<PAGE> 1
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JUNE 16, 2000
$521,517,000.00
[FIRST SECURITY BANK LOGO]
FIRST SECURITY AUTO OWNER TRUST 2000-2
Asset Backed Notes
FIRST SECURITY BANK(R), N.A.
Seller and Servicer
YOU SHOULD CONSIDER
CAREFULLY THE RISK
FACTOR ON PAGE S-8 IN
THIS PROSPECTUS
SUPPLEMENT AND THE RISK
FACTORS BEGINNING ON
PAGE 5 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
-----------------------------------------------------------------------
A-1 NOTES A-2 NOTES A-3 NOTES A-4 NOTES
<S> <C> <C> <C> <C>
Initial Principal
Amount $98,000,000 $211,000,000 $115,000,000 $58,400,000
Interest Rate 6.66% 6.80% 6.83% 6.93%
Final Scheduled
Distribution Date September 17, 2001 August 15, 2003 July 15, 2004 January 17, 2005
Price to Public, plus
accrued interest, if
any, from September
27, 2000. 100.000000% 99.995765% 99.933213% 99.911128%
Underwriting Discount 0.125% 0.175% 0.220% 0.250%
Proceeds to Seller 99.875000% 99.820765% 99.713213% 99.661128%
<CAPTION>
CLASS B NOTES
-----------------
B NOTES
<S> <C>
Initial Principal
Amount $39,117,000
Interest Rate 7.21%
Final Scheduled
Distribution Date February 15, 2007
Price to Public, plus
accrued interest, if
any, from September
27, 2000. 99.915240%
Underwriting Discount 0.300%
Proceeds to Seller 99.615240%
</TABLE>
Price to Public, excluding accrued interest, is $521,346,202.28. Total
underwriting discount is $1,008,101.00. Expenses payable
by the seller, estimated to be $650,000.00 have not been
deducted from the Proceeds to the Seller. Total proceeds
to the seller will be $520,338,101.28.
- Principal and interest on all notes will be payable on each monthly
distribution date. The first distribution date will be October 16, 2000.
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 $26,075,886.93.
- Yield supplement account, with an initial balance of $372,118.42.
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
J.P. MORGAN & CO.
BANC OF AMERICA SECURITIES LLC
CREDIT SUISSE FIRST BOSTON
FIRST SECURITY VAN KASPER
LEHMAN BROTHERS
WELLS FARGO BROKERAGE SERVICE LLC
UNDERWRITERS OF THE CLASS B NOTES
J.P. MORGAN & CO. FIRST SECURITY VAN KASPER
September 21, 2000
<PAGE> 2
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-8 in this prospectus supplement
and under the caption "Glossary of Terms" which appears at the end of the
prospectus.
------------------------------
i
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY OF TERMS..................... S-1
The Parties........................ S-1
The Securities..................... S-1
Credit Enhancement................. S-4
Trust Property..................... S-5
The Receivables.................... S-6
Collection Account; Priority of
Distributions..................... S-6
Tax Status......................... S-7
ERISA Considerations............... S-7
Legal Investment................... S-7
RISK FACTORS......................... S-8
THE TRUST............................ S-9
Capitalization of the Trust........ S-9
The Owner Trustee.................. S-9
DELINQUENCY AND LOSS EXPERIENCE OF
SELLER............................. S-10
Delinquency Experience............. S-10
Credit Loss/Repossession
Experience...................... S-10
THE RECEIVABLES POOL................. S-11
The Receivables.................... S-11
Certain Characteristics............ S-11
Composition of the Receivables..... S-12
Distribution by Contract Rate of
the Receivables................... S-12
Distribution by Remaining Term of
Receivables....................... S-13
Geographic Distribution of the
Receivables....................... S-13
Payments on the Receivables........ S-13
Weighted Average Life of the
Notes........................... S-14
THE NOTES............................ S-18
General............................ S-18
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Payments of Interest............... S-18
Payments of Principal.............. S-19
Monthly Dates...................... S-19
Redemption......................... S-20
Parity and Priority of Notes....... S-20
Voting Rights...................... S-20
Delivery of Notes.................. S-20
THE TRANSFER AND SERVICING
AGREEMENTS.......................... S-20
Distributions...................... S-20
Servicing Compensation............. S-22
Advances........................... S-22
Yield Supplement Account and Yield
Supplement Agreement.............. S-22
Reserve Account.................... S-23
MATERIAL FEDERAL INCOME TAX
CONSEQUENCES........................ S-24
Characterization as Debt........... S-24
Characterization of the Trust...... S-24
Interest Income to Noteholders..... S-24
Original Issue Discount............ S-24
Disposition of Notes............... S-25
Information Reporting and Backup
Withholding....................... S-25
Tax Consequences to Foreign
Noteholders....................... S-25
STATE AND LOCAL TAX CONSEQUENCES..... S-26
ERISA CONSIDERATIONS................. S-26
UNDERWRITING......................... S-27
LEGAL OPINIONS....................... S-28
GLOSSARY............................. S-29
</TABLE>
ii
<PAGE> 4
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 2000-2, a Delaware
business trust.
Seller and Servicer........ First Security Bank(R), N.A.
Indenture Trustee.......... Chase Manhattan Bank will be the Indenture Trustee.
Owner Trustee.............. Wilmington Trust Company will be the Owner Trustee.
THE SECURITIES THE NOTES
The trust will issue the following notes:
- Class A-1 6.66% asset backed notes in the
aggregate principal amount of $98,000,000.00;
- Class A-2 6.80% asset backed notes in the
aggregate principal amount of $211,000,000.00;
- Class A-3 6.83% asset backed notes in the
aggregate principal amount of $115,000,000.00;
and
- Class A-4 6.93% asset backed notes in the
aggregate principal amount of $58,400,000.00.
- Class B 7.21% asset backed notes in the aggregate
principal amount of $39,117,738.61, of which
$39,117,000.00 will be offered by this prospectus
supplement.
The seller will retain a Class B Note in the
aggregate principal amount of $738.61, which is not
offered by this prospectus supplement.
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
S-1
<PAGE> 5
(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 September 27, 2000.
DISTRIBUTION DATES
The 15th day of each calendar month, or the next
business day if the 15th is not a business day,
beginning with October 16, 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--
- first, 100% to the Class A Notes sequentially, so
that no principal will be paid on any class of
Class A Notes until each class of Class A Notes
with a lower numerical designation has been paid
in full (e.g., no principal will be paid on the
Class A-2 Notes until the Class A-1 Notes have
been paid in full and no principal will be paid
on the Class A-3 Notes until the Class A-1 Notes
and the Class A-2 Notes have been paid in full)
until all of the Class A Notes have been paid in
full;
- second, 100% to the Class B Notes until paid in
full.
S-2
<PAGE> 6
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, then principal payments will be
made as follows:
- first, to the Class A-1 Notes until paid in full;
- second, to the Class A-2 Notes, the Class A-3
Notes and the Class A-4 Notes ratably according
to the amount due and payable on each class until
all of the Class A-2 Notes, the Class A-3 Notes
and the Class A-4 Notes have been paid in full;
and
- third, to the Class B Noteholders until the Class
B Notes have been paid in full.
- After an acceleration of the notes following an
event of default or if any notes remain
outstanding following the applicable final
scheduled distribution date, any amounts
otherwise payable as interest on the Class B
Notes will be available to make payments of
principal on the Class A Notes.
FINAL SCHEDULED DISTRIBUTION DATES
The outstanding principal amount, if any, of each
class of notes will be payable in full on the 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.
<TABLE>
<CAPTION>
FINAL SCHEDULED
NOTES DISTRIBUTION DATE
----- -----------------
<S> <C>
Class A-1 September 2001
distribution date
Class A-2 August 2003
distribution date
Class A-3 July 2004
distribution date
Class A-4 January 2005
distribution date
Class B February 2007
distribution date
</TABLE>
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;
S-3
<PAGE> 7
- 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
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 owed on
all Class A Notes has been paid in full.
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
shortfalls 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.
S-4
<PAGE> 8
The reserve account will be funded as follows--
- On the closing date, the seller will deposit the
reserve account initial deposit of $26,075,886.93
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.
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 6.50% 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 9.0%
of the aggregate receivables balance for any
distribution date, beginning on the January 2001
distribution date, on which the average net loss
ratio exceeds 1.50% or the average delinquency
ratio exceeds 1.25%.
In no event will the specified reserve account
balance be less than the lesser of:
(1) $13,037,943.47 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.
YIELD SUPPLEMENT ACCOUNT
Funds on deposit in the yield supplement account
will be available to supplement the interest
collections on some receivables. On each
distribution date, funds on deposit in the yield
supplement account will be used to cover, for each
receivable, the excess, if any, of:
(1) one month's interest that would accrue on the
receivable balance at a rate equal to (a) the
weighted average interest rate of the notes
plus (b) the servicing fee rate of 1%; over
(2) one month's interest that accrued on that
receivable at the contract rate of that
receivable.
On the closing date, the seller will deposit
$372,118.42 in cash into the yield supplement
account. That amount is the total amount estimated
to be required to be withdrawn from the yield
supplement account on all distribution dates.
Neither the seller nor the servicer will make any
other deposits to the yield supplement account on
or after the closing date.
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;
S-5
<PAGE> 9
- A security or ownership interest in the new and
used automobiles and light 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 and the yield
supplement 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 $521,517,738.61 as of the cutoff date.
As of the cutoff date--
- the weighted average contract rate of the
receivables is approximately 10.863%;
- 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 49.90 months; and
- the weighted average original term of the
receivables is approximately 66.61 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 notes; and
(6) the remainder, if any, to be deposited in the
reserve account.
Funds on deposit in the reserve account and the
yield supplement account will also be available as
described in this prospectus supplement.
S-6
<PAGE> 10
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> 11
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.
LACK OF GEOGRAPHIC
DIVERSIFICATION OF OBLIGORS
COULD
AFFECT THE PERFORMANCE OF
THE
RECEIVABLES Economic conditions in states where obligors
reside may affect the delinquency, loan loss and
repossession experience of the trust for the
receivables. As of the cutoff date, the mailing
addresses of obligors with respect to 23.12%,
17.18%, 15.59% and 15.47% by aggregate
receivables balance of the receivables were
located in Washington, Utah, Idaho and
California, respectively. Adverse economic
conditions in Washington, Utah, Idaho and
California, 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."
S-8
<PAGE> 12
THE TRUST
The Issuer, First Security Auto Owner Trust 2000-2, 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:
<TABLE>
<S> <C>
Class A-1 6.66% Asset Backed Notes......................... $ 98,000,000.00
Class A-2 6.80% Asset Backed Notes......................... $211,000,000.00
Class A-3 6.83% Asset Backed Notes......................... $115,000,000.00
Class A-4 6.93% Asset Backed Notes......................... $ 58,400,000.00
Class B 7.21% Asset Backed Notes........................... $ 39,117,738.61
---------------
Total.................................................... $521,517,738.61
===============
</TABLE>
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 $738.61 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.
THE OWNER TRUSTEE
Wilmington Trust Company is the Owner Trustee under the trust agreement.
Wilmington Trust Company is a Delaware banking corporation and its principal
offices are located at Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890.
S-9
<PAGE> 13
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 JUNE 30, AS OF DECEMBER 31,
------------------------------------------- -----------------------------------------------------
2000 1999 1999 1998 1997
-------------------- -------------------- -------------------- -------------------- -------
NUMBER NUMBER NUMBER NUMBER NUMBER
OF OF OF OF OF
LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS
------- ---------- ------- ---------- ------- ---------- ------- ---------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Portfolio at Period
End................. 366,796 $4,433,036 336,740 $4,041,242 358,395 $4,370,722 303,595 $3,495,181 242,396
Delinquency(1)
30-59 Days.......... 5,190 $ 58,387 4,419 $ 47,858 6,252 $ 67,455 5,002 $ 53,150 3,557
60-89 Days.......... 1,551 $ 16,871 1,512 $ 16,101 2,627 $ 28,783 1,726 $ 18,839 765
90 Days or More..... 724 $ 7,638 691 $ 7,670 1,337 $ 15,356 792 $ 8,891 444
Total
Delinquencies....... 7,465 $ 82,896 6,622 $ 71,630 10,216 $ 111,595 7,520 $ 80,880 4,766
Total Delinquencies
as Percentage of the
Portfolio........... 2.04% 1.87% 1.97% 1.77% 2.85% 2.55% 2.48% 2.31% 1.97%
<CAPTION>
AS OF DECEMBER 31,
---------------------------------
1997 1996
---------- --------------------
NUMBER
OF
AMOUNT LOANS AMOUNT
---------- ------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Portfolio at Period
End................. $2,557,565 200,922 $1,979,782
Delinquency(1)
30-59 Days.......... $ 35,995 3,380 $ 31,646
60-89 Days.......... $ 8,035 1,209 $ 11,330
90 Days or More..... $ 4,694 600 $ 5,947
Total
Delinquencies....... $ 48,724 5,189 $ 48,923
Total Delinquencies
as Percentage of the
Portfolio........... 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.
CREDIT LOSS/REPOSSESSION EXPERIENCE
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 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 End........ $4,433,036 $4,041,242 $4,370,722 $3,495,181 $2,557,565 $1,979,782 $1,824,411
Average Portfolio Balance during the
Period............................... $4,413,081 $3,842,412 $4,051,580 $3,020,363 $2,270,731 $1,883,171 $1,850,693
Average Number of Loans Outstanding
during the Period.................... 363,787 324,879 337,782 273,261 222,092 195,749 195,834
Number of Repossessions during the
Period............................... 4,601 4,023 8,333 6,207 4,967 4,198 4,153
Number of Repossession as percentage of
Average Number of Loans
Outstanding(4)....................... 2.53% 2.48% 2.47% 2.27% 2.24% 2.14% 2.12%
Gross Charge-offs(1)................... $ 43,439 $ 35,570 $ 69,930 $ 53,485 $ 39,184 $ 29,488 $ 25,644
Recoveries on Loans Previously Charged
Off(2)............................... $ 20,284 $ 17,138 $ 33,614 $ 19,882 $ 16,901 $ 11,849 $ 11,321
Net Charge-offs(3)..................... $ 23,154 $ 18,432 $ 36,316 $ 33,604 $ 22,283 $ 17,639 $ 14,323
Net Charge-offs as a Percentage of
Portfolio Balance at Period End(4)... 1.04% 0.91% 0.83% 0.96% 0.87% 0.89% 0.79%
Net Charge-offs as a Percentage of
Average Balance During Period(4)..... 1.05% 0.96% 0.90% 1.11% 0.98% 0.94% 0.77%
</TABLE>
------------------------------
(1) Gross Charge-offs are generally stated net of liquidation proceeds.
S-10
<PAGE> 14
(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.
THE RECEIVABLES POOL
THE RECEIVABLES
Approximately 96.98% 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 6.0% and less than or equal
to 29.99%;
(3) each receivable had a remaining maturity, as of the cutoff date, of not less
than 6 months and not more than 72 months;
(4) each receivable had a remaining principal balance of not less than $100 and
not more than $59,000 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 July 23, 1991.
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 35.49% of the Aggregate Receivables Balance
was attributable to loans for purchases of new financed vehicles and
approximately 64.51% of the Aggregate Receivables Balance was attributable to
loans for purchases of used financed vehicles.
S-11
<PAGE> 15
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%.
COMPOSITION OF THE RECEIVABLES
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED
CONTRACT NUMBER OF AVERAGE WEIGHTED AVERAGE
RATE OF AGGREGATE STARTING RECEIVABLES RECEIVABLE AVERAGE REMAINING
RECEIVABLES RECEIVABLES BALANCE IN POOL BALANCE ORIGINAL TERM TERM
----------- ------------------- ----------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
10.863% $521,517,738.61 42,027 $12,409.11 66.61 mos. 49.90 mos.
</TABLE>
DISTRIBUTION BY CONTRACT RATE OF THE RECEIVABLES
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF AGGREGATE STARTING
CONTRACT RATE RANGE RECEIVABLES RECEIVABLES BALANCE RECEIVABLES BALANCE
------------------- ----------- ------------------- -------------------
<S> <C> <C> <C>
6.00-6.99%.................................... 748 $ 10,524,727.88 2.02%
7.00-7.99..................................... 2,462 36,673,398.85 7.03
8.00-8.99..................................... 4,939 69,342,644.23 13.30
9.00-9.99..................................... 8,454 109,569,565.99 21.01
10.00-10.99................................... 7,461 89,833,579.75 17.23
11.00-11.99................................... 5,420 65,477,267.30 12.56
12.00-12.99................................... 4,754 55,385,360.11 10.62
13.00-13.99................................... 2,979 34,634,315.10 6.64
14.00-14.99................................... 1,877 20,773,285.40 3.98
15.00-15.99................................... 1,242 13,482,188.14 2.59
16.00-16.99................................... 692 7,241,761.76 1.39
17.00-17.99................................... 351 3,383,507.47 0.65
18.00-18.99................................... 352 3,081,643.42 0.59
19.00-19.99................................... 119 921,715.63 0.18
20.00-20.99................................... 62 482,966.93 0.09
21.00-21.99................................... 83 538,504.01 0.10
22.00-22.99................................... 13 88,628.93 0.02
23.00-23.99................................... 10 33,523.17 0.01
24.00-24.99................................... 3 20,981.19 0.00
25.00-25.99................................... 3 14,424.15 0.00
26.00-26.99................................... 2 9,216.22 0.00
27.00-29.99................................... 1 4,532.98 0.00
------ --------------- ------
Total....................................... 42,027 $521,517,738.61 100.00%
====== =============== ======
</TABLE>
S-12
<PAGE> 16
DISTRIBUTION BY REMAINING TERM OF RECEIVABLES
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF AGGREGATE STARTING
REMAINING TERM (MONTHS) RECEIVABLES RECEIVABLES BALANCE RECEIVABLES BALANCE
----------------------- ----------- ------------------- -------------------
<S> <C> <C> <C>
1-12.......................................... 2,114 $ 6,175,570.42 1.18%
13-24......................................... 5,093 28,046,616.18 5.38
25-36......................................... 6,870 59,339,593.74 11.38
37-48......................................... 9,713 118,061,467.16 22.64
49-60......................................... 11,555 179,323,935.81 34.39
61-72......................................... 6,682 130,570,555.30 25.04
------ --------------- ------
Total....................................... 42,027 $521,517,738.61 100.00%
====== =============== ======
</TABLE>
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.......................................... 23.12%
Utah................................................ 17.18%
Idaho............................................... 15.59%
California.......................................... 15.47%
Nevada.............................................. 6.89%
Oregon.............................................. 6.40%
Colorado............................................ 3.11%
Montana............................................. 2.69%
Oklahoma............................................ 2.13%
Wyoming............................................. 1.91%
South Dakota........................................ 1.17%
</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
S-13
<PAGE> 17
principal balance will be correspondingly less. In either case, 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,
- 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 August 25, 2000. 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
S-14
<PAGE> 18
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
hypothetical pools, with all of the receivables within the pools 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 each pool
will be fully amortized by the end of its remaining term to maturity.
<TABLE>
<CAPTION>
AGGREGATE ORIGINAL TERM TO REMAINING TERM TO
RECEIVABLES BALANCE APR MATURITY (MOS.) MATURITY (MOS.)
------------------- ------ ---------------- -----------------
<S> <C> <C> <C>
$ 118,060.18 10.062% 12 9
860,211.56 12.460 24 19
6,872,225.04 11.688 35 26
22,547,746.04 11.969 47 34
133,075,681.34 10.971 60 45
327,547,542.25 10.746 70 53
30,496,272.20 10.613 74 53
</TABLE>
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 pools 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-15
<PAGE> 19
PERCENT OF INITIAL PRINCIPAL BALANCE AT VARIOUS ABS PERCENTAGES
<TABLE>
<CAPTION>
CLASS A NOTES
-----------------------------------------------------------------------------------------------------------
CLASS A-1 NOTES CLASS A-2 NOTES CLASS A-3 NOTES
----------------------------------------- ----------------------------------------- -------------------
0.5% 1.2% 1.5% 1.8% 0.5% 1.2% 1.5% 1.8% 0.5% 1.2%
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
10/15/2000........... 88.41 83.43 80.83 77.86 100.00 100.00 100.00 100.00 100.00 100.00
11/15/2000........... 76.84 67.05 61.93 56.08 100.00 100.00 100.00 100.00 100.00 100.00
12/15/2000........... 65.29 50.86 43.31 34.68 100.00 100.00 100.00 100.00 100.00 100.00
1/15/2001............ 53.75 34.85 24.96 13.66 100.00 100.00 100.00 100.00 100.00 100.00
2/15/2001............ 42.23 19.03 6.90 0.00 100.00 100.00 100.00 96.76 100.00 100.00
3/15/2001............ 30.73 3.41 0.00 0.00 100.00 100.00 94.95 87.36 100.00 100.00
4/15/2001............ 19.25 0.00 0.00 0.00 100.00 94.42 86.82 78.14 100.00 100.00
5/15/2001............ 7.79 0.00 0.00 0.00 100.00 87.35 78.84 69.11 100.00 100.00
6/15/2001............ 0.00 0.00 0.00 0.00 98.31 80.37 70.99 60.26 100.00 100.00
7/15/2001............ 0.00 0.00 0.00 0.00 93.01 73.50 63.29 51.62 100.00 100.00
8/15/2001............ 0.00 0.00 0.00 0.00 87.72 66.72 55.73 43.17 100.00 100.00
9/15/2001............ 0.00 0.00 0.00 0.00 82.45 60.05 48.32 34.92 100.00 100.00
10/15/2001........... 0.00 0.00 0.00 0.00 77.18 53.47 41.06 26.86 100.00 100.00
11/15/2001........... 0.00 0.00 0.00 0.00 71.93 46.99 33.94 19.01 100.00 100.00
12/15/2001........... 0.00 0.00 0.00 0.00 66.68 40.62 26.97 11.37 100.00 100.00
1/15/2002............ 0.00 0.00 0.00 0.00 61.45 34.36 20.16 3.93 100.00 100.00
2/15/2002............ 0.00 0.00 0.00 0.00 56.23 28.20 13.51 0.00 100.00 100.00
3/15/2002............ 0.00 0.00 0.00 0.00 51.03 22.14 7.01 0.00 100.00 100.00
4/15/2002............ 0.00 0.00 0.00 0.00 45.83 16.20 0.68 0.00 100.00 100.00
5/15/2002............ 0.00 0.00 0.00 0.00 40.67 10.39 0.00 0.00 100.00 100.00
6/15/2002............ 0.00 0.00 0.00 0.00 35.53 4.69 0.00 0.00 100.00 100.00
7/15/2002............ 0.00 0.00 0.00 0.00 30.40 0.00 0.00 0.00 100.00 98.36
8/15/2002............ 0.00 0.00 0.00 0.00 25.28 0.00 0.00 0.00 100.00 88.32
9/15/2002............ 0.00 0.00 0.00 0.00 20.18 0.00 0.00 0.00 100.00 78.51
10/15/2002........... 0.00 0.00 0.00 0.00 15.09 0.00 0.00 0.00 100.00 68.91
11/15/2002........... 0.00 0.00 0.00 0.00 10.02 0.00 0.00 0.00 100.00 59.53
12/15/2002........... 0.00 0.00 0.00 0.00 5.08 0.00 0.00 0.00 100.00 50.55
1/15/2003............ 0.00 0.00 0.00 0.00 0.17 0.00 0.00 0.00 100.00 41.79
2/15/2003............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 91.31 33.25
3/15/2003............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 82.35 24.95
4/15/2003............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 73.41 16.88
5/15/2003............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 64.51 9.05
6/15/2003............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 55.65 1.46
7/15/2003............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 46.81 0.00
8/15/2003............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 38.57 0.00
9/15/2003............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 30.36 0.00
10/15/2003........... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 22.18 0.00
11/15/2003........... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 14.04 0.00
12/15/2003........... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 5.93 0.00
1/15/2004............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
2/15/2004............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
3/15/2004............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
4/15/2004............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
5/15/2004............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
6/15/2004............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
7/15/2004............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
8/15/2004............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
9/15/2004............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
10/15/2004........... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
11/15/2004........... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
12/15/2004........... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1/15/2005............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
2/15/2005............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
3/15/2005............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
4/15/2005............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
5/15/2005............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
<CAPTION>
CLASS A NOTES
---------------------------------------------------------------
CLASS A-3 NOTES CLASS A-4 NOTES CLASS B NOTES
------------------- ----------------------------------------- -----------------------------------------
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>
Closing Date 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
10/15/2000........... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
11/15/2000........... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
12/15/2000........... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
1/15/2001............ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
2/15/2001............ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
3/15/2001............ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
4/15/2001............ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
5/15/2001............ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
6/15/2001............ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
7/15/2001............ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
8/15/2001............ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
9/15/2001............ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
10/15/2001........... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
11/15/2001........... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
12/15/2001........... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
1/15/2002............ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
2/15/2002............ 100.00 93.97 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
3/15/2002............ 100.00 81.11 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
4/15/2002............ 100.00 68.65 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
5/15/2002............ 89.94 56.62 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
6/15/2002............ 78.95 45.01 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
7/15/2002............ 68.26 33.81 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
8/15/2002............ 57.88 23.03 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
9/15/2002............ 47.81 12.68 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
10/15/2002........... 38.07 2.76 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
11/15/2002........... 28.65 0.00 100.00 100.00 100.00 86.77 100.00 100.00 100.00 100.00
12/15/2002........... 19.69 0.00 100.00 100.00 100.00 69.19 100.00 100.00 100.00 100.00
1/15/2003............ 11.06 0.00 100.00 100.00 100.00 52.49 100.00 100.00 100.00 100.00
2/15/2003............ 2.77 0.00 100.00 100.00 100.00 36.67 100.00 100.00 100.00 100.00
3/15/2003............ 0.00 0.00 100.00 100.00 89.77 21.75* 100.00 100.00 100.00 100.00*
4/15/2003............ 0.00 0.00 100.00 100.00 74.75 7.73 100.00 100.00 100.00 100.00
5/15/2003............ 0.00 0.00 100.00 100.00 60.42 0.00 100.00 100.00 100.00 91.97
6/15/2003............ 0.00 0.00 100.00 100.00 46.77 0.00 100.00 100.00 100.00 73.80
7/15/2003............ 0.00 0.00 100.00 88.41 33.82 0.00 100.00 100.00 100.00 57.05
8/15/2003............ 0.00 0.00 100.00 75.10 22.05* 0.00 100.00 100.00 100.00* 42.47
9/15/2003............ 0.00 0.00 100.00 62.26 10.95 0.00 100.00 100.00 100.00 29.67
10/15/2003........... 0.00 0.00 100.00 49.89 0.52 0.00 100.00 100.00 100.00 18.16
11/15/2003........... 0.00 0.00 100.00 37.99 0.00 0.00 100.00 100.00 86.25 7.95
12/15/2003........... 0.00 0.00 100.00 26.58 0.00 0.00 100.00 100.00 72.76 2.06
1/15/2004............ 0.00 0.00 95.79 15.66* 0.00 0.00 100.00 100.00* 60.34 0.62
2/15/2004............ 0.00 0.00 79.97 5.23 0.00 0.00 100.00 100.00 48.98 0.00
3/15/2004............ 0.00 0.00 64.23 0.00 0.00 0.00 100.00 93.00 38.71 0.00
4/15/2004............ 0.00 0.00 48.56 0.00 0.00 0.00 100.00 78.95 29.55 0.00
5/15/2004............ 0.00 0.00 32.97 0.00 0.00 0.00 100.00 65.67 21.50 0.00
6/15/2004............ 0.00 0.00 17.47* 0.00 0.00 0.00 100.00* 53.18 14.59 0.00
7/15/2004............ 0.00 0.00 6.70 0.00 0.00 0.00 100.00 44.51 9.93 0.00
8/15/2004............ 0.00 0.00 0.00 0.00 0.00 0.00 94.01 36.40 6.22 0.00
9/15/2004............ 0.00 0.00 0.00 0.00 0.00 0.00 78.11 28.86 3.25 0.00
10/15/2004........... 0.00 0.00 0.00 0.00 0.00 0.00 62.30 21.90 1.05 0.00
11/15/2004........... 0.00 0.00 0.00 0.00 0.00 0.00 46.58 15.53 0.00 0.00
12/15/2004........... 0.00 0.00 0.00 0.00 0.00 0.00 30.95 9.75 0.00 0.00
1/15/2005............ 0.00 0.00 0.00 0.00 0.00 0.00 15.43 4.57 0.00 0.00
2/15/2005............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
3/15/2005............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
4/15/2005............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
5/15/2005............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
</TABLE>
S-16
<PAGE> 20
<TABLE>
<CAPTION>
CLASS A NOTES
-----------------------------------------------------------------------------------------------------------
CLASS A-1 NOTES CLASS A-2 NOTES CLASS A-3 NOTES
----------------------------------------- ----------------------------------------- -------------------
0.5% 1.2% 1.5% 1.8% 0.5% 1.2% 1.5% 1.8% 0.5% 1.2%
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6/15/2005............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
7/15/2005............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
8/15/2005............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
9/15/2005............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
10/15/2005........... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
11/15/2005........... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
12/15/2005........... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1/15/2006............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Weighted Average Life
(years)(1).......... 0.37 0.27 0.23 0.20 1.53 1.15 1.00 0.87 2.82 2.28
* Weighted Average
Life to Optional
Clean Up Call
(years)(1)..........
* Optional Clean Up
Call................
<CAPTION>
CLASS A NOTES
---------------------------------------------------------------
CLASS A-3 NOTES CLASS A-4 NOTES CLASS B NOTES
------------------- ----------------------------------------- -----------------------------------------
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>
6/15/2005............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
7/15/2005............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
8/15/2005............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
9/15/2005............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
10/15/2005........... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
11/15/2005........... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
12/15/2005........... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1/15/2006............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Weighted Average Life
(years)(1).......... 2.00 1.73 3.59 3.10 2.75 2.36 4.16 3.84 3.46 2.90
* Weighted Average
Life to Optional
Clean Up Call
(years)(1).......... 3.57 3.08 2.72 2.34 3.72 3.30 2.88 2.47
* Optional Clean Up
Call................ 06/04 01/04 08/03 03/03 06/04 01/04 08/03 03/03
</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 of the note to the related Distribution Date, (b)
adding the results and (c) dividing the sum by the related principal balance
of the note.
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.
S-17
<PAGE> 21
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:
<TABLE>
<CAPTION>
INTEREST RATE
(PER ANNUM)
-------------
<S> <C>
Class A-1 Notes............................................. 6.66%
Class A-2 Notes............................................. 6.80%
Class A-3 Notes............................................. 6.83%
Class A-4 Notes............................................. 6.93%
Class B Notes............................................... 7.21%
</TABLE>
PAYMENTS OF INTEREST
Interest on the unpaid principal balance of each class of notes will accrue at
the applicable interest rate and will be payable monthly on each distribution
date commencing with the distribution date on October 16, 2000. 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 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.
S-18
<PAGE> 22
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 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, then to the Class A-4
Notes until paid in full; and
(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 paid
first to the Class A-1 Notes until paid in full, then pro rata to the Class A-2
Notes, the Class A-3 Notes and the Class A-4 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:
September 26-October 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 September 25, 2000.
November 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.
November 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, October 25 for a November 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.
November 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.
November 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.
S-19
<PAGE> 23
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.
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.
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
S-20
<PAGE> 24
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 Yield Supplement Amount, if any,
- the Aggregate Class A Noteholders' Interest Distributable Amount,
- the Class B Noteholders' Interest 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;
(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 Yield Supplement Amount, if any, to be withdrawn from the yield
supplement account and deposited into the collection account;
(5) 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;
(6) any amount to be withdrawn from the collection account and deposited in the
reserve account; and
(7) 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.
S-21
<PAGE> 25
Any amount to be withdrawn from the collection account and deposited in the
reserve account on the Deposit Date as specified in clause (6) 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 (7) 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 (6) 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
(5) under "Distributions--Monthly Withdrawals and Deposits" above. These
withdrawals will be made only to the extent of the Total Available Amount
allocated to that application for that distribution date. In calculating the
amounts which can be withdrawn from the collection account and applied as
specified in clauses (3), (4) and (5) 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.
YIELD SUPPLEMENT ACCOUNT AND YIELD SUPPLEMENT AGREEMENT
The seller will establish in the name of the Indenture Trustee the yield
supplement account with the Indenture Trustee. The yield supplement account will
be part of the trust property and will be funded by a deposit by the
S-22
<PAGE> 26
seller of the yield supplement account initial deposit. Neither the seller nor
the servicer will make any other deposits into the yield supplement account on
or after the closing date.
On each distribution date, the servicer will instruct the Indenture Trustee to
withdraw the Yield Supplement Amount, if any, from the yield supplement account
and deposit such amount in the collection account. If the Yield Supplement
Amount exceeds the amount available for withdrawal from the yield supplement
account on that distribution date, the seller will not have any further
obligation to deposit any further amounts into the yield supplement account. The
amount on deposit in the yield supplement account may decline as a result of
prepayments or repayments in full of the receivables. Amounts on deposit in the
yield supplement account will be released to the seller on each distribution
date to the extent the amount on deposit in the yield supplement account exceeds
the Specified Yield Supplement Balance. On each distribution date, investment
earnings attributable to the yield supplement account shall be distributed to
the seller. Upon any distribution to the seller of amounts from the yield
supplement account, the noteholders will not have any rights in, or claims to,
such amounts.
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 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.
S-23
<PAGE> 27
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 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 to section 1272(a)(6)
of the Code
S-24
<PAGE> 28
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 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
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<PAGE> 29
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
(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.
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<PAGE> 30
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:
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL AMOUNT TO BE PURCHASED
CLASS A-1 NOTES CLASS A-2 NOTES CLASS A-3 NOTES CLASS A-4 NOTES CLASS B NOTES
---------------- ---------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
J.P. Morgan
Securities Inc..... $ 16,335,000.00 $ 35,170,000.00 $ 19,170,000.00 $ 9,735,000.00 $ 19,558,500.00
Banc of America
Securities LLC..... 16,333,000.00 35,166,000.00 19,166,000.00 9,733,000.00 --
Credit Suisse First
Boston
Corporation........ 16,333,000.00 35,166,000.00 19,166,000.00 9,733,000.00 --
First Security Van
Kasper, Inc. ...... 16,333,000.00 35,166,000.00 19,166,000.00 9,733,000.00 19,558,500.00
Lehman Brothers
Inc. .............. 16,333,000.00 35,166,000.00 19,166,000.00 9,733,000.00 --
Wells Fargo Brokerage
Service LLC........ 16,333,000.00 35,166,000.00 19,166,000.00 9,733,000.00 --
---------------- ---------------- ---------------- ---------------- ---------------
Total.............. $ 98,000,000.00 $ 211,000,000.00 $ 115,000,000.00 $ 58,400,000.00 $ 39,117,000.00
================ ================ ================ ================ ===============
</TABLE>
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.
<TABLE>
<CAPTION>
SELLING
CONCESSION REALLOWANCE
---------- -----------
<S> <C> <C>
Class A-1 Notes....................................... 0.09% 0.07%
Class A-2 Notes....................................... 0.12% 0.10%
Class A-3 Notes....................................... 0.15% 0.12%
Class A-4 Notes....................................... 0.18% 0.14%
Class B Notes......................................... 0.21% 0.17%
</TABLE>
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.
J.P. Morgan Securities Inc., 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 J.P. Morgan Securities Inc. 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 bids may cause prices of the notes to be higher than they would
otherwise be in the absence of these transactions. If J.P. Morgan Securities
Inc. begins these transactions, they may discontinue them at any time.
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<PAGE> 31
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 Van Kasper is an affiliate of the seller. Any obligations of FSVK
are the sole obligations of FSVK and do not create any obligations on the part
of any affiliate of FSVK.
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. Kirkland & Ellis has from time to time represented, and is
currently representing, First Security Bank, N.A.
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<PAGE> 32
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,
(2) all Advances made by the servicer for that distribution date, and
(3) any Yield Supplement Amount 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.
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.
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<PAGE> 33
"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
(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 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.
"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.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collection Period" means the period from and including the 26th day of a
calendar month to and including the 25th day of the succeeding calendar month.
"Collections" means all collections on the receivables.
"Contract Rate" means the contractual interest rate on the receivables.
"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.
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<PAGE> 34
"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.
"FSVK" means First Security Van Kasper, Inc.
"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.
"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 Carryover Shortfall" means, on a distribution date, the
excess, if any, of the Noteholders' Principal Distributable Amount over the
Principal Payment Amount on such distribution date.
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<PAGE> 35
"Noteholders' Principal Distributable Amount" means, for any distribution date,
the sum of--
(1) the Principal Distributable Amount,
(2) the Noteholders' Principal Carryover Shortfall for the prior distribution
date, and
(3) without duplication, on the final scheduled distribution date for a class of
notes, the amount necessary to reduce the outstanding principal balance of
such class of notes to zero.
"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.
"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.
"Required Rate" means, with respect to any distribution date, the sum of (1) the
Weighted Average ABS Rate and (2) 1%.
"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 6.50% of the Aggregate Receivables Balance, except that the Specified
Reserve Account Balance will never be less than the lesser of--
(1) $13,037,943.47 and
(2) the aggregate outstanding principal amount of the notes.
The Specified Reserve Account Balance will be calculated as 9.0% of the
Aggregate Receivables Balance for any distribution date (beginning on the
January 2001 distribution date) on which the Average Net Loss Ratio exceeds
1.50% or the Average Delinquency Ratio exceeds 1.25%. The Specified Reserve
Account Balance may
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<PAGE> 36
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.
"Specified Yield Supplement Balance" means, an amount equal to the lesser of:
(a) the maximum aggregate Yield Supplement Amounts that will be withdrawn from
the yield supplement account on future distribution dates assuming--
(1) payments on the receivables are made on their scheduled payment dates,
(2) that no receivable is prepaid, and
(3) a Weighted Average ABS Rate of 7.83%; and
(b) $372,118.42.
"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.
"Yield Supplement Amount" means, for a distribution date, an amount equal to the
excess of:
(a) one month's interest on the Receivable Balance as of the first day of the
related Collection Period of each Yield Supplemented Receivable (other than
a Liquidating Receivable) at a rate equal to the Required Rate, over
(b) one month's interest on that Receivable Balance at that Yield Supplemented
Receivable's Contract Rate.
"Yield Supplemented Receivable" means a receivable that has a Contract Rate less
than the Required Rate.
"Weighted Average ABS Rate" means, for any distribution date, the quotient of:
(a) the sum of:
(1) the interest rate on the Class A-1 Notes multiplied by the outstanding
principal amount of the Class A-1 Notes on such distribution date;
(2) the interest rate on the Class A-2 Notes multiplied by the outstanding
principal amount of the Class A-2 Notes on such distribution date;
(3) the interest rate on the Class A-3 Notes multiplied by the outstanding
principal amount of the Class A-3 Notes on such distribution date;
(4) the interest rate on the Class A-4 Notes multiplied by the outstanding
principal amount of the Class A-4 Notes on such distribution date; and
(5) the interest rate on the Class B Notes multiplied by the outstanding
principal amount of the Class B Notes on such distribution date; and
(b) the aggregate outstanding principal amount of the notes on such distribution
date.
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<PAGE> 37
BASE PROSPECTUS
[FIRST SECURITY BANK LOGO]
FIRST SECURITY(R) AUTO OWNER TRUSTS
Asset Backed Notes
FIRST SECURITY BANK(R), N.A.
Seller and Servicer
YOU SHOULD CONSIDER
CAREFULLY THE RISK
FACTORS BEGINNING ON
PAGE 5 IN THIS
PROSPECTUS.
The notes of a series
represent the
obligations of the
trust that issued those
notes only. The notes
issued by any trust do
not represent
obligations of, and are
not guaranteed by,
First Security Bank(R),
N.A. or any of its
affiliates.
This prospectus may be
used to offer and sell
notes only if
accompanied by a
prospectus supplement.
THE TRUSTS--
- A new trust will be formed to issue each series of notes.
- The primary assets of each trust will be:
- a pool of fixed rate retail motor vehicle installment sales contracts and
installment loans;
- monies received on those contracts and loans;
- a security or ownership interest in the automobiles and light trucks
financed under those contracts and loans; and
- other related assets.
THE NOTES--
- will represent indebtedness of the trust that issued the notes;
- will be paid only from the assets of the trust that issued the notes;
- will represent the right to payments in the amounts and at the times
described in the accompanying prospectus supplement;
- may benefit from one or more forms of credit enhancement; and
- will be issued as part of a designated series, which will include one or
more classes of notes.
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 June 16, 2000
<PAGE> 38
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
We tell you about the notes in two separate documents that progressively provide
more detail:
(1) this prospectus, which provides general information, some of which may not
apply to particular notes, including your notes, and
(2) the accompanying supplement to this prospectus, which will describe the
specific terms of your notes, 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 notes.
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 notes 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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<PAGE> 39
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUMMARY.................... 1
The Parties......................... 1
The Offered Notes................... 1
The Trust Property.................. 2
Credit Enhancement.................. 2
Servicing and Administrative
Arrangements..................... 3
Optional Repurchase................. 3
The Agreements...................... 3
Tax Status.......................... 4
ERISA Considerations................ 4
RISK FACTORS.......................... 5
FORMATION OF THE TRUSTS............... 10
TRUST PROPERTY........................ 10
THE MOTOR VEHICLE LOAN PORTFOLIO...... 11
Origination of Receivables.......... 11
Underwriting........................ 11
Servicing and Collections........... 13
Physical Damage Insurance........... 14
Delinquency and Loss Experience..... 15
MATURITY AND PREPAYMENT ASSUMPTIONS... 15
POOL FACTORS AND TRADING
INFORMATION......................... 16
USE OF PROCEEDS....................... 16
THE BANK.............................. 16
DESCRIPTION OF THE NOTES.............. 16
Principal and Interest on the
Notes............................ 17
The Indenture....................... 18
Certain Covenants................... 21
The Indenture Trustee............... 22
The Owner Trustee................... 22
CERTAIN INFORMATION REGARDING THE
NOTES............................... 23
Fixed Rate Notes.................... 23
Floating Rate Notes................. 23
Indexed Notes....................... 24
Book-Entry Registration............. 24
Definitive Notes.................... 27
Reports to Noteholders.............. 28
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DESCRIPTION OF THE TRANSFER AND
SERVICING AGREEMENTS................ 29
Sale and Assignment of
Receivables...................... 29
Accounts............................ 32
Servicing Procedures................ 32
Collections......................... 33
Servicing Compensation and Payment
of Expenses...................... 33
Net Deposits........................ 34
Advances............................ 34
Other Servicing Matters............. 34
Distributions....................... 34
Credit Enhancement.................. 35
Statements to Trustees and Trust.... 36
Evidence as to Compliance........... 36
Events of Servicing Termination..... 37
Rights Upon Event of Servicing
Termination...................... 37
Waiver of Past Defaults............. 38
Amendment........................... 38
Payment of Notes.................... 39
Termination......................... 39
Administration Agreement............ 40
LEGAL ASPECTS OF THE RECEIVABLES...... 40
Rights in the Receivables........... 40
Security Interests in the Financed
Vehicles......................... 40
Repossession........................ 43
Notice of Sale; Redemption Rights... 43
Deficiency Judgments and Excess
Proceeds......................... 43
Consumer Protection Laws............ 44
Other Limitations................... 45
ERISA CONSIDERATIONS.................. 45
PLAN OF DISTRIBUTION.................. 46
LEGAL MATTERS......................... 47
WHERE YOU CAN FIND MORE INFORMATION... 47
GLOSSARY.............................. 48
</TABLE>
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<PAGE> 40
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 notes, read carefully this entire prospectus and the prospectus supplement.
THE PARTIES
Issuer..................... Each series of notes 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 NOTES We will describe in each prospectus supplement the
notes we are offering at that time. The offered
notes will include one or more classes of
asset-backed notes. 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.
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.
REGISTRATION AND CLEARANCE
In most cases, notes 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 notes will not receive a definitive
certificate representing its interest. However, in
some circumstances we may issue the notes in fully
registered, certificated form.
DENOMINATIONS
The prospectus supplement will specify the
denominations in which you may purchase notes. If
no denomination is specified, then the notes will
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<PAGE> 41
be available for purchase in minimum denominations
of $1,000 and in greater whole-dollar
denominations.
RATINGS
We will issue a series of notes only if we obtain
the required ratings specified in the prospectus
supplement for that series of notes.
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 notes 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
notes
- reserve or cash collateral accounts
- a yield supplement account
- advances
- interest rate swaps or caps
- 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 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 notes to the extent described in this
prospectus and in the prospectus supplement.
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<PAGE> 42
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 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 notes. A yield supplement agreement or
account is designed to provide for payments to
noteholders where the interest rate of a receivable
is less than the sum of the interest rate of the
notes and the servicing fee rate.
SERVICING AND
ADMINISTRATIVE
ARRANGEMENTS For each series of notes, 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 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 notes.
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 notes.
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<PAGE> 43
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. The certificates are not being offered
hereby.
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 notes.
ERISA CONSIDERATIONS 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.
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<PAGE> 44
RISK FACTORS
You should consider the following risk factors in deciding whether to purchase
any notes.
PREPAYMENTS ON AND
REPURCHASES OF THE
RECEIVABLES
COULD REDUCE THE AVERAGE
LIFE
OF THE NOTES Obligors may prepay the receivables in full or in
part. In addition, defaults or the receipt of
proceeds from credit life, disability or physical
damage insurance may lead to prepayment. Also, some
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 notes.
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. 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."
EXTENSIONS AND DEFERRALS OF
PAYMENTS ON RECEIVABLES
COULD
INCREASE THE AVERAGE LIFE
OF
THE NOTES In some circumstances, the servicer may permit an
extension on payments due on receivables on a
case-by-case basis. In addition, the servicer has
historically offered payment deferrals to all
obligors that meet the Bank's eligibility
requirements for these deferrals in June and in
December of each year. Any of these deferrals or
extensions may extend the maturity of the
receivables and increase the weighted average life
of the notes. 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 notes. See "The
Motor Vehicle Loan Portfolio--Underwriting."
THE ASSETS OF EACH TRUST
ARE
LIMITED AND ARE THE ONLY
SOURCE OF PAYMENT FOR THE
NOTES Each trust will not have any significant assets or
sources of funds other than the receivables and any
credit enhancement provided for in the prospectus
supplement. The notes will represent obligations
solely of the trust.
The notes 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 notes.
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<PAGE> 45
LACK OF FIRST PRIORITY
LIENS ON
FINANCED VEHICLES OR
RECEIVABLES COULD MAKE THE
RECEIVABLES UNCOLLECTIBLE
AND
REDUCE OR DELAY PAYMENTS ON
THE NOTES The seller will file financing statements to
perfect the interest of each trust in its
receivables as required by the UCC in the
applicable states. Similarly, the trust will file
financing statements as required by the UCC to
perfect the pledge of the receivables by the trust
to the Indenture Trustee. For each trust, the
servicer will appoint its affiliate, First Security
Service Company, as the custodian to hold the
receivables and the receivable files.
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.
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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<PAGE> 46
THE BANK'S INSOLVENCY COULD
REDUCE OR DELAY PAYMENTS ON
THE NOTES The seller intends that the transfer of receivables
to each trust be treated as a sale. If the seller
were to become insolvent, the FDIA, as amended by
FIRREA, gives certain powers to the FDIC, if it
were approved 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:
- is validly perfected before the seller's
insolvency, and
- 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 notes. In addition, the FDIC might
have the right to repay the notes 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 ENFORCEABILITY OF
THE
RECEIVABLES COULD REDUCE OR
DELAY PAYMENTS ON THE NOTES Federal and state consumer protection laws regulate
the creation and enforcement of consumer loans such
as the receivables. These laws impose specific
statutory liabilities upon creditors who fail to
comply with their provisions. In some cases, this
liability could affect an assignee's ability to
enforce secured loans 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 notes.
THE BANK HAS LIMITED
OBLIGATIONS TO A TRUST AND
IT
WILL NOT MAKE PAYMENTS ON
THE
NOTES The Bank and its affiliates are generally not
obligated to make any payments to you on your
notes. The Bank and its affiliates do not guarantee
payments on the receivables or your notes. However,
the Bank, as seller, will make representations and
warranties about the characteristics of the
receivables.
7
<PAGE> 47
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 notes.
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 notes. 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
notes resulting from delays in processing payments
on the receivables and information about the
receivables.
A CLASS OF NOTES WILL BE
SUBJECT TO GREATER CREDIT
RISK
IF IT IS SUBORDINATED TO
ANOTHER CLASS OF NOTES Payments of interest and/or principal on the notes
of any class of notes may be subordinated in
priority of payment to interest and/or principal
due on one or more other classes of notes in the
same series. As a result, if your class of notes is
subordinated, you will not 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 notes.
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.
COMMINGLING OF ASSETS BY
THE
SERVICER COULD REDUCE OR
DELAY PAYMENTS ON THE NOTES The servicer will generally be required to deposit
all collections and proceeds of the receivables
into the collection account within two business
days of receipt. However, if the servicer satisfies
the conditions specified by the rating agencies,
the 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 noteholders.
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 notes.
See "Description of the Transfer and Servicing
Agreements--Collections on the Receivables."
THE ABSENCE OF A SECONDARY
MARKET COULD LIMIT YOUR
ABILITY TO RESELL YOUR
NOTES The underwriters may assist in resales of the notes
but they are not required to do so. A secondary
market for any notes may not develop. If a
secondary market does develop, it might not
continue or it might not be sufficiently liquid to
allow you to resell any of your notes.
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<PAGE> 48
THE RATINGS FOR THE NOTES
ARE
LIMITED IN SCOPE, MAY NOT
CONTINUE TO BE ISSUED AND
DO
NOT CONSIDER THE
SUITABILITY OF
THE NOTES FOR YOU We will issue a class of notes under this
prospectus only if that class receives the rating
specified in the prospectus supplement. The rating
considers only the likelihood that the trust will
pay interest on time and will ultimately pay
principal in full. A security rating is not a
recommendation to buy, sell or hold the notes. The
rating agencies may revise or withdraw the ratings
at any time. Ratings on the notes do not address
the timing of distributions of principal on the
notes prior to the applicable final scheduled
distribution date. The ratings do not consider the
prices of the notes 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.
9
<PAGE> 49
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. 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 noteholders. 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 Receivables" 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:
- 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;
- all monies due or received under those receivables after the cutoff date
specified in the prospectus supplement;
- specific amounts from time to time on deposit in the trust accounts, including
any reserve account;
- security interests in the new and used automobiles and light trucks financed
by the receivables;
- specific rights of a trust under any yield supplement agreement;
- 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;
- the seller's right to all documents and information contained in the
receivable files;
- the rights of a trust under the sale and servicing agreement;
- 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;
- the rights under any credit enhancement to the extent specified in the
prospectus supplement; and
- all proceeds, within the meaning of the UCC, of the assets of each trust.
10
<PAGE> 50
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.
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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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 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 Lend Line by automated fax or phone.
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The dealer, branch or Lend Line 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 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 3rd day of delinquency. Delinquent accounts also
enter the Davox dialer group on the 6th 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 6th day of delinquency, medium risk accounts on
the 10th day of delinquency, and low risk on the 30th day of delinquency.
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High and medium risk accounts are assigned to dedicated collectors on the 44th
day of delinquency, while low risk accounts are assigned on the 60th 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.
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, and the
Bank believes in good faith that a sale is in the best interests of 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, noteholders 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:
- the sale, insured loss or other disposition of the related financed vehicle,
or
- 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. Noteholders 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 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. Noteholders 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.
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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.
Noteholders will receive periodic reports concerning:
- payments received on the receivables,
- the Aggregate Receivables Balance,
- each Certificate Pool Factor or Note Pool Factor, as applicable, and
- various other items of information specified in the prospectus supplement.
In addition, noteholders of record during any calendar year will be furnished
information for tax reporting purposes not later than the latest date permitted
by law. See "Certain Information Regarding the Notes--Reports to Noteholders."
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(R), 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.
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.
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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 Notes--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.
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
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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:
- 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.
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;
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- 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.
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
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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,
(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,
(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.
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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;
(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.
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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,
- 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.
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 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.
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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 NOTES
Each class of notes may be Fixed Rate Notes or Floating Rate Notes, other than
certain classes of Strip Notes, as more fully described below and in the
prospectus supplement.
FIXED RATE NOTES
Each class of Fixed Rate Notes will bear interest at the applicable per annum
interest rate. Unless otherwise set forth in the prospectus supplement, interest
on each class of Fixed Rate Notes 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" in this prospectus.
FLOATING RATE NOTES
Each class of Floating Rate Notes will bear interest for each Interest Reset
Period at a rate per annum:
- determined by reference to the Base Rate,
- plus or minus any Spread, or
- 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 Notes. The
prospectus supplement will designate a Base Rate for a given Floating Rate Note.
The Base Rate may be based on LIBOR, commercial paper rates, federal funds
rates, U.S. Government treasury securities rates, negotiable certificates of
deposit rates or another rate named in the prospectus supplement. Floating Rate
Notes may also have either or both of the following, in each case expressed as a
rate per annum:
- a maximum limitation, or ceiling, on the rate at which interest may accrue
during any interest period, and
- 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 Notes, the interest rate for any class of Floating Rate Notes 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 Notes will be issued will appoint,
and enter into agreements with, a calculation agent to calculate interest rates
on each class of Floating Rate Notes issued by that trust. The prospectus
supplement will identify the calculation agent for each class of Floating Rate
Notes, 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 Notes 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 Note will be rounded, if necessary, to the
nearest 1/100,000 of 1% (.0000001), with five one-millionths of a percentage
point rounded upward.
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INDEXED NOTES
To the extent so specified in any prospectus supplement, any class of notes may
consist of Indexed Notes in which the Indexed Principal Amount is determined by
reference to an Index. The Index will be related to--
- the difference in the rate of exchange between United States dollars and an
Indexed Currency;
- the difference in the price of an Indexed Commodity on specified dates;
- the difference in the level of a Stock Index, which may be based on U.S. or
foreign stocks, on specified dates; or
- 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 Note and
historical and other information concerning the Indexed Currency, the Indexed
Commodity, the Stock Index or other price or 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 Notes.
The determination of the Indexed Principal Amount of an Indexed Note 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 Note was issued or
the change was permitted by the prospectus supplement, then that Index shall be
calculated for purposes of the Indexed Note 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 Note 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
Note will be payable based on the amount designated in the prospectus supplement
as the face amount of that Indexed Note. The prospectus supplement will describe
whether the principal amount of the Indexed Note, 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 Note, the Indexed
Principal Amount of the Indexed Note at the time of redemption or repayment or
another amount described in the prospectus supplement.
BOOK-ENTRY REGISTRATION
Noteholders 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 notes of any class or series. Unless and until
Definitive Notes are issued under the limited circumstances described in this
prospectus or in the prospectus supplement, no noteholder will be entitled to
receive a physical certificate representing its interest in a note. All
references in this prospectus and in the prospectus supplement to actions by
noteholders 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 noteholders of book-entry
notes refer to distributions, notices, reports and statements to DTC or its
nominee, as the registered holder of the applicable notes, for distribution to
noteholders in accordance with DTC's procedures with respect to the notes. See
"--Definitive Notes" in this prospectus.
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
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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 noteholder, as used in this prospectus, means a holder of a beneficial
interest in a book-entry note. Unless otherwise provided in the prospectus
supplement, noteholders that are not DTC participants or DTC indirect
participants but desire to purchase, sell or otherwise transfer ownership of, or
other interest in, securities may do so only through DTC participants and DTC
indirect participants. In addition, noteholders will receive all distributions
of principal of and interest on notes from the Applicable Trustee, through the
DTC participants, who in turn will receive them from DTC.
Under a book-entry format, noteholders 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
noteholders. We anticipate that the only "noteholder" will be Cede & Co., as
nominee of DTC. Noteholders will not be recognized by the Trustee as
noteholders, as this term is used in the indenture. Noteholders will only be
permitted to exercise the rights of noteholders indirectly through DTC,
Clearstream or Euroclear and their respective participants or organizations.
Under the Rules, DTC is required to make book-entry transfers of notes among DTC
participants on whose behalf it acts with respect to the notes and to receive
and transmit distributions of principal of, and interest on, the notes. DTC
participants and DTC indirect participants with which noteholders have accounts
with respect to the notes similarly are required to make book-entry transfers
and receive and transmit those payments on behalf
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of their respective noteholders. Accordingly, although noteholders will not
physically possess note, 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
noteholder to pledge notes to persons or entities that do not participate in the
DTC system, or to otherwise act with respect to those notes, may be limited due
to the lack of physical certificates for those notes.
DTC has advised the seller that it will take any action permitted to be taken by
a noteholder under the indenture only at the direction of one or more DTC
participants to whose accounts with DTC the applicable notes 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:
- services for safekeeping, administration, clearance and settlement of
internationally traded securities, and
- securities lending and borrowing.
Clearstream interfaces with domestic markets in several countries. As a
professional depository, Clearstream is subject to 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 Belgian 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
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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.
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 noteholder 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 notes of any series
held by DTC, Clearstream or Euroclear or for maintaining, supervising or
reviewing any records relating to these beneficial ownership interests.
DEFINITIVE NOTES
Unless otherwise specified in the prospectus supplement, the notes of any series
will be issued as Definitive Notes to noteholders 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, 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 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
is no longer in the best interest of the holders of those notes.
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 Notes. 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 Notes. Then the Applicable
Trustee will recognize the holders as noteholders under the indenture.
The Applicable Trustee will then distribute principal and interest on the
Definitive Notes in accordance with the procedures described in the indenture.
The Applicable Trustee will make distributions directly to the holders of
Definitive Notes in whose names the Definitive Notes 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
Note, however, will be made only upon presentation and surrender of the
Definitive Note at the office or agency specified in the notice of final
distribution mailed to holders.
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Definitive Notes 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 NOTEHOLDERS
On each distribution date, the paying agent will include with each distribution
to each noteholder 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 the derivation of those amounts;
(2) the amount of the distribution allocable to interest on or for each class
of notes 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;
(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, after giving effect to all payments reported under
clause (1) above on that date;
(8) the interest rate for the next period for any class of notes 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, as defined in the prospectus supplement for each class
of notes, 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 notes of that series; and
(15) any other information specified in the prospectus supplement.
Each amount specified pursuant to subclauses (1), (2), (3) and (4) with respect
to the notes of any series will be expressed as a dollar amount per $1,000 of
the initial principal balance of those notes.
Unless otherwise specified in the prospectus supplement, the statements for each
Collection Period will be delivered to DTC for further distribution to
noteholders in accordance with DTC procedures. See "Certain
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Information Regarding the Notes--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 with respect to that trust and received any payment on their
notes a statement containing certain information for the purposes of the
noteholder'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.
The seller will sell the notes offered by this prospectus to the underwriters
named in the prospectus supplement. The notes offered by this prospectus may or
may not include all notes 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 notes 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.
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- 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.
- 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 disposition of a
repossessed financed vehicle 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.
- 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.
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- 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.
- 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 noteholders
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 noteholder, 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."
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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 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 noteholders.
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 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 noteholders, the Indenture Trustee
or the Owner Trustee for any uncured breach.
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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, noteholders 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.
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
noteholders, 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.
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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 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 noteholders.
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 notes entitled to distributions will be
made by the applicable Owner
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Trustee or paying agent to the noteholders 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
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 notes 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,
- 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 noteholders of that class or series of the full amount of principal and
interest due on that note and to decrease the likelihood that those noteholders
will experience losses. Unless otherwise specified in the prospectus supplement,
the credit enhancement for a class or series of note will not provide protection
against all risks of loss and will not guarantee repayment of the entire
principal balance and interest on the notes. If losses occur that exceed the
amount covered by any credit enhancement or that are not covered by any form of
credit enhancement, noteholders 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
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series of notes, noteholders of any covered series will be subject to the risk
that the credit enhancement will be exhausted by the claims of noteholders of
other series.
The seller may add to or supplement the credit enhancement for any class of note
with another form of credit enhancement without the consent of the related
noteholders, provided that if the addition shall affect any class of noteholders
differently from any other class of noteholders, 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.
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 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
noteholders 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 noteholders 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 noteholders in respect of receivables the
Contract Rate of which is less than the sum of the applicable interest rate of
the notes 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 noteholders of that series
described in this prospectus under "Certain Information Regarding the
Notes--Reports to Noteholders."
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
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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 noteholders by a
request in writing addressed to the Indenture Trustee or Owner Trustee, as
applicable.
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 noteholders--which determination shall be
made without regard to whether funds are available to the noteholders
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 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
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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 noteholder'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,
- 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.
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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:
- 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
- the payment to noteholders 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:
- 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
- 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 noteholder of record for that series. This notice will
specify the distribution date upon which those noteholders 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.
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
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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 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
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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 noteholders 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.
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 noteholders. 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
noteholders 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 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.
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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 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.
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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 noteholders 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 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
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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.
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 notes 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 notes described in the underwriting agreement which are offered by this
prospectus and by the prospectus supplement if any of those notes 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:
- set forth the price at which each class of notes 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
notes, or
- specify that the notes 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 notes, 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 notes in accordance with Regulation M under the Exchange Act. Over-
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allotment transactions involve syndicate sales in excess of the offering size,
which creates a syndicate short position. Stabilizing transactions permit bids
to purchase the note 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 the underwriters to reclaim a
selling concession from a syndicate member when the notes 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 notes 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 notes subject to that underwriting agreement will be conditioned on the
closing of the sale of all other classes of notes of that series.
The prospectus supplement will state the place and time of delivery for the
notes 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 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 notes 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 Notes 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 Notes" means a class of Indexed Notes 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 Notes" means a class of Indexed Notes 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 Notes" means notes issued in fully registered, certificated form.
"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-1+ 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.
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"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.
"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 Notes" means securities which bear interest at a fixed rate per
annum.
"Floating Rate Notes" 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 Note.
"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.
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"Indexed Principal Amount" means the principal amount payable at the final
scheduled distribution date for a class of Indexed Notes.
"Indexed Notes" 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.
"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
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(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.
"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 Notes.
"Spread Multiplier" means the percentage that may be multiplied by the Base Rate
when determining the interest rate payable on Floating Rate Notes.
"Stock Index" means the stock index specified in the prospectus supplement to
which an Index is related.
"Stock Indexed Notes" means a class of Indexed Notes for which the Index is
determined by reference to a Stock Index.
"Strip Notes" means notes entitled to--
(1) principal payments with disproportionate, nominal or no interest payments,
or
(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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