or
- select to have the trust maintain possession of the assets of the trust
and continue to apply collections on the secured notes owned by that
trust as if there had been no declaration of acceleration.
The indenture trustee, however, is prohibited from selling the secured
notes owned by that trust following an event of default, unless:
- the holders of all the outstanding notes issued by that trust consent to
the sale;
- the proceeds of the sale are sufficient to pay in full the principal of
and the accrued interest on the outstanding securities issued by that
trust at the date of the sale; or
- there has been a default in the payment of interest or principal on the
notes issued by that trust, the indenture trustee determines that the
secured notes will not continue to provide sufficient funds on an ongoing
basis to make all payments on the notes issued by that trust as these
payments would have become due if these obligations had not been declared
due and payable, and the indenture trustee obtains the consent of the
holders of a majority of the aggregate outstanding amount of the notes
issued by that trust.
If the indenture trustee elects to sell the secured notes following an
event of default, any sale of less than all of the secured notes must be made in
blocks of at least the greater of the following:
- $50,000,000 in aggregate secured note value of the secured notes; and
- 300 secured notes.
Unless otherwise specified in the accompanying prospectus supplement,
following a declaration upon an event of default that the notes are immediately
due and payable,
(1) noteholders will be entitled to ratable repayment of principal on the
basis of their respective unpaid principal balances and
(2) if that event of default resulted from a payment default, repayment in
full of the accrued interest on and unpaid principal balances of the notes will
be made prior to any further distribution of interest on the certificates issued
by that trust or in respect of the certificate balance.
21
Subject to the provisions of the indenture relating to the duties of the
indenture trustee, if an event of default occurs and is continuing for a series
of notes, the indenture trustee will be under no obligation to exercise any of
the rights or powers under the indenture at the request or direction of any of
the holders of those notes, if the indenture trustee reasonably believes it will
not be adequately indemnified against the costs, expenses and liabilities which
might be incurred by it in complying with that request. Subject to the
provisions for indemnification and certain limitations contained in the
indenture, the holders of a majority in aggregate principal amount of the
outstanding notes of a trust, voting together as a single class, will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the indenture trustee, and the holders of a majority in
aggregate principal amount of those notes then outstanding, voting together as a
single class, may, in certain cases, waive any default with respect to those
notes, 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 those outstanding notes.
No holder of a note of any series will have the right to institute any
proceeding under the indenture, unless:
- that holder previously has given to the indenture trustee written notice
of a continuing event of default;
- the holders of not less than 25% in aggregate principal amount of the
outstanding notes of the series, voting together as a single class, have
made written request of the indenture trustee to institute a proceeding
in its own name as indenture trustee;
- those holder or holders have offered the indenture trustee reasonable
indemnity;
- the indenture trustee has for 60 days failed to institute a proceeding;
and
- no direction inconsistent with that written request has been given to the
indenture trustee during the 60-day period by the holders of a majority
in aggregate principal amount of those outstanding notes.
If an event of default occurs and is continuing for any trust and if it is
known to the indenture trustee, the indenture trustee will mail to each
noteholder of that trust notice of the event of default within 90 days after it
occurs. Except in the case of a failure to make any required payment of
principal of or interest on any note, the indenture trustee may withhold the
notice beyond that 90-day period if and so long as it determines in good faith
that withholding the notice is in the interests of noteholders.
In addition, each indenture trustee and the noteholders, by accepting the
notes, 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 trust that
issued those notes or us, any bankruptcy, reorganization or other proceeding
under any federal or state bankruptcy or similar law.
Neither the indenture trustee nor the owner trustee in their individual
capacities, nor any holder of a certificate including, without limitation, us,
nor any of their or our respective owners, beneficiaries, agents, officers,
directors, employees, affiliates, or any successors or assigns of the indenture
trustee or the owner trustee will, in the absence of an express agreement to the
contrary, be personally liable for the payment of the principal of or interest
on the notes or for the agreements of the trust that issued those notes
contained in the indenture.
22
Material Covenants. Each indenture provides that the trust it binds may not
consolidate with or merge into any other entity, unless:
- the entity formed by or surviving the consolidation or merger is
organized under the laws of the United States, any state or the District
of Columbia;
- the entity expressly assumes the trust's obligation to make due and
punctual payments on the notes and the performance or observance of every
agreement and covenant of the trust under the indenture;
- no event of default has occurred and is continuing immediately after the
merger or consolidation;
- the trust has been advised that the rating of the notes or certificates
issued by that trust then in effect would not be reduced or withdrawn by
the rating agencies rating the notes or certificates as a result of the
merger or consolidation;
- any action necessary to maintain the lien and security interest created
by the indenture has been taken; and
- the trust has received an opinion of counsel to the effect that the
consolidation or merger would have no material adverse tax consequence to
the trust or to any noteholder or certificateholder of that trust.
No trust will, except as expressly permitted by the indenture, the transfer
and servicing agreements or documents for that trust:
- sell, transfer, exchange or otherwise dispose of any of the assets of the
trust;
- claim any credit on or make any deduction from the principal and interest
payable in respect of the related notes, other than amounts withheld
under the Internal Revenue Code or applicable state law, or assert any
claim against any present or former holder of the notes because of the
payment of taxes levied or assessed upon the trust;
- dissolve or liquidate in whole or in part;
- permit the validity or effectiveness of the indenture to be impaired or
permit any person to be released from any covenants or obligations for
the notes issued by that trust under the indenture except as may be
expressly permitted by the indenture; or
- permit any lien, charge, excise, claim, security interest, mortgage or
other encumbrance to be created on or extend to or otherwise arise upon
or burden the assets of the trust or any part of it, or any interest or
proceeds of it.
Except as specified in the accompanying prospectus supplement, a trust may
not engage in any activity other than as specified under "The Trusts" above. No
trust will incur, assume or guarantee any indebtedness other than indebtedness
incurred under the notes issued by that trust and indenture or otherwise in
accordance with the documents for that trust.
Annual Compliance Statement. Each trust will be required to file annually
with the indenture trustee of that trust a written statement as to the
fulfillment of its obligations under the indenture.
Indenture Trustee's Annual Report. For each trust, the indenture trustee
will be required to mail each year to all noteholders of that trust, to the
extent required under the Trust Indenture Act, a brief report relating to its
eligibility and qualification to continue as
23
indenture trustee under the indenture for that trust, any amounts advanced by it
under the indenture, the amount, interest rate and maturity date of certain
indebtedness owing by the trust to the indenture trustee in its individual
capacity, the property and funds physically held by the indenture trustee and
any action taken by it that materially affects the notes and that has not been
previously reported.
Satisfaction and Discharge of Indenture. The indenture for each trust will
be discharged for the notes of that trust upon the delivery to the indenture
trustee of that trust for cancellation of all those notes or, with certain
limitations, upon deposit with the indenture trustee of funds sufficient for the
payment in full of all of those notes. The indenture trustee will continue to
act as indenture trustee under the indenture and the trust sale and servicing
agreement for the benefit of the certificateholders of that trust until that
time as all payments in respect of certificate balance and interest due to the
certificateholders have been paid in full.
THE INDENTURE TRUSTEE
The indenture trustee for a series of notes will be specified in the
accompanying prospectus supplement. The indenture trustee may give notice of its
intent to resign at any time, in which event the trust will be obligated to
appoint a successor indenture trustee. The trust may also remove the indenture
trustee if the indenture trustee ceases to be eligible to continue under the
indenture or if the indenture trustee becomes insolvent or otherwise becomes
incapable of acting. In those circumstances, the trust will be obligated to
appoint a successor indenture trustee. The holders of a majority of the
aggregate principal amount of the outstanding notes also have the right to
remove the indenture trustee and appoint a successor. Any resignation or removal
of the indenture trustee and appointment of a successor indenture trustee does
not become effective until acceptance of the appointment by the successor
indenture trustee.
THE CERTIFICATES
One or more classes of certificates may be issued by each trust under the
terms of a trust agreement, a form of which has been filed as an exhibit to the
registration statement of which this prospectus forms a part. The certificates
issued by each trust may be offered by this prospectus and the accompanying
prospectus supplement or may be sold in transactions exempt from registration
under the Securities Act of 1933 or retained by us or our affiliates. The
following summary, together with the related description in the accompanying
prospectus supplement, describes the material terms of the certificates and the
trust agreement. Where particular provisions or terms used in the trust
agreement are referred to, the actual provisions, including definitions of
terms, are incorporated by reference as part of this summary.
BOOK ENTRY REGISTRATION OF THE CERTIFICATES
Each class of certificates to be sold by the certificate underwriters will
initially be represented by a single certificate registered in the name of the
nominee of DTC, except as set forth below. We have been informed by DTC that
DTC's nominee will be Cede. Accordingly, Cede is expected to be the holder of
record of any offered certificates that are not retained by us. Unless otherwise
specified in the accompanying prospectus supplement, any certificates offered
under any prospectus supplement will be available for purchase in minimum
denominations of $25,000 and integral multiples of $1,000 in excess of that
amount in
24
book-entry form only and resales or other transfers of the certificates will not
be permitted in amounts of less than $25,000. Unless and until definitive
certificates are issued under the limited circumstances described in this
prospectus or in the accompanying prospectus supplement, no certificateholder,
other than us, will be entitled to receive a physical certificate representing a
certificate. In that case, all references in this prospectus to actions by
certificateholders refer to actions taken by DTC upon instructions from the
participants and all references in this prospectus to distributions, notices,
reports and statements to certificateholders refer to distributions, notices,
reports and statements to DTC or Cede, as the registered holder of the
certificates, as the case may be, for distribution to certificateholders in
accordance with DTC's procedures. Certificates owned by us or our affiliates
will be entitled to equal and proportionate benefits under the trust agreement,
except that, unless all those certificates are owned by us and our affiliates,
those certificates will be deemed not to be outstanding for purposes of
determining whether the requisite percentage of certificateholders have given
any request, demand, authorization, direction, notice, consent or other action
under the agreements for the trust that issued those certificates, other than
commencement by the trust of a voluntary proceeding in bankruptcy as described
in "The Transfer and Servicing Agreements--Insolvency Events."
Under the trust agreement, the trust, and the owner trustee on its behalf,
and the certificateholders, by accepting the certificates issued by that trust,
will covenant that they will not, for a period of one year and one day after the
termination of the trust agreement, institute against us any bankruptcy,
reorganization or other proceeding under any federal or state bankruptcy or
similar law.
DISTRIBUTIONS OF INTEREST AND CERTIFICATE BALANCE
The timing and priority of distributions, seniority, allocations of loss,
pass-through rate and amount or method of determining distributions for the
certificate balance and interest--or, where applicable, for the certificate
balance only or interest only--on the certificates of any series will be
described in the related prospectus supplement. Distributions of interest on the
certificates will be made on the dates specified in the accompanying prospectus
supplement, each called a distribution date, and will be made prior to
distributions for the certificate balance. A series may include one or more
classes of certificates called strip certificates entitled to (1) distributions
in respect of certificate balance with disproportionate, nominal or no interest
distributions, or (2) interest distributions, with disproportionate, nominal or
no distributions in respect of certificate balance. Each class of certificates
may have a different pass through rate, which may be a fixed, variable or
adjustable pass-through rate or any combination of the foregoing. The interest
rate on certain classes of strip certificates may be zero. The accompanying
prospectus supplement will specify the pass through rate for each class of
certificates, or the initial pass through rate and the method for determining
the pass through rate. Unless otherwise specified in the accompanying prospectus
supplement, interest on the certificates will be calculated on the basis of a
360-day year consisting of twelve 30-day months. Distributions in respect of the
certificates will be subordinate to payments in respect of the notes as more
fully described in the accompanying prospectus supplement. Distributions in
respect of certificate balance of any class of certificates will be made on a
pro rata basis among all of the certificateholders of that class.
In the case of a series of certificates which includes two or more classes
of certificates, the timing, sequential order, priority of payment or amount of
distributions in respect of principal, and any schedule or formula or other
provisions applicable to the determination of that principal, of each class will
be as set forth in the accompanying prospectus supplement.
25
BOOK ENTRY REGISTRATION; REPORTS TO SECURITYHOLDERS
BOOK-ENTRY REGISTRATION
Unless otherwise specified in the accompanying prospectus supplement, each
class of securities offered by this prospectus will be represented by one or
more certificates registered in the name of Cede, as nominee of the Depository
Trust Company. Unless otherwise specified in the accompanying prospectus
supplement, securityholders may hold beneficial interests in securities through
the DTC, in the United States, or Clearstream (previously known as Cedelbank) or
the Euroclear System, in Europe or Asia, directly if they are participants of
those systems, or indirectly through organizations which are participants in
those systems.
No securityholder will be entitled to receive a certificate representing
that person's interest in the securities, except as set forth below. Unless and
until securities of a class are issued in fully registered certificated form,
known as definitive securities, under the limited circumstances described below
in this subsection, all references in this prospectus to actions by noteholders,
certificateholders or securityholders will refer to actions taken by DTC upon
instructions from DTC participants, and all references in this prospectus to
distributions, notices, reports and statements to noteholders,
certificateholders or securityholders will refer to distributions, notices,
reports and statements to Cede, as the registered holder of the securities, for
distribution to securityholders in accordance with DTC procedures. Because the
circumstances for issuing the securities in fully registered certificated form
are limited, it is anticipated that the only noteholder, certificateholder or
securityholder will be Cede, as nominee of DTC. Securityholders will not be
recognized by the trustee as noteholders, certificateholders or securityholders
as those terms will be used in the relevant agreements, and securityholders will
only be permitted to exercise the rights of holders of securities of the related
class indirectly through DTC and DTC participants, as further described below in
this subsection.
The Depository Trust Company is a limited purpose trust company organized
under the laws of the State of New York, a "banking organization" within the
meanings of New York Banking Law, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform Commercial
Code and a "clearing agency" registered under Section 17A of the Exchange Act.
DTC was created to hold securities for its participating members and to
facilitate the clearance and settlement of securities transactions between DTC
participants through electronic book-entries, eliminating the need for physical
movement of certificates. DTC participants include securities brokers and
dealers, banks, trust companies and clearing corporations which may include
underwriters, agents or dealers for securities of any class or series. Indirect
access to the DTC system also is available to others like banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a DTC participant, either directly or indirectly known as
indirect participants.
A securityholder, as used in this prospectus, will mean a holder of a
beneficial interest in a book-entry security. Unless otherwise specified in the
accompanying prospectus supplement, securityholders that are not DTC
participants or indirect participants but desire to purchase, sell or otherwise
transfer ownership of, or other interests in, securities may do so only through
DTC participants and indirect participants.
Because DTC can only act on behalf of DTC participants, who in turn act on
behalf of indirect participants and certain banks, the ability of
securityholders to pledge securities to
26
persons or entities that do not participate in the DTC system, or to otherwise
act on behalf of those securityholders may be limited due to the lack of a
physical certificate for the securities.
The information in the section concerning DTC and DTC's book-entry system
has been obtained from sources that we believe to be reliable, but for which we
assume no responsibility for the accuracy.
DTC participants will receive a credit for the securities on DTC's records.
The ownership interest of each securityholder will in turn be recorded on
respective records of the DTC participants and indirect participants.
Securityholders will not receive written confirmation from DTC of their
purchase, but securityholders are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their
holdings, from the DTC participant or indirect participant through which the
securityholder entered into the transaction. Transfers of ownership interests in
the securities of any class will be accomplished by entries made on the books of
DTC participants acting on behalf of securityholders.
To facilitate subsequent transfers, all securities deposited by DTC
participants with DTC will be registered in the name of Cede, a nominee of DTC.
The deposit of securities with DTC and their registration in the name of Cede
will effect no change in beneficial ownership. DTC will have no knowledge of the
actual securityholders and its records will reflect only the identity of the DTC
participants to whose accounts those securities are credited, which may or may
not be the securityholders. DTC participants and indirect participants will
remain responsible for keeping account of their holdings on behalf of their
customers. While the securities of a series are held in book-entry form,
securityholders will not have access to the list of securityholders of that
series, which may impede the ability of securityholders to communicate with each
other.
Conveyance of notices and other communications by DTC to DTC participants,
by DTC participants to indirect participants and by DTC participants and
indirect participants to securityholders will be governed by arrangements among
them, subject to any statutory or regulatory requirements as may be in effect
from time to time.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among DTC
participants on whose behalf it acts for the securities and is required to
receive and transmit payments of principal of and interest on the securities.
DTC participants and indirect participants with which securityholders have
accounts for the securities similarly are required to make book-entry transfers
and receive and transmit the payments on behalf of their respective
securityholders.
DTC's practice is to credit DTC participants' accounts on each distribution
date in accordance with their respective holdings shown on its records, unless
DTC has reason to believe that it will not receive payment on that distribution
date. Payments by DTC participants and indirect participants to securityholders
will be governed by standing instructions and customary practices, as is the
case with securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of that DTC
participant and not of DTC, the indenture trustee or owner trustee, or any
paying agent appointed by them, and our responsibility or that of the servicer,
subject to any statutory or regulatory requirements as may be in effect from
time to time. Payment of principal of and interest on each class of securities
to DTC will be the responsibility of the indenture trustee or trustee, or any
paying agent, disbursement of those payments to DTC participants will be the
responsibility of DTC and disbursement of payments to the securityholders will
be the responsibility of DTC participants and indirect participants of DTC. As a
result, under the
27
book-entry format, securityholders may experience some delay in their receipt of
payments. DTC will forward those payments to its DTC participants which
thereafter will forward them to indirect participants or securityholders.
DTC has advised us that it will take any action permitted to be taken by a
securityholder only at the direction of one or more DTC participants to whose
account with DTC the securities are credited. Additionally, DTC has advised us
that it will take actions for specified percentages of the securityholders'
interest only at the direction of and on behalf of DTC participants whose
holdings include undivided interests that satisfy such specified percentages.
DTC may take conflicting actions for other undivided interests to the extent
that actions are taken on behalf of DTC participants whose holdings include
those undivided interests.
Neither DTC nor Cede will consent or vote the securities. Under its usual
procedures, DTC will mail an "Omnibus Proxy" on such matters to the indenture
trustee or trustee as soon as possible after any applicable record date for the
consent or vote. The Omnibus Proxy will assign Cede's consenting or voting
rights to those DTC participants to whose accounts the securities are credited
on that record date. The record date will be identified in a listing attached to
the Omnibus Proxy.
In addition to holding notes through DTC participants or indirect
participants of DTC in the United States as described above in this subsection,
holders of book-entry notes may hold their notes through Clearstream or
Euroclear in Europe if they are participants of those systems, or indirectly
through organizations which are participants in them.
Clearstream and Euroclear will hold omnibus positions on behalf of their
participants through customers' securities accounts in Clearstream's and
Euroclear's names on the books of their respective depositaries which in turn
will hold those positions in customers' securities accounts in the depositaries'
names on the books of DTC.
Transfers between Clearstream participants and Euroclear participants will
occur in accordance with their respective rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly through
DTC, on the one hand, and directly or indirectly through Clearstream
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 that system in accordance with its rules and
procedures and within its established deadlines, European time. The relevant
European international clearing system will, if the transaction meets its
settlement requirements, deliver instructions to its depositary to take action
to effect final settlement on its behalf by delivering or receiving securities
in DTC, and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. Clearstream participants and
Euroclear participants may not deliver instructions directly to the
depositaries.
Because of time-zone differences, credits of securities received in
Clearstream or Euroclear as a result of a transaction with a participant will be
made during subsequent securities settlement processing and dated the business
day following the DTC settlement date. Those credits or any transactions in
those securities settled during processing will be reported to the relevant
Euroclear or Clearstream participants on that business day. Cash received in
Clearstream or Euroclear as a result of sales of securities by or through a
Clearstream participant or a Euroclear participant to a DTC participant will be
received with value on the DTC settlement date but will be available in the
relevant Clearstream or
28
Euroclear cash account only as of the business day following settlement in DTC.
For information on tax documentation procedures, see "Federal Income Tax
Consequences--The Notes--Tax Consequences to Foreign Noteholders" in this
prospectus.
Clearstream Banking, S.A. is incorporated under the laws of Luxembourg as a
professional depository. Clearstream holds securities for its participating
organizations and facilitates the clearance and settlement of securities
transactions between Clearstream participants through electronic book-entry
changes in accounts of Clearstream participants to eliminate the need for the
physical movement of certificates. Transactions may be settled in Clearstream in
any of 28 currencies, including United States dollars. Clearstream provides to
Clearstream participants, among other things, services for safekeeping,
administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. Clearstream interfaces with domestic
markets in several countries. As a professional depository, Clearstream is
subject to regulation by the Luxembourg Monetary Institute. Clearstream
participants are recognized financial institutions around the world, including
underwriters, securities brokers and dealers, banks, trust companies, clearing
corporations and other organizations and may include the underwriters. Indirect
access to Clearstream is also available to others, like banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Clearstream participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for participants of
Euroclear and to clear and settle transactions between those Euroclear
participants through simultaneous electronic book-entry delivery against
payment, eliminating the need for physical movement of certificates and any risk
from lack of simultaneous transfers of securities and cash. 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 in this
subsection. The Euroclear system is owned by Euroclear Clearance System Public
Limited Company and operated through a license agreement by Euroclear Bank
S.A./N.V., a bank incorporated under the laws of the Kingdom of Belgium, the
Euroclear Operator. 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 regulated and examined by the Belgian Banking and
Finance Commission and the National Bank of Belgium.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
Operating Procedures of the Euroclear System and the applicable Belgian law,
referred to collectively as the "Terms and Conditions." The Terms and Conditions
govern transfers of securities and cash with Euroclear, withdrawals of
securities and cash from Euroclear, and receipts of payments for 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 on notes held through Clearstream or Euroclear will be
credited to the cash accounts of Clearstream participants or Euroclear
participants in accordance with the relevant system's rules and procedures, to
the extent received by its depositary. These distributions will
29
be subject to tax reporting in accordance with relevant United States tax laws
and regulations. Clearstream or the Euroclear Operator, as the case may be, will
take any other action permitted to be taken by a noteholder under the indenture
or other document for the trust that issued the notes on behalf of a Clearstream
participant or Euroclear participant only in accordance with its relevant rules
and procedures and subject to its depositary's ability to effect those actions
on its behalf through DTC.
Although DTC, Clearstream and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of notes among participants of DTC,
Clearstream and Euroclear, they are under no obligation to perform or continue
to perform those procedures and they may be discontinued at any time.
Except as required by law, neither the trust, us, the servicer, the
administrator, the owner trustee nor the indenture trustee will have any
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests of the notes or the certificates of any series
held by Cede, as nominee for DTC, by Clearstream or by Euroclear in Europe, or
for maintaining, supervising or reviewing any records relating to the beneficial
ownership interests.
DEFINITIVE SECURITIES
Unless otherwise specified in the accompanying prospectus supplement, any
notes and certificates originally issued in book-entry form will be issued in
fully registered, certificated form definitive notes or definitive certificates,
as the case may be, and, collectively, the definitive securities, to
noteholders, certificateholders or their respective nominees, rather than to DTC
or its nominee, only if:
- the administrator advises the appropriate trustee in writing that DTC is
no longer willing or able to discharge properly its responsibilities as
depository for those securities and the trust is unable to locate a
qualified successor;
- the administrator or trustee or us, at its or our option, elects to
terminate the book-entry system through DTC; or
- after the occurrence of an event of default or a servicer default,
holders representing at least a majority of the outstanding principal
amount of those securities advise the appropriate trustee through DTC in
writing that the continuation of a book-entry system through DTC, or its
successor is no longer in the best interest of the holders of those
securities.
Upon the occurrence of any event described in the immediately preceding
paragraph, the appropriate trustee will be required to notify DTC of the
availability of definitive notes or definitive certificates, as the case may be.
DTC will notify all the note owners or certificate owners, as applicable, of the
availability of definitive notes or definitive certificates, as the case may be.
Upon surrender by DTC of the definitive securities representing the securities
and receipt of instructions for re-registration, the appropriate trustee will
reissue these securities as definitive notes or definitive certificates, as the
case may be, to the holders.
Distributions of principal of, and interest on, the definitive securities
will be made in accordance with the procedures set forth in the indenture or
trust agreement, as applicable, for those definitive securities directly to
holders of definitive securities in whose names the definitive securities were
registered at the close of business on the last day of the preceding monthly
period. Those distributions will be made by check mailed to the address of the
holder
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as it appears on the register maintained by the indenture trustee or owner
trustee, as applicable. The final payment on any definitive security, however,
will be made only upon presentation and surrender of the definitive security at
the office or agency specified in the notice of final distribution to the
holders of that class.
Definitive securities will be transferable and exchangeable at the offices
of the appropriate trustee or of a registrar named in a notice delivered to
holders of definitive securities. No service charge will be imposed for any
registration of transfer or exchange, but the appropriate trustee may require
payment of a sum sufficient to cover any tax or other governmental charge
imposed in connection therewith.
REPORTS TO SECURITYHOLDERS
For 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
noteholders of that Trust on that payment date and on or prior to each
distribution date, the servicer will prepare and provide to the owner trustee a
statement to be delivered to the certificateholders of that Trust. Each
statement to be delivered to noteholders will include the information set forth
below as to the notes for the payment date or the period since the previous
payment date on those notes, as applicable. Each statement to be delivered to
certificateholders will include the information set forth below as to the
certificates for that distribution date or the period since the previous
distribution date, as applicable:
- the amount of the distribution allocable to principal of each class of
the notes and to the certificate balance of each class of certificates;
- the amount of the distribution allocable to interest on or for each class
of securities;
- the aggregate secured note value as of the close of business on the
preceding distribution date and as of the current distribution date, and
the principal distributable amount for that distribution date;
- the aggregate outstanding principal balance and the note pool factor for
each class of notes, and the certificate balance and the certificate pool
factor for each class of certificates, each after giving effect to all
principal payments and reinvestments on that date;
- the amount of outstanding secured note servicer advances on that date;
- the amount of the total servicing fee paid to the secured note servicer
for the prior month or months, as the case may be;
- the interest rate or pass-through rate for the next period for any class
of notes or certificates with variable or adjustable rates;
- the amount, if any, distributed to noteholders and certificateholders
from amounts on deposit in the reserve account or from other forms of
credit enhancement;
- the balance of the reserve account, if any, on that date, after giving
effect to changes to it on that date;
- the aggregate stipulated market value of the lease assets securing the
secured notes; the auction turn-in rate and the residual realization
ratio for the leases held by COLT; and
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- the percentage coverage then being applied to each lease asset to
determine the amount of available termination value insurance, the base
amount of termination value insurance and the maximum amount of
termination value insurance then available for all the lease assets held
by COLT and the percentage of all the lease assets represented by the
lease assets securing the secured notes; and
- the amount, if any, reinvested in additional secured notes, if any.
Each amount under the first, second, seventh, ninth and tenth item listed
above for notes or certificates will be expressed as a dollar amount per $1,000
of the initial principal balance of the notes or the initial certificate
balance, as applicable.
Within the prescribed period of time for tax reporting purposes after the
end of each calendar year during the term of the trust, the trustees of that
trust will mail to each holder of a class of securities who at any time during
that calendar year has been a securityholder, and received any payment on the
securities, a statement containing certain information for the purposes of that
securityholder's preparation of federal income tax returns. As long as the
holder of record of the securities is Cede, as nominee of DTC, beneficial owners
of the securities will receive tax and other information from participants and
indirect DTC participants rather than from the trustees.
THE TRANSFER AND SERVICING AGREEMENTS
Except as otherwise specified in the accompanying prospectus supplement,
the following summary describes certain terms of:
(1) the secured note pooling and servicing agreement under which we
will purchase secured notes from GMAC and the servicer for the secured
notes will agree to service the secured notes;
(2) the secured note trust sale and servicing agreement under which a
trust will acquire the secured notes from us and agree to the servicing of
those secured notes by the secured note servicer;
(3) the trust agreement under which the trust will be created and
certificates of the trust will be issued; and
(4) the administration agreement under which GMAC will undertake
administrative duties for the trust.
These agreements are referred to as the transfer and servicing agreements.
Forms of the transfer and servicing agreements have been filed as exhibits to
the registration statement of which this prospectus forms a part. We will
provide a copy of the transfer and servicing agreements, without exhibits, to
holders of securities upon written request to: General Motors Acceptance
Corporation, 200 Renaissance Center, Detroit, Michigan 48265. This summary,
together with the related description in the accompanying prospectus supplement,
describes the material terms of the transfer and servicing agreements and
servicing agreements. Where particular provisions or terms used in the transfer
and servicing agreements are referred to, the actual provisions, including
definitions of terms, are incorporated by reference as part of this summary.
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SALE AND ASSIGNMENT OF SECURED NOTES
GMAC will sell and assign to us, without recourse, its entire interest in a
pool of secured notes, including its security interests in the leases and leased
vehicles, under a secured note pooling and servicing agreement. We will transfer
and assign to the applicable trust, without recourse, our entire interest in the
secured notes owned by that trust, including our security interests in the
leases and leased vehicles, under a secured note trust sale and servicing
agreement between us, the secured note servicer and the trust. Each secured note
in a trust will be identified in a schedule that will be on file at the
locations set forth in an exhibit to the secured note trust sale and servicing
agreement. The trust will, concurrently with the transfer and assignment,
execute and deliver the notes and certificates issued by that trust to us in
exchange for the secured notes. Except as set forth in the accompanying
prospectus supplement, we will sell the securities offered by this prospectus
which may or may not include all securities of a series, to the underwriters
named in the accompanying prospectus supplement.
The accompanying prospectus supplement will provide the terms, conditions
and manner under which additional secured notes will be sold by GMAC to us and
by us to the applicable trust during the revolving period, if any. The revolving
period may not be longer than one year from the date of an issuance of a series
of securities.
In each secured note pooling and servicing agreement, GMAC will represent
and warrant to us, among other things, that:
- each secured note was originated to fund a portion of the purchase price
of the lease; has or will create a valid, binding and enforceable first
priority security interest in favor of GMAC in the lease which is
assignable by GMAC to us; contains customary and enforceable provisions
so as to render the rights and remedies of the holder of the secured note
adequate for realization against the collateral of the benefits of the
security; and will yield interest at the rate established in the secured
note;
- each lease represents the genuine, legal, valid and binding payment
obligation in writing of the lessee, enforceable by the holder in
accordance with terms of the lease, except as enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws
affecting the enforcement of creditors' rights in general and by equity,
regardless of whether the enforceability is considered in a proceeding in
equity or at law;
- no lease has been satisfied, subordinated, canceled, terminated or
rescinded;
- there has been no default, breach, violation or event permitting a lessor
to terminate under the terms of any related lease, and no event has
occurred and is continuing that with notice or the lapse of time or both
would constitute a default, breach, violation or event permitting the
lessor to terminate under the terms of any lease, and none of the dealer,
GMAC, as lease servicer or agent for COLT, has waived any of these
rights;
- each lessee is required to maintain physical damage and liability
insurance policies of the type that the agent requires in accordance with
its customary underwriting standards for the purchase of automotive
leases;
- no lease was originated in, or is subject to the laws of, any
jurisdiction the laws of which would make the sale, transfer and
assignment of that lease unlawful;
- each lease is underwritten in substantial conformance with underwriting
guidelines applied to similar leases originated for GMAC for its own
account and on behalf of the issuer of the secured notes;
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- the dealer selling each lease is located in the United States and each
lessee has a billing address located in the United States;
- each lease is a triple net lease that requires the lessee, or another
person other than the owner of the leased vehicle to pay all costs
relating to taxes, insurance and maintenance for the leased vehicle;
- each leased vehicle which secures a secured note is a new or used
automobile or light truck, provided that the number of used vehicles as
of any date of determination is no greater than 10% of the number of all
vehicles securing secured notes;
- no right of rescission, setoff, counterclaim or defense has been asserted
or threatened for any lease;
- there are, to the best of GMAC's knowledge, no liens or claims which have
been filed for work, labor or materials affecting any leased vehicle;
- all UCC and other filings and/or actions necessary in any jurisdiction to
give us and GMAC a first priority perfected ownership or security
interest, as the case may be, in the secured notes and in the leases and
leased vehicles have been made;
- there is only one original executed copy of each lease;
- the lowest lease rate of any lease is 0%; and
- each lease has a monthly payment that is due in the calendar month
following the calendar month in which it was purchased from the dealer.
In the secured note trust sale and servicing agreement, we will assign
these representations and warranties to the trust. We will also represent and
warrant to the trust that we have taken no action that would cause GMAC's
representations and warranties to be false in any material respect.
If any of the above representations and warranties for any secured note or
lease or leased vehicle that materially and adversely affects the interests of
the securityholders are breached, we will repurchase, or will enforce the
obligation of GMAC under the secured note pooling and servicing agreement to
repurchase, the secured note from the noteholder as of the last day of the
second collection period following the discovery of the breach unless we or GMAC
cure the breach in all material respects. The repurchase will be the sole remedy
for any breach. If this occurs, we will pay an amount equal to the remaining
unpaid principal balance of the secured note, together with all accrued and
unpaid interest on the secured note to the date of payment.
In each secured note trust sale and servicing agreement, the secured note
servicer will covenant that:
- it will not impair the rights of the noteholders; and
- it will not create or permit to exist any lien on any secured note that
arises from any act of the secured note servicer or for which the
servicer has any payment liability.
As of the last day of the second, or, if the secured note servicer so
elects, the first, month after discovery by the secured note servicer, the owner
trustee or the indenture trustee of a breach of any of the covenants set forth
above that materially and adversely affects any secured note, unless the breach
is cured in all material respects, the secured note servicer will, for each
affected secured note, pay an amount equal to the remaining unpaid principal
balance of the secured note, together with all accrued and unpaid interest on
the secured note to the date of payment, plus, as of the payment date, all
unpaid out-of-pocket expenses reasonably incurred in connection with the
collection of amounts due under the secured note. This
34
repurchase obligation constitutes the sole remedy available to the trust, the
indenture trustee, the owner trustee, the noteholders and the certificateholders
for any uncured breach.
In the lease origination agreement, GMAC, as agent for COLT, makes
representations and warranties as to the leases and leased vehicles acquired by
COLT. As of the second payment date following the discovery of any breach of
these representations and warranties that materially and adversely affects the
interests of the COLT certificateholders or noteholders, GMAC as agent for COLT
will purchase the lease and leased vehicle from COLT unless GMAC cures the
breach. This purchase will be the sole remedy available against GMAC, as agent
for COLT, for any breach. GMAC will pay an amount to purchase the lease and
leased vehicle equal to the total claim for that lease asset net of any
outstanding amounts advanced by the lease servicer. The total claim on a lease
asset equals the sum of:
- the stipulated market value of the lease asset;
- the unpaid amount of any monthly payment that is due and payable;
- all outstanding advances by the lease servicer on the lease asset;
- to the extent not included above, any accrued and unpaid (1) interest on
the secured note, (2) lease servicing fees, (3) termination value fees,
(4) the fixed rate swap payment to the swap provider for COLT and (5)
basic origination fees; and
- all unpaid out-of-pocket expenses reasonably incurred to collect amounts
due under the lease or to sell the leased vehicle.
The total claim on a lease asset advanced by GMAC as agent must defray all
the costs and expenses related to the lease asset, including fees of the lease
servicer, the termination value insurer and the agent as well as principal and
interest on the COLT certificates and the secured note.
In the lease servicing agreement, the lease servicer has made the following
covenants, among others:
- it will not release the interest of VAULT in any leased vehicle;
- it will not impair the rights of the COLT certificateholders or
noteholders; and
- it may, in accordance with its normal procedures for comparable
automotive leases that it services for itself or others, accept amended
performance of the lessee's obligations under the lease, provided that
the lease servicer makes advances on that lease and leased vehicle as
though it had not been modified.
As of the second payment date following discovery of a breach of any of
these covenants, the lease servicer will purchase from COLT any lease and leased
vehicle materially and adversely affected by a breach, unless the lease servicer
cures the breach in all material respects. The lease servicer's repurchase will
be the sole remedy for any breach. The lease servicer will pay an amount for the
repurchase of the lease and leased vehicle equal to the total claim for that
lease asset as described above. Under the lease trust sale and servicing
agreement, these payments of the total claim on lease assets will, in part,
provide collections on the secured notes.
Under each secured note trust sale and servicing agreement, GMAC will act
as custodian to maintain custody and control, as the trust's agent, of the
secured notes owned by that trust while in electronic form, and any other
documents relating to the secured notes. The secured
35
notes are intended to be issued in electronic form. However, if the secured
notes are issued in definitive form, COLT will agree that COLT will follow the
instructions of the indenture trustee as to the secured notes and will deliver
possession of any and all secured notes in definitive form to the indenture
trustee or to a custodian as the indenture trustee directs. Uniform Commercial
Code financing statements reflecting the sale and assignment of the secured
notes to the trust and the pledge of the secured notes by the trust to the
indenture trustee will be filed, and the servicer's accounting records and
computer files will reflect that sale and assignment.
ADDITIONAL SALES OF SECURED NOTES
In addition to secured notes that we buy from GMAC on a closing date as
described above in this subsection, we may also buy secured notes from GMAC to
transfer to a trust on one or more later dates for that trust under a separate
purchase agreement. We would buy those receivables on substantially the same
terms as under the pooling and servicing agreement for the initial closing. We
would then sell secured notes that we have bought from GMAC to a trustee, for
the benefit of one of the trusts, pursuant to a sale and servicing agreement. On
the initial closing date, the trust will apply the net proceeds received from
the sale of its notes and certificates to pay us for the secured notes that are
being sold to that trust, and, to the extent specified in the accompanying
prospectus supplement, to make a deposit in a additional funding account and
initial deposits in other trust accounts. If there is a additional funding
account, then we will buy additional secured notes from GMAC, and sell them to
the trust from time to time during a additional funding period, as described
further in the related prospectus supplement. If we receive a tax opinion
confirming the tax status of the trust, we may also sell additional secured
notes to a trust at a later closing date and, concurrently, with this sale,
execute and deliver additional notes and certificates of the trust to fund the
purchase of the additional secured notes.
ACCOUNTS
For each trust, the secured note servicer will establish and maintain the
following accounts:
- a collection account or accounts, in the name of the indenture trustee on
behalf of the noteholders and the certificateholders of that trust, into
which all payments made on or with respect to the secured notes owned by
that trust will be deposited;
- a note distribution account, in the name of the indenture trustee on
behalf of the related noteholders of that trust, in which amounts
released from the collection account and any reserve account or other
credit enhancement for payment to the noteholders will be deposited and
from which all distributions to the noteholders will be made;
- a certificate distribution account, in the name of the owner trustee on
behalf of the certificateholders of that trust, in which amounts released
from the collection account and any reserve account or other credit
enhancement for distribution to the certificateholders will be deposited
and from which all distributions to those certificateholders will be
made, and
- any other accounts to be established with respect to securities of the
trust will be described in the accompanying prospectus supplement.
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For any series of securities, funds in the collection account, the note
distribution account and any reserve account and other accounts designated in
the accompanying prospectus supplement will be invested as provided in the
secured note trust sale and servicing agreement in eligible investments.
Eligible investments are generally limited to investments acceptable to the
rating agencies then rating the notes and certificates. Except as described
below in this subsection or in the accompanying prospectus supplement, eligible
investments are limited to obligations or securities that mature no later than
the business day preceding the next distribution date or, in the case of the
note distribution account, the next payment date for the notes. To the extent
permitted by the rating agencies then rating the notes and certificates, funds
in any reserve account may be invested in notes that will not mature prior to
the next payment date for the notes. Except as otherwise specified in the
accompanying prospectus supplement, these notes will not be sold to meet any
shortfalls unless they are sold at a price equal to or greater than their unpaid
principal balance if, following the sale, the amount on deposit in the reserve
account would be less than the required reserve account balance. Thus, the
amount of cash in any reserve account at any time may be less than the required
balance of the reserve account. If the amount required to be withdrawn from any
reserve account to cover shortfalls in collections on the secured notes, as
provided in the accompanying prospectus supplement, exceeds the amount of cash
in the reserve account, a temporary shortfall in the amounts distributed to the
noteholders or certificateholders could result, which could, in turn, increase
the average life of the notes or the certificates. Except as otherwise specified
in the accompanying prospectus supplement, investment earnings on funds
deposited in the trust accounts, net of losses and investment expenses, will be
payable to the secured note servicer.
Each of the trust accounts must be either:
- a segregated account with an eligible institution; or
- a segregated trust account with the corporate trust department of a
depository institution organized under the laws of the United States of
America or any one of the states or the District of Columbia, or any
domestic branch of a foreign bank, having corporate trust powers and
acting as trustee for funds deposited in that account, so long as any of
the securities of the depository institution have a credit rating from
each rating agency then rating that institution in one of its generic
rating categories which signifies investment grade.
Eligible institution means, for a trust:
- the corporate trust department of the indenture trustee or the owner
trustee, as applicable, of that trust, or
- a depository institution organized under the laws of the United States of
America or any one of the states or the District of Columbia, or any
domestic branch of a foreign bank, (1) which has either a long-term
unsecured debt rating acceptable to the rating agencies then rating the
notes and certificates or a short-term unsecured debt rating or
certificate of deposit rating acceptable to those rating agencies and (2)
whose deposits are insured by the Federal Deposit Insurance Corporation
or any successor.
Any other accounts to be established for a trust will be described in the
accompanying prospectus supplement.
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SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Servicing of Secured Notes. For each trust, unless otherwise provided in
the related prospectus supplement, on each distribution date in a calendar
month, the servicer of the secured notes will receive a basic servicing fee for
the preceding month equal to one-twelfth of the basic servicing fee rate
specified in the accompanying prospectus supplement multiplied by the aggregate
principal balance of all secured notes held by that trust as of the first day of
that month. Unless otherwise specified in the accompanying prospectus
supplement, on each distribution date, the secured note servicer will also
receive for each trust an additional servicing amount equal to the lesser of (1)
the amount by which (A) the sum of the basic servicing fee for that distribution
date and all prior distribution dates exceeds (B) additional servicing amounts
paid to the secured note servicer on all prior distribution dates and (2) the
amount by which the amount on deposit in the reserve account on that
distribution date, after giving effect to all deposits, withdrawals and payments
affecting that reserve account other than the additional servicing amounts and
payments to us--exceeds the required reserve account balance. On each
distribution date, the secured note servicer will be paid the basic servicing
fee, any unpaid basic servicing fees from all prior distribution dates and the
additional servicing amount to the extent funds are available. Unless otherwise
provided in the prospectus supplement, all servicing fees for each month,
together with any portion of servicing fees that remains unpaid from prior
distribution dates, may be paid at the beginning of that month out of
collections for that month. In addition, unless otherwise provided in the
accompanying prospectus supplement, for each trust the servicer will be entitled
to retain any late fees, prepayment charges or certain similar fees and charges
collected during a month and any investment earnings on funds deposited in the
trust accounts during a month.
The foregoing amounts for each trust are intended to compensate the secured
note servicer for performing the functions of a third party servicer of secured
notes as an agent for their beneficial owner, including:
- collecting and posting all payments;
- investigating delinquencies;
- accounting for collections and furnishing monthly and annual statements
to us and any other person designated in the secured note trust sale and
servicing agreement regarding distributions;
- generating federal income tax information;
- giving, on a timely basis, any required notices or instructions to us or
the custodian; and
- performing the other duties specified in the secured note trust sale and
servicing agreement or in any other transaction document.
These amounts also will reimburse the secured note servicer for taxes, the
fees of the owner trustee and the indenture trustee, accounting fees, outside
auditor fees, data processing costs and other costs incurred in connection with
administering the pool of secured notes.
Servicing of Underlying Leases and Leased Vehicles. In addition to the
servicing of the pool of secured notes, GMAC also acts as servicer for the
leases and leased vehicles under a lease asset servicing agreement with COLT.
GMAC will agree under each secured note trust sale and servicing agreement that
we and the trust are third-party beneficiaries of the lease
38
asset servicing agreement and may enforce GMAC's obligations under the lease
asset servicing agreement as if we and the trust had been signatories to it.
Under the lease asset servicing agreement, GMAC will receive a monthly
basic servicing fee equal to one-twelfth of 1.75% of the then stipulated market
value of each lease asset. GMAC will also receive a supplemental servicing fee
in the form of all investment earnings and any late fees, prepayment charges and
other administrative fees and expenses or similar charges, and other proceeds
from terminated lease assets. On each distribution date, GMAC will receive the
basic servicing fee and the supplemental servicing fee out of collections from
the leases and leased vehicles.
GMAC will be entitled to receive all supplemental servicing fees when and
as paid without any obligation to COLT, the owner trustee or the owner of any
program account, and it will not have any obligation to deposit that amount in
any program account.
The lease servicing fees described above in this subsection are intended to
compensate GMAC for performing the function of a third-party servicer of leases
and leased vehicles, including:
- collection and posting of all payments;
- responding to inquiries of lessees;
- investigating delinquencies;
- sending payment coupons to lessees;
- reporting tax information to lessees;
- policing the vehicles;
- monitoring the status of insurance policies for the lessees and the
vehicles;
- accounting for collections and furnishing monthly and annual statements
regarding distributions; and
- performing the other duties specified in the lease asset servicing
agreement or in any other related document.
These amounts will also reimburse GMAC for its expenses incurred in
connection with it responsibilities under the lease servicing agreement and
other lease documents for taxes, the fees of various transaction parties
relating to the creation of the secured notes, accounting fees, outside auditor
fees, data processing costs and other costs incurred in connection with
administering the leases and the leased vehicles.
COLLECTIONS
For each trust, the secured note servicer will deposit all payments
received on the secured notes and all proceeds of these secured notes collected
during each calendar month into the collection account for that trust not later
than two business days after receipt. However, at any time that
(1) GMAC is the secured note servicer,
(2) there exists no servicer default and
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(3) either (A) the short-term unsecured debt of the secured note servicer
is rated at least "A-1" by Standard & Poor's and "P-1" by Moody's, or (B)
certain arrangements are made which are acceptable to the rating agencies,
the secured note servicer may retain those amounts until the next distribution
date. Pending deposit into the collection account, collections may be employed
by the secured note servicer at its own risk and for its own benefit and will
not be segregated from its own funds.
The lease servicer will retain any partial prepayment on a lease that it
receives prior to its scheduled payment date other than a prepayment in full
received in connection with early termination of a lease. The lease servicer
will include the partial prepayment in distributions to the related secured note
on the distribution date after the scheduled payment date for the lease for
which the partial payment was made.
To the extent the lease servicer retains partial prepayments as described
above in the immediately preceding paragraph and advances payments as described
below in the next subsection, on each distribution date each secured note will
receive a distribution that reflects either the payment that was due on the
lease in the previous month or payment in full of the remaining lease
obligation, which will result in the full prepayment of that secured note.
SERVICER ADVANCES
Secured Note Servicer Advances. The secured note servicer for each trust
will make an advance in the amount equal to any shortfalls of collections on the
secured notes as of the last day of each month, for each secured note other than
those which have been repurchased due to a breach of a representation, warranty
or covenant. The secured note servicer will deposit any advances on each
distribution date.
The secured note servicer will be obligated to make an advance on a secured
note only to the extent that (1) the secured note servicer, in its sole
discretion, has reasonably determined that that advance will be recoverable from
later collections or recoveries on that secured note, and (2) the lease servicer
has failed to make the advances required under the lease asset servicing
agreement as described below in this subsection.
Subject to the release of its claim for reimbursement, the secured note
servicer will be reimbursed for outstanding servicer advances for a secured note
from later payments received on that secured note. On any distribution date when
the secured note servicer determines that it will not recover any outstanding
servicer advances on any secured note from collections and recoveries on that
secured note, the trust will reimburse the secured note servicer from any
collections and recoveries from other secured notes held by the trust at the
time outstanding servicer advances were made.
Lease Servicer Advances. The lease servicer will make an advance under the
lease asset servicing agreement to cover shortfalls of collections on the leases
and leased vehicles.
As of the last day of each month, for each lease asset other than a lease
asset that has been repurchased due to a breach of a representation, warranty or
covenant, if there is a shortfall in the monthly payment on that lease asset,
after
- application of payments ahead on the lease assets applied in the current
month;
- allocation of amounts paid when the lessee pays less than the full amount
required or pays an amount to reimburse an outstanding advance; or
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- if the lease terminated or expired during the prior month and, as of the
end of that month, there is a shortfall in disposition proceeds received
that are needed to reduce the total claim on that lease asset to zero,
then the lease servicer will advance an amount equal to that shortfall or
remaining balance, as the case may be, plus, in the case of a remaining balance,
any unpaid interest. The lease servicer will deposit any advances on each
distribution date.
The lease servicer will be obligated to make an advance on a lease asset
only:
- to the extent that the lease servicer, in its sole discretion, has
reasonably determined that that advance will be recoverable from later
collections or recoveries on that lease asset or from the termination
value insurance or available amounts on deposit in the termination
reserve account; or
- the lease servicer has agreed to accept extended or modified performance
from the lessee.
Subject to the release of its claim for reimbursement, the trust will
reimburse the lease servicer for outstanding advances on a lease asset from the
following sources:
- later payments by or on behalf of the lessee on that lease asset;
- collections of disposition proceeds for that lease asset; and
- any other collections and recoveries, including any amounts that may be
collected from the dealer on that lease asset if that lease asset
terminates prior to its scheduled lease end date and the lease rate
exceeds the market lease purchase rate.
When the lease servicer determines that it will not recover any outstanding
advances on any lease asset from collections and recoveries on that lease asset,
the trust will reimburse the lease servicer from any collections and recoveries
from other lease assets securing the secured notes held by the same holder at
the time outstanding advances were made.
DISTRIBUTIONS
For each trust, beginning on the payment date or distribution date, as
applicable, specified in the accompanying prospectus supplement, distributions
of principal and interest or, where applicable, of principal or interest only on
the notes and distributions in respect of certificate balance and interest or,
where applicable, of certificate balance or interest only on the certificates
will be made by the indenture trustee or the owner trustee, as applicable, to
the noteholders and the certificateholders. The trustee will make distributions
to the noteholders and certificateholders of record on the record date. The
timing, calculation, allocation, order, source, priorities of and requirements
for all payments to each class of noteholders and all distributions to each
class of certificateholders will be set forth in the accompanying prospectus
supplement. The secured note value and the principal distributable amount will
be defined in the accompanying prospectus supplement.
For each trust, on each payment date and distribution date, collections on
the secured notes will be transferred from the collection account to the note
distribution account and the certificate distribution account for distribution
to noteholders and certificateholders as and to the extent described in the
accompanying prospectus supplement. Credit enhancement, such as a reserve
account, will be available to cover any shortfalls in the amount available for
distribution on that date to the extent specified in the accompanying prospectus
supplement.
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Distributions in respect of principal and certificate balance will be
subordinate to distributions in respect of interest, and distributions in
respect of the certificates will be subordinate to payments in respect of the
notes, as more fully described in the accompanying prospectus supplement.
CREDIT ENHANCEMENT
The amounts and types of credit enhancement arrangements and the provider
of those arrangements, if applicable, for each class of securities will be set
forth in the accompanying prospectus supplement. If and to the extent provided
in the accompanying prospectus supplement, credit enhancement may be in the form
of:
- subordination of one or more classes of securities;
- reserve or other cash collateral accounts;
- overcollateralization;
- letters of credit;
- credit or liquidity facilities;
- repurchase obligations; or
- third party insurance payments or other support, cash advances or
deposits or other arrangements, including interest rate or other swaps,
as may be described in the accompanying prospectus supplement or any
combination of two or more of the foregoing.
If specified in the applicable prospectus supplement, credit enhancement
for a series of securities may cover one or more other series of securities.
The presence of any reserve account and other forms of credit enhancement
is intended to enhance the likelihood of receipt by the noteholders and the
certificateholders of the full amount of principal or certificate balance, as
the case may be, and interest due and to decrease the likelihood that the
noteholders and the certificateholders will experience losses. Unless otherwise
specified in the accompanying prospectus supplement, the credit enhancement for
a class of securities will not provide protection against all risks of loss and
will not guarantee repayment of the entire principal balance or certificate
balance, as the case may be, and interest. If losses occur that exceed the
amount covered by any credit enhancement or that are not covered by any credit
enhancement, securityholders will bear their allocable share of deficiencies. In
addition, if a form of credit enhancement covers more than one series of
securities, securityholders of any of those series will be subject to the risk
that credit enhancement will be exhausted by the claims of securityholders of
other series.
Reserve Account. If provided in the accompanying prospectus supplement,
under the secured note trust sale and servicing agreement, we will establish for
a series a reserve account, as specified in the accompanying prospectus
supplement, which will be maintained with the indenture trustee for a specific
trust.
Unless otherwise provided in the accompanying prospectus supplement, the
reserve account will not be included in the property of the associated trust but
will be a segregated trust account held by the indenture trustee for the benefit
of noteholders and certificateholders. Unless otherwise provided in the
accompanying prospectus supplement, we will fund
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the reserve account with an initial deposit on the closing date in the amount
set forth in the accompanying prospectus supplement. To the extent, if any,
described in the accompanying prospectus supplement, the amount on deposit in
the reserve account will be increased on each distribution date after the
closing date up to the required reserve account balance described in the
accompanying prospectus supplement by depositing the amount of collections on
the secured notes owned by that trust remaining on each distribution date after
the payment of the total servicing fee payable to the secured note servicer and
the distributions and allocations to the noteholders and the certificateholders
required on that date. Unless otherwise provided in the accompanying prospectus
supplement or agreed by us, amounts on deposit in the reserve account after
payments to noteholders, certificateholders and the secured note servicer may be
paid to us to the extent that those amounts exceed the required reserve account
balance. Upon any distribution to us of amounts from the reserve account,
neither the noteholders nor the certificateholders will have any rights in, or
claims to, those amounts.
Termination Reserve Account. COLT has established a termination reserve
account, which has been established for the benefit of all secured note holders
and which provides credit enhancement for all the pools of secured notes
financing the lease assets. The termination reserve account provides protection
to the holders of the secured notes if the total proceeds received after
termination of a lease are insufficient to pay in full the principal amount of,
and accrued and unpaid interest on, the secured note related to that lease.
Termination occurs on any lease asset when the lease servicer reasonably
determines that it has received all amounts that it will be able to collect on
that lease asset, other than from the termination reserve account and the
termination value insurer. In order to determine the amounts to be deposited in
or withdrawn from the termination reserve account, the lease servicer determines
on a monthly basis the total proceeds received on each lease and leased vehicle
that is a terminating lease asset, which consist of:
- for each lease for which termination occurred in a prior month, all
amounts received for that lease and leased vehicle prior to or during the
month in which lease termination occurred to the extent not applied in a
previous month, including all insurance proceeds, all monthly payments
and all disposition proceeds for that lease and leased vehicle; and
- for each lease for which termination occurred in any of the three months
prior to the prior month, all amounts received for that lease and leased
vehicle during the prior month.
Total proceeds do not include any excess proceeds when a lease is prepaid
early and any amounts payable to the lessee and/or any other person as required
by law.
The lease servicer then determines on a lease-by-lease basis the amount by
which the total amounts outstanding for a lease and leased vehicle, which
includes the principal amount plus accrued and unpaid interest on the secured
note related to that lease, either exceeds the total proceeds for that lease and
leased vehicle or is less than the total proceeds for that lease and leased
vehicle. The lease servicer then calculates for all the leases in each pool of
secured notes the total amount of this excess or deficiency for that pool of
leases. Any excess from a pool of leases securing a pool of secured notes is
either transferred by the lease servicer to the termination reserve account or
used by the lease servicer to pay unpaid fees owing to the insurer under the
termination value insurance as described in a prospectus supplement. If there is
a deficiency in any pool of leases securing a pool of secured notes, the lease
servicer applies funds in the termination reserve account proportionately to all
the pools with
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deficiencies. In this way, any excesses in any pool of leases securing a pool of
secured notes are available to cover any deficiencies in any other pool of
leases securing a pool of secured notes.
If there are insufficient funds in the termination reserve account to pay
all deficiencies in each pool of leases securing a pool of secured notes, the
lease servicer calculates the amount of this deficiency on a lease-by-lease
basis after the allocations described above in this subsection. Subject to the
limitations of the termination value insurance described in the accompanying
prospectus supplement, the lease servicer will then turn to the termination
value insurer to obtain payment of the remaining deficiency.
Termination Value Insurance. A termination value insurer or insurers will
provide termination value insurance for all secured notes and certificates
issued by COLT. The identity of the termination value insurer and the terms of,
and risks associated with, the termination value insurance for a pool of secured
notes will be described in the accompanying prospectus supplement.
NET DEPOSITS
As an administrative convenience during months when the secured note
servicer is permitted to hold payments on secured notes until the next
distribution date, the secured note servicer may also deposit collections, and
any payments received upon the repurchase of any secured note, for any trust for
that month net of distributions to be made to the secured note servicer for that
trust for that month. The secured note servicer, however, will account to the
indenture trustee, the owner trustee, the noteholders and the certificateholders
of each trust as if all deposits, distributions and transfers were made
individually. In addition, in connection with any trust at any time that the
secured note servicer is not required to remit collections on a daily basis, the
secured note servicer may retain collections allocable to the notes or the note
distribution account until the next payment date, and pending deposit into the
collection account or the note distribution account, these collections may be
employed by the secured note servicer at its own risk and for its own benefit
and will not be segregated from its own funds. On each payment date, we, the
secured note servicer, the indenture trustee and the owner trustee will make all
distributions, deposits and other remittances for the notes or the note
distribution account of a trust for the periods since the previous distribution
was to have been made. If payment dates do not coincide with distribution dates,
all distributions, deposits or other remittances made on a payment date will be
treated as having been distributed, deposited or remitted on the distribution
date for the applicable month for purposes of determining other amounts required
to be distributed, deposited or otherwise remitted on that distribution date.
STATEMENTS TO TRUSTEES AND TRUST
Prior to each payment date and distribution date, for each trust the
secured note servicer will provide to the indenture trustee and the owner
trustee as of the close of business on the last day of the preceding month a
statement setting forth substantially the same information as is required to be
provided in the periodic reports provided to securityholders on the date
described under "Book-Entry Registration; Reports to Securityholders--Reports to
Securityholders" in this prospectus.
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EVIDENCE AS TO COMPLIANCE
Each secured note trust sale and servicing agreement will provide that a
firm of independent public accountants will furnish to the owner trustee and the
indenture trustee on or before August 15 of each year, beginning the first
August 15 which is at least twelve months after the closing date, a statement as
to compliance by the secured note servicer during the preceding twelve months
ended June 30, or, in the case of the first such certificate, the period from
the closing date to the June 30 of that year, with certain standards relating to
the servicing of the secured notes, the secured note servicer's accounting
records and computer files for the secured notes and certain other matters.
Each secured note trust sale and servicing agreement will also provide for
delivery to the owner trustee and the indenture trustee, on or before August 15
of each year, beginning the first August 15 which is at least twelve months
after the closing date, of a certificate signed by an officer of the secured
note servicer stating that the secured note servicer has fulfilled its
obligations under the secured note trust sale and servicing agreement and the
secured note pooling and servicing agreement throughout the preceding twelve
months ended June 30, or in the case of the first certificate, the period from
the closing date to June 30 of that year, or, if there has been a default in the
fulfillment of any obligation, describing each default. The certificate may be
provided as a single certificate making the required statements as to more than
one secured note trust sale and servicing agreement.
Copies of these statements and certificates may be obtained by
securityholders by a request in writing addressed to the applicable indenture
trustee or owner trustee.
In each secured note trust sale and servicing agreement, we will agree to
give the indenture trustee and the owner trustee notice of any event which with
the giving of notice or the lapse of time, or both, would become a default by
the secured note servicer. In addition, we will agree to give the indenture
trustee, the owner trustee and the trust notice of certain covenant breaches
which with the giving of notice or lapse of time, or both, would constitute a
default by the secured note servicer.
MATTERS REGARDING THE SECURED NOTE SERVICER
Each secured note trust sale and servicing agreement will provide that GMAC
may not resign from its obligations and duties as secured note servicer
thereunder and under the secured note pooling and servicing agreement, except
upon determination that GMAC's performance of those duties is no longer
permissible under applicable law. That resignation will not become effective
until the indenture trustee or a successor secured note servicer has assumed
GMAC's servicing obligations and duties under the transfer and servicing
agreements.
Each secured note trust sale and servicing agreement will further provide
that, except as specifically provided otherwise, neither the secured note
servicer nor any of its directors, officers, employees and agents will be under
any liability to the trust or the noteholders or certificateholders of that
trust for taking any action or for refraining from taking any action under the
transfer and servicing agreements or the indenture for that trust or for errors
in judgment. Neither the secured note servicer nor any of the other persons
named in the immediately preceding sentence will be protected against any
liability that would otherwise be imposed by reason of wilful misfeasance, bad
faith or negligence, except errors in judgment, in the performance of the
secured note servicer's duties thereunder or by reason of reckless disregard of
its obligations and duties thereunder. Each secured note trust sale and
servicing
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agreement will further provide that the secured note servicer and its directors,
officers, employees and agents will be reimbursed by the indenture trustee or
the owner trustee for any contractual damages, liability or expense incurred by
reason of that trustee's wilful misfeasance, bad faith or negligence, except
errors in judgment, in the performance of that trustee's duties thereunder or by
reason of reckless disregard of its obligations and duties thereunder or under
the trust agreement or the indenture. In addition, each secured note trust sale
and servicing agreement will provide that the secured note servicer is under no
obligation to appear in, prosecute or defend any legal action that is not
incidental to the secured note servicer's servicing responsibilities under the
transfer and servicing agreements and that, in its opinion, may cause it to
incur any expense or liability. The secured note servicer may, however,
undertake any reasonable action that it may deem necessary or desirable in
respect of the transfer and servicing agreements and the rights and duties of
the parties and the interests of the noteholders and the certificateholders
under the agreements. In that event, the legal expenses and costs of that action
and any liability resulting therefrom will be expenses, costs and liabilities of
the trust, and the secured note servicer will be entitled to be reimbursed out
of the collection account for that trust. Any indemnification or reimbursement
will reduce the amount otherwise available for distribution to the noteholders
and the certificateholders.
Under the circumstances specified in each secured note trust sale and
servicing agreement, any entity into which the secured note servicer may be
merged or consolidated, or any entity resulting from any merger or consolidation
to which the secured note servicer is a party, or any entity succeeding to the
business of the secured note servicer or, for its obligations as secured note
servicer, any entity 50% or more of the voting interests of which are owned,
directly or indirectly, by General Motors, which entity in each of the foregoing
cases assumes the obligations of the secured note servicer under the secured
note trust sale and servicing agreement and the secured note pooling and
servicing agreement, will be the successor of the secured note servicer under
that secured note trust sale and servicing agreement and the secured note
pooling and servicing agreement. So long as GMAC acts as secured note servicer,
the servicer may at any time subcontract any duties as secured note servicer
under any secured note trust sale and servicing agreement and the secured note
pooling and servicing agreement to any entity in which more than 50% of the
voting interests are owned, directly or indirectly, by General Motors or to any
entity that agrees to conduct those duties in accordance with the secured note
servicer's servicing guidelines and the secured note trust sale and servicing
agreement. The secured note servicer may at any time perform specific duties as
secured note servicer through subcontractors who are in the business of
servicing secured notes similar to the secured notes, provided that delegation
will not relieve the secured note servicer of its responsibility for those
duties.
SECURED NOTE SERVICER DEFAULT
Except as otherwise provided in the accompanying prospectus supplement, a
default by the secured note servicer under each secured note trust sale and
servicing agreement will consist of:
- any failure by the secured note servicer to make any required
distribution, payment, transfer or deposit or to direct the indenture
trustee to make any required distribution, which failure continues
unremedied for five business days after written notice from the indenture
trustee or the owner trustee is received by the servicer or after
discovery of that failure by an officer of the secured note servicer;
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- any failure by the secured note servicer to observe or perform in any
material respect any other covenant or agreement in the secured note
trust sale and servicing agreement, the secured note pooling and
servicing agreement, the trust agreement or the indenture, which failure
materially and adversely affects the rights of the noteholders or the
certificateholders and which continues unremedied for 90 days after the
giving of written notice of that failure to the secured note servicer by
the indenture trustee or the owner trustee or to the secured note
servicer, the indenture trustee and the owner trustee by holders of notes
or certificates, as applicable, evidencing not less than 25% in principal
amount of those outstanding notes or of the certificate balance or after
discovery of that failure by an officer of the secured note servicer;
- any representation, warranty or certification made by the secured note
servicer in the secured note trust sale and servicing agreement or in any
certificate delivered pursuant thereto proves to have been incorrect when
made and which has a material adverse effect on the rights of the
securityholders and which effect continues unremedied for a period of 60
days after the giving of written notice of it to the secured note
servicer by the indenture trustee or the owner trustee; or
- certain events of bankruptcy, insolvency or receivership of the secured
note servicer by the secured note servicer indicating its insolvency,
reorganization under bankruptcy proceedings, or inability to pay its
obligations.
Notwithstanding the foregoing, there will be no default by the secured note
servicer where the default would otherwise exist under the first item above for
a period of ten business days or under the second or third items for a period of
60 days if the delay or failure giving rise to the default was caused by an act
of God or other similar occurrence. Upon the occurrence of any of those events,
the secured note servicer will not be relieved from using its best efforts to
perform its obligations in a timely manner in accordance with the terms of the
secured note pooling and servicing agreement and the secured note trust sale and
servicing agreement and the secured note servicer will provide us, the indenture
trustee, the owner trustee, and the securityholders prompt notice of that
failure or delay by it, together with a description of its efforts to so perform
its obligations.
RIGHTS UPON SECURED NOTE SERVICER DEFAULT
As long as a default by the secured note servicer under a secured note
trust sale and servicing agreement remains unremedied, the indenture trustee or
holders of notes evidencing not less than a majority in principal amount of the
then outstanding notes or, if the notes have been paid in full and the indenture
has been discharged with respect thereto, the owner trustee or the holders of
certificates evidencing not less than a majority of the aggregate outstanding
certificate balance of all certificates other than certificates owned by us, the
trust, GMAC or any of our or their affiliates, may terminate all the rights and
obligations of the secured note servicer under the secured note trust sale and
servicing agreement and the secured note pooling and servicing agreement, at
which time the indenture trustee will succeed to all the responsibilities,
duties and liabilities of the secured note servicer under those agreements and
will be entitled to similar compensation arrangements. If, however, a bankruptcy
trustee or similar official has been appointed for the secured note servicer,
and no default by the secured note servicer other than that appointment has
occurred, the bankruptcy trustee or official may have the power to prevent the
indenture trustee or the noteholders from effecting a transfer of servicing. If
the indenture trustee is unwilling to so act, it may, and if it is unable to so
act, it will appoint, or petition a court of competent jurisdiction for the
appointment of, a successor
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with a net worth of at least $100,000,000 and whose regular business includes
the servicing of automotive loans or leases and which satisfies the other
criteria set forth in the secured note trust sale and servicing agreement. The
indenture trustee may make those arrangements for compensation to be paid, which
in no event may be greater than the servicing compensation to the secured note
servicer under the secured note trust sale and servicing agreement.
WAIVER OF PAST DEFAULTS
For each trust, the holders of notes evidencing at least a majority in
principal amount of the then outstanding notes issued by the trust or, if all of
the notes have been paid in full, holders of the certificates issued by that
trust whose certificates evidence not less than a majority of the outstanding
certificate balance may, on behalf of all those noteholders and
certificateholders, waive any default by the secured note servicer in the
performance of its obligations under the secured note pooling and servicing
agreement and the secured note trust sale and servicing agreement and its
consequences, except a default by the secured note servicer in making any
required deposits to or payments from any of the trust accounts or the
certificate distribution account in accordance with the secured note trust sale
and servicing agreement. That waiver will not impair those noteholders' or
certificateholders' rights for subsequent defaults.
AMENDMENT
For each trust, each of the secured note pooling and servicing agreement,
secured note trust sale and servicing agreement, and trust agreement may be
amended by the parties to the agreements without the consent of the noteholders
or certificateholders of that trust:
- to cure any ambiguity;
- to correct or supplement any provision in that agreement that may be
defective or inconsistent with any other provision in the agreement or in
any other related agreement;
- to add or supplement any credit, liquidity or other enhancement
arrangement for the benefit of noteholders or certificateholders of that
trust, provided that if the addition affects any class of noteholders or
certificateholders differently than any other class of noteholders or
certificateholders, then that addition will not, as evidenced by an
opinion of counsel, adversely affect in any material respect the
interests of any class of noteholders or certificateholders;
- to add to our covenants, restrictions or obligations or those of the
secured note servicer, the owner trustee or the indenture trustee; or
- to add, change or eliminate any other provisions of any of these
agreements in any manner that will not, as evidenced by an opinion of
counsel, adversely affect in any material respect the interests of the
noteholders or the certificateholders of that trust.
Each of these agreements may also be amended by the parties with the
consent of the holders of at least a majority in principal amount of the then
outstanding notes and the holders of the certificates evidencing at least a
majority of the certificate balance for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of the agreement
or of modifying in any manner the rights of the noteholders or
certificateholders.
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No amendment may:
- increase or reduce in any manner the amount of, or accelerate or delay
the timing of, distributions of payments that are required to be made on,
or change any interest rate, any pass through rate or the required
reserve account balance of, to any note or certificate without the
consent of the holder;
- adversely affect the rating of any series by any rating agency then
rating the notes or certificates without the consent of two-thirds of the
principal amount of the outstanding notes or the voting interests of the
outstanding certificates, as appropriate, of that series; or
- reduce the stated percentage required of noteholders or
certificateholders to consent to any of the amendments set forth above
without the consent of all of the noteholders or certificateholders, as
the case may be.
INSOLVENCY EVENTS
Each trust agreement will provide that the owner trustee does not have the
power to commence a voluntary proceeding in bankruptcy relating to the trust
without the unanimous prior approval of all certificateholders, including us.
Under no circumstance will the owner trustee commence any bankruptcy proceeding
prior to the date that is one year and one day after the termination of the
trust. In the secured note trust sale and servicing agreement for each trust, we
and the secured note servicer will agree that we will not, for a period of one
year and one day after the final distribution on the notes and certificates
issued by that trust, institute against that trust any bankruptcy,
reorganization or other proceeding under any federal or state bankruptcy or
similar law.
CERTIFICATEHOLDER LIABILITY; INDEMNIFICATION
Under each trust agreement, certificateholders will be entitled to the same
limitation of personal liability extended to stockholders of for profit
corporations under the Delaware General Corporation Law.
Each secured note trust sale and servicing agreement will provide that the
secured note servicer will indemnify the indenture trustee and the owner trustee
from and against any loss, liability, expense, damage or cost arising out of or
incurred in connection with the acceptance or performance of its duties under
the transaction documents, including any judgment, award, settlement, reasonable
attorneys' fees and other costs or expenses incurred in connection with the
defense of any actual or threatened action, proceeding or claim. Neither the
indenture trustee nor owner trustee will be so indemnified if those acts or
omissions or alleged acts or omissions constitute willful misfeasance bad faith
or negligence by the indenture trustee or the owner trustee, as applicable. In
addition, the secured note servicer will indemnify the trust, the indenture
trustee, the owner trustee, the noteholders and the certificateholders against
losses arising out of the negligence, willful misfeasance or bad faith of the
servicer in the performance of its duties under the transaction documents or by
reason of its reckless disregard of its obligations and duties set forth in the
agreements. The secured note servicer will also indemnify those parties against
any taxes that may be asserted against them for the transactions contemplated in
the secured note trust sale and servicing agreement, other than taxes for the
sale of secured notes or securities, the ownership of secured notes or the
receipt of payments on securities or other compensation.
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TERMINATION
Each trust will terminate upon the final distribution by the indenture
trustee and the owner trustee of all monies and other property of the trust in
accordance with the terms of the trust agreement, the indenture and the secured
note trust sale and servicing agreement, including in the case of the exercise
by the secured note servicer of its repurchase option described below in the
following paragraph. Upon termination of the trust and payment or deposit of all
amounts to be paid to the securityholders, any remaining assets of the trust and
any amounts remaining on deposit in the reserve account for that trust will be
paid to us.
Unless otherwise provided in the accompanying prospectus supplement, in
order to avoid excessive administrative expense, the secured note servicer, or
its successor, will be permitted at its option to purchase from each trust, as
of the last day of any month, if the then outstanding aggregate principal
balance of the secured notes held by the trust is 10% or less of the initial
aggregate principal balance of secured notes, all remaining secured notes and
other trust assets at a price equal to the aggregate principal amount
outstanding on those secured notes, plus accrued and unpaid interest on the
secured notes to the date of that payment, plus the appraised value of any other
property held as part of the trust. This amount will in no event be less than
the sum of the outstanding notes and certificates plus accrued and unpaid
interest on them. As further described in the accompanying prospectus
supplement, any outstanding notes will be redeemed at the same time. Then, the
distribution to the certificateholders of all amounts required to be distributed
to them under the trust agreement will effect early retirement of the
certificates. The indenture trustee will give written notice of redemption to
each noteholder of record and the owner trustee will give written notice of
termination to each certificateholder of record. The final distribution to any
noteholder or certificateholder will be made only upon surrender and
cancellation of the noteholder's note at an office or agency of the indenture
trustee specified in the notice of redemption or the certificateholder's
certificate at an office or agency of the owner trustee specified in the notice
of termination.
ADMINISTRATION AGREEMENT
GMAC, in its capacity as administrator, will enter into an administration
agreement with each trust and the indenture trustee for that trust under which
the administrator will agree, to the extent provided in the administration
agreement, to provide the notices and to perform other administrative
obligations required by the indenture for that trust. For each trust, unless
otherwise specified in the prospectus supplement, as compensation for the
performance of the administrator's obligations under the administration
agreement and as reimbursement for its related expenses, the administrator will
be entitled to an administration fee in an amount equal to $1,500 per month. The
servicer will pay the administration fee.
LEGAL ASPECTS OF THE SECURED NOTES AND
THE LEASES SECURING THE SECURED NOTES
INSOLVENCY RELATED MATTERS
Although no assurance can be given, we believe that in the unlikely event
of a bankruptcy of GMAC, the secured notes would not be treated as part of
GMAC's bankruptcy estate. In addition, we have taken steps in structuring the
transactions contemplated in this prospectus that are intended to make it
unlikely that the voluntary or involuntary application for relief by
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GMAC under any insolvency laws will result in consolidation of our assets and
liabilities, those of VAULT, the owner of the leases and leased vehicles
securing the secured notes or the trust with those of GMAC. Delays and possible
reductions in payments on the notes and certificates could occur if:
- a court concluded that our assets and liabilities, or those of COLT, the
beneficial owner of the leases and leased vehicles securing the secured
notes, or the trust should be consolidated with those of GMAC in the
event of the application of applicable insolvency laws to GMAC;
- a filing were made under any insolvency law by or against us, VAULT, the
owner of the leases and leased vehicles securing the secured notes, or
the trust; or
- an attempt were made to litigate any of the foregoing issues.
Any perfected security interest of the indenture trustee in all or part of
the property of the trust could be subordinate to claims of any trustee in
bankruptcy or debtor-in-possession in the event of our bankruptcy prior to any
perfection of the transfer of the assets transferred by us to the trust under
the secured note trust sale and servicing agreement.
SECURITY INTEREST IN SECURED NOTES AND LEASES AND LEASED VEHICLES THAT SECURE
THE SECURED NOTES
For each trust, the indenture trustee will be the holder of a first
priority security interest in the secured notes for the benefit of the holders
of the notes and, to the extent provided in the indenture, the certificates.
Each secured note is secured by a first priority security interest in the
underlying lease and leased vehicle, running to the benefit of the holder of the
secured note. The parties to the transaction will take the following steps to
effect the perfection of these security interests.
Security Interests in the Secured Notes. The secured notes are issued by
COLT to GMAC in electronic form only, as an administrative convenience, and,
unless otherwise provided in a prospectus supplement, will not exist in
definitive form. Although it is not anticipated that the secured notes will ever
be in definitive form, COLT is obligated to deliver secured notes in definitive
form upon the request of the holder of the secured notes, including the
indenture trustee. Until secured notes are released from the lien of the
indenture, COLT will agree to deliver secured notes in definitive form only upon
the direction of the indenture trustee. The indenture trustee will perfect its
security interest in the secured notes assuming that they may be either in
electronic or definitive form and, under the UCC, considered to be "chattel
paper," "uncertificated or certificated securities," "instruments," "accounts"
or "general intangibles."
We will perfect our ownership interest in the secured notes by GMAC's sale
of the secured notes to us and by COLT's consent and acknowledgment to us that
it recognizes us as the purchaser of the secured notes. We will also perfect our
interest by filing a UCC-1 financing statement with the appropriate state
authorities in the jurisdictions in which the principal places of business of
GMAC are located, Michigan and New York.
The trust will perfect its ownership/security interest in the secured notes
by our transfer of the secured notes to the trust and by COLT's consent and
acknowledgment to the trust that it recognizes the trust as the transferee of
the secured notes. The trust will also perfect its interest by filing a UCC-1
financing statement with the appropriate state authorities in the
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jurisdictions in which our principal places of business are located, Delaware,
Michigan and New York.
The indenture trustee will perfect its security interest in the secured
notes by filing a UCC-1 financing statement with the appropriate state
authorities in the jurisdiction in which the principal place of business of the
trust is located--in this case Delaware. The indenture trustee will also perfect
its security interest by having control of the secured notes. The indenture
trustee obtains control through an agreement with COLT under which COLT will
consent to and acknowledge the granting of the first priority security interest
in the secured notes to the indenture trustee. COLT will also agree that, if
definitive secured notes are issued, COLT will follow the instructions of the
indenture trustee as to the secured notes and will deliver possession of the
secured notes to the indenture trustee or to a custodian as the indenture
trustee directs. In addition, this grant will be reflected on COLT's books and
records. By taking these steps, the secured notes will have been effectively
transferred to the indenture trustee and the indenture trustee will have
perfected its security interest in the secured notes if the transfer of the
secured notes is considered the transfer or sale of an interest in chattel
paper, uncertificated or certificated securities or instruments, or the transfer
of an interest in general intangibles, under the UCC. If the transfer of the
secured notes from GMAC to us is considered the sale of a general intangible,
UCC perfection requirements would not govern that transfer. However, the sale of
an interest in general intangibles under New York [, Michigan and Delaware]
common law will not require that any other action be taken to transfer a
perfected ownership interest in the secured notes.
Under the UCC, a successor holder of secured debt will maintain the
original holder's valid lien on the collateral securing that debt. Therefore, to
the extent that GMAC has a valid lien on the underlying leases and leased
vehicles securing the secured notes, the indenture trustee, as pledgee and
successor holder of the debt evidenced by the secured notes, will maintain
GMAC's lien on this collateral.
GMAC's security interest in the leases and leased vehicles securing the
secured notes will, moreover, be assigned and transferred by GMAC to us, by us
to the trust, and by the trust to the indenture trustee at the same time as the
interests in the secured notes owned by that trust are transferred. As a
precautionary step, the UCC-1 financing statements referred to in the second
through fourth paragraphs of this section will include GMAC's lien as additional
collateral covered by these financing statements.
Security Interest in the Leases Securing the Secured Notes. Under the UCC,
the leases securing the secured notes are chattel paper. GMAC as lienholder
perfects its security interest in the leases both by filing a UCC-1 financing
statement against COLT in Delaware, the jurisdiction in which COLT's principal
place of business is located, as well as in the states where COLT leases
vehicles, and by taking possession of the leases.
Security Interest in the Leased Vehicles Securing the Secured Notes. Legal
title to the leased vehicles securing the secured notes is held by VAULT, as
nominee for COLT. As COLT's nominee, VAULT consents to COLT's grant of a
security interest in the leased vehicles. Under the UCC, the filing of a
financial statement is not required to perfect a security interest in property
subject to certificate of title statutes covering automobiles, unless the
automobiles are considered to be inventory held for sale by a debtor who is in
the business of selling goods of that kind. Since it is unclear whether or not
COLT is in the business of selling automobiles, GMAC as lienholder perfects its
security interest in the leased vehicles, by being designated as the first
lienholder on each vehicle certificate of title. GMAC also perfects its security
interest in the leased vehicles by filing against VAULT in the jurisdictions
52
in which the principal places of business of VAULT are located, Delaware, New
York and Michigan, and against COLT in Delaware, the jurisdiction in which
COLT's principal place of business is located, as well as in the states where
COLT leases vehicles.
Limitations on Indenture Trustee's Lien. Various liens could be imposed
upon the leased vehicles, that, by operation of law, would take priority over
GMAC's and therefore, the indenture trustee's interest in these assets. These
liens could include mechanics', repairmen's and garagemen's liens and certain
liens for personal property taxes, in each case arising on a particular leased
vehicle. In addition, the laws of certain states and federal law permit
governmental authorities to confiscate vehicles under certain circumstances if
they are used in unlawful activities, which may result in the loss of a secured
party's perfected security interest in the confiscated vehicle. These liens, or
the confiscation of a leased vehicle, could arise at any time during the term of
the lease, and without notice being given to the owner trustee, the indenture
trustee, the noteholders or certificateholders.
In addition, any perfected security interest of the indenture trustee in
all or part of the property of the trust could be subordinate to claims of any
trustee in bankruptcy or debtor in possession in the event of a bankruptcy of
GMAC or us prior to any perfection of the transfer of the assets transferred by
us to the trust under the secured note trust sale and servicing agreement.
REPOSSESSION OF LEASED VEHICLES SECURING THE SECURED NOTES
In the event that a default by a lessee of a leased vehicle securing a
secured note has not been cured within a certain period of time after notice,
the lease servicer will ordinarily retake possession of that leased vehicle.
Some jurisdictions require that the lessee be notified of the default and be
given a time period within which to cure the default prior to repossession.
Generally, this right to cure may be exercised on a limited number of occasions
in any one-year period. In these jurisdictions, if the lessee objects or raises
a defense to repossession, an order must be obtained from the appropriate state
court, and the vehicle must then be repossessed in accordance with that order.
Other jurisdictions permit repossession without notice to the lessee, but only
if the repossession can be accomplished peacefully. If a breach of the peace
cannot be avoided, judicial action is required, and the lessor typically must
seek a writ of possession or replevin in a state court action or pursue other
judicial action to repossess that leased vehicle.
After the lease servicer has repossessed a leased vehicle, it may provide
the lessee with a period of time within which to cure the default under the
lease. If by the end of that period the default has not been cured, the lease
servicer will attempt to sell the leased vehicle. As a result of those delays,
the net charged-off vehicle proceeds may be less than the remaining amounts due
under the lease at the time of default by the lessee.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of sale of the leased vehicles generally will be applied first
to the expenses of the sale and repossession and then to the satisfaction of
amounts due under the lease. While some states impose prohibitions or
limitations on deficiency judgments if the net proceeds from sale do not cover
the full amount of amounts due under the lease, a deficiency judgment can be
sought in those states that do not prohibit directly or limit those judgments.
In some states, however, including California, a lessee may be allowed an
offsetting recovery for any amount not recovered at sale because the terms of
the sale were not commercially reasonable. In any event, the deficiency judgment
would be a personal judgment against the lessee for the
53
shortfall, and a defaulting lessee might have little capital or sources of
income available following repossession. Therefore, in many cases, it may not be
useful to seek a deficiency judgment. Because it is a personal judgment against
a lessee who may have few if any assets remaining after the repossession, even
if one is obtained, it may be settled at a significant discount or it may be
impossible to collect all or any portion of it.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon lessors and servicers involved in consumer
leasing. The federal Consumer Leasing Act of 1976 and Regulation M, issued by
the Board of Governors of the Federal Reserve System, for example, require that
a number of disclosures be made at the time a vehicle is leased, including,
among other things, all amounts due at the time of origination of the lease, a
description of the lessee's liability at the end of the lease term, the amount
of any periodic payments, the circumstances under which the lessee may terminate
the lease prior to the end of the lease term and the capitalized cost of the
vehicle and a warning regarding possible charges for early termination. All
States have adopted Article 2A of the Uniform Commercial Code, which provides
protection to lessees through certain implied warranties and the right to cancel
a lease contract relating to defective goods. Courts have applied general
equitable principles in litigation relating to repossession and deficiency
balances. These equitable principles may have the effect of relieving a lessee
from some or all of the legal consequences of a default.
In several cases, consumers have asserted that the self-help remedies of
lessors violate the due process protection provided under the Fourteenth
Amendment to the Constitution of the United States. Courts have generally found
that repossession and resale by the creditor do not involve sufficient state
action to afford constitutional protection to consumers.
Several states have adopted so-called "Lemon Laws" providing redress to
consumers who purchase or lease a vehicle which remains out of conformance with
its manufacturer's warranty after a specified number of attempts to correct a
problem or after a specific time period. A successful claim under a Lemon Law
could result in, among other things, the termination of the lease and/or the
refunding to the lessee of some portion of the payments paid by them.
Under each secured note pooling and servicing agreement, GMAC will
represent to us that each lease complies with all requirements of law in all
material respects. We will assign that representation, among others, to the
trust under each secured note trust sale and servicing agreement. Accordingly,
if a lessee has a claim against the trust for violation of any law and that
claim materially and adversely affects the trust's interest in a secured note,
this violation may create an obligation to repurchase the secured note unless
the breach is cured in all material respects.
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a secured party
to enforce its rights under an automobile or light truck lease. For example, if
a lessee commences a bankruptcy proceedings, the lessor's receipt of related
payments due under the lease is likely to be delayed. In addition, a lessee who
commences bankruptcy proceedings might be able to assign the lease to another
party even though the lease prohibits assignment.
54
FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the material federal income tax consequences of
the purchase, ownership and disposition of the notes and the certificates of any
series, to the extent it relates to matters of law or legal conclusions with
respect thereto, represents the opinion of Mayer, Brown & Platt, special tax
counsel to the seller, with respect to the related series on the material
matters associated with such consequences, subject to the qualifications set
forth in this prospectus and the accompanying prospectus supplement. This
summary is based upon current provisions of the Internal Revenue Code of 1986,
existing and proposed Treasury Regulations under the Code and published rulings
and court decisions. There are no cases or Internal Revenue Service rulings on
similar transactions involving both debt and equity interests issued by a trust
with terms similar to those of the notes and certificates. As a result, there
can be no assurance that the IRS will not challenge the conclusions reached in
this summary, and no ruling from the IRS has been or will be sought on any of
the issues discussed below. Furthermore, the current tax laws and the current
regulations, rulings and court decisions may be changed, possibly retroactively.
If changes occur, the accuracy of the statements and conclusions set forth in
this summary, as well as the tax consequences to noteholders and
certificateholders could be affected.
Mayer, Brown & Platt has prepared or reviewed the statements under the
heading "Federal Income Tax Consequences" and is of the opinion that these
statements are correct in all material respects. However, the following
discussion does not discuss the unique tax consequences of the purchase,
ownership and disposition of the notes and certificates by investors that are
given special treatment under the federal income tax laws, including:
- banks and thrifts;
- insurance companies;
- regulated investment companies;
- dealers in securities;
- holders that will hold the offered certificates as a position in a
"straddle" for tax purposes or as a part of a "synthetic security,"
"conversion transaction" or other integrated investment comprised of the
offered certificates and one or more other investments;
- foreign investors;
- trusts and estates; and
- pass-through entities, the equityholders of which are any of the above.
Additionally, the discussion regarding the notes and certificates is
limited to the federal income tax consequences to the initial investors and not
to a purchaser in the secondary market, to investors who are citizens or
residents of the United States, and to investors who hold the notes or
certificates as "capital assets" within the meaning of Section 1221 of the Code.
We suggest that prospective investors consult with their own tax advisors
about the federal, state, local, foreign and any other tax consequences to them
of the purchase, ownership and disposition of the notes and certificates.
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The following discussion addresses notes and certificates issued by each
trust falling into four general categories:
- notes, other than strip notes or any other series of notes specifically
identified as receiving different tax treatment in the accompanying
prospectus supplement which the seller, the servicer and the noteholders
will agree to treat as indebtedness secured by the secured notes owned by
that trust;
- certificates representing interests in a trust that the seller, the
servicer and the applicable certificateholders will agree to treat as
equity interests in a grantor trust;
- certificates including strip certificates and strip notes, representing
interests in a trust which the seller, the servicer and the applicable
holders will agree to treat as equity interests in a tax partnership; and
- certificates, all of which are owned by the seller, representing
interests in a trust which the seller and the servicer will agree to
treat as a division of the seller and hence disregarded as a tax
non-entity, in each case for purposes of federal, state and local income
and franchise taxes.
Certificates issued by a tax trust are referred to as trust certificates,
certificates, including strip certificates, and strip notes issued by a tax
partnership are referred to as partnership certificates, and certificates issued
by a tax non-entity are referred to as tax non-entity certificates. The
prospectus supplement for each series of certificates will indicate whether the
trust fund for that series of certificates is a tax trust, tax partnership or
tax non-entity. Because the seller will treat each tax trust as a grantor trust,
each tax partnership as a partnership, and each tax non-entity as a division of
seller, for federal income tax purposes, the seller will not comply with the tax
reporting requirements that would apply under any alternative characterizations
of a tax trust, tax partnership or tax non-entity. For purposes of this
discussion, references to a noteholder are to the beneficial owner of a note,
and references to a certificateholder or a holder are to the beneficial owner of
a trust certificate, partnership certificate or tax non-entity certificate, as
the context may require.
COLT
Upon the issuance of each series of notes or certificates, Mayer, Brown &
Platt will deliver its opinion that COLT will not be treated as an association
or publicly traded partnership taxable as a corporation for federal income tax
purposes.
THE NOTES
The following discussion of the material federal income tax consequences of
the purchase, ownership and disposition of the notes of any series regardless of
whether the notes are issued by a tax trust, tax partnership or tax non-entity,
except for strip notes and any other series of notes which is specifically
identified as receiving different tax treatment in the related prospectus
supplement, to the extent it relates to matters of law or legal conclusions with
respect thereto, represents the opinion of Mayer, Brown & Platt, special tax
counsel to the seller, with respect to the related series of notes on the
material matters associated with those consequences, subject to the
qualifications set forth in this prospectus. In addition, Mayer, Brown & Platt,
special tax counsel to the seller, has prepared or reviewed the statements in
this prospectus under the heading "Federal Income Tax Consequences--The Notes,"
and is of the opinion that such statements are correct in all material respects.
Such statements are
56
intended as an explanatory discussion of the related tax matters affecting
prospective investors generally, but do not purport to furnish information in
the level of detail or with the attention to a prospective investor's specific
tax circumstances that would be provided by a prospective investor's own tax
advisor.
Characterization as Debt. For each series of notes, except for strip notes
and any series which is specifically identified as receiving different tax
treatment in the applicable prospectus supplement, regardless of whether the
notes are issued by a tax trust or a tax partnership or a tax non-entity, Mayer,
Brown & Platt, special tax counsel to the seller, will deliver its opinion to
the effect that the notes will be treated as debt for federal income tax
purposes. The seller, the servicer and each noteholder, by acquiring an interest
in a note, will agree to treat the notes as indebtedness for federal, state and
local income and franchise tax purposes. See "Trust Certificates--Classification
of Trusts and Trust Certificates," "Partnership Certificates--Classification of
Partnerships and Partnership Certificates" or "Tax Non-Entity
Certificates--Classification of Tax Non-Entity and Tax Non-Entity
Certificates"for a discussion of the potential federal income tax consequences
to you if the IRS were successful in challenging the characterization of a tax
trust, a tax partnership or a tax non-entity, as applicable, for federal income
tax purposes.
Treatment of Stated Interest. Based on the opinion that the notes will be
treated as debt, and assuming the notes are not issued with original issue
discount, the stated interest on a note will be taxable to a you as ordinary
income when received or accrued in accordance with your method of tax
accounting. Interest received on a note may constitute "investment income"
subject to certain limitations of the Internal Revenue Code on the deductibility
of investment interest expense.
Original Issue Discount. Unless indicated in the accompanying prospectus
supplement, no series of notes will be issued with original issue discount. In
general, original issue discount is the excess of the stated redemption price at
maturity of a debt instrument over its issue price, unless that excess falls
within a statutorily defined de minimis exception. A note's stated redemption
price at maturity is the aggregate of all payments required to be made under the
note through maturity except qualified stated interest. Qualified stated
interest is generally interest that is unconditionally payable in cash or
property other than debt instruments of the issuer, at fixed intervals of one
year or less during the entire term of the instrument at certain specified
rates. The issue price will be the first price at which a substantial amount of
the notes are sold, excluding sales to bond holders, brokers or similar persons
acting as underwriters, placement agents or wholesalers.
If a note were treated as being issued with original issue discount, a you
would be required to include original issue discount in income as interest over
the term of the note under a constant yield method. In general, original issue
discount must be included in income in advance of the receipt of cash
representing that income. Thus, each cash distribution would be treated as an
amount already included in income, to the extent original issue discount has
accrued as of the date of the interest distribution and is not allocated to
prior distributions, or as a repayment of principal. This treatment would have
no significant effect on you if you use the accrual method of accounting.
However, if you use the cash method, you may be required to report income on the
notes in advance of the receipt of cash attributable to that income. Even if a
note has original issue discount falling within the de minimis exception you
must include original issue discount in income proportionately as principal
payments are made on the note.
57
If you hold a note with a fixed maturity date not more than one year from
the issue date of that note, you will generally not be required to include
original issue discount on the note in income as it accrues, provided that you
are not an accrual method taxpayer, a bank, a broker or dealer that holds the
note as inventory, a regulated investment company or common trust fund, or the
beneficial owner of certain pass-through entities specified in the Internal
Revenue Code, or provided that you do not hold the instrument as part of a
hedging transaction, or as a stripped bond or stripped coupon. Instead, if you
hold a short-term note, you would include the original issue discount accrued on
the note in gross income upon a sale or exchange of the note or at maturity, or
if the note is payable in installments, as principal is paid on the note. You
would be required to defer deductions for any interest expense on an obligation
incurred to purchase or carry the short-term note to the extent the expense
exceeds the sum of the interest income, if any, and original issue discount
accrued on the note. However, you may elect to include original issue discount
in income as it accrues on all obligations having a maturity of one year or less
that you hold in that taxable year or thereafter, in which case the deferral
rule of the preceding sentence will not apply. For purposes of this paragraph,
original issue discount accrues on a short-term note on a ratable, straight-line
basis, unless you irrevocably elect, under regulations to be issued by the
Treasury Department to apply a constant interest method to the note, using the
your yield to maturity and daily compounding.
If you purchase a note after its initial distribution at a discount that
exceeds a statutorily defined de minimis amount, you will be subject to the
market discount rules of the Internal Revenue Code, and if you purchase a note
at a premium, you will be subject to the bond premium amortization rules of the
Internal Revenue Code.
Disposition of Notes. If you sell a note, you will recognize gain or loss
in an amount equal to the difference between the amount realized on the sale and
your adjusted tax basis in the note. Your adjusted tax basis in the note will
equal your cost for the note, increased by any original issue discount and
market discount previously included in your income from the note and decreased
by any bond premium previously amortized and any principal payments previously
received by you on the note. Your gain or loss will be capital gain or loss if
you held the note as a capital asset, except for gain representing accrued
interest or accrued market discount not previously included in income. Capital
gain or loss will be long-term if you held the note for more than one year and
otherwise will be short-term. Any capital losses realized generally may be used
by a corporate taxpayer only to offset capital gains, and by an individual
taxpayer only to the extent of capital gains plus $3,000 of other income.
Information Reporting and Backup Withholding. Each tax trust, tax
partnership and tax nonentity will be required to report annually to the IRS,
and to each noteholder of record, the amount of interest paid on the notes, and
the amount of interest withheld for federal income taxes, if any, for each
calendar year, except as to exempt holders, generally:
- corporations;
- tax-exempt organizations;
- qualified pension and profit-sharing trusts;
- individual retirement accounts; or
- nonresident aliens who provide certification as to their status.
You will be required to provide to the tax trust, tax partnership or tax
non-entity related to your notes, under penalties of perjury, a certificate
containing your name, address, correct federal taxpayer identification number
and a statement that you are not subject to backup
58
withholding. If you are a nonexempt noteholder and you fail to provide the
required certification, the tax trust, tax partnership or tax nonentity will be
required to withhold, from interest otherwise payable to you, 31% of that
interest and remit the withheld amount to the IRS as a credit against your
federal income tax liability.
The IRS has issued new regulations governing the backup withholding and
information reporting requirements. You should consult your tax advisors about
the impact, if any, of the new regulations.
Because the seller will treat each tax trust as a grantor trust, each tax
partnership as a partnership, each tax non-entity as a division of the seller
and all notes, except strip notes and any other series of notes specifically
identified as receiving different tax treatment in the accompanying prospectus
supplement, as indebtedness for federal income tax purposes, the seller will not
comply with the tax reporting requirements that would apply under any
alternative characterizations of a tax trust, tax partnership or tax non-entity.
Tax Consequence to Foreign Noteholders. If interest paid, or accrued, to a
noteholder who is a nonresident alien, foreign corporation or other non-United
States person, a foreign person, is not effectively connected with the conduct
of a trade or business within the United States by the foreign person, the
interest generally will be considered portfolio interest, and generally will not
be subject to United States federal income tax and withholding tax, as long as
the foreign person:
- is not actually or constructively a 10% percent shareholder of a related
tax trust, tax partnership or the seller, including a holder of 10% of
the applicable outstanding certificates, or a controlled foreign
corporation with which the tax trust, tax partnership or the seller is a
related person within the meaning of the Internal Revenue Code, and
- provides an appropriate statement, signed under penalties of perjury,
certifying that the beneficial owner of the note is a foreign person and
providing that foreign person's name and address.
If the information provided in this statement changes, the foreign person must
inform the tax trust or tax partnership within 30 days of the change. If the
interest were not portfolio interest or if applicable certification requirements
were not satisfied, then it would be subject to United States federal income and
withholding tax at a rate of 30% unless reduced or eliminated under an
applicable tax treaty.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a note by a foreign person will be exempt from United
States federal income and withholding tax, provided that:
- the gain is not effectively connected with the conduct of a trade or
business in the United States by the foreign person; and
- in the case of a foreign individual, the foreign person is not present in
the United States for 183 days or more in the taxable year.
If the interest, gain or income on a note held by a foreign person is
effectively connected with the conduct of a trade or business in the United
States by the foreign person, the holder, although exempt from the withholding
tax previously discussed if an appropriate statement is furnished, generally
will be subject to United States Federal income tax on the interest, gain or
income at regular federal income tax rates. In addition, if the foreign person
is a foreign corporation, it may be subject to a branch profits tax equal to 30%
of its effectively connected
59
earnings and profits within the meaning of the Internal Revenue Code for the
taxable year, as adjusted for certain items, unless it qualifies for a lower
rate under an applicable tax treaty.
TRUST CERTIFICATES
The following discussion of the material federal income tax consequences of
the purchase, ownership and disposition of the certificates of any series
identified in the accompanying prospectus supplement as trust certificates, to
the extent it relates to matters of law or legal conclusions with respect
thereto, represents the opinion of Mayer, Brown & Platt, special tax counsel to
the seller, with respect to the related series of trust certificates on the
material matters associated with those consequences, subject to the
qualifications set forth in this prospectus. In addition, Mayer, Brown & Platt,
special tax counsel to the seller, has prepared or reviewed the statements in
this prospectus under the heading "Federal Income Tax Consequences--Trust
Certificates," and is of the opinion that such statements are correct in all
material respects. Such statements are intended as an explanatory discussion of
the related tax matters affecting prospective investors generally, but do not
purport to furnish information in the level of detail or with the attention to a
prospective investor's specific tax circumstances that would be provided by a
prospective investor's own tax advisor.
Classification of Trusts and Trust Certificates. For each series of
certificates identified in the accompanying prospectus supplement as trust
certificates, prior to the sale of those certificates tax counsel will deliver
its opinion to the effect that the tax trust related to that series of
certificates will not be taxable as an association or publicly traded
partnership taxable as a corporation, but will be classified as a grantor trust
under Sections 671 through 679 of the Internal Revenue Code. For each series,
the seller will express in the trust agreement and on the trust certificates and
you will agree by your purchase of trust certificates the intent that, for
federal, state and local income and franchise tax purposes, the trust
certificates will represent an equity interest in the tax trust.
Although tax counsel will opine that each tax trust should properly be
characterized as a grantor trust for federal income tax purposes, this opinion
is not binding on the IRS or the courts and no assurance can be given that this
characterization would prevail. If the IRS were to contend successfully that any
tax trust is not a grantor trust, the tax trust should be classified for federal
income tax purposes as a partnership which is not taxable as a corporation. The
income reportable by the holders of that trust certificates as partners could
differ from the income reportable by the holders of trust certificates as
grantors of a grantor trust. However, it is not expected that these differences
would be material. If a tax trust were classified for federal income tax
purposes as a partnership, the IRS might contend that it is a publicly traded
partnership taxable as a corporation. If the IRS were to contend successfully
that a tax trust is an association taxable as a corporation for federal income
tax purposes, the tax trust would be subject to federal and state income tax at
corporate rates on the income from the secured notes, reduced by deductions,
including interest on any notes unless the notes were treated as an equity
interest. See "Partnership Certificates--Classification of Partnerships and
Partnership Certificates" below.
Despite tax counsel's opinion that a tax trust should be classified as a
grantor trust, the lack of cases or rulings on similar transactions, as
discussed above, permits a variety of alternative characterizations in addition
to the position to be taken that the trust certificates represent equity
interests in a grantor trust. For example, because trust certificates will have
certain features characteristic of debt, the trust certificates might be
considered indebtedness of a tax trust, the seller or the issuer. However, in
the opinion of Tax Counsel, this
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characterization would not result in materially adverse tax consequences to
certificateholders as compared to the consequences from treatment of trust
certificates as equity in a trust, described below in this subsection. Indeed,
classification of the trust certificates as indebtedness would result in
favorable tax consequences to certain holders, particularly foreign persons.
Nonetheless, because Tax Counsel believes that it is more likely that the trust
certificates will be treated as equity interests in the trust and the parties
will treat the trust certificates as representing equity interests in the trust,
the following discussion assumes that trust certificates represent equity
interests in a grantor trust.
Grantor Trust Treatment. As a grantor trust, a tax trust will not be
subject to federal income tax. Subject to the discussion below under "Treatment
of Fees or Payment," in tax counsel's opinion that, as a certificateholder, you
will be required to report on your federal income tax return your pro rata share
of the entire income from the secured notes and any other property in the tax
trust related to your certificates for the period during which you own a trust
certificate, including interest or finance charges earned on the secured notes
and any gain or loss upon collection or disposition of the secured notes, in
accordance with your method of accounting. If you use the cash method of
accounting, you should take into account your pro rata share of income as and
when received by the owner trustee. If you use an accrual method of accounting,
you should take into account your pro rata share of income as it accrues or is
received by the owner trustee, whichever is earlier.
Assuming that the market discount rules do not apply, the portion of each
payment to you that is allocable to principal on the secured notes will
represent a recovery of capital, which will reduce the tax basis of your
undivided interest in the secured notes. In computing your federal income tax
liability, you will be entitled to deduct, consistent with your method of
accounting, your pro rata share of interest paid on any notes, reasonable
servicing fees, and other fees paid or incurred by the tax trust related to your
certificates. If you are an individual, estate or trust, the deduction for your
pro rata share of fees will be allowed only to the extent that all of your
miscellaneous itemized deductions, including the fees, exceed 2% of your
adjusted gross income. Because the servicer will not report to
certificateholders the amount of income or deductions attributable to
miscellaneous charges, you may effectively underreport your net taxable income.
See "Treatment of Fees or Payments" below for a discussion of other possible
consequences if amounts paid to the servicer exceed reasonable compensation for
services rendered.
Treatment of Fees or Payments. For each tax trust it is expected that
income will be reported to you on the assumption that the certificateholders of
that tax trust collectively own a 100% interest in all of the principal and
interest derived from the related secured notes owned by that tax trust.
However, a portion of the amounts paid to the servicer or the seller may exceed
reasonable fees for services. There are no authoritative guidelines, for federal
income tax purposes, as to the maximum amount of compensation that may be
considered reasonable for servicing the secured notes or performing other
services, in the context of this or similar transactions; accordingly, tax
counsel is unable to give an opinion on this issue. If amounts paid to the
servicer or the seller exceed reasonable compensation for services provided, the
servicer or the seller or both may be viewed as having retained, for federal
income tax purposes, an ownership interest in a portion of each interest payment
on certain secured notes. As a result, those secured notes may be treated as
stripped bonds within the meaning of the Internal Revenue Code.
If the secured notes are characterized as stripped bonds, the income of the
tax trust allocable to you would not include the portion of the interest on the
secured notes treated as having been retained by the servicer or the seller, as
the case may be, and the tax trust's
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deductions would be limited to reasonable servicing fees, interest paid on any
notes and other fees. In addition, you would not be subject to the market
discount and premium rules discussed below in this subsection for the stripped
secured notes, but instead would be subject to the original issue discount rules
of the Internal Revenue Code. However, if the price at which you were deemed to
have acquired a stripped secured note is less than the remaining principal
balance of the secured note by an amount which is less than a statutorily
defined de minimis amount, the secured note would not be treated as having
original issue discount. In general, it appears that the amount of original
issue discount on a secured note treated as a stripped bond will be de minimis
if it is less than 1/4 of 1% for each full year remaining after the purchase
date until the final maturity of the secured note, although the IRS could take
the position that the weighted average maturity date, rather than the final
maturity date, should be used in performing this calculation. If the amount of
original issue discount was de minimis under this rule, the actual amount of
discount on a secured note would be includible in income as principal payments
are received on the secured note.
If the original issue discount on a secured note were not treated as de
minimis, you would be required to include any original issue discount in income
as it accrues, regardless of when cash payments are received, using a method
reflecting a constant yield on the secured notes. It is possible that the IRS
could assert that a prepayment assumption should be used in computing the yield
of a stripped secured note. If a stripped secured note is deemed to be acquired
by you at a significant discount, a prepayment assumption could accelerate your
accrual of income.
For each tax trust, it is also possible that any fees deemed to be
excessive could be recharacterized as deferred purchase price payable to the
seller by certificateholders in exchange for the related secured notes owned by
that tax trust. The likely effect of this recharacterization would be to
increase your current taxable income.
Discount And Premium. The following discussion generally assumes that the
fees and other amounts payable to the servicer and the seller will not be
recharacterized as being retained ownership interests in the secured notes,
which we have discussed above. You should be treated as purchasing an interest
in each secured note and any other property in the tax trust related to your
certificates at a price determined by allocating the purchase price paid for the
trust certificate among the secured notes and other property in proportion to
their fair market values at the time of your purchase of the trust certificate.
It is believed that the secured notes were not and will not be issued with
original issue discount; therefore, a tax trust should not have original issue
discount income. However, the purchase price paid by the tax trust for the
secured notes may be greater or less than the remaining principal balance of the
secured notes at the time of purchase. If so, the secured notes will have been
acquired at a premium or market discount, as the case may be. The market
discount on a secured note will be considered to be zero if it is less than the
statutorily defined de minimis amount.
For each tax trust, any gain on the sale of a trust certificate
attributable to your share of unrecognized accrued market discount on the
secured notes owned by that tax trust would generally be treated as ordinary
income to you. Moreover, if you acquire a trust certificate representing an
interest in secured notes acquired at a market discount, you may be required to
defer a portion of any interest expense otherwise deductible as indebtedness
incurred or maintained to purchase or carry the trust certificate until you
dispose of the trust certificate in a taxable transaction. Instead of
recognizing market discount, if any, upon a disposition of trust certificates
and deferring any applicable interest expense, you may elect to include
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market discount in income currently as the discount accrues. The current
inclusion election, once made, applies to all market discount obligations
acquired on or after the first day of the first taxable year to which the
election applies, and may not be revoked without the consent of the IRS.
In the event that a secured note is treated as purchased at a premium, for
instance, the allocable portion of your purchase price for the trust certificate
issued by the related tax trust exceeds the remaining principal balance of the
secured note, the premium will be amortizable by you as an offset to interest
income, with a corresponding reduction in basis, under a constant yield method
over the term of the secured note if you make an election. This election would
apply to all debt instruments you hold during the year in which the election is
made and to all debt instruments acquired thereafter.
Disposition of Trust Certificates. You will generally be required to
recognize a capital gain or loss on a sale of trust certificates in an amount
equal to the difference between the amount realized and your tax basis in the
trust certificates sold. Your tax basis in a trust certificate will generally
equal your cost increased by any original issue discount and market discount
previously included in income, and decreased by any bond premium previously
amortized and by the amount of principal payments previously received on the
secured notes held by the tax trust related to your certificates. For each tax
trust, any gain on the sale of a trust certificate attributable to your share of
unrecognized accrued market discount on the secured notes owned by that tax
trust would generally be treated as ordinary income to you, unless make the
special election described under discount and premium above in this subsection.
If you are required to recognize an aggregate amount of income, not
including income attributable to disallowed itemized deductions described above
in this subsection, over the life of the trust certificates that exceeds the
aggregate cash distributions, that excess will generally give rise to a capital
loss upon the retirement of the trust certificates.
Backup Withholding. Distributions made on trust certificates and proceeds
from the sale of the certificates will be subject to a backup withholding tax of
31% if, as discussed above for the notes, you fail to comply with certain
identification procedures, unless you are an exempt recipient under applicable
provisions of the Internal Revenue Code.
Tax Consequences to Foreign Trust Certificateholders. Interest attributable
to secured notes which is received by a Certificateholder which is a foreign
person will generally not be subject to the normal 30% withholding tax imposed
on these payments, provided that the certificateholder is not engaged in a trade
or business in the United States and that the certificateholder fulfills certain
certification requirements discussed above under "The Notes--Tax Consequences to
Foreign Noteholders" above.
PARTNERSHIP CERTIFICATES
The following discussion of the material federal income tax consequences of
the purchase, ownership and disposition of the certificates of any series
identified in the accompanying prospectus supplement as partnership
certificates, to the extent it relates to matters of law or legal conclusions
with respect thereto, represents the opinion of Mayer, Brown & Platt, special
tax counsel to the seller, with respect to the related series of partnership
certificates on the material matters associated with those consequences, subject
to the qualifications set forth in this prospectus. In addition, Mayer, Brown &
Platt, special tax counsel to the seller, has prepared or reviewed the
statements in this prospectus under the heading "Federal Income Tax
Consequences--Partnership Certificates," and is of the opinion
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that such statements are correct in all material respects. Such statements are
intended as an explanatory discussion of the related tax matters affecting
prospective investors generally, but do not purport to furnish information in
the level of detail or with the attention to a prospective investor's specific
tax circumstances that would be provided by a prospective investor's own tax
advisor.
Classification of Partnerships and Partnership Certificates. For each
series of certificates identified in the accompanying prospectus supplement as
partnership certificates, the seller and the servicer will agree, and you will
agree by your purchase of partnership certificates, to treat the tax partnership
as a partnership for purposes of federal, state and local income and franchise
tax purposes, with the partners of the partnership being the certificateholders
and the seller, in its capacity as recipient of distributions from the reserve
account, and any related notes being debt of the tax partnership. However, the
proper characterization of the arrangement involving the tax partnership, the
partnership certificates, the seller and the servicer is not clear because there
is no authority on transactions closely comparable to that contemplated in this
prospectus.
If the tax partnership were classified as an association taxable as a
corporation for federal income tax purposes, that tax partnership would be
subject to corporate income tax. Any corporate income tax could materially
reduce or eliminate cash that would otherwise be distributable on the
partnership certificates, and you could be liable for any tax that is unpaid by
the tax partnership. However, upon the issuance of each series of partnership
certificates, tax counsel will deliver its opinion generally to the effect that
the tax partnership will not be classified as an association taxable as a
corporation.
Even if a tax partnership were not classified as an association taxable as
a corporation, it would be subject to corporate income tax if it were a publicly
traded partnership taxable as a corporation. However, in the opinion of tax
counsel, even if the tax partnership were treated as a publicly traded
partnership, it would not be taxable as a corporation because it would meet
certain qualifying income tests. Nonetheless, if a tax partnership were treated
as a publicly traded partnership and the partnership certificates were treated
as equity interests in that partnership, certain holders could suffer adverse
consequences. For example, certain holders might be subject to certain
limitations on their ability to deduct their share of the tax partnership's
expenses.
Despite tax counsel's opinion that a tax partnership will be classified as
a partnership and not as an association or publicly traded partnership taxable
as a corporation, the lack of cases or rulings on similar transactions, as
discussed above, permits a variety of alternative characterizations in addition
to the position to be taken that the partnership certificates represent equity
interests in a partnership. For example, because the partnership certificates
will have certain features characteristic of debt, the partnership certificates
might be considered indebtedness of the tax partnership, the seller or the
issuer. However, in the opinion of Tax Counsel, any characterization would not
result in materially adverse tax consequences to you as compared to the
consequences from treatment of the partnership certificates as equity in a
partnership, described below in this subsection. Indeed, classification of the
partnership certificates as indebtedness would result in favorable tax
consequences to certain holders, particularly foreign persons. Nonetheless,
because Tax Counsel believes that it is more likely that the partnership
certificates will be treated as equity in a partnership and the parties will
treat the partnership certificates as representing equity in a partnership, the
following discussion assumes that the partnership certificates represent equity
interests in a partnership.
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Partnership Taxation. A tax partnership will not be subject to federal
income tax, but you will be required to separately take into account your
allocated share of income, gains, losses, deductions and credits of the tax
partnership. The tax partnership's income will consist primarily of interest and
finance charges earned on the secured notes owned by that tax partnership,
including appropriate adjustments for market discount, original issue discount,
and bond premium, and any gain upon collection or disposition of the secured
notes. The tax partnership's deductions will consist primarily of interest paid
or accrued on any notes, servicing and other fees, and losses or deductions upon
collection or disposition of the secured notes owned by that tax partnership.
The tax items of a partnership are allocable to the partners in accordance
with the Internal Revenue Code, Treasury Regulations and the partnership
agreement for any series of partnership certificates, the trust agreement and
related documents. Each trust agreement for a tax partnership will provide that
the certificateholders will be allocated taxable income of the tax partnership
for each month equal to their allocable share of the sum of:
- the pass through rate on the partnership certificates issued by that tax
partnership for the month;
- an amount equivalent to interest that accrues during that month on
amounts previously due on the partnership certificates but not yet
distributed;
- any tax partnership income attributable to discount on the secured notes
owned by that tax partnership that corresponds to any excess of the
principal amount of the partnership certificates over their initial issue
price; and
- any prepayment surplus as defined in the accompanying prospectus
supplement, payable to the partnership certificates for that month.
If the tax partnership issues any strip notes or strip certificates, it will
also provide that the certificateholders of that tax partnership will be
allocated taxable income of the tax partnership for each month in the amounts
described in the accompanying prospectus supplement. All taxable income of the
tax partnership remaining after the allocations to you will be allocated to the
seller. It is believed that the allocations to you will be valid under
applicable Treasury Regulations, although no assurance can be given that the IRS
would not require a greater amount of income to be allocated to you. Moreover,
even under the method of allocation provided above in this subsection, you may
be allocated income equal to the entire pass through rate plus the other items
described above in this subsection, and holders of strip notes or strip
certificates may be allocated income equal to the amount described in the
accompanying prospectus supplement, even though the tax partnership that issued
your certificates might not have sufficient cash to make current cash
distributions of that amount. Thus, cash basis holders will in effect be
required to report income from the partnership certificates on the accrual
method. In addition, because tax allocations and tax reporting will be done on a
uniform basis for all certificateholders but certificateholders may be
purchasing partnership certificates at different times and at different prices,
you may be required to report on your tax returns taxable income that is greater
or less than the amount reported to you by the tax partnership that issued your
certificates.
Additionally, all of the taxable income allocated to a certificateholder
that is a pension, profit sharing or employee benefit plan or other tax-exempt
entity, including an individual retirement account, will constitute unrelated
business taxable income generally taxable to that holder under the Internal
Revenue Code.
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An individual taxpayer may generally deduct miscellaneous itemized
deductions, which do not include interest expense, only to the extent they
exceed two percent of adjusted gross income, and, certain additional limitations
may apply. Those limitations would apply to an individual certificateholder's
share of expenses of a tax partnership, including fees to the servicer, and
might result in the holder being taxed on an amount of income that exceeds the
amount of cash actually distributed to the holder over the life of the tax
partnership.
Each tax partnership intends to make all tax calculations relating to
income and allocations to you on an aggregate basis. If the IRS were to require
that the calculations be made separately for each secured note, a tax
partnership might be required to incur additional expense but it is believed
that there would not be a material adverse effect on you.
Discount and Premium. It is believed that the secured notes were not and
will not be issued with original issue discount and, therefore, that a tax
partnership should not have original issue discount income. However, the
purchase price paid by the tax partnership for the secured notes purchased by it
may be greater or less than the remaining principal balance of the secured notes
at the time of purchase. If so, the secured notes will have been acquired at a
premium or market discount, as the case may be. As indicated above, each tax
partnership will make this calculation on an aggregate basis, but might be
required to recompute it on a secured note by secured note basis.
Each tax partnership will make an election that will result in any market
discount on the secured notes owned by it being included in income currently as
the discount accrues over the life of the secured notes. As indicated above in
this subsection, a portion of the market discount income will be allocated to
you.
Section 708 Termination. Under Section 708 of the Internal Revenue Code, a
tax partnership will be deemed to terminate for federal income tax purposes if
50% or more of the capital and profits interests in the tax partnership are sold
or exchanged within a 12-month period. If a termination occurs, a tax
partnership will be considered to contribute all of its assets to a new
partnership followed by a liquidation of the original tax partnership. A tax
partnership will not comply with certain technical requirements that might apply
when a constructive termination occurs. As a result, the tax partnership may be
subject to certain tax penalties and may incur additional expenses if it is
required to comply with those requirements. Furthermore, a tax partnership might
not be able to comply due to lack of data.
Disposition of Certificates. You will generally be required to recognize a
capital gain or loss on a sale of partnership certificates in an amount equal to
the difference between the amount realized and your tax basis in the partnership
certificates sold. Your tax basis in a partnership certificate will generally
equal your cost increased by your share of the tax partnership's income,
includible in on the income, for the current and prior taxable years and
decreased by any distributions received on the partnership certificate. In
addition, both tax basis in the partnership certificates and the amount realized
on a sale of a partnership certificate would include on the share of any notes
issued by that tax partnership and other liabilities of the tax partnership. If
you acquire partnership certificates of the same series at different prices, you
may be required to maintain a single aggregate adjusted tax basis in the
partnership certificates, and, upon a sale or other disposition of some of the
partnership certificates, allocate a pro rata portion of the aggregate tax basis
to the partnership certificates sold, rather than maintaining a separate tax
basis in each partnership certificate for purposes of computing gain or loss on
a sale of that partnership certificate.
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If you are required to recognize an aggregate amount of income, not
including income attributable to disallowed itemized deductions described above
in this subsection, over the life of the partnership certificates that exceeds
the aggregate cash distributions on the partnership certificates that excess
will generally give rise to a capital loss upon the retirement of the
partnership certificates.
Allocations Between Transferors and Transferees. In general, each tax
partnership's taxable income and losses will be determined monthly and the tax
items for a particular calendar month will be apportioned among the
certificateholders in proportion to the principal amount of the partnership
certificates or a fractional share of the strip notes or strip certificates
owned by them as of the first record date following the end of that month. As a
result, when you purchase a partnership certificate you may be allocated tax
items which will affect your tax liability and tax basis for periods before your
actual purchase of partnership certificates.
The use of a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed, or only applies to
transfers of less than all of the partner's interest, taxable income or losses
of a tax partnership might be reallocated among the certificateholders. The
owner trustee is authorized to revise a tax partnership's method of allocation
between transferors and transferees to conform to a method permitted by future
regulations.
Section 754 Election. If a certificateholder sells its partnership
certificate for greater than its adjusted basis, the purchasing
certificateholder will have a higher basis in the partnership certificates than
the selling certificateholder had. Similarly, if a certificateholder sells its
partnership certificate for less than its adjusted basis, the purchasing
certificateholder will have a lower basis in the partnership certificates than
the selling certificateholder had. The tax basis of the tax partnership's assets
will not be adjusted to reflect that higher or lower basis unless the tax
partnership were to file an election under Section 754 of the Internal Revenue
Code. In order to avoid the administrative complexities that would be involved
in keeping accurate accounting records, as well as potentially onerous
information reporting requirements, a tax partnership will not make this
election. As a result, you might be allocated a greater or lesser amount of tax
partnership income than would be based on your own purchase price for
partnership certificates.
Administrative Matters. For each tax partnership, the owner trustee is
required to keep or have kept complete and accurate books of that tax
partnership. Those books will be maintained for financial reporting and tax
purposes on an accrual basis and the fiscal year of each tax partnership will be
the calendar year. The owner trustee will file a partnership information return,
on IRS Form 1065 with the IRS for each taxable year of the tax partnership and
will report your allocable share of items of tax partnership income and expense
to you and to the IRS on Schedule K-1. Any person that holds partnership
certificates as a nominee at any time during a calendar year is required to
furnish the tax partnership that issued its partnership certificates with a
statement containing certain information on the nominee, the beneficial owners
and the partnership certificates so held. Each tax partnership will provide the
Schedule K-1 information to nominees that fail to provide the tax partnership
with the information referenced in the preceding sentence and those nominees
will be required to forward that information to the beneficial owners of the
partnership certificates issued by that tax partnership. Generally, you must
file tax returns that are consistent with the information return filed by the
tax partnership that issued your partnership certificates or be subject to
penalties unless you notify the IRS of all inconsistencies.
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The seller, as the tax matters partner for each tax partnership, will be
responsible for representing you in any dispute with the IRS. The Internal
Revenue Code provides for administrative examination of a partnership as if the
partnership were a separate taxpayer. Generally, the statute of limitations for
partnership items does not expire until three years after the date on which the
partnership information return is filed or deemed filed. Any adverse
determination following an audit of the return of a tax partnership by the
appropriate taxing authorities could result in an adjustment of your return and,
under certain circumstances, you may be precluded from separately litigating a
proposed adjustment to the items of the tax partnership that issued your
partnership certificates. An adjustment could result in an audit of your returns
and adjustments of items not related to the income and losses of the tax
partnership that issued your partnership certificates.
Tax Consequences to Foreign Certificateholders. It is not clear whether any
tax partnership would be considered to be engaged in a trade or business in the
United States for purposes of federal withholding taxes with respect to
non-United States persons because there is no clear authority regarding that
issue under facts substantially similar to those described in this prospectus.
Although it is not expected that any tax partnership would be engaged in a trade
or business in the United States for these purposes, the tax partnership will
withhold as if it were so engaged in order to protect the tax partnership from
possible adverse consequences of a failure to withhold. It is expected that each
tax partnership will withhold on the portion of its taxable income that is
allocable to foreign certificateholders as if the income were effectively
connected to a United States trade or business, at a rate of 35% for foreign
holders that are taxable as corporations and 39.6% for all other foreign
holders. In determining a holder's nonforeign status, a tax partnership may
generally rely on the holder's certification of nonforeign status signed under
penalties of perjury.
Each foreign holder might be required to file a United States individual or
corporate income tax return and pay tax, including, in the case of a
corporation, the branch profits tax, on its share of the tax partnership's
income. Each foreign holder must obtain a taxpayer identification number from
the IRS and submit that number to the tax partnership that issued their
certificates on Form W-8 or on new Form W-8 BEN in order to assure appropriate
crediting of the taxes withheld. A foreign holder generally would be entitled to
file with the IRS a claim for refund for taxes withheld by the tax partnership
that issued their certificates, taking the position that no taxes were due
because the tax partnership was not engaged in a U.S. trade or business.
However, the IRS may assert that the tax liability should be based on gross
income, and no assurance can be given as to the appropriate amount of tax
liability.
Backup Withholding. Distributions made on any partnership certificates and
proceeds from the sale of those partnership certificates will be subject to a
"backup" withholding tax of 31% if, as discussed above for the notes, you fail
to comply with certain identification procedures, unless you are an exempt
recipient under applicable provisions of the Internal Revenue Code.
TAX NON-ENTITY CERTIFICATES
Classification of Tax Non-Entity and Tax Non-Entity Certificates. For
certificates identified in the accompanying prospectus supplement as tax
non-entity certificates and which are entirely owned by the seller, the seller
and the servicer will agree, under the check-the-box Treasury Regulations, to
treat the tax non-entity as a division of the seller, and hence a disregarded
entity, for federal income tax purposes. In other words, for federal income tax
purposes, the seller will be treated as the owner of all the assets of the tax
non-entity and the
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obligor of all the liabilities of the tax non-entity. Under the check-the-box
Treasury Regulations, unless it is treated as a tax trust for federal income tax
purposes, an unincorporated domestic entity with more than one equity owner is
automatically classified as a tax partnership for federal income tax purposes.
If the trust is classified as a tax non-entity when all its equity interests are
wholly-owned by the seller and if certificates are then sold or issued in any
manner which results in there being more than one certificateholder, the trust
will be treated as a tax partnership.
If certificates are issued to more than one person, the seller and the
servicer will agree, and the applicable certificateholders will agree by their
purchase, to treat the trust as a tax partnership for purposes of federal, state
and local income and franchise tax purposes, with the partners of that
partnership being the certificateholders, including the seller, and the notes
being debt of that partnership.
Risks of Alternative Characterization. If a tax non-entity were an
association or a publicly traded partnership taxable as a corporation for
federal income tax purposes, it would be subject to corporate income tax as
discussed above under "Partnership Certificates--Classification of Partnerships
and Partnership Certificates."
STATE AND LOCAL TAX CONSEQUENCES
The above discussion does not address the tax treatment of any tax trust,
tax partnership, tax non-entity, notes, certificates, noteholders or
certificateholders under any state or local tax laws. The activities to be
undertaken by the servicer in servicing and collecting the secured notes will
take place throughout the United States and, therefore, many different tax
regimes potentially apply to different portions of these transactions. We
recommend that prospective investors consult their tax advisors regarding the
state and local tax treatment of any tax trust, tax partnership or tax
non-entity as well as any state and local tax consequences to them of
purchasing, holding and disposing of notes or certificates.
ERISA CONSIDERATIONS
Section 406 of ERISA and Section 4975 of the Code prohibit a pension,
profit-sharing or other employee benefit plan, as well as individual retirement
accounts and specified types of Keogh Plans and collective investment funds or
insurance company general or separate accounts in which these plans and accounts
are invested (we refer to each of these as a "benefit plan") from engaging in
specified transactions with persons that are "parties in interest" under ERISA
or "disqualified persons" under the Code with respect to that 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 these persons. The
acquisition or holding of securities by a benefit plan could be considered to
give rise to a prohibited transaction if the seller, the servicer, the related
trust or any of their respective affiliates is or becomes a party in interest or
a disqualified person with respect to that benefit plan. Employee benefit plans
that are governmental plans as defined in Section 3(32) of ERISA and specified
church plans as defined in Section 3(33) of ERISA are not subject to ERISA
requirements.
EXEMPTION APPLICABLE TO DEBT INSTRUMENTS
Transactions involving the trust might be deemed to constitute prohibited
transactions under ERISA and the Code with respect to a benefit plan that
purchased securities if assets of
69
the trust were deemed to be assets of the benefit plan. Under a regulation
issued by the U.S. 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 applied. An equity interest is defined under the plan assets
regulation as an interest other than an instrument that is treated as
indebtedness under applicable local law and that has no substantial equity
features. It is likely that the certificates will be treated as an equity
interest for these purposes. For additional information regarding the equity or
debt treatment of notes, see "ERISA Considerations" in the prospectus
supplement. Subject to the restrictions in the following paragraph, notes that
are debt instruments will be available for purchase by benefit plans.
Without regard to whether the notes are treated as debt under the plan
assets regulation, the acquisition or holding of notes by or on behalf of a
benefit plan could be considered to give rise to a prohibited transaction if the
servicer, the seller, the trust or any of our respective affiliates is or
becomes a party in interest or a disqualified person with respect to that
benefit plan. Exemptions from the prohibited transaction rules could apply to
the purchase and holding of the notes by a benefit plan depending on the type
and circumstances of the plan fiduciary making the decision to acquire the
notes. These exemptions include: Prohibited Transaction Class Exemption 96-23,
regarding transactions effected by "in-house asset managers"; PTCE 95-60,
regarding investments by insurance company general accounts; PTCE 91-38,
regarding investments by bank collective investment funds; PTCE 90-1, regarding
investments by insurance company pooled separate accounts; and PTCE 84-14,
regarding transactions effected by "qualified professional asset managers."
We suggest that a fiduciary considering the purchase of notes on behalf of
a benefit plan consult with its ERISA advisors and refer to the prospectus
supplement regarding whether the assets of the trust would be considered plan
assets, the possibility of exemptive relief from the prohibited transaction
rules and other issues and their potential consequences.
UNDERWRITER EXEMPTION
Both notes and certificates may be eligible for relief from prohibited
transaction rules of ERISA and the plan assets regulation in reliance on
administrative exemptions granted by the Department of Labor to specified
underwriters. The underwriter's exemption provides relief with respect to the
initial purchase, holding and subsequent resale by benefit plans of pass-
through securities or securities denominated as debt instruments that represent
interests in an investment pool for which the underwriter is the sole
underwriter or the co-manager of an underwriting syndicate and that consist of
specified secured receivables, loans and other obligations that meet the
conditions and requirements of the underwriter's exemption. The receivables
covered by the underwriter's exemption include motor vehicle installment
obligations such as those securing the notes and certificates offered by this
prospectus.
The underwriter's exemption will apply only if specific conditions are met.
Among the conditions that must be satisfied for the underwriter's exemption to
apply to the acquisition of the notes or certificates by a benefit plan are the
following:
(1) The acquisition of notes or certificates by a benefit plan is on
terms, including the price, that are at least as favorable to the benefit
plan as they would be in an arm's-length transaction with an unrelated
party;
70
(2) The notes or certificates acquired by the benefit plan have
received a rating at the time of such acquisition that is in one of the
four highest generic rating categories from S&P, Duff & Phelps, Moody's or
Fitch;
(3) The sum of all payments made to the underwriter in connection with
the distribution of the notes or certificates represents not more than
reasonable compensation for underwriting the notes or certificates. The sum
of all payments made to and retained by us pursuant to the sale of the
receivables to the trust represents not more than the fair market value of
the receivables. The sum of all payments made to and retained by the
servicer represents not more than reasonable compensation for the
servicer's services as servicer under the related agreements and
reimbursement of the servicer's reasonable expenses in connection with
these services;
(4) The trustee is a substantial financial institution and is not an
"affiliate," as defined in the exemption, of any other member of the
"restricted group," which consists of the underwriter, the trustee, the
seller, the servicer, any subservicer, any obligor with respect to motor
vehicle installment obligations constituting more than 5% of the aggregate
unamortized principal balance of the assets of the trust as of the date of
initial issuance of the notes or certificates and any affiliate of these
parties;
(5) The benefit plan investing in the notes or certificates is an
"accredited investor" as defined in Rule 501(a)(1) of Regulation D of the
SEC under the Securities Act; and
(6) The trust satisfies the following requirements:
(a) the corpus of the trust consists solely of assets of the type
which have been included in other investment pools,
(b) securities in these other investment pools have been rated in
one of the four highest generic rating categories of one of the rating
agencies specified above for at least one year prior to the benefit
plan's acquisition of the notes or certificates, and
(c) securities evidencing interests in these other investment pools
have been purchased by investors other than benefit plans for at least
one year prior to any benefit plan's acquisition of the notes or
certificates.
(7) The legal document establishing the trust contains restrictions
necessary to ensure that the assets of the trust may not be reached by
creditors of the seller in the event of its bankruptcy or insolvency, the
transfer and servicing agreement prohibits all parties from filing an
involuntary bankruptcy or insolvency petition against the trust and a true
sale opinion is issued in connection with the transfer of assets to the
trust.
Some transactions are not covered by the underwriter's exemption or any
other exemption. The underwriter's exemption does not exempt the acquisition and
holding of securities by benefit plans sponsored by the seller, the
underwriters, the owner trustee, the servicer or any "obligor" (as defined in
the exemption) with respect to receivables included in the trust constituting
more than 5% of the aggregate unamortized principal balance of the assets in the
restricted group. Moreover, the exemptive relief from the
self-dealing/conflict-of-interest prohibited transaction rules of ERISA is
available for other benefit plans only if, among other requirements:
- a benefit plan's investment in the notes or certificates does not exceed
25% of all of the notes or certificates outstanding at the time of the
acquisition;
71
- immediately after the acquisition, no more than 25% of the assets of a
benefit plan with respect to which the person who has discretionary authority to
render investment advice are invested in securities representing an interest in
a trust containing assets sold or serviced by the same entity; and
- in the case of the acquisition of notes or certificates in connection
with their initial issuance, at least 50% of such securities are acquired by
persons independent of the restricted group and at least 50% of the aggregate
interest in the related trust is acquired by persons independent of the
restricted group.
The underwriter's exemption will also apply to transactions in connection
with the servicing, management and operation of the trust, provided that, in
addition to the general requirements described above, (a) these transactions are
carried out in accordance with the terms of a binding pooling and servicing
agreement and (b) the pooling and servicing agreement is provided to, or
described in all material respects in the prospectus provided to, investing
benefit plans before the plans purchase the notes or certificates issued by the
trust. All transactions relating to the servicing, management and operations of
the trust will be carried out in accordance with the trust agreement, indenture
and transfer and servicing agreements, which will be described in all material
respects in this prospectus and the prospectus supplement.
Each prospective purchaser of notes or certificates in reliance on the
underwriter's exemption should consider the possibility that the rating of a
note or certificate may change during the period that note or certificate is
held. If the rating were to decline below BBB-, the note or certificate could no
longer be transferred to a plan in reliance on the exemption.
For more information, including whether an underwriter's exemption is
likely to provide relief for a particular class of notes or certificates, see
"ERISA Considerations" in the prospectus supplement. If you are a benefit plan
fiduciary considering the purchase of the notes or certificates, you should
consult with your counsel with respect to whether the trust will be deemed to
hold plan assets and the applicability of an underwriter's exemption or another
exemption from the prohibited transaction rules and determine on your own
whether all conditions have been satisfied and whether the notes or certificates
are an appropriate investment for a benefit plan under ERISA and the Code.
PLAN OF DISTRIBUTION
On the terms and conditions set forth in one or more underwriting
agreements for each trust, we will agree to sell to each of the underwriters
named in each underwriting agreement and in the accompanying prospectus
supplement, and each of those underwriters will severally agree to purchase from
us, the principal amount of each class of securities of the related series set
forth in the underwriting agreement and in the accompanying prospectus
supplement.
In each underwriting agreement, the several underwriters will agree,
subject to the terms and conditions set forth in the agreement, to purchase all
the securities described in it which are offered by the prospectus and by the
accompanying prospectus supplement if any of those securities are purchased. In
the event of a default by any underwriter, each underwriting agreement will
provide that, in certain circumstances, purchase commitments of the
nondefaulting underwriters may be increased or the underwriting agreement may be
terminated.
72
Each prospectus supplement will either:
- set forth the price at which each class of securities being offered by
the prospectus supplement will be offered to the public and any
concessions that may be offered to certain dealers participating in the
offering of those securities; or
- specify that the securities being offered by the prospectus supplement
are to be resold by the underwriters in negotiated transactions at
varying prices to be determined at the time of that sale.
After the initial public offering of any securities, the public offering price
and concessions may be changed.
Each underwriting agreement will provide that we will indemnify the
underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.
The indenture trustee may, from time to time, invest the funds in the
designated accounts in eligible investments acquired from the underwriters or
from us.
Under each underwriting agreement, except as otherwise provided in the
accompanying prospectus supplement, the closing of the sale of any class of
securities subject to the underwriting agreement will be conditioned on the
closing of the sale of all other classes of securities of that series.
The place and time of delivery for the securities in respect of which this
prospectus is delivered will be set forth in the accompanying prospectus
supplement.
LEGAL OPINIONS
Certain legal matters relating to the notes and the certificates will be
passed upon by Robert L. Schwartz, our General Counsel and Assistant General
Counsel of GMAC, and by Mayer, Brown & Platt, our special counsel and special
counsel to each trust and GMAC. Mr. Schwartz owns shares of both classes of
General Motors common stock and has options to purchase shares of General Motors
common stock. Mayer, Brown & Platt will pass upon certain federal income tax
matters for us, GMAC and each trust.
WHERE YOU CAN FIND MORE INFORMATION
We filed a registration statement relating to the securities with the
Securities and Exchange Commission under the Securities Act of 1933, as amended.
This prospectus is part of the registration statement, but the registration
statement includes additional information.
The servicer will file with the SEC all required annual, monthly and
special SEC reports and other information about the trust.
You may read and copy any reports, statements or other information we file
at the SEC's public reference room in Washington, D.C. You can request copies of
these documents, upon payment of a duplicating fee, by writing to the SEC.
Please call the SEC at (800) SEC-0330 for further information on the operation
of the public reference rooms. Our SEC filings are also available to the public
on the SEC Internet site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" information we file with
it, which means that we can disclose important information to you by referring
you to those documents.
73
The information incorporated by reference is considered to be part of this
prospectus. Information that we file later with the SEC will automatically
update the information in this prospectus. In all cases, you should rely on the
later information over different information included in this prospectus or the
accompanying prospectus supplement. We incorporate by reference any future SEC
reports and materials filed by or on behalf of the trust until we terminate our
offering.
As a recipient of this prospectus, you may request a copy of any document
we incorporate by reference, except exhibits to the documents, unless the
exhibits are specifically incorporated by reference, at no cost, by writing us
at:
General Motors Acceptance
Corporation
200 Renaissance Center
Detroit, Michigan 48265
74
- ------------------------------------------------------
- ------------------------------------------------------
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, THAT INFORMATION OR THOSE
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 BY THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS TO ANYONE IN
ANY JURISDICTION IN WHICH THE PERSON MAKING THAT 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 UNDER THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT INFORMATION IN THOSE
DOCUMENTS IS CORRECT AS OF ANY TIME SINCE THE DATE OF THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS.
------------------
UNTIL , , ALL DEALERS EFFECTING TRANSACTIONS IN THESE
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS SUPPLEMENT AND THE PROSPECTUS TO WHICH IT RELATES. THIS
DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN ACTING AS UNDERWRITERS AND FOR THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
CAPITAL AUTO RECEIVABLES
ASSET TRUST - SN[1]
ISSUER
$
ASSET BACKED NOTES
[$
ASSET BACKED CERTIFICATES]
CAPITAL AUTO RECEIVABLES, INC.
SELLER
GENERAL MOTORS
ACCEPTANCE CORPORATION
SERVICER
------------------------------------
PROSPECTUS SUPPLEMENT
------------------------------------
UNDERWRITERS
- ------------------------------------------------------
- ------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses to be incurred in
connection with the offering of the securities, other than underwriting
discounts and commissions, described in this Registration Statement:
<Table>
Securities and Exchange Commission registration fee......... $239
Printing and engraving costs................................ 0
Legal fees.................................................. 0
Trustee fees and expenses................................... 0
Accountant's fees........................................... 0
Rating Agencies' fees....................................... 0
Miscellaneous expenses...................................... 0
----
Total............................................. $239
====
</Table>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Capital Auto Receivables, Inc. is incorporated under the laws of Delaware.
Section 145 of the Delaware General Corporation Law provides that a Delaware
corporation may indemnify any persons, including officers and directors, who
are, or are threatened to be made, parties to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such corporation, by
reason of the fact that such person was an officer, director, employee or agent
of such corporation, or is or was serving at the request of such corporation as
a director, officer, employee or agent of another corporation or enterprise).
The indemnity may include expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding, provided such person acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the corporation's best interests and, for criminal proceedings, had no
reasonable cause to believe that his conduct was illegal. A Delaware corporation
may indemnify officers and directors in an action by or in the right of the
corporation under the same conditions, except that no indemnification is
permitted without judicial approval if the officer or director is adjudged to be
liable to the corporation. Where an officer or director is successful on the
merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses which such officer or
director actually and reasonably incurred.
Capital Auto Receivables Inc.'s By-laws provide, in effect, that, subject
to certain limited exceptions, such corporation shall indemnify and advance
expenses to its directors and officers in the manner and to the full extent
permitted by applicable law against any and all amounts reasonably incurred by
reason of the fact that such person is or was a director or officer of such
corporation. General Motors Acceptance Corporation has agreed to satisfy such
indemnification obligations of Capital Auto Receivables Inc. if and to the
extent that Capital Auto Receivables Inc. fails to do so. Certain controlling
persons of the Registrant may also be entitled to indemnification from General
Motors Acceptance Corporation, the direct parent of
II-1
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 fiduciary duty as a director, except for liability
(i) for any breach of the director's duty of loyalty to General Motors
Acceptance Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174, or any successor provision
thereto, of the Delaware Corporation Law, or (iv) for any transaction from
which the director derived an improper personal benefit.
(b) Under Article VI of its By-Laws, General Motors Acceptance
Corporation shall indemnify and advance expenses to every director and
officer (and to such person's heirs, executors, administrators or other
legal representatives) in the manner and to the full extent permitted by
applicable law as it presently exists, or may hereafter be amended, against
any and all amounts (including judgments, fines, payments in settlement,
attorneys' fees and other expenses) reasonably incurred by or on behalf of
such person in connection with any threatened, pending or completed action,
suit or proceeding, whether civil, criminal administrative or investigative
(a "proceeding"), in which such director or officer was or is made or is
threatened to be made a party or is otherwise involved by reason of the
fact that such person is or was a director or officer of General Motors
Acceptance Corporation, or is or was serving at the request of General
Motors Acceptance Corporation as a director, officer, employee, fiduciary
or member of any other corporation, partnership, joint venture, trust,
organization or other enterprise. General Motors Acceptance Corporation
shall not be required to indemnify a person in connection with a proceeding
initiated by such person if the proceeding was not authorized by the Board
of Directors of General Motors Acceptance Corporation. General Motors
Acceptance Corporation shall pay the expenses of directors and officers
incurred in defending any proceeding in advance of its final disposition
("advancement of expenses"); provided, however, that the payment of
expenses incurred by a director or officer in advance of the final
disposition of the proceeding shall be made only upon receipt of an
undertaking by the director or officer to repay full amounts advanced if it
should be ultimately determined that the director or officer is not
entitled to be indemnified under Article VI of the By-Laws or otherwise. If
a claim for indemnification or advancement of expenses by an officer or
director under Article VI of the By-Laws is not paid in full within ninety
days after a written claim therefor has been received by General Motors
Acceptance Corporation, the claimant may file suit to recover the unpaid
amount of such claim, and if successful in whole or in part, shall be
entitled to the requested indemnification or advancement of expenses under
applicable law. The rights conferred on any person by Article VI of the
By-Laws shall not be exclusive of any other rights which such person may
have or hereafter acquire under any statute, provision of the Certificate
of Incorporation, By-Laws, agreement, vote of stockholders or disinterested
directors of General Motors Acceptance Corporation or otherwise. The
obligation, if any, of General Motors Acceptance Corporation to indemnify
any person who was or is serving at its request as a director, officer or
employee of another corporation, partnership, joint venture, trust,
organization or other enterprise shall be reduced by any amount such person
may collect as indemnification from such other corporation, partnership,
joint venture, trust, organization or other enterprise.
II-2
As a subsidiary of General Motors Corporation, General Motors Acceptance
Corporation is insured against liabilities which it may incur by reason of the
foregoing provisions of the Delaware General Corporation Law and directors and
officers of General Motors Acceptance Corporation are insured against some
liabilities which might arise out of their employment and not be subject to
indemnification under said General Corporation Law.
Pursuant to resolutions adopted by the Board of Directors of General Motors
Corporation, General Motors Corporation, to the fullest extent permissible under
law, will indemnify, and has purchased insurance on behalf of, directors or
officers of the Company, or any of them, who incur or are threatened with
personal liability, including expenses, under Employee Retirement Income
Security Act of 1974 or any amendatory or comparable legislation or regulation
thereunder.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
A list of exhibits filed herewith or incorporated by reference is contained
in the Exhibit Index which is incorporated herein by reference.
ITEM 17. UNDERTAKINGS.
The undersigned registrant on Form S-1, Central Originating Lease Trust,
and the undersigned registrant on Form S-3, Capital Auto Receivables, Inc.,
hereby each undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if total dollar
volume of securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in this registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in the registration statement.
II-3
(2) That, for the purposes of determining any liability under the
Securities Act, 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.
(4) Insofar as indemnification for liabilities arising under the
Securities Act 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.
(5) For the purpose of determining any liability under the Securities
Act, 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.
(6) 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.
(7) With respect to Capital Auto Receivables, Inc. only, the
undersigned registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act, each filing of the registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act that is incorporated by reference in this registration
statement shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
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 25th day of January 2002.
CAPITAL AUTO RECEIVABLES, INC.
/s/ WILLIAM F. MUIR
------------------------------------
William F. Muir
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on January 25, 2002 by the
following persons in the capacities indicated.
/s/ WILLIAM F. MUIR
------------------------------------
William F. Muir
Chairman of the Board
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
/s/ WILLIAM F. MUIR Chairman of the Board and Director
- -----------------------------------------------------
William F. Muir
/s/ JOHN D. FINNEGAN President and Director
- -----------------------------------------------------
John D. Finnegan
/s/ PAUL D. BULL Vice President and Director
- -----------------------------------------------------
Paul D. Bull
/s/ JOHN E. GIBSON Vice President and Director
- -----------------------------------------------------
John E. Gibson
/s/ JEROME B. VAN ORMAN, JR. Vice President and Director
- ----------------------------------------------------- (Principal Financial Officer)
Jerome B. Van Orman, Jr.
/s/ CYNTHIA A. RANZILLA Vice President and Director
- -----------------------------------------------------
Cynthia A. Ranzilla
/s/ GUNTER DUFEY Director
- -----------------------------------------------------
Gunter Dufey
/s/ RICHARD E. DAMMAN Director
- -----------------------------------------------------
Richard E. Damman
/s/ GERALD E. GROSS Comptroller
- ----------------------------------------------------- (Principal Accounting Officer)
Gerald E. Gross
By: /s/ GERALD E. GROSS
- -----------------------------------------------------
Gerald E. Gross
Attorney-in-Fact
</Table>
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing Form S-1 and has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Detroit, State of Michigan, on the 25th day of January 25, 2002.
LEASE AUTO RECEIVABLES, INC., AS
GENERAL PARTNER OF CORRAL, L.P., A
CERTIFICATEHOLDER OF CENTRAL
ORIGINATING LEASE TRUST
/s/ WILLIAM F. MUIR
------------------------------------
William F. Muir
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on January 25, 2002 by the
following persons in the capacities indicated.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
/s/ WILLIAM F. MUIR Chairman of the Board and Director
- -----------------------------------------------------
William F. Muir
/s/ JOHN D. FINNEGAN President and Director
- -----------------------------------------------------
John D. Finnegan
/s/ PAUL D. BULL Vice President and Director
- -----------------------------------------------------
Paul D. Bull
/s/ JOHN E. GIBSON Vice President and Director
- -----------------------------------------------------
John E. Gibson
/s/ JEROME B. VAN ORMAN, JR. Vice President and Director
- ----------------------------------------------------- (Principal Financial Officer)
Jerome B. Van Orman, Jr.
/s/ CYNTHIA A. RANZILLA Vice President and Director
- -----------------------------------------------------
Cynthia A. Ranzilla
/s/ GUNTER DUFEY Director
- -----------------------------------------------------
Gunter Dufey
/s/ RICHARD E. DAMMAN Director
- -----------------------------------------------------
Richard E. Damman
/s/ GERALD E. GROSS Comptroller
- ----------------------------------------------------- (Principal Accounting Officer)
Gerald E. Gross
By: /s/ GERALD E. GROSS
- -----------------------------------------------------
Gerald E. Gross
Attorney-in-Fact
</Table>
II-6
EXHIBIT INDEX
<Table>
<Caption>
EXHIBIT
INDEX DESCRIPTION
- ------- -----------
1.1 Form of Underwriting Agreement for the Grantor Trust
Certificates (incorporated by reference to Registrant from
Registration Statement File No. 333-06039, dated June 14,
1996).
1.2 Form of Underwriting Agreement for the Owner Trust Notes and
Certificates (incorporated by reference to Registrant from
Registration Statement File No. 333-06039, dated June 14,
1996).
1.3 Form of Underwriting Agreement for the Secured Notes
(incorporated by reference to Registrant from Registration
Statement File No. 333-93431, dated August 18, 2000).
3.1 Articles of Incorporation (incorporated by reference to
Registrant from Registration Statement File No. 33-49169,
dated November 15, 1993) and Amended and Restated By-laws of
Capital Auto Receivables, Inc. (incorporated by reference to
Registrant from Registration Statement File No. 333-06039,
dated June 14, 1996).
3.2 Amended and Restated Declaration of Trust, dated as of March
15, 1996 by Bankers Trust (Delaware) and acknowledged,
accepted and agreed to by Corral, L.P. (incorporated by
reference to Registrant from Registration Statement File No.
333-93431, dated March 22, 2001).
4.1 Form of Indenture between the Trust and the Indenture
Trustee (incorporated by reference to Registrant from
Registration Statement File No. 333-06039, dated June 14,
1996).
4.2 Form of Owner Trust Pooling and Servicing Agreement between
GMAC and the Seller (Version 1) (incorporated by reference
to Registrant from Registration Statement File No.
333-06039, dated June 14, 1996).
4.3 GMAC Grantor Trusts Standard Terms and Conditions of
Agreement Effective June 1, 1996 (incorporated by reference
to Registrant from Registration Statement File No.
333-06039, dated June 14, 1996).
4.4 Form of Grantor Trust Pooling and Servicing Agreement
between GMAC and the Seller (Version 2) (incorporated by
reference to Registrant from Registration Statement File No.
333-06039, dated June 14, 1996).
4.5 Form of Trust Agreement between the Seller and the Owner
Trustee (incorporated by reference to Registrant from
Registration Statement File No. 333-06039, dated June 14,
1996).
4.6 Form of Secured Note Indenture between the Trust and the
Indenture Trustee (incorporated by reference to Registrant
from Registration Statement File No. 333-93431, dated
February 28, 2001).
4.7 Form of Secured Note and Master Terms of Secured Notes
(incorporated by reference to Registrant from Registration
Statement File No. 333-93431, dated February 28, 2001).
5.1 Opinion of Kirkland & Ellis with respect to legality of
Grantor Trust Certificates and Owner Trust Notes and
Certificates.**
5.2 Opinion of Mayer, Brown & Platt with respect to legality of
Secured Notes, the Notes and the Certificates.**
8.1 Opinion of Kirkland & Ellis with respect to tax matters of
Grantor Trust Certificates and Owner Trust Notes and
Certificates.**
</Table>
<Table>
<Caption>
EXHIBIT
INDEX DESCRIPTION
- ------- -----------
8.2 Opinion of Mayer, Brown & Platt with respect to tax matters
of Secured Notes.**
10.1 Form of Purchase Agreement between GMAC and the Seller
(incorporated by reference to Registrant from Registration
Statement File No. 333-06039, dated June 14, 1996).
23.1 Consent of Kirkland & Ellis (included as part of Exhibit
5.1).
23.2 Consent of Mayer, Brown & Platt (included as part of Exhibit
5.2).
24.1 Power of Attorney.*
25.1 Statement of Eligibility of the Trustee for the Owner
Trustee Notes and Certificates.***
25.2 Statement of Eligibility of the Trustee for the Notes and
Certificates secured by the Secured Notes.***
25.3 Statement of Eligibility of the Trustee of the Secured
Notes***
99.1 Form of Trust Sale and Servicing Agreement among the Trust,
the Seller and the Servicer (incorporated by reference to
Registrant from Registration Statement File No. 333-06039,
dated June 14, 1996).
99.2 Form of Custodian Agreement (incorporated by reference to
Registrant from Registration Statement File No. 33-49307,
dated January 23, 1993).
99.3 Form of Administration Agreement among the Servicer, the
Owner Trustee and the Indenture Trustee (incorporated by
reference to Registrant from Registration Statement File No.
33-49307, dated January 23, 1993).
99.4 Form of Secured Note Pooling and Servicing Agreement between
GMAC and the Seller (incorporated by reference to Registrant
from Registration Statement File No. 333-93431, dated
February 28, 2001).
99.5 Form of Secured Note Trust Sale and Servicing Agreement
between the Trust, the Seller and GMAC (incorporated by
reference to Registrant from Registration Statement File No.
333-93431, dated February 28, 2001).
99.6 Form of Secured Note Trust Agreement between the Seller and
the Owner Trustee (incorporated by reference to Registrant
from Registration Statement File No. 333-93431, dated
February 28, 2001).
99.7 Form of Secured Note Administration Agreement between GMAC,
the Owner Trustee and the Indenture Trustee (incorporated by
reference to Registrant from Registration Statement File No.
333-93431, dated February 28, 2001).
99.8 Form of Consent and Acknowledgment between COLT, the
Servicer, the Seller, the Trust and the Indenture Trustee
(incorporated by reference to Registrant from Registration
Statement File No. 333-93431, dated February 28, 2001).
</Table>
- -------------------------
* Previously filed.
** Filed herewith.
*** To be filed in accordance with Section 305(b)(2) of the Trust Indenture Act
of 1939.