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As filed with the Securities and Exchange Commission on May 10, 2000
Registration No. 333-________
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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FIRST SECURITY AUTO OWNER TRUSTS
(Issuer with respect to the Notes and the Certificates)
FIRST SECURITY BANK,(R) N.A.
(Originator of the Trust described herein)
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United States of America 6025 87-0131890
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer Identification No.)
incorporation or organization) Classification Code No.)
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First Security Bank, N.A.
79 South Main Street
Salt Lake City, Utah 84111
(801) 246-5706
(Address, including zip code, and telephone number, including area code,
of the Registrant's principal executive office)
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Scott C. Ulbrich
Executive Vice President
First Security Van Kasper, Inc.
61 South Main Street
Salt Lake City, Utah 84111
(801) 246-5706
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
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Copies to:
A.R. Thorup Kenneth P. Morrison
Ray, Quinney & Nebeker Kirkland & Ellis
79 South Main Street, 400 Deseret Building 200 East Randolph Drive
Salt Lake City, Utah 84145-0385 Chicago, Illinois 60601
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
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, 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: [_]
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Title of Each Class of Proposed Maximum
Securities Amount to be Proposed Maximum Offering Aggregate Offering Amount of
to be Registered Registered Price Per Unit (1) Price (1) Registration Fee
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Asset Backed Securities $1,000,000 100% $1,000,000 $264.00
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(1) Estimated solely for the purposes of calculating the registration fee.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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Base Prospectus
LOGO
First Security(R) Auto Owner Trusts
Asset Backed Notes
Asset Backed Certificates
First Security Bank(R), N.A.
Seller and Servicer
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YOU SHOULD CONSIDER THE TRUSTS--
CAREFULLY THE RISK
FACTORS BEGINNING ON PAGE . A new trust will be formed to issue each series of securities.
__ IN THIS PROSPECTUS.
. The primary assets of each trust will be:
The notes of a series
represent the obligations . a pool of fixed rate retail motor vehicle installment sales contracts and
of the trust that issued installment loans;
those notes only. The
certificates of a series . monies received on those contracts and loans;
represent the beneficial
interest in the trust . a security or ownership interest in the automobiles and light trucks financed
that issued those under those contracts and loans; and
certificates only.
Neither the notes nor the . other related assets.
certificates issued by
any trust represent THE SECURITIES--
obligations of or
interests in, and are not
guaranteed by, First . will represent indebtedness of the trust that issued those securities, in the
Security Bank(R), N.A. or case of the notes, or beneficial interests in the trust that issued those
any of its affiliates. securities, in the case of the certificates;
This prospectus may be . will be paid only from the assets of the trust that issued those securities;
used to offer and sell
securities only if . will represent the right to payments in the amounts and at the times
accompanied by a described in the accompanying prospectus supplement;
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 one or more classes of certificates.
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NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is May 10, 2000
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Important Notice About Information Presented In This
Prospectus And The Accompanying Prospectus Supplement
We tell you about the securities in two separate documents that progressively
provide more detail:
(1) this prospectus, which provides general information, some of which may not
apply to particular securities, including your securities, and
(2) the accompanying supplement to this prospectus, which will describe the
specific terms of your securities, including:
. the timing of any interest and principal payments;
. the priority of any interest and principal payments;
. financial and other information about the property owned by the trust;
. information about credit enhancement for each class;
. the ratings of each class; and
. the method for selling the securities.
You should rely only on the information provided in this prospectus and the
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 jurisdiction where the offer is not
permitted. We do not claim the accuracy of the information in this prospectus or
the prospectus supplement as of any date other than the dates stated on their
respective covers.
We include cross-references in this prospectus and in the prospectus
supplement to captions in these materials where you can find further related
discussions. The following Table of Contents and the Table of Contents included
in the prospectus supplement provide the pages on which these captions are
located.
Capitalized terms used in this prospectus are defined under the caption
"Glossary of Terms" which appears at the end of this prospectus.
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TABLE OF CONTENTS
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PROSPECTUS SUMMARY........................................................... 1
THE PARTIES................................................................ 1
THE OFFERED SECURITIES..................................................... 1
THE TRUST PROPERTY......................................................... 2
CREDIT ENHANCEMENT......................................................... 2
SERVICING AND ADMINISTRATIVE ARRANGEMENTS.................................. 3
OPTIONAL REPURCHASE........................................................ 4
THE AGREEMENTS............................................................. 4
TAX STATUS................................................................. 4
ERISA CONSIDERATIONS....................................................... 5
RISK FACTORS................................................................. 6
FORMATION OF THE TRUSTS...................................................... 12
TRUST PROPERTY............................................................... 12
THE MOTOR VEHICLE LOAN PORTFOLIO............................................. 13
Origination of Receivables................................................. 14
Underwriting............................................................... 14
Servicing and Collections.................................................. 17
Physical Damage Insurance.................................................. 18
Delinquency and Loss Experience............................................ 19
MATURITY AND PREPAYMENT ASSUMPTIONS.......................................... 19
POOL FACTORS AND TRADING INFORMATION......................................... 20
USE OF PROCEEDS.............................................................. 21
THE BANK..................................................................... 21
DESCRIPTION OF THE NOTES..................................................... 22
Principal and Interest on the Notes........................................ 22
The Indenture.............................................................. 23
Certain Covenants.......................................................... 28
The Indenture Trustee...................................................... 30
DESCRIPTION OF THE CERTIFICATES.............................................. 30
Distributions of Interest and Certificate Balance.......................... 31
The Owner Trustee.......................................................... 31
CERTAIN INFORMATION REGARDING THE SECURITIES................................. 32
Fixed Rate Securities...................................................... 32
Floating Rate Securities................................................... 32
Indexed Securities......................................................... 33
Book-Entry Registration.................................................... 34
Definitive Securities...................................................... 38
Reports to Securityholders................................................. 39
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS......................... 41
Sale and Assignment of Receivables......................................... 41
Accounts................................................................... 45
Servicing Procedures....................................................... 46
Collections................................................................ 47
Servicing Compensation and Payment of Expenses............................. 47
Net Deposits............................................................... 48
Advances................................................................... 49
Other Servicing Matters.................................................... 49
Distributions.............................................................. 49
Credit Enhancement......................................................... 50
Statements to Trustees and Trust........................................... 52
Evidence as to Compliance.................................................. 52
Events of Servicing Termination............................................ 53
Rights Upon Event of Servicing Termination................................. 53
Waiver of Past Defaults.................................................... 54
Amendment.................................................................. 54
Payment of Notes........................................................... 55
Termination................................................................ 55
Administration Agreement................................................... 57
LEGAL ASPECTS OF THE RECEIVABLES............................................. 57
Rights in the Receivables.................................................. 57
Security Interests in the Financed Vehicles................................ 58
Repossession............................................................... 61
Notice of Sale; Redemption Rights.......................................... 61
Deficiency Judgments and Excess Proceeds................................... 61
Consumer Protection Laws................................................... 62
Other Limitations.......................................................... 63
ERISA CONSIDERATIONS......................................................... 64
PLAN OF DISTRIBUTION......................................................... 65
LEGAL MATTERS................................................................ 66
WHERE YOU CAN FIND MORE INFORMATION.......................................... 67
GLOSSARY..................................................................... 68
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PROSPECTUS 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 all of the material terms of an offering of
the securities, read carefully this entire prospectus and the prospectus
supplement.
THE PARTIES
Issuer
Each series of securities will be issued by a separate trust created by a trust
agreement.
Seller and Servicer
First Security Bank(R), N.A. will be the seller and the servicer for each trust.
Owner Trustee
Each trust will have an Owner Trustee which will be specified in the prospectus
supplement.
Indenture Trustee
Each trust will have an Indenture Trustee which will be specified in the
prospectus supplement.
THE OFFERED SECURITIES
We will describe in each prospectus supplement the securities we are offering at
that time. The offered securities will include one or more classes of asset-
backed notes and may include one or more classes of asset-backed certificates.
We may not offer all classes of a series under this prospectus. Instead, we may
retain one or more classes and we may sell one or more classes in private
placements.
The Notes
Each note will represent the right to receive payments of principal and
interest, which will be described in the prospectus supplement.
In general, each class of notes will have a stated principal amount and will
bear interest at a specified rate or rates. The interest rate for each class of
notes, or the method for determining the interest rate, will be specified in the
prospectus supplement.
Each class of notes may have a different interest rate, which may be fixed,
variable or adjustable, or any combination of these. Each class of notes may
also provide for principal payments to be made at different times and in
different amounts.
If a series includes two or more classes of notes, each class may differ as to
the timing and priority of payments of principal and interest, seniority and
allocations of losses. Some classes of notes may be subordinated to other
classes of notes of the same series. The prospectus supplement will describe
the extent of any subordination.
The Certificates
The certificates included in each series may or may not be offered under this
prospectus and the prospectus supplement. In general, each class of certificates
will have a stated certificate balance and will accrue interest on the
certificate balance at a pass-through rate. Each prospectus supplement will
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specify the pass-through rate for each class of certificates offered by that
prospectus supplement or the method for determining the pass-through rate.
Each certificate offered by this prospectus will represent the right to receive
payments of interest and the certificate balance. Each class of certificates
may also provide for payments on the certificate balance to be made at different
times and in different amounts. The prospectus supplement will specify the
details of payments of interest and the certificate balance for each class of
certificates.
Payments on the certificates will be subordinated in priority to payments on the
notes. In addition, if a series includes two or more classes of certificates,
each class may differ as to timing and priority of payments of interest and the
certificate balance, seniority and allocations of losses. Some classes of
certificates may be subordinated to other classes of certificates of the same
series. The prospectus supplement will specify the details of the
subordination.
Registration and Clearance
In most cases, securities offered by this prospectus will be registered in the
name of Cede & Co., as the nominee of DTC in the United States or Clearstream or
Euroclear in Europe. Generally, a holder of securities will not receive a
definitive certificate representing its interest. However, in some
circumstances we may issue the securities in fully registered, certificated
form.
Denominations
The prospectus supplement will specify the denominations in which you may
purchase securities. If no denomination is specified, then the notes will be
available for purchase in minimum denominations of $1,000 and in greater whole-
dollar denominations. The certificates will be available for purchase in
minimum denominations of $20,000 and in greater whole-dollar denominations.
Ratings
We will issue a series of securities only if we obtain the required ratings
specified in the prospectus supplement for that series of securities.
THE TRUST PROPERTY
The primary assets of each trust will be a pool of fixed rate retail motor
vehicle installment sales contracts and installment loans. These contracts and
loans are made by the seller or through a dealer that sold a motor vehicle. The
receivables in each trust will be sold by the seller to the trust.
CREDIT ENHANCEMENT
A holder of a class of securities may benefit from one or more forms of credit
enhancement that provide additional payment protection. Credit enhancement may
include any one or more of the following, as specified in the prospectus
supplement:
. subordination of one or more other classes of securities
. reserve or cash collateral accounts
. a yield supplement account
. advances
. interest rate swaps or caps
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. over collateralization
. letters of credit
. credit or liquidity facilities
. repurchase obligations
. third party payments or other support
. cash deposits
Reserve Account
The prospectus supplement will state whether the trust will have a reserve
account. In general, the reserve account will be funded as follows:
. On the closing date, the seller will deposit a reserve account initial
deposit.
. Additional amounts may be deposited in the reserve account in connection
with the purchase of subsequent receivables.
. The amount in the reserve account will be supplemented by the deposit of
funds remaining after providing for amounts to be distributed to the
holders of the notes and the certificates and the payment to the servicer
of the servicing fee.
Funds on deposit in the reserve account will be available on each distribution
date to cover shortfalls in payments of interest and principal on the securities
to the extent described in this prospectus and in the prospectus supplement.
Unless otherwise specified in the prospectus supplement, the trust will pay the
seller any amounts in the reserve account in excess of the specified reserve
account balance. The specified reserve account balance will be calculated only
after giving effect to all distributions to be made to or for the benefit of the
noteholders, the certificateholders and the servicer. The prospectus supplement
will state the specified reserve account balance.
Yield Supplement Agreement; Yield Supplement Account
The prospectus supplement will state whether the seller or a third party will
enter into a yield supplement agreement and/or establish a yield supplement
account for the benefit of the holders of the securities. A yield supplement
agreement or account is designed to provide for payments to securityholders
where the interest rate of a receivable is less than the sum of the interest
rate of the notes or pass-through rate of the certificates and the servicing fee
rate.
SERVICING AND ADMINISTRATIVE ARRANGEMENTS
For each series of securities, the seller will transfer the receivables to a
trust pursuant to a sale and servicing agreement between the seller and the
trust. The servicer will service, manage, maintain custody of and make
collections on the receivables. The trust will pay the servicer a servicing fee.
In addition, the Bank, as the administrator, will undertake administrative
duties for each trust under an administration agreement. See " Description of
the Transfer and Servicing Agreements--Servicing Compensation and Payment of
Expenses."
The prospectus supplement may provide that the servicer may make an advance for
each receivable if payments are due and unpaid on that receivable. The
prospectus supplement will specify the amount of that advance. The servicer will
not be obligated
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to make any advance for a receivable if it does not expect to recover that
advance from subsequent collections or recoveries on that receivable. The
servicer will be entitled to reimbursement of all advances.
OPTIONAL REPURCHASE
Unless otherwise provided in the prospectus supplement, the servicer will have
the option to purchase the receivables of a trust in the manner and on the terms
and conditions described under "Description of the Transfer and Servicing
Agreements--Termination." Any purchase of this type would result in the payment
in full of all outstanding securities.
THE AGREEMENTS
For each trust, we will enter into the agreements described below. We may also
enter into other agreements to provide for credit enhancement or other matters.
Sale and Servicing Agreement
. A sale and servicing agreement between the seller, the trust and the
Indenture Trustee will provide for the transfer of the receivables by the
seller to the trust.
. The sale and servicing agreement will also appoint the servicer and set
forth servicing procedures, compensation and other matters relating to the
servicing of the receivables.
. The sale and servicing agreement will provide for matters relating to
collections and distributions on the securities.
Trust Agreement
A trust agreement between the seller and the Owner Trustee will provide for the
formation of each trust and the issuance of the certificates for that trust.
Indenture
Each trust will issue notes under an indenture between the trust and the
Indenture Trustee. Each trust will pledge the trust property to the Indenture
Trustee for the benefit of the notes and certificates to the extent provided in
the indenture for that trust.
Administration Agreement
The Bank, each trust and the Indenture Trustee will enter into an administration
agreement. Under the administration agreement, the Bank will agree to
(1) act as administrator,
(2) provide notices, and
(3) perform other administrative obligations required by the indenture, on
behalf of the trust and Owner Trustee.
TAX STATUS
For information concerning the application of the federal income tax laws,
including whether the notes will be characterized as debt for federal income tax
purposes, see the prospectus supplement. We suggest that you consult with your
own tax counsel to determine the federal, state, local and other tax
consequences of the purchase, ownership and disposition of any securities.
ERISA CONSIDERATIONS
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Subject to the considerations discussed under "ERISA Considerations" in this
prospectus and in the prospectus supplement, the notes are eligible for purchase
by employee benefit plans.
No certificates may be acquired by any employee benefit plan subject to the
Employee Retirement Income Security Act of 1974, as amended, or by any
individual retirement account. See "ERISA Considerations" in this prospectus
and in the prospectus supplement.
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RISK FACTORS
You should consider the following risk factors in deciding whether to purchase
any securities.
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Prepayments on and Obligors may prepay the receivables in full or in
Repurchases of the part. In addition, defaults or the receipt of
Receivables Could proceeds from credit life, disability or physical
Reduce the Average damage insurance may lead to prepayment. Also, some
Life of the Securities events may require the seller to repurchase
receivables from a trust, and the servicer may have
the right to purchase all remaining receivables from
a trust pursuant to its optional purchase right. See
"Description of the Transfer and Servicing
Agreements--Sale and Assignment of Receivables" and
"--Termination." Each prepayment, repurchase or
purchase will shorten the average life of the
underlying securities.
A variety of economic, social and other factors may
influence prepayment rates. We cannot predict with
any assurance how these factors will affect
prepayment rates. For example, decreases in interest
rates and the fact that the obligor may sell or
transfer the financed vehicle without the consent of
the seller may affect the rate of prepayment.
If prepayments occurred after a decline in interest
rates, you may be required to reinvest your funds at
a return lower than the applicable interest rate of
the notes or pass-through rate of the certificates.
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. See "Maturity and Prepayment
Assumptions."
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Extensions and In some circumstances, the servicer may permit an
Deferrals of extension on payments due on receivables on a case-by-
Payments on case basis. In addition, the servicer has historically
Receivables Could offered payment deferrals to all obligors that meet
Increase the the Bank's eligibility requirements for these
Average Life of the deferrals in June and in December of each year. Any of
Securities these deferrals or extensions may extend the maturity
of the receivables and increase the weighted average
life of the securities. Any fees received by the
servicer associated with these deferrals or extensions
will increase the principal balance of the underlying
receivable. You will bear any reinvestment risk
resulting from extensions or deferrals of payments on
receivables. However, unless otherwise provided in the
prospectus supplement, the servicer must purchase the
receivable from the trust if any payment deferral of a
receivable extends the term of the receivable beyond
the latest final scheduled distribution date for any
class of securities. See "The Motor Vehicle Loan
Portfolio--Underwriting."
The Assets of Each Each trust will not have any significant assets or
Trust Are Limited sources of funds other than the receivables and any
and Are the Only credit enhancement provided for in the prospectus
Source of Payment supplement. The notes will represent obligations
for the Securities solely of the trust. The certificates will represent
beneficial interests in the trust.
The notes and the certificates will not be insured or
guaranteed by the seller, the Owner Trustee, the
Indenture Trustee, any of their affiliates or any
other person or entity unless the prospectus
supplement specifically states otherwise. You must
rely on payments on the receivables and, if available,
amounts on deposit in the trust accounts and any
credit enhancement described in the prospectus
supplement for repayment of your securities.
Lack of First The seller will file financing statements to perfect
Priority Liens on the interest of each trust in its receivables as
Financed Vehicles required by the UCC in the applicable states.
or Receivables Similarly, the trust will file financing statements as
Could Make the required by the UCC to perfect the pledge of the
Receivables receivables by the trust to the Indenture Trustee. For
Uncollectible and each trust, the servicer will appoint its affiliate,
Reduce or Delay First Security Service Company, as the custodian to
Payments on the hold the receivables and the receivable files.
Securities
The servicer and First Security Service Company will
not segregate, stamp or otherwise mark the receivables
files to indicate that they have been sold to the
trust or pledged to the Indenture Trustee. However,
the servicer and First Security Service Company will
note in their computer records that the receivables
have been sold to the trust and pledged to the
Indenture Trustee.
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Another person will acquire an interest in the
receivables superior to the interest of the trust and
the Indenture Trustee if that person-
(1) purchases or takes a security interest in the
receivables,
(2) for value,
(3) in the ordinary course of business, and
(4) without actual knowledge of the trust's and the
Indenture Trustee's interest.
The seller will assign its security interest in the
financed vehicles to the trust and the trust will
pledge that security interest to the Indenture
Trustee. The certificates of title or ownership of the
financed vehicles will not identify the trust or the
Indenture Trustee as the new secured party. In Utah,
Idaho and most other states, in most cases, the
security interest of the trust and the Indenture
Trustee in the financed vehicle will be perfected
against other security interests if-
. the Bank files an application requesting the
Bank's lien be noted on the certificates of title
or ownership, and/or
. the Bank has possession of the certificates with
the notation within 20 days after the obligor
takes possession of the financed vehicle.
Idaho also has procedures allowing for a paperless
electronic record of title. There is a risk, however,
in some states that if the certificate of title does
not identify the trust or the Indenture Trustee as the
new secured party, its security interest may not be
perfected.
In the event a trust or the Indenture Trustee does not
have a perfected security interest in a financed
vehicle, its security interest, and the security
interest of the Indenture Trustee, would be
subordinate to, among others-
. a bankruptcy trustee of the obligor,
. a subsequent purchaser of the financed vehicle,
or
. a holder of a perfected security interest.
See "Legal Aspects of the Receivables."
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The Bank's The seller intends that the transfer of receivables to
Insolvency Could each trust be treated as a sale. If the seller were to
Reduce or Delay become insolvent, the FDIA, as amended by FIRREA,
Payments on the gives certain powers to the FDIC, if it were approved
Securities as receiver. FDIC staff positions taken prior to the
passage of FIRREA do not suggest that the FDIC would
interrupt the timely transfer to a trust of payments
collected on the receivables.
Under FIRREA, if the transfer of the receivables to
the trust were characterized as a loan secured by a
pledge of receivables rather than a sale, that trust's
security interest in the receivables should be
respected by the FDIC if--
. the seller's transfer of the receivables is the
grant of a valid security interest in the
receivables to that trust;
. the seller becomes insolvent and the FDIC is
appointed conservator or receiver of the seller;
and
. the security interest:
(1) is validly perfected before the seller's
insolvency, and
(2) was not taken in contemplation of the seller's
insolvency or with the intent to hinder, delay
or defraud the seller or its creditors.
If the FDIC were to assert a different position, you
might experience delays and/or reductions in payments
on your securities. In addition, the FDIC might have
the right to repay the securities early and for an
amount which may be greater or less than their
principal balance. For example, under the FDIA, the
FDIC could--
. require the trust or the Indenture Trustee to go
through an administrative claims procedure to
establish its right to those payments;
. request a stay of proceedings with respect to the
seller; or
. reject the seller's sales contract and limit the
trust's resulting claim to actual direct
compensatory damages.
See "Certain Legal Aspects of the Receivables--Other
Limitations" in this prospectus.
Limited Federal and state consumer protection laws regulate
Enforceability of the creation and enforcement of consumer loans such as
the receivables. These laws impose specific statutory
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the Receivables liabilities upon creditors who fail to comply with
Could Reduce or their provisions. In some cases, this liability could
Delay Payments on affect an assignee's ability to enforce secured loans
the Securities such as the receivables. If an obligor had a claim
against any trust for violation of these laws prior to
the cutoff date, the seller must repurchase the
receivable unless it cures the breach. If the seller
fails to repurchase that receivable, you might
experience delays and/or reductions in payments on
your securities.
The Bank has The Bank and its affiliates are generally not
Limited Obligations obligated to make any payments to you on your
to a Trust and It Will securities. The Bank and its affiliates do not
not Make Payments guarantee payments on the receivables or your
on the Securities securities. However, the Bank, as seller, will make
representations and warranties about the
characteristics of the receivables.
If the seller breaches a representation or warranty
for a receivable, the seller may be required to
repurchase that receivable. If the seller fails to
repurchase that receivable, you might experience
delays and/or reductions in payments on your
securities. See "Description of the Transfer and
Servicing Agreements--Sale and Assignment of
Receivables."
In addition, in some circumstances, the servicer may
be required to purchase receivables. If the servicer
fails to purchase receivables, you might experience
delays and/or reductions in payments on your
securities. See "Description of the Transfer and
Servicing Agreements--Servicing Procedures."
If the Bank were to stop acting as the servicer, you
might experience delays in payments on your securities
resulting from delays in processing payments on the
receivables and information about the receivables.
A Class of Payments of interest and/or principal on the
Securities Will Be securities of any class of securities may be
Subject to Greater subordinated in priority of payment to interest and/or
Credit Risk If It Is principal due on one or more other classes of
Subordinated to securities in the same series. As a result, if your
Another Class of class of securities is subordinated, you will not
Securities receive any distributions on a distribution date until
the full amount of interest and/or principal of senior
classes has been allocated to those senior securities.
In addition, the Class B Notes of a series may not be
entitled to vote on matters while any Class A Notes
remain outstanding. The prospectus supplement will
describe the extent of any subordination.
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Commingling of The servicer will generally be required to deposit all
Assets by the collections and proceeds of the receivables into the
Servicer Could collection account within two business days of
Reduce or Delay receipt. However, if the servicer satisfies the
Payments on the conditions specified by the rating agencies, the
Securities servicer will not be required to deposit those amounts
in the collection account until shortly before funds
are needed to make required distributions to the
securityholders.
Until these funds have been deposited in the
collection account, the servicer may invest these
funds at its own risk and for its own benefit and will
not segregate them from its own funds. If the servicer
cannot deposit the funds in the collection account on
the specified date, you might experience delays and/or
reductions in payments on your securities. See
"Description of the Transfer and Servicing
Agreements--Collections on the Receivables."
The Absence of a The underwriters may assist in resales of the
Secondary Market securities but they are not required to do so. A
Could Limit your secondary market for any securities may not develop.
Ability to Resell If a secondary market does develop, it might not
Your Securities continue or it might not be sufficiently liquid to
allow you to resell any of your securities.
The Ratings for the We will issue a class of securities under this
Securities are prospectus only if that class receives the rating
Limited in Scope, specified in the prospectus supplement. The rating
May Not Continue considers only the likelihood that the trust will pay
to Be Issued and Do interest on time and will ultimately pay principal in
Not Consider the full or make full distributions of certificate
Suitability of the balance. A security rating is not a recommendation to
Securities for You buy, sell or hold the securities. The rating agencies
may revise or withdraw the ratings at any time.
Ratings on the securities do not address the timing of
distributions of principal on the securities prior to
the applicable final scheduled distribution date. The
ratings do not consider the prices of the securities
or their suitability to a particular investor. If a
rating agency changes its rating or withdraws a
rating, no one has an obligation to provide additional
credit enhancement or to restore the original rating.
</TABLE>
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FORMATION OF THE TRUSTS
With respect to each series of securities, the seller will establish a
separate trust by selling and assigning the receivables and other specified
trust property to the trust in exchange for those securities. The notes and
certificates of a series are collectively referred to as securities. Prior to
each sale and assignment, the trust will have no assets or obligations or any
operating history. A trust will not engage in any activity other than acquiring
and holding the trust property, issuing the securities and making payments on
those securities.
The servicer will service the receivables of each trust, either directly or
through subservicers, and will be paid the Servicing Fee out of collections from
the receivables, prior to distributions to the securityholders. The servicer
will also be entitled to the Supplemental Servicing Fee. The seller or the
servicer will pay certain other expenses of each trust as provided in the
applicable sale and servicing agreement. See "Description of the Transfer and
Servicing Agreement--Servicing Compensation and Payment of Expenses."
For each trust, the servicer will appoint an affiliate, First Security Service
Company, to hold the receivables and receivable files as custodian for the trust
and on behalf of the Indenture Trustee. The receivables will not be marked or
stamped to indicate that they have been sold to a trust or pledged to an
Indenture Trustee. The certificates of title for the financed vehicles will not
be endorsed or otherwise amended to identify that trust or Indenture Trustee as
the new secured party. However, the servicer and the Custodian will indicate in
their computer records that the receivables have been sold to that trust and
pledged to the Indenture Trustee. Under these circumstances and in some
jurisdictions, a trust's or an Indenture Trustee's interest in the receivables
and the financed vehicles may be subordinate to third parties. See "Legal
Aspects of the Receivables--Rights in the Receivable" and "--Security
Interests in the Financed Vehicles."
A trust will not acquire any assets other than the trust property, and we do
not anticipate that any trust will have a need for additional capital resources.
Each trust will not have an operating history upon its establishment and will
not engage in any activity other than acquiring and holding the trust property,
issuing the securities and distributing payments on the securities. Therefore,
we have not included historical or pro forma financial statements or ratios of
earnings to fixed charges with respect to a trust either in this prospectus or
in the prospectus supplement.
TRUST PROPERTY
The primary assets of each trust will include:
(1) a pool of fixed rate motor vehicle installment sales contracts and
installment loans made by the seller or through a dealer that sold a
motor vehicle;
(2) all monies due or received under those receivables after the cutoff
date specified in the prospectus supplement;
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(3) specific amounts from time to time on deposit in the trust accounts,
including any reserve account;
(4) security interests in the new and used automobiles and light trucks
financed by the receivables;
(5) specific rights of a trust under any yield supplement agreement;
(6) any of the seller's rights to receive proceeds from claims on credit
life, disability, theft and physical damage insurance policies
covering the financed vehicles or the obligors under the receivables;
(7) the seller's right to all documents and information contained in the
receivable files;
(8) the rights of a trust under the sale and servicing agreement;
(9) some of the seller's rights relating to the receivables under
agreements between the seller and the dealers that sold the financed
vehicles and Related Documents;
(10) the rights under any credit enhancement to the extent specified in the
prospectus supplement; and
(11) all proceeds, within the meaning of the UCC, of the assets of each
trust.
THE MOTOR VEHICLE LOAN PORTFOLIO
The Bank originates motor vehicle loans. These contracts and loans are
secured by new and used automobiles and light-duty trucks manufactured by a
number of automobile manufacturers. The motor vehicle loans to be transferred
to any trust have been or will be originated by participating dealers or will be
made by the Bank directly to borrowers. All applications are reviewed by the
Bank in accordance with its established underwriting procedures.
Historically, a substantial portion of the Bank's portfolio of motor vehicle
loans are located in Washington, Utah and Idaho, and that area of the country
generally. The prospectus supplement will provide detailed information relating
to the geographic distribution of motor vehicle loans.
The following is a description of the origination, underwriting and servicing
of the Bank's portfolio of motor vehicle loans as of the date of this
prospectus. The prospectus supplement will describe any material changes to this
information with respect to a trust known at the time the trust is created.
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Origination of Receivables
Applications for direct auto loans are originated in the Bank's branch
network, through the Bank's Loan by Phone - Lend Line - system, or through
direct mail solicitation. The applications are sent via facsimile to the
Application Processing Center in Boise, Idaho. Here applications are data
entered and scored. The electronic applications are then forwarded to the
Direct Consumer Loan Center located in Boise for credit approval and document
preparation. Approved loans are funded through the branch system in each state
or by mail to the customer.
The Bank originates its indirect loan applications through dealers in 18
states. These applications are also sent via facsimile to the Application
Processing Center in Boise to be data entered and scored. Those that are not
automatically decisioned are transmitted to regional Dealer Credit Services
Centers located in Salt Lake City, Utah, and Boise and Lewiston, Idaho. These
centers are responsible for credit analysis and credit decisions on indirect
loan requests.
Bank-wide consumer loan collections are performed by the Consumer Collections
Center located in Salt Lake City. A satellite office is located in Boise for
bankruptcy and charge off collections.
The Consumer Loan Servicing Center in Boise provides servicing for installment
loans, auto leases, and flooring. It reviews and tracks all loan documentation,
stores and maintains all loan files on an imaging system, follows up on lien
perfection, processes payments, reconciles accounting records, provides for
internal and external reporting for all of the Bank's direct and indirect
consumer lending and auto leasing business, provides central processing of
manufacturer's drafts and flooring requests for the regional Dealer Credit
Services Centers, and provides processing of flooring billing and payments.
The Small Business and Consumer Loan Administration department in Boise
provides credit administration. This department provides policy and functional
guidance for all areas of consumer lending.
Underwriting
The Bank uses the applicant's creditworthiness as the basic criterion in
purchasing a retail installment sale contract from a dealer and in making an
installment loan. The Bank evaluates each applicant individually based on the
Bank's underwriting and credit scoring guidelines. These guidelines are
intended to assess the applicant's ability to repay the loan and the adequacy of
the financed vehicle as collateral.
The credit underwriting process begins when a credit application is received
via fax from a dealer or a branch. It is data entered in to the application
Processing System and a credit bureau report is pulled. Once a credit bureau
report and all other applicant information have been gathered, an automated
custom credit score and a generic FICO credit score are generated.
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<PAGE>
The generic scorecard was developed by Fair Isaac and Company based on pooled
data received from different creditors. It is validated at least twice a year.
It predicts whether a borrower will repay based strictly on credit bureau
characteristics. The custom scorecard, developed with assistance from
Experian/Management Decision Systems or MDS, has been in place since January
1994. It is reviewed and validated periodically based on statistical samplings
of actual Bank credit results. The most recent update to the custom scorecard
was implemented in January 1999.
The custom scorecard measures the creditworthiness of an applicant based on
the following characteristics:
Stability: residential status, time at present address, time at current job;
Ability to repay: sum of net monthly income, revolving debt ratio;
Credit experience shown on credit report: credit card reference, personal
finance company reference, delinquencies, number of inquiries; and
Collateral equity: percent down payment.
The MDS custom credit score and the generic FICO credit score are an integral
part of the overall decision process. These two scores are used in a two-
dimensional credit quality matrix that assigns a credit quality factor to each
application (A-E). These quality factors are based upon observed bad rates for
each cell in the matrix. This credit quality matrix is used for an automated
decision making process. Applications are automatically approved or declined
based on predetermined score ranges and automated review guidelines. All auto
applications go through this process; about 30% of the decisions are automated.
At this point, the system assigns applications that have not been
automatically decisioned to the regional dealer centers or the Direct Consumer
Loan Center for credit review. Credit analysts review the credit scores, credit
quality factor, statistical information, debt to income analysis, and the credit
bureau report in making a credit decision. In certain cases, the credit analyst
requests verification of the applicant's employment record by the Verification
team of the Application Processing Center.
The applicant's creditworthiness is then evaluated based on the following:
Credit history: The applicant's credit background and current pay habits are
reviewed through the credit bureau report. If the credit report is
insufficient, direct phone calls to other creditors may be necessary to develop
additional information, clarify facts, or explore recent inquiries.
Income/employment: It is the responsibility of the credit analyst to determine
when income or employment verification is necessary. Employment is verified
through the credit report and direct employment verification calls are conducted
in approximately 10% of all cases. When the ability to pay is questionable or
the income stated is unreasonable for the industry, the net income is verified.
In some instances, the customer will be asked
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<PAGE>
for either personal financial statements or a copy of previous tax returns, for
example - self-employed individuals.
Ability to pay: The general guideline for acceptable net debt service-to-
income ratio is 50%. On any application with a higher than usual monthly net
debt service-to-income ratio, the analyst evaluates the applicant's overall
circumstances and must be satisfied that the applicant has the ability to pay.
Collateral: The maximum allowable advance for new and used vehicles is 130% of
dealer invoice or wholesale value from an approved guide book, either NADA or
Kelly, plus tax, license fees, documentation fees, warranties, and certain other
rebatable insurance products. The allowable advance varies with credit quality
and is often less than 130%. Advances in excess of the maximum allowable amount
require additional review and appropriate authorization, and are reported as
policy exceptions.
Character: Evaluated through consideration of all previous steps in the credit
process.
After analysis of the above factors and consideration of the credit score, the
credit analyst will enter the credit decision into the system and, subsequently,
notify the dealer, branch or LendLine by automated fax or phone. The dealer,
branch or LendLine will notify the applicant of the Bank's decision. The Bank
provides a Notice of Credit Decision on declined requests to the applicant.
In mid-1998, First Security introduced the First Approval program which allows
dealers to pre-approve loans based upon a generic credit score and several other
individual borrower characteristics. These loans have very low delinquency/loss
ratios and tend to be very price sensitive. Once the dealer has approved the
loan, the contract is forwarded to the Bank. The application is processed
through the credit quality matrix. If the system does not automatically approve
the application, it is forwarded to the credit analysts for a very limited
underwriting review. These applications/loans experience virtually a 100%
funding ratio.
In cases where a co-signer/guarantor is offered, the same underwriting
standards and procedures will be followed with respect to that party. Although
such cases are rare, a co-signer/guarantor may be used to provide additional
support to the applicant in the areas of employment, income, or insufficient
credit history.
All policy exceptions must be approved and documented by an authorized credit
analyst. Monthly monitoring by Risk Management identifies all exceptions
approved and purchased by type of exception.
The Bank has selected dealers from which it purchases retail installment sale
contracts based on the dealer's financial and operating history. Each dealer has
made representations and warranties to the Bank with respect to the contracts
originated through it and the security interests in the financed vehicles.
However, these representations and warranties do not relate to the
creditworthiness of any applicant or the collectibility of any loans. As to a
generally small percentage of the motor vehicle loans, the Bank has direct
recourse to a dealer if an applicant defaults under a receivable, subject to
certain conditions to be fulfilled by the Bank. Upon breach of any
representation or warranty made by a dealer with respect to a retail installment
sale contract originated
16
<PAGE>
through it, the Bank may require that dealer to repurchase that contract.
Generally, in determining whether to exercise that right or any right of direct
recourse to a dealer, the Bank considers the prior performance of the dealer and
other business and commercial considerations. The Bank, as servicer, is
obligated to enforce these rights with respect to dealer agreements relating to
the receivables in accordance with its customary practices, and the right to any
proceeds received upon enforcement of those rights will be conveyed to the
applicable trust.
Servicing and Collections
When the signed loan documents are received by the Bank, the Validation and
Discounting Center in Boise performs a quality control review to ensure that the
loan documents are in compliance with all state and federal laws and bank
policies, validates the terms and conditions of the contract, ensures all credit
conditions are met, and calculates the dealer reserve. The documents are
forwarded to the Consumer Loan Servicing Center for complete loan servicing and
lien perfection follow-up.
Electronic image storage was initiated in 1994. All files are now stored on
Image. All paid loan records are retained for five years on the Image system.
The consumer Loan Service Center has a comprehensive disaster plan for the
replacement of loan documents in the event of a catastrophe.
The Bank's Consumer Loan Collection Department handles all retail credit
products, including auto loans, home equity loans, lease, bankcard, and small
business loans. A reminder notice is mailed to all of the Bank's accounts by
the tenth day of delinquency. Unpaid installment loans enter the bank's on-line
collection system - Shaw - on the 3/rd/ day of delinquency. Delinquent accounts
also enter the Davox dialer group on the 6/th/ day.
The Davox dialer group consists of 50 dialer stations, which utilizes
predictive dialing technology developed by Davox Corporation to contact accounts
which are between 6 and 59 days delinquent. Accounts in the 6 to 59 days
delinquent category are primarily contacted by telephone. However, letters and
personal contacts are also employed on a case-by-case basis. Accounts are risk
graded based on the FICO score to determine how early they are contacted. High-
risk accounts are contacted on the 6/th/ day of delinquency, medium risk
accounts on the 10/th/ day of delinquency, and low risk on the 30/th/ day of
delinquency.
High and medium risk accounts are assigned to dedicated collectors on the
44/th/ day of delinquency, while low risk accounts are assigned on the 60/th/
day of delinquency. The dedicated collector will continue collecting the
account until it is resolved.
The Bank considers repossession when all collection efforts have been
exhausted. The decision to repossess may occur at any point in the delinquency
depending upon the customer's inability to maintain a satisfactory repayment
schedule. Generally, repossessions will occur on an account between 60 and 90
days delinquent where further collection activities are judged to be fruitless.
Approval of the Collection Manager is required for exceptions to this policy.
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<PAGE>
A Bank field collector or an outside agency close to the geographical location
of the vehicle will be used to repossess the vehicle. After repossession, the
Bank is required to give reasonable notice to the obligor of any proposed sale
of the financed vehicle. The Bank's practice is to give the obligor 10 days'
notice unless otherwise required by law.
Repossessed vehicles are sold at dealer wholesale auctions. Approximately 75%
of the repossession are sold at auctions in Salt Lake City or Boise. The
remainder are sold at wholesale auctions near the place of repossession.
In the event that the Bank determines that, after it has exhausted all
customary and usual collection practices and procedures, including efforts to
repossess and liquidate a financed vehicle or recover a deficiency balance
related to a Liquidating Receivable, further collection efforts by it as to that
receivable will not result in the realization of additional proceeds to the
trust, the Bank, may, on behalf of the trust, sell the receivable to any person
not affiliated with the servicer free and clear of the rights of the trust. All
proceeds of the sale of such receivables shall be deposited directly in or
credited to the collection account.
The Bank, as servicer, may, on a case-by-case basis, permit extensions of the
due dates of receivables or payment deferrals in the discretion of a collector
other than the original officer. In addition to these extensions, the Bank, as
servicer, has historically offered payment deferrals to a broader population of
qualifying applicants in June and December of each year. Unless otherwise
specified in a prospectus supplement, all obligors that meet the Bank's
eligibility requirements will be given the opportunity to take advantage of
these payment deferrals. Any deferrals or extensions may extend the maturity of
the receivable and increase the weighted average life of the receivable. Any
deferral or extension could also result in delays of payments on the securities.
Physical Damage Insurance
The Bank requires that an obligor provide an insurance policy covering
collision and comprehensive insurance. The deductibles are a maximum of $1,000
each for the collision insurance and the comprehensive insurance. The servicer
may increase the maximum deductible consistent with the standard of care
required by the applicable sale and servicing agreement.
Each receivable generally gives the Bank the right to force place insurance
coverage in the event the required physical damage insurance on a financed
vehicle is not maintained by an obligor. However, the Bank is not obligated to
force place coverage. In the event obligors do not maintain insurance coverage
and coverage is not force placed, then insurance recoveries may be limited in
the event of losses or casualties to financed vehicles included in the trust
property. As a result, securityholders could suffer a loss on their investment.
The Bank reserves the right to change its policies with respect to insurance
on financed vehicles in accordance with its business judgment.
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Delinquency and Loss Experience
Fluctuations in delinquencies, repossessions and charge-offs generally follow
trends in the overall economic environment and may be affected by such factors
as
(1) increased competition for obligors,
(2) rising consumer debt burden per household and
(3) increases in personal bankruptcies.
Information with respect to delinquencies, repossessions and charge-offs will
be set forth in the prospectus supplement. This information will include, to
the extent appropriate, data indicating the delinquency and credit
loss/repossession experience for each of the last five calendar years of the
Bank's entire portfolio of motor vehicle loans. No assurance can be made that
the performance of the receivables in any trust will be similar to historical
experience.
MATURITY AND PREPAYMENT ASSUMPTIONS
Full or partial prepayments on the receivables in a trust will reduce the
weighted average life of the securities. Delinquencies by obligors under the
receivables, as well as extensions and deferrals on the receivables, will
increase the weighted average life of the securities.
Obligors may prepay receivables at any time and mandatory prepayments of a
receivable may result from, among other things,
(1) the sale, insured loss or other disposition of the related financed
vehicle or
(2) the receivable becoming a Liquidating Receivable.
If a prospectus supplement provides that the property of the trust will
include a pre-funding account, the related securities will be subject to partial
redemption on or immediately following the end of the pre-funding period. The
prospectus supplement will describe the amount and the manner of any potential
redemption. We cannot predict or assure the level or timing of prepayments. If
prepayments were to occur after a decline in interest rates, investors seeking
to reinvest their funds might be required to invest at a return lower than the
applicable interest rate of the notes or pass-through rate of the certificates.
Securityholders will bear all reinvestment risk resulting from prepayment of the
receivables in the trust.
The rate of prepayments on the receivables may be influenced by a variety of
economic, social and other factors, including the fact that an obligor may sell
or transfer a financed vehicle without the consent of the
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<PAGE>
servicer. The servicer believes that the actual rate of prepayments will result
in a substantially shorter weighted average life than the scheduled weighted
average life of the receivables in a trust. Securityholders will bear any
reinvestment risks resulting from a faster or slower incidence of prepayment of
these receivables. See "Description of the Transfer and Servicing Agreements--
Termination" regarding the servicer's option to purchase all of the receivables
in a trust in some circumstances.
The Bank maintains records of the historical prepayment experience of its
portfolio of motor vehicle loans. The Bank does not believe that these records
are adequate to provide meaningful information with respect to the receivables
in a trust. In any event, we cannot assure you that prepayments on these
receivables would conform to any historical experience. We cannot predict the
actual prepayment experience to be expected.
POOL FACTORS AND TRADING INFORMATION
The Note Pool Factor expresses the remaining outstanding principal balance of
that class of notes, as of the close of that date, after giving effect to
payments to be made on that date, as a fraction of the initial outstanding
principal balance of that class of notes. Each Note Pool Factor and each
Certificate Pool Factor will be 1.0000000 as of the closing date. Each Note
Pool Factor and Certificate Pool Factor will decline after the closing date to
reflect reductions in the outstanding principal balance of the applicable class
of notes or the reduction of the certificate balance of the applicable class of
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 that
noteholder's note and (2) the applicable Note Pool Factor. A certificateholder's
portion of the aggregate outstanding certificate balance for the related class
of certificates is the product of (1) the original denomination of that
certificateholder's certificate and (2) the applicable Certificate Pool Factor.
Securityholders will receive periodic reports concerning
(1) payments received on the receivables,
(2) the Aggregate Receivables Balance,
(3) each Certificate Pool Factor or Note Pool Factor, as applicable, and
(4) various other items of information specified in the prospectus
supplement.
In addition, securityholders of record during any calendar year will be
furnished information for tax reporting purposes not later than the latest date
permitted by law. See "Certain Information Regarding the Securities--Reports to
Securityholders."
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USE OF PROCEEDS
Unless the prospectus supplement provides for other applications, the net
proceeds from the sale of the securities of a given series will be added to the
seller's general funds. This will occur only after making the initial deposit
in the applicable reserve account, yield supplement account, or the deposit of
the pre-funded amount into the related pre-funding account, if any.
THE BANK
First Security Bank, N.A., a national banking association, which will act
as the seller and servicer for the trusts. The Bank is a subsidiary of First
Security Corporation, a Delaware multi-state financial services corporation
based in Salt Lake City, Utah. First Security Corporation is the oldest
continuously operating multi-state bank holding company in the United States.
The Bank is a major participant in the motor vehicle financing and dealer
flooring markets in Utah, Idaho and neighboring market areas, as well as in all
facets of consumer and commercial lending.
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DESCRIPTION OF THE NOTES
For each trust, one or more classes of asset-backed notes will be issued
pursuant to the terms of an indenture. A form of the indenture has been filed
as an exhibit to the registration statement of which this prospectus forms a
part. With respect to each series, the rights and benefits of the trust in the
trust property will be assigned to the Indenture Trustee as collateral for the
related notes and certificates to the extent provided in the indenture. The
following summary describes the material terms of the form of the notes and the
form of the indenture. The summary is not complete and you should read the full
text of the notes and the indenture to understand their provisions. 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 prospectus supplement, each class of notes
will initially be represented by one or more notes. In each case, the notes
will be registered in the name of a nominee of DTC, in the United States, or
Clearstream or Euroclear, in Europe, except as set forth below. See "Certain
Information Regarding the Securities - Book Entry Registration."
Principal and Interest on the Notes
The prospectus supplement will describe the timing and priority of payment,
seniority, interest rate and amount of or method of determining payments of
principal and interest on each class of notes. Each prospectus supplement will
specify the payment dates, which may be monthly, quarterly or otherwise. 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 of that series, as described in the prospectus
supplement. Unless otherwise provided in the prospectus supplement, payments of
interest on the notes of each series will be made prior to payments of principal
on those notes.
To the extent provided in the prospectus supplement, a series may include one
or more classes of Strip Notes.
Each class of notes may have a different interest rate, which may be a fixed,
variable or adjustable interest rate or any combination of these. The interest
rate may be zero for certain classes of Strip Notes. The prospectus supplement
will specify the interest rate or the method for determining the interest rate
for each class of notes of a given series. One or more classes of notes of a
series may be redeemable in whole or in part under the circumstances specified
in the prospectus supplement, including at the end of any funding period or as a
result of the servicer's exercise of its purchase option.
If a series of notes includes two or more classes of notes, the prospectus
supplement will describe the sequential order and priority of payment of
principal and interest for each class, and any schedule or formula or other
provisions applicable to the determination of order or priority. Payments of
principal and interest of any class of notes will be made on a pro rata basis
among all the noteholders of that class.
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<PAGE>
Unless the prospectus supplement specifies that notes of different classes
within a series will have different priorities, payments to noteholders of all
classes within a series will have the same priority. Under some circumstances,
the amount available could be less than the amount of total interest required
with respect to the notes on any of the payment dates. In this case, each class
of noteholders will receive its ratable share of the aggregate amount available
to be distributed in respect of interest on the notes of that series based upon
the aggregate amount of interest due to each class of noteholders. See
"Description of the Transfer and Servicing Agreements--Distributions" and "--
Credit Enhancement" in this prospectus.
To the extent specified in the prospectus supplement, one or more classes of
notes of a series may be entitled to receive principal payments prior to the
receipt of principal payments by other classes of that series. If so provided in
the prospectus supplement, a class or classes of notes may have a final
scheduled distribution date of less than 397 days from the applicable closing
date and that class or classes may have received a short-term rating by a rating
agency that is in one of the two highest short-term rating categories. The
failure to pay such a class of notes on or prior to the related final scheduled
distribution date would constitute an Event of Default under the indenture.
To the extent specified in the prospectus supplement, one or more classes of
notes of a series may have principal payment schedules which are fixed or based
on targeted schedules derived by assuming differing prepayment rates. One or
more classes of notes of a series may be designated to receive principal
payments on a payment date only if principal payments have been made to another
class of notes, and to receive any excess payments over the amount required to
be paid to another class of notes on that payment date. Noteholders of these
notes would be entitled to receive as payments of principal on any given payment
date the applicable amounts set forth on the schedule for those notes, in the
manner and to the extent set forth in the prospectus supplement.
If the servicer exercises its option, if any, to purchase the receivables of a
trust in the manner and on the terms and conditions described under
"Description of the Transfer and Servicing Agreements--Termination" in this
prospectus, the outstanding notes of that series will be prepaid as set forth in
the prospectus supplement. In addition, if the prospectus supplement provides
that the property of a trust will include a pre-funding account, the related
outstanding notes may be subject to partial prepayment on or immediately
following the end of the related pre-funding period in an amount and manner
specified in the prospectus supplement. In the event of a partial prepayment,
the noteholders of that series may be entitled to receive a prepayment premium,
in the amount and to the extent provided in the prospectus supplement.
The Indenture
Modification of Indenture Without Noteholder Consent. Each trust and the
Indenture Trustee, on behalf of the trust, may enter into one or more
supplemental indentures without consent of the related noteholders for any of
the following purposes:
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. 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, or to
surrender any rights or power in the indenture conferred upon the
trust;
. 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 which may be inconsistent
with any other provision of the indenture or in any supplemental
indenture;
. 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;
. 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 to modify in any manner the rights
of noteholders under that indenture; provided that any action
specified in this clause 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.
Modification of Indenture With Noteholder Consent. For each trust, the trust
and the Indenture Trustee may execute a supplemental indenture with the consent
of a majority of the holders of the outstanding notes of that series. A
supplemental indenture may-
(1) add provisions to the indenture,
(2) change the indenture in any manner,
(3) eliminate any provisions of the indenture, or
(4) modify in any manner the rights of the related noteholders, except as
provided below.
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Unless the prospectus supplement for a series of notes specifies otherwise,
the trust and the Indenture Trustee must obtain the consent of the holder of
each outstanding affected note to execute a supplemental indenture, if that
supplemental indenture would-
. change the date of payment of any installment of principal of or interest
on that note;
. reduce the principal amount of that note, the interest rate specified on
that note or the redemption price for that note;
. change any place of payment where, or the coin or currency in which, any
note or any interest on that note is payable;
. impair the right to institute suit for the enforcement of certain
provisions of the indenture regarding payment;
. reduce the percentage of the aggregate amount of the outstanding notes of
that series, the consent of the holders of which is required for any
supplemental indenture or for any waiver of compliance with certain
provisions of the indenture or of certain defaults under the indenture and
their consequences as provided for in that indenture;
. modify or alter the provisions of the indenture regarding the voting of
notes held by the trust, any other obligor on those notes, the seller or an
affiliate of any of them;
. reduce the percentage of the aggregate outstanding amount of those notes
required to direct the Indenture Trustee to sell or liquidate the
receivables, the consent of the holders of which is required if the
proceeds of the sale or liquidation would be insufficient to pay the
principal amount and accrued but unpaid interest on the outstanding notes
of that series;
. decrease the percentage of the aggregate principal amount of those notes
required to amend the sections of the indenture that specify the applicable
percentage of aggregate principal amount of the notes of that series
necessary to amend the indenture or certain other related agreements;
. modify any provisions of the indenture in such 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, including the calculation of any of the
individual components of that calculation;
. permit the creation of any lien ranking prior to or on a parity with the
lien of the indenture with respect to any of the collateral for those
notes; or
. except as otherwise permitted or contemplated in the indenture, terminate
the lien of the indenture on any collateral or deprive the holder of any
note of the security afforded by the lien of the indenture.
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Events of Default; Rights Upon Event of Default.
Unless otherwise specified in the prospectus supplement, the failure to pay
principal on a class of notes on any payment date generally will not result in
the occurrence of an Event of Default until the final scheduled distribution
date for that class of notes.
Unless otherwise specified in the prospectus supplement, "Events of Default"
under the indenture will consist of:
(1) a default in the payment of any interest on any note for a period of
five days;
(2) a default in the payment of the principal of or any installment of the
principal of any note when that payment or installment becomes due and
payable;
(3) a default in the observance or performance of any covenant or
agreement of the trust made in the indenture which default materially
and adversely affects the rights of the noteholders, and which default
continues for a period of 30 days after written notice of the default
is given to the trust by the Indenture Trustee or to the trust and the
Indenture Trustee by the holders of at least a majority in principal
amount of those notes then outstanding, or for a longer period, not in
excess of 90 days, as may be reasonably necessary to remedy the
default; provided that the default is capable of remedy within 90 days
or less; or
(4) specified events of bankruptcy, insolvency, receivership or
liquidation of the trust.
If an Event of Default should occur and be continuing with respect to the
notes of any series, unless otherwise specified in the prospectus supplement,
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. Unless otherwise specified in the prospectus supplement, the
declaration may be rescinded, under some circumstances by the holders of a
majority in principal amount of the notes then outstanding.
If the notes of any series are declared to be due and payable following an
Event of Default, the Indenture Trustee may institute proceedings to collect
amounts due or foreclose on the trust property, exercise remedies as a secured
party, sell the receivables or elect to have the trust maintain possession of
the receivables and continue to apply collections on the receivables as if there
had been no declaration of acceleration.
Unless otherwise specified in the prospectus supplement, the Indenture Trustee
is prohibited from selling the receivables following an Event of Default,
unless:
(1) the holders of all the outstanding notes consent to the sale,
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(2) the proceeds of the sale are sufficient to pay in full the principal
and the accrued interest on the outstanding notes at the date of the
sale, or
(3) there has been an Event of Default arising from a failure to make a
required payment of principal or interest on any notes, and
(4) the Indenture Trustee determines that the proceeds of receivables
would not be sufficient on an ongoing basis to make all payments on
the notes as the payments would have become due if those obligations
had not been declared due and payable, and
(5) the Indenture Trustee obtains the consent of the holders of sixty-six
and two-thirds percent of the aggregate outstanding principal amount
of the notes.
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
that series of 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 principal amount of the outstanding
notes of a given series will have the right to direct the time, method and place
of conducting any proceeding or any remedy available to the Indenture Trustee.
The holders of a majority in principal amount of those notes then outstanding
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 the outstanding notes.
Unless and to the extent the prospectus supplement specifies other
circumstances in which a holder of a note of a series will have the right to
institute the proceedings described below, no holder of a note will have the
right to institute any proceeding with respect to the indenture unless:
(1) that holder has previously given written notice to the Indenture
Trustee of a continuing Event of Default,
(2) the holders of not less than a majority in principal amount of the
outstanding notes of that series have made written request to the
Indenture Trustee to institute a proceeding in its own name as
Indenture Trustee,
(3) that holder or holders have offered the Indenture Trustee indemnity
reasonably satisfactory to it against the costs, expenses and
liabilities to be incurred in complying with the request,
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(4) the Indenture Trustee has for 60 days after receipt of the notice,
request and offer of indemnity failed to institute a proceeding, and
(5) 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 principal amount of the outstanding notes.
In addition, each Indenture Trustee and the noteholders, by accepting the
notes, will covenant that they will not, for a period of one year after the
termination of the indenture, institute against the trust any bankruptcy,
reorganization or other proceeding under any federal or state bankruptcy or
similar law.
In the absence of an express agreement to the contrary, none of the
following will 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-
. the Indenture Trustee in its individual capacity;
. the Owner Trustee in its individual capacity;
. any holder of a certificate representing an ownership interest in the
trust; and
. any of the owners, beneficiaries, agents, officers, directors,
employees, affiliates, successors or assigns of the parties named
above.
Certain Covenants
Each indenture will provide that the trust 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) that entity expressly assumes the trust's obligation to make due and
punctual payments of principal and interest on the notes and the
performance or observance of every agreement and covenant of the trust
under the indenture;
(3) no Event of Default with respect to that series shall have occurred
and be continuing immediately after the merger or consolidation;
(4) the trust has been advised that any ratings of the notes and the
certificates then in effect would not be downgraded or withdrawn by
the rating agencies as a result of the merger or consolidation;
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(5) any action as was necessary to maintain the lien and security interest
created by the indenture shall have 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 related noteholder or certificateholder.
Each trust will not, among other things:
. except as expressly permitted by the Related Documents, sell,
transfer, exchange or otherwise dispose of any of the properties or
assets of that trust;
. claim any credit on or make any deduction from the principal or
interest payable in respect of the notes of the related series - other
than amounts withheld under the Code or applicable state law - or
assert any claim against any present or former holder of those notes
because of the payment of taxes levied or assessed upon the trust;
. permit the validity or effectiveness of the indenture to be impaired
or permit any person to be released from any covenants or obligations
with respect to the notes under that indenture except as may be
expressly permitted by that indenture,
. 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 the trust, or
any interest in the trust or the proceeds of the trust, or
. permit any lien of the indenture not to constitute a valid first
priority security interest in the receivables, other than with respect
to any tax, mechanics' or other lien.
A trust may not engage in any activity other than as specified in this
prospectus or in the prospectus supplement. A trust will not incur, assume or
guarantee any indebtedness other than indebtedness incurred under the notes and
the indenture, pursuant to any Advances made to it by the servicer or otherwise
in accordance with the Related Documents.
Annual Compliance Statement. Each trust will be required to file annually with
the Indenture Trustee a written statement as to the fulfillment of its
obligations under the indenture.
Indenture Trustee's Annual Report. To the extent required by the Trust
Indenture Act of 1939, as amended, the Indenture Trustee for each trust will be
required to mail each year to all noteholders a brief report relating to:
. its eligibility and qualification to continue as Indenture Trustee
under the indenture,
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. any amounts advanced by it under the indenture,
. the amount, interest rate and maturity date of certain indebtedness
owing by the trust to the Indenture Trustee in its individual
capacity,
. the property and funds physically held by the Indenture Trustee as
such and
. any action taken by it that materially affects the related notes and
that has not been previously reported.
Satisfaction and Discharge of Indenture. An indenture will be discharged with
respect to the notes upon the delivery to the Indenture Trustee for cancellation
of all of 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
The prospectus supplement will specify the Indenture Trustee for a series of
notes. The Indenture Trustee for any series may resign at any time. The
administrator of the trust may also remove any 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. In those
circumstances, the administrator of the trust will be obligated to appoint a
successor indenture trustee for that series of notes. If an Event of Default
occurs under an indenture and the prospectus supplement provides that a given
class of notes is subordinated to one or more other classes of notes of that
series, pursuant to the Trust Indenture Act of 1939, as amended, the Indenture
Trustee may be deemed to have a conflict of interest and be required to resign
as trustee for one or more of the classes of notes. In this case, the indenture
will provide for a successor trustee to be appointed for one or more of those
classes of notes and may provide for rights of senior noteholders to consent to
or direct actions by the Indenture Trustee which are different from those of
subordinated noteholders. Any resignation or removal of the Indenture Trustee
and appointment of a successor indenture trustee for any series of notes will
not become effective until acceptance of the appointment by the successor
indenture trustee for that series.
DESCRIPTION OF THE CERTIFICATES
Each trust may issue one or more classes of asset-backed certificates pursuant
to the terms of a trust agreement. A form of the trust agreement 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 certificates and
the trust agreement. The summary is not complete and you should read the full
text of the certificates and the trust agreement to understand their provisions.
The prospectus supplement may contain additional information relating to a
specific trust agreement and the series issued pursuant to that trust agreement.
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The prospectus supplement will specify whether each class of certificates
offered under the prospectus supplement will initially be represented by one or
more certificates registered in the name of the Depository or its nominee,
except as set forth below, or will be issued in fully registered, certificated
form.
Distributions of Interest and Certificate Balance
The prospectus supplement will describe the timing and priority of
distributions, seniority, allocations of losses, pass-through rate and amount of
or method of determining distributions with respect to certificate balance and
interest of each class of certificates. Distributions of interest on the
certificates will be made on the distribution dates and will be made prior to
distributions with respect to principal of those certificates. To the extent
provided in the prospectus supplement, a series may include one or more classes
of Strip Certificates. Each class of certificates may have a different pass-
through rate, which may be zero for certain classes of Strip Certificates.
The prospectus supplement will specify the pass-through rate for each class of
certificates of a given series. Unless otherwise provided in the prospectus
supplement, distributions on the certificates of a given series will be
subordinate to payments on the notes of that series as more fully described in
the prospectus supplement. Distributions of interest on and principal of any
class of certificates will be made on a pro rata basis among all the
certificateholders of that class.
In the case of a series of certificates that includes two or more classes of
certificates, the prospectus supplement will describe the timing, sequential
order, priority of payment or amount of distributions of interest and principal
on each class, and any schedule or formula or other provisions applicable to the
determination of these amounts and priorities.
If the servicer exercises its option to purchase the receivables of a trust in
the manner and on the respective terms and conditions described under
"Description of the Transfer and Servicing Agreements--Termination" in this
prospectus, certificateholders will receive as prepayment an amount in respect
of those certificates as specified in the prospectus supplement. In addition, if
the prospectus supplement provides that the property of a trust will include a
pre-funding account, certificateholders may receive a partial prepayment of
principal on or immediately following the end of the pre-funding period in an
amount and manner specified in the prospectus supplement. In the event of a
partial prepayment, the certificateholders may be entitled to receive a
prepayment premium, in the amount and to the extent provided in the prospectus
supplement.
The Owner Trustee
The prospectus supplement will specify the Owner Trustee for each trust. 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. The Owner Trustee will perform administrative
functions including, if specified in the prospectus supplement, making
distributions from the related certificate distribution account. An Owner
Trustee may resign at any time by giving written notice to the administrator
under the trust
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agreement, in which event the administrator or its successor will be obligated
to appoint a successor trustee. The administrator may also remove the Owner
Trustee if the Owner Trustee:
. ceases to be eligible to continue as Owner Trustee under the trust
agreement,
. becomes legally unable to act, or
. 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.
CERTAIN INFORMATION REGARDING THE SECURITIES
Each class of securities may be Fixed Rate Securities or Floating Rate
Securities, other than certain classes of Strip Notes or Strip Certificates, as
more fully described below and in the prospectus supplement.
Fixed Rate Securities
Each class of Fixed Rate Securities will bear interest at the applicable per
annum interest rate or pass-through rate specified in the prospectus supplement.
Unless otherwise set forth in the prospectus supplement, interest on each class
of Fixed Rate Securities will be computed on the basis of a 360-day year of
twelve 30-day months. See "Description of the Notes--Principal and Interest on
the Notes" and "Description of the Certificates--Distributions of Interest and
Certificate Balance" in this prospectus.
Floating Rate Securities
Each class of Floating Rate Securities will bear interest for each Interest
Reset Period at a rate per annum:
(1) determined by reference to the Base Rate,
(2) plus or minus any Spread, or
(3) multiplied by any Spread Multiplier.
The prospectus supplement will specify the details for calculating the Base
Rate, the Spread, and/or the Spread Multiplier for any Floating Rate Securities.
The prospectus supplement will designate a Base Rate for a given Floating Rate
Security. The Base Rate may be based on LIBOR, commercial paper rates, federal
funds
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rates, U.S. Government treasury securities rates, negotiable certificates of
deposit rates or another rate named in the prospectus supplement. Floating Rate
Securities may also have either or both of the following, in each case expressed
as a rate per annum:
(1) a maximum limitation, or ceiling, on the rate at which interest
may accrue during any interest period, and
(2) a minimum limitation, or floor, on the rate at which interest may
accrue during any interest period.
In addition to any maximum interest rate that may be applicable to any class
of Floating Rate Securities, the interest rate for any class of Floating Rate
Securities will not be higher than the maximum rate permitted by applicable law,
as that rate may be modified by United States law of general application.
Each trust for which a class of Floating Rate Securities will be issued will
appoint, and enter into agreements with, a calculation agent to calculate
interest rates on each class of Floating Rate Securities issued by that trust.
The prospectus supplement will identify the calculation agent for each class of
Floating Rate Securities, which may be either the Owner Trustee or any Indenture
Trustee for that series. All determinations of interest by the calculation agent
shall, in the absence of manifest error, be conclusive for all purposes and
binding on the holders of Floating Rate Securities of that class. Unless
otherwise specified in the prospectus supplement, all percentages resulting from
any calculation of the rate of interest on a Floating Rate Security will be
rounded, if necessary, to the nearest 1/100,000 of 1% (.0000001), with five
one-millionths of a percentage point rounded upward.
Indexed Securities
To the extent so specified in any prospectus supplement, any class of
securities may consist of Indexed Securities in which the Indexed Principal
Amount is determined by reference to an Index. The Index will be related to-
(1) the difference in the rate of exchange between United States dollars and
an Indexed Currency;
(2) the difference in the price of an Indexed Commodity on specified dates;
(3) the difference in the level of a Stock Index, which may be based on U.S.
or foreign stocks, on specified dates; or
(4) any other objective price or economic measures as are described in the
prospectus supplement.
The manner of determining the Indexed Principal Amount of an Indexed Security
and historical and other information concerning the Indexed Currency, the
Indexed Commodity, the Stock Index or other price or
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economic measures used in this determination will be set forth in the prospectus
supplement, together with information concerning tax consequences to the holders
of the Indexed Securities.
The determination of the Indexed Principal Amount of an Indexed Security may
be based on an Index calculated or announced by a third party. That third party
may either suspend the calculation or announcement of that Index or change the
basis upon which that Index is calculated. In this case, unless the change is
consistent with policies in effect at the time the Indexed Security was issued
or the change was permitted by the prospectus supplement, then that Index shall
be calculated for purposes of the Indexed Security by an independent calculation
agent named in the prospectus supplement. The calculation shall be on the same
basis, and subject to the same conditions and controls, as applied to the
original third party.
If for any reason the Index cannot be calculated on the same basis and subject
to the same conditions and controls as applied to the original third party, then
the Indexed Principal Amount of that Indexed Security shall be calculated in the
manner described in the prospectus supplement. Any determination of the
independent calculation agent shall, in the absence of manifest error, be
binding on all parties.
Unless otherwise specified in the prospectus supplement, interest on an
Indexed Security will be payable based on the amount designated in the
prospectus supplement as the face amount of that Indexed Security. The
prospectus supplement will describe whether the principal amount of the Indexed
Security, if any, that would be payable upon redemption or repayment prior to
the applicable final scheduled distribution date will be the face amount of the
Indexed Security, the Indexed Principal Amount of the Indexed Security at the
time of redemption or repayment or another amount described in the prospectus
supplement.
Book-Entry Registration
Securityholders may hold their securities through DTC in the United States or
Clearstream or Euroclear in Europe, which in turn hold through DTC, if they are
participants of those systems, or indirectly through organizations that are
participants in those systems.
DTC's nominee will be Cede & Co., unless another nominee is specified in the
prospectus supplement. Accordingly, the nominee is expected to be the holder of
record of any book-entry securities of any class or series. Unless and until
Definitive Securities are issued under the limited circumstances described in
this prospectus or in the prospectus supplement, no securityholder will be
entitled to receive a physical certificate representing its interest in a
security. All references in this prospectus and in the prospectus supplement to
actions by securityholders refer to actions taken by DTC upon instructions from
DTC participants. All references in this prospectus and in the prospectus
supplement to distributions, notices, reports and statements to securityholders
of book-entry securities refer to distributions, notices, reports and statements
to DTC or its nominee, as the registered holder of the applicable securities,
for distribution to securityholders in accordance with DTC's procedures with
respect to the securities. See "--Definitive Securities" in this prospectus.
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Clearstream and Euroclear will hold omnibus positions on behalf of the
Clearstream participants and the Euroclear participants, respectively, 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.
DTC is a limited-purpose trust company organized under the laws of the State
of New York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. DTC was created to hold securities for DTC participants and facilitate the
clearance and settlement of securities transactions between Participants through
electronic book-entry changes in accounts of DTC participants, thereby
eliminating the need for physical movement of certificates. Indirect access to
the DTC system also is available to DTC indirect 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.
Transfers between DTC participants will occur in accordance with DTC rules.
Transfers between Clearstream participants and Euroclear participants will occur
in the ordinary way in accordance with their applicable rules and operating
procedures.
Cross-market transfers between persons holding directly or indirectly through
DTC in the United States, on the one hand, and directly or indirectly through
Clearstream participants or Euroclear participants, on the other, will be
effected in DTC in accordance with DTC rules on behalf of the relevant European
international clearing system by its depositary. However, these 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 or securities in Clearstream or
Euroclear as a result of a transaction with a DTC participant will be made
during the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and these credits or any transactions in
these securities settled during the processing will be reported to the relevant
Clearstream participant or Euroclear participant on that business day. Cash
received in Clearstream or Euroclear as a result of sales of securities by or
through a Clearstream participant or 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.
A securityholder, as used in this prospectus, means a holder of a beneficial
interest in a book-entry security. Unless otherwise provided in the prospectus
supplement, securityholders that are not DTC participants or DTC indirect
participants but desire to purchase, sell or otherwise transfer ownership of, or
other interest in, securities
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may do so only through DTC participants and DTC indirect participants. In
addition, securityholders will receive all distributions of principal of and
interest on securities from the Applicable Trustee, through the DTC
participants, who in turn will receive them from DTC.
Under a book-entry format, securityholders may experience some delay in their
receipt of payments, since these payments will be forwarded by the Applicable
Trustee to Cede & Co., as nominee for DTC. DTC will forward these payments to
DTC participants which will then forward them to DTC indirect participants or
securityholders. We anticipate 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
these terms are used in the trust agreement and indenture. Securityholders will
only be permitted to exercise the rights of securityholders indirectly through
DTC, Clearstream or Euroclear and their respective participants or
organizations.
Under the Rules, DTC is required to make book-entry transfers of securities
among DTC participants on whose behalf it acts with respect to the securities
and to receive and transmit distributions of principal of, and interest on, the
securities. DTC participants and DTC indirect participants with which
securityholders have accounts with respect to the securities similarly are
required to make book-entry transfers and receive and transmit those payments on
behalf of their respective securityholders. Accordingly, although
securityholders will not physically possess securities, the DTC rules provide a
mechanism by which DTC participants 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 DTC indirect participants and certain banks, the ability of a
securityholder to pledge securities to persons or entities that do not
participate in the DTC system, or to otherwise act with respect to those
securities, may be limited due to the lack of physical certificates for those
securities.
DTC has advised the seller that it will take any action permitted to be taken
by a noteholder under the indenture or a certificateholder under the trust
agreement, only at the direction of one or more DTC participants to whose
accounts with DTC the applicable notes or certificates are credited. DTC may
take conflicting actions with respect to other undivided interests to the extent
that those actions are taken on behalf of DTC participants whose holdings
include those undivided interests.
Clearstream 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, thereby eliminating the need for physical movement of
certificates. Transactions may be settled by Clearstream in any of 28
currencies, including United States dollars.
Clearstream provides to its Clearstream participants, among other things:
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(1) services for safekeeping, administration, clearance and settlement of
internationally traded securities, and
(2) securities lending and borrowing.
Clearstream interfaces with domestic markets in several countries. As a
professional depository, Clearstream is subject to regulations 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 certain other
organizations and may include an underwriter of any series. Indirect access to
Clearstream is also available to others, such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
Clearstream participant, either directly or indirectly.
The Euroclear System was created in 1968 to hold securities for participants
of Euroclear and to clear and settle transactions between Euroclear participants
through simultaneous electronic book-entry delivery against payment, thereby
eliminating the need for physical movement of certificates and any risk from
lack of simultaneous transfers of securities and cash. Transactions may now be
settled in any of 27 currencies, including United States dollars. Euroclear
includes various other services, including securities lending and borrowing and
interfaces with domestic markets in several countries generally similar to the
arrangement for cross-market transfers with DTC described above. Euroclear is
operated by the Euroclear Operator, under contract with the Cooperative. All
operations are conducted by the Euroclear Operator, and all Euroclear securities
clearance accounts and Euroclear cash accounts are accounts with the Euroclear
Operator, not the Cooperative. The Cooperative establishes policy for Euroclear
on behalf of Euroclear participants. Euroclear participants include banks,
including central banks, securities brokers and dealers and other professional
financial intermediaries and may include an underwriter of any series. Indirect
access to Euroclear is also available to other firms that clear through or
maintain a custodial relationship with a Euroclear participant, either directly
or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking corporation
which is a member of the Federal Reserve System. As such, it is regulated and
examined by the Board of Governors of the Federal Reserve System and the New
York State Banking Department, as well as the Belgian Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the terms and conditions Governing Use of Euroclear and the
related Operating Procedures of Euroclear and applicable Belgain law. These
terms and conditions govern transfers of securities and cash within Euroclear,
withdrawal of securities and cash from Euroclear, and receipts of payments with
respect to securities in Euroclear. All securities in Euroclear are held on a
fungible basis without attribution of specific certificates to specific
securities clearance accounts. The Euroclear Operator acts under the
aforementioned terms and conditions only on behalf of Euroclear participants and
has no record of or relationship with persons holding through Euroclear
participants.
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Distributions with respect to securities 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. Clearstream or the Euroclear Operator will take any other action
permitted to be taken by a securityholder under the indenture or trust agreement
on behalf of a Clearstream participant or a 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.
DTC, Clearstream and Euroclear have agreed to the procedures described above
in order to facilitate transfers of certificates among participants of DTC,
Clearstream and Euroclear. However, they are under no obligation to perform or
continue to perform these procedures, and they may discontinue these procedures
at any time.
Except as required by law, neither 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 securities of any
series held by DTC, Clearstream or Euroclear or for maintaining, supervising or
reviewing any records relating to these beneficial ownership interests.
Definitive Securities
Unless otherwise specified in the prospectus supplement, the notes or
certificates of any series will be issued as Definitive Notes or Definitive
Certificates to noteholders or certificateholders or their respective nominees,
rather than to the depository or its nominee, only if-
(1) (a) the administrator notifies the Applicable Trustee in writing that
it has been advised that the depository is no longer willing or
able to discharge properly its responsibilities as depository
with respect to the notes or the certificates, and
(b) the administrator is unable to locate a qualified successor;
(2) the administrator, at its option, elects to terminate the book-entry
system through the depository; or
(3) (a) an Event of Default or an Event of Servicing Termination has
occurred with respect to those securities, and
(b) the holders representing at least a majority of the outstanding
principal amount of the notes or the certificates of that series
advise the Applicable Trustee and DTC through DTC participants in
writing that they have determined that the continuation of a
book-entry system through the depository, or the depository's
successor, with respect to those notes or certificates is no
longer in the best interest of the holders of those securities.
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If any of the events described in the immediately preceding paragraph occurs,
the depository must notify all DTC participants of the availability through the
depository of Definitive Securities. After DTC surrenders to the Applicable
Trustee the global certificates representing the corresponding securities and
the Applicable Trustee receives instructions for re-registration, the Applicable
Trustee will reissue those securities as Definitive Securities. Then the
Applicable Trustee will recognize the holders as noteholders or
certificateholders under the indenture or trust agreement.
The Applicable Trustee will then distribute principal and interest on the
Definitive Securities in accordance with the procedures described in the
indenture or trust agreement. The Applicable Trustee will make distributions
directly to the holders of Definitive Securities in whose names the Definitive
Securities were registered at the close of business on the record date specified
for those securities in the prospectus supplement. The Applicable Trustee will
make these distributions by check mailed to the address of that holder as it
appears on the register maintained by the Applicable Trustee's. 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 mailed to holders.
Definitive Securities will be transferable and exchangeable subject to the
reasonable regulations that the Applicable Trustee may prescribe. The Applicable
Trustee will not impose a service charge for any registration of transfer or
exchange. However, the Applicable Trustee may require payment of a sum
sufficient to cover any tax or other government charge imposed in connection
with a transfer or exchange.
Reports to Securityholders
On each distribution date, the paying agent will include with each
distribution to each noteholder and/or certificateholder a statement prepared by
the servicer for that series. The information in this statement will apply to
that distribution date or to the period since the previous distribution date.
This statement will include, among other things-
(1) the amount of the distribution allocable to principal for each class
of notes and to the certificate balance of each class of certificates
and the derivation of those amounts;
(2) the amount of the distribution allocable to interest on or for each
class of notes and each class of certificates of that series;
(3) amount of the Servicing Fee paid to the servicer for the Collection
Period;
(4) the amount of the administration fee paid to the administrator for the
related Collection Period;
(5) any aggregate unreimbursed Advances as of the last day of the
preceding Collection Period and the change in that amount from the
previous Collection Period;
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(6) the Aggregate Receivables Balance as of the close of business on the
last day of the preceding Collection Period;
(7) 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, in each case
after giving effect to all payments reported under clause (1) above on
that date;
(8) the interest rate or pass-through rate for the next period for any
class of notes or any class of certificates of that series with
variable or adjustable rates;
(9) the amount of the any aggregate realized losses for the preceding
Collection Period;
(10) any Noteholders' Interest Carryover Shortfall, any Noteholders'
Principal Carryover Shortfall, any Certificateholders' Interest
Carryover Shortfall and any Certificateholders' Principal Carryover
Shortfall, each as defined in the prospectus supplement for each class
of securities, and the change in these amounts from the preceding
statement;
(11) the aggregate of any Repurchase Amounts for the receivables that were
repurchased by the seller or purchased by the servicer in that
Collection Period;
(12) (a) any balance in the reserve account or any other enhancement
account, as of that date, after giving effect to changes in the
reserve account on that date,
(b) the calculation of the Specified Reserve Account Balance, and
(c) the calculation of the components of the Specified Reserve
Account Balance on that date, as defined in the prospectus
supplement, or any other required enhancement account balance on
that date, and the components of calculating any required
balance;
(13) for each date during any pre-funding period, the remaining pre-funded
amount;
(14) for the first date that is on or immediately following the end of any
funding period, the amount of any remaining pre-funded amount that has
not been used to fund the purchase of Subsequent Receivables and is
being passed through as payments of principal on the securities of
that series; and
(15) any other information specified in the prospectus supplement.
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Each amount specified pursuant to subclauses (1), (2), (3) and (4) with
respect to the notes or the certificates of any series will be expressed as a
dollar amount per $1,000 of the initial principal balance of those notes or the
initial certificate balance of those certificates, as applicable.
Unless otherwise specified in the prospectus supplement, the statements for
each Collection Period will be delivered to DTC for further distribution to
securityholders in accordance with DTC procedures. See "Certain Information
Regarding the Securities--Book-Entry Registration" in this prospectus. The
servicer, on behalf of each trust, will file with the SEC those periodic reports
with respect to each trust as required under the Exchange Act and the rules and
regulations of the SEC under the Exchange Act.
Within the prescribed period of time for tax reporting purposes after the end
of each calendar year during the term of each trust, the servicer or the paying
agent will furnish to each person who at any time during that calendar year has
been a noteholder or certificateholder with respect to that trust and received
any payment on their security a statement containing certain information for the
purposes of the securityholder's preparation of federal income tax returns. See
"Material Federal Income Tax Consequences" in the prospectus supplement.
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes material terms of:
. the sale and servicing agreement pursuant to which each trust will
acquire receivables from the seller and the servicer will agree to
service those receivables;
. the trust agreement pursuant to which each trust will be created; and
. the administration agreement pursuant to which the Bank will undertake
administrative duties for each trust.
Forms of the Transfer and Servicing Agreements have been filed as exhibits to
the Registration Statement of which this prospectus forms a part. The following
summary describes the material terms of the Transfer and Servicing Agreements
related to any series. This summary is not complete and you should read the full
text of the Transfer and Servicing Agreements to understand their provisions.
Sale and Assignment of Receivables
On or before the closing date for any trust, the seller will transfer and
assign to the trust its entire interest in the receivables, if any, and related
property and the proceeds of that property. The assigned property will include
the seller's security interests in the related financed vehicles. The seller
will transfer this property in consideration of the receipt of the related
securities, without recourse, pursuant to a sale and servicing agreement. Each
receivable will be identified in a schedule of receivables.
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The seller will sell the securities offered by this prospectus to the
underwriters named in the prospectus supplement. The securities offered by this
prospectus may or may not include all securities of that series. See "Plan of
Distribution." To the extent specified in the prospectus supplement, a portion
of the net proceeds received from the sale of the securities of a given series
will be applied to the deposit of the pre-funded amount into the pre-funding
account and/or to the initial deposit into any reserve account or any yield
supplement account. The prospectus supplement will specify whether Subsequent
Receivables will be sold by the seller to the trust during any pre-funding
period. The prospectus supplement may also specify the terms, conditions and
manner under which the seller will transfer Subsequent Receivables. The seller
will transfer any Subsequent Receivables on a Subsequent Transfer Date.
Each sale and servicing agreement will describe the criteria that each
receivable must satisfy. The prospectus supplement may specify that any of these
criteria are not required to be satisfied. Otherwise, the criteria will
include-
. The receivable has been fully and properly executed by the parties to
that receivable.
. The receivable:
(1) has been originated by the seller in the ordinary course of its
business or by a dealer for the retail sale of a motor vehicle in
the ordinary course of that dealer's business,
(2) has been purchased by the seller in the ordinary course of the
seller's business, and
(3) has been validly assigned by that dealer to the seller.
. The receivable is secured by a valid, subsisting and enforceable
security interest in favor of the seller in the financed vehicle,
subject to administrative delays and clerical errors on the part of
the applicable government agency. The seller's interest is prior in
right to the security interest of any other creditor. The seller's
security interest is assignable together with that receivable, and the
seller has assigned the security interest to the trust.
. The receivable contains customary and enforceable provisions such that
the rights and remedies of the holder of the receivable are adequate
for realization against the collateral of the benefits of the
security.
. At origination, the receivable provided for level monthly payments,
although the amount of the first and last payments may be different.
. The payments fully amortize the initial principal balance of the
receivable over the original term.
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. In the event of a complete prepayment, the receivable provides for a
payment that will fully pay the principal balance of that receivable
as of the first day of the Collection Period in which the receivable
is fully prepaid, together with interest accrued at least to the date
of prepayment at the related interest rate.
. The information for that receivable in the schedule of receivables was
true and correct as of the close of business of the seller on the
cutoff date.
. The receivable complied at the time it was originated or made, and
will comply as of the closing date, in all material respects with all
requirements of applicable federal, state and local laws, and
regulations under those laws.
. The receivable constitutes the genuine, legal, valid and binding
payment obligation in writing of the obligor.
. The receivable is enforceable in all material respects by the holder
of the receivable in accordance with its terms.
. The receivable is not subject to any right of rescission, setoff,
counterclaim or defense, including the defense of usury.
. The operation of any of the terms of the receivable, or the exercise
of any right under the receivable, will not render the receivable
unenforceable in whole or in part or subject to any right of
rescission, setoff, counterclaim or defense, including the defense of
usury.
. The seller has no notice that any right of rescission, setoff,
counterclaim or defense has been asserted with respect to the
receivable.
. The seller has not taken any action which would release the underlying
financed vehicle from the lien granted by the receivable in whole or
in part, except in the event of payment in full by the obligor or
repossession or except as may be required by an insurer in order to
receive proceeds from insurance covering that financed vehicle.
. The parties to the receivable have not amended, waived, altered or
modified any receivable, except for any amendments, waivers or
modifications that would be permitted under the sale and servicing
agreement.
. The parties have not amended, waived, altered or modified the
receivable such that the receivable does not conform to the other
representations or warranties contained in this paragraph.
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. The seller has not received notice of any liens or claims, including
liens for work, labor, materials or unpaid state or federal taxes
relating to the financed vehicle securing the receivable, that are or
may be prior to or equal to the lien granted by the receivable.
. Except for payment delinquencies continuing for a period of not more
than 30 days as of the cutoff date, no default, breach, violation or
event permitting acceleration under the terms of the receivable
exists.
. No continuing condition has arisen, that with notice, lapse of time,
or both, would constitute a default, breach, violation or event
permitting acceleration under the terms of the receivable.
. Except to the extent the servicer customarily does not force place
insurance:
. the financed vehicle securing each receivable is insured
under an insurance policy covering theft and physical damage,
. the premiums for the insurance policy have been paid in full, and
. the insurance policy is in full force and effect.
. The receivable has not been sold, assigned, pledged or otherwise
conveyed by the seller to any person other than the trust.
. Immediately prior to the transfer and assignment under the sale and
servicing agreement:
. the seller had good and marketable title to the receivable free
and clear of any encumbrance, equity, lien, pledge, charge,
claim, security interest or other right or interest of any other
person, and
. the seller had full right and power to transfer and assign the
receivable to the trust.
. Immediately upon the transfer and assignment of the receivable to the
trust, the trust will have good and marketable title to the
receivable, free and clear of any encumbrance, equity, lien, pledge,
charge, claim, security interest or other right or interest of any
other person and, if the transfer to the trust is deemed to be a
transfer for security, the trust's interest in the receivable
resulting from the transfer has been perfected under the UCC.
. The receivables are "chattel paper" as defined in the UCC.
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. The seller has duly fulfilled all obligations on its part to be
fulfilled under, or in connection with, the receivable.
. There is only one original executed receivable, and immediately prior
to the closing date, the seller will have possession of that original
executed receivable.
Unless otherwise provided in the prospectus supplement, the seller will
repurchase a receivable if-
. the seller discovers or receives written notice from the Indenture
Trustee that a receivable does not meet any of the criteria described
in the sale and servicing agreement;
. that failure materially and adversely affects the interests of the
securityholders in that receivable; and
. the seller has not cured the failed criterion.
The seller will repurchase the receivable as of the last day of the month
following the date on which the seller discovered or received notice of the
failed criterion. If the seller elects, it may repurchase the receivable on the
last day of the month including the date the seller discovered the failed
criterion. The seller will repurchase that receivable from the trust at a price
equal to the Repurchase Amount. The repurchase obligation will be the sole
remedy available to any securityholder, the Owner Trustee or the Indenture
Trustee for the failure of a receivable to meet any of the criteria in the sale
and servicing agreement.
Pursuant to each sale and servicing agreement, to assure uniform quality in
servicing the receivables and to reduce administrative costs, the trust will
appoint the servicer and the servicer will appoint the Custodian to hold the
receivable files on behalf of the trust and the Indenture Trustee for the
benefit of the noteholders and certificateholders to the extent set forth in the
indenture. Receivables will not be stamped or otherwise marked to reflect the
transfer of the receivables to a trust or the pledge to the Indenture Trustee
and will not be segregated from the other motor vehicle loans owned or serviced
by the servicer. The obligors under the receivables will not be notified of the
transfer of the receivables to a trust or the pledge of the receivables to the
Indenture Trustee, but the seller's accounting records and computer systems will
reflect the sale and assignment of the receivables to the trust and the pledge
to the Indenture Trustee. See "Legal Aspects of the Receivables."
Accounts
With respect to each trust, the Indenture Trustee will establish one or more
collection accounts in the name of the Indenture Trustee on behalf of the trust
and for the benefit of the noteholders and any certificateholders, into which
all payments made on or with respect to the receivables will be deposited. The
Indenture Trustee will also establish and maintain a note distribution account,
in the name of the Indenture Trustee on behalf of the noteholders, into which,
to the extent and in the manner described in the prospectus supplement, amounts
released from the collection account and any pre-funding account, yield
supplement account, reserve account or
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other credit or cash flow enhancement for payment to that noteholder will be
deposited and from which all distributions to those noteholders will be made.
Unless otherwise provided in the trust agreement, the Owner Trustee will
establish and maintain a certificate distribution account, in the name of the
trust on behalf of the certificateholders, into which amounts released from the
collection account and any pre-funding account, yield supplement account,
reserve account or other credit or cash flow enhancement for distribution to
those certificateholders will be deposited and from which all distributions to
those certificateholders will be made. The collection account, note
distribution account, certificate distribution account, any pre-funding account,
any reserve account, any yield supplement account, and any other accounts
identified as such in a prospectus supplement are collectively referred to as
the trust accounts.
Each trust account will be at all times an Eligible Deposit Account, unless
otherwise provided in the prospectus supplement. If any trust account held by
the Indenture Trustee in its own trust department ceases to be an Eligible
Deposit Account, the Indenture Trustee will be required to transfer that account
to an Eligible Bank or otherwise cause that account to again become an Eligible
Deposit Account.
The trust accounts may be maintained with the Bank, or any affiliate of the
Bank, if the Bank or that affiliate, as the case may be, and the trust accounts
meet the eligibility criteria described in the preceding paragraphs.
Funds in the trust accounts will be invested in Eligible Investments.
Investments of amounts on deposit in the trust accounts with respect to any
Collection Period or distribution date are limited to obligations or securities
that mature not later than the Deposit Date. However, to the extent permitted
by each rating agency, funds on deposit in any reserve account may be invested
in securities that will not mature prior to the date of the next distribution
with respect to the securities. Unless otherwise provided in the prospectus
supplement, any earnings, net of losses and investment expenses, on amounts on
deposit in the trust accounts will be paid to the servicer and will not be
available to securityholders.
The Indenture Trustee will be the initial paying agent under each indenture.
An alternate paying agent may be appointed for the purpose of making
distributions to the noteholders in the manner provided in the indenture.
Servicing Procedures
The servicer will service the receivables of each trust and will make
reasonable efforts to collect all payments due on those receivables. The
servicer will follow the collection and servicing procedures as it follows with
respect to comparable new or used automobile receivables that it services for
itself and that are consistent with prudent industry standards and consistent
with the sale and servicing agreement and with the terms of the receivables. See
"The Motor Vehicle Loan Portfolio--Servicing and Collections." The servicer
shall be entitled to amend or modify any receivable in accordance with its
customary procedures if the servicer believes in good faith that such amendment
or modification is in the best interest of the trust. The servicer may
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also permit extensions or payment deferrals for a receivable if it meets certain
eligibility requirements. See "The Motor Vehicle Loan Portfolio-Servicing and
Collections." Notwithstanding the foregoing, the servicer may not (1) extend a
receivable beyond the last day of the Collection Period immediately preceding
the latest final scheduled distribution date for any class of securities or (2)
amend or modify the Receivable Balance or Contract Rate of any receivable,
except as required by court order or applicable law and will be obligated to
purchase any receivable so extended, amended or modified. Any required purchase
will constitute the sole remedy available to the securityholders, the Indenture
Trustee or the Owner Trustee for any uncured breach.
Each sale and servicing agreement will provide that the servicer, on behalf of
the trust, shall use reasonable efforts, consistent with its customary servicing
procedures, to repossess or otherwise take possession of the financed vehicle
securing any Liquidating Receivable. See "The Motor Vehicle Loan Portfolio--
Servicing and Collections." The servicer shall follow those customary and usual
practices and procedures as it shall deem necessary or advisable in its
servicing of new or used automobile receivables, which may include reasonable
efforts to realize upon any recourse to dealers, consigning the financed vehicle
to a dealer for resale and selling the financed vehicle at public or private
sale. See "Legal Aspects of the Receivables." The servicer will deposit any
Liquidation Proceeds, net of expenses and other costs incurred in the collection
of a Liquidating Receivable or disposition of a financed vehicle, in the
collection account.
In the event the servicer determines that, after it has exhausted all
customary and usual collection practices and procedures, including efforts to
repossess and liquidate a financed vehicle or recover a deficiency balance
related to a Liquidating Receivable, further collection efforts by it as to that
receivable will not result in the realization of additional proceeds to the
trust, the servicer may, on behalf of the trust, sell the receivable to any
person not affiliated with the servicer free and clear of the rights of the
trust. All proceeds of the sale of such receivables shall be deposited directly
in or credited to the collection account.
Collections
With respect to each trust, the servicer will deposit all payments on the
receivables, from whatever source, and all proceeds of those receivables
collected during each Collection Period into the collection account on a daily
basis within forty-eight hours of receipt. However, at any time that and for so
long as each condition to making deposits less frequently than daily as may be
required by the rating agencies or any enhancement provider or as set forth in
the prospectus supplement is satisfied, the servicer will not be required to
deposit those amounts into the collection account until on or before the Deposit
Date preceding the distribution date. Pending deposit into the collection
account, collections may be invested by the servicer at its own risk and for its
own benefit and will not be segregated from its own funds. If the servicer were
unable to remit those funds, securityholders might incur a loss. The servicer
may, in order to satisfy the requirements described above, obtain letters of
credit or other security for the benefit of the trust to secure timely
remittances of collections on the receivables.
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Servicing Compensation and Payment of Expenses
Unless otherwise specified in the prospectus supplement with respect to any
trust, the servicer will be entitled to receive the Total Servicing Fee for each
Collection Period payable on the related distribution date, which consists of
the Servicing Fee, any interest earned during the Collection Period on deposits
in the trust accounts to the extent set forth in the prospectus supplement and
any portion of the Servicing Fee that remains unpaid from prior distribution
dates, will be paid solely to the extent of amounts allocable to the Total
Servicing Fee as specified in the prospectus supplement. The servicer will be
entitled to reimbursement from each trust for certain liabilities.
The Servicing Fee will compensate the servicer for performing the functions of
a third-party servicer of motor vehicle receivables as an agent for the
securityholders, including:
. collecting and posting all payments by obligors,
. responding to inquiries of obligors,
. investigating delinquencies, and
. reporting tax information to obligors.
The Servicing Fee also will compensate the servicer for administering the
receivables of a trust, accounting for collections and furnishing monthly and
annual statements to the Owner Trustee and the Indenture Trustee with respect to
distributions.
The Servicing Fee will also compensate the servicer for:
. certain taxes, accounting fees,
. outside auditor fees,
. the fees of the paying agent, the transfer agent, the registrar and the
Owner Trustee and its counsel,
. data processing costs, and
. other costs incurred in connection with administering the applicable
receivables.
Net Deposits
As an administrative convenience, the servicer, so long as no Event of
Servicing Termination has occurred and is continuing and the servicer has not
been terminated as servicer, will be permitted to deposit the
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collections, aggregate Advances and Repurchase Amounts for any trust for or with
respect to the related Collection Period net of distributions to be made to the
servicer or the seller for that trust with respect to that Collection Period,
remitting amounts to the seller directly.
Advances
The prospectus supplement may provide that the servicer may, in its sole
discretion, make an Advance in an amount described in the prospectus supplement.
The servicer may elect not to make any Advance with respect to a receivable
under the circumstances described in the prospectus supplement. The servicer
will be entitled to be reimbursed for outstanding Advances in the manner
described in the prospectus supplement. The servicer will deposit all Advances
with respect to any distribution date on the related Deposit Date.
Other Servicing Matters
Each sale and servicing agreement will provide that the servicer may not
resign from its obligations and duties as servicer, except upon a determination
that the servicer's performance of those duties is no longer permissible under
applicable law. A servicer's resignation will not become effective until the
Indenture Trustee or a successor servicer has assumed the servicer's servicing
obligations and duties under the sale and servicing agreement.
Any corporation or other entity into which the servicer may be merged or
consolidated, or that may result from any merger, conversion or consolidation to
which the servicer is a party, or any entity that may succeed by purchase and
assumption to all or substantially all the business of the servicer, where the
servicer is not the surviving entity and where that corporation or other entity
assumes the obligations of the servicer under a sale and servicing agreement,
will be the successor to the servicer under that sale and servicing agreement.
Each sale and servicing agreement will provide that the servicer will be
liable only to the extent of the obligations specifically undertaken by it under
that sale and servicing agreement the servicer will have no other obligations or
liabilities under that sale or servicing agreement. Each sale and servicing
agreement will also provide that the servicer will not be under any obligation
to appear in, prosecute or defend any legal action that is not incidental to the
servicer's servicing responsibilities under the sale and servicing agreement and
that, in its opinion, may cause it to incur any expense or liability. The
servicer may, however, at its own expense, undertake any reasonable action that
it may deem necessary or desirable in respect of the sale and servicing
agreement and the rights and duties of the parties to the sale and servicing
agreement and the interests of the securityholders.
Distributions
With respect to each trust, beginning on the distribution date or payment
date, as applicable, specified in the prospectus supplement, distributions of
principal and interest - or, where applicable, in respect of principal or
interest only - on each class of those securities entitled to distributions will
be made by the applicable Owner
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Trustee or paying agent to the noteholders and the certificateholders of that
series. The timing -monthly, quarterly or otherwise -, calculation, allocation,
order, source, priorities of and requirements for all payments to any class of
noteholders of that series and all distributions to any class of
certificateholders of that series will be set forth in the prospectus
supplement.
With respect to each trust, on each distribution date, collections on the
receivables will be transferred from the collection account directly to the note
distribution account and the certificate distribution account, if any, for
distribution to noteholders and certificateholders to the extent provided in the
prospectus supplement. Credit enhancement, such as a reserve account or yield
supplement account, will be available to cover any shortfalls in the amount
available for distribution on that date to the extent specified in the
prospectus supplement.
Except as otherwise provided in the prospectus supplement, distributions of
interest on the notes will be made prior to distributions of principal on the
notes. Distributions in respect of certificates will be subordinate to payments
on the notes, as more fully described in the prospectus supplement.
Credit Enhancement
The amounts and types of any credit and cash flow enhancement arrangements,
and the provider thereof, if applicable, with respect to each class of
securities of a given series will be set forth in the prospectus supplement. If
and to the extent provided in the prospectus supplement, credit enhancement may
be in the form of:
. one or more subordinate classes of securities,
. reserve or cash collateral accounts,
. a yield supplement agreement,
. a yield supplement account,
. over collateralization,
. letters of credit,
. credit or liquidity facilities,
. surety bonds,
. guaranteed investment contracts,
. swaps or other interest rate protection agreements,
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. repurchase obligations,
. other agreements with respect to third party payments or other support,
. cash deposits or
. any other arrangements that may be described in the prospectus
supplement.
Credit or cash flow enhancement for a class of securities may cover one or
more other classes of securities of the same series, and credit or cash flow
enhancement for a series of securities may cover one or more other series of
securities.
The presence of a yield supplement agreement, a reserve account, a yield
supplement account and other forms of credit enhancement for the benefit of any
class or series of securities is intended to enhance the likelihood of receipt
by the securityholders of that class or series of the full amount of principal
and interest due on that security and to decrease the likelihood that those
securityholders will experience losses. Unless otherwise specified in the
prospectus supplement, the credit enhancement for a class or series of
securities will not provide protection against all risks of loss and will not
guarantee repayment of the entire principal balance and interest on the
securities. If losses occur that exceed the amount covered by any credit
enhancement or that are not covered by any form of credit enhancement,
securityholders of any class or series will bear their allocable share of
deficiencies, as described in the prospectus supplement. In addition, if a form
of credit enhancement covers more than one series of securities, securityholders
of any covered series will be subject to the risk that the credit enhancement
will be exhausted by the claims of securityholders of other series.
The seller may add to or supplement the credit enhancement for any class of
securities with another form of credit enhancement without the consent of the
related securityholders, provided that if the addition shall affect any class of
noteholders or certificateholders differently from any other class of
noteholders or certificateholders, then the addition shall not, as evidenced by
an opinion of counsel, adversely affect in any material respect the interests of
any class of noteholder or certificateholder.
Reserve Account. If provided in the prospectus supplement, pursuant to the
sale and servicing agreement, the seller will establish a reserve account which
will be maintained in the name of the Indenture Trustee. Unless otherwise
provided in the prospectus supplement, the reserve account will be included in
the property of the trust. The reserve account will be funded by an initial
deposit on the closing date and, if the related series has a Funding Period,
will also be funded on each Subsequent Transfer Date. As described in the
prospectus supplement, the amount on deposit in the reserve account will be
increased on each distribution date up to the Specified Reserve Account Balance
by the deposit in the reserve account of the amount of collections on the
receivables remaining on each distribution date after the payment of all other
required payments and distributions on that date. The prospectus supplement will
describe the circumstances and manner under which distributions will be made out
of the reserve account to holders of the securities covered by the reserve
account
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in the event of shortfalls and with respect to amounts, if any, in excess of the
Specified Reserve Account Balance, to the seller or to a third-party specified
in the prospectus supplement.
In the event the funds on deposit in a reserve account are reduced to zero,
the securityholders of that series will bear directly the credit and other risks
associated with ownership of the receivables held by the trust, including the
risk that the trust may not have a perfected security interest in the financed
vehicles. In that case, the amount available for distribution may be less than
that described in the prospectus supplement and the securityholders may
experience delays or suffer losses as a result, among other things, of defaults
and delinquencies by the obligors or previous extensions made by the servicer.
Yield Supplement Account; Yield Supplement Agreement. If so provided in the
prospectus supplement, the seller or a third party will enter into a yield
supplement agreement and/or establish a yield supplement account with the
Indenture Trustee or Owner Trustee for the benefit of the holders of the related
securities. A yield supplement agreement or a yield supplement account will be
designed to provide payments to the securityholders in respect of receivables
the Contract Rate of which is less than the sum of the applicable interest rate
of the notes or pass-through rate of the certificates and the Servicing Fee
Rate.
Statements to Trustees and Trust
Prior to each distribution date, the servicer will provide to the Owner
Trustee and any Indenture Trustee a statement setting forth substantially the
same information for that date and the related Collection Period as is required
to be provided in the periodic reports provided to securityholders of that
series described in this prospectus under "Certain Information Regarding the
Securities--Reports to Securityholders."
Evidence as to Compliance
Each sale and servicing agreement will provide that a firm of independent
public accountants will annually furnish to the trust and Indenture Trustee a
statement as to compliance by the servicer during the preceding twelve months
or, in the case of the first certificate, from the closing date with certain
standards relating to the servicing of the receivables, or as to the
effectiveness of its processing and reporting procedures and certain other
matters.
Each sale and servicing agreement will also provide for delivery to the trust
and the Indenture Trustee on or before March 15 of each year, beginning the
first March 15 that is at least three months after the closing date, a
certificate signed by an officer of the servicer stating that the servicer has
fulfilled its obligations in all material respects under the sale and servicing
agreement throughout the preceding twelve months or, in the case of the first
certificate, from the closing date or, if there has been a default in the
fulfillment of any of these obligations, describing that default.
Copies of these statements and certificates may be obtained by securityholders
by a request in writing addressed to the Indenture Trustee or Owner Trustee, as
applicable.
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Events of Servicing Termination
Except as otherwise provided in the prospectus supplement, Events of Servicing
Termination under each sale and servicing agreement will consist of:
(1) any failure by the servicer to deliver to the Owner Trustee or any
Indenture Trustee the servicer's report for the related Collection
Period or any failure by the servicer to deliver to the Owner Trustee
or Indenture Trustee for deposit in any trust account any proceeds or
payments required to be delivered under the terms of those securities
or the sale and servicing agreement or, in the case of a payment or
deposit to be made not later than the Deposit Date, the failure to
make that payment or deposit on that Deposit Date, which failure
continues unremedied for five business days after the due date;
(2) any failure by the servicer to duly observe or perform in any material
respect any other covenant or agreement of the servicer set forth in
the sale and servicing agreement, which failure materially and
adversely affects the rights of the trust or the securityholders -
which determination shall be made without regard to whether funds are
available to the securityholders pursuant to any credit enhancement -
and which continues unremedied for 60 days after the date of written
notice of the failure to the servicer by the Owner Trustee or the
Indenture Trustee or to the Owner Trustee or the Indenture Trustee and
the servicer by holders of the notes, so long as notes are
outstanding, evidencing not less than a majority of the principal
amount of those notes then outstanding or, if no notes are
outstanding, certificates of that series evidencing not less than a
majority of the certificate balance then outstanding; or
(3) certain events of bankruptcy, receivership, insolvency or similar
proceedings and certain actions by the servicer indicating its
insolvency pursuant to bankruptcy, receivership, conservatorship,
insolvency or similar proceedings or its inability to pay its
obligations.
The holders of the related notes, so long as notes are outstanding, evidencing
not less than a majority of the principal amount of those notes then outstanding
or, if no notes are outstanding, certificates of that series evidencing not less
than a majority of the certificate balance then outstanding, may, with the
written consent of any provider of enhancement specified in the prospectus
supplement, waive certain defaults by the servicer in the performance of its
obligations.
Rights Upon Event of Servicing Termination
Unless otherwise provided in the prospectus supplement, as long as an Event of
Servicing Termination under a sale and servicing agreement remains unremedied,
the Indenture Trustee or holders of notes of the related series evidencing not
less than a majority of the principal amount of those notes then outstanding -
or, if the notes have been paid in full and the indenture has been discharged in
accordance with its terms, by the
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Owner Trustee or holders of certificates evidencing not less than a majority of
the certificate balance then outstanding- by notice given in writing to the
servicer, and to the Owner Trustee if given by the certificateholders, may
terminate all the rights and obligations of the servicer under the sale and
servicing agreement. If the servicer has been terminated, the Indenture Trustee
or a successor servicer appointed by the Indenture Trustee will succeed to all
the responsibilities, duties and liabilities of the servicer under the sale and
servicing agreement and will be entitled to similar compensation arrangements.
If no notes are outstanding, as long as an Event of Servicing Termination
under the sale and servicing agreement remains unremedied, the Owner Trustee or
holders of certificates of that series evidencing not less than a majority of
the certificate balance then outstanding, by notice given in writing to the
servicer, and to the Owner Trustee if given by certificateholders, may terminate
all of the rights, duties and liabilities of the servicer under the sale and
servicing agreement. If the servicer has been terminated, a successor servicer
appointed by the Owner Trustee will succeed to all of the rights, duties and
liabilities of the servicer under the sale and servicing agreement and will be
entitled to similar compensation arrangements. In the event that the Indenture
Trustee or successor servicer appointed by the Owner Trustee is unwilling or
unable to so act, it may appoint, or petition a court of competent jurisdiction
for the appointment of, a successor servicer to act as successor to the outgoing
servicer. The Indenture Trustee or successor servicer may make arrangements for
compensation to be paid, which in no event may be greater than the Servicing Fee
payable under the sale and servicing agreement.
Waiver of Past Defaults
Unless otherwise provided in the prospectus supplement, the holders of notes
evidencing at least a majority in principal amount of the then outstanding notes
of the related series or, the holders of any certificates of that series
evidencing not less than a majority of the certificate balance then outstanding,
in the case of any Event of Servicing Termination that does not adversely affect
the Indenture Trustee or noteholders may, on behalf of all of those noteholders
and certificateholders, waive any default by the servicer in the performance of
its obligations under the sale and servicing agreement and its consequences,
except an Event of Servicing Termination in making any required deposits to or
payments from any of the trust accounts in accordance with the sale and
servicing agreement. This waiver will not impair the securityholder's rights
with respect to subsequent defaults.
Amendment
Each of the Transfer and Servicing Agreements may be amended by the parties to
those agreements without the consent of the related noteholders or
certificateholders:
. to cure any ambiguity,
. to correct or supplement any provision in the agreements that may be
defective or inconsistent with any other provision in the agreements
or in the Related Documents,
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. to add or supplement any credit enhancement 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 the
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 provision 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 of those agreements may also be amended by the parties to the agreement
with the consent of the holders of at least a majority in principal amount of
the then outstanding notes and the holders of those 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 agreements or modifying in any manner the rights of the noteholders or
certificateholders; except that an amendment may not:
(1) increase or reduce in any manner the amount of, or accelerate or delay
the timing of, collection of payments on receivables or distributions
that are required to be made on any note or certificate, any interest
rate, any pass-through rate or the Specified Reserve Account Balance;
or
(2) 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.
Payment of Notes
Upon payment in full of all outstanding notes of a given series and the
satisfaction and discharge of the indenture, the Owner Trustee will succeed to
all the rights of the Indenture Trustee, and any certificateholders of that
series will succeed to all the rights of the noteholders of that series under
the sale and servicing agreement, except as otherwise provided in the indenture
and the sale and servicing agreement.
Termination
With respect to each trust, the obligations of the servicer, the seller, the
Owner Trustee and any Indenture Trustee pursuant to the Transfer and Servicing
Agreements will terminate upon the earlier of:
(1) the maturity or other liquidation of the last receivable and the
disposition of any amounts received upon liquidation of any property
remaining in the trust, and
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(2) the payment to securityholders of that series of all amounts required
to be paid to them pursuant to the Transfer and Servicing Agreements.
Unless otherwise provided in the prospectus supplement, in order to avoid
excessive administrative expense, the servicer will be permitted at its option
to purchase all remaining trust property at a purchase price equal to the
aggregate of the Repurchase Amounts of the remaining receivables, other than
Liquidating Receivables, from each trust, as of the last day of any Collection
Period in which:
(1) the outstanding Aggregate Receivables Balance with respect to the
receivables held by that trust is 10% or less - or another percentage
as specified in the prospectus supplement - of the Aggregate Starting
Receivables Balance; and
(2) the Repurchase Amount for the receivables, other than the Liquidating
Receivables, is greater than or equal to the sum of the outstanding
principal balance of all of the securities, plus accrued and unpaid
interest on those securities.
As more fully described in the prospectus supplement, concurrently with the
purchase event specified above, any outstanding notes of the related series will
be redeemed and the subsequent distribution to any certificateholders of all
amounts required to be distributed to them pursuant to the trust agreement will
effect early retirement of the certificates of that series.
The Owner Trustee and the Indenture Trustee will give written notice of
termination to each securityholder of record for that series. This notice will
specify the distribution date upon which those securityholders may surrender
their securities to the Owner Trustee for final payment. Upon receipt of written
notice by the trust, the Indenture Trustee will give written notice of
redemption to each noteholder of record and the Owner Trustee will give written
notice of redemption to each related 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.
Subject to applicable law and after the Indenture Trustee has taken certain
measures to notify noteholders, any money held by the Indenture Trustee or any
paying agent in trust for payment on the notes which remain unclaimed for two
years shall, upon request of that trust, be paid to that trust, or its
successor. Following this payment, the Owner Trustee and any paying agent shall
no longer be liable to any noteholder with respect to that unclaimed amount, and
any claim with respect to that amount shall be an unsecured claim against the
trust. If, within 18 months after the first notice of final payment on any
certificates, there remain certificates which have not been surrendered for
cancellation, the Owner Trustee may take appropriate steps to notify the
applicable certificateholders. The cost of notice will be paid out of the
unclaimed amounts. Subject to applicable law, any funds that then remain shall
be paid to the seller.
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Administration Agreement
With respect to each trust, the Bank, in its capacity as administrator, will
enter into an administration agreement with the trust and the Indenture Trustee
pursuant to which the administrator will agree, to the extent provided in the
administration agreement, to provide the notices and to perform on behalf of the
trust and Owner Trustee certain other administrative obligations required by the
indenture. 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,
which will be paid by the servicer or as otherwise specified in the prospectus
supplement.
LEGAL ASPECTS OF THE RECEIVABLES
Rights in the Receivables
The receivables are "chattel paper" as defined in Article 9 of the UCC.
Article 9 of the UCC specifically states that with respect to a sale of chattel
paper, the provisions of Article 9 apply. In that connection and to avail each
trust and Indenture Trustee of the benefits and protections afforded by the UCC
to a purchaser of chattel paper whether by reason of a sale of chattel paper or
the grant of a security interest in chattel paper against other competing
claimants, the trust will take actions prescribed by the UCC to "perfect" the
interests of each trust and Indenture Trustee in the receivables transferred to
that trust and pledged or granted to the Indenture Trustee.
First, the seller will cause appropriate financing statements to be filed with
the appropriate governmental authorities in the states of Washington, Utah and
Idaho to evidence the sale to that trust and also the pledge to the Indenture
Trustee. Second, following the sale and assignment of the receivables to a
trust, pursuant to the sale and servicing agreement, the Custodian will be
appointed by the servicer to have physical possession of the receivables and the
receivable files as custodian for the trust and the Indenture Trustee. The
receivables will not be stamped, or otherwise marked to indicate that they have
been sold to the trust or further pledged to the Indenture Trustee; however, the
servicer and the Custodian will indicate in their computer records that the
receivables have been sold to that trust and pledged or granted to the Indenture
Trustee and both will have notice of the interest of that trust and the
Indenture Trustee in those receivables.
If, through inadvertence or otherwise, another party purchases, or takes a
security interest in, the receivables for new value in the ordinary course of
business and somehow manages to take possession of the receivables without
actual knowledge of the trust's or the Indenture Trustee's interests, that
purchaser or secured party will acquire an interest in the receivables superior
to the interest of that trust and the Indenture Trustee. Under the sale and
servicing agreement, in addition to the obligation to provide for perfection as
described above, the seller is also obligated to assure that the interest of the
trust in the receivables is perfected in such a manner as to affect the highest
priority afforded by the UCC to those interests. Under the indenture, the trust
is obligated to assure that the security interest created under the indenture is
maintained.
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Security Interests in the Financed Vehicles
Generally, retail motor vehicle installment sale contracts and installment
loans such as the receivables evidence loans to obligors to finance the purchase
of motor vehicles. The loan documents also constitute personal property security
agreements and include grants of security interests in the vehicles under the
UCC. Perfection of security interests in motor vehicles is generally governed by
the motor vehicle registration laws of the state in which the vehicle is
located.
In Washington, Utah, Idaho and most other states, with the exception of the
Idaho electronic title option described below, perfection of a security interest
in the vehicle is accomplished by taking action to have the secured party's lien
noted on the certificate of title. If the filing of the registration, title and
lien application papers necessary to cause this notation to occur is
accomplished within the appropriate period, 20 days for Idaho and Washington and
30 days for Utah, the date of perfection is generally the date that these papers
were executed except that the date of perfection in Washington is the date of
attachment. Otherwise, perfection is deemed to occur at the time of filing these
papers. Accordingly, if for any reason there is a failure to file these papers,
or take other appropriate action, within the appropriate period, subsequent
purchasers and lien or security interest claimants whose interests are perfected
before the filing of these papers would have prior claims to the vehicle. Also,
even though the laws in Utah allow 30 days for this filing, a filing after 20
days exposes the secured party to a possible claim in a bankruptcy proceeding
that the obligor's grant of the security interest is a preferential transfer.
According to recent revisions to the laws of Washington, a security interest
in a certificated vehicle may be temporarily perfected through the use of a
"transitional ownership record." This is an electronic record of the interests
of secured parties in a particular vehicle. It is only effective when a secured
party does not possess the actual title to the vehicle and the department of
licensing already has a computer record of the vehicles. None of the receivables
will be perfected utilizing this revision.
In Idaho, upon receipt of a properly completed title application, the
department of motor vehicles is authorized to create a paperless electronic
record of title to a vehicle in lieu of issuing a paper certificate of title if
the department and the lienholder so agree in writing. Under this alternative
method of registering and maintaining title to a motor vehicle, liens filed with
the department shall be perfected and take priority according to the order of
time in which the liens are entered into the electronic records of the
department. In the absence of a written agreement between the department and the
lienholder to create a paperless electronic title, the paper certificate of
title is the controlling title document evidencing the recording date.
The Bank's practice is to take any action as is required in accordance with
its normal and customary servicing practices and procedures to perfect its
security interest in a financed vehicle under the laws of the jurisdiction in
which the financed vehicle is registered. If the Bank, because of clerical error
or otherwise, has failed to take this action with respect to a financed vehicle,
it will not have a perfected security interest in the financed vehicle and its
security interest may be subordinate to the interests of, among others,
subsequent
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purchasers of the financed vehicle that give value without notice of the Bank's
security interest and to whom a certificate of title is issued in the
purchaser's name, holders of perfected security interests in the financed
vehicle, and the trustee in bankruptcy of the obligor. The Bank's security
interest may also be subordinate to these third parties in the event of fraud or
forgery by the obligor or administrative error by state recording officials or
in the circumstances noted below. As described more fully below, the Bank will
warrant in each sale and servicing agreement that it has an enforceable first
priority perfected security interest with respect to each financed vehicle and
will be required to repurchase the underlying receivable in the event of an
uncured breach of that warranty.
Pursuant to each sale and servicing agreement, the seller will assign its
security interests in the financed vehicles, along with the sale and assignment
of the receivables, to the trust. The trust will pledge this interest to the
Indenture Trustee for the benefit of the noteholders and the certificateholders
to the extent provided in the indenture. The certificates of title will not be
endorsed or otherwise amended to identify the trust or Indenture Trustee as the
new secured party, however, because of the administrative burden and expense
involved.
In Utah, Idaho and most other states, an assignment of a security interest in
a financed vehicle along with the applicable receivable is effective without
amendment of any lien noted on a vehicle's certificate of title or ownership,
and the assignee succeeds thereby to the assignor's rights as secured party. In
Utah, Idaho and most other states, in the absence of fraud or forgery by the
vehicle owner or of fraud, forgery, negligence or error by the Bank or
administrative error by state or local agencies, the notation of the Bank's lien
on the certificates of title or ownership and/or possession of these
certificates with this notation will be sufficient to protect the trust and
Indenture Trustee against the rights of subsequent purchasers of a financed
vehicle or subsequent lenders who take a security interest in a financed
vehicle.
There exists a risk, however, in not identifying the trust or Indenture
Trustee as the new secured party on the certificate of title that the security
interest of the trust or the Indenture Trustee may not be enforceable. In the
event the trust or Indenture Trustee has failed to obtain or maintain a
perfected security interest in a financed vehicle, their security interest would
be subordinate to, among others, a bankruptcy trustee of the obligor, a
subsequent purchaser of the financed vehicle or a holder of a perfected security
interest.
With respect to each trust, the seller will warrant in the sale and servicing
agreement as to each receivable conveyed by it to the trust that, on the closing
date, it has a valid, subsisting, and enforceable first priority perfected
security interest in the financed vehicle securing the receivable, subject to
administrative delays and clerical errors on the part of the applicable
government agency. The security interest will be assigned by the seller to the
trust. In the event of an uncured breach of that warranty, the seller will be
required to repurchase the receivable for its Repurchase Amount. The repurchase
obligation will constitute the sole remedy available to the affected trust, the
Indenture Trustee, the Owner Trustee and the related securityholders for the
breach. The seller's warranties with respect to perfection and enforceability of
a security interest in a financed vehicle will not cover statutory or other
liens arising after the closing date by operation of law which have priority
over the security interest. Accordingly, any of these liens would not by itself
give rise to a repurchase obligation on the part of the seller.
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If an obligor moves to a state other than the state in which the financed
vehicle is registered, under the laws of Washington, Utah, Idaho and most other
states, a perfected security interest in a motor vehicle continues for four
months after the relocation. The perfected security interest continues
thereafter, in most instances, until the obligor re-registers the motor vehicle
in the new state, but in any event not beyond the surrender of the certificate
of title.
A majority of states require surrender of a certificate of title to reregister
a motor vehicle. Many require that notice of that surrender be given to each
secured party noted on the certificate of title. In those states that require a
secured party to take possession of a certificate of title to perfect a security
interest, the secured party would likely learn of the re-registration through
the request from the obligor to surrender possession of the certificate of
title. In those states that require a secured party to note its lien on a
certificate of title to perfect a security interest but do not require
possession of the certificate of title, the secured party would likely learn of
the re-registration through the notice from the state department of motor
vehicles that the certificate of title had been surrendered.
The requirements that a certificate of title be surrendered and that notices
of the surrender be given to each secured party also apply to re-registrations
effected following a sale of a motor vehicle. The servicer would therefore have
the opportunity to re-perfect the seller's security interest in a financed
vehicle in the state of re-registration following relocation of the obligor and
would be able to require satisfaction of the underlying receivable following a
sale of the financed vehicle.
In states that do not require a certificate of title for registration of a
motor vehicle, re-registration could defeat perfection. In the ordinary course
of servicing motor vehicle loans, the servicer takes steps to effect re-
perfection upon receipt of notice of re-registration or information from the
obligor of a relocation. However, there is a risk that an obligor could relocate
without notification to the servicer, then file a false affidavit with the new
state to cause a new certificate of title to be issued without notation of the
seller's lien.
Under the laws of Washington, Utah, Idaho and many other states, certain
possessory liens for repairs performed on or storage of a motor vehicle and
liens for unpaid taxes may take priority over a perfected security interest in
the motor vehicle. The Code also grants priority to certain federal tax liens
over the lien of a secured party. The laws of certain states and federal law
permit the confiscation of motor vehicles under certain circumstances if used in
unlawful activities, which may result in a loss of a secured party's perfected
security interest in the confiscated motor vehicle. For each trust, the seller
will warrant in the sale and servicing agreement that, as of the closing date,
the seller has not taken any action which would have a material and adverse
effect on the interests of the trust and securityholders. If the seller breaches
this warranty, the seller will be required to repurchase the receivable secured
by the financed vehicle involved. This repurchase obligation will constitute the
sole remedy available to the trust, Owner Trustee, Indenture Trustee and
securityholders for the breach. Any liens for repairs or taxes arising at any
time after the closing date during the term of a receivable would not give rise
to a repurchase obligation on the part of the seller.
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Repossession
In the event of a default by an obligor, the holder of a receivable has all
the remedies of a secured party under the UCC, except where specifically limited
by other state laws or by contract. The remedies of a secured party under the
UCC include the right to repossession by means of self-help, unless these means
would constitute a breach of the peace. Self-help repossession is the method
employed by the Bank in most cases, and is accomplished simply by taking
possession of the financed vehicle.
Generally, where the obligor objects or raises a defense to repossession, the
Bank must obtain a court order from the appropriate state court, and must
repossess the financed vehicle in accordance with that order. In the event of a
default by an obligor, the laws of many jurisdictions - but not Washington, Utah
and Idaho - 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.
However, the notice need not be given in emergency situations pursuant to an
order from the appropriate state court.
Notice of Sale; Redemption Rights
The UCC and other state laws require the secured party to provide an 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. The obligor
generally has the right to redeem the collateral prior to actual sale by paying
the secured party the unpaid principal balance of the obligation plus accrued
and unpaid interest. In most cases, the obligor must also pay reasonable
expenses for repossessing, holding and preparing the collateral for disposition
and arranging for its sale. In some jurisdictions, the obligor must also pay
reasonable attorneys' fees. In some states - but not Washington, Utah and Idaho
- - the obligor has the right, prior to actual sale, to reinstatement of the
original loan terms and to return of the collateral by payment of delinquent
installments of the unpaid balance.
Deficiency Judgments and Excess Proceeds
The proceeds of resale of financed vehicles generally will be applied first to
the expenses of repossession and resale and then to the satisfaction of the
indebtedness on the underlying receivable. 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 Utah, Idaho and other states that do not prohibit or limit these judgments.
The ability to get a deficiency judgment assumes proper notice of sale has been
given and the sale has been conducted in a commercially reasonable manner and
otherwise in compliance with applicable UCC provisions.
Although a deficiency judgment can be sought in Washington, deficiency
judgments are limited to the extent the agreement so provides and the collateral
is chattel paper or accounts. Any deficiency judgment would be a personal
judgment against the obligor for the shortfall, however, and a defaulting
obligor may have very little capital or sources of income available following
repossession. Therefore, in many cases, it may not be
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useful to seek a deficiency judgment. If a deficiency judgment is obtained, it
may be settled at a significant discount or not paid at all.
Occasionally, after resale of a repossessed motor vehicle and payment of all
expenses and indebtedness, there is a surplus of funds. In that case, the UCC
requires the secured party to remit the surplus to any other holder of a lien on
the financed vehicle. If no other lienholder exists or funds remain after
paying the other lienholders, the secured party must remit surplus funds to the
obligor.
Consumer Protection Laws
Numerous federal and state consumer protection laws and related regulations
impose substantial and detailed 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 Billing Act,
. the Fair Credit Reporting Act,
. the Fair Debt Collection Practices Act,
. the Magnuson-Moss Warranty Act,
. the Federal Reserve Board's Regulations B, Z, and AA, and other similar
acts and regulations,
. state adoptions of the National Consumer Act and of the Uniform Consumer
Credit Code, and
. other similar laws.
Also, state laws impose other restrictions on consumer transactions, may
require contract disclosures in addition to those required under federal law and
may limit the remedies available in the event of default by an obligor. These
requirements impose specific statutory liabilities upon creditors who fail to
comply with their provisions where applicable. In most cases, this liability
could affect the ability of an assignee, such as a trust or an Indenture
Trustee, to enforce secured loans such as the receivables.
The FTC Rule subjects a seller of motor vehicles, and some related lenders and
their assignees, in a consumer credit transaction and any assignee of the seller
to all claims and defenses which the purchaser could
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assert against the seller. Liability under the FTC Rule is limited to the
amounts paid by the purchaser under the contract, and the holder of the contract
may also be unable to collect any balance remaining due thereunder from the
purchaser. The FTC Rule is generally duplicated by state statutes or the common
law in most states. Although the Bank is not a seller of motor vehicles and is
not subject to the jurisdiction of the FTC, the loan agreements evidencing the
receivables contain provisions which contractually apply the FTC Rule.
Accordingly, the Bank, and each trust as a holder of receivables, will be
subject to any claims or defenses that the purchaser of a financed vehicle may
assert against the seller of that vehicle. In Washington, Utah and Idaho, those
claims and defenses could also arise under state "lemon laws," statutes
governing the sale of "salvage" vehicles, and other consumer protection laws.
Other examples of these claims include, but are not limited to, breach of
implied UCC warranties and fraud.
Under the motor vehicle dealer licensing laws of most states, sellers of motor
vehicles are required to be licensed to sell those vehicles at retail sale. In
addition, for used motor vehicles, the FTC's Rule on Sale of Used Vehicles
requires that all sellers of used motor vehicles prepare, complete and display a
"Buyer's Guide" which explains the warranty coverage of the vehicles. Federal
Odometer Regulations promulgated under the Motor Vehicle Information and Cost
Savings Act require that all sellers of used motor vehicles furnish a written
statement signed by the seller certifying the accuracy of the odometer reading.
If a seller is not properly licensed or if either a Buyer's Guide or Odometer
Disclosure Statement was not properly provided to the purchaser of a financed
vehicle, the purchaser may be able to assert a claim against the seller of that
vehicle. Although the Bank is not a seller of motor vehicles and is not subject
to those laws, a violation of those laws may form the basis for a claim or
defense against the Bank or a trust as a holder of the affected receivable.
Courts have applied general equitable principles to secured parties pursuing
repossession or litigation involving deficiency balances. These equitable
principles may relieve an obligor from some or all of the legal consequences of
a default.
The seller will warrant in each sale and servicing agreement as to each
receivable conveyed by it to the trust that the receivable complied at the time
it was originated and as of the closing date in all material respects with all
requirements of applicable law. If, as of the cutoff date, an obligor had a
claim against the trust for violation of any law and that claim materially and
adversely affects that trust's interest in a receivable, that violation would
create an obligation of the seller to repurchase the receivable unless the
breach was cured. This repurchase obligation will constitute the sole remedy of
the trust, Indenture Trustee, Owner Trustee and securityholders against the
seller for any uncured breach. See "Description of the Transfer and Servicing
Agreements--Sale and Assignment of the Receivables."
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 lender to realize upon
collateral or enforce a deficiency judgment. For example, in a Chapter 13
proceeding under the United States Bankruptcy Code, a court may prevent a lender
from repossessing a motor vehicle and, as part of
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the rehabilitation plan, reduce the amount of the secured indebtedness to the
market value of that vehicle at the time of bankruptcy, as determined by the
court. This would leave the party providing financing 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 interest
and time of repayment of the indebtedness.
The seller intends that the transfer of the receivables under each sale and
servicing agreement constitute a sale. FIRREA sets forth certain powers that the
FDIC could exercise if it were appointed as receiver for the seller. Subject to
clarification by FDIC regulations or interpretations, it would appear from the
positions taken by the FDIC before and after the passage of FIRREA that the FDIC
in its capacity as receiver for the seller would not interfere with the timely
transfer to a trust of payments collected on the receivables.
To the extent that the seller is deemed to have granted a security interest in
the receivables to a trust, and that interest was validly perfected before the
seller's insolvency and was not taken in contemplation of insolvency, that
security interest should not be subject to avoidance, and payments to the trust
with respect to the affected receivables should not be subject to recovery by
the FDIC as receiver. If, however, the FDIC were to assert a contrary position,
such as by requiring the Indenture Trustee, on behalf of the trust, to establish
its right to those payments by submitting to and completing the administrative
claims procedure established under FIRREA, delays in distributions on the
securities and possible reductions in the amount of those payments could occur.
Alternatively, in these circumstances, the FDIC might have the right to repay
the securities for an amount which may be greater or less than the principal
balance of the securities and which would shorten their weighted average life.
ERISA CONSIDERATIONS
ERISA and Section 4975 of the Code impose certain requirements on Plans, and
on persons who are fiduciaries with respect to Plans, in connection with the
investment of Plan Assets. ERISA generally imposes on Plan fiduciaries certain
general fiduciary requirements, including those of investment prudence and
diversification and the requirement that a Plan's investments be made in
accordance with the documents governing the Plan. Generally, any person who has
discretionary authority or control respecting the management or disposition of
Plan Assets, and any person who provides investment advice with respect to Plan
Assets for a fee, is a fiduciary with respect to those Plan Assets.
ERISA and Section 4975 of the Code prohibit a broad range of transactions
involving Plan Assets and Parties in Interest or Disqualified Persons, unless a
statutory or administrative exemption is available. Parties in Interest or
Disqualified Persons that participate in a prohibited transaction may be subject
to a penalty imposed under ERISA and/or an excise tax imposed pursuant to
Section 4975 of the Code, unless a statutory or administrative exemption is
available. These prohibited transactions generally are set forth in Section 406
of ERISA and Section 4975 of the Code. The acquisition or holding of securities
by a Plan or with Plan Assets could be considered to give rise to a prohibited
transaction if the seller, the servicer, the trust or any of their respective
Affiliates is or becomes a party in interest or a disqualified person with
respect to the Plan.
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In addition, certain transactions involving a trust might be deemed to
constitute prohibited transactions under ERISA and the Code with respect to a
Plan that purchased securities if assets of the trust were deemed to be Plan
Assets of the Plan. Under the Plan Assets Regulation, the assets of the trust
would be treated as Plan Assets only if the Plan acquired an "equity interest"
in the trust and none of the exceptions in the Plan Assets Regulation was
applicable. An equity interest is defined under the Plan Assets Regulation as an
interest other than an instrument which is treated as indebtedness under local
law and which has no substantial equity features.
Any fiduciary or other Plan investor considering whether to purchase any
securities on behalf of or with Plan Assets of any Plan should consult with its
counsel and refer to the prospectus supplement for guidance regarding the ERISA
Considerations applicable to the securities offered by that prospectus
supplement.
Some employee benefit plans, such as governmental plans, as defined in Section
3(32) of ERISA and some church plans, as defined in Section 3(33) of ERISA, are
not subject to the requirements of ERISA or Section 4975 of the Code.
Accordingly, assets of these plans may be invested in the securities without
regard to the ERISA considerations described in this prospectus, subject to the
provisions of our applicable federal and state law. However, any plan that is
qualified and exempt from taxation under Section 401(a) and 501(a) of the Code
is subject to the prohibited transaction rules set forth in Section 503 of the
Code.
PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement for each
trust, the seller will sell to each of the underwriters named in the
underwriting agreement and in the 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
agreement and in the prospectus supplement. One or more classes of a series may
not be subject to an underwriting agreement. Any of these classes will be
retained by the seller or sold in a private placement.
In each underwriting agreement, the underwriters will agree, subject to the
terms and conditions set forth in the underwriting agreement, to purchase all of
the securities described in the underwriting agreement which are offered by this
prospectus and by the 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.
Each prospectus supplement will either:
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(1) set forth the price at which each class of securities being
offered by that 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
(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
prices and the concessions may be changed.
Each underwriting agreement will provide that the seller will indemnify the
underwriters against certain civil liabilities, including liabilities under the
Securities Act, or contribute to payments the several underwriters may be
required to make in respect of those liabilities. Each trust may invest funds
in its trust accounts in Eligible Investments acquired from the underwriters or
from the seller or any of its affiliates.
Underwriters may engage in over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids with respect to
the securities in accordance with Regulation M under the Exchange Act. Over-
allotment transactions involve syndicate sales in excess of the offering size,
which creates a syndicate short position. Stabilizing transactions permit bids
to purchase the security so long as the stabilizing bids do not exceed a
specified maximum. Syndicate covering transactions involve purchases of the
securities 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 securities
originally sold by the syndicate member are purchased in a syndicate covering
transaction. These over-allotment transactions, stabilizing transactions,
syndicate covering transactions and penalty bids may cause the prices of the
securities to be higher than they would otherwise be in the absence of these
transactions. Neither the seller nor any of the underwriters will represent that
they will engage in any of these transactions or that these transactions, once
commenced, will not be discontinued without notice.
The underwriting agreement will provide that the closing of the sale of any
class of securities subject to that underwriting agreement will be conditioned
on the closing of the sale of all other classes of securities of that series.
The prospectus supplement will state the place and time of delivery for the
securities of any series in respect of which this prospectus is delivered.
LEGAL MATTERS
Certain legal matters will be passed upon for the seller by Ray, Quinney &
Nebeker, Salt Lake City, Utah and Perkins Coie LLP, Seattle, Washington and for
the underwriters by Kirkland & Ellis. Certain federal income tax and other
matters will be passed upon for the seller by Kirkland & Ellis. Certain Idaho
state tax and
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other matters will be passed upon for the seller by Moffatt, Thomas, Barrett,
Rock & Fields, Chtd. A daughter of the chief executive officer of First Security
Corporation is a shareholder and director of Ray, Quinney & Nebeker.
WHERE YOU CAN FIND MORE INFORMATION
We filed a registration statement relating to the securities 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., New York, New York or
Chicago, Illinois. 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 over the Internet at the SEC web site
(http://www.sec.gov).
The SEC allows us to "incorporate by reference" information we file with
it, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this prospectus. Information that we file later with the SEC will
automatically update the information in this prospectus. In all cases, you
should rely on the later information over different information included in this
prospectus or the prospectus supplement.
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 or
calling us at: 801-246-5976.
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GLOSSARY
"Advance" means a payment that the servicer may make with respect to each
delinquent receivable.
"Aggregate Receivables Balance" means, as of any date, the sum of the
Receivable Balances of all outstanding receivables (other than Liquidating
Receivables) held by the trust on that date.
"Aggregate Starting Receivables Balance" shall mean the sum of the
Aggregate Receivables Balance of all receivables transferred to the trust as of
the cutoff date. That amount will be specified in the prospectus supplement.
"Applicable Trustee" means the Owner Trustee or the Indenture Trustee, as
applicable based on the context in which the term is used.
"Base Rate" means an interest rate basis upon which the interest rate
payable on Floating Rate Securities is calculated.
"Certificate Pool Factor" means, for any class of certificates, a seven-
digit decimal which the servicer will compute prior to each distribution with
respect to that class of certificates, as of the close of that date (after
giving effect to distributions to be made on that date), as a fraction of the
initial certificate balance of that class of certificates.
"Collection Period" means a collection period specified in the prospectus
supplement.
"Commodity Indexed Securities" means a class of Indexed Securities for
which the Index is determined by reference to an Indexed Commodity.
"Cooperative" means Euroclear Clearance System, S.C., a Belgian cooperative
corporation.
"Currency Indexed Securities" means a class of Indexed Securities for which
the Index is determined by reference to an Indexed Currency.
"Custodian" means First Security Service Corporation in its role as
custodian of the receivables and the receivables files.
"Definitive Certificates" means certificates issued in fully registered,
certificated form.
"Definitive Notes" means notes issued in fully registered, certificated
form.
"Definitive Securities" means Definitive Certificates and Definitive Notes.
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"Deposit Date" means the business day preceding the related distribution
date or, with respect to the note distribution account, the next payment date.
"Disqualified Persons" means persons under the Code who have certain
specified relationships to a Plan or its Plan Assets.
"Eligible Bank" means any institution with trust powers -which may be the
Bank or the Owner Trustee, 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, which has a combined capital and surplus in
excess of $100,000,000, the deposits of which are insured to the full extent
permitted by law by the FDIC, which is subject to supervision and examination by
federal or state banking authorities and which has
(1)(a) a rating of at least P-1 from Moody's and A-l+ from S&P with
respect to short-term deposits obligations, and
(b) a rating of A2 or higher from Moody's and A from S&P with respect
to long-term unsecured debt obligations, or
(2) those other ratings that may be described in a prospectus
supplement.
"Eligible Deposit Account" means either-
(1) a segregated account with an Eligible Bank, or
(2) a segregated trust account with the trust department of a
depository institution organized under the laws of the United
States of America or any one of the states thereof or the
District of Columbia (or any domestic branch of a foreign bank),
having trust powers and acting as trustee for funds deposited in
that account, so long as the long-term unsecured debt of that
depository institution shall have a credit rating from each
rating agency in one of its generic rating categories which
signifies investment grade.
"Eligible Investments" means investments which will generally be limited to
those acceptable to the rating agencies as being consistent with the rating of
the securities. Eligible Investments may include, if otherwise eligible, debt
securities of the Owner Trustees, the Bank or any of their affiliates and money
market funds for which the Owner Trustees, the Indenture Trustees, the Bank or
any of their affiliates is an investment manager or investment advisor.
"Euroclear Operator" means the Brussels, Belgium office of Morgan Guaranty
Trust Company of New York.
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"Events of Default" means, unless otherwise specified in the prospectus
supplement, events under the indenture which consist of:
(1) a default in the payment of any interest on any note for a
period of five days;
(2) a default in the payment of the principal of or any installment
of the principal of any note when that payment or installment
becomes due and payable;
(3) a default in the observance or performance of any covenant or
agreement of the trust made in the indenture which default
materially and adversely affects the rights of the noteholders,
and which default continues for a period of 30 days after
written notice of the default is given to the trust by the
Indenture Trustee or to the trust and the Indenture Trustee by
the holders of at least a majority in principal amount of those
notes then outstanding, or for a longer period, not in excess of
90 days, as may be reasonably necessary to remedy the default;
provided that the default is capable of remedy within 90 days or
less; or
(4) specified events of bankruptcy, insolvency, receivership or
liquidation of the trust.
However, the amount of principal required to be paid to noteholders of a
series under the indenture will generally be limited to amounts available to be
deposited in the note distribution account, absent acceleration of the notes.
"Events of Servicing Termination" is defined in the section "Description of
the Transfer and Servicing Agreements-Events of Servicing Termination."
"FDIA" means the Federal Deposit Insurance Act, as amended by FIRREA.
"FDIC" means the Federal Deposit Insurance Corporation.
"FIRREA" means the Financial Institutions Reform, Recovery and Enforcement
Act of 1989.
"Fixed Rate Securities" means securities which bear interest at a fixed
rate per annum.
"Floating Rate Securities" means securities which bear interest at a
variable or adjustable rate per annum.
"FTC Rule" means the FTC's holder-in-due-course rule.
"Index" means the reference measure used to calculate the Indexed Principal
Amount on an Indexed Security.
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"Indexed Commodity" means the commodity specified in the prospectus
supplement to which an Index is related.
"Indexed Currency" means the currency or composite currency specified in
the prospectus supplement to which an Index is related.
"Indexed Principal Amount" means the principal amount payable at the final
scheduled distribution date for a class of Indexed Securities.
"Indexed Securities" means a class of securities for which the Indexed
Principal Amount is determined by reference to an Index.
"Initial Receivable Balance" means, for a receivable,
(1) the aggregate amount advanced toward the purchase price of all
financed vehicles related to that receivable, including
insurance premiums, federal excise taxes, sales taxes and other
items customarily financed as part of motor vehicle loans and
related costs, less
(2) payments received from the obligor prior to the related cutoff
date allocable to principal in accordance with the terms of the
receivable.
"Interest Reset Period" will be defined in the prospectus supplement.
"Liquidating Receivable" means a receivable which the servicer has
determined to charge off during any Collection Period in accordance with its
customary servicing practices.
"Liquidation Proceeds" means, with respect to any distribution date and a
receivable that became a Liquidating Receivable during the Collection Period:
(1) insurance proceeds received during the Collection Period by the
servicer relating to the financed vehicle;
(2) amounts received by the servicer during the Collection Period
from a dealer under a dealer agreement; and
(3) monies collected by the servicer from whatever source during the
Collection Period on the Liquidating Receivable, net of expenses
incurred by the servicer in connection with that receivable and
the disposition of the financed vehicle and any payments
required by law to be remitted to the obligor - in no event less
than zero.
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"Note Pool Factor" means, for each class of notes, a seven-digit decimal
which the servicer will compute prior to each distribution to that class of
notes.
"Parties in Interest" means persons under ERISA who have certain specified
relationships to a Plan or its Plan Assets.
"Plans" means employee benefit plans and certain other plans and
arrangements, including individual retirement accounts and annuities, Keogh
plans and certain collective investment funds or insurance company general or
separate accounts in which these plans, accounts or arrangements are invested,
that are subject to the fiduciary responsibility provisions of ERISA and/or
Section 4975 of the Code.
"Plan Assets" means the plan assets of Plans.
"Plan Assets Regulations" means a regulation issued by the United States
Department of Labor regulating the investment of Plan Assets.
"Pre-Funded Amount" means a portion of the proceeds of a sale of securities
used to pay the purchase price for Subsequent Receivables and related purposes.
The Pre-Funded Amount shall be held in a trust account.
"Receivable Balance" means, as of the last day of the related Collection
Period, for any receivable, the Initial Receivable Balance minus the sum, in
each case computed in accordance with the terms of the receivable, of-
(1) that portion of payments due on and after the cutoff date and on or
prior to the last day of the related Collection Period allocated to
principal,
(2) any prepayments applied by the servicer to reduce the Receivable
Balance, and
(3) that portion of the following received and allocated to principal by
the servicer:
(a) proceeds from any insurance policies covering the financed
vehicle or financed vehicles,
(b) Liquidation Proceeds, and
(c) proceeds from any dealer agreement.
The obligor on a receivable secured by multiple financed vehicles may prepay an
amount corresponding to the outstanding principal balance for one or more of
those financed vehicles and the security interest in those vehicles will
generally be released.
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"Related Documents" means the Transfer and Servicing Agreements and the
related documents with respect to that trust.
"Repurchase Amount" means the unpaid principal balance owed by an obligor
on a receivable plus interest at the respective contract rate of interest
through the last day of the month of repurchase.
"Rules" means the rules, regulations and procedures creating and affecting
DTC and its operations.
"Servicing Fee" means an amount equal to the sum of
(1) the product of one-twelfth of the Servicing Fee Rate specified in
the prospectus supplement and the Aggregate Receivables Balance as
of the close of business on the last day of the second Collection
Period immediately preceding the Collection Period in which that
distribution date occurs, and
(2) unless otherwise specified in the prospectus supplement with respect
to any trust, any late fees, prepayment charges and deferral fees
and other fees and charges collected during the Collection Period.
"Specified Reserve Account Balance" will be defined in the prospectus
supplement.
"Spread" means the number of basis points - one basis point equals one one-
hundredth of a percentage point - added to the Base Rate when determining the
interest rate payable on Floating Rate Securities.
"Spread Multiplier" means the percentage that may be multiplied by the Base
Rate when determining the interest rate payable on Floating Rate Securities.
"Stock Index" means the stock index specified in the prospectus supplement
to which an Index is related.
"Stock Indexed Securities" means a class of Indexed Securities for which
the Index is determined by reference to a Stock Index.
"Strip Certificates" means certificates entitled to-
(1) distributions of principal with disproportionate, nominal or no
interest distributions, or
(2) interest distributions with disproportionate, nominal or no
distributions of principal.
"Strip Notes" means notes entitled to-
(1) principal payments with disproportionate, nominal or no interest
payments, or
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(2) interest payments with disproportionate, nominal or no principal
payments.
"Subsequent Receivables" means additional receivables that the trust may
have the right to purchase from the seller after the securities are issued, if
certain conditions are satisfied and if so specified in the prospectus
supplement.
"Subsequent Transfer Date" means each date specified as a transfer date in
the prospectus supplement.
"Total Servicing Fee" means the Servicing Fee, together with any portion of
the Servicing Fee that remains unpaid from prior distribution dates.
"Transfer and Servicing Agreements" means the sale and servicing agreement,
the trust agreement and the indenture.
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Prospectus Supplement to Prospectus dated _________, 20__
$-------------
LOGO
First Security Auto Owner Trust 20__-__
Asset Backed Notes
First Security Bank(R), N.A.
Seller and Servicer
YOU SHOULD CONSIDER
CAREFULLY THE RISK
FACTORS ON PAGE S-__ IN THIS PROSPECTUS SUPPLEMENT AND THE RISK FACTORS
BEGINNING ON PAGE __ IN THE PROSPECTUS.
The notes represent obligations of the trust only and do not represent
obligations of or interests in, and are not guaranteed by, First Security
Bank(R), N.A. or any of its affiliates.
This prospectus supplement may be used to offer and sell the notes only if
accompanied by the prospectus.
THE NOTES
The seller will sell the following notes pursuant to this prospectus supplement:
<TABLE>
<CAPTION>
Class A Notes
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
A-1 Notes A-2 Notes A-3 Notes A-4 Notes Class B Notes
Initial Principal Amount $___,000,000 $___,000,000 $___,000,000 $___,000,000 $__,000,000
Interest Rate ____% ____% ____% ____% ____%
Final Scheduled ____ 20__ _____ 20__ ______ 20__ ______ 20__ _____ 20__
Distribution Date
</TABLE>
Price to Public, plus accrued interest, if any, from
______, 20__.
Underwriting Discount
Proceeds to Seller
Price to Public, excluding accrued interest, is $_______________. Total
underwriting discount is $_____________. Expenses payable by the seller,
estimated to be $___,000 have not been deducted from the Proceeds to the Seller.
Total proceeds to the seller will be $_____________.
. Principal and interest on all notes will be payable on each monthly
distribution date. The first distribution date will be _______________.
CREDIT ENHANCEMENT
. The Class B Notes are subordinated to the Class A Notes as described
in this prospectus supplement.
. Reserve account, with an initial balance of $___________.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Underwriters of the Class A Notes
Underwriters of the Class B Notes
_______, 20__
<PAGE>
Important Notice About Information Presented In This
Prospectus Supplement And The Prospectus
We tell you about the notes in two separate documents that progressively
provide more detail-
(1) the prospectus, which provides general information, some of
which may not apply to the notes, and
(2) this prospectus supplement, which describes the specific terms
of your notes.
If the terms of the notes vary between this prospectus supplement and the
prospectus, you should rely on the information in this prospectus supplement.
You should rely only on the information provided in this prospectus
supplement and the 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 notes in any jurisdiction where the offer
is not permitted. We do not claim the accuracy of the information in this
prospectus supplement or the prospectus as of any date other than the dates
stated on their respective covers.
We include cross-references in this prospectus supplement and in the
prospectus to captions in these materials where you can find further related
discussions. The following Table of Contents and the Table of Contents included
in the prospectus provide the pages on which these captions are located.
You can find definitions of capitalized terms used in this prospectus
supplement under the caption ''Glossary'' beginning on page S-___ in this
prospectus supplement and under the caption "Glossary of Terms'' which appears
at the end of the prospectus.
--------------------
<PAGE>
TABLE OF CONTENTS
SUMMARY OF TERMS............................. S-1
The Parties.............................. S-1
The Securities........................... S-1
Credit Enhancement....................... S-5
Trust Property........................... S-6
The Receivables.......................... S-7
Collection Account; Priority
of Distributions................... S-7
Tax Status............................... S-8
Erisa Considerations..................... S-8
Legal Investment......................... S-8
RISK FACTORS................................. S-9
THE TRUST.................................... S-10
Capitalization of the Trust.............. S-10
The Owner Trustee........................ S-10
DELINQUENCY AND LOSS
EXPERIENCE OF SELLER..................... S-11
Delinquency Experience................... S-11
Credit Loss/Repossession
Experience......................... S-11
THE RECEIVABLES POOL......................... S-12
The Receivables.......................... S-12
Certain Characteristics.................. S-13
Composition of the
Receivables........................ S-14
Distribution by Contract Rate
of the Receivables................. S-14
Distribution by Remaining
Term of Receivables................ S-15
Geographic Distribution of
the Receivables.................... S-16
Payments on the Receivables ............. S-16
Weighted Average Life of the
Notes.............................. S-17
THE NOTES.................................... S-21
General................................. S-21
Payments of Interest.................... S-21
Payments of Principal................... S-22
Monthly Dates........................... S-23
Redemption.............................. S-24
Parity and Priority of Notes ........... S-24
Voting Rights........................... S-24
Delivery of Notes....................... S-25
THE TRANSFER AND
SERVICING
AGREEMENTS.............................. S-26
Distributions........................... S-26
Servicing Compensation.................. S-28
Advances................................ S-28
Reserve Account......................... S-28
MATERIAL FEDERAL INCOME
TAX CONSEQUENCES........................ S-29
Characterization as Debt................ S-30
Characterization of the Trust........... S-30
Interest Income to
Noteholders...................... S-30
Original Issue Discount................. S-30
Disposition of Notes.................... S-31
Information Reporting and
Backup Withholding............... S-31
Tax Consequences to Foreign
Noteholders...................... S-32
STATE AND LOCAL TAX
CONSEQUENCES............................ S-33
ERISA CONSIDERATIONS......................... S-33
UNDERWRITING................................. S-33
LEGAL OPINIONS............................... S-35
GLOSSARY..................................... S-36
i
<PAGE>
SUMMARY OF TERMS
. 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 all of the material terms of our
offering of the notes, you should read carefully this entire document and
the prospectus, including the information under "Risk Factors" in both as
well.
. This summary provides an overview of certain calculations, cash flows and
other information to aid your understanding and is qualified by the full
description of these calculations, cash flows and other information in this
prospectus supplement and the prospectus.
THE PARTIES
Issuer
First Security Auto Owner Trust 20__-__, a Delaware business trust.
Seller and Servicer
First Security Bank(R), N.A.
Indenture Trustee
__________________________
Owner Trustee
__________________________
THE SECURITIES
The Notes
The trust will issue the following notes:
Class A Notes
. Class A-1 ____% asset backed notes in the aggregate principal amount of
$____,000,000.00;
. Class A-2 ____% asset backed notes in the aggregate principal amount of
$____,000,000.00;
. Class A-3 ____% asset backed notes in the aggregate principal amount of
$____,000,000.00; and
. Class A-4 ____% asset backed notes in the aggregate principal amount of
$____,000,000.00.
. Class B ____% asset backed notes in the aggregate principal amount of
$____,000,000.00, of which $____,000,000.00 will be offered by this prospectus
supplement.
The seller will retain a Class B Note in the aggregate principal amount of
$_______, which is not offered by this prospectus supplement.
S-1
<PAGE>
The notes will have the benefit of the credit enhancements described below.
Ratings of the Notes
We will issue the notes only if-
(1) the Class A-1 Notes are rated in the highest short-term rating category
by at least two nationally recognized statistical rating agencies,
(2) the Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes are rated
in the highest long-term rating category by at least two nationally
recognized statistical rating agencies and
(3) the Class B Notes are rated at least investment grade by at least two
nationally recognized statistical rating agencies.
After the notes are issued, any ratings may be lowered or withdrawn by the
applicable rating agencies.
Closing Date
The purchase of the receivables and the issuance of the notes will take place
on _______, 2000.
Distribution Dates
The 15/th/ day of each calendar month, or the next business day if the 15/th/
is not a business day, beginning with _____ 15, 2000.
Interest Payments
The interest rate for each class of notes is the fixed rate as specified on
the cover page of this prospectus supplement. Interest will be payable on all
notes on each distribution date.
Interest on the Class A-1 Notes will be calculated on the basis of the actual
number of days elapsed from the last distribution date and a 360-day year.
Interest on the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes and
the Class B Notes will be calculated on the basis of a 360-day year of twelve
30-day months.
Payments of interest on the Class B Notes are subordinated to interest
payments on the Class A Notes as follows:
. On any distribution date, interest on the Class B Notes will not be paid
until all accrued and unpaid interest on the Class A Notes has been paid
in full.
. After an acceleration of the notes following an event of default or if any
notes remain outstanding on or after the applicable final scheduled
distribution date, no interest or principal will be paid on the Class B
Notes until all principal and interest on the Class A Notes has been paid
in full.
Principal Payments
Principal on the notes will be payable on each distribution date in an
aggregate amount based on the amount of principal collected on the receivables
during the related collection period. Except as provided below, these payments
will be made-
S-2
<PAGE>
. first, 100% to the Class A-1 Notes until the Class A-1 Notes are paid in
full;
. second,
(1) the Class A Principal Percentage to the Class A Notes until paid in
full. The entire Class A Principal Percentage shall be paid to the Class
A-2 Notes until paid in full, then to the Class A-3 Notes until paid in
full and then to the Class A-4 Notes until paid in full, and
(2) the Class B Principal Percentage to the Class B Notes until paid in
full.
Principal on the Class B Notes will be paid on any distribution date only
after the Class A Noteholders' Principal Distributable Amount for that
distribution date has been paid in full. Also, so long as any Class A Notes are
outstanding, if the amount in the reserve account is less than the Specified
Reserve Account Balance for that distribution date, all amounts otherwise
payable as principal on the Class B Notes will be paid as principal on the Class
A Notes. The Specified Reserve Account Balance will be calculated after giving
effect to all deposits or withdrawals into or from the reserve account for that
distribution date.
From and after the occurrence of a gross loss trigger event, except as
provided below, principal payments will be made-
. first, 100% to the Class A Notes until paid in full. All principal
payments shall be paid to the Class A-1 Notes until paid in full, then to
the Class A-2 Notes until paid in full, then to the Class A-3 Notes until
paid in full and then to the Class A-4 Notes until paid in full; and
. second, 100% to the Class B Notes until paid in full.
In addition to the above, payments of principal on the Class B Notes are
subordinated to payments of interest and principal on the Class A Notes. This
subordination means that-
(1) after an acceleration of the notes following an event of default or
(2) if any notes remain outstanding on or after the applicable final
scheduled distribution date, then principal payments will not be made as
described above.
Instead, principal payments will be made-
. first, to the Class A Noteholders ratably according to the amount due
and payable on each class until all the Class A Notes have been paid
in full; and
. second, to the Class B Noteholders until the Class B Notes have been
paid in full.
Any amounts otherwise payable as interest and principal on the Class B Notes
will be available to make payments of principal on the Class A Notes.
Final Scheduled Distribution Dates
S-3
<PAGE>
The outstanding principal amount, if any, of each class of notes will be
payable in full on final scheduled distribution date set forth below.
If any class of notes is not repaid in full on or prior to that class's final
scheduled distribution date, an event of default will occur. If an event of
default occurs, no interest or principal will be paid on the Class B Notes until
all interest and principal has been paid on the Class A Notes.
Notes Final scheduled distribution date
----- ---------------------------------
Class A-1 ______ 20__ distribution date
Class A-2 ______ 20__ distribution date
Class A-3 ______ 20__ distribution date
Class A-4 ______ 20__ distribution date
Class B ______ 20__ distribution date
Redemption
The Class A-4 Notes and the Class B Notes will be redeemed in whole on any
distribution date if the servicer exercises its option to purchase from the
trust the receivables and other trust property. The servicer may exercise this
option only if-
. the aggregate receivables balance declines to 10% or less of the aggregate
starting receivables balance;
. the aggregate of the repurchase amount of the receivables, other than
Liquidating Receivables, is greater than or equal to the sum of the
outstanding principal balance of all notes, plus accrued and unpaid
interest on the notes; and
. the Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes have been
paid in full.
The redemption price will be equal to the unpaid principal amount of such Class
A-4 Notes and Class B Notes, plus accrued and unpaid interest on those notes.
Voting Rights
If the prospectus specifies certain circumstances under which a specified
percentage in principal amount of the outstanding notes must consent, approve,
direct or request an action, that action shall be valid only if that specified
percentage in principal amount of all the outstanding Class A Notes or, in the
event no Class A Notes are outstanding, all outstanding Class B Notes, voting
together as a single class have voted to give that consent, approval, direction,
request or notice, or take that action.
Any notes held by the seller will not be deemed to be outstanding and shall
be disregarded when a vote is taken.
CREDIT ENHANCEMENT
Subordination
S-4
<PAGE>
The Class B Notes are subordinated to the Class A Notes. This provides
additional credit enhancement for the Class A Notes.
No interest will be paid on the Class B Notes on any distribution date until
all accrued and unpaid interest on the Class A Notes has been paid in full.
No principal will be paid on the Class B Notes on any distribution date until
all principal payable on the Class A Notes on that distribution date has been
paid in full.
On any distribution date, if the amount in the reserve account, after giving
effect to all withdrawals or deposits from the reserve account for that
distribution date, is less than the specified reserve account balance, all
amounts otherwise payable as principal on the Class B Notes will be paid as
principal on the Class A Notes.
From and after the occurrence of a gross loss trigger event-
. no principal will be paid on the Class B Notes until all principal
owed on the Class A Notes has been paid in full; and
. amounts otherwise payable as principal on the Class B Notes will be
available to make payments of principal on the Class A Notes.
After an acceleration of the notes following an event of default or if any of
the notes remain outstanding on and after the applicable final scheduled
distribution date-
. no principal or interest will be paid on the Class B Notes until all
principal and interest owed on the Class A Notes has been paid in
full; and
. amounts otherwise payable as interest and principal on the Class B
Notes will be available to make payments of principal on the Class A
Notes.
Reserve Account
Funds on deposit in the reserve account will be available on each
distribution date to cover short falls in distributions of interest and
principal on the notes due to delinquencies and defaults on the receivables.
Amounts in the reserve account will also be available to pay servicing fees and
to make principal payments on the final scheduled distribution date for each
class of notes.
The reserve account will be funded as follows-
. On the closing date, the seller will deposit the reserve account initial
deposit of $_____________ into the reserve account.
. On each distribution date, any collections on the receivables remaining
after providing for all required payments to holders of the notes, the
payment of the total servicing fee and reimbursement of outstanding
advances will be deposited in the reserve account.
S-5
<PAGE>
On each distribution date, any amount in the reserve account in excess of
the specified reserve account balance will be paid to the certificateholders.
The seller will be the initial certificateholder. The noteholders will have no
further rights to any amounts paid to the certificateholders from the reserve
account.
The specified reserve account balance for any distribution date will equal
___% of the aggregate receivables balance as of the last day of the related
collection period. However, the specified reserve account balance will be
calculated as ____% of the aggregate receivables balance for any distribution
date, beginning on the _______, 20__ distribution date, on which the average net
loss ratio exceeds ___% or the average delinquency ratio exceeds ___%.
In no event will the specified reserve account balance be less than the
lesser of:
(1) $_________ and
(2) the aggregate outstanding principal amount of the notes. We may change this
definition without your consent so long as the change does not cause the
ratings of the notes to be reduced or withdrawn.
TRUST PROPERTY
The primary assets of the trust will be the receivables. The receivables in
the trust will be sold by the seller to the trust. The trust property will also
include:
. All monies due or received under the receivables after the cutoff date;
. A security or ownership interest in the new and used automobiles and
lights trucks financed by the receivables;
. Any proceeds from claims on insurance policies for the financed vehicles
or from obligors under the receivables;
. Amounts on deposit in the trust accounts, including the reserve account;
. Specified rights of the seller relating to receivables from agreements
between the seller and the dealers that sold the financed vehicles and
related documents; and
. All rights of the trust under the sale and servicing agreement and any
credit enhancement.
The trust will assign the trust property to the Indenture Trustee for the
benefit of the noteholders, to the extent provided in the indenture and the
remainder of the trust property to the certificateholders.
THE RECEIVABLES
On the closing date, the trust will acquire receivables with an Aggregate
Starting Receivables Balance of $__________ as of the cutoff date. As of the
cutoff date-
. the weighted average contract rate of the receivables is approximately
_____%;
. the weighted average remaining term-which is the period from but excluding
the cutoff date to and including each receivable's maturity date-of the
receivables is approximately ____ months; and
S-6
<PAGE>
including each receivable's maturity date-of the receivables is
approximately ____ months; and
. the weighted average original term of the receivables is approximately ____
months.
Each receivable has a scheduled maturity prior to the date that is six
months prior to the final scheduled distribution date for the Class B Notes.
COLLECTION ACCOUNT; PRIORITY OF DISTRIBUTIONS
On each distribution date, funds on deposit in the collection account
relating to payments received on the receivables for the prior collection period
will be applied to the following in the priority indicated but subject to the
subordination provisions described above-
(1) reimbursement of outstanding advances;
(2) the total servicing fee;
(3) accrued and unpaid interest on the Class A Notes;
(4) accrued and unpaid interest on the Class B Notes;
(5) principal on the Class A Notes, up to the Class A Noteholders' Principal
Distributable Amount;
(6) principal on the Class B Notes, up to the Class B Noteholders' Principal
Distributable Amount; and
(7) the remainder, if any, to be deposited in the reserve account.
Funds on deposit in the reserve account will also be available as described
in this prospectus supplement.
TAX STATUS
As described below under "Material Federal Income Tax Consequences,"
Kirkland & Ellis, special federal tax counsel to the seller, will give an
opinion that for federal income tax purposes-
. the notes will be characterized as debt and
. the trust will not be characterized as an association or publicly traded
partnership taxable as a corporation.
See "Material Federal Income Tax Consequences" in this prospectus supplement
for additional information concerning the application of federal tax laws to the
trust and the notes. See also "State and Local Tax Consequences."
ERISA CONSIDERATIONS
Subject to the considerations discussed under "ERISA Considerations," the
notes are eligible for purchase by employee benefit plans. See "ERISA
Considerations" in this prospectus supplement and "ERISA Considerations" in
the prospectus.
LEGAL INVESTMENT
The Class A-1 Notes will be eligible securities for purchase by money market
funds under paragraph (a)(9) of Rule 2a-7 under the Investment Company Act of
1940, as amended.
S-7
<PAGE>
RISK FACTORS
In addition to the other information contained in this prospectus
supplement, you should consider the following risk factor and the risk factors
in the prospectus in deciding whether to purchase the notes.
<TABLE>
<S> <C>
Lack of Geographic Economic conditions in states where obligors reside may affect the
Diversification of delinquency, loan loss and repossession experience of the trust for the
Obligors Could receivables. As of the cutoff date, the mailing addresses of obligors
Affect the with respect to ____%, ____% and ____% by aggregate receivables
Performance of the balance of the receivables were located in Washington, Idaho and
Receivables Utah, respectively. Adverse economic conditions in Washington,
Idaho and Utah, or that area of the country generally, may have a
disproportionate impact on the performance of the receivables.
Economic factors such as unemployment, interest rates, the rate of
inflation and consumer perceptions may affect the rate of prepayment
and defaults on the receivables and could reduce or delay payments to
you. See "The Receivables Pool--Certain Geographic Distribution of
the Receivables."
</TABLE>
S-8
<PAGE>
THE TRUST
The Issuer, First Security Auto Owner Trust 20__-_, is a business trust
formed under the laws of the State of Delaware pursuant to a trust agreement
dated as of the closing date between the seller and the Owner Trustee. The Owner
Trustee acts under the trust agreement solely as trustee of the trust and not in
its individual capacity. After its formation, the trust will not engage in any
activities other than-
(1) acquiring, holding and managing the receivables and the other assets
of the trust and proceeds from those assets,
(2) issuing the notes,
(3) making payments on the notes, and
(4) engaging in other activities that are necessary, suitable, desirable
or convenient to accomplish the above activities or are incidental to
or connected with the above activities.
The trust will deliver the securities to the seller in exchange for the
receivables and other assets pursuant to the sale and servicing agreement. The
trust's principal offices are in Wilmington, Delaware, in care of Wilmington
Trust Company, 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 and sale of the notes offered by this prospectus
supplement or retained by the seller had taken place on that date:
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 B _____% Asset Backed Notes............ $
-------------
Total..................................... $
=============
The trust will also issue certificates. The certificates represent the
equity of the trust and will be issued pursuant to the trust agreement. A Class
B Note in the aggregate principal amount of $_____ and the certificates will
initially be held by the seller and/or one or more of its affiliates and are not
offered by this prospectus supplement.
S-9
<PAGE>
The Owner Trustee
____________ is the Owner Trustee under the trust agreement. ________________
is a _____________ corporation and its principal offices are located at
_____________________.
DELINQUENCY AND LOSS EXPERIENCE OF SELLER
The tables set forth below indicate the delinquency and credit
loss/repossession experience for each of the last five calendar years of the
Bank's entire portfolio of motor vehicle loans, including motor vehicle loans
that it previously sold but continues to service. The tables include both motor
vehicle loans originated directly by the Bank and through dealers in a relative
proportion substantially similar to the motor vehicle loans to be transferred to
the trust.
Fluctuations in delinquencies, repossessions and charge-offs generally follow
trends in the overall economic environment and may be affected by such factors
as:
. increased competition for obligors,
. rising consumer debt burden per household,
. the supply and demand for automobiles, light trucks and sport utility
vehicles, and
. increases in personal bankruptcies.
We cannot assure that the delinquency and loss experience for the motor
vehicle loans as a whole or those transferred to the trust will be similar to
the historical experience described below.
Delinquency Experience
<TABLE>
<CAPTION>
As of March 31, As of December 31,
----------------------------------------------------------------------------------------------------
2000 1999 1999 1998
----------------------------------------------------------------------------------------------------
Number Number Number Number
of of of of
Loans Amount Loans Amount Loans Amount Loans Amount
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Portfolio at Period End...... 363,431 $4,411,195 326,740 $3,872,070 358,395 $4,370,722 303,595 $3,495,181
Delinquency(1)
30-59 Days................ 4,460 $ 49,721 4,278 $ 46,686 6,252 $ 67,455 5,002 $ 53,150
60-89 Days................ 1,582 $ 17,734 1,485 $ 16,840 2,627 $ 28,783 1,726 $ 18,839
90 Days or More........... 845 $ 9,265 776 $ 8,481 1,337 $ 15,356 792 $ 8,891
Total Delinquencies.......... 6,887 $ 76,719 6,539 $ 72,007 10,216 $ 111,595 7,520 $ 80,880
Total Delinquencies
as Percentage of the
Portfolio.................... 1.89% 1.74% 2.00% 1.86% 2.85% 2.55% 2.48% 2.31%
<CAPTION>
---------------------------------------------
1997 1996
---------------------------------------------
Number Number
of of
Loans Amount Loans Amount
---------------------------------------------
<S> <C> <C> <C> <C>
Portfolio at Period End....... 242,396 $2,557,565 200,922 $1,979,782
Delinquency(1)
30-59 Days................. 3,557 $ 35,995 3,380 $ 31,646
60-89 Days................. 765 $ 8,035 1,209 $ 11,330
90 Days or More............ 444 $ 4,694 600 $ 5,947
Total Delinquencies........... 4,766 $ 48,724 5,189 $ 48,923
Total Delinquencies
as Percentage of the
Portfolio..................... 1.97% 1.91% 2.58% 2.47%
</TABLE>
- ---------------------------------------------------
(1) The period of delinquency is based on the number of days payments are
contractually past due for all motor vehicle loans other than motor vehicle
loans previously charged off.
S-10
<PAGE>
Credit Loss/Repossession Experience
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
-----------------------------------------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-----------------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Portfolio Balance at Period......... $4,411,195 $3,872,070 $4,370,722 $3,495,181 $2,557,565 $1,979,782 $1,824,411
Average Portfolio Balance
during the Period.................. $4,397,646 $3,713,832 $4,051,580 $3,020,363 $2,270,731 $1,883,171 $1,850,693
Average Number of Loans Outstanding
during the Period.................. $ 361,782 $ 317,204 $ 337,782 $ 273,261 $ 222,092 $ 195,749 $ 195,834
Number of Repossessions during
the Period......................... 2,618 $ 2,068 $ 8,333 $ 6,207 $ 4,967 $ 4,198 $ 4,153
Number of Repossession as percentage of
Number of Loans Outstanding(4)..... 2.89% 2.61% 2.47% 2.27% 2.24% 2.14% 2.12%
Gross Charge-offs(1)................ $ 25,282 $ 19,574 $ 69,930 $ 53,485 $ 39,184 $ 29,488 $ 25,644
Recoveries on Loans Previously
Charged........................... $ 10,961 $ 8,851 $ 33,614 $ 19,882 $ 16,901 $ 11,849 $ 11,321
Net Charge-offs(3).................. $ 14,321 $ 10,723 $ 36,316 $ 33,604 $ 22,283 $ 17,639 $ 14,323
Net Charge-offs as a Percentage of
Portfolio Balance at Period
End(4)............................ 1.30% 1.11% 0.83% 0.96% 0.87% 0.89% 0.79%
Net Charge-offs as a Percentage of
Average Balance During
Period (4)........................ 1.30% 1.15% 0.90% 1.11% 0.98% 0.94% 0.77%
</TABLE>
______________________
(1) Gross Charge-offs are generally stated net of liquidation proceeds.
(2) Recoveries on Loans Previously Charged Off generally include amounts
received with respect to loans previously charged off, other than liquidation
proceeds, net of collection expenses. A portion of recoveries has resulted from
certain collection and recovery efforts used by the Bank with respect to
defaulted receivables acquired by the Bank from other institutions as a result
of mergers. These defaulted receivables are not being transferred to the Trust
and the reported recoveries may not be indicative of future results.
(3) Net Charge-offs equal Gross Charge-offs minus Recoveries on Loans
Previously Charged Off.
(4) Annualized.
Total delinquency over 30 days increased to 2.85% at year-end 1999. This was an
increase of .37% over year-end 1998 at which time conversion to a new collection
system occurred. The cause of the increase in delinquency at year-end 1999 was a
result of staffing shortages that occurred in the collection center, a
tightening of extension policies, and experiences in computer downtime. The
increased delinquency at year-end resulted in above normal losses in January and
February 2000. Corrective action and intensified recovery efforts resulted in
normalized loss and delinquency performance by March 2000. Delinquency of 1.89%
for March 2000 compares favorably with March 1999 at 2.00%.
THE RECEIVABLES POOL
The Receivables
Approximately ____% of the Aggregate Starting Receivables Balance of motor
vehicle loans were originated by the seller through dealers in the ordinary
course of the seller's business and in accordance with seller's underwriting
standards. The remainder of the motor vehicle loans were made directly by the
seller to the obligors in accordance with the seller's underwriting standards.
The seller will warrant in the sale and servicing agreement that all the
receivables have the following individual characteristics, among others-
(1) the obligation of the obligor under each receivable is secured by a
security interest in either a new or used automobile or light truck;
(2) each receivable has a Contract Rate of at least ___% and less than
___%;
S-11
<PAGE>
(3) each receivable had a remaining maturity, as of the cutoff date, of
not less than __ months and not more than __ months;
(4) each receivable had a remaining principal balance of not less than
$___ and not more than $____ as of the cutoff date;
(5) no receivable was more than 29 days past due as of the cutoff date;
(6) no financed vehicle had been repossessed as of the cutoff date;
(7) each receivable is a Simple Interest Receivable, as that term is
described below;
(8) any dealer of the financed vehicle does not have a participation in,
or other right to receive, any proceeds of the receivable; and
(9) each receivable was originated on or after ________, 19__.
The seller did not use any procedures adverse to noteholders in selecting
the receivables to be transferred to the trust on the closing date. The
prospectus describes all terms of the retail motor vehicle installment sale
contracts and installment loans constituting the receivables which are material
to the noteholders.
Certain Characteristics
As of the cutoff date, approximately ____% of the Aggregate Receivables
Balance was attributable to loans for purchases of new financed vehicles and
approximately ____% of the Aggregate Receivables Balance was attributable to
loans for purchases of used financed vehicles.
The composition, distribution by Contract Rate and distribution by
remaining term of the receivables as of the cutoff date are described in the
following tables. Due to rounding, the percentages shown in these tables may not
add to 100.00%.
S-12
<PAGE>
Composition of the Receivables
<TABLE>
<CAPTION>
Weighted Average Aggregate Starting Number of Average
Contract Rate of Receivables Receivables in Receivable Weighted Average Weighted Average
Receivables Balance Pool Balance Original Term Remaining Term
- ----------------- ------------------ -------------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
_____% $_________ ______ $________ _____ mos. ______ mos.
</TABLE>
Distribution by Contract Rate of the Receivables
<TABLE>
<CAPTION>
Percentage of
Number of Receivables Aggregate Starting
Contract Rate Range Receivables Balance Receivables Balance
- ------------------- ------------ ------- -------------------
<S> <C> <C> <C>
7.500- 7.999%...........
8.000- 8.999............
9.000- 9.999............
10.000-10.999............
11.000-11.999............
12.000-12.999............
13.000-13.999............
14.000-14.999............
15.000-15.999............
16.000-16.999............
17.000-17.999............
18.000-18.999............
19.000-19.999............
20.000-20.999............
21.000-21.999............
22.000-22.999............
23.000-23.999............
24.000-24.999............
25.000-25.999............
26.000-26.999............
27.000-27.999............
28.000-28.999............
</TABLE>
S-13
<PAGE>
Total................... 100.00%
-------------------
Distribution by Remaining Term of Receivables
<TABLE>
<CAPTION>
Percentage of
Number of Receivables Aggregate Starting
Remaining Term (Months) Receivables Balance Receivables Balance
- ----------------------- ----------- ------- -------------------
<S> <C> <C> <C>
1-12......................
13-24......................
25-36......................
37-48......................
49-60......................
61-66......................
67-72......................
73-78......................
79-84......................
----------- ------- --------------------
Total 100.00%
======
</TABLE>
S-14
<PAGE>
Geographic Distribution of the Receivables
The following table sets forth the percentage of the Aggregate Starting
Receivables Balance of the receivables in the states with the largest
concentration of receivables. No other state accounts for more than 1.0% of the
Aggregate Starting Receivables Balance of the receivables.
<TABLE>
<CAPTION>
Percentage of Aggregate
State Starting Receivables Balance
----- ----------------------------
<S> <C>
Washington................ %
Idaho..................... %
Utah...................... %
Oregon.................... %
Nevada.................... %
California................ %
Wyoming................... %
Montana................... %
South Dakota.............. %
Colorado.................. %
Oklahoma.................. %
</TABLE>
Payments on the Receivables
All receivables are Simple Interest Receivables. A Simple Interest
Receivable provides for the amortization of the amount financed under the
receivable over a series of fixed level months payments, except that the last
payment may be different. However, each monthly payment consists of an
installment of interest which is calculated on the basis of the Receivable
Balance multiplied by the stated Contract Rate and further multiplied by the
period elapsed-as a fraction of a calendar year-since the preceding payment of
interest was made.
As payments are received under a Simple Interest Receivable the amount
received is applied first to interest accrued and unpaid to the date of payment
and the balance is applied to reduce the unpaid Receivable Balance of the
receivables. Accordingly, if an obligor pays a fixed monthly installment before
its scheduled due date, the portion of the payment allocable to interest for the
period since the preceding payment was made will be less than it would have been
had the payment been made as scheduled. The portion of the payment applied to
reduce the unpaid principal balance will be correspondingly greater, which has
the effect of a prepayment.
Conversely, if an obligor pays a fixed monthly installment after its
scheduled due date, the portion of the payment allocable to interest for the
period since the preceding payment was made will be greater than it would have
been had the payment been made as scheduled. The portion of the payment applied
to reduce the unpaid principal balance will be correspondingly less. In either
case,
S-15
<PAGE>
the obligor pays a fixed monthly installment until the final scheduled payment
date, at which time the amount of the final installment is increased or
decreased as necessary to repay the Receivable Balance as of that date.
The receivables are prepayable at any time. Prepayments may also result
from-
. liquidations due to default,
. the receipt of monthly installments earlier than the scheduled due
dates for those installments,
. the receipt of proceedings from credit life, disability, theft or
physical damage, insurance,
. repurchases by the seller as a result of certain uncured breaches of
the warranties made by it in the sale and servicing agreement,
. purchases by the servicer as a result of certain uncured breaches of
the covenants made by it in the sale and servicing agreement, or
. the servicer exercising its option to purchase all of the remaining
receivables.
A variety of economic, social, and other factors may influence prepayments
on the receivables. These factors include decreases in interest rates and the
fact that an obligor may sell or transfer the financed vehicle securing a
receivable without the seller's consent.
Weighted Average Life of the Notes
Prepayments on automotive receivables can be measured relative to a
prepayment standard or model. The Model used in this prospectus supplement is
based on an ABS each month relative to the original number of receivables in a
pool of receivables. The Model further assumes that all the receivables are the
same size and amortize at the same rate and that each receivable in each month
of its life will either be paid as scheduled or be prepaid in full. For example,
in a pool of receivables originally containing 10,000 receivables, a 1% ABS rate
means that 100 receivables prepay each month. ABS does not purport to be an
historical description of prepayment experience or a prediction of the
anticipated rate of prepayment of any pool of receivables, including the
receivables.
The rate of payment of principal of each class of notes will depend on the
rate of payment, including prepayments, of the principal balance of the
receivables. Therefore, the final payment for any class of notes could occur
significantly earlier than the respective final scheduled distribution dates.
The noteholders will bear exclusively any reinvestment risk associated with
early payment of the notes.
The table on the following pages captioned "Percent of Initial Principal
Balance at Various ABS Percentages" is the ABS Table. The ABS Table has been
prepared on the basis of the characteristics of the receivables, as described
below. The ABS Table assumes that-
. the receivables prepay in full at the specified constant percentage of
ABS monthly, with no defaults, losses or repurchases,
S-16
<PAGE>
. each scheduled monthly payment on the receivables is made on the last
day of each month and each month has 30 days,
. distributions on the notes are made on each distribution date, and
each of those dates is assumed to be the fifteenth day of each
applicable month, and
. the servicer does not exercise its option to purchase the receivables.
The pool has an assumed cutoff date of ______, 20__. The ABS Table
indicates the projected weighted average life of each class of notes and sets
forth the percent of the initial principal balance of each class of the notes
that is projected to be outstanding after payments are made on each of the
distribution dates shown at various constant ABS percentages. The ABS Table also
indicates the month in which the servicer can exercise its option to purchase
the receivables and the associated projected weighted average life.
The ABS Table also assumes that the receivables have been aggregated into a
hypothetical pool, with all of the receivables within the pool having the
following characteristics and that the level scheduled monthly payment - which
is based on its Aggregate Receivables Balance, APR, original term to maturity
and remaining term to maturity as of the cutoff date - will be such that the
pool will be fully amortized by the end of its remaining term to maturity.
Remaining
Term
Aggregate to
Receivables Original Term to Maturity
Balance APR Maturity (mos.) (mos.)
$__________ ____% ___ ___
The actual characteristics and performance of the receivables will differ
from the assumptions used in constructing the ABS Table. The assumptions used
are hypothetical and have been provided only to give a general sense of how the
principal cash flows might behave under varying prepayment scenarios. For
example, it is very unlikely that the receivables will prepay at a constant
level of ABS until maturity or that all of the receivables will prepay at the
same level of ABS. Moreover, the diverse terms of receivables within the
hypothetical pool could produce slower or faster principal distributions than
indicated in the ABS Table at the various constant percentages of ABS specified,
even if the original and remaining terms to maturity of the receivables are as
assumed. Any difference between these assumptions and the actual characteristics
and performance of the receivables, or actual prepayment experience, will affect
the percentages of initial amounts outstanding over time and the weighted
average lives of each class of the notes.
S-17
<PAGE>
PERCENT OF INITIAL PRINCIPAL BALANCE AT VARIOUS [needs to be completed]
<TABLE>
<CAPTION>
Class A Notes
- ------------------------------------------------------------------------------------------------------------------------------------
Class A-1 Notes Class A-2 Notes Class A-3 Notes Class A-4 Notes Class B Notes
- ------------------------------------------------------------------------------------------------------------------------------------
Distribution Date 0.5% 1.2% 1.5% 1.8% 0.5% 1.2% 1.5% 1.8% 0.5% 1.2% 1.5% 1.8% 0.5% 1.2% 1.5% 1.8% 0.5% 1.2% 1.5% 1.8%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9/15/2001.........
10/15/2001.........
11/15/2001.........
12/15/2001.........
1/15/2002.........
2/15/2002.........
3/15/2002.........
4/15/2002.........
5/15/2002.........
6/15/2002.........
7/15/2002.........
8/15/2002.........
9/15/2002.........
10/15/2002.........
11/15/2002.........
12/15/2002.........
1/15/2003.........
2/15/2003.........
3/15/2003.........
4/15/2003.........
5/15/2003.........
6/15/2003.........
7/15/2003.........
8/15/2003.........
9/15/2003.........
10/15/2003.........
11/15/2003.........
12/15/2003.........
1/15/2004.........
2/15/2004.........
3/15/2004.........
4/15/2004.........
5/15/2005.........
6/15/2004.........
7/15/2004.........
8/15/2004.........
9/15/2004.........
*Weighted Average
Life (years)
(1)................
*Weighted Average
Life to Optional
Clean Up Call
(years) (1)........
*Optional Clean Up
Call Date
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The weighted average life of a note is determined by (a) multiplying the
amounts of each principal payment on a note by the number of years from the date
of the issuance Distribution Date, (b) adding the results and (c) dividing the
sum by the related principal balance of the Note.
S-18
<PAGE>
The ABS Table has been prepared based on the assumptions described above
(including the assumptions regarding the characteristics and performance of the
receivables which will differ from the actual characteristics and performance of
the receivables) and should be read in conjunction with the assumptions.
THE NOTES
General
The notes will be issued pursuant to the terms of an indenture to be dated
as of the closing date between the trust and the Indenture Trustee, a form of
which has been filed as an exhibit to the registration statement of which this
prospectus supplement and the prospectus form a part. A copy of the indenture
will be available from the Indenture Trustee upon request to holders of notes
and will be filed with the Securities and Exchange Commission following the
issuance of the notes. The following summary describes the material terms of the
notes and the indenture. The summary is not complete and you should read the
full text of the notes and the indenture to understand their provisions.
For each class of notes, the interest rate will be a fixed rate as
described below:
Interest Rate
(per annum)
Class A-1 Notes ____%
Class A-2 Notes ____%
Class A-3 Notes ____%
Class A-4 Notes ____%
Class B Notes ____%
Payments of Interest
Interest on the unpaid principal balance of each class of notes will accrue
at the applicable interest rate and will be payable monthly on each distribution
date commencing with the distribution date on _______, 20__. However, interest
on the Class B Notes will not be paid on any distribution date until all accrued
interest due and payable on the Class A Notes on that distribution date has been
paid in full. In addition, after acceleration of the notes following an Event of
Default and if any notes remain outstanding on and after the applicable final
scheduled distribution date, no principal or interest will be payable on the
Class B Notes until all principal of and interest on the Class A Notes has been
paid in full.
Interest on the Class A-1 Notes will be calculated on the basis of the
actual number of days elapsed since the last distribution date and a 360-day
year. Interest on the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes
and the Class B Notes will be calculated on the basis of a 360-day year
S-19
<PAGE>
consisting of twelve 30-day months. All references in the prospectus to
"Payment Date" or "Payment Dates" shall be deemed references to
"distribution date" or "distribution dates," for purposes of this prospectus
supplement.
On each distribution date, interest payments to all classes of Class A
Notes will have the same priority while interest on the Class B Notes will not
be paid until all accrued interest on the Class A Notes has been paid in full.
Under certain circumstances, the amount available for these payments could be
less than the amount of interest payable on the Class A Notes on any
distribution date. In this case, noteholders of each class of Class A Notes
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 Class A Notes. See "The Transfer and Servicing
Agreements--Distributions" and "--Reserve Account."
The failure to pay the Class A Noteholders' Interest Distributable Amount
or the Class B Noteholders' Interest Distributable Amount, as applicable, to the
noteholders on the related distribution date shall constitute an Event of
Default under the indenture after the applicable grace period.
Payments of Principal
On each distribution date, principal of the notes will be payable in an
aggregate amount equal to the Principal Payment Amount. Except as provided
below, the Principal Payment Amount will be applied on each distribution date-
(1) first, 100% to the Class A-1 Notes until the Class A-1 Notes are paid
in full; and
(2) second, (a) the Class A Principal Percentage to the Class A Notes
until paid in full (all of which shall be paid to the Class A-2 Notes
until paid in full, then to the Class A-3 Notes until paid in full and
then to the Class A-4 Notes until paid in full) and (b) the Class B
Principal Percentage to the Class B Notes until paid in full.
However, principal on the Class B Notes will not be paid on any
distribution date until the Class A Noteholders' Principal
Distributable Amount for that distribution date has been paid in full.
In addition, so long as any Class A Notes are outstanding, if the
amount on deposit in the reserve account (after giving effect to all
deposits or withdrawals therefrom on the related Deposit Date) is less
than the Specified Reserve Account Balance for that distribution date,
all amounts otherwise payable as principal on the Class B Notes will
be paid as principal on the Class A Notes.
From and after the occurrence of a Gross Loss Trigger Event, except as provided
below, the Principal Payment Amount will be applied on each distribution date-
(1) first, 100% to the Class A Notes, all of which shall be paid to the
Class A-1 Notes until paid in full, then to the Class A-2 Notes until
paid in full, then to the Class A-3 Notes until paid in full and then
to the Class A-4 Notes until paid in full; and
S-20
<PAGE>
(2) second, 100% to the Class B Notes, until the Class B Notes are paid in
full.
Notwithstanding the above, if
(1) an Event of Default occurs as a result of which the notes are declared
immediately due and payable, or
(2) if any notes remain outstanding on or after the applicable final
scheduled distribution date, then
100% of the Principal Payment Amount on each distribution date will be
allocated pro rata to each outstanding class of the Class A Notes on the basis
of their respective unpaid principal balances. Upon repayment of the Class A
Notes in full, the Class B Notes will be allocated 100% of the Principal Payment
Amount on each distribution date until the Class B Notes are paid in full.
Monthly Dates
The following chart defines a Collection Period and other pertinent dates
and demonstrates the application of these terms to a hypothetical monthly
distribution for the notes:
May 26--June 25 A Collection Period is the period from and
including the 26th day of a calendar month to and
including the 25th day of the succeeding calendar
month. The Initial Collection Period will be the
period from but not including the cutoff date to
and including _____, 2000.
July 10 The Determination Date is the tenth calendar day
of each month. On or before this date, the
servicer will deliver to the Indenture Trustee and
the Owner Trustee a certificate specifying the
amounts required to be distributed and the amounts
available for distribution on the next
distribution date.
July 14 The Record Date is the day before each
distribution date (or, if Definitive Securities
are issued, the Record Date will be the last day
of the Collection Period, June 23 for a July 15
distribution date). Distributions on the next
distribution date are made to noteholders of
record at the close of business of the Indenture
Trustee on this date.
July 14 The Deposit Date is the business day immediately
preceding each distribution date. All collections
and Advances relating to the related Collection
Period are required to be deposited into the
collection account on or before this date. Funds
will also be transferred between the reserve
account and the collection account to the extent
required as described below.
S-21
<PAGE>
July 15 The distribution date is the 15th day of each
calendar month (or the next business day). The
Indenture Trustee pays to noteholders amounts
payable on the notes, pays the Total Servicing Fee
and reimburses outstanding Advances to the
servicer, deposits any excess funds to the reserve
account and, if the reserve account is equal to
the Specified Reserve Account Balance, pays any
remaining funds to the certificateholders.
Redemption
The Class A-4 Notes and the Class B Notes will be redeemed in whole, but
not in part, on any distribution date after all of the other classes of notes
have been paid in full if the servicer exercises its option to purchase the
receivables when-
(1) the Aggregate Receivables Balance of the receivables on the last day
of the prior Collection Period shall have declined to 10% or less of
the Aggregate Starting Receivables Balance and
(2) the sum of the Repurchase Amount of the receivables-other than the
Liquidating Receivables-is greater than or equal to the sum of the
outstanding principal balance of all of the Class A-4 Notes and the
Class B Notes, plus accrued and unpaid interest on those notes. See
"Description of the Transfer and Servicing Agreements--Termination"
in the prospectus.
The redemption price will be equal to the unpaid principal amount of the
Class A-4 Notes and the Class B Notes, plus accrued and unpaid interest on those
notes.
Parity and Priority of Notes
Distribution of principal and interest payments on the notes will be made
in accordance with the priorities described in "--Payments of Interest" and
"--Payments of Principal" above. Also see "The Transfer and Servicing
Agreements--Distributions" below.
Voting Rights
The prospectus may specify certain circumstances under which the consent,
approval, direction, or request of a specified percentage in principal amount of
the outstanding notes must be obtained, given or made, or under which such a
specified percentage are permitted to take an action or give a notice. In that
case, that consent, approval, direction, request, action or notice shall be
valid only if the holders of the specified percentage in principal amount of all
the outstanding Class A Notes - or, if no Class A Notes remain outstanding, all
of the outstanding Class B Notes - voting together as a single class have voted
to give that consent, approval, direction, request or notice, or take that
action.
S-22
<PAGE>
Any notes held by the seller will not be deemed to be outstanding and shall
be disregarded when a vote is taken.
Delivery of Notes
The notes, other than those retained by the seller, will be issued on or
about the closing date in book entry form through the facilities of DTC,
Clearstream and Euroclear against payment in immediately available funds.
S-23
<PAGE>
THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes material terms of the Transfer and
Servicing Agreements. Forms of the Transfer and Servicing Agreements have been
filed as exhibits to the Registration Statement of which this prospectus
supplement and the prospectus form a part. A copy of the Transfer and Servicing
Agreements will be available from the servicer upon request to noteholders. The
summary is not complete and you should read the full text of the Transfer and
Servicing Agreements to understand their provisions.
Distributions
Unless the servicer satisfies the conditions for monthly remittances
described in "Description of the Transfer and Servicing Agreements--
Collections" in the prospectus, it will transfer all collections on the
receivables, including all prepayments, to the collection account within two
business days after receipt of those collections. The Indenture Trustee will
make distributions to the note distribution account out of the amounts on
deposit in the collection account. The amount to be distributed to the note
distribution account will be determined in the manner described below.
Monthly Withdrawals and Deposits. On or before the Determination Date,
the servicer will calculate, for the preceding Collection Period and the related
distribution date-
. the Available Amount,
. the Total Available Amount,
. Collected Interest,
. Collected Principal,
. the Total Servicing Fee,
. the Aggregate Class A Noteholders' Interest Distributable Amount,
. the Class B Noteholders' Interest Distributable Amount,
. the Class A Noteholders' Principal Distributable Amount,
. the Class B Noteholders' Principal Distributable Amount,
. the Noteholders' Principal Distributable Amount,
. the Principal Payment Amount and
. certain other items.
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
the Deposit Date:
(1) any amount to be withdrawn from the reserve account and deposited in
the collection account;
(2) the amounts to be withdrawn from the collection account and paid to
the servicer for reimbursement of outstanding Advances;
S-24
<PAGE>
(3) the amount to be withdrawn from the collection account and paid to the
servicer for the Total Servicing Fee for that distribution date;
(4) the amounts to be withdrawn from the collection account in respect of
the Aggregate Class A Noteholders' Interest Distributable Amount, the
Class B Noteholders' Interest Distributable Amount and the
Noteholders' Principal Distributable Amount and deposited in the note
distribution account for payment to Noteholders on that distribution
date;
(5) any amount to be withdrawn from the collection account and deposited
in the reserve account; and
(6) any amount to be withdrawn from the reserve account and paid to the
certificateholders.
Any amount to be withdrawn from the reserve account and deposited in the
collection account on the Deposit Date as specified in clause (1) above will be
the lesser of-
(A) the amount of cash or other immediately available funds on deposit in
the reserve account on the Deposit Date; and
(B) any amount by which
(x) the sum of the Total Servicing Fee, the Aggregate Class A
Noteholders' Interest Distributable Amount, the Class B Noteholders'
Interest Distributable Amount and the Noteholders' Principal
Distributable Amount exceeds
(y) the Available Amount for that distribution date.
Any amount to be withdrawn from the collection account and deposited in the
reserve account on the Deposit Date as specified in clause (5) above will equal
any amount by which the Available Amount for that distribution date exceeds the
amount described in subclause (x) of clause (B) of the preceding sentence.
The amount, if any, to be withdrawn from the reserve account and paid to
the certificateholders as specified in clause (6) above will equal any amount 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 the
Deposit Date exceeds the Specified 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, as described in this prospectus
supplement.
Priorities for Withdrawals from Collection Account. Withdrawals of funds
from the collection account on each Deposit Date will be made first for
reimbursements of outstanding Advances. Then, withdrawals of funds from the
collection account will be made for application as described in clauses (3) and
(4) under "Distributions--Monthly Withdrawals and Deposits" above. These
withdrawals will
S-25
<PAGE>
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 (3)
and (4) above, the Indenture Trustee, at the direction of the servicer, will
allocate the Total Available Amount in the following order of priority:
(1) the Total Servicing Fee;
(2) the Aggregate Class A Noteholders' Interest Distributable Amount;
(3) the Class B Noteholders' Interest Distributable Amount; and
(4) the Noteholders' Principal Distributable Amount.
All amounts allocated pursuant to clauses (2) through (4) above shall be
deposited in the note distribution account and will be applied as described
above under "The Notes-Payments of Interest" and "-Payments of Principal,"
including the subordination provisions contained therein.
Servicing Compensation
On each distribution date, the servicer will be entitled to receive the
Total Servicing Fee. The Servicing Fee Rate will be 1.0% per annum.
Advances
On each Deposit Date, the servicer may, subject to the following, make an
Advance with respect to each receivable serviced by it, other than a Liquidating
Receivable. The Advance will be equal to any excess of-
(1) the product of the Receivables Balance of that receivable as of the
first day of the related Collection Period and one-twelfth of its
Contract Rate - calculated on the basis of a 360-day year comprised of
twelve 30-day months - over
(2) the interest actually received by the servicer with respect to that
receivable from the obligor during or for that Collection Period.
The servicer may elect not to make an Advance of interest due and unpaid to
the extent that the servicer, in its sole discretion, determines that the
Advance is not recoverable from subsequent payments on that receivable or from
funds in the reserve account. On each distribution date, the servicer will be
reimbursed for all outstanding Advances as described above.
Reserve Account
The seller will establish in the name of the Indenture Trustee the reserve
account with the Indenture Trustee. The reserve account will be funded by a
deposit by the seller of the reserve account
S-26
<PAGE>
initial deposit on the closing date. On each Deposit Date, an amount equal to
the Available Amount remaining with respect to that distribution date shall be
deposited in the reserve account. The Available Amount will be calculated after
the payment of the Total Servicing Fee and the deposit of the Aggregate Class A
Noteholders' Interest Distributable Amount, the Class B Noteholders' Interest
Distributable Amount and the Noteholders' Principal Distributable Amount in the
note distribution account. See "Distributions--Monthly Withdrawals and
Deposits."
If the amount on deposit in the reserve account on any 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 certificateholders. The amount on deposit in the reserve account
shall be calculated after giving effect to all deposits or withdrawals from the
reserve account on the related Deposit Date, including the deposit pursuant to
the second sentence of the preceding paragraph. Upon any distribution to the
certificateholders of amounts from the reserve account, the noteholders will not
have any rights in, or claims to, those amounts.
The initial certificateholders may at any time, without consent of the
noteholders, sell, transfer, convey or assign in any manner its rights to and
interests in distributions from the reserve account, including interest earnings
on funds in the reserve account. However, this right is subject to certain
conditions being satisfied. These conditions include-
(1) the action will not result in a reduction or withdrawal of the rating
of any class of the notes,
(2) the certificateholders provide to the Owner Trustee and the Indenture
Trustee an opinion of independent counsel that the action will not
cause the trust to be treated as an association, or publicly traded
partnership, taxable as a corporation for federal income tax purposes,
and
(3) any transferee or assignee agrees to take positions for tax purposes
consistent with the tax positions agreed to be taken by the
certificateholders.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of material U.S. federal income tax
consequences of the acquisition, ownership and disposition of the notes. This
discussion does not purport to deal with all aspects of federal income taxation
that may be relevant to the noteholders in light of their personal investment
circumstances. This discussion does not, except for certain limited discussions
of particular topics, purport to deal with certain types of 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 in the initial distribution of the notes, who are citizens or
residents of the United States, except as set forth under "Tax Consequences to
Foreign Noteholders", including domestic corporations and partnerships, and who
hold the notes as "capital assets" within the meaning of Section 1221 of the
Code. Prospective investors should consult their own tax advisors and tax return
preparers regarding
S-27
<PAGE>
the preparation of any item on a tax return, even where the anticipated tax
treatment has been discussed in this prospectus supplement. This discussion is
for general information purposes only and does not consider all aspects of U.S.
federal income taxation that may be relevant to the purchase, ownership and
disposition of the notes by a prospective investor, especially in light of that
investor's personal circumstances. Prospective investors should consult with
their own tax advisors as to the purchase, ownership and disposition of the
notes.
This discussion is based upon the Code, existing and proposed regulations
under the Code, and current administrative rulings and court decisions. There
are no cases or IRS rulings on similar transactions involving debt issued by a
trust with terms similar to those of the notes. As a result, we cannot assure
that the IRS will not challenge the conclusions reached in this discussion. We
have not sought, nor will we seek, a ruling from the IRS on any of the issues
discussed below. Furthermore, the Code and rules and decisions applying the
Code are subject to change, possibly on a retroactive basis. Any change in the
Code, or rules or decisions applying the Code, could affect the continuing
validity of this discussion.
Characterization as Debt
As stated above, no specific authority exists with respect to the
characterization for federal income tax purposes of securities having the same
terms as the notes. However, Kirkland & Ellis, special tax counsel to the
seller, will deliver its opinion to the effect that, based on the terms of the
notes and the transactions relating to the receivables as set forth in the
prospectus and this prospectus supplement, 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.
Characterization of the Trust
With respect to the trust, tax counsel will deliver its opinion to the
effect that the trust will not be characterized as an association, or publicly
traded partnership, taxable as a corporation.
Interest Income to Noteholders
If the notes do not have OID, interest payments on the notes will be
taxable as ordinary income for U.S. federal income tax purposes when received by
noteholders utilizing the cash method of accounting and when accrued by
noteholders utilizing the accrual method of accounting. Interest received on the
notes may constitute "investment income" for purposes of certain limitations
of the Code concerning the deductibility of investment interest expense.
Original Issue Discount
Although we do not currently anticipate that the notes will be issued at a
greater than de minimis discount and therefore should not have OID, the notes
may nevertheless be deemed to have been issued with OID. For example, the IRS
could take the position that the notes have OID pursuant
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to section 1272(a)(6) of the Code because prepayments of the receivables could
accelerate the notes. In addition, the IRS could take the position that the
notes have OID because interest payments on the notes are not "unconditionally
payable" and thus do not constitute "qualified stated interest," as that term
is defined below.
The total amount of OID, if any, with respect to a note will be equal to
the excess of the "stated redemption price at maturity" of that note over its
"issue price." The "stated redemption price at maturity" of a note will be
the sum of all payments, whether denominated as interest or principal, required
to be made on that note other than payments of "qualified stated interest."
"Qualified stated interest" is stated interest that is unconditionally payable
at least annually at a single fixed rate that appropriately takes into account
the length of the interval between payments. The "issue price" will be the first
price at which a substantial amount of the notes are sold, excluding sales to
bondholders, brokers or similar persons acting as underwriters, placement agents
or wholesalers. We anticipate that the "issue price" will be the face amount
of the notes.
The holder of a note that is treated as having OID, including a cash method
holder, would be required to include OID on that note in his or her income for
U.S. federal income tax purposes on a constant yield basis. This treatment
would result in the inclusion of income in advance of the receipt of cash
attributable to that income. This treatment may not significantly affect an
accrual method holder of notes, although this treatment would accelerate taxable
income to a cash method holder by in effect requiring that holder to report
interest income on the accrual method. Finally, even if a note has OID falling
within the de minimis exception, the holder must include the de minimis OID in
income proportionately as principal payments are made on that note.
Disposition of Notes
Upon the sale, exchange, redemption, retirement or other disposition of a
note, the holder will recognize gain or loss in an amount equal to the
difference between the amount realized on the disposition 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 that noteholder in income
with respect to the note and decreased by any principal payments previously
received by that noteholder with respect to that note. Subject to the market
discount rules of the Code, any such gain or loss will be capital gain or loss
if the note was held as a capital asset. 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
The seller 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
any interest withheld for federal income taxes for each calendar year. This
requirement does not apply to exempt holders, which are generally corporations,
tax-exempt organizations, qualified pension and profit-sharing trusts,
individual
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retirement accounts, or nonresident aliens who provide certification as to their
status. Each holder, other than holders who are not subject to the reporting
requirements, will be required to provide to the seller, under penalties of
perjury, a certificate containing the holder's name, address, correct federal
taxpayer identification number and a statement that the holder is not subject to
backup withholding. Should a nonexempt noteholder fail to provide the required
certification, the seller 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. Noteholders
should consult their tax advisors as to their qualification for exemption from
backup withholding and the procedure for obtaining that exemption.
Tax Consequences to Foreign Noteholders
The following discussion does not deal with all aspects of U.S. federal
income taxation that may be relevant to the purchase, ownership or disposition
of the notes by any particular non-U.S. noteholder in light of such holder's
personal circumstances, including holding the notes through a partnership. For
example, persons who are partners in foreign partnerships or beneficiaries of
foreign trusts or estates and who are subject to U.S. federal income tax because
of their own status, such as United States residents or foreign persons engaged
in a trade or business in the United States, may be subject to U.S. federal
income tax even though the entity is not subject to income tax on disposition of
its note.
If interest paid, or accrued, to 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
the seller, including a holder of 10% of the outstanding
certificates, or a "controlled foreign corporation" with
respect to which the seller is a "related person" within the
meaning of the Code, and
(2) provides an appropriate statement, signed under penalties of
perjury, certifying that the beneficial owner of the note is a
foreign person and providing that foreign person's name and
address.
If the information provided in this statement changes, the foreign person
must so inform the trust within 30 days of such change. The statement generally
must be provided in the year a payment occurs or in either of the two preceding
years. If such interest were not portfolio interest, then it would be subject to
United States federal income and withholding tax at a rate of 30% unless reduced
or eliminated pursuant to 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
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(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 an individual foreign person, the foreign person
is not present in the United States for 183 days or more in the
taxable year.
If the interest, gain or income on a 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 U. S. federal income tax on the interest, gain or income at
regular federal income tax rates. In addition, if the foreign person is a
foreign corporation, it may be subject to a branch profits tax equal to 30% of
its "effectively connected earnings and profits" within the meaning of the
Code for the taxable year, as adjusted for certain items, unless it qualifies
for a lower rate under an applicable tax treaty.
STATE AND LOCAL TAX CONSEQUENCES
The above discussion does not address the tax treatment of the trust or the
notes under any state or local tax laws. Prospective investors should consult
with their own tax advisors regarding the state and local tax treatment of the
trust, as well as any state and local tax consequences to them of purchasing,
holding and disposing of the notes.
ERISA CONSIDERATIONS
Although there is little guidance on the subject, the seller believes the
notes should be treated as indebtedness without substantial equity features for
purposes of the Plan Assets Regulation. Therefore, the notes are available for
investment by a Benefit Plan, subject to a determination by that Benefit Plan's
fiduciary that the notes are suitable investments for that Benefit Plan under
ERISA and the Code. For additional information regarding treatment of the notes
under ERISA, see "ERISA Considerations" 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 notes set forth opposite its name below:
Aggregate Principal Amount to be Purchased
Class A-1 Class A-2 Class A-3 Class A-4 Class B
Notes Notes Notes Notes Notes
----- ----- ----- ----- -----
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--------- --------- --------- --------- -------
Total:
========= ========= ========= ========= =======
In the underwriting agreement, the underwriters have agreed, subject to the
terms and conditions set forth in that agreement, to take and pay for all of the
notes offered by this prospectus supplement if any of the notes are taken.
The underwriters have advised the seller that they propose initially to
offer the notes to the public at the prices set forth on the cover page of this
prospectus supplement, and to certain dealers at those prices less a selling
concession not in excess of the percentage stated below for each class of notes.
The underwriters may allow, and those dealers may reallow to other dealers, a
subsequent concession not in excess of the percentage stated below for each
class of securities. After the initial public offering, the public offering
price and these concessions may be changed.
Selling
Concession Reallowance
---------- -----------
Class A-1 Notes................
Class A-2 Notes................
Class A-3 Notes................
Class A-4 Notes................
Class B Notes..................
[The seller has agreed not to offer for sale, sell, contract to sell or
otherwise dispose of, directly or indirectly, or file a registration statement
for, or announce any offering of, any securities collateralized by, or
evidencing an ownership interest in, a pool of motor vehicle loans, other than
the securities, for a period of 30 days from the date of this prospectus
supplement, without the prior written consent of the underwriters.]
____________________, on behalf of the underwriters, may engage in over-
allotment transactions, stabilizing transactions, syndicate covering
transactions and penalty bids with respect to the notes in accordance with
Regulation M under the Exchange Act. Over-allotment transactions involve
syndicate sales in excess of the offering size which creates a syndicate short
position. Stabilizing transactions permit bids to purchase the notes so long as
the stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of the notes in the open market after the
distribution has been completed in order to cover syndicate short positions.
Penalty bids permit ____________________ to reclaim a selling concession from a
syndicate member when the notes originally sold by that syndicate member are
purchased in a syndicate covering transaction. These over-allotment
transactions, stabilizing transactions, syndicate covering transactions and
penalty
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bids may cause prices of the notes to be higher than they would otherwise be in
the absence of these transactions. If ____________________ begins these
transactions, they may discontinue them at any time.
Neither we nor the underwriters makes any representation or prediction as
to the direction or magnitude of any effect that these transactions may have on
the prices of the notes. In addition, neither we nor any underwriter makes any
representation that ___________________ will engage in these transactions or if
they begin these transactions, they will not discontinue them without notice.
The seller has agreed to indemnify the underwriters against certain civil
liabilities, including liabilities under the Securities Act, or to contribute to
payments which the underwriters may be required to make in respect of those
liabilities. The seller has also agreed to reimburse the underwriters for
certain of their expenses.
In the ordinary course of their respective businesses, the underwriters and
their respective affiliates have engaged and may in the future engage in
commercial banking and investment banking transactions with affiliates of the
seller.
First Security Capital Markets, Inc. is an affiliate of the seller. Any
obligations of FSCM are the sole obligations of FSCM and do not create any
obligations on the part of any affiliate of FSCM.
LEGAL OPINIONS
In addition to the legal opinions described in the prospectus, certain
legal matters relating to the notes will be passed upon for the underwriters by
Kirkland & Ellis.
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GLOSSARY
"ABS" means the assumed rate of prepayment on the receivables.
"Aggregate Class A Noteholders' Interest Distributable Amount" means, for
any distribution date, the sum of the Class A Noteholders' Interest
Distributable Amounts for all classes of Class A Notes and the Class A
Noteholders' Interest Carryover Shortfall as of the preceding distribution date.
"Aggregate Net Losses" means, for any Collection Period, the aggregate
amount allocable to principal of all receivables newly designated during that
Collection Period as Liquidating Receivables minus all Liquidation Proceeds to
the extent allocable to principal collected during that Collection Period with
respect to all Liquidating Receivables, whether or not newly designated as
Liquidating Receivables.
"Available Amount" means, for each distribution date, the sum of the
Available Interest and the Available Principal.
"Available Interest" means, for any distribution date, the excess of-
(a) the sum of
(1) Interest Collections for that distribution date, and
(2) all Advances made by the servicer for that distribution
date, over
(b) the amount of outstanding Advances to be reimbursed on or with
respect to that distribution date.
"Available Principal" means, for any distribution date, the sum of the
following amounts with respect to the related Collection Period -
(1) that portion of all Collections allocable to principal in
accordance with the terms of the receivables and the servicer's
customary servicing procedures;
(2) to the extent attributable to principal, the Repurchase Amount
received with respect to each receivable repurchased by the
seller or purchased by the servicer as of any day in the related
Collection Period;
(3) all related Recoveries, to the extent allocable to principal, and
(4) all related Liquidation Proceeds, to the extent allocable to
principal.
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Available Principal on any distribution date shall exclude all payments and
proceeds of any receivables the Repurchase Amount of which has been distributed
on a prior distribution date.
"Average Delinquency Ratio" means, as of any distribution date, the
average of the Delinquency Ratios for the preceding three Collection Periods.
"Average Net Loss Ratio" means, as of any distribution date, the average
of the Net Loss Ratios for the preceding three Collection Periods.
"Business Day" means a day on which the Indenture Trustee and commercial
banks located in the State of Utah, the State of Idaho, the State of Delaware
and the City of New York are open for the purpose of conducting commercial
banking business. However, for purposes of determining any distribution date,
the term "business day" shall mean a day on which the Indenture Trustee and
commercial banks located in the State of New York generally and the City of New
York are open for the purpose of conducting a commercial banking business.
"Class A Noteholders' Interest Carryover Shortfall" means, as of the
close of any distribution date, any excess of the Aggregate Class A Noteholders'
Interest Distributable Amount for that distribution date over the amount that
was actually deposited in the note distribution account on the related Deposit
Date in respect of interest on the Class A Notes.
"Class A Noteholders' Interest Distributable Amount" means-
(A) with respect to the Class A-1 Notes and any distribution date the
product of
(1) the outstanding principal balance of the Class A-1 Notes on
the preceding distribution date after giving effect to all
payments of principal in respect of the Class A-1 Notes on
that preceding distribution date - or, in the case of the
first distribution date, the outstanding principal balance
on the closing date - and
(2) the product of the interest rate for the Class A-1 Notes and
a fraction, the numerator of which is the actual number of
days elapsed from the most recent distribution date - or the
closing date, in the case of the initial period - and the
denominator of which is 360 and
(B) with respect to the Class A-2 Notes, the Class A-3 Notes and the
Class A-4 Notes, the product of
(1) the outstanding principal balance of that class of Class A
Notes on the preceding distribution date after giving effect
to all payments of principal in respect of that class of
Class A Notes on that a preceding distribution date - or, in
the case of the first distribution date, the outstanding
principal balance on the closing date - and
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(2) the product of the interest rate for that class of Class A
Notes and /1//12 - multiplied by, in the case of the first
distribution date, a fraction, the numerator of which is the
number of days elapsed from the closing date and the
denominator of which is 30.
"Class A Noteholders' Principal Carryover Shortfall" means, on a
distribution date, any excess of the Class A Noteholders' Principal
Distributable Amount over the amount paid to the Class A Noteholders in respect
of principal on that distribution date.
"Class A Noteholders' Principal Distributable Amount" means, for any
distribution date, the sum of-
(1) the Class A Principal Distributable Amount,
(2) the Class A Noteholders' Principal Carryover Shortfall for the
prior distribution date, and
(3) without duplication, on the final scheduled distribution date for
a class of Class A Notes, the amount necessary to reduce the
outstanding balance of those Class A Notes to zero.
"Class A Principal Distributable Amount" means, with respect to any
distribution date and the related Collection Period, the product of
(1) the Class A Principal Percentage and
(2) the Principal Distributable Amount.
"Class A Principal Percentage" means, with respect to any distribution
date, the quotient of-
(1) the sum of the initial principal amount of the Class A-2 Notes,
the Class A-3 Notes and the Class A-4 Notes divided by
(2) the sum of the initial principal amount of the Class A-2 Notes,
the Class A-3 Notes, the Class A-4 Notes and the Class B Notes.
"Class B Noteholders' Interest Carryover Shortfall" means, as of the
close of any distribution date, any excess of the Class B Noteholders' Interest
Distributable Amount for that distribution date over the amount that was
actually deposited in the note distribution account on the related Deposit Date
in respect of payments of interest on the Class B Notes.
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"Class B Noteholders' Interest Distributable Amount" means, with respect
to any distribution date, the sum of-
(1) the Class B Noteholders' Monthly Interest Distributable Amount
for that distribution date and
(2) the Class B Noteholders' Interest Carryover Shortfall as of the
preceding distribution date.
"Class B Noteholders' Monthly Interest Distributable Amount" means, with
respect to any distribution date, the product of-
(1) the outstanding principal balance of the Class B Notes on the
preceding distribution date after giving effect to all payments
of principal in respect of the Class B Notes on that preceding
distribution date - or, in the case of the first distribution
date, the outstanding principal balance on the closing date - and
(2) the product of the interest rate for the Class B Notes and /1//12
- multiplied by, in the case of the first distribution date, a
fraction, the numerator of which is the number of days elapsed
from the closing date and the denominator of which is 30.
"Class B Noteholders' Principal Carryover Shortfall" means, on a
distribution date, any excess of the Class B Noteholders' Principal
Distributable Amount over the amount paid to the Class B Noteholders in respect
of principal on that distribution date.
"Class B Noteholders' Principal Distributable Amount" means, for any
distribution date, the sum of-
(1) the Class B Principal Distributable Amount,
(2) the Class B Noteholders' Principal Carryover Shortfall for the
prior distribution date, and
(3) without duplication, on the final scheduled distribution date for
the Class B Notes, the amount necessary to reduce the outstanding
balance of the Class B Notes to zero.
"Class B Principal Distributable Amount" means, with respect to any
distribution date and the related Collection Period, the product of-
(1) the Class B Principal Percentage and
(2) the Principal Distributable Amount.
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"Class B Principal Percentage" means, with respect to any distribution
date, the quotient of
(1) the initial principal amount of the Class B Notes divided by
(2) the sum of the initial principal amount of the Class A-2 Notes,
the Class A-3 Notes, the Class A-4 Notes and the Class B Notes.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collection Period" means the period from and including the ___ day of a
calendar month to and including the ___ day of the succeeding calendar month.
"Collections" means all collections on the receivables.
"Contract Rate" means the contractual interest rate on the receivables.
"Cumulative Gross Losses" shall equal, on any distribution date, the
aggregate amount allocable to principal of all receivables which have been
designated as Liquidating Receivables for any Collection Period ending prior to
that distribution date.
"Delinquency Ratio" means, for any Collection Period, the ratio,
expressed as a percentage, of-
(1) the principal amount of all outstanding receivables, other than
Purchased Receivables and Liquidating Receivables, which are 60
or more days delinquent as of the last day of that Collection
Period, determined in accordance with the servicer's customary
practices, divided by
(2) the Aggregate Receivables Balance as of the last day of such
Collection Period.
"Deposit Date" means the business day immediately preceding each
distribution date.
"Determination Date" means the tenth calendar day of each month.
"Foreign Person" means a noteholder who is a nonresident alien, foreign
corporation or other non-United States person.
"FSCM" means First Security Capital Markets, Inc., a division of First
Security Van Kasper, Inc.
"Gross Loss Ratio" means, on any distribution date, an amount expressed
as a percentage, equal to the quotient of
(1) the Cumulative Gross Losses as of that distribution date divided
by
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(2) $_______________.
"Gross Loss Trigger Event" means an event which shall occur if, on any
distribution date, the Gross Loss Ratio exceeds ___%.
"Interest Collections" means, for any distribution date, the sum of the
following amounts for the related Collection Period:
(1) that portion of the Collections on the receivables received
during the related Collection Period that is allocable to
interest in accordance with the terms of the receivables and the
servicer's customary procedures,
(2) all related Liquidation Proceeds, to the extent allocable to
interest,
(3) to the extent allocable to interest, all related Recoveries, and
(4) to the extent attributable to interest, the Repurchase Amount of
all receivables that are repurchased by the seller or purchased
by the servicer as of any day in the related Collection Period.
Interest Collections for any distribution date shall exclude all payments and
proceeds of any receivables the Repurchase Amount of which has been distributed
on a prior distribution date.
"Liquidation Proceeds" means, with respect to any distribution date, and
a receivable that became a Liquidating Receivable during the related Collection
Period,
(1) insurance proceeds received during such Collection Period by the
servicer with respect to Insurance Policies relating to the
financed vehicles or the obligors,
(2) amounts received by the servicer during that Collection Period
from a dealer in connection with that a Liquidating Receivable
pursuant to the exercise of rights under a dealer agreement, and
(3) the monies collected by the servicer, from whatever source,
including proceeds of a sale of a financed vehicle or a
deficiency balance recovered after the charge-off of the related
receivable, during that Collection Period on that Liquidating
Receivable, net of any expenses incurred by the servicer in
connection with the collection of the receivable and the
disposition of the financed vehicle and any payments required by
law to be remitted to the obligor, but, in any event, not less
than zero. Liquidation Proceeds shall be applied first to accrued
and unpaid interest on the receivable and then to the Receivable
Balance of that receivable.
"Model" means the Absolute Prepayment Model.
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"Net Loss Ratio" means, for any Collection Period, an amount, expressed
as percentage, equal to-
(1) the product of (a) the Aggregate Net Losses minus Recoveries for
that Collection Period and (b) twelve, divided by
(2) the average of the Aggregate Receivables Balance on each of the
first day of that Collection Period and the last day of that
Collection Period.
"Noteholders' Principal Distributable Amount" means, for any distribution
date, the sum of-
(1) the Class A Noteholders' Principal Distributable Amount and
(2) the Class B Noteholders' Principal Distributable Amount.
"OID" means original issue discount.
"Principal Distributable Amount" means, with respect to any distribution
date and the related Collection Period, the excess of-
(1) Available Principal for that distribution date plus Realized
Losses over
(2) all related Recoveries, to the extent allocable to principal.
"Principal Payment Amount" means the lesser of-
(1) the Noteholders' Principal Distributable Amount and
(2) the Total Available Amount remaining after payment of the Total
Servicing Fee, the Aggregate Class A Noteholders' Interest
Distributable Amount and the Class B Noteholders' Interest
Distributable Amount.
"Purchased Receivable" means, at any time, a receivable as to which
payment of the Repurchase Amount has previously been made by the seller or the
servicer pursuant to the applicable sale and servicing agreement.
"Realized Losses" means, for any distribution date and a receivable that
became a Liquidating Receivable during the related Collection Period, the excess
of-
(1) the Receivable Balance of that receivable as of the first day of
the related Collection Period over
(2) Liquidation Proceeds received with respect to that receivable
during that Collection Period, to the extent allocable to
principal.
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"Record Date" means the day before each distribution date, or, if
Definitive Securities are issued, the Record Date will be the last day of the
Collection Period.
"Recoveries" means, with respect to any distribution date, all monies
received by the servicer with respect to any Liquidating Receivable during the
related Collection Period if that Collection Period follows the Collection
Period in which that receivable became a Liquidating Receivable net of the sum
of -
(1) any expenses incurred by the servicer in connection with the
collection of that receivable and the disposition of the financed
vehicle (to the extent not previously reimbursed) and
(2) any payments required by law to be remitted to the obligor but,
in any event, not less than zero.
"Simple Interest Receivable" means a receivable which provide for the
allocation of payments according to the "Simple Interest" method.
"Specified Reserve Account Balance" with respect to any distribution date
will equal ___% of the Aggregate Receivables Balance, except that the Specified
Reserve Account Balance will never be less than the lesser of-
(1) $____________ and
(2) the aggregate outstanding principal amount of the notes.
The Specified Reserve Account Balance will be calculated as __% of the Aggregate
Receivables Balance for any distribution date (beginning on the ________ 20__
distribution date) on which the Average Net Loss Ratio exceeds ___% or the
Average Delinquency Ratio exceeds ___%. The Specified Reserve Account Balance
may be reduced or the definition may be otherwise modified without the consent
of the noteholders if the Rating Agencies confirm in writing or fail to object
in writing after having received notice of the modification, that the reduction
or modification will not result in a reduction or withdrawal of the rating of
the notes.
"Total Available Amount" means, for a distribution date, 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.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
To be filed by amendment.
Item 14. Indemnification of Directors and Officers.
The Articles of Association of First Security Bank, N.A. (the "Bank")
requires the Bank to indemnify its officers and directors against reasonable
expenses (in the event of a derivative claim), and against reasonable expenses
and damages (in the event of a third-party claim). This indemnity is available
only if the officer or director in question was at the time of the acts
complained of acting in his or her official capacity, in good faith and in or
not opposed to the best interests of the Bank. However, no indemnity is allowed
by the Bank if the officer or director is found to have been guilty of a crime,
or to have acted in a manner evidencing willful misconduct or gross negligence,
or where there is a final order assessing civil money penalties or requiring
payments by the officer or director to the Bank. The Bank will not provide
indemnity for a derivative claim if the officer or director shall have been
adjudged to be liable for negligence or misconduct in the performance of his or
her duty to the Bank, unless a court shall nevertheless determine that indemnity
is proper. The availability of indemnification for an officer or director will
be determined under the foregoing standards by (a) a majority of disinterested
directors, (b) the opinion of independent legal counsel retained to examine the
conduct in question, or (c) a vote of the shareholders of the Bank.
Item 15. Recent Sales of Unregistered Securities
Inapplicable.
<PAGE>
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits.
<TABLE>
<CAPTION>
Number Description
------ -----------
<S> <C>
1.1* Form of Underwriting Agreement
3.1* Articles of Association, as amended, of First Security Bank, N.A.
3.2* Bylaws, as amended, of First Security Bank, N.A.
4.1* Form of Indenture between the Owner Trustee and the Indenture Trustee,
including the form of Notes as exhibits thereto
4.2* Form of Trust Agreement between First Security Bank, N.A. and the Owner
Trustee
4.3* Form of Trust Sale and Servicing Agreement between First Security Bank, N.A.
and the Trust
4.4* Form of Administration Agreement
5.1* Opinion of Kirkland & Ellis re Legality
8.1* Opinion of Kirkland & Ellis re Tax Consequences
24.1* Consent of Kirkland & Ellis (contained in Exhibits 5.1 and 8.1)
24.2* Consent of Ray, Quinney & Nebeker
24.3* Consent of Moffatt, Thomas, Barrett, Rock & Fields, Chtd.
24.4* Consent of Perkins Coie LLP
25.1 Powers of Attorney of directors and officers of First Security Bank, N.A.
(included on the signature pages to the Registration Statement)
</TABLE>
_______
* To be filed by amendment.
(b) Financial Statement Schedules.
Not applicable.
Item 17. Undertakings.
The undersigned Registrant hereby agrees:
(a) To provide to the Underwriter, at the closings specified in the
Underwriting Agreement, Securities in such denominations and registered in such
names as required by the Underwriter to permit prompt delivery to each
purchaser.
(b) That, 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 provisions described under Item 14
above, or otherwise, the Registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Securities 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,
<PAGE>
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 Securities Act and will be governed by the final
adjudication of such issue.
(c) That, for purposes 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 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.
(d) That, for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned thereto duly authorized, in Salt Lake City, State of Utah, on May
10, 2000.
FIRST SECURITY BANK, N.A.
as originator of the Trust, Registrant
By: /s/ L. Scott Nelson
-----------------------------------------
L. Scott Nelson, Chairman
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
each of Brad D. Hardy and A. Robert Thorup his true and lawful attorney-in-fact
and agent, with full powers of substitution, for him and in his name, place and
stead, in any and all capacities, to sign and to file any and all amendments,
including post-effective amendments, to this Registration Statement with the
Securities and Exchange Commission, granting to each of said attorney-in-fact
full power and authority to perform any other act on behalf of the undersigned
required to be done in connection therewith.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on May 10, 2000 by the following persons
in the capacities indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ L. Scott Nelson Chairman (a Principal Executive May 10, 2000
- ------------------------------
L. Scott Nelson Officer) and Director
/s/ J. Patrick McMurray President (a Principal Executive May 10, 2000
- ------------------------------
J. Patrick McMurray Officer) and Director
/s/ Scott C. Ulbrich Executive Vice President May 10, 2000
- ------------------------------
Scott C. Ulbrich and Director
/s/ Brad D. Hardy Executive Vice President and May 10, 2000
- ------------------------------
Brad D. Hardy Cashier (a Principal Financial and
Accounting Officer) and Director
/s/ David R. Golden Executive Vice President May 10, 2000
- ------------------------------
David R. Golden and Director
/s/ Spencer F. Eccles Executive Vice President May 10, 2000
- ------------------------------
Spencer F. Eccles and Director
/s/ Morgan J. Evans Executive Vice President May 10, 2000
- ------------------------------
Morgan J. Evans and Director
/s/ Michael P. Caughlin Executive Vice President May 10, 2000
- ------------------------------
Michael P. Caughlin and Director
/s/ Mark D. Howell Executive Vice President May 10, 2000
- ------------------------------
Mark D. Howell and Director
</TABLE>
