-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RpNCYBVLZqFKt0G31RExvq9ueTGuhEOkrVHyVrOoUCskSWy/wXMyLvzVffnqAvFU NBC9zEvgbsXb9f4UuJDOfQ== 0000909518-01-500049.txt : 20010507 0000909518-01-500049.hdr.sgml : 20010507 ACCESSION NUMBER: 0000909518-01-500049 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 13 FILED AS OF DATE: 20010503 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BMW FS SECURITIES LLC CENTRAL INDEX KEY: 0001136586 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-AUTO RENTAL & LEASING (NO DRIVERS) [7510] FILING VALUES: FORM TYPE: S-3/A SEC ACT: SEC FILE NUMBER: 333-56802 FILM NUMBER: 1622023 BUSINESS ADDRESS: STREET 1: 300 CHESTNUT RIDGE RD CITY: WOODCLIFF LAKE STATE: NJ ZIP: 07677 BUSINESS PHONE: 2013074000 MAIL ADDRESS: STREET 1: 300 CHESTNUT RIDGE RD CITY: WOODCLIFF LAKE STATE: NJ ZIP: 07677 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BMW VEHICLE OWNER TRUST 2001-A CENTRAL INDEX KEY: 0001139903 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 516521496 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-3/A SEC ACT: SEC FILE NUMBER: 333-56802-01 FILM NUMBER: 1622024 BUSINESS ADDRESS: STREET 1: 300 CHESTNUT RIDGE ROAD CITY: WOODCLIFF STATE: NJ ZIP: 07677 BUSINESS PHONE: 3026511576 S-3/A 1 a5-3_s3a.txt As Filed with the Securities and Exchange Commission on May 3, 2001. Registration No. 333-56802 333-56802-01 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------- Amendment No. 2 to FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ----------------- BMW FS Securities LLC (Originator of the Trust described herein and transferor of the Receivables to the Trust) BMW Vehicle Owner Trust 2001-A (Issuer with respect to the Notes) (Exact name of registrant as specified in its charter) Delaware 7515 22-3784653 (State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer Incorporation or Organization) Classification Code Number) Identification Number)
300 Chestnut Ridge Road Woodcliff Lake, NJ 07677 (201) 307-4000 (Address, including Zip Code, and Telephone Number, including Area Code, of Principal Executive Offices of BMW FS Securities LLC and BMW Vehicle Owner Trust 2001-A ) ----------------- Daniel J. Mette, Esq. Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, New York 10153 (212) 310-8749 (Name, Address, including Zip Code, and Telephone Number, including Area Code, of Agent for Service) ----------------- Copies to: Reed Auerbach Stroock & Stroock & Lavan LLP 180 Maiden Lane New York, NY 10038 Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective. If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. |_| If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [X] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. |_| If this form is filed to register additional securities for an offering pursuant to Rule 462(c) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. |_| If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. |_| CALCULATION OF REGISTRATION FEE =================================================================================================================================== Title of Each Class of Proposed Maximum Proposed Maximum Amount of Amount to Offering Aggregate Registration Securities to be Registered Be Registered Price Per Unit(1) Offering Price(1) Fee(2)(3) - ----------------------------------------------------------------------------------------------------------------------------------- Asset-Backed Notes and Certificates.............. $3,500,000,000 100% $3,500,000,000 $875,000 - -----------------------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee. (2) Calculated pursuant to Rule 457(o) under the Securities Act. Pursuant to Rule 457(o) under the Securities Act, the registration fee is calculated on the basis of the maximum aggregate offering price of all the Notes and Certificates. This amount was then multiplied by .000250. (3) $250 was previously paid. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a) may determine. ----------------- ================================================================================ PROSPECTUS BMW Vehicle Owner Trusts Asset Backed Notes Asset Backed Certificates BMW FS Securities LLC, Depositor BMW Financial Services NA, LLC, Servicer The Trusts: 1. A new trust will be formed to issue each series of securities and a particular trust may issue multiple series of securities; 2. Each trust will consist of: o a pool of retail installment sale contracts secured by new or used motor vehicles; and o other assets specified in the applicable prospectus supplement. The Securities: 1. will be asset-backed securities sold periodically in one or more series; 2. will be paid only from the assets of the related trust and any form of credit enhancement; 3. will be issued as part of a designated series that may include one or more classes; and 4. will consist of: o notes (which will be treated as indebtedness of the trust) and/or o certificates (which will represent an undivided ownership interest in the trust). You should review carefully the factors set forth under "Risk Factors" beginning on page 13 of this prospectus. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved the securities or determined that this prospectus or the applicable prospectus supplement is accurate or complete. Any representation to the contrary is a criminal offense. The amounts, prices and terms of each offering of securities will be determined at the time of sale and will be described in a prospectus supplement that will be attached to this prospectus. This prospectus may be used to offer and sell any series of securities only if accompanied by the prospectus supplement for that series. The date of this prospectus is May [ ], 2001. 1 TABLE OF CONTENTS Important Notice About Information Presented in this Prospectus and the Accompanying Prospectus Supplement ....................................6 Summary of Terms...............................................................7 Trust..........................................................................7 Depositor......................................................................7 Servicer.......................................................................7 Trustee........................................................................7 Indenture Trustee..............................................................7 Securities Offered.............................................................7 The Receivables................................................................8 The Trust Property.............................................................9 Credit and Cash Flow Enhancement...............................................9 Servicing Fee.................................................................10 Advances......................................................................10 Optional Purchase.............................................................11 Tax Status....................................................................11 ERISA Considerations..........................................................12 Risk Factors..................................................................13 You must rely for repayment only upon payments from the trust's assets which may not be sufficient to make full payments on your securities .........13 You may experience reduced returns on your investment resulting from prepayments, repurchases or early termination of the trust ...................13 Interests of other persons in the receivables and financed vehicles could be superior to the trust's interest, which may result in reduced payments on your securities ..................................................14 Receivables that fail to comply with consumer protection laws may be unenforceable, which may result in losses on your investment .................15 The bankruptcy of BMW Financial Services NA, LLC (servicer) or BMW FS Securities LLC (depositor) could result in losses or delays in payments on your securities ...............................................15 Proceeds of the sale of receivables may not be sufficient to pay your securities in full ......................................................16 Failure to pay principal on your notes will not constitute an event of default until maturity ....................................................16 Funds held by the servicer that are intended to be used to make payments on the securities may be exposed to a risk of loss ..................16 If the trust enters into a currency or an interest rate swap, payments on the securities will be dependent on payments made under the swap agreement ...............................................................17 2 Termination of a swap agreement and the inability to locate replacement swap counterparty may cause termination of the trust .........................17 The rating of a third party credit enhancement provider may affect the ratings of the securities ....................................................18 The calculations for the payments of principal or interest may be based on an index which may result in payments to you of less principal or interest than a non- indexed security ........................................18 You may have difficulty selling your securities and/or obtaining your desired price due to the absence of a secondary market .......................19 Because the securities are in book-entry form, your rights can only be exercised indirectly .........................................................19 Possible Prepayment Due to Inability to Acquire Subsequent Receivables........20 Formation of the Trusts.......................................................21 Property of the Trusts........................................................21 The Receivables...............................................................22 Use of Proceeds...............................................................24 The Trustee...................................................................24 The Depositor.................................................................24 The Servicer..................................................................24 BMW FS' Financing Program.....................................................25 General.......................................................................25 Underwriting..................................................................25 Dealer Agreements.............................................................27 Servicing.....................................................................27 Physical Damage and Liability Insurance.......................................28 Certified Pre-Owned Program...................................................28 Where can you find more information about your Securities.....................28 Delinquencies, Repossessions and Net Losses...................................29 Weighted Average Life of the Securities.......................................29 Pool Factors and Trading Information..........................................30 The Notes.....................................................................31 General.......................................................................31 Principal and Interest on the Notes...........................................31 The Indenture.................................................................32 The Certificates..............................................................37 General.......................................................................37 Payments of Principal and Interest............................................38 Certain Information Regarding the Securities..................................38 3 Fixed Rate Securities.........................................................39 Floating Rate Securities......................................................39 Indexed Securities............................................................49 Interest Rate Swaps...........................................................50 Variable Funding Note.........................................................50 Pro-Rata Pay/Subordinate Securities...........................................50 Revolving Period..............................................................50 Book-Entry Registration.......................................................50 Definitive Securities.........................................................55 Description of the Transfer and Servicing Agreements..........................56 Sale and Assignment of Receivables............................................56 Accounts......................................................................58 Servicing Procedures..........................................................60 Insurance on Financed Vehicles................................................61 Collections...................................................................61 Advances......................................................................62 Servicing Compensation........................................................63 Yield Supplement Account; Yield Supplement Agreement..........................64 Distributions on the Securities...............................................65 Credit and Cash Flow Enhancement..............................................65 Net Deposits..................................................................67 Statements to Trustees and the Trust..........................................67 Statements to Securityholders.................................................67 Evidence as to Compliance.....................................................69 Certain Matters Regarding the Servicer........................................69 Servicer Default..............................................................70 Rights Upon Servicer Default..................................................70 Waiver of Past Defaults.......................................................71 Amendment.....................................................................71 List of Securityholders.......................................................72 Insolvency Event..............................................................72 Payment of Notes..............................................................72 Termination...................................................................73 Administration Agreement......................................................73 4 Certain Legal Aspects of the Receivables......................................74 General.......................................................................74 Security Interests............................................................74 Repossession..................................................................76 Notice of Sale; Redemption Rights.............................................76 Deficiency Judgments and Excess Proceeds......................................77 Certain Bankruptcy Considerations.............................................77 Consumer Protection Laws......................................................78 Other Limitations.............................................................80 Material Income Tax Consequences..............................................80 Tax Treatment of Owner Trusts.................................................81 Tax Treatment of Grantor Trusts...............................................90 State and Local Tax Considerations............................................97 ERISA Considerations..........................................................97 Underwriting..................................................................99 Legal Opinions................................................................99 Index of Terms...............................................................100 5 Important Notice About Information Presented in this Prospectus and the Accompanying Prospectus Supplement We provide information to you about the securities in two separate documents that progressively provide varying levels of detail: o This prospectus, which provides general information, some of which may not apply to a particular series of securities including your series, and o The accompanying prospectus supplement, which will describe the specific terms of the offered securities. We have started with several introductory sections describing the trust and the securities in abbreviated form, followed by a more complete description of the terms. The introductory sections are: o Summary of Terms--which gives a brief introduction to the securities to be offered, and o Risk Factors--which describes briefly some of the risks to investors of a purchase of the securities. You can find a listing of the pages where capitalized terms used in this prospectus are defined under the caption "Index of Terms" beginning on page 102 in this prospectus. Whenever we use words like "intends," "anticipates" or "expects" or similar words in this prospectus, we are making a forward-looking statement, or a projection of what we think will happen in the future. Forward-looking statements are inherently subject to a variety of circumstances, many of which are beyond our control and could cause actual results to differ materially from what we anticipate. Any forward-looking statements in this prospectus speak only as of the date of this prospectus. We do not assume any responsibility to update or review any forward-looking statement contained in this prospectus to reflect any change in our expectation about the subject of that forward-looking statement or to reflect any change in events, conditions or circumstances on which we have based any forward-looking statement, except to the extent required by law. If the terms of a particular series of securities vary between this prospectus and the prospectus supplement, you should rely on the information in the prospectus supplement. 6 Summary of Terms The following summary highlights selected information from this prospectus and provides a general overview of relevant terms of the securities. You should read carefully this entire document and the accompanying prospectus supplement to understand all of the terms of the offering. Trust................................. The trust to be formed for each series of securities. If the trust issues notes and certificates, it will be formed by a trust agreement between the seller and the trustee of the trust. If the trust issues only certificates, it will be formed by a pooling and servicing agreement among the seller, the servicer and the trustee of the trust. Depositor............................. BMW FS Securities LLC, a wholly owned, limited purpose subsidiary of BMW Financial Services NA, LLC. Servicer.............................. BMW Financial Services NA, LLC, a wholly owned subsidiary of BMW of North America LLC. BMW of North America LLC is the exclusive distributor of BMW motor vehicles, BMW motorcycles and BMW parts and accessories in the United States and is a wholly owned subsidiary of Bayerische Motoren Werke Aktiengesellschaft, a German corporation. Trustee............................... The trustee for each series of securities will be named in the prospectus supplement for that series. Indenture Trustee..................... If the trust issues notes, the trustee for the indenture pursuant to which the notes will be issued will be named in the prospectus supplement for that series. Securities Offered..................... Notes--A series of securities may include one or more classes of notes. Notes of a series will be issued pursuant to an indenture. Certificates--Each series of securities may include one or more classes of certificates, whether or not a class of notes is issued as part of the series. The applicable prospectus supplement will describe the following: 1. if any notes are issued, the priority of payments (a) between the notes and certificates and (b) among different classes of notes; and 2. the priority of payments among different classes of certificates. Terms--The terms of each class of notes and certificates in a series described in the applicable prospectus supplement will include the following: 1. the stated principal amount of each class of notes and the stated certificate balance of each class of certificates; and 2. the interest rate (which may be fixed, variable, 7 adjustable or some combination of these rates) or method of determining the interest rate. A class of notes may differ from other classes of notes and a class of certificates may differ from other classes of certificates in one or more aspects, including: 1. timing and priority of payments; 2. seniority; 3. allocation of losses; 4. interest rate or formula for determining the interest rate; 5. amount of interest or principal payments; 6. whether interest or principal will be payable to holders of the class if specified events occur; 7. the right to receive collections from designated portions of the receivables owned by the trust; and 8. The ability of holders of a class to direct the trustee to take specified remedies. The Receivables....................... Purchasers of motor vehicles often finance their purchases by entering into retail installment sale contracts with dealers who then resell the contracts to finance companies such as BMW Financial Services NA, LLC. These contracts are referred to as "receivables," and the underlying vehicles are referred to as the "financed vehicles." The purchasers of the financed vehicles are referred to as the "obligors." The terms of the contracts must meet specified BMW Financial Services NA, LLC requirements. On or before the date the securities of a series are issued, BMW Financial Services NA, LLC or BMW Bank of North America will sell a specified amount of receivables to BMW FS Securities LLC, the seller. The seller will then sell those receivables to the trust. The sale by the seller to the trust will be documented under: 1. a pooling and servicing agreement among the seller, the servicer and the trustee (if the trust will be treated as a grantor trust for federal income tax purposes); or 2. a sale and servicing agreement among the seller, the servicer and the trust (if the trust will be treated other than as a grantor trust for federal income tax purposes). The receivables to be sold by BMW Financial Services NA, LLC or BMW Bank of North America will be described in the applicable prospectus 8 supplement. The Trust Property.................... The property of each trust: 1. will be described in the applicable prospectus supplement; 2. will primarily be a pool of receivables secured by new and used motor vehicles (which term, for purposes of this prospectus and each prospectus supplement, shall include motorcycles) and amounts due or collected under the receivables on or after a specified cutoff date; and 3. will include assets related to the receivables including: o security interests in the motor vehicles; o proceeds from claims on related insurance policies; o the rights of the seller in rebates of premiums and other amounts relating to insurance policies and other items financed under the receivables; o the rights of the seller in the agreements identified in the applicable prospectus supplement; o amounts deposited in specified bank accounts; and o proceeds from liquidated assets. Credit and Cash Flow Enhancement...... The trusts may include features designed to provide protection from losses on assets of the trust to one or more classes of securities. These features are referred to as "credit enhancement." Credit enhancement may include any one or more of the following: 1. subordination of one or more other classes of securities; 2. one or more reserve funds; 3. over-collateralization; 4. letters of credit, cash collateral accounts or other credit or liquidity facilities; 5. surety bonds; 6. guaranteed investment contracts, swap or other 9 interest rate protections; 7. repurchase obligations; 8. cash deposits; or 9. other agreements, guarantees or arrangements providing for other third party payments or other support. In addition, the trusts may include features designed to ensure the timely payment of amounts owed to securityholders. These features may include any one or more of the following: 1. yield supplement agreements; 2. liquidity facilities; 3. cash deposits; or 4. other agreements or arrangements providing for other third party payments or other support. The specific terms of any credit and cash flow enhancement applicable to a trust or to the securities issued by a trust will be described in detail in the applicable prospectus supplement. Servicing Fee......................... BMW Financial Services NA, LLC will act as servicer for the receivables. In that capacity, the servicer will handle all collections, administer defaults and delinquencies and otherwise service the receivables. The trust will pay the servicer a monthly fee equal to a percentage of the total principal balance of the receivables at the beginning of the preceding month specified in the applicable prospectus supplement. The servicer may also receive additional servicing compensation in the form of investment earnings, late fees, prepayment fees and other administrative fees and expenses or similar charges received by the servicer during that month. Advances.............................. The servicer may be obligated to advance to the trust interest on receivables that is due but unpaid by the obligor. In addition, the servicer may be obligated to advance to the trust principal of any receivables that are classified as precomputed receivables rather than as simple interest receivables. The servicer will not be required to make any advance if it determines that it will not be able to recover an advance from an obligor. The trust will reimburse the servicer from later collections on the receivables for which it has made advances, or from collections generally if the servicer determines that an advance will not be recoverable with respect to that receivable. We refer you to "Description of the Transfer and 10 Servicing Agreements--Advances" in this prospectus for more detailed information on advances and reimbursement of advances. Optional Purchase..................... The servicer may purchase all the receivables in the trust when the outstanding aggregate principal balance of the receivables declines to 10% or less of the original total principal balance of the receivables as of the cutoff date (or other level as may be disclosed in the applicable prospectus supplement). If the servicer exercises this option, the notes will be redeemed. We refer you to "Description of The Transfer and Servicing Agreements-- Termination" in this prospectus for more detailed information on the servicer's optional purchase of securities Tax Status............................ Grantor Trusts--If a trust is referred to as a "grantor trust" in the applicable prospectus supplement, special tax counsel to the trust will be required to deliver an opinion that: 1. the trust will be treated as a grantor trust for federal income tax purposes; and 2. the trust will not be subject to federal income tax. Owner Trusts--If a trust is referred to as an "owner trust" in the applicable prospectus supplement, special tax counsel to the trust will be required to deliver an opinion for federal income tax purposes: 1. as to the characterization as debt of the notes issued by the trust; and 2. that the trust will not be characterized as an association (or a publicly traded partnership) taxable as a corporation. If a trust is referred to as an "owner trust" in the applicable prospectus supplement: 1. by purchasing a note, you will be agreeing to treat the note as indebtedness for tax purposes; and 2. by purchasing a certificate, you will be agreeing to treat the trust: o as a partnership in which you are a partner; or o if you are the sole beneficial owner of the certificates, as a "disregarded entity," for federal income tax purposes. Applicable taxing authorities could impose alternative tax characterizations of the trust, the notes and the certificates. 11 However, these characterizations generally will not result in material adverse tax consequences to securityholders. We refer you to "Material Income Tax Consequences" in this prospectus and the applicable prospectus supplement for more detailed information on the application of federal income tax laws. ERISA Considerations.................. Notes--Notes will generally be eligible for purchase by employee benefit plans. Unsubordinated Grantor Trust Certificates--Certificates of a class issued by a grantor trust that are not subordinated to any other class will generally be eligible for purchase by employee benefit plans. Other Certificates--Subordinated classes of certificates issued by a grantor trust and certificates issued by owner trusts will not be eligible for purchase by an employee benefit plan or individual retirement account unless the related prospectus supplement states otherwise. We refer you to "ERISA Considerations" in this prospectus and the applicable prospectus supplement for more detailed information regarding the ERISA eligibility of any class of securities. 12 Risk Factors You should consider the following risk factors and the risks described in the section captioned "Risk Factors" in the applicable prospectus supplement in deciding whether to purchase securities of any class. You must rely for repayment only The securities represent interests upon payments from the trust's solely in the trust or indebtedness assets which may not be sufficient of the trust and will not be to make full payments on your insured or guaranteed by BMW securities. Financial Services NA, LLC (the servicer), BMW FS Securities LLC (the depositor), or any of their respective affiliates, or the related trustee or any other person or entity other than the trust. The only source of payment on your securities are payments received on the receivables and, if and to the extent available, any credit or cash flow enhancement for the trust, including amounts on deposit in the reserve fund, if any, established for that trust. If the available credit enhancement is exhausted, your securities will be paid solely from current distributions on the receivables. In limited circumstances, the trust will also have access to the funds in the yield supplement account or have the benefit of over-collateralization to provide limited protection against low-interest receivables. We refer you to "Description of the Transfer and Servicing Agreements--Yield Supplement Account; Yield Supplement Agreement" in this prospectus. You may experience reduced returns You may receive payment of on your investment resulting from principal on your securities prepayments, repurchases or early earlier than you expected for the termination of the trust. reasons set forth below. As a result, you may not be able to reinvest the principal paid to you earlier than you expected at a rate of return that is equal to or greater than the rate of return on your securities. Prepayments on the receivables by the related obligors and purchases of the receivables by the seller and the servicer will shorten the life of the securities to an extent that cannot be fully predicted. In addition, a trust may contain a feature known as a prefunding account from which specified funds will be used to purchase additional receivables after the date the securities are issued. To the extent all of those funds are not used by the end of the specified period to purchase new receivables, those funds will be used to make payments on the securities. In that event, you would receive payments on your securities earlier than expected. Also, the seller will be required to repurchase receivables from the trust if there is a breach of a representation or warranty relating to those receivables that materially adversely affects those receivables. If so disclosed in the related prospectus supplement BMW Financial Services NA, LLC, as servicer, will also be required to purchase receivables from the trust if it breaches its servicing obligations with respect to those receivables. The servicer shall be permitted to purchase all remaining receivables from the trust when the outstanding aggregate principal balance of the receivables is 10% or less of the initial aggregate principal balance of the receivables as of the related cutoff date. 13 Further, the receivables included in the trust may be prepaid, in full or in part, voluntarily or as a result of defaults, theft of or damage to the related vehicles or for other reasons. The rate of prepayments on the receivables may be influenced by a variety of economic, social and other factors in addition to those described above. The servicer has limited historical experience with respect to prepayments on receivables. In addition, the servicer is not aware of publicly available industry statistics that detail the prepayment experience for contracts similar to the receivables. For these reasons, the servicer cannot predict the actual prepayment rates for the receivables. You will bear all reinvestment risk resulting from prepayments on the receivables and the corresponding acceleration of payments on the securities. The final payment of each class of securities is expected to occur prior to its scheduled final payment date because of the prepayment and purchase considerations described above. If sufficient funds are not available to pay any class of notes in full on its final scheduled payment date, an event of default will occur and final payment of that class of notes may occur later than that date. Interests of other persons in the Another person could acquire an receivables and financed vehicles interest in a receivable that is could be superior to the trust's superior to the trust's interest in interest, which may result in that receivable because the reduced payments on your receivables will not be segregated securities. or marked as belonging to the trust. The seller will cause financing statements to be filed with the appropriate governmental authorities to perfect the trust's interest in the receivables. However, the servicer will continue to hold the receivables. If another party purchases, or takes a security interest in, one or more receivables for new value in the ordinary course of business and obtains possession of those receivables without actual knowledge of the trust's interest because of the failure to segregate or mark those receivables, the new purchaser, or secured party, will acquire an interest in those receivables superior to the interest of the trust. Another person could acquire an interest in a vehicle financed by a receivable that is superior to the trust's interest in the vehicle because of the failure to identify the trust as the secured party on the related certificate of title. While BMW Financial Services NA, LLC, will assign its security interest in the financed vehicles to the depositor, and the depositor will assign to the trust its security interests in the financed vehicles, the servicer will continue to hold the certificates in the capacity of an administrative lienholder of title or ownership for the vehicles. However, for administrative reasons, the servicer will not endorse or otherwise amend the certificates of title or ownership to identify the trust as the new secured party. Because the trust will not be identified as the secured party on any certificates of title or ownership, the security interest of the trust in the vehicles may be defeated through fraud, forgery, negligence or error and as a result the trust may not have a perfected security interest in the financed 14 vehicles in every state. The possibility that the trust may not have a perfected security interest in the financed vehicles may affect the trust's ability to repossess and sell the financed vehicles or may limit the amount realized to less than the amount due by the related obligors. Therefore, you may be subject to delays in payment and may incur losses on your investment in the securities as a result of defaults or delinquencies by obligors and because of depreciation in the value of the related financed vehicles. We refer you to "Certain Legal Aspects of the Receivables--Security Interests" in this prospectus. Receivables that fail to comply Many federal and state consumer with consumer protection laws may protection laws regulate consumer be unenforceable, which may result contracts including the in losses on your investment. receivables. If any of the receivables do not comply with one or more of these laws, the servicer may be prevented from or delayed in collecting amounts due on the receivables. If that happens, payments on the securities could be delayed or reduced. Each of BMW FS Securities LLC and BMW Financial Services NA, LLC will make representations and warranties relating to the receivables' compliance with law and the trust's ability to enforce the contracts. If BMW FS Securities LLC or BMW Financial Services NA, LLC breaches any of these representations or warranties, the trust's sole remedy will be to require BMW FS Securities LLC to repurchase the affected receivables. We refer you to "Certain Legal Aspects of the Receivables-- Consumer Protection Laws" in this prospectus. The bankruptcy of BMW Financial If either BMW Financial Services Services NA, LLC (servicer) or BMW NA, LLC, the servicer, or BMW FS FS Securities LLC (depositor) could Securities LLC, the depositor, result in losses or delays in become subject to bankruptcy payments on your securities. proceedings, you could experience losses or delays in the payments on your securities. BMW Financial Services NA, LLC will sell the receivables to BMW FS Securities LLC, and BMW FS Securities LLC will in turn transfer the receivables to the trust. However, if BMW Financial Services NA, LLC or BMW FS Securities LLC becomes subject to a bankruptcy proceeding, the court in the bankruptcy proceeding could conclude that BMW Financial Services NA, LLC or BMW FS Securities LLC still owns the receivables by concluding that the sale to the seller or the trust was not a "true sale" or, in the case of a bankruptcy of BMW Financial Services NA, LLC, that the depositor should be consolidated with BMW Financial Services NA, LLC for bankruptcy purposes. If a court were to reach this conclusion, you could experience losses or delays in payments on your securities as a result of, among other things: (1) the "automatic stay," which prevents secured creditors from exercising remedies against a debtor in bankruptcy without permission from the court and provisions of the U.S. Bankruptcy Code that permit substitution for collateral in limited circumstances; 15 (2) tax or government liens on BMW Financial Services NA, LLC's or BMW FS Securities LLC's property (that arose prior to the transfer of a receivable to the trust) having a prior claim on collections before the collections are used to make payments on your securities; and (3) the trust not having a perfected security interest in either one or more of the financed vehicles securing the receivables or any cash collections held by BMW Financial Services NA, LLC at the time BMW Financial Services NA, LLC becomes the subject of a bankruptcy proceeding. The depositor will take steps in structuring each transaction described in this prospectus and the applicable prospectus supplement to minimize the risk that a court would consolidate the depositor with BMW Financial Services NA, LLC for bankruptcy purposes or conclude that the sale of receivables to the seller was not a "true sale." We refer you to "Certain Legal Aspects of the Receivables--Certain Bankruptcy Considerations" in this prospectus. Proceeds of the sale of receivables If so directed by the holders of may not be sufficient to pay your the requisite percentage of securities in full. outstanding notes of a series, following an acceleration of the notes upon an event of default, the indenture trustee will sell the receivables owned by the trust only in limited circumstances. However, there is no assurance that the market value of those receivables will at any time be equal to or greater than the aggregate principal amount of the notes or the sum of the aggregate principal amount of the notes and the aggregate principal balance of the certificates. Therefore, upon an event of default, there can be no assurance that sufficient funds will be available to repay you in full. This deficiency will be exacerbated in the case of any securities where the aggregate principal balance of the securities exceeds the aggregate principal balance of the receivables. Failure to pay principal on your The amount of principal required to notes will not constitute an event be paid to the noteholders will of default until maturity. generally be limited to amounts available in the collection account (and the reserve fund or other forms of credit or cash flow enhancement, if any). Therefore, the failure to pay principal of your notes generally will not result in the occurrence of an event of default until the final scheduled payment date for your notes. We refer you to "The Notes--The Indenture--Events of Default; Rights Upon Event of Default" in this prospectus. Funds held by the servicer that are The servicer generally may retain intended to be used to make all payments and proceeds collected payments on the securities may be on the receivables during each exposed to a risk of loss. collection period. The servicer is generally not required to segregate those funds from its own accounts until the funds are deposited in the collection account on each payment date. Until any collections or proceeds are deposited into the collection account, the servicer will be able to invest those amounts for its own benefit at its own risk. The trust and securityholders are not entitled to any amount earned on the funds 16 held by the servicer. If the servicer does not deposit the funds in the collection account as required on any payment date, the trust may be unable to make the payments owed on your securities. If the trust enters into a currency If the trust enters into a currency or an interest rate swap, payments swap, interest rate swap or a on the securities will be dependent combined currency and interest rate on payments made under the swap swap, its ability to protect itself agreement. from shortfalls in cash flow caused by currency or interest rate changes will depend to a large extent on the terms of the swap agreement and whether the swap counterparty performs its obligations under the swap. If the trust does not receive the payments it expects from the swap, the trust may not have adequate funds to make all payments to securityholders when due, if ever. Termination of a swap agreement and A swap agreement may be terminated the inability to locate replacement if particular events occur. Most of swap counterparty may cause these events are generally beyond termination of the trust. the control of the trust or the swap counterparty. If an event of default under swap agreement occurs and the trustee is not able to assign the swap agreement to another party, obtain a swap agreement on substantially the same terms or is unable to establish any other arrangement satisfactory to the rating agencies, the trustee may terminate the swap agreement. In addition, the trust may terminate and the trustee would then sell the assets of the trust. It is impossible to predict how long it would take to sell the assets of the trust. Some of the possible adverse consequences of a sale of the assets of the trust are: 1. the proceeds from the sale of assets under those circumstances may not be sufficient to pay all amounts owed to you; 2. amounts available to pay you will be further reduced if the trust is required to make a termination payment to the swap counterparty; 3. termination of the swap agreement may expose the trust to currency or interest rate risk, further reducing amounts available to pay you; 4. the sale may result in payments to you significantly earlier than expected; and 5. a significant delay in arranging a sale of the trust's assets could result in a delay in principal payments. This would, in turn, increase the weighted average life of the securities and could reduce the return on your securities. Additional information about termination of the trust and sale of the trust's assets, including a description of how the proceeds of a sale would be distributed will be included in the applicable prospectus supplement. Any swap agreement involves risk. A trust will be exposed to this risk should it use this mechanism. For this reason, 17 only investors capable of understanding these risks should invest in the securities. You are strongly urged to consult with your financial advisors before deciding to invest in the securities if a swap is involved. The rating of a third party credit If a trust enters into any third enhancement provider may affect the party credit enhancement ratings of the securities. arrangement, the rating agencies that rate the trust's securities will consider the provisions of arrangement and the rating of any third party credit enhancement provided. If a rating agency downgrades the debt rating of any third party credit provided, it is also likely to downgrade the rating of the securities. Any downgrade in the rating of the securities could have severe adverse consequences on their liquidity or market value. The calculations for the payments The calculation of interest or of principal or interest may be principal on a series of securities based on an index which may result may be based on a currency, in payments to you of less commodity, interest rate or other principal or interest than a non- index. In this situation, the indexed security. amount of principal or interest payable on the securities may be less than that payable on a conventional debt security issued at the same time, including the possibility that no interest or principal will be paid. In addition, if the formula for calculating the payments on the securities includes a feature that multiplies the effect of any change in the index, changes to the index could result in even greater changes in the value of the securities or the payments to be made on the securities. You may not be able to easily trade these types of securities after you purchase them. This is referred to as a "secondary market." It cannot be predicted whether there will be a secondary market for these types of securities or if one develops, how liquid it would be. The secondary market for these types of securities will be affected by a number of factors that are not dependent on the performance of the trust and its assets. These factors include the complexity and volatility of any index, the method of calculating the principal and interest payments on the securities, the time remaining to the maturity of the securities, the outstanding amount of the securities and market interest rates. The value of any index will depend on a number of interrelated factors which cannot be controlled by the trust, including economic, financial and political events. For these reasons, you may not be able to readily sell your securities or receive the price you expected for their sale. In recent years, many indices have been highly volatile, and the volatility may continue in the future. You should review carefully the historical experience of any index to which a series of securities are pegged, but should not take that historical experience as a predictor of future performance of the index during the term of any security. The credit ratings assigned to the securities do not reflect the potential impact of the factors discussed above, or what the impact may be on your securities' market value at any time. For this reason, only investors capable of understanding the risks involved should invest in 18 indexed securities. In addition, investors whose investment activities are restricted by law or subject to regulation may not be able to purchase these types of securities. Investors are responsible for determining whether they may purchase indexed securities. You are strongly urged to consult with your financial advisors before deciding to invest in indexed securities. You may have difficulty selling your The securities are not expected to securities and/or obtaining your be listed on any securities desired price due to the absence of a exchange. Therefore, in order to secondary market. sell your securities, you must first locate a willing purchaser. In addition, currently, no secondary market exists for the securities. We cannot assure you that a secondary market will develop. The underwriters of any series of securities may make a secondary market for the securities by offering to buy the securities from investors that wish to sell. However, any underwriters agreeing to do so will not be obligated to offer to buy the securities and they may stop making offers at any time. Because the securities are in Because the securities will be book-entry form, your rights can only issued in book-entry form, you will be exercised indirectly. be required to hold your interest in the securities through The Depository Trust Company in the United States, or Clearstream Banking, societe anonyme, or the Euroclear System in Europe. Transfers of interests in the securities within DTC, Clearstream, Luxembourg or Euroclear must be made in accordance with the usual rules and operating procedures of those systems. So long as the securities are in book-entry form, you will not be entitled to receive a physical note or certificate representing your interest. The securities will remain in book-entry form except in the limited circumstances described under the caption "Certain Information Regarding the Securities--Book-Entry Registration." Unless and until the securities cease to be held in book-entry form, the trustee will not recognize you as a "Securityholder," as that term is used in the trust agreement. As a result, you will only be able to exercise the rights of securityholders indirectly through The Depository Trust Company (if in the United States) and its participating organizations, or Clearstream, Luxembourg and Euroclear (in Europe) and their participating organizations. Holding the securities in book-entry form could also limit your ability to pledge your securities to persons or entities that do not participate in The Depository Trust Company, Clearstream, Luxembourg or Euroclear and to take other actions that require a physical note or certificate representing the securities. Interest and principal on the securities will be paid by the trust to The Depository Trust Company as the record holder of the securities while they are held in book-entry form. The Depository Trust Company will credit payments received from the trust to the accounts of its participants which, in turn, will credit those amounts to securityholders either directly or indirectly through indirect participants. This process may delay your receipt of principal and interest payments from the trust. 19 Possible Prepayment Due to If so disclosed in the applicable Inability to Acquire Subsequent prospectus supplement, a trust may Receivables agree to buy additional receivables from the depositor after the closing date. The number of receivables that the depositor has to sell depends on its ability to acquire additional receivables which, in turn, is affected by, among other things, the number of financed vehicles sold. The number of financed vehicles sold is affected by a variety of factors, including interest rates, unemployment levels, the rate of inflation and consumer perception of economic conditions generally. If the full amount deposited on the closing date for the purpose of purchasing additional receivables from the depositor cannot be used for that purpose during the specified period, all remaining monies will be applied as a mandatory prepayment of a designated class or classes of securities. We refer you to "Description of the Transfer and Servicing Agreements-Distribution- Payments to Noteholders and Description of Transfer and Servicing Agreements-Credit and Cash Flow Enhancement-Pre-funding feature." 20 Formation of the Trusts BMW FS Securities LLC (the "Depositor") will establish each trust (each, a "Trust") pursuant to a Trust Agreement (as amended and supplemented from time to time, the "Trust Agreement") or a Pooling and Servicing Agreement (as amended from time to time, the "Pooling and Servicing Agreement"), as applicable. The terms of each series of notes or certificates issued by each Trust and additional information concerning the assets of each Trust and any applicable credit or cash flow enhancement will be set forth in a supplement to this prospectus (a "prospectus supplement"). The notes and certificates are collectively referred to in this prospectus as the "Securities." Property of the Trusts The property of each Trust will consist of a pool (each, a "Receivables Pool") of retail installment sale contracts originated on or after the date indicated in the applicable prospectus supplement between dealers in BMW products ("BMW Centers") or other dealers and retail purchasers (the "Obligors"). These contracts are referred to as the "Receivables" and evidence the indirect financing made available by BMW Financial Services NA, LLC ("BMW FS") and BMW Bank of North America ("BMW Bank") to the Obligors. The Receivables will be secured by new or used motor vehicles (which term for purposes of this prospectus includes motorcycles) (the "Financed Vehicles") and all principal and interest payments made on or after the applicable cutoff date (each, a "Cutoff Date") and other property, all as specified in the applicable prospectus supplement. "New" vehicles may include "demonstration" vehicles, which are not titled in some states and may be classified as new vehicles in those states. Unless otherwise disclosed in the applicable prospectus supplement, the Receivables will be originated by BMW Centers in accordance with BMW FS' requirements under agreements with BMW Centers governing the assignment of the Receivables to BMW FS or BMW Bank, as applicable (the "Dealer Agreements"). BMW FS or BMW Bank, as applicable will purchase the Receivables of each Receivables Pool in the ordinary course of business pursuant to the Dealer Agreements. In some cases, BMW FS will acquire the Receivables from other persons, including BMW Bank of North America. On or before the date of the initial issuance of any series of Securities (each, a "Closing Date"), BMW FS or BMW Bank will sell the Receivables comprising the related Receivables Pool to the Depositor, and the Depositor will sell those Receivables to the Trust pursuant to, if the Trust is to be treated other than as a grantor trust for federal income tax purposes, the related Sale and Servicing Agreement among the Depositor, the Servicer and the Trust (as amended and supplemented from time to time, the "Sale and Servicing Agreement") or, if the Trust is to be treated as a grantor trust for federal income tax purposes, the related Pooling and Servicing Agreement. BMW FS will to service the Receivables. In addition to the Receivables, the property of each Trust will also include the following: 1. amounts that may be held in separate trust accounts established and maintained by the Servicer with the Trustee pursuant to the related Sale and Servicing Agreement or Pooling and Servicing Agreement; 2. security interests in the Financed Vehicles and any related property; 3. the rights to proceeds from claims on physical damage, credit life and disability insurance policies covering the Financed Vehicles or the Obligors; 21 4. BMW FS' (or BMW Bank) right to receive payments from Dealers obligated to repurchase Receivables from BMW FS which do not meet specified representations made by the BMW Centers ("Dealer Recourse"); 5. the Depositor's right under, as applicable, the Sale and Servicing Agreement, the Pooling and Servicing Agreement, the Purchase Agreement and the Yield Supplement Agreement, if any; 6. the Depositor's right to realize upon any property, including the right to receive future net liquidation proceeds, that secured a Receivable; and 7. all proceeds of the foregoing. Various forms of credit and cash flow enhancement may be used to benefit holders of the related Securities, including a Reserve Fund. In limited circumstances, a Trust will also have access to the funds in a Yield Supplement Account or have the benefit of over-collateralization to provide limited protection against low-interest receivables. The Receivables BMW FS or BMW Bank will purchase the Receivables in the ordinary course of business in accordance with BMW FS' underwriting standards. The Receivables to be held by each Trust will be selected from those motor vehicle retail installment sale contracts in BMW FS' or BMW Bank's portfolio that meet several criteria. Apart from the criteria specified herein and in the applicable prospectus supplement, the Depositor will not use selection procedures adverse to Securityholders when selecting the Receivables from qualifying retail installment sale contracts. These criteria provide that each Receivable: 1. was originated in the United States and the Obligor is not a federal, state or local governmental entity; 2. is attributable to the purchase of a new or used BMW motor vehicle and is secured by that vehicle, light truck or motorcycle; and 3. satisfies the other criteria, if any, set forth in the applicable prospectus supplement. Each Receivable will provide for the allocation of payments (each, a "Scheduled Payment") according to: o the simple interest method ("Simple Interest Receivables"); o the "actuarial" method ("Actuarial Receivables"); or o the "sum of periodic balances" or "sum of monthly payments" ("Rule of 78s Receivables" and, together with the Actuarial Receivables, the "Precomputed Receivables"). Simple Interest Receivables. Payments on Simple Interest Receivables will be applied first to interest accrued through the date immediately preceding the date of payment and then to unpaid principal. Accordingly, if an Obligor pays an installment before its due date, the portion of the payment allocable to interest for the payment period will be less than if the payment had been made on the due date, the portion of the payment applied to reduce the principal balance will be correspondingly greater, and the principal 22 balance will be amortized more rapidly than scheduled. Conversely, if an Obligor pays an installment after its due date, the portion of the payment allocable to interest for the payment period will be greater than if the payment had been made on the due date, the portion of the payment applied to reduce the principal balance will be correspondingly less, and the principal balance will be amortized more slowly than scheduled, in which case a larger portion of the principal balance may be due on the final scheduled payment date. No adjustment to the scheduled monthly payments is made in the event of early or late payments, although in the case of late payments the Obligor may be subject to a late charge. Actuarial Receivables. An Actuarial Receivable provides for amortization of the contract over a series of fixed level monthly installments. Each scheduled payment is deemed to consist of an amount of interest equal to 1/12 of the stated APR of the Receivable multiplied by the scheduled principal balance of the Receivable and an amount of principal equal to the remainder of the Scheduled Payment. No adjustment to the scheduled monthly payments is made in the event of early or late payments, although in the case of late payments the Obligor may be subject to a late charge. Rule of 78s Receivables. A Rule of 78s Receivable provides for the payment by the Obligor of a specified total amount of payments, payable in monthly installments on the related due date, which total represents the principal amount financed and finance charges in an amount calculated on the basis of the related APR for the term of that Receivable. The rate at which the amount of finance charges is earned and, correspondingly, the amount of each Scheduled Payment allocated to reduction of the outstanding principal balance of a Rule of 78s Receivable are calculated in accordance with the Rule of 78s. Under the Rule of 78s, the portion of each payment allocable to interest is higher during the early months of the term of a Rule of 78s Receivable and lower during later months than that under a constant yield method for allocating payments between interest and principal. Notwithstanding the foregoing, all payments received by the Servicer on or in respect of the Rule of 78s Receivables will be allocated pursuant to the related Transfer and Servicing Agreement, as the case may be, on an actuarial basis. No adjustment is made in the event of early or late payments, although in the case of late payments the Obligor may be subject to a late charge. In the event of a prepayment in full, either voluntarily or by acceleration, of a Precomputed Receivable, a "rebate" will be made to the Obligor of that portion of the total amount of payments under the Receivable allocable to "unearned" interest charges. In the event of the prepayment in full, either voluntarily or by acceleration, of a Simple Interest Receivable, a "rebate" will not be made to the Obligor, but the Obligor will be required to pay interest only to the date immediately preceding the date of prepayment. The amount of a rebate under a Precomputed Receivable will always be less than or equal to the remaining scheduled payments of interest that would have been due under a Simple Interest Receivable for which all remaining payments were made on schedule. Payments to Securityholders will not be affected by rebates under the Rule of 78s Receivables because pursuant to the related Transfer and Servicing Agreement the payments will be determined using the actuarial method. Unless otherwise provided in the related prospectus supplement, each Trust will account for the Rule of 78s Receivables as if those Receivables were Actuarial Receivables. Amounts received upon prepayment in full of a Rule of 78s Receivable in excess of the then outstanding principal balance of the Receivable and accrued interest on the Receivable (calculated pursuant to the actuarial method) will not be paid to the Noteholders or passed through to the Certificateholders of the applicable series but will be deemed to be an excess amount and released to the Seller or otherwise applied as set forth in the related prospectus supplement. The Receivables generally will provide for level monthly payments that fully amortize the amount financed over the Receivable's original term to maturity. Additional information with respect to 23 each Receivables Pool will be set forth in the related prospectus supplement, including, to the extent appropriate, the composition, the distribution by APR and by the states of origination, the portion of the Receivables Pool consisting of Actuarial Receivables and the portion of the Receivables Pool secured by new and used vehicles. Use of Proceeds Each Trust will use the net proceeds from the sale of the Securities of a given series to purchase Receivables from the Depositor and to fund any related Reserve Fund or other accounts of the Trust. The Depositor will purchase Receivables from BMW FS from the net proceeds it receives from any Trust. The Trustee The trustee for each Trust (the "Trustee") or the trustee under any Indenture pursuant to which notes are issued (the "Indenture Trustee") will be specified in the applicable prospectus supplement. The Trustee's or the Indenture Trustee's liability in connection with the issuance and sale of the related Securities is limited solely to the express obligations of that Trustee or Indenture Trustee set forth in the related Trust Agreement, Pooling and Servicing Agreement, Sale and Servicing Agreement or Indenture, as applicable. A Trustee or Indenture Trustee may resign at any time, in which event the Servicer, or its successor, will be obligated to appoint a successor Trustee or Indenture Trustee, as applicable. The Administrator of a Trust that is not a grantor trust may also remove a Trustee or Indenture Trustee that becomes insolvent or otherwise ceases to be eligible to continue in that capacity under the related Trust Agreement, Sale and Servicing Agreement or Indenture, as applicable. The Servicer for a Trust that is a grantor trust may remove a Trustee that becomes insolvent or otherwise ceases to be eligible to continue in that capacity under the related Pooling and Servicing Agreement. In those circumstances, the Servicer or, in the case of a series that includes notes, the Administrator, as the case may be, will be obligated to appoint a successor Trustee. Any resignation or removal of a Trustee or Indenture Trustee and appointment of a successor trustee will not become effective until acceptance of the appointment by the successor. The Depositor BMW FS Securities LLC (the "Depositor"), a wholly owned subsidiary of BMW FS, was formed on February 27, 2001 in the State of Delaware. The principal office of the Depositor is located at 300 Chestnut Ridge Road, Woodcliff Lake, New Jersey 07677 and its telephone number is (201) 307-4000. The Depositor was organized primarily for the purpose of acquiring retail installment sale contracts similar to the Receivables and associated rights from BMW FS and BMW Bank, causing the issuance of securities similar to the Securities and engaging in related transactions. The Depositor's limited liability company agreement limit the activities of the Depositor to the foregoing purposes and to any activities related to, incidental to, and necessary, convenient or advisable for those purposes. The Servicer BMW Financial Services NA, Inc., the predecessor of BMW Financial Services NA, LLC ("BMW FS"), was incorporated on April 23, 1984 in the State of Delaware and, on May 1, 2000, was converted into a limited liability company organized under the laws of the State of Delaware. BMW FS is a wholly owned subsidiary of BMW of North America, LLC. ("BMW NA"). BMW FS provides retail and wholesale financing, retail leasing and other financial services to authorized BMW Centers and their 24 customers throughout the United States. BMW NA is based in Woodcliff Lake, New Jersey and is engaged in the wholesale distribution of BMW motor vehicles and motorcycles throughout the United States. BMW NA is an indirectly wholly-owned subsidiary of Bayerishe Motoren Werke Aktiengesellschaft ("BMW AG"), a German corporation that is an international manufacturer and distributor of luxury automobiles, sports utility vehicles, light trucks and motorcycles. The national executive headquarters of BMW FS are located at 300 Chestnut Ridge Road, Woodcliff Lake, New Jersey 07677. Its telephone number is: (201) 307-4000. Its Customer Service Center is located at 5515 Parkcenter Circle, Dublin, Ohio 43017. BMW FS' Financing Program General Each of BMW FS and BMW Bank currently purchases motor vehicle retail installment sale contracts (the "Motor Vehicle Contracts", or "Contracts") directly from authorized BMW Centers and other dealers throughout the United States. The Contracts are originated by BMW Centers and other dealers who regularly sell those Contracts to BMW FS, and BMW Bank or other finance sources. BMW FS and BMW Bank purchase Contracts in accordance with its established underwriting procedures, subject to the terms of its agreement (each, a "Dealer Agreement") with each BMW Center or other dealer. In some cases BMW FS may purchase contracts from other originators, such as BMW Bank of North America. Each Dealer Agreement, among other things, obligates the related BMW Center or other dealer to repurchase any Contract BMW FS or BMW Bank financed for the outstanding principal balance of that Contract, if the BMW Center or other dealer breaches specific representations and warranties as set forth in the Dealer Agreement. The representations and warranties typically relate to the origination of the Contract and the security interest in the related Financed Vehicle and not the creditworthiness of the Obligor under the Contract. Each of BMW FS and BMW Bank currently purchases Contracts relating to new and used vehicles manufactured by BMW AG and Land Rover as well as a small percentage of non-BMW used vehicles. BMW FS and BMW Bank apply the same underwriting standards to its purchases of Contracts whether or not the Contract relates to a vehicle manufactured by BMW AG. See "--Underwriting". In the case of BMW vehicles, each of BMW FS and BMW Bank in many cases purchases Contracts with APRs that are lower than those it would otherwise require, pursuant to incentive finance programs intended to increase new and used BMW vehicle sales. Set forth below is a description of current underwriting and collection policies and practices of BMW FS, which also originates Contracts for BMW Bank. These policies and practices are subject to change from time to time. Underwriting Contracts are originated or purchased by BMW FS in accordance with underwriting procedures that are intended to assess the applicant's ability to pay the amounts due on the contract and the adequacy of the financed vehicle as collateral. BMW FS utilizes predetermined credit score cutoffs and approval authority levels as credit controls. BMW FS requires applicants to complete an application form providing various items of financial information, credit and employment history and other personal information. Applications are accepted for new and used vehicles from approved retailers via U.S. mail, facsimile, personal delivery or InfoBahn - a BMW intranet system linking BMW Centers, BMW NA and BMW FS. The application is reviewed 25 for completeness. Independent verification of information in the application generally is not required. However, BMW FS will seek verification of some information, including employment, income and/or residence, under some circumstances, such as discovery of a discrepancy between information in the application and information in a credit bureau report. For the year ended June 30, 2000, 89.68% of applications were approved, 88.24% of which were funded by BMW FS. A credit buyer reviews each application that is not automatically approved. Credit buyers have credit authority levels of "I" or "II". The credit buyer's review includes an evaluation of a credit bureau report on the applicant from an independent credit bureau and the applicant's credit score based on a credit scoring system or "scorecard" developed for BMW FS. This system, which has been in use since 1997, calculates a score based on data in a credit application that, based on past performance of BMW FS' contract portfolio, appear to be indicative of the degree of likelihood that an applicant will make scheduled payments to BMW FS. Upon review of the application, the applicant's credit score and credit bureau report, an assessment is made regarding the relative degree of credit risk. BMW FS' guidelines provide that an applicant's credit score will be highly considered by the credit buyer in determining whether to extend credit. Besides the credit score, BMW FS also considers the applicant's debt to income to debt ratio, the applicant's equity in the financed vehicle and other attributes as part of the decision making process. BMW FS' management sets limits on the approval of applications scoring below the company's minimum scores. In the case of a complete application scoring above a certain level of the scoring system, the application may be subject to an automated credit approval process which does not require review and approval by a credit buyer. Applicants that score below a minimum score established by BMW FS management may not be approved by credit buyers with Level I credit authority. These applicants may be approved by a credit buyer with Level II credit authority (or in some cases only by the credit manager) based on the presence of certain factors, including a guarantee by the BMW Center. A credit buyer with Level I credit authority may not disapprove without management review applicants that score above the specified minimum. In case of a commercial applicant, BMW FS reviews information concerning bank accounts, credit references and recent financial results of each business entity. BMW FS requires an individual to guarantee the business' obligations under the Contract, otherwise it will obtain a Dun and Bradstreet report. BMW FS generally does not provide financing to applicants with previous bankruptcies. However, BMW FS' guidelines do permit financing for these applicants under some circumstances, for example, if the customer has re-established credit for at least 24 months and has had no 30-day delinquencies in that period. The amount of a contract generally will not exceed: o with respect to a new vehicle, 100% of the manufacturer's suggested retail price ("MSRP") for the vehicle, or o with respect to a used vehicle, 100% of the retail price reported for the vehicle that is stated in the most recent edition of the National Automotive Dealers Association Used Car Guide or the Kelly Blue Book, plus in each case options, dealer-installed accessories, various taxes and fees incurred in connection with the sale and, in some cases, insurance policies, extended service contracts (up to the greater of five 26 percent of MSRP or $1,500) and other items. The credit manager may approve contracts up to 105% of the above amounts, and the national credit manager may approve contracts up to 110% of the above amounts. Upon the maturity of a lease financing, the customer has the option to refinance or purchase the financed vehicle from BMW FS. The same underwriting and credit procedures described above apply to any financing offered to these obligors. A portion of the Receivables may be secured by used vehicles that derive from this lease to loan program. Dealer Agreements Each BMW Center or other dealer that originated Motor Vehicle Contracts sold to BMW FS pursuant to a Dealer Agreement has made representations and warranties with respect to the Motor Vehicle Contracts and the related security interest. These representations and warranties typically do not relate to the creditworthiness of the Obligors or the collectibility of the Motor Vehicle Contracts. Upon breach of any representation or warranty made by a BMW Center, BMW FS would have a right of recourse against that BMW Center to require it to repurchase the loan. Generally, the Dealer Agreements do not provide for recourse against the BMW Center in the event of a default by the Obligor. Servicing BMW FS measures delinquency by the number of days elapsed from the date a payment is due under the Contract (each, a "Due Date"). BMW FS considers a payment to be past due or delinquent when an obligor fails to make at least 80% of a scheduled payment by the related Due Date. BMW FS generally begins collection activities with respect to a delinquent Contract through telephone contact. An automated system supports BMW FS' collection activities to monitor delinquencies and to track the contacts with the obligors. BMW FS assigns collectors to specific Obligors and attempts to contact the delinquent obligor by telephone or by letter based on the term of delinquency and the history of the account. Repossession procedures typically begin when a contract becomes 60 to 90 days delinquent. Repossessions are carried out pursuant to applicable state law and specific procedures adopted by BMW FS. BMW FS' deferment policy allows a total of four deferments over the life of the Contract. BMW FS' current policy is to generally charge off a Contract on the earlier of: o the date on which the proceeds of sale of the financed vehicle are applied to the Contract balance; and o the month in which the Contract reaches its 150th day of delinquency. Any deficiencies remaining after repossession and sale of the related financed vehicle or after full charge-off of the related Contract are pursued by BMW FS to the extent practicable and legally permitted. Obligors are contacted, and when warranted by individual circumstances, repayment schedules are established and monitored until the deficiencies are either paid in full or become impractical to pursue. 27 Physical Damage and Liability Insurance Each Contract requires the obligor to obtain physical damage insurance covering loss or damage to the financed vehicle. The Dealer Agreements include a requirement that the BMW Centers provide BMW FS with written evidence that physical damage and liability insurance covers the financed vehicle at least in the amount required by the Contract at the time the Contract is purchased by BMW FS. The amounts of insurance required by the Contracts are at least equal to the amounts required by applicable state law, subject to customary deductibles. BMW FS tracks the ongoing status of insurance and attempts to cause the obligors to reinstate the required insurance in the event that it is allowed to lapse; nevertheless, there can be no assurance that each financed vehicle will continue to be covered by physical damage insurance for the entire term during which the related Contract is outstanding. BMW FS does not "force place" insurance. Certified Pre-Owned Program Some of the Receivables may be secured by used BMW vehicles that were sold pursuant to the certified Pre-Owned BMW Vehicle Program ("CPO"). CPO was established by BMW NA in 1996 to create customer and BMW Center demand for off-lease used BMW vehicles and to enhance the value of off-lease BMW vehicles. To qualify for CPO, a vehicle must pass an inspection conducted by the related BMW Center based on standards set by BMW NA. For CPO vehicles, BMW NA provides a limited warranty for two years or 50,000 miles (whichever comes first) that becomes effective upon the expiration of the original four year/50,000 mile (whichever comes first) new car warranty. Each CPO vehicle also is covered by the BMW Roadside Assistance Program which is identical to that offered on new vehicles. CPO is actively marketed by BMW NA through its sales force and is advertised using both broadcast and print media. Where can you find more information about your Securities The Trust--The Trustee will provide to securityholders ("Securityholders") (which shall be Cede & Co. ("Cede") as the nominee of DTC unless Definitive Securities are issued under the limited circumstances described in this prospectus) unaudited monthly and annual reports concerning the Receivables and other specified matters. We refer you to "Description of the Transfer and Servicing Agreements--Statements to Securityholders" and "--Evidence as to Compliance" in this prospectus. Copies of these reports may be obtained at no charge at the offices specified in the applicable prospectus supplement. The Depositor--BMW FS Securities LLC, as depositor of the Receivables, has filed with the SEC a registration statement on Form S-3 under the Securities Act of 1933 (the "Securities Act") of which this prospectus forms a part. The registration statement is available for inspection without charge at the public reference facilities maintained at the principal office of the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the SEC at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and Seven World Trade Center, Suite 1300, New York, New York 10048. You may obtain information on the operation of the SEC's public reference rooms by calling the SEC at (800) SEC-0330. You may obtain copies of SEC filings at prescribed rates by writing to the Public Reference Section of the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. The SEC also maintains a website (http:// www.sec.gov) that contains reports, registration statements, proxy and information statements and other information regarding issuers that file electronically with the SEC. Copies of the operative agreements relating to the Securities will also be filed with the SEC. 28 Delinquencies, Repossessions and Net Losses Information concerning BMW FS' experience pertaining to delinquencies, repossessions and net losses on its portfolio of new and used retail motor vehicle receivables (including receivables previously sold that BMW FS continues to service) will be set forth in each prospectus supplement. There can be no assurance that the delinquency, repossession and net loss experience on any Receivables Pool will be comparable to prior experience or to the information in any prospectus supplement. Weighted Average Life of the Securities The weighted average life of the Securities of any series will generally be influenced by the rate at which the principal balances of the related Receivables are paid, which payment may be in the form of scheduled amortization or prepayments. For this purpose, the term "prepayments" includes prepayments in full, partial prepayments (including those related to rebates of extended warranty contract costs and insurance premiums), liquidations due to default as well as receipts of proceeds from physical damage, credit life and disability insurance policies and repurchases or purchases by the Depositor or BMW FS, as the case may be, of particular Receivables for administrative reason or for breaches of representations and warranties. The term "weighted average life" means the average amount of time during which each dollar of principal of a Receivable is outstanding. All of the Receivables will be prepayable at any time without penalty to the Obligor. However, partial prepayments on the Precomputed Receivables made by Obligors will not be paid on the Payment Date following the Collection Period in which they were received but will be retained and applied towards payments due in later Collection Periods. If prepayments in full are received on the Precomputed Receivables or if full or partial prepayments are received on the Simple Interest Receivables, the actual weighted average life of the Receivables may be shorter than the scheduled weighted average life of the Receivables set forth in the related prospectus supplement. The rate of prepayment of motor vehicle retail installment sale contracts are influenced by a variety of economic, social and other factors, including the fact that an Obligor generally may not sell or transfer the Financed Vehicle securing a Receivable without the consent of the Servicer. No prediction can be made as to the rate of prepayment on the Receivables in either stable or changing interest rate environments. BMW FS maintains limited records of the historical prepayment experience of the motor vehicle retail installment sale contracts included in its portfolio. However, no assurance can be given that prepayments on the Receivables will conform to historical experience and no prediction can be made as to the actual prepayment experience on the Receivables. The rate of prepayment on the Receivables may also be influenced by the structure of the related contract. In addition, under some circumstances, the Depositor or Servicer will be obligated to repurchase Receivables from a given Trust pursuant to the related Sale and Servicing Agreement or Pooling and Servicing Agreement as a result of breaches of particular representations and warranties or covenants. We refer you to "Description of the Transfer and Servicing Agreements--Sale and Assignment of Receivables" and "--Servicing Procedures." We also refer you to "Description of the Transfer and Servicing Agreements-- Termination" regarding the Servicer's option to purchase the Receivables from a given Trust. Any reinvestment risk resulting from the rate of prepayments of the Receivables and the payment of prepayments to Securityholders will be borne entirely by the Securityholders. In addition, early retirement of the Securities may be effected by the exercise of the option of the Servicer, or any successor to the Servicer, to purchase all of the Receivables remaining in the Trust when the Pool Balance is 10% or less of the Pool Balance as of the Cutoff Date. 29 In addition, pursuant to agreements between BMW FS and the BMW Centers, each BMW Center is obligated to repurchase from BMW FS contracts which do not meet particular representations and warranties made by that BMW Center (these BMW Center repurchase obligations are referred to in this prospectus as "Dealer Recourse"). These representations and warranties relate primarily to the origination of the retail installment sale contracts and the perfection of the security interests in the related Financed Vehicles, and do not typically relate to the creditworthiness of the related Obligors or the collectibility of the contracts. Although the Dealer Agreements with respect to the Receivables will not be assigned to the Trustee, the related Sale and Servicing Agreement or Pooling and Servicing Agreement will require that BMW FS deposit any recovery in respect of any Receivable pursuant to any Dealer Recourse in the related Collection Account. The sales by the BMW Centers of retail installment sale contracts to BMW FS do not generally provide for recourse against the BMW Centers for unpaid amounts in the event of a default by an Obligor thereunder, other than in connection with the breach of the foregoing representations and warranties. We refer you to "Description of the Transfer and Servicing Agreements--Sale and Assignment of Receivables" and "--Servicing Procedures." In light of the above considerations, there can be no assurance as to the amount of principal payments to be made on the Securities of a given series on each Payment Date, since the amount of principal payments will depend, in part, on the amount of principal collected on the related Receivables Pool during the applicable Collection Period. No prediction can be made as to the actual prepayment experience on the Receivables, and any reinvestment risks resulting from a faster or slower rate of prepayment of Receivables will be borne entirely by the Securityholders of a given series. We refer you to "Risk Factors--You may experience reduced returns on your investment resulting from prepayments, repurchases or early termination of the trust" in this prospectus. The applicable prospectus supplement may set forth additional information regarding the maturity and prepayment considerations applicable to the particular Receivables Pool and the related series of Securities. Pool Factors and Trading Information The "Note Pool Factor" for each class of notes will be a seven-digit decimal which the Servicer will compute prior to each payment with respect to that class of notes. The Note Pool Factor represents the remaining outstanding principal amount of that class of notes, as of the close of business on the last day of the applicable Collection Period, as a fraction of the initial outstanding principal amount of that class of notes. The "Certificate Pool Factor" for each class of certificates will be a seven-digit decimal which the Servicer will compute prior to each payment with respect to that class of certificates indicating the remaining Certificate Balance of that class of certificates, as of the close of business on the last day of the applicable Collection Period, as a fraction of the Original Certificate Balance of that class of certificates. The "Certificate Balance" for any class of certificates as of any Payment Date will equal the Original Certificate Balance of that class, as reduced by all amounts distributed on or prior to that Payment Date on that class of certificates and allocable to principal. The "Original Certificate Balance" for each class of certificates will be stated in the applicable prospectus supplement. Each Note Pool Factor and each Certificate Pool Factor will initially be 1.0000000 and thereafter will decline to reflect reductions in the outstanding principal amount 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 amount of the related class of notes is the product of: o the original denomination of that Noteholder's note; and 30 o 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: o the original denomination of that Certificateholder's certificate; and o the applicable Certificate Pool Factor. The Securityholders will receive monthly reports concerning payments received on the Receivables, the Pool Balance, each Certificate Pool Factor or Note Pool Factor, as applicable, and various other items of information. The Notes General With respect to each Trust that issues notes, one or more classes (each, a "class") of notes of the related series will be issued pursuant to the terms of an indenture (the "Indenture"). A form of the Indenture has been filed as an exhibit to the registration statement of which this prospectus is a part. The following summary describes the material terms of the Notes and the Indenture. The summary does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all the provisions of the notes and the Indenture. Each class of notes will initially be represented by one or more notes, in each case registered in the name of the nominee of DTC, except as set forth below. Notes will be available for purchase in the denominations specified in the applicable prospectus supplement in book-entry form only. The Depositor has been informed by DTC that DTC's nominee will be Cede, unless another nominee is specified in the applicable prospectus supplement. Accordingly, that nominee is expected to be the holder of record of the notes (a "Noteholder") of each class. No Noteholder will be entitled to receive a physical certificate representing a note until Definitive Notes are issued under the limited circumstances described in this prospectus or in the applicable prospectus supplement. All references in this prospectus and in the applicable prospectus supplement to actions by Noteholders refer to actions taken by DTC upon instructions from its participating organizations (the "DTC Participants") and all references in this prospectus and in the applicable prospectus supplement to payments, notices, reports and statements to Noteholders refer to payments, notices, reports and statements to DTC or its nominee, as the registered holder of the notes, for distribution to Noteholders in accordance with DTC's procedures. We refer you to "Certain Information Regarding the Securities--Book-Entry Registration" and "--Definitive Securities." Principal and Interest on the Notes The applicable prospectus supplement will describe the timing and priority of payment, seniority, allocations of losses, interest rate (the "Interest Rate") and amount of or method of determining payments of principal and interest on each class of notes of a given series. The rights 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. Payments of interest on a class of notes will generally be made prior to payments of principal on the class. A series may include one or more classes of notes (the "Strip Notes") entitled to either principal payments with disproportionate, nominal or no interest payments or interest payments with disproportionate, nominal or no principal payments. Each class of notes may have a different Interest Rate, which may be a fixed, variable or adjustable Interest Rate (and 31 which may be zero for some classes of Strip Notes), or any combination of the foregoing. The applicable prospectus supplement will specify the Interest Rate for each class of notes of a given series or the method for determining the Interest Rate. We refer you to "Certain Information Regarding the Securities--Fixed Rate Securities" and "--Floating Rate Securities." One or more classes of notes of a series may be redeemable in whole or in part, including as a result of the Servicer exercising its option to purchase the related Receivables Pool or other early termination of the related trust. One or more classes of notes of a given series may have fixed principal payment schedules, in the manner and to the extent set forth in the applicable prospectus supplement. Noteholders of those notes would be entitled to receive as payments of principal on any given Payment Date the amounts set forth on that schedule with respect to those notes. To the extent provided in the related prospectus supplement, payments of interest to Noteholders of two or more classes within a series may have the same priority. Under some circumstances, on any Payment Date the amount available for those payments could be less than the amount of interest payable on the notes. If this is the case, each class of Noteholders will receive its ratable share (based upon the aggregate amount of interest due to that class of Noteholders) of the aggregate amount of interest available for payment on the notes. We refer you to "Description of the Transfer and Servicing Agreements--Distributions on the Securities" and "--Credit and Cash Flow Enhancement." If a series of notes includes two or more classes of notes, the sequential order and priority of payment in respect of principal and interest, and any schedule or formula or other provisions, of each of those classes will be set forth in the applicable prospectus supplement. Payments of principal and interest within any class of notes will be made on a pro rata basis among all the Noteholders of that class. The Indenture Modification of Indenture. If a Trust has issued notes pursuant to an Indenture, the Trust and the Indenture Trustee may, with the consent of the holders of a majority of the outstanding notes of the related series (or relevant class or classes of notes of the series), execute a supplemental indenture to add provisions to, change in any manner or eliminate any provisions of, the related Indenture, or modify (except as provided below) in any manner the rights of the related Noteholders. Without the consent of the holder of each outstanding affected note, no supplemental indenture will: 1. change: o the due date of any installment of principal of or interest on that note or reduce the principal amount of that note; o the Interest Rate for that note or the redemption price for that note; o provisions of the Indenture relating to the application of collections on, or proceeds of a sale of, the Trust Estate to payments of principal and interest on the note; or o any place of payment where or the coin or currency in which that note or any interest on that note is payable; 32 2. impair the right to institute suit for the enforcement of specified provisions of the related Indenture regarding payment; 3. reduce the percentage of the aggregate amount of the outstanding notes of a series of notes, the consent of the holders of which is required for any supplemental indenture or any waiver of compliance with specified provisions of the related Indenture or of specified defaults and their consequences as provided for in that Indenture; 4. modify or alter the provisions of the related Indenture regarding the voting of notes held by the applicable Trust, any other obligor on those notes, the Depositor or an affiliate of any of them; 5. reduce the percentage of the aggregate outstanding amount of notes, the consent of the holders of which is required to direct the related Indenture Trustee to sell or liquidate the Receivables if the proceeds of that sale would be insufficient to pay the principal amount of and accrued but unpaid interest on the outstanding notes of that series; 6. reduce the percentage of the aggregate principal amount of notes required to amend the sections of the related Indenture that specify the applicable percentage of aggregate principal amount of the notes of a series necessary to amend the Indenture or other specified agreements; or 7. permit the creation of any lien ranking prior to or on a parity with the lien of the related Indenture with respect to any of the collateral for that note or, except as otherwise permitted or contemplated in the Indenture, terminate the lien of that Indenture on any of the collateral or deprive the holder of any note of the security afforded by the lien of the Indenture. The Trust and the applicable Indenture Trustee may also enter into supplemental indentures, without obtaining the consent of the Noteholders of the related series, for the purpose of, among other things, adding any provisions to or changing in any manner or eliminating any of the provisions of the related Indenture or of modifying in any manner the rights of those Noteholders; provided that that action will not adversely affect in any material respect the interest of any of those Noteholders. Events of Default; Rights Upon Event of Default. With respect to the notes of a given series in the related prospectus supplement, "Events of Default" under the related Indenture will consist of the occurrence and continuation of any of the following: 1. a default for five days or more in the payment of any interest on any of the notes of the class or classes specified in the prospectus supplement when the same becomes due and payable; 2. a default in the payment of the principal of or any installment of the principal of any of the notes when the same becomes due and payable; 3. a default in the observance or performance in any material respect of any covenant or agreement of the applicable Trust made in the related Indenture and the continuation of the default for a period of 30 days after notice is given to that Trust by the applicable Indenture Trustee or to that Trust and the applicable Indenture Trustee by the holders of at least 25% in principal amount of the notes then outstanding acting together as a single class; 33 4. any representation or warranty made by the applicable Trust in the related Indenture or in any certificate delivered pursuant to the related Indenture or in connection therewith having been incorrect in a material respect as of the time made, and the breach not having been cured within 30 days after written notice is given to that Trust by the applicable Indenture Trustee or to that Trust and the applicable Indenture Trustee by the holders of at least 25% in principal amount of the notes then outstanding acting together as a single class; 5. particular events of bankruptcy, insolvency, receivership or liquidation of the applicable Trust; or 6. other events, if any, set forth in the related prospectus supplement. However, the amount of principal required to be paid to Noteholders of an affected series under the related Indenture will generally be limited to amounts available to be deposited in the Collection Account. Therefore, the failure to pay any principal on any class of notes generally will not result in the occurrence of an Event of Default until the final scheduled Payment Date for that class of notes. The failure to pay interest to holders of a subordinated class of notes on a particular Payment Date will generally not constitute an Event of Default. In addition, as described below, following the occurrence of an Event of Default and acceleration of the maturity of the notes, the Indenture Trustee is not required to sell the assets of the Trust, and the Indenture Trustee may sell the assets of the Trust only after meeting requirements specified in the Indenture. Under those circumstances, even if the maturity of the notes has been accelerated, there may not be any funds to pay the principal owed on the notes. If an Event of Default should occur and be continuing with respect to the notes of any series, the related Indenture Trustee or holders of a majority in principal amount of the most senior notes then outstanding (or relevant class or classes of notes) may declare the notes to be immediately due and payable. This declaration may, under specified circumstances, be rescinded by the holders of a majority in principal amount of the most senior notes then outstanding (or relevant class or classes of notes). If the notes of any series are due and payable following an Event of Default on those notes, the related Indenture Trustee may: o institute proceedings to collect amounts due or foreclose on Trust property; o exercise remedies as a secured party; o sell the assets of the related trust; or o elect to have the applicable Trust maintain possession of those Receivables and continue to apply collections on those Receivables as if there had been no declaration of acceleration. Unless otherwise specified in the applicable prospectus supplement, however, the Indenture Trustee is prohibited from selling the assets of the related trust following an Event of Default (other than a default in the payment of any principal on any note of a particular series or a default for five days or more in the payment of any interest on the most senior notes of a particular series), unless: o the holders of the notes of the related series then outstanding (or relevant class or classes of notes) consent to the sale; or 34 o the proceeds of the sale are sufficient to pay in full the principal of and the accrued interest on all outstanding notes of the related series at the date of the sale; or o the Indenture Trustee determines that the proceeds from the sale of the Trust Estate will not be sufficient on an ongoing basis to make all payments on the outstanding notes of the related series as those payments would have become due if the obligations had not been declared due and payable, and the Indenture Trustee obtains the consent of the holders of 662/3% of the aggregate outstanding amount of the most senior notes then of the related series outstanding (or relevant class or classes of notes). Subject to the provisions of the applicable Indenture relating to the duties of the related Indenture Trustee, if an Event of Default occurs and is continuing with respect to a series of notes, the Indenture Trustee will be under no obligation to exercise any of the rights or powers under the Indenture at the request or direction of any of the holders of the notes, if the Indenture Trustee reasonably believes it will not be adequately indemnified against the costs, expenses and liabilities that might be incurred by it in complying with the request. Subject to the provisions for indemnification and other limitations contained in the related Indenture, the holders of a majority of the aggregate principal amount of the most senior notes of the related series then outstanding (or relevant class or classes of notes of the series) will have the right to direct the time, method and place of conducting any proceeding or any remedy available to the applicable Indenture Trustee, and the holders of at least 51% of the aggregate principal amount of the most senior notes of the related series then outstanding (or relevant class or classes of notes) may, in some cases, waive a default, except a default in the deposit of collections or other required amounts, any required payment from amounts held in any trust account in respect of amounts due on the notes, payment of principal or interest or a default in respect of a covenant or provision of the Indenture which cannot be modified without the waiver or consent of all the holders of the outstanding notes of the related series. Unless otherwise specified in the related prospectus supplement, no holder of a note of any series will have the right to institute any proceeding with respect to the related Indenture, unless: 1. the holder of a note or notes previously has given to the applicable Indenture Trustee written notice of a continuing Event of Default; 2. the Event of Default arises from the Servicer's failure to remit payments when due or the holders of not less than 25% of the aggregate principal amount of the most senior notes of the related series then outstanding (or relevant class or classes of notes) have requested in writing that the Indenture Trustee institute the proceeding in its own name as Indenture Trustee; 3. the holder or holders of notes have offered the Indenture Trustee reasonable indemnity; 4. the Indenture Trustee has for 60 days failed to institute a proceeding; and 5. no direction inconsistent with such written request has been given to the Indenture Trustee during such 60 day period by the holders of a majority of the aggregate principal amount of the most senior notes of the related series then outstanding (or relevant class or classes of notes). In addition, each Indenture Trustee and the related Noteholders, by accepting the related notes, will covenant that they will not at any time institute against the applicable Trust any bankruptcy, reorganization or other proceeding under any federal or state bankruptcy or similar law. With respect to any Trust, neither the related Indenture Trustee nor the related Trustee in its individual capacity, nor any holder of a certificate representing an ownership interest in that Trust nor any of their respective owners, beneficiaries, agents, officers, directors, employees, successors or assigns will, 35 in the absence of an express agreement to the contrary, be personally liable for the payment of the principal of or interest on the related notes or for the agreements of that Trust contained in the applicable Indenture. Particular Covenants. Each Indenture will provide that the related Trust may not consolidate with or merge into any other entity, unless, among other things, 1. the entity formed by or surviving the consolidation or merger is organized under the laws of the United States or any state; 2. that entity expressly assumes the Trust's obligation to make due and punctual payments upon the notes of the related series and the performance or observance of every agreement and covenant of the Trust under the Indenture; 3. no Event of Default shall have occurred and be continuing immediately after the merger or consolidation; 4. each rating agency delivers a letter to the Indenture Trustee to the effect that the consideration or merger will not result in a qualification, reduction or withdrawal of its then current rating on any class of notes; 5. that 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; 6. the parties take any action necessary to maintain the lien and security interest created by the Indenture; and 7. the Indenture Trustee has received an officer's certificate and an opinion of counsel stating that the consolidation or merger comply with the terms of the Indenture and all conditions precedent provided in the Indenture have been complied with. Each Trust will not, among other things, o except as expressly permitted by the applicable Indenture, the applicable Transfer and Servicing Agreements or other specified documents with respect to that Trust (collectively, the "Related Documents"), sell, transfer, exchange or otherwise dispose of any of the assets of the Trust unless directed to do so by the Indenture Trustee; o claim any credit on or make any deduction from the principal of and interest payable on 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; o except as expressly permitted by the Related Documents, dissolve or liquidate in whole or in part; 36 o permit the validity or effectiveness of the related Indenture to be impaired or permit any person to be released from any covenants or obligations with respect to the notes under the Indenture except as may be expressly permitted by the Indenture; o permit any lien 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 assets of the Trust or the proceeds of those assets; or o assume or incur any indebtedness other than the related notes or as expressly permitted by the related Indenture or the Related Documents. No Trust may engage in any activity other than as specified in this prospectus or in the applicable prospectus supplement. Annual Compliance Statement. Each Trust will be required to file annually with the related Indenture Trustee a written statement as to the fulfillment of its obligations under the related Indenture. Indenture Trustee's Annual Report. The Indenture Trustee for each Trust will be required to mail each year to all related Noteholders a brief report relating to its eligibility and qualification to continue as Indenture Trustee under the related Indenture, any amounts advanced by it under the Indenture, the amount, interest rate and maturity date of specified indebtedness owing by the Trust to the applicable Indenture Trustee in its individual capacity, the property and funds physically held by the Indenture Trustee and any action taken by it that materially affects the related notes and that has not been previously reported. Satisfaction and Discharge of Indenture. An Indenture will be discharged with respect to the collateral securing the related notes upon the delivery to the related Indenture Trustee for cancellation of all of those notes or, with specified limitations, upon deposit with the Indenture Trustee of funds sufficient for the payment in full of all the notes. The Certificates General With respect to each Trust that issues certificates, one or more classes (each, a "class") of certificates of the related series will be issued pursuant to the terms of a Trust Agreement or a Pooling and Servicing Agreement, a form of each of which has been filed as an exhibit to the Registration Statement of which this prospectus forms a part. The following summary describes the material terms of the certificates and the Trust Agreement or the Pooling and Servicing Agreement, as applicable. The summary does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all the provisions of the certificates and the Trust Agreement or Pooling and Servicing Agreement, as applicable. Except for the certificates, if any, of a given series purchased by the Depositor, each class of certificates will initially be represented by one or more certificates registered in the name of the nominee for DTC, except as set forth below. Except for the certificates, if any, of a given series purchased by the Depositor, the certificates will be available for purchase in the denominations specified in the applicable prospectus supplement in book-entry form only. The Depositor has been informed by DTC that DTC's nominee will be Cede, unless another nominee is specified in the applicable prospectus supplement. Accordingly, that nominee is expected to be the holder of record of the certificates (a "Certificateholder") 37 of any series that are not purchased by the Depositor. No Certificateholder (other than a Trust) will be entitled to receive a physical certificate representing a certificate until Definitive Certificates are issued under the limited circumstances described in this prospectus or in the applicable prospectus supplement. All references in this prospectus and in the applicable prospectus supplement to actions by Certificateholders refer to actions taken by DTC upon instructions from DTC Participants and all references in this prospectus and in the applicable prospectus supplement to distributions, notices, reports and statements to Certificateholders refer to distributions, notices, reports and statements given, made or sent to DTC or its nominee, as the case may be, as the registered holder of the certificates, for distribution to Certificateholders in accordance with DTC's procedures with respect to the certificates. We refer you to "Certain Information Regarding the Securities--Book-Entry Registration" and "-- Definitive Securities." Any certificates of a given series owned by the Depositor or its affiliates will be entitled to equal and proportionate benefits under the applicable Trust Agreement, except that those certificates will be deemed not to be outstanding for the purpose of determining whether the requisite percentage of Certificateholders have given any request, demand, authorization, direction, notice, consent or other action under the Related Documents (other than the commencement by the related Trust of a voluntary proceeding in bankruptcy as described under "Description of the Transfer and Servicing Agreements--Insolvency Event"). Payments of Principal and Interest The timing and priority of payments, seniority, allocations of losses, pass through rate (the "Pass Through Rate") and amount of or method of determining payments with respect to principal and interest of each class of certificates will be described in the applicable prospectus supplement. Payments of interest on those certificates will be made on the dates specified in the applicable prospectus supplement (each, a "Payment Date"). To the extent provided in the applicable prospectus supplement, a series may include one or more classes of certificates (the "Strip Certificates") entitled to either payments in respect of principal with disproportionate, nominal or no interest payments or interest payments with disproportionate, nominal or no payments in respect of principal. Each class of certificates may have a different Pass Through Rate, which may be a fixed, variable or adjustable Pass Through Rate (and which may be zero for some classes of Strip Certificates) or any combination of the foregoing. The applicable prospectus supplement will specify the Pass Through Rate for each class of certificates of a given series or the method for determining the Pass Through Rate. We also refer you to "Certain Information Regarding the Securities--Fixed Rate Securities" and "--Floating Rate Securities." Payments in respect of the certificates of a given series that includes notes may be subordinate to payments in respect of the notes of that series as more fully described in the applicable prospectus supplement. The rights of holders of any class of certificates to receive payments of principal and interest may also be senior or subordinate to the rights of holders of any other class or classes of certificates of that series as more fully described in the applicable prospectus supplement. Payments in respect of principal of and interest on any class of certificates will be made on a pro rata basis among all the Certificateholders of that class. In the case of a series of certificates that includes two or more classes of certificates, the timing, sequential order, priority of payment or amount of payments in respect of interest and principal, and any schedule or formula or applicable other provisions, of each class shall be as set forth in the applicable prospectus supplement. If and as provided in the applicable prospectus supplement, amounts remaining on deposit in the Collection Account after all required payments to the related Securityholders have been made may be released to the Depositor, BMW FS or one or more third party credit or liquidity enhancement providers. 38 Certain Information Regarding the Securities Fixed Rate Securities Any class of Securities (other than some classes of Strip Notes or Strip Certificates) may bear interest at a fixed rate per annum ("Fixed Rate Securities") or at a variable or adjustable rate per annum ("Floating Rate Securities"), as more fully described below and in the applicable prospectus supplement. Each class of Fixed Rate Securities will bear interest at the applicable per annum Interest Rate or Pass Through Rate, as the case may be, specified in the applicable prospectus supplement. Interest on each class of Fixed Rate Securities will be computed on the basis of a 360-day year consisting of twelve 30-day months or other day count basis as is specified in the applicable prospectus supplement. We refer you to "The Notes--Principal and Interest on the Notes" and "The Certificates-- Payments of Principal and Interest." Floating Rate Securities Interest Rate Basis. Each class of Floating Rate Securities will bear interest during each applicable Interest Period at a rate per annum determined by reference to an interest rate basis (the "Base Rate"), plus or minus the Spread, if any, or multiplied by the Spread Multiplier, if any, in each case as specified in the applicable prospectus supplement. The "Spread" is the number of basis points to be added to or subtracted from the related Base Rate applicable to the Floating Rate Securities. The "Spread Multiplier" is the percentage of the related Base Rate applicable to the Floating Rate Securities by which that Base Rate will be multiplied to determine the applicable interest rate on those Floating Rate Securities. The applicable prospectus supplement may designate one of the following Base Rates as applicable to a particular Floating Rate Security: o LIBOR (a "LIBOR Security"); o the Commercial Paper Rate (a "Commercial Paper Rate Security"); o the Treasury Rate (a "Treasury Rate Security"); o the Federal Funds Rate (a "Federal Funds Rate Security"); o the CD Rate (a "CD Rate Security"); or o any other Base Rate that is set forth in the applicable prospectus supplement. "Business Day" as used in this prospectus means, unless otherwise specified in the applicable prospectus supplement: 1. for United States dollar denominated Securities for which LIBOR is not an applicable Interest Rate Basis: o any day other than a Saturday or Sunday, that is neither a legal holiday nor a day on which commercial banks are authorized or required by law, regulation or executive order to close in The City of New York (a "New York Business Day"); 2. or United States dollar denominated Securities for which LIBOR is an applicable Interest Rate Basis: 39 o a day that is both (1) a day on which commercial banks are open for business, including dealings in the designated Index Currency (as defined below) in London (a "London Business Day") and (2) a New York Business Day; 3. for non-United States dollar denominated Securities (other than Securities denominated in euro) for which LIBOR is not an applicable Interest Rate Basis: o a day that is both (1) a day other than a day on which commercial banks are authorized or required by law, regulation or executive order to close in the Principal Financial Center (as defined below) of the country issuing the Specified Currency (as defined below) (a "Principal Financial Center Business Day") and (2) a New York Business Day; 4. for non-United States dollar denominated Securities (other than Securities denominated in euro) for which LIBOR is an applicable Interest Rate Basis: o a day that is all of (1) a Principal Financial Center Business Day; (2) a New York Business Day; and (3) a London Business Day; 5. for euro denominated Securities for which LIBOR is not an applicable Interest Rate Basis: o a day that is both (1) a day on which the Trans-European Automated Real-time Gross Settlement Express Transfer (TARGET) System is open (a "TARGET Business Day") and (2) a New York Business Day; 6. for euro denominated Securities for which LIBOR is an applicable Interest Rate Basis: o a day that is all of (1) a TARGET Business Day; (2) a New York Business Day; and (3) a London Business Day. "Principal Financial Center" means, unless otherwise specified in the applicable prospectus supplement: o the capital city of the country issuing the Specified Currency except that with respect to United States dollars, Australian dollars, Canadian dollars, Deutsche marks, Dutch guilders, South African rand and Swiss francs, the Principal Financial Center will be The City of New York, Sydney and Melbourne, Toronto, Frankfurt, Amsterdam, Johannesburg and Zurich, respectively; or o the capital city of the country to which the Index Currency relates, except that with respect to United States dollars, Canadian dollars, Deutsche marks, Dutch guilders, Portuguese escudos, South African rand and Swiss francs, the Principal Financial Center will be the City of New York, Toronto, Frankfurt, Amersterdam, London, Johannesburg and Zurich, respectively. "Specified Currency" means the currency in which a particular Security is denominated (or, if the currency is no longer legal tender for the payment of public and private debts, any other currency of the relevant country which is then legal tender for the payment of pubic and private debts). "Index Currency" means the currency specified in the applicable prospectus supplement as the currency for which LIBOR will be calculated. If no currency is specified in the applicable prospectus supplement, the Index Currency will be United States dollars. 40 Interest Reset Dates. Each applicable prospectus supplement will specify whether the rate of interest on the related Floating Rate Securities will be reset daily, weekly, monthly, quarterly, semiannually, annually or some other specified period (each, an "Interest Reset Period") and the dates on which that Interest Rate will be reset (each, an "Interest Reset Date"). Unless otherwise specified in the applicable prospectus supplement, the Interest Reset Date will be, in the case of Floating Rate Securities which reset: (1) daily, each Business Day; (2) weekly, the Wednesday of each week (with the exception of weekly reset Treasury Rate Securities which will reset the Tuesday of each week except as described below); (3) monthly, the third Wednesday of each month; (4) quarterly, the third Wednesday of March, June, September and December of each year; (5) semiannually, the third Wednesday of the two months specified in the applicable prospectus supplement; (6) annually, the third Wednesday of the month specified in the applicable prospectus supplement; or (7) any other Interest Reset Date set forth in the applicable prospectus supplement. Unless otherwise specified in the related prospectus supplement, if any Interest Reset Date for any Floating Rate Security would otherwise be a day that is not a Business Day, the applicable Interest Reset Date will be postponed to the next succeeding day that is a Business Day, except that in the case of a Floating Rate Security as to which LIBOR is an applicable Base Rate, if that Business Day falls in the next succeeding calendar month, that Interest Reset Date will be the immediately preceding Business Day. In addition, in the case of a Floating Rate Security for which the Treasury Rate is an applicable Interest Rate Basis, if the Interest Determination Date would otherwise fall on an Interest Reset Date, then the applicable Interest Reset Date will be postponed to the next succeeding Business Day. Except as set forth above or in the applicable prospectus supplement, the interest rate in effect on each date will be: o if the date is an Interest Reset Date, the interest rate determined on the related Interest Determination Date, as defined below, immediately preceding that Interest Reset Date, or o if the day is not an Interest Reset Date, the interest rate determined on the related Interest Determination Date immediately preceding the most recent Interest Reset Date. Interest Payments. The interest Payment Dates will be specified in the applicable prospectus supplement. Unless otherwise specified in the related prospectus supplement, if any Payment Date for a Floating Rate Security (other than the final Payment Date) would otherwise be a day that is not a Business Day, that Payment Date will be the next succeeding day that is a Business Day except that in the case of a Floating Rate Security as to which LIBOR is the applicable Base Rate, if the Business Day falls in the next succeeding calendar month, the applicable Payment Date will be the immediately preceding Business Day. If the final Payment Date of a Floating Rate Security falls on a day that is not a Business Day, the payment of principal, premium, if any, and interest will be made on the next succeeding 41 Business Day, and no interest on that payment shall accrue for the period from and after that scheduled Payment Date. Floating Rate Securities may accrue interest on an "Actual/360" basis, an "Actual/Actual" basis, or a "30/360" basis, in each case as specified in the applicable prospectus supplement. For Floating Rate Securities calculated on an Actual/360 basis and Actual/Actual basis, accrued interest for each Interest Period will be calculated by multiplying: (1) the face amount of the Floating Rate Security; (2) the applicable interest rate; and (3) the actual number of days in the related Interest Period, and dividing the resulting product by 360 or 365, as applicable (or, with respect to an Actual/Actual basis Floating Rate Security, if any portion of the related Interest Period falls in a leap year, the product of (1) and (2) above will be multiplied by the sum of (x) the actual number of days in that portion of that Interest Period falling in a leap year divided by 366 and (y) the actual number of days in that portion of that Interest Period falling in a non-leap year divided by 365). For Floating Rate Securities calculated on a 30/360 basis, accrued interest for an Interest Period will be computed on the basis of a 360-day year consisting of twelve 30-day months, irrespective of how many days are actually in that Interest Period. With respect to any Floating Rate Security that accrues interest on a 30/360 basis, if any Payment Date, including the related final Payment Date, falls on a day that is not a Business Day, the related payment of principal or interest will be made on the next succeeding Business Day as if made on the date that payment was due, and no interest will accrue on the amount so payable for the period from and after that Payment Date. The "Interest Period" with respect to any class of Floating Rate Securities will be set forth in the applicable prospectus supplement. Interest Determination Dates. The interest rate applicable to each Interest Reset Period beginning on the Interest Reset Date with respect to that Interest Reset Period will be the rate determined on the applicable "Interest Determination Date," as follows unless otherwise specified in the applicable prospectus supplement: o The Interest Determination Date for the CD Rate, the Commercial Paper Rate and the Federal Funds Rate will be the second Business Day preceding each Interest Reset Date for the related Floating Rate Security; o The Interest Determination Date for LIBOR will be the second London Banking Day preceding each Interest Reset Date; o The Interest Determination Date for the Treasury Rate will be the day in the week in which the related Interest Reset Date falls on which day Treasury Bills, as defined below, are normally auctioned. Treasury Bills are normally sold at auction on Monday of each week, unless that day is a legal holiday, in which case the auction is normally held on the following Tuesday, except that the auction may be held on the preceding Friday; provided, however, that if an auction is held on the Friday of the week preceding the related Interest Reset Date, the related Interest Determination Date will be that preceding Friday; and provided further, 42 that if an auction falls on any Interest Reset Date, then the related Interest Reset Date will instead be the first Business Day following that auction. As used in this prospectus, "London Banking Day" means any day on which commercial banks are open for business (including dealings in designated Index Currency) in London. Maximum and Minimum Interest Rates. As specified in the applicable prospectus supplement, Floating Rate Securities of a given class may also have either or both of the following (in each case expressed as a rate per annum): o a maximum limitation, or ceiling, on the rate at which interest may accrue during any Interest Period, which may be an available funds cap rate; and o a minimum limitation, or floor, on the rate at which interest may accrue during any Interest Period. In addition to any maximum interest rate that may be applicable to any class of Floating Rate Securities, the interest rate applicable to any class of Floating Rate Securities will in no event be higher than the maximum rate permitted by applicable law, as the same may be modified by United States law of general application. Calculation Agent. If so disclosed in the related prospectus supplement, a Trust with respect to which a class of Floating Rate Securities will be issued will appoint, and enter into agreements with, a calculation agent (each, a "Calculation Agent") to calculate Interest Rates on each class of Floating Rate Securities. The applicable prospectus supplement will set forth the identity of the Calculation Agent for each class of Floating Rate Securities of a given series, which may be the related Trustee or Indenture Trustee with respect to that series. All determinations of interest by the Calculation Agent shall, in the absence of manifest error, be conclusive for all purposes and binding on the holders of Floating Rate Securities of a given class. All percentages resulting from any calculation on Floating Rate Securities will be rounded to the nearest one hundred-thousandth of a percentage point, with five one millionths of a percentage point rounded upwards (e.g., 9.876545% (or .09876545) would be rounded to 9.87655% (or .0987655)), and all dollar amounts used in or resulting from that calculation on Floating Rate Securities will be rounded to the nearest cent (with one-half cent being rounded upwards). Calculation Date. Unless specified otherwise in the applicable prospectus supplement, the "Calculation Date," if applicable, pertaining to any Interest Determination Date, will be the earlier of: o the tenth calendar day after the applicable Interest Determination Date, or, if that day is not a Business Day, the next succeeding Business Day, or o the Business Day preceding the applicable Interest Payment Date or final scheduled Payment Date, as the case may be. Index Maturity means the period to maturity of the instrument or obligation with respect to which the Base Rate will be calculated. CD Rate Securities. Each CD Rate Security will bear interest at the rates calculated with reference to the CD Rate and the Spread or Spread Multiplier, if any, specified in that CD Rate Security and in the applicable prospectus supplement. 43 Unless otherwise specified in the applicable prospectus supplement, "CD Rate" means the rate on the applicable Interest Determination Date for negotiable United States dollar certificates of deposit having the Index Maturity designated in the applicable prospectus supplement as published in H.15(519) (as defined below) under the heading "CDs (secondary market)." The following procedures will be followed if the CD Rate cannot be determined as described above: (1) If the rate referred to above is not published prior to 3:00 P.M., New York City time, on the related Calculation Date, then the CD Rate on the applicable Interest Determination Date will be the rate for negotiable United States dollar certificates of deposit of the Index Maturity designated in the applicable prospectus supplement as published in H.15 Daily Update (as defined below), or other recognized electronic source used for the purpose of displaying the applicable rate, under the heading "CDs (secondary market)." (2) If the rate referred to in clause (1) above is not so published by 3:00 P.M., New York City time, on the related Calculation Date, then the CD Rate for the applicable Interest Determination Date will be the rate calculated by the Calculation Agent as the arithmetic mean of the secondary market offered rates as of 10:00 A.M., New York City time, on the applicable Interest Determination Date of three leading nonbank dealers in negotiable United States dollar certificates of deposit in The City of New York selected by the Calculation Agent for negotiable United States dollar certificates of deposit of major United States money market banks for negotiable certificates of deposit with a remaining maturity closest to the Index Maturity designated in the applicable prospectus supplement in an amount that is representative for a single transaction in that market at that time. (3) If the dealers selected by the Calculation Agent are not quoting as set forth in clause (2) above, the CD Rate on the applicable Interest Determination Date will be the rate in effect on the applicable Interest Determination Date. "H.15(519)" means the weekly statistical release designated as H.15(519) or any successor publication, published by the Board of Governors of the Federal Reserve System. "H.15 Daily Update" means the daily update of H.15(519), available through the world-wide-web site of the Board of Governors of the Federal Reserve System at http://www.bog.frb.fed.us/releases/ h15/update, or any successor site or publication. Commercial Paper Rate Securities. Each Commercial Paper Rate Security will bear interest at the rates calculated with reference to the Commercial Paper Rate and the Spread or Spread Multiplier, if any, specified in that Commercial Paper Rate Security and in the applicable prospectus supplement. Unless otherwise provided in the applicable prospectus supplement, "Commercial Paper Rate" means the Money Market Yield (as defined below) on the applicable Interest Determination Date of the rate for commercial paper having the Index Maturity specified in the applicable prospectus supplement, as published in H.15(519) under the heading "Commercial Paper--Nonfinancial." The following procedures will be followed if the Commercial Paper Rate cannot be determined as described above: 44 (1) If the rate referred to above is not published by 3:00 P.M., New York City time, on the related Calculation Date, then the Commercial Paper Rate will be the Money Market Yield on the applicable Interest Determination Date of the rate for commercial paper having the Index Maturity specified in the applicable prospectus supplement published in H.15 Daily Update, or other recognized electronic source for the purpose of displaying the applicable rate under the heading "Commercial Paper--Nonfinancial." (2) If by 3:00 P.M. New York City time, on the related Calculation Date, the Commercial Paper Rate is not yet published in either H.15(519) or H.15 Daily Update, then the Commercial Paper Rate for the applicable Interest Determination Date will be calculated by the Calculation Agent as the Money Market Yield of the arithmetic mean of the offered rates at approximately 11:00 A.M., New York City time, on the applicable Interest Determination Date of three leading dealers of United States commercial paper in The City of New York selected by the Calculation Agent for commercial paper having the Index Maturity specified in the applicable prospectus supplement placed for industrial issuers whose bond rating is "Aa" or the equivalent, by a nationally recognized securities rating organization. (3) If the dealers selected by the Calculation Agent are not quoting as mentioned in clause (2) above, the Commercial Paper Rate determined on the applicable Interest Determination Date will be the rate in effect on the applicable Interest Determination Date. "Money Market Yield" means a yield (expressed as a percentage rounded upwards to the nearest one hundred-thousandth of a percentage point) calculated in accordance with the following formula: D x 360 Money Market Yield = -------------- x 100 360 - (D x M) where "D" refers to the applicable per annum rate for commercial paper quoted on a bank discount basis and expressed as a decimal, and "M" refers to the actual number of days in the Interest Period for which interest is being calculated. Federal Funds Rate Securities. Each Federal Funds Rate Security will bear interest at the rates calculated with reference to the Federal Funds Rate and the Spread or Spread Multiplier, if any, specified in that Federal Funds Rate Security and in the applicable prospectus supplement. Unless otherwise provided in the applicable prospectus supplement, "Federal Funds Rate" means the rate on the applicable Interest Determination Date for United States dollar federal funds as published in H.15(519) under the heading "Federal Funds (Effective)" as displayed on Bridge Telerate, Inc. or any successor service on page 120 or any other page as may replace the applicable page on the service ("Telerate Page 120"). The following procedures will be followed if the Federal Funds Rate cannot be determined as described above: (1) If the rate referred above does not appear on Telerate Page 120 or is not published prior to 3:00 P.M., New York City time, on the related Calculation Date, the Federal Funds Rate for the applicable Interest Determination Date will be the rate on the applicable Interest Determination Date for United States dollar federal funds published in H.15 Daily Update, or other recognized electronic source for the purpose of displaying the applicable rate under the heading "Federal Funds (Effective)." 45 (2) If the Federal Funds Rate is not so published by 3:00 P.M., New York City time, on the related Calculation Date, the Federal Funds Rate for the applicable Interest Determination Date will be calculated by the Calculation Agent as the arithmetic mean of the rates for the last transaction in overnight United States dollar federal funds arranged by three leading brokers of United States dollar federal funds transactions in The City of New York selected by the Calculation Agent before 9:00 A.M., New York City time, on the applicable Interest Determination Date (3) If brokers so selected by the Calculation Agent are not quoting as mentioned in clause (2) above, the Federal Funds Rate for the applicable Interest Determination Date will be the Federal Funds Rate in effect on the applicable Interest Determination Date. LIBOR Securities. Each LIBOR Security will bear interest at the rates calculated with reference to LIBOR and the Spread or Spread Multiplier, if any, specified in that LIBOR Security and in the applicable prospectus supplement. Unless otherwise provided in the applicable prospectus supplement, "LIBOR" means: 1. if "LIBOR Telerate" is specified in the applicable prospectus supplement, or if neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in the applicable prospectus supplement as the method for calculating LIBOR, LIBOR will be the rate for deposits in the Index Currency having the Index Maturity designated in the applicable prospectus supplement, commencing on the second London Banking Day immediately following the applicable Interest Determination Date that appears on the Designated LIBOR Page specified in the applicable prospectus supplement as of 11:00 A.M. London time, on the applicable Interest Determination Date, or 2. If "LIBOR Reuters" is specified in the applicable prospectus supplement, LIBOR will be the arithmetic mean of the offered rates for deposits in the Index Currency having the Index Maturity designated in the applicable prospectus supplement, commencing on the second London Banking Day immediately following the applicable Interest Determination Date, that appear on the Designated LIBOR Page specified in the applicable prospectus supplement as of 11:00 A.M. London time on the applicable Interest Determination Date, if at least two offered rates appear (except as provided in the following sentence). If the Designated LIBOR Page by its terms provides for only a single rate, then the single rate will be used. The following procedures will be followed if LIBOR cannot be determined as described above: 1. With respect to an Interest Determination Date on which fewer than two offered rates appear, or no rate appears, as the case may be, on the applicable Designated LIBOR Page, LIBOR for the applicable Interest Determination Date will be the rate calculated by the Calculation Agent as the arithmetic mean of at least two quotations obtained by the Calculation Agent after requesting the principal London offices of each of four major reference banks in the London interbank market, as selected by the Calculation Agent, to provide the Calculation Agent with their offered quotations for deposits in the Index Currency for the period of the Index Maturity designated in the applicable prospectus supplement, commencing on the second London Banking Day immediately following the applicable Interest Determination Date, to prime banks in the London interbank market at approximately 11:00 A.M., London time, on the applicable Interest Determination Date and in a principal amount that is representative for a single transaction in the applicable 46 Index Currency in that market at that time. If at least two quotations are provided, LIBOR determined on the applicable Interest Determination Date will be the arithmetic mean of those quotations. 2. If fewer than two quotations referred to in clause (1) above are provided, LIBOR determined on the applicable Interest Determination Date will be rate calculated by the Calculation Agent as the arithmetic mean of the rates quoted at approximately 11:00 A.M. (or another time specified in the applicable prospectus supplement), in the applicable Principal Financial Center, on the applicable Interest Determination Date, by three major banks, in that Principal Financial Center selected by the Calculation Agent for loans in the Index Currency to leading European banks, having the Index Maturity designated in the applicable prospectus supplement and in a principal amount that is representative for a single transaction in the Index Currency in that market at that time. 3. If the banks so selected by the Calculation Agent are not quoting as mentioned in clause (2) above, LIBOR for the applicable Interest Determination Date will be LIBOR in effect on the applicable Interest Determination Date. "Designated LIBOR Page" means either: o if "LIBOR Telerate" is designated in the applicable prospectus supplement or neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in the applicable prospectus supplement as the method for calculating LIBOR, the display on Bridge Telerate, Inc., or any successor service on the page designated in the applicable prospectus supplement or any page as may replace the designated page on that service for the purpose of displaying the London interbank rates of major banks for the applicable Index Currency. o if "LIBOR Reuters" is designated in the applicable prospectus supplement, the display on Reuters Monitor Money Rates Service or any successor service on the page designated in the applicable prospectus supplement or any page that may replace that designated page on that service for the purpose of displaying London interbank rates of major banks for the applicable Index Currency, or Treasury Rate Securities. Each Treasury Rate Security will bear interest calculated with reference to the Treasury Rate and the Spread or Spread Multiplier, if any, specified in the Treasury Rate Security and in the applicable prospectus supplement. Unless otherwise provided in the applicable prospectus supplement, "Treasury Rate" means the rate from the auction held on the applicable Interest Determination Date ("Auction") of direct obligations of the United States ("Treasury Bills") having the Index Maturity specified in the applicable prospectus supplement, under the heading "INVESTMENT RATE" on the display on Bridge Telerate, Inc., or any successor service on page 56 or any other page as may replace page 56 of that service ("Telerate Page 56") or page 57 or any other page as may replace page 57 of that service ("Telerate Page 57"). The following procedures will be followed if the Treasury Rate cannot be determined as described above: 1. If the rate described above is not so published by 3:00 P.M., New York City time, on the related Calculation Date, the Treasury Rate for the applicable Interest Determination Date 47 will be the Bond Equivalent Yield (as defined below) of the rate for the applicable Treasury Bills as published in H.15 Daily Update, or other recognized electronic source used for the purpose of displaying the applicable rate, under the caption "U.S. Government Securities/ Treasury Bills/Auction High." 2. If the rate described in clause (1) above is not so published by 3:00 P.M., New York City time, on the related Calculation Date, the Treasury Rate for the applicable Interest Determination Date will be the Bond Equivalent Yield of the auction rate of the applicable Treasury Bills announced by the United States Department of the Treasury. 3. If the rate described in clause (2) above is not announced by the United States Department of the Treasury, or if the Auction is not held, the Treasury Rate for the applicable Interest Determination Date will be the Bond Equivalent Yield of the rate on the applicable Interest Determination Date of Treasury Bills having the Index Maturity specified in the applicable prospectus supplement published in H.15(519) under the caption "U.S. Government Securities/Treasury Bills/ Secondary Market." 4. If the rate described in clause (3) above is not so published by 3:00 P.M., New York City time, on the related Calculation Date, the Treasury Rate for the applicable Interest Determination Date will be the rate on the applicable Interest Determination Date of the applicable Treasury Bills as published in H.15 Daily Update, or other recognized electronic source used for the purpose of displaying the applicable rate, under the caption "U.S. Government Securities/ Treasury Bills/ Secondary Market." 5. If the rate described in clause (4) above is not so published by 3:00 P.M., New York City time, on the related Calculation Date, the Treasury Rate for the applicable Interest Determination Date will be the rate for the applicable Interest Determination Date calculated by the Calculation Agent as the Bond Equivalent Yield of the arithmetic mean of the secondary market bid rates, as of approximately 3:30 P.M., New York City time, on the applicable Interest Determination Date, of three primary United States government securities dealers, selected by the Calculation Agent, for the issue of Treasury Bills with a remaining maturity closest to the Index Maturity specified in the applicable prospectus supplement. 6. If the dealers selected by the Calculation Agent are not quoting as described in clause(s) above, the Treasury Rate for the applicable Interest Determination Date will be the rate in effect on the applicable Interest Determination Date. "Bond Equivalent Yield" means a yield calculated in accordance with the following formula and expressed as a percentage: D x N Bond Market Yield = ------------- x 100 360 - (D x M) where "D" refers to the applicable per annum rate for Treasury Bills quoted on a bank discount basis, "N" refers to 365 or 366, as the case may be, and "M" refers to the actual number of days in the interest period for which interest is being calculated. 48 Indexed Securities To the extent specified in any prospectus supplement, any class of Securities of a given series may consist of Securities ("Indexed Securities") in which the principal amount payable on the final scheduled Payment Date for that class (the "Indexed Principal Amount") and/or the interest payable on any Payment Date is determined by reference to a measure (the "Index") which will be related to: o the exchange rates of one or more currencies; o the price or prices of specified commodities; o specified stocks, which may be based on U.S. or foreign stocks, on specified dates specified in the applicable prospectus supplement; or o another price, interest rate, exchange rate or other financial index or indices as are described in the applicable prospectus supplement. Holders of Indexed Securities may receive a principal amount on the related final scheduled Payment Date that is greater than or less than the face amount of the Indexed Securities depending upon the relative value on the related final scheduled Payment Date of the specified indexed item. The applicable prospectus supplement will also contain information as to the method for determining the principal amount payable on the related final scheduled Payment Date, if any, and, where applicable, historical information with respect to the specific indexed item or items and special tax considerations associated with investment in Indexed Securities. Notwithstanding anything to the contrary in this prospectus, for purposes of determining the rights of a holder of a Security indexed as to principal in respect of voting for or against amendments to the related Trust Agreement, Indenture, or other related agreements, as the case may be, and modifications and the waiver of rights under those agreements, the principal amount of that Indexed Security shall be deemed to be the face amount of that Indexed Security upon issuance less any payments allocated to principal of that Indexed Security. If the determination of the Indexed Principal Amount of an Indexed Security is based on an Index calculated or announced by a third party and that third party either suspends the calculation or announcement of that Index or changes the basis upon which that Index is calculated (other than changes consistent with policies in effect at the time that Indexed Security was issued and permitted changes described in the applicable prospectus supplement), then that Index shall be calculated for purposes of that Indexed Security by an independent calculation agent named in the applicable prospectus supplement on the same basis, and subject to the same conditions and controls, as applied to the original third party. If for any reason that Index cannot be calculated on the same basis and subject to the same conditions and controls as applied to the original third party, then the Indexed Principal Amount of that Indexed Security shall be calculated in the manner set forth in the applicable prospectus supplement. Any determination of that independent calculation agent shall, in the absence of manifest error, be binding on all parties. The applicable prospectus supplement will describe whether the principal amount of the related Indexed Security, if any, that would be payable upon redemption or repayment prior to the applicable final scheduled Payment Date will be the face amount of that Indexed Security, the Indexed Principal Amount of that Indexed Security at the time of redemption or repayment or another amount described in that prospectus supplement. 49 Interest Rate Swaps The Trust may also include a derivative arrangement for the payment of interest on the Securities of a series or any class of Securities. A derivative arrangement may include a guaranteed rate agreement, a maturity liquidity facility, a tax protection agreement, an interest rate cap or floor agreement, an interest rate or currency swap agreement or any other similar arrangement. The type of derivative arrangement, if any, for a series of Securities or class of Securities will be described in the applicable prospectus supplement. Variable Funding Note The applicable prospectus supplement for a Trust may provide that the Trust issue one or more series of Securities having particular maturity dates and at the same time the Trust may issue amortizing floating notes, known as "variable funding notes," which relate to those particular maturity dates. These Securities may have a balance that may either decrease based on the amortization of the related Receivables or increase based on principal collections used to purchase additional Receivables. Interest Rate Flexibility for a Variable Funding Note. The prospectus supplement may provide that the Securities issued in connection with a variable funding note may have different rates of interest which may be fixed or floating. The related prospectus supplement will specify the interest rate for each series or class of Securities and the method, if any, for determining subsequent changes to the interest rate. Pro-Rata Pay/Subordinate Securities The applicable prospectus supplement for a Trust may provide that one or more classes of Securities will be payable on an interest only or principal only basis. In addition, the Securities may include two or more classes that differ as to timing, sequential order, priority of payment, interest rate or amount of distributions of principal or interest or both. Distributions of principal or interest or both on any class of Securities may be made upon the occurrence of specified events, in accordance with a schedule or formula, or on the basis of collections from designated assets of the Trust. A series may include one or more classes of Securities, as to which accrued interest will not be distributed but rather will be added to the principal or specified balance of the Security on each Payment Date. Revolving Period The applicable prospectus supplement for a Trust may provide that all or a portion of the principal collected on the Receivables may be applied by the Trustee to the acquisition of subsequent Receivables during a specified period rather than used to distribute payments of principal to Securityholders during that period. These Securities would then possess an interest only period, also commonly referred to as a "Revolving Period," which will be followed by an "amortization period," during which principal would be paid. Any interest only or Revolving Period may terminate prior to the end of the specified period and result in earlier than expected principal repayment of the Securities. Book-Entry Registration Each class of Securities offered by this prospectus will be represented by one or more certificates registered in the name of Cede, as nominee of The Depository Trust Company ("DTC"). Securityholders may hold beneficial interests in Securities through DTC (in the United States) or Clearstream Banking, societe anonyme (formerly Cedelbank, referred to herein as "Clearstream, Luxembourg") or the Euroclear 50 System ("Euroclear") (in Europe or Asia) directly if they are participants of those systems, or indirectly through organizations which are participants in those systems. No Securityholder will be entitled to receive a certificate representing that person's interest in the Securities, except as set forth below. Unless and until Securities of a class are issued in fully registered certificated form ("Definitive Securities") under the limited circumstances described below, all references in this prospectus to actions by Noteholders, Certificateholders or Securityholders shall refer to actions taken by DTC upon instructions from DTC Participants, and all references in this prospectus to distributions, notices, reports and statements to Noteholders, Certificateholders or Securityholders shall refer to distributions, notices, reports and statements to Cede, as the registered holder of the Securities, for distribution to Securityholders in accordance with DTC procedures. Therefore, it is anticipated that the only Noteholder, Certificateholder or Securityholder will be Cede, as nominee of DTC. Securityholders will not be recognized by the related Trustee as Noteholders, Certificateholders or Securityholders as those terms will be used in the relevant agreements, and Securityholders will only be permitted to exercise the rights of holders of Securities of the related class indirectly through DTC and DTC Participants, as further described below. Clearstream, Luxembourg and Euroclear will hold omnibus positions on behalf of their participants (referred to herein as "Clearstream, Luxembourg Participants" and "Euroclear Participants," respectively) through customers' securities accounts in their respective names on the books of their respective depositaries (collectively, the "Depositaries") which in turn will hold those positions in customers' securities accounts in the Depositaries' names on the books of DTC. Transfers between DTC Participants will occur in accordance with DTC rules. Transfers between Clearstream, Luxembourg Participants and Euroclear Participants will occur in accordance with their applicable rules and operating procedures. Cross-market transfers between persons holding directly or indirectly through DTC, on the one hand, and directly or indirectly through Clearstream, Luxembourg 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, each of 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. 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, Luxembourg Participants and Euroclear Participants may not deliver instructions directly to the Depositaries. Because of time-zone differences, credits of securities received in Clearstream, Luxembourg or Euroclear as a result of a transaction with a DTC Participant will be made during subsequent securities settlement processing and dated the business day following the DTC settlement date. Those credits or any transactions in those securities settled during that processing will be reported to the relevant Euroclear Participant or Clearstream, Luxembourg Participant on that business day. Cash received in Clearstream, Luxembourg or Euroclear as a result of sales of Securities by or through a Clearstream, Luxembourg Participant or a Euroclear Participant to a DTC Participant will be received with value on the DTC settlement date but will be available in the relevant Clearstream, Luxembourg or Euroclear cash account only as of the business day following settlement in DTC. 51 DTC is a limited purpose trust company organized under the laws of the State of New York, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code and a "clearing agency" registered pursuant to Section 17A of the Exchange Act of 1934. DTC was created to hold securities for its participating members ("DTC Participants") and to facilitate the clearance and settlement of securities transactions between DTC Participants through electronic book-entries, thereby eliminating the need for physical movement of certificates. DTC Participants include securities brokers and dealers, banks, trust companies and clearing corporations which may include underwriters, agents or dealers with respect to the Securities of any class or series. Indirect access to the DTC system also is available to others including banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a DTC Participant, either directly or indirectly (the "Indirect DTC Participants"). The rules applicable to DTC and DTC Participants are on file with the SEC. Securityholders that are not DTC Participants or Indirect DTC Participants but desire to purchase, sell or otherwise transfer ownership of, or other interests in, Securities may do so only through DTC Participants and Indirect DTC Participants. DTC Participants will receive a credit for the Securities on DTC's records. The ownership interest of each Securityholder will in turn be recorded on respective records of the DTC Participants and Indirect DTC Participants. Securityholders will not receive written confirmation from DTC of their purchase, but Securityholders are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the DTC Participant or Indirect DTC Participant through which the Securityholder entered into the transaction. Transfers of ownership interests in the Securities of any class will be accomplished by entries made on the books of DTC Participants acting on behalf of Securityholders. To facilitate subsequent transfers, all Securities deposited by DTC Participants with DTC will be registered in the name of Cede, as nominee of DTC. The deposit of Securities with DTC and their registration in the name of Cede will effect no change in beneficial ownership. DTC will have no knowledge of the actual Securityholders and its records will reflect only the identity of the DTC Participants to whose accounts those Securities are credited, which may or may not be the Securityholders. DTC Participants and Indirect DTC Participants will remain responsible for keeping account of their holdings on behalf of their customers. While the Securities of a series are held in book-entry form, Securityholders will not have access to the list of Securityholders of that series, which may impede the ability of Securityholders to communicate with each other. Conveyance of notices and other communications by DTC to DTC Participants, by DTC Participants to Indirect DTC Participants and by DTC Participants and Indirect DTC Participants to Securityholders will be governed by arrangements among them, subject to any statutory or regulatory requirements that may be in effect from time to time. Under the rules, regulations and procedures creating and affecting DTC and its operations, DTC is required to make book-entry transfers among DTC Participants on whose behalf it acts with respect to the Securities and is required to receive and transmit payments of principal of and interest on the Securities. DTC Participants and Indirect DTC Participants with which Securityholders have accounts with respect to the Securities similarly are required to make book-entry transfers and receive and transmit those payments on behalf of their respective Securityholders. DTC's practice is to credit DTC Participants' accounts on each Payment Date in accordance with their respective holdings shown on its records, unless DTC has reason to believe that it will not receive payment on that Payment Date. Payments by DTC Participants and Indirect DTC Participants to Securityholders will be governed by standing instructions and customary practices, as is the case with 52 securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of that DTC Participant and not of DTC, the related Indenture Trustee or Trustee (or any paying agent appointed by the Indenture Trustee or Trustee), the Depositor or the Servicer, subject to any statutory or regulatory requirements that may be in effect from time to time. Payment of principal of and interest on each class of Securities to DTC will be the responsibility of the related Indenture Trustee or Trustee (or any paying agent), disbursement of those payments to DTC Participants will be the responsibility of DTC and disbursement of those payments to the related Securityholders will be the responsibility of DTC Participants and Indirect DTC Participants. DTC will forward those payments to its DTC Participants which thereafter will forward them to Indirect DTC Participants or Securityholders. Because DTC can only act on behalf of DTC Participants, who in turn act on behalf of Indirect DTC Participants and some other banks, a Securityholder may be limited in its ability to pledge Securities to persons or entities that do not participate in the DTC system, or otherwise take actions with respect to those Securities due to the lack of a physical certificate for those Securities. DTC has advised the Depositor that it will take any action permitted to be taken by a Securityholder only at the direction of one or more DTC Participants to whose account with DTC the Securities are credited. Additionally, DTC has advised the Depositor that it will take those actions with respect to specified percentages of the Securityholders' interest only at the direction of and on behalf of DTC Participants whose holdings include undivided interests that satisfy those specified percentages. 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. Neither DTC nor Cede will consent or vote with respect to the Securities. Under its usual procedures, DTC will mail an "Omnibus Proxy" to the related Indenture Trustee or Trustee as soon as possible after any applicable record date for that consent or vote. The Omnibus Proxy will assign Cede's consenting or voting rights to those DTC Participants to whose accounts the related Securities are credited on that record date (which record date will be identified in a listing attached to the Omnibus Proxy). Clearstream Banking, societe anonyme, 67 Bd Grande-Duchesse Charlotte, L-2967 Luxembourg, was incorporated in 1970 as "Cedel S.A.," a company with limited liability under Luxembourg law (a societe anonyme). Cedel S.A. subsequently changed its name to Cedelbank. On 10 January 2000, Cedelbank's parent company, Cedel International, societe anonyme ("CI") merged its clearing, settlement and custody business with that of Deutsche Borse Clearing AG ("DBC"). The merger involved the transfer by CI of substantially all of its assets and liabilities (including its shares in CB) to a new Luxembourg company, New Cedel International, societe anonyme ("New CI"), which is 50% owned by CI and 50% owned by DBC's parent company Deutsche Borse AG. The shareholders of these two entities are banks, securities dealers and financial institutions. Cedel International currently has 92 shareholders, including U.S. financial institutions or their subsidiaries. No single entity may own more than 5 percent of Cedel International's stock. Further to the merger, the Board of Directors of New Cedel International decided to re-name the companies in the group in order to give them a cohesive brand name. The new brand name that was chosen is "Clearstream." With effect from 14 January 2000 New CI has been renamed "Clearstream International, societe anonyme." On 18 January 2000, Cedelbank was renamed "Clearstream Banking, societe anonyme," and Cedel Global Services was renamed "Clearstream Services, societe anonyme." On 17 January 2000 DBC was renamed "Clearstream Banking AG." This means that there are now two entities in the corporate group headed by Clearstream International which share the name 53 "Clearstream Banking," the entity previously named "Cedelbank" and the entity previously named "Deutsche B orse Clearing AG." Clearstream, Luxembourg holds securities for its customers and facilitates the clearance and settlement of securities transactions between Clearstream, Luxembourg customers through electronic book-entry changes in accounts of Clearstream, Luxembourg customers, thereby eliminating the need for physical movement of certificates. Transactions may be settled by Clearstream, Luxembourg in any of 36 currencies, including United States dollars. Clearstream, Luxembourg provides to its customers, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Clearstream, Luxembourg also deals with domestic securities markets in over 30 countries through established depository and custodial relationships. Clearstream, Luxembourg is registered as a bank in Luxembourg, and is subject to regulation by the Commission de Surveillance du Secteur Financier, "CSSF," which supervises Luxembourg banks. Clearstream, Luxembourg's customers are world-wide financial institutions including underwriters, securities brokers and dealers, banks, trust companies and clearing corporations. Clearstream, Luxembourg's U.S. customers are limited to securities brokers and dealers, and banks. Currently, Clearstream, Luxembourg has approximately 2,000 customers located in over 80 countries, including all major European countries, Canada, and the United States. Indirect access to Clearstream, Luxembourg is available to other institutions that clear through or maintain a custodial relationship with an account holder of Clearstream, Luxembourg. Clearstream, Luxembourg has established an electronic bridge with Morgan Guaranty Trust Company of New York as the Operator of the Euroclear System in Brussels to facilitate settlement of trades between Clearstream, Luxembourg and Euroclear. Euroclear was created in 1968 to hold securities for participants of the Euroclear System 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. The Euroclear System includes various other services, including securities lending and borrowing, and interfaces with domestic markets in several countries generally similar to the arrangements for cross-market transfers with DTC described above. The Euroclear System is operated by Morgan Guaranty Trust Company of New York, Brussels, Belgium office (the "Euroclear Operator" or "Euroclear"), under contract with Euroclear Clearance System S.C., a Belgian cooperative corporation (the "Cooperative"). All operations are conducted by the Euroclear Operator, and all Euroclear securities clearance accounts and Euroclear cash accounts are accounts with the Euroclear Operator, not the Cooperative. The Cooperative establishes policy for the Euroclear System on behalf of Euroclear Participants. Euroclear Participants include banks (including central banks), securities brokers and dealers and other professional financial intermediaries and may include any underwriters, agents or dealers with respect to any class or series of Securities offered by this prospectus. Indirect access to the Euroclear System is also available to other firms that clear through or maintain a custodial relationship with a Euroclear Participant, either directly or indirectly. The Euroclear Operator is the Belgian branch of a New York banking corporation which is a member bank of the Federal Reserve System. Therefore, it is regulated and examined by the Board of Governors of the Federal Reserve System and the New York State Banking Department, as well as the Belgian Banking Commission. Securities clearance accounts and cash accounts with the Euroclear Operator are governed by the Terms and Conditions Governing Use of Euroclear and the related Operating Procedures of the Euroclear System and applicable Belgian law (collectively, the "Terms and Conditions"). The Terms and Conditions govern transfers of securities and cash within the Euroclear System, withdrawals of securities 54 and cash from the Euroclear System and receipts of payments with respect to securities in the Euroclear System. All securities in the Euroclear System are held on a fungible basis without attribution of specific certificates to specific securities clearance accounts. The Euroclear Operator acts under the Terms and Conditions only on behalf of Euroclear Participants, and has no record of or relationship with persons holding through Euroclear Participants. Payments with respect to Securities held through Clearstream, Luxembourg or Euroclear will be credited to the cash accounts of Clearstream, Luxembourg Participants or Euroclear Participants in accordance with the relevant system's rules and procedures, to the extent received by its Depositary. Those payments will be subject to tax withholding in accordance with relevant United States tax laws and regulations. We refer you to "Material Income Tax Consequences." Clearstream, Luxembourg or the Euroclear Operator, as the case may be, will take any other action permitted to be taken by a Securityholder on behalf of a Clearstream, Luxembourg Participant or Euroclear Participant only in accordance with its relevant rules and procedures and subject to its Depositary's ability to effect those actions on its behalf through DTC. Although DTC, Clearstream, Luxembourg and Euroclear have agreed to the foregoing procedures in order to facilitate transfers of Securities among DTC Participants, Clearstream Luxembourg Participants and Euroclear Participants, they are under no obligation to perform or continue to perform those procedures and those procedures may be discontinued at any time. Definitive Securities The notes, if any, and the certificates of a given series will be issued in fully registered, certificated form ("Definitive Notes" and "Definitive Certificates," respectively, and collectively referred to in this prospectus as "Definitive Securities") to Noteholders or Certificateholders or their respective nominees, rather than to DTC or its nominee, only if: 1. DTC is no longer willing or able to discharge properly its responsibilities as depository with respect to those Securities and the Depositor, the Administrator or the Trustee is unable to locate a qualified successor (and if it is the Depositor or the Administrator that has made that determination, the Depositor or that Administrator so notifies the applicable Trustee in writing); 2. the Depositor or the Administrator or the Trustee, as applicable, at its option, elects to terminate the book-entry system through DTC; or 3. after the occurrence of an Event of Default or a Servicer Default with respect to those Securities, holders representing at least a majority of the outstanding principal amount of the notes or the certificates, as the case may be, of that series, acting together as a single class, advise the applicable Trustee through DTC in writing that the continuation of a book-entry system through DTC (or its successor) with respect to those notes or certificates is no longer in the best interests of the holders of those Securities. Upon the occurrence of any event described in the immediately preceding paragraph, the applicable Trustee or Indenture Trustee will be required to notify all applicable Securityholders of a given series through DTC Participants of the availability of Definitive Securities. Upon surrender by DTC of the Definitive Certificates representing the corresponding Securities and receipt of instructions for re-registration, the applicable Trustee or Indenture Trustee will reissue those Securities as Definitive Securities to those Securityholders. 55 Payments of principal of, and interest on, the Definitive Securities will thereafter be made by the applicable Trustee or Indenture Trustee in accordance with the procedures set forth in the related Indenture or the related Trust Agreement or Pooling and Servicing Agreement, as applicable, directly to holders of Definitive Securities in whose names the Definitive Securities were registered at the close of business on the applicable record date specified for those Securities in the applicable prospectus supplement. Those payments will be made by check mailed to the address of that holder as it appears on the register maintained by the applicable Trustee or Indenture Trustee. The final payment on any Definitive Security, however, will be made only upon presentation and surrender of that Definitive Security at the office or agency specified in the notice of final payment to the applicable Securityholders. The applicable Trustee or the Indenture Trustee will provide notice to the applicable Securityholders not less than 15 nor more than 30 days prior to the date on which final payment is expected to occur. Definitive Securities will be transferable and exchangeable at the offices of the applicable Trustee or of a registrar named in a notice delivered to holders of Definitive Securities. No service charge will be imposed for any registration of transfer or exchange, but the applicable Trustee may require payment of a sum sufficient to cover any tax or other governmental charge imposed in connection therewith. Description of the Transfer and Servicing Agreements The following summary describes the material terms of each Sale and Servicing Agreement or Pooling and Servicing Agreement pursuant to which a Trust will purchase Receivables from the Depositor and the Servicer will agree to service those Receivables, each Trust Agreement (or in the case of a grantor trust, the Pooling and Servicing Agreement) pursuant to which a Trust will be created and certificates will be issued and each Administration Agreement pursuant to which BMW FS will undertake specified administrative duties with respect to a Trust that issues notes (collectively, the "Transfer and Servicing Agreements"). Forms of the Transfer and Servicing Agreements have been filed as exhibits to the registration statement of which this prospectus forms a part. The provisions of any of the Transfer and Servicing Agreements may differ from those described in this prospectus and, if so, will be described in the applicable prospectus supplement. This summary does not purport to be complete and is subject to, and qualified in its entirety by reference to, all the provisions of the Transfer and Servicing Agreements. Sale and Assignment of Receivables On or prior to the closing date specified with respect to any given Trust in the applicable prospectus supplement (the "Closing Date"), BMW FS or BMW Bank will sell and assign to the Depositor, without recourse, pursuant to a Purchase Agreement (the "Purchase Agreement"), its entire interest in the Receivables comprising the related Receivables Pool, including the security interests in the Financed Vehicles. On the Closing Date, the Depositor will transfer and assign to the applicable Trustee on behalf of the Trust, without recourse, pursuant to a Sale and Servicing Agreement or a Pooling and Servicing Agreement, as applicable, its entire interest in the Receivables comprising the related Receivables Pool, including its security interests in the related Financed Vehicles. Each Receivable will be identified in a schedule appearing as an exhibit to the related Sale and Servicing Agreement or Pooling and Servicing Agreement (a "Schedule of Receivables"), but the existence and characteristics of the related Receivables will not be verified by the related Trustee. The applicable Trustee will, concurrently with the transfer and assignment, on behalf of the Trust, execute and deliver the related notes and/or certificates. The net proceeds received from the sale of the certificates and the notes of a given series will be applied to the purchase of the related Receivables from the Depositor and, to the extent specified in the applicable prospectus supplement, to make any required initial deposit into the Reserve Fund and the Yield Supplement Account, if any. 56 Unless otherwise provided in the related prospectus supplement, BMW FS, (or BMW Bank, as applicable) pursuant to a Purchase Agreement, and the Depositor, pursuant to a Sale and Servicing Agreement or a Pooling and Servicing Agreement, will represent and warrant, among other things, that: 1. the information provided in the related Schedule of Receivables is true and correct in all material respects; 2. at the time of origination of each Receivable, the related Obligor on each Receivable is required to maintain physical damage insurance covering the Financed Vehicle in accordance with BMW FS' (or BMW Bank's) normal requirements; 3. as of the applicable Closing Date, each of those Receivables is or will be secured by a first priority perfected security interest in favor of BMW FS (or BMW Bank, as applicable) in the Financed Vehicle; 4. to the best of its knowledge, as of the applicable Closing Date, the related Receivables are free and clear of all security interests, liens, charges and encumbrances and no offsets, defenses or counterclaims have been asserted or threatened; 5. each related Receivable, at the time it was originated, complied and, as of the applicable Closing Date, complies in all material respects with applicable federal and state laws, including, consumer credit, truth-in-lending, equal credit opportunity and disclosure laws; and 6. any other representations and warranties that may be set forth in the applicable prospectus supplement are true and correct in all material respects. Unless otherwise provided for in the related prospectus supplement, as of the last day of the second (or, if the Depositor so elects, the first) Collection Period following the discovery by or notice to the Depositor of a breach of any representation or warranty of the Depositor that materially and adversely affects the interests of the related Securityholders in any Receivable, the Depositor, unless the breach is cured, will repurchase that Receivable (a "Warranty Receivable") from that Trust and, pursuant to the related Purchase Agreement, BMW FS (or BMW Bank, as applicable) will purchase that Warranty Receivable from the Depositor, at a price equal to the Warranty Purchase Payment for that Receivable. Unless otherwise specified in the related prospectus supplement, the "Warranty Purchase Payment"for 1. a Precomputed Receivable will be equal to: (a) the sum of: (i) all remaining Scheduled Payments; (ii) all past due Scheduled Payments for which an Advance has not been made; (iii) all outstanding Advances made by the Servicer in respect of the Precomputed Receivable; and (iv) an amount equal to any reimbursements of outstanding Advances made to the Servicer with respect to the Precomputed Receivable from collections made on or in respect of other Receivables, minus 57 (b) the sum of: (i) of all Payments Ahead in respect to that Warranty Receivable held by the Servicer or on deposit in the Payahead Account; (ii) the rebate, calculated on an actuarial basis, that would be payable to the Obligor on the Precomputed Receivable were the Obligor to prepay the Precomputed Receivable in full on that day (a "Rebate"); and (iii) any proceeds of the liquidation of the Precomputed Receivable previously received (to the extent applied to reduce the Principal Balance of the Precomputed Receivable) and 2. a Simple Interest Receivable, will be equal to its unpaid principal balance, plus interest on that Receivable at a rate equal to the APR to the last day of the Collection Period relating to the repurchase. This repurchase obligation will constitute the sole remedy available to the Securityholders or the Trust for any uncured breach by the Depositor. The obligation of the Depositor to repurchase a Receivable will not be conditioned on performance by BMW FS of its obligation to purchase that Receivable from the Depositor pursuant to the related Purchase Agreement. Pursuant to each Sale and Servicing Agreement or Pooling and Servicing Agreement, the Depositor and each Trust will designate the Servicer as custodian to maintain possession as that Trust's agent of the related retail installment sale contracts and any other documents relating to the Receivables. To assure uniform quality in servicing both the Receivables and the Servicer's own portfolio of motor vehicle retail installment sale contracts, as well as to facilitate servicing and reduce administrative costs, the documents evidencing the Receivables will not be physically segregated from other motor vehicle retail installment sale contracts of the Servicer, or those which the Servicer services for others, or marked to reflect the transfer to the related Trust as long as BMW FS is servicing the Receivables. However, Uniform Commercial Code ("UCC") financing statements reflecting the sale and assignment of the Receivables by BMW FS (or BMW Bank, as applicable) to the Depositor and by the Depositor to the applicable Trust will be filed, and the respective accounting records and computer files of BMW FS (or BMW Bank, as applicable) and the Depositor will reflect that sale and assignment. Because the Receivables will remain in the Servicer's possession and will not be stamped or otherwise marked to reflect the assignment to the Trustee, if a subsequent purchaser were able to take physical possession of the Receivables without knowledge of the assignment, the Trust's interest in the Receivables could be defeated. In addition, in some cases, the Trustee's security interest in collections that have been received by the Servicer but not yet remitted to the related Collection Account could be defeated. We refer you to "Certain Legal Aspects of the Receivables--Security Interests" in this prospectus. Accounts With respect to each Trust that issues notes, the Servicer will establish and maintain with the related Trustee or Indenture Trustee one or more accounts (each, a "Collection Account"), in the name of the Trustee or Indenture Trustee on behalf of the related Securityholders, into which payments made on or with respect to the related Receivables and amounts released from any Yield Supplement Account, Reserve Fund or other form of credit enhancement will be deposited for payment to the related Securityholders. With respect to each Trust that does not issue notes, the Servicer will also establish and 58 maintain a Collection Account and any other Account in the name of the related Trustee on behalf of the related Certificateholders. If so provided in the related prospectus supplement, the Servicer will establish for each series of Securities an additional account (the "Payahead Account"), in the name of the related Trustee or, if that Trust issues notes, the Indenture Trustee, into which, to the extent required by the Sale and Servicing Agreement or Pooling and Servicing Agreement, early payments by or on behalf of Obligors on Precomputed Receivables ("Payments Ahead") will be deposited until the time as the related payment becomes due. Until that time as Payments Ahead are transferred from the Payahead Account to a Collection Account, they will not constitute collected interest or collected principal and will not be available for payment to the applicable Noteholders or Certificateholders. The Payahead Account will initially be maintained with the applicable Indenture Trustee or Trustee. Any other accounts to be established with respect to a Trust, including any Yield Supplement Account or any Reserve Fund, will be described in the applicable prospectus supplement. For any series of Securities, funds in the related Collection Account, any Yield Supplement Account, the Reserve Fund and other accounts that may be identified in the applicable prospectus supplement (collectively, the "Accounts") will be invested as provided in the related Sale and Servicing Agreement or Pooling and Servicing Agreement in Eligible Investments. "Eligible Investments" are generally limited to investments acceptable to the rating agencies rating the Securities as being consistent with the rating of those Securities, including obligations of the Servicer and its affiliates, to the extent consistent with that rating. Except as described below or in the related prospectus supplement, Eligible Investments are limited to obligations or securities that mature on or before the next Payment Date for that series. However, to the extent permitted by the rating agencies, funds in any Account, except the Collection Account, may be invested in obligations or securities that will not mature prior to the next Payment Date with respect to those certificates or notes and will not be sold to meet any shortfalls. Thus, the amount of cash in any Reserve Fund or the Yield Supplement Account at any time may be less than the balance of the Reserve Fund or the Yield Supplement Account, as the case may be. If the amount required to be withdrawn from any Reserve Fund or the Yield Supplement Account to cover shortfalls in collections on the related Receivables (as provided in the applicable prospectus supplement) exceeds the amount of cash in the Reserve Fund or the Yield Supplement Account, as the case may be, a temporary shortfall in the amounts paid to the related Noteholders or Certificateholders could result, which could, in turn, increase the average life of the notes or the certificates of that series. Investment earnings on funds deposited in the Accounts, net of losses and investment expenses, shall be released to the Servicer or the Depositor on each Payment Date and shall be the property of the Servicer or the Depositor, as the case may be. For each Trust, the Accounts will be maintained with the related Indenture Trustee or the Trustee so long as it is an "Eligible Institution," which is a depository institution or trust company, 1. the short-term unsecured debt obligations of which have a rating of "P-1" by Moody's Investors Service, Inc. ("Moody's") and a rating of "A-1+" by Standard & Poor's Ratings Services, a division of The McGraw Hill Companies, Inc. ("Standard & Poor's") (the "Required Deposit Rating"); or 2. having corporate trust powers and organized under the laws of the United States, any State, the District of Columbia or the Commonwealth of Puerto Rico which has a long-term deposit rating from Moody's of at least "Baa3" or Standard & Poor's of at least "BBB-" (or a lower rating as either rating agency shall approve in writing). 59 If the related Indenture Trustee or the Trustee, as the case may be, ceases to be an Eligible Institution, then the Servicer shall, with the assistance of the Indenture Trustee or the Trustee as may be necessary, cause each Account to be moved to an Eligible Institution. Servicing Procedures The Servicer will make reasonable efforts to collect all payments due with respect to the Receivables held by any Trust and will, consistent with the related Sale and Servicing Agreement or Pooling and Servicing Agreement, follow the collection procedures it follows with respect to comparable motor vehicle retail installment sale contracts it services for itself and others. The Servicer will be authorized to grant, in some circumstances, rebates, adjustments or extensions with respect to a Receivable. However, if any modification of a Receivable extends the maturity of a Receivable beyond the final scheduled maturity date set forth in the applicable prospectus supplement (the "Final Scheduled Maturity Date") the Servicer will be obligated to purchase the Receivable as described below. In addition, the Servicer will covenant that, except as otherwise contemplated in the related agreement (including the provisions in the immediately two preceding paragraphs) and except as permitted by the Servicer's credit and collection policies: 1. it will not release any Financed Vehicle from the security interest granted in the related Receivable; 2. it will do nothing to impair the rights of the Securityholders in the Receivables; 3. it will not alter the APR of any Receivable; 4. it will not modify the number of payments under a Receivable or the maturity of a Receivable beyond the Final Scheduled Maturity Date unless it is making advances corresponding to reduction in Scheduled Payments as described above; and 5. it will not alter the amount financed under a Receivable. The Servicer or the Trustee shall inform the other party and the Indenture Trustee promptly upon the discovery of any breach by the Servicer of the above obligations that would materially and adversely affect any Receivable. Unless the breach is cured by the last day of the second Collection Period following the discovery (or, if the Servicer so elects, the last day of the first Collection Period following the discovery), the Servicer is required to purchase any Receivable materially and adversely affected by the breach (an "Administrative Receivable") from the Trust at a price equal to the Administrative Purchase Payment for that Receivable or at another price as set forth in the related prospectus supplement. The "Administrative Purchase Payment" 1. for a Precomputed Receivable, will be equal to: (a) the sum of: (i) all remaining Scheduled Payments (plus any applicable yield maintenance payments); 60 (ii) an amount equal to any reimbursements of Advances made by the Servicer with respect to the Precomputed Receivable from collections on or in respect of other Receivables; and (iii) all past due Scheduled Payments for which an Advance has not been made, minus; (b) all Payments Ahead in respect of the Precomputed Receivable held by the Servicer or on deposit in the Payahead Account; 2. for a Simple Interest Receivable, will be equal to its unpaid Principal Balance, plus interest on that Receivable at a rate equal to the sum of the Interest Rate or Pass Through Rate specified in the related Sale and Servicing Agreement or Pooling and Servicing Agreement and the Servicing Fee Rate to the last day of the Collection Period relating to that purchase. Upon the purchase of any Administrative Receivable, the Servicer will for all purposes of the related Sale and Servicing Agreement or the Pooling and Servicing Agreement, as applicable, be deemed to have released all claims for the reimbursement of outstanding Advances made in respect of that Administrative Receivable. This purchase obligation will constitute the sole remedy available to the Certificateholders or the Trustee for any uncured breach by the Servicer. If the Servicer determines that eventual payment in full of a Receivable is unlikely, the Servicer will follow its normal practices and procedures to recover all amounts due upon that Receivable, including repossessing and disposing of the related Financed Vehicle at a public or private sale, or taking any other action permitted by applicable law. We refer you to "Certain Legal Aspects of the Receivables." Insurance on Financed Vehicles Each Receivable requires the related Obligor to maintain specific levels and types of insurance coverage to protect the Financed Vehicle against losses. BMW FS requires evidence of insurance coverage by the Obligors at the time of origination of the Receivables, but performs no verification of continued coverage after origination. BMW FS will not be obligated to make payments to the Trust for any loss as to which third party insurance has not been maintained, except to the extent of its obligations under the related Purchase Agreement. Since the Obligors may select their own insurers to provide the requisite coverage, the specific terms of their policies may vary. BMW FS will not be required to monitor the maintenance of insurance. A failure by an Obligor to maintain physical damage insurance will constitute a default under the related Receivable. We refer you to "The Receivables--Underwriting of Motor Vehicle Loans." In the event that the Obligor fails to maintain any required insurance and this failure results in a shortfall in amounts to be distributed to Noteholders which is not covered by amounts on deposit in the Reserve Fund or by subordination of payments on the certificates to the extent described in this prospectus, the Securityholders could suffer a loss on their investment. Collections With respect to each Trust, the Servicer will deposit all payments on Receivables received from Obligors and all proceeds of Receivables collected during the collection period specified in the applicable prospectus supplement (each, a "Collection Period") into the Collection Account not later than two Business Days after receipt. However, if each condition to making monthly deposits as may be required by the related Sale and Servicing Agreement or Pooling and Servicing Agreement (including, the 61 satisfaction of specified ratings criteria by the Servicer and the absence of any Servicer Default) is satisfied, the Servicer may retain these amounts until the Business Day immediately preceding the related Payment Date. The Servicer will be entitled to withhold, or to be reimbursed from amounts otherwise payable into or on deposit in the Collection Account, amounts previously deposited in the Collection Account but later determined to have resulted from mistaken deposits or postings. Except in some circumstances described in the related Sale and Servicing Agreement or Pooling and Servicing Agreement, pending deposit into the Collection Account, collections may be employed by the Servicer at its own risk and for its own benefit and will not be segregated from its own funds. The Servicer or the Depositor, as the case may be, will remit the aggregate Warranty Purchase Payments and Administrative Purchase Payments of Receivables to be purchased from the Trust, if any, to the Collection Account on the Business Day immediately preceding the related Payment Date. If the Servicer were unable to remit the funds as described above, Securityholders might incur a loss. To the extent set forth in the applicable prospectus supplement, the Servicer may, in order to satisfy the requirements described above, obtain a letter of credit or other security for the benefit of the related Trust to secure timely remittances of collections on the related Receivables and payment of the aggregate Warranty Purchase Payments and Administrative Purchase Payments with respect to Receivables required to be repurchased by the Depositor or the Servicer, as applicable. Collections on or in respect of a Receivable made during a Collection Period (including Warranty Purchase Payments and Administrative Purchase Payments) which are not late fees, extension fees or other similar fees or charges will be applied first to any outstanding Advances made by the Servicer with respect to the Receivable, and then to the related Scheduled Payment. Any collections on or in respect of a Receivable remaining after those applications will be considered an "Excess Payment." Excess Payments constituting a prepayment in full of Precomputed Receivables and any Excess Payments relating to Simple Interest Receivables will be applied as a prepayment in respect of the Receivable (each, a "Prepayment"). All other Excess Payments in respect of Precomputed Receivables will be held by the Servicer (or if the Servicer has not satisfied particular requirements, deposited in the Payahead Account), as a Payment Ahead. Advances Unless otherwise provided in the related prospectus supplement, if the Scheduled Payment due on a Precomputed Receivable (other than an Administrative Receivable or a Warranty Receivable) is not received in full by the end of the month in which it is due, whether as the result of any extension granted to the Obligor or otherwise, the amount of Payments Ahead, if any, not previously applied with respect to the Precomputed Receivable, shall be applied by the Servicer to the extent of the shortfall and the Payments Ahead shall be reduced accordingly. If any shortfall remains, the Servicer will make an advance to the Trust in an amount equal to the shortfall (each, a "Precomputed Advance"). The Servicer will not be obligated to make a Precomputed Advance to the extent that it determines, in its sole discretion, that the Precomputed Advance will not be recovered from subsequent collections on or in respect of the related Precomputed Receivable. All Precomputed Advances shall be reimbursable to the Servicer, without interest, if and when a payment relating to a Receivable with respect to which a Precomputed Advance has previously been made is subsequently received (other than from Administrative Purchase Payments). Upon the determination by the Servicer that reimbursement from the preceding source is unlikely, it will be entitled to recover unreimbursed Precomputed Advances from collections on or in respect of other Precomputed Receivables. 62 In addition, if the Scheduled Payment on a Simple Interest Receivable, other than an Administrative Receivable or a Warranty Receivable, is not received in full by the end of the month in which it is due, the Servicer shall, subject to the limitations set forth below, advance to the Trust in an amount with respect to the Simple Interest Receivable equal to the product of the Principal Balance of the Simple Interest Receivable as of the first day of the related Collection Period and one-twelfth of its APR minus the amount of interest actually received on the Simple Interest Receivable during the related Collection Period (each, a "Simple Interest Advance," and together with the Precomputed Advances, the "Advances"). If a calculation results in a negative number, an amount equal to that negative amount shall be paid to the Servicer in reimbursement of outstanding Simple Interest Advances. In addition, in the event that a Simple Interest Receivable becomes a liquidated Receivable, the amount of accrued and unpaid interest on that Receivable (but not including interest for the current Collection Period) shall, up to the amount of all outstanding Simple Interest Advances in respect of that Receivable, be withdrawn from the related Collection Account and paid to the Servicer in reimbursement of the outstanding Simple Interest Advances. No advances of principal will be made with respect to Simple Interest Receivables. The Servicer will not be obligated to make a Simple Interest Advance, other than in respect of an interest shortfall arising from the prepayment of a Simple Interest Receivable, to the extent that it determines, in its sole discretion, that Simple Interest Advance will not be recovered from subsequent collections on or in respect of the related Simple Interest Receivable. The Servicer will make all Advances by depositing into the related Collection Account an amount equal to the aggregate of the Precomputed Advances and Simple Interest Advances due in respect of a Collection Period on the Business Day immediately preceding the related Payment Date. Servicing Compensation Unless otherwise provided in the applicable prospectus supplement, the Servicer will be entitled to receive a basic servicing fee for each Collection Period in an amount equal to a specified percent per annum (as set forth in the applicable prospectus supplement, the "Servicing Fee Rate") of the Pool Balance as of the first day of the related Collection Period (the "Base Servicing Fee"). The Base Servicing Fee (together with any portion of the Base Servicing Fee that remains unpaid from prior Payment Dates) will be paid solely to the extent of amounts available for that purpose as set forth in the applicable prospectus supplement. However, the Base Servicing Fee will be paid prior to the payment of available amounts to the Noteholders or the Certificateholders of the given series. Unless otherwise provided in the applicable prospectus supplement, the Servicer will also be entitled to collect and retain any late fees, prepayment charges and other administrative fees or similar charges allowed by applicable law with respect to the related Receivables and any interest earned during a Collection Period from the investment of monies in the Collection Account as additional servicing compensation (the "Supplemental Servicing Fee" and, together with the Base Servicing Fee, the "Total Servicing Fee"). Payments by or on behalf of Obligors will be allocated to scheduled payments and late fees and other charges in accordance with the Servicer's normal practices and procedures. In addition, the Servicer will be entitled to reimbursement from any given Trust for specified liabilities. The Servicer will be paid the Base Servicing Fee for each Collection Period on the Payment Date related to that Collection Period prior to the payment of interest on any class of notes or certificates. However, if each rating agency for a series of notes or certificates confirms that it will not reduce the rating of any class of notes or certificates in that series, as the case may be, the Base Servicing Fee in respect of a Collection Period (together with any portion of the Base Servicing Fee that remains unpaid from the prior Payment Dates) will be paid at the beginning of that Collection Period out of collections of interest on the related Receivables. 63 The Total Servicing Fee will compensate the Servicer for performing the functions of a third party servicer of motor vehicle receivables as an agent for the beneficial owner of those Receivables, including collecting and posting all payments, responding to inquiries of Obligors on the Receivables, investigating delinquencies, sending payment statements to Obligors, reporting tax information to Obligors, paying costs of collections and policing the collateral. The Total Servicing Fee also will compensate the Servicer for administering the particular Receivables Pool, including making Advances, accounting for collections and furnishing monthly statements to the related Trustee and Indenture Trustee with respect to payments. The Total Servicing Fee also will reimburse the Servicer for specified taxes, the fees of the related Trustee and Indenture Trustee, if any, accounting fees, outside auditor fees, data processing costs and other costs incurred in connection with administering the applicable Receivables Pool. The "Pool Balance" will equal the aggregate Principal Balance of the Receivables. The "Principal Balance" of a Receivable as of any date will equal the original principal balance of the Receivable minus the sum of: (i) in the case of a Precomputed Receivable, that portion of all Scheduled Payments due on or prior to that date allocable to principal, computed in accordance with the actuarial method; (ii) in the case of a Simple Interest Receivable, that portion of all Scheduled Payments actually received on or prior to that date allocable to principal; (iii) any Warranty Purchase Payment or Administrative Purchase Payment with respect to the Receivable allocable to principal (to the extent not included in clauses (i) and (ii) above); and (iv) any Prepayments or other payments applied to reduce the unpaid principal balance of the Receivable (to the extent not included in clauses (i) and (ii) above). Yield Supplement Account; Yield Supplement Agreement Yield Supplement Account. A "Yield Supplement Account" may be established with respect to any class or series of Securities. The terms relating to any Yield Supplement Account will be set forth in the applicable prospectus supplement. Each Yield Supplement Account will be designed to hold funds to be applied by the related Trustee or, if that Trust issues notes, the related Indenture Trustee, to provide payments to Securityholders in respect of Receivables that have APRs less than the sum of the Pass Through Rate or Interest Rate specified in the applicable prospectus supplement plus the Servicing Fee Rate specified in the applicable prospectus supplement (the "Required Rate"). Unless otherwise specified in the applicable prospectus supplement, each Yield Supplement Account will be maintained with the same entity with which the related Collection Account is maintained and will be created on the related Closing Date with an initial deposit in an amount and by the Depositor or other person specified in the applicable prospectus supplement. On each Payment Date, the related Trustee or Indenture Trustee will transfer to the Collection Account from monies on deposit in the Yield Supplement Account an amount specified in the applicable prospectus supplement (the "Yield Supplement Deposit") in respect of the Receivables having APRs less than the Required Rate for that Payment Date. Unless otherwise specified in the applicable prospectus 64 supplement, amounts on deposit on any Payment Date in the Yield Supplement Account in excess of the "Required Yield Supplement Amount" specified in the applicable prospectus supplement, after giving effect to all payments to be made on that Payment Date, will be released to the Depositor. The Depositor or other person specified in the applicable prospectus supplement will not have any obligation after the related Closing Date to deposit any amounts into the Yield Supplement Account after the related Closing Date even if the amount on deposit in that account is less than the Required Yield Supplement Amount for any Payment Date. Monies on deposit in the Yield Supplement Account may be invested in Eligible Investments under the circumstances and in the manner described in the related Pooling and Servicing Agreement or Trust Agreement. Distributions on the Securities With respect to each series of Securities, beginning on the Payment Date specified in the applicable prospectus supplement, payments of principal of and interest (or, where applicable, of principal or interest only) on each class of those Securities entitled to payments of principal and interest will be made by the applicable Indenture Trustee to the Noteholders and by the applicable Trustee to the Certificateholders of that series. The timing, calculation, allocation, order, source, priorities of and requirements for all payments to each class of Noteholders and all payments to each class of Certificateholders of that series will be set forth in the applicable prospectus supplement. With respect to each Trust, on each Payment Date, collections on the related Receivables will be withdrawn from the related Collection Account and will be paid to the Noteholders and/or Certificateholders to the extent provided in the applicable prospectus supplement. Credit enhancement, such as a Reserve Fund, may be available to cover any shortfalls in the amount available for payment to the Securityholders on that date to the extent specified in the applicable prospectus supplement. As more fully described in the applicable prospectus supplement, 1. payments of principal of a class of Securities of a given series will be subordinate to payments of interest on that class; 2. payments in respect of one or more classes of certificates of that series may be subordinate to payments in respect of notes, if any, of that series or other classes of certificates of that series; and 3. payments in respect of one or more classes of notes of that series may be subordinated to payments in respect of other classes of notes of that series. Credit and Cash Flow Enhancement The amounts and types of credit and cash flow enhancement arrangements and the applicable provider, with respect to each class of Securities of a given series, if any, will be set forth in the applicable prospectus supplement. If and to the extent provided in the applicable prospectus supplement, credit and cash flow enhancement may be in the form of subordination of one or more classes of Securities, Reserve Funds, over-collateralization to cover either or both credit risk or yield enhancement, letters of credit, credit or liquidity facilities, surety bonds, guaranteed investment contracts, swaps or other interest rate protection agreements, repurchase obligations, yield supplement agreements, other agreements with respect to third party payments or other support, cash deposits or other arrangements that may be described in the applicable prospectus supplement or any combination of the foregoing. If specified in the applicable prospectus supplement, credit or cash flow enhancement for a class of 65 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 Reserve Fund and other forms of credit enhancement for the benefit of any class or series of Securities is intended to enhance the likelihood of receipt by the Securityholders of that class or series of the full amount of principal and interest due on those Securities and to decrease the likelihood that that Securityholders will experience losses. Credit or cash flow enhancement for a class or series of Securities will not provide protection against all risks of loss and will not guarantee repayment of the entire principal of and interest on those Securities. If losses occur which exceed the amount covered by any credit enhancement or which are not covered by any credit enhancement, Securityholders of any class or series will bear their allocable share of deficiencies, as described in the applicable prospectus supplement. In addition, if a form of credit enhancement covers more than one class or series of Securities, Securityholders of any of that class or series will be subject to the risk that that credit enhancement will be exhausted by the claims of Securityholders of other classes or series. Reserve Fund. If provided in the applicable prospectus supplement, pursuant to the related Sale and Servicing Agreement or Pooling and Servicing Agreement, the Depositor or a third party will establish for a series or class of Securities an account, as specified in the applicable prospectus supplement, which may be designated as a "Reserve Fund" (the "Reserve Fund"), which will be maintained with the related Trustee or Indenture Trustee, as applicable. Unless otherwise specified in the prospectus supplement, the Reserve Fund will be funded by an initial deposit by the Depositor or a third party on the Closing Date in the amount set forth in the applicable prospectus supplement (the "Reserve Fund Initial Deposit"). To the extent provided in the applicable prospectus supplement, the amount on deposit in the Reserve Fund will be increased on each Payment Date thereafter up to the Specified Reserve Fund Balance (as defined in the applicable prospectus supplement) by the deposit in the Reserve Fund of the amount of collections on the related Receivables remaining on each Payment Date after all specified payments on that date are made. The applicable prospectus supplement will describe the circumstances and manner under which payments may be made out of the Reserve Fund, either to holders of the Securities covered by that prospectus supplement or to the Depositor or a third party. Monies on deposit in the Reserve Fund may be invested in Eligible Investments under the circumstances and in the manner described in the related Sale and Servicing Agreement or the Pooling and Servicing Agreement. Surety Bond. The prospectus supplement may provide that the Trust enter into agreements with an insurer for the purpose of guaranteeing payments of principal and/or interest on the Securities. If, on the date so specified in the prospectus supplement, the amount on deposit in the Collection Account after giving effect to all amounts deposited to or payable from a Payahead Account, a prefunding account or a capitalized interest agreement with respect to the related Payment Date, is less than the sum of the Base Servicing Fee, and amounts due to Securityholders on the related Payment Date, the Trustee by delivering a notice to the insurer shall demand payment under the surety bond in an amount equal to the deficiency. The applicable prospectus supplement will describe the circumstances and manner under which payments may be made under the surety bond, either to Securityholders, or the Trustee or the Indenture Trustee, as the case may be. Pre-funding feature. A Trust may enter into an agreement with the Depositor, in which the Depositor may sell additional Receivables to the Trust after the Closing Date. The transfer of Receivables to the Trust after the Closing Date is known as a pre-funding feature. Any subsequent Receivables will be required to conform to the requirements described in the related prospectus supplement. If a pre-funding feature is used, the Trustee or the Indenture Trustee will be required to deposit all or a portion of the proceeds of the sale of the Securities of the series in a segregated account. The subsequent Receivables will be transferred to the Trust in exchange for money released from that 66 segregated account. Any transfer of Receivables must occur within a specified period, not to exceed one year. If a Trust elects federal income tax treatment as a grantor trust, the pre-funding period will be limited to three months. If all of the monies originally deposited in the segregated account are not used by the end of the specified period, all remaining monies will be applied as a mandatory prepayment of a designated class or classes of Securities. Cash Collateral Account. The prospectus supplement may provide that upon the occurrence of an event of default by the Servicer, a segregated cash collateral account may be established as security for the Servicer's obligations under the Sale and Servicing Agreement or the Pool and Servicing Agreement, as the case may be. Net Deposits As an administrative convenience, as long as specified conditions are satisfied, the Servicer will be permitted to make the deposit of collections, aggregate Advances and Administrative Purchase Payments for any Trust for or with respect to the related Collection Period net of payments to be made to the Servicer with respect to that Collection Period. The Servicer may cause to be made a single, net transfer to the Collection Account. The Servicer, however, will account to the Trustee, any Indenture Trustee, the Noteholders, if any, and the Certificateholders with respect to each Trust as if all deposits, payments and transfers were made individually. With respect to any Trust that issues both certificates and notes, if the related Payment Dates are not the same for all classes of Securities, all distributions, deposits or other remittances made on a Payment Date will be treated as having been distributed, deposited or remitted on the same Payment Date for the applicable Collection Period for purposes of determining other amounts required to be distributed, deposited or otherwise remitted on a Payment Date. Statements to Trustees and the Trust On or prior to each Payment Date (each, a "Determination Date" to be specified in the applicable prospectus supplement), the Servicer will provide to the applicable Indenture Trustee, if any, and the applicable Trustee a statement setting forth with respect to a series of Securities substantially the same information that is required to be provided in the periodic reports provided to Securityholders of that series described under "--Statements to Securityholders" below. Statements to Securityholders With respect to each series of Securities that includes notes, on or prior to each Payment Date, the Servicer will prepare and provide to the related Indenture Trustee a statement to be delivered to the related Noteholders on that Payment Date. In addition, on or prior to each Payment Date, the Servicer will prepare and provide to the related Trustee of each Trust, a statement to be delivered to the Certificateholders. Each statement to be delivered to Securityholders will include (to the extent applicable) the following information (and any other information so specified in the applicable prospectus supplement) as to the notes of that series and as to the certificates of that series with respect to that Payment Date: 1. the amount of the payment allocable to the principal amount of each class of those notes and to the Certificate Balance of each class of those certificates; 2. the amount of the payment allocable to interest on each class of Securities of that series; 3. the amount of the distribution allocable to the Yield Supplement Deposit, if any; 67 4. the Pool Balance as of the close of business on the last day of the related Collection Period after giving effect to payments allocated to principal reported under clause (1) above; 5. the amount of the total Servicing Fee paid to the Servicer with respect to the related Collection Period; 6. the Interest Rate or Pass Through Rate for the Interest Period relating to the succeeding Payment Date for any class of notes or certificates of that series with variable or adjustable rates; 7. the Noteholders' Interest Carryover Shortfall, the Noteholders' Principal Carryover Shortfall, the Certificateholders' Interest Carryover Shortfall and the Certificateholders' Principal Carryover Shortfall (each as defined in the applicable prospectus supplement), if any, in each case as applicable to each class of Securities; 8. the Note Pool Factor for each class of those notes, and the Certificate Balance and the Certificate Pool Factor for each class of those certificates, each after giving effect to all payments reported under clause (1) above on that date; 9. the amount of non-recoverable Advances on that Payment Date; 10. the balance of any related Reserve Fund on that date, after giving effect to changes to the related Reserve Fund on that date and the amount of those changes; 11. the amount of Trust fees and expenses; 12. the Available Amounts, as that term is defined in the prospectus supplement; 13. the amount available under the Servicer's letter of credit, surety bond or insurance policy (the "Servicer Letter of Credit") as provided in the Sale and Servicing Agreement, if any, and the amount as a percentage of the Pool Balance as of the last day of that Collection Period; and 14. payments to and from third party credit enhancement providers, if any. Each amount set forth in subclauses (1), (2), (5) and (7) above will be expressed in the aggregate and as a dollar amount per $1,000 of the original principal amount of each class of notes or the Original Certificate Balance of each class of certificates, as the case may be. Copies of the statements may be obtained by the Securityholders by delivering a request in writing addressed to the applicable Trustee at its address set forth in the applicable prospectus supplement. Within the prescribed period of time for tax reporting purposes after the end of each calendar year during the term of each Trust, the applicable Trustee will mail to each person who at any time during that calendar year has been a Securityholder with respect to that Trust and received any payment a statement containing information for the purposes of that Securityholder's preparation of federal income tax returns. We refer you to "Material Income Tax Consequences." 68 Evidence as to Compliance Each Sale and Servicing Agreement and Pooling and Servicing Agreement will provide that a firm of independent public accountants will furnish to the related Trust and Indenture Trustee or Trustee, as applicable, annually a statement as to compliance in all material respects by the Servicer during the preceding twelve months (or, in the case of the first statement, from the applicable Closing Date, which may be longer than twelve months) with specified standards relating to the servicing of the applicable Receivables. Each Sale and Servicing Agreement and Pooling and Servicing Agreement will also provide for delivery to the related Trust and Indenture Trustee or Trustee, as applicable, substantially simultaneously with the delivery of those accountants' statement referred to above, of a certificate signed by an officer of the Servicer stating that the Servicer has fulfilled its obligations under the Sale and Servicing Agreement or Pooling and Servicing Agreement, as applicable, throughout the preceding twelve months (or, in the case of the first certificate, from the Closing Date) in all material respects or, if there has been a default in the fulfillment of any obligation, describing each default. The Servicer has agreed to give each Indenture Trustee and each Trustee notice of specified Servicer Defaults under the related Sale and Servicing Agreement or Pooling and Servicing Agreement, as applicable. Copies of the statements and certificates may be obtained by Securityholders by a request in writing addressed to the applicable Trustee. Certain Matters Regarding the Servicer Each Sale and Servicing Agreement and Pooling and Servicing Agreement will provide that BMW FS may not resign from its obligations and duties as Servicer under those documents, except upon BMW FS' determination that its performance of those duties is no longer permissible under applicable law. No resignation will become effective until the related Indenture Trustee or Trustee, as applicable, or a successor servicer has assumed BMW FS' servicing obligations and duties under the related Sale and Servicing Agreement or Pooling and Servicing Agreement. Each Sale and Servicing Agreement and Pooling and Servicing Agreement will further provide that neither the Servicer nor any of its directors, officers, employees or agents will be under any liability to the related Trust or the related Noteholders or Certificateholders for taking any action or for refraining from taking any action pursuant to the related Sale and Servicing Agreement or Pooling and Servicing Agreement or for errors in judgment; except that neither the Servicer nor any person will be protected against any liability that would otherwise be imposed by reason of willful misfeasance, bad faith or negligence in the performance of the Servicer's duties under that document or by reason of reckless disregard of its obligations and duties under that document. In addition, each Sale and Servicing Agreement and Pooling and Servicing Agreement will provide that the Servicer is not obligated to appear in, prosecute or defend any legal action that is not incidental to the Servicer's servicing responsibilities under the related Sale and Servicing Agreement or Pooling and Servicing Agreement and that, in its opinion, may cause it to incur any expense or liability. The Servicer may, however, undertake any reasonable action that it may deem necessary or desirable in respect of the related Sale and Servicing Agreement or Pooling and Servicing Agreement, the rights and duties of the parties to the related Sale and Servicing Agreement or Pooling and Servicing Agreement and the interests of the Securityholders under the applicable agreement. In that event, the legal expenses and costs of that action and any liability resulting from that course of action will be expenses, costs and liabilities of the Servicer, and the Servicer will not be entitled to be reimbursed for those costs and liabilities. 69 Under the circumstances specified in each Sale and Servicing Agreement and Pooling and Servicing Agreement, any entity into which the Servicer may be merged or consolidated, or any entity resulting from any merger or consolidation to which the Servicer is a party, or any entity succeeding to all or substantially all of the business of the Servicer will be the successor of the Servicer under the related Sale and Servicing Agreement or Pooling and Servicing Agreement. Servicer Default Except as otherwise provided in the related prospectus supplement, "Servicer Default" under each Sale and Servicing Agreement and Pooling and Servicing Agreement will consist of the following: 1. any failure by the Servicer to deposit in or credit to any Account any required payment or make the required payments from any Account and that failure continues unremedied for five Business Days after discovery of that failure by the Servicer or after receipt of written notice by the Servicer from the Trustee or the Indenture Trustee, as applicable or from not less than 25% of the voting interests of the most senior class of Securities then outstanding; 2. any failure by the Servicer to duly observe or perform in any material respect any other covenants or agreements in the Sale and Servicing Agreement or the Pooling and Servicing Agreement, which failure materially and adversely affects the rights of the Securityholders, and which failure continues unremedied for 90 days after written notice of that failure is given as described in clause 1 above; and 3. the occurrence of events of insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings with respect to the Servicer indicating its insolvency, reorganization pursuant to bankruptcy proceedings or inability to pay its obligations (any of these events with respect to the Servicer being an "Insolvency Event"). Rights Upon Servicer Default In the case of any Trust that has issued notes, unless otherwise provided in the related prospectus supplement, so long as a Servicer Default under a Sale and Servicing Agreement remains unremedied, the related Indenture Trustee or holders of notes of the related series evidencing not less than 25% of the principal amount of the most senior class of notes then outstanding may terminate all the rights and obligations of the Servicer under the Sale and Servicing Agreement, and at that time 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. In the case of any Trust that has not issued notes, or the notes have been discharged in accordance with their terms, unless otherwise provided in the related prospectus supplement, as long as a Servicer Default under the related Sale and Servicing Agreement or Pool and Servicing Agreement remains unremedied, the related Trustee or holders of certificates of the related series evidencing not less than 25% of the principal amount of the certificates then outstanding (but excluding for purposes of that calculation and action all certificates held by the Depositor, the Servicer or any of their affiliates), acting together as a single class, may terminate all the rights and obligations of the Servicer under the related Sale and Servicing Agreement or Pooling and Servicing Agreement, and at that time the Trustee or a successor servicer appointed by the Trustee will succeed to all the responsibilities, duties and liabilities of the Servicer in its capacity under the Sale and Servicing Agreement and will be entitled to similar compensation arrangements. 70 However, if a bankruptcy trustee or similar official has been appointed for the Servicer, and no Servicer Default other than the appointment of a bankruptcy trustee or similar official has occurred, that bankruptcy trustee or official may have the power to prevent that Indenture Trustee, those Noteholders, that Trustee or those Certificateholders, as applicable, from effecting a transfer of servicing as described above. If that Indenture Trustee or 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 with a net worth of at least $50,000,000 and whose regular business includes the servicing of motor vehicle receivables. The related Indenture Trustee or the Trustee, or any person appointed as successor servicer, will be the successor in all respects to the predecessor Servicer under the related Sale and Servicing Agreement or Pooling and Servicing Agreement and all references in the related Sale and Servicing Agreement or Pooling and Servicing Agreement to the Servicer shall apply to that successor servicer. The related Indenture Trustee or Trustee may make arrangements for compensation to be paid, but the compensation for the successor servicer may not be greater than the Base Servicing Fee under the related Sale and Servicing Agreement or Pooling and Servicing Agreement. Notwithstanding termination, the Servicer will be entitled to payment of specified amounts payable to it prior to the termination for services it rendered prior to the termination. Upon payment in full of the principal of and interest on the notes, the Certificateholders will succeed to the rights of the Noteholders with respect to removal of the Servicer. Waiver of Past Defaults With respect to each Trust that has issued notes, unless otherwise provided in the applicable prospectus supplement: o the holders of not less than a majority of the most senior class of Securities then outstanding; or o in the case of any Servicer Default that does not adversely affect the related Indenture Trustee or the related Noteholders, the holders of certificates of that series (or relevant class or classes of certificates of the series) evidencing a majority of the aggregate Certificate Balance of those certificates then outstanding (but excluding for purposes of calculation and action all certificates held by the Depositor, the Servicer or any of their affiliates), may, on behalf of all those Noteholders or Certificateholders, waive any default by the Servicer in the performance of its obligations under the related Sale and Servicing Agreement and its consequences, except a Servicer Default in making any required deposits to the related Collection Account in accordance with that Sale and Servicing Agreement. With respect to each Trust that has not issued notes, holders of certificates of that series evidencing a majority of the aggregate Certificate Balance of those certificates then outstanding (or relevant class or classes of certificates but excluding for purposes of calculation and action all certificates held by the Depositor, the Servicer or any of their affiliates), may, on behalf of all those Certificateholders, waive any default by the Servicer in the performance of its obligations under the related Pooling and Servicing Agreement, except a Servicer Default in making any required deposits to the related Account in accordance with the related Pooling and Servicing Agreement. No waiver will impair those Noteholders' or Certificateholders' rights with respect to subsequent defaults. Amendment Unless otherwise provided in the related prospectus supplement, each of the Transfer and Servicing Agreements may be amended by the parties to that Transfer and Servicing Agreement, without the consent of the related Noteholders or Certificateholders, for the purpose of adding any provisions to or 71 changing in any manner or eliminating any of the provisions of that Transfer Agreement and Servicing Agreement or of modifying in any manner the rights of the Securityholders thereunder; provided, that any amendment will not, as evidenced by an opinion of counsel, adversely affect in any material respect the interests of the Securityholder; provided, however, that the amendment shall be deemed not to materially and adversely affect the interests of any Securityholder, and no opinion shall be required, if the Rating Agencies confirm that the amendment will not result in the withdrawal, qualification or reduction of the then current ratings of the Securities. Each of the Transfer and Servicing Agreements may also be amended from time to time by the parties to that Transfer and Servicing Agreement with the consent of the Noteholders evidencing at least a majority of the Note Balance and the Certificateholders evidencing 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 Transfer and Servicing Agreements or of modifying in any manner the rights of the Securityholders; provided, that the amendment may not: o increase or reduce in any manner the amount of, or accelerate or delay the timing of, collections of payments on or in respect of the Receivables or distributions that are required to be made for the benefit of the Securityholders; or o reduce the aforesaid percentage of the notes or certificates that is required to consent to the amendment, without the consent of the holders of all of the outstanding notes or certificates, as applicable. List of Securityholders Three or more holders of the certificates of any class in a series or one or more holders of those certificates of that class evidencing not less than 51% of the Certificate Balance of those certificates may, by written request to the related Trustee, obtain access to the list of all Certificateholders maintained by that Trustee for the purpose of communicating with other Certificateholders with respect to their rights under the related Trust Agreement or Pooling and Servicing Agreement or under those certificates. No Transfer and Servicing Agreement will provide for the holding of annual or other meetings of Securityholders. Insolvency Event Each Trust Agreement will provide that the related Trustee does not have the power to commence a voluntary proceeding in bankruptcy with respect to the related Trust without the unanimous prior approval of all Certificateholders (including the Depositor) of that Trust and the delivery to that Trustee by each Certificateholder (including the Depositor) of a certificate certifying that that Certificateholder reasonably believes that that Trust is insolvent. Payment of Notes Upon the payment in full of all outstanding notes of a given series and the satisfaction and discharge of the related Indenture, the related Trustee will succeed to all the rights of the Indenture Trustee, and the Certificateholders of that series will succeed to all the rights of the Noteholders of that series, under the related Sale and Servicing Agreement, except as otherwise provided in the Sale and Servicing Agreement. 72 Termination The respective obligations of the Depositor, the Servicer, BMW FS (so long as BMW FS has rights or obligations under the related Transfer and Servicing Agreement), the related Trustee and the related Indenture Trustee, as the case may be, pursuant to a Transfer and Servicing Agreement will terminate upon the earlier of: o the maturity or other liquidation of the last Receivable and the disposition of any amounts received upon liquidation of any remaining Receivables; o the payment to Securityholders of all amounts required to be paid to them pursuant to the related agreement; or o the purchase by the Servicer of all of the Receivables as of the end of any Collection Period after the Pool Balance is reduced to 10% or less of the sum of the Pool Balance as of the related Cutoff Date and the amount on deposit in the pre-funding account on the Closing Date pursuant to the terms of the Sale and Servicing Agreement. The Trustee will give written notice of termination to each Securityholder of record. The final distribution to any Securityholder will be made only upon surrender and cancellation of that holder's Security at any office or agency of the Trustee specified in the notice of termination. Any funds remaining in the Trust, after the Trustee has taken measures to locate a Securityholder set forth in the related Transfer and Servicing Agreement and those measures have failed, will be distributed, subject to applicable law, to the Depositor. Upon termination of any Trust, the assets of that Trust will be liquidated and the proceeds from any liquidation, and amounts held in related Accounts, will be applied to pay the notes and the certificates of the related series in full, to the extent of amounts available. As more fully described in the applicable prospectus supplement, any outstanding notes of the related series will be redeemed concurrently with any of the events specified above and the subsequent payment to the related Certificateholders of all amounts required to be paid to them pursuant to the applicable Trust Agreement or Pooling and Servicing Agreement will effect early retirement of the certificates of that series. Administration Agreement BMW FS, in its capacity as administrator (the "Administrator"), will enter into an agreement (as amended and supplemented from time to time, an "Administration Agreement") with each Trust that issues notes and the related Indenture Trustee pursuant to which the Administrator will agree, to the extent provided in that Administration Agreement, to provide the notices and to perform other administrative obligations required by the related Indenture. Unless provided for in the applicable prospectus supplement, the Administrator shall not be paid a separate fee for the performance of its duties as Administrator. 73 Certain Legal Aspects of the Receivables General The transfer of the Receivables to the applicable Trustee, the perfection of the security interests in the Receivables and the enforcement of rights to realize on the Financed Vehicles as collateral for the Receivables are subject to a number of federal and state laws, including the UCC as in effect in various states. The Servicer and the Depositor will take the action described below to perfect the rights of the applicable Trustee in the Receivables. If another party purchases (including the taking of a security interest in) the Receivables for new value in the ordinary course of its business, without actual knowledge of the Trust's interest, and takes possession of the Receivables, that purchaser would acquire an interest in the Receivables superior to the interest of the Trust. Security Interests General. In states in which retail installment sale contracts, including the Receivables, evidence the credit sale of motor vehicles by dealers to obligors, the contracts also constitute personal property security agreements and include grants of security interests in the vehicles under the applicable UCC. Perfection of security interests in financed motor vehicles is generally governed by the motor vehicle registration laws of the state in which the vehicle is located. In most states, a security interest in a motor vehicle is perfected by obtaining possession of the certificate of title to the motor vehicle or notation of the secured party's lien on the motor vehicle's certificate of title. All retail installment sale contracts acquired by BMW FS from BMW Centers name BMW FS as obligee or assignee and as the secured party. BMW FS also takes all actions necessary under the laws of the state in which the related Financed Vehicle is located to perfect its security interest in that Financed Vehicle, including, where applicable, having a notation of its lien recorded on the related certificate of title and obtaining possession of that certificate of title. Because BMW FS continues to service the contracts as Servicer under the Sale and Servicing Agreement or the Pooling and Servicing Agreement, as applicable, the Obligors on the contracts will not be notified of the sale from BMW FS to the Depositor or the sale from the Depositor to the related Trust. Perfection. Pursuant to the related Purchase Agreement, BMW FS will sell and assign its security interest in the Financed Vehicles to the Depositor and, with respect to each Trust, pursuant to the related Sale and Servicing Agreement or Pooling and Servicing Agreement, as applicable, the Depositor will assign its security interest in the Financed Vehicles to that Trust. However, because of the administrative burden and expense, none of BMW FS, the Depositor or the related Trustee will amend any certificate of title to identify that Trust as the new secured party on that certificate of title relating to a Financed Vehicle. However, UCC financing statements with respect to the transfer to the Depositor of BMW FS' security interest in the Financed Vehicles and the transfer to the Trustee of the Depositor's security interest in the Financed Vehicles will be filed. In addition, the Servicer will continue to hold any certificates of title relating to the Financed Vehicles in its possession as custodian for that Trust pursuant to the related Sale and Servicing Agreement or Pooling and Servicing Agreement. We refer you to "Description of the Transfer and Servicing Agreements--Sale and Assignment of Receivables." In most states, an assignment such as that under each Purchase Agreement or each Sale and Servicing Agreement or Pooling and Servicing Agreement is an effective conveyance of a security interest without amendment of any lien noted on a motor vehicle's certificate of title, and the assignee succeeds to the assignor's rights as secured party. Although re-registration of the motor vehicle is not necessary to convey a perfected security interest in the Financed Vehicles to the Trust, because the Trust 74 will not be listed as lienholder on the certificates of title, the security interest of that Trust in the vehicle could be defeated through fraud or negligence. In those states, in the absence of fraud or forgery by the motor vehicle owner or the Servicer or administrative error by state or local agencies, the notation of BMW FS' lien on the certificates of title will be sufficient to protect that Trust against the rights of subsequent purchasers of a Financed Vehicle or subsequent lenders who take a security interest in a Financed Vehicle. In each Purchase Agreement, BMW FS will represent and warrant, and in each Sale and Servicing Agreement or Pooling and Servicing Agreement, the Depositor will represent and warrant, that it has taken all action necessary to obtain a perfected security interest in each Financed Vehicle. If there are any Financed Vehicles as to which BMW FS failed to obtain and assign to the Depositor a perfected security interest, the security interest of the Depositor would be subordinate to, among others, subsequent purchasers of the Financed Vehicles and holders of perfected security interests in the Financed Vehicles. To the extent that failure has a material and adverse effect on the Trust's interest in the related Receivables, however, it would constitute a breach of the warranties of BMW FS under the related Purchase Agreement or the Depositor under the related Sale and Servicing Agreement or Pooling and Servicing Agreement. Accordingly, pursuant to the related Sale and Servicing Agreement or Pooling and Servicing Agreement, the Depositor would be required to repurchase the related Receivable from the Trust and, pursuant to the related Purchase Agreement, BMW FS would be required to purchase that Receivable from the Depositor, in each case unless the breach was cured. Pursuant to each Sale and Servicing Agreement and Pooling and Servicing Agreement, the Depositor will assign to the related Trust its rights to cause BMW FS to purchase that Receivable under the related Purchase Agreement. We refer you to "Description of the Transfer and Servicing Agreements--Sale and Assignment of Receivables" and "Risk Factors--Interests of other persons in the receivables and financed vehicles could be superior to the trust's interest, which may result in reduced payments on your securities." Continuity of Perfection. Under the laws of most states, the perfected security interest in a motor vehicle would continue for four months after the motor vehicle is moved to a state that is different from the one in which it is initially registered and thereafter until the owner re-registers the motor vehicle in the new state. A majority of states generally require surrender of a certificate of title to reregister a motor vehicle. In those states (for example, California) that require a secured party to hold possession of the certificate of title to maintain perfection of the security interest, the secured party would learn of the re-registration through the request from the obligor under the related installment sales contract to surrender possession of the certificate of title. In the case of motor vehicles registered in states providing for the notation of a lien on the certificate of title but not possession by the secured party (for example, Texas), the secured party would receive notice of surrender from the state of re-registration if the security interest is noted on the certificate of title. Thus, the secured party would have the opportunity to re-perfect its security interest in the vehicle in the state of relocation. However, these procedural safeguards will not protect the secured party if through fraud, forgery or administrative error, the debtor somehow procures a new certificate of title that does not list the secured party's lien. Additionally, 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 the Receivables, BMW FS will take steps to effect re-perfection upon receipt of notice of re-registration or information from the Obligor as to relocation. Similarly, when an Obligor sells a Financed Vehicle, BMW FS must surrender possession of the certificate of title or will receive notice as a result of its lien noted on the certificate of title and accordingly will have an opportunity to require satisfaction of the related Receivable before release of the lien. Under each Sale and Servicing Agreement and Pooling and Servicing Agreement, the Servicer will be obligated to take appropriate steps, at the Servicer's expense, to maintain perfection of security interests in the Financed Vehicles and will be obligated to purchase the related Receivable if it fails to do so and that failure has a material and adverse effect on the Trust's interest in the Receivable. 75 Priority of Liens Arising by Operation of Law. Under the laws of most states (including California), liens for repairs performed on a motor vehicle and liens for unpaid taxes take priority over even a perfected security interest in a Financed Vehicle. The Code also grants priority to specified federal tax liens over the lien of a secured party. The laws of some states and federal law permit the confiscation of motor vehicles by governmental authorities under some circumstances if used in unlawful activities, which may result in the loss of a secured party's perfected security interest in the confiscated vehicle. BMW FS will represent and warrant to the Depositor in each Purchase Agreement, and the Depositor will represent and warrant to the Trust in each Sale and Servicing Agreement and Pooling and Servicing Agreement, that, as of the related Closing Date, each security interest in a Financed Vehicle is prior to all other present liens (other than tax liens and other liens that arise by operation of law) upon and security interests in that Financed Vehicle. However, liens for repairs or taxes could arise, or the confiscation of a Financed Vehicle could occur, at any time during the term of a Receivable. No notice will be given to the Trustee, any Indenture Trustee, any Noteholders or any Certificateholders in respect of a given Trust if a lien arises or confiscation occurs that would not give rise to the Depositor's repurchase obligation under the related Sale and Servicing Agreement or Pooling and Servicing Agreement or BMW FS' repurchase obligation under the related Purchase Agreement. Repossession In the event of default by an obligor, the holder of the related retail installment sale contract has all the remedies of a secured party under the UCC, except where specifically limited by other state laws. Among the UCC remedies, the secured party has the right to perform repossession by self-help means, unless it would constitute a breach of the peace or is otherwise limited by applicable state law. Unless a motor vehicle financed by BMW FS is voluntarily surrendered, self-help repossession is the method employed by BMW FS in most states and is accomplished simply by retaking possession of the Financed Vehicle. In cases where an obligor objects or raises a defense to repossession, or if otherwise required by applicable state law, a court order must be obtained from the appropriate state court, and that vehicle must then be recovered in accordance with that order. In some jurisdictions, the secured party is required to notify that obligor of the default and the intent to repossess the collateral and to give that obligor a time period within which to cure the default prior to repossession. In some states, an obligor has the right to reinstate its contract and recover the collateral by paying the delinquent installments and other amounts due. Notice of Sale; Redemption Rights In the event of default by an obligor under a retail installment sale contract, some jurisdictions require that the obligor be notified of the default and be given a time period within which to cure the default prior to repossession. Generally, this right of cure may only be exercised on a limited number of occasions during the term of the related contract. 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. In most states, an obligor has the right to redeem the collateral prior to actual sale by paying the secured party the unpaid principal balance of the obligation, accrued interest on the obligation plus reasonable expenses for repossessing, holding and preparing the collateral for disposition and arranging for its sale, plus, in some jurisdictions, reasonable attorneys' fees. In some states, an obligor has the right to redeem the collateral prior to actual sale by payment of delinquent installments or the unpaid balance. 76 Deficiency Judgments and Excess Proceeds The proceeds of resale of motor vehicles generally will be applied first to the expenses of resale and repossession and then to the satisfaction of the indebtedness. While some states impose prohibitions or limitations on deficiency judgments if the net proceeds from resale do not cover the full amount of the indebtedness, a deficiency judgment can be sought in those states that do not prohibit or limit those judgments. In addition to the notice requirement described above, the UCC requires that every aspect of the sale or other disposition, including the method, manner, time, place and terms, be "commercially reasonable." Generally, courts have held that when a sale is not "commercially reasonable," the secured party loses its right to a deficiency judgment. However, the deficiency judgment would be a personal judgment against the obligor for the shortfall, and a defaulting obligor can be expected to have very little capital or sources of income available following repossession. Therefore, in many cases, it may not be useful to seek a deficiency judgment or, if one is obtained, it may be settled at a significant discount or be uncollectible. In addition, the UCC permits the obligor or other interested party to recover for any loss caused by noncompliance with the provisions of the UCC. Also, prior to a sale, the UCC permits the obligor or other interested person to prohibit the secured party from disposing of the collateral if it is established that the secured party is not proceeding in accordance with the "default" provisions under the UCC. Occasionally, after resale of a repossessed vehicle and payment of all expenses and indebtedness, there is a surplus of funds. In that case, the UCC requires the creditor to remit the surplus to any holder of a subordinate lien with respect to that vehicle or if no lienholder exists, the UCC requires the creditor to remit the surplus to the obligor. Certain Bankruptcy Considerations In structuring the transactions contemplated by this prospectus, the Depositor has taken steps that are intended to make it unlikely that the voluntary or involuntary application for relief by BMW FS, under the United States Bankruptcy Code or similar applicable state laws (collectively, "Insolvency Laws"), will result in consolidation of the assets and liabilities of the Depositor with those of BMW FS. These steps include the creation of the Depositor as a wholly owned, limited purpose subsidiary pursuant to articles of incorporation and bylaws containing limitations, including restrictions on the nature of the Depositor's business and on its ability to commence a voluntary case or proceeding under any Insolvency Law without the unanimous affirmative vote of all of its directors. In addition, to the extent that the Depositor granted a security interest in the Receivables to the Trust, and that interest was validly perfected before the bankruptcy or insolvency of BMW FS and was not taken or granted in contemplation of insolvency or with the intent to hinder, delay or defraud BMW FS or its creditors, that security interest should not be subject to avoidance, and payments to the Trust with respect to the Receivables should not be subject to recovery by a creditor or trustee in bankruptcy of BMW FS. However, delays in payments on the Securities and possible reductions in the amount of those payments could occur if: (A) a court were to conclude that the assets and liabilities of the Depositor should be consolidated with those of BMW FS in the event of the application of applicable Insolvency Laws to BMW FS; (B) a filing were made under any Insolvency Law by or against the Depositor; or (C) an attempt were to be made to litigate any of the foregoing issues. 77 On each Closing Date, counsel to the Depositor will give an opinion to the effect that, based on a reasoned analysis of analogous case law (although there is no precedent based on directly similar facts), and, subject to facts, assumptions and qualifications specified in the opinion and applying the principles set forth in the opinion, in the event of a voluntary or involuntary bankruptcy case in respect of BMW FS under Title 11 of the United States Bankruptcy Code at a time when BMW FS was insolvent, the property of the Depositor would not properly be substantively consolidated with the property of the estate of BMW FS. Among other things, that opinion will assume that each of the Depositor and BMW FS will follow specified procedures in the conduct of its affairs, including maintaining records and books of account separate from those of the other, refraining from commingling its assets with those of the other, and refraining from holding itself out as having agreed to pay, or being liable for, the debts of the other. The Depositor and BMW FS intend to follow these and other procedures related to maintaining their separate corporate identities. However, there can be no assurance that a court would not conclude that the assets and liabilities of the Depositor should be consolidated with those of BMW FS. BMW FS will warrant in each Purchase Agreement that the sale of the related Receivables by it to the Depositor is a valid sale. Notwithstanding the foregoing, if BMW FS were to become a debtor in a bankruptcy case, a court could take the position that the sale of Receivables to the Depositor should instead be treated as a pledge of those Receivables to secure a borrowing of BMW FS. If a court were to reach this conclusion, or a filing were made under any Insolvency Law by or against the Depositor, or if an attempt were made to litigate any of the foregoing issues, delays in payments on the certificates (and possible reductions in the amount of payments) could occur. In addition, if the transfer of Receivables to the Depositor is treated as a pledge instead of a sale, a tax or government lien on the property of BMW FS arising before the transfer of a Receivable to the Depositor may have priority over the Depositor's interest in that Receivable. Also, while BMW FS is the Servicer, cash collections on the Receivables may be commingled with general funds of BMW FS and, in the event of a bankruptcy of BMW FS, a court may conclude that the Trust does not have a perfected interest in those collections. BMW FS and the Depositor will treat the transactions described in this prospectus as a sale of the Receivables to the Depositor. Consumer Protection Laws Numerous federal and state consumer protection laws and related regulations impose substantial requirements upon lenders and servicers involved in consumer finance. These laws include the Truth-in-Lending Act, the Equal Credit Opportunity Act, the Federal Trade Commission Act, the Fair Credit 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 and Z, the Soldiers' and Sailors' Civil Relief Act of 1940, the Texas Consumer Credit Code, state adoptions of the National Consumer Act and of the Uniform Consumer Credit Code and state motor vehicle retail installment sales acts and other similar laws. Also, state laws impose finance charge ceilings and other restrictions on consumer transactions and require contract disclosures in addition to those required under federal law. These requirements impose specific statutory liabilities upon creditors who fail to comply with their provisions. In some cases, this liability could affect an assignee's ability to enforce consumer finance contracts including the Receivables. The so-called "Holder-in-Due-Course" Rule of the Federal Trade Commission (the "FTC Rule"), the provisions of which are generally duplicated by the Uniform Consumer Credit Code, other statutes or the common law in some states, has the effect of subjecting a seller, and specified creditors and their assignees, in a consumer credit transaction to all claims and defenses that the obligor in the transaction could assert against the seller of the goods. Liability under the FTC Rule is limited to the amounts paid 78 by the obligor under the contract, and the holder of the contract may also be unable to collect any balance remaining due under that contract from the obligor. The FTC Rule is generally duplicated by the Uniform Consumer Credit Code, other state statutes or the common law in certain states. Most of the Receivables will be subject to the requirements of the FTC Rule. Accordingly, each Trust, as holder of the related Receivables, will be subject to any claims or defenses that the purchaser of the applicable Financed Vehicle may assert against the seller of the related Financed Vehicle. As to each Obligor, these claims are limited to a maximum liability equal to the amounts paid by the Obligor on the related Receivable. Under most state motor vehicle dealer licensing laws, sellers of motor vehicles are required to be licensed to sell motor vehicles at retail sale. Furthermore, federal odometer regulations promulgated under the Motor Vehicle Information and Cost Savings Act require that all sellers of new and used vehicles furnish a written statement signed by the seller certifying the accuracy of the odometer reading. If the seller is not properly licensed or if a written odometer disclosure statement was not provided to the purchaser of the related Financed Vehicle, an obligor may be able to assert a defense against the seller of the vehicle. If an Obligor were successful in asserting any of those claims or defenses, that claim or defense would constitute a breach of the Depositor's representations and warranties under the related Sale and Servicing Agreement or Pooling and Servicing Agreement and a breach of BMW FS' warranties under the related Purchase Agreement and would, if the breach materially and adversely affects the Receivable or the interests of the Securityholders, create an obligation of the Depositor and BMW FS, respectively, to repurchase the Receivable unless the breach is cured. We refer you to "Description of the Transfer and Servicing Agreements--Sale and Assignment of Receivables." Courts have applied general equitable principles to secured parties pursuing repossession and litigation involving deficiency balances. These equitable principles may have the effect of relieving an obligor from some or all of the legal consequences of a default. In several cases, consumers have asserted that the self-help remedies of secured parties under the UCC and related laws violate the due process protections provided under the 14th Amendment to the Constitution of the United States. Courts have generally upheld the notice provisions of the UCC and related laws as reasonable or have found that the repossession and resale by the creditor do not involve sufficient state action to afford constitutional protection to borrowers. From time to time, BMW FS has been involved in litigation under consumer protection laws. In addition, substantially all of the motor vehicle contracts originated by BMW FS in California after 1990 (the "California Contracts") provided that the contract may be rescinded by the related BMW Center if the BMW Center is unable to assign the contract to a lender within ten days of the date of the contract. As of the date of this prospectus, the ten-day rescission period had run in respect of all of the California Contracts in which the rescission provision appears. Although there is authority, which is not binding upon any court, providing that a conditional sale contract containing such a provision does not comply with California law and would render the contract unenforceable, to the Depositor's and BMW FS' knowledge, the issue has not been presented before any California court. On the Closing Date, the Depositor will receive an opinion of counsel to the effect that all of the California Contracts are enforceable under California law and applicable federal laws. BMW FS and the Depositor will represent and warrant under each Purchase Agreement and each Sale and Servicing Agreement and Pooling and Servicing Agreement, as applicable, that each Receivable complies with all requirements of law in all material respects. Accordingly, if an Obligor has a claim against a Trust for violation of any law and that claim materially and adversely affects that Trust's interest in a Receivable, that violation would constitute a breach of the representations and warranties of BMW FS under the Purchase Agreement and the Depositor under the related Sale and Servicing Agreement or 79 Pooling and Servicing Agreement and would create an obligation of BMW FS and the Depositor to repurchase the Receivable unless the breach is cured. We refer you to "Description of the Transfer and Servicing Agreements--Sale and Assignment of 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 secured party to realize upon collateral or to enforce a deficiency judgment. For example, in a Chapter 13 proceeding under the federal bankruptcy law, a court may prevent a creditor from repossessing a motor vehicle and, as part of the rehabilitation plan, reduce the amount of the secured indebtedness to the market value of the vehicle at the time of bankruptcy (as determined by the court), leaving the creditor as a general unsecured creditor for the remainder of the indebtedness. A bankruptcy court may also reduce the monthly payments due under a contract or change the rate of interest and time of repayment of the indebtedness. Under the terms of the Soldiers' and Sailors' Relief Act of 1940 (the "Relief Act"), an Obligor who enters the military service after the origination of that Obligor's Receivable (including an Obligor who is a member of the National Guard or is in reserve status at the time of the origination of the Obligor's Receivable and is later called to active duty) may not be charged interest above an annual rate of 6% during the period of that Obligor's active duty status, unless a court orders otherwise upon application of the lender. In addition, some states, including California, allow members of its national guard to extend payments on any contract obligation if called into active service by the Governor for a period exceeding 7 days. It is possible that the foregoing could have an effect on the ability of the Servicer to collect the full amount of interest owing on some of the Receivables. In addition, both the Relief Act and the laws of some states, including California, New York and New Jersey, imposes limitations that would impair the ability of the Servicer to repossess the released Financed Vehicle during the Obligor's period of active duty status. Thus, if that Receivable goes into default, there may be delays and losses occasioned by the inability to exercise the Trust's rights with respect to the Receivable and the related Financed Vehicle in a timely fashion. Any shortfall pursuant to either of the two preceding paragraphs, to the extent not covered by amounts payable to the Securityholders from amounts on deposit in the related Reserve Fund or from coverage provided under any other credit enhancement mechanism, could result in losses to the Securityholders. Material Income Tax Consequences The following is a discussion of the anticipated material federal income tax consequences of the purchase, ownership and disposition of the notes and the certificates of any series, to the extent it relates to matters of law or legal conclusions. This discussion represents the opinion of tax counsel to the Trust, subject to the qualifications set forth in this prospectus. The summary does not purport to deal with federal income tax consequences applicable to all categories of investors, some of which may be subject to special rules. For example, it does not discuss the tax treatment of Noteholders or Certificateholders that are insurance companies, regulated investment companies, dealers in securities, S-corporations, banks, thrifts, other financial institutions, broker-dealers, tax-exempt organizations, real estate investment trusts and persons that hold certificates or notes as part of a straddle, hedging or conversion transaction or to a person or entity holding an interest in a holder. Moreover, there are no cases or Internal Revenue Service ("IRS") rulings on similar transactions involving both debt and equity interests issued by a trust with terms similar to those of the notes and the certificates. As a result, the IRS may disagree with all or a part of the 80 discussion below. It is suggested that prospective investors consult their own tax advisors in determining the federal, state, local, foreign and any other tax consequences to them of the purchase, ownership and disposition of the notes and the certificates. The following summary is based upon current provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the Treasury regulations promulgated under the Code and judicial or ruling authority, all of which are subject to change, which change may be retroactive. No ruling on any of the issues discussed below will be sought from the IRS. For purposes of the following summary, references to the Trust, the notes, the certificates and related terms, parties and documents shall be deemed to refer to each Trust and the notes, certificates and related terms, parties and documents applicable to that Trust. The federal income tax consequences to Certificateholders will vary depending on whether the Trust is treated as a partnership (or a "disregarded entity," in the event that there is a single beneficial owner of the Certificates) or a grantor trust under the Code. The prospectus supplement for each series of certificates will specify, and each trust will receive an opinion of Tax Counsel regarding: o whether the Trust will be treated as a partnership, or a disregarded entity, or a grantor trust; and o the tax characterization of the notes and certificates. An opinion of Tax Counsel, however, is not binding on the IRS or the courts. Tax Treatment of Owner Trusts Tax Characterization of the Trust The following general discussion of the anticipated federal income tax consequences of the purchase, ownership and disposition of the notes and the certificates of a Trust referred to as an "owner trust" in the applicable prospectus supplement (an "Owner Trust"), subject to the qualifications set forth in this prospectus. These statements are intended as an explanatory discussion of the related federal income tax matters affecting investors generally, but do not purport to furnish information in the level of detail or with the attention to an investor's specific tax circumstances that would be provided by an investor's own tax advisor. Accordingly, it is suggested that each investor consult its own tax advisor with regard to the tax consequences to it of investing in notes or certificates. Tax Counsel will deliver its opinion that an Owner Trust will not be an association or publicly traded partnership taxable as a corporation for federal income tax purposes. This opinion will be based on the assumption that the terms of the Related Documents will be complied with, and on Tax Counsel's conclusion that the nature of the income of the Trust will exempt it from the rule that some publicly traded partnerships are taxable as corporations. If the Owner Trust were taxable as a corporation for federal income tax purposes, the Trust would be subject to corporate income tax on its taxable income. The Trust's taxable income would include all its income on the Receivables, possibly reduced by its interest expense on some or all of the classes of notes. Any corporate income tax could materially reduce cash available to make payments on the notes and the certificates, and Certificateholders could be liable for any tax of this type that is not paid by the Trust. 81 Tax Consequences to Owners of the Notes Treatment of the Notes as Indebtedness. The Depositor and any Noteholders will agree, and the beneficial owners of the notes (the "Note Owners") will agree by their purchase of notes, to treat the notes as debt for federal income tax purposes. Except as otherwise provided in the related prospectus supplement, Tax Counsel will deliver its opinion that the notes will be classified as debt for federal income tax purposes. The discussion below assumes this characterization of the notes is correct. OID, Indexed Securities, etc. The discussion below assumes that all payments on the notes are denominated in U.S. dollars, and that the notes are not Indexed Securities or Strip Notes (as defined in this prospectus). Moreover, the discussion assumes that the interest formula for the notes meets the requirements for "qualified stated interest" under Treasury regulations (the "OID regulations") relating to original issue discount ("OID"), and that any OID on the notes (i.e., any excess of the principal amount of the notes over their issue price) does not exceed a de minimis amount (i.e., 1/4% of their principal amount multiplied by the number of full years included in determining their term), all within the meaning of the OID regulations. In determining whether any OID on the notes is de minimis, the Depositor expects to use a reasonable assumption regarding prepayments (a "Prepayment Assumption") to determine the weighted average maturity of the notes. If these conditions are not satisfied with respect to any given series of notes, additional tax considerations with respect to those notes will be disclosed in the applicable prospectus supplement. Interest Income on the Notes. Based on the above assumptions, except as discussed in the following paragraph, the notes will not be considered issued with OID. The stated interest on the notes will be taxable to a Note Owner as ordinary interest income when received or accrued in accordance with that Note Owner's method of tax accounting. Under the OID regulations, the Note Owner of a note issued with a de minimis amount of OID must include that OID in income, on a pro rata basis, as principal payments are made on the note. A purchaser who buys a note for more or less than its principal amount will generally be subject, respectively, to the premium amortization or market discount rules of the Code. The Note Owner of a note that has a fixed maturity date of not more than one year from the issue date of that note (a "Short-Term Note") may be subject to special rules. An accrual basis Note Owner of a Short-Term Note (and some cash method Note Owners, including regulated investment companies, as set forth in Section 1281 of the Code) generally would be required to report interest income as interest accrues on a straight-line basis or under a constant yield method over the term of each interest period. Other cash basis Note Owners of a Short-Term Note would, in general, be required to report interest income as interest is paid (or, if earlier, upon the taxable disposition of the Short-Term Note). However, a cash basis Note Owner of a Short-Term Note reporting interest income as it is paid may be required to defer a portion of any interest expense otherwise deductible on indebtedness incurred to purchase or carry the Short-Term Note until the taxable disposition of the Short-Term Note. A cash basis Note Owner that is not required to report interest income as it accrues under Section 1281 may elect to accrue interest income on all nongovernment debt obligations with a term of one year or less, in which case the Note Owner would not be subject to the interest expense deferral rule referred to in the preceding sentence. Certain special rules apply if a Short-Term Note is purchased for more or less than its principal amount. Sale or Other Disposition. If a Note Owner sells a note, the Note Owner will recognize gain or loss in an amount equal to the difference between the amount realized on the sale and the Note Owner's adjusted tax basis in the note. The adjusted tax basis of a note to a particular Note Owner will equal the Note Owner's cost for the note, increased by any market discount, acquisition discount, OID and gain previously included in income by that Note Owner with respect to the note and decreased by the amount 82 of bond premium, if any, previously amortized and by the amount of payments of principal and OID previously received by that Note Owner with respect to that note. Any such gain or loss, and any gain or loss recognized on a prepayment of the notes, will be capital gain or loss if the note was held as a capital asset, except for gain representing accrued interest and accrued market discount not previously included in income. Capital losses generally may be used only to offset capital gains. Foreign Owners. Interest paid (or accrued) to a Note Owner who is a Foreign Owner generally will be considered "portfolio interest," and generally will not be subject to United States federal income tax and withholding tax if the interest is not effectively connected with the conduct of a trade or business within the United States by the Foreign Owner and: 1. the Foreign Owner is not actually or constructively a "10 percent shareholder" of the Trust or the Depositor (including a holder of 10% of the outstanding certificates issued by the Trust) or a "controlled foreign corporation" with respect to which the Trust or the Depositor is a "related person" within the meaning of the Code; 2. the Foreign Owner is not a bank receiving interest described in Section 881(c)(3)(A) of the Code; 3. the interest is not contingent interest described in Section 871(h)(4) of the Code; and 4. the Foreign Owner does not bear specified relationships to any Certificateholder. To qualify for the exemption from taxation, the Foreign Owner must provide the applicable Trustee or other person who is otherwise required to withhold U.S. tax with respect to the notes with an appropriate statement, on Form W-8BEN or a similar form, signed under penalty of perjury, certifying that the Note Owner is a Foreign Owner and providing the Foreign Owner's name and address. If a note is held through a securities clearing organization or other financial institution, the organization may provide the relevant signed statement to the withholding agent; in that case, however, the signed statement must be accompanied by a Form W-8BEN or substitute form provided by the Foreign Owner and the Foreign Owner must notify the financial institution acting on its behalf of any changes to the information on the Form W-8BEN, or substitute form, within 30 days of that change. If interest paid to a Foreign Owner is not considered portfolio interest, then it will be subject to United States federal income and withholding tax at a rate of 30 percent, unless reduced or eliminated pursuant to an applicable tax treaty. In order to claim the benefit of any applicable tax treaty, the Foreign Owner must provide the applicable Trustee or other person who is required to withhold U.S. tax with respect to the notes with an appropriate statement on Form W-8BEN or substitute form, signed under penalties of perjury, certifying that the Foreign Owner is entitled to benefits under the treaty. Any capital gain realized on the sale, redemption, retirement or other taxable disposition of a note by a Foreign Owner will be exempt from United States federal income and withholding tax, provided that: o the gain is not effectively connected with the conduct of a trade or business in the United States by the Foreign Owner; and o in the case of an individual Foreign Owner, the Foreign Owner is not present in the United States for 183 days or more during the taxable year of disposition. As used in this prospectus, a "U.S. Person" means: 83 1. a citizen or resident of the United States; 2. a corporation or a partnership organized in or under the laws of the United States or any political subdivision of the United States; 3. an estate, the income of which from sources outside the United States is includible in gross income for federal income tax purposes regardless of its connection with the conduct of a trade or business within the United States; or 4. a trust if: (a) a court within the U.S. is able to exercise primary supervision over the administration of the trust and one or more United States persons have authority to control all substantial decisions of the trust; or (b) the trust was in existence on August 20, 1996 and is eligible to elect, and has made a valid election, to be treated as a U.S. Person despite not meeting the requirements of clause (a). A "Foreign Owner"means a person other than a U.S. Person and persons subject to rules applicable to certain former citizens or residents of the United States. Backup Withholding. Each Note Owner (other than an exempt Note Owner which includes a corporation, tax-exempt organization, qualified pension and profit-sharing trust, individual retirement account or nonresident alien who provides certification as to status as a nonresident) will be required to provide, under penalties of perjury, a certificate on Form W-9 providing the Note Owner's name, address, correct federal taxpayer identification number and a statement that the Note Owner is not subject to backup withholding. Should a nonexempt Note Owner fail to provide the required certification, the Trust will be required to withhold 31 percent of the amount otherwise payable to the Note Owner, and remit the withheld amount to the IRS. The amount withheld would be credited against the Note Owner's federal income tax liability. New Withholding Regulations. Recently, the Treasury Department issued new regulations (the "New Regulations") which modify the withholding, backup withholding and information reporting rules described above. The New Regulations attempt to unify certification requirements and modify reliance standards. The New Regulations will generally be effective for payments made after December 31, 2000, subject to certain transition rules. It is suggested that prospective investors consult their own tax advisors regarding the New Regulations. Possible Alternative Treatments of the Notes. If, contrary to the opinion of Tax Counsel, the IRS successfully asserted that one or more of the notes did not represent debt for federal income tax purposes, the notes might be treated as equity interests in the Trust. If so treated, the Trust might be taxable as a corporation with the adverse consequences described above (and the taxable corporation would not be able to reduce its taxable income by deductions for interest expense on notes recharacterized as equity). Alternatively, and most likely in the view of Tax Counsel, the Trust might be treated as a publicly traded partnership that would not be taxable as a corporation because it would meet specified qualifying income tests. Nonetheless, treatment of the notes as equity interests in a publicly traded partnership could have adverse tax consequences to some Note Owners. For example, income to some tax-exempt entities (including pension funds) may be "unrelated business taxable income," income to Foreign Owners may be subject to U.S. tax and cause Foreign Owners to be subject to U.S. tax return filing and withholding 84 requirements, and individual Note Owners might be subject to some limitations on their ability to deduct their share of trust expenses. Tax Consequences to Owners of the Certificates Treatment of the Trust as a Partnership. Tax counsel to the Trust is of the opionion that for federal income tax purposes, the Notes should constitute debt and, if the Certificates are held by more than one person, the Trust will constitute a partnership. However, the proper characterization of the arrangement involving the Trust, the certificates, the notes, the Depositor and the Servicer is not clear because there is no authority on transactions closely comparable to that contemplated in this prospectus. The Depositor and the Servicer will agree, and the beneficial owners of the certificates (the "Certificate Owners") will agree by their purchase of certificates, to treat the Owner Trust as a partnership (or as an entity disregarded as separate from the Certificate Owner in the event that there is a single Certificate Owner) for purposes of federal and state income tax, franchise tax and any other tax measured in whole or in part by income. Unless otherwise specified in the applicable prospectus supplement, if the Owner Trust is treated as a partnership, the assets of the partnership would be the assets held by the Trust, the partners of the partnership would be the Certificate Owners (including the Depositor in its capacity as recipient of payments from the Reserve Fund), and the notes would be debt of the partnership. A variety of alternative characterizations are possible. For example, because the certificates have features characteristic of debt, the certificates might be considered debt of the Depositor or the Trust. Any characterization of this type generally would not result in materially adverse tax consequences to Certificate Owners as compared to the consequences from treatment of the certificates as equity in a partnership, described below. The following discussion assumes that the certificates represent equity interests in a partnership. The applicable prospectus supplement will disclose the tax considerations relevant to any certificates not intended to constitute equity interests in a partnership. Indexed Securities, etc. The following discussion assumes that all payments on the certificates are denominated in U.S. dollars, none of the certificates are Indexed Securities or Strip Certificates, and that a series of Securities includes a single class of certificates. If these conditions are not satisfied with respect to any given series of certificates, additional tax considerations with respect to those certificates will be disclosed in the applicable prospectus supplement. Partnership Taxation. As a partnership, the Owner Trust will not be subject to federal income tax. Rather, each Certificate Owner will be required to separately take into account that Owner's allocated share of income, gains, losses, deductions and credits of the Owner Trust. The Trust's income will consist primarily of interest and finance charges earned on the Receivables (including appropriate adjustments for market discount, OID and bond premium) and any gain upon collection or disposition of Receivables. The Trust's deductions will consist primarily of interest accruing with respect to the notes, servicing and other fees, and losses or deductions upon collection or disposition of Receivables. The tax items of a partnership are allocable to the partners in accordance with the Code, Treasury regulations and the partnership agreement (here, the Trust Agreement and related documents). In the Trust Agreement, the Certificate Owners will agree that the yield on a certificate is intended to qualify as a "guaranteed payment" and not as a distributive share of partnership income. A guaranteed payment would be treated by a Certificate Owner as ordinary income, but may well not be treated as interest income. The Trust Agreement will provide that, to the extent that the treatment of the yield on a Certificate as a guaranteed payment is not respected, the Certificate Owners of each class of certificates will be allocated taxable income of the Trust for each month equal to the sum of: 85 1. the interest that accrues on the certificates in accordance with their terms for that month, including interest accruing at the Pass Through Rate for that month and interest on amounts previously due on the certificates but not yet paid; 2. any Trust income attributable to discount on the Receivables that corresponds to any excess of the principal amount of the certificates over their initial issue price; 3. prepayment premium payable to the Certificate Owners for that month; and 4. any other amounts of income payable to the Certificate Owners for that month. That allocation will be reduced by any amortization by the Trust of premium on Receivables that corresponds to any excess of the initial issue price of certificates over their initial principal amount. All remaining taxable income of the Trust will be allocated to the Depositor. Except as provided below, losses and deductions generally will be allocated to the Certificate Owners only to the extent the Certificate Owners are reasonably expected to bear the economic burden of those losses or deductions. Any losses allocated to Certificate Owners could be characterized as capital losses, and the Certificate Owners generally would only be able to deduct those losses against capital gain income, and deductions would be subject to the limitations set forth below. Accordingly, a Certificate Owner's taxable income from the Trust could exceed the cash it is entitled to receive from the Trust. Based on the economic arrangement of the parties, this approach for allocating Trust income and loss should be permissible under applicable Treasury regulations, although no assurance can be given that the IRS would not require a greater amount of income to be allocated to Certificate Owners. Moreover, even under the foregoing method of allocation, Certificate Owners may be allocated income equal to the entire Pass Through Rate plus the other items described above even though the Trust might not have sufficient cash to make current cash payments of that amount. Thus, cash basis Certificate Owners will, in effect, be required to report income from the certificates on the accrual basis and Certificate Owners may become liable for taxes on Trust income even if they have not received cash from the Trust to pay those taxes. In addition, because tax allocations and tax reporting will be done on a uniform basis for all Certificate Owners but Certificate Owners may be purchasing certificates at different times and at different prices, Certificate Owners may be required to report on their tax returns taxable income that is greater or less than the amount reported to them by the Trust. For each taxable year of the Certificate Owner, the Certificate Owner will be required to report items of income, loss and deduction allocated to them by the Owner Trust for the Trust's taxable year that ends on or before the last day of that taxable year of the Certificate Owner. The Code prescribes rules for determining the taxable year of the Trust. It is likely that, under these rules, the taxable year of the Trust will be the calendar year. However, in the event that all of the Certificate Owners possessing a 5 percent or greater interest in the equity or profits of the Trust share a taxable year that is other than the calendar year, the Trust could be required to use that year as its taxable year. A significant portion of the taxable income allocated to a Certificate Owner that is a pension, profit sharing or employee benefit plan or other tax-exempt entity (including an individual retirement account) generally will constitute "unrelated business taxable income" taxable to that Certificate Owner under the Code. An individual taxpayer's share of expenses of the Owner Trust (including fees to the Servicer but not interest expense) would be miscellaneous itemized deductions. Those deductions might be disallowed to the individual in whole or in part and might result in that Certificate Owner being taxed on an amount 86 of income that exceeds the amount of cash actually paid to that Certificate Owner over the life of the Trust. The Owner Trust intends to make all tax calculations relating to income and allocations to Certificate Owners on an aggregate basis. If the IRS were to require that those calculations be made separately for each Receivable, the Trust might be required to incur additional expense but it is believed that there would not be a material adverse effect on Certificate Owners. Discount and Premium. It is believed that the Receivables were not issued with OID, and, therefore, the Owner Trust should not have OID income. However, the purchase price paid by the Trust for the Receivables may be greater or less than the remaining principal balance of the Receivables at the time of purchase. If so, the Receivables will have been acquired at a premium or discount, as the case may be. (As indicated above, the Trust will make this calculation on an aggregate basis, but might be required to recompute it on a Receivable-by-Receivable basis.) If the Owner Trust acquires the Receivables at a market discount or premium, the Trust will elect to include that discount in income currently as it accrues over the life of the Receivables or to offset the premium against interest income on the Receivables. As indicated above, a portion of the market discount income or premium deduction may be allocated to Certificate Owners. Section 708 Termination. Under Section 708 of the Code, the Owner Trust will be deemed to terminate for federal income tax purposes if 50% or more of the capital and profits interests in the Trust are sold or exchanged within a 12-month period. If that termination occurs, the Trust will be considered to transfer all of it assets and liabilities to a new partnership in exchange for an interest in the new partnership, after which the Trust would be deemed to distribute interests in the new partnership to Certificate Owners (including the purchasing partner who caused the termination) in liquidation of the terminated partnership. The Trust will not comply with technical requirements that might apply when a constructive termination occurs. As a result, the Trust may be subject to tax penalties and may incur additional expenses if it is required to comply with those requirements. Furthermore, the Trust might not be able to comply due to lack of data. Disposition of Certificates. Generally, capital gain or loss will be recognized on a sale of certificates in an amount equal to the difference between the amount realized and the seller's tax basis in the certificates sold. A Certificate Owner's tax basis in a certificate will generally equal the Certificate Owner's cost increased by the Certificate Owner's share of Trust income (includible in income) and decreased by any payments received with respect to that certificate. In addition, both the tax basis in the certificates and the amount realized on a sale of a certificate would include the Certificate Owner's share of the notes and other liabilities of the Trust. A Certificate Owner acquiring certificates at different prices may be required to maintain a single aggregate adjusted tax basis in those certificates, and, upon sale or other disposition of some of the certificates, allocate a portion of that aggregate tax basis to the certificates sold (rather than maintaining a separate tax basis in each certificate for purposes of computing gain or loss on a sale of that certificate). Any gain on the sale of a certificate attributable to the holder's share of unrecognized accrued market discount on the Receivables would generally be treated as ordinary income to the holder and would give rise to special tax reporting requirements. The Owner Trust does not expect to have any other assets that would give rise to those special reporting requirements. Thus, to avoid those special reporting requirements, the Trust will elect to include market discount in income as it accrues. 87 If a Certificate Owner is required to recognize an aggregate amount of income (not including income attributable to disallowed itemized deductions described above) over the life of the certificates that exceeds the aggregate cash payments with respect to the Certificates, the excess will generally give rise to a capital loss upon the retirement of the certificates. Allocations Between Transferors and Transferees. In general, the Owner Trust's taxable income and losses will be determined monthly and the tax items for a particular calendar month will be apportioned among the Certificate Owners in proportion to the principal amount of certificates owned by them as of the close of the last day of that month. As a result, a Certificate Owner purchasing certificates may be allocated tax items (which will affect its tax liability and tax basis) attributable to periods before the Certificate Owner actually owned the certificates. The use of a monthly convention may not be permitted by existing regulations. If a monthly convention is not allowed (or only applies to transfers of less than all of the partner's interest), taxable income or losses of the Owner Trust might be reallocated among the Certificate Owners. The Depositor is authorized to revise the Owner Trust's method of allocation between transferors and transferees to conform to a method permitted by future regulations. Section 754 Election. In the event that a Certificate Owner sells its certificates at a profit (loss), the purchasing Certificate Owner will generally have a higher (or lower) basis in the certificates than the selling Certificate Owner had. The tax basis of the Owner Trust's assets will not be adjusted to reflect that higher (or lower) basis unless the Trust were to file an election under Section 754 of the Code. In order to avoid the administrative complexities that would be involved in keeping accurate accounting records, as well as potentially onerous information reporting requirements, the Owner Trust will not make that election. As a result, Certificate Owners might be allocated a greater or lesser amount of Trust income than would be appropriate based on their own purchase price for certificates. Administrative Matters. The Trustee is required to keep or have kept complete and accurate books of the Owner Trust. These books will be maintained for financial reporting and tax purposes on an accrual basis and the fiscal year of the Trust will be set forth in the applicable prospectus supplement. The Trustee will file a partnership information return (IRS Form 1065) with the IRS for each taxable year of the Trust during which the Owner Trust is treated as a partnership for federal income tax purposes, and for each such taxable year will report each Certificate Owner's allocable share of items of Trust income and expense to holders and the IRS on Schedule K-1. The Trust will provide the Schedule K-1 information to nominees that fail to provide the Trust with the information statement described below and those nominees will be required to forward that information to the Certificate Owners. Generally, Certificate Owners must file tax returns that are consistent with the information return filed by the Trust or be subject to penalties unless the Certificate Owner timely notifies the IRS of all those inconsistencies. Under Section 6031 of the Code, any person that holds certificates as a nominee at any time during a calendar year is required to furnish the Trust with a statement containing specified information on the nominee, the Certificate Owners and the certificates so held. The information includes (1) the name, address and taxpayer identification number of the nominee and (2) as to each Certificate Owner (x) the name, address and identification number of that person, (y) whether that person is a U.S. person, a tax-exempt entity or a foreign government, an international organization, or any wholly-owned agency or instrumentality of any of the foregoing, and (z) specified information on certificates that were held, bought or sold on behalf of that person throughout the year. In addition, brokers and financial institutions that hold certificates through a nominee are required to furnish directly to the Trust information as to themselves and their ownership of certificates. A clearing agency registered under Section 17A of the Exchange Act is not required to furnish any information statement of this type to the Trust. The 88 information referred to above for any calendar year must be furnished to the Trust on or before the following January 31. Nominees, brokers and financial institutions that fail to provide the Trust with the information described above may be subject to penalties. The Depositor will be designated as the tax matters partner in the related Trust Agreement, and as the tax matters partner is designated to receive notice on behalf of, and to provide notice to those Certificate Owners not receiving notice from, the IRS, and to represent the Certificate Owners in certain disputes with the IRS. The Code provides for administrative examination of a partnership as if the partnership were a separate and distinct taxpayer. Generally, the statute of limitations for partnership items does not expire before three years after the date on which the partnership information return is filed. Any adverse determination following an audit of the return of the Trust by the appropriate taxing authorities could result in an adjustment of the returns of the Certificate Owners, and, under some circumstances, a Certificate Owner may be precluded from separately litigating a proposed adjustment to the items of the Trust. As the tax matters partner, the Depositor may enter into a binding settlement on behalf of all Certificate Owners with a less than 1 percent interest in the Trust (except for any group of those Certificate Owners with an aggregate interest of 5 percent or more in Trust profits that elects to form a notice group or Certificate Owners who otherwise notify the IRS that the Depositor is not authorized to settle on their behalf). In the absence of a proceeding at the Trust level, a Certificate Owner under some circumstances may pursue a claim for credit or refund on his own behalf by filing a request for administrative adjustment of a Trust item. It is suggested that each Certificate Owner consult its own tax advisor with respect to the impact of these procedures on its particular case. An adjustment could also result in an audit of a Certificate Owner's returns and adjustments of items not related to the income and losses of the Trust. Tax Consequences to Foreign Certificate Owners. It is not clear whether the Trust would be considered to be engaged in a trade or business in the United States for purposes of federal withholding taxes with respect to Certificate Owners who are not U.S. Persons ("Foreign Certificate Owners") because there is no clear authority dealing with that issue under facts substantially similar to those described in this prospectus. Although it is not expected that the Owner Trust would be engaged in a trade or business in the United States for those purposes, the Trust will withhold as if it were so engaged in order to protect the Trust from possible adverse consequences of a failure to withhold. The Trust expects to withhold on the portion of its taxable income that is allocable to Foreign Certificate Owners pursuant to Section 1446 of the Code, as if that income were effectively connected to a U.S. trade or business, at a rate of 35% for Foreign Certificate Owners that are taxable as corporations and 39.6% for all other Foreign Certificate Owners. Subsequent adoption of Treasury regulations or the issuance of other administrative pronouncements may require the Trust to change its withholding procedures. In determining a holder's withholding status, the Trust may rely on IRS Form W-8BEN (or any applicable successor form), IRS Form W-9 or the holder's certification of nonforeign status signed under penalties of perjury. Each Foreign Certificate Owner might be required to file a U.S. individual or corporate income tax return (including, in the case of a corporation, the branch profits tax) on its share of the Trust's income. Each Foreign Certificate Owner must obtain a taxpayer identification number from the IRS and submit that number to the Trust on Form W-8BEN (or any applicable successor form) in order to assure appropriate crediting of the taxes withheld. A Foreign Certificate Owner generally would be entitled to file with the IRS a claim for refund with respect to taxes withheld by the Trust, taking the position that no taxes were due because the Trust was not engaged in a U.S. trade or business. However, interest payments made (or accrued) to a Foreign Certificate Owner generally will be considered guaranteed payments to the extent those payments are determined without regard to the income of the Trust. If these interest payments are properly characterized as guaranteed payments, then the interest will not be considered "portfolio interest," in which case Certificate Owners would be subject to United States 89 federal income tax and withholding tax at a rate of 30 percent, unless reduced or eliminated pursuant to an applicable treaty. In that case, a Foreign Certificate Owner would only be entitled to claim a refund for that portion of the taxes, if any, in excess of the taxes that should be withheld with respect to the guaranteed payments. Backup Withholding. Payments made on the certificates and proceeds from the sale of the certificates will be subject to a backup withholding tax of 31% if, in general, the Certificate Owner fails to comply with specified identification procedures, unless the holder is an exempt recipient under applicable provisions of the Code. We refer you to "--Tax Consequences to Owners of the Notes--Backup Withholding" above. Tax Treatment of Grantor Trusts Tax Characterization of the Trust as a Grantor Trust. The following general discussion of the anticipated federal income tax consequences of the purchase, ownership and disposition of the certificates of a Trust referred to as a "grantor trust" in the applicable prospectus supplement (a "Grantor Trust"). It is intended as an explanatory discussion of the possible effects of the classification of any Trust as a grantor trust for federal income tax purposes on investors generally and of related federal income tax matters affecting investors generally, but does not purport to furnish information in the level of detail or with the attention to an investor's specific tax circumstances that would be provided by an investor's own tax advisor. Accordingly, it is suggested that each investor consult its own tax advisors with regard to the tax consequences to it of investing in certificates of a Grantor Trust ("Grantor Trust Certificates"). Tax Counsel will deliver its opinion that the Grantor Trust will not be classified as an association taxable as a corporation and that the Trust will be classified as a grantor trust under the Code. In this case, beneficial owners of Grantor Trust Certificates (referred to as "Grantor Trust Certificateholders") could be considered to own either: o an undivided interest in a single debt obligation held by the Grantor Trust and having a principal amount equal to the total stated principal amount of the Receivables and an interest rate equal to the relevant Pass Through Rate; or o an interest in each of the Receivables and any other Trust property. The determination of whether the economic substance of a property transfer is a sale or a loan secured by the transferred property has been made by the IRS and the courts on the basis of numerous factors designed to determine whether the transferor has relinquished and the transferee has obtained substantial incidents of ownership in the property. Among those factors, the primary factors examined are whether the transferee has the opportunity to gain if the property increases in value, and has the risk of loss if the property decreases in value. The relevant pooling and servicing agreement will express the intent of the Depositor to sell, and the Grantor Trust Certificateholders to purchase, the Receivables, and the Depositor and each Grantor Trust Certificateholder, by accepting a beneficial interest in a Grantor Trust Certificate, will agree to treat the Grantor Trust Certificates as ownership interests in the Receivables and any other Trust property. Treatment as Debt Obligation. If a Grantor Trust Certificateholder was considered to own an undivided interest in a single debt obligation, the principles described under "--Tax Treatment of Owner Trusts--Tax Consequences to Owners of the Notes" would apply. Each Grantor Trust Certificateholder, rather than reporting its share of the interest accrued on each Receivable, would, in general, be required to 90 include in income interest accrued or received on the principal amount of the Grantor Trust Certificates at the relevant Pass Through Rate in accordance with its usual method of accounting. The Grantor Trust Certificates would be subject to OID rules, described below under "--Stripped Bonds and Stripped Coupons" and "--Original Issue Discount." In determining whether any OID on the Grantor Trust Certificates is de minimis, the Depositor expects to use a reasonable Prepayment Assumption to determine the weighted average life of the Grantor Trust Certificates. OID includible in income for any accrual period (generally, the period between payment dates) would generally be calculated using a Prepayment Assumption and an anticipated yield established as of the date of initial sale of the Grantor Trust Certificates, and would increase or decrease to reflect prepayments at a faster or slower rate than anticipated. The Grantor Trust Certificates would also be subject to the market discount provisions of the Code to the extent that a Grantor Trust Certificateholder purchased those certificates at a discount from the initial issue price (as adjusted to reflect prior accruals of OID). The remainder of the discussion in this prospectus assumes that a Grantor Trust Certificateholder will be treated as owning an interest in each Receivable and the proceeds from each Receivable, any right to receive Yield Supplement Deposits and any other Trust property, although for administrative convenience, the Servicer will report information on an aggregate basis as though all of the Receivables and the Yield Supplement Agreement were a single obligation. The amount and, in some instances, character, of the income reported to a Grantor Trust Certificateholder may differ under this method for a particular period from that which would be reported if income were reported on a precise asset-by-asset basis. Characterization. Each Grantor Trust Certificateholder will be treated as the owner of a pro rata undivided interest in the interest and principal portions of the Trust represented by the Grantor Trust Certificates and will be considered the equitable owner of a pro rata undivided interest in each of the Receivables in the Trust, any right to receive Yield Supplement Deposits, and any other Trust property. Any amounts received by a Grantor Trust Certificateholder in lieu of amounts due with respect to any Receivable because of a default or delinquency in payment will be treated for federal income tax purposes as having the same character as the payments they replace. For federal income tax purposes, the Depositor will be treated as having retained a fixed portion of the interest due on each Receivable having an annual percentage rate in excess of the sum of the applicable Pass Through Rate and the Servicing Rate (each, a "High Yield Receivable") equal to the difference between: o the annual percentage rate of the Receivable; and o the sum of the applicable Pass Through Rate and the Servicing Rate (the "Retained Yield"). The Retained Yield will be treated as "stripped coupons" within the meaning of Section 1286 of the Code, and the Stripped Receivables will be treated as "stripped bonds." We refer you to "--Stripped Bonds and Stripped Coupons" below. Accordingly, each Grantor Trust Certificateholder will be treated as owning its pro rata percentage interest in: o payments received under any Yield Supplement Agreement, and o the principal of, and interest payable on, each Receivable (minus the Retained Yield on the High Yield Receivables). 91 Those Receivables that bear interest at a rate which is less than or equal to the sum of the applicable Pass Through Rate and the Servicing Rate (the "Low Yield Receivables") will not be treated as stripped bonds. Instead, Yield Supplement Deposits will be payable to eliminate the difference between the actual yield on each Low Yield Receivable and the yield the Receivable would have had if its interest rate had equaled the sum of the applicable Pass Through Rate and the Servicing Rate. We refer you to "--Yield Supplement Deposits" below. Each Grantor Trust Certificateholder will be required to report on its federal income tax return in accordance with that Grantor Trust Certificateholder's method of accounting its pro rata share of the entire income from the Receivables in the Trust represented by Grantor Trust Certificates, including interest, OID, if any, prepayment fees, assumption fees, any gain recognized upon an assumption, late payment charges received by the Servicer and any gain recognized upon collection or disposition of the Receivables (but not including any portion of the Retained Yield). A Grantor Trust Certificateholder will also be required to report under its usual method of accounting any payments received under any Yield Supplement Agreement to the extent that these payments are treated as income. Under Sections 162 or 212 of the Code, each Grantor Trust Certificateholder will be entitled to deduct its pro rata share of Base Servicing Fees, prepayment fees, assumption fees, any loss recognized upon an assumption and late payment charges retained by the Servicer, provided that those amounts are reasonable compensation for services rendered to the Trust. Grantor Trust Certificateholders that are individuals, estates or trusts will be entitled to deduct their share of expenses only to the extent those expenses plus all other Code Section 212 expenses exceed two percent of its adjusted gross income. In addition, Grantor Trust Certificateholders who are individuals may be subject to additional deduction limitations based on adjusted gross income. A Grantor Trust Certificateholder using the cash method of accounting must take into account its pro rata share of income and deductions as and when collected by or paid to the Servicer. A Grantor Trust Certificateholder using an accrual method of accounting must take into account its pro rata share of income and deductions as they become due or are paid to the Servicer, whichever is earlier. Because interest accrues on the Receivables over differing monthly periods and is paid in arrears and interest collected on a Receivable generally is paid to Certificateholders in the following month, the amount of interest accruing to a Grantor Trust Certificateholder during any calendar month will not equal the interest distributed in that month. The actual amount of discount on a Receivable will be includible in income as principal payments are received on the Receivables. If the Base Servicing Fees paid to the Servicer are deemed to exceed reasonable servicing compensation, the amount of that excess could be considered as an ownership interest retained by the Servicer (or any person to whom the Servicer assigned for value all or a portion of the Base Servicing Fees) in a portion of the interest payments on the Receivables. The Receivables would then be subject to the "stripped bond" and "stripped coupons" rules of the Code discussed below. Discount and Premium. In determining whether a Grantor Trust Certificateholder has purchased its interest in the Receivables held by the related Trust at a discount or premium and whether the Receivables have OID, market discount, or amortizable premium, a portion of the purchase price of a Certificate should be allocated to the Grantor Trust Certificateholder's undivided interest in accrued but unpaid interest, amounts collected at the time of purchase but not distributed, and rights to receive Yield Supplement Deposits. As a result, the portion of the purchase price allocable to a Grantor Trust Certificateholder's undivided interest in the Receivables will be increased or decreased, as applicable, and the potential OID, market discount, or amortizable premium on the Receivables could be increased or decreased accordingly. 92 Premium. A Grantor Trust Certificateholder that acquires an interest in Receivables at a premium over the "stated redemption price at maturity" of the Receivables may elect to amortize that premium under a constant interest method. Amortizable bond premium will be treated as an offset to interest income on that Grantor Trust Certificate. The basis for that Grantor Trust Certificate will be reduced to the extent that amortizable premium is applied to offset interest payments. It is not clear whether a reasonable prepayment assumption should be used in computing amortization of premium allowable under Section 171 of the Code. With some exceptions, a Grantor Trust Certificateholder that makes this election for a Grantor Trust Certificate that is acquired at a premium will be deemed to have made an election to amortize bond premium with respect to all debt instruments having amortizable bond premium that the Grantor Trust Certificateholder holds during the year of the election or thereafter. Absent an election to amortize bond premium, the premium will be deductible as an ordinary loss upon disposition of the Certificate or pro rata as principal is paid on the Receivables. If a premium is not subject to amortization using a reasonable prepayment assumption, the holder of a Grantor Trust Certificate acquired at a premium should recognize a loss if a Receivable prepays in full, equal to the difference between the portion of the prepaid principal amount of that Receivable that is allocable to the Grantor Trust Certificate and the portion of the adjusted basis of the Grantor Trust Certificate that is allocable to that Receivable. If a reasonable prepayment assumption is used to amortize that premium, it appears that that loss would be available, if at all, only if prepayments have occurred at a rate faster than the reasonable assumed prepayment rate. It is not clear whether any other adjustments would be required to reflect differences between an assumed prepayment rate and the actual rate of prepayments. Stripped Bonds and Stripped Coupons. Although the tax treatment of stripped bonds is not entirely clear, based on recent guidance from the IRS, each purchaser of a Grantor Trust Certificate will be treated as the purchaser of a stripped bond (to the extent that the Receivables consist of High Yield Receivables) which generally should be treated as a single debt instrument issued on the day it is purchased for purposes of calculating any original issue discount. Generally, under applicable Treasury regulations (the "Section 1286 Treasury Regulations"), if the discount on a stripped bond is larger than a de minimis amount (as calculated for purposes of the OID rules of the Code), that stripped bond will be considered to have been issued with OID. We refer you to "--Original Issue Discount." Based on the preamble to the Section 1286 Treasury Regulations, the Trust intends to take the position that, although the matter is not entirely clear, the interest income on the certificates at the sum of the Pass Through Rate and the portion of the Servicing Rate that does not constitute excess servicing will be treated as "qualified stated interest" within the meaning of the Section 1286 Treasury Regulations. In this case, the amount of OID on a High Yield Receivable will equal the amount by which the purchase price of a High Yield Receivable is less than the portion of the remaining principal balance of the Receivable allocable to the interest acquired. Original Issue Discount. The IRS has stated in published rulings that, in circumstances similar to those described in this prospectus, the special rules of the Code relating to OID will be applicable to a Grantor Trust Certificateholder's interest in those Receivables meeting the conditions necessary for these rules to apply. Generally, a Grantor Trust Certificateholder that acquires an undivided interest in a Receivable issued or acquired with OID must include in gross income the sum of the "daily portions," as defined below, of the OID on that Receivable for each day on which it owns a Grantor Trust Certificate, including the date of purchase but excluding the date of disposition. In the case of an original Grantor Trust Certificateholder, the daily portions of OID with respect to a Receivable generally would be determined as follows. A calculation will be made of the portion of OID that accrues on the Receivable during each successive monthly accrual period (or shorter period in respect of the date of original issue or the final Payment Date). This will be done, in the case of each full monthly accrual period, by adding: 93 o the present value of all remaining payments to be received on the Receivable under the Prepayment Assumption used in respect of the Receivables; and o any payments received during that accrual period, and subtracting from that total the "adjusted issue price" of the Receivable at the beginning of that accrual period. No representation is made that the Receivables will prepay at any prepayment assumption. The "adjusted issue price" of a Receivable at the beginning of the first accrual period is the amount of the purchase price paid by the Grantor Trust Certificateholder for the Grantor Trust Certificate that is allocable to the Receivable, and the "adjusted issue price" of a Receivable at the beginning of a subsequent accrual period is the "adjusted issue price" at the beginning of the immediately preceding accrual period plus the amount of OID allocable to that accrual period and reduced by the amount of any payment on the Receivable (other than "qualified stated interest") made at the end of or during that accrual period. The OID accruing during that accrual period will then be divided by the number of days in the period to determine the daily portion of OID for each day in the period. With respect to an initial accrual period shorter than a full monthly accrual period, the daily portions of OID must be determined according to a reasonable method, provided that that method is consistent with the method used to determine the yield to maturity of the Receivables. If the amount of OID is de minimis under the rule set forth above, a High Yield Receivable would not be treated as having OID. The actual amount of discount on a High Yield Receivable would be includible in income as principal payments are received on the Receivable, in the proportion that each principal payment bears to the total principal amount of the Receivable. With respect to the Receivables, the method of calculating OID as described above will cause the accrual of OID to either increase or decrease (but never below zero) in any given accrual period to reflect the fact that prepayments are occurring at a faster or slower rate than the prepayment assumption used in respect of the Receivables. Subsequent purchasers that purchase Receivables at more than a de minimis discount should consult their tax advisors with respect to the proper method to accrue that OID. Yield Supplement Deposits. The proper Federal income tax characterization of the Yield Supplement Deposits is not clear. Moreover, the sum of the income and deductions properly reportable by a Grantor Trust Certificateholder in any taxable year may not equal the amounts that would be reportable if a Grantor Trust Certificateholder held instead of an interest in the Receivables and in the Yield Supplement Agreement either a debt instrument bearing interest at the applicable Pass Through Rate or an interest in a trust holding Receivables each of which bears interest at a rate at least equal to the sum of the Pass Through Rate plus the Servicing Rate. It is likely that the right to receive Yield Supplement Deposits will be treated as a separate asset purchased by each Grantor Trust Certificateholder, in which case a portion of each Grantor Trust Certificateholder's purchase price or other tax basis in the Grantor Trust Certificate equal to the fair market value of the right to receive the Yield Supplement Deposits should be allocated to the right to receive payments of Yield Supplement Deposits. The right to receive Yield Supplement Deposits may be treated as a loan made by a Grantor Trust Certificateholder to the Depositor in an amount equal to the present value, discounted at a rate equal to the sum of the applicable Pass Through Rate and the Servicing Rate, of the projected Yield Supplement Deposits. In that event, a portion of the Yield Supplement Deposits generally representing a yield equal to the applicable Pass Through Rate plus the Servicing Rate on the discounted value should be treated as interest includible in income as accrued or received, and the remainder should be treated as a return of the principal amount of the deemed loan. Alternatively, it is possible that the entire amount of each Yield Supplement Deposit should be included in income as accrued or received, in which event a Grantor Trust Certificateholder should also be entitled to amortize the portion of its purchase price allocable to its right 94 to receive Yield Supplement Deposits. The method of calculating that amortization is unclear, and could result in the inclusion of greater amounts of income than a Grantor Trust Certificateholder's actual yield on a Receivable. Alternatively, it is possible that the Yield Supplement Deposits could be treated as payments adjusting the purchase price of the Low Yield Receivables, rather than as a separate asset. In that event, a Grantor Trust Certificateholder could be treated as having purchased each Low Yield Receivable at a discount (which may consist of imputed interest, market discount, or both) that, combined with the actual coupon rate of the Receivable, produces a yield equal to the sum of the applicable Pass Through Rate and the Servicing Rate. It is not clear whether, and to what extent, the amounts includible in income or amortizable under any of these methods would be adjusted to take account of prepayments on the Receivables. Moreover, it is possible that the IRS might contend that none of the above methods is appropriate, and that income with respect to the Yield Supplement Agreement should be reported by a Grantor Trust Certificateholder in some other manner. In addition, to the extent that the amounts payable pursuant to Yield Supplement Agreement decline during any period by reason of prepayments on the Receivables, it is possible that a portion of the amount amortizable by the Grantor Trust Certificateholder during that period would be treated as a capital loss (which would not offset ordinary income), rather than as an ordinary deduction. It is suggested that Grantor Trust Certificateholders consult their tax advisors regarding the appropriate method of accounting for income attributable to the Yield Supplement Agreement. Market Discount. A Grantor Trust Certificateholder that acquires an undivided interest in Receivables may be subject to the market discount rules of Sections 1276 through 1278 of the Code to the extent an undivided interest in a Receivable is considered to have been purchased at a "market discount." Generally, the amount of market discount is equal to the excess of the portion of the principal amount of that Receivable allocable to that Grantor Trust Certificateholder's undivided interest in the Receivable over that holder's tax basis in that interest. Market discount with respect to a Receivable will be considered to be zero if the amount allocable to the Receivable is less than 0.25% of the Receivable's stated redemption price at maturity multiplied by the weighted average maturity remaining after the date of purchase. Treasury regulations implementing the market discount rules have not yet been issued; therefore, it is suggested that investors consult their own tax advisors regarding the application of these rules and the advisability of making any of the elections allowed under Code Sections 1276 through 1278. The Code provides that any principal payment (whether a scheduled payment or a prepayment) or any gain on disposition of a market discount bond shall be treated as ordinary income to the extent that it does not exceed the accrued market discount at the time of that payment. The amount of accrued market discount for purposes of determining the tax treatment of subsequent principal payments or dispositions of the market discount bond is to be reduced by the amount so treated as ordinary income. The Code also grants the Treasury Department authority to issue regulations providing for the computation of accrued market discount on debt instruments, the principal of which is payable in more than one installment. While the Treasury Department has not yet issued regulations, rules described in the relevant legislative history will apply. Under those rules, the holder of a market discount bond may elect to accrue market discount either on the basis of a constant interest rate or according to one of the following methods. If a Grantor Trust Certificate is issued with respect to which there is OID, the amount of market discount that accrues during any accrual period would be equal to the product of: o the total remaining market discount; and o a fraction, the numerator of which is the OID accruing during the period and the denominator of which is the total remaining OID at the beginning of the accrual period. 95 If a Grantor Trust Certificate is issued with respect to which there is no OID, the amount of market discount that accrues during a period is equal to the product of: o the total remaining market discount; and o a fraction, the numerator of which is the amount of stated interest paid during the accrual period and the denominator of which is the total amount of stated interest remaining to be paid at the beginning of the accrual period. For purposes of calculating market discount under any of the above methods in the case of instruments, for example, the Grantor Trust Certificates, that provide for payments that may be accelerated by reason of prepayments of other obligations securing those instruments, the same prepayment assumption applicable to calculating the accrual of OID will apply. Because the regulations described above have not been issued, it is impossible to predict what effect those regulations might have on the tax treatment of a Grantor Trust Certificate purchased at a discount or premium in the secondary market. A Grantor Trust Certificate holder who acquired a Grantor Trust Certificate at a market discount also may be required to defer a portion of its interest deductions for the taxable year attributable to any indebtedness incurred or continued to purchase or carry that Grantor Trust Certificate purchased with market discount. For these purposes, the de minimis rule referred to above applies. Any deferred interest expense would not exceed the market discount that accrues during that taxable year and is, in general, allowed as a deduction not later than the year in which the market discount is includible in income. If that holder elects to include market discount in income currently as it accrues on all market discount instruments acquired by the holder in that taxable year or thereafter, the interest deferral rule described above will not apply. Election to Treat All Interest as OID. The OID regulations permit a Grantor Trust Certificateholder to elect to accrue all interest, discount (including de minimis market or original issue discount) and premium in income as interest, based on a constant yield method. If that election were to be made with respect to a Grantor Trust Certificate with market discount, the Grantor Trust Certificateholder would be deemed to have made an election to include in income currently market discount with respect to all other debt instruments having market discount that that Grantor Trust Certificateholder acquires during the year of the election or thereafter. Similarly, a Grantor Trust Certificateholder that makes this election for a Grantor Trust Certificate that is acquired at a premium will be deemed to have made an election to amortize bond premium with respect to all debt instruments having amortizable bond premium that that Grantor Trust Certificateholder owns or acquires. We refer you to "--Premium" above. The election to accrue interest, discount and premium on a constant yield method with respect to a Grantor Trust Certificate is irrevocable except with the approval of the IRS. Sale or Exchange of a Grantor Trust Certificate. Sale or exchange of a Grantor Trust Certificate prior to its maturity will result in gain or loss equal to the difference, if any, between the amount received and the owner's adjusted tax basis in the Grantor Trust Certificate. The adjusted tax basis generally will equal the seller's purchase price for the Grantor Trust Certificate, increased by any market discount, OID and gain previously included in the seller's gross income with respect to the Grantor Trust Certificate, and reduced by the amount of any premium, if any, previously amortized and by the amount of any payments of principal and OID on the Grantor Trust Certificate previously received by the seller. That gain or loss will be capital gain or loss to an owner for which a Grantor Trust Certificate is a "capital asset" within the meaning of Section 1221, and will be long-term or short-term depending on whether the Grantor Trust Certificate has been owned for the long-term capital gain holding period (currently more than one year). 96 Foreign Persons. Generally, interest or OID paid by the person required to withhold tax under Section 1441 or 1442 of the Code to: o a Grantor Trust Certificateholder that is not a U.S. Person (as defined under "--Tax Treatment of Owner Trusts--Tax Consequences to Owners of the Notes--Foreign Owners") (a "Foreign Grantor Trust Certificateholder"); or o a person holding on behalf of a Foreign Grantor Trust Certificateholder, as well as accrued OID recognized by the Foreign Grantor Trust Certificateholder on the sale or exchange of that Grantor Trust Certificate. will not be subject to withholding to the extent that a Grantor Trust Certificate evidences ownership in Receivables issued after July 18, 1984 by natural persons, if that Foreign Grantor Trust Certificateholder complies with specified identification requirements (including delivery of a statement, signed by the Foreign Grantor Trust Certificateholder under penalties of perjury, certifying that that Foreign Grantor Trust Certificateholder is not a U.S. Person and providing the name and address of that Foreign Grantor Trust Certificateholder). Additional restrictions apply to Receivables where the obligor is not a natural person in order to qualify for the exemption from withholding. Although it is not entirely clear, it is likely that amounts received by a Foreign Grantor Trust Certificateholder that are attributable to payments of Yield Supplement Deposits received pursuant to any Yield Supplement Agreement generally would not be subject to withholding tax. It is suggested that Foreign Grantor Trust Certificateholders consult their tax advisors regarding the withholding tax consequences of amounts received on the Grantor Trust Certificates that are attributable to payments of Yield Supplement Deposits received pursuant to any Yield Supplement Agreement. Information Reporting and Backup Withholding. The Servicer will furnish or make available, within a reasonable time after the end of each calendar year, to each person who was a Grantor Trust Certificateholder at any time during that year, that information as may be deemed necessary or desirable to assist Grantor Trust Certificateholders in preparing their federal income tax returns, or to enable holders to make that information available to beneficial owners or financial intermediaries that hold Grantor Trust Certificates as nominees on behalf of beneficial owners. If a holder, beneficial owner, financial intermediary or other recipient of a payment on behalf of a beneficial owner fails to supply a certified taxpayer identification number or if the Secretary of the Treasury determines that that person has not reported all interest and dividend income required to be shown on its federal income tax return, 31% backup withholding may be required with respect to any payments. Any amounts deducted and withheld from a payment to a recipient would be allowed as a credit against that recipient's federal income tax liability. 97 State and Local Tax Considerations Potential holders should consider the state and local income tax consequences of the purchase, ownership and disposition of the certificates and notes. State and local income tax laws may differ substantially from the corresponding federal law, and this discussion does not purport to describe any aspect of the income tax laws of any state or locality. Therefore, potential holders should consult their own tax advisors with respect to the various state and local tax consequences of an investment in the certificates and notes. ERISA Considerations Section 406 of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") and Section 4975 of the Code prohibit a pension, profit-sharing or other employee benefit plan, as well as individual retirement accounts and some types of Keogh Plans (each a "Benefit Plan"), from engaging in transactions involving "plan assets" with persons that are "parties in interest" under ERISA or "disqualified persons" under the Code with respect to that Benefit Plan. ERISA also imposes duties on persons who are fiduciaries of Benefit Plans subject to ERISA and prohibits specified transactions between a Benefit Plan and parties in interest with respect to those Benefit Plans. Under ERISA, any person who exercises any authority or control with respect to the management or disposition of the assets of a Benefit Plan is considered to be a fiduciary of that Benefit Plan (subject to exceptions not here relevant). A violation of these "prohibited transaction" rules may result in an excise tax or other penalties and liabilities under ERISA and the Code for those persons. Certain exemptions from the prohibited transaction rules could be applicable to the purchase and holding of Securities by a Benefit Plan depending on the type and circumstances of the plan fiduciary making the decision to acquire the Securities. Potentially available exemption would include, without limitation, Prohibited Transaction Class Exemption ("PTCE") 90-1, which exempts certain transactions involving insurance company pooled separate accounts; PTCE 95-60, which exempts certain transactions involving insurance company general accounts; PTCE 91-38, which exempts certain transactions involving bank collective investment funds; PTCE 84-14, which exempts certain transactions effected on behalf of a plan by a "qualified professional asset manager"; and PTCE 96-23, which exempts certain transactions effected on behalf of a plan by an "in-house asset manager." Insurance company general accounts should also discuss with their legal counsel the availability of exemptive relief under Section 401(c) of ERISA. A purchaser of Securities should be aware, however, that even if the conditions specified in one or more exemptions are met, the scope of the relief provided by the applicable exemption or exemptions might not cover all acts that might be construed as prohibited transactions. Some transactions involving a Trust might be deemed to constitute prohibited transactions under ERISA and the Code with respect to a Benefit Plan that purchased notes or certificates if assets of the Trust were deemed to be assets of the Benefit Plan. Under a regulation issued by the United States Department of Labor (the "Plan Assets Regulation"), the assets of a Trust would be treated as plan assets of a Benefit Plan for the purposes of ERISA and the Code only if the Benefit Plan acquired an "equity interest" in the Trust and none of the exceptions contained in the Plan Assets Regulation was applicable. An equity interest is defined under the Plan Assets Regulation as an interest other than an instrument which is treated as indebtedness under applicable local law and which has no substantial equity features. The likely treatment in this context of notes and certificates of a given series will be discussed in the applicable prospectus supplement. 98 Employee benefit plans that are 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 ERISA requirements nor to Section 4975 of the Code. However, governmental plans may be subject to state or local laws that impose similar requirements. In addition, governmental plans and church plans that are "qualified" under Section 401(a) of the Code are subject to restrictions with respect to prohibited transactions under Section 503(a)(1)(B) of the Code, the sanction for violation being loss of "qualified" status. Due to the complexities of the "prohibited transaction" rules and the penalties imposed upon persons involved in prohibited transactions, it is important that the fiduciary of any Benefit Plan considering the purchase of Securities consult with its tax and/or legal advisors regarding whether the assets of the related Trust would be considered plan assets, the possibility of exemptive relief from the prohibited transaction rules and other issues and their potential consequences. 99 Underwriting On the terms and conditions set forth in an underwriting agreement with respect to the notes, if any, of a given series and an underwriting agreement with respect to the certificates of that series (collectively, the "Underwriting Agreements"), the Depositor will agree to cause the related Trust to sell to the underwriters named in the Underwriting Agreements (the "Underwriters") and in the applicable prospectus supplement, and each of those Underwriters will severally agree to purchase, the principal amount of each class of notes and certificates, as the case may be, of the related series set forth in the Underwriting Agreements and in the applicable prospectus supplement. In each of the Underwriting Agreements with respect to any given series of Securities, the several Underwriters will agree, subject to the terms and conditions set forth in the Underwriting Agreements, to purchase all the notes and certificates, as the case may be, described in the Underwriting Agreements which are offered by this prospectus and by the applicable prospectus supplement if any of those notes and certificates, as the case may be, are purchased. Each prospectus supplement will either: o set forth the price at which each class of notes and certificates, as the case may be, being offered by that prospectus supplement will be offered to the public and any concessions that may be offered to some dealers participating in the offering of those notes and certificates; or o specify that the related notes and certificates, as the case may be, are to be resold by the underwriters in negotiated transactions at varying prices to be determined at the time of that sale. After the initial public offering of those notes and certificates, those public offering prices and those concessions may be changed. Each Underwriting Agreement will provide that BMW FS and the Depositor will indemnify the Underwriters against specified civil liabilities, including liabilities under the Securities Act, or contribute to payments the several Underwriters may be required to make in respect of the specified civil liabilities. Each Trust may, from time to time, invest the funds in its Accounts in Eligible Investments acquired from the Underwriters or from the Depositor. Pursuant to each Underwriting Agreement with respect to a given series of Securities, the closing of the sale of any class of Securities subject to that Underwriting Agreement will be conditioned on the closing of the sale of all other classes of Securities of that series. The place and time of delivery for the Securities in respect of which this prospectus is delivered will be set forth in the applicable prospectus supplement. Legal Opinions Certain legal matters relating to the Securities of any series will be passed upon for the related Trust, the Depositor and the Servicer by counsel specified in the applicable prospectus supplement. Certain legal matters will be passed upon for the Underwriters by counsel specified in the applicable prospectus supplement. 100 Index of Terms Accounts...........................................59 Actuarial Receivables..............................22 Administration Agreement...........................73 Administrative Purchase Payment....................60 Administrative Receivable..........................60 Administrator......................................73 Advances...........................................63 Auction............................................47 Base Rate..........................................39 Base Servicing Fee.................................63 Bond Equivalent Yield..............................48 Business Day.......................................39 Calculation Agent..................................43 Calculation Date...................................43 California Contracts...............................79 CD Rate............................................44 CD Rate Security...................................39 Cede...............................................28 Certificate Pool Factor............................30 Certificateholder..................................37 CI.................................................53 class..............................................31 Clearstream, Luxembourg Participants...............51 Code...............................................81 Collection Account.................................58 Commercial Paper Rate..............................44 Commercial Paper Rate Security.....................39 Cooperative........................................54 DBC................................................53 Dealer Agreements..................................21 Definitive Certificates............................55 Definitive Notes...................................55 Definitive Securities..............................51 Depositaries.......................................51 Designated LIBOR Page..............................47 DTC Participants...................................31 Euroclear Operator.................................54 Euroclear Participants.............................51 Events of Default..................................33 Excess Payment.....................................62 Federal Funds Rate.................................45 Federal Funds Rate Security........................39 Final Scheduled Maturity Date......................60 Fixed Rate Securities..............................39 Floating Rate Securities...........................39 Foreign Certificate Owners.........................89 Foreign Grantor Trust Certificateholder............97 FTC Rule...........................................78 grantor trust......................................11 Grantor Trust Certificateholders...................90 Grantor Trust Certificates.........................90 H.15 Daily Update..................................44 H.15(519)..........................................44 High Yield Receivable..............................91 Indenture..........................................31 Index..............................................49 Index Currency.....................................40 Indexed Principal Amount...........................49 Indexed Securities.................................49 Indirect DTC Participants..........................52 Insolvency Event...................................70 Insolvency Laws....................................77 Interest Determination Date........................42 Interest Reset Date................................41 Interest Reset Period..............................41 IRS................................................80 LIBOR..........................................39, 46 London Banking Day.................................43 London Business Day................................40 Low Yield Receivables..............................92 Money Market Yield.................................45 Moody's............................................59 New CI.............................................53 New Regulations....................................84 New York Business Day..............................39 Noteholder.........................................31 OID................................................82 OID regulations....................................82 Original Certificate Balance.......................30 owner trust........................................11 Payahead Account...................................59 Payments Ahead.....................................59 Pool Balance.......................................64 Pooling and Servicing Agreement....................21 Precomputed Advance................................62 Prepayment Assumption..............................82 Principal Balance..................................64 Principal Financial Center.........................40 Principal Financial Center Business Day............40 prospectus supplement..............................21 Purchase Agreement.................................56 rebate.............................................23 Receivables Pool...................................21 Related Documents..................................36 Relief Act.........................................80 Required Deposit Rating............................59 Required Yield Supplement Amount...................65 Reserve Fund.......................................66 Retained Yield.....................................91 Schedule of Receivables............................56 Scheduled Payment..................................22 Section 1286 Treasury Regulations..................93 Securities.........................................21 Securities Act.....................................28 Securityholders....................................28 101 Servicer Default...................................70 Servicer Letter of Credit..........................68 Servicing Fee Rate.................................63 Short-Term Note....................................82 Simple Interest Advance............................63 Specified Currency.................................40 Spread.............................................39 Spread Multiplier..................................39 Standard & Poor's..................................59 Strip Certificates.................................38 Strip Notes........................................31 Supplemental Servicing Fee.........................63 TARGET Business Day................................40 Telerate Page 120..................................45 Telerate Page 56...................................47 Telerate Page 57...................................47 Terms and Conditions...............................54 Total Servicing Fee................................63 Treasury Bills.....................................47 Treasury Rate......................................47 Treasury Rate Security.............................39 Trustee............................................24 U.S. Person........................................83 UCC................................................58 Underwriting Agreements............................99 Warranty Purchase Payment..........................57 Warranty Receivable................................57 weighted average life..............................29 Yield Supplement Deposit...........................64 102 ================================================================================ No dealer, salesperson or other person has been authorized to give any information or to make any representations other than those contained in or incorporated by reference in this Prospectus and, if given or made, such information or representations must not be relied upon as having been authorized by the Depositor or any Underwriter. Neither the delivery of this Prospectus nor any sale made hereunder shall under any circumstance create an implication that there has been no change in the affairs of the Depositor or the Receivables since the date thereof. This Prospectus does not constitute an offer or solicitation by anyone in any state in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to anyone to whom it is unlawful to make such offer or solicitation. BMW FS Securities LLC Depositor BMW Financial Services NA, LLC Servicer Until [ ] , 2001 (90 days after the date of this Prospectus), all dealers effecting transactions in the Notes, whether or not participating in this distribution, may be required to deliver a Prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a Prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. ================================================================================ ================================================================================ BMW Vehicle Owner Trust 2001-A $[ ] % Asset Backed Notes, Class A-1 $[ ] % Asset Backed Notes, Class A-2 $[ ] % Asset Backed Notes, Class A-3 $[ ] % Asset Backed Notes, Class A-4 $[ ] % Asset Backed Notes, Class B PROSPECTUS SUPPLEMENT JPMorgan [ ] [ ] [ ] ================================================================================ The information in this prospectus is not complete and may be changed. A registration statement relating to these securities has been declared effective by the Securities and Exchange Commission. We are not using this Prospectus to offer to sell these securities or to solicit offers to buy these securities in any place where the offer or sale is not permitted. Subject to completion, dated May [ ], 2001 Prospectus Supplement (To Prospectus dated April [ ], 2001) BMW Vehicle Owner Trust 2001-A BMW FS Securities LLC, Depositor BMW Financial Services NA, LLC, Servicer $[ ] ASSET BACKED NOTES _____% Class A-1 Notes due 200_ _____% Class A-2 Notes due 200_ _____% Class A-3 Notes due 200_ _____% Class A-4 Notes due 200_ _____% Class B Notes due 200_ The trust's main source of payments on the notes will be loan payments generated by a portfolio of retail installment sale contracts secured in most cases by BMW or Land Rover motor vehicles. See "Risk Factors" beginning on page S-__ for a discussion of risks that you should consider in connection with an investment in the notes. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the notes or determined that this Prospectus is accurate or complete. Any representation to the contrary is a criminal offense. ================================================================================ Initial Principal Price to Underwriting Proceeds Balance Public Discounts to Depositor - -------------------------------------------------------------------------------- Class A-1 Notes % % % - -------------------------------------------------------------------------------- Class A-2 Notes % % % - -------------------------------------------------------------------------------- Class A-3 Notes % % % - -------------------------------------------------------------------------------- Class A-4 Notes % % % - -------------------------------------------------------------------------------- Class B Notes % % % - -------------------------------------------------------------------------------- Total $ $ $ - -------------------------------------------------------------------------------- The notes will not be listed on any securities exchange. Currently, there is no public market for the notes. We expect that delivery of the notes will be made to investors on or about ____________. JPMorgan May [ ], 2001 TABLE OF CONTENTS Page Important Notice About Information Presented in this Prospectus Supplement and the Accompanying Prospectus......................5 Summary of Parties to the Transaction.........................................6 Summary of Monthly Deposits to and Withdrawals from Accounts..................7 Summary of Terms..............................................................8 Risk Factors.................................................................21 The Trust....................................................................29 General .....................................................................29 Capitalization of the Trust..................................................30 The Owner Trustee and the Indenture Trustee..................................30 The Receivables..............................................................30 Assets of the Trust..........................................................30 Eligibility Criteria.........................................................32 Description of Initial Receivables...........................................33 Maturity and Prepayment Considerations.......................................39 Delinquencies, Repossessions and Loan Loss Information.......................39 Weighted Average Life of the Notes...........................................42 Note Factors.................................................................50 Use of Proceeds..............................................................50 The Depositor and the Servicer...............................................50 The Notes....................................................................50 General .....................................................................50 Payments of Interest.........................................................51 Payments of Principal........................................................51 Optional Prepayment..........................................................53 Indenture....................................................................53 Notices .....................................................................53 Governing Law................................................................54 Payments on the Notes........................................................54 Calculation of Available Amounts.............................................54 Payment of Distributable Amounts.............................................56 Credit Enhancement...........................................................59 S-2 TABLE OF CONTENTS (continued) Page Subordination................................................................59 Reserve Account..............................................................59 Yield Supplement Overcollateralization Amount................................60 Description of the Transfer and Servicing Agreements.........................62 The Transfer and Servicing Agreements........................................62 Sale and Assignment of Receivables; Subsequent Receivables...................62 Accounts ....................................................................62 Collections..................................................................62 Pre-Funding Account..........................................................63 Capitalized Interest Account.................................................64 Note Distribution Account....................................................64 Advances ....................................................................65 Servicing Compensation.......................................................65 Net Deposits.................................................................65 Optional Purchase............................................................66 Removal of Servicer..........................................................66 Duties of the Owner Trustee and the Indenture Trustee........................67 The Owner Trustee and the Indenture Trustee..................................68 Material Income Tax Consequences.............................................69 Tax Characterization of the Trust............................................69 Treatment of the Notes as Indebtedness.......................................69 ERISA Considerations.........................................................70 Underwriting.................................................................71 Notice to Canadian Residents.................................................73 Resale Restrictions..........................................................73 Representations of Purchasers................................................73 Rights of Action (Ontario Purchasers)........................................73 Enforcement of Legal Rights..................................................74 Notice to British Columbia Residents.........................................74 Taxation and Eligibility for Investment......................................74 Legal Opinions...............................................................74 Index of Terms...............................................................75 S-3 Annex A Global Clearance, Settlement and Tax Documentation Procedures.........1 Initial Settlement............................................................1 Secondary Market Trading......................................................1 Material U.S. Federal Income Tax Documentation Requirements...................3 S-4 Important Notice About Information Presented in this Prospectus Supplement and the Accompanying Prospectus Information about the securities is provided in two separate documents that progressively provide varying levels of detail: (1) the accompanying prospectus, which provides general information, some of which may not apply to a particular class of securities, including your class; and (2) this prospectus supplement, which describes the specific terms of your class of securities. If the description of the terms of your securities varies between this prospectus supplement and the accompanying prospectus, you should rely on the information in this prospectus supplement. Cross-references are included in this prospectus supplement and in the accompanying prospectus which direct you to more detailed descriptions of a particular topic. You can also find references to key topics in the Table of Contents beginning on page S-2 in this prospectus supplement and the Table of Contents beginning on page 2 in the accompanying prospectus. You can find a listing of the pages where capitalized terms used in this prospectus supplement are defined under the caption "Index of Terms" beginning on page S-75 in this prospectus supplement and under the caption "Index of Terms" beginning on page 102 in the accompanying prospectus. S-5 - -------------------------------------------------------------------------------- Summary of Parties to the Transaction* --------------------- |----------------------- BMW FINANCIAL | SERVICES NA, LLC | (seller and servicer) | --------------------- | | | | - ------------ --------------------- servicing of BMW FS receivables SECURITIES - ------------ LLC | (depositor) | --------------------- | | ------------------------ | | WILMINGTON TRUST | --------------------- / COMPANY | BMW VEHICLE / (owner trustee) |----------------------- OWNER TRUST / ------------------------ 2001-A (ISSUER) ----------------------- --------------------- THE CHASE MANHATTAN BANK / \ (indenture trustee) / \ ------------------------ / \ / \ / \ / \ / \ / \ / ------------------ --------------- CLASS A-1 NOTES CERTIFICATES CLASS A-2 NOTES CLASS A-3 NOTES ------------------ CLASS A-4 NOTES AND CLASS B NOTES --------------- * This chart provides only a simplified overview of the relations between the key parties to the transaction. Refer to this prospectus supplement and the prospectus for a further description. - --------------------------------------------------------------------------------
S-6 Summary of Monthly Deposits to and Withdrawals From Accounts* - ----------------------------------------------------------- /----------- ----------- Servicer / Payments on Obligors on \ Receivables Receivables \----------- ----------- - ----------------------------------------------------------- | | | | / \ | | | | | | / \ | | | | | | / \ | | | | | | / \ | | |Principal | |Servicer| |Reimbursements| |Warranty & | |& Interest | |Advances| |of Servicer | |Administrative| |on | | | | Advances | |Payments | |Receivables| | | | | \ / \ / \ / | | \ / \ / \ / | | \ / \ / \ / | | \ / / ---------------- / Withdrawals from \ Reserve Account - ---------------------------------------------------------- \ --------------- ------- COLLECTION ACCOUNT Reserve - ---------------------------------------------------------- ------------\ Account | | Deposits to \ ------- | | Reserve Account | | | | ------------/ | | | | |Excess monies| Interest & Payments on |from Reserve | Principal Certificates |Account | | | \ / \|/ \|/ \ / ----------- ----------- \ / Noteholders Certificate ---------- Holders Depositor ----------- ----------- ---------- * This chart provides only a simplified overview of the monthly flow of funds. Refer to this prospectus supplement and the prospectus for a further description.
S-7 Summary of Terms The following summary contains a brief description of the notes. You will find a detailed description of the terms of the offering of the notes following this summary. You should carefully read this entire document and the accompanying prospectus to understand all of the terms of the offering of the notes. You should consider both documents when making your investment decision. Relevant Parties Issuer................................. BMW Vehicle Owner Trust 2001-A. The trust will be established by a trust agreement. Seller................................. BMW Financial Services NA, LLC. Servicer............................... BMW Financial Services NA, LLC. Depositor.............................. BMW FS Securities LLC. Indenture Trustee...................... The Chase Manhattan Bank. Owner Trustee.......................... Wilmington Trust Company. Relevant Agreements Indenture.............................. The indenture between the issuer and the indenture trustee. The indenture provides for the terms relating to the notes. Trust Agreement........................ The trust agreement between the depositor and the owner trustee. The trust agreement governs the creation of the trust and provides for the terms relating to the certificates. Sale and Servicing Agreement........... The sale and servicing agreement among the issuer, the indenture trustee, the servicer and the depositor. The sale and servicing agreement governs the transfer of the receivables by the depositor to the trust and the servicing of the receivables by the servicer. Administration Agreement............... The administration agreement among BMW Financial Services NA, LLC, as administrator, the trust and the indenture trustee. The administration agreement governs the provision of reports by the administrator and the performance by the administrator of other administrative duties for the trust.
S-8 Receivables Purchase Agreement......... The receivables purchase agreement between the depositor and the seller. This agreement governs the sale of the receivables from BMW Financial Services NA, LLC to the depositor. Relevant Dates Closing Date........................... Expected to be May [ ], 2001. Initial Cutoff Date.................... [ ], 2001. Subsequent Cutoff Date................. The first day of the month during which a subsequent receivable is transferred to the trust. Payment Dates.......................... The trust will pay interest and principal on the notes on the twenty-fifth day of each month. If the twenty-fifth day of the month is not a business day, payments on the securities will be made on the next business day. The date that any payment is made is called a payment date. The first payment date is [ ], 2001. Final Scheduled Payment Dates.......... The final principal payment for each class of notes is scheduled to be made on the final scheduled payment dates as follows: o Class A-1 Notes ____, 200_ o Class A-2 Notes ____, 200_ o Class A-3 Notes ____, 200_ o Class A-4 Notes ____, 200_ o Class B Notes _____, 200_. Record Date............................ So long as the notes are in book-entry form, the trust will make payments on the securities to the holders of record on the day immediately preceding the payment date. If the notes are issued in definitive form, the record date will be the last day of the month preceding the payment date.
S-9 Description of the Securities General................................ The notes consist of the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes - sometimes referred to as the Class A Notes - and the Class B Notes. The initial principal amount of each class of notes is described on the front cover of this prospectus supplement. Payments of interest on the Class B Notes are subordinated to the payments of interest on and, in certain circumstances, principal of the Class A Notes as described in this prospectus supplement. The trust is also issuing certificates representing the equity interest in the trust. The depositor currently does not expect to sell the certificates, but is not prohibited from doing so. The depositor is not offering the certificates by this prospectus supplement. Any information in this prospectus supplement relating to the certificates is presented solely to provide you with a better understanding of the notes. Receivables............................ The trust's main source of funds for making payments on the notes will be collections on motor vehicle retail installment sale contracts, also known as the receivables. All of the initial receivables are, and all of the subsequent receivables will be, secured by motor vehicles manufactured by subsidiaries of Bayerische Motoren Werke Aktiengesellschaft ("BMW AG" and, together with all other BMW group companies, the "BMW Group") and Land Rover vehicles except that __% by principal balance of the receivables are secured by vehicles of other manufacturers. Initially, the principal balance of the receivables on [ ], 2001, referred to as the "initial cutoff date," was $[ ]. As of the initial cutoff date, the receivables (the "Initial Receivables") had the following characteristics: o number of receivables: [ ] o average principal balance: $[ ] o weighted average annual percentage rate: [ ]%
S-10 o weighted average remaining term to maturity: [ ] months o weighted average original term to maturity: [ ] months The receivables owned by the trust are classified as simple interest receivables. Simple interest receivables are described in more detail in "The Receivables" in the accompanying prospectus. We refer you to "The Receivables" in this prospectus supplement for more information on the receivables. Funding Period......................... During the period from the Closing Date through the end of the Collection Period in [ ], 2001 (the "Funding Period"), the Trust can use funds on deposit in an account (the "Pre-Funding Account") to purchase additional receivables (the "Subsequent Receivables") from the Depositor in an amount up to approximately $[ ]. The purchase price for the Subsequent Receivables will be withdrawn from the Pre-Funding Account. A portion of the purchase price will be deposited into the reserve account and the remainder of the purchase price will be paid to the Depositor by the trust and then to BMW Financial Services NA, LLC by the Depositor. If the full amount deposited on the Closing Date cannot be used for the purpose of purchasing Subsequent Receivables during the Funding Period, all remaining monies will be applied as a mandatory prepayment of the notes sequentially to the earliest maturing class of Class A Notes then outstanding. Terms of the Notes..................... In general, noteholders are entitled to receive payments of interest and principal from the trust only to the extent that collections from trust assets are sufficient to make those payments. Interest and principal collections from trust assets will be divided among the various classes of securities in specified proportions. The trust will pay interest and principal to noteholders of record as of the preceding record date. Interest:
S-11 The interest rate for each class of notes is set forth on the front cover of this prospectus supplement. The Class A-1 Notes will accrue interest on an actual/360 basis from the previous payment date to the next payment date, except that the first interest accrual period will be from the closing date to [ ], 2001. This means that the interest due on each payment date will be the product of: o the outstanding principal balance of the related class of notes, o the interest rate, and o the actual number of days since the previous payment date to but excluding the current payment date or, in the case of the first payment date, since the closing date divided by 360. The Class A-2, Class A-3, Class A-4 and Class B Notes will accrue interest on a 30/360 basis from the 25th day of each calendar month to the 25th day of the succeeding calendar month except that the first interest accrual period will be from the closing date to [ ], 2001. This means that the interest due on each payment date will be the product of: o the outstanding principal balance of the related class of notes; o the applicable interest rate; and o 30 or, in the case of the first payment date, ___ divided by 360. If noteholders of any class do not receive all interest owed to them on a payment date, the trust will make payments of interest on later payment dates to make up the shortfall together with interest on those amounts, to the extent funds from specified sources are available to cover the shortfall. Principal: The trust will pay principal sequentially to the earliest maturing class of Class A Notes then outstanding until that class is paid in full and then to the Class B
S-12 Notes. S-13 Priority of Distributions.............. From collections on the receivables during the prior calendar month and, in the event of a shortfall in meeting the payments described in clauses (1) through (5), amounts withdrawn from the reserve account, the trust will pay the following amounts on each payment date in the following order of priority: (1) To the servicer, the servicing fee and all unpaid servicing fees from prior collection periods and amounts in respect of reimbursement for non-recoverable servicer advances, (2) To the Class A Noteholders, the accrued interest on the Class A Notes, (3) To the principal distribution account, the first priority principal distribution amount which will generally be the amount, if any, equal to the excess of: o the principal balances of the Class A Notes over o the sum of the principal balance of the receivables plus the amount, if any, remaining on deposit in the pre-funding account less the required yield supplement overcollateralization amount, (4) To the Class B noteholders, accrued and unpaid interest on the Class B Notes, (5) To the principal distribution account, generally an amount equal to: o the excess of o the sum of the principal balance of the notes over o an amount equal to the sum of the principal balance of the receivables plus the amount, if any, on deposit in the pre-funding account less the required yield supplement overcollateralization amount, provided
S-14 that this amount will be reduced by any amounts previously deposited in the principal distribution account in accordance with clause (3) above, (6) To the reserve account, the amount, if any, necessary to cause the amount on deposit in the reserve account to equal the specified reserve account balance, which is [ ]% of the current aggregate principal balance of the receivables, (7) To the indenture trustee and the owner trustee, the indenture trustee fee and owner trustee fee, respectively, to the extent not paid by the servicer, and all unpaid indenture trustee fees and owner trustee fees from prior collection periods to the extent not otherwise paid by the servicer, and (8) To the certificateholders, any amounts remaining in the collection account. On the final scheduled payment date of any class of notes, the amount required to be allocated to the principal distribution account will be the amount necessary to reduce the principal balance of that class of notes to zero.
S-15 Distributions from the Principal Distribution Account........................ From deposits made to the principal distribution account, the trust will generally pay principal on the notes in the following order of priority: o to the Class A-1 Notes until they are paid in full; o to the Class A-2 Notes until they are paid in full; o to the Class A-3 Notes until they are paid in full; o to the Class A-4 Notes until they are paid in full; o to the Class B Notes until they are paid in full; and o to the certificateholders, any funds remaining. Change in Priority of Distribution upon The order of priority for distributions will change following Certain Events of Default.............. the occurrence of: o a default for five days or more in the payment of interest on the controlling class of notes that has resulted in an acceleration of the notes; o a default in the payment of principal on any note when due that has resulted in an acceleration of the notes; o an insolvency or a bankruptcy with respect to the trust that has resulted in an acceleration of the notes, or o any other event of default that results in the liquidation of the trust. Following the occurrence of the preceding events, the trust will make no distributions of principal or interest on the Class B Notes until payment in full of principal and interest on the Class A Notes. In addition, payments of principal on the Class A Notes will be made first to the Class A-1 Notes until the Class A-1 Notes are repaid in full, and then pro rata to the Class A-2, Class A-3 and Class A-4 Notes.
S-16 Following the occurrence of any other event of default which has resulted in an acceleration of the notes but has not yet resulted in a liquidation of the trust, no change will be made in the priority of payments on the Class A Notes and the Class B Notes on each distribution date until a liquidation, if any, of the property of the trust. Optional Redemption.................... The servicer may cause the trust to redeem any outstanding securities when the outstanding aggregate principal balance of the receivables declines to 10% or less of the original aggregate principal balance of the receivables as of the initial cutoff date plus the original amount deposited in the pre-funding account. We refer you to "Description of the Transfer and Servicing Agreements-Optional Purchase" in this prospectus supplement for more detailed information. Credit Enhancement..................... Credit enhancement is intended to protect you against losses and delays in payments on your securities by absorbing losses on the receivables and other shortfalls in cash flows. The credit enhancement for the Class A Notes will include: o the subordination of the Class B Notes; o the reserve account; and o the subordination of the certificateholder's right to receive excess interest. The credit enhancement for the Class B Notes will include: o the reserve account; and o the subordination of the certificateholder's right to receive excess interest. Subordination of Principal and Interest. As long as the Class A Notes remain outstanding: o payments of interest on the Class B Notes will be subordinated to payments of interest on the Class A Notes and, in certain circumstances, payments of principal on the Class A Notes; and o payments of principal on the Class B Notes
S-17 will be subordinated to payment of interest and principal on the Class A Notes. Reserve Account. On each payment date, the trust will use funds in the reserve account to cover shortfalls in payments of the servicing fee and interest and principal required to be paid on the notes. The sale and servicing agreement sets forth the specified reserve account balance, which is the amount that is required to be on deposit in the reserve account. On the closing date, the depositor will cause to be deposited $[ ] into the reserve account, which is [ ]% of the initial aggregate principal balance of the receivables as of the initial cutoff date. During the Funding Period, if the trust purchases Subsequent Receivables, a portion of the purchase price for the Subsequent Receivables withdrawn from the Pre-Funding Account will be deposited into the reserve account, if necessary, to maintain the amount on deposit in the reserve account at the specified reserve account balance. On each payment date, after making required payments to the servicer and to the holders of the notes, the trust will make a deposit into the reserve account to the extent necessary to maintain the amount on deposit in the reserve account at the specified reserve account balance. Excess Interest. The certificateholder is entitled to receive payments of interest collected on the receivables which are not used by the trust to make other required payments. The certificateholder's right to receive this excess interest is subordinated to the payment of the servicing fee, reimbursement of non-recoverable advances, the payment of principal and interest on the notes, the funding of the reserve account and the payment of indenture trustee and owner trustee fees. For more detailed information about the reserve account, we refer you to "Subordination; Reserve Account" in this prospectus supplement. Yield Supplement Overcollateralization Amount........... On the Closing Date, the sum of the principal balance of the receivables as of the initial cutoff date and the amount on deposit in the pre-funding account will exceed the initial principal amount of the securities, by [$ ] (the "Initial Yield Supplement Overcollateralization Amount"), which is approximately [ ]% of the sum of the aggregate
S-18 principal balance of the initial receivables as of the initial cutoff date and the amount on deposit in the pre-funding account on the closing date. The yield supplement overcollateralization amount will decline on each payment date. The yield supplement overcollateralization amount is intended to compensate for the low APRs on some of the receivables. For detailed information on the yield supplement overcollateralization amount, we refer you to "Description of the Transfer and Servicing Agreements-Yield Supplement Overcollateralization Amount" in this prospectus supplement. Tax Status............................. Subject to important considerations described in this prospectus supplement and the accompanying prospectus, Weil, Gotshal & Manges LLP, special tax counsel to the trust, will deliver its opinion that: 1. the notes will be characterized as debt for tax purposes; 2. the trust will not be characterized as an association or a publicly traded partnership taxable as a corporation for federal income tax purposes. If you purchase the notes, you will agree to treat the notes as debt. The depositor and any subsequent purchaser of the certificates will agree to treat the trust o as a partnership in which the owners of the certificates are partners, or o if there is only one beneficial owner of the certificates, as a "disregarded entity," for federal income tax purposes. We refer you to "Material Income Tax Consequences" in this prospectus supplement and "Material Income Tax Consequences--Tax Treatment of Owner Trusts" in the accompanying prospectus. ERISA Considerations................... The notes are generally eligible for purchase by employee benefit plans and individual retirement accounts, subject to those considerations discussed under "ERISA Considerations" in this prospectus
S-19 supplement and in the accompanying prospectus. We refer you to "ERISA Considerations" in this prospectus supplement and in the accompanying prospectus. If you are a benefit plan fiduciary considering purchase of the securities you should, among other things, consult with your counsel in determining whether all required conditions have been satisfied. Eligibility for Purchase by Money Market Funds........................... The Class A-1 Notes will be eligible for purchase by money market funds under Rule 2a-7 under the Investment Company Act of 1940, as amended. A money market fund should consult its legal advisers regarding the eligibility of the Class A-1 Notes under Rule 2a-7 and whether an investment in the Class A-1 Notes satisfies the fund's investment policies and objectives. Ratings................................ It is a condition to the issuance of the securities that the securities will receive the following ratings from Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., Moody's Investors Service, Inc. and Fitch, Inc. (the "Rating Agencies"): Standard & Class Poor's Moody's Fitch ----- ---------- ------- ----- A-1 A-1+ P-l F-1+ A-2 AAA Aaa AAA A-3 AAA Aaa AAA A-4 AAA Aaa AAA B A A3 A
S-20 Risk Factors You should consider the following risk factors (and the factors set forth under "Risk Factors" in the accompanying prospectus) in deciding whether to purchase the securities of any class. Because the trust has limited assets, The only source of funds for payments on the securities is there is only limited protection against the assets of the trust and the reserve account. The potential losses. securities are not obligations of, and will not be insured or guaranteed by, any governmental agency or the seller, the servicer, any trustee or any of their affiliates. You must rely solely on payments on the receivables and amounts on deposit in the reserve account for payments on the notes. Although funds in the reserve account will be available to cover shortfalls in payments of interest and principal on each payment date, the amounts deposited in the reserve account will be limited. If the entire reserve account has been used, the trust will depend solely on current collections on the receivables to make payments on the notes. Any excess amounts released from the reserve account to the depositor will no longer be available to noteholders on any later payment date. We refer you to "Subordination; Reserve Account" in this prospectus supplement. Occurrence of events of default under the Payment defaults or the insolvency or dissolution of the indenture may result in insufficient depositor may result in prepayment of the securities, which funds to make payments on your securities. may result in losses. If the trust fails to pay principal of the notes when due, or fails to pay interest on the notes of the controlling class within five days of the due date, the indenture trustee or the holders of the controlling class of notes outstanding may declare the entire amount of the notes to be due immediately. If this happens, the trustee may be directed to sell the assets of the trust and prepay the notes. In the event the indenture trustee sells the receivables under adverse market conditions, proceeds from the sale of the receivables may not be sufficient to repay all of the securities and you may suffer a loss. If you own Class B Notes, you are subject The Class B Notes bear greater risk than the Class A Notes to greater credit risk because the Class because payments of interest and principal on the Class B Notes are subordinate to the Class A Notes. Notes B are subordinate, to the extent described below, to payments of interest and principal on the Class A Notes.
S-21 Interest payments on the Class B Notes on each payment date will be subordinated to servicing fees due to the servicer, interest payments on the Class A Notes and an allocation of principal payments to the Class A Notes to the extent the sum of the principal balances of the Class A Notes exceeds the receivables balance plus the amount on deposit in the pre-funding account less the yield supplement overcollateralization amount. Principal payments on the Class B Notes will be fully subordinated to principal payments on the Class A Notes. No principal will be paid on the Class B Notes until the Class A Notes have been paid in full. The failure to pay interest on the Class The indenture provides that failure to pay interest when due B Notes is not an event of default. on the Class B Notes will not be an event of default under the indenture. Under these circumstances, the holders of the Class B Notes will not have any right to declare an event of default, to cause the maturity of the notes to be accelerated or to direct or consent to any action under the Indenture. You may suffer losses because you have Because the trust has pledged the property of the trust to limited control over actions of the trust the indenture trustee to secure payment on the notes, the and conflicts between classes of notes may indenture trustee may, and at the direction of the required occur. percentage of the controlling class, which will be the Class A Notes for so long as any Class A Notes are outstanding and the Class B Notes after the Class A Notes have been paid in full, will take one or more of the other actions specified in the indenture relating to the property of the trust, including a sale of the assets of the trust. In addition, the holders of a majority of the Class A Notes, under some circumstances, have the right to waive events of servicing termination or terminate the servicer without consideration of the effect that the waiver or termination would have on the holders of Class B Notes. The holders of Class B Notes will not have the ability to waive events of servicing termination or to remove the servicer until the Class A Notes have been paid in full. The occurrence of an event of default The trust will not make any distributions of principal or under the indenture may delay payments on interest on the Class B Notes until payment in full of the Class B Notes. principal and interest on the Class A Notes following:
S-22 o an event of default under the indenture relating to the payment of principal on any note or the payment of interest on the Class A Notes which has resulted in acceleration of the notes; o an event of default under the indenture relating to an insolvency event or a bankruptcy with respect to the trust which has resulted in an acceleration of the notes; or o a liquidation of the trust assets following any event of default under the indenture. This may result in a delay or default in making payments on the Class B Notes. Class B noteholders may not be able to If an event of default occurs under the indenture, only the direct the indenture trustee upon an holders of the Class A Notes may waive that event of default, event of default under the accelerate the maturity dates of the notes or direct or indenture. consent to any action under the indenture. The holders of any outstanding Class B Notes will not have any rights to direct or to consent to any action until the Class A Notes have been repaid in full. Payment priorities increase risk of loss Classes of notes that receive payments, particularly or delay in payment to certain notes. principal payments, before other classes will be repaid more rapidly than the other classes and payments to these other classes may be delayed if collections and amounts on deposit in the reserve account are inadequate to pay all amounts payable on all classes of notes on any payment date. In addition, because principal of each class of notes will be paid sequentially, classes of notes that have higher sequential numerical class designation - and, in particular, the Class B Notes - will be outstanding longer and therefore will be exposed to the risk of losses on the receivables during periods after other classes have been receiving most or all amounts payable on their notes, and after which a disproportionate amount of credit enhancement may have been applied and not replenished.
S-23 As a result, the yields of the later maturing classes of Class A Notes will be sensitive, and the yields of the Class B Notes will be very sensitive to losses on the receivables and the timing of those losses. If the actual rate and amount of losses exceed your expectations, and if amounts in the reserve account are insufficient to cover the resulting shortfalls, the yield to maturity on your notes may be lower than anticipated, and you could suffer a loss. Classes of notes that receive payments earlier than expected are exposed to greater reinvestment risk and classes of notes that receive principal later than expected are exposed to greater risk of loss. In either case, the yields on your notes could be materially and adversely affected. Upon the occurrence of an event of default and acceleration of the notes, principal payments will be made first on the Class A-1 Notes until the Class A-1 Notes have been paid in full, and thereafter on the Class A-2 Notes, Class A-3 Notes and Class A-4 Notes pro rata based on the amount outstanding under each class. Consequently, even after an event of default and acceleration of all the notes, the Class A-2 Noteholders, Class A-3 Noteholders and Class A-4 Noteholders will not receive payments on principal until the Class A-1 notes have been paid in full. The geographic concentration of the Economic conditions in the states where obligors reside may obligors and performance of the affect delinquencies, losses and prepayments on the receivables may increase the risk of loss receivables. The following economic conditions may affect on investment. your payments on the receivables: o unemployment, o interest rates, o inflation rates, and o consumer perceptions of the economy. If a large number of obligors are located in a particular state, these conditions could increase the delinquency, credit loss or repossession experience of the receivables. If there is a concentration of obligors and receivables in particular states, any adverse economic conditions in those states may affect the performance of the securities more than if this concentration did not exist.
S-24 As of the initial cutoff date, BMW Financial Services NA, LLC's records indicate that the billing addresses of the originating dealers of the receivables were concentrated in the following states: Percentage of Total State Principal Balance ----- ----------------- California 27.3% Texas 7.3% New York 6.8% Florida 5.9% No other state, by billing address, constituted more than 5% of the aggregate principal balance of the receivables as of the initial cutoff date. 27.3% of the outstanding principal amount of the receivables were originated in California. A large number of manufacturers and providers of high-technology equipment and services are headquartered in California. Some companies in this sector have recently reported significant reductions in orders or sales. If this downturn continues, it could have a substantial impact on the California economy and on the performance of receivables originated in that state. For a discussion of the breakdown of the receivables by state, we refer you to "The Receivables" in this prospectus supplement. Prepayments on receivables may cause You may receive payment of principal on your securities prepayments on the securities, resulting earlier than you expected. If that happens, you may not be in reinvestment risk to you. able to reinvest the principal you receive at a rate as high as the rate on your securities. Prepayments on the receivables will shorten the life of the securities to an extent that cannot be predicted. Prepayments may occur for a number of reasons. Some prepayments may be caused by the obligors under the receivables. For example, obligors may: o make early payments, since receivables will generally be prepayable at any time without penalty; o default, resulting in the repossession and sale of the financed vehicle; or
S-25 o damage the vehicle or become unable to pay due to death or disability, resulting in payments to the trust under any existing physical damage, credit life or other insurance. Some prepayments may be caused by the seller or the servicer. For example, the seller will make representations and warranties regarding the receivables, and the servicer will agree to take or refrain from taking certain actions with respect to the receivables. If the seller or the servicer breaches a representation or warranty and the breach is material and cannot be remedied, it will be required to purchase the affected receivables from the trust. This will result, in effect, in the prepayment of the purchased receivables. In addition, if amounts on deposit in the pre-funding account are not fully utilized by the end of the funding period, these amounts will be applied as a prepayment of principal of the Class A Notes sequentially to the earliest maturing class of Class A Notes then outstanding. Moreover, the servicer has the option to purchase the receivables from the trust when the total outstanding principal balance of the receivables is 10% or less of the sum of the total outstanding principal balance of the receivables as of the initial cutoff date plus the amount on deposit in the pre-funding account as of the closing date. The rate of prepayments on the receivables may be influenced by a variety of economic, social and other factors. The seller maintains limited historical data with respect to prepayments. For these reasons, the seller cannot predict the actual prepayment rates for the receivables. The seller, however, believes that the actual rate of prepayments will result in the weighted average life of the receivables being shorter than the period from the closing date to the final scheduled maturity date for the related class of securities. If this is the case, the weighted average life of each class of securities will be correspondingly shorter.
S-26 Possible prepayment due to inability to The trust will buy subsequent receivables from the depositor acquire subsequent receivables during the funding period and the depositor will buy subsequent receivables from the seller during same time period to the extent that the seller has receivables to sell to the depositor. The number of receivables that the seller has to sell depends on its ability to originate and acquire additional receivables which, in turn, is affected by the number of financed vehicles sold. The number of financed vehicles sold is affected by a variety of factors, including interest rates, unemployment levels, the rate of inflation and consumer perception of economic conditions generally. If the full amount deposited in the pre-funding account for the purpose of purchasing subsequent receivables from the seller cannot be used for that purpose during the funding period, any remaining amounts will be paid on the notes as prepayment or principal on the following payment date. If the amount on deposit in the pre-funding account exceeds $100,000, then such mount will be applied in reduction of the principal balance of each preceding payment date. If the amount on deposit in the pre-funding account is less than $100,000, then such amount will be applied in reduction of the principal balance of the Class A Notes in sequential order. We refer you to "Description of the Transfer and Servicing Agreements - Pre-Funding Account in this prospectus supplement." In addition, the subsequent receivables will have different characteristics than those described in this prospectus supplement. However, the seller will not select any subsequent receivables to adversely affect the interests of the noteholders and certificateholders. Withdrawal or downgrading of the initial A security rating is not a recommendation to buy, sell or ratings of the notes will affect the hold securities. Similar ratings on different types of prices for the notes upon resale. securities do not necessarily mean the same thing. You should analyze the significance of each rating independently from any other rating. A rating agency may change its rating of the notes after the notes are issued if that rating agency believes that circumstances have changed. Any subsequent change in a rating will likely affect the price that a subsequent purchaser would be willing to pay for the notes and your ability to resell your notes.
S-27 The notes are not suitable investments The notes, and in particular the Class B Notes, are not a for all investors. suitable investment for any investor that requires a regular or predictable schedule of payments or payment on specific dates. The notes are complex investments that should be considered only by sophisticated investors. We suggest that only investors who, either alone or with their financial, tax and legal advisors, have the expertise to analyze the prepayment, reinvestment and default risks, the tax consequences of an investment and the interaction of these factors should consider investing in the notes.
S-28 The Trust General The BMW Vehicle Owner Trust 2001-A (the "Trust") is a Delaware business trust to be formed pursuant to the trust agreement (the "Trust Agreement") between BMW FS Securities LLC, as depositor (the "Depositor"), and Wilmington Trust Company, as owner trustee (the "Owner Trustee"). After its formation, the Trust will not engage in any activity other than: 1. acquiring, holding and managing a pool of motor vehicle retail installment sales contracts (the "Initial Receivables") and any additional motor vehicle retail installment sale contracts purchased during the Funding Period (the "Subsequent Receivables" and together with the "Initial Receivables", 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 or convenient to accomplish the foregoing or are incidental to or connected with those activities. The net proceeds from the sale of the Notes (as defined in this prospectus supplement) will be used by the Trust to purchase the Initial Receivables and the Subsequent Receivables from the Depositor pursuant to the sale and servicing agreement dated as of _______ __, 2001 (the "Sale and Servicing Agreement") among BMW Financial Services NA, LLC ("BMW FS") as seller, servicer (in that capacity the "Servicer"), custodian and administrator, the Trust, and The Chase Manhattan Bank, as indenture trustee (the "Indenture Trustee") and to fund the Reserve Account. BMW FS will be appointed to act as the servicer of the Receivables. The Servicer will service the Receivables pursuant to the Sale and Servicing Agreement, the Trust Agreement and the owner trust administration agreement dated as of ________ __, 2001, (the "Administration Agreement") among BMW FS, as administrator, the Trust and the Indenture Trustee, and will be compensated for those services as described under "Description of the Transfer and Servicing Agreements--Servicing Compensation" in this prospectus supplement and "Description of the Transfer and Servicing Agreements--Servicing Compensation" in the accompanying prospectus. Pursuant to agreements between BMW FS and dealers in BMW products ("BMW Centers"), BMW Centers will repurchase from BMW FS those contracts that do not meet specified representations and warranties made by the BMW Centers. These BMW Centers' repurchase obligations are referred to in this prospectus supplement as "BMW Center Recourse." Those representations and warranties relate primarily to the origination of the contracts and the perfection of the security interests in the related financed vehicles, and do not relate to the creditworthiness of the related Obligors or the collectability of those contracts. Although the Dealer Agreements with respect to the Receivables will not be assigned to the Owner Trustee, the Sale and Servicing Agreement will require that any recovery by BMW FS in respect of any Receivable pursuant to any BMW Center Recourse be deposited in the Collection Account to satisfy BMW FS' repurchase obligations under the Sale and Servicing Agreement. The sales by the BMW Centers of retail installment sale contracts to BMW FS do not generally provide for recourse against the BMW S-29 Centers for unpaid amounts in the event of a default by an Obligor, other than in connection with the breach of the foregoing representations and warranties. The Trust property includes the Receivables and monies due or received under the Receivables on or after the related cutoff date. The Reserve Account will be maintained for the benefit of the Noteholders. The Trust's principal offices are in Wilmington, Delaware, in care of Wilmington Trust Company, as Owner Trustee, at the address set forth below under "The Owner Trustee and the Indenture Trustee." Capitalization of the Trust The following table illustrates the capitalization of the Trust as of the Closing Date, as if the issuance and sale of the Notes had taken place on that date: Class A-1 Notes....................................... $[ ] ---------- Class A-2 Notes....................................... [ ] ---------- Class A-3 Notes....................................... [ ] ---------- Class A-4 Notes....................................... [ ] ---------- Class B Notes......................................... [ ] ---------- Total.............................................. $[ ] ========== The Owner Trustee and the Indenture Trustee Wilmington Trust Company is the Owner Trustee under the Trust Agreement. Wilmington Trust Company is a Delaware banking corporation, and its Corporate Trust Office is located at 1100 North Market Street, Rodney Square North, Wilmington, Delaware 19890-0001, Attn: Corporate Trust Administration. The Depositor, the Servicer and its affiliates may maintain normal commercial banking relations with the Owner Trustee and its affiliates. The fees and expenses of the Owner Trustee will be paid by the Administrator. The Chase Manhattan Bank is the Indenture Trustee under the Indenture (the Indenture Trustee and the Owner Trustee are collectively referred to as the "Trustees"). The Chase Manhattan Bank is a New York banking association and its principal executive offices are located at 450 West 33rd Street, New York, New York 10001. The Depositor, the Servicer and its affiliates may maintain normal commercial banking relations with the Indenture Trustee and its affiliates. The Receivables Assets of the Trust On the Closing Date, the assets of the Trust will include: 1. the Initial Receivables having an aggregate principal balance as of the close of business on [ ] (the "Initial Cutoff Date") of approximately $[ ] (the "Initial Pool Balance") and the Subsequent Receivables; S-30 2. all rights, benefits, obligations and proceeds arising from or in connection with the Receivables, including the right to receive payments collected thereon after the Initial Cutoff Date with respect to the Initial Receivables and on or after the related Subsequent Cutoff Date with respect to any Subsequent Receivables; 3. security interests in the new or used automobiles, motorcycles, light-duty trucks and sport utility vehicles (the "Financed Vehicles") securing each Receivable; 4. the related Receivable files; 5. all rights to insurance proceeds and liquidation proceeds with respect to the Receivables; 6. certain rights under the Receivables Purchase Agreement dated as of [___________], 2001 (the "Receivables Purchase Agreement") between the Depositor and BMW FS, as seller (the "Seller") and any Subsequent Purchase Agreement between the Depositor and BMW FS; 7. funds on deposit from time to time in the Reserve Account; 8. funds on deposit in the Collection Account; 9. funds on deposit in the Pre-Funding Account; and 10. funds on deposit in the Capitalized Interest Account. The Motor Vehicle Contracts that comprise the Receivables are secured by new or used automobiles, motorcycles, light-duty trucks and sport utility vehicles manufactured by the BMW Group as well as Land Rover sport utility vehicles except that __% by principal balance of the Receivables are secured by vehicles of other manufacturers. The Contracts were originated by BMW Centers and Land Rover dealers who participate in BMW FS' vehicle financing program and were acquired by BMW FS. See "BMW FS' Vehicle Financing Programs." The Trust will purchase the Initial Receivables from the Depositor on or about May [ ], 2001 (the "Closing Date") pursuant to the Sale and Servicing Agreement. The Depositor will have purchased the Initial Receivables from the Seller pursuant to the Receivables Purchase Agreement. In the Receivables Purchase Agreement, the Seller makes specific representations and warranties as of the Closing Date with respect to the Receivables and agrees to repurchase any Receivable with respect to which there is a breach of any such representation and warranty if that breach has a material and adverse effect on the interests of the Depositor or the Trust in the related Receivable. Under the Sale and Servicing Agreement, the Depositor will assign all of its rights under the Receivables Purchase Agreement, including its right to enforce the Seller's repurchase obligations, to the Trust. The Receivables may be prepaid at any time without penalty by the purchaser or co-purchasers of the Financed Vehicle or any other person or persons who are obligated to make payments thereunder (each, an "Obligor"). S-31 Eligibility Criteria The Receivables were or will be selected from the Seller's portfolio of motor vehicle retail installment sale contracts based on several criteria, including the requirement that each Receivable: 1. has an original term of not more than [ ] months; 2. has a current principal balance of at least $[ ]; 3. provides for level monthly payments that fully amortize the amount financed over the original term of the related Contract; 4. is not more than 30 days past due as of the Initial Cutoff Date or Subsequent Cutoff Date, as applicable; 5. does not have a final scheduled payment date later than six months prior to the Final Scheduled Payment Date of the Class B Notes; and 6. does not have any notation in the Servicer's records indicating the Obligor is the subject of a bankruptcy proceeding. No selection procedures believed to be adverse to the Noteholders were used in selecting the Receivables. During the Funding Period, pursuant to the Receivables Purchase Agreement, the Depositor is obligated to purchase from BMW FS and, pursuant to the Sale and Servicing Agreement, to sell to the Trust, Subsequent Receivables to the extent they are available. On the Closing Date, the amount available to purchase Subsequent Receivables will be approximately $[ ]. On each date on which Subsequent Receivables are transferred to the Trust (each, a "Subsequent Transfer Date"), BMW FS will convey Subsequent Receivables to the Depositor pursuant to an agreement (a "Subsequent Purchase Agreement") between BMW FS and the Depositor. The Depositor will convey the Subsequent Receivables to the Trust on the related Subsequent Transfer Date pursuant to the Sale and Servicing Agreement and an agreement (a "Subsequent Transfer Agreement") between the Depositor and the Trust. The purchase price for each Subsequent Receivable will be withdrawn from the Pre-Funding Account, a portion of the withdrawal amount will be deposited into the Reserve Account, if necessary, and the remainder of the purchase price will be paid to the Depositor by the Trust and then to BMW FS by the Depositor. Any conveyance of Subsequent Receivables is subject to the following conditions, among others: 1. as of the Subsequent Cutoff Date, each of the Subsequent Receivable must satisfy the eligibility criteria specified under "The Receivables" in the Prospectus Supplement and in the Sale and Servicing Agreement; 2. BMW FS will have selected the Subsequent Receivables in a manner that it believes is not adverse to the interests of the Noteholders; S-32 3. BMW FS and the Depositor will deliver opinions of counsel to the Trust, the Indenture Trustee and the Rating Agencies with respect to the validity of the conveyance of the Subsequent Receivables; 4. after inclusion of the Subsequent Receivables, the weighted average remaining term of the Receivables shall not be greater than ___ months; 5. none of the Subsequent Receivables will have an APR of less than [ ]%; 6. after inclusion of the Subsequent Receivables, at least [ ]% of the aggregate principal balance of the Receivables is secured by Financed Vehicles which were new at the date of origination; 7. None of the Subsequent Receivables will have a final scheduled payment not later than six months prior to the Final Scheduled Payment Date for the Class B Notes: 8. the Rating Agencies shall confirm that the ratings on the Notes (as defined in this prospectus supplement) will not be withdrawn or reduced as a result of the transfer of such Subsequent Receivables to the Trust. Because the Subsequent Receivables may be originated after the Initial Receivables, following the conveyance of Subsequent Receivables to the Trust some of the characteristics of the Receivables, such as the weighted average APR of the Receivables, the weighted average term to maturity of the Receivables and the geographic concentration of the Receivables are likely to vary from those of the Initial Receivables. Description of Initial Receivables All of the Initial Receivables were originated by BMW FS or purchased by BMW FS from BMW Centers. As of the Initial Cutoff Date, approximately [ ]% of the Initial Receivables by aggregate principal balance represented financing of new vehicles and [ ]% of the Initial Receivables by aggregate principal balance represented financing of used vehicles. As of the Initial Cutoff Date, approximately [ ]%, [ ]%, [ ]%, [ ]% and [ ]% of the Initial Receivables by aggregate principal balance were BMW automobiles, BMW motorcycles, BMW sport utility vehicles, Land Rover sport utility vehicles and vehicles of other manufacturers, respectively. The distribution by APR, geographic distribution, distribution by remaining term and distribution by remaining balance of the Initial Receivables as of the Initial Cutoff Date are as set forth in the following tables. We refer you to "The Receivables" in the accompanying prospectus for a further description of the characteristics of Simple Interest Receivables. COMPOSITION OF THE INITIAL RECEIVABLES Aggregate Principal Balance......................... $[ ] Number of Receivables............................... [ ] Average Principal Balance........................... $[ ] Average Original Amount Financed.................... $[ ] Range of Original Amount Financed................ $[ ] Weighted Average APR(1)............................. [ ]% Range of APRs.................................... [ ]% to [ ]% Weighted Average Original Term to Maturity(1)....... [ ] months Range of Original Term to Maturities............. [ ] months to [ ] months S-33 Weighted Average Remaining Term to Maturity(1)...... [ ] months Range of Remaining Term to Maturities............ [ ] months to [ ] months - ---------------- (1) Weighted by Principal Balance as of the Initial Cutoff Date. S-34 Distribution of the Initial Receivables by APR (Percentages may not add to 100.00% due to rounding)
Percentage of Aggregate Initial Cutoff Date Percentage Number of Number of Principal of Initial Range of APRs (%) Receivables Receivables Balance Pool Balance - ----------------- ----------- ------------ ------------------- ------------ 2.01% to 3.00%................ [ ] [ ] $ % 3.01% to 4.00%................ [ ] [ ] 4.01% to 5.00%................ [ ] [ ] 5.01% to 6.00%................ [ ] [ ] 6.01% to 7.00%................ [ ] [ ] 7.01% to 8.00%................ [ ] [ ] 8.01% to 9.00%................ [ ] [ ] 9.01% to 10.00%............... [ ] [ ] 10.01% to 11.00%.............. [ ] [ ] 11.01% to 12.00%.............. [ ] [ ] 12.01% to 13.00%.............. [ ] [ ] 13.01% to 14.00%.............. [ ] [ ] 14.01% to 15.00%.............. [ ] [ ] 15.01% to 16.00%.............. [ ] [ ] -------- -------- -------- ------- Totals:....................... [ ] [ ]% $ %
Distribution of the Initial Receivables by State Based on the State in which the Related Vehicle is Titled (Percentages may not add to 100.00% due to rounding)
Percentage of Aggregate Percentage Number of Number of Initial Cutoff Date of Initial State(1) Receivables Receivables Principal Balance Pool Balance - ----------------- ----------- ------------- ------------------- ------------ Alabama....................... % % Alaska........................ Arizona....................... Arkansas...................... California.................... Colorado...................... Connecticut................... Delaware...................... Florida....................... Georgia....................... Hawaii........................ Idaho......................... Illinois...................... Indiana....................... Iowa.......................... Kansas........................ Kentucky...................... Louisiana..................... Maine.........................
S-35
Percentage of Aggregate Percentage Number of Number of Initial Cutoff Date of Initial State(1) Receivables Receivables Principal Balance Pool Balance - ----------------- ----------- ------------- ------------------- ------------ Alabama....................... % % Alaska........................ Arizona....................... Arkansas...................... California.................... Colorado...................... Connecticut................... Delaware...................... Florida....................... Georgia....................... Hawaii........................ Idaho......................... Illinois...................... Indiana....................... Iowa.......................... Kansas........................ Kentucky...................... Louisiana..................... Maine......................... Maryland...................... Massachusetts................. Michigan...................... Minnesota..................... Mississippi................... Missouri...................... Montana....................... Nebraska...................... Nevada........................ New Hampshire................. New Jersey.................... New Mexico.................... New York...................... North Carolina................ North Dakota.................. Ohio.......................... Oklahoma...................... Oregon........................ Pennsylvania.................. Rhode Island.................. South Carolina................ South Dakota.................. Tennessee..................... Texas......................... Utah.......................... Vermont....................... Virginia......................
S-36
Percentage of Aggregate Percentage Number of Number of Initial Cutoff Date of Initial State(1) Receivables Receivables Principal Balance Pool Balance - ----------------- ----------- ------------- ------------------- ------------ Washington.................... West Virginia................. Wisconsin..................... Wyoming....................... -------- -------- -------- ------- Totals:....................... ======== ======== ======== =======
- ---------------- (1) Percentages may not add to 100% due to rounding. Distribution of the Initial Receivables by Remaining Term to Scheduled Maturity
Percentage of Percentage of Remaining Term to Number of Aggregate Number of Aggregate Aggregate Principal Scheduled Maturity Receivables Receivables Principal Balance Balance (1) - ------------------ ----------- ----------- ----------------- ----------- 6 months or less............... [ ] 00.00% [$ . ] 00.00% 7 to 12 months................. [ ] 00.00% [$ . ] 00.00% 13 to 18 months................ [ ] 00.00% [$ . ] 00.00% 19 to 24 months................ [ ] 00.00% [$ . ] 00.00% 25 to 30 months................ [ ] 00.00% [$ . ] 00.00% 31 to 36 months................ [ ] 00.00% [$ . ] 00.00% 37 to 42 months................ [ ] 00.00% [$ . ] 00.00% 43 to 48 months................ [ ] 00.00% [$ . ] 00.00% 49 to 54 months................ [ ] 00.00% [$ . ] 00.00% 55 to 60 months................ [ ] 00.00% [$ . ] 00.00% Greater than 60 months......... [ ] 00.00% [$ . ] 00.00% Total................. [ ] 00.00% [$ . ] 00.00%
- ---------------- (1) Percentage may not add to 100% because of rounding. S-37 Distribution by Remaining Principal Balance of the Initial Receivables
Percentage of Percentage of Aggregate Aggregate Aggregate Number of Number of Principal Principal Range of Remaining Principal Balances Receivables Receivables Balance Balance(1) - ------------------------------------- ----------- ------------- --------- ---------- $0 - 2,500.00............................. [ , ] [0.00%] [$ . ] [0.00%] $2,501.01 - 5,000.00...................... [ , ] [0.00%] [$ . ] [0.00%] $5,001.01 - 7,500.00...................... [ , ] [0.00%] [$ . ] [0.00%] $7,501.01 - 10,000.00..................... [ , ] [0.00%] [$ . ] [0.00%] $10,001.01 - 12,500.00.................... [ , ] [0.00%] [$ . ] [0.00%] $12,501.01 - 15,000.00.................... [ , ] [0.00%] [$ . ] [0.00%] $15,001.01 - 17,500.00.................... [ , ] [0.00%] [$ . ] [0.00%] $17,501.01 - 20,000.00.................... [ , ] [0.00%] [$ . ] [0.00%] $20,001.01 - 22,500.00.................... [ , ] [0.00%] [$ . ] [0.00%] $22,501.01 - 25,000.00.................... [ , ] [0.00%] [$ . ] [0.00%] $25,001.01 - 27,500.00.................... [ , ] [0.00%] [$ . ] [0.00%] $27,501.01 - 30,000.00.................... [ , ] [0.00%] [$ . ] [0.00%] $30,001.01 - 32,500.00.................... [ , ] [0.00%] [$ . ] [0.00%] $32,501.01 - 35,000.00.................... [ , ] [0.00%] [$ . ] [0.00%] $35,001.01 - 37,500.00.................... [ , ] [0.00%] [$ . ] [0.00%] $37,501.01 - 40,000.00.................... [ , ] [0.00%] [$ . ] [0.00%] $40,001.01 - 42,500.00.................... [ , ] [0.00%] [$ . ] [0.00%] $42,501.01 - 45,000.00.................... [ , ] [0.00%] [$ . ] [0.00%] $45,001.01 - 47,500.00.................... [ , ] [0.00%] [$ . ] [0.00%] $47,501.01 - 50,000.00.................... [ , ] [0.00%] [$ . ] [0.00%] $50,001.01 - 52,500.00.................... [ , ] [0.00%] [$ . ] [0.00%] $52,501.01 - 55,500.00.................... [ , ] [0.00%] [$ . ] [0.00%] $55,001.01 - 57,500.00.................... [ , ] [0.00%] [$ . ] [0.00%] $57,501.01 - 60,000.00.................... [ , ] [0.00%] [$ . ] [0.00%] $60,001.01 - 62,500.00.................... [ , ] [0.00%] [$ . ] [0.00%] $62,501.01 - 65,000.00.................... [ , ] [0.00%] [$ . ] [0.00%] Greater than $65,000.01................... [ , ] [0.00%] [$ . ] [0.00%] Totals........................... [ , ] [0.00%] [$ . ] [0.00%]
- ---------------- (1) Percentages may not add to 100% because of rounding. S-38 Maturity and Prepayment Considerations Information regarding maturity and prepayment considerations with respect to the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes (collectively, the "Class A Notes") and the Class B Notes (the "Class B Notes" and together with the Class A Notes, the "Notes") is set forth under "Weighted Average Life of the Securities" in the accompanying prospectus and "Risk Factors--You may experience reduced returns on your investment resulting from prepayments, repurchases or early termination of the trust" in the accompanying prospectus. Except as otherwise provided in this prospectus supplement, no principal payments will be made on the Class A-2 Notes until the Class A-1 Notes have been paid in full; no principal payments will be made on the Class A-3 Notes until the Class A-2 Notes have been paid in full; and no principal payments will be made on the Class A-4 Notes until the Class A-3 Notes have been paid in full. In addition, no principal payments will be made on the Class B Notes until the Class A Notes have been paid in full. We refer you to "Payments on the Notes" in this prospectus supplement. Because the rate of payment of principal of each class of Notes depends primarily on the rate of payment (including prepayments) of the principal balance of the Receivables, final payment of any class of Notes could occur significantly earlier or later than their respective final scheduled Payment Dates set forth under "Payments on the Notes" (each, a "Final Scheduled Payment Date") in this prospectus supplement. Noteholders will bear the risk of being able to reinvest principal payments on the Notes at yields at least equal to the yield on their respective classes of Notes. No prediction can be made as to the rate of prepayments on the Receivables in either stable or changing interest rate environments. Although the Receivables have different APRs, disproportionate rates of prepayments between Receivables with APRs greater than or less than the Required Rate (as defined in the accompanying prospectus) will generally not affect your yield. However, higher rates of prepayments of Receivables with higher APRs will decrease the amount available to cover delinquencies and defaults on the Receivables and may decrease the amounts available to be deposited in the Reserve Account. Delinquencies, Repossessions and Loan Loss Information Set forth below is information concerning BMW FS' experience with respect to its entire portfolio of new and used BMW motor vehicle retail installment sale contracts, which includes contracts sold by but still being serviced by BMW FS. Credit losses are an expected cost in the business of extending credit and are considered in BMW FS' rate-setting process. Delinquency, repossession and loss experience may be influenced by a variety of economic, social and geographic conditions and other factors beyond the control of BMW FS. There is no assurance that BMW FS' delinquency, repossession and loss experience with respect to its retail installment sale contracts, or the experience of the trust with respect to the contracts, will be similar to that set forth below. If economic conditions in the future differ from those during the periods referenced in the tables below, BMW FS' delinquency, repossession and loss experience may be adversely affected. The percentages in the tables below have not been adjusted to eliminate the effect of the growth of BMW FS' portfolio. Accordingly, the delinquency, repossession and net loss percentages would be expected to be higher than those shown if a group of receivables were isolated at a period S-39 in time and the delinquency, repossession and net loss data showed the activity only for that isolated group over the periods indicated. The following tables set forth the historical delinquency experience and net credit loss and repossession experience of BMW FS' portfolio of contracts for new and used automobiles, motorcycles, light duty trucks and sport utility vehicles. In the table below, the period of delinquency for the years ended December 31, 2000, 1999, 1998, 1997 and 1996 is based on the number of days more than 20% of a scheduled payment on a cumulative basis is contractually past due. The information included below under the headings "Delinquencies as a percent of contracts outstanding - 90 days or more" and "Dollar Delinquencies as a percent of principal amount outstanding - 90 days or more" excludes vehicles that have been repossessed. There is no assurance that the behavior of the Receivables will be comparable to BMW FS' experience shown in the following tables. Delinquency Experience At December 31,
-------- -------- -------- -------- -------- 2000 1999 1998 1997 1996 -------- -------- -------- -------- -------- Number of contracts at end of period....................... 120,009 98,921 89,431 87,222 77,525 Delinquencies as a percent of contracts outstanding 30-59 days................. 1.60% 1.78% 1.84% 2.08% 1.81% 60-89 days................. 0.36% 0.33% 0.36% 0.61% 0.44% 90 days or more............ 0.29% 0.23% 0.24% 0.35% 0.72% Total...................... 2.25% 2.34% 2.44% 3.04% 2.97% Dollar delinquencies as a percent of principal amount outstanding 30-59 days................. 1.50% 1.55% 1.63% 2.04% 1.80% 60-89 days................. 0.38% 0.30% 0.34% 0.60% 0.47% 90 days or more............ 0.26% 0.20% 0.25% 0.32% 0.76% Total...................... 2.13% 2.06% 2.22% 2.96% 3.03%
S-40 The information in the table below includes contracts for new and used automobiles, motorcycles, light duty trucks and sport utility vehicles. All amounts and percentages, except as indicated, are based on the principal balances of the contracts net of unearned finance and other charges. Averages are computed by taking a simple average of year-end outstanding amounts for each period presented. The information set forth under the heading "Charge-offs" represents the total aggregate net principal balance of contracts determined to be uncollectible in the period less proceeds from disposition of related vehicles, other than recoveries described in the next sentence. The information set forth under the heading "Recoveries" generally includes amounts received from customers with respect to contracts previously charged-off, net of the proceeds realized in connection with the sale of the financed vehicles. The information set forth under the heading "Number of Repossessions sold" means the number of repossessed financed vehicles that have been sold by BMW FS in a given period. Net Credit Loss Experience (dollars in thousands) At or for Twelve Months Ended
-------- -------- -------- -------- -------- 2000 1999 1998 1997 1996 -------- -------- -------- -------- -------- Principal Amount Outstanding .. $2,467,392 $1,956,319 $1,627,533 $1,563,687 $1,432,160 Average Principal Amount Outstanding ................. $2,211,856 $1,791,926 $1,595,610 $1,497,924 $1,314,649 Number of Contracts Outstanding 120,009 98,921 89,431 87,222 77,525 Average Number of Contracts Outstanding.................. 109,465 94,176 88,327 82,374 70,188 Charge-offs - full period actuals $ 14,839 $ 13,362 $ 11,658 $ 9,958 $ 7,435 Recoveries - full period actuals $ 3,547 $ 3,941 $ 3,485 $ 2,852 $ 1,960 Net Losses .................... $ 11,292 $ 9,421 $ 8,173 $ 7,106 $ 5,475 Number of Repossessions sold... Number of Repossessions sold as a percent of the Average Number of Contracts Outstanding..... 0.68% 0.84% 0.95% 0.89% 0.68% Net Losses as a percent of Average Principal Amount Outstanding.................. 0.51% 0.53% 0.51% 0.47% 0.42%
S-41 Weighted Average Life of the Notes Prepayments on motor vehicle receivables can be measured relative to a payment standard or model. The model used in this prospectus supplement, the Absolute Prepayment Model ("ABS"), represents an assumed rate of prepayment each month relative to the original number of receivables in a pool of receivables. ABS further assumes that all the receivables in question 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 paid in full. For example, in a pool of receivables originally containing 10,000 receivables, a 1% ABS rate means that 1% of the 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. As the rate of the payment of principal of each class of Notes will depend on the rate of payment (including prepayments) of the principal balance of the Receivables, final payment of any class of Notes could occur significantly earlier than the respective Final Scheduled Payment Dates. Reinvestment risk associated with early payment of the Notes will be borne exclusively by the holders of the Notes. The tables captioned "Percent of Initial Class A Note Principal at Various ABS Percentages" (the "ABS Tables") have been prepared on the basis of the characteristics of the Receivables described under "The Receivables Pool." The ABS Tables assume that: o the Receivables prepay in full at the specified constant percentage of ABS monthly, with no defaults, losses or repurchases; o each scheduled monthly payment on each Receivable is scheduled to be made and is made on the last day of each month and each month has 30 days; o payments are made on the Notes on each Payment Date, and each Payment Date is assumed to be the twenty-fifth day of each applicable month; o the balance in the Reserve Account on each Payment Date is the required amount described under "Subordination; Reserve Account"; o the amounts in the Pre-Funding Account are fully invested in Subsequent Receivables on __; and o except as indicated in the ABS Tables, the Servicer does not exercise its option to purchase the Receivables on the earliest Payment Date on which its option may be exercised. The hypothetical pools each have an assumed cutoff date of [ ], 2001. The ABS Tables indicate the projected weighted average life of each class of Notes and sets forth the percent of the initial principal amount of each class of Notes that is projected to be outstanding after each of the Payment Dates shown at various constant ABS percentages. The ABS Tables also assume that the Initial Receivables and the Subsequent Receivables have been aggregated into hypothetical pools with all of the Receivables within each hypothetical pool having the characteristics set forth in the tables below and that the level scheduled monthly payment for each of the pools, based on the aggregate principal balance, APR, original term to S-42 maturity and remaining term to maturity as of the assumed cutoff date, will be such that each pool will be fully amortized by the end of its remaining term to maturity. S-43 Initial Receivables - -------------------------------------------------------------------------------- Aggregate Principal Original Term Stated Remaining Pool Balance APR (in Months) Term (in Months) - ---- ------- --- ----------- ---------------- - -------------------------------------------------------------------------------- 1 - -------------------------------------------------------------------------------- 2 - -------------------------------------------------------------------------------- 3 - -------------------------------------------------------------------------------- 4 - -------------------------------------------------------------------------------- 5 - -------------------------------------------------------------------------------- 6 - -------------------------------------------------------------------------------- 7 - -------------------------------------------------------------------------------- 8 - -------------------------------------------------------------------------------- Subsequent Receivables - -------------------------------------------------------------------------------- Aggregate Principal Original Term Stated Remaining Pool Balance APR (in Months) Term (in Months) ---- ------- --- ----------- ---------------- - -------------------------------------------------------------------------------- 1 - -------------------------------------------------------------------------------- The actual characteristics and performance of the Receivables will differ from the assumptions used in constructing the ABS Tables. 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, that all of the Receivables will prepay at the same level of ABS or that no defaults will occur on the Receivables. Moreover, the diverse terms of receivables within each of 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 the 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 life of each class of Notes. S-44 Percentage of Initial Class A-1 Note Principal at Various ABS Percentages Payment Date 0.5% 1.0% 1.5% 1.7% - ------------ ---- ---- ---- ---- Closing Date Weighted Average Life (years)(1)(2).................. Weighted Average Life to Call (years)(1)(3).......... - ----------------------- (1) The weighed average life of a note is determined by (x) multiplying the amount of each principal payment on a note by the number of years from the date of issuance of the note to the related Payment Date, (y) adding the results and (z) dividing the sum by the original principal amount of the note. (2) This calculation assumes that the Servicer does not exercise its option to purchase the Receivables. (3) This calculation assumes that the Servicer exercises its option to purchase the Receivables. This table has been prepared based on the assumptions in this prospectus supplement (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 those assumptions. Percentage of Initial Class A-2 Note Principal at Various ABS Percentages Payment Date 0.5% 1.0% 1.5% 1.7% - ------------ ---- ---- ---- ---- Closing Date........... Weighted Average Life (years)(1)(2)................... Weighted Average Life to Call (years)(1)(3)........... S-45 - ------------- (1) The weighed average life of a note is determined by (x) multiplying the amount of each principal payment on a note by the number of years from the date of issuance of the note to the related Payment Date, (y) adding the results and (z) dividing the sum by the original principal amount of the note. (2) This calculation assumes that the Servicer does not exercise its option to purchase the Receivables. (3) This calculation assumes that the Servicer exercises its option to purchase the Receivables. This table has been prepared based on the assumptions in this prospectus supplement (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 those assumptions. S-46 Percentage of Initial Class A-3 Note Principal at Various ABS Percentages Payment Date 0.5% 1.0% 1.5% 1.7% - ------------ ---- ---- ---- ---- Closing Date.............. Weighted Average Life (years)(1)(2)................... Weighted Average Life to Call (years)(1)(3)........... - ----------------- (1) The weighed average life of a note is determined by (x) multiplying the amount of each principal payment on a note by the number of years from the date of issuance of the note to the related Payment Date, (y) adding the results and (z) dividing the sum by the original principal amount of the note. (2) This calculation assumes that the Servicer does not exercise its option to purchase the Receivables. (3) This calculation assumes that the Servicer exercises its option to purchase the Receivables. This table has been prepared based on the assumptions in this prospectus supplement (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 those assumptions. S-47 Percentage of Initial Class A-4 Note Principal at Various ABS Percentages Payment Date 0.5% 1.0% 1.5% 1.7% - ------------ ---- ---- ---- ---- Closing Date.......... Weighted Average Life (years)(1)(2) Weighted Average Life to Call (years)(1)(3) *Month of optional purchase(3) - ------------- (1) The weighed average life of a note is determined by (x) multiplying the amount of each principal payment on a note by the number of years from the date of issuance of the note to the related Payment Date, (y) adding the results and (z) dividing the sum by the original principal amount of the note. (2) This calculation assumes that the Servicer does not exercise its option to purchase the Receivables. (3) This calculation assumes that the Servicer exercises its option to purchase the Receivables. This table has been prepared based on the assumptions in this prospectus supplement (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 those assumptions. S-48 Percentage of Class B Note Principal at Various ABS Percentages Payment Date 0.5% 1.0% 1.5% 1.7% - ------------ ---- ---- ---- ---- Closing Date.......... Weighted Average Life (years)(1)(2) Weighted Average Life to Call (years)(1)(3) *Month of optional purchase(3) - ------------- (1) The weighed average life of a certificate is determined by (x) multiplying the amount of each principal payment on a certificate by the number of years from the date of issuance of the note to the related Payment Date, (y) adding the results and (z) dividing the sum by the original principal amount of the certificate. (2) This calculation assumes that the Servicer does not exercise its option to purchase the Receivables. (3) This calculation assumes that the Servicer exercises its option to purchase the Receivables. This table has been prepared based on the assumptions in this prospectus supplement (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 those assumptions. S-49 Note Factors The "Note Pool Factor" with respect to any class of Notes will be a seven-digit decimal indicating the principal amount of that class of Notes as of the close of business on the Payment Date in that month as a fraction of the respective principal amount of that class of Notes as of the Closing Date. The Servicer will compute the Note Pool Factor each month for each class of Notes. Each Note Pool Factor will initially be 1.0000000 and thereafter will decline to reflect reductions in the principal amount of each class of Notes. The portion of the principal amount of any class of Notes for a given month allocable to a Noteholder can be determined by multiplying the original denomination of the holder's note by the related Note Pool Factor for that month. Pursuant to the Transfer and Servicing Agreements, the Noteholders will receive monthly reports concerning the payments received on the Receivables, the Pool Balance, the related Note Pool Factors and various other items of information pertaining to the Trust. Noteholders of record during each calendar year will be furnished information by the Indenture Trustee or the Owner Trustee, as appropriate, for tax reporting purposes not later than the latest date permitted by law. We refer you to "Description of the Transfer and Servicing Agreements--Statements to Securityholders" in the accompanying prospectus. Use of Proceeds The Depositor will use the net proceeds from the sale of the Notes to purchase the Receivables from BMW FS pursuant to the Receivables Purchase Agreement and to fund the Initial Reserve Account, the Pre-Funding Account and the Capitalized Interest Account. The net proceeds to be received by the Depositor from the sale of the Receivables to the Trust will be used by the Depositor in connection with its acquisition of the Receivables from BMW FS and to pay other expenses in connection with the issuance of the Notes. BMW FS will use the proceeds from the sale of the Receivables for general corporate purposes. In addition, BMW FS or its affiliates may apply all or any portion of the net proceeds of this offering to the repayment of debt, including "warehouse" debt secured by the Receivables prior to their sale to the Trust. One or more of the Underwriters, or their respective affiliates or entities for which their respective affiliates act as administrator and/or provide liquidity lines, may have acted as a "warehouse lender" to BMW FS or its affiliates, and may receive a portion of the proceeds as repayment of that "warehouse" debt. The Depositor and the Servicer Information regarding the Depositor and the Servicer is set forth under the captions "The Depositor" and "The Servicer" in the accompanying prospectus. The Notes General The Notes will be issued pursuant to the terms of the Indenture, a form of which has been filed as an exhibit to the registration statement. A copy of the final signed Indenture will be filed with the SEC following the issuance of the Securities. The following summary describes the material terms of the Notes and the Indenture. The summary does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all the provisions of the Notes and the Indenture. Where particular provisions or terms used in the Indenture are referred to, the actual provisions, which includes definitions of terms, are incorporated by reference as part of the S-50 summary. The following summary supplements, and to the extent inconsistent therewith replaces, the description of the general terms and provisions of the notes of any given series and the related Indenture set forth in the accompanying prospectus, to which description reference is hereby made. Payments of Interest Each class of Notes will constitute Fixed Rate Securities, as that term is defined under "Certain Information Regarding the Securities--Fixed Rate Securities" in the accompanying prospectus. Interest on the principal balances of the classes of the Notes will accrue at the respective per annum interest rates set forth on the cover of this prospectus supplement (each, an "Interest Rate") and will be payable to the Noteholders monthly on the twenty-fifth day of each month (or, if that date is not a Business Day, on the next succeeding Business Day) (a "Payment Date") commencing [ ], 2001. Interest on the outstanding principal amount of Class A-1 Notes will accrue at the related Interest Rate from and including the most recent Payment Date on which interest has been paid (or from and including the Closing Date with respect to the first Payment Date) to but excluding the current Payment Date. Interest on the Class A-2, Class A-3, Class A-4 Notes and Class B Notes will accrue at the related Interest Rate from and including the 25th day of the month (or from and including the Closing Date with respect to the first Payment Date) to but excluding the 25th day of the following calendar month. Interest on the Class A-1 Notes will be calculated on the basis of the actual number of days in the related Interest Period divided by 360, and interest on the Class A-2, Class A-3 Notes, Class A-4 Notes and Class B Notes will be calculated on the basis of a 360-day year consisting of twelve 30-day months. Interest accrued but not paid on any Payment Date will be due on the next Payment Date, together with interest on that amount at the applicable Interest Rate, to the extent lawful. Interest payments on the Notes will generally be made from Available Amounts and from amounts on deposit in the Reserve Account, after the Servicing Fee and non-recoverable Advances have been paid. We refer you to "Subordination; Reserve Account--Reserve Account" and "Payments on the Notes" in this prospectus supplement. Interest payments to holders of the Class A Notes will have the same priority. Under specified circumstances, the amount available for interest payments could be less than the amount of interest payable on the Class A Notes on any Payment Date, in which case the holders of the Class A Notes will receive their ratable share (based upon the aggregate amount of interest due to that class) of the aggregate amount available to be distributed in respect of interest on the Class A Notes. Interest payments to holders of the Class B Notes will be subordinated to interest payments and, in limited circumstances, principal to holders of the Class A Notes. Payments of Principal The Trust will generally make principal payments to the Noteholders on each Payment Date in an amount equal to the Principal Distribution Amount. The "Principal Distribution Amount" with respect to any Payment Date equals the sum of: o the First Priority Principal Distribution Amount (as defined in this prospectus supplement); and o the Regular Principal Distribution Amount (as defined in this prospectus supplement). S-51 The Trust will pay principal on the Notes from funds on deposit in the Collection Account including amounts, if any, from the Reserve Account, in accordance with the priorities described under "Payments on the Notes--Payment of Distributable Amounts." Principal payments on the Notes will generally be made on each Payment Date, in the following order of priority: 1. to the Class A-1 Notes until paid in full; 2. to the Class A-2 Notes until paid in full; 3. to the Class A-3 Notes until paid in full; 4. to the Class A-4 Notes until paid in full; and 5. to the Class B Notes until paid in full. Notwithstanding the foregoing, following the occurrence and during the continuation of: o a default in the payment of any interest on any Note of the Controlling Class (as defined in this prospectus supplement) when the same becomes due and payable, which default continues for a period of five days; o a default in the payment of principal of or any installment of the principal of any Note when the same becomes due and payable; o the bankruptcy of the Trust or the occurrence of other circumstances relating to the bankruptcy or insolvency of the Trust, as described in the Indenture; or o any other Event of Default that results in a liquidation of the Trust; the priority of payments change. In particular, the Class A Notes will receive 100% of the Principal Distribution Amount until the Notes are paid in full. The trust will make no distributions of principal on the Class B Notes until payment in full of principal and interest on the Class A Notes and will not make any distributions of interest on the Class B Notes until interest on the Class A Notes and the First Priority Principal Distribution Amount has been allocated to the Class A Notes. In addition, principal payments on the Class A Notes will be made first to the holders of the Class A-1 Notes until they have been paid in full; thereafter principal payments on the Class A Notes will be made to the holders of the Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes (together with the holders of the Class A-1 Notes, the "Noteholders") on a pro rata basis based on the principal balance of that class of outstanding Notes. Beginning on the Payment Date on which the Class A Notes have been paid in full, the remainder of the Principal Distribution Amount, if any, and on each subsequent Payment Date, 100% of the Principal Distribution Amount, will be paid to the holders of record of the Class B Notes (the "Class B Noteholders") until the Class B Notes have been paid in full. The actual Payment Date on which the outstanding principal amount of any class of Notes is paid in full may be significantly earlier than its Final Scheduled Payment Date based on a variety of factors, including the factors described under "Weighted Average Life of the Securities" in the accompanying prospectus. S-52 If the principal amount of a class of Notes has not been paid in full on or prior to its Final Scheduled Payment Date, the Noteholders' Principal Distribution Amount for that Payment Date will, to the extent the remaining Available Amounts are sufficient, include an amount sufficient to reduce the unpaid principal amount of that class of Notes to zero on that Payment Date. We refer you to "Payment on the Notes--Payment of Distributable Amounts" in this prospectus supplement. Optional Prepayment If the Servicer exercises its option to purchase the Receivables when the Pool Balance declines to 10% or less of the sum of the Initial Pool Balance and the amount on deposit in the Pre-Funding Account on the Closing Date, Class A-4 and Class B Noteholders will receive an amount in respect of the Class A-4 and Class B Notes equal to the outstanding principal balance of the Class A-4 and Class B Notes, together with accrued but unpaid interest at the related Interest Rate. The "Pool Balance" on any Payment Date will equal the aggregate principal balance of the Receivables at the end of the related Collection Period, after giving effect to all payments of principal received from Obligors and Purchased Amounts (for this purpose, Liquidated Receivables will have a principal balance of zero.). Indenture Events of Default; Rights upon Event of Default. Upon an Event of Default, the Controlling Class of Noteholders will have the rights set forth in the prospectus under "The Notes--Indenture--Events of Default; Rights Upon Event of Default." The Indenture Trustee may sell the Receivables subject to the conditions set forth in the Indenture following an Event of Default, including a default in the payment of any principal of or a default for five days or more in the payment of any interest on any note of the Controlling Class. The failure to pay interest on any Class B Note within five days of the related payment date will not constitute an Event of Default under the Indenture. In the case of an Event of Default not involving any default in payment of principal of or interest on a Class A Note, the Indenture Trustee is prohibited from selling the Receivables unless one of the conditions set forth in the accompanying prospectus under "The Notes--Indenture--Events of Default and--Rights Upon Event of Default" has been satisfied. Following the occurrence of certain Events of Default under the Indenture, the trust will make no distributions of principal or interest on the Class B Notes until payment in full of principal and interest on the Class A Notes. In addition, payments of principal on the Class A Notes will be made first to the Class A-1 Notes until the Class A-1 Notes are repaid in full, and then pro rata to the Class A-2, Class A-3 and Class A-4 Notes until each principal amount is paid in full. If there are any amounts remaining, those amounts will be used to pay interest and principal on the Class B Notes until the principal amount is paid in full. "Controlling Class" means with respect to any outstanding Notes, the Class A Notes (voting together as a single class) as long as any Class A Notes are outstanding, and thereafter, the Class B Notes for so long as any Class B Notes are outstanding - excluding Notes held by the Depositor, the Servicer or their affiliates. Notices Noteholders will be notified in writing by the Indenture Trustee of any Event of Default, Servicer Default or termination of, or appointment of a successor to, the Servicer promptly upon a Responsible Officer (as defined in the Transfer and Servicing Agreements) obtaining actual knowledge of these events. S-53 If Notes are issued other than in book-entry form, those notices will be mailed to the addresses of Noteholders as they appear in the register maintained by the Indenture Trustee prior to mailing. Those notices will be deemed to have been given on the date of that publication or mailing. Governing Law The Indenture and the Notes are governed by and shall be construed in accordance with the laws of the State of New York applicable to agreements made in and to be performed wholly within that jurisdiction. Payments on the Notes On or before the 18th calendar day of each month (or, if the 18th day is not a Business Day, the next succeeding Business Day (each a "Determination Date")), the Servicer will inform the Owner Trustee and the Indenture Trustee of, among other things, the amount of funds collected on or in respect of the Receivables, the amount of Advances to be made by and reimbursed to the Servicer and the Servicing Fee and other servicing compensation payable to the Servicer, in each case with respect to the immediately preceding Collection Period. On or prior to each Payment Date, the Servicer will also determine the following: 1. Available Amounts; 2. Class A Noteholders' interest distribution; 3. Class B Noteholders' interest distribution; 4. Principal Distribution Amount; and 5. based on the available funds and other amounts available for payment on the related Payment Date as described below, the amount to be distributed to the Class A Noteholders and Class B Noteholders. The Indenture Trustee or the Owner Trustee, as the case may be, will make payments to the Noteholders out of the amounts on deposit in the Collection Account. The amounts to be distributed to the Noteholders will be determined in the manner described below. Calculation of Available Amounts The amount of funds available for distribution on a Payment Date will generally equal the sum of Available Interest and Available Principal (collectively, "Available Amounts"). "Available Interest" for a Payment Date will equal the sum of the following amounts (without duplication) allocable to interest received or allocated by the Servicer on or in respect of the Receivables during the related Collection Period: 1. that portion of all collections on Receivables allocable to interest (including the amount, if any, of Advances for that Collection period, but excluding the amount, if any, of reimbursements of Advances previously made to the Servicer); S-54 2. the Purchase Amount of each Receivable that became a Purchased Receivable to the extent attributable to accrued interest on that Receivable; 3. Recoveries for that Collection Period; 4. investment earnings on the Accounts (other than the Collection Account and the Reserve Account) for the related Payment Date; 5. net Liquidation Proceeds for that Collection Period to the extent allocable to interest; 6. net Investment Losses deposited by the Servicer; and 7. Capitalized Interest Payments. "Available Principal" for a Payment Date will equal the sum of the following amounts, without duplication, with respect to the related Collection Period: 1. the portion of all collections on Receivables allocable to principal; 2. net Liquidation Proceeds for that Collection Period to the extent allocable to principal; 3. that portion allocable to principal of the Purchase Amount of all Receivables that became Purchased Receivables during or in respect of that Collection Period; and 4. on the Payment Date immediately following the end of the Funding Period, the remaining Pre-Funded Amount not used to acquire Subsequent Receivables. Available Interest and Available Principal on any Payment Date will exclude the following amounts: 1. amounts received on a particular Receivable (other than a Liquidated Receivable) to the extent that the Servicer has previously made an unreimbursed Advance in respect of that Receivable; and 2. net Liquidation Proceeds with respect to a particular Receivable to the extent of unreimbursed Advances in respect of that Receivable. "Liquidation Proceeds" means, with respect to any Receivable that becomes a Liquidated Receivable, the moneys collected in respect of that Liquidated Receivable, from whatever source, during or after the Collection Period in which the Receivable became a Liquidated Receivable, including liquidation of the related Financed Vehicle, net of the sum of any out-of-pocket expenses of the Servicer reasonably allocated to the liquidation and any amounts required by law to be remitted to the Obligor on the Liquidated Receivable. A "Liquidated Receivable" means a Receivable with respect to which the earliest of the following shall have occurred: o the related Financed Vehicle has been repossessed and liquidated; S-55 o the related Financed Vehicle has been repossessed in excess of 90 days and has not yet been liquidated; o the Servicer has determined in accordance with its collection policies that all amounts that it expects to receive with respect to the Receivable have been received; or o the end of the Collection Period in which the Receivable becomes more than 150 days or more past due. "Purchased Amount" means any Administrative Purchase Payments or Warranty Purchase Payments made with respect to Purchased Receivables. "Purchased Receivable" means a Warranty Receivable or an Administrative Receivable, respectively. "Recoveries" means, with respect to any Receivable that becomes a Liquidated Receivable, monies collected in respect of that Liquidated Receivable, from whatever source, during any Collection Period following the Collection Period in which the Receivable became a Liquidated Receivable, net of the sum of any amounts expended by the Servicer for the account of the Obligor and any amounts required by law to be remitted to the Obligor. Payment of Distributable Amounts Prior to each Payment Date, the Servicer will calculate the amount to be distributed to the Class A Noteholders and Class B Noteholders. On each Payment Date, the Servicer will allocate amounts on deposit in the Collection Account with respect to the related Collection Period as described below and will instruct the Indenture Trustee to make the following payments and distributions from Available Amounts on deposit in the Collection Account, and in the event of a shortfall in meeting the payments described in clauses (1) through (5) below (an "Available Amounts Shortfall") amounts withdrawn from the Reserve Account, in the following amounts and order of priority: 1. to the Servicer, the Servicing Fee, including any unpaid Servicing Fees with respect to one or more prior Collection Periods, and non-recoverable Advances; 2. to the Class A Noteholders: o the aggregate amount of interest accrued for the related Interest Period on each of the Class A Notes at their respective interest rates on the principal outstanding as of the previous Payment Date after giving effect to all payments of principal to the Class A Noteholders on the preceding Payment Date; and o the excess, if any, of the amount of interest payable to the Class A Noteholders on prior Payment Dates over the amounts actually paid to the Class A Noteholders on those prior Payment Dates, plus interest on that shortfall to the extent permitted by law; S-56 3. to the Principal Distribution Account, the First Priority Principal Distribution Amount, if any; 4. to the Class B Noteholders: o (a) the aggregate amount of interest accrued for the related Interest Period on each of the Class B Notes at the interest rate on the Class B Notes on the principal outstanding as of the previous Payment Date after giving effect to all payments of principal to the Class B Noteholders on the preceding Payment Date; and o the excess, if any, of the amount of interest payable to the Class B Noteholders on prior Payment Dates over the amounts actually paid to the Class B Noteholders on those prior Payment Dates, plus interest on that shortfall to the extent permitted by law; 5. to the Principal Distribution Account, the Regular Principal Distribution Amount; 6. to the Reserve Account, from Available Amounts remaining (this amount being the "Excess Amount"), the amount necessary to cause the amount on deposit in that account to equal the Specified Reserve Account Balance; 7. to the Indenture Trustee and the Owner Trustee, any accrued and unpaid Trust Fees and Expenses, in each case to the extent the fees and expenses have not been previously paid by the Servicer;] and 8. any Available Amounts remaining, to the Certificateholder. The Noteholders' Principal Distribution Amount will be allocated among the Notes as described above under "The Notes--Payments of Principal." For the purposes of this prospectus supplement, the following terms will have the following meanings: The "First Priority Principal Distribution Amount" will mean, with respect to any Payment Date, an amount equal to the excess, if any of: o the aggregate outstanding principal amount of the Class A Notes as of the preceding Payment Date (after giving effect to any principal payments made on the Class A Notes on that preceding Payment Date) over o the Pool Balance at the end of the Collection Period preceding that Payment Date plus amounts on deposit in the Pre-Funding Account less the Yield Supplement Overcollateralization Amount with respect to such Payment Date; provided however, that the First Priority Principal Distribution Amount shall not exceed the sum of the aggregate outstanding principal amount of all of the Notes on that Payment Date (after giving effect to any principal payments made on the Notes on that preceding Payment Date); and provided further, that the First Priority Principal Distribution Amount on and after the Final Scheduled Payment Date of a class of Class A Notes shall not be less than the amount that is necessary to S-57 reduce the outstanding principal amount of that class of Class A Notes and all earlier maturing classes of Class A Notes to zero. "Interest Period" means: o with respect to the Class A-1 Notes, the period from and including the most recent Payment Date on which interest has been paid (or, in the case of the first Payment Date, the Closing Date) to but excluding the next succeeding Payment Date; and o with respect to the Class A-2, Class A-3, Class A-4 Notes and Class B Notes, the period from and including the 25th day of the calendar month (or, in the case of the first Payment Date, from and including the Closing Date) to but excluding the 25th day of the next calendar month. The "Principal Distribution Account" will mean the administrative subaccount of the Note Distribution Account established and maintained as the Principal Distribution Account pursuant to the Sale and Servicing Agreement. The "Principal Distribution Amount" will mean, with respect to any Payment Date, the sum of the First Priority Principal Distribution Amount and the Regular Principal Distribution Amount with respect to that Payment Date. The "Regular Principal Distribution Amount" will: mean, with respect to any Payment Date, an amount not less than zero equal to the excess, if any of: o an amount equal to (i) the aggregate outstanding principal amount of all the Notes as of the preceding Payment Date (after giving effect to any principal payments made on the Notes on that preceding Payment Date) or the Closing Date, as the case may be, minus (ii) the sum of the Pool Balance at the end of the Collection Period preceding that Payment Date plus amounts on deposit in the Pre-Funding Account less the Yield Supplement Overcollateralization Amount with respect to that Payment Date, over o the First Priority Principal Distribution Amount, if any, with respect to that Payment Date; provided however, that the Regular Principal Distribution Amount shall not exceed the sum of the aggregate outstanding principal amount of all of the Notes on that Payment Date (after giving effect to any principal payments made on the Notes on that preceding Payment Date in respect of the First Priority Principal Distribution Amount, if any); and provided further, that the Regular Principal Distribution Amount on and after the Final Scheduled Payment Date of a class of Class A Notes shall not be less than the amount that is necessary to reduce the outstanding principal amount of that class of Class A Notes and all earlier maturing classes of Class A Notes to zero. "Trust Fees and Expenses" will mean all accrued and unpaid Trustees' fees and any amounts due to the Trustees for reimbursement of expenses or in respect of indemnification and other administrative fees of the Trust. S-58 Credit Enhancement The protection afforded to the Noteholders will be effected both by the preferential right of the Noteholders to receive, to the extent described in this prospectus supplement, current distributions on the Receivables, the establishment of the Reserve Account and the subordination of the Certificateholder's right to receive excess interest. The protection afforded to the Class B Noteholders will be effected by the establishment of the Reserve Account and the subordination of the Certificateholder's right to receive excess interest. Subordination The rights of the Class B Noteholders to receive any distributions of interest or principal is subordinated to payments of interest on the Class A Notes and, in limited circumstances, payments of principal of the Class A Notes. To the extent that the Pool Balance plus the amount on deposit in the Pre-Funding Account less the Yield Supplement Overcollateralization Amount with respect to a Payment Date has decreased to a level which is less than the aggregate outstanding principal balance on the Class A Notes, a First Priority Principal Distribution Amount will be payable prior to the payment of interest on or principal of the Class B Notes. The Certificateholder is entitled to receive payments of interest collected on the Receivables which are not used by the trust to make other required payments. The Certificateholder's right to receive this excess interest is subordinated to all other payments required to be made on any Payment Date. Reserve Account The Reserve Account will be a segregated account in the name of the Indenture Trustee. The Reserve Account will be created with an initial deposit by the Depositor on the Closing Date of an amount equal to $[ ] (the "Reserve Account Initial Deposit"). The Reserve Account will thereafter be funded by the deposit in the Reserve Account of all Excess Amounts, if any, for each Payment Date to the extent necessary to restore or bring the amounts on deposit in the Reserve Account to the Specified Reserve Account Balance. Amounts held from time to time in the Reserve Account will continue to be held for the benefit of Noteholders and may be invested in Eligible Investments. Investment income on those investments (net of losses and expenses) will be paid to the Depositor, upon the direction of the Servicer, to the extent that funds on deposit in the Reserve Account exceed the Specified Reserve Account Balance. If the amount on deposit in the Reserve Account on any Payment Date (after giving effect to all deposits to and withdrawals from the Reserve Account on that Payment Date) is greater than the Specified Reserve Account Balance for that Payment Date, subject to limitations set forth in the Transfer and Servicing Agreements, the Indenture Trustee will include the amount of the excess in the amounts to be distributed to the Certificateholder pursuant to clause (8) in the first paragraph under "Payments on the Securities--Payment of Distributable Amounts" in this prospectus supplement. The Noteholders will not have any rights in, or claims to, amounts distributed to the Certificateholders or to the Depositor. The "Specified Reserve Account Balance" with respect to any Payment Date will be an amount equal to [ ]% of the sum of the current Pool Balance. During the Funding Period, if the Trust purchases Subsequent Receivables, a portion of the purchase price for the Subsequent Receivables withdrawn from the Pre-Funding Account will be deposited in the Reserve Account, if necessary, to maintain the amount on deposit in the Reserve Account at the Specified Reserve S-59 Account Balance. In no event, however, will the Specified Reserve Account Balance on any Payment Date be less than $[ ]. The Servicer may, from time to time after the date of this prospectus supplement, request each rating agency to approve a formula for determining the Specified Reserve Account Balance that is different from that described above or change the manner by which the Reserve Account is funded. If each rating agency delivers a letter to the Owner Trustee to the effect that the use of any new formula will not result in a qualification, reduction or withdrawal of its then-current rating of any class of the Notes, then the Specified Reserve Account Balance will be determined in accordance with the new formula. The Sale and Servicing Agreement will accordingly be amended, without the consent of any Noteholder, to reflect the new calculation. Amounts held from time to time in the Reserve Account will be held for the benefit of the Noteholders. On each Payment Date, funds will be withdrawn from the Reserve Account to the extent of any Available Amounts Shortfall with respect to that Payment Date and will be deposited in the Note Distribution Account for distribution to the Noteholders None of the Noteholders, the Indenture Trustee, the Owner Trustee or the Depositor will be required to refund any amounts properly distributed or paid to them, whether or not there are sufficient funds on any subsequent Payment Date to make full distributions to the Noteholders. The Reserve Account and the subordination of the Class B Notes are intended to enhance the likelihood of receipt by Class A Noteholders of the full amount of principal and interest due them and to decrease the likelihood that the Class A Noteholders will experience losses. However, the Reserve Account could be depleted. If the amount required to be deposited into or required to be withdrawn from the Reserve Account to cover shortfalls in collections on the Receivables exceeds the amount of available cash in the Reserve Account, Noteholders could incur losses or suffer a temporary shortfall in the amounts distributed to the Noteholders. Yield Supplement Overcollateralization Amount On the Closing Date, the sum of the Pool Balance and the amount on deposit in the Pre-Funding Account will exceed the initial principal amount of the Notes, by [ ] (the "Initial Yield Supplement Overcollateralization Amount"), which is approximately [ ]% of the sum of the aggregate principal balance of the Initial Receivables as of the Initial Cutoff Date and the amount on deposit in the Pre-Funding Account on the Closing Date. The Yield Supplement Overcollateralization Amount is intended to compensate for the low APRs on some of the Receivables. With respect to any Payment Date, the "Yield Supplement Overcollateralization Amount" is the amount specified below with respect to that Payment Date: - -------------------------------------------------------------------------------- Closing Date - -------------------------------------------------------------------------------- May 2001 [ ] - -------------------------------------------------------------------------------- June 2001 [ ] - -------------------------------------------------------------------------------- July 2001 [ ] - -------------------------------------------------------------------------------- August 2001 [ ] - -------------------------------------------------------------------------------- September 2001 [ ] - -------------------------------------------------------------------------------- S-60 - -------------------------------------------------------------------------------- Closing Date - -------------------------------------------------------------------------------- October 2001 [ ] - -------------------------------------------------------------------------------- November 2001 [ ] - -------------------------------------------------------------------------------- December 2001 [ ] - -------------------------------------------------------------------------------- January 2002 [ ] - -------------------------------------------------------------------------------- February 2002 [ ] - -------------------------------------------------------------------------------- March 2002 [ ] - -------------------------------------------------------------------------------- April 2002 [ ] - -------------------------------------------------------------------------------- May 2002 [ ] - -------------------------------------------------------------------------------- June 2002 [ ] - -------------------------------------------------------------------------------- July 2002 [ ] - -------------------------------------------------------------------------------- August 2002 [ ] - -------------------------------------------------------------------------------- September 2002 [ ] - -------------------------------------------------------------------------------- October 2002 [ ] - -------------------------------------------------------------------------------- November 2002 [ ] - -------------------------------------------------------------------------------- December 2002 [ ] - -------------------------------------------------------------------------------- January 2003 [ ] - -------------------------------------------------------------------------------- February 2003 [ ] - -------------------------------------------------------------------------------- March 2003 [ ] - -------------------------------------------------------------------------------- April 2003 [ ] - -------------------------------------------------------------------------------- May 2003 [ ] - -------------------------------------------------------------------------------- June 2003 [ ] - -------------------------------------------------------------------------------- July 2003 [ ] - -------------------------------------------------------------------------------- August 2003 [ ] - -------------------------------------------------------------------------------- September 2003 [ ] - -------------------------------------------------------------------------------- October 2003 [ ] - -------------------------------------------------------------------------------- November 2003 [ ] - -------------------------------------------------------------------------------- December 2003 [ ] - -------------------------------------------------------------------------------- January 2004 [ ] - -------------------------------------------------------------------------------- February 2004 [ ] - -------------------------------------------------------------------------------- March 2004 [ ] - -------------------------------------------------------------------------------- April 2004 [ ] - -------------------------------------------------------------------------------- May 2004 [ ] - -------------------------------------------------------------------------------- June 2004 [ ] - -------------------------------------------------------------------------------- July 2004 [ ] - -------------------------------------------------------------------------------- August 2004 [ ] - -------------------------------------------------------------------------------- September 2004 [ ] - -------------------------------------------------------------------------------- October 2004 [ ] - -------------------------------------------------------------------------------- November 2004 [ ] - -------------------------------------------------------------------------------- December 2004 [ ] - -------------------------------------------------------------------------------- January 2005 [ ] - -------------------------------------------------------------------------------- February 2005 [ ] - -------------------------------------------------------------------------------- March 2005 [ ] - -------------------------------------------------------------------------------- April 2005 [ ] - -------------------------------------------------------------------------------- May 2005 [ ] - -------------------------------------------------------------------------------- June 2005 [ ] - -------------------------------------------------------------------------------- S-61 The Yield Supplement Overcollateralization Amount has been calculated for each Payment Date as the sum of the amount for each Receivable equal to the excess, if any, of (x) the scheduled payments due on the Receivable for each future Collection Period discounted to present value as of the end of the preceding Collection Period at the APR of that Receivable over (y) the scheduled payments due on the Receivable for each future Collection Period discounted to present value as of the end of the preceding Collection Period at [ ]%. For purposes of the preceding definition, future scheduled payments on the Receivables are assumed to be made on their scheduled due dates without any delay, defaults or prepayments. Description of the Transfer and Servicing Agreements The Transfer and Servicing Agreements The following summary of the Indenture, the Sale and Servicing Agreement, the Administration Agreement and the Trust Agreement (collectively, the "Transfer and Servicing Agreements") describes the material terms of the Transfer and Servicing Agreements. The description of the terms of the Transfer and Servicing Agreements in this prospectus supplement does not purport to be complete and is subject to, and qualified in its entirety by reference to, all the provisions of the Transfer and Servicing Agreements. Forms of the Transfer and Servicing Agreements have been filed as exhibits to the Registration Statement. Copies of the final signed Transfer and Servicing Agreements will be filed with the SEC following the issuance of the Notes. Any description of the Transfer and Servicing Agreements in this prospectus supplement supplements, and to the extent inconsistent replaces, the description of the general terms and provisions of the Transfer and Servicing Agreements set forth in the accompanying prospectus, to which description reference is hereby made. Sale and Assignment of Receivables; Subsequent Receivables Information with respect to the conveyance of the Initial Receivables from the Depositor to the Trust on the Closing Date and the Subsequent Receivables from the Depositor to the Trust on the Subsequent Closing Date pursuant to the Sale and Servicing Agreement is set forth under "Description of the Transfer and Servicing Agreements--Sale and Assignment of Receivables; Subsequent Receivables " in the accompanying prospectus. Accounts In addition to the accounts referred to under "Description of the Transfer and Servicing Agreements--Accounts" in the accompanying prospectus, the Servicer will also establish and will maintain with the Indenture Trustee the Reserve Account in the name of the Indenture Trustee on behalf of the Noteholders. Collections The Transfer and Servicing Agreements generally require that the Servicer deposit all payments on Receivables received from Obligors and all proceeds of Receivables collected during each Collection Period into the Collection Account not later than two Business Days after receipt. However, if each condition to making monthly deposits as may be required by the Sale and Servicing Agreement (including the satisfaction of specified ratings criteria by the Servicer or the Servicer obtaining a letter of credit or similar agreement and the absence of any Servicer Default) is satisfied, the Servicer may retain those amounts until the related Deposit Date. The Servicer or the S-62 Depositor, as the case may be, will remit the aggregate Warranty Purchase Payments and Administrative Purchase Payments of Receivables to be purchased from the Trust into the Collection Account on or before each Deposit Date. The Servicer will be entitled to withhold, or to be reimbursed from amounts otherwise payable into or on deposit in the Collection Account, amounts previously deposited in the Collection Account but later determined to have resulted from mistaken deposits or postings. Except as described in the Sale and Servicing Agreement, 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. We refer you to "Description of the Transfer and Servicing Agreements--Collections" in the accompanying prospectus. "Eligible Investments" are specified in the Trust Agreement and will be limited to investments which meet the criteria of each rating agency from time to time as being consistent with its then-current ratings of the Notes. Collections on or in respect of a Receivable made during a Collection Period (including Warranty Purchase Payments and Administrative Purchase Payments) will be applied first to interest accrued to date, second to principal until the principal balance is brought current, third to reduce the unpaid late charges as provided in the Receivable and finally to prepay principal of the Receivable. We refer you to "Description of the Transfer and Servicing Agreements--Collections" in the accompanying prospectus. Collections on or in respect of a Receivable made during a Collection Period which are not late fees, prepayment charges, extension fees or certain other similar fees or charges will be applied first to any outstanding Advances made by the Servicer with respect to that Receivable, and then to the related Scheduled Payment. Any collections on or in respect of a Receivable remaining after such applications will be considered an "Excess Payment." Excess Payments constituting a prepayment in full of the related Receivable will be applied as a partial prepayment (a "Prepayment") of the Notes. Pre-Funding Account On the Closing Date, a cash amount equal to approximately $[ ] (the "Pre-Funded Amount") will be deposited into an account (the "Pre-Funding Account") which will be established in the name of the Indenture Trustee. The Pre-Funded Amount will be equal to approximately [ ]% of the aggregate principal amount of the Notes. The Pre-Funding Account will be an asset of the Trust and will be pledged to the Indenture Trustee pursuant to the Indenture. The Pre-Funded Amount will be funded from the sale of the Notes and is expected to be used to acquire Subsequent Receivables. The "Funding Period" is the period from and including the Closing Date until the earliest of: o the Determination Date on which the amount on deposit in the Pre-Funding Account is $100,000 or less; o the occurrence of a Servicer Default (as defined in the Sale and Servicing Agreement) or an Event of Default under the Indenture; and o the last day of the Collection Period in [ ] 2001. The Pre-Funded Amount will be reduced during the Funding Period by the amount withdrawn from the Pre-Funding Account used to purchase Subsequent Receivables in accordance with the Sale and S-63 Servicing Agreement and by the amount withdrawn from the Pre-Funding Account deposited in the Reserve Account in connection with the purchase of the Subsequent Receivables. Amounts held in the Pre-Funding Account may be invested in Eligible Investments. Any earnings on amounts on deposit in the Pre-Funding Account will be included in Available Interest on the next Payment Date pursuant to the Sale and Servicing Agreement. Any Pre-Funded Amount remaining at the end of the Funding Period will be payable as a principal distribution to the Noteholders as a partial mandatory redemption or prepayment on the immediately following Payment Date. If the remaining Pre-funded Amount is equal to or less than $100,000, the Servicer will instruct the Indenture Trustee in writing to withdraw the remaining Pre-Funded Amount and deposit that amount in the Note Distribution Account to be applied to reduce the outstanding amount of the earliest maturing class of Class A Notes. If the Pre-Funded Amount is greater than $100,000, the Servicer will instruct the Indenture Trustee in writing to withdraw amounts equal to the product of the Pre-Funded Percentage for each Class of Notes and the Pre-Funded Amount and deposit those amounts in the Note Distribution Account to be applied in reduction of the outstanding amount of each Class of Notes, sequentially to the earliest maturing class of Class A Notes then outstanding. We refer you to "Description of Transfer and Servicing Agreements-Accounts" in the accompanying prospectus. "Pre-Funded Percentage" means, with respect to a Class of Notes, the ratio (expressed as a percentage), the numerator of which is the outstanding amount of such Class of Notes as of the preceding Payment Date and the denominator of which is the Note Balance as of the preceeding Payment Date. Capitalized Interest Account On the Closing Date, approximately $[ ] will be deposited in an account (the "Capitalized Interest Account") which will be established in the name of the Indenture Trustee. The Capitalized Interest Account will be an asset of the Trust, and will be pledged to the Indenture Trustee pursuant to the Indenture. The amount so deposited in the Capitalized Interest Account, including reinvestment income thereon, will be deposited to the Collection Account as a collection on each Payment Date up to and including the Mandatory Redemption Date in an amount equal to the interest accrued at the Weighted Average Security Rate less 2.5% on the amount on deposit in the Pre-Funding Account (the "Capitalized Interest Payments"). Any amounts on deposit in the Capitalized Interest Account in excess of the required amount on each Payment Date or on deposit in the Capitalized Interest Account at the end of the Funding Period will be paid to the Depositor. The "Weighted Average Security Rate" shall be the percentage equivalent of a fraction, the numerator of which is the sum of: o the product of the Class A-1 Rate times the Initial Class A-1 Note Balance; o the product of the Class A-2 Rate times the Initial Class A-2 Note Balance; o the product of the Class A-3 Rate times the Initial Class A-3 Note Balance; o the product of the Class A-4 Rate times the Initial Class A-4 Note Balance; and o the product of the Class B Rate times the Initial Class B Note Balance, and the denominator of which is the sum of: the Initial Class A-1 Note Balance, the Initial Class A-2 Note Balance, the Initial Class A-3 Note Balance, the Initial Class A-4 Note Balance and the Initial Class B Note Balance. Note Distribution Account On or prior to the Closing Date, the Indenture Trustee will establish and maintain initially with itself an account into which amounts released from the Collection Account and the Reserve Account for payment to the Noteholders will be deposited and from which all distributions to the Noteholders will be made (the "Note Distribution Account). The Note Distribution Account will be maintained at an Eligible Institution. S-64 Advances On or before the Business Day prior to each Payment Date (the "Deposit Date"), the Servicer will make a payment into the Collection Account for each Receivable of an amount equal to the product of the principal balance of the Receivable as of the first day of the related Collection Period and one-twelfth of its APR minus the amount of interest actually received on the Receivable during the Collection Period (an "Advance"). If the calculation results in a negative number, an amount equal to the negative amount will be paid to the Servicer in reimbursement of outstanding Advances. In addition, if a Receivable becomes a Liquidated Receivable, the amount of accrued and unpaid interest on that Receivable (but not including interest for the current Collection Period) will, up to the amount of outstanding Advances in respect that Receivable, be withdrawn from the Collection Account and paid to the Servicer in reimbursement of the outstanding Advances. The Servicer will not be required to make any Advances, other than the Advance of an interest shortfall arising from a prepaid Receivable, to the extent that it does not expect to recoup the Advance from subsequent collections or recoveries. The Servicer will make all Advances by depositing into the Collection Account Advances in respect of a Collection Period on the Business Day immediately preceding the related Payment Date. We refer you to "Description of the Transfer and Servicing Agreements--Advances" in the accompanying prospectus. Servicing Compensation The servicing fee for the calendar month immediately preceding any Payment Date (a "Collection Period") will be one-twelfth of 1.00% (the "Servicing Rate") of the Pool Balance as of the first day of the related Collection Period or, in the case of the first Payment Date, the Pool Balance as of the Initial Cutoff Date (the "Servicing Fee"). The Servicing Fee, together with any previously unpaid Servicing Fee, will be paid on each Payment Date solely to the extent of Available Interest. The Servicer will be entitled to collect and retain as additional servicing compensation in respect of each Collection Period any late fees, prepayment charges and any other administrative fees and expenses or similar charges collected during that Collection Period, plus any investment earnings or interest earned during that Collection Period from the investment of monies on deposit in the Collection Account and the Note Distribution Account. We refer you to "Description of the Transfer and Servicing Agreements--Collections" in this prospectus supplement and "Description of the Transfer and Servicing Agreements--Servicing Compensation" in the accompanying prospectus. The Servicer will be paid the Servicing Fee for each Collection Period on the following Payment Date related to that Collection Period. However, if it is acceptable to each rating agency without a reduction in the rating of each class of Notes, the Servicing Fee in respect of a Collection Period (together with any portion of the Servicing Fee that remains unpaid from prior Payment Dates) will be paid at the beginning of that Collection Period out of collections of interest on the Receivables for that Collection Period. The Servicing Fee will be paid from Available Interest in accordance with the priority of payments set forth under "Payment on the Notes-Payment of Distributable Amounts". Net Deposits As an administrative convenience and as long as specified conditions are satisfied, for so long as BMW FS is the Servicer, BMW FS will be permitted to make the deposit of collections, aggregate Advances and amounts deposited in respect of purchases of Receivables by the Depositor or the Servicer for or with respect to the related Collection Period net of payments to be made to the Servicer with respect to that Collection Period. The Servicer, however, will account to the Owner Trustee and to the Noteholders as if all of the foregoing deposits and payments were made S-65 individually. We refer you to "Description of the Transfer and Servicing Agreements--Net Deposits" in the accompanying prospectus. Optional Purchase The outstanding Notes will be redeemed in whole, but not in part, on any Payment Date on which the Servicer or any successor to the Servicer exercises its option to purchase the Receivables. The Servicer or any successor to the Servicer may purchase the Receivables when the Pool Balance shall have declined to 10% or less of the sum of the Initial Pool Balance plus the amount on deposit in the Pre-Funding Account on the Closing Date, as described in the accompanying prospectus under "Description of the Transfer and Servicing Agreements--Termination." The "Redemption Price" for the outstanding Notes will be equal to the unpaid principal amount of the outstanding Notes plus accrued and unpaid interest on the Notes on the date of the optional purchase. Removal of Servicer The Indenture Trustee or Noteholders evidencing more than 50% of the voting interests of the Class A Notes then outstanding (or if the Class A Notes have been paid in full, by holders of Class B Notes then outstanding evidencing more than 50% of the voting interests of the Class B Notes), may terminate the rights and obligations of the Servicer under the Sale and Servicing Agreement upon the following events ("Servicer Defaults"): 1. any failure by the Servicer to deliver to the applicable Trustee for deposit in any Account any required payment or to direct the Indenture Trustee to make the required payments from any Account and that failure continues unremedied for five Business Days after discovery of that failure by the Servicer or after the receipt by the Servicer of notice of that failure; 2. any failure by the Servicer to duly observe or perform in any material respect any other covenants or agreements in the Sale and Servicing Agreement, which failure materially and adversely affects the rights of the Noteholders, and which failure continues unremedied for 60 days after written notice of that failure is given to the Servicer by (a) the Indenture Trustee or (b) the holders of Notes representing more than 50% of the Controlling Class; and 3. the occurrence of an Insolvency Event (as defined in the attached prospectus) of the Servicer. Under those circumstances, authority and power shall, without further action, pass to and be vested in the Indenture Trustee or a successor Servicer appointed by the Indenture Trustee under the Sale and Servicing Agreement. The Indenture Trustee or successor Servicer will succeed to all the responsibilities, duties and liabilities of the Servicer in its capacity under the Sale and Servicing Agreement and will be entitled to similar compensation arrangements. If, however, a bankruptcy trustee or similar official has been appointed for the Servicer, and no Servicer Default other than the appointment of a bankruptcy trustee or similar official has occurred, that trustee or official may have the power to prevent the Indenture Trustee or the Noteholders from effecting a transfer of servicing. In the event that the Indenture Trustee is unwilling or unable so to act, it may appoint or petition a court of competent jurisdiction to appoint a successor servicer. The Indenture Trustee may make arrangements for compensation to be paid, which in no event may be greater than the servicing compensation paid to the Servicer under the Sale and Servicing Agreement. S-66 Notwithstanding termination under this section, the Servicer shall be entitled to payment of amounts payable to it prior to termination, for services rendered prior to termination. Upon payment in full of the principal and interest on the Class A Notes, the Class B Noteholders will succeed to the rights of the Class A Noteholders with respect to removal of the Servicer. Duties of the Owner Trustee and the Indenture Trustee The Owner Trustee will make no representations as to the validity or sufficiency of the Trust Agreement, the Notes or certificates (other than the authentication of the certificates) or of any Receivables or related documents and is not accountable for the use or application by the Depositor or the Servicer of any funds paid to the Depositor or the Servicer in respect of the Notes, the certificates or the Receivables, or the investment of any monies by the Servicer before those monies are deposited into the Collection Account. The Owner Trustee will not independently verify the Receivables. If no Servicer Default has occurred, the Owner Trustee is required to perform only those duties specifically required of it under the Trust Agreement. In addition to making distributions to the Certificateholder, those duties generally are limited to the receipt of the various certificates, reports or other instruments required to be furnished to the Owner Trustee under the Trust Agreement, in which case it will only be required to examine them to determine whether they conform to the requirements of the Trust Agreement. The Trust Agreement says that the Owner Trustee will not be responsible for knowing about any event unless an officer of the Owner Trustee has actual knowledge of the event or has received written notice of the event. The Indenture Trustee will make no representations as to the validity or sufficiency of the Indenture, the Notes (other than authentication of the Notes) or of any Receivables or related documents, and is not accountable for the use or application by the Depositor or the Servicer of any funds paid to the Depositor or the Servicer in respect of the Notes or the Receivables, or the investment of any monies by the Servicer before those monies are deposited into the Collection Account. The Indenture Trustee will not independently verify the Receivables. If no Event of Default or Servicer Default has occurred, the Indenture Trustee is required to perform only those duties specifically required of it under the Indenture. In addition to making distributions to the Noteholders, those duties generally are limited to the receipt of the various certificates, reports or other instruments required to be furnished to the Indenture Trustee under the indenture, in which case it will only be required to examine them to determine whether they conform to the requirements of the Indenture. The Indenture says that the Indenture Trustee will not be responsible for knowing about any event unless an officer of the Indenture Trustee has actual knowledge of the event or has received written notice of the event. The Indenture Trustee will be under no obligation to exercise any of the rights or powers vested in it by the Indenture or to make any investigation of matters arising under the Indenture or to institute, conduct or defend any litigation under the Indenture or in relation to the Indenture or that litigation at the request, order or direction of any of the Noteholders, unless those Noteholders have offered to the Indenture Trustee reasonable security or indemnity against the costs, expenses and liabilities that may be incurred by the Indenture Trustee in connection with the exercise of those rights. No Noteholder will have any right under the Indenture to institute any proceeding with respect to the Indenture, other than with respect to the failure by the Depositor or the Servicer, as applicable, to remit payment. A Noteholder's right to institute any proceeding with respect to the Indenture Trustee is conditioned upon the Noteholder providing the Indenture Trustee with written notice of the Event of Default and the holders of the Controlling Class evidencing not less than 25% of the voting interests of the Controlling Class, voting together as a single class, have made written request upon the Indenture Trustee to institute that proceeding in its own name as the Indenture S-67 Trustee under the Indenture. No proceeding shall commence unless the Noteholders have offered to the Indenture Trustee reasonable indemnity and the Indenture Trustee for 60 days has neglected or refused to institute that proceeding. The Owner Trustee and the Indenture Trustee Wilmington Trust Company will be the Owner Trustee under the Trust Agreement. The Chase Manhattan Bank will be the Indenture Trustee under the Indenture. The Owner Trustee, the Indenture Trustee and any of their respective affiliates may hold Notes in their own names or as pledgees. For the purpose of meeting the legal requirements of some jurisdictions, the Servicer and the Owner Trustee or the Servicer and the Indenture Trustee, in each case acting jointly (or in some instances, the Owner Trustee or the Indenture Trustee acting alone), will have the power to appoint co-trustees or separate trustees of all or any part of the Trust. In the event of an appointment of co-trustees or separate trustees, all rights, powers, duties and obligations conferred or imposed upon the Owner Trustee by the Sale and Servicing Agreement and the Trust Agreement or the Indenture Trustee by the Indenture will be conferred or imposed upon the Owner Trustee or the Indenture Trustee and each of their respective separate trustees or co-trustees jointly, or, in any jurisdiction in which the Owner Trustee or the Indenture Trustee will be incompetent or unqualified to perform specified acts, singly upon that separate trustee or co-trustee who will exercise and perform those rights, powers, duties and obligations solely at the direction of the Owner Trustee or the Indenture Trustee. The Owner Trustee and the Indenture Trustee may resign at any time, in which event the Servicer will be obligated to appoint a successor Owner Trustee or Indenture Trustee, as applicable. The Servicer may also remove the Owner Trustee or the Indenture Trustee if either ceases to be eligible to continue as trustee under the Trust Agreement or the Indenture, as the case may be, becomes legally unable to act or becomes insolvent. In those circumstances, the Servicer will be obligated to appoint a successor Owner Trustee or Indenture Trustee, as applicable. Any resignation or removal of the Owner Trustee or the Indenture Trustee and appointment of a successor Owner Trustee or Indenture Trustee, as applicable, will not become effective until acceptance of the appointment by the successor. The Servicer will be obligated to pay the fees of the Owner Trustee and the Indenture Trustee in connection with their duties under the Trust Agreement and Indenture, respectively. The Owner Trustee and the Indenture Trustee will be entitled to indemnification by BMW FS and the Depositor for, and will be held harmless against, any loss, liability, fee, disbursement or expense incurred by the Owner Trustee or the Indenture Trustee not resulting from its own willful misfeasance, bad faith or negligence (other than by reason of a breach of any of its representations or warranties set forth in the Trust Agreement or the Indenture, as the case may be). The Depositor will be obligated to indemnify the Owner Trustee and the Indenture Trustee for specified taxes that may be asserted in connection with the transaction. S-68 Material Income Tax Consequences The following is a general discussion of the material federal income tax considerations of the purchase, ownership and disposition of the Notes. The discussion is based upon law, regulations, rulings and decisions now in effect, all of which are subject to change. The discussion below does not purport to deal with all federal tax considerations applicable to all categories of investors. It is recommended that investors consult their own tax advisors in determining the federal, state, local and any other tax consequences to them of the purchase, ownership and disposition of the Notes. We refer you to the discussions under "Material Income Tax Consequences--Tax Treatment of Owner Trusts" and "State and Local Tax Considerations" in the accompanying prospectus. Tax Characterization of the Trust In the opinion of Weil, Gotshal & Manges LLP, tax counsel to the Trust: o the Notes will be characterized as debt for tax purposes; and o the Trust will not be characterized as an association (or a publicly traded partnership) taxable as a corporation for federal income tax purposes. If the Trust were taxable as a corporation for federal income tax purposes, it would be subject to corporate income tax on its taxable income. The Trust's taxable income would include all its income on the related Receivables, which may be reduced by its interest expense on the Notes. Any imposition of corporate income tax could materially reduce cash available to make payments on the Notes, and the beneficial owners of the Certificates could be liable for any corporate income tax that is unpaid by the Trust. Treatment of the Notes as Indebtedness The Depositor, any Certificateholder and the beneficial owners of the Notes (the "Note Owners") will agree by their purchase of the Securities, to treat the Notes as debt for federal income tax purposes. The Depositor and the Servicer and any subsequent holder of Certificates will agree, to treat the Trust: o as a partnership for purposes of federal and state income tax, franchise tax and any other tax measured in whole or in part by income, with the assets of the partnership being the assets held by the Trust, the partners of the partnership being the Certificate Owner, and the Notes being debt of the partnership; or o if a single beneficial owner owns all of the Certificates and none of the Notes are characterized as equity interests in the Trust, as disregarded as an entity separate from the Certificate Owner for purpose of federal and state income tax, franchise tax and any other tax measured in whole or in part by income, with the assets of the Trust and the Notes treated as assets and indebtedness of the Certificate Owner. S-69 However, the proper characterization of the arrangement involving the Trust, the Notes, the Depositor and the Servicer is not clear because there is no authority on transactions closely comparable to the transaction described in this prospectus supplement. ERISA Considerations Section 406 of ERISA and Section 4975 of the Code prohibit pension, profit-sharing and other employee benefit plans, as well as individual retirement accounts and certain types of Keogh Plans (each, a "Benefit Plan"), from engaging in specified transactions, such as direct or indirect sales or exchanges or extensions of credit with persons that are "parties in interest" under ERISA or "disqualified persons" under the Code with respect to those Benefit Plans. A violation of these "prohibited transaction" rules may result in an excise tax or other penalties and liabilities under ERISA and the Code for those persons. Title I of ERISA also requires that fiduciaries of a Benefit Plan subject to ERISA make investments that are prudent, diversified (except if prudent not to do so) and in accordance with governing, plan documents. If the assets of the trust were deemed to be assets of a Benefit Plan, transactions involving the trust, which are described in Section 406 of ERISA or Section 4975 of the Code, might be deemed to constitute prohibited transactions for which an exemption is not available. Under a regulation issued by the United States Department of Labor (the "Plan Assets Regulation"), the assets of the trust would be treated as plan assets of a Benefit Plan for the purposes of ERISA and the Code only if the Benefit Plan acquired an "equity interest" in the trust and none of the exceptions contained in the Plan Assets Regulation were applicable. An equity interest is defined under the Plan Assets Regulation as an interest other than an instrument which is treated as indebtedness under applicable local law and which has no substantial equity features. Although there is little guidance on the subject, the Notes should be treated as indebtedness without substantial equity features for purposes of the Plan Assets Regulation. This determination is based in part upon the traditional debt features of the Notes, including the reasonable expectation of purchasers of Notes that the Notes will be repaid when due, as well as the absence of conversion rights, warrants and other typical equity features. The debt treatment of the Notes for ERISA purposes could change if the trust incurred losses. However, even if the Notes are treated as debt for purposes of the Plan Assets Regulation, the acquisition or holding of Notes by or on behalf of a Benefit Plan could be considered to give rise to a prohibited transaction if the trust or any of its affiliates is or becomes a party in interest or a disqualified person with respect to a Benefit Plan. In that instance, certain exemptions from the prohibited transaction rules could be applicable depending on the type and circumstances of the plan fiduciary making the decision to acquire a note. Included among these exemptions are: Prohibited Transaction Class Exemption ("PTCE") 90- 1, regarding investments by insurance company pooled separate accounts; PTCE 95-60, regarding investments by insurance company general accounts; PTCE 91-38, regarding investments by bank collective investment finds; PTCE 96-23, regarding transactions affected by "in-house asset managers"; and PTCE 84-14, regarding transactions effected by "qualified professional asset managers." Each investor using the assets of a Benefit Plan which acquires the Notes, or to whom the Notes are transferred, will be deemed to have represented that the acquisition and continued holding of the Notes will be covered by one of the exemptions listed above or by another Department of Labor prohibited transaction class exemption. Employee benefit plans that are governmental plans (as defined in Section 3(32) of ERISA) and certain church plans (as defined in Section 3(33) of ERISA) are not subject to ERISA S-70 requirements; however, those plans may be subject to comparable federal, state or local law restrictions. A plan fiduciary considering the purchase of Notes should consult its tax and/or legal advisors regarding whether the assets of the trust would be considered plan assets, the possibility of exemptive relief from the prohibited transaction rules and other related issues and their potential consequences. The sale of Notes to a Benefit Plan is in no respect a representation that this investment meets all relevant legal requirements with respect to investments by Benefit Plans generally or by a particular Benefit Plan, or that this investment is appropriate for Benefit Plans generally or any particular Benefit Plan. Underwriting Subject to the terms and conditions set forth in an Underwriting Agreement (the "Underwriting Agreement"), the Depositor has agreed to cause the Trust to sell to each of the underwriters named below (collectively, the "Underwriters"), and each of the Underwriters has severally but not jointly agreed to purchase, the principal amount of Notes set forth opposite its name below:
Underwriters Class A-1 Notes Class A-2 Notes Class A-3 Notes Class A-4 Notes Class B Notes - ------------ --------------- --------------- --------------- --------------- ------------- JP Morgan Securities Inc. $ $ $ $ $ [ $ $ $ $ $ ]........................ [ $ $ $ $ $ ]........................ [ $ $ $ $ $ ]........................ [ $ $ $ $ $ ]........................ Total.................... $ $ $ $ $
In the Underwriting Agreement, the Underwriters have agreed, subject to the terms and conditions set forth in the Underwriting Agreement, to purchase all of the Notes. This obligation of the Underwriters is subject to specified conditions precedent set forth in the Underwriting Agreement. The Depositor has been advised by the Underwriters that they propose to offer the Notes to the public initially at the prices set forth on the cover of this prospectus supplement, and to specified dealers at these prices less the concessions and reallowance discounts set forth below: Class Selling Concession Reallowance Discount A-1...................... % % A-2...................... % % A-3...................... % % A-4...................... % % B........................ % % The Depositor and BMW FS have agreed to indemnify the Underwriters against specified liabilities, including liabilities under the Securities Act or to contribute to payments which the Underwriters may be required to make in respect thereof. However, in the opinion of the SEC, S-71 certain indemnification provisions for liability arising under the federal securities law are contrary to public policy and therefore unenforceable. In the ordinary course of their respective businesses, the Underwriters and their respective affiliates have engaged and may engage in investment banking and/or commercial banking transactions with BMW FS and its affiliates. The Notes are new issues of securities with no established trading market. The Depositor has been advised by the Underwriters that they intend to make a market in the Notes as permitted by applicable laws and regulations. The Underwriters are not obligated, however, to make a market in the Notes, and that market-making may be discontinued at any time without notice at the sole discretion of the Underwriters. Accordingly, no assurance can be given as to the liquidity of, or trading markets for, the Notes of any class. The Trust may, from time to time, invest funds in the Accounts in Eligible Investments acquired from the Underwriters. The Underwriters have advised the Depositor that, pursuant to Regulation M under the Securities Act, the Underwriters may engage in transactions, including stabilizing bids, syndicate covering transactions or the imposition of penalty bids, which may have the effect of stabilizing or maintaining the market price of the Notes of any class at levels above those that might otherwise prevail in the open market. A "stabilizing bid" is a bid for or the purchase of the Notes of any class on behalf of the Underwriters for the purpose of fixing or maintaining the price of those Notes. A "syndicate covering transaction" is the bid for or the purchase of those Notes of any class on behalf of the Underwriters to reduce a short position incurred by the Underwriters in connection with this offering. A "penalty bid" is an arrangement permitting one of the Underwriters to reclaim the selling concession otherwise accruing to another Underwriter or syndicate member in connection with this offering if the Notes of any class originally sold by the other Underwriter or syndicate member are purchased by the reclaiming Underwriter in a syndicate covering transaction and has therefore not been effectively placed by the other Underwriter or syndicate member. Stabilizing bids and syndicate covering transactions may have the effect of causing the price of the Notes of any class to be higher than it might be in the absence of stabilizing bids and syndicate covering transactions, and the imposition of penalty bids might also have an effect on the price of any note to the extent that it discourages resale of that note. Neither the Depositor nor the Underwriters makes any representation or prediction as to the direction or magnitude of any of that effect on the prices for the Notes. Neither the Depositor nor the Underwriters makes any representation that the Underwriters will engage in any of those transactions or that, once commenced, any of those transactions will not be discontinued without notice. It is expected that delivery of the Notes will be made against payment for the Notes on or about the Closing Date, which is the [ ] business day following the date of this prospectus supplement. Rule 15c6-1 of the Commission under the Exchange Act of 1934 generally requires trades in the secondary market to settle in three business days, unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade Notes on the date of this prospectus supplement will be required, by virtue of the fact that the Notes initially will settle [ ] business days after the date of this prospectus supplement, to specify an alternate settlement cycle at the time of any such trade to prevent a failed settlement. It is suggested that purchasers of Notes who wish to trade Notes on the date of this prospectus supplement consult their own advisors. Upon receipt of a request by an investor who has received an electronic prospectus from an Underwriter or a request by that investor's representative within the period during which there is an S-72 obligation to deliver a prospectus, BMW FS, the Depositor, or the Underwriters will promptly deliver, or cause to be delivered, without charge, a paper copy of the prospectus. Each Underwriter will represent that: o it has not offered or sold and will not offer or sell, prior to the date six months after their date of issuance, any Notes to persons in the United Kingdom, except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted in and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995; o it has complied and will comply with all applicable provisions of the Financial Services Act 1986 with respect to anything done by it in relation to the Notes in, from or otherwise involving the United Kingdom; and o it has only issued or passed on and will only issue or pass on in the United Kingdom any document received by it in connection with the issuance of the Notes or the person who is of a kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1997 or is a person to whom the document can otherwise lawfully be issued or passed on. Notice to Canadian Residents Resale Restrictions The distribution of the Notes in Canada is being made only on a private placement basis exempt from the requirement that the Depositor, on behalf of the Trust, prepare and file a prospectus with the securities regulatory authorities in each province where trades of Notes are effected. Accordingly, any resale of the Notes in Canada must be made in accordance with applicable securities laws which will vary depending on the relevant jurisdiction, and which may require resales to be made in accordance with available statutory exemptions or pursuant to a discretionary exemption granted by the applicable Canadian securities regulatory authority. Purchasers are advised to seek legal advice prior to any resale of the Notes. Representations of Purchasers Each purchaser of Notes in Canada who receives a purchase confirmation will be deemed to represent to the Depositor, the Servicer, the related trustee, the Trust and the dealer from whom such purchase confirmation is received that (i) such purchaser is entitled under applicable provincial securities laws to purchase such Notes or Notes without the benefit of a prospectus qualified under such securities laws, (ii) where required by law, that such purchaser is purchasing as principal and not as agent, and (iii) such purchaser has reviewed the text above under "--Resale Restrictions." Rights of Action (Ontario Purchasers) The securities being offered are those of a foreign issuer and Ontario purchasers will not receive the contractual right of action prescribed by Section 32 of the Regulation under the Securities Act (Ontario). As a result, Ontario purchasers must rely on other remedies that may be S-73 available, including common law rights of action for damages or rescission or rights of action under the civil liability provisions of the U.S. federal securities laws. Enforcement of Legal Rights All of the issuer's directors and officers as well as the experts named herein may be located outside of Canada and, as a result, it may not be possible for Canadian purchasers to effect service of process within Canada upon the issuer or such persons. All or a substantial portion of the assets of the issuer and such persons may be located outside of Canada and, as a result, it may not be possible to satisfy a judgment against the issuer or such persons in Canada or to enforce a judgment obtained in Canadian courts against such issuer or persons outside of Canada. Notice to British Columbia Residents A purchaser of Notes to whom the Securities Act (British Columbia) applies is advised that such purchaser is required to file with the British Columbia Securities Commission a report within ten days of the sale of any Notes acquired by such purchaser pursuant to this offering. Such report must be in the form attached to British Columbia Securities Commission Blanket Order BOR #95/17, a copy of which may be obtained from the Depositor. Only one such report must be filed in respect of Notes acquired on the same date and under the same prospectus exemption. Taxation and Eligibility for Investment Canadian purchasers of Notes should consult their own legal and tax advisors with respect to the tax consequences of an investment in the Notes or in their particular circumstances and with respect to the eligibility of the Notes or for investment by the purchaser under relevant Canadian legislation. Legal Opinions In addition to the legal opinions described in the accompanying prospectus, legal matters relating to the Notes and federal income tax and other matters will be passed upon for the Trust by Weil, Gotshal & Manges LLP. Certain legal matters will be passed upon for the Underwriters by Stroock & Stroock & Lavan LLP. S-74 Index of Terms ABS................................................42 ABS Tables.........................................42 Advance............................................65 Available Amounts..................................54 Benefit Plan.......................................70 BMW AG.............................................10 BMW Center Recourse................................29 BMW Centers........................................29 BMW FS.............................................29 BMW Group..........................................10 Capitalized Interest Account.......................64 Capitalized Interest Payments......................64 Class A Notes......................................39 Class B Noteholders................................52 Class B Noteowners.................................69 Class B Notes......................................39 Clearstream, Luxembourg.............................1 Closing Date.......................................31 Collection Period..................................65 Controlling Class..................................53 Deposit Date.......................................65 Depositor..........................................29 Determination Date.................................54 DTC.................................................1 Euroclear...........................................1 Excess Amount......................................57 Final Scheduled Payment Date.......................39 Financed Vehicles..................................31 Funding Period.....................................11 Global Securities...................................1 Indenture Trustee..................................30 Initial Cutoff Date................................31 Initial Overcollateralization Amount...............18 Initial Pool Balance...............................31 Initial Receivables............................10, 31 Initial Yield Supplement Overcollateralization Amount..........................................60 Interest Rate......................................51 Note Distribution Account..........................64 Note Owners........................................69 Noteholders........................................52 Obligor............................................32 Owner Trustee......................................29 Payment Date.......................................51 Plan Assets Regulation.............................70 Pre-Funded Amount..................................63 Pre-Funding Account............................11, 63 Prepayment.........................................63 PTCE...............................................70 Receivables Purchase Agreement.....................31 Reserve Fund Initial Deposit.......................59 Sale and Servicing Agreement.......................29 Servicer...........................................29 Servicer Defaults..................................66 Servicing Fee......................................65 Servicing Rate.....................................65 Subsequent Purchase Agreement......................32 Subsequent Receivables.........................11, 31 Subsequent Transfer Agreement......................32 Subsequent Transfer Date...........................32 Trust..............................................29 Trust Agreement....................................29 Trustees...........................................30 Underwriters.......................................71 Underwriting Agreement.............................71 Weighted Average Security Rate.....................64 S-75 Annex A Global Clearance, Settlement and Tax Documentation Procedures Except in specified circumstances, the globally offered Class A Notes (the "Global Securities") will be available only in book-entry form. Investors in the Global Securities may hold the Global Securities through The Depository Trust Company ("DTC"), Clearstream Banking, societe anonyme ("Clearstream, Luxembourg") or the Euroclear System ("Euroclear. The Global Securities will be tradable as home market instruments in both the European and U.S. domestic markets. Initial settlement and all secondary trades will settle in same-day funds. Secondary market trading between investors holding Global Securities through Clearstream, Luxembourg and Euroclear will be conducted in the ordinary way in accordance with their normal rules and operating procedures and in accordance with conventional eurobond practice (i.e., three calendar day settlement). Secondary market trading between investors holding Global Securities through DTC will be conducted according to the rules and procedure applicable to U.S. corporate debt obligations and prior asset-backed securities issues. Secondary cross-market trading between Clearstream, Luxembourg or Euroclear and DTC Participants holding securities will be effected on a delivery-against-payment basis through the depositaries of Clearstream, Luxembourg and Euroclear (in that capacity) and as DTC Participants. Non-U.S. holders (as described below) of Global Securities will be subject to U.S. withholding taxes unless those holders meet specified requirements and deliver appropriate U.S. tax documents to the securities clearing organizations or their participants. Initial Settlement All Global Securities will be held in book-entry form by DTC in the name of Cede & Co. as nominee of DTC. Investors' interests in the Global Securities will be represented through financial institutions acting on their behalf as direct and indirect Participants in DTC. As a result, Clearstream, Luxembourg and Euroclear will hold positions on behalf of their participants through their depositaries, which in turn will hold those positions in accounts as DTC Participants. Investors electing to hold their Global Securities through DTC will follow DTC settlement practice. Investor securities custody accounts will be credited with their holdings against payment in same-day funds on the settlement date. Investors electing to hold their Global Securities through Clearstream, Luxembourg or Euroclear accounts will follow the settlement procedures applicable to conventional eurobonds, except that there will be no temporary global security and no "lock-up" or restricted period. Global Securities will be credited to securities custody accounts on the settlement date against payment in same-day funds. Secondary Market Trading Since the purchaser determines the place of delivery, it is important to establish at the time of the trade where both the purchaser's and seller's accounts are located to ensure that settlement can be made on the desired value date. A-1 Trading between DTC Participants. Secondary market trading between DTC Participants will be settled using the procedures applicable to prior asset-backed securities issues in same-day funds. Trading between Clearstream, Luxembourg and/or Euroclear Participants. Secondary market trading between Clearstream, Luxembourg Participants or Euroclear Participants will be settled using the procedures applicable to conventional eurobonds in same-day funds. Trading between DTC Depositor and Clearstream, Luxembourg or Euroclear Participants. When Global Securities are to be transferred from the account of a DTC Participant to the account of a Clearstream, Luxembourg Participant or a Euroclear Participant, the purchaser will send instructions to Clearstream, Luxembourg or Euroclear through a Clearstream, Luxembourg Participant or Euroclear Participant at least one business day prior to settlement. Clearstream, Luxembourg or Euroclear will instruct the respective Depositary, as the case may be, to receive the Global Securities against payment. Payment will include interest accrued on the Global Securities from and including the last coupon payment date to and excluding the settlement date, on the basis of the actual number of days in that accrual period and a year assumed to consist of 360 days. For transactions settling on the 31st of the month, payment will include interest accrued to and excluding the first day of the following month. Payment will then be made by the respective Depositary to the DTC Participant's account against delivery of the Global Securities. After settlement has been completed, the Global Securities will be credited to the respective clearing system and by the clearing system, in accordance with its usual procedures, to the Clearstream, Luxembourg Participant's or Euroclear Participant's account. The securities credit will appear the next day (European time) and the cash debt will be back-valued to, and the interest on the Global Securities will accrue from, the value date (which would be the preceding day when settlement occurred in New York). If settlement is not completed on the intended value date (i.e., the trade fails), the Clearstream, Luxembourg or Euroclear cash debt will be valued instead as of the actual settlement date. Clearstream, Luxembourg Participants and Euroclear Participants will need to make available to the respective clearing systems the funds necessary to process same-day funds settlement. The most direct means of doing so is to pre-position funds for settlement, either from cash on hand or existing lines of credit, as they would for any settlement occurring within Clearstream, Luxembourg or Euroclear. Under this approach, they may take on credit exposure to Clearstream, Luxembourg or Euroclear until the Global Securities are credited to their accounts one day later. As an alternative, if Clearstream, Luxembourg or Euroclear has extended a line of credit to them, Clearstream, Luxembourg Participants or Euroclear Participants can elect not to pre-position funds and allow that credit line to be drawn upon to finance settlement. Under this procedure, Clearstream Bank Participants or Euroclear Participants purchasing Global Securities would incur overdraft charges for one day, assuming they clear the overdraft when the Global Securities are credited to their accounts. However, interest on the Global Securities would accrue from the value date. Therefore, in many cases the investment income on the Global Securities earned during that one-day period may substantially reduce or offset the amount of those overdraft charges, although this result will depend on each Clearstream, Luxembourg Participant's or Euroclear Participant's particular cost of funds. Since the settlement is taking place during New York business hours, DTC Participants can employ their usual procedures for sending Global Securities to the respective European Depositary for the benefit of Clearstream, Luxembourg Participants or Euroclear Participants. The sale A-2 proceeds will be available to the DTC seller on the settlement date. Thus, to the DTC Participants a cross-market transaction will settle no differently than a trade between two DTC Participants. Trading between Clearstream, Luxembourg or Euroclear Depositor and DTC Purchaser. Due to time zone differences in their favor, Clearstream, Luxembourg Participants and Euroclear Participants may employ their customary procedures for transactions in which Global Securities are to be transferred by the respective clearing system, through the respective Depositary, to a DTC Participant. The seller will send instructions to Clearstream, Luxembourg or Euroclear through a Clearstream, Luxembourg Participant or Euroclear Participant at least one business day prior to settlement. In these cases, Clearstream, Luxembourg or Euroclear will instruct the Relevant Depositary, as appropriate, to deliver the Global Securities to the DTC Participant's account against payment. Payment will include interest accrued on the Global Securities from and including the last coupon payment to and excluding the settlement date on the basis of the actual number of days in that accrual period and a year assumed to consist of 360 days. For transactions settling on the 31st of the month, payment will include interest accrued to and excluding the first day of the following month. The payment will then be reflected in the account of the Clearstream, Luxembourg Participant or Euroclear Participant the following day, and receipt of the cash proceeds in the Clearstream, Luxembourg Participant's or Euroclear Participant's account would be back-valued to the value date (which would be the preceding day, when settlement occurred in New York). Should the Clearstream, Luxembourg Participant or Euroclear Participant have a line of credit with its respective clearing system and elect to be in debt in anticipation of receipt of the sale proceeds in its account, the back valuation will extinguish any overdraft incurred over that one-day period. If settlement is not completed on the intended value date (i.e., the trade fails), receipt of the cash proceeds in the Clearstream, Luxembourg Participant's or Euroclear Participant's account would instead be valued as of the actual settlement date. Finally, day traders that use Clearstream, Luxembourg or Euroclear and that purchase Global Securities from DTC Participants for delivery to Clearstream, Luxembourg Participants or Euroclear Participants should note that these trades would automatically fail on the sale side unless affirmative action were taken. At least three techniques should be readily available to eliminate this potential problem: (1) borrowing through Clearstream, Luxembourg or Euroclear for one day (until the purchase side of the day trade is reflected in their Clearstream, Luxembourg or Euroclear accounts) in accordance with the clearing system's customary procedures; (2) borrowing the Global Securities in the U.S. from a DTC Participant no later than one day prior to settlement, which would give the Global Securities sufficient time to be reflected in their Clearstream, Luxembourg or Euroclear account in order to settle the sale side of the trade; or (3) staggering the value dates for the buy and sell sides of the trade so that the value date for the purchase from the DTC Participant is at least one day prior to the value date for the sale to the Clearstream, Luxembourg Participant or Euroclear Participant. Material U.S. Federal Income Tax Documentation Requirements A beneficial owner of Global Securities holding securities through Clearstream, Luxembourg or Euroclear (or through DTC if the holder has an address outside the U.S.) will be subject to the 30% U.S. withholding tax that generally applies to payments of interest (including A-3 original issue discount) on registered debt issued by U.S. Persons (as defined in the accompanying prospectus), unless (1) each clearing system, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business in the chain of intermediaries between that beneficial owner and the U.S. entity required to withhold tax complies with applicable certification requirements and (2) that beneficial owner takes one of the following steps to obtain an exemption or reduced tax rate: Exemption for Non-U.S. Persons (Form W-8BEN). Beneficial owners of Global Securities that are Non-U.S. Persons generally can obtain a complete exemption from the withholding tax by filing a signed Form W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Withholding). If the information shown on Form W-8BEN changes, a new Form W-8BEN must be filed within 30 days of that change. Exemption for non-U.S. Persons with effectively connected income (Form W-8ECI). A Non-U.S. Person, including a non-U.S. corporation or bank with a U.S. branch, for which the interest income is effectively connected with its conduct of a trade or business in the United States, generally can obtain an exemption from the withholding tax by filing Form W-ECI (Certificate of Foreign Person's Claim for Exemption from Withholding on Income Effectively Connected with the Conduct of a Trade or Business in the United States). Exemption or reduced rate for non-U.S. Persons resident in treaty countries (Form W-8BEN). Non-U.S. Persons residing in a country that has a tax treaty with the United States generally can obtain an exemption or reduced tax rate depending on the treaty terms) by filing Form W-8BEN. Form W-8BEN may be filed by the Class B Noteowners or their authorized agents. Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete exemption from the withholding tax by filing Form W-9 (Payer's Request for Taxpayer Identification Number and Certification). U.S. Federal Income Tax Reporting Procedure. The beneficial owner of a Global Security files by submitting the appropriate form to the person through whom it holds (the clearing agency, in the case of persons holding directly on the books of the clearing agency). A Form W-8BEN on which the beneficial owner of a Global Security provides a U.S. taxpayer identification number generally remains in effect until a change in circumstances causes any of the information on the form to be incorrect. A W-8BEN on which a U.S. taxpayer identification is not provided and a Form W-8ECI generally remain in effect for three calendar years, absent a change in circumstances causing any information on the form to be incorrect. The term "Non-U.S. Person" means any person who is not a U.S. Person (as defined in the accompanying prospectus). This summary does not deal with all aspects of U.S. federal income tax withholding that may be relevant to foreign holders of Global Securities. It is suggested that investors consult their tax advisors for specific tax advice concerning their holding and disposing of Global Securities. A-4 The information in this prospectus is not complete and may be changed. A registration statement relating to these securities has been declared effective by the Securities and Exchange Commission. We are not using this Prospectus to offer to sell these securities or to solicit offers to buy these securities in any place where the offer or sale is not permitted. Subject to completion, dated April [ ], 2001 Prospectus Supplement (To Prospectus dated April [ ], 2001) BMW Vehicle Owner Trust 2001-A BMW FS Securities LLC, Depositor BMW Financial Services NA, LLC, Servicer $[ ] ASSET BACKED NOTES $[ ] ASSET BACKED CERTIFICATES _____% Class A-1 Notes due 200_ _____% Class A-2 Notes due 200_ _____% Class A-3 Notes due 200_ _____% Class A-4 Notes due 200_ _____% Certificates due 200_ The trust's main source of payments on the notes and the certificates will be loan payments generated by a portfolio of retail installment sale contracts secured in most cases by BMW or Land Rover motor vehicles. The certificates are subordinated to the notes. The certificates will not receive distributions of principal until after the notes are paid in full. See "Risk Factors" beginning on page S-__ for a discussion of risks that you should consider in connection with an investment in the notes. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the notes or determined that this Prospectus is accurate or complete. Any representation to the contrary is a criminal offense.
- ----------------------------------------------------------------------------------------------------------- Initial Principal Price to Underwriting Proceeds Balance Public Discounts to Depositor - ----------------------------------------------------------------------------------------------------------- Class A-1 Notes % % % - ----------------------------------------------------------------------------------------------------------- Class A-2 Notes % % % - ----------------------------------------------------------------------------------------------------------- Class A-3 Notes % % % - ----------------------------------------------------------------------------------------------------------- Class A-4 Notes % % % - ----------------------------------------------------------------------------------------------------------- Certificates % % % - ----------------------------------------------------------------------------------------------------------- Total $ $ $ - -----------------------------------------------------------------------------------------------------------
Neither the notes nor the certificates will not be listed on any securities exchange. Currently, there is no public market for the notes or the certificates. We expect that delivery of the notes and the certificates will be made to investors on or about ____________. April [ ], 2001 TABLE OF CONTENTS Page Important Notice About Information Presented in this Prospectus Supplement and the accompanying Prospectus...................................5 Summary of Parties to the Transaction..........................................6 Summary of Monthly Deposits to and Withdrawls from Accounts....................7 Summary of Terms...............................................................8 Risk Factors..................................................................20 The Trust.....................................................................25 General .....................................................................25 Capitalization of the Trust...................................................26 The Owner Trustee and the Indenture Trustee...................................26 The Receivables...............................................................26 Assets of the Trust...........................................................26 Eligibility Criteria..........................................................28 Description of Initial Receivables............................................29 Maturity and Prepayment Considerations........................................35 Delinquencies, Repossessions and Loan Loss Information........................35 Weighted Average Life of the Notes............................................38 Note Factors..................................................................46 Use of Proceeds...............................................................46 The Depositor and the Servicer................................................46 The Notes.....................................................................47 General .....................................................................47 Payments of Interest..........................................................47 Payments of Principal.........................................................48 Optional Prepayment...........................................................49 Indenture.....................................................................49 Notices .....................................................................49 Governing Law.................................................................50 The Certificates..............................................................50 General.......................................................................50 Payments of Interest..........................................................50 Optional Prepayment...........................................................51 Payments of Principal.........................................................51 Notices.......................................................................51 Governing Law.................................................................51 Payments on the Securities....................................................51 Calculation of Available Amounts..............................................52 Payment of Distributable Amounts..............................................54 Credit Enhancement............................................................56 S-2 TABLE OF CONTENTS (continued) Page Subordination.................................................................56 Reserve Account...............................................................56 Yield Supplement Overcollateralization Amount.................................57 Description of the Transfer and Servicing Agreements..........................59 The Transfer and Servicing Agreements.........................................59 Sale and Assignment of Receivables; Subsequent Receivables....................59 Accounts......................................................................59 Collections...................................................................60 Pre-Funding Account...........................................................60 Capitalized Interest Account..................................................61 Note Distribution Account.....................................................62 Certificate Distribution Account..............................................62 Advances......................................................................62 Servicing Compensation........................................................62 Net Deposits..................................................................63 Optional Purchase.............................................................63 Removal of Servicer...........................................................63 Duties of the Owner Trustee and the Indenture Trustee.........................64 The Owner Trustee and the Indenture Trustee...................................65 Material Income Tax Consequences..............................................66 Tax Characterization of the Trust.............................................66 Treatment of the Notes as Indebtedness........................................66 Treatment of the Certificates.................................................67 ERISA Considerations..........................................................67 Underwriting..................................................................68 Notice to Canadian Residents..................................................71 Resale Restrictions...........................................................71 Representations of Purchasers.................................................71 Rights of Action (Ontario Purchasers).........................................71 Enforcement of Legal Rights...................................................71 Notice to British Columbia Residents..........................................71 Taxation and Eligibility for Investment.......................................72 Legal Opinions................................................................72 Index of Terms................................................................73 S-3 TABLE OF CONTENTS (continued) Page Annex A Global Clearance, Settlement and Tax Documentation Procedures..........1 Initial Settlement.............................................................1 Secondary Market Trading.......................................................1 Material U.S. Federal Income Tax Documentation Requirements....................3 S-4 Important Notice About Information Presented in this Prospectus Supplement and the accompanying Prospectus Information about the securities is provided in two separate documents that progressively provide varying levels of detail: (1) the accompanying prospectus, which provides general information, some of which may not apply to a particular class of securities, including your class; and (2) this prospectus supplement, which describes the specific terms of your class of securities. If the description of the terms of your securities varies between this prospectus supplement and the accompanying prospectus, you should rely on the information in this prospectus supplement. Cross-references are included in this prospectus supplement and in the accompanying prospectus which direct you to more detailed descriptions of a particular topic. You can also find references to key topics in the Table of Contents beginning on page S-2 in this prospectus supplement and the Table of Contents beginning on page 2 in the accompanying prospectus. You can find a listing of the pages where capitalized terms used in this prospectus supplement are defined under the caption "Index of Terms" beginning on page S-73 in this prospectus supplement and under the caption "Index of Terms" beginning on page 102 in the accompanying prospectus. S-5 - -------------------------------------------------------------------------------- SUMMARY OF PARTIES TO THE TRANSACTION* --------------------- |----------------------- BMW FINANCIAL | SERVICES NA, LLC | (seller and servicer) | --------------------- | | | | - ------------ --------------------- servicing of BMW FS receivables SECURITIES - ------------ LLC | (depositor) | --------------------- | | ------------------------ | | WILMINGTON TRUST | --------------------- / COMPANY | BMW VEHICLE / (owner trustee) |----------------------- OWNER TRUST / ------------------------ 2001-A (ISSUER) --------------------- ------------------------ / \ THE CHASE MANHATTAN BANK / \ (indenture trustee) / \ ------------------------ / \ / \ / \ / \ / \ / ------------------ --------------- CLASS A-1 NOTES CERTIFICATES CLASS A-2 NOTES CLASS A-3 NOTES ------------------ AND CLASS A-4 NOTES --------------- * This chart provides only a simplified overview of the relations between the key parties to the transaction. Refer to this prospectus supplement and the prospectus for a further description. - --------------------------------------------------------------------------------
S-6 SUMMARY OF MONTHLY DEPOSITS TO AND WITHDRAWALS FROM ACCOUNTS* - ----------------------------------------------------------- /----------- ----------- Servicer / Payments on Obligors on \ Receivables Receivables \----------- ----------- - ----------------------------------------------------------- | | | | / \ | | | | | | / \ | | | | | | / \ | | | | | | / \ | | |Principal | |Servicer| |Reimbursements| |Warranty & | |& Interest | |Advances| |of Servicer | |Administrative| |on | | | | Advances | |Payments | |Receivables| | | | | \ / \ / \ / | | \ / \ / \ / | | \ / \ / \ / | | \ / / ---------------- / Withdrawals from \ Reserve Account - ---------------------------------------------------------- \ --------------- ------- COLLECTION ACCOUNT Reserve - ---------------------------------------------------------- ------------\ Account | | Deposits to \ ------- | | Reserve Account | | | | ------------/ | | | | |Excess monies| Interest & Payments on |from Reserve | Principal Certificates |Account | | | \ / \|/ \|/ \ / ----------- ----------- \ / Noteholders Certificate ---------- Holders Depositor ----------- ----------- ---------- * This chart provides only a simplified overview of the monthly flow of funds. Refer to this prospectus supplement and the prospectus for a further description.
S-7 Summary of Terms The following summary contains a brief description of the notes. You will find a detailed description of the terms of the offering of the notes following this summary. You should carefully read this entire document and the accompanying prospectus to understand all of the terms of the offering of the notes. You should consider both documents when making your investment decision. Relevant Parties Issuer................................. BMW Vehicle Owner Trust 2001-A. The trust will be established by a trust agreement. Seller................................. BMW Financial Services NA, LLC. Servicer............................... BMW Financial Services NA, LLC. Depositor.............................. BMW FS Securities LLC. Indenture Trustee...................... The Chase Manhattan Bank. Owner Trustee.......................... Wilmington Trust Company. Relevant Agreements Indenture.............................. The indenture between the issuer and the indenture trustee. The indenture provides for the terms relating to the notes. Trust Agreement........................ The trust agreement between the depositor and the owner trustee. The trust agreement governs the creation of the trust and provides for the terms relating to the certificates. Sale and Servicing Agreement........... The sale and servicing agreement among the issuer, the indenture trustee, the servicer and the depositor. The sale and servicing agreement governs the transfer of the receivables by the depositor to the trust and the servicing of the receivables by the servicer. Administration Agreement............... The administration agreement among BMW Financial Services NA, LLC, as administrator, the trust and the indenture trustee. The administration agreement governs the provision of reports by the administrator and the performance by the administrator of other administrative duties for the trust.
S-8 Receivables Purchase Agreement ........ The receivables purchase agreement between the depositor and the seller. This agreement governs the sale of the receivables from BMW Financial Services NA, LLC to the depositor. Relevant Dates Closing Date........................... Expected to be April [ ], 2001. Initial Cutoff Date.................... [ ], 2001. Subsequent Cutoff Date................. The first day of the month during which a subsequent receivable is transferred to the trust. Payment Dates.......................... The trust will pay interest and principal on the securities on the twenty-fifth day of each month. If the twenty-fifth day of the month is not a business day, payments on the securities will be made on the next business day. The date that any payment is made is called a payment date. The first payment date is [ ], 2001. Final Scheduled Payment Dates.......... The final principal payment for each class of securities is scheduled to be made on the final scheduled payment dates as follows: o Class A-1 Notes ____, 200_ o Class A-2 Notes ____, 200_ o Class A-3 Notes ____, 200_ o Class A-4 Notes ____, 200_ o Certificates _____, 200_. Record Date............................ So long as the notes are in book-entry form, the trust will make payments on the securities to the holders of record on the day immediately preceding the payment date. If the securities are issued in definitive form, the record date will be the last day of the month preceding the payment date.
S-9 Description of the Securities General................................ The notes consist of the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes,(collectively referred to as the Class A Notes). The initial principal amount of each Class of notes is described on the front cover of this prospectus supplement. The trust will also issue $[ ] initial principal amount of certificates (the "Certificates", and together with the Class A Notes, the "Securities"), as described on the cover page. The certificates will represent fractional undivided interests in the trust. Payments of interest on and principal of the Certificates are subordinated to the payments of interest on and principal of the notes as described herein. Receivables............................ The trust's main source of funds for making payments on the securities will be collections on motor vehicle retail installment sale contracts, also known as the receivables. All of the initial receivables are, and all of the subsequent receivables will be, secured by motor vehicles manufactured by subsidiaries of Bayerische Motoren Werke Aktiengesellschaft ("BMW AG" and, together with all other BMW group companies, the "BMW Group") and Land Rover vehicles except that __% by principal balance of the receivables are secured by vehicles of other manufacturers. Initially, the principal balance of the receivables on [ ], 2001, referred to as the "initial cutoff date," was $[ ]. As of the initial cutoff date, the receivables (the "Initial Receivables") had the following characteristics: o number of receivables: [ ] o average principal balance: $[ ] o weighted average annual percentage rate: [ ]% o weighted average remaining term to maturity: [ ] months o weighted average original term to maturity: [ ] months
S-10 The receivables owned by the trust are classified as simple interest receivables. Simple interest receivables are described in more detail in "The Receivables" in the accompanying prospectus. We refer you to "The Receivables" in this prospectus supplement for more information on the receivables. Funding Period......................... During the period from the Closing Date through the end of the Collection Period in [ ], 2001 (the "Funding Period"), the Trust can use funds on deposit in an account (the "Pre-Funding Account") to purchase additional receivables (the "Subsequent Receivables") from the Depositor in an amount up to approximately $[ ]. The purchase price for the Subsequent Receivables will be withdrawn from the Pre-Funding Account. A portion of the purchase price will be deposited into the reserve account if necessary to maintain the amount on deposit in the reserve account at the specified reserve account balance and the remainder of the purchase price will be paid to the Depositor by the trust and then to BMW Financial Services NA, LLC by the Depositor. If the full amount deposited on the Closing Date cannot be used for the purpose of purchasing Subsequent Receivables during the Funding Period, all remaining monies will be applied as a mandatory prepayment of the notes sequentially to the earliest maturing class of Class A Notes then outstanding. Terms of the Notes..................... In general, noteholders are entitled to receive payments of interest and principal from the trust only to the extent that collections from trust assets are sufficient to make those payments. Interest and principal collections from trust assets will be divided among the various classes of securities in specified proportions. The trust will pay interest and principal to noteholders of record as of the preceding record date.
S-11 Interest: The interest rate for each class of notes is set forth on the front cover of this prospectus supplement. The Class A-1 Notes will accrue interest on an actual/360 basis from the previous payment date to the next payment date, except that the first interest accrual period will be from the closing date to [ ], 2001. This means that the interest due on each payment date will be the product of: o the outstanding principal balance of the related class of notes, o the interest rate, and o the actual number of days since the previous payment date to but excluding the current payment date or, in the case of the first payment date, since the closing date divided by 360. The Class A-2, Class A-3, Class A-4 and Certificates will accrue interest on a 30/360 basis from the 25th day of each calendar month to the 25th day of the succeeding calendar month except that the first interest accrual period will be from the closing date to [ ], 2001. This means that the interest due on each payment date will be the product of: o the outstanding principal balance of the related class of notes; o the applicable interest rate; and o 30 or, in the case of the first payment date, ___ divided by 360. If noteholders of any class do not receive all interest owed to them on a payment date, the trust will make payments of interest on later payment dates to make up the shortfall together with interest on those amounts, to the extent funds from specified sources are available to cover the shortfall. Principal: The trust will pay principal sequentially to the earliest maturing class of Class A Notes then outstanding until that class is paid in full.
S-12 Terms of the Certificates.............. In general, certificateholders are entitled to receive payments of interest and principal from the trust only to the extent that collections from trust assets are sufficient to make those payments. The trust will pay interest and principal to certificateholders, of record as of the preceding record date. Interest: The interest rate for the certificates is set forth on the front cover of this prospectus supplement. The certificates will accrue interest on a 30/360 basis from the [ ]th day of each calendar month to the [ ]th day of the succeeding calendar month except that the first interest accrual period will be from the closing date to [ ], 2001. This means that the interest due on each payment date will be the product of: (i) the outstanding principal balance of the certificates, (ii) the applicable interest rate, and (iii) 30 (or, in the case of the first payment date, __) divided by 360. Interest distributions on the certificates are subordinated to payments on the notes. This subordination of distributions on the certificates is intended to increase the likelihood that the trust will not default in making payments due on the notes. Principal: o The trust will not distribute principal payments on the certificates until the class A-1 Notes are paid in full. On and after the payment date on which the class A-1 Notes have been paid in full, the certificates will receive distribution of principal until the certificates have been paid in full. The trust must pay the outstanding principal amount of the certificates, to the extent not previously paid, by [ ]. Priority of Distributions.............. From collections on the receivables during the prior calendar month and, in the event of a shortfall in meeting the payments described in clauses (1) through (5), amounts withdrawn from the reserve account, the trust will pay the following amounts on each payment date in the following order of priority: (1) To the servicer, the servicing fee and all unpaid servicing fees from prior collection periods and
S-13 amounts in respect of reimbursement for non-recoverable servicer advances, (2) To the Class A Noteholders, the accrued interest on the Class A Notes, (3) To the principal distribution account, the first priority principal distribution amount which will generally be the amount, if any, equal to the excess of: o the principal balances of the Class A Notes over o the sum of the principal balance of the receivables plus the amount, if any, remaining on deposit in the pre-funding account, (4) To the certificateholders, accrued and unpaid interest on the certificates, (5) To the principal distribution account, generally an amount equal to the greater of: o the principal balance of the Class A-1 Notes and o the excess of o the sum of the principal balance of the notes and the certificates over o an amount equal to the sum of the principal balance of the receivables plus the amount, if any, on deposit in the pre-funding account less the required yield supplement overcollateralization amount, provided that this amount will be reduced by any amounts previously deposited in the principal distribution account in accordance with clause (3) above, (6) To the reserve account, the amount, if any, necessary to cause the amount on deposit in the reserve account to equal the specified reserve account balance, which is [ ]% of the sum of the current aggregate principal balance of the receivables and the amounts currently on deposit
S-14 in the pre-funding account, (7) To the indenture trustee and the owner trustee, the indenture trustee fee and owner trustee fee, respectively, and all unpaid indenture trustee fees and owner trustee fees from prior collection periods to the extent not otherwise paid by the servicer; provided that until the notes have been paid in full, the annual amount paid to the indenture trustee and the owner trustee, respectively, out of available amounts allocated described in this clause (7) shall not exceed [$10,000], and (8) To the depositor, any amounts remaining in the collection account. On the final scheduled payment date of any class of notes, the amount required to be allocated to the principal distribution account will be the amount necessary to reduce the principal balance of that class of notes to zero.
S-15 Distributions from the Principal Distribution Account........................ From deposits made to the principal distribution account, the trust will generally pay principal on the notes in the following order of priority: o to the Class A-1 Notes until they are paid in full; o to the Class A-2 Notes until they are paid in full; o to the Class A-3 Notes until they are paid in full; o to the Class A-4 Notes until they are paid in full; o to the Certificates until they are paid in full; and o to the Depositor, any funds remaining. Optional Redemption.................... The servicer may cause the trust to redeem any outstanding securities when the outstanding aggregate principal balance of the receivables declines to 10% or less of the original aggregate principal balance of the receivables as of the initial cutoff date plus the original amount deposited in the pre-funding account. We refer you to "Description of the Transfer and Servicing Agreements-Optional Purchase" in this prospectus supplement for more detailed information. Credit Enhancement..................... Credit enhancement is intended to protect you against losses and delays in payments on your securities by absorbing losses on the receivables and other shortfalls in cash flows. The credit enhancement for the Class A Notes will include the subordination of the Certificates, the reserve account and the subordination of the depositor's right to receive excess interest. The credit enhancement for the Certificates will include the reserve account and the subordination of the depositor's right to receive excess interest. Subordination of Principal and Interest. As long as the Class A Notes remain outstanding: o payments of interest on the Certificates will be subordinated to payments of interest on the
S-16 Class A Notes and, in certain circumstances, payments of principal on the Class A Notes; and o payments of principal on the Certificates will be subordinated to payment of interest and principal on the Class A Notes. Reserve Account. On each payment date, the trust will use funds in the reserve account to cover shortfalls in payments of the servicing fee and interest and principal required to be paid on the notes. The sale and servicing agreement sets forth the specified reserve account balance, which is the amount that is required to be on deposit in the reserve account. On the closing date, the depositor will cause to be deposited $[ ] into the reserve account, which is [ ]% of the initial aggregate principal balance of the receivables as of the initial cutoff date and the amount on deposit in the pre-funding account as of the closing date. On each payment date, after making required payments to the servicer and to the holders of the notes, the trust will make a deposit into the reserve account to the extent necessary to maintain the amount on deposit in the reserve account at the specified reserve account balance. Excess Interest. The depositor is entitled to receive payments of interest collected on the receivables which are not used by the trust to make other required payments. The depositor's right to receive this excess interest is subordinated to the payment of the servicing fee, reimbursement of non-recoverable advances, the payment of principal and interest on the notes, the funding of the reserve account, the payment of indenture trustee and owner trustee fees and the payment of principal and interest on the certificates. For more detailed information about the reserve account, we refer you to "Subordination; Reserve Account" in this prospectus supplement. Yield Supplement Overcollateralization Amount........... On the Closing Date, the sum of the principal balance of the receivables as of the initial cutoff date and the amount on deposit in the pre-funding account will exceed the initial principal amount of the securities, by [ ] (the "Initial Yield Supplement Overcollateralization Amount"), which is
S-17 approximately [ ]% of the sum of the aggregate principal balance of the initial receivables as of the initial cutoff date and the amount on deposit in the pre-funding account on the closing date. The yield supplement overcollateralization amount will decline on each payment date. The yield supplement overcollateralization amount is intended to compensate for the low APRs on some of the receivables. For detailed information on the yield supplement overcollateralization amount, we refer you to "Description of the Transfer and Servicing Agreement-Yield Supplement Overcollateralization Amount" in this prospectus supplement. Tax Status............................. Subject to important considerations described in this prospectus supplement and the accompanying prospectus, Weil, Gotshal & Manges LLP, special tax counsel to the trust, will deliver its opinion that: 1. the notes will be characterized as debt for tax purposes; 2. the trust will not be characterized as an association or a publicly traded partnership taxable as a corporation for federal income tax purposes. If you purchase the notes, you will agree to treat the notes as debt. The depositor and any subsequent purchaser of the certificates will agree to treat the trust o as a partnership in which the owners of the certificates are partners, or o if there is only one beneficial owner of the certificates, as a "disregarded entity," for federal income tax purposes. We refer you to "Material Income Tax Consequences" in this prospectus supplement and "Material Income Tax Consequences--Tax Treatment of Owner Trusts" in the accompanying prospectus. ERISA Considerations................... The notes and certificates are generally eligible for purchase by employee benefit plans and individual retirement accounts, subject to those considerations
S-18 discussed under "ERISA Considerations" in this prospectus supplement and in the accompanying prospectus. We refer you to "ERISA Considerations" in this prospectus supplement and in the accompanying prospectus. If you are a benefit plan fiduciary considering purchase of the securities you should, among other things, consult with your counsel in determining whether all required conditions have been satisfied. Eligibility for Purchase by Money Market Funds........................... The Class A-1 Notes will be eligible for purchase by money market funds under Rule 2a-7 under the Investment Company Act of 1940, as amended. A money market fund should consult its legal advisers regarding the eligibility of the Class A-1 Notes under Rule 2a-7 and whether an investment in the Class A-1 Notes satisfies the fund's investment policies and objectives. Ratings................................ It is a condition to the issuance of the securities that the securities will receive the following ratings from Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., and Moody's Investors Service, Inc. (the "Rating Agencies"): Standard & Class Poor's Moody's ----- --------------- ------- A-1 A-1+ P-l A-2 AAA Aaa A-3 AAA Aaa A-4 AAA Aaa Certificates A A3
S-19 Risk Factors You should consider the following risk factors (and the factors set forth under "Risk Factors" in the accompanying prospectus) in deciding whether to purchase the securities of any class. Because the trust has limited assets, The only source of funds for payments on the securities is the there is only limited protection against assets of the trust and the reserve account. The securities are potential losses. not obligations of, and will not be insured or guaranteed by, any governmental agency or the seller, the servicer, any trustee or any of their affiliates. You must rely solely on payments on the receivables and amounts on deposit in the reserve account for payments on the notes. Although funds in the reserve account will be available to cover shortfalls in payments of interest and principal on each payment date, the amounts deposited in the reserve account will be limited. If the entire reserve account has been used, the trust will depend solely on current collections on the receivables to make payments on the notes. Any excess amounts released from the reserve account to the depositor will no longer be available to noteholders on any later payment date. We refer you to "Subordination; Reserve Account" in this prospectus supplement. Occurrence of events of default under the Payment defaults or the insolvency or dissolution of the indenture may result in insufficient depositor may result in prepayment of the securities, which may funds to make payments on your securities. result in losses. If the trust fails to pay principal of the notes when due, or fails to pay interest on the notes within five days of the due date, the indenture trustee or the holders of the controlling class of notes outstanding may declare the entire amount of the notes to be due immediately. If this happens, the holders of a majority of the notes outstanding then may direct the indenture trustee to sell the assets of the trust and prepay the notes. In the event the indenture trustee sells the receivables under adverse market conditions, proceeds from the sale of the receivables may not be sufficient to repay all of the securities and you may suffer a loss. If you own Certificates, you are subject The Certificates bear greater risk than the Class A Notes to greater credit risk because the because payments of interest and principal on the Certificates Certificates are subordinate to the Class are subordinate, to the extent described below, to payments of A Notes. interest and principal on the Class A Notes.
S-20 Interest payments on the Certificates on each distribution date will be subordinated to servicing fees due to the servicer, interest payments on the Class A Notes and an allocation of principal payments to the Class A Notes to the extent the sum of the principal balances of the Class A Notes exceeds the receivables balance. Principal payments on the Certificates will be fully subordinated to principal payments on the Class A Notes. No principal will be paid on the Certificates until the Class A Notes have been paid in full. Payment priorities increase risk of loss Classes of notes that receive payments, particularly principal or delay in payment to certain notes. payments, before other classes will be repaid more rapidly than the other classes and payments to these other classes may be delayed if collections and amounts on deposit in the reserve account are inadequate to pay all amounts payable on all classes of notes on any payment date. In addition, because principal of each class of notes will be paid sequentially, classes of notes that have higher sequential numerical class designation will be outstanding longer and therefore will be exposed to the risk of losses on the receivables during periods after other classes have been receiving most or all amounts payable on their notes, and after which a disproportionate amount of credit enhancement may have been applied and not replenished. As a result, the yields of the later maturing classes of Class A Notes will be sensitive, and the yields of the Certificates will be very sensitive to losses on the receivables and the timing of those losses. If the actual rate and amount of losses exceed your expectations, and if amounts in the reserve account are insufficient to cover the resulting shortfalls, the yield to maturity on your notes may be lower than anticipated, and you could suffer a loss. Classes of notes that receive payments earlier than expected are exposed to greater reinvestment risk and classes of notes that receive principal later than expected are exposed to greater risk of loss. In either case, the yields on your notes could be materially and adversely affected.
S-21 Upon the occurrence of an event of default and acceleration of the notes, principal payments will be made first on the Class A-1 Notes until the Class A-1 Notes have been paid in full, and thereafter on the Class A-2 Notes, Class A-3 Notes and Class A-4 Notes pro rata based on the amount outstanding under each class. Consequently, even after an event of default and acceleration of all the notes, the Class A-2 Noteholders, Class A-3 Noteholders and Class A-4 Noteholders will not receive payments on principal until the Class A-1 notes have been paid in full. The geographic concentration of the Economic conditions in the states where obligors reside may obligors and performance of the affect delinquencies, losses and prepayments on the receivables may increase the risk of loss receivables. The following economic conditions may affect on your investment. payments on the receivables: o unemployment, o interest rates, o inflation rates, and o consumer perceptions of the economy. If a large number of obligors are located in a particular state, these conditions could increase the delinquency, credit loss or repossession experience of the receivables. If there is a concentration of obligors and receivables in particular states, any adverse economic conditions in those states may affect the performance of the securities more than if this concentration did not exist. As of the initial cutoff date, BMW Financial Services NA, LLC's records indicate that the billing addresses of the originating dealers of the receivables were concentrated in the following states: Percentage of Total State Principal Balance ----- ----------------- % % % % No other state, by billing address, constituted more than 5% of the aggregate principal balance of the receivables as of the initial cutoff date.
S-22 For a discussion of the breakdown of the receivables by state, we refer you to "The Receivables" in this prospectus supplement. Prepayments on receivables may cause You may receive payment of principal on your securities earlier prepayments on the securities, resulting than you expected. If that happens, you may not be able to in reinvestment risk to you. reinvest the principal you receive at a rate as high as the rate on your securities. Prepayments on the receivables will shorten the life of the securities to an extent that cannot be predicted. Prepayments may occur for a number of reasons. Some prepayments may be caused by the obligors under the receivables. For example, obligors may: o make early payments, since receivables will generally be prepayable at any time without penalty; o default, resulting in the repossession and sale of the financed vehicle; or o damage the vehicle or become unable to pay due to death or disability, resulting in payments to the trust under any existing physical damage, credit life or other insurance. Some prepayments may be caused by the seller or the servicer. For example, the seller will make representations and warranties regarding the receivables, and the servicer will agree to take or refrain from taking certain actions with respect to the receivables. If the seller or the servicer breaches a representation or warranty and the breach is material and cannot be remedied, it will be required to purchase the affected receivables from the trust. This will result, in effect, in the prepayment of the purchased receivables. In addition, if amounts on deposit in the pre-funding account are not fully utilized by the end of the funding period, these amounts will be applied as a prepayment of principal of the Class A Notes sequentially to the earliest maturing class of Class A Notes then outstanding. Moreover, the servicer has the option to purchase the receivables from the trust when the total outstanding principal balance of the receivables is 10% or less of the sum of the total outstanding principal balance of the receivables as of the initial cutoff date plus the amount on deposit in the pre-funding account as of the closing date.
S-23 The rate of prepayments on the receivables may be influenced by a variety of economic, social and other factors. The seller maintains limited historical data with respect to prepayments. For these reasons, the seller cannot predict the actual prepayment rates for the receivables. The seller, however, believes that the actual rate of prepayments will result in the weighted average life of the receivables being shorter than the period from the closing date to the final scheduled maturity date for the related class of securities. If this is the case, the weighted average life of each class of securities will be correspondingly shorter. Withdrawal or downgrading of the initial A security rating is not a recommendation to buy, sell or hold ratings of the notes will affect the securities. Similar ratings on different types of securities do prices for the notes upon resale. not necessarily mean the same thing. You should analyze the significance of each rating independently from any other rating. A rating agency may change its rating of the notes after the notes are issued if that rating agency believes that circumstances have changed. Any subsequent change in a rating will likely affect the price that a subsequent purchaser would be willing to pay for the notes and your ability to resell your notes. The notes are not suitable investments The notes are not a suitable investment for any investor that for all investors. requires a regular or predictable schedule of payments or payment on specific dates. The notes are complex investments that should be considered only by sophisticated investors. We suggest that only investors who, either alone or with their financial, tax and legal advisors, have the expertise to analyze the prepayment, reinvestment and default risks, the tax consequences of an investment and the interaction of these factors should consider investing in the notes. Payments on the certificates will be Payments on the certificates will be subordinated in priority of subordinated to payments on the notes. payment to payments on the notes as described in this prospectus supplement. This subordination has the effect of increasing the likelihood of payment on the notes and therefore decreasing the likelihood of payment on the certificates. The certificateholders will not receive any payments of principal on a payment date until after the class A-1 Notes have been paid in full.
S-24 The Trust General The BMW Vehicle Owner Trust 2001-A (the "Trust") is a Delaware business trust to be formed pursuant to the trust agreement (the "Trust Agreement") between BMW FS Securities LLC, as depositor (the "Depositor"), and Wilmington Trust Company, as owner trustee (the "Owner Trustee"). After its formation, the Trust will not engage in any activity other than: 1. acquiring, holding and managing the Initial Receivables and the Subsequent Receivables and the other assets of the Trust and proceeds from those assets; 2. issuing the notes and the certificates; 3. making payments on the notes and the certificates; and 4. engaging in other activities that are necessary, suitable or convenient to accomplish the foregoing or are incidental to or connected with those activities. The net proceeds from the sale of the Securities (as defined in this prospectus supplement) will be used by the Trust to purchase the Initial Receivables and the Subsequent Receivables from the Depositor pursuant to the sale and servicing agreement dated as of _______ __, 2001 (the "Sale and Servicing Agreement") among BMW Financial Services NA, LLC ("BMW FS") as seller, servicer (in that capacity the "Servicer"), custodian and administrator, the Trust, and The Chase Manhattan Bank, as indenture trustee (the "Indenture Trustee") and to fund the Reserve Account. BMW FS will be appointed to act as the servicer of the Receivables. The Servicer will service the Receivables pursuant to the Sale and Servicing Agreement, the owner trust administration agreement dated as of ________ __, 2001, (the "Administration Agreement") among BMW FS, as administrator, the Trust and the Indenture Trustee and the Trust Agreement, and will be compensated for those services as described under "Description of the Transfer and Servicing Agreements--Servicing Compensation" in this prospectus supplement and "Description of the Transfer and Servicing Agreements--Servicing Compensation" in the accompanying prospectus. Pursuant to agreements between BMW FS and dealers in BMW products ("BMW Centers"), BMW Centers will repurchase from BMW FS those contracts that do not meet specified representations and warranties made by the BMW Centers. These BMW Centers' repurchase obligations are referred to in this prospectus supplement as "BMW Center Recourse." Those representations and warranties relate primarily to the origination of the contracts and the perfection of the security interests in the related financed vehicles, and do not relate to the creditworthiness of the related Obligors or the collectability of those contracts. Although the Dealer Agreements with respect to the Receivables will not be assigned to the Owner Trustee, the Sale and Servicing Agreement will require that any recovery by BMW FS in respect of any Receivable pursuant to any BMW Center Recourse be deposited in the Collection Account to satisfy BMW FS' repurchase obligations under the Sale and Servicing Agreement. The sales by the BMW Centers of retail installment sale contracts to BMW FS do not generally provide for recourse against the BMW Centers for unpaid amounts in the event of a default by an Obligor, other than in connection with the breach of the foregoing representations and warranties. S-25 Each certificate represents a fractional undivided ownership interest in the Trust. The Trust property includes the Receivables and monies due or received under the Receivables on or after the related cutoff date. The Reserve Account will be maintained for the benefit of the Noteholders and the Certificateholders. The Trust's principal offices are in Wilmington, Delaware, in care of Wilmington Trust Company, as Owner Trustee, at the address set forth below under "The Owner Trustee and the Indenture Trustee." Capitalization of the Trust The following table illustrates the capitalization of the Trust as of the Closing Date, as if the issuance and sale of the Notes and the Certificates had taken place on that date: Class A-1 Notes....................................... $[ ] ------------------- Class A-2 Notes....................................... [ ] ------------------- Class A-3 Notes....................................... [ ] ------------------- Class A-4 Notes....................................... [ ] ------------------- Certificates.......................................... [ ] ------------------- Total.............................................. $[ ] =================== The Owner Trustee and the Indenture Trustee Wilmington Trust Company is the Owner Trustee under the Trust Agreement. Wilmington Trust Company is a Delaware banking corporation, and its Corporate Trust Office is located at 1100 North Market Street, Rodney Square North, Wilmington, Delaware 19890-0001, Attn: Corporate Trust Administration. The Depositor, the Servicer and its affiliates may maintain normal commercial banking relations with the Owner Trustee and its affiliates. The fees and expenses of the Owner Trustee will be paid by the Administrator. The Chase Manhattan Bank is the Indenture Trustee under the Indenture (the Indenture Trustee and the Owner Trustee are collectively referred to as the "Trustees"). The Chase Manhattan Bank is a New York banking association and its principal executive offices are located at 450 West 33rd Street, New York, New York 10001. The Depositor, the Servicer and its affiliates may maintain normal commercial banking relations with the Indenture Trustee and its affiliates. The Receivables Assets of the Trust On the Closing Date, the assets of the Trust will include: 1. a pool of motor vehicle retail installment sale contracts (the "Initial Receivables") having an aggregate principal balance as of the close of business on [ ] (the "Initial Cutoff Date") of approximately $[ ] (the "Initial Pool Balance") and any additional motor vehicle retail installment sale contracts purchased during the Funding Period (the "Subsequent Receivables" and together with the Initial Receivables, the "Receivables"); S-26 2. all rights, benefits, obligations and proceeds arising from or in connection with the Receivables, including the right to receive payments collected thereon after the Initial Cutoff Date with respect to the Initial Receivables and on or after the related Subsequent Cutoff Date with respect to any Subsequent Receivables; 3. security interests in the new or used automobiles, motorcycles, light-duty trucks and sport utility vehicles (the "Financed Vehicles") securing each Receivable; 4. the related Receivable files; 5. all rights to insurance proceeds and liquidation proceeds with respect to the Receivables; 6. certain rights under the Receivables Purchase Agreement dated as of [___________], 2001 (the "Receivables Purchase Agreement") between the Depositor and BMW FS, as seller (the "Seller") and any Subsequent Purchase Agreement between the Depositor and BMW FS; 7. funds on deposit from time to time in the Reserve Account; 8. funds on deposit in the Collection Account; 9. funds on deposit in the Pre-Funding Account; and 10. funds on deposit in the Capitalized Interest Account. The Motor Vehicle Contracts that comprise the Receivables are secured by new or used automobiles, motorcycles, light-duty trucks and sport utility vehicles manufactured by the BMW Group as well as Land Rover sport utility vehicles except that __% by principal balance of the Receivables are secured by vehicles of other manufacturers. The Contracts were originated by BMW Centers and Land Rover dealers who participate in BMW FS' vehicle financing program and were acquired by BMW FS. See "BMW FS' Vehicle Financing Programs." The Trust will purchase the Initial Receivables from the Depositor on or about April [ ], 2001 (the "Closing Date") pursuant to the Sale and Servicing Agreement. The Depositor will have purchased the Initial Receivables from the Seller pursuant to the Receivables Purchase Agreement. In the Receivables Purchase Agreement, the Seller makes specific representations and warranties as of the Closing Date with respect to the Receivables and agrees to repurchase any Receivable with respect to which there is a breach of any such representation and warranty if that breach has a material and adverse effect on the interests of the Depositor or the Trust in the related Receivable. Under the Sale and Servicing Agreement, the Depositor will assign all of its rights under the Receivables Purchase Agreement, including its right to enforce the Seller's repurchase obligations, to the Trust. The Receivables may be prepaid at any time without penalty by the purchaser or co-purchasers of the Financed Vehicle or any other person or persons who are obligated to make payments thereunder (each, an "Obligor"). S-27 Eligibility Criteria The Receivables were or will be selected from the Seller's portfolio of motor vehicle retail installment sale contracts based on several criteria, including the requirement that each Receivable: 1. has an original term of not more than [ ] months; 2. has a current principal balance of at least $[ ]; 3. provides for level monthly payments that fully amortize the amount financed over the original term of the related Contract; 4. is not more than 30 days past due as of the Initial Cutoff Date or Subsequent Cutoff Date, as applicable; 5. does not have a final scheduled payment date later than six months prior to the Final Scheduled Payment Date of the Certificates; and 6. does not have any notation in the Servicer's records indicating the Obligor is the subject of a bankruptcy proceeding. No selection procedures believed to be adverse to the Noteholders were used in selecting the Receivables. During the Funding Period, pursuant to the Receivables Purchase Agreement, the Depositor is obligated to purchase from BMW FS and, pursuant to the Sale and Servicing Agreement, to sell to the Trust, Subsequent Receivables to the extent they are available. On the Closing Date, the amount available to purchase Subsequent Receivables will be approximately $[ ]. On each date on which Subsequent Receivables are transferred to the Trust (each, a "Subsequent Transfer Date"), BMW FS will convey Subsequent Receivables to the Depositor pursuant to an agreement (a "Subsequent Purchase Agreement") between BMW FS and the Depositor. The Depositor will convey the Subsequent Receivables to the Trust on the related Subsequent Transfer Date pursuant to the Sale and Servicing Agreement and an agreement (a "Subsequent Transfer Agreement") between the Depositor and the Trust. The purchase price for each Subsequent Receivable will be withdrawn from the Pre-Funding Account, a portion of the withdrawal amount will be deposited into the Reserve Account, if necessary, and the remainder of the purchase price will be paid to the Depositor by the Trust and then to BMW FS by the Depositor. Any conveyance of Subsequent Receivables is subject to the following conditions, among others: 1. as of the Subsequent Cutoff Date, each of the Subsequent Receivable must satisfy the eligibility criteria specified under "The Receivables" in the Prospectus Supplement and in the Sale and Servicing Agreement; 2. BMW FS will have selected the Subsequent Receivables in a manner that it believes is not adverse to the interests of the Noteholders; S-28 3. BMW FS and the Depositor will deliver opinions of counsel to the Trust, the Indenture Trustee and the Rating Agencies with respect to the validity of the conveyance of the Subsequent Receivables; 4. after inclusion of the Subsequent Receivables, the weighted average number of months since the initial installment due date for the Receivables is at least [ ] months; 5. none of the Subsequent Receivables will have an APR of less than [ ]%; 6. after inclusion of the Subsequent Receivables, at least [ ]% of the aggregate principal balance of the Receivables is secured by Financed Vehicles which were new at the date of origination; and 7. the Rating Agencies shall confirm that the ratings on the Notes (as defined in this prospectus supplement) will not be withdrawn or reduced as a result of the transfer of such Subsequent Receivables to the Trust. Because the Subsequent Receivables may be originated after the Initial Receivables, following the conveyance of Subsequent Receivables to the Trust some of the characteristics of the Receivables, such as the weighted average APR of the Receivables, the weighted average term to maturity of the Receivables and the geographic concentration of the Receivables are likely to vary from those of the Initial Receivables. Description of Initial Receivables All of the Initial Receivables were originated by BMW FS or purchased by BMW FS from BMW Centers. As of the Initial Cutoff Date, approximately [ ]% of the Initial Receivables by aggregate principal balance represented financing of new vehicles and [ ]% of the Initial Receivables by aggregate principal balance represented financing of used vehicles. As of the Initial Cutoff Date, approximately [ ]%, [ ]%, [ ]%, [ ]% and [ ]% of the Initial Receivables by aggregate principal balance were BMW automobiles, BMW motorcycles, BMW sport utility vehicles, Land Rover sport utility vehicles and vehicles of other manufacturers, respectively. The distribution by APR, geographic distribution, distribution by remaining term and distribution by remaining balance of the Initial Receivables as of the Initial Cutoff Date are as set forth in the following tables. We refer you to "The Receivables" in the accompanying prospectus for a further description of the characteristics of Simple Interest Receivables. COMPOSITION OF THE INITIAL RECEIVABLES
Aggregate Principal Balance............................................. $[ ] Number of Receivables................................................... [ ] Average Principal Balance............................................... $[ ] Average Original Amount Financed........................................ $[ ] Range of Original Amount Financed.................................... $[ ] Weighted Average APR(1)................................................. [ ]% Range of APRs........................................................ [ ]% to [ ]% Weighted Average Original Term to Maturity(1)........................... [ ] months Range of Original Term to Maturities................................. [ ] months to [ ] months
S-29 Weighted Average Remaining Term to Maturity(1).......................... [ ] months Range of Remaining Term to Maturities................................ [ ] months to [ ] months
- ---------------- (1) Weighted by Principal Balance as of the Initial Cutoff Date. S-30 Distribution of the Initial Receivables by APR (Percentages may not add to 100.00% due to rounding)
Percentage of Aggregate Initial Cutoff Date Percentage Number of Number of Principal of Initial Range of APRs (%) Receivables Receivables Balance Pool Balance - ----------------- ----------- ----------- ------- ------------ 2.01% to 3.00%........................ [ ] [ ] $ % 3.01% to 4.00%........................ [ ] [ ] 4.01% to 5.00%........................ [ ] [ ] 5.01% to 6.00%........................ [ ] [ ] 6.01% to 7.00%........................ [ ] [ ] 7.01% to 8.00%........................ [ ] [ ] 8.01% to 9.00%........................ [ ] [ ] 9.01% to 10.00%....................... [ ] [ ] 10.01% to 11.00%...................... [ ] [ ] 11.01% to 12.00%...................... [ ] [ ] 12.01% to 13.00%...................... [ ] [ ] 13.01% to 14.00%...................... [ ] [ ] 14.01% to 15.00%...................... [ ] [ ] 15.01% to 16.00%...................... [ ] [ ] Totals:............................... [ ] [ ]% $ %
Distribution of the Initial Receivables by State Based on the Addresses of the Originating BMW Centers (Percentages may not add to 100.00% due to rounding)
Percentage of Aggregate Percentage Number of Number of Initial Cutoff Date of Initial State(1) Receivables Receivables Principal Balance Pool Balance - -------- ----------- ----------- ----------------- ------------ Alabama............................... % % Alaska................................ Arizona............................... Arkansas.............................. California............................ Colorado.............................. Connecticut........................... Delaware.............................. Florida............................... Georgia............................... Hawaii................................ Idaho................................. Illinois.............................. Indiana............................... Iowa.................................. Kansas................................ Kentucky.............................. Louisiana............................. Maine.................................
S-31
Percentage of Aggregate Percentage Number of Number of Initial Cutoff Date of Initial State(1) Receivables Receivables Principal Balance Pool Balance - -------- ----------- ----------- ----------------- ------------ Alabama............................... % % Alaska................................ Arizona............................... Arkansas.............................. California............................ Colorado.............................. Connecticut........................... Delaware.............................. Florida............................... Georgia............................... Hawaii................................ Idaho................................. Illinois.............................. Indiana............................... Iowa.................................. Kansas................................ Kentucky.............................. Louisiana............................. Maine................................. Maryland.............................. Massachusetts......................... Michigan.............................. Minnesota............................. Mississippi........................... Missouri.............................. Montana............................... Nebraska.............................. Nevada................................ New Hampshire......................... New Jersey............................ New Mexico............................ New York.............................. North Carolina........................ North Dakota.......................... Ohio.................................. Oklahoma.............................. Oregon................................ Pennsylvania.......................... Rhode Island.......................... South Carolina........................ South Dakota.......................... Tennessee............................. Texas................................. Utah.................................. Vermont............................... Virginia..............................
S-32
Percentage of Aggregate Percentage Number of Number of Initial Cutoff Date of Initial State(1) Receivables Receivables Principal Balance Pool Balance - -------- ----------- ----------- ----------------- ------------ Washington............................ West Virginia......................... Wisconsin............................. Wyoming............................... ----------- ----------- ----------------- ------------ Totals:............................... =========== =========== ================= ============
- ---------------- (1) Based on the addresses of the originating BMW Centers. Distribution of the Initial Receivables by Remaining Term to Scheduled Maturity
Percentage of Percentage of Remaining Term to Number of Aggregate Number of Aggregate Aggregate Principal Scheduled Maturity Receivables Receivables Principal Balance Balance (1) - ------------------ ----------- ----------- ----------------- ----------- 6 months or less......................... [ ] 00.00% [$ . ] 00.00% 7 to 12 months........................... [ ] 00.00% [$ . ] 00.00% 13 to 18 months.......................... [ ] 00.00% [$ . ] 00.00% 19 to 24 months.......................... [ ] 00.00% [$ . ] 00.00% 25 to 30 months.......................... [ ] 00.00% [$ . ] 00.00% 31 to 36 months.......................... [ ] 00.00% [$ . ] 00.00% 37 to 42 months.......................... [ ] 00.00% [$ . ] 00.00% 43 to 48 months.......................... [ ] 00.00% [$ . ] 00.00% 49 to 54 months.......................... [ ] 00.00% [$ . ] 00.00% 55 to 60 months.......................... [ ] 00.00% [$ . ] 00.00% Greater than 60 months................... [ ] 00.00% [$ . ] 00.00% Total........................... [ ] 00.00% [$ . ] 00.00%
- ---------------- (1) Percentage may not add to 100% because of rounding. S-33 Distribution by Remaining Principal Balance of the Initial Receivables
Percentage of Percentage of Number of Aggregate Number Aggregate Aggregate Principal Range of Remaining Principal Balances Receivables of Receivables Principal Balance Balance(1) - ------------------------------------- ----------- ---------------- ----------------- ---------- $0 - 2,500.00......................................... [ , ] [0.00%] [$ . ] [0.00%] $2,501.01 - 5,000.00.................................. [ , ] [0.00%] [$ . ] [0.00%] $5,001.01 - 7,500.00.................................. [ , ] [0.00%] [$ . ] [0.00%] $7,501.01 - 10,000.00................................. [ , ] [0.00%] [$ . ] [0.00%] $10,001.01 - 12,500.00................................ [ , ] [0.00%] [$ . ] [0.00%] $12,501.01 - 15,000.00................................ [ , ] [0.00%] [$ . ] [0.00%] $15,001.01 - 17,500.00................................ [ , ] [0.00%] [$ . ] [0.00%] $17,501.01 - 20,000.00................................ [ , ] [0.00%] [$ . ] [0.00%] $20,001.01 - 22,500.00................................ [ , ] [0.00%] [$ . ] [0.00%] $22,501.01 - 25,000.00................................ [ , ] [0.00%] [$ . ] [0.00%] $25,001.01 - 27,500.00................................ [ , ] [0.00%] [$ . ] [0.00%] $27,501.01 - 30,000.00................................ [ , ] [0.00%] [$ . ] [0.00%] $30,001.01 - 32,500.00................................ [ , ] [0.00%] [$ . ] [0.00%] $32,501.01 - 35,000.00................................ [ , ] [0.00%] [$ . ] [0.00%] $35,001.01 - 37,500.00................................ [ , ] [0.00%] [$ . ] [0.00%] $37,501.01 - 40,000.00................................ [ , ] [0.00%] [$ . ] [0.00%] $40,001.01 - 42,500.00................................ [ , ] [0.00%] [$ . ] [0.00%] $42,501.01 - 45,000.00................................ [ , ] [0.00%] [$ . ] [0.00%] $45,001.01 - 47,500.00................................ [ , ] [0.00%] [$ . ] [0.00%] $47,501.01 - 50,000.00................................ [ , ] [0.00%] [$ . ] [0.00%] $50,001.01 - 52,500.00................................ [ , ] [0.00%] [$ . ] [0.00%] $52,501.01 - 55,500.00................................ [ , ] [0.00%] [$ . ] [0.00%] $55,001.01 - 57,500.00................................ [ , ] [0.00%] [$ . ] [0.00%] $57,501.01 - 60,000.00................................ [ , ] [0.00%] [$ . ] [0.00%] $60,001.01 - 62,500.00................................ [ , ] [0.00%] [$ . ] [0.00%] $62,501.01 - 65,000.00................................ [ , ] [0.00%] [$ . ] [0.00%] Greater than $65,000.01............................... [ , ] [0.00%] [$ . ] [0.00%] Totals....................................... [ , ] [0.00%] [$ . ] [0.00%]
- ---------------- (1) Percentages may not add to 100% because of rounding. S-34 Maturity and Prepayment Considerations Information regarding maturity and prepayment considerations with respect to the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes (collectively, the "Class A Notes") and the Certificates (the "Certificates", and together with the Class A Notes, the "Securities") is set forth under "Weighted Average Life of the Securities" in the accompanying prospectus and "Risk Factors--You may experience reduced returns on your investment resulting from prepayments, repurchases or early termination of the trust" in the accompanying prospectus. Except as otherwise provided in this prospectus supplement, no principal payments will be made on the Class A-2 Notes until the Class A-1 Notes have been paid in full; no principal payments will be made on the Class A-3 Notes until the Class A-2 Notes have been paid in full; and no principal payments will be made on the Class A-4 Notes until the Class A-3 Notes have been paid in full. In addition, no principal payments will be made on the Certificates until the Class A-1 Notes have been paid in full. We refer you to "Payments on the Notes" in this prospectus supplement. Because the rate of payment of principal of each class of Notes depends primarily on the rate of payment (including prepayments) of the principal balance of the Receivables, final payment of any class of Notes could occur significantly earlier or later than their respective final scheduled Payment Dates set forth under "Payments on the Notes" (each, a "Final Scheduled Payment Date") in this prospectus supplement. Securityholders will bear the risk of being able to reinvest principal payments on the Securities at yields at least equal to the yield on their respective classes of Notes and the Certificates. No prediction can be made as to the rate of prepayments on the Receivables in either stable or changing interest rate environments. Although the Receivables have different APRs, disproportionate rates of prepayments between Receivables with APRs greater than or less than the Required Rate (as defined in the accompanying prospectus) will generally not affect your yield. However, higher rates of prepayments of Receivables with higher APRs will decrease the amount available to cover delinquencies and defaults on the Receivables and may decrease the amounts available to be deposited in the Reserve Account. Delinquencies, Repossessions and Loan Loss Information Set forth below is information concerning BMW FS' experience with respect to its entire portfolio of new and used BMW motor vehicle retail installment sale contracts, which includes contracts sold by but still being serviced by BMW FS. Credit losses are an expected cost in the business of extending credit and are considered in BMW FS' rate-setting process. Delinquency, repossession and loss experience may be influenced by a variety of economic, social and geographic conditions and other factors beyond the control of BMW FS. There is no assurance that BMW FS' delinquency, repossession and loss experience with respect to its retail installment sale contracts, or the experience of the trust with respect to the contracts, will be similar to that set forth below. If economic conditions in the future differ from those during the periods referenced in the tables below, BMW FS' delinquency, repossession and loss experience may be adversely affected. The percentages in the tables below have not been adjusted to eliminate the effect of the growth of BMW FS' portfolio. Accordingly, the delinquency, repossession and net loss percentages would be expected to be higher than those show if a group of receivables were isolated at a period in S-35 time and the delinquency, repossession and net loss data showed the activity only for that isolated group over the periods indicated. The following tables set forth the historical delinquency experience and net credit loss and repossession experience of BMW FS' portfolio of contracts for new and used automobiles, motorcycles, light duty trucks and sport utility vehicles. In the table below, the period of delinquency for the years ended December 31, 2000, 1999, 1998, 1997 and 1996 is based on the number of days more than 20% of a scheduled payment on a cumulative basis is contractually past due. The information included below under the headings "Delinquencies as a percent of contracts outstanding - 90 days or more" and "Dollar Delinquencies as a percent of principal amount outstanding - 90 days or more" excludes vehicles that have been repossessed. There is no assurance that the behavior of the Receivables will be comparable to BMW FS' experience shown in the following tables.
Delinquency Experience At December 31, ---- ---- ---- ---- ---- 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- Number of contracts at end of period....................... Delinquencies as a percent of contracts outstanding 30-59 days................. 60-89 days................. 90 days or more............ Total...................... Dollar delinquencies as a percent of principal amount outstanding 30-59 days................. 60-89 days................. 90 days or more............ Total......................
S-36 The information in the table below includes contracts for new and used automobiles, motorcycles, light duty trucks and sport utility vehicles. All amounts and percentages, except as indicated, are based on the principal balances of the contracts net of unearned finance and other charges. Averages are computed by taking a simple average of year-end outstanding amounts for each period presented. The information set forth under the heading "Charge-offs" represents the total aggregate net principal balance of contracts determined to be uncollectible in the period less proceeds from disposition of related vehicles, other than recoveries described in the next sentence. The information set forth under the heading "Recoveries" generally includes amounts received with respect to contracts previously charged-off, net of the proceeds realized in connection with the sale of the financed vehicles. The information set forth under the heading "Number of Repossessions sold" means the number of repossessed financed vehicles that have been sold by BMW FS in a given period.
Net Credit Loss Experience (dollars in thousands) At or for Twelve Months Ended ---- ---- ---- ---- ---- 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- Principal Amount Outstanding .. $ Average Principal Amount Outstanding ................. $ Number of Contracts Outstanding Average Number of Contracts Outstanding.................. Charge-offs - full period actuals Recoveries - full period actuals Net Losses .................... Number of Repossessions sold as a percent of the Average Number of Contracts Outstanding..... Net Losses as a percent of Average Principal Amount Outstanding..................
S-37 Weighted Average Life of the Securities Prepayments on motor vehicle receivables can be measured relative to a payment standard or model. The model used in this prospectus supplement, the Absolute Prepayment Model ("ABS"), represents an assumed rate of prepayment each month relative to the original number of receivables in a pool of receivables. ABS further assumes that all the receivables in question 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 paid in full. For example, in a pool of receivables originally containing 10,000 receivables, a 1% ABS rate means that 1% of the 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. As the rate of the payment of principal of each class of Notes will depend on the rate of payment (including prepayments) of the principal balance of the Receivables, final payment of any class of Notes and the Certificates could occur significantly earlier than the respective Final Scheduled Payment Dates. Reinvestment risk associated with early payment of the Notes and the Certificates will be borne exclusively by the holders of the Notes and the Certificates. The tables captioned "Percent of Initial Class A Note Principal at Various ABS Percentages" (the "ABS Tables") have been prepared on the basis of the characteristics of the Receivables described under "The Receivables Pool." The ABS Tables assume that: o the Receivables prepay in full at the specified constant percentage of ABS monthly, with no defaults, losses or repurchases; o each scheduled monthly payment on each Receivable is scheduled to be made and is made on the last day of each month and each month has 30 days; o payments are made on the Notes on each Payment Date, and each Payment Date is assumed to be the twenty-fifth day of each applicable month; o the balance in the Reserve Account on each Payment Date is the required amount described under "Subordination; Reserve Account"; o the amounts in the Pre-Funding Account are fully invested in Subsequent Receivables on __; and o except as indicated in the ABS Tables, the Servicer does not exercise its option to purchase the Receivables on the earliest Payment Date on which its option may be exercised. The hypothetical pools each have an assumed cutoff date of [ ], 2001. The ABS Tables indicate the projected weighted average life of each class of Notes and the Certificates and sets forth the percent of the initial principal amount of each class of Notes and the Certificates that is projected to be outstanding after each of the Payment Dates shown at various constant ABS percentages. The ABS Tables also assume that the Initial Receivables and the Subsequent Receivables have been aggregated into hypothetical pools with all of the Receivables within each hypothetical pool having the characteristics set forth in the tables below and that the level scheduled monthly S-38 payment for each of the pools, based on the aggregate principal balance, APR, original term to maturity and remaining term to maturity as of the assumed cutoff date, will be such that each pool will be fully amortized by the end of its remaining term to maturity. S-39 Initial Receivables
- ------------ ---------------------- ------------------ ------------------------- ----------------------------- Pool Aggregate Principal APR Original Term Stated Remaining Term ---- Balance --- (in Months) (in Months) ------- ----------- ----------- - ------------ ---------------------- ------------------ ------------------------- ----------------------------- 1 - ------------ ---------------------- ------------------ ------------------------- ----------------------------- 2 - ------------ ---------------------- ------------------ ------------------------- ----------------------------- 3 - ------------ ---------------------- ------------------ ------------------------- ----------------------------- 4 - ------------ ---------------------- ------------------ ------------------------- ----------------------------- 5 - ------------ ---------------------- ------------------ ------------------------- ----------------------------- 6 - ------------ ---------------------- ------------------ ------------------------- ----------------------------- 7 - ------------ ---------------------- ------------------ ------------------------- ----------------------------- 8 - ------------ ---------------------- ------------------ ------------------------- ----------------------------- 9 - ------------ ---------------------- ------------------ ------------------------- ----------------------------- 10 - ------------ ---------------------- ------------------ ------------------------- ----------------------------- 11 - ------------ ---------------------- ------------------ ------------------------- ----------------------------- 12 - ------------ ---------------------- ------------------ ------------------------- ----------------------------- 13 - ------------ ---------------------- ------------------ ------------------------- ----------------------------- 14 - ------------ ---------------------- ------------------ ------------------------- ----------------------------- 15 - ------------ ---------------------- ------------------ ------------------------- ----------------------------- 16 - ------------ ---------------------- ------------------ ------------------------- ----------------------------- 17 - ------------ ---------------------- ------------------ ------------------------- ----------------------------- 18 - ------------ ---------------------- ------------------ ------------------------- ----------------------------- 19 - ------------ ---------------------- ------------------ ------------------------- ----------------------------- 20 - ------------ ---------------------- ------------------ ------------------------- ----------------------------- Total - ------------ ---------------------- ------------------ ------------------------- -----------------------------
S-40 Subsequent Receivables
- -------------- ---------------------------- -------------- ----------------------- --------------------------- Pool Aggregate Principal Balance APR Original Term Stated Remaining ---- --------------------------- --- (in Months) (in Months) ---------- ----------- - -------------- ---------------------------- -------------- ----------------------- --------------------------- 1 - -------------- ---------------------------- -------------- ----------------------- ---------------------------
The actual characteristics and performance of the Receivables will differ from the assumptions used in constructing the ABS Tables. 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, that all of the Receivables will prepay at the same level of ABS or that no defaults will occur on the Receivables. Moreover, the diverse terms of receivables within each of 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 the 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 life of each class of Notes. Percentage of Initial Class A-1 Note Principal at Various ABS Percentages Payment Date 0.5% 1.0% 1.3% 1.5% 1.7% - ------------ ---- ---- ---- ---- ---- Closing Date Weighted Average Life (years)(1)(2).................. Weighted Average Life to Call (years)(1)(3).......... - ----------------------- (1) The weighed average life of a note is determined by (x) multiplying the amount of each principal payment on a note by the number of years from the date of issuance of the note to the related Payment Date, (y) adding the results and (z) dividing the sum by the original principal amount of the note. (2) This calculation assumes that the Servicer does not exercise its option to purchase the Receivables. (3) This calculation assumes that the Servicer exercises its option to purchase the Receivables. This table has been prepared based on the assumptions in this prospectus supplement (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 those assumptions. S-41 Percentage of Initial Class A-2 Note Principal at Various ABS Percentages Payment Date 0.5% 1.0% 1.3% 1.5% 1.7% - ------------ ---- ---- ---- ---- ---- Closing Date Weighted Average Life (years)(1)(2)................... Weighted Average Life to Call (years)(1)(3)........... - ------------- (1) The weighed average life of a note is determined by (x) multiplying the amount of each principal payment on a note by the number of years from the date of issuance of the note to the related Payment Date, (y) adding the results and (z) dividing the sum by the original principal amount of the note. (2) This calculation assumes that the Servicer does not exercise its option to purchase the Receivables. (3) This calculation assumes that the Servicer exercises its option to purchase the Receivables. This table has been prepared based on the assumptions in this prospectus supplement (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 those assumptions. S-42 Percentage of Initial Class A-3 Note Principal at Various ABS Percentages
Payment Date 0.5% 1.0% 1.3% 1.5% 1.7% - ------------ ---- ---- ---- ---- ---- Closing Date.........................................
Weighted Average Life (years)(1)(2)................... Weighted Average Life to Call (years)(1)(3)........... - ----------------- (1) The weighed average life of a note is determined by (x) multiplying the amount of each principal payment on a note by the number of years from the date of issuance of the note to the related Payment Date, (y) adding the results and (z) dividing the sum by the original principal amount of the note. (2) This calculation assumes that the Servicer does not exercise its option to purchase the Receivables. (3) This calculation assumes that the Servicer exercises its option to purchase the Receivables. This table has been prepared based on the assumptions in this prospectus supplement (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 those assumptions. S-43 Percentage of Initial Class A-4 Note Principal at Various ABS Percentages
Payment Date 0.5% 1.0% 1.3% 1.5% 1.7% - ------------ ---- ---- ---- ---- ---- Closing Date.....................................
Weighted Average Life (years)(1)(2) Weighted Average Life to Call (years)(1)(3) *Month of optional purchase(3) - ------------- (1) The weighed average life of a note is determined by (x) multiplying the amount of each principal payment on a note by the number of years from the date of issuance of the note to the related Payment Date, (y) adding the results and (z) dividing the sum by the original principal amount of the note. (2) This calculation assumes that the Servicer does not exercise its option to purchase the Receivables. (3) This calculation assumes that the Servicer exercises its option to purchase the Receivables. This table has been prepared based on the assumptions in this prospectus supplement (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 those assumptions. S-44 Percentage of Certificate Principal at Various ABS Percentages
Payment Date 0.5% 1.0% 1.3% 1.5% 1.7% - ------------ ---- ---- ---- ---- ---- Closing Date.....................................
Weighted Average Life (years)(1)(2) Weighted Average Life to Call (years)(1)(3) *Month of optional purchase(3) - ------------- (1) The weighed average life of a certificate is determined by (x) multiplying the amount of each principal payment on a certificate by the number of years from the date of issuance of the note to the related Payment Date, (y) adding the results and (z) dividing the sum by the original principal amount of the certificate. (2) This calculation assumes that the Servicer does not exercise its option to purchase the Receivables. (3) This calculation assumes that the Servicer exercises its option to purchase the Receivables. This table has been prepared based on the assumptions in this prospectus supplement (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 those assumptions. S-45 Note and Certificate Factors The "Note Pool Factor" with respect to any class of Notes will be a seven-digit decimal indicating the principal amount of that class of Notes as of the close of business on the Payment Date in that month as a fraction of the respective principal amount of that class of Notes as of the Closing Date. The Servicer will compute the Note Pool Factor each month for each class of Notes. Each Note Pool Factor will initially be 1.0000000 and thereafter will decline to reflect reductions in the principal amount of each class of Notes. The portion of the principal amount of any class of Notes for a given month allocable to a Noteholder can be determined by multiplying the original denomination of the holder's note by the related Note Pool Factor for that month. The "Certificate Pool Factor" with respect to the certificates will be a seven-digit decimal indicating the principal amount of the certificates as of the close of business on the Payment Date in that month as a fraction of the respective principal amount thereof as of the Closing Date. The Servicer will compute the Certificate Pool Factor each month for the certificates. The Certificate Pool Factor will initially be 1.0000000 and thereafter will decline to reflect reductions in the principal amount of the certificates. The portion of the principal amount of the certificates for a given month allocable to a Certificateholder can be determined by multiplying the original denomination of the holder's note by the Certificate Pool Factor for that month. Pursuant to the Transfer and Servicing Agreements, the Securityholders will receive monthly reports concerning the payments received on the Receivables, the Pool Balance, the related Note Pool Factors, the Certificate Factor and various other items of information pertaining to the Trust. Securityholders of record during each calendar year will be furnished information by the Indenture Trustee or the Owner Trustee, as appropriate, for tax reporting purposes not later than the latest date permitted by law. We refer you to "Description of the Transfer and Servicing Agreements--Statements to Securityholders" in the accompanying prospectus. Use of Proceeds The Depositor will use the net proceeds from the sale of the Securities to purchase the Receivables from BMW FS pursuant to the Receivables Purchase Agreement and to fund the Initial Reserve Account, the Pre-Funding Account and the Capitalized Interest Account. The net proceeds to be received by the Depositor from the sale of the Receivables to the Trust will be used by the Depositor in connection with its acquisition of the Receivables from BMW FS and to pay other expenses in connection with the issuance of the Notes. BMW FS will use the proceeds from the sale of the Receivables for general corporate purposes. In addition, BMW FS or its affiliates may apply all or any portion of the net proceeds of this offering to the repayment of debt, including "warehouse" debt secured by the Receivables prior to their sale to the Trust. One or more of the Underwriters, or their respective affiliates or entities for which their respective affiliates act as administrator and/or provide liquidity lines, may have acted as a "warehouse lender" to BMW FS or its affiliates, and may receive a portion of the proceeds as repayment of that "warehouse" debt. The Depositor and the Servicer Information regarding the Depositor and the Servicer is set forth under the captions "The Depositor" and "The Servicer" in the accompanying prospectus. S-46 The Notes General The Notes will be issued pursuant to the terms of the Indenture, a form of which has been filed as an exhibit to the registration statement. A copy of the final signed Indenture will be filed with the SEC following the issuance of the Securities. The following summary describes the material terms of the Notes and the Indenture. The summary does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all the provisions of the Notes and the Indenture. Where particular provisions or terms used in the Indenture are referred to, the actual provisions, which includes definitions of terms, are incorporated by reference as part of the summary. The following summary supplements, and to the extent inconsistent therewith replaces, the description of the general terms and provisions of the notes of any given series and the related Indenture set forth in the accompanying prospectus, to which description reference is hereby made. Payments of Interest Each class of Notes will constitute Fixed Rate Securities, as that term is defined under "Certain Information Regarding the Securities--Fixed Rate Securities" in the accompanying prospectus. Interest on the principal balances of the classes of the Notes will accrue at the respective per annum interest rates set forth on the cover of this prospectus supplement (each, an "Interest Rate") and will be payable to the Noteholders monthly on the twenty-fifth day of each month (or, if that date is not a Business Day, on the next succeeding Business Day) (a "Payment Date") commencing [ ], 2001. Interest on the outstanding principal amount of Class A-1 Notes will accrue at the related Interest Rate from and including the most recent Payment Date on which interest has been paid (or from and including the Closing Date with respect to the first Payment Date) to but excluding the current Payment Date. Interest on the Class A-2, Class A-3, Class A-4 Notes and Certificates will accrue at the related Interest Rate from and including the 25th day of the month (or from and including the Closing Date with respect to the first Payment Date) to but excluding the 25th day of the following calendar month. Interest on the Class A-1 Notes will be calculated on the basis of the actual number of days in the related Interest Period divided by 360, and interest on the Class A-2, Class A-3 Notes, Class A-4 Notes and Certificates will be calculated on the basis of a 360-day year consisting of twelve 30-day months. Interest accrued but not paid on any Payment Date will be due on the next Payment Date, together with interest on that amount at the applicable Interest Rate, to the extent lawful. Interest payments on the Notes will generally be made from Available Amounts and from amounts on deposit in the Reserve Account, after the Servicing Fee and non-recoverable Advances have been paid. We refer you to "Subordination; Reserve Account--Reserve Account" and "Payments on the Notes" in this prospectus supplement. Interest payments to holders of the Class A Notes will have the same priority. Under specified circumstances, the amount available for interest payments could be less than the amount of interest payable on the Class A Notes on any Payment Date, in which case the holders of the Class A Notes will receive their ratable share (based upon the aggregate amount of interest due to that class) of the aggregate amount available to be distributed in respect of interest on the Class A Notes. Interest payments to holders of the Certificates will be subordinated to interest payments and, in limited circumstances, principal to holders of the Class A Notes. S-47 Payments of Principal The Trust will generally make principal payments to the Noteholders on each Payment Date in an amount equal to the Principal Distribution Amount. The "Principal Distribution Amount" with respect to any Payment Date equals the sum of: o the First Priority Principal Distribution Amount (as defined in this prospectus supplement); and o the Regular Principal Distribution Amount (as defined in this prospectus supplement). The Trust will pay principal on the Notes from funds on deposit in the Collection Account including amounts, if any, from the Reserve Account, in accordance with the priorities described under "Payments on the Notes--Payment of Distributable Amounts." Principal payments on the Notes will generally be made on each Payment Date, in the following order of priority: 1. to the Class A-1 Notes until paid in full; 2. to the Class A-2 Notes until paid in full; 3. to the Class A-3 Notes until paid in full; 4. to the Class A-4 Notes until paid in full; and 5. to the Certificates until paid in full. Notwithstanding the foregoing, following the occurrence and during the continuation of: o a default in the payment of any interest on any Note of the Controlling Class (as defined in this prospectus supplement) when the same becomes due and payable, which default continues for a period of five days; o a default in the payment of principal of or any installment of the principal of any Note when the same becomes due and payable; or o the bankruptcy of the Trust or the occurrence of other circumstances relating to the bankruptcy or insolvency of the Trust, as described in the Indenture the priority of payments changes. In particular, the Class A Notes will receive 100% of the Principal Distribution Amount until the Notes are paid in full. The trust will make no distributions of principal or interest on the Certificates until payment in full of principal and interest on the Class A-1 Notes. In addition, principal payments on the Class A Notes will be made first to the holders of the Class A-1 Notes until they have been paid in full; thereafter principal payments on the Class A Notes will be made to the holders of the Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes (together with the holders of the Class A-1 Notes, the "Noteholders") on a pro rata basis based on the principal balance of that Class of outstanding Notes. Beginning on the Payment Date on which the Class A Notes have been paid in full, the remainder of the Principal Distribution Amount, if any, and on each subsequent Payment Date, 100% of the Principal Distribution Amount, S-48 will be paid to the holders of record of the Certificates (the "Certificateholders") until the Certificates have been paid in full. The actual Payment Date on which the outstanding principal amount of any class of Notes is paid in full may be significantly earlier than its Final Scheduled Payment Date based on a variety of factors, including the factors described under "Weighted Average Life of the Securities" in the accompanying prospectus. If the principal amount of a class of Notes has not been paid in full on or prior to its Final Scheduled Payment Date, the Noteholders' Principal Distribution Amount for that Payment Date will, to the extent the remaining Available Amounts are sufficient, include an amount sufficient to reduce the unpaid principal amount of that class of Notes to zero on that Payment Date. We refer you to "Payment on the Notes--Payment of Distributable Amounts" in this prospectus supplement. Optional Prepayment If the Servicer exercises its option to purchase the Receivables when the Pool Balance declines to 10% or less of the sum of the Initial Pool Balance and the amount on deposit in the Pre-Funding Account on the Closing Date, Class A-4 and Certificateholders will receive an amount in respect of the Class A-4 and Certificates equal to the outstanding principal balance of the Class A-4 and Certificates, together with accrued but unpaid interest at the related Interest Rate. The "Pool Balance" on any Payment Date will equal the aggregate principal balance of the Receivables at the end of the related Collection Period, after giving effect to all payments of principal received from Obligors and Purchased Amounts. Indenture Events of Default; Rights upon Event of Default. Upon an Event of Default, the Controlling Class of Noteholders will have the rights set forth in the prospectus under "The Notes--Indenture--Events of Default; Rights Upon Event of Default." The Indenture Trustee may sell the Receivables subject to the conditions set forth in the Indenture following an Event of Default, including a default in the payment of any principal of or a default for five days or more in the payment of any interest on any Class A Note. In the case of an Event of Default not involving any default in payment of principal of or interest on a Class A Note, the Indenture Trustee is prohibited from selling the Receivables unless one of the conditions set forth in the accompanying prospectus under "The Notes--Indenture--Events of Default and--Rights Upon Event of Default" has been satisfied. Following the occurrence of certain Events of Default under the Indenture, the trust will make no distributions of principal or interest on the Certificates until payment in full of principal and interest on the Class A Notes. In addition, payments of principal on the Class A Notes will be made first to the Class A-1 Notes until the Class A-1 Notes are repaid in full, and then pro rata to the Class A-2, Class A-3 and Class A-4 Notes until each principal amount is paid in full. If there are any amounts remaining, those amounts will be used to pay interest and principal on the Certificates until the principal amount is paid in full. Notices Noteholders will be notified in writing by the Indenture Trustee of any Event of Default, Servicer Default or termination of, or appointment of a successor to, the Servicer promptly upon a Responsible Officer (as defined in the Transfer and Servicing Agreements) obtaining actual knowledge of these events. S-49 If Notes are issued other than in book-entry form, those notices will be mailed to the addresses of Noteholders as they appear in the register maintained by the Indenture Trustee prior to mailing. Those notices will be deemed to have been given on the date of that publication or mailing. Governing Law The Indenture and the Notes are governed by and shall be construed in accordance with the laws of the State of New York applicable to agreements made in and to be performed wholly within that jurisdiction. The Certificates General The certificates will be issued pursuant to the terms of the Trust Agreement, a form of which has been filed as an exhibit to the registration statement. A copy of the final signed Trust Agreement will be filed with the SEC following the issuance of the securities. The certificates will evidence undivided ownership interests in the Trust created pursuant to the Trust Agreement. The following summary describes material terms of the certificates and the Trust Agreement. The summary does not purport to be complete and is subject to, and qualified in its entirety by reference to, all the provisions of the certificates and the Trust Agreement. The following summary supplements, and to the extent inconsistent therewith replaces, the description of the general terms and provisions of the certificates of any given series and the related Trust Agreement set forth in the accompanying prospectus, to which description reference is hereby made. Payments of Interest Interest on the Certificate Balance will accrue during each Interest Period at ___% per annum (the "Pass Through Rate") and will be payable to the Certificateholders on the related Payment Date. The certificates will constitute Fixed Rate Securities, as that term is defined under "Certain Information Regarding the Securities--Fixed Rate Securities" in the accompanying prospectus. Interest due on a Payment Date will accrue during the related Interest Period and will be calculated on the basis of a 360-day year consisting of twelve 30-day months. Interest distributions with respect to the certificates generally will be made from Available Amounts after: 1. payment of the Servicing Fee; and 2. Class A Noteholders' interest distribution; 3. [Principal Distribution Amount for the Class A-1 Notes]; and 4. depositing of funds in the Reserve Account so that the amount on deposit in the Reserve Account equals the Specified Reserve Account Balance. We refer you to "Payments on the Notes--Payment of Distributable Amounts" in this prospectus supplement. S-50 Optional Prepayment If the Servicer exercises its option to purchase the Receivables when the Pool Balance declines to 10% or less of the sum of the Pool Balance and the amount on deposit in the Pre-Funding Account on the Closing Date, Certificateholders will receive an amount in respect of the Certificates equal to the outstanding Certificate Balance together with accrued but unpaid interest at the Pass-Through Rate after the Notes have been retired, which distribution shall effect an early retirement of Certificates. Interest payments due for any Payment Date but not paid on that Payment Date will be due on the next Payment Date increased by an amount equal to interest accrued on that amount at the Pass Through Rate (to the extent lawful). Payments of Principal No principal payments will be made on the certificates until the Class A-1 Notes have been paid in full. Thereafter, principal payments of the certificates will be made on each Payment Date from Available Amounts after payment of interest on the certificates. Notwithstanding the foregoing, on each Payment Date after the acceleration of the notes following an Event of Default, the certificates will not receive any of the Principal Distributable Amount until the notes have been paid in full. Notices Certificateholders will be notified in writing by the Owner Trustee of any Event of Default, Servicer Default or termination of, or appointment of a successor to, the Servicer promptly upon an specified officer of the Owner Trustee obtaining actual knowledge of these events. Except for the monthly and annual reports to Certificateholders described this prospectus supplement, the Owner Trustee is not obligated under the Trust Agreement to forward any other notices to the Certificateholders. There are no provisions in the Trust Agreement for the regular or special meetings of Certificateholders. Governing Law The Trust Agreement and the certificates are governed by and shall be construed in accordance with the laws of the State of Delaware applicable to agreements made in and to be performed wholly within that jurisdiction. Payments on the Securities On or before the 18th calendar day of each month (or, if the 18th day is not a Business Day, the next succeeding Business Day (each a "Determination Date")), the Servicer will inform the Owner Trustee and the Indenture Trustee of, among other things, the amount of funds collected on or in respect of the Receivables, the amount of Advances to be made by and reimbursed to the Servicer and the Servicing Fee and other servicing compensation payable to the Servicer, in each case with respect to the immediately preceding Collection Period. On or prior to each Payment Date, the Servicer will also determine the following: 1. Available Amounts; S-51 2. Class A Noteholders' interest distribution; 3. Certificateholders' interest distribution; 4. Principal Distribution Amount; and 5. based on the available funds and other amounts available for payment on the related Payment Date as described below, the amount to be distributed to the Class A Noteholders and Certificateholders. The Indenture Trustee or the Owner Trustee, as the case may be, will make payments to the Noteholders and Certificateholders out of the amounts on deposit in the Collection Account. The amounts to be distributed to the Noteholders and Certificateholders will be determined in the manner described below. Calculation of Available Amounts The amount of funds available for distribution on a Payment Date will generally equal the sum of Available Interest and Available Principal (collectively, "Available Amounts"). "Available Interest" for a Payment Date will equal the sum of the following amounts (without duplication) allocable to interest received or allocated by the Servicer on or in respect of the Receivables during the related Collection Period: 1. that portion of all collections on Receivables allocable to interest (including the amount, if any, of Advances for that Collection period, but excluding the amount, if any, of reimbursements of Advances previously made to the Servicer); 2. the Purchase Amount of each Receivable that became a Purchased Receivable to the extent attributable to accrued interest on that Receivable; 3. Recoveries for that Collection Period; 4. investment earnings on the Trust Accounts (other than the Collection Account) for the related Payment Date; 5. net Liquidation Proceeds for that Collection Period to the extent allocable to interest; 6. net Investment Losses deposited by the Servicer; and 7. Capitalized Interest Payments. "Available Principal" for a Payment Date will equal the sum of the following amounts, without duplication, with respect to the related Collection Period: 1. the portion of all collections on Receivables allocable to principal; 2. net Liquidation Proceeds for that Collection Period to the extent allocable to principal; S-52 3. that portion allocable to principal of the Purchase Amount of all Receivables that became Purchased Receivables during or in respect of that Collection Period; and 4. on the Payment Date immediately following the end of the Funding Period, the remaining Pre-Funded Amount not used to acquire Subsequent Receivables. Available Interest and Available Principal on any Payment Date will exclude the following amounts: 1. amounts received on a particular Receivable (other than a Liquidated Receivable) to the extent that the Servicer has previously made an unreimbursed Advance in respect of that Receivable; and 2. net Liquidation Proceeds with respect to a particular Receivable to the extent of unreimbursed Advances in respect of that Receivable. "Liquidation Proceeds" means, with respect to any Receivable that becomes a Liquidated Receivable, the moneys collected in respect of that Liquidated Receivable, from whatever source, during or after the Collection Period in which the Receivable became a Liquidated Receivable, including liquidation of the related Financed Vehicle, net of the sum of any out-of-pocket expenses of the Servicer reasonably allocated to the liquidation and any amounts required by law to be remitted to the Obligor on the Liquidated Receivable. A "Liquidated Receivable" means a Receivable with respect to which the earliest of the following shall have occurred: o the related Financed Vehicle has been repossessed and liquidated; o the related Financed Vehicle has been repossessed in excess of 90 days and has not yet been liquidated; o the Servicer has determined in accordance with its collection policies that all amounts that it expects to receive with respect to the Receivable have been received; or o the end of the Collection Period in which the Receivable becomes more than 150 days or more past due. "Purchased Amount" means any Administrative Purchase Payments or Warranty Purchase Payments made with respect to Purchased Receivables. "Purchased Receivable" means a Warranty Receivable or an Administrative Receivable, respectively. "Recoveries" means, with respect to any Receivable that becomes a Liquidated Receivable, monies collected in respect of that Liquidated Receivable, from whatever source, during any Collection Period following the Collection Period in which the Receivable became a Liquidated Receivable, net of the sum of any amounts expended by the Servicer for the account of the Obligor and any amounts required by law to be remitted to the Obligor. S-53 Payment of Distributable Amounts Prior to each Payment Date, the Servicer will calculate the amount to be distributed to the Class A Noteholders and Certificateholders. On each Payment Date, the Servicer will allocate amounts on deposit in the Collection Account with respect to the related Collection Period as described below and will instruct the Indenture Trustee to make the following payments and distributions from Available Amounts on deposit in the Collection Account, and in the event of a shortfall in meeting the payments described in clauses (1) through (5) below (an "Available Amounts Shortfall") amounts withdrawn from the Reserve Account, in the following amounts and order of priority: 1. to the Servicer, the Servicing Fee, including any unpaid Servicing Fees with respect to one or more prior Collection Periods, and non-recoverable Advances; 2. to the Class A Noteholders, (a) the aggregate amount of interest accrued for the related Interest Period on each of the Class A Notes at their respective interest rates on the principal outstanding as of the previous Payment Date after giving effect to all payments of principal to the Class A Noteholders on the preceding Payment Date; and (b) the excess, if any, of the amount of interest payable to the Class A Noteholders on prior Payment Dates over the amounts actually paid to the Class A Noteholders on those prior Payment Dates, plus interest on that shortfall to the extent permitted by law; 3. to the Principal Distribution Account, the First Priority Principal Distribution Amount, if any; 4. to the Certificateholders, (a) the aggregate amount of interest accrued for the related Interest Period on each of the Certificates at the interest rate on the Certificates on the principal outstanding as of the previous Payment Date after giving effect to all payments of principal to the Certificates on the preceding Payment Date; and (b) the excess, if any, of the amount of interest payable to the Certificates on prior Payment Dates over the amounts actually paid to the Certificateholders on those prior Payment Dates, plus interest on that shortfall to the extent permitted by law; 5. to the Principal Distribution Account, the Regular Principal Distribution Amount; 6. to the Reserve Account, from Available Amounts remaining (this amount being the "Excess Amount"), the amount necessary to cause the amount on deposit in that account to equal the Specified Reserve Account Balance; 7. to the Indenture Trustee and the Owner Trustee, any accrued and unpaid Trust Fees and Expenses, in each case to the extent the fees and expenses have not been previously paid by the Servicer; provided that, until the Notes have been paid in full, the annual amount paid to the Trustees out of the Available Amount allocation described in this clause (7) shall not exceed [$10,000;] and 8. any Available Amounts remaining, to the Depositor. The Noteholders' Principal Distribution Amount will be allocated among the Notes as described above under "The Notes--Payments of Principal." S-54 For the purposes of this prospectus supplement, the following terms will have the following meanings: The "First Priority Principal Distribution Amount" will mean, with respect to any Payment Date, an amount equal to the excess, if any of: o the aggregate outstanding principal amount of the Class A Notes as of the preceding Payment Date (after giving effect to any principal payments made on the Class A Notes on that preceding Payment Date) over o the Pool Balance at the end of the Collection Period preceding that Payment Date plus amounts on deposit in the Pre-Funding Account less the Yield Supplement Overcollateralization Amount with respect to such Payment Date; provided however, that the First Priority Principal Distribution Amount shall not exceed the sum of the aggregate outstanding principal amount of all of the Notes on that Payment Date (after giving effect to any principal payments made on the Notes on that preceding Payment Date); and provided further, that the First Priority Principal Distribution Amount on and after the Final Scheduled Payment Date of a class of Class A Notes shall not be less than the amount that is necessary to reduce the outstanding principal amount of that class of Class A Notes and all earlier maturing classes of Class A Notes to zero. "Interest Period" means: o with respect to the Class A-1 Notes, the period from and including the most recent Payment Date on which interest has been paid (or, in the case of the first Payment Date, the Closing Date) to but excluding the next succeeding Payment Date; and o with respect to the Class A-2, Class A-3, Class A-4 Notes and Certificates, the period from and including the 25th day of the calendar month (or, in the case of the first Payment Date, from and including the Closing Date) to but excluding the 25th day of the next calendar month. The "Principal Distribution Account" will mean the administrative subaccount of the Note Distribution Account established and maintained as the Principal Distribution Account pursuant to the Sale and Servicing Agreement. The "Principal Distribution Amount" will mean, with respect to any Payment Date, the sum of the First Priority Principal Distribution Amount and the Regular Principal Distribution Amount with respect to that Payment Date. The "Regular Principal Distribution Amount" will: mean, with respect to any Payment Date, an amount not less than zero equal to the excess, if any of: o an amount equal to (i) the aggregate outstanding principal amount of all the Notes as of the preceding Payment Date (after giving effect to any principal payments made on the Notes on that preceding Payment Date) or the Closing Date, as the case may be, minus (ii) the sum of the Pool Balance at the end of the Collection Period preceding that Payment Date plus amounts on deposit in the Pre-Funding Account S-55 less the Yield Supplement Overcollateralization Amount with respect to that Payment Date, over o the First Priority Principal Distribution Amount, if any, with respect to that Payment Date; provided however, that the Regular Principal Distribution Amount shall not exceed the sum of the aggregate outstanding principal amount of all of the Notes on that Payment Date (after giving effect to any principal payments made on the Notes on that preceding Payment Date in respect of the First Priority Principal Distribution Amount, if any). "Trust Fees and Expenses" will mean all accrued and unpaid Trustees' fees and any amounts due to the Trustees for reimbursement of expenses or in respect of indemnification and other administrative fees of the Trust. Credit Enhancement The protection afforded to the Noteholders will be effected both by the preferential right of the Noteholders to receive, to the extent described in this prospectus supplement, current distributions on the Receivables, the establishment of the Reserve Account and the subordination of the Depositor's right to receive excess interest. The protection afforded to the Certificateholders will be effected by the establishment of the Reserve Account and the subordination of the Depositor's right to receive excess interest. Subordination The rights of the Certificateholders to receive any distributions of interest or principal is subordinated to payments of interest on the Class A Notes and, in limited circumstances, payments of principal of the Class A Notes. To the extent that the Pool Balance plus the amount on deposit in the Pre-Funding Account less the Yield Supplement Overcollateralization Amount with respect to a Payment Date has decreased to a level which is less than the aggregate outstanding principal balance on the Class A Notes, a First Priority Principal Distribution Amount will be payable prior to the payment of interest on or principal of the Certificates. The Depositor is entitled to receive payments of interest collected on the Receivables which are not used by the trust to make other required payments. The Depositor's right to receive this excess interest is subordinated to all other payments required to be made on any Payment Date. Reserve Account The Reserve Account will be a segregated account in the name of the Indenture Trustee. The Reserve Account will be created with an initial deposit by the Depositor on the Closing Date of an amount equal to $[ ] (the "Reserve Account Initial Deposit"). The Reserve Account will thereafter be funded by the deposit in the Reserve Account of all Excess Amounts, if any, for each Payment Date to the extent necessary to restore or bring the amounts on deposit in the Reserve Account to the Specified Reserve Account Balance. Amounts held from time to time in the Reserve Account will continue to be held for the benefit of Securityholders and may be invested in Eligible Investments. Investment income on those investments (net of losses and expenses) will be paid to the Depositor, upon the direction of the Servicer, to the extent that funds on deposit in the Reserve Account exceed the Specified S-56 Reserve Account Balance. If the amount on deposit in the Reserve Account on any Payment Date (after giving effect to all deposits to and withdrawals from the Reserve Account on that Payment Date) is greater than the Specified Reserve Account Balance for that Payment Date, subject to limitations set forth in the Transfer and Servicing Agreements, the Indenture Trustee will include the amount of the excess in the amounts to be distributed to the Depositor pursuant to clause (8) in the first paragraph under "Payments on the Securities--Payment of Distributable Amounts" in this prospectus supplement. The Noteholders will not have any rights in, or claims to, amounts distributed to the Certificateholders or to the Depositor. The "Specified Reserve Account Balance" with respect to any Payment Date will be an amount equal to [ ]% of the sum of the Pool Balance and the amount, if any, on deposit in the Pre-Funding Account as of the end of the related Collection Period. In no event, however, will the Specified Reserve Account Balance on any Payment Date be less than $[ ]. The Servicer may, from time to time after the date of this prospectus supplement, request each rating agency to approve a formula for determining the Specified Reserve Account Balance that is different from those described above or change the manner by which the Reserve Account is funded. If each rating agency delivers a letter to the Owner Trustee to the effect that the use of any new formula will not result in a qualification, reduction or withdrawal of its then-current rating of any class of the Notes, then the Specified Reserve Account Balance will be determined in accordance with the new formula. The Sale and Servicing Agreement will accordingly be amended, without the consent of any Noteholder, to reflect the new calculation. Amounts held from time to time in the Reserve Account will be held for the benefit of the Noteholders and Certificateholders. On each Payment Date, funds will be withdrawn from the Reserve Account to the extent of any Available Amounts Shortfall with respect to that Payment Date and will be deposited in the Note Distribution Account for distribution to the Noteholders. Following payment of all amounts due on the notes on any payment date, funds will be withdrawn from the Reserve Fund to the extent that the remaining Available Amounts are insufficient to make all payments due on the Certificates on such Payment Date. None of the Securityholders, the Indenture Trustee, the Owner Trustee or the Depositor will be required to refund any amounts properly distributed or paid to them, whether or not there are sufficient funds on any subsequent Payment Date to make full distributions to the Noteholders. The Reserve Account and the subordination of the Certificates are intended to enhance the likelihood of receipt by Class A Noteholders of the full amount of principal and interest due them and to decrease the likelihood that the Class A Noteholders will experience losses. However, the Reserve Account could be depleted. If the amount required to be deposited into or required to be withdrawn from the Reserve Account to cover shortfalls in collections on the Receivables exceeds the amount of available cash in the Reserve Account, Noteholders could incur losses or suffer a temporary shortfall in the amounts distributed to the Noteholders. Yield Supplement Overcollateralization Amount On the Closing Date, the sum of the Pool Balance and the amount on deposit in the Pre-Funding Account will exceed the initial principal amount of the Notes, by [ ] (the "Initial Yield Supplement Overcollateralization Amount"), which is approximately [ ]% of the sum of the aggregate principal balance of the Initial Receivables as of the Initial Cutoff Date and the amount on deposit in the Pre-Funding Account on the Closing Date. The Yield Supplement S-57 Overcollateralization Amount is intended to compensate for the low APRs on some of the Receivables. With respect to any Payment Date, the "Yield Supplement Overcollateralization Amount" is the amount specified below with respect to that Payment Date: - ------------------------------ ------------------------- ----------------------- Closing Date - ------------------------------ ------------------------- ----------------------- April 2001 [ ] - ------------------------------ ------------------------- ----------------------- May 2001 [ ] - ------------------------------ ------------------------- ----------------------- June 2001 [ ] - ------------------------------ ------------------------- ----------------------- July 2001 [ ] - ------------------------------ ------------------------- ----------------------- August 2001 [ ] - ------------------------------ ------------------------- ----------------------- September 2001 [ ] - ------------------------------ ------------------------- ----------------------- October 2001 [ ] - ------------------------------ ------------------------- ----------------------- November 2001 [ ] - ------------------------------ ------------------------- ----------------------- December 2001 [ ] - ------------------------------ ------------------------- ----------------------- January 2002 [ ] - ------------------------------ ------------------------- ----------------------- February 2002 [ ] - ------------------------------ ------------------------- ----------------------- March 2002 [ ] - ------------------------------ ------------------------- ----------------------- April 2002 [ ] - ------------------------------ ------------------------- ----------------------- May 2002 [ ] - ------------------------------ ------------------------- ----------------------- June 2002 [ ] - ------------------------------ ------------------------- ----------------------- July 2002 [ ] - ------------------------------ ------------------------- ----------------------- August 2002 [ ] - ------------------------------ ------------------------- ----------------------- September 2002 [ ] - ------------------------------ ------------------------- ----------------------- October 2002 [ ] - ------------------------------ ------------------------- ----------------------- November 2002 [ ] - ------------------------------ ------------------------- ----------------------- December 2002 [ ] - ------------------------------ ------------------------- ----------------------- January 2003 [ ] - ------------------------------ ------------------------- ----------------------- February 2003 [ ] - ------------------------------ ------------------------- ----------------------- March 2003 [ ] - ------------------------------ ------------------------- ----------------------- April 2003 [ ] - ------------------------------ ------------------------- ----------------------- May 2003 [ ] - ------------------------------ ------------------------- ----------------------- June 2003 [ ] - ------------------------------ ------------------------- ----------------------- July 2003 [ ] - ------------------------------ ------------------------- ----------------------- August 2003 [ ] - ------------------------------ ------------------------- ----------------------- September 2003 [ ] - ------------------------------ ------------------------- ----------------------- October 2003 [ ] - ------------------------------ ------------------------- ----------------------- November 2003 [ ] - ------------------------------ ------------------------- ----------------------- December 2003 [ ] - ------------------------------ ------------------------- ----------------------- January 2004 [ ] - ------------------------------ ------------------------- ----------------------- February 2004 [ ] - ------------------------------ ------------------------- ----------------------- March 2004 [ ] - ------------------------------ ------------------------- ----------------------- April 2004 [ ] - ------------------------------ ------------------------- ----------------------- May 2004 [ ] - ------------------------------ ------------------------- ----------------------- June 2004 [ ] - ------------------------------ ------------------------- ----------------------- July 2004 [ ] - ------------------------------ ------------------------- ----------------------- August 2004 [ ] - ------------------------------ ------------------------- ----------------------- S-58 - ------------------------------ ------------------------- ----------------------- Closing Date - ------------------------------ ------------------------- ----------------------- September 2004 [ ] - ------------------------------ ------------------------- ----------------------- October 2004 [ ] - ------------------------------ ------------------------- ----------------------- November 2004 [ ] - ------------------------------ ------------------------- ----------------------- December 2004 [ ] - ------------------------------ ------------------------- ----------------------- January 2005 [ ] - ------------------------------ ------------------------- ----------------------- February 2005 [ ] - ------------------------------ ------------------------- ----------------------- March 2005 [ ] - ------------------------------ ------------------------- ----------------------- April 2005 [ ] - ------------------------------ ------------------------- ----------------------- May 2005 [ ] - ------------------------------ ------------------------- ----------------------- The Yield Supplement Overcollateralization Amount has been calculated for each Payment Date as the sum of the amount for each Receivable equal to the excess, if any, of (x) the scheduled payments due on the Receivable for each future Collection Period discounted to present value as of the end of the preceding Collection Period at the APR of that Receivable over (y) the scheduled payments due on the Receivable for each future Collection Period discounted to present value as of the end of the preceding Collection Period at [ ]%. For purposes of the preceding definition, future scheduled payments on the Receivables are assumed to be made on their scheduled due dates without any delay, defaults or prepayments. Description of the Transfer and Servicing Agreements The Transfer and Servicing Agreements The following summary of the Indenture, the Sale and Servicing Agreement, the Administration Agreement and the Trust Agreement (collectively, the "Transfer and Servicing Agreements") describes the material terms of the Transfer and Servicing Agreements. The description of the terms of the Transfer and Servicing Agreements in this prospectus supplement does not purport to be complete and is subject to, and qualified in its entirety by reference to, all the provisions of the Transfer and Servicing Agreements. Forms of the Transfer and Servicing Agreements have been filed as exhibits to the Registration Statement. Copies of the final signed Transfer and Servicing Agreements will be filed with the SEC following the issuance of the Notes. Any description of the Transfer and Servicing Agreements in this prospectus supplement supplements, and to the extent inconsistent replaces, the description of the general terms and provisions of the Transfer and Servicing Agreements set forth in the accompanying prospectus, to which description reference is hereby made. Sale and Assignment of Receivables; Subsequent Receivables Information with respect to the conveyance of the Initial Receivables from the Depositor to the Trust on the Closing Date and the Subsequent Receivables from the Depositor to the Trust on the Subsequent Closing Date pursuant to the Sale and Servicing Agreement is set forth under "Description of the Transfer and Servicing Agreements--Sale and Assignment of Receivables; Subsequent Receivables " in the accompanying prospectus. Accounts In addition to the accounts referred to under "Description of the Transfer and Servicing Agreements--Accounts" in the accompanying prospectus, the Servicer will also establish and will S-59 maintain with the Indenture Trustee the Reserve Account in the name of the Indenture Trustee on behalf of the Noteholders [and the Certificateholders]. Collections The Transfer and Servicing Agreements generally require that the Servicer deposit all payments on Receivables received from Obligors and all proceeds of Receivables collected during each Collection Period into the Collection Account not later than two Business Days after receipt. However, if each condition to making monthly deposits as may be required by the Sale and Servicing Agreement (including the satisfaction of specified ratings criteria by the Servicer or the Servicer obtaining a letter of credit or similar agreement and the absence of any Servicer Default) is satisfied, the Servicer may retain those amounts until the related Deposit Date. The Servicer or the Depositor, as the case may be, will remit the aggregate Warranty Purchase Payments and Administrative Purchase Payments of Receivables to be purchased from the Trust into the Collection Account on or before each Deposit Date. The Servicer will be entitled to withhold, or to be reimbursed from amounts otherwise payable into or on deposit in the Collection Account, amounts previously deposited in the Collection Account but later determined to have resulted from mistaken deposits or postings. Except as described in the Sale and Servicing Agreement, 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. We refer you to "Description of the Transfer and Servicing Agreements--Collections" in the accompanying prospectus. "Eligible Investments" are specified in the Trust Agreement and will be limited to investments which meet the criteria of each rating agency from time to time as being consistent with its then-current ratings of the Securities. Collections on or in respect of a Receivable made during a Collection Period (including Warranty Purchase Payments and Administrative Purchase Payments) will be applied first to interest accrued to date, second to principal until the principal balance is brought current, third to reduce the unpaid late charges as provided in the Receivable and finally to prepay principal of the Receivable. We refer you to "Description of the Transfer and Servicing Agreements--Collections" in the accompanying prospectus. Collections on or in respect of a Receivable made during a Collection Period which are not late fees, prepayment charges, extension fees or certain other similar fees or charges will be applied first to any outstanding Advances made by the Servicer with respect to that Receivable, and then to the related Scheduled Payment. Any collections on or in respect of a Receivable remaining after such applications will be considered an "Excess Payment." Excess Payments constituting a prepayment in full of the related Receivable will be applied as a partial prepayment (a "Prepayment"). Pre-Funding Account On the Closing Date, a cash amount equal to approximately $[ ] (the "Pre-Funded Amount") will be deposited into an account (the "Pre-Funding Account") which will be established in the name of the Indenture Trustee. The Pre-Funded Amount will be equal to approximately [ ]% of the aggregate principal amount of the Securities. The Pre-Funding Account will be an asset of the Trust and will be pledged to the Indenture Trustee pursuant to the Indenture. The Pre-Funded Amount will be funded from the sale of the Securities and is expected to be used to acquire S-60 Subsequent Receivables. The "Funding Period" is the period from and including the Closing Date until the earliest of: o the Determination Date on which the amount on deposit in the Pre-Funding Account is $100,000 or less; o the occurrence of a Servicer Default (as defined in the Sale and Servicing Agreement) or an Event of Default under the Indenture; and o the last day of the Collection Period in [ ] 2001. The Pre-Funded Amount will be reduced during the Funding Period by the amount withdrawn from the Pre-Funding Account used to purchase Subsequent Receivables in accordance with the Sale and Servicing Agreement and by the amount withdrawn from the Pre-Funding Account deposited in the Reserve Account in connection with the purchase of the Subsequent Receivables. Amounts held in the Pre-Funding Account may be invested in Eligible Investments. Any earnings on amounts on deposit in the Pre-Funding Account will be included in Available Interest on the next Payment Date pursuant to the Sale and Servicing Agreement. Any Pre-Funded Amount remaining at the end of the Funding Period will be payable as a principal distribution to the Noteholders sequentially to the earliest maturing class of Class A Notes then outstanding as a partial mandatory redemption or prepayment on the immediately following Payment Date. We refer you to "Description of Transfer and Servicing Agreements-Accounts" in the accompanying prospectus. Capitalized Interest Account On the Closing Date, approximately $[ ] will be deposited in an account (the "Capitalized Interest Account") which will be established in the name of the Indenture Trustee. The Capitalized Interest Account will be an asset of the Trust, and will be pledged to the Indenture Trustee pursuant to the Indenture. The amount so deposited in the Capitalized Interest Account, including reinvestment income thereon, will be deposited to the Collection Account as a collection on each Payment Date up to and including the Mandatory Redemption Date in an amount equal to the interest accrued at the Weighted Average Security Rate less 2.5% on the amount on deposit in the Pre-Funding Account (the "Capitalized Interest Payments"). Any amounts on deposit in the Capitalized Interest Account in excess of the required amount on each Payment Date or on deposit in the Capitalized Interest Account at the end of the Funding Period will be paid to the Depositor. The "Weighted Average Security Rate" shall be the percentage equivalent of a fraction, the numerator of which is the sum of: o the product of the Class A-1 Rate times the Initial Class A-1 Note Balance; o the product of the Class A-2 Rate times the Initial Class A-2 Note Balance; o the product of the Class A-3 Rate times the Initial Class A-3 Note Balance; o the product of the Class A-4 Rate times the Initial Class A-4 Note Balance; and o the product of the Pass-Through Rate times the Initial Certificates Balance, and S-61 the denominator of which is the sum of: the Initial Class A-1 Note Balance, the Initial Class A-2 Note Balance, the Initial Class A-3 Note Balance, the Initial Class A-4 Note Balance and the Initial Certificate Balance. Note Distribution Account On or prior to the Closing Date, the Indenture Trustee will establish and maintain initially with itself an account into which amounts released from the Collection Account and the Reserve Account for payment to the Noteholders will be deposited and from which all distributions to the Noteholders will be made (the "Note Distribution Account). The Note Distribution Account will be maintained at an Eligible Institution. Certificate Distribution Account The Servicer will establish an account in the name of the Owner Trustee (the "Certificate Distribution Account") into which amounts released from the Collection Account and the Reserve Fund for distribution to the Certificateholders will be deposited and from which all distributions to the Certificateholders will be made. The Certificate Distribution Account will be maintained at an Eligible Institution. Advances On or before the Business Day prior to each Payment Date (the "Deposit Date"), the Servicer will make a payment into the Collection Account for each Receivable of an amount equal to the product of the principal balance of the Receivable as of the first day of the related Collection Period and one-twelfth of its APR minus the amount of interest actually received on the Receivable during the Collection Period (an "Advance"). If the calculation results in a negative number, an amount equal to the negative amount will be paid to the Servicer in reimbursement of outstanding Advances. In addition, if a Receivable becomes a Liquidated Receivable, the amount of accrued and unpaid interest on that Receivable (but not including interest for the current Collection Period) will, up to the amount of outstanding Advances in respect that Receivable, be withdrawn from the Collection Account and paid to the Servicer in reimbursement of the outstanding Advances. The Servicer will not be required to make any Advances, other than the Advance of an interest shortfall arising from a prepaid Receivable, to the extent that it does not expect to recoup the Advance from subsequent collections or recoveries. The Servicer will make all Advances by depositing into the Collection Account Advances in respect of a Collection Period on the Business Day immediately preceding the related Payment Date. We refer you to "Description of the Transfer and Servicing Agreements--Advances" in the accompanying prospectus. Servicing Compensation The servicing fee for the calendar month immediately preceding any Payment Date (a "Collection Period") will be one-twelfth of 1.00% (the "Servicing Rate") of the Pool Balance as of the first day of the related Collection Period or, in the case of the first Payment Date, the Pool Balance as of the Initial Cutoff Date (the "Servicing Fee"). The Servicing Fee, together with any previously unpaid Servicing Fee, will be paid on each Payment Date solely to the extent of Available Interest. The Servicer will be entitled to collect and retain as additional servicing compensation in respect of each Collection Period any late fees, prepayment charges and any other administrative fees and expenses or similar charges collected during that Collection Period, plus any investment earnings or interest earned during that Collection Period from the investment of monies S-62 on deposit in the Collection Account and the Note Distribution Account. We refer you to "Description of the Transfer and Servicing Agreements--Collections" in this prospectus supplement and "Description of the Transfer and Servicing Agreements--Servicing Compensation" in the accompanying prospectus. The Servicer will be paid the Servicing Fee for each Collection Period on the following Payment Date related to that Collection Period. However, if it is acceptable to each rating agency without a reduction in the rating of each class of Notes, the Servicing Fee in respect of a Collection Period (together with any portion of the Servicing Fee that remains unpaid from prior Payment Dates) will be paid at the beginning of that Collection Period out of collections of interest on the Receivables for that Collection Period. The Servicing Fee will be paid from Available Interest in accordance with the priority of payments set forth under "Payment on the Notes-Payment of Distributable Amounts". Net Deposits As an administrative convenience and as long as specified conditions are satisfied, for so long as BMW FS is the Servicer, BMW FS will be permitted to make the deposit of collections, aggregate Advances and amounts deposited in respect of purchases of Receivables by the Depositor or the Servicer for or with respect to the related Collection Period net of payments to be made to the Servicer with respect to that Collection Period. The Servicer, however, will account to the Owner Trustee and to the Noteholders as if all of the foregoing deposits and payments were made individually. We refer you to "Description of the Transfer and Servicing Agreements--Net Deposits" in the accompanying prospectus. Optional Purchase The outstanding Notes will be redeemed in whole, but not in part, on any Payment Date on which the Servicer or any successor to the Servicer exercises its option to purchase the Receivables. The Servicer or any successor to the Servicer may purchase the Receivables when the Pool Balance shall have declined to 10% or less of the sum of the Initial Pool Balance plus the amount on deposit in the Pre-Funding Account on the Closing Date, as described in the accompanying prospectus under "Description of the Transfer and Servicing Agreements--Termination." The "Redemption Price" for the outstanding Notes will be equal to the unpaid principal amount of the outstanding Notes plus accrued and unpaid interest on the Notes on the date of the optional purchase. Removal of Servicer The Indenture Trustee or Noteholders evidencing more than 50% of the voting interests of the Class A Notes then outstanding (or if the Class A Notes have been paid in full, by holders of Certificates then outstanding evidencing more than 50% of the voting interests of the Certificates), may terminate the rights and obligations of the Servicer under the Sale and Servicing Agreement upon the following events ("Servicer Defaults"): 1. any failure by the Servicer to deliver to the applicable Trustee for deposit in any Account any required payment or to direct the Indenture Trustee to make the required payments from any Account and that failure continues unremedied for five Business Days after discovery of that failure by the Servicer or after the receipt by the Servicer of notice of that failure; 2. any failure by the Servicer to duly observe or perform in any material respect any other covenants or agreements in the Sale and Servicing Agreement, which failure S-63 materially and adversely affects the rights of the Noteholders, and which failure continues unremedied for 60 days after written notice of that failure is given to the Servicer by (a) the Indenture Trustee or (b) the holders of Notes representing more than 50% of the outstanding amount of the notes; and 3. the occurrence of an Insolvency Event (as defined in the attached prospectus) of the Servicer. Under those circumstances, authority and power shall, without further action, pass to and be vested in the Indenture Trustee or a successor Servicer appointed by the Indenture Trustee under the Sale and Servicing Agreement. The Indenture Trustee or successor Servicer will succeed to all the responsibilities, duties and liabilities of the Servicer in its capacity under the Sale and Servicing Agreement and will be entitled to similar compensation arrangements. If, however, a bankruptcy trustee or similar official has been appointed for the Servicer, and no Servicer Default other than the appointment of a bankruptcy trustee or similar official has occurred, that trustee or official may have the power to prevent the Indenture Trustee or the Noteholders (or Certificateholders) from effecting a transfer of servicing. In the event that the Indenture Trustee is unwilling or unable so to act, it may appoint or petition a court of competent jurisdiction to appoint a successor servicer. The Indenture Trustee may make arrangements for compensation to be paid, which in no event may be greater than the servicing compensation paid to the Servicer under the Sale and Servicing Agreement. Notwithstanding termination under this section, the Servicer shall be entitled to payment of amounts payable to it prior to termination, for services rendered prior to termination. Upon payment in full of the principal and interest on the Class A Notes, the Certificateholders will succeed to the rights of the Class A Noteholders with respect to removal of the Servicer. Duties of the Owner Trustee and the Indenture Trustee The Owner Trustee will make no representations as to the validity or sufficiency of the Trust Agreement, the Notes or certificates (other than the authentication of the certificates), the Notes or of any Receivables or related documents and is not accountable for the use or application by the Depositor or the Servicer of any funds paid to the Depositor or the Servicer in respect of the Notes, the Certificates or the Receivables, or the investment of any monies by the Servicer before those monies are deposited into the Collection Account. The Owner Trustee will not independently verify the Receivables. If no Servicer Default has occurred, the Owner Trustee is required to perform only those duties specifically required of it under the Trust Agreement. In addition to making distributions to the Certificateholders, those duties generally are limited to the receipt of the various certificates, reports or other instruments required to be furnished to the Owner Trustee under the Trust Agreement, in which case it will only be required to examine them to determine whether they conform to the requirements of the Trust Agreement. The Trust Agreement says that the Owner Trustee will not be responsible for knowing about any event unless an officer of the Owner Trustee has actual knowledge of the event or has received written notice of the event. The Indenture Trustee will make no representations as to the validity or sufficiency of the Indenture, the Notes (other than authentication of the Notes) or of any Receivables or related documents, and is not accountable for the use or application by the Depositor or the Servicer of any funds paid to the Depositor or the Servicer in respect of the Notes or the Receivables, or the investment of any monies by the Servicer before those monies are deposited into the Collection Account. The Indenture Trustee will not independently verify the Receivables. If no Event of Default or Servicer Default has occurred, the Indenture Trustee is required to perform only those duties specifically required of it under the Indenture. In addition to making distributions to the S-64 Noteholders, those duties generally are limited to the receipt of the various certificates, reports or other instruments required to be furnished to the Indenture Trustee under the indenture, in which case it will only be required to examine them to determine whether they conform to the requirements of the Indenture. The Indenture says that the Indenture Trustee will not be responsible for knowing about any event unless an officer of the Indenture Trustee has actual knowledge of the event or has received written notice of the event. The Indenture Trustee will be under no obligation to exercise any of the rights or powers vested in it by the Indenture or to make any investigation of matters arising under the Indenture or to institute, conduct or defend any litigation under the Indenture or in relation to the Indenture or that litigation at the request, order or direction of any of the Noteholders, unless those Noteholders have offered to the Indenture Trustee reasonable security or indemnity against the costs, expenses and liabilities that may be incurred by the Indenture Trustee in connection with the exercise of those rights. No Noteholder will have any right under the Indenture to institute any proceeding with respect to the Indenture, other than with respect to the failure by the Depositor or the Servicer, as applicable, to remit payment. A Noteholder's right to institute any proceeding with respect to the Indenture Trustee is conditioned upon the Noteholder providing the Indenture Trustee with written notice of the Event of Default and the holders of the outstanding amount of Notes evidencing not less than 25% of the voting interests of the Notes, voting together as a single class, have made written request upon the Indenture Trustee to institute that proceeding in its own name as the Indenture Trustee under the Indenture. No proceeding shall commence unless the Noteholders have offered to the Indenture Trustee reasonable indemnity and the Indenture Trustee for 60 days has neglected or refused to institute that proceeding. The Owner Trustee and the Indenture Trustee Wilmington Trust Company will be the Owner Trustee under the Trust Agreement. The Chase Manhattan Bank will be the Indenture Trustee under the Indenture. The Owner Trustee, the Indenture Trustee and any of their respective affiliates may hold Notes in their own names or as pledgees. For the purpose of meeting the legal requirements of some jurisdictions, the Servicer and the Owner Trustee or the Servicer and the Indenture Trustee, in each case acting jointly (or in some instances, the Owner Trustee or the Indenture Trustee acting alone), will have the power to appoint co-trustees or separate trustees of all or any part of the Trust. In the event of an appointment of co-trustees or separate trustees, all rights, powers, duties and obligations conferred or imposed upon the Owner Trustee by the Sale and Servicing Agreement and the Trust Agreement or the Indenture Trustee by the Indenture will be conferred or imposed upon the Owner Trustee or the Indenture Trustee and each of their respective separate trustees or co-trustees jointly, or, in any jurisdiction in which the Owner Trustee or the Indenture Trustee will be incompetent or unqualified to perform specified acts, singly upon that separate trustee or co-trustee who will exercise and perform those rights, powers, duties and obligations solely at the direction of the Owner Trustee or the Indenture Trustee. The Owner Trustee and the Indenture Trustee may resign at any time, in which event the Servicer will be obligated to appoint a successor Owner Trustee or Indenture Trustee, as applicable. The Servicer may also remove the Owner Trustee or the Indenture Trustee if either ceases to be eligible to continue as trustee under the Trust Agreement or the Indenture, as the case may be, becomes legally unable to act or becomes insolvent. In those circumstances, the Servicer will be obligated to appoint a successor Owner Trustee or Indenture Trustee, as applicable. Any resignation S-65 or removal of the Owner Trustee or the Indenture Trustee and appointment of a successor Owner Trustee or Indenture Trustee, as applicable, will not become effective until acceptance of the appointment by the successor. The Servicer will be obligated to pay the fees of the Owner Trustee and the Indenture Trustee in connection with their duties under the Trust Agreement and Indenture, respectively. The Owner Trustee and the Indenture Trustee will be entitled to indemnification by BMW FS and the Depositor for, and will be held harmless against, any loss, liability, fee, disbursement or expense incurred by the Owner Trustee or the Indenture Trustee not resulting from its own willful misfeasance, bad faith or negligence (other than by reason of a breach of any of its representations or warranties set forth in the Trust Agreement or the Indenture, as the case may be). The Depositor will be obligated to indemnify the Owner Trustee and the Indenture Trustee for specified taxes that may be asserted in connection with the transaction. Material Income Tax Consequences The following is a general discussion of the material federal income tax and California tax considerations of the purchase, ownership and disposition of the Notes. The discussion is based upon law, regulations, rulings and decisions now in effect, all of which are subject to change. The discussion below does not purport to deal with all federal tax considerations applicable to all categories of investors. It is recommended that investors consult their own tax advisors in determining the federal, state, local and any other tax consequences to them of the purchase, ownership and disposition of the Notes. We refer you to the discussions under "Material Income Tax Consequences--Tax Treatment of Owner Trusts" and "--Material State Tax Consequences with respect to Owner Trusts" in the accompanying prospectus. Tax Characterization of the Trust In the opinion of Weil, Gotshal & Manges LLP, tax counsel to the Trust, (i) the Notes will be characterized as debt for tax purposes, and (ii) the Trust will not be characterized as an association (or a publicly traded partnership) taxable as a corporation for federal income tax purposes. If the Trust were taxable as a corporation for federal income tax purposes, it would be subject to corporate income tax on its taxable income. The Trust's taxable income would include all its income on the related Receivables, which may be reduced by its interest expense on the Notes. Any imposition of corporate income tax could materially reduce cash available to make payments on the Notes, and the beneficial owners of the Certificates could be liable for any corporate income tax that is unpaid by the Trust. Treatment of the Notes as Indebtedness The Depositor, any Certificateholder and the beneficial owners of the Notes (the "Note Owners") will agree by their purchase of the Notes, to treat the Notes as debt for federal income tax purposes. The Depositor and the Servicer and any subsequent holder of Certificates will agree to treat the Trust o as a partnership for purposes of federal and state income tax, franchise tax and any other tax measured in whole or in part by income, with the assets of the partnership being the assets held by the Trust, the partners of the partnership being the Certificate Owner, and the Notes being debt of the partnership, or S-66 o if a single beneficial owner owns all of the Certificates and none of the Notes are characterized as equity interests in the Trust, as disregarded as an entity separate from the Certificate Owner for purpose of federal and state income tax, franchise tax and any other tax measured in whole or in part by income, with the assets of the Trust and the Notes treated as assets and indebtedness of the Certificate Owner. However, the proper characterization of the arrangement involving the Trust, the Notes, the Depositor and the Servicer is not clear because there is no authority on transactions closely comparable to the transaction described in this prospectus supplement. Treatment of the Certificates [to come] ERISA Considerations Section 406 of ERISA and Section 4975 of the Code prohibit pension, profit-sharing and other employee benefit plans, as well as individual retirement accounts and certain types of Keogh Plans (each, a "Benefit Plan"), from engaging in specified transactions, such as direct or indirect sales or exchanges or extensions of credit with persons that are "parties in interest" under ERISA or "disqualified persons" under the Code with respect to those Benefit Plans. A violation of these "prohibited transaction" rules may result in an excise tax or other penalties and liabilities under ERISA and the Code for those persons. Title I of ERISA also requires that fiduciaries of a Benefit Plan subject to ERISA make investments that are prudent, diversified (except if prudent not to do so) and in accordance with governing, plan documents. If the assets of the trust were deemed to be assets of a Benefit Plan, transactions involving the trust, which are described in Section 406 of ERISA or Section 4975 of the Code, might be deemed to constitute prohibited transactions for which an exemption is not available. Under a regulation issued by the United States Department of Labor (the "Plan Assets Regulation"), the assets of the trust would be treated as plan assets of a Benefit Plan for the purposes of ERISA and the Code only if the Benefit Plan acquired an "equity interest" in the trust and none of the exceptions contained in the Plan Assets Regulation were applicable. An equity interest is defined under the Plan Assets Regulation as an interest other than an instrument which is treated as indebtedness under applicable local law and which has no substantial equity features. Although there is little guidance on the subject, the Notes should be treated as indebtedness without substantial equity features for purposes of the Plan Assets Regulation. This determination is based in part upon the traditional debt features of the Notes, including the reasonable expectation of purchasers of Notes that the Notes will be repaid when due, as well as the absence of conversion rights, warrants and other typical equity features. The debt treatment of the Notes for ERISA purposes could change if the trust incurred losses. However, even if the Notes are treated as debt for purposes of the Plan Assets Regulation, the acquisition or holding of Notes by or on behalf of a Benefit Plan could be considered to give rise to a prohibited transaction if the trust or any of its affiliates is or becomes a party in interest or a disqualified person with respect to a Benefit Plan. In that instance, certain exemptions from the prohibited transaction rules could be applicable depending on the type and circumstances of the plan fiduciary making the decision to acquire a note. Included among these exemptions are: Prohibited Transaction Class Exemption ("PTCE") 90- 1, regarding investments by insurance company pooled separate accounts; PTCE 95-60, regarding investments by insurance company general accounts; S-67 PTCE 91-38, regarding investments by bank collective investment finds; PTCE 96-23, regarding transactions affected by "in-house asset managers"; and PTCE 84-14, regarding transactions effected by "qualified professional asset managers." Each investor using the assets of a Benefit Plan which acquires the Notes, or to whom the Notes are transferred, will be deemed to have represented that the acquisition and continued holding of the Notes will be covered by one of the exemptions listed above or by another Department of Labor prohibited transaction class exemption. Employee benefit plans that are governmental plans (as defined in Section 3(32) of ERISA) and certain church plans (as defined in Section 3(33) of ERISA) are not subject to ERISA requirements; however, those plans may be subject to comparable federal, state or local law restrictions. A plan fiduciary considering the purchase of Notes should consult its tax and/or legal advisors regarding whether the assets of the trust would be considered plan assets, the possibility of exemptive relief from the prohibited transaction rules and other related issues and their potential consequences. The sale of Notes to a Benefit Plan is in no respect a representation that this investment meets all relevant legal requirements with respect to investments by Benefit Plans generally or by a particular Benefit Plan, or that this investment is appropriate for Benefit Plans generally or any particular Benefit Plan. [Add Certificates Disclosure] Underwriting Subject to the terms and conditions set forth in an Underwriting Agreement (the "Underwriting Agreement"), the Depositor has agreed to cause the Trust to sell to each of the underwriters named below (collectively, the "Underwriters"), and each of the Underwriters has severally but not jointly agreed to purchase, the principal amount of Notes and Certificates set forth opposite its name below:
Underwriters Class A-1 Notes Class A-2 Notes Class A-3 Notes Class A-4 Notes Certificates - ------------ --------------- --------------- --------------- --------------- ------------ Chase Securities Inc..... $ $ $ $ $ [ $ $ $ $ $ ]........................ [ $ $ $ $ $ ]........................ [ $ $ $ $ $ ]........................ [ $ $ $ $ $ ]........................ Total.................... $ $ $ $ $
In the Underwriting Agreement, the Underwriters have agreed, subject to the terms and conditions set forth in the Underwriting Agreement, to purchase all of the Notes and the Certificates. This obligation of the Underwriters is subject to specified conditions precedent set forth in the Underwriting Agreement. The Depositor has been advised by the Underwriters that they propose to offer the Notes and the Certificates to the public initially at the prices set forth on the cover of this prospectus supplement, and to specified dealers at these prices less the concessions and reallowance discounts set forth below: S-68
Class Selling Concession Reallowance Discount A-1.......................................... % % A-2.......................................... % % A-3.......................................... % % A-4.......................................... % % Certificates................................. % %
The Depositor and BMW FS have agreed to indemnify the Underwriters against specified liabilities, including liabilities under the Securities Act or to contribute to payments which the Underwriters may be required to make in respect thereof. However, in the opinion of the SEC, certain indemnification provisions for liability arising under the federal securities law are contrary to public policy and therefore unenforceable. In the ordinary course of their respective businesses, the Underwriters and their respective affiliates have engaged and may engage in investment banking and/or commercial banking transactions with BMW FS and its affiliates. The Notes and Certificates are new issues of securities with no established trading market. The Depositor has been advised by the Underwriters that they intend to make a market in the Notes and Certificates as permitted by applicable laws and regulations. The Underwriters are not obligated, however, to make a market in the Notes and Certificates, and that market-making may be discontinued at any time without notice at the sole discretion of the Underwriters. Accordingly, no assurance can be given as to the liquidity of, or trading markets for, the Notes of any class and the Certificates. The Trust may, from time to time, invest funds in the Accounts in Eligible Investments acquired from the Underwriters. The Underwriters have advised the Depositor that, pursuant to Regulation M under the Securities Act, the Underwriters may engage in transactions, including stabilizing bids, syndicate covering transactions or the imposition of penalty bids, which may have the effect of stabilizing or maintaining the market price of the Notes of any class and the Certificates at levels above those that might otherwise prevail in the open market. A "stabilizing bid" is a bid for or the purchase of the Notes of any class and the Certificates on behalf of the Underwriters for the purpose of fixing or maintaining the price of those Notes. A "syndicate covering transaction" is the bid for or the purchase of those Notes of any class and the Certificates on behalf of the Underwriters to reduce a short position incurred by the Underwriters in connection with this offering. A "penalty bid" is an arrangement permitting one of the Underwriters to reclaim the selling concession otherwise accruing to another Underwriter or syndicate member in connection with this offering if the Notes of any class and the Certificates originally sold by the other Underwriter or syndicate member are purchased by the reclaiming Underwriter in a syndicate covering transaction and has therefore not been effectively placed by the other Underwriter or syndicate member. Stabilizing bids and syndicate covering transactions may have the effect of causing the price of the Notes of any class and the Certificates to be higher than it might be in the absence of stabilizing bids and syndicate covering transactions, and the imposition of penalty bids might also have an effect on the price of any note to the extent that it discourages resale of that note. Neither the Depositor nor the Underwriters makes any representation or prediction as to the direction or magnitude of any of that effect on the prices for the Notes. Neither the Depositor nor the Underwriters makes any representation that the Underwriters will engage in any of those S-69 transactions or that, once commenced, any of those transactions will not be discontinued without notice. It is expected that delivery of the Notes and the Certificates will be made against payment for the Notes on or about the Closing Date, which is the [ ] business day following the date of this prospectus supplement. Rule 15c6-1 of the Commission under the Exchange Act of 1934 generally requires trades in the secondary market to settle in three business days, unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade Notes and the Certificates on the date of this prospectus supplement will be required, by virtue of the fact that the Notes and the Certificates initially will settle [ ] business days after the date of this prospectus supplement, to specify an alternate settlement cycle at the time of any such trade to prevent a failed settlement. It is suggested that purchasers of Notes or the Certificateholders who wish to trade Notes or Certificates on the date of this prospectus supplement consult their own advisors. Upon receipt of a request by an investor who has received an electronic prospectus from an Underwriter or a request by that investor's representative within the period during which there is an obligation to deliver a prospectus, BMW FS, the Depositor, or the Underwriters will promptly deliver, or cause to be delivered, without charge, a paper copy of the prospectus. Each Underwriter will represent that: o it has not offered or sold and will not offer or sell, prior to the date six months after their date of issuance, any Notes or Certificates to persons in the United Kingdom, except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted in and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995; o it has complied and will comply with all applicable provisions of the Financial Services Act 1986 with respect to anything done by it in relation to the Notes in, from or otherwise involving the United Kingdom; and o it has only issued or passed on and will only issue or pass on in the United Kingdom any document received by it in connection with the issuance of the Notes or the person who is of a kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1997 or is a person to whom the document can otherwise lawfully be issued or passed on. S-70 Notice to Canadian Residents Resale Restrictions The distribution of the Notes and Certificates in Canada is being made only on a private placement basis exempt from the requirement that the Depositor, on behalf of the Trust, prepare and file a prospectus with the securities regulatory authorities in each province where trades of Notes or Certificates are effected. Accordingly, any resale of the Notes in Canada must be made in accordance with applicable securities laws which will vary depending on the relevant jurisdiction, and which may require resales to be made in accordance with available statutory exemptions or pursuant to a discretionary exemption granted by the applicable Canadian securities regulatory authority. Purchasers are advised to seek legal advice prior to any resale of the Notes and Certificates. Representations of Purchasers Each purchaser of Notes and Certificates in Canada who receives a purchase confirmation will be deemed to represent to the Depositor, the Servicer, the related trustee, the Trust and the dealer from whom such purchase confirmation is received that (i) such purchaser is entitled under applicable provincial securities laws to purchase such Notes or Certificates without the benefit of a prospectus qualified under such securities laws, (ii) where required by law, that such purchaser is purchasing as principal and not as agent, and (iii) such purchaser has reviewed the text above under "--Resale Restrictions." Rights of Action (Ontario Purchasers) The securities being offered are those of a foreign issuer and Ontario purchasers will not receive the contractual right of action prescribed by Section 32 of the Regulation under the Securities Act (Ontario). As a result, Ontario purchasers must rely on other remedies that may be available, including common law rights of action for damages or rescission or rights of action under the civil liability provisions of the U.S. federal securities laws. Enforcement of Legal Rights All of the issuer's directors and officers as well as the experts named herein may be located outside of Canada and, as a result, it may not be possible for Canadian purchasers to effect service of process within Canada upon the issuer or such persons. All or a substantial portion of the assets of the issuer and such persons may be located outside of Canada and, as a result, it may not be possible to satisfy a judgment against the issuer or such persons in Canada or to enforce a judgment obtained in Canadian courts against such issuer or persons outside of Canada. Notice to British Columbia Residents A purchaser of Notes and Certificates to whom the Securities Act (British Columbia) applies is advised that such purchaser is required to file with the British Columbia Securities Commission a report within ten days of the sale of any Notes and Certificates acquired by such purchaser pursuant to this offering. Such report must be in the form attached to British Columbia Securities Commission Blanket Order BOR #95/17, a copy of which may be obtained from the Depositor. Only one such report must be filed in respect of Notes and Certificates acquired on the same date and under the same prospectus exemption. S-71 Taxation and Eligibility for Investment Canadian purchasers of Notes and Certificates should consult their own legal and tax advisors with respect to the tax consequences of an investment in the Notes and Certificates or in their particular circumstances and with respect to the eligibility of the Notes and Certificates or for investment by the purchaser under relevant Canadian legislation. Legal Opinions In addition to the legal opinions described in the accompanying prospectus, legal matters relating to the Notes and Certificates and federal income tax and other matters will be passed upon for the Trust by Weil, Gotshal & Manges LLP. Certain legal matters will be passed upon for the Underwriters by Stroock & Stroock & Lavan LLP. S-72 Index of Terms ABS................................................38 ABS Tables.........................................38 Administration Agreement...........................25 Advance............................................62 Available Amounts..................................52 Available Amounts Shortfall........................54 Available Interest.................................52 Available Principal................................52 Benefit Plan.......................................67 BMW AG.............................................10 BMW Center Recourse................................25 BMW Centers........................................25 BMW FS.............................................25 BMW Group..........................................10 Capitalized Interest Account.......................61 Capitalized Interest Payments......................61 Certificate Distribution Account...................62 Certificate Pool Factor............................46 Certificateholders.................................49 Certificates....................................10,35 Class A Notes......................................35 Clearstream, Luxembourg...........................A-1 Closing Date.......................................27 Collection Period..................................62 Deposit Date.......................................62 Depositor..........................................25 Determination Date.................................51 DTC...............................................A-1 Euroclear.........................................A-1 Excess Amount......................................54 Final Scheduled Payment Date.......................35 Financed Vehicles..................................27 First Priority Distribution Amount.................55 Funding Period..................................11,61 Global Securities.................................A-1 Indenture Trustee..................................25 Initial Cutoff Date................................27 Initial Pool Balance...............................27 Initial Receivables.............................10,27 Initial Yield Supplement Overcollateralization Amount .......................................17,57 Interest Period....................................55 Interest Rate......................................47 Liquidation Proceeds...............................53 Note Distribution Account..........................62 Note Owners........................................66 Note Pool Factor...................................46 Noteholders........................................48 Obligor............................................27 Owner Trustee......................................25 Payment Date.......................................47 penalty bid........................................69 Plan Assets Regulation.............................67 Pre-Funded Amount..................................60 Pre-Funding Account.............................11,60 Principal Distribution Account.....................55 Principal Distribution Amount...................48,55 Prepayment.........................................60 PTCE...............................................67 Purchased Amount...................................53 Purchased Receivable...............................53 Receivables........................................27 Receivables Purchase Agreement.....................27 Recoveries.........................................53 Redemption Price...................................63 Regular Principal Distribution Amount..............55 Reserve Fund Initial Deposit.......................56 Sale and Servicing Agreement.......................25 Securities......................................10,35 Seller.............................................27 Servicer...........................................25 Servicer Defaults..................................63 Servicing Fee......................................62 Servicing Rate.....................................62 Specified Reserve account balance..................57 stabilizing bid....................................69 Subsequent Purchase Agreement......................28 Subsequent Receivables..........................11,27 Subsequent Transfer Agreement......................28 Subsequent Transfer Date...........................28 syndicate covering transaction.....................69 Trust..............................................25 Trust Agreement....................................25 Trust Fees and Expenses............................56 Trustees...........................................26 Underwriters.......................................68 Underwriting Agreement.............................68 Weighted Average Security Rate.....................61 Yield Supplement Overcollateralization Amount......58 S-73 Annex A Global Clearance, Settlement and Tax Documentation Procedures Except in specified circumstances, the globally offered Class A Notes (the "Global Securities") will be available only in book-entry form. Investors in the Global Securities may hold the Global Securities through The Depository Trust Company ("DTC"), Clearstream Banking, societe anonyme ("Clearstream, Luxembourg") or the Euroclear System ("Euroclear. The Global Securities will be tradable as home market instruments in both the European and U.S. domestic markets. Initial settlement and all secondary trades will settle in same-day funds. Secondary market trading between investors holding Global Securities through Clearstream, Luxembourg and Euroclear will be conducted in the ordinary way in accordance with their normal rules and operating procedures and in accordance with conventional eurobond practice (i.e., three calendar day settlement). Secondary market trading between investors holding Global Securities through DTC will be conducted according to the rules and procedure applicable to U.S. corporate debt obligations and prior asset-backed securities issues. Secondary cross-market trading between Clearstream, Luxembourg or Euroclear and DTC Participants holding securities will be effected on a delivery-against-payment basis through the depositaries of Clearstream, Luxembourg and Euroclear (in that capacity) and as DTC Participants. Non-U.S. holders (as described below) of Global Securities will be subject to U.S. withholding taxes unless those holders meet specified requirements and deliver appropriate U.S. tax documents to the securities clearing organizations or their participants. Initial Settlement All Global Securities will be held in book-entry form by DTC in the name of Cede & Co. as nominee of DTC. Investors' interests in the Global Securities will be represented through financial institutions acting on their behalf as direct and indirect Participants in DTC. As a result, Clearstream, Luxembourg and Euroclear will hold positions on behalf of their participants through their depositaries, which in turn will hold those positions in accounts as DTC Participants. Investors electing to hold their Global Securities through DTC will follow DTC settlement practice. Investor securities custody accounts will be credited with their holdings against payment in same-day funds on the settlement date. Investors electing to hold their Global Securities through Clearstream, Luxembourg or Euroclear accounts will follow the settlement procedures applicable to conventional eurobonds, except that there will be no temporary global security and no "lock-up" or restricted period. Global Securities will be credited to securities custody accounts on the settlement date against payment in same-day funds. Secondary Market Trading Since the purchaser determines the place of delivery, it is important to establish at the time of the trade where both the purchaser's and seller's accounts are located to ensure that settlement can be made on the desired value date. A-1 Trading between DTC Participants. Secondary market trading between DTC Participants will be settled using the procedures applicable to prior asset-backed securities issues in same-day funds. Trading between Clearstream, Luxembourg and/or Euroclear Participants. Secondary market trading between Clearstream, Luxembourg Participants or Euroclear Participants will be settled using the procedures applicable to conventional eurobonds in same-day funds. Trading between DTC Depositor and Clearstream, Luxembourg or Euroclear Participants. When Global Securities are to be transferred from the account of a DTC Participant to the account of a Clearstream, Luxembourg Participant or a Euroclear Participant, the purchaser will send instructions to Clearstream, Luxembourg or Euroclear through a Clearstream, Luxembourg Participant or Euroclear Participant at least one business day prior to settlement. Clearstream, Luxembourg or Euroclear will instruct the respective Depositary, as the case may be, to receive the Global Securities against payment. Payment will include interest accrued on the Global Securities from and including the last coupon payment date to and excluding the settlement date, on the basis of the actual number of days in that accrual period and a year assumed to consist of 360 days. For transactions settling on the 31st of the month, payment will include interest accrued to and excluding the first day of the following month. Payment will then be made by the respective Depositary to the DTC Participant's account against delivery of the Global Securities. After settlement has been completed, the Global Securities will be credited to the respective clearing system and by the clearing system, in accordance with its usual procedures, to the Clearstream, Luxembourg Participant's or Euroclear Participant's account. The securities credit will appear the next day (European time) and the cash debt will be back-valued to, and the interest on the Global Securities will accrue from, the value date (which would be the preceding day when settlement occurred in New York). If settlement is not completed on the intended value date (i.e., the trade fails), the Clearstream, Luxembourg or Euroclear cash debt will be valued instead as of the actual settlement date. Clearstream, Luxembourg Participants and Euroclear Participants will need to make available to the respective clearing systems the funds necessary to process same-day funds settlement. The most direct means of doing so is to pre-position funds for settlement, either from cash on hand or existing lines of credit, as they would for any settlement occurring within Clearstream, Luxembourg or Euroclear. Under this approach, they may take on credit exposure to Clearstream, Luxembourg or Euroclear until the Global Securities are credited to their accounts one day later. As an alternative, if Clearstream, Luxembourg or Euroclear has extended a line of credit to them, Clearstream, Luxembourg Participants or Euroclear Participants can elect not to pre-position funds and allow that credit line to be drawn upon to finance settlement. Under this procedure, Clearstream Bank Participants or Euroclear Participants purchasing Global Securities would incur overdraft charges for one day, assuming they clear the overdraft when the Global Securities are credited to their accounts. However, interest on the Global Securities would accrue from the value date. Therefore, in many cases the investment income on the Global Securities earned during that one-day period may substantially reduce or offset the amount of those overdraft charges, although this result will depend on each Clearstream, Luxembourg Participant's or Euroclear Participant's particular cost of funds. Since the settlement is taking place during New York business hours, DTC Participants can employ their usual procedures for sending Global Securities to the respective European Depositary for the benefit of Clearstream, Luxembourg Participants or Euroclear Participants. The sale A-2 proceeds will be available to the DTC seller on the settlement date. Thus, to the DTC Participants a cross-market transaction will settle no differently than a trade between two DTC Participants. Trading between Clearstream, Luxembourg or Euroclear Depositor and DTC Purchaser. Due to time zone differences in their favor, Clearstream, Luxembourg Participants and Euroclear Participants may employ their customary procedures for transactions in which Global Securities are to be transferred by the respective clearing system, through the respective Depositary, to a DTC Participant. The seller will send instructions to Clearstream, Luxembourg or Euroclear through a Clearstream, Luxembourg Participant or Euroclear Participant at least one business day prior to settlement. In these cases, Clearstream, Luxembourg or Euroclear will instruct the Relevant Depositary, as appropriate, to deliver the Global Securities to the DTC Participant's account against payment. Payment will include interest accrued on the Global Securities from and including the last coupon payment to and excluding the settlement date on the basis of the actual number of days in that accrual period and a year assumed to consist of 360 days. For transactions settling on the 31st of the month, payment will include interest accrued to and excluding the first day of the following month. The payment will then be reflected in the account of the Clearstream, Luxembourg Participant or Euroclear Participant the following day, and receipt of the cash proceeds in the Clearstream, Luxembourg Participant's or Euroclear Participant's account would be back-valued to the value date (which would be the preceding day, when settlement occurred in New York). Should the Clearstream, Luxembourg Participant or Euroclear Participant have a line of credit with its respective clearing system and elect to be in debt in anticipation of receipt of the sale proceeds in its account, the back valuation will extinguish any overdraft incurred over that one-day period. If settlement is not completed on the intended value date (i.e., the trade fails), receipt of the cash proceeds in the Clearstream, Luxembourg Participant's or Euroclear Participant's account would instead be valued as of the actual settlement date. Finally, day traders that use Clearstream, Luxembourg or Euroclear and that purchase Global Securities from DTC Participants for delivery to Clearstream, Luxembourg Participants or Euroclear Participants should note that these trades would automatically fail on the sale side unless affirmative action were taken. At least three techniques should be readily available to eliminate this potential problem: (1) borrowing through Clearstream, Luxembourg or Euroclear for one day (until the purchase side of the day trade is reflected in their Clearstream, Luxembourg or Euroclear accounts) in accordance with the clearing system's customary procedures; (2) borrowing the Global Securities in the U.S. from a DTC Participant no later than one day prior to settlement, which would give the Global Securities sufficient time to be reflected in their Clearstream, Luxembourg or Euroclear account in order to settle the sale side of the trade; or (3) staggering the value dates for the buy and sell sides of the trade so that the value date for the purchase from the DTC Participant is at least one day prior to the value date for the sale to the Clearstream, Luxembourg Participant or Euroclear Participant. Material U.S. Federal Income Tax Documentation Requirements A beneficial owner of Global Securities holding securities through Clearstream, Luxembourg or Euroclear (or through DTC if the holder has an address outside the U.S.) will be subject to the 30% U.S. withholding tax that generally applies to payments of interest (including A-3 original issue discount) on registered debt issued by U.S. Persons (as defined in the accompanying prospectus), unless (1) each clearing system, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business in the chain of intermediaries between that beneficial owner and the U.S. entity required to withhold tax complies with applicable certification requirements and (2) that beneficial owner takes one of the following steps to obtain an exemption or reduced tax rate: Exemption for Non-U.S. Persons (Form W-8BEN). Beneficial owners of Global Securities that are Non-U.S. Persons generally can obtain a complete exemption from the withholding tax by filing a signed Form W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Withholding). If the information shown on Form W-8BEN changes, a new Form W-8BEN must be filed within 30 days of that change. Exemption for non-U.S. Persons with effectively connected income (Form W-8ECI). A Non-U.S. Person, including a non-U.S. corporation or bank with a U.S. branch, for which the interest income is effectively connected with its conduct of a trade or business in the United States, generally can obtain an exemption from the withholding tax by filing Form W-ECI (Certificate of Foreign Person's Claim for Exemption from Withholding on Income Effectively Connected with the Conduct of a Trade or Business in the United States). Exemption or reduced rate for non-U.S. Persons resident in treaty countries (Form W-8BEN). Non-U.S. Persons residing in a country that has a tax treaty with the United States generally can obtain an exemption or reduced tax rate depending on the treaty terms) by filing Form W-8BEN. Form W-8BEN may be filed by the Class B Noteowners or their authorized agents. Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete exemption from the withholding tax by filing Form W-9 (Payer's Request for Taxpayer Identification Number and Certification). U.S. Federal Income Tax Reporting Procedure. The beneficial owner of a Global Security files by submitting the appropriate form to the person through whom it holds (the clearing agency, in the case of persons holding directly on the books of the clearing agency). A Form W-8BEN on which the beneficial owner of a Global Security provides a U.S. taxpayer identification number generally remains in effect until a change in circumstances causes any of the information on the form to be incorrect. A W-8BEN on which a U.S. taxpayer identification is not provided and a Form W-8ECI generally remain in effect for three calendar years, absent a change in circumstances causing any information on the form to be incorrect. The term "Non-U.S. Person" means any person who is not a U.S. Person (as defined in the accompanying prospectus). This summary does not deal with all aspects of U.S. federal income tax withholding that may be relevant to foreign holders of Global Securities. It is suggested that investors consult their tax advisors for specific tax advice concerning their holding and disposing of Global Securities. A-4 PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Other Expenses of Issuance and Distribution. Expenses in connection with the offering of the Notes being registered hereby are estimated as follows: SEC registration fee................................. $875,000 Legal fees and expenses.............................. $750,000 Accounting fees and expenses......................... $ 70,000 Rating agency fees................................... $375,000 Trustee's fees and expenses.......................... $ 30,000 Printing............................................. $ 50,000 Miscellaneous........................................ 0 Total............................................. $2,150,000 Item 15. Indemnification of Directors and Officers. Section 18-108 of the Limited Liability Company Act of Delaware empowers a limited liability company, subject to such standards and restrictions, if any, as are set forth in its limited liability company agreement, to indemnify and hold harmless any member or manager or other person from and against any and all claims and demands whatsoever. The Limited Liability Company Agreement ("LLC Agreement"), of BMW FS Securities LLC (the "Depositor") provides that the Depositor shall defend, indemnify and save harmless each of its members from and against all claims, losses, damages, costs, expense, demands, liabilities, obligations, liens, encumbrances, rights of action or attorneys' fees sustained by reason of any act performed, or omitted to be performed, in good faith and without gross negligence or willful misconduct, within the scope of its authority expressly conferred by the LLC Agreement, to the fullest extent permitted by applicable law in effect on the date of the LLC Agreement and to such greater extent as applicable law may thereafter from time to time permit. Such indemnity shall not be construed to limit or diminish the coverage of each member under any insurance obtained by the Depositor and payment shall not be a condition precedent to any indemnification provided in the LLC Agreement. Reference is also made to the form of Underwriting Agreement filed as Exhibit 1.1 hereto among the Depositor, BMW Financial Services, NA, LLC, J.P. Morgan Securities Inc. and the other underwriters named therein (see Exhibit 1.1), which provides for indemnification by the Depositor in certain circumstances. II-1 Item 16. Exhibits. 1.1 Form of Underwriting Agreement 3.1 Certificate of Formation of BMW FS Securities LLC 3.2 Limited Liability Company Agreement of BMW FS Securities LLC between BMW Financial Services NA, LLC and BMW FS Receivables Corporation 3.3 Trust Agreement for BMW Vehicle Owner Trust 2001-A (with Certificate of Trust Attached) 4.1 Form of Indenture between BMW Vehicle Owner Trust 2001-A and The Chase Manhattan Bank, as Indenture Trustee (including forms of Notes) 5.1 Opinion of Weil, Gotshal & Manges LLP with respect to legality 8.1 Opinion of Weil, Gotshal & Manges LLP with respect to federal income tax matters 10.1 Form of Amended and Restated Trust Agreement between BMW FS Securities LLC and Wilmington Trust Company 10.2 Form of Sale and Servicing Agreement among BMW Financial Services NA, LLC, BMW Vehicle Owner Trust 2001-A and The Chase Manhattan Bank 10.3 Form of Owner Trust Administration Agreement among BMW Financial Services NA, LLC, The Chase Manhattan Bank and BMW Vehicle Owner Trust 2001-A 10.4 Form of Receivables Purchase Agreement between BMW FS Securities LLC, and BMW Financial Services NA, LLC 23.1 Consent of Weil, Gotshal & Manges LLP (included in Exhibits 5.1 and 8.1) 24.1 Power of Attorney (included on Signature Pages) 25.1 Statement of Eligibility and Qualification of the Indenture Trustee on Form T-1 II-2 Item 17. Undertakings. The Registrant hereby undertakes as follows: To provide to the Underwriters at the closing date specified in the Underwriting Agreement certificates in such denominations and registered in such names as required by the Underwriters to provide prompt delivery to each purchaser. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the "Act") may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is therefore unenforceable. In the event that a claim for indemnification against such liabilities (other than payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of such Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. For purposes of determining any liability under the Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Act will be deemed to be part of this registration statement as of the time it was declared effective. For purposes of determining any liability under the Act, each post-effective amendment that contains a form of prospectus will be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time will be deemed to be the initial bona fide offering thereof. II-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant BMW FS Securities LLC certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Amendment No. 2 to Registration Statement on Form S-3 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Woodcliff Lake, State of New Jersey, on the 3rd day of May 2001. BMW FS SECURITIES LLC, a Delaware limited liability company By: * ---------------------------------------------- John M. Christman President By: /s/ Norbert Mayer ----------------------------------------------- Norbert Mayer Treasurer *___/s/ Norbert Mayer______________ Norbert Mayer Attorney in fact II-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant BMW Vehicle Owner Trust 2001-A certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Amendment No. 2 to Registration Statement on Form S-3 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Woodcliff Lake, State of New Jersey, on the 3rd day of May 2001. BMW Vehicle Owner Trust 2001-A, a Delaware business trust By: BMW FS SECURITIES LLC, as depositor of BMW Vehicle Owner Trust 2001-A By: * ------------------------------------------------ John M. Christman President By: /s/ Norbert Mayer -------------------------------------------------- Norbert Mayer Treasurer *___/s/ Norbert Mayer______________ Norbert Mayer Attorney in fact II-5 Know all men by these presents, that each person whose signature appears below constitutes and appoints Norbert Mayer as his true and lawful attorney-in-fact and agent, with full powers of substitution, for him and in his name, place and stead, in any and all capacities, to sign and file this Registration Statement and any and all amendments, including post-effective amendments to this Registration Statement, with the Securities and Exchange Commission granting to said attorney-in-fact power and authority to perform any other act on behalf of the undersigned required to be done in connection therewith. Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment No. 2 to Registration Statement on Form S-3 has been signed by the following persons in the capacities and on the dates indicated.
Signature Title * Member of the Management Committee of May 3, 2001 - -------------------------------- the Managing Member of John M. Christman BMW FS Securities LLC and President of BMW FS Securities LLC (Principal Executive Officer) * Vice President of Finance of May 3, 2001 - -------------------------------- BMW FS Securities LLC Joost Vander-meij (Principal Financial and Accounting Officer) /s/ Norbert Mayer Treasurer of May 3, 2001 - -------------------------------- BMW FS Securities LLC Norbert Mayer * Member of the Management Committee of May 3, 2001 - -------------------------------- the Managing Member of Robert E. Devine BMW FS Securities LLC _*___/s/ Norbert Mayer___ - ---------------------- Norbert Mayer Attorney in fact
EX-1.1 2 s3aex1-1.txt EXHIBIT 1.1 ----------- BMW VEHICLE OWNER TRUST 2001-A $__________ NOTES BMW FS SECURITIES LLC (DEPOSITOR) UNDERWRITING AGREEMENT ------------------------------ ____ __, 2001 JPMorgan, a division of Chase Securities Inc. As Representative of the Several Underwriters 270 Park Avenue New York, New York 10017 Dear Sirs: SECTION 1. Introductory. BMW FS Securities LLC (the "Depositor") proposes to cause BMW Vehicle Owner Trust 2001-A (the "Trust") to issue and sell $___________ principal amount of its _____% Class A-1 Notes (the "Class A-1 Notes"), $___________ principal amount of its _____% Class A-2 Notes (the "Class A-2 Notes"), $___________ principal amount of its _____% Class A-3 Notes (the "Class A-3 Notes"), $___________ principal amount of its _____% Class A-4 Notes (the "Class A-4 Notes" and together with the Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes, the "Class A Notes") and $________ principal amount of its ______% Class B Notes (the "Class B Notes" and together with the Class A Notes, the "Notes") to the several underwriters set forth on Schedule I (each, an "Underwriter"), for whom you are acting as representative (the "Representative"). The Notes will be issued pursuant to an Indenture, dated as of _____ __, 2001 (the "Indenture"), between the Trust and The Chase Manhattan Bank, as indenture trustee (in such capacity, the "Indenture Trustee"). The assets of the Trust will include, among other things, a pool of motor vehicle retail installment sale contracts transferred to the Trust on the Closing Date (the "Initial Receivables") secured by new and used automobiles, motorcycles, light-duty trucks and sport utility vehicles financed thereby (the "Initial Vehicles") and certain monies received thereunder after ________, 2001 (the "Initial Cutoff Date"), motor vehicle retail installment sale contracts transferred to the Trust after the Closing Date and prior to __________, 2001 (the "Subsequent Receivables" and together with the Initial Receivables, the "Receivables") secured by new and used automobiles, motorcycles, light-duty trucks and sport utility vehicles financed thereby (the "Subsequent Vehicles" and together with the Initial Vehicles, the "Vehicles") and certain monies received thereunder after the related subsequent cutoff date, and the other property and the proceeds thereof to be conveyed to the Trust pursuant to the Sale and Servicing Agreement to be dated as of _______, 2001 (the "Sale and Servicing Agreement") among the Trust, BMW FS Financial Services NA, LLC ("BMW FS"), as servicer (in such capacity, the "Servicer"), the Depositor and the Indenture Trustee. Pursuant to the Sale and Servicing Agreement, the Depositor will sell the Receivables to the Trust and the Servicer will service the Receivables on behalf of the Trust. In addition, pursuant to the Owner Trust Administration Agreement to be dated as of _______, 2001 (the "Owner Trust Administration Agreement") among the Trust, BMW FS and the Indenture Trustee, BMW FS will agree to perform certain administrative tasks on behalf of the Trust. The Depositor will form the Trust pursuant to a Trust Agreement (as amended and supplemented from time to time, the "Trust Agreement") to be dated as of _______, 2001 between the Depositor and Wilmington Trust Company, as owner trustee (the "Owner Trustee"). The Certificates, each representing a fractional undivided interest in the Trust, will be issued pursuant to the Trust Agreement. The Depositor will acquire the Receivables from BMW FS pursuant to the terms of the Receivables Purchase Agreement (the "Second Tier Receivables Purchase Agreement") dated as of ______, 2001 between the Depositor and BMW FS. BMW FS will acquire the Receivables from BMW FS Funding Corp. ("BFFC") pursuant to the terms of the Receivables Purchase Agreement (the "First Tier Receivables Purchase Agreement") dated as of ______, 2001 between BFFC and BMW FS. Capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Sale and Servicing Agreement. As used herein, the term "Transaction Documents" refers to the Sale and Servicing Agreement, Indenture, Trust Agreement, First Tier Receivables Purchase Agreement, Second Tier Receivables Purchase Agreement, Owner Trust Administration Agreement and Note Depository Agreement. SECTION 2. Representations and Warranties. (a) As a condition of the obligation of the Underwriters to purchase the Notes, each of the Depositor and BMW FS makes the representations and warranties set forth below to each of the Underwriters. To the extent a representation or warranty specifically relates to the Depositor, the representation or warranty solely with respect to the Depositor is only made by the Depositor and to the extent a representation or warranty specifically relates to BMW FS, the representation or warranty solely with respect to BMW FS is only made by BMW FS. (i) A registration statement on Form S-3 (No. 333-56802), including a prospectus, relating to the Notes has been filed with the Securities and Exchange Commission (the "Commission") and has become effective. Such registration statement, as amended as of the date of this Agreement, together with any filings incorporated by reference into it, is hereinafter referred to as the "Registration Statement," and the prospectus included in such Registration Statement, as 2 supplemented to reflect the terms of the Notes as first filed with the Commission after the date of this Agreement pursuant to and in accordance with Rule 424(b) ("Rule 424(b)") under the Securities Act of 1933, as amended (the "Act"), including all material incorporated by reference therein, is hereinafter referred to as the "Prospectus;" a "preliminary prospectus" means any form of prospectus, including any prospectus supplement, relating to the Notes used prior to date of this Agreement that is subject to completion; the "Base Prospectus" means the base prospectus dated _______, 2001 included in the Prospectus; the "Prospectus Supplement" means the prospectus supplement dated the date hereof included in the Prospectus. (ii) On the effective date of the registration statement relating to the Notes, such registration statement conformed in all respects to the requirements of the Act and the rules and regulations of the Commission promulgated under the Act (the "Rules and Regulations") and did not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and on the date of this Agreement the Registration Statement and the preliminary prospectus conform, and at the time of the filing of the Prospectus in accordance with Rule 424(b), the Registration Statement and the Prospectus will conform in all respects to the requirements of the Act and the Rules and Regulations, and neither of such documents includes or will include any untrue statement of a material fact or omits or will omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading. The preceding sentence does not apply to statements in or omissions from such documents based upon written information furnished to the Depositor by the Representative specifically for use therein (the "Underwriters' Information") which information is limited to the information in the ___ paragraph under the heading "Underwriting" in each preliminary prospectus and the Prospectus. (iii) Since the respective dates as of which information is given in the Registration Statement and the Prospectus there has not been any material adverse change, or any development involving a prospective material adverse change, in or affecting the condition, financial or otherwise, earnings, business or operations of the Depositor or BMW FS, and their respective subsidiaries, taken as a whole, except as disclosed to you in writing prior to the date hereof. (iv) The Notes are "asset backed securities" within the meaning of, and satisfy the requirements for use of, Form S-3 under the Act. (v) The documents incorporated by reference in the Registration Statement and Prospectus, at the time they were or hereafter are filed with the Commission, complied and will comply in all material respects with the requirements of the Securities Exchange 3 Act of 1934, as amended (the "Exchange Act"), and the rules and regulations of the Commission thereunder. (vi) The Trust Agreement need not be qualified under the Trust Indenture Act of 1939, as amended and the Trust is not required to register under the Investment Company Act of 1940, as amended. (vii) The Indenture has been qualified under the Trust Indenture Act of 1939, as amended. (viii) The Depositor has filed the preliminary prospectus supplement relating to the Notes pursuant to and in accordance with Rule 424(b). (ix) The issuance and sale of the Notes have been duly authorized by all necessary corporate action of the Depositor and, when executed, authenticated and delivered to and paid for by the Underwriters in accordance with the terms of this Agreement and the Indenture, the Notes will be valid and binding obligations of the Trust, enforceable in accordance with their terms, and entitled to the benefits of the Indenture. (x) Each of the Depositor, BMW FS, BFFC and BMW has been duly incorporated and is validly existing as a corporation or limited liability company in good standing under the law of its jurisdiction of incorporation with full power and authority to own, lease and operate its properties and assets and conduct its business as described in the Prospectus, is duly qualified to transact business and is in good standing in each jurisdiction in which its ownership, leasing or operation of its properties or assets or the conduct of its business requires such qualification, and has full power and authority to execute and perform its obligations under this Agreement, the Transaction Documents and the Notes. (xi) The execution and delivery of this Agreement have been duly authorized by all necessary corporate action of the Depositor and BMW FS, and this Agreement has been duly executed and delivered by the Depositor and BMW FS and when duly executed and delivered by the other parties hereto will be the valid and binding agreement of the Depositor and BMW FS, enforceable against the Depositor and BMW FS in accordance with its terms. (xii) The execution and delivery of the Transaction Documents have been duly authorized by all necessary corporate action of the Depositor, BFFC BMW FS [and BMW North America] and, when duly executed and delivered by the Depositor, BMW FS, BFFC and [BMW North America] and the other parties thereto, will be valid and binding agreements of the Depositor, BMW FS, BFFC and [BMW North America], enforceable against the Depositor, BMW FS, BFFC and [BMW North America] in accordance with their terms. 4 (xiii) The execution and delivery by the Depositor, BFFC and BMW FS of, and the performance by the Depositor and BMW FS of its obligations under, this Agreement, the Transaction Documents and the Notes, the issuance and sale of the Notes to the Underwriters by the Depositor pursuant to this Agreement, the compliance by the Depositor and BMW FS with the other provisions of this Agreement and the consummation of the other transactions herein contemplated do not (x) require the consent, approval, authorization, registration or qualification of or with any governmental authority, except such as have been obtained or made or such as may be required by the state securities or Blue Sky laws of the various states of the United States of America or other U.S. jurisdictions in connection with the Offering by the Underwriters, or (y) conflict with or result in a breach or violation or acceleration of, or constitute a default under, any term or provision of the organizational documents of the Depositor, BMW FS, BFFC [or BMW], any indenture mortgage, deed of trust, lease or other agreement or instrument to which the Depositor, BMW FS, BFFC [or BMW] is a party or by which any of them or their properties is bound or result in a violation of or contravene the terms of any statute, order or regulation applicable to the Depositor, BMW FS, BFFC [or BMW] of any court, regulatory body, administrative agency, governmental body or arbitrator having jurisdiction over the Depositor, BMW FS, BFFC [or BMW], or will result in the creation of any lien upon any material property or assets of the Depositor, BMW FS, BFFC [or BMW] (other than pursuant to the Transaction Documents). (xiv) None of the Depositor, BMW FS, BFFC [or BMW] is in violation of any term or provision of its charter documents or by-laws, or in breach of or in default under any statute or any judgment, decree, order, rule or regulation of any court or other governmental authority or any arbitrator applicable to the Depositor, BMW FS, BFFC [or BMW], the consequence of which violation, breach or default would have (a) a materially adverse effect on or constitute a materially adverse change in, or constitute a development involving a prospective materially adverse effect on or change in, the condition (financial or otherwise), earnings, properties, business affairs or business prospects, net worth or results of operations of the Depositor, BMW FS, BFFC [or BMW] or (b) a material and adverse effect on its ability to perform its obligations under this Agreement or any of the Transaction Documents, in each case, to which it is a party. (xv) Neither the Depositor nor BMW FS nor anyone acting on their behalf has taken any action that would require registration of the Depositor or the Trust under the Investment Company Act of 1940, as amended (the "Investment Company Act"); nor will the Depositor nor BMW FS act, nor has either of them authorized nor will either of them authorize any person to act, in such manner. 5 (xvi) The Depositor, BFFC and BMW FS each possess all consents, licenses, certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses, and none of the Depositor, BFFC or BMW FS has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a materially adverse effect on or constitute a materially adverse change in, or constitute a development involving a prospective materially adverse effect on or change in, the condition (financial or otherwise), earnings, properties, business affairs or business prospects, net worth or results of operations of the Depositor, BFFC or BMW FS, except as described in or contemplated by the Prospectus. (xvii) No legal or governmental proceedings are pending or threatened to which the Depositor, BMW FS or BMW is a party or to which the property of the Depositor, BMW FS or BMW is subject except for such proceedings that would not, if the subject of any unfavorable decision, ruling or finding, singly or in the aggregate, have a material adverse effect on the condition (financial or otherwise), earnings, properties, business affairs or business prospects, net worth or results of operations of the Depositor, BMW FS or BMW, or the Depositor's or BMW FS' ability to perform its obligations under this Agreement, the Transaction Documents or the Notes. (xviii) No default exists, and no event has occurred which, with notice or lapse of time or both, would constitute a default in the due performance and observance of any term, covenant or condition of any indenture, mortgage, deed of trust, lease or other agreement or instrument to which the Depositor or any of its affiliates is a party or by which the Depositor or any of its affiliates or any of their respective properties is bound. (xix) The Notes and the Transaction Documents conform in all material respects to the descriptions thereof contained in the Prospectus. (xx) As of the Closing Date, each of the Depositor's, BFFC's and BMW FS' representations and warranties in the Transaction Documents, will be true and correct and such representations and warranties are incorporated herein by reference. (xxi) Other than as contemplated by this Agreement or as disclosed in the Prospectus, there is no broker, finder or other party that is entitled to receive from the Depositor or any of its affiliate or the Underwriters, any brokerage or finder's fee or other fee or commission as a result of any of the transactions contemplated by this Agreement. (xxii) Neither the Depositor nor any of its affiliates has entered into, nor will it enter into, any contractual arrangement with respect to the distribution of the Notes except for this Agreement. 6 (xxiii) BFFC's assignment of the Receivables to BMW FS pursuant to the First Tier Receivables Purchase Agreement will vest in BMW FS all of BFFC's right, title and interest to the Receivables. (xxiv) BMW FS's assignment of the Receivables to the Depositor pursuant to the Second Tier Receivables Purchase Agreement will vest in the Depositor all of BMW FS's right, title and interest to the Receivables. (xxv) The Depositor's assignment of the Receivables to the Trust pursuant to the Sale and Servicing Agreement will vest in the Trust all of the Depositor's right, title and interest to the Receivables. (xxvi) The Trust's assignment of the Collateral to the Trustee pursuant to the Indenture will vest in the Indenture Trustee, for the benefit of the Noteholders, a first priority perfected security interest therein, subject to no other outstanding Lien. (xxvii) The Notes, when duly and validly executed by the Indenture Trustee, authenticated and delivered in accordance with the Indenture, and delivered and paid for pursuant hereto will be validly issued and outstanding and entitled to the benefits of the Indenture. (xxviii) The Certificates, when duly and validly executed by the Owner Trustee, authenticated and delivered in accordance with the Trust Agreement, will be validly issued and outstanding and entitled to the benefits of the Trust Agreement. (xxix) Any taxes, fees and other governmental charges due on or prior to the Closing Date (including, without limitation, sales taxes) in connection with the execution, delivery and issuance of this Agreement, the Transaction Documents and the Notes have been or will have been paid at or prior to the Closing Date. (xxx) The Receivables are chattel paper as defined in the Uniform Commercial Code as in effect in the State of New Jersey. (xxxi) Under generally accepted accounting principles, BFFC will report its transfer of the Receivables as a sale, BMW FS will report its transfer of the Receivables as a sale, and the Depositor will report its transfer of the Receivables to the Trust as a sale of the Receivables. (xxxii) Immediately prior to the transfer thereof to BMW FS pursuant to the First Tier Receivables Purchase Agreement, BFFC is the sole owner of all right, title and interest in, and has good and marketable title to the Receivables and the other property to be transferred to BMW FS. BFFC, pursuant to the First Tier Receivables Purchase Agreement, is transferring to BMW FS ownership of the Receivables, the security interest in the Vehicles securing the 7 Receivables and the proceeds of each of the foregoing, and, immediately prior to the transfer thereof to the Depositor, BMW FS will be the sole owner of all right, title and interest in, and will have good and marketable title to, the Receivables and the other property to be transferred by it to the Depositor. BMW FS, pursuant to the Second Tier Receivables Purchase Agreement, is transferring to the Depositor ownership of the Receivables, the security interest in the Vehicles securing the Receivables and the proceeds of each of the foregoing, and, immediately prior to the transfer thereof to the Trust, the Depositor will be the sole owner of all right, title and interest in, and will have good and marketable title to, the Receivables and the other property to be transferred by it to the Trust. The assignment of the Receivables, all documents and instruments relating thereto and all proceeds thereof to the Trust, pursuant to the First Tier Receivables Purchase Agreement, the Second Tier Receivables Purchase Agreement and the Sale and Servicing Agreement, vests in the Trust all interests which are purported to be conveyed thereby, free and clear of any liens, security interests or encumbrances. (xxxiii) Immediately prior to the transfer of the Receivables to BMW FS, BMW FS' interest in the Receivables and the proceeds thereof shall be perfected upon the filing of UCC-1 financing statements (the "Financing Statements") in the offices specified in Schedule III and there shall be no unreleased statements affecting the Receivables filed in such offices other than the Financing Statements. If a court concludes that the transfer of the Receivables from BFFC to BMW FS is a sale, the interest of BMW FS in the Receivables and the proceeds thereof will be perfected upon the filing of the Financing Statements in the offices set forth in Schedule III hereto. If a court concludes that such transfer is not a sale, the First Tier Receivables Purchase Agreement and the transactions contemplated thereby constitute a grant by BFFC to BMW FS of a valid security interest in the Receivables and the proceeds thereof, which security interest will be perfected upon the filing of the Financing Statements in the offices specified in Schedule III. No other filing or other action is necessary to perfect and maintain the interest or the security interest of BMW FS in the Receivables and the proceeds thereof against third parties. (xxxiv) Immediately prior to the transfer of the Receivables to the Depositor, the Depositor' interest in the Receivables and the proceeds thereof shall be perfected upon the filing of UCC-1 financing statements (the "Financing Statements") in the offices specified in Schedule III and there shall be no unreleased statements affecting the Receivables filed in such offices other than the Financing Statements. If a court concludes that the transfer of the Receivables from BMW FS to the Depositor is a sale, the interest of the Depositor in the Receivables and the proceeds thereof will be perfected upon the filing of the Financing Statements in the offices set forth in Schedule III hereto. If a court concludes that such transfer is not a sale, the Second Tier Receivables Purchase Agreement and the transactions contemplated thereby constitute a grant by BMW FS to the Depositor of a valid security interest in the Receivables and the proceeds thereof, 8 which security interest will be perfected upon the filing of the Financing Statements in the offices specified in Schedule III. No other filing or other action is necessary to perfect and maintain the interest or the security interest of the Depositor in the Receivables and the proceeds thereof against third parties. (xxxv) Immediately prior to the transfer of the Receivables to the Trust, the Trust' interest in the Receivables and the proceeds thereof shall be perfected upon the filing of UCC-1 financing statements (the "Financing Statements") in the offices specified in Schedule III and there shall be no unreleased statements affecting the Receivables filed in such offices other than the Financing Statements. If a court concludes that the transfer of the Receivables from Depositor to the Trust is a sale, the interest of the Trust in the Receivables and the proceeds thereof will be perfected upon the filing of the Financing Statements in the offices set forth in Schedule III hereto. If a court concludes that such transfer is not a sale, the Sale and Servicing Agreement and the transactions contemplated thereby constitute a grant by Depositor to the Trust of a valid security interest in the Receivables and the proceeds thereof, which security interest will be perfected upon the filing of the Financing Statements in the offices specified in Schedule III. No other filing or other action is necessary to perfect and maintain the interest or the security interest of the Trust in the Receivables and the proceeds thereof against third parties. (b) The above representations and warranties shall be deemed to be repeated at the Closing Date. SECTION 3. Purchase, Sale and Delivery of Notes. (a) On the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein set forth, the Depositor agrees to cause the Trust to sell to each Underwriter, and each Underwriter agrees, severally and not jointly, to purchase from the Trust the respective principal amount of the Notes set forth opposite the name of such Underwriter on Schedule I, at a purchase price (the "Purchase Price") equal to "Price $" as specified on Schedule II hereto, plus accrued interest from _____ ___, 2001. Delivery of and payment for the Notes shall be made at the offices of Weil, Gotshal & Manges LLP, at 10:00 a.m. (New York City time) on ____ __, 2001 (or at such other place and time on the same or other date as shall be agreed to in writing by the Representative and the Depositor, the "Closing Date"). Delivery of one or more global notes representing the Notes shall be made against payment of the aggregate purchase price in immediately available funds drawn to the order of the Depositor. The global notes to be so delivered shall be registered in the name of Cede & Co., as nominee of The Depository Trust Company ("DTC"). The interests of beneficial owners of the Notes will be represented by book entries on the records of DTC and participating members thereof. Definitive Notes representing the Notes will be available only under limited circumstances. (b) The Depositor hereby acknowledges that the payment of monies pursuant to Section 3(a) hereof (a "Payment") by or on behalf of the Underwriters of the aggregate Purchase Price for the Notes does not constitute 9 closing of a purchase and sale of the Notes. Only execution and delivery, by facsimile or otherwise, of a receipt for Notes by the Representative indicates completion of the closing of a purchase of the Notes from the Depositor. Furthermore, in the event that the Underwriters make a Payment to the Depositor prior to the completion of the closing of a purchase of Notes, the Depositor hereby acknowledges that until the Representative executes and delivers such receipt for the Notes the Depositor will not be entitled to the Payment and shall return the Payment to the Underwriters as soon as practicable (by wire transfer of same-day funds) upon demand. In the event that the closing of a purchase of Notes is not completed and the Payment is not returned by the Depositor to the Underwriters on the same day the Payment was received by the Company, the Company agrees to pay to the Underwriters in respect of each day the Payment is not returned by it, in same-day funds, interest on the amount of such Payment in an amount representing the Underwriters' cost of financing as reasonably determined by the Representative. (c) It is understood that any of you, individually, may (but shall not be obligated to) make Payment on behalf of any Underwriter or Underwriters for any of the Notes to be purchased by such Underwriter or Underwriters. No such Payment shall relieve such Underwriter or Underwriters from any of its or their obligations hereunder. SECTION 4. Offering by Underwriters. It is understood that the Underwriters propose to offer the Notes for sale to the public (which may include selected dealers) on the terms set forth in the Prospectus. It is further understood that the Underwriters shall not deliver any Computational Materials to any potential investors unless such Computational Materials have been approved of by the Depositor. SECTION 5. Covenants of the Depositor and BMW FS. The Depositor and BMW FS, as applicable, each covenant and agree with the Underwriters as set forth below. For purposes of this Section, the Depositor and BMW FS shall jointly make each of the covenants set forth below in clauses (a), (b), (c), (e), (g), (h), (i), (k), (l) and (m) and the entity specified in the covenant below shall make the covenants set forth in all of the other clauses below. (a) The Depositor will furnish to the Underwriters and counsel for the Underwriters, without charge, as many copies of any preliminary prospectus, the Prospectus, the Registration Statement and all amendments and supplements to such documents, in each case as soon as available and in such quantities as the Underwriters reasonably request. (b) The Depositor will file the Prospectus, properly completed, with the Commission pursuant to and in accordance with subparagraph (2) (or, if applicable and if consented to by the Representative, subparagraph (5)) of Rule 424(b) no later than the second business day following the date it is first used. The Depositor and BMW FS will advise the Representative promptly of any such filing 10 pursuant to Rule 424(b). The Depositor shall file with the Commission a current report on Form 8-K (the "Current Report") including any "computational materials," "structural terms sheets" or "collateral term sheets" (together "Computational Materials") (i) no later than the date that the Prospectus Supplement is filed with respect to "computational materials" and "structural terms sheets" (as such terms are interpreted in the No-Action letters addressed to Kidder, Peabody Acceptance Corporation I, et al. and the Public Securities Association dated May 20, 1994 and February 17, 1995, respectively (collectively, the "PSA Letters")) or (ii) no later than two days following their date of first use with respect to "collateral term sheets" (as such term is interpreted in the PSA Letters). (c) The Depositor and BMW FS will advise the Representative promptly of any proposal to amend or supplement the Registration Statement or the Prospectus and will not effect or file any such amendment or supplement without the consent of the Representative, which consent shall not be unreasonably withheld. The Depositor and BMW FS will advise the Representative promptly of any amendment or supplement of the Registration Statement or the Prospectus and of the institution by the Commission of any stop order proceedings in respect of the Registration Statement. The Depositor and BMW FS will use its best efforts to prevent the issuance of any such stop order and to obtain as soon as possible its lifting, if issued. The Depositor and BMW FS will comply with the Act, the Exchange Act, the Trust Indenture Act of 1939, as amended and the rules and regulations contemplated thereunder so as to permit the completion of the distribution of the Notes as contemplated in this Agreement and in the Prospectus. The Depositor will file with the Commission all documents required to be filed pursuant to the Exchange Act within the time periods specified in the Exchange Act or the rules and regulations promulgated thereunder. (d) The Depositor will arrange for the qualification of the Notes for offering and sale in each jurisdiction as the Representative shall designate including, but not limited to, pursuant to applicable state securities ("Blue Sky") laws of certain states of the United States of America or other U.S. jurisdictions, and the Depositor shall maintain such qualifications in effect for so long as may be necessary in order to complete the placement of the Notes; provided, however, that the Depositor shall not be obliged to file any general consent to service of process or to qualify as a foreign corporation or as a securities dealer in any jurisdiction or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject. The Depositor will promptly advise the Representative of the receipt by the Depositor of any notification with respect to the suspension of the qualification of the Notes for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose. 11 (e) If, at any time when a prospectus relating to the Notes is required to be delivered by an Underwriter or dealer either (i) any event occurs as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made not misleading, or (ii) for any other reason it shall be necessary to amend or supplement the Prospectus to comply with the Act, the Depositor and BMW FS promptly will notify the Representative of such event and promptly will prepare, at their own expense, an amendment or supplement which will correct such statement or omission. Neither the Underwriters' consent to, nor the Underwriters' distribution of any amendment or supplement to the Prospectus shall constitute a waiver of any of the conditions set forth in Section 6 hereof. (f) The Depositor will cooperate with the Representative and use its best efforts to permit the Notes to be eligible for clearance and settlement through DTC. (g) BMW FS and the Depositor shall (i) furnish or make available to the Underwriters or their counsel such additional documents and information regarding BMW FS, the Depositor and their respective affairs as the Underwriters may from time to time reasonably request prior to the Closing Date, including any and all documentation reasonably requested in connection with its due diligence efforts regarding information in the Prospectus and in order to evidence the accuracy or completeness of any of the conditions contained in this Agreement, (ii) provide the Underwriters or their advisors, or both, prior to acceptance of its subscription, the opportunity to ask questions of, and receive answers with respect to such matters. (h) Until the retirement of the Notes, or until none of the Underwriters maintains a secondary market in the Notes, whichever occurs first, the Depositor will deliver to each of the Underwriters, through the Representative, the annual statement of compliance and any annual independent certified public accountants' report furnished to the Indenture Trustee pursuant to the Sale and Servicing Agreement, as soon as such statements and reports are furnished to the Indenture Trustee. (i) So long as any of the Notes are outstanding, the Depositor will deliver to each of the Underwriters, through the Representative: (i) all documents distributed to Noteholders and (ii) from time to time, any other information concerning BMW FS, the Depositor or the Trust as the Underwriters may reasonably request only insofar as such information reasonably relates to the Offering Memorandum or the transactions contemplated by the Transaction Documents. (j) On or before the Closing Date, the Depositor, BFFC and BMW FS shall cause their computer records relating to the Receivables to be marked to show the Trust's absolute ownership of the Receivables, and from and after the Closing Date none of the Depositor, BFFC or BMW FS 12 shall take any action inconsistent with the Trust's ownership of such Receivables, other than as permitted by the Indenture or Sale and Servicing Agreement. (k) To the extent, if any, that any of the ratings assigned to the Notes by any of the rating agencies that initially rate the Notes are conditional upon the furnishing of documents or the taking of any other actions by the Depositor or BMW FS, as the case may be, the relevant party shall furnish, or cause to be furnished, such documents and take any such other actions as promptly as possible. (l) As soon as practicable, but no later than sixteen months after the date hereof, the Depositor and BMW FS will cause the Trust to make generally available to the Noteholders an earnings statement covering a period of at least 12 consecutive months beginning after the later of (i) the effective date of the registration statement relating to the Notes and (ii) the effective date of the most recent post-effective amendment to the Registration Statement to become effective prior to the date of this Agreement and, in each case, satisfying the provisions of Section 11(a) of the Act (including Rule 158 promulgated thereunder). (m) For a period of 45 days from the date hereof, none of the Depositor, BMW FS or any of their respective affiliates will, without the prior written consent of the Representative, directly or indirectly, offer, sell or contract to sell or announce the offering of, in a public or private transaction, any other collateralized securities similar to the Notes. SECTION 6. Payment of Expenses. The Depositor will pay all expenses (including legal fees and disbursements) incident to the transactions contemplated by this Agreement, whether or not the transactions contemplated herein are consummated or this Agreement is terminated pursuant to Section 8 hereof, including: (a) the preparation, printing and distribution of each preliminary prospectus and the Prospectus and each amendment or supplement thereto and delivery of copies thereof to the Underwriters, (b) the preparation of this Agreement, (c) the preparation, issuance and delivery of the Notes to the Underwriters (or any appointed clearing organizations), (d) the fees and disbursements of BMW FS's and the Depositor's counsel and accountants, (e) the qualification of the Notes under state securities laws in accordance with Section 5(c) including filing fees and the fees and disbursements of counsel in connection therewith and in connection with the preparation of any blue sky survey (including the printing and delivery thereof to the Underwriters), (f) any fees charged by rating agencies for the rating (or consideration of the rating) of the Notes, (g) the fees and expenses incurred with respect to any filing with, and review by, DTC or any similar organizations, (h) the fees and disbursements of the Indenture Trustee and its counsel, if any, (i) the fees and disbursements of the Owner Trustee and its counsel, if any, and (j) the fees and expenses of Richards, Layton & Finger. 13 SECTION 7. Conditions of the Obligations of the Underwriters. The obligations of the Underwriters to purchase and pay for the Notes will be subject to the accuracy of the representations and warranties made herein, to the accuracy of the statements of officers made pursuant hereto, to the performance by the Depositor and BMW FS of their obligations hereunder, and to the following additional conditions precedent: (a) On the Closing Date, each of the Transaction Documents, the Notes and the Certificates shall have been duly authorized, executed and delivered by the parties thereto, shall be in full force and effect and no default shall exist thereunder, and the Owner Trustee and the Indenture Trustee shall have received a fully executed copy thereof or, with respect to the Notes and Certificates, a conformed copy thereof. The Transaction Documents, the Notes and the Certificates shall be substantially in the forms heretofore provided to the Representative. (b) Both at or before the date hereof, and on or before the Closing Date, you shall have received letters, dated as of the date hereof and as of the Closing Date, respectively, of KPMG Peat Marwick, independent certified public accountants, substantially in the form of the drafts to which you have agreed previously and otherwise substantially in form and substance reasonably satisfactory to you and counsel to the Underwriters. (c) The Prospectus and the Computational Materials shall have been filed with the Commission in accordance with the Rules and Regulations and Section 5(a) hereof on or prior to the Closing Date, no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been instituted or, to the knowledge of the Depositor or BMW FS shall be contemplated by the Commission. (d) The Representative shall have received an opinion of in-house counsel to the Depositor, BFFC and BMW FS, addressed to the Underwriters, dated the Closing Date and satisfactory in form and substance to you and counsel to the Underwriters, to the effect that: (i) Each of BMW FS, BFFC and the Depositor has been duly formed and is validly existing as a limited liability company or corporation in good standing under the laws of the jurisdiction of its formation, and has the power and authority to own its properties and to conduct its business as presently conducted, and to enter into and perform its obligations under this Agreement and the Transaction Documents, and had at all relevant times, and now has, the power and authority to acquire, own, sell and service the Receivables and the related Collateral. (ii) Each of this Agreement and each Transaction Document has been duly authorized, executed and delivered by the Depositor, BFFC and BMW FS, as applicable. 14 (iii) Each of the Depositor, BFFC and BMW FS is duly qualified to do business and is in good standing, and has obtained all necessary licenses, in each jurisdiction in which failure to so qualify or obtain such licenses would (a) render any Receivable unenforceable by the Depositor or the Indenture Trustee on behalf of any Noteholder or (b) have a material adverse affect upon its business or the ownership of its property. (iv) Neither: (A) the transfer of the Receivables from BFFC to BMS FS pursuant to the First Tier Receivables Purchase Agreement, (B) the transfer of the Receivables from BMW FS to the Depositor pursuant to the Second Tier Receivables Purchase Agreement, (C) the transfer of the Receivables from the Depositor to the Trust pursuant to the Sale and Servicing Agreement, (D) the assignment of the Collateral from BFFC to BMW FS, from BMW FS to the Depositor and thereafter to the Trust, (E) the assignment of the First Tier Receivables Purchase Agreement from BMW FS to the Depositor and the assignment of the First Tier Receivables Purchase Agreement and the Second Tier Receivables Purchase Agreement by the Depositor to the Trust, (F) the grant of the security interest in the Receivables and the Collateral by the Trust to the Indenture Trustee pursuant to the Indenture, (G) the execution and delivery of this Agreement and the Transaction Documents by BMW FS, (H) the execution and delivery of this Agreement, the Transaction Documents and the Notes by the Depositor, (I) the execution and delivery of the Transaction Documents by BFFC, (J) the consummation of any transactions contemplated in this Agreement or the Transaction Documents, nor (K) the fulfillment of the terms of this Agreement, the Transaction Documents or the Notes by BMW FS, BFFC or the Depositor, as the case may be, will conflict with, or result in a breach, violation or acceleration of, or constitute a default under, any term or provision of the certificate of formation and limited liability company agreement of BMW FS or the Depositor or articles of incorporation or by-laws of BFFC or of any indenture or other material agreement or instrument to which either of them is a party or by which any of them or their respective property is bound, or result in a violation, or contravene the terms, of any statute, order or regulation applicable to either of them of any court, regulatory body, administrative agency or governmental body having jurisdiction over such person. (v) There are no actions, proceedings or investigations pending or, to the best of such counsel's knowledge after due inquiry, threatened before any court, administrative agency or other tribunal: (A) asserting the invalidity or unenforceability of this Agreement or the Transaction Documents, (B) seeking to prevent the consummation of any of the transactions contemplated by this Agreement or the Transaction Documents, or the execution and delivery thereof, (C) that might materially and adversely affect the performance by the Depositor of its obligations under this Agreement or the Transaction Documents, (D) that might materially and adversely affect the performance by BMW FS of its obligations under this Agreement or the Transaction 15 Documents, or (E) that might materially and adversely affect the performance by BFFC of its obligations under the Transaction Documents. (vi) BFFC has a valid and unencumbered ownership interest in each Receivable in existence as of the date of the First Tier Receivables Purchase Agreement. (vii) Such counsel is familiar with BMW FS's standard operating procedures relating to its acquisition of a perfected first priority security interest in the vehicles financed by it pursuant to retail installment sale contracts in the ordinary course of its business. Assuming that its standard procedures are followed with respect to the perfection of security interests in the Vehicles (and such counsel has no reason to believe that BMW FS has not followed its standard procedures in all material respects in connection with the perfection of security interests in the Vehicles), BMW FS has acquired or will acquire a perfected first priority security interest in the Vehicles. Neither such security interest nor the perfection of such security interest shall be adversely affected by the transfer of the Receivables to the Depositor, the Trust or the pledge thereof to the Indenture Trustee. (viii) The direction by the Trust to the Indenture Trustee to authenticate the Notes has been duly authorized by BMW FS, acting as the administrator of the Trust under the Owner Trust Administration Agreement. (e) The Representative shall have received an opinion of Weil, Gotshal & Manges LLP, counsel to the Depositor, BFFC, BMW FS and the Trust, addressed to the Representative, dated the Closing Date and satisfactory in form and substance to the Representative and their counsel, to the effect that: (i) Each of this Agreement and the Transaction Documents is the legal, valid and binding obligation of BMW FS, BFFC and the Depositor, as the case may be, enforceable against them in accordance with its terms: (A) subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to creditors' rights generally, and (B) except that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. (ii) The Notes, when duly executed and delivered by BMW FS, as Administrator, authenticated by the Indenture Trustee and delivered and paid for pursuant to this Agreement, will be valid and binding obligations of the Trust, enforceable in accordance with their terms, subject to: (A) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally, (B) general principles of equity (regardless of whether the enforcement 16 of such remedies is considered in a proceeding in equity or at law), and (C) the further qualification that certain of the remedial provisions in the Indenture may be limited or rendered unenforceable under the laws of New York (but such laws do not, in such counsel's opinion, make the remedies provided by the Indenture unsatisfactory for the realization of the benefits provided thereby). (iii) The Transaction Documents conform in all material respects with the description thereof contained in the Prospectus and any amendment or supplement thereto. (iv) The statements contained in the Prospectus and any supplement thereto under the captions "The Notes" and "Payments on the Notes," insofar as such statements constitute a summary of the Notes and the Transaction Documents, constitute a fair summary of such documents. (v) Neither the Trust nor the Depositor is, or as a result of the offering and sale of the Notes will be, required to be registered under the Investment Company Act. (vi) The Indenture has been duly qualified under the Trust Indenture Act. (vii) The Trust Agreement need not be qualified under the Trust Indenture Act. (viii) The First Tier Receivables Purchase Agreement constitutes a grant by BFFC to BMW FS of a valid security interest in the Receivables and other property granted to the Depositor pursuant thereto and the proceeds of the foregoing. (ix) The Second Tier Receivables Purchase Agreement constitutes a grant by BMW FS to the Depositor of a valid security interest in the Receivables and other property granted to the Depositor pursuant thereto and the proceeds of the foregoing. (x) The Sale and Servicing Agreement constitutes a grant by the Depositor to the Trust of a valid security interest in the Receivables and other property granted to the Trust pursuant thereto and the proceeds of the foregoing. (xi) The Indenture constitutes a grant by the Trust to the Indenture Trustee of a valid security interest in the Collateral, as such term is defined in the Indenture (including the property held in the Reserve Account) and the proceeds of each of the foregoing, which security interest in the Reserve Account constitutes a perfected first priority security interest therein. 17 (xii) The Class A-1 Notes are "eligible securities" as defined in Rule 2a-7(a)(10) promulgated under the 1940 Act. (xiii) To such counsel's knowledge, no consent, approval, authorization or order of any court or governmental agency or body is required for the consummation of the transactions contemplated in this Agreement and the Transaction Documents, except such filings with respect to the transfer of the Receivables to BMW FS pursuant to the First Tier Receivables Purchase Agreement, the transfer of the Receivables to the Depositor pursuant to the Second Tier Receivables Purchase Agreement, and the transfer of the Receivables to the Trust pursuant to the Sale and Servicing Agreement, as have been made and such other approvals as have been obtained. (xiv) To the best of such counsel's knowledge, there are no contracts or documents of the Registrants which are required to be filed as exhibits to the Registration Statement pursuant to the Act or the Rules or Regulations which have not been so filed. (xv) The Registration Statement became effective under the Act on ________ 2001 and, to the best of such counsel's knowledge, no stop order suspending the effectiveness of the Registration Statement or any part thereof or any amendment thereto has been issued under the Act and no proceeding for that purpose has been instituted or threatened by the Commission. (xvi) The Registration Statement relating to the Notes as of its effective date and the Prospectus as of the date of this Agreement, and any amendment or supplement thereto, as of its date, complied as to form in all material respects with the requirements of the Act and the applicable Rules and Regulations. Such counsel need express no opinion with respect to the financial statements, the exhibits, annexes and other financial, statistical, numerical or portfolio data, economic conditions or financial condition of the portfolio information included in or incorporated by reference into the Registration Statement relating to the Notes, the Prospectus or any amendment or supplement thereto. (xvii) Such counsel shall state that they have participated in the preparation of the Registration Statement and the Prospectus, and that no facts have come to their attention which cause them to believe that the Registration Statement relating to the Notes as of its effective date, and the Prospectus, as of the date of this Agreement, and any amendment or supplement thereto, as of its date when it became effective, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that the Prospectus on its date contained or on the Closing Date contains, any untrue statement of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that such counsel need not express any view 18 with respect to the financial, statistical or computational material included in or incorporated by reference into the Registration Statement relating to the Notes, the Prospectus or any amendment or supplement thereto. Such opinion may contain such assumptions, qualifications and limitations as are customary in opinions of this type and are reasonably acceptable to counsel to the Underwriter. In rendering such opinion, such counsel may state that they express no opinion as to the laws of any jurisdiction other than the federal law of the United States of America and the laws of the State of New York. (f) You shall have received an opinion of Sills, Cummis, counsel to the Depositor, BMW FS and the Trust, addressed to the Underwriters, dated the Closing Date and satisfactory in form and substance to you and counsel to the Underwriters, to the effect that: (i) If a court concludes that the transfer of the Receivables from BFFC to BMW FS is a sale, the ownership interest of BMW FS in the Receivables and the proceeds thereof will have been perfected by the filing of a UCC financing statement with all applicable governmental offices and will constitute a perfected first priority interest therein. If a court concludes that such transfer is not a sale, the Second Tier Receivables Purchase Agreement constitutes a grant by BFFC to BMW FS of a valid security interest in the Receivables and the proceeds of each of the foregoing, which security interest will have been perfected upon the filing of a UCC financing statement with all applicable governmental offices and will constitute a perfected first priority security interest therein. No filing or other action, other than the filing of the UCC financing statements referred to above and any required continuation statements thereto, was or will be necessary to perfect and maintain the interest of BMW FS in the Receivables and the proceeds of each of the foregoing against third parties. (ii) If a court concludes that the transfer of the Receivables from BMW FS to the Depositor is a sale, the ownership interest of the Depositor in the Receivables and the proceeds thereof will have been perfected by the filing of a UCC financing statement with all applicable governmental offices and will constitute a perfected first priority interest therein. If a court concludes that such transfer is not a sale, the Second Tier Receivables Purchase Agreement constitutes a grant by BMW FS to the Depositor of a valid security interest in the Receivables and the proceeds of each of the foregoing, which security interest will have been perfected upon the filing of a UCC financing statement with all applicable governmental offices and will constitute a perfected first priority security interest therein. No filing or other action, other than the filing of the UCC financing statements referred to above and any required continuation statements thereto, was or will be necessary to perfect and maintain the interest of the Depositor in the Receivables and the proceeds of each of the foregoing against third parties. 19 (iii) Immediately before the transfer of the Receivables to the Trust pursuant to the Sale and Servicing Agreement, the Depositor's interest in the Receivables and the proceeds of each of the foregoing was perfected upon the filing of a UCC financing statement with all applicable governmental offices and constituted a perfected first priority interest therein. If a court concludes that the transfer of the Receivables from the Depositor to the Trust is a sale, the ownership interest of the Trust in the Receivables and the proceeds of each of the foregoing will have been perfected by the filing of a UCC financing statement with all applicable governmental offices and will constitute a perfected first priority interest therein. If a court concludes that such transfer is not a sale, the Sale and Servicing Agreement constitutes a grant by the Depositor to the Trust of a valid security interest in the Receivables and the proceeds of each of the foregoing, which security interest will have been perfected upon the filing of a UCC financing statement with all applicable governmental offices and will constitute a perfected first priority security interest therein. No filing or other action, other than the filing of the UCC financing statements referred to above and any required continuation statements thereto, was or will be necessary to perfect and maintain the interest of the Trust in the Receivables and the proceeds of each of the foregoing against third parties. (iv) The Receivables are chattel paper or general intangibles as defined in the Uniform Commercial Code as in effect in New Jersey. (g) Weil, Gotshal & Manges LLP, in its capacity as Federal tax and ERISA counsel for the Depositor and the Trust, shall have delivered an opinion satisfactory in form and substance to the Representative and counsel to the Underwriters, dated the Closing Date and addressed to you, to the effect that the statements in the Prospectus Supplement under the heading "Summary of Terms - - Tax Status" and "Material Income Tax Consequences," and in the Base Prospectus under the heading ["Summary of Terms - Tax Status"] and "Material Federal Income Tax Consequences" to the extent they constitute matters of law or legal conclusions, accurately describe the material Federal income tax consequences to the Noteholders, and the statements in the Prospectus Supplement under the heading "Summary of Terms - ERISA Considerations" and "ERISA Considerations" and in the Base Prospectus under the heading ["Summary of Terms - ERISA Considerations"] and "ERISA Considerations" have been prepared or reviewed by such counsel and, to the extent they constitute matters of law or legal conclusions, accurately describe the material consequences to the Noteholders under ERISA. (h) Weil, Gotshal & Manges LLP, in its capacity as counsel for the Depositor and the Trust, shall have delivered an opinion satisfactory in form and substance to the Representative and their counsel, dated the Closing Date and addressed to the Representative, with respect to (i) the consolidation of the assets and liabilities of the Depositor with those of BMW FS under the doctrine of substantive consolidation, (ii) the creation of a "true sale" with respect to the sale of the Receivables from BFFC to BMW FS and from BMW FS to 20 the Depositor and (iii) the validity of the Notes and such other related matters as the Underwriter shall reasonably require and the Depositor shall have furnished or caused to be furnished to such counsel such documents as they may reasonably request for the purpose of enabling them to pass upon such matters. Such opinions shall be limited to the laws of the State of New York and United States federal law. (i) You shall have received an opinion addressed to the Underwriters of [Thacher, Proffitt & Wood], counsel to the Indenture Trustee, dated the Closing Date and satisfactory in form and substance to you and counsel to the Underwriters, to the effect that: (i) The Indenture Trustee is a banking corporation duly incorporated and validly existing under the laws of the State of New York. (ii) The Indenture Trustee has the full corporate trust power to accept the office of trustee under Indenture and to enter into and perform its obligations under the Indenture. (iii) The execution and delivery of the Indenture and the performance by the Indenture Trustee of its obligations under the Indenture have been duly authorized by all necessary action of the Indenture Trustee. (iv) The Indenture constitutes a valid and binding obligation of the Indenture Trustee enforceable against it in accordance with their terms under the laws of New York and the Federal laws of the United States. (v) The execution and delivery by the Indenture Trustee of the Indenture does not require any consent, approval or authorization of, or any registration or filing with, any New York or United States Federal governmental authority. (vi) Each of the Notes has been duly executed by the Indenture Trustee as trustee and authenticating agent. (j) You shall have received an opinion addressed to the Underwriters, of [Richards, Layton & Finger], counsel to the Owner Trustee, dated the Closing Date and satisfactory in form and substance to you and counsel to the Underwriters, to the effect that: (i) The Owner Trustee is duly formed and validly existing as a [national banking association] under the laws of the [United States of America] with trust powers and with its principal place of business in the State of Delaware. 21 (ii) The Owner Trustee has the full corporate trust power to accept the office of trustee under the Trust Agreement and the Sale and Servicing Agreement and to enter into and perform its obligations under the Trust Agreement and the Sale and Servicing Agreement. (iii) The execution and delivery of the Trust Agreement and the Sale and Servicing Agreement and the performance by the Owner Trustee of its obligations under the Trust Agreement and the Sale and Servicing Agreement have been duly authorized by all necessary action of the Owner Trustee. (iv) The execution and delivery by the Owner Trustee of the Trust Agreement and the Sale and Servicing Agreement does not require any consent, approval or authorization of, or any registration or filing with, any New York, Delaware or United States Federal governmental authority. (v) The Owner Trustee has duly authorized, executed and delivered the Trust Agreement and the Sale and Servicing Agreement and on behalf of the Trust, the Owner Trustee has duly executed and delivered the Transaction Documents to which the Trust is a party. (vi) The Notes have been duly executed and delivered by the Owner Trustee, on behalf of the Trust. (k) You shall have received an opinion addressed to the Underwriters, of Richards, Layton & Finger, special Delaware counsel for the Trust, dated the Closing Date and satisfactory in form and substance to you and counsel to the Underwriters, to the effect that: (i) The Trust Agreement constitutes the valid and binding obligation of the Owner Trustee and the Depositor enforceable against the Owner Trustee and the Depositor in accordance with its terms subject to (i) applicable bankruptcy, insolvency, moratorium, receivership, reorganization, fraudulent conveyance and similar laws relating to and affecting the rights and remedies of creditors generally, and (ii) principles of equity (regardless of whether considered and applied in a proceeding in equity or at law). (ii) The Trust has been duly formed and is validly existing as a business trust under the Delaware Business Trust Act (the "Business Trust Act") and has the power and authority under the Trust Agreement and the Business Trust Act to execute, deliver and perform its obligations under the Transaction Documents to which the Trust is a party. (iii) The Transaction Documents have been duly authorized, executed and delivered by the Trust. 22 (iv) To the extent that Article 9 of the Uniform Commercial Code as in effect in the State of Delaware (the "Delaware UCC") is applicable (without regard to conflicts of laws principles), and assuming that the security interest created by each of the Sale and Servicing Agreement and the Indenture in the Receivables has been duly created and has attached, upon the filing of UCC-1 financing statements with the Secretary of State of the State of Delaware the Trust will have a perfected security interest in the transfer of Receivables pursuant to the Indenture and the proceeds thereof, and such security interest will be prior to any other security interest that is perfected solely by the filing of financing statements under the Delaware UCC, excluding purchase money security interests under ss. 9-312(4) of the UCC and temporarily perfected security interests in proceeds under ss. 9-306(3) of the Delaware UCC and the Trustee will have a perfected security interest in such Receivables and the proceeds thereof, and such security interest will be prior to any other security interest that is perfected solely by the filing of financing statements under the Delaware UCC, excluding purchase money security interests under ss. 9-312(4) of the UCC and temporarily perfected security interests in proceeds under ss. 9-306(3) of the Delaware UCC. (v) No re-filing or other action is necessary under the Delaware UCC in order to maintain the perfection of such security interests except for the filing of continuation statements at five year intervals. (vi) Under ss. 3805(b) of the Business Trust Act, no creditor of any Certificateholder shall have any right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, the property of the Trust except in accordance with the terms of the Trust Agreement. (vii) Under ss. 3805(c) of the Business Trust Act, and assuming that the Sale and Servicing Agreement conveys good title to the Receivables to the Trust as a true sale and not as a security arrangement, the Trust rather than the holder of the Certificates is the owner of the Receivables. (viii) Neither the execution, delivery and performance by the Owner Trustee of the Trust Agreement and, on behalf of the Trust, the Transaction Documents to which the Trust is a party, do not require any consent, approval or authorization of, or any registration or filing with, any governmental authority of the State of Delaware, except for the filing of the Certificate of Trust with the Secretary of State. (ix) Neither the consummation by the Owner Trustee of the transactions contemplated in the Trust Agreement or, on behalf of the Trust, the transactions contemplated in the Transaction Documents to which the Trust is a party nor the fulfillment of the terms thereof by 23 the Owner Trustee will conflict with or result in a breach or violation of any law of the State of Delaware. (l) The Representative shall have received copies of each opinion of counsel delivered to any rating agency, together with a letter addressed to the Underwriters, dated the Closing Date, to the effect that the Underwriters may rely on each such opinion to the same extent as though such opinion was addressed to each as of its date. (m) You shall have received certificates dated the Closing Date of any two of the President, Chief Financial Officer, any Vice President, the Controller or the Treasurer of the Depositor, BFFC and BMW FS in which such officers shall state that: (A) the representations and warranties made by such entity contained in the Transaction Documents and this Agreement are true and correct, that such party has complied with all agreements and satisfied all conditions on its part to be performed or satisfied under such agreements on or before the Closing Date, (B) since the date of this Agreement there has not occurred any material adverse change, or any development involving a prospective material adverse change, in or affecting the condition, financial or otherwise, or in the earnings, business or operations of the Trust, the Depositor, BFFC or BMW FS except as disclosed to you in writing and (C) no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been instituted or are contemplated by the Commission. (n) You shall have received evidence satisfactory to you that, on or before the Closing Date, UCC-1 financing statements have been or are being filed in all applicable governmental offices reflecting (A) the transfer of the interest of BFFC in the Receivables and the proceeds thereof to BMW FS pursuant to the First Tier Receivables Purchase Agreement, (B) the transfer of the interest of BMW FS in the First Tier Receivables Purchase Agreement and the Receivables, and the proceeds thereof to the Depositor pursuant to the Second Tier Receivables Purchase Agreement, (C) the transfer of the interest of the Depositor in the First Tier Receivables Purchase Agreement and the Second Tier Receivables Purchase Agreement, the Receivables, and the proceeds thereof to the Trust pursuant to the Sale and Servicing Agreement, and (D) the grant by the Trust to the Indenture Trustee under the Indenture of a security interest in the interest of the Trust in the First Tier Receivables Purchase Agreement, the Second Tier Receivables Purchase Agreement, the Receivables, the Collateral and the proceeds thereof. (o) The Class A-1 Notes shall have been rated in the highest short-term rating by both Standard and Poor's, a division of The McGraw- Hill Companies, Inc. ("S&P") and Moody's Investors Service, Inc. ("Moody's"). The Class A notes (other than the Class A-1 Notes) shall have been rated in the highest long-term rating by both S&P and Moody's. The Class B Notes shall have been rated at least in the single "A" rating category by both S&P and Moody's. 24 (p) No Early Amortization Event or other event or condition, which event or condition with notice, the passage of time or both could result in an Early Amortization Event, shall have occurred or shall exist with respect to any securities issued by the Trust that are outstanding on the Closing Date. (q) You shall have received, from each of BMW FS, BFFC and the Depositor, a certificate executed by a secretary or assistant secretary thereof to which shall be attached certified copies of the: (i) charter, (ii) by-laws, (iii) applicable resolutions and (iv) designation of incumbency of each such entity. The Depositor will provide or cause to be provided to you conformed copies of such opinions, certificates, letters and documents as you or your counsel reasonably request. SECTION 8. Termination. This Agreement shall be subject to termination in the sole discretion of the Representative by notice to the Depositor given on or prior to the Closing Date in the event that the Depositor shall have failed, refused or been unable to perform all obligations and satisfy all conditions on its part to be performed or satisfied hereunder at or prior thereto or, if at or prior to the Closing Date, (a) trading in securities generally on the New York Stock Exchange shall have been suspended or materially limited or minimum or maximum prices shall have been established by or on, as the case may be, the Securities and Exchange Commission or the New York Stock Exchange; (b) trading of any securities of the Depositor or any affiliate of the Depositor shall have been suspended on any exchange or in any over-the-counter market; (c) a general moratorium on commercial banking activities shall have been declared by either federal, New Jersey State authorities or New York State authorities; (d) there shall have occurred (i) an outbreak or escalation of hostilities between the United States and any foreign power, (ii) an outbreak or escalation of any other insurrection or armed conflict involving the United States, or (iii) any other calamity or crisis or materially adverse change in general economic, political or financial conditions having an effect on the U.S. financial markets that, in the sole judgment of the Representative, makes it impractical or inadvisable to proceed with the offering or the delivery of the Notes as contemplated by the Prospectus, as amended as of the date hereof; (e) any change, or any development involving a prospective change, in or affecting the Receivables or particularly the business or properties of the Trust, the Depositor or BMW FS shall have occurred which, in the judgment of the Representative, materially impairs the investment quality of the Notes or makes it impractical or inadvisable to market the Notes; or (f) any downgrading in the rating of any debt securities of the Depositor or any of its Affiliates, if any, by any "nationally recognized statistical rating organization" (as defined for purposes of Rule 436(g) under the Act), or any public announcement that any such organization has under surveillance or review its rating of any such debt securities (other than an announcement with positive implications of a possible upgrading, and no implication of a possible downgrading, of such rating) shall have occurred. Termination of this Agreement pursuant to this Section 8 shall be without liability of any party to any other party except for the liability of the Depositor in relation to expenses as provided in Sections 6 hereof, the 25 indemnity provided in Section 9 hereof and any liability arising before or in relation to such termination. SECTION 9. Indemnification and Contribution. -------------------------------- (a) The Depositor and BMW FS will, jointly and severally, indemnify and hold harmless each Underwriter, the directors, officers, employees and agents of each Underwriter and each person, if any, who controls any Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which such Underwriter or such controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement made by the Depositor or BMW FS in Section 2 hereof, (ii) any untrue statement or alleged untrue statement of any material fact contained or incorporated in the Registration Statement, any preliminary prospectus or the Prospectus or any amendment or supplement thereto, or (iii) the omission or alleged omission to state in the Registration Statement , any preliminary prospectus or the Prospectus or any amendment or supplement thereto a material fact required to be stated therein or necessary to make the statements therein, not misleading, and will reimburse, as incurred, each such indemnified party for any legal or other costs or expenses reasonably incurred by it in connection with investigating, defending against or appearing as a third-party witness in connection with any such loss, claim, damage, liability or action; provided, however, that the Depositor and BMW FS will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in any preliminary prospectus or the Prospectus or any amendment or supplement thereto in reliance upon and in conformity with the Underwriters' Information; provided, further, that the Depositor and BMW FS shall not be liable to any Underwriter or any of the directors, officers, employees and agents of an Underwriter and each person, if any, who controls any Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act with respect to any loss, claim, damage or liability that results from the fact that the Underwriter sold Notes to a person to whom there was not sent or given, at or prior to the written confirmation of such sale, if delivery thereof was required, a copy of the Prospectus or of the Prospectus as then amended or supplemented, whichever is most recent, if the Depositor has previously furnished copies thereof to such Underwriter. The indemnity provided for in this Section 9 shall be in addition to any liability which the Depositor and BMW FS may otherwise have. The Depositor and BMW FS will not, without the prior written consent of the Representative, settle or compromise or consent to 26 the entry of any judgment in any pending or threatened claim, action, suit or proceeding in respect of which indemnification may be sought hereunder (whether or not the Representative or any person who controls the Representative is a party to such claim, action, suit or proceeding), unless such settlement, compromise or consent (i) includes an unconditional release of all of the Underwriters and such controlling persons from all liability arising out of such claim, action, suit or proceeding and (ii) does not include a statement as to or admission of, fault, culpability or a failure to act by or on behalf of any Underwriter or controlling person. (b) Each Underwriter, severally and not jointly, will indemnify and hold harmless each of the Depositor and BMW FS, each of its directors and officers and each person, if any, who controls the Depositor or BMW FS within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act against any losses, claims, damages or liabilities to which the Depositor, BMW FS or any such director, officer or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement (or any amendment thereto) or any preliminary prospectus or the Prospectus (or any amendment or supplement thereto) or (ii) the omission or the alleged omission to state in the Registration Statement (or any amendment thereto) or any preliminary prospectus or the Prospectus (or any amendment or supplement thereto) a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with the Underwriters' Information, and, subject to the limitation set forth immediately preceding this clause, will reimburse, as incurred, any legal or other expenses reasonably incurred by the Depositor, BMW FS or any such director, officer or controlling person in connection with investigating, defending against or appearing as a third-party witness in connection with any such loss, claim, damage, liability or any action in respect thereof. The remedies provided for in this Section 9 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity. (c) In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to paragraph (a) or (b) of this Section 9, such person (for purposes of this paragraph (c), the "indemnified party") shall, promptly after receipt by such party of notice of the commencement of such action, notify the person against whom such indemnity may be sought (for purposes of this paragraph (c), the "indemnifying party"), but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party otherwise than under this Section 9. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party (which may be counsel 27 to such indemnifying party if otherwise reasonably acceptable to the indemnified party); provided, however, that if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be one or more legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnifying party shall not have the right to direct the defense of such action on behalf of such indemnified party or parties and such indemnified party or parties shall have the right to select separate counsel to defend such action on behalf of such indemnified party or parties. After notice from the indemnifying party to such indemnified party of its election so to assume the defense of any such action and approval by such indemnified party of counsel appointed to defend such action, the indemnifying party will not be liable to such indemnified party under this Section 9 for any legal or other expenses, other than reasonable costs of investigation, subsequently incurred by such indemnified party in connection with the defense thereof, unless (i) the indemnified party shall have employed separate counsel in accordance with the proviso to the next preceding sentence (it being understood, however, that in connection with such action the indemnifying party shall not be liable for the expenses of more than one separate counsel (in addition to local counsel in each applicable local jurisdiction) in any one action or separate but substantially similar actions arising out of the same general allegations or circumstances, designated in writing by the Representative in the case of paragraph (a) of this Section 9, representing the indemnified parties under such paragraph (a) who are parties to such action or actions), or (ii) the indemnifying party does not promptly retain counsel satisfactory to the indemnified party, or (iii) the indemnifying party has authorized the employment of counsel for the indemnified party at the expense of the indemnifying party. All fees and expenses reimbursed pursuant to this paragraph (c) shall be reimbursed as they are incurred. After such notice from the indemnifying party to such indemnified party, the indemnifying party will not be liable for the costs and expenses of any settlement of such action effected by such indemnified party without the consent of the indemnifying party. (d) In circumstances in which the indemnity agreement provided for in the preceding paragraphs of this Section 9 is unavailable or insufficient, for any reason, to hold harmless an indemnified party in respect of any losses, claims, damages or liabilities (or actions in respect thereof), each indemnifying party, in order to provide for just and equitable contribution, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect (i) the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party on the other from the offering of Notes or (ii) if the allocation provided by the foregoing clause (i) is not permitted by applicable law, not only such relative benefits but also the relative fault of the indemnifying party or parties on the one hand and the indemnified party on the other in connection with the statements or omissions or alleged statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable 28 considerations. The relative benefits received by the Depositor and BMW FS on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total proceeds from the offering of the Notes (before deducting expenses) received by the Depositor bear to the total discounts and commissions received by the Underwriters (the "Spread"), in each case as set forth in the Prospectus Supplement. The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Depositor, BMW FS or the Underwriters, the parties' relative intents, knowledge, access to information and opportunity to correct or prevent such statement or omission, and any other equitable considerations appropriate in the circumstances. The Depositor, BMW FS and the Underwriters agree that it would not be equitable if the amount of such contribution were determined by pro rata or per capita allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take into account the equitable considerations referred to above in this paragraph (d). Notwithstanding any other provision of this paragraph (d), no Underwriter shall be obligated to make contributions hereunder that in the aggregate exceed the amount by which the Spread received by it in the initial offering of such Notes, less the aggregate amount of any damages that such Underwriter has otherwise been required to pay in respect of the same or any substantially similar claim, and no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations to contribute hereunder are several in proportion to their respective principal amount of Securities they have purchased hereunder, and not joint. For purposes of this paragraph (d), each person, if any, who controls an Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, and each director, officer, employee and agent of an Underwriter shall have the same rights to contribution as such Underwriter, and each director of the Depositor and BMW FS, each officer of the Depositor and BMW FS and each person, if any, who controls the Depositor and BMW FS within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, shall have the same rights to contribution as the Depositor and BMW FS. SECTION 10. Defaults by an Underwriter. If any one or more Underwriter(s) fail(s) to purchase and pay for any of the Notes agreed to be purchased by such Underwriter(s) hereunder, and such failure constitutes a default in the performance of its or their obligations under this Agreement, the remaining Underwriter(s) shall be obligated severally to take up and pay for (in the respective proportions that the amount of Notes set forth opposite their names in Schedule I bears to the aggregate amount of Notes set forth opposite the names of all the remaining Underwriter(s)) the Notes that the defaulting Underwriter(s) agreed but failed to purchase; provided, however, that if the aggregate amount of Notes that the defaulting Underwriter(s) agreed but failed to purchase exceeds 10% of the aggregate principal amount of Notes, the remaining Underwriter(s) shall have the right to purchase all, but shall not be under any obligation to purchase any, of the Notes, and if such non-defaulting 29 Underwriter(s) do not purchase all the Notes, this Agreement will terminate without liability to any non-defaulting Underwriter. In the event of a default by any Underwriter as set forth in this paragraph, the Closing Date shall be postponed for such period, not exceeding seven days, as the remaining Underwriter(s) shall determine in order that the required changes in the Prospectus or in any other documents or arrangements may be effected. Nothing contained in this Agreement shall relieve any defaulting Underwriter(s) of any liability to the Depositor, BMW FS, their affiliates and any non-defaulting Underwriter(s) for damages occasioned by its default hereunder. SECTION 11. Survival of Representations and Obligations. The respective indemnities, agreements, representations, warranties and other statements set forth in or made pursuant to this Agreement or contained in certificates of officers submitted pursuant hereto shall remain operative and in full force and effect, regardless of any investigation or statement as to the results thereof, and will survive delivery of and payment for the Notes. If for any reason the purchase of the Notes by the Underwriters is not consummated, each of the Depositor and BMW FS shall remain responsible for the expenses to be paid or reimbursed pursuant to Section 6 and the obligations pursuant to Section 9 shall remain in effect. If for any reason the purchase of the Notes by the Underwriters is not consummated, the Depositor and BMW FS will reimburse the Underwriters severally, upon demand, for all out-of-pocket expenses (including fees and disbursements of counsel) incurred by any Underwriter in connection with the offering of the Notes. SECTION 12. Notices. In all dealings hereunder, you shall act on behalf of each of the Underwriters, and the parties hereto shall be entitled to act and rely upon any statement, request, notice or agreement on behalf of any Underwriter made or given by the Representative. Any notice or notification in any form to be given under this Agreement may be delivered in person or sent by telex, facsimile or telephone (subject in the case of a communication by telephone to confirmation by telex or facsimile) addressed to: in the case of the Depositor: BMW FS Securities LLC ------------------- --------------- Facsimile: Telex: Attention: 30 in the case of BMW FS: BMW FS Financial Services NA, LLC 5515 Parkcenter Circle Dublin, OH 43017 Facsimile: Telex: Attention: in the case of the Representative: JPMorgan a division of Chase Securities Inc. 270 Park Avenue New York, New York 10017 Facsimile: Telex: Attention: Any such notice shall take effect, in the case of delivery, at the time of delivery and, in the case of telex or facsimile, at the time of dispatch. SECTION 13. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto, their respective successors and agents, and the directors, officers and control persons referred to in Section 9, and no other person will have any rights or obligations hereunder. SECTION 14. Miscellaneous. ------------- (a) Time shall be of the essence of this Agreement. (b) The headings herein are inserted for convenience of reference only and are not intended to be part of, or to affect, the meaning or interpretation of this Agreement. (c) For purposes of this Agreement, (a) "business day" means any day on which the New York Stock Exchange is open for trading, and (b) "subsidiary" has the meaning set forth in Rule 405 under the Securities Act. 31 (d) This Agreement may be executed in any number of counterparts, all of which, taken together, shall constitute one and the same Agreement and any party may enter into this Agreement by executing a counterpart. (e) This Agreement shall inure to the benefit of and shall be binding upon the several Underwriters, the Depositor, BMW FS and their respective successors and legal representatives, and nothing expressed or mentioned in this Agreement is intended or shall be construed to give any other person any legal or equitable right, remedy or claim under or in respect of this Agreement, or any provisions herein contained, this Agreement and all conditions and provisions hereof being intended to be and being for the sole and exclusive benefit of such persons and for the benefit of no other person, except that (i) the indemnities of the Depositor and BMW FS contained in Section 9 hereof shall also be for the benefit of any person or persons who control any Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act and (ii) the indemnities of the Underwriters contained in Section 9 hereof shall also be for the benefit of the directors of the Depositor and BMW FS, the officers of the Depositor and BMW FS and any person or persons who control the Depositor or BMW FS within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act. No purchaser of Notes from any Underwriter shall be deemed a successor because of such purchase. (f) The respective representations, warranties, agreements, covenants, indemnities and other statements of the Depositor and BMW FS, its officers and the several Underwriters set forth in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement shall remain in full force and effect, regardless of (i) any investigation made by or on behalf of the Depositor or BMW FS, any of its officers, directors, employees or agents, any Underwriter or any controlling person referred to in Section 9 hereof and (ii) delivery of and payment for the Notes. The respective agreements, covenants, indemnities and other statements set forth in Sections 5 and 9 hereof shall remain in full force and effect, regardless of any termination or cancellation of this Agreement. SECTION 15. Severability. It is the desire and intent of the parties that the provisions of this Agreement be enforced to the fullest extent permissible under the law and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, in the event that any provision of this Agreement would be held in any jurisdiction to be invalid, prohibited or unenforceable for any reason, such provision, as to such jurisdiction, shall be ineffective, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 16. Governing Law. The validity and interpretation of this Agreement, and the terms and conditions set forth herein, shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to any provisions relating to conflicts of laws. 32 If the foregoing is in accordance with your understanding, please sign and return to us five counterparts hereof, and upon the acceptance hereof by you, on behalf of each of the Underwriters, this letter and such acceptance hereof shall constitute a binding agreement among each of the Underwriters and the Depositor and BMW FS. Very truly yours, BMW FS SECURITIES LLC By:______________________ Name: Title: BMW FS FINANCIAL SERVICES NA, LLC By:______________________ Name: Title: The foregoing Agreement is hereby confirmed and accepted as of the date first above written. JPMORGAN a division of CHASE SECURITIES INC. on behalf of itself and as Representative of the several Underwriters By:___________________ Name: Title: 33 SCHEDULE I Principal Amount of ------------------- Underwriter Notes Purchased ----------- --------------- JPMorgan a division of Chase Securities Inc. $ $ Total Amount of Notes Purchased $ SCHEDULE II
Original Principal Investor Investor Security Balance $ Price % Price $ Price % Price $ Rate % - -------- --------- ------- ------- ------- ------- ------ Class A-1 Notes Class A-2 Notes Class A-3 Notes Class A-4 Notes Class B Notes Total Price to Public: $ Total Price to Depositor: Underwriting Discounts and Commissions: $
SCHEDULE III EX-3.1 3 a4_30ex3-1.txt EXHIBIT 3.1 ----------- CERTIFICATE OF FORMATION OF BMW FS SECURITIES LLC This Certificate of Formation of BMW FS Securities LLC (the "LLC"), dated as of February 27, 2001, is being duly executed and filed by Norbert Mayer, as an authorized person, to form a limited liability company under the Delaware Limited Liability Company Act (6 Del.C, ss.18-101, et seq.) FIRST. The name of the limited liability company formed hereby is BMW FS Securities LLC. SECOND. The address of the registered office of the LLC in the State of Delaware is c/o The Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. THIRD. The name and address of the registered agent for service of process on the LLC in the State of Delaware is The Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. IN WITNESS WHEREOF, the undersigned has executed this Certificate of Formation as of the date first above written. /s/ Norbert Mayer --------------------------------- Name: Norbert Mayer Authorized Person EX-3.2 4 a4_30ex3-2.txt EXHIBIT 3.2 ----------- LIMITED LIABILITY COMPANY AGREEMENT FOR BMW FS SECURITIES LLC, a Delaware limited liability company TABLE OF CONTENTS Page Article I - Definitions................................................................................1 Section 1.1........................................................................................."Act\ 1 Section 1.2..................................................................................."Affiliate\ 1 Section 1.3.................................................................................."Bankruptcy" 1 Section 1.4......................................................................................"BMW FS\ 2 Section 1.5........................................................................"Capital Contribution\ 2 Section 1.6................................................................................."Certificate\ 2 Section 1.7........................................................................................"Code\ 2 Section 1.8....................................................................................."Company\ 2 Section 1.9.........................................................................."Distributable Cash\ 2 Section 1.10................................................................................"Fiscal Year\ 2 Section 1.11......................................................................"Independent Directors\ 2 Section 1.12.............................................................................."LLC Agreement\ 2 Section 1.13............................................................................"Managing Member\ 3 Section 1.14..............................................................."Managing Membership Interest\ 3 Section 1.15...................................................................................."Members\ 3 Section 1.16........................................................................"Membership Interest\ 3 Section 1.17..............................................................."Net Profits" and "Net Losses\ 3 Section 1.18........................................................................"Percentage Interest\ 3 Section 1.19....................................................................."Permitted Indebtedness\ 3 Section 1.20....................................................................................."Person\ 3 Section 1.21........................................................................."Purchase Agreement\ 3 Section 1.22................................................................................"Receivables\ 3 Section 1.23.........................................................................."Receivables Corp.\ 3 Section 1.24................................................................................"Regulations\ 4 Section 1.25............................................................................."Special Member\ 4 Section 1.26................................................................"Special Membership Interest\ 4 Article II - Organizational Matters.....................................................................4 Section 2.1....................................................................................Formation. 4 i TABLE OF CONTENTS (continued) Page Section 2.2..........................................................................................Name 4 Section 2.3..........................................................................................Term 5 Section 2.4.........................................Registered Office; Registered Agent; Principal Office 5 Section 2.5............................................................................Address of Members 5 Section 2.6............................................................................Purpose of Company 5 Section 2.7............................................................Limited Liability Company Interest 10 Article III - Capital Contributions.....................................................................10 Section 3.1..................................................................Initial Capital Contribution 10 Section 3.2..............................................................Additional Capital Contributions 10 Section 3.3...................................................................................No Interest 10 Section 3.4...............................................................................Capital Account 11 Section 3.5.........................................................No Withdrawal of Capital Contribution 11 Section 3.6......................................No Personal Liability for Return of Capital Contribution 11 Section 3.7...........................................................Negative Balance in Capital Account 11 Section 3.8.........................................................................................Loans 11 Article IV - Member....................................................................................11 Section 4.1...............................................................Admission of Additional Members 11 Section 4.2..................................................................................Resignations 11 Section 4.3..................................................................Transaction With the Company 12 Section 4.4........................................................................Remuneration to Member 12 Section 4.5.................................................................................Voting Rights 12 Section 4.6........................................................................Meetings of the Member 12 Article V - Management And Control Of The Company; Limited Liability..................................12 Section 5.1...........................................................Management of the Company by Member 12 Section 5.2..............................................Powers With Respect to Management of the Company 12 Section 5.3.........................................................................Special Member Powers 13 Section 5.4...................................................Performance of Duties; Liability of Members 13 Section 5.5.............................................................................Limited Liability 13 Article VI - Allocations Of Net Profits And Net Losses And Distributions...............................13 ii TABLE OF CONTENTS (continued) Page Section 6.1.....................................................Allocations of Net Profits and Net Losses 13 Section 6.2..................................................................Distributions of the Company 13 Section 6.3..........................................................................Form of Distribution 14 Section 6.4.......................................................................Return of Distributions 14 Article VII - Transfer Of Interests.....................................................................14 Article VIII - Accounting, Records, Reporting By Members.................................................14 Section 8.1.............................................................................Books and Records 14 Section 8.2.............................................................Delivery to Member and Inspection 15 Section 8.3.............................................................................Annual Statements 15 Section 8.4.......................................................................................Filings 15 Section 8.5.................................................................................Bank Accounts 15 Section 8.6...................................................Accounting Decisions and Reliance on Others 15 Section 8.7.................................................Tax Matters for the Company Handled by Member 16 Article IX - Dissolution And Winding-Up................................................................16 Section 9.1...................................................................................Dissolution 16 Section 9.2....................................................................................Winding-Up 16 Section 9.3..............................................Order of Payment of Liabilities Upon Dissolution 17 Section 9.4........................................................................No Deficit Restoration 17 Section 9.5...................................................................Certificate of Cancellation 17 Section 9.6.....................................................................No Action for Dissolution 17 Article X - Indemnification...........................................................................17 Section 10.1..............................................................................Indemnification 17 Article XI - Miscellaneous.............................................................................18 Section 11.1...........................................................................Complete Agreement 18 Section 11.2...............................................................................Binding Effect 18 Section 11.3..........................................................................Parties in Interest 18 Section 11.4...............................................................Pronouns; Statutory References 18 Section 11.5.....................................................................................Headings 18 Section 11.6.............................................................References to this LLC Agreement 18 iii TABLE OF CONTENTS (continued) Page Section 11.7.................................................................................Severability 19 Section 11.8................................................................Additional Documents and Acts 19 Section 11.9......................................................................................Notices 19 Section 11.10..................................................................................Amendments 19 Section 11.11.......................................................................Multiple Counterparts 19 Section 11.12.........................................................................Remedies Cumulative 19 Section 11.13...............................................................................Choice of Law 19 Section 11.14...............................................................Federal Income Tax Allocation 19
iv LIMITED LIABILITY COMPANY AGREEMENT FOR BMW FS SECURITIES LLC, a Delaware limited liability company This Limited Liability Company Agreement is made as of and is effective the __ day of , 2001 ("LLC Agreement"), by BMW Financial Services NA, LLC, a Delaware limited liability company ("BMW FS"), as the primary member and BMW FS Receivables Corporation, a Delaware Corporation ("Receivables Corp."), as the second member with reference to the following: RECITALS -------- A. The Certificate of Formation for BMW FS Securities LLC (the "Company") was filed on February 27, 2001, with the Delaware Secretary of State. B. BMW FS and Receivables Corp. now desire to adopt and approve a Limited Liability Company Agreement for the Company. AGREEMENT --------- NOW, THEREFORE, BMW FS and Receivables Corp., adopt and approve the LLC Agreement for the Company under the laws of the State of Delaware upon the terms and subject to the conditions of this LLC Agreement. Article I - Definitions ----------------------- When used in this LLC Agreement, the following terms shall have the meanings set forth below (terms used in this LLC Agreement that are not defined in this Article 1 shall have the meanings set forth elsewhere in this LLC Agreement or in Section 18-101 of the Act, as defined below): Section 1.1 "Act" shall mean the Delaware Limited Liability Company Act (6 Del. C. Section 18-101 et. seq.), as the same may be amended from time to time. Section 1.2 "Affiliate" shall mean a Person or Persons directly or indirectly, through one or more intermediaries, controlling, controlled by or under common control with the Person or Persons in question. The term "control", as used in the immediately preceding sentence, shall mean, with respect to a Person that is a corporation, the right to exercise, directly or indirectly, more than 50% of the voting rights attributable to the shares of the controlled corporation and, with respect to a Person that is not a corporation, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of the controlled Person. Section 1.3 "Bankruptcy"means, with respect to any Person, if such Person (i) makes an assignment for the benefit of creditors, (ii) files a voluntary petition in bankruptcy, (iii) is adjudged a bankrupt or insolvent, or has entered against it an order for relief, in any bankruptcy or insolvency proceedings, (iv) files a petition or answer seeking for itself any reorganization, arrangement, composition, readjustment, liquidation or similar relief under any statute, law or regulation, (v) files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against it in any proceeding of this nature, (vi) seeks, consents or to acquiesces in the appointment of a trustee, receiver or liquidator of the Person or of all or any substantial part of its properties, or (vii) if 120 days after the commencement of any proceeding against the Person seeking reorganization, arrangement, composition, readjustment, liquidation or similar relief under any statute, law or regulation, if the proceeding has not been dismissed, or if within 90 days after the appointment without such Person's consent or acquiescence of a trustee, receiver or liquidator of such Person or of all or any substantial part of its properties, the appointment is not vacated or stayed, or within 90 days after the expiration of any such stay, the appointment is not vacated. The foregoing definition of "Bankruptcy" is intended to replace and shall supersede and replace the definition of "Bankruptcy" set forth in Sections 18-101(1) and 18-304 of the Act. Section 1.4 "BMW FS" means BMW Financial Services NA, LLC, a Delaware limited liability company. Section 1.5 "Capital Contribution" shall mean the total of cash and other assets contributed to the Company by the Managing Member. Section 1.6 "Certificate" shall mean the Certificate of Formation of the Company, filed with the Delaware Secretary of State on February 27, 2001 (which is hereby ratified and approved in all respects), as amended from time to time. Section 1.7 "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, the provisions of succeeding law, and to the extent applicable, the Regulations. Section 1.8 "Company" shall mean BMW FS Securities LLC, a Delaware limited liability company. Section 1.9 "Distributable Cash" shall mean the amount of cash which the Managing Member deems available for distribution, taking into account all the Company's debts, liabilities, and obligations then due (including, without limitation, any agreement to purchase or sell Receivables) and amounts necessary to place into reserves for customary and usual claims with respect to the Company's business. Section 1.10 "Fiscal Year" shall mean the Company's fiscal year, which shall end on December 31st of each year. Section 1.11 "Independent Directors" shall have the meaning set forth in Section 2.6(c) hereof. Section 1.12 "LLC Agreement" shall mean this Limited Liability Company Agreement dated as of __, 2001, for BMW FS Securities LLC, as originally executed and as amended from time to time. 2 Section 1.13 "Managing Member" shall mean BMW FS in its capacity as a member of the Company or any other Person that succeeds BMW FS in that capacity, who is hereby appointed and designated as sole "manager" within the meaning of the Act. Section 1.14 "Managing Membership Interest" shall mean all of the Managing Member's right, title and interest in, to and against the Company (including its limited liability company interest in the Company), including rights to Distributable Cash of the Company and all other rights of the Managing Member to participate in the business, affairs and management of the Company, including without limitation, the right to vote on or grant consent or approval with respect to matters coming before the Company. Section 1.15 "Members" shall mean the Managing Member and the Special Member. Section 1.16 "Membership Interest" shall mean the Special Membership Interest and the Managing Membership Interest. Section 1.17 "Net Profits" and "Net Losses" shall mean the net profits and net losses of the Company for a period (or from a transaction) as determined in accordance with generally accepted accounting principles, consistently applied. Section 1.18 "Percentage Interest" shall mean the limited liability company interest in the Company expressed as a percentage of the total limited liability company interests outstanding. The Percentage Interest of the Managing Member is 100.0%. The Percentage Interest of the Special Member is 0.0%. Section 1.19 "Permitted Indebtedness" shall mean the indebtedness permitted under Section 2.6(b)(iv) hereof. Section 1.20 "Person" shall mean any individual, sole proprietorship, corporation, general partnership, limited partnership, limited liability company or partnership, joint venture, association, joint stock company, bank, trust, estate, unincorporated organization, any federal, state, county or municipal government (or any agency or political subdivision thereof), endowment fund or any other form of entity. Section 1.21 "Purchase Agreement" shall mean any purchase agreement entered into by the Company with respect to the purchase of Receivables. Section 1.22 "Receivables" shall have the meaning set forth in Section 2.6(a)(i) hereof. Section 1.23 "Receivables Corp." shall mean BMW FS Receivables Corporation, a Delaware corporation. 3 Section 1.24 "Regulations" shall, unless the context clearly indicates otherwise, mean the regulations currently in force as formal or temporary that have been issued by the U.S. Department of Treasury pursuant to its authority under the Code. Section 1.25 "Special Member" shall mean Receivables Corp. in its capacity as a member of the Company or any other Person that succeeds Receivables Corp. in that capacity. Section 1.26 "Special Membership Interest" shall mean the Special Member's limited right to manage the Company with respect to voting on the certain matters specified in Section 2.6(d) hereof and the limited right to manage the Company in the event the Managing Member is the subject of a bankruptcy proceeding and is incapable of carrying out its management responsibilities hereunder. The Special Member has no right to any distributions hereunder and has no economic interest in the Company. Article II - Organizational Matters ----------------------------------- Section 2.1 Formation. Pursuant to the Act, BMW FS and Norbert Mayer, as an authorized person within the meaning of the Act, formed a limited liability company under the laws of the State of Delaware by filing the Certificate with the Delaware Secretary of State and otherwise complying with the requirements of the Act for the formation of limited liability companies. Upon the filing of the Certificate, Norbert Mayer's powers as an authorized person ceased. The filing of the Certificate of the Company with the Delaware Secretary of State is hereby ratified and approved in all respects. BMW FS and Receivables Corp. (and any successors thereto as Members) are each hereby designated an authorized person, within the meaning of the Act, to execute, deliver and file with the Delaware Secretary of State any amendments and/or restatements of the Certificate of the Company. Without the need for the consent of any Person, BMW FS is hereby admitted to the Company as the Managing Member of the Company and Receivables Corp. is hereby admitted to the Company as the Special Member of the Company. The rights and liabilities of each Member shall be determined pursuant to the Act and this LLC Agreement. To the extent that the rights or obligations of each Member are different by reason of any provision of this LLC Agreement than they would be in the absence of such provision, this LLC Agreement shall control, to the extent permitted by the Act. Section 2.2 Name. The name of the Company shall be "BMW FS Securities LLC". The business of the Company may be conducted under that name or, upon compliance with applicable laws, any other name that the Managing Member deems appropriate or advisable. The Managing Member shall qualify the Company to do business in New Jersey and shall file any qualification instruments and fictitious name certificates and similar filings, and any amendments thereto, as necessary to qualify the Company to conduct business in the State of New Jersey or which the Managing Member otherwise considers appropriate or advisable in accordance with Article 5 of this LLC Agreement. 4 Section 2.3 Term. The term of the Company shall commence from the date as set forth in the introductory paragraph and shall continue until dissolution of the Company, as hereinafter provided. Section 2.4 Registered Office; Registered Agent; Principal Office. The Company shall continuously maintain a registered office and registered agent in the State of Delaware as required by the Act. At the time of its formation, the registered office and registered agent of the Company in Delaware is The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, County of New Castle, Delaware 19801. In addition, the Company shall maintain its principal office at 300 Chestnut Ridge Road, Woodcliff Lake, New Jersey 07677, or at such other place as the Managing Member may determine. The registered office, registered agent and principal office of the Company may be changed at any time and from time to time by the Managing Member. Section 2.5 Address of Members. The address of BMW FS as the initial Managing Member as of the date of this LLC Agreement is 300 Chestnut Ridge Road, Woodcliff, New Jersey 07677, Attention: General Counsel. The address of Receivables Corp. as the initial Special Member as of the date of this LLC Agreement is 300 Chestnut Ridge Road, Woodcliff, New Jersey 07677, Attention General Counsel. Any successor Member who is admitted shall notify BMW FS, Receivables Corp. and the Company of its address upon admission as a member of the Company. Each Member shall provide notice of a change in its address to the Managing Member and the Company. Section 2.6 Purpose of Company. (a) The nature of the business or purposes to be conducted or promoted by the Company is to engage solely in the following activities: (i) to acquire from time to time all right, title and interest in and to receivables or leases arising out of or relating to the financing, sale or lease of new or used motor vehicles or industrial equipment, including automobiles, sports utility vehicles, light and heavy duty trucks, motorcycles and recreational vehicles, monies due thereunder, security interests in the motor vehicles or equipment financed thereby, proceeds from claims on insurance policies related thereto, and related rights (collectively, "Receivables"); (ii) to acquire, own, hold, service, sell, assign, pledge and otherwise deal with the Receivables, collateral securing the Receivables, related insurance policies, agreements with motor vehicle or equipment dealers or lessors or other obligors, originators or servicers of Receivables and any proceeds or further rights associated with any of the foregoing; (iii) to transfer Receivables to corporations, trusts (the "Trusts") or other entities (each a "Transferee") pursuant to one or more receivables purchase agreements, pooling and servicing agreements, sale and servicing agreements or other agreements (the "Agreements") to be entered into 5 by and among, among others, the Company, the Transferee named therein and any entity acting as collection agent or servicer of the Receivables; (iv) to sell Receivables to, or to finance ownership of Receivables through, one or more Transferees established to fund the transfer of Receivables through the issuance of commercial paper notes (such Transferee's commercial paper notes issued to fund such Receivables, the "Commercial Paper") pursuant to one or more Agreements to be entered into by and among, among others, the Company, such Transferee and any entity acting as collection agent or servicer of the Receivables; (v) to authorize, sell and deliver, or to participate in the issuance and sale of, any class of certificates or other securities (collectively, the "Certificates") issued by a Trust or other Transferee under the related Agreements; (vi) to acquire certificates or other interests (including special units of beneficial interest) issued by one or more trusts owning (or established to acquire) Receivables directly or indirectly; (vii) to issue, sell, authorize and deliver, or to participate in the issuance and sale of, one or more series and classes of bonds, notes or other evidence of indebtedness secured or collateralized by one or more pools of Receivables or by certificates of any class issued by one or more trusts including certificates of any class issued by a trust established, or interests in which are acquired, by BMW FS or Receivables Corp. (collectively, the "Notes"); (viii) to hold and enjoy all of the rights and privileges of any Certificates issued by the Trusts to the Company under the related Agreements and to hold and enjoy all of the rights and privileges of any class of any series of Notes, or Certificates, including any class of Notes or Certificates which may be subordinate to any other class of Notes or Certificates, respectively; (ix) to perform its obligations under the Agreements and any indenture or other agreement (each, an "Indenture") pursuant to which any Certificates or Notes are issued; and (x) transact any and all lawful business that is reasonably necessary, proper or incidental or convenient to the conduct, promotion or attainment or for the furtherance of the purposes, activities and businesses described in this Section 2.6(a) and for the protection of the Company. In furtherance of such purposes, the Company shall have the power, and is hereby authorized to buy and sell Receivables. (b) Notwithstanding any other provision of this LLC Agreement to the contrary, and any provision of law that otherwise so empowers the Company, the Company shall not do any of the following: 6 (i) own any asset or property other than (A) the Receivables, and (B) incidental personal and intangible property relating to the ownership of the Receivables; (ii) engage in any business other than those set forth in subsection (a) above; (iii) enter into any contract or agreement with any Affiliate of the Company, any constituent party of the Company, or any Affiliate of any constituent party, except in the ordinary course of business and upon terms and conditions that are substantially similar to those that would be available on an arms-length basis with third parties; (iv) incur any indebtedness, or assume or guarantee any indebtedness of any other entity, secured or unsecured, direct or indirect, absolute or contingent other than (A) any indebtedness incurred in connection with any Commercial Paper, Certificates or Notes, and (B) any indebtedness to BMW FS or any Affiliate thereof incurred in connection with the acquisition of Receivables, which indebtedness shall be subordinated to all other obligations of the Company and shall be nonrecourse debt of the Company, except with respect to proceeds of the Receivables in excess of such proceeds necessary to pay all obligations in relation to the Commercial Paper, Certificates or Notes ("Excess Proceeds"), and shall not constitute a claim against the Company to the extent that Excess Proceeds are insufficient to pay such indebtedness (provided that such indebtedness is also expressly authorized by the Special Member, including all of its Independent Directors), or endeavor to obtain credit or incur any other obligations (other than with respect to Receivables) to any Person based on the assets of any Person other than itself or pledge its assets for the benefit of any other Person; or fail to correct promptly any known misunderstanding with respect to the foregoing; (v) become insolvent or not pay its debts and liabilities (including operating expenses, employment and overhead expenses) from its assets as the same shall become due; (vi) fail to do or cause to be done all things necessary to observe organizational formalities and preserve its existence, or amend, modify, or otherwise change the organizational documents of the Company without the prior written authorization of all its Members, including that of all the Independent Directors of the Special Member; (vii) fail to maintain all of its books, records, and bank accounts separate from those of its Affiliates and any constituent party or fail to prepare separate financial statements (even if consolidated financial statements are also prepared) audited by independent certified public accountants, and file its own tax returns (except to the extent consolidation is required as a matter of law); (viii) fail to hold itself out to the public as a legal entity separate and distinct from any other Person (including any of its 7 Affiliates, any of its constituent parties, or any Affiliate of any constituent party), fail to conduct business in its own name or fail to maintain and utilize separate invoices and checks; (ix) fail to maintain adequate capital, taking into account anticipated excess interest income on assets over interest expense in liabilities, in light of its contemplated business purpose; (x) commingle or pool Company funds and assets with those of any other Person; (xi) fail to maintain its assets in such a manner that it will not be costly or difficult to segregate, ascertain or identify its individual assets from those of any Affiliate or constituent party or any Affiliate of any constituent party or any other Person; (xii) hold itself out to be responsible for or guaranty the debts or obligations of any other Person; (xiii) seek to merge into or consolidate with any Person or, subject to Section 9.1 hereof, dissolve (in whole or in part), wind up (in whole or in part), terminate, convert to a different form of business association (or otherwise change its legal structure) including, but not limited to, transfer of the limited liability company interests of any Member, in whole or in part, or liquidate (in whole or in part), transfer or otherwise dispose of all or substantially all of its assets, unless: (A) the entity (if other than the Company) formed or surviving the consolidation or merger or which acquires the properties and assets of the Company is organized and existing under the laws of the State of Delaware, expressly assumes the due and punctual payment of, and all obligations of the Company, including those obligations of the Company under any Agreement and any Indenture, and has a certificate of incorporation, limited liability company agreement or other controlling document containing provisions identical to the provision of this Section 2.6; and (B) immediately after giving effect to the transaction, no default or event of default has occurred and is continuing under any indebtedness of the Company or any agreements relating to such indebtedness; and (C) the entity (if other than the Company) formed or surviving the consolidation or merger or which acquires the properties and assets of the Company agrees that (i) it shall maintain its funds or assets as identifiable and not commingle its funds or assets with those of any direct or ultimate parent of such entity and pay from its assets all obligations and indebtedness of any kind incurred by it, (ii) it shall maintain separate bank accounts, company records and books of account from those of any direct or ultimate parent of such entity and (iii) the business affairs of such entity will be managed by or under the direction of its Board of Directors, Managing Board, Managing Member, or other governing board and it will 8 conduct its business from an office separate from any direct or ultimate parent of such entity; and (D) the organizational and constituent documents and the surviving entity's organizational documents continue to have provisions identical to the provisions of this Section 2.6; (xiv) file or consent to the filing of any petition, either voluntary or involuntary, for insolvency, bankruptcy, liquidation, receivership, or reorganization under any laws or regulations, or make an assignment for the benefit of creditors or, except as required by law, admit in writing its inability to pay its debts as they come due, except as contemplated by Section 2.6(d) of this LLC Agreement; (xv) take any action that could reasonably be expected to cause the Company to be treated as an association taxable as a corporation for federal, state or local tax purposes, or (xvi) fail to fairly allocate and apportion any overhead (including costs of office space, utilities and routine services) or other expenses (including employee salaries and benefits) shared between the Company and any other Person. Failure of the Company to comply with any of the foregoing restrictions shall not affect the status of the Company as a separate legal entity or adversely affect the limited liability of a Member. (c) The Special Member of the Company shall at all times, except as noted hereafter, cause there to be at least one duly appointed director of its Board of Directors who is an independent director (an "Independent Director") who is not (i) a director, officer or employee of any affiliate of the Company; (ii) a person related to any officer or director of any affiliate of the Company; (iii) a holder (directly or indirectly) of more than 10% of any voting securities of any affiliate of the Company; or (iv) a person related to a holder (directly or indirectly) of more than 10% of any voting securities of any affiliate of the Company; and in the event of the death, incapacity, resignation or removal of all Independent Directors, the Board of Directors shall promptly appoint an Independent Director for each Independent Director whose death, incapacity, resignation or removal caused the related vacancy on the Board of Directors, provided, however, that the Board of Directors shall not vote on any matter unless and until at least one Independent Director has been duly appointed to serve on the Board of Directors. (d) Notwithstanding any other provision of this LLC Agreement or the Certificate or of law that otherwise so empowers the Company, the Company shall not, without the unanimous affirmative vote of all of the Members, which vote must include the vote of all of the Independent Directors of the Special Member, take any of the following actions: (i) to the fullest extent permitted by law, the dissolution, winding up, liquidation, consolidation, conversion to another form of business association, or change in the legal 9 structure of the Company including, but not limited to, transfer of the limited liability company interests of any Member in whole or in part, or the merger of the Company; (ii) the engagement by Company in any business other than as specified in Section 2.6(a); or (iii) the amendment or modification of this Section 2.6. Notwithstanding another provision of this LLC Agreement or the Certificate or of law that otherwise so empowers the Company, the Company shall not, without the unanimous affirmative vote of all of the Members, which vote must include the vote of all of the Independent Directors of the Special Member, take any of the following actions: (A) institute proceedings to be adjudicated bankrupt or insolvent, or consent to the institution of bankruptcy or insolvency proceedings against it, or file a petition seeking or consenting to reorganization or relief under any applicable federal or state law relating to bankruptcy, or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company or a substantial part of its property, or make any assignment for the benefit of creditors, or except as required by law, admit in writing its inability to pay its debts generally as they become due, or take Company action in furtherance of any such action; or (B) the material amendment or modification of any provision of this LLC Agreement (other than this Section 2.6, amendment of which by the Company is prohibited by the prior sentence of this Section 2.6(d)) or the Certificate; and any purported action of the Company which violates this sentence shall be void ab initio and of no force or effect. (e) The Company shall have no liabilities, contingent or otherwise, other than the Permitted Indebtedness. Section 2.7 Limited Liability Company Interest. BMW FS shall, on the execution hereof, sell, transfer or contribute to the Company from time to time all its right, title and interest in and to a pool of Receivables and related assets in a related Purchase Agreement (a "Transaction"). BMW FS will represent, warrant and covenant in each Purchase Agreement to the Company that the Receivable sold thereby will be free and clear of all liens and encumbrances, except for those which constitute Permitted Indebtedness and that the sale, transfer or contribution of the Receivables and related assets and the consummation of the transactions contemplated by this LLC Agreement and the related Purchase Agreement were duly authorized. Article III - Capital Contributions ----------------------------------- Section 3.1 Initial Capital Contribution. The Managing Member shall, on the execution hereof, contribute $100.00 to the Company. The Managing Member shall execute any additional assignments and documents necessary to evidence the foregoing assignment to Company. Section 3.2 Additional Capital Contributions. The Managing Member may contribute additional capital to the Company in such amounts and at such times as Managing Member shall determine in its sole and absolute discretion. Section 3.3 No Interest. The Managing Member shall not be entitled to receive interest on any Capital Contributions. 10 Section 3.4 Capital Account. The Company shall establish and maintain a capital account for the Managing Member to which it shall credit the amount of its Capital Contributions and Net Profits of the Company from time to time and to which it shall charge the Managing Member's share of distributions and Net Losses. The initial capital account of the Managing Member shall be equal to $100.00. Section 3.5 No Withdrawal of Capital Contribution. Except as otherwise provided in this LLC Agreement, the Managing Member shall not withdraw any Capital Contributions without the consent of all the Members. The Managing Member shall not receive any drawing with respect to its Capital Contributions except as otherwise provided in this LLC Agreement. Section 3.6 No Personal Liability for Return of Capital Contribution. Notwithstanding anything to the contrary contained herein, no Member shall be personally liable for the return of Capital Contributions or the return of any additions to the capital accounts of the other Members or the return of any portion of such Capital Contributions or capital account, it being expressly agreed that any return of Capital Contributions as may be made at any time, or from time to time, shall be made solely from the assets of the Company and only in accordance with the term hereof. Section 3.7 Negative Balance in Capital Account. Except as may be required by law, at no time during the term of the Company, or upon the dissolution or liquidation thereof, shall the Managing Member have any obligation to the Company or any other Member to restore any negative balance in its capital account. Section 3.8 Loans. The Managing Member may, but shall not be required to, make loans to the Company and in respect of such loans shall be treated as a creditor of the Company. Such loans shall be repaid as and when the Company has funds available therefor, and such loans and interest thereon (at rates to be agreed upon by the Managing Member and the Company) shall constitute obligations of the Company. Any such loan shall not increase the Managing Member's capital account, entitle the Managing Member to any increase in its share of the Net Profits or to any greater proportion of Net Losses which the Company may sustain. Article IV - Member ------------------- Section 4.1 Admission of Additional Members. No additional members shall be admitted to the Company without the unanimous agreement of all the Members, it being the intent of the Members that the Company shall at all times be a two member limited liability company. Without the need for the consent of any Person, upon a transfer of the limited liability company interest in accordance with this LLC Agreement the transferee shall be deemed admitted as a member of the Company upon the effective date of, and immediately prior to, such transfer. Section 4.2 Resignations. The Members shall not resign as the members of the Company. 11 Section 4.3 Transaction With the Company. Subject to any limitations set forth in this LLC Agreement, including without limitation, Section 2.6 hereof, the Managing Member may lend money to, act as a surety, guarantor or endorser for, guarantee or assume one or more obligations of, provide collateral for, and transact other business with the Company. Subject to this LLC Agreement and applicable law, the Managing Member has the same rights and obligations with respect to any transaction with Company as a person or entity who is not a member or manager. Section 4.4 Remuneration to Member. Except as otherwise authorized in or pursuant to this LLC Agreement, the Members are not entitled to remuneration for acting on Company business. Section 4.5 Voting Rights. Except as expressly modified in this LLC Agreement, each Member shall have the voting, approval and consent rights provided in the Act. Section 4.6 Meetings of the Member. No annual or regular meeting of the Members is required. Article V - Management And Control Of The Company; Limited Liability -------------------------------------------------------------------- Section 5.1 Management of the Company by Member. The business, property and affairs of the Company shall be managed solely by or under the direction of the Managing Member and all powers of the Company shall be exercised by or under the direction of Managing Member, except only for the powers which require the vote of the Special Member under this Article 5. The Managing Member shall conduct the affairs of the Company in the best interest of the Company and the Members, including the safekeeping and use of all Company funds for the benefit of the Company and the Members. Section 5.2 Powers With Respect to Management of the Company. Subject to the limitations set forth in Section 2.6 and in Section 5.3 or expressly provided elsewhere in this LLC Agreement, the Managing Member shall have all necessary powers to manage and carry out the management of the Company and the power to sign contracts and obligations on behalf of the Company, including without limitation, the power to exercise on behalf and in the name of the Company all of the powers of a manager described in the Act. The Managing Member, in its capacity as a manager of the Company, has the authority to bind the Company. Except as otherwise provided herein, the Special Member, in its capacity as a member of the Company, does not have the authority to bind the Company. Notwithstanding any other provision of this LLC Agreement, the Company, and the Managing Member on behalf of the Company, may execute, enter into and perform such agreements as are necessary to carry out the purposes of the Company without any further act, vote or approval. Section 5.3 Special Member Powers. Subject to the terms of the Act and as otherwise provided under this Section 5, the Company shall be managed by the Special Member to the extent, and only to the extent, of the matters described in Section 2.6(d) hereof, and any action taken by the Special Member 12 to approve or ratify any action described in Section 2.6(d) shall require the unanimous approval of all the Members (including all the Independent Directors of the Special Member). The Special Member is hereby designated as a manager within the meaning of the Act but shall have only the rights and powers as are set forth in this Section 5.3 and shall not have the authority to bind the Company. Section 5.4 Performance of Duties; Liability of Members. Neither the Managing Member nor the Special Member shall be liable to Company for any loss or damage sustained by Company, unless the loss or damage shall have been the result of an act performed, or omitted to be performed, in bad faith or with gross negligence or willful misconduct by the Managing Member or by the Special Member, as the case may be. To the extent that, at law or in equity, the Managing Member or the Special Member has duties (including fiduciary duties) and liabilities relating thereto to the Company or to the other Member, the Managing Member and the Special Member acting under this LLC Agreement shall not be liable to the Company or to the other Member for its good faith reliance on the provisions of this LLC Agreement. The provisions of this LLC Agreement, to the extent that they restrict the duties and liabilities of the Managing Member or the Special Member otherwise existing at law or in equity, are agreed by the parties hereto to replace, to the fullest extent permitted by law, such other duties and liabilities of the Managing Member and the Special Member. Section 5.5 Limited Liability. Except as otherwise required by the Act, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and neither the Managing Member nor the Special Member shall be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a manager or member of the Company. Article VI - Allocations Of Net Profits And Net Losses And Distributions ------------------------------------------------------------------------ Section 6.1 Allocations of Net Profits and Net Losses. Net Profits and Net Losses shall be allocated solely to the Managing Members as the holder of 100% of the Percentage Interest. Section 6.2 Distributions of the Company. Distributable Cash shall be distributed solely to the Managing Member. All such distributions shall be made only to the Person who, according to the books and records of the Company, is the holder of record of the Managing Membership Interest in respect of which such distributions are made on the actual date of distribution. Notwithstanding any provision to the contrary contained in this LLC Agreement, the Company shall not make a distribution which would violate the Act or other applicable law. Neither the Company nor the Managing Member shall incur any liability for making distributions in good faith in accordance with Section 2.6 and this Section 6.2. Section 6.3 Form of Distribution. The Managing Member has no right to demand and receive any distribution from the Company in any form other than money. Except upon a dissolution and winding-up of the Company, the 13 Managing Member may not be compelled to accept from the Company a distribution of any asset in kind. Section 6.4 Return of Distributions. Except for distributions made in violation of the Act, other applicable law, or this LLC Agreement, the Managing Member shall not be obligated to return any distribution to the Company or pay the amount of any distribution for the account of the Company or to any creditor of the Company. The amount of any distribution returned to the Company by the Managing Member or paid by the Managing Member for the account of the Company or to a creditor of the Company shall be added to the account or accounts from which it was subtracted when it was distributed to the Managing Member. Article VII - Transfer Of Interests ----------------------------------- Subject to Section 2.6, the Members shall not be entitled to directly or indirectly transfer, assign, convey, sell, encumber or in any way alienate all or any part of their Membership Interest (a "Transfer"). To the fullest extent permitted by law, transfers in violation of this Article 7 shall be null and void ab initio. Article VIII - Accounting, Records, Reporting By Members -------------------------------------------------------- Section 8.1 Books and Records. The books and records of the Company shall be kept, and the financial position and the results of its operations recorded, in accordance with generally accepted accounting principles or such other commonly accepted accounting methods, consistently applied, as may be selected by the Managing Member from time to time. The books and records of the Company shall reflect all the Company transactions and shall be appropriate and adequate for the Company's business. The Company shall maintain at its principal office all of the following: (1) Members. A record of the full name and last known business address of each Member, together with the capital account, Capital Contributions, and Percentage Interest of such Member; (2) Certificate. A copy of the Certificate and any and all amendments thereto together with executed copies of any powers of attorney pursuant to which the Certificate or any amendments thereto have been executed; (3) Tax Returns. Copies of the Company's federal, state, and local income tax or information returns and reports, if any; (4) LLC Agreement. A copy of this LLC Agreement and any and all amendments thereto together with executed copies of any powers of attorney pursuant to which this LLC Agreement or any amendments thereto have been executed; 14 (5) Financial Statements. Copies of the financial statements of the Company, if any, for the six (6) most recent Fiscal Years (but if for less than six (6) years, then for the number of Fiscal Years the Company has been in existence); and (6) Books and Records. The Company's books and records as they relate to the affairs of the Company (including, without limitation, accounting records, leases, contracts and other agreements) for at least the current and past six (6) Fiscal Years (but if for less than six (6) years, then for the number of Fiscal Years the Company has been in existence). Section 8.2 Delivery to Member and Inspection. Each Member has the right to inspect and copy during normal business hours any of the Company records described in Sections 8.1(1) through (6). Section 8.3 Annual Statements. The Managing Member shall cause to be prepared at least annually, at the Company's expense, information necessary for the preparation of each Member's federal and state income tax returns. Within ninety (90) days after the end of each Fiscal Year, such information as is necessary to complete federal and state income tax or information returns shall be made available to each Member, and a copy of the Company's federal, state, and local income tax or information returns, if any, for that year. Section 8.4 Filings. The Managing Member, at the Company's expense, shall cause the income tax and information returns, if any, for the Company to be prepared and timely filed with the appropriate authorities. The Managing Member, at the Company's expense, shall also cause to be prepared and timely filed, with appropriate federal and state regulatory and administrative bodies, amendments to or restatements of the Certificate and all reports required to be filed by the Company with those entities under the Act or other then current applicable laws, rules, and regulations. Section 8.5 Bank Accounts. Subject to the requirements under Section 2.6 of this LLC Agreement, the Managing Member shall maintain the funds of the Company in one or more separate bank accounts. Section 8.6 Accounting Decisions and Reliance on Others. All decisions as to accounting matters, except as otherwise specifically set forth herein, shall be made by the Managing Member. The Managing Member may rely upon the advice of its accountants as to whether such decisions are in accordance with generally accepted accounting principles or other accounting methods appropriate for the Company and authorized hereby. Section 8.7 Tax Matters for the Company Handled by Member. The Managing Member shall from time to time cause the Company to make such tax elections, if any, as it deems to be in the best interests of the Company and the Members. The Managing Member shall be the "Tax Matters Partner" as defined in Code Section 6231, shall represent the Company (at the Company's expense) in connection with all examinations of the Company's affairs by tax authorities, including resulting judicial and administrative proceedings, and shall expend 15 the Company funds for professional services and costs associated therewith. The Managing Member shall oversee the Company tax affairs in the overall best interests of the Company and the Members. Article IX - Dissolution And Winding-Up --------------------------------------- Section 9.1 Dissolution (a) The Company shall be dissolved, and its affairs shall be wound up upon the first to occur of the following: (i) the termination of the legal existence of the last remaining Member of the Company or the occurrence of any other event which terminates the continued membership of the last remaining Member of the Company in the Company unless the Company is continued in a manner permitted by this LLC Agreement or the Act, (ii) the entry of a decree of judicial dissolution under Section 18-802 of the Act or (iii) the unanimous written consent of the Members subject to Section 2.6(d). Upon the occurrence of any event that causes the last remaining Member of the Company to cease to be a member of the Company, to the fullest extent permitted by law, the personal representative of such member is hereby authorized to and shall, within 90 days after the occurrence of the event that terminated the continued membership of such Member in the Company, agree in writing (i) to continue the Company and (ii) to the admission of the personal representative or its nominee or designee, as the case may be, as a substitute Member of the Company, effective as of the occurrence of the event that terminated the continued membership of the last remaining Member of the Company in the Company. (b) Notwithstanding any other provision of this LLC Agreement, the Bankruptcy of a Member (including the Special Member) shall not cause such Member (including the Special Member) to cease to be a Member of the Company and upon the occurrence of such an event, the business of the Company shall continue without dissolution. Section 9.2 Winding-Up. Upon the dissolution of the Company, the Company shall continue solely for the purpose of winding-up its affairs in an orderly manner, liquidating its assets, and satisfying the claims of its creditors. The Managing Member shall be responsible for overseeing the winding-up and liquidation of the Company, shall take full account of the liabilities of the Company and its assets, shall either cause its assets to be sold or distributed (as provided in Section 9.3 hereof), and if sold (as promptly as is consistent with obtaining the fair market value thereof) shall cause the proceeds therefrom, to the extent sufficient therefor, to be applied and distributed as provided in Section 9.3 hereof. Section 9.3 Order of Payment of Liabilities Upon Dissolution. Upon dissolution, the assets of the Company shall be liquidated, and the proceeds from such liquidation shall be allocated and distributed in the following order of priority: (a) First, to the satisfaction of creditors of the Company, including the Managing Member if a creditor, to the extent otherwise permitted by law, in satisfaction of the liabilities of the Company (whether by 16 payment or the making of reasonable provision for payment thereof); (b) Second, to the satisfaction of all debts, liabilities and other obligations owed to the Managing Member and not paid pursuant to clause (a) above (whether by payment or the making of reasonable provision for payment thereof); and (c) The balance to the Managing Member. Section 9.4 No Deficit Restoration. If, upon liquidation, the Managing Member has a deficit balance in its capital account, after taking into account all capital account adjustments for the Company's Fiscal Year during which liquidation occurs, neither the Managing Member nor the Special Member shall have any obligation to contribute cash to the capital of the Company to restore such deficit balance. Section 9.5 Certificate of Cancellation. The Managing Member shall cause to be filed in the office of, and on a form prescribed by, the Delaware Secretary of State, a certificate of cancellation of the Certificate upon completion of the winding-up of the affairs of the Company to terminate the Company. The existence of the Company as a separate legal entity shall continue until the cancellation of the Certificate as provided in the Act. Section 9.6 No Action for Dissolution. To the fullest extent permitted by law, neither the Managing Member nor the Special Member shall take any voluntary action that directly or indirectly causes a dissolution of the Company. The Members acknowledge that irreparable damage would be done to the goodwill and reputation of the Company if the Members should bring an action in court to dissolve the Company under circumstances where dissolution is not required by Section 9.1. This LLC Agreement has been drawn carefully to provide fair treatment of all parties and equitable payment in liquidation of the Membership Interests. Accordingly, to the fullest extent permitted by law, each Member hereby waives and renounces its right to initiate legal action to seek the appointment of a receiver or trustee to liquidate the Company or to seek a decree of judicial dissolution of the Company (including, but not limited to, any right which any Member may have under Section 18-802 of the Act). Article X - Indemnification --------------------------- Section 10.1 Indemnification. The Company shall defend, indemnify and save harmless each Member (including in its capacity as Managing Member or Special Member) from and against all claims, losses, damages, cost, expense, demands, liabilities, obligations, liens, encumbrances, rights of action or attorneys' fees ("Claims") sustained by reason of any act performed, or omitted to be performed, in good faith and without gross negligence or willful misconduct, within the scope of its authority expressly conferred by this LLC Agreement, to the fullest extent permitted by applicable law in effect on the date hereof and to such greater extent as applicable law may hereafter 17 from time to time permit, to the extent of available funds, otherwise it shall be subordinated. Such indemnity shall not be construed to limit or diminish the coverage of each Member under any insurance obtained by the Company. Payment shall not be a condition precedent to any indemnification provided in this LLC Agreement. Article XI - Miscellaneous -------------------------- Section 11.1 Complete Agreement. This LLC Agreement and the Certificate constitute the complete and exclusive statement of agreement of the Members with respect to the subject matter herein and therein and replace and supersede all prior written and oral agreements or statements by the Members. No representation, statement, condition or warranty not contained in this LLC Agreement or the Certificate will be binding on any Member or has any force or effect whatsoever. Section 11.2 Binding Effect. Subject to the provisions of this LLC Agreement relating to transferability, this LLC Agreement will be binding upon and inure to the benefit of each Member, and its respective successors and assigns. Section 11.3 Parties in Interest. Except as expressly provided in the Act or in this LLC Agreement, nothing in this LLC Agreement shall confer any rights or remedies under or by reason of this LLC Agreement on any Person other than each Member and its successors and assigns nor shall anything in this LLC Agreement relieve or discharge the obligation or liability of any third Person to the Company or any party to this LLC Agreement, nor shall any provision hereof give any third Person any right of subrogation or action over or against Company or any party to this LLC Agreement. Section 11.4 Pronouns; Statutory References. All pronouns and all variations thereof shall be deemed to refer to the masculine, feminine, or neuter, singular or plural, as the context in which they are used may require. Any reference to the Code, the Regulations, the Act, or other statutes or laws will include all amendments, modifications, or replacements of the specific sections and provisions concerned. Section 11.5 Headings. All headings herein are inserted only for convenience and ease of reference and are not to be considered in the construction or interpretation of any provision of this LLC Agreement. Section 11.6 References to this LLC Agreement. Numbered or lettered articles, sections and subsections herein contained refer to articles, sections and subsections of this LLC Agreement unless otherwise expressly stated. Section 11.7 Severability. If any provision of this LLC Agreement or the application of such provision to any Person or circumstance shall be held invalid, the remainder of this LLC Agreement or the application of such provision to Persons or circumstances other than those to which it is held invalid shall not be affected thereby. Section 11.8 Additional Documents and Acts. The Members agree to execute and deliver such additional documents and instruments and to perform such additional acts as may be necessary or appropriate to effectuate, carry out 18 and perform all of the terms, provisions, and conditions of this LLC Agreement and the transactions contemplated hereby. Section 11.9 Notices. Any notice which the Company or the Managing Member or Special Member is required or may desire to give the others shall be in writing and may be personally delivered or given by United States registered or certified mail, return receipt requested, addressed as provided under Section 2.5 above (subject to the right of such Person to designate a different address for itself by notice similarly given). Any notice so given by United States mail shall be deemed to have been given on the third day after the same is deposited in the United States mail as a registered or certified matter, return receipt requested, addressed as above provided, with postage thereon fully prepaid. Any notice not given by registered or certified mail as aforesaid shall be deemed to be given upon actual receipt of the same by the Person to whom the same is to be given, provided that the refusal by such Person to receive any such notice shall be deemed such Person's receipt of the same. Section 11.10 Amendments. Subject to Section 2.6, all amendments to this LLC Agreement will be in writing and signed by all of the Members. Section 11.11 Multiple Counterparts. This LLC Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. Section 11.12 Remedies Cumulative. The remedies under this LLC Agreement are cumulative and shall not exclude any other remedies to which any person may be lawfully entitled. Section 11.13 Choice of Law. This LLC Agreement shall be governed by, and shall be construed in accordance with, the laws of the State of Delaware (without regard to conflict of laws principles). Section 11.14 Federal Income Tax Allocation. It is the intention of the parties hereto that, for federal income tax purposes, the Company shall be disregarded as an entity apart from the Managing Member, as long as the Managing Member is the holder of all the beneficial interest in the Company for federal income tax purposes, or treated as a partnership if the Managing Member is not the holder of all the beneficial interest in the Company for federal income tax purposes. The parties agree that, unless otherwise required by appropriate tax authorities, the Managing Member will file or cause to be filed annual or other necessary returns, reports and other forms consistent with the characterization of the Company as a division of the Managing Member, or as a partnership, as the case may be, for such tax purposes. For so long as the Managing Member's Percentage Interest is 100%, the Company shall be disregarded as an entity separate from the Managing Member for federal income tax purposes and all net income of the Company for any month as determined solely for federal income tax purposes (and each item of income, gain, loss, credit and deduction entering into the computation thereof) 19 shall be allocated to the Managing Member and treated in the same manner as if the Company were a division or branch of the Managing Member. 20 IN WITNESS WHEREOF, each Member has executed this LLC Agreement, effective as of the date first written above. BMW FINANCIAL SERVICES NA, LLC By:________________________ Name: Title: By:________________________ Name: Title: BMW FS RECEIVABLES CORPORATION By:_________________________ Name: Title: By:________________________ Name: Title: 21 EX-3.3 5 a4_30ex3-3.txt EXHIBIT 3.3 ----------- TRUST AGREEMENT OF BMW VEHICLE OWNER TRUST 2001-A TRUST AGREEMENT, dated as of April __, 2001, between BMW FS Securities LLC, a Delaware limited liability company (the "Depositor"), and Wilmington Trust Company, a Delaware banking corporation (the "Owner Trustee"). The Depositor and the Owner Trustee hereby agree as follows: 1. The trust created hereby shall be known as "BMW Vehicle Owner Trust 2001- A" (the "Trust"), in which name the Owner Trustee may conduct the business of the Trust, make and execute contracts, and sue and be sued. 2. The Depositor hereby assigns, transfers, conveys and sets over to the Owner Trustee the sum of $1. The Owner Trustee hereby acknowledges receipt of such amount in trust from the Depositor, which amount shall constitute the initial trust estate. The Owner Trustee hereby declares that it will hold the trust estate in trust for the Depositor. It is the intention of the parties hereto that the Trust created hereby constitute a business trust under Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. ss. 3801 et seq. and that this document constitute the governing instrument of the Trust. The Owner Trustee is hereby authorized and directed to execute and file a certificate of trust with the Delaware Secretary of State in the form attached hereto as Exhibit A. 3. The Owner Trustee may resign upon thirty days prior notice to the Depositor. If no successor has been appointed within such thirty day period, the Owner Trustee may, at the expense of the Trust, petition a court of competent jurisdiction to appoint a successor trustee. 4. The Depositor and the Owner Trustee will enter into an amended and restated Trust Agreement, satisfactory to each such party, to provide for the contemplated operation of the Trust created hereby. Prior to the execution and delivery of such amended and restated Trust Agreement, the Owner Trustee shall not have any duty or obligation hereunder or with respect to the trust estate, except as otherwise required by applicable law or as may be necessary to obtain prior to such execution and delivery any licenses, consents or approvals required by applicable law or otherwise as such are prepared for filing with the appropriate authority and presented to the Owner Trustee by the Depositor, or its counsel, in execution form. The Depositor is hereby authorized to execute on behalf of the Trust any informational or other filings, documents papers and instruments as may be required to be filed with the Securities and Exchange Commission. 5. The Owner Trustee accepts the trusts hereby created and agrees to perform its duties hereunder with respect to the same but only upon the terms of this Trust Agreement. Except as otherwise expressly required in Section 2 of this Trust Agreement, the Owner Trustee shall not have any duty or liability with respect to the administration of the Trust, the investment of the Trust's property or the payment of dividends or other distributions of income or principal to the Trust's beneficiaries, and no implied obligations shall be inferred from this Trust Agreement on the 1 part of the Owner Trustee. The Owner Trustee shall not be liable for the acts or omissions of the Depositor or any other person who acts on behalf of the Trust nor shall the Owner Trustee be personally liable for any act or omission of the Owner Trustee, except for its own willful misconduct or gross negligence. 6. This Trust Agreement may be executed in one or more counterparts, each of which when so executed shall be an original and all of which when taken together shall constitute but one and the same instrument. 7. This Trust Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without reference to is conflict of law provisions, and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such laws. [signature page follows] 2 IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to be duly executed by their respective officers thereunto duly authorized, as of the day and year first above written. BMW FS SECURITIES LLC, as Depositor By: ----------------------------------------- Name: Title: WILMINGTON TRUST COMPANY, as Owner Trustee By: ----------------------------------------- Name: Title: 3 EXHIBIT A: FORM OF CERTIFICATE OF TRUST - --------------------------------------- CERTIFICATE OF TRUST OF BMW VEHICLE OWNER TRUST 2001-A THIS Certificate of Trust of BMW Vehicle Owner Trust 2001-A (the "Trust") is being duly executed and filed on behalf of the Trust by the undersigned, as trustee, to form a business trust under the Delaware Business Trust Act (12 Del. C.ss.3801 et. seq.) (the "Act"). 1. Name. The name of the business trust formed hereby is BMW Vehicle Owner Trust 2001-A. 2. Delaware Trustee. The name and business address of the trustee of the Trust in the State of Delaware is Wilmington Trust Company, Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890, Attention: Corporate Trust Administration. 3. Effective Date. This Certificate of Trust shall be effective upon filing. IN WITNESS WHEREOF, the undersigned has duly executed this Certificate of Trust in accordance with Section 3811 (a)(1) of the Act. WILMINGTON TRUST COMPANY, as trustee By: _____________________________ Name: Title: A-1 EX-4.1 6 s3aex4-1.txt INDENTURE between BMW VEHICLE OWNER TRUST 2001-A, as Issuer and THE CHASE MANHATTAN BANK, as Indenture Trustee Dated as of April [ ], 2001 TABLE OF CONTENTS Page ARTICLE I. DEFINITIONS AND INCORPORATION BY REFERENCE......................2 SECTION 1.01. Definitions................................................2 SECTION 1.02. Rules of Construction......................................8 SECTION 1.03. Incorporation by Reference of Trust Indenture Act..........9 ARTICLE II. THE NOTES.......................................................9 SECTION 2.01. Form.......................................................9 SECTION 2.02. Execution, Authentication and Delivery....................10 SECTION 2.03. Temporary Notes...........................................10 SECTION 2.04. Registration; Registration of Transfer and Exchange.......11 SECTION 2.05. [Reserved]................................................12 SECTION 2.06. Mutilated, Destroyed, Lost or Stolen Notes................12 SECTION 2.07. Persons Deemed Owners.....................................13 SECTION 2.08. Payment of Principal and Interest; Defaulted Interest.....13 SECTION 2.09. Cancellation..............................................14 SECTION 2.10. Book-Entry Notes..........................................15 SECTION 2.11. Notices to Clearing Agency................................15 SECTION 2.12. Definitive Notes..........................................16 SECTION 2.13. Tax Treatment.............................................16 ARTICLE III. COVENANTS......................................................16 SECTION 3.01. Payment of Principal and Interest.........................16 SECTION 3.02. Maintenance of Office or Agency...........................17 SECTION 3.03. Money for Payments To Be Held in Trust....................17 SECTION 3.04. Existence.................................................18 SECTION 3.05. Protection of Trust Estate................................18 SECTION 3.06. Opinions as to Trust Estate...............................19 SECTION 3.07. Performance of Obligations; Servicing of Receivables......19 SECTION 3.08. Negative Covenants........................................21 SECTION 3.09. Annual Statement as to Compliance.........................21 SECTION 3.10. Issuer May Consolidate, etc., Only on Certain Terms.......22 SECTION 3.11. Successor or Transferee...................................23 SECTION 3.12. No Other Business.........................................23 SECTION 3.13. No Borrowing..............................................23 SECTION 3.14. Servicer's Obligations....................................24 SECTION 3.15. Guarantees, Loans, Advances and Other Liabilities.........24 SECTION 3.16. Capital Expenditures......................................24 SECTION 3.17. Removal of Administrator..................................24 SECTION 3.18. Restricted Payments.......................................24 SECTION 3.19. Notice of Events of Default...............................24 SECTION 3.20. Further Instruments and Acts..............................24 i TABLE OF CONTENTS (continued) Page ARTICLE IV. SATISFACTION AND DISCHARGE.....................................24 SECTION 4.01. Satisfaction and Discharge of Indenture...................25 SECTION 4.02. Application of Trust Money................................26 SECTION 4.03. Repayment of Moneys Held by Paying Agent..................26 SECTION 4.04. Release of Collateral.....................................26 ARTICLE V. REMEDIES.......................................................26 SECTION 5.01. Events of Default.........................................26 SECTION 5.02. Acceleration of Maturity; Rescission and Annulment........27 SECTION 5.03. Collection of Indebtedness and Suits for Enforcement by Indenture Trustee......................................28 SECTION 5.04. Remedies; Priorities......................................31 SECTION 5.05. Optional Preservation of the Receivables..................33 SECTION 5.06. Limitation of Suits.......................................33 SECTION 5.07. Unconditional Rights of Noteholders To Receive Principal and Interest....................................34 SECTION 5.08. Restoration of Rights and Remedies........................34 SECTION 5.09. Rights and Remedies Cumulative............................34 SECTION 5.10. Delay or Omission Not a Waiver............................34 SECTION 5.11. Control by the Controlling Class of Noteholders...........34 SECTION 5.12. Waiver of Past Defaults...................................35 SECTION 5.13. Undertaking for Costs.....................................35 SECTION 5.14. Waiver of Stay or Extension Laws..........................36 SECTION 5.15. Action on Notes...........................................36 SECTION 5.16. Performance and Enforcement of Certain Obligations........36 ARTICLE VI. THE INDENTURE TRUSTEE..........................................37 SECTION 6.01. Duties of Indenture Trustee...............................37 SECTION 6.02. Rights of Indenture Trustee...............................39 SECTION 6.03. Individual Rights of Indenture Trustee....................40 SECTION 6.04. Indenture Trustee's Disclaimer............................40 SECTION 6.05. Notice of Defaults........................................40 SECTION 6.06. Reports by Indenture Trustee to Holders...................40 SECTION 6.07. Compensation and Indemnity................................40 SECTION 6.08. Replacement of Indenture Trustee..........................41 SECTION 6.09. Successor Indenture Trustee by Merger.....................42 SECTION 6.10. Appointment of Co-Indenture Trustee or Separate Indenture Trustee.........................................42 SECTION 6.11. Eligibility; Disqualification.............................43 SECTION 6.12. [Reserved]................................................44 SECTION 6.13. Preferential Collection of Claims AgainstIssuer...........44 SECTION 6.14. Waiver of Setoffs.........................................44 ii TABLE OF CONTENTS (continued) Page ARTICLE VII. NOTEHOLDERS' LISTS AND REPORTS.................................44 SECTION 7.01. Issuer To Furnish Indenture Trustee Names and Addresses of Noteholders..................................44 SECTION 7.02. Preservation of Information; Communications to Noteholders...............................................44 SECTION 7.03. Reports by Issuer.........................................45 SECTION 7.04. Reports by Indenture Trustee..............................45 ARTICLE VIII. ACCOUNTS, DISBURSEMENTS AND RELEASES...........................45 SECTION 8.01. Collection of Money.......................................45 SECTION 8.02. Trust Accounts............................................46 SECTION 8.03. General Provisions Regarding Accounts.....................48 SECTION 8.04. Release of Trust Estate...................................48 SECTION 8.05. Opinion of Counsel........................................48 ARTICLE IX. SUPPLEMENTAL INDENTURES........................................49 SECTION 9.01. Supplemental Indentures Without Consent of Noteholders....49 SECTION 9.02. Supplemental Indentures with Consent of Noteholders.......50 SECTION 9.03. Execution of Supplemental Indentures......................52 SECTION 9.04. Effect of Supplemental Indenture..........................52 SECTION 9.05. Reference in Notes to Supplemental Indentures.............52 SECTION 9.06. Conformity with Trust Indenture Act.......................52 ARTICLE X. REDEMPTION OF NOTES............................................52 SECTION 10.01. Redemption................................................52 SECTION 10.02. Form of Redemption Notice.................................53 SECTION 10.03. Notes Payable on Redemption Date..........................53 ARTICLE XI. MISCELLANEOUS..................................................53 SECTION 11.01. Compliance Certificates and Opinions, etc.................53 SECTION 11.02. Form of Documents Delivered to Indenture Trustee..........55 SECTION 11.03. Acts of Noteholders.......................................56 SECTION 11.04. Notices, etc., to Indenture Trustee, Issuer and Rating Agencies...........................................56 SECTION 11.05. Notices to Noteholders; Waiver............................57 SECTION 11.06. Alternate Payment and Notice Provisions...................58 SECTION 11.07. Effect of Headings and Table of Contents..................58 SECTION 11.08. Successors and Assigns....................................58 SECTION 11.09. Separability..............................................58 SECTION 11.10. Benefits of Indenture.....................................58 SECTION 11.11. Legal Holidays............................................58 SECTION 11.12. GOVERNINGLAW..............................................58 SECTION 11.13. Counterparts..............................................58 SECTION 11.14. Recording of Indenture....................................58 SECTION 11.15. Trust Obligation..........................................59 SECTION 11.16. No Petition...............................................59 iii TABLE OF CONTENTS (continued) Page SECTION 11.17. Inspection................................................59 SECTION 11.18. Conflict with Trust Indenture Act.........................59 SECTION 11.19. Limitation of Liability...................................60 EXHIBITS SCHEDULE A Schedule of Receivables EXHIBIT A-1 Form of Class A-1 Note EXHIBIT A-2 Form of Class A-2 Note EXHIBIT A-3 Form of Class A-3 Note EXHIBIT A-4 Form of Class A-4 Note EXHIBIT B Form of the Note Depository Agreement iv THIS INDENTURE, dated as of April [ ], 2001, is between BMW VEHICLE OWNER TRUST 2001-A, a Delaware business trust (the "Issuer"), and THE CHASE MANHATTAN BANK, a New York banking corporation, as trustee and not in its individual capacity (the "Indenture Trustee"). Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of the Issuer's [ ]% Asset Backed Notes, Class A-1 (the "Class A-1 Notes"), [ ]% Asset Backed Notes, Class A-2 (the "Class A-2 Notes"), [ ]% Asset Backed Notes, Class A-3 (the "Class A-3 Notes") and [ ]% Asset Backed Notes, Class A-4 (the "Class A-4 Notes") and [ ]% Asset Backed Notes, Class B (the "Class B Notes" and, together with the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes and the Class A-4 Notes, the "Notes"): GRANTING CLAUSE The Issuer hereby Grants to the Indenture Trustee at the Closing Date, as Indenture Trustee for the benefit of the Holders of the Notes, all of the Issuer's right, title and interest in and to (a) the Receivables listed on Schedule A and all moneys received thereon on or after April [ ], 2001, (b) the security interests in the Financed Vehicles and any accessions thereto granted by Obligors pursuant to the Receivables and any other interest of the Issuer in such Financed Vehicles; (c) any Liquidation Proceeds and any other proceeds with respect to the Receivables from claims on any physical damage, credit life or disability insurance policies covering Financed Vehicles or Obligors, including any vendor's single interest or other collateral protection insurance policy; (d) any property that shall have secured a Receivable and that shall have been acquired by or on behalf of the Seller, the Servicer, or the Issuer; (e) all documents and other items contained in the Receivable Files; (f) all funds on deposit from time to time in the Trust Accounts and in all investments and proceeds thereof (including all income thereon); (g) the Issuer's rights and benefits, but none of its obligations, under the Sale and Servicing Agreement (including the Issuer's right to cause the Seller, or the Servicer, as the case may be, to repurchase Receivables from the Issuer under the circumstances described therein); (h) the Issuer's rights and benefits under the Receivables Purchase Agreement, including the representations and warranties and the cure and repurchase obligations of the Seller under the Receivables Purchase Agreement; (i) the Issuer's rights and benefits under the Subsequent Purchase Agreement, including the representations and warranties and the cure and repurchase obligations of the Seller under the Subsequent Purchase Agreement; (j) all right, title and interest in all funds on deposit from time to time in the Trust Accounts and all investments and proceeds thereof (including all investment earnings therein); and (k) all present and future claims, demands, causes of action and choses in action in respect of any or all of the foregoing and all payments on or under and all proceeds of every kind and nature whatsoever in respect of any or all of the foregoing, including all proceeds of the conversion thereof, voluntary or involuntary, into cash or other liquid property, all cash proceeds, accounts, accounts receivable, notes, drafts, acceptances, chattel paper, checks, deposit accounts, insurance proceeds, condemnation awards, rights to payment of any and every kind and other forms of obligations and receivables, instruments and other property that at any time constitute all or part of or are included in the proceeds of any of the foregoing (collectively, the "Collateral"). The foregoing Grant is made in trust to secure the payment of principal of and interest on, and any other amounts owing in respect of, the Notes, equally and ratably without prejudice, priority or distinction, and to secure compliance with the provisions of this Indenture, all as provided in this Indenture. The Indenture Trustee, on behalf of the Holders of the Notes, acknowledges such Grant, accepts the trusts under this Indenture in accordance with the provisions of this Indenture and agrees to perform its duties required in this Indenture to the best of its ability to the end that the interests of the Holders of the Notes may be adequately and effectively protected. ARTICLE I. DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. Definitions. (a) Definitions. Except as otherwise specified herein or as the context may otherwise require, the following terms have the respective meanings set forth below for all purposes of this Indenture. "Act" has the meaning specified in Section 11.03(a). "Administration Agreement" means the Owner Trust Administration Agreement, dated as of April [ ], 2001, among the Administrator, the Issuer and the Indenture Trustee. "Administrator" means BMW FS, or any successor Administrator under the Administration Agreement. "Affiliate" means, with respect to any specified Person, any other Person controlling or controlled by or under common control with such specified Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Authorized Officer" means, with respect to the Issuer, any officer of the Owner Trustee who is authorized to act for the Owner Trustee in matters relating to the Issuer and who is identified on the list of Authorized Officers delivered by the Owner Trustee to the Indenture Trustee on the Closing Date (as such list may be modified or supplemented from time to time thereafter) and, so long as the Administration Agreement is in effect, any Vice President or more senior officer of the Administrator who is authorized to act for the Administrator in matters relating to the Issuer and to be acted upon by the Administrator pursuant to the Administration Agreement and who is identified on the list of Authorized Officers delivered by the Administrator to the Indenture Trustee on the Closing Date (as such list may be modified or supplemented from time to time thereafter). 2 "BMW FS" means BMW Financial Services NA, LLC, a Delaware corporation, and its successors. "Book-Entry Notes" means a beneficial interest in the Notes, ownership and transfers of which shall be made through book entries by a Clearing Agency as described in Section 2.10. "Business Day" shall have the meaning assigned thereto in the Sale and Servicing Agreement. "Certificate of Trust" means the certificate of trust of the Issuer substantially in the form of Exhibit A to the Trust Agreement. "Class A Notes" means collectively the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes, as the context may require. "Class A-1 Notes" means the [ ]% Asset Backed Notes, Class A-1, substantially in the form of Exhibit A-1. "Class A-1 Rate" means [ ]% per annum, computed on the basis of the actual number of days elapsed in the related Interest Accrual Period. "Class A-2 Notes" means the [ ]% Asset Backed Notes, Class A-2, substantially in the form of Exhibit A-2. "Class A-2 Rate" means a [ ]% per annum computed on the basis of a 360-day year consisting of twelve 30-day months. "Class A-3 Notes" means the [ ]% Asset Backed Notes, Class A-3, substantially in the form of Exhibit A-3. "Class A-3 Rate" means [ ]% per annum, computed on the basis of a 360-day year consisting of twelve 30-day months. "Class A-4 Notes" means the [ ]% Asset Backed Notes, Class A-4, substantially in the form of Exhibit A-4. "Class A-4 Rate" means [ ]% per annum, computed on the basis of a 360-day year consisting of twelve 30-day months. "Class B Notes" means the [ ]% Asset Backed Notes, Class B, substantially in the form of Exhibit A-5. "Class B Rate" means [ ]% per annum, computed on the basis of a 360-day year consisting of twelve 30-day months. "Clearing Agency" means an organization registered as a "clearing agency" pursuant to Section 17A of the Exchange Act. 3 "Clearing Agency Participant" means a broker, dealer, bank, other financial institution or other Person for whom from time to time a Clearing Agency effects book-entry transfers and pledges of securities deposited with the Clearing Agency. "Closing Date" means April [ ], 2001. "Code" means the Internal Revenue Code of 1986, as amended from time to time, and Treasury Regulations promulgated thereunder. "Collateral" has the meaning specified in the Granting Clause of this Indenture. "Controlling Class" means with respect to any Notes Outstanding, the Class A Notes (voting together as a single class) so long as any Class A Notes are Outstanding, and thereafter the Class B Notes so long as any Class B Notes are Outstanding. "Corporate Trust Office" means the principal office of the Indenture Trustee at which at any particular time its corporate trust business is administered, which office at the date of execution of this Agreement is located at The Chase Manhattan Bank, 450 West 33rd Street, 14th Floor, New York, New York 10001 (facsimile number (212) 946-3916); Attention: Capital Markets Fiduciary Services/BMW Vehicle Owner Trust 2001-A, or at such other address as the Indenture Trustee may designate from time to time by notice to the Noteholders and the Issuer, or the principal corporate trust office of any successor Indenture Trustee at the address designated by such successor Indenture Trustee by notice to the Noteholders and the Issuer. "Default" means any occurrence that is, or with notice or the lapse of time or both would become, an Event of Default. "Definitive Notes" has the meaning specified in Section 2.10. "Depositor" means BMW FS Securities LLC, its successors and assigns. "Event of Default" has the meaning specified in Section 5.01. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Executive Officer" means, with respect to any corporation, the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, President, any Executive Vice President, any Senior Vice President, any Vice President, the Secretary, the Controller or the Treasurer of such corporation; and with respect to any partnership, any general partner thereof. "Grant" means mortgage, pledge, bargain, sell, warrant, alienate, remise, release, convey, assign, transfer, create, and grant a lien upon and a security interest in and a right of set-off against, deposit, set over and confirm pursuant to this Indenture. A Grant of the Collateral or of any other agreement or instrument shall include all rights, powers and options (but none of the obligations) of the granting party thereunder, including the immediate and continuing right to claim for, collect, receive and give receipt for principal and interest payments in respect of the Collateral and all other moneys payable thereunder, to give and receive notices and other 4 communications, to make waivers or other agreements, to exercise all rights and options, to bring Proceedings in the name of the granting party or otherwise, and generally to do and receive anything that the granting party is or may be entitled to do or receive thereunder or with respect thereto. "Holder" or "Noteholder" means a Person in whose name a Note is registered on the Note Register. "Indenture Trustee" means The Chase Manhattan Bank, a New York banking corporation, not in its individual capacity, but as Indenture Trustee under this Indenture, or any successor Indenture Trustee under this Indenture. "Independent" means, when used with respect to any specified Person, that such Person (a) is in fact independent of the Issuer, any other obligor on the Notes, the Seller and any Affiliate of any of the foregoing Persons, (b) does not have any direct financial interest or any material indirect financial interest in the Issuer, any such other obligor, the Seller or any Affiliate of any of the foregoing Persons and (c) is not connected with the Issuer, any such other obligor, the Seller or any Affiliate of any of the foregoing Persons as an officer, employee, promoter, underwriter, trustee, partner, director or person performing similar functions. "Independent Certificate" means a certificate or opinion to be delivered to the Indenture Trustee under the circumstances described in, and otherwise complying with, the applicable requirements of Section 11.01, made by an Independent appraiser or other expert appointed by an Issuer Order and approved by the Indenture Trustee in the exercise of reasonable care, and such opinion or certificate shall state that the signer has read the definition of "Independent" in this Indenture and that the signer is Independent within the meaning thereof. "Interest Rate" means the Class A-1 Rate, the Class A-2 Rate, the Class A-3 Rate, the Class A-4 Rate or the Class B Rate, as the context may require. "Issuer" means BMW Vehicle Owner Trust 2001-A until a successor replaces it and, thereafter, means the successor and, for purposes of any provision contained herein and required by the TIA, each other obligor on the Notes. "Issuer Order" or "Issuer Request" means a written order or request signed in the name of the Issuer by any one of its Authorized Officers and delivered to the Indenture Trustee. "Note" means a Class A Note or a Class B Note, as the context may require. "Note Depository Agreement" means the agreement dated April [ ], 2001, among the Issuer, the Administrator, the Indenture Trustee and The Depository Trust Company, as the initial Clearing Agency, relating to the Class A Notes and the Class B Notes, substantially in the form of Exhibit B. "Note Owner" means, with respect to a Book-Entry Note, the Person who is the beneficial owner of such Book-Entry Note, as reflected on the books of the Clearing Agency or 5 on the books of a Person maintaining an account with such Clearing Agency (directly as a Clearing Agency Participant or as an indirect participant, in each case in accordance with the rules of such Clearing Agency). "Note Register" and "Note Registrar" have the respective meanings specified in Section 2.04. "Officer's Certificate" means a certificate signed by any Authorized Officer of the Issuer, under the circumstances described in, and otherwise complying with, the applicable requirements of Section 11.01, and delivered to the Indenture Trustee. Unless otherwise specified, any reference in this Indenture to an Officer's Certificate shall be to an Officer's Certificate of any Authorized Officer of the Issuer. "Opinion of Counsel" means one or more written opinions of counsel who may, except as otherwise expressly provided in this Indenture, be an employee of or counsel to the Issuer and who shall be satisfactory to the Indenture Trustee, and which opinion or opinions shall be addressed to the Indenture Trustee, shall comply with any applicable requirements of Section 11.01 and shall be in form and substance satisfactory to the Indenture Trustee. "Outstanding" means, as of any date of determination, all Notes theretofore authenticated and delivered under this Indenture except: (i) Notes theretofore cancelled by the Note Registrar or delivered to the Note Registrar for cancellation; (ii) Notes or portions thereof the payment for which money in the necessary amount has been theretofore deposited with the Indenture Trustee or any Paying Agent in trust for the Holders of such Notes (provided, however, that if such Notes are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision for such notice has been made, satisfactory to the Indenture Trustee); and (iii) Notes in exchange for or in lieu of which other Notes have been authenticated and delivered pursuant to this Indenture unless proof satisfactory to the Indenture Trustee is presented that any such Notes are held by a bona fide purchaser; provided, however, that in determining whether the Holders of the requisite Outstanding Amount of the Notes have given any request, demand, authorization, direction, notice, consent or waiver hereunder or under any Basic Document, Notes owned by the Issuer, any other obligor on the Notes, the Depositor, the Seller or any Affiliate of any of the foregoing Persons shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Indenture Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes that a Responsible Officer of the Indenture Trustee knows to be so owned shall be so disregarded. Notes so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Indenture Trustee the pledgee's right so to act with respect to such Notes and that the pledgee is not the 6 Issuer, any other obligor on the Notes, the Depositor, the Seller or any Affiliate of any of the foregoing Persons. "Outstanding Amount" means, as of any date of determination and as to any Notes, the aggregate principal amount of such Notes Outstanding as of such date of determination. "Owner Trustee" means Wilmington Trust Company, not in its individual capacity but solely as Owner Trustee under the Trust Agreement, or any successor Owner Trustee under the Trust Agreement. "Paying Agent" means the Indenture Trustee or any other Person that meets the eligibility standards for the Indenture Trustee specified in Section 6.11 and is authorized by the Issuer to make payments to and distributions from the Collection Account, the Note Distribution Account and the Reserve Account, including payments of principal of or interest on the Notes on behalf of the Issuer. "Payment Date" means the twenty-fifth day of each month, or if any such date is not a Business Day, the next succeeding Business Day, commencing [ ], 2001. "Person" means any individual, corporation, estate, partnership, limited liability company, joint venture, association, joint stock company, trust or business trust (including any beneficiary thereof), unincorporated organization or government or any agency or political subdivision thereof. "Predecessor Note" means, with respect to any particular Note, every previous Note evidencing all or a portion of the same debt as that evidenced by such particular Note; and, for the purpose of this definition, any Note authenticated and delivered under Section 2.06 in lieu of a mutilated, lost, destroyed or stolen Note shall be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Note. "Proceeding" means any suit in equity, action at law or other judicial or administrative proceeding. "Record Date" means, with respect to a Payment Date or Redemption Date, the close of business on the day immediately preceding such Payment Date or Redemption Date. "Redemption Date" means, as the context requires, in the case of a redemption of the Notes pursuant to Section 10.01, the Payment Date specified by the Servicer or the Issuer pursuant to Section 10.01. "Redemption Price" means in the case of a redemption of the Notes pursuant to Section 10.01, an amount equal to the unpaid principal amount of the Notes redeemed plus accrued and unpaid interest thereon at the Interest Rate for each Note being so redeemed to but excluding the Redemption Date. "Registered Holder" means the Person in whose name a Note is registered on the Note Register on the applicable Record Date. 7 "Responsible Officer" means, with respect to the Indenture Trustee or Owner Trustee, as applicable, any officer within the Corporate Trust Office of the Indenture Trustee or the Owner Trustee, including any Vice President, Assistant Vice President, Assistant Treasurer, Assistant Secretary or any other officer of the Indenture Trustee or the Owner Trustee customarily performing functions similar to those performed by any of the above designated officers and also, with respect to a particular matter, any other officer to whom such matter is referred because of such officer's knowledge of and familiarity with the particular subject, in each case having direct responsibility for the administration of the Basic Documents. "Sale and Servicing Agreement" means the Sale and Servicing Agreement, dated as of April [ ], 2001, among the Issuer, the Depositor, BMW FS, as Seller, Servicer, Custodian and Administrator, and the Indenture Trustee. "Schedule of Receivables" means the list of Receivables set forth in Schedule A (which Schedule may be in the form of microfiche). "Securities Act" means the Securities Act of 1933, as amended. "Seller" means BMW FS in its capacity as seller under the Receivables Purchase Agreement and the Sale and Servicing Agreement, and its successor in interest. "Servicer" means BMW FS, in its capacity as servicer under the Sale and Servicing Agreement, and any Successor Servicer thereunder. "State" means any one of the 50 states of the United States of America, or the District of Columbia. "Successor Servicer" has the meaning specified in Section 3.07(f). "Trust Estate" means all money, instruments, rights and other property that are subject or intended to be subject to the lien and security interest of this Indenture for the benefit of the Noteholders (including, without limitation, all property and interests Granted to the Indenture Trustee), including all proceeds thereof. "Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939 as in force on the date hereof, unless otherwise specifically provided. "UCC" means, unless the context otherwise requires, the Uniform Commercial Code as in effect in the relevant jurisdiction, as amended from time to time. (b) Except as otherwise specified herein or as the context may otherwise require, capitalized terms used herein but not otherwise defined shall have the meanings ascribed thereto in the Sale and Servicing Agreement. SECTION 1.02. Rules of Construction. Unless the context otherwise requires: (i) a term has the meaning assigned to it; 8 (ii) an accounting term not otherwise defined has the meaning assigned to it in accordance with generally accepted accounting principles as in effect from time to time; (iii) "or" is not exclusive; (iv) "including" means including without limitation; (v) definitions are applicable to the singular and plural forms of such terms and to the masculine, feminine and neuter genders of such terms; and (vi) any agreement, instrument or statute defined or referred to herein or in any instrument or certificate delivered in connection herewith means such agreement, instrument or statute as from time to time amended, modified or supplemented and includes (in the case of agreements or instruments) references to all attachments thereto and instruments incorporated therein; references to a Person are also to its permitted successors and assigns. SECTION 1.03. Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the TIA, such provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "Commission" means the Securities and Exchange Commission. "indenture securities" means the Notes. "indenture security holder" means a Noteholder. "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Indenture Trustee. "obligor" on the indenture securities means the Issuer and any other obligor on the indenture securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by Commission rule have the meaning assigned to them by such definitions. ARTICLE II. THE NOTES SECTION 2.01. Form. The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes and the Class B Notes, in each case together with the Indenture Trustee's certificate of authentication, shall be in substantially the form set forth in Exhibit A-1, Exhibit A-2, Exhibit A-3, Exhibit A-4 and Exhibit A-5, respectively, with such appropriate 9 insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may, consistently herewith, be determined by the officers executing the Notes, as evidenced by their execution of the Notes. Any portion of the text of any Note may be set forth on the reverse thereof, with an appropriate reference thereto on the face of such Note. The Definitive Notes shall be typewritten, printed, lithographed or engraved or produced by any combination of these methods (with or without steel engraved borders), all as determined by the officers executing such Notes, as evidenced by their execution of such Notes. Each Note shall be dated the date of its authentication. The terms of the Notes set forth in Exhibit A-1, Exhibit A-2, Exhibit A-3, Exhibit A-4 and Exhibit A-5 are part of the terms of this Indenture. SECTION 2.02. Execution, Authentication and Delivery. The Notes shall be executed on behalf of the Issuer by any of its Authorized Officers. The signature of any such Authorized Officer on the Notes may be manual or facsimile. Notes bearing the manual or facsimile signature of individuals who were at any time Authorized Officers of the Issuer shall bind the Issuer, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Notes or did not hold such offices at the date of such Notes. The Indenture Trustee shall upon Issuer Order authenticate and deliver Class A-1 Notes for original issue in an aggregate principal amount of $[ ], Class A-2 Notes for original issue in an aggregate principal amount of $[ ], Class A-3 Notes for original issue in an aggregate principal amount of $[ ], Class A-4 Notes for original issue in an aggregate principal amount of $[ ] and Class B Notes for original issue in an aggregate principal amount $[ ]. The aggregate principal amount of Class A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class A-4 Notes and Class B Notes outstanding at any time may not exceed such respective amounts except as provided in Section 2.06. The Notes shall be issuable as registered Notes in minimum denominations of $1,000 and in integral multiples of $1,000 in excess thereof (except for one Note of each class which may be issued in a denomination other than an integral multiple of $1,000). No Note shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose, unless there appears on such Note a certificate of authentication substantially in the form provided for herein executed by the Indenture Trustee by the manual signature of one of its authorized signatories, and such certificate upon any Note shall be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered hereunder. SECTION 2.03. Temporary Notes. Pending the preparation of Definitive Notes, the Issuer may execute, and upon receipt of an Issuer Order the Indenture Trustee shall authenticate and deliver, temporary Notes that are printed, lithographed, typewritten, mimeographed or 10 otherwise produced, of the tenor of the Definitive Notes in lieu of which they are issued and with such variations not inconsistent with the terms of this Indenture as the officers executing such Notes may determine, as evidenced by their execution of such Notes. If temporary Notes are issued, the Issuer shall cause Definitive Notes to be prepared without unreasonable delay. After the preparation of Definitive Notes, the temporary Notes shall be exchangeable for Definitive Notes upon surrender of the temporary Notes at the office or agency of the Issuer to be maintained as provided in Section 3.02, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Notes, the Issuer shall execute, and the Indenture Trustee shall authenticate and deliver in exchange therefor, a like principal amount of Definitive Notes of authorized denominations. Until so exchanged, the temporary Notes shall in all respects be entitled to the same benefits under this Indenture as Definitive Notes. SECTION 2.04. Registration; Registration of Transfer and Exchange. The Issuer shall cause to be kept a register (the "Note Register") in which, subject to such reasonable regulations as it may prescribe, the Note Registrar shall provide for the registration of Notes and the registration of transfers of Notes. The Indenture Trustee initially shall be the "Note Registrar" for the purpose of registering Notes and transfers of Notes as herein provided. Upon any resignation of any Note Registrar, the Issuer shall promptly appoint a successor or, if it elects not to make such an appointment, assume the duties of Note Registrar. If a Person other than the Indenture Trustee is appointed by the Issuer as Note Registrar, the Issuer will give the Indenture Trustee prompt written notice of the appointment of such Note Registrar and of the location, and any change in the location, of the Note Register, and the Indenture Trustee shall have the right to inspect the Note Register at all reasonable times and to obtain copies thereof, and the Indenture Trustee shall have the right to conclusively rely upon a certificate executed on behalf of the Note Registrar by an Executive Officer thereof as to the names and addresses of the Holders of the Notes and the principal amounts and number of such Notes. Upon surrender for registration of transfer of any Note at the office or agency of the Issuer to be maintained as provided in Section 3.02, if the requirements of Section 8-401(1) of the UCC are met, the Issuer shall execute, and the Indenture Trustee shall authenticate and the Noteholder shall obtain from the Indenture Trustee, in the name of the designated transferee or transferees, one or more new Notes of the same Class in any authorized denominations, of a like aggregate principal amount. At the option of the Holder, Notes may be exchanged for other Notes of the same Class in any authorized denominations, of a like aggregate principal amount, upon surrender of the Notes to be exchanged at such office or agency. Whenever any Notes are so surrendered for exchange, if the requirements of Section 8-401(1) of the UCC are met, the Issuer shall execute, and the Indenture Trustee, without having to verify that the requirements of 8-401(1) have been met, shall authenticate and the Noteholder shall obtain from the Indenture Trustee, the Notes that the Noteholder making the exchange is entitled to receive. 11 All Notes issued upon any registration of transfer or exchange of Notes shall be the valid obligations of the Issuer, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Notes surrendered upon such registration of transfer or exchange. Every Note presented or surrendered for registration of transfer or exchange shall be duly endorsed by, or be accompanied by a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing, with such signature guaranteed by an "eligible guarantor institution" meeting the requirements of the Note Registrar, which requirements include membership or participation in the Securities Transfer Agent's Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, all in accordance with the Exchange Act. No service charge shall be made to a Holder for any registration of transfer or exchange of Notes, but the Issuer may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Notes, other than exchanges pursuant to Section 2.03 or 9.05 not involving any transfer. The preceding provisions of this Section notwithstanding, the Issuer shall not be required to make and the Note Registrar need not register transfers or exchanges of Notes selected for redemption or of any Note for a period of 15 days preceding the due date for any payment with respect to the Note. No Note, or any interest therein, may be transferred to an "employee benefit plan" within the meaning of Section 3(3) of ERISA that is subject to ERISA, a "plan" described in Section 4975(e)(1) of the Code, any entity that is deemed to hold "plan assets" of any of the foregoing by reason of an employee benefit plan's or other plan's investment in such entity, or any governmental plan subject to applicable law that is substantially similar to the fiduciary responsibility provisions of ERISA or Section 4975 of the Code, unless such transferee represents, warrants and covenants that its purchase and holding of such note is and will be eligible for, and satisfies and will satisfy all the requirements of, Department of Labor prohibited transaction class exemption ("PTE") 90-1; PTE 96-23; PTE 95-60; PTE 91-38; PTE 84-14 or another applicable prohibited transaction exemption (or in the case of a governmental plan, will not violate any applicable law that is substantially similar to ERISA or Section 4975 of the Code). By its acquisition of a Note in book-entry form or any interest therein, each transferee will be deemed to have represented, warranted and covenanted that it satisfies the foregoing requirements and the Indenture Trustee may relay conclusively on the same for purposes hereof. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the transfer of Notes. SECTION 2.05. [Reserved]. SECTION 2.06. Mutilated, Destroyed, Lost or Stolen Notes. If (i) any mutilated Note is surrendered to the Indenture Trustee, or the Indenture Trustee receives evidence to its 12 satisfaction of the destruction, loss or theft of any Note, and (ii) there is delivered to the Indenture Trustee such security or indemnity as may be required by it to hold the Issuer and the Indenture Trustee harmless, then, in the absence of notice to the Issuer, the Note Registrar or the Indenture Trustee that such Note has been acquired by a bona fide purchaser, and provided that the requirements of Section 8-405 of the UCC are met, the Issuer shall execute, and upon an Issuer Order the Indenture Trustee shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Note, a replacement Note of the same Class; provided, however, that if any such destroyed, lost or stolen Note, but not a mutilated Note, shall have become or within 15 days shall be due and payable, or shall have been called for redemption, instead of issuing a replacement Note, the Issuer may pay such destroyed, lost or stolen Note when so due or payable or upon the Redemption Date without surrender thereof. If, after the delivery of such replacement Note or payment of a destroyed, lost or stolen Note, a bona fide purchaser of the original Note in lieu of which such replacement Note was issued presents for payment such original Note, the Issuer and the Indenture Trustee shall be entitled to recover such replacement Note (or such payment) from the Person to whom it was delivered or any Person taking such replacement Note from such Person to whom such replacement Note was delivered or any assignee of such Person, except a bona fide purchaser, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the Issuer or the Indenture Trustee in connection therewith. Upon the issuance of any replacement Note under this Section, the Issuer may require the payment by the Holder of such Note of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other reasonable expenses (including the fees and expenses of the Indenture Trustee) connected therewith. Every replacement Note issued pursuant to this Section in replacement of any mutilated, destroyed, lost or stolen Note shall constitute an original additional contractual obligation of the Issuer, whether or not the mutilated, destroyed, lost or stolen Note shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Notes duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes. SECTION 2.07. Persons Deemed Owners. Prior to due presentment for registration of transfer of any Note, the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture Trustee may treat the Person in whose name any Note is registered (as of the day of determination) as the owner of such Note for the purpose of receiving payments of principal of and interest, if any, on such Note and for all other purposes whatsoever, whether or not such Note be overdue, and none of the Issuer, the Indenture Trustee or any agent of the Issuer or the Indenture Trustee shall be affected by notice to the contrary. SECTION 2.08. Payment of Principal and Interest; Defaulted Interest. 13 (a) The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes and the Class B Notes shall accrue interest at the Class A-1 Rate, the Class A-2 Rate, the Class A-3 Rate, the Class A-4 Rate and the Class B Rate, respectively, as set forth in Exhibit A-1, Exhibit A-2, Exhibit A-3, Exhibit A-4 and Exhibit A-5, respectively, and such interest shall be payable on each Payment Date as specified therein, subject to Section 3.01. Any installment of interest or principal payable on a Note that is punctually paid or duly provided for by the Issuer on the applicable Payment Date shall be paid to the Person in whose name such Note (or one or more Predecessor Notes) is registered on the Record Date by check mailed first-class postage prepaid to such Person's address as it appears on the Note Register on such Record Date, except that, unless Definitive Notes have been issued pursuant to Section 2.12, with respect to Notes registered on the Record Date in the name of the nominee of the Clearing Agency (initially, such nominee to be Cede & Co.), payment shall be made by wire transfer in immediately available funds to the account designated by such nominee; provided, however, that the final installment of principal payable with respect to such Note on a Payment Date or on the related Final Scheduled Payment Date (including the Redemption Price for any Note called for redemption pursuant to Section 10.01) shall be payable as provided in paragraph (b) below. The funds represented by any such checks returned undelivered shall be held in accordance with Section 3.03. (b) The principal of each Note shall be payable in installments on each Payment Date as provided in Section 3.01 hereof and the forms of the Notes set forth in Exhibit A-1, Exhibit A-2, Exhibit A-3, Exhibit A-4 and Exhibit A-5. Notwithstanding the foregoing, the entire unpaid principal amount of the Notes may be declared immediately due and payable, if not previously paid, in the manner provided in Section 5.02 on any date on which an Event of Default shall have occurred and be continuing by the Indenture Trustee or the Indenture Trustee acting at the direction of the Holders of Notes representing not less than a majority of the Outstanding Amount of the Controlling Class. All principal payments on each Class of Notes shall be made pro rata to the Noteholders of the related Class entitled thereto. Upon written notice thereof, the Indenture Trustee shall notify the Person in whose name a Note is registered at the close of business on the Record Date preceding the Payment Date on which the Issuer expects the final installment of principal of and interest on such Note to be paid. Such notice shall specify that such final installment will be payable only upon presentation and surrender of such Note and shall specify the place where such Note may be presented and surrendered for payment of such installment. Notices in connection with redemptions of Notes shall be mailed to Noteholders as provided in Section 10.02. (c) If the Issuer defaults in a payment of interest on the Notes, the Issuer shall pay defaulted interest (plus interest on such defaulted interest to the extent lawful) at the applicable Interest Rate in any lawful manner on the next Payment Date. SECTION 2.09. Cancellation. All Notes surrendered for payment, registration of transfer, exchange or redemption shall, if surrendered to any Person other than the Indenture Trustee, be delivered to the Indenture Trustee and shall be promptly cancelled by the Indenture Trustee. The Issuer may at any time deliver to the Indenture Trustee for cancellation any Notes previously authenticated and delivered hereunder that the Issuer may have acquired in any manner whatsoever, and all Notes so delivered shall be promptly cancelled by the Indenture 14 Trustee. No Notes shall be authenticated in lieu of or in exchange for any Notes cancelled as provided in this Section, except as expressly permitted by this Indenture. All cancelled Notes may be held or disposed of by the Indenture Trustee in accordance with its standard retention or disposal policy as in effect at the time unless the Issuer shall direct by an Issuer Order that they be destroyed or returned to it; provided, that such Issuer Order is timely and the Notes have not been previously disposed of by the Indenture Trustee. SECTION 2.10. Book-Entry Notes. The Notes, upon original issuance, will be issued in the form of typewritten Notes representing the Book-Entry Notes, to be delivered to The Depository Trust Company, the initial Clearing Agency, by, or on behalf of, the Issuer. The Book-Entry Notes shall be registered initially on the Note Register in the name of Cede & Co., the nominee of the initial Clearing Agency, and no Owner thereof will receive a Definitive Note representing such Note Owner's interest in such Note, except as provided in Section 2.12. Unless and until definitive, fully registered Notes (the "Definitive Notes") have been issued to such Note Owners pursuant to Section 2.12: (i) the provisions of this Section shall be in full force and effect; (ii) the Note Registrar and the Indenture Trustee shall be entitled to deal with the Clearing Agency for all purposes of this Indenture (including the payment of principal of and interest on the Notes and the giving of instructions or directions hereunder) as the sole holder of the Notes, and shall have no obligation to the Note Owners; (iii) to the extent that the provisions of this Section conflict with any other provisions of this Indenture, the provisions of this Section shall control; (iv) the rights of Note Owners shall be exercised only through the Clearing Agency and shall be limited to those established by law and agreements between such Note Owners and the Clearing Agency or the Clearing Agency Participants pursuant to the Note Depository Agreement. Unless and until Definitive Notes are issued pursuant to Section 2.12, the initial Clearing Agency will make book-entry transfers among the Clearing Agency Participants and receive and transmit payments of principal of and interest on the Notes to such Clearing Agency Participants; and (v) whenever this Indenture requires or permits actions to be taken based upon instructions or directions of Holders of Notes evidencing a specified percentage of the Outstanding Amount of the Controlling Class of Notes, the Clearing Agency shall be deemed to represent such percentage only to the extent that it has received instructions to such effect from Note Owners or Clearing Agency Participants owning or representing, respectively, such required percentage of the beneficial interest in the Notes and has delivered such instructions to the Indenture Trustee. SECTION 2.11. Notices to Clearing Agency. Whenever a notice or other communication to the Noteholders is required under this Indenture, unless and until Definitive Notes shall have been issued to such Note Owners pursuant to Section 2.12, the Indenture 15 Trustee shall give all such notices and communications specified herein to be given to Holders of the Notes to the Clearing Agency, and shall have no obligation to such Note Owners. SECTION 2.12. Definitive Notes. If (i) the Administrator advises the Indenture Trustee in writing that the Clearing Agency is no longer willing or able to properly discharge its responsibilities with respect to the Book-Entry Notes and the Administrator is unable to locate a qualified successor or (ii) after the occurrence of an Event of Default or a Servicer Termination Event, Owners of the Book-Entry Notes representing beneficial interests aggregating at least a majority of the Outstanding Amount of such Notes advise the Clearing Agency in writing that the continuation of a book-entry system through the Clearing Agency is no longer in the best interests of such Note Owners, then the Clearing Agency shall notify all Note Owners, the Administrator and the Indenture Trustee of the occurrence of any such event and of the availability of Definitive Notes to Note Owners requesting the same. Upon surrender to the Indenture Trustee of the typewritten Notes representing the Book-Entry Notes by the Clearing Agency, accompanied by registration instructions, the Issuer shall execute and the Indenture Trustee upon an Issuer Order shall authenticate the Definitive Notes in accordance with the written instructions of the Clearing Agency. None of the Issuer, the Note Registrar, the Administrator or the Indenture Trustee shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such instructions. Upon the issuance of Definitive Notes, the Indenture Trustee shall recognize the Holders of the Definitive Notes as Noteholders. SECTION 2.13. Tax Treatment. The Issuer has entered into this Indenture, and the Notes will be issued, with the intention that, for purposes of federal and state income tax, franchise tax and any other tax measure in whole or in part by income, the Notes will qualify as indebtedness secured by the Trust Estate. The Issuer, by entering into this Indenture, and each Noteholder, by its acceptance of a Note (and each Note Owner by its acceptance of an interest in the applicable Book-Entry Note), agree to treat the Notes for such purposes as indebtedness. ARTICLE III. COVENANTS SECTION 3.01. Payment of Principal and Interest. The Issuer will duly and punctually pay the principal of and interest, if any, on the Notes in accordance with the terms of the Notes and this Indenture. Without limiting the foregoing, subject to Section 8.02(c), on each Payment Date, the Issuer will cause to be distributed all amounts deposited pursuant to the Sale and Servicing Agreement into the Note Distribution Account (i) for the benefit of the Class A-1 Notes, to the Class A-1 Noteholders, (ii) for the benefit of the Class A-2 Notes, to the Class A-2 Noteholders, (iii) for the benefit of the Class A-3 Notes, to the Class A-3 Noteholders (iv) for the benefit of the Class A-4 Notes, to the Class A-4 Noteholders and (v) for the benefit of the Class B Notes, to the Class B Noteholders. Amounts properly withheld under the Code by any Person from a payment to any Noteholder of interest and/or principal shall be considered as having been paid by the Issuer to such Noteholder for all purposes of this Indenture. 16 SECTION 3.02. Maintenance of Office or Agency. The Issuer will maintain in the Borough of Manhattan, The City of New York, an office or agency where Notes may be surrendered for registration of transfer or exchange, and where notices and demands to or upon the Issuer in respect of the Notes and this Indenture may be served. Such office will initially be located at 450 West 33rd Street, 14th floor, Attention: Capital Markets Fiduciary Services, New York, New York 10001. The Issuer will give prompt written notice to the Indenture Trustee of the location, and of any change in the location, of any such office or agency. If at any time the Issuer shall fail to maintain any such office or agency or shall fail to furnish the Indenture Trustee with the address thereof, such surrenders, notices and demands may be made or served at the Corporate Trust Office, and the Issuer hereby appoints the Indenture Trustee as its agent to receive all such surrenders, notices and demands. SECTION 3.03. Money for Payments To Be Held in Trust. All payments of amounts due and payable with respect to any Notes that are to be made from amounts withdrawn from the Collection Account, the Note Distribution Account and the Reserve Account shall be made on behalf of the Issuer by the Indenture Trustee or by another Paying Agent, and no amounts so withdrawn from the Collection Account, the Note Distribution Account or the Reserve Account for payments of Notes shall be paid over to the Issuer except as provided in this Section. On or before the Business Day preceding each Payment Date and Redemption Date, the Issuer shall deposit or cause to be deposited in the Note Distribution Account an aggregate sum sufficient to pay the amounts then becoming due under the Notes, such sum to be held in trust for the benefit of the Persons entitled thereto, and (unless the Paying Agent is the Indenture Trustee) shall promptly notify the Indenture Trustee of its action or failure so to act. The Issuer will cause each Paying Agent other than the Indenture Trustee to execute and deliver to the Indenture Trustee an instrument in which such Paying Agent shall agree with the Indenture Trustee (and if the Indenture Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions of this Section, that such Paying Agent will: (i) hold all sums held by it for the payment of amounts due with respect to the Notes in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided and pay such sums to such Persons as herein provided; (ii) give the Indenture Trustee notice of any default by the Issuer (or any other obligor on the Notes) of which it has actual knowledge in the making of any payment required to be made with respect to the Notes; (iii) at any time during the continuance of any such default, upon the written request of the Indenture Trustee, forthwith pay to the Indenture Trustee all sums so held in trust by such Paying Agent; (iv) immediately resign as a Paying Agent and forthwith pay to the Indenture Trustee all sums held by it in trust for the payment of Notes if at any time it ceases to meet the standards required to be met by a Paying Agent at the time of its appointment; and 17 (v) comply with all requirements of the Code with respect to the withholding from any payments made by it on any Notes of any applicable withholding taxes imposed thereon and with respect to any applicable reporting requirements in connection therewith. The Issuer may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, by Issuer Order direct any Paying Agent to pay to the Indenture Trustee all sums held in trust by such Paying Agent, such sums to be held by the Indenture Trustee upon the same trusts as those upon which the sums were held by such Paying Agent; and upon such payment by any Paying Agent to the Indenture Trustee, such Paying Agent shall be released from all further liability with respect to such money. Subject to applicable laws with respect to escheat of funds, any money held by the Indenture Trustee or any Paying Agent in trust for the payment of any amount due with respect to any Note and remaining unclaimed for two years after such amount has become due and payable shall be discharged from such trust and be paid upon Issuer Request to the Issuer; and the Holder of such Note shall thereafter, as an unsecured general creditor, look only to the Issuer for payment thereof (but only to the extent of the amounts so paid to the Issuer), and all liability of the Indenture Trustee or such Paying Agent with respect to such trust money shall thereupon cease; provided, however, that the Indenture Trustee or such Paying Agent, before being required to make any such repayment, shall at the expense and direction of the Issuer cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in The City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Issuer. The Indenture Trustee shall also adopt and employ, at the expense and direction of the Issuer, any other reasonable means of notification of such repayment (including, but not limited to, mailing notice of such repayment to Holders whose Notes have been called but have not been surrendered for redemption or whose right to or interest in moneys due and payable but not claimed is determinable from the records of the Indenture Trustee or of any Paying Agent, at the last address of record for each such Holder). SECTION 3.04. Existence. Except as otherwise permitted by the provisions of Section 3.10, the Issuer will keep in full effect its existence, rights and franchises as a business trust under the laws of the State of Delaware (unless it becomes, or any successor Issuer hereunder is or becomes, organized under the laws of any other State or of the United States of America, in which case the Issuer will keep in full effect its existence, rights and franchises under the laws of such other jurisdiction) and will obtain and preserve its qualification to do business in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Indenture, the Notes, the Collateral and each other instrument or agreement included in the Trust Estate. SECTION 3.05. Protection of Trust Estate. The Issuer will from time to time execute and deliver all such supplements and amendments hereto and all such financing statements, continuation statements, instruments of further assurance and other instruments, and will take such other action necessary or advisable to: 18 (i) maintain or preserve the lien and security interest (and the priority thereof) of this Indenture or carry out more effectively the purposes hereof; (ii) perfect, publish notice of or protect the validity of any Grant made or to be made by this Indenture; (iii) enforce any of the Collateral; or (iv) preserve and defend title to the Trust Estate and the rights of the Indenture Trustee and the Noteholders in such Trust Estate against the claims of all persons and parties. The Issuer hereby designates the Indenture Trustee, as its agent and attorney-in-fact, to execute upon an Issuer Order any financing statement, continuation statement or other instrument required to be executed pursuant to this Section 3.05. SECTION 3.06. Opinions as to Trust Estate. (a) On the Closing Date, the Issuer shall cause to be furnished to the Indenture Trustee an Opinion of Counsel either stating that, in the opinion of such counsel, such action has been taken with respect to the recording and filing of this Indenture, any indentures supplemental hereto, and any other requisite documents, and with respect to the execution and filing of any financing statements and continuation statements, as are necessary to perfect and make effective the lien and security interest of this Indenture and reciting the details of such action, or stating that, in the opinion of such counsel, no such action is necessary to make such lien and security interest effective. (b) On or before April 30, in each calendar year, beginning in 2002, the Issuer shall furnish to the Indenture Trustee and the Rating Agencies an Opinion of Counsel either stating that, in the opinion of such counsel, such action has been taken with respect to the recording, filing, re-recording and refiling of this Indenture, any indentures supplemental hereto and any other requisite documents and with respect to the execution and filing of any financing statements and continuation statements as is necessary to maintain the lien and security interest created by this Indenture and reciting the details of such action, or stating that in the opinion of such counsel no such action is necessary to maintain such lien and security interest. Such Opinion of Counsel shall also describe the recording, filing, re-recording and refiling of this Indenture, any indentures supplemental hereto and any other requisite documents and the execution and filing of any financing statements and continuation statements that will, in the opinion of such counsel, be required to maintain the lien and security interest of this Indenture until April 30 in the following calendar year. SECTION 3.07. Performance of Obligations; Servicing of Receivables. (a) The Issuer will not take any action and will use its reasonable best efforts not to permit any action to be taken by others that would release any Person from any of such Person's material covenants or obligations under any instrument or agreement included in the 19 Trust Estate or that would result in the amendment, hypothecation, subordination, termination or discharge of, or impair the validity or effectiveness of, any such instrument or agreement, except as expressly provided in this Indenture, the Sale and Servicing Agreement or such other instrument or agreement. (b) The Issuer may contract with other Persons with notification to the Rating Agencies to assist it in performing its duties under this Indenture, and any performance of such duties by a Person identified to the Indenture Trustee in an Officer's Certificate of the Issuer shall be deemed to be action taken by the Issuer. Initially, the Issuer has contracted with the Servicer and the Administrator to assist the Issuer in performing its duties under this Indenture. (c) The Issuer will punctually perform and observe all of its obligations and agreements contained in this Indenture, the Basic Documents and in the instruments and agreements included in the Trust Estate, including but not limited to filing or causing to be filed all UCC financing statements and continuation statements required to be filed by the terms of this Indenture and the Sale and Servicing Agreement in accordance with and within the time periods provided for herein and therein. Except as otherwise expressly provided therein, the Issuer shall not waive, amend, modify, supplement or terminate any Basic Document or any provision thereof without the consent of either the Indenture Trustee or the Holders of at least a majority of the Outstanding Amount of the Notes. (d) If the Issuer shall have knowledge of the occurrence of a Servicer Termination Event under the Sale and Servicing Agreement, the Issuer shall promptly notify the Indenture Trustee and the Rating Agencies thereof, and shall specify in such notice the action, if any, the Issuer is taking with respect to such default. (e) [Reserved] (f) Upon any termination of the Servicer's rights and powers pursuant to the Sale and Servicing Agreement, the Issuer shall promptly notify the Indenture Trustee thereof. As soon as a successor servicer (a "Successor Servicer") is appointed, the Issuer shall notify the Indenture Trustee in writing of such appointment, specifying in such notice the name and address of such Successor Servicer. (g) Without limitation of the absolute nature of the assignment granted to the Indenture Trustee under this Indenture or the rights of the Indenture Trustee hereunder, the Issuer agrees (i) except to extent otherwise provided in any Basic Documents, that it will not, without the prior written consent of either the Indenture Trustee acting at the direction of the Holders of at least a majority in Outstanding Amount of the Notes, amend, modify, waive, supplement, terminate or surrender, or agree to any amendment, modification, supplement, termination, waiver or surrender of, the terms of any Collateral (except to the extent otherwise provided in the Sale and Servicing Agreement) or the Basic Documents, or waive timely performance or observance by the Servicer or the Seller under the Sale and Servicing Agreement; and (ii) that any such amendment shall not (A) increase or reduce in any manner the amount of, or accelerate or delay the timing of, distributions that are required to be made for the benefit of the Noteholders or (B) reduce the aforesaid percentage of the Notes that is required to consent to any 20 such amendment, without the consent of the Holders of all Outstanding Notes. If the Indenture Trustee acting at the direction of such Holders agrees to any such amendment, modification, supplement or waiver, the Indenture Trustee agrees, promptly following a request by the Issuer to do so, to execute and deliver, at the Issuer's own expense, such agreements, instruments, consents and other documents as the Issuer may deem necessary or appropriate in the circumstances. SECTION 3.08. Negative Covenants. So long as any Notes are Outstanding, the Issuer shall not: (i) except as expressly permitted by this Indenture, the Receivables Purchase Agreement or the Sale and Servicing Agreement, sell, transfer, exchange or otherwise dispose of any of the properties or assets of the Issuer, including those included in the Trust Estate, unless directed to do so by the Indenture Trustee acting on direction of at least a majority in Outstanding Amount of the Controlling Class given pursuant to this Agreement; (ii) claim any credit on, or make any deduction from the principal or interest payable in respect of, the Notes (other than amounts properly withheld from such payments under the Code) or assert any claim against any present or former Noteholder by reason of the payment of the taxes levied or assessed upon any part of the Trust Estate; or (iii) (A) permit the validity or effectiveness of this Indenture to be impaired, or permit the lien of this Indenture to be amended, hypothecated, subordinated, terminated or discharged, or permit any Person to be released from any covenants or obligations with respect to the Notes under this Indenture except as may be expressly permitted hereby, (B) permit any lien, charge, excise, claim, security interest, mortgage or other encumbrance (other than the lien of this Indenture) to be created on or extend to or otherwise arise upon or burden the Trust Estate or any part thereof or any interest therein or the proceeds thereof (other than tax liens, mechanics' liens and other liens that arise by operation of law, in each case on any of the Financed Vehicles and arising solely as a result of an action or omission of the related Obligor) or (C) permit the lien of this Indenture not to constitute a valid first priority (other than with respect to any such tax, mechanics' or other lien) security interest in the Trust Estate. SECTION 3.09. Annual Statement as to Compliance. The Issuer will deliver to the Indenture Trustee and the Rating Agencies, within 120 days after the end of each fiscal year of the Issuer (commencing with the fiscal year 2001), an Officer's Certificate stating, as to the Authorized Officer signing such Officer's Certificate, that: (i) a review of the activities of the Issuer during such year and of its performance under this Indenture has been made under such Authorized Officer's supervision; and (ii) to the best of such Authorized Officer's knowledge, based on such review, the Issuer has complied with all conditions and covenants under this Indenture throughout such year or, if there has been a default in its compliance with any such condition or 21 covenant, specifying each such default known to such Authorized Officer and the nature and status thereof. SECTION 3.10. Issuer May Consolidate, etc., Only on Certain Terms. (a) The Issuer shall not consolidate or merge with or into any other Person, unless: (i) the Person (if other than the Issuer) formed by or surviving such consolidation or merger shall be a Person organized and existing under the laws of the United States of America or any State and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Indenture Trustee, in form satisfactory to the Indenture Trustee, the due and punctual payment of the principal of and interest on all Notes and the performance or observance of every agreement and covenant of this Indenture on the part of the Issuer to be performed or observed, all as provided herein; (ii) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; (iii) the Rating Agency Condition shall have been satisfied with respect to such transaction; (iv) the Issuer shall have received an Opinion of Counsel (and shall have delivered copies thereof to the Indenture Trustee) to the effect that such transaction will not have any material adverse federal income tax consequences to the Issuer, any Noteholder or any Certificateholder; (v) any action that is necessary to maintain the lien and security interest created by this Indenture shall have been taken; and (vi) the Issuer shall have delivered to the Indenture Trustee an Officer's Certificate and an Opinion of Counsel each stating that such consolidation or merger and such supplemental indenture comply with this Article III and that all conditions precedent herein provided for relating to such transaction have been complied with (including any filing required by the Exchange Act) in all material respects. (b) The Issuer shall not convey or transfer any of its properties or assets, including those included in the Trust Estate, to any Person, unless: (i) the Person that acquires by conveyance or transfer the properties and assets of the Issuer the conveyance or transfer of which is hereby restricted (A) shall be a United States citizen or a Person organized and existing under the laws of the United States of America or any State, (B) expressly assumes, by an indenture supplemental hereto, executed and delivered to the Indenture Trustee, in form satisfactory to the Indenture Trustee, the due and punctual payment of the principal of and interest on all Notes and the performance or observance of every agreement and covenant of this Indenture on the part of the Issuer to be performed or 22 observed, all as provided herein, (C) expressly agrees by means of such supplemental indenture that all right, title and interest so conveyed or transferred shall be subject and subordinate to the rights of Holders of the Notes, (D) unless otherwise provided in such supplemental indenture, expressly agrees to indemnify, defend and hold harmless the Issuer and the Indenture Trustee against and from any loss, liability or expense arising under or related to this Indenture and the Notes and (E) expressly agrees by means of such supplemental indenture that such Person (or, if a group of Persons, one specified Person) shall make all filings with the Commission (and any other appropriate Person) required by the Exchange Act in connection with the Notes; (ii) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; (iii) the Rating Agency Condition shall have been satisfied with respect to such transaction; (iv) the Issuer shall have received an Opinion of Counsel (and shall have delivered copies thereof to the Indenture Trustee) to the effect that such transaction will not have any material adverse federal income tax consequences to the Issuer, any Noteholder or any Certificateholder; (v) any action that is necessary to maintain the lien and security interest created by this Indenture shall have been taken; and (vi) the Issuer shall have delivered to the Indenture Trustee an Officer's Certificate and an Opinion of Counsel each stating that such conveyance or transfer and such supplemental indenture comply with this Article III and that all conditions precedent herein provided for relating to such transaction have been complied with (including any filing required by the Exchange Act) in all material respects. SECTION 3.11. Successor or Transferee. (a) Upon any consolidation or merger of the Issuer in accordance with Section 3.10(a), the Person formed by or surviving such consolidation or merger (if other than the Issuer) shall succeed to, and be substituted for, and may exercise every right and power of, the Issuer under this Indenture with the same effect as if such Person had been named as the Issuer herein. (b) Upon a conveyance or transfer of all the assets and properties of the Issuer pursuant to Section 3.10(b), BMW Vehicle Owner Trust 2001-A will be released from every covenant and agreement of this Indenture to be observed by or performed on the part of the Issuer with respect to the Notes immediately upon the delivery of written notice to the Indenture Trustee stating that BMW Vehicle Owner Trust 2001-A is to be so released. SECTION 3.12. No Other Business. The Issuer shall not engage in any business other than financing, purchasing, owning, selling and managing the Receivables in the manner contemplated by this Indenture and the Basic Documents and any activities incidental thereto. 23 SECTION 3.13. No Borrowing. The Issuer shall not issue, incur, assume, guarantee or otherwise become liable, directly or indirectly, for any indebtedness except for the Notes. SECTION 3.14. Servicer's Obligations. The Issuer shall cause the Servicer to comply with Sections 4.09, 4.10, 4.11 and Article VII of the Sale and Servicing Agreement. SECTION 3.15. Guarantees, Loans, Advances and Other Liabilities. Except as contemplated by the Trust Agreement, the Sale and Servicing Agreement or this Indenture, the Issuer shall not make any loan or advance or credit to, or guarantee (directly or indirectly or by an instrument having the effect of assuring another's payment or performance on any obligation or capability of so doing or otherwise), endorse or otherwise become contingently liable, directly or indirectly, in connection with the obligations, stocks or dividends of, or own, purchase, repurchase or acquire (or agree contingently to do so) any stock, obligations, assets or securities of, or any other interest in, or make any capital contribution to, any Person. SECTION 3.16. Capital Expenditures. The Issuer shall not make any expenditure (by long-term or operating lease or otherwise) for capital assets (either realty or personalty). SECTION 3.17. Removal of Administrator. So long as any Notes are Outstanding, the Issuer shall not remove the Administrator unless the Rating Agency Condition shall have been satisfied in connection with such removal and the Indenture Trustee receives written notice of the foregoing and consents thereto. SECTION 3.18. Restricted Payments. Except with respect to the proceeds from issuance of the Notes, the Issuer shall not, directly or indirectly, (i) pay any dividend or make any distribution (by reduction of capital or otherwise), whether in cash, property, securities or a combination thereof, to the Owner Trustee or any owner of a beneficial interest in the Issuer or otherwise with respect to any ownership or equity interest or security in or of the Issuer or to the Servicer, (ii) redeem, purchase, retire or otherwise acquire for value any such ownership or equity interest or security or (iii) set aside or otherwise segregate any amounts for any such purpose; provided, however, that the Issuer may make, or cause to be made, distributions as contemplated by, and to the extent funds are available for such purpose under, the Sale and Servicing Agreement, this Indenture or the Trust Agreement. The Issuer will not, directly or indirectly, make payments to or distributions from the Note Distribution Account, the Collection Account, the Pre-Funding Account, the Capitalized Interest Account or the Reserve Account except in accordance with this Indenture and the Basic Documents. SECTION 3.19. Notice of Events of Default. The Issuer shall give the Indenture Trustee and the Rating Agencies prompt written notice of each Event of Default hereunder, and of each default on the part of the Servicer or the Seller of its obligations under the Sale and Servicing Agreement. SECTION 3.20. Further Instruments and Acts. Upon request of the Indenture Trustee, the Issuer will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture. 24 ARTICLE IV. SATISFACTION AND DISCHARGE SECTION 4.01. Satisfaction and Discharge of Indenture. This Indenture shall cease to be of further effect with respect to the Notes except as to (i) rights of registration of transfer and exchange, (ii) substitution of mutilated, destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments of principal thereof and interest thereon, (iv) Sections 3.03, 3.04, 3.05, 3.08, 3.10, 3.11, 3.12, 3.13, 3.15, 3.16 and 3.18, (v) the rights, obligations and immunities of the Indenture Trustee hereunder (including the rights of the Indenture Trustee under Section 6.07 and the obligations of the Indenture Trustee under Section 4.02) and (vi) the rights of Noteholders as beneficiaries hereof with respect to the property so deposited with the Indenture Trustee payable to all or any of them, and the Indenture Trustee, on demand of and at the expense of the Issuer, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture with respect to the Notes, when (A) either: (1) all Notes theretofore authenticated and delivered (other than (i) Notes that have been destroyed, lost or stolen and that have been replaced or paid as provided in Section 2.06 and (ii) Notes for the payment of which money has theretofore been deposited in trust or segregated and held in trust by the Issuer and thereafter repaid to the Issuer or discharged from such trust, as provided in Section 3.03, have been delivered to the Indenture Trustee for cancellation; or (2) all Notes not theretofore delivered to the Indenture Trustee for cancellation a. have become due and payable, b. will become due and payable at the Class B Final Scheduled Payment Date within one year or c. are to be called for redemption within one year under arrangements satisfactory to the Indenture Trustee for the giving of notice of redemption by the Indenture Trustee in the name, and at the expense, of the Issuer; and the Issuer, in the case of a, b, or c above, has irrevocably deposited or caused to be irrevocably deposited with the Indenture Trustee cash or direct obligations of or obligations guaranteed by the United States of America (that will mature prior to the date such amounts are payable), in trust for such purpose, in an amount sufficient to pay and discharge the entire indebtedness on such Notes not theretofore delivered to the Indenture Trustee for cancellation when due to the applicable Final Scheduled Payment Date or Redemption Date (if Notes shall have been called for redemption pursuant to Section 10.01), as the case may be; 25 (B) the Issuer has paid or caused to be paid all other sums payable hereunder by the Issuer including, but not limited to, fees and expenses due to the Indenture Trustee; and (C) the Issuer has delivered to the Indenture Trustee an Officer's Certificate, an Opinion of Counsel and (if required by the TIA or the Indenture Trustee) an Independent Certificate from a firm of certified public accountants, each meeting the applicable requirements of Section 11.01(a) and, subject to Section 11.02, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. SECTION 4.02. Application of Trust Money. All moneys deposited with the Indenture Trustee pursuant to Section 4.01 hereof shall be held in trust and applied by it in accordance with the provisions of the Notes and this Indenture to the payment, either directly or through any Paying Agent, as the Indenture Trustee may determine, to the Holders of the particular Notes for the payment or redemption of which such moneys have been deposited with the Indenture Trustee, of all sums due and to become due thereon for principal and interest; but such moneys need not be segregated from other funds except to the extent required herein, in the Sale and Servicing Agreement or by law. SECTION 4.03. Repayment of Moneys Held by Paying Agent. In connection with the satisfaction and discharge of this Indenture with respect to the Notes, all moneys then held by any Paying Agent other than the Indenture Trustee under the provisions of this Indenture with respect to such Notes shall, upon written demand of the Issuer, be paid to the Indenture Trustee to be held and applied according to Section 3.03; and thereupon, such Paying Agent shall be released from all further liability with respect to such moneys. SECTION 4.04. Release of Collateral. Subject to Section 11.01 and the terms of the Basic Documents, the Indenture Trustee shall release property from the lien of this Indenture only upon receipt by it of an Issuer Request accompanied by an Officer's Certificate, an Opinion of Counsel and Independent Certificates in accordance with TIA ss.ss. 314(c) and 314(d)(1) or an Opinion of Counsel in lieu of such Independent Certificates to the effect that the TIA does not require any such Independent Certificates. ARTICLE V. REMEDIES SECTION 5.01. Events of Default. "Event of Default", wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): 26 (i) default in the payment of any interest on any Note of the Controlling Class when the same becomes due and payable, and such default shall continue for a period of five days; (ii) default in the payment of the principal of or any installment of the principal of any Note when the same becomes due and payable; (iii) default in the observance or performance of any covenant or agreement of the Issuer made in this Indenture (other than a covenant or agreement, a default in the observance or performance of which is elsewhere in this Section specifically dealt with), or any representation or warranty of the Issuer made in this Indenture or in any certificate or other writing delivered pursuant hereto or in connection herewith proving to have been incorrect in any material respect as of the time when the same shall have been made, and such default shall continue or not be cured, or the circumstance or condition in respect of which such misrepresentation or warranty was incorrect shall not have been eliminated or otherwise cured, for a period of 30 days after there shall have been given, by registered or certified mail, to the Issuer by the Indenture Trustee or to the Issuer and the Indenture Trustee by the Holders of at least 50% of the Outstanding Amount of the Controlling Class of Notes, a written notice specifying such default or incorrect representation or warranty and requiring it to be remedied and stating that such notice is a notice of Default hereunder; (iv) the filing of a decree or order for relief by a court having jurisdiction in the premises in respect of the Issuer or any substantial part of the Trust Estate in an involuntary case under any applicable federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Issuer or for any substantial part of the Trust Estate, or the ordering of the winding-up or liquidation of the Issuer's affairs, and such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (v) the commencement by the Issuer of a voluntary case under any applicable federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or the consent by the Issuer to the entry of an order for relief in an involuntary case under any such law, or the consent by the Issuer to the appointment of or taking of possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Issuer or for any substantial part of the Trust Estate, or the making by the Issuer of any general assignment for the benefit of creditors, or the failure by the Issuer generally to pay its debts as such debts become due, or the taking of any action by the Issuer in furtherance of any of the foregoing. The Issuer shall promptly deliver to the Indenture Trustee written notice in the form of an Officer's Certificate of any event that with the giving of notice and the lapse of time would become an Event of Default under clause (iii), its status and what action the Issuer is taking or proposes to take with respect thereto. SECTION 5.02. Acceleration of Maturity; Rescission and Annulment. 27 (a) If an Event of Default shall occur and be continuing, then and in every such case the Indenture Trustee may or the Indenture Trustee as directed in writing by the Holders of Notes representing not less than a majority of the Outstanding Amount of the Controlling Class of Notes shall declare all the Notes to be then immediately due and payable, by a notice in writing to the Issuer (and to the Indenture Trustee if given by Noteholders), and upon any such declaration the Outstanding Amount of such Notes, together with accrued and unpaid interest thereon through the date of acceleration, shall become immediately due and payable. (b) If an Event of Default under this Indenture shall have occurred, the Indenture Trustee in its discretion may, or if so requested in writing by Holders of Notes representing at least a majority of the Outstanding Amount of the Controlling Class of Notes, shall, declare by written notice to the Issuer all of the Notes to be immediately due and payable, and upon any such declaration, the Outstanding Amount of the Notes, together with accrued interest thereon through the date of acceleration, shall become immediately due and payable as provided in the Notes set forth in Exhibit A-1, Exhibit A-2, Exhibit A-3, Exhibit A-4 and Exhibit A-5. Notwithstanding anything to the contrary in this paragraph (b), if an Event of Default specified in clauses (iv) or (v) of Section 5.01 shall have occurred and be continuing the Notes shall become immediately due and payable at par, together with accrued interest thereon. (c) At any time after such declaration of acceleration of maturity has been made and before a judgment or decree for payment of the money due has been obtained by the Indenture Trustee as hereinafter in this Article V provided, the Holders of Notes representing a majority of the Outstanding Amount of the Controlling Class of Notes, by written notice to the Issuer and the Indenture Trustee, may rescind and annul such declaration and its consequences if: (i) the Issuer has paid or deposited with the Indenture Trustee a sum sufficient to pay: A. all payments of principal of and interest on the Notes and all other amounts that would then be due hereunder or upon such Notes if the Event of Default giving rise to such acceleration had not occurred; and B. all sums paid by the Indenture Trustee hereunder and the reasonable compensation, expenses and disbursements of the Indenture Trustee and its agents and counsel and the reasonable compensation, expenses and disbursements of the Owner Trustee and its agents and counsel; and (ii) all Events of Default, other than the nonpayment of the principal of the Notes that has become due solely by such acceleration, have been cured or waived as provided in Section 5.12. No such rescission shall affect any subsequent default or impair any right consequent thereto. SECTION 5.03. Collection of Indebtedness and Suits for Enforcement by Indenture Trustee. 28 (a) The Issuer covenants that if (i) a default is made in the payment of any interest on any Note when the same becomes due and payable, and such default continues for a period of five days or, (ii) default is made in the payment of the principal of or any installment of the principal of any Note when the same becomes due and payable, the Issuer will, upon demand of the Indenture Trustee, pay to it, for the benefit of the Holders of the Notes, the entire amount then due and payable on such Notes in respect of principal and interest, with interest on the overdue principal and, to the extent payment at such rate of interest shall be legally enforceable, on overdue installments of interest at the related Interest Rate and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses and disbursements of the Indenture Trustee and its agents and counsel. (b) In case the Issuer shall fail forthwith to pay such amounts upon such demand, the Indenture Trustee, in its own name and as trustee of an express trust, may institute a Proceeding for the collection of the sums so due and unpaid, and may prosecute such Proceeding to judgment or final decree, and may enforce the same against the Issuer or other obligor on such Notes and collect in the manner provided by law out of the Trust Estate or the property of any other obligor on such Notes, wherever situated, the moneys adjudged or decreed to be payable. (c) If an Event of Default occurs, the Indenture Trustee may, as more particularly provided in Section 5.04, in its discretion or shall at the directions of the Holders of at least a majority of the Outstanding Amount of the Controlling Class of Notes proceed to protect and enforce its rights and the rights of the Noteholders, by such appropriate Proceedings as the Indenture Trustee or the Indenture Trustee at the direction of the Holders of at least a majority of the Outstanding Amount of the Controlling Class of Notes shall reasonably deem most effective to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy or legal or equitable right vested in the Indenture Trustee by this Indenture or by law. (d) In case there shall be pending, relative to the Issuer or any other obligor on the Notes or any Person having or claiming an ownership interest in the Trust Estate, Proceedings under Title 11 of the United States Code or any other applicable federal or state bankruptcy, insolvency or other similar law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, or liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Issuer or its property or such other obligor or Person, or in case of any other comparable Proceedings relative to the Issuer or other obligor on the Notes, or to the creditors or property of the Issuer or such other obligor, the Indenture Trustee, irrespective of whether the principal of any Notes shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Indenture Trustee shall have made any demand pursuant to the provisions of this Section, shall be entitled and empowered, by intervention in such Proceedings or otherwise: (i) to file and prove a claim or claims for the entire amount of principal and interest owing and unpaid in respect of the Notes and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Indenture Trustee 29 (including any claim for reasonable compensation to the Indenture Trustee and each predecessor Indenture Trustee, and their respective agents, attorneys and counsel, and for reimbursement of reasonable out-of-pocket expenses and liabilities incurred, by the Indenture Trustee and each predecessor Indenture Trustee, except as a result of negligence or bad faith) and of the Noteholders allowed in such Proceedings; (ii) unless prohibited by applicable law or regulation, to vote on behalf of the Holders of Notes in any election of a trustee, a standby trustee or a Person performing similar functions in any such Proceedings; (iii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute all amounts received with respect to the claims of the Noteholders and of the Indenture Trustee on their behalf; and (iv) to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Indenture Trustee or the Holders of Notes allowed in any Proceedings relative to the Issuer, its creditors or its property; and any trustee, receiver, liquidator, custodian or other similar official in any such Proceeding is hereby authorized by each of such Noteholders to make payments to the Indenture Trustee and, in the event that the Indenture Trustee shall consent to the making of payments directly to such Noteholders, to pay to the Indenture Trustee such amounts as shall be sufficient to cover reasonable compensation to the Indenture Trustee, each predecessor Indenture Trustee and their respective agents, attorneys and counsel, and all other expenses and liabilities incurred by the Indenture Trustee and each predecessor Indenture Trustee except as a result of negligence or bad faith. (e) Nothing herein contained shall be deemed to authorize the Indenture Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Noteholder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof or to authorize the Indenture Trustee to vote in respect of the claim of any Noteholder in any such proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar Person. (f) All rights of action and of asserting claims under this Indenture, or under any of the Notes, may be enforced by the Indenture Trustee without the possession of any of the Notes or the production thereof in any Proceedings relative thereto, and any such Proceedings instituted by the Indenture Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the expenses, disbursements and compensation of the Indenture Trustee, each predecessor Indenture Trustee and their respective agents and attorneys, shall be for the ratable benefit of the Holders of the Notes. (g) In any Proceedings brought by the Indenture Trustee (and also any Proceedings involving the interpretation of any provision of this Indenture to which the Indenture Trustee shall be a party), the Indenture Trustee shall be held to represent all the 30 Holders of the Notes, and it shall not be necessary to make any Noteholder a party to any such Proceedings. SECTION 5.04. Remedies; Priorities. (a) If an Event of Default shall have occurred and be continuing, the Indenture Trustee may do one or more of the following (subject to Section 5.05): (i) institute Proceedings in its own name and as trustee of an express trust for the collection of all amounts then payable on the Notes or under this Indenture with respect thereto, whether by declaration or otherwise, enforce any judgment obtained and collect from the Issuer and any other obligor on such Notes moneys adjudged due; (ii) institute Proceedings from time to time for the complete or partial foreclosure of this Indenture with respect to the Trust Estate; (iii) exercise any remedies of a secured party under the UCC and take any other appropriate action to protect and enforce the rights and remedies of the Indenture Trustee and the Holders of the Notes; and (iv) sell the Trust Estate or any portion thereof or rights or interest therein, at one or more public or private sales called and conducted in any manner permitted by law; provided that Indenture Trustee may not sell or otherwise liquidate the Trust Estate following an Event of Default unless: (A) the Event of Default is of the type described in Section 5.01(i) or (ii); or (B) with respect to an Event of Default described in Section 5.01 (iii); (i) the Noteholders of all Outstanding Notes and the Certificateholders of all outstanding Certificates consent thereto; or (ii) the proceeds of such sale or liquidation are sufficient to pay in full the principal of and accrued interest on the Outstanding Notes and outstanding Certificates. (C) with respect to any Event of Default described in Section 5.01 (iv) and (v): (i) the Noteholders of Notes evidencing 100% of the principal amount of the Controlling Class consent thereto; or (ii) the proceeds of such sale or liquidation are sufficient to pay in full the principal of and the accrued interest on the Outstanding Notes; or (iii) the Indenture Trustee 31 (x) determines (but shall have no obligation to make such determination) that the Trust Estate will not continue to provide sufficient funds for the payment of principal of and interest on the Notes as they would have become due if the Notes had not been declared due and payable; and (y) the Indenture Trustee obtains the consent of Noteholders of Notes evidencing not less than 66 2/3% of the principal amount of the Controlling Class; or In determining such sufficiency or insufficiency with respect to clause (B)(ii) and (C)(ii) or (C)(iii)(x), Indenture Trustee may, but need not, obtain and rely upon an opinion of an Independent investment banking or accounting firm of national reputation as to the feasibility of such proposed action and as to the sufficiency of the Trust Estate for such purpose. (b) (i) Notwithstanding the provisions of Section 8.02, following the occurrence and during the continuation of an Event of Default specified in Section 5.01(i), 5.01(ii), 5.01(iii), 5.01(iv) which has resulted in an acceleration of the Notes (or following the occurrence of any such event after an Event of Default specified in Section 5.01(iii) has occurred and the Trust Estate has been liquidated), if Indenture Trustee collects any money or property, it shall pay out such money or property (and other amounts including amounts held on deposit in the Reserve Account) held as Collateral for the benefit of the Noteholders, net of liquidation costs associated with the sale of the Trust Estate, in the following order: FIRST: to the Servicer for due and unpaid Servicing Fees; SECOND: to Class A Noteholders for amounts due and unpaid on the Class A Notes in respect of interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Class A Notes in respect of interest; THIRD: to Holders of the Class A-1 Notes for amounts due and unpaid on the Class A-1 Notes in respect of principal, ratably, without preference or priority of any kind, according to the amounts due and payable on the Class A-1 Notes in respect of principal, until the Outstanding Amount of the Class A-1 Notes is reduced to zero; FOURTH: to Holders of the Class A-2 Notes, Class A-3 Notes and Class A-4 Notes for amounts due and unpaid on the Class A-2 Notes, Class A-3 Notes and Class A-4 Notes in respect of principal, ratably, without preference or priority of any kind, according to the amounts due and payable on the Class A-2 Notes, Class A-3 Notes and Class A-4 Notes in respect of principal, until the Outstanding Amount of the Class A-2 Notes, Class A-3 Notes and Class A-4 Notes is reduced to zero; 32 FIFTH: to Holders of the Class B Notes for amounts due and unpaid on the Class B Notes in respect of interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Class B Notes in respect of interest; SIXTH: to Holders of the Class B Notes for amounts due and unpaid on the Class B Notes in respect of principal, ratably, without preference or priority of any kind, according to the amounts due and payable on the Class B Notes in respect of principal, until the Outstanding Amount of the Class B Notes is reduced to zero; SEVENTH: to the Indenture Trustee, any amounts due under Section 6.7; and EIGHTH: to the Certificate Distribution Account, for distribution to the Certificateholders. The Indenture Trustee may fix a record date and payment date for any payment to Noteholders pursuant to this Section. At least 15 days before such record date, the Issuer shall mail to each Noteholder and the Indenture Trustee a notice that states the record date, the payment date and the amount to be paid. (ii) Except as provided in Section 5.04(b)(i), the Indenture Trustee shall make all payments and distributions of the Trust Estate in accordance with Section 8.02. SECTION 5.05. Optional Preservation of the Receivables. If the Notes have been declared to be due and payable under Section 5.02 following an Event of Default, and such declaration and its consequences have not been rescinded and annulled, the Indenture Trustee may, but need not, elect to maintain possession of the Trust Estate. It is the desire of the parties hereto and the Noteholders that there be at all times sufficient funds for the payment of principal of and interest on the Notes, and the Indenture Trustee shall take such desire into account when determining whether or not to maintain possession of the Trust Estate. In determining whether or not to maintain possession of the Trust Estate, the Indenture Trustee may, at the expense of the Issuer and paid in the priority set forth in Section 5.06(b) of the Sale and Servicing Agreement, but need not, obtain and conclusively rely upon an opinion of an Independent investment banking or accounting firm of national reputation as to the feasibility of such proposed action and as to the sufficiency of the Trust Estate for such purpose. SECTION 5.06. Limitation of Suits. No Holder of any Note shall have any right to institute any Proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless: (i) such Holder has previously given written notice to the Indenture Trustee of a continuing Event of Default; 33 (ii) the Holders of not less than 25% of the Outstanding Amount of the Controlling Class of Notes have made written request to the Indenture Trustee to institute such Proceeding in respect of such Event of Default in its own name as Indenture Trustee hereunder; (iii) such Holder or Holders have offered to the Indenture Trustee reasonable indemnity against the costs, expenses and liabilities that may be incurred in complying with such request; (iv) the Indenture Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute such Proceedings; and (v) no direction inconsistent with such written request has been given to the Indenture Trustee during such 60 day period by the Holders of a majority of the Outstanding Amount of the Controlling Class of Notes. It is understood and intended that no one or more Holders of Notes shall have any right in any manner whatsoever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders of Notes or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided. In the event the Indenture Trustee shall receive conflicting or inconsistent requests and indemnity from two or more groups of Holders of Notes pursuant to this Section, each representing less than a majority of the Outstanding Amount of the Controlling Class of Notes, the Indenture Trustee shall act at the direction of the group representing the greater percentage of the Outstanding Amount of Notes and if there is no such group then in its sole discretion may determine what action, if any, shall be taken, notwithstanding any other provisions of this Indenture. SECTION 5.07. Unconditional Rights of Noteholders To Receive Principal and Interest. Notwithstanding any other provisions in this Indenture, the Holder of any Note shall have the right, which is absolute and unconditional, to receive payment of the principal of and interest, if any, on such Note on or after the respective due dates thereof expressed in such Note or in this Indenture (or, in the case of redemption, on or after the Redemption Date) and to institute suit for the enforcement of any such payment, and such right shall not be impaired without the consent of such Holder. SECTION 5.08. Restoration of Rights and Remedies. If the Indenture Trustee or any Noteholder has instituted any Proceeding to enforce any right or remedy under this Indenture and such Proceeding has been discontinued or abandoned for any reason or has been determined adversely to the Indenture Trustee or to such Noteholder, then and in every such case the Issuer, the Indenture Trustee and the Noteholders shall, subject to any determination in such Proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Indenture Trustee and the Noteholders shall continue as though no such Proceeding had been instituted. 34 SECTION 5.09. Rights and Remedies Cumulative. No right or remedy herein conferred upon or reserved to the Indenture Trustee or to the Noteholders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 5.10. Delay or Omission Not a Waiver. No delay or omission of the Indenture Trustee, or any Holder of any Note to exercise any right or remedy accruing upon any Default or Event of Default shall impair any such right or remedy or constitute a waiver of any such Default or Event of Default or an acquiescence therein. Every right and remedy given by this Article V or by law to the Indenture Trustee or to the Noteholders may be exercised from time to time, and as often as may be deemed expedient, by the Indenture Trustee or the Noteholders, as the case may be. SECTION 5.11. Control by the Controlling Class of Noteholders. The Holders of a majority of the Outstanding Amount of the Controlling Class of Notes shall have the right to direct the time, method and place of conducting any Proceeding for any remedy available to the Indenture Trustee with respect to the Notes or exercising any trust or power conferred on the Indenture Trustee; provided that: (i) such direction shall not be in conflict with any rule of law or with this Indenture; (ii) subject to the express terms of Section 5.04, any direction to the Indenture Trustee to sell or liquidate the Trust Estate shall be by Holders of Notes representing not less than 100% of the Outstanding Amount of the Controlling Class of Notes; (iii) if the conditions set forth in Section 5.05 have been satisfied and the Indenture Trustee elects to retain the Trust Estate pursuant to such Section, then any written direction to the Indenture Trustee by Holders of Notes representing less than 100% of the Outstanding Amount of the Notes to sell or liquidate the Trust Estate shall be of no force and effect; and (iv) the Indenture Trustee may take any other action deemed proper by the Indenture Trustee that is not inconsistent with such direction. Notwithstanding the rights of Noteholders set forth in this Section, subject to Section 6.01, the Indenture Trustee need not take any action that it determines might involve it in liability or might materially adversely affect the rights of any Noteholders not consenting to such action. SECTION 5.12. Waiver of Past Defaults. Prior to the declaration of the acceleration of the maturity of the Notes as provided in Section 5.02, the Holders of Notes of not less than a majority of the Outstanding Amount of the Controlling Class of Notes may, waive any past Default or Event of Default and its consequences except a Default (a) in payment of principal of 35 or interest on any of the Notes or (b) in respect of a covenant or provision hereof that cannot be modified or amended without the consent of the Holder of each Note. In the case of any such waiver, the Issuer, the Indenture Trustee and the Holders of the Notes shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereto. Upon any such waiver, such Default shall cease to exist and be deemed to have been cured and not to have occurred, and any Event of Default arising therefrom shall be deemed to have been cured and not to have occurred, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereto. SECTION 5.13. Undertaking for Costs. All parties to this Indenture agree, and each Holder of a Note by such Holder's acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Indenture Trustee for any action taken, suffered or omitted by it as Indenture Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to (a) any suit instituted by the Indenture Trustee, (b) any suit instituted by any Noteholder, or group of Noteholders, in each case holding in the aggregate more than 10% of the Outstanding Amount of the Notes (or in the case of a right or remedy under this Indenture which is instituted by the Controlling Class, more than 10% of the Outstanding Amount of the Controlling Class) or (c) any suit instituted by any Noteholder for the enforcement of the payment of principal of or interest on any Note on or after the respective due dates expressed in such Note and in this Indenture (or, in the case of redemption, on or after the Redemption Date). SECTION 5.14. Waiver of Stay or Extension Laws. The Issuer covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Issuer (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Indenture Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. SECTION 5.15. Action on Notes. The Indenture Trustee's right to seek and recover judgment on the Notes or under this Indenture shall not be affected by the seeking, obtaining or application of any other relief under or with respect to this Indenture. Neither the lien of this Indenture nor any rights or remedies of the Indenture Trustee or the Noteholders shall be impaired by the recovery of any judgment by the Indenture Trustee against the Issuer or by the levy of any execution under such judgment upon any portion of the Trust Estate or upon any of the assets of the Issuer. Any money or property collected by the Indenture Trustee shall be applied in accordance with Section 5.04(b). 36 SECTION 5.16. Performance and Enforcement of Certain Obligations. (a) Promptly following a request from the Indenture Trustee to do so and at the Administrator's expense, the Issuer shall take all such lawful action as the Indenture Trustee may request to compel or secure the performance and observance by the Seller or the Servicer, as applicable, of each of their obligations to the Issuer under or in connection with the Sale and Servicing Agreement or the Receivables Purchase Agreement, as applicable, and to exercise any and all rights, remedies, powers and privileges lawfully available to the Issuer under or in connection with the Sale and Servicing Agreement or the Receivables Purchase Agreement to the extent and in the manner directed by the Indenture Trustee, including the transmission of notices of default on the part of either Seller or the Servicer thereunder and the institution of legal or administrative actions or proceedings to compel or secure performance by the Seller or the Servicer of each of their obligations under the Sale and Servicing Agreement or the Receivables Purchase Agreement; provided, however, nothing herein shall in any way impose on the Indenture Trustee the duty to monitor the performance of the Seller or the Servicer of any of their liabilities, duties or obligations under any Basic Document. (b) If an Event of Default has occurred, the Indenture Trustee may, and at the direction (which direction shall be in writing) of the Holders of not less than a majority of the Outstanding Amount of the Controlling Class of Notes shall, exercise all rights, remedies, powers, privileges and claims of the Issuer against the Seller or the Servicer under or in connection with the Sale and Servicing Agreement and the Receivables Purchase Agreement including the right or power to take any action to compel or secure performance or observance by the Seller or the Servicer, as the case may be, of each of their obligations to the Issuer thereunder and to give any consent, request, notice, direction, approval, extension or waiver under the Sale and Servicing Agreement and the Receivables Purchase Agreement, as the case may be, and any right of the Issuer to take such action shall be suspended. ARTICLE VI. THE INDENTURE TRUSTEE SECTION 6.01. Duties of Indenture Trustee. (a) If an Event of Default has occurred and is continuing of which a Responsible Officer of the Indenture Trustee has actual knowledge, the Indenture Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. (b) Except during the continuance of an Event of Default: (i) the Indenture Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Indenture Trustee; and 37 (ii) in the absence of bad faith or negligence on its part, the Indenture Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon the face value of the certificates, reports, resolutions, documents, orders, opinions or other instruments furnished to the Indenture Trustee and conforming to the requirements of this Indenture; provided, however, that the Indenture Trustee shall not be responsible for the accuracy or content of any such resolution, certificate, statement, opinion, report, document, order or other instrument; however, the Indenture Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. If any such instrument is found not to conform in any material respect to the requirements of this Agreement, the Indenture Trustee shall notify the Noteholders of such instrument in the event that the Indenture Trustee, after so requesting, does not receive a satisfactorily corrected instrument. (c) The Indenture Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (i) this paragraph does not limit the effect of paragraph (b) of this Section; (ii) the Indenture Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer unless it is proved that the Indenture Trustee was negligent in ascertaining the pertinent facts; and (iii) the Indenture Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to the terms of this Indenture or any other Basic Documents. (d) Every provision of this Indenture that in any way relates to the Indenture Trustee is subject to paragraphs (a), (b), (c) and (g) of this Section. (e) The Indenture Trustee shall not be liable for indebtedness evidenced by or arising under any of the Basic Documents, including principal of or interest on the Notes, or interest on any money received by it except as the Indenture Trustee may agree in writing with the Issuer. (f) Money held in trust by the Indenture Trustee need not be segregated from other funds except to the extent required by law or the terms of this Indenture or the Sale and Servicing Agreement. (g) No provision of this Indenture shall require the Indenture Trustee to advance, expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. 38 (h) Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Indenture Trustee shall be subject to the provisions of this Section and to the provisions of the TIA. (i) In no event shall the Indenture Trustee be required to perform, or be responsible for the manner of performance of, any of the obligations of the Servicer or any other party under the Sale and Servicing Agreement. (j) The Indenture Trustee shall have no duty (A) to see to any recording, filing, or depositing of this Indenture or any agreement referred to herein or any financing statement or continuation statement evidencing a security interest, or to see to the maintenance of any such recording or filing or depositing or to any rerecording, refiling or redepositing of any thereof, (B) to see to any insurance, or (C) to see to the payment or discharge of any tax, assessment, or other governmental charge or any lien or encumbrance of any kind owing with respect to, assessed or levied against, any part of the Trust Fund. For purposes of this Section 6.01 and Section 8.03(c), the Indenture Trustee, or a Responsible Officer thereof, shall be charged with actual knowledge of any default or an Event of Default if a Responsible Officer actually knows of such default or Event of Default or the Indenture Trustee receives written notice of such default or Event of Default from the Issuer, the Servicer or Noteholders owning Notes aggregating not less than 10% of the Outstanding Amount of the Notes. Notwithstanding the foregoing, the Indenture Trustee shall not be required to take notice and in the absence of such actual notice and knowledge, the Indenture Trustee may conclusively assume that there is no such default or Event of Default. SECTION 6.02. Rights of Indenture Trustee. (a) The Indenture Trustee may conclusively rely on the face value of any document believed by it to be genuine and to have been signed or presented by the proper person. The Indenture Trustee need not investigate any fact or matter stated in the document. (b) Before the Indenture Trustee acts or refrains from acting, it may require an Officer's Certificate or an Opinion of Counsel from the appropriate party. The Indenture Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on an Officer's Certificate or Opinion of Counsel from the appropriate party. The right of the Indenture Trustee to perform any discretionary act enumerated in this Indenture or in any Basic Document shall not be construed as a duty of the Indenture Trustee and the Indenture Trustee shall not be answerable for other than its negligence or willful misconduct in the performance of such discretionary act. (c) The Indenture Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys or a custodian or nominee and the Indenture Trustee shall not be responsible for any misconduct or negligence on the part of any such agent, attorney or custodian appointed by the Indenture Trustee with due care. 39 (d) The Indenture Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within its rights or powers; provided, that the Indenture Trustee's conduct does not constitute willful misconduct, negligence or bad faith. (e) The Indenture Trustee may consult, at the Issuer's expense and paid in the priority set forth in Section 5.06(b) of the Sale and Servicing Agreement, with counsel, and the written advice or opinion of counsel with respect to legal matters relating to this Indenture and the Notes shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. (f) In the event that the Indenture Trustee is also acting as Paying Agent, Note Registrar or collateral agent, the rights and protections afforded to the Indenture Trustee pursuant to this Article 6 shall be afforded to such Paying Agent, Note Registrar or collateral agent. (g) The Indenture Trustee shall be under no obligation to exercise any of the trusts or powers vested in it by this Indenture or to institute, conduct or defend any litigation hereunder or in relation hereto at the request, order or direction of any of the Noteholders, pursuant to the provisions of this Indenture, unless such Noteholders shall have offered to the Indenture Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby; (h) The right of the Indenture Trustee to perform any discretionary act enumerated in this Indenture shall not be construed as a duty, and the Indenture Trustee shall not be answerable for other than its negligence or willful misconduct in the performance of such act; and (i) The Indenture Trustee shall not be required to give any bond or surety in respect of the powers granted hereunder. SECTION 6.03. Individual Rights of Indenture Trustee. The Indenture Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Issuer or its Affiliates with the same rights it would have if it were not Indenture Trustee. Any Paying Agent, Note Registrar, co-registrar or co-paying agent may do the same with like rights. However, the Indenture Trustee must comply with Sections 6.11 and 6.12. SECTION 6.04. Indenture Trustee's Disclaimer. The Indenture Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture, the Trust Estate or the Notes, it shall not be accountable for the Issuer's use of the proceeds from the Notes, and it shall not be responsible for any statement of the Issuer in the Indenture, any Basic Document or in any document issued in connection with the sale of the Notes or in the Notes other than the Indenture Trustee's certificate of authentication. SECTION 6.05. Notice of Defaults. If a Default occurs and is continuing and if it is actually known to a Responsible Officer of the Indenture Trustee, the Indenture Trustee shall mail to each Noteholder notice of the Default within 30 days after it occurs. Except in the case 40 of a Default in payment of principal of or interest on any Note (including payments pursuant to the mandatory redemption provisions of such Note), the Indenture Trustee may withhold the notice to Noteholders if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of Noteholders. SECTION 6.06. Reports by Indenture Trustee to Holders. The Indenture Trustee shall deliver to each Noteholder such information as may be required to enable such holder to prepare its federal and state income tax returns. SECTION 6.07. Compensation and Indemnity. The Issuer shall cause the Servicer to pay to the Indenture Trustee from time to time reasonable compensation for its services. The Indenture Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Issuer shall cause the Administrator to reimburse the Indenture Trustee for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable out-of-pocket compensation and expenses, disbursements and advances of the Indenture Trustee's agents, counsel, accountants and experts. The Issuer shall cause the Administrator to indemnify the Indenture Trustee against any and all loss, liability or expense (including attorneys' fees and expenses) incurred by it in connection with the administration of this trust and the performance of its duties hereunder or under the Sale and Servicing Agreement or under any other Basic Document. The Indenture Trustee shall notify the Issuer and the Administrator promptly of any claim for which it may seek indemnity. Failure by the Indenture Trustee to so notify the Issuer and the Administrator shall not relieve the Issuer or the Administrator of its obligations hereunder if no prejudice to the Issuer or the Administrator shall have resulted from such failure. The Issuer shall, or shall cause the Administrator to, defend any such claim, and the Indenture Trustee may have separate counsel and the Issuer shall, or shall cause the Administrator to, pay the fees and expenses of such counsel. Neither the Issuer nor the Administrator need reimburse any expense or indemnify against any loss, liability or expense incurred by the Indenture Trustee through the Indenture Trustee's own willful misconduct, negligence or bad faith. The Issuer's payment obligations to the Indenture Trustee and the Administrator's indemnities to the Indenture Trustee pursuant to this Section shall survive the discharge of this Indenture or the earlier resignation or removal of the Indenture Trustee. When the Indenture Trustee incurs expenses after the occurrence of a Default specified in Section 5.01(iv) or (v) with respect to the Issuer, the expenses are intended to constitute expenses of administration under Title 11 of the United States Code or any other applicable federal or state bankruptcy, insolvency or similar law. SECTION 6.08. Replacement of Indenture Trustee. No resignation or removal of the Indenture Trustee and no appointment of a successor Indenture Trustee shall become effective until the acceptance of appointment by the successor Indenture Trustee pursuant to this Section 6.08. The Indenture Trustee may resign at any time by so notifying the Issuer and each Rating Agency. The Holders of a majority in Outstanding Amount of the Controlling Class of Notes may remove the Indenture Trustee by notifying the Indenture Trustee if: (i) the Indenture Trustee fails to comply with Section 6.11; 41 (ii) the Indenture Trustee is adjudged a bankrupt or insolvent; (iii) a receiver or other public officer takes charge of the Indenture Trustee or its property; (iv) the Indenture Trustee otherwise becomes incapable of acting; or (v) the Indenture Trustee breaches any representation, warranty or covenant made by it under any Basic Document. If the Indenture Trustee resigns or is removed or if a vacancy exists in the office of Indenture Trustee for any reason (the Indenture Trustee in such event being referred to herein as the retiring Indenture Trustee), the Issuer shall promptly appoint a successor Indenture Trustee. A successor Indenture Trustee shall deliver a written acceptance of its appointment to the retiring Indenture Trustee and to the Issuer. Thereupon the resignation or removal of the retiring Indenture Trustee shall become effective, and the successor Indenture Trustee shall have all the rights, powers and duties of the Indenture Trustee under this Indenture. The retiring Indenture Trustee shall be paid all amounts owed to it upon its resignation or removal. The successor Indenture Trustee shall mail a notice of its succession to Noteholders. The retiring Indenture Trustee shall promptly transfer all property held by it as Indenture Trustee to the successor Indenture Trustee. The retiring Indenture Trustee shall not be liable for the acts or omissions of any Successor Indenture Trustee. If a successor Indenture Trustee does not take office within 60 days after the retiring Indenture Trustee resigns or is removed, the retiring Indenture Trustee, the Issuer or the Holders of a majority in Outstanding Amount of the Controlling Class of Notes may petition any court of competent jurisdiction for the appointment of a successor Indenture Trustee. If the Indenture Trustee fails to comply with Section 6.11, any Noteholder may petition any court of competent jurisdiction for the removal of the Indenture Trustee and the appointment of a successor Indenture Trustee. Notwithstanding the replacement of the Indenture Trustee pursuant to this Section, the Issuer's and the Administrator's obligations under Section 6.07 shall continue for the benefit of the retiring Indenture Trustee. SECTION 6.09. Successor Indenture Trustee by Merger. If the Indenture Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation without any further act shall be the successor Indenture Trustee; provided, that such corporation or banking association shall be qualified and eligible under Section 6.11. The Indenture Trustee shall provide the Rating Agencies notice of any such transaction. In case at the time such successor or successors by merger, conversion or consolidation to the Indenture Trustee shall succeed to the trusts created by this Indenture any of the Notes shall 42 have been authenticated but not delivered, any such successor to the Indenture Trustee may adopt the certificate of authentication of any predecessor trustee and deliver such Notes so authenticated; and in case at that time any of the Notes shall not have been authenticated, any successor to the Indenture Trustee may authenticate such Notes either in the name of any predecessor hereunder or in the name of the successor to the Indenture Trustee; and in all such cases such certificates shall have the full force that it is anywhere in the Notes or in this Indenture provided that the certificate of the Indenture Trustee shall have. SECTION 6.10. Appointment of Co-Indenture Trustee or Separate Indenture Trustee. (a) Notwithstanding any other provisions of this Indenture, at any time, for the purpose of meeting any legal requirement of any jurisdiction in which any part of the Trust Estate may at the time be located, the Indenture Trustee shall have the power and may execute and deliver all instruments to appoint one or more Persons to act as a co-trustee or co-trustees, or separate trustee or separate trustees, of all or any part of the Trust, and to vest in such Person or Persons, in such capacity and for the benefit of the Noteholders, such title to the Trust Estate, or any part thereof, and, subject to the other provisions of this Section, such powers, duties, obligations, rights and trusts as the Indenture Trustee may consider necessary or desirable. No co-trustee or separate trustee hereunder shall be required to meet the terms of eligibility as a successor trustee under Section 6.11 and no notice to Noteholders of the appointment of any co-trustee or separate trustee shall be required under Section 6.08 hereof. (b) Every separate trustee and co-trustee shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions: (i) all rights, powers, duties and obligations conferred or imposed upon the Indenture Trustee shall be conferred or imposed upon and exercised or performed by the Indenture Trustee and such separate trustee or co-trustee jointly (it being understood that such separate trustee or co-trustee is not authorized to act separately without the Indenture Trustee joining in such act), except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Trust Estate or any portion thereof in any such jurisdiction) shall be exercised and performed singly by such separate trustee or co-trustee, but solely at the direction of the Indenture Trustee; (ii) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder; and (iii) the Indenture Trustee may at any time accept the resignation of or remove any separate trustee or co-trustee. (c) Any notice, request or other writing given to the Indenture Trustee shall be deemed to have been given to each of the then separate trustees and co-trustees, as effectively as if given to each of them. Every instrument appointing any separate trustee or co-trustee shall refer to this Agreement and the conditions of this Article VI. Each separate trustee and 43 co-trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Indenture Trustee or separately, as may be provided therein, subject to all the provisions of this Indenture, specifically including every provision of this Indenture relating to the conduct of, affecting the liability of, or affording protection to, the Indenture Trustee. Every such instrument shall be filed with the Indenture Trustee. (d) Any separate trustee or co-trustee may at any time constitute the Indenture Trustee, its agent or attorney-in-fact with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect of this Agreement on its behalf and in its name. If any separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Indenture Trustee, to the extent permitted by law, without the appointment of a new or successor trustee. SECTION 6.11. Eligibility; Disqualification. The Indenture Trustee shall at all times satisfy the requirements of TIA ss. 310(a). The Indenture Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition, and the time deposits of the Indenture Trustee shall be rated at least A-1 by Standard & Poor's and P-1 by Moody's. The Indenture Trustee shall comply with TIA ss. 310(b), including the optional provision permitted by the second sentence of TIA ss. 310(b)(9); provided, however, that there shall be excluded from the operation of TIA ss. 310(b)(1) any indenture or indentures under which other securities of the Issuer are outstanding if the requirements for such exclusion set forth in TIA ss. 310(b)(1) are met. SECTION 6.12. [Reserved]. SECTION 6.13. Preferential Collection of Claims Against Issuer. The Indenture Trustee shall comply with TIA ss. 311(a), excluding any creditor relationship listed in TIA ss. 311(b). An Indenture Trustee who has resigned or been removed shall be subject to TIA ss. 311(a) to the extent indicated. SECTION 6.14. Waiver of Setoffs. The Indenture Trustee hereby expressly waives any and all rights of setoff that the Indenture Trustee may otherwise at any time have under applicable law with respect to any Trust Account and agrees that amounts in the Trust Accounts shall at all times be held and applied solely in accordance with the provisions hereof and of the other Basic Documents. ARTICLE VII. NOTEHOLDERS' LISTS AND REPORTS SECTION 7.01. Issuer To Furnish Indenture Trustee Names and Addresses of Noteholders. The Issuer will furnish or cause to be furnished to the Indenture Trustee (a) not more than five days after the earlier of (i) each Record Date and (ii) three months after the last Record Date, a list, in such form as the Indenture Trustee may reasonably require, of the names 44 and addresses of the Holders of Notes as of such Record Date, and (b) at such other times as the Indenture Trustee may request in writing, within 30 days after receipt by the Issuer of any such request, a list of similar form and content as of a date not more than 10 days prior to the time such list is furnished; provided, however, that so long as the Indenture Trustee is the Note Registrar, no such list shall be required to be furnished. SECTION 7.02. Preservation of Information; Communications to Noteholders. (a) The Indenture Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of the Holders of Notes contained in the most recent list furnished to the Indenture Trustee as provided in Section 7.01 and the names and addresses of Holders of Notes received by the Indenture Trustee in its capacity as Note Registrar. The Indenture Trustee may destroy any list furnished to it as provided in such Section 7.01 upon receipt of a new list so furnished. The Indenture Trustee shall make such list available to the Owner Trustee on written request, and to the Noteholders upon written request of three or more Noteholders or one or more Noteholders evidencing not less than 25% of the Outstanding Amount of the Notes. Upon receipt by the Indenture Trustee of any request by a Noteholder to receive a copy of the current list of Noteholders, the Indenture Trustee shall promptly notify the Administrator thereof by providing to the Administrator a copy of such request and a copy of the list of Noteholders in response thereto. (b) Noteholders may communicate pursuant to TIAss. 312(b) with other Noteholders with respect to their rights under this Indenture or under the Notes. (c) The Issuer, the Indenture Trustee and the Note Registrar shall have the protection of TIAss. 312(c). SECTION 7.03. Reports by Issuer. (a) The Issuer shall: (i) file with the Indenture Trustee, within 15 days after the Issuer is required (if at all) to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) that the Issuer may be required to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act; (ii) file with the Indenture Trustee and the Commission in accordance with rules and regulations prescribed from time to time by the Commission such additional information, documents and reports with respect to compliance by the Issuer with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; and (iii) supply to the Indenture Trustee (and the Indenture Trustee shall transmit by mail to all Noteholders described in TIA ss. 313(c)) such summaries of any information, documents and reports required to be filed by the Issuer pursuant to clauses (i) and 45 (ii) of this Section 7.03(a) and by rules and regulations prescribed from time to time by the Commission. (b) Unless the Issuer otherwise determines, the fiscal year of the Issuer shall end on December 31 of each year. SECTION 7.04. Reports by Indenture Trustee. If required by TIA ss. 313(a), within 60 days after each March 31 beginning with March 31, 2002, the Indenture Trustee shall mail to each Noteholder as required by TIA ss. 313(c) a brief report dated as of such date that complies with TIA ss. 313(a). The Indenture Trustee also shall comply with TIA ss. 313(b). A copy of each report at the time of its mailing to Noteholders shall be filed by the Indenture Trustee with the Commission and each stock exchange, if any, on which the Notes are listed. The Issuer shall notify the Indenture Trustee if and when the Notes are listed on any stock exchange. ARTICLE VIII. ACCOUNTS, DISBURSEMENTS AND RELEASES SECTION 8.01. Collection of Money. Except as otherwise expressly provided herein, the Indenture Trustee may demand payment or delivery of, and shall receive and collect, directly and without intervention or assistance of any fiscal agent or other intermediary, all money and other property payable to or receivable by the Indenture Trustee pursuant to this Indenture. The Indenture Trustee shall apply all such money received by it as provided in this Indenture. Except as otherwise expressly provided in this Indenture, if any default occurs in the making of any payment or performance under any agreement or instrument that is part of the Trust Estate, the Indenture Trustee may take such action as may be appropriate to enforce such payment or performance, including the institution and prosecution of appropriate Proceedings. Any such action shall be without prejudice to any right to claim a Default or Event of Default under this Indenture and any right to proceed thereafter as provided in Article V. SECTION 8.02. Trust Accounts. (a) On or prior to the Closing Date, the Issuer shall cause the Servicer to establish and maintain, in the name of the Indenture Trustee, for the benefit of the Noteholders and, in the case of the Collection Account and the Reserve Account, the Certificateholders, the Trust Accounts as provided in Section 5.01 of the Sale and Servicing Agreement. (b) On or before each Payment Date, the Issuer shall cause the Servicer to deposit all Available Amounts with respect to the Collection Period preceding such Payment Date in the Collection Account as provided in Section 5.02 and 5.04 of the Sale and Servicing Agreement. On or before each Deposit Date, all amounts required to be withdrawn from the Reserve Account and deposited in the Collection Account pursuant to Section 5.05 of the Sale and Servicing Agreement shall be withdrawn by the Indenture Trustee from the Reserve Account and deposited 46 to the Collection Account as provided therein, as to which Issuer shall cause Servicer to timely provide the related instructions. (c) On each Payment Date, the Indenture Trustee (based on the information contained in the Servicer's report delivered on or before the related Determination Date pursuant to Section 4.9 of the Sale and Servicing Agreement) shall make the withdrawals from the Collection Account and make deposits, distributions and payments, to the extent of funds on deposit in the Collection Account with respect to the Collection Period preceding such Payment Date (including funds, if any, deposited therein from the Reserve Account), in accordance with the provisions of Section 5.5(b) of the Sale and Servicing Agreement (as to which Issuer shall cause Servicer to timely provide the related instructions). (i) On each Payment Date, the Indenture Trustee (based on the information contained in the Servicer's report delivered on or before the related Determination Date pursuant to Section 4.9 of the Sale and Servicing Agreement) shall withdraw the funds on deposit in the Interest Distribution Account with respect to the Collection Period preceding such Distribution Date and make distributions and payments in the following order of priority: (A) first, to the Noteholders of Class A Notes, the accrued and unpaid interest on the Class A Notes; provided that if there are not sufficient funds available to pay the entire amount of the accrued and unpaid interest on the Class A Notes, the amounts available shall be applied to the payment of such interest on the Class A Notes on a pro rata basis based upon the amount of interest due on each Class of Class A Notes; and (B) second, to the Noteholders of Class B Notes, the accrued and unpaid interest on the Class B Notes; provided that if there are not sufficient funds available to pay the entire amount of the accrued and unpaid interest on the Class B Notes, the amounts available shall be applied to the payment of such interest on the Class B Notes on a pro rata basis. (d) On each Distribution Date, the Indenture Trustee (based on the information contained in the Servicer's report delivered on or before the related Determination Date pursuant to Section 4.9 of the Sale and Servicing Agreement) shall withdraw the funds on deposit on the Principal Distribution Account with respect to the Collection Period preceding such Distribution Date and make distributions and payments in the following order of priority: (i) first, to the Noteholders of the Class A-1 Notes in reduction of principal until the principal amount of the Outstanding Class A-1 Notes has been paid in full; provided that if there are not sufficient funds available to pay the principal amount of the Outstanding Class A-1 Notes in full, the amounts available shall be applied to the payment of principal on the Class A-1 Notes on a pro rata basis; (ii) second, to the Noteholders of the Class A-2 Notes in reduction of principal until the principal amount of the Outstanding Class A-2 Notes has been paid in full; provided that if there are not sufficient funds available to pay the principal amount of the 47 Outstanding Class A-2 Notes in full, the amounts available shall be applied to the payment of principal on the Class A-2 Notes on a pro rata basis; (iii) third, to the Noteholders of the Class A-3 Notes in reduction of principal until the principal amount of the Outstanding Class A-3 Notes has been paid in full; provided that if there are not sufficient funds available to pay the principal amount of the Outstanding Class A-3 Notes in full, the amounts available shall be applied to the payment of principal on the Class A-3 Notes on a pro rata basis; (iv) fourth, to the Noteholders of the Class A-4 Notes in reduction of principal until the principal amount of the Outstanding Class A-4 Notes has been paid in full; provided that if there are not sufficient funds available t pay the principal amount of the Outstanding Class A-4 Notes in full, the amounts available shall be applied to the payment of principal on the Class A-4 Notes on a pro rata basis; (v) fifth, to the Noteholders of the Class B Notes in reduction of principal until the principal amount of the Outstanding Class B Notes has been paid in full; provided that if there are not sufficient funds available to pay the principal amount of the Outstanding Class B Notes in full, the amounts available shall be applied to the payment of principal on the Class B Notes on a pro rata basis; and (vi) sixth, any remaining amounts, to the Certificate Distribution Account. SECTION 8.03. General Provisions Regarding Accounts. The Indenture Trustee shall not in any way be held liable by reason of any insufficiency in any of the Trust Accounts resulting from any loss on any Eligible Investment included therein except for losses attributable to the Indenture Trustee's failure to make payments on such Eligible Investments issued by the Indenture Trustee, in its commercial capacity as principal obligor and not as trustee, in accordance with their terms. SECTION 8.04. Release of Trust Estate. (a) Subject to the payment of its fees and expenses pursuant to Section 6.07, the Indenture Trustee may, and when required by the provisions of this Indenture shall, execute instruments to release property from the lien of this Indenture, or convey the Indenture Trustee's interest in the same, in a manner and under circumstances that are not inconsistent with the provisions of this Indenture. No party relying upon an instrument executed by the Indenture Trustee as provided in this Article VIII shall be bound to ascertain the Indenture Trustee's authority, inquire into the satisfaction of any conditions precedent or see to the application of any moneys. (b) The Indenture Trustee shall, at such time as there are no Notes Outstanding and all sums due the Indenture Trustee pursuant to Section 6.07 have been paid in full, release any remaining portion of the Trust Estate that secured the Notes from the lien of this Indenture and release to the Issuer or any other Person entitled thereto any funds then on deposit in the 48 Trust Accounts. The Indenture Trustee shall release property from the lien of this Indenture pursuant to this Section 8.04(b) only upon receipt by it of an Issuer Request accompanied by an Officer's Certificate, an Opinion of Counsel and (if required by the TIA) Independent Certificates in accordance with TIA ss.ss. 314(c) and 314(d)(1) meeting the applicable requirements of Section 11.01. (c) The Issuer agrees, upon request by the Servicer and representation by the Servicer that it has complied with the procedure in Section 9.01 of the Sale and Servicing Agreement, to render the Issuer Request to the Indenture Trustee in accordance with Section 4.04, and take such other actions as are required in that Section. SECTION 8.05. Opinion of Counsel. The Indenture Trustee shall receive at least seven days prior written notice when requested by the Issuer to take any action pursuant to Section 8.04(b), accompanied by copies of any instruments involved, and the Indenture Trustee shall also require, as a condition to such action, an Opinion of Counsel, in form and substance satisfactory to the Indenture Trustee, stating the legal effect of any such action, outlining the steps required to complete the same, and concluding that all conditions precedent to the taking of such action have been complied with and such action will not materially and adversely impair the security for the Notes or the rights of the Noteholders in contravention of the provisions of this Indenture; provided, however, that such Opinion of Counsel shall not be required to express an opinion as to the fair value of the Trust Estate. Counsel rendering any such opinion may rely, without independent investigation, on the accuracy and validity of any certificate or other instrument delivered to the Indenture Trustee in connection with any such action. ARTICLE IX. SUPPLEMENTAL INDENTURES SECTION 9.01. Supplemental Indentures Without Consent of Noteholders. (a) Without the consent of the Holders of any Notes but with prior written notice to the Rating Agencies (with copy to the Indenture Trustee), the Issuer and the Indenture Trustee, when authorized by an Issuer Order, at any time and from time to time, may enter into one or more supplemental indentures hereto (which shall conform to the provisions of the Trust Indenture Act as in force at the date of the execution thereof), in form satisfactory to the Indenture Trustee, for any of the following purposes: (i) to correct or amplify the description of any property at any time subject to the lien of this Indenture, or better to assure, convey and confirm unto the Indenture Trustee any property subject or required to be subjected to the lien of this Indenture, or to subject to the lien of this Indenture additional property; (ii) to evidence the succession, in compliance with the applicable provisions hereof, of another person to the Issuer, and the assumption by any such successor of the covenants of the Issuer herein and in the Notes contained; 49 (iii) to add to the covenants of the Issuer, for the benefit of the Holders of the Notes, or to surrender any right or power herein conferred upon the Issuer; (iv) to convey, transfer, assign, mortgage or pledge any property to or with the Indenture Trustee; (v) to cure any ambiguity, to correct or supplement any provision herein or in any supplemental indenture that may be inconsistent with any other provision herein or in any supplemental indenture or to make any other provisions with respect to matters or questions arising under this Indenture or in any supplemental indenture; provided, that such action shall not adversely affect the interests of the Holders of the Notes; (vi) to evidence and provide for the acceptance of the appointment hereunder by a successor trustee with respect to the Notes and to add to or change any of the provisions of this Indenture as shall be necessary to facilitate the administration of the trusts hereunder by more than one trustee, pursuant to the requirements of Article VI; or (vii) to modify, eliminate or add to the provisions of this Indenture to such extent as shall be necessary to effect the qualification of this Indenture under the TIA or under any similar federal statute hereafter enacted and to add to this Indenture such other provisions as may be expressly required by the TIA. The Indenture Trustee is hereby authorized to join in the execution of any such supplemental indenture and to make any further appropriate agreements and stipulations that may be therein contained. (b) The Issuer and the Indenture Trustee, when authorized by an Issuer Order, may, also without the consent of any of the Holders of the Notes but with prior notice to the Rating Agencies, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Indenture or of modifying in any manner the rights of the Holders of the Notes under this Indenture; provided, however, that such action shall not, as evidenced by an Opinion of Counsel, adversely affect in any material respect the interests of any Noteholder provided further that such action shall not be deemed to adversely affect in any material respect the interests of any Noteholder and no Opinion of Counsel to that effect shall be required if the person requesting such amendment obtains a letter from the Rating Agencies stating that the amendment would not result in the downgrading or withdrawal of the ratings then assigned to the Notes. SECTION 9.02. Supplemental Indentures with Consent of Noteholders. The Issuer and the Indenture Trustee, when authorized by an Issuer Order, also may, with prior notice to the Rating Agencies and with the consent of the Holders of not less than a majority of the Outstanding Amount of the Notes, by Act of such Holders delivered to the Issuer and the Indenture Trustee, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Indenture or of modifying in any manner the rights of the Holders of the Notes under this 50 Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Note affected thereby: (i) change the date of payment of any installment of principal of or interest on any Note, or reduce the principal amount thereof, the interest rate thereon or the Redemption Price with respect thereto, change the provisions of this Indenture relating to the application of collections on, or the proceeds of the sale of, the Trust Estate to payment of principal of or interest on the Notes, or change any place of payment where, or the coin or currency in which, any Note or the interest thereon is payable, or impair the right to institute suit for the enforcement of the provisions of this Indenture requiring the application of funds available therefor, as provided in Article V, to the payment of any such amount due on the Notes on or after the respective due dates thereof (or, in the case of redemption, on or after the Redemption Date); (ii) reduce the percentage of the Outstanding Amount of the Notes or the Controlling Class, the consent of the Holders of which is required for any such supplemental indenture, or the consent of the Holders of which is required for any waiver of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences provided for in this Indenture; (iii) modify or after (x) the provisions of the proviso as to the definition of the term "Outstanding" or (y) the definition of Controlling Class; (iv) reduce the percentage of the Outstanding Amount of the Notes or the Controlling Class of Notes, as applicable, required to direct the Indenture Trustee to direct the Issuer to sell or liquidate the Trust Estate pursuant to Section 5.04; (v) modify any provision of this Section except to increase any percentage specified herein or to provide that certain additional provisions of this Indenture or the Basic Documents cannot be modified or waived without the consent of the Holder of each Outstanding Note affected thereby; (vi) modify any of the provisions of this Indenture in such manner as to affect the calculation of the amount of any payment of interest or principal due on any Note on any Payment Date (including the calculation of any of the individual components of such calculation) or to affect the rights of the Holders of Notes to the benefit of any provisions for the mandatory redemption of the Notes contained herein; or (vii) permit the creation of any lien ranking prior to or on a parity with the lien of this Indenture with respect to any part of the Trust Estate or, except as otherwise permitted or contemplated herein, terminate the lien of this Indenture on any property at any time subject hereto or deprive the Holder of any Note of the security provided by the lien of this Indenture. The Indenture Trustee may in its discretion or at the advice of counsel determine whether or not any Notes would be affected by any supplemental indenture and any such determination shall be 51 conclusive upon the Holders of all Notes, whether theretofore or thereafter authenticated and delivered hereunder. The Indenture Trustee shall not be liable for any such determination made in good faith. It shall not be necessary for any Act of Noteholders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. Promptly after the execution by the Issuer and the Indenture Trustee of any supplemental indenture pursuant to this Section, the Indenture Trustee shall mail to the Holders of the Notes to which such amendment or supplemental indenture relates a notice setting forth in general terms the substance of such supplemental indenture. Any failure of the Indenture Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. SECTION 9.03. Execution of Supplemental Indentures. In executing, or permitting the additional trusts created by, any supplemental indenture permitted by this Article IX or the modification thereby of the trusts created by this Indenture, the Indenture Trustee shall be entitled to receive, and subject to Sections 6.01 and 6.02, shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Indenture Trustee may, but shall not be obligated to, enter into any such supplemental indenture that affects the Indenture Trustee's own rights, duties, liabilities or immunities under this Indenture or otherwise. The Administrator shall provide a fully executed copy of any supplemental indentures to this Indenture to each Rating Agency. SECTION 9.04. Effect of Supplemental Indenture. Upon the execution of any supplemental indenture pursuant to the provisions hereof, this Indenture shall be and shall be deemed to be modified and amended in accordance therewith with respect to the Notes affected thereby, and the respective rights, limitations of rights, obligations, duties, liabilities and immunities under this Indenture of the Indenture Trustee, the Issuer and the Holders of the Notes shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes. SECTION 9.05. Reference in Notes to Supplemental Indentures. Notes authenticated and delivered after the execution of any supplemental indenture pursuant to this Article IX may, and if required by the Indenture Trustee shall, bear a notation in form approved by the Indenture Trustee as to any matter provided for in such supplemental indenture. If the Issuer or the Indenture Trustee shall so determine, new Notes so modified as to conform, in the opinion of the Indenture Trustee and the Issuer, to any such supplemental indenture may be prepared and executed by the Issuer and authenticated and delivered by the Indenture Trustee in exchange for Outstanding Notes. SECTION 9.06. Conformity with Trust Indenture Act. Every amendment of this Indenture and every supplemental indenture executed pursuant to this Article IX shall conform to 52 the requirements of the Trust Indenture Act as then in effect so long as this Indenture shall then be qualified under the Trust Indenture Act. ARTICLE X. REDEMPTION OF NOTES SECTION 10.01. Redemption. The Notes are subject to redemption in whole, but not in part, at the direction of the Servicer pursuant to Section 9.01 of the Sale and Servicing Agreement, on any Payment Date on which the Servicer exercises its option to purchase the Trust Estate pursuant to said Section 9.01, for a purchase price equal to the Redemption Price; provided, that the Issuer has available funds sufficient to pay the Redemption Price. The Servicer or the Issuer shall furnish the Rating Agencies and the Indenture Trustee notice of such redemption. If the Notes are to be redeemed pursuant to this Section 10.01, the Servicer shall furnish notice of such election to the Indenture Trustee not later than 20 days prior to the Redemption Date and shall deposit the Business Day prior to the Redemption Date with the Indenture Trustee in the Note Distribution Account the Redemption Price of the Notes to be redeemed, whereupon all such Notes shall be due and payable on the Redemption Date upon the furnishing of a notice complying with Section 10.02 to each Holder of the Notes. SECTION 10.02. Form of Redemption Notice. Notice of redemption under Section 10.01 shall be given by the Indenture Trustee by first-class mail, postage prepaid, or by facsimile mailed or transmitted not later than 10 days prior to the applicable Redemption Date to each Holder of Notes, as of the close of business on the Record Date preceding the applicable Redemption Date, at such Holder's address or facsimile number appearing in the Note Register. All notices of redemption shall state: (i) the Redemption Date; (ii) the Redemption Price; (iii) the place where such Notes are to be surrendered for payment of the Redemption Price (which shall be the office or agency of the Issuer to be maintained as provided in Section 3.02); and (iv) that interest on the Notes shall cease to accrue on the Redemption Date. Notice of redemption of the Notes shall be given by the Indenture Trustee in the name and at the expense of the Issuer. Failure to give notice of redemption, or any defect therein, to any Holder of any Note shall not impair or affect the validity of the redemption of any other Note. SECTION 10.03. Notes Payable on Redemption Date. The Notes or portions thereof to be redeemed shall, following notice of redemption as required by Section 10.02 (in the case of redemption pursuant to Section 10.01), on the Redemption Date become due and payable at the 53 Redemption Price and (unless the Issuer shall default in the payment of the Redemption Price) no interest shall accrue on the Redemption Price for any period after the date to which accrued interest is calculated for purposes of calculating the Redemption Price. ARTICLE XI. MISCELLANEOUS SECTION 11.01. Compliance Certificates and Opinions, etc. (a) Upon any application or request by the Issuer to the Indenture Trustee to take any action under any provision of this Indenture, the Issuer shall furnish to the Indenture Trustee (i) an Officer's Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and (ii) an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with and (iii) (if required by the TIA) an Independent Certificate from a firm of certified public accountants meeting the applicable requirements of this Section, except that, in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: (i) a statement that each signatory of such certificate or opinion has read or has caused to be read such covenant or condition and the definitions herein relating thereto; (ii) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (iii) a statement that, in the opinion of each such signatory, such signatory has made such examination or investigation as is necessary to enable such signatory to express an informed opinion as to whether or not such covenant or condition has been complied with; and (iv) a statement as to whether, in the opinion of each such signatory, such condition or covenant has been complied with. (b) (i) Prior to the deposit of any Collateral or other property or securities with the Indenture Trustee that is to be made the basis for the release of any property or securities subject to the lien of this Indenture, the Issuer shall, in addition to any obligation imposed in Section 11.01(a) or elsewhere in this Indenture, furnish to the Indenture Trustee an Officer's Certificate certifying or stating the opinion of each person signing such certificate as to the fair 54 value (within 90 days of such deposit) to the Issuer of the Collateral or other property or securities to be so deposited. (ii) Whenever the Issuer is required to furnish to the Indenture Trustee an Officer's Certificate certifying or stating the opinion of any signer thereof as to the matters described in clause (i) above, the Issuer shall also deliver to the Indenture Trustee an Independent Certificate as to the same matters, if the fair value to the Issuer of the securities to be so deposited and of all other such securities made the basis of any such withdrawal or release since the commencement of the then-current fiscal year of the Issuer, as set forth in the certificates delivered pursuant to clause (i) above and this clause (ii), is 10% or more of the Outstanding Amount of the Notes, but such a certificate need not be furnished with respect to any securities so deposited, if the fair value thereof to the Issuer as set forth in the related Officer's Certificate is less than $25,000 or less than one percent of the Outstanding Amount of the Notes. (iii) Whenever any property or securities are to be released from the lien of this Indenture, the Issuer shall also furnish to the Indenture Trustee an Officer's Certificate certifying or stating the opinion of each person signing such certificate as to the fair value (within 90 days of such release) of the property or securities proposed to be released and stating that in the opinion of such person the proposed release will not impair the security under this Indenture in contravention of the provisions hereof. (iv) Other than with respect to the release of any Purchased Receivable, the Issuer is required to furnish to the Indenture Trustee an Officer's Certificate certifying or stating the opinion of any signer thereof as to the matters described in clause (iii) above, the Issuer shall also furnish to the Indenture Trustee an Independent Certificate as to the same matters if the fair value of the property or securities and of all other property, other than property as contemplated by clause (v) below, or securities released from the lien of this Indenture since the commencement of the then-current calendar year, as set forth in the certificates required by clause (iii) above and this clause (iv), equals 10% or more of the Outstanding Amount of the Notes, but such certificate need not be furnished in the case of any release of property or securities if the fair value thereof as set forth in the related Officer's Certificate is less than $25,000 or less than one percent of the then Outstanding Amount of the Notes. (v) Notwithstanding Section 4.04 or any other provision of this Section, the Issuer may, without compliance with the requirements of the other provisions of this Section, (A) collect, liquidate, sell or otherwise dispose of Receivables and Financed Vehicles as and to the extent permitted or required by the Basic Documents and (B) make cash payments out of the Trust Accounts as and to the extent permitted or required by the Basic Documents. SECTION 11.02. Form of Documents Delivered to Indenture Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such 55 Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an Authorized Officer of the Issuer may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which such officer's certificate or opinion is based are erroneous. Any such certificate of an Authorized Officer or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Servicer, either Seller, the Issuer or the Administrator, stating that the information with respect to such factual matters is in the possession of the Servicer, the applicable Seller, the Issuer or the Administrator, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. Whenever in this Indenture, in connection with any application or certificate or report to the Indenture Trustee, it is provided that the Issuer shall deliver any document as a condition of the granting of such application, or as evidence of the Issuer's compliance with any term hereof, it is intended that the truth and accuracy, at the time of the granting of such application or at the effective date of such certificate or report (as the case may be), of the facts and opinions stated in such document shall in such case be conditions precedent to the right of the Issuer to have such application granted or to the sufficiency of such certificate or report. The foregoing shall not, however, be construed to affect the Indenture Trustee's right to rely upon the truth and accuracy of any statement or opinion contained in any such document as provided in Article VI. SECTION 11.03. Acts of Noteholders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Noteholders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Noteholders in person or by agents duly appointed in writing; and except as herein otherwise expressly provided such action shall become effective when such instrument or instruments are delivered to the Indenture Trustee and, where it is hereby expressly required, to the Issuer. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Noteholders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 6.01) conclusive in favor of the Indenture Trustee and the Issuer, if made in the manner provided in this Section. (b) The fact and date of the execution by any person of any such instrument or writing may be proved in any manner that the Indenture Trustee deems sufficient. 56 (c) The ownership of Notes shall be proved by the Note Register. (d) Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Notes shall bind the Holder of every Note issued upon the registration thereof or in exchange therefor or in lieu thereof, in respect of anything done, omitted or suffered to be done by the Indenture Trustee or the Issuer in reliance thereon, whether or not notation of such action is made upon such Note. SECTION 11.04. Notices, etc., to Indenture Trustee, Issuer and Rating Agencies. Any request, demand, authorization, direction, notice, consent, waiver or Act of Noteholders or other documents provided or permitted by this Indenture shall be in writing and, if such request, demand, authorization, direction, notice, consent, waiver or act of Noteholders is to be made upon, given or furnished to or filed with: (i) the Indenture Trustee by any Noteholder or by the Issuer, shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Indenture Trustee at its Corporate Trust Office; or (ii) the Issuer by the Indenture Trustee or by any Noteholder, shall be sufficient for every purpose hereunder if in writing and mailed first-class, postage prepaid to the Issuer addressed to: BMW Vehicle Owner Trust 2001-A, in care of Wilmington Trust Company, as Owner Trustee, Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration, or at any other address previously furnished in writing to the Indenture Trustee by the Issuer or the Administrator. The Issuer shall promptly transmit any notice received by it from the Noteholders to the Indenture Trustee. Notices required to be given to the Rating Agencies by the Issuer, the Indenture Trustee or the Owner Trustee shall be in writing, personally delivered or mailed by certified mail, return receipt requested, to (i) in the case of Moody's, at the following address: Moody's Investors Service, Inc., ABS Monitoring Department, 99 Church Street, New York, New York 10007 and (ii) in the case of Standard & Poor's, at the following address: Standard & Poor's, a division of The McGraw-Hill Companies, Inc., 55 Water Street, New York, New York 10041, Attention of Asset Backed Surveillance Department; or as to each of the foregoing, at such other address as shall be designated by written notice to the other parties. SECTION 11.05. Notices to Noteholders; Waiver. Where this Indenture provides for notice to Noteholders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class, postage prepaid to each Noteholder affected by such event, at such Holder's address as it appears on the Note Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Noteholders is given by mail, neither the failure to mail such notice nor any defect in any notice so mailed to any particular Noteholder shall affect the sufficiency of such notice with respect to other Noteholders, and any notice that is mailed in the manner herein provided shall conclusively be presumed to have been duly given. 57 Where this Indenture provides for notice in any manner, such notice may be waived in writing by any Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Noteholders shall be filed with the Indenture Trustee but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such a waiver. In case, by reason of the suspension of regular mail service as a result of a strike, work stoppage or similar activity, it shall be impractical to mail notice of any event to Noteholders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a sufficient giving of such notice. Where this Indenture provides for notice to the Rating Agencies, failure to give such notice shall not affect any other rights or obligations created hereunder, and shall not under any circumstance constitute a Default or Event of Default. SECTION 11.06. Alternate Payment and Notice Provisions. Notwithstanding any provision of this Indenture or any of the Notes to the contrary, the Issuer may enter into any agreement with any Holder of a Note providing for a method of payment, or notice by the Indenture Trustee or any Paying Agent to such Holder, that is different from the methods provided for in this Indenture for such payments or notices. The Issuer will furnish to the Indenture Trustee a copy of each such agreement and the Indenture Trustee will cause payments to be made and notices to be given in accordance with such agreements. The Indenture Trustee shall provide a copy of any request made pursuant to this Section 11.06 to the Owner Trustee. SECTION 11.07. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 11.08. Successors and Assigns. All covenants and agreements in this Indenture and the Notes by the Issuer shall bind its successors and assigns, whether so expressed or not. All agreements of the Indenture Trustee in this Indenture shall bind its successors, co-trustees and agents. SECTION 11.09. Separability. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 11.10. Benefits of Indenture. Nothing in this Indenture or in the Notes, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, and the Noteholders, and any other party secured hereunder, and any other Person with an ownership interest in any part of the Trust Estate, any benefit or any legal or equitable right, remedy or claim under this Indenture. SECTION 11.11. Legal Holidays. In any case where the date on which any payment is due shall not be a Business Day, then (notwithstanding any other provision of the Notes or this 58 Indenture) payment need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the date on which nominally due, and no interest shall accrue for the period from and after any such nominal date. SECTION 11.12. GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. SECTION 11.13. Counterparts. This Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. SECTION 11.14. Recording of Indenture. If this Indenture is subject to recording in any appropriate public recording offices, such recording is to be effected by the Issuer and at the expense of the Servicer accompanied by an Opinion of Counsel (which may be counsel to the Indenture Trustee or any other counsel reasonably acceptable to the Indenture Trustee) to the effect that such recording is necessary either for the protection of the Noteholders or any other Person secured hereunder or for the enforcement of any right or remedy granted to the Indenture Trustee under this Indenture. SECTION 11.15. Trust Obligation. No recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under this Indenture or any certificate or other writing delivered in connection herewith or therewith, against (i) the Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any owner of a beneficial interest in the Issuer, including the Seller, or (iii) any partner, owner, beneficiary, agent, officer, director, employee or agent of the Indenture Trustee or the Owner Trustee in its individual capacity, any holder of a beneficial interest in the Issuer, the Owner Trustee or the Indenture Trustee or of any successor or assign of the Indenture Trustee or the Owner Trustee in its individual capacity, except as any such Person may have expressly agreed (it being understood that the Indenture Trustee and the Owner Trustee have no such obligations in their individual capacity). For all purposes of this Indenture, in the performance of any duties or obligations of the Issuer hereunder, the Owner Trustee shall be subject to, and entitled to the benefits of, the terms and provisions of Article VI, VII and VIII of the Trust Agreement. SECTION 11.16. No Petition. The Indenture Trustee, by entering into this Indenture, and each Noteholder, by accepting a Note, hereby covenant and agree that they will not at any time institute against the Issuer or the Depositor, or join in any institution against the Issuer or the Depositor, of any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Notes, this Indenture or any of the Basic Documents. 59 SECTION 11.17. Inspection. The Issuer agrees that, on reasonable prior notice, it will permit any representative of the Indenture Trustee, during the Issuer's normal business hours, to examine all the books of account, records, reports and other papers of the Issuer, to make copies and extracts therefrom, to cause such books to be audited by Independent certified public accountants, and to discuss the Issuer's affairs, finances and accounts with the Issuer's officers, employees and Independent certified public accountants, all at such reasonable times and as often as may be reasonably requested; provided, however, that the Indenture Trustee may only cause the books of the Issuer to be audited on an annual basis, unless there occurs an Event of Default hereunder. The Indenture Trustee shall, and shall cause its representatives to, hold in confidence all such information except to the extent such information is publicly available or such disclosure may be required by law (and all reasonable applications for confidential treatment are unavailing) and except to the extent that the Indenture Trustee may reasonably determine with the advice of counsel and after consultation with the Issuer that such disclosure is consistent with its obligations hereunder. SECTION 11.18. Conflict with Trust Indenture Act. If any provision hereof limits, qualifies or conflicts with another provision hereof that is required to be included in this Indenture by any of the provisions of the Trust Indenture Act, such required provision shall control. The provisions of TIA ss.ss. 310 through 317 that impose duties on any person (including the provisions automatically deemed included herein unless expressly excluded by this Indenture) are a part of and govern this Indenture, whether or not physically contained herein. SECTION 11.19. Limitation of Liability. It is expressly understood and agreed by the parties hereto that (a) this Indenture is executed and delivered by Wilmington Trust Company, not individually or personally but solely as Owner Trustee of BMW Vehicle Owner Trust 2001-A, in the exercise of the powers and authority conferred and vested in it, (b) each of the representations, undertakings and agreements herein made on the part of the Issuer is made and intended not as personal representations, undertakings and agreements by Wilmington Trust Company but is made and intended for the purpose for binding only the Issuer, (c) nothing herein contained shall be construed as creating any liability on Wilmington Trust Company, individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the parties hereto and by any Person claiming by, through or under the parties hereto and (d) under no circumstances shall Wilmington Trust Company be personally liable for the payment of any indebtedness or expenses of the Issuer or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Issuer under this Indenture or any other related documents. * * * * * 60 IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused this Indenture to be duly executed by their respective officers, thereunto duly authorized and duly attested, all as of the day and year first above written. BMW VEHICLE OWNER TRUST 2001-A, By: WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Owner Trustee, By: ____________________________________ Name: Title: THE CHASE MANHATTAN BANK, not in its individual capacity but solely as Indenture Trustee, By: ____________________________________ Name: Title: 61 STATE OF NEW YORK } } ss.: COUNTY OF NEW YORK } BEFORE ME, the undersigned authority, a Notary Public in and for said county and state, on this day personally appeared _________________, a _________________ of Wilmington Trust Company, not in its individual capacity but solely as Owner Trustee of BMW Vehicle Owner Trust 2001-A, a Delaware Business Trust (the "Trust") known to me to be the person and officer whose name is subscribed to the foregoing instrument and acknowledged to me that the same was the act of the said Trust, and that s/he executed the same as the act of said business trust for the purpose and consideration therein expressed, and in the capacities therein stated. GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ___ day of April, 2001. ----------------------------------------------- Notary Public in and for the State of New York. My commission expires: - --------------------------- 62 STATE OF NEW YORK } } ss.: COUNTY OF NEW YORK } BEFORE ME, the undersigned authority, a Notary Public in and for said county and state, on this day personally appeared _________________, known to me to be the person and officer whose name is subscribed to the foregoing instrument and acknowledged to me that the same was the act of THE CHASE MANHATTAN BANK, a New York banking corporation, and that s/he executed the same as the act of said corporation for the purpose and consideration therein stated. GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ___ day of April, 2001. ----------------------------------------------- Notary Public in and for the State of New York. My commission expires: - --------------------------- 63 SCHEDULE A [To be Provided on the Closing Date] 64 EXHIBIT A-1 [FORM OF CLASS A-1 NOTE] UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. 65 REGISTERED $ (1) No. R-_____ CUSIP NO. _________ BMW VEHICLE OWNER TRUST 2001-A [*]% ASSET BACKED NOTE, CLASS A-1 BMW VEHICLE OWNER TRUST 2001-A, a business trust organized and existing under the laws of the State of Delaware (herein referred to as the "Issuer"), for value received, hereby promises to pay to ___________________, or registered assigns, the principal sum of __________ DOLLARS, payable on each Payment Date in an amount equal to the result obtained by multiplying (i) a fraction the numerator of which is $ [INSERT INITIAL PRINCIPAL AMOUNT OF NOTE] and the denominator of which is $________ by (ii) the aggregate amount, if any, payable from the Note Distribution Account in respect of principal on the Class A-1 Notes pursuant to Section 3.01 of the Indenture dated as of April [ ], 2001 (the "Indenture"), between the Issuer and The Chase Manhattan Bank, a New York banking corporation, as Indenture Trustee (the "Indenture Trustee"); provided, however, that the entire unpaid principal amount of this Note shall be due and payable on [o] (the "Class A-1 Final Scheduled Payment Date"). Capitalized terms used but not defined herein are defined in the Indenture, which also contains rules as to construction that shall be applicable herein. The Issuer will pay interest on this Note at the rate per annum set forth above, on each Payment Date until the principal of this Note is paid or made available for payment, on the principal amount of this Note outstanding on the preceding Payment Date (after giving effect to all payments of principal made on the preceding Payment Date), subject to certain limitations contained in Section 3.01 of the Indenture. Interest on this Note will accrue for each Payment Date from and including the prior Payment Date (in the case of the first Payment Date, from the Closing Date) to the next Payment Date. Interest will be computed on the basis of the actual number of days elapsed in the related Interest Accrual Period and a 360-day year. Such principal of and interest on this Note shall be paid in the manner specified on the reverse hereof. The principal of and interest on this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments made by the Issuer with respect to this Note shall be applied first to interest due and payable on this Note as provided above and then to the unpaid principal of this Note. Reference is made to the further provisions of this Note set forth on the reverse hereof, which shall have the same effect as though fully set forth on the face of this Note. Unless the certificate of authentication hereon has been executed by the Indenture Trustee whose name appears below by manual signature, this Note shall not be entitled to any benefit under the Indenture, or be valid or obligatory for any purpose. - ---------- (1) Denominations of $1,000 and integral multiples of $1,000 in excess thereof. 66 IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually or in facsimile, by its Authorized Officer, as of the date set forth below. Date: BMW VEHICLE OWNER TRUST 2001-A By: WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Owner Trustee under the Trust Agreement, By: _________________________________ Authorized Signatory TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Notes designated above and referred to in the within- mentioned Indenture. Date: THE CHASE MANHATTAN BANK, not in its individual capacity but solely as Indenture Trustee, By: _________________________________ Authorized Signatory 67 REVERSE OF CLASS A-1 NOTE This Note is one of a duly authorized issue of Notes of the Issuer, designated as its Floating Rate Asset Backed Notes, Class A-1 (herein called the "Class A-1 Notes"), all issued under the Indenture, to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights and obligations thereunder of the Issuer, the Indenture Trustee and the Holders of the Notes. The Class A-1 Notes are subject to all terms of the Indenture. The Class A-1 Notes, Class A-2 Notes, Class A-3 Notes and Class A-4 Notes (collectively, the "Class A Notes" and together with the Class B Notes, the "Notes") are and will be secured by the collateral pledged as security therefor as provided in the Indenture. Principal of the Class A-1 Notes will be payable on each Payment Date in an amount described on the face hereof. "Payment Date" means the [ ]th day of each month, or, if any such date is not a Business Day, the next succeeding Business Day, commencing [ ], 2001. As described above, the entire unpaid principal amount of this Note shall be due and payable on the Class A-1 Final Scheduled Payment Date. Notwithstanding the foregoing, if an Event of Default occurs, the Indenture Trustee or the Holders of Notes representing not less than a majority of the Outstanding Amount of the Controlling Class of Notes have declared the Notes to be immediately due and payable in the manner provided in Section 5.02 of the Indenture. All principal payments on the Class A-1 Notes shall be made pro rata to the Class A-1 Noteholders entitled thereto. Payments of interest on this Note due and payable on each Payment Date, together with the installment of principal, if any, to the extent not in full payment of this Note, shall be made by check mailed to the Person whose name appears as the Registered Holder of this Note (or one or more Predecessor Notes) on the Note Register as of the close of business on each Record Date, except that with respect to Notes registered on the Record Date in the name of the nominee of the Clearing Agency (initially, such nominee to be Cede & Co.), payments will be made by wire transfer in immediately available funds to the account designated by such nominee. Such checks shall be mailed to the Person entitled thereto at the address of such Person as it appears on the Note Register as of the applicable Record Date without requiring that this Note be submitted for notation of payment. Any reduction in the principal amount of this Note (or any one or more Predecessor Notes) effected by any payments made on any Payment Date shall be binding upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. If funds are expected to be available, as provided in the Indenture, for payment in full of the then remaining unpaid principal amount of this Note on a Payment Date, then the Indenture Trustee, in the name of and on behalf of the Issuer, will notify the Person who was the Registered Holder hereof as of the Record Date preceding such Payment Date by notice mailed or transmitted by facsimile prior to such Payment Date, and the amount then due and payable shall be payable only upon presentation and surrender of this Note at the Indenture Trustee's principal Corporate Trust Office or at the office of the Indenture Trustee's agent appointed for such purposes located in The City of New York. 68 The Issuer shall pay interest on overdue installments of interest at the Class A-1 Rate to the extent lawful. As provided in the Indenture and subject to the limitations set forth therein and on the face hereof, the transfer of this Note may be registered on the Note Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuer pursuant to the Indenture, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney duly authorized in writing, with such signature guaranteed by an "eligible guarantor institution" meeting the requirements of the Note Registrar, which requirements include membership or participation in the Securities Transfer Agent's Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended, and thereupon one or more new Notes of authorized denominations and in the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be charged for any registration of transfer or exchange of this Note, but the transferor may be required to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any such registration of transfer or exchange subject to certain exceptions set forth in the Indenture. Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a Note Owner, a beneficial interest in a Note, covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Seller, the Servicer, the Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any owner of a beneficial interest in the Issuer, including the Seller or (iii) any partner, owner, beneficiary, agent, officer, director or employee of the Seller, the Servicer, the Indenture Trustee or the Owner Trustee in its individual capacity, any holder of a beneficial interest in the Issuer, the Seller, the Servicer, the Owner Trustee or the Indenture Trustee or of any successor or assign of the Indenture Trustee or the Owner Trustee in its individual capacity, except as any such Person may have expressly agreed and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity. Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a Note Owner, a beneficial interest in a Note, covenants and agrees by accepting the benefits of the Indenture that such Noteholder or Note Owner will not at any time institute against the Issuer, or join in any institution against the Issuer of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Notes, the Indenture or the other Basic Documents. The Issuer has entered into the Indenture and this Note is issued with the intention that, for purposes of federal and state income tax, franchise tax and any other tax measured in whole or in part by income, the Notes will qualify as indebtedness secured by the Trust Estate. Each 69 Noteholder, by acceptance of a Note (and each Note Owner by acceptance of a beneficial interest in a Note), agrees to treat the Notes for such purposes as indebtedness. This Note, or any interest therein, may not be transferred to an "employee benefit plan" within the meaning of Section 3(3) of ERISA that is subject to ERISA, a "plan" described in Section 4975(e)(1) of the Code, any entity that is deemed to hold "plan assets" of any of the foregoing by reason of an employee benefit plan's or other plan's investment in such entity, or any governmental plan subject to applicable law that is substantially similar to the fiduciary responsibility provisions of ERISA or Section 4975 of the Code, unless such transferee represents, warrants and covenants that its purchase and holding of this note is and will be eligible for, and satisfies and will satisfy all the requirements of, Department of Labor prohibited transaction class exemption ("PTE") 90-1; PTE 96-23; PTE 95-60; PTE 91-38; PTE 84-14 or another applicable prohibited transaction exemption (or in the case of a governmental plan, will not violate any applicable law that is substantially similar to ERISA or Section 4975 of the Code). By its acquisition of this Note in book-entry form or any interest therein, each transferee will be deemed to have represented, warranted and covenanted that it satisfies the foregoing requirements and the Indenture Trustee may relay conclusively on the same for purposes hereof. Prior to the due presentment for registration of transfer of this Note, the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture Trustee may treat the Person in whose name this Note (as of the day of determination or as of such other date as may be specified in the Indenture) is registered as the owner hereof for all purposes, whether or not this Note be overdue, and none of the Issuer, the Indenture Trustee or any such agent shall be affected by notice to the contrary. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Holders of the Notes under the Indenture at any time by the Issuer with the consent of the Holders of Notes or the Controlling Class of Notes, as applicable, representing a majority of the Outstanding Amount of all Notes at the time Outstanding. The Indenture also contains provisions permitting Holders of Notes representing specified percentages of the Outstanding Amount of the Controlling Class of Notes, on behalf of the Holders of all the Notes, to waive compliance by the Issuer with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note (or any one or more Predecessor Notes) shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. The Indenture also permits the Indenture Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of Holders of the Notes issued thereunder. The term "Issuer" as used in this Note includes any successor to the Issuer under the Indenture. The Notes are issuable only in registered form in denominations as provided in the Indenture, subject to certain limitations therein set forth. 70 This Note and the Indenture shall be construed in accordance with the laws of the State of New York, without reference to its conflict of law provisions, and the obligations, rights and remedies of the parties hereunder and thereunder shall be determined in accordance with such laws. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Note at the times, place and rate, and in the coin or currency herein prescribed. Anything herein to the contrary notwithstanding, except as expressly provided in the Basic Documents, none of Wilmington Trust Company in its individual capacity, The Chase Manhattan Bank in its individual capacity, any owner of a beneficial interest in the Issuer, the Seller, the Servicer, or any of their respective partners, beneficiaries, agents, officers, directors, employees or successors or assigns shall be personally liable for, nor shall recourse be had to any of them for, the payment of principal of or interest on this Note or performance of, or omission to perform, any of the covenants, obligations or indemnifications contained in the Indenture. The Holder of this Note by its acceptance hereof agrees that, except as expressly provided in the Basic Documents, in the case of an Event of Default under the Indenture, the Holder shall have no claim against any of the foregoing for any deficiency, loss or claim therefrom; provided, however, that nothing contained herein shall be taken to prevent recourse to, and enforcement against, the assets of the Issuer for any and all liabilities, obligations and undertakings contained in the Indenture or in this Note. 71 ASSIGNMENT Social Security or taxpayer I.D. or other identifying number of assignee: _______________________________________ FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto: ________________________________________________________________________________ (name and address of assignee) the within Note and all rights thereunder, and hereby irrevocably constitutes and appoints ____________________________________________, attorney, to transfer said Note on the books kept for registration thereof, with full power of substitution in the premises. Dated: */ Signature Guaranteed: */ - ---------- */ NOTICE: The signature to this assignment must correspond with the name of the registered owner as it appears on the face of the within Note in every particular, without alteration, enlargement or any change whatsoever. Such signature must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Note Registrar, which requirements include membership or participation in STAMP or such other "signature guarantee program" as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. 72 EXHIBIT A-2 [FORM OF CLASS A-2 NOTE] UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. 73 REGISTERED $__________(2) No. R-________ CUSIP NO. _________ BMW VEHICLE OWNER TRUST 2001-A [x]% ASSET BACKED NOTE, CLASS A-2 BMW VEHICLE OWNER TRUST 2001-A, a business trust organized and existing under the laws of the State of Delaware (herein referred to as the "Issuer"), for value received, hereby promises to pay to ____________________, or registered assigns, the principal sum of __________ DOLLARS, payable on each Payment Date in an amount equal to the result obtained by multiplying (i) a fraction the numerator of which is $ [INSERT INITIAL PRINCIPAL AMOUNT OF NOTE] and the denominator of which is $_____ by (ii) the aggregate amount, if any, payable from the Note Distribution Account in respect of principal on the Class A-2 Notes pursuant to Section 3.01 of the Indenture dated as of April [ ], 2001 (the "Indenture"), between the Issuer and The Chase Manhattan Bank, a New York banking corporation, as Indenture Trustee (the "Indenture Trustee"); provided, however, that the entire unpaid principal amount of this Note shall be due and payable on [*] (the "Class A-2 Final Scheduled Payment Date"). No payments of principal of the Class A-2 Notes shall be made until the Class A-1 Notes have been paid in full. Capitalized terms used but not defined herein are defined in the Indenture, which also contains rules as to construction that shall be applicable herein. The Issuer will pay interest on this Note at the rate per annum set forth above, on each Payment Date until the principal of this Note is paid or made available for payment, on the principal amount of this Note outstanding on the preceding Payment Date (after giving effect to all payments of principal made on the preceding Payment Date), subject to certain limitations contained in the last sentence of Section 3.01 of the Indenture. Interest on this Note will accrue for each Payment Date from and including the [ ]th day of the month preceding the month of such Payment Date (or, in the case of the first Payment Date, from the Closing Date) to but excluding the [ ]th day of the month of such Payment Date. Interest will be computed on the basis of a 360-day year of twelve 30-day months. Such principal of and interest on this Note shall be paid in the manner specified on the reverse hereof. The principal of and interest on this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments made by the Issuer with respect to this Note shall be applied first to interest due and payable on this Note as provided above and then to the unpaid principal of this Note. Reference is made to the further provisions of this Note set forth on the reverse hereof, which shall have the same effect as though fully set forth on the face of this Note. - ---------- (2) Denominations of $1,000 and integral multiples of $1,000 in excess thereof. 74 Unless the certificate of authentication hereon has been executed by the Indenture Trustee whose name appears below by manual signature, this Note shall not be entitled to any benefit under the Indenture, or be valid or obligatory for any purpose. 75 IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually or in facsimile, by its Authorized Officer, as of the date set forth below. Date: BMW VEHICLE OWNER TRUST 2001-A By: WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Owner Trustee under the Trust Agreement, By: _________________________________ Authorized Signatory TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Notes designated above and referred to in the within-mentioned Indenture. Date: THE CHASE MANHATTAN BANK, not in its individual capacity but solely as Indenture Trustee, By: _________________________________ Authorized Signatory 76 REVERSE OF CLASS A-2 NOTE This Note is one of a duly authorized issue of Notes of the Issuer, designated as its [*]% Asset Backed Notes, Class A-2 (herein called the "Class A-2 Notes"), all issued under the Indenture, to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights and obligations thereunder of the Issuer, the Indenture Trustee and the Holders of the Notes. The Class A-2 Notes are subject to all terms of the Indenture. The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes (collectively, the "Class A Notes" and together with the Class B Notes, the "Notes") are and will be secured by the collateral pledged as security therefor as provided in the Indenture. Principal of the Class A-2 Notes will be payable on each Payment Date in an amount described on the face hereof only after the Class A-1 Notes are paid in full and have no Principal Balance. "Payment Date" means the [ ]th day of each month, or, if any such date is not a Business Day, the next succeeding Business Day, commencing [ ], 2001. As described above, the entire unpaid principal amount of this Note shall be due and payable on the Class A-2 Final Scheduled Payment Date. Notwithstanding the foregoing, if an Event of Default occurs, the Indenture Trustee or the Holders of Notes representing not less than a majority of the Outstanding Amount of the Controlling Class of Notes have declared the Notes to be immediately due and payable in the manner provided in Section 5.02 of the Indenture. All principal payments on the Class A-2 Notes shall be made pro rata to the Class A-2 Noteholders entitled thereto. Payments of interest on this Note due and payable on each Payment Date, together with the installment of principal, if any, to the extent not in full payment of this Note, shall be made by check mailed to the Person whose name appears as the Registered Holder of this Note (or one or more Predecessor Notes) on the Note Register as of the close of business on each Record Date, except that with respect to Notes registered on the Record Date in the name of the nominee of the Clearing Agency (initially, such nominee to be Cede & Co.), payments will be made by wire transfer in immediately available funds to the account designated by such nominee. Such checks shall be mailed to the Person entitled thereto at the address of such Person as it appears on the Note Register as of the applicable Record Date without requiring that this Note be submitted for notation of payment. Any reduction in the principal amount of this Note (or any one or more Predecessor Notes) effected by any payments made on any Payment Date shall be binding upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. If funds are expected to be available, as provided in the Indenture, for payment in full of the then remaining unpaid principal amount of this Note on a Payment Date, then the Indenture Trustee, in the name of and on behalf of the Issuer, will notify the Person who was the Registered Holder hereof as of the Record Date preceding such Payment Date by notice mailed or transmitted by facsimile prior to such Payment Date, and the amount then due and payable shall be payable only upon presentation and surrender of this Note at the Indenture Trustee's principal Corporate Trust 77 Office or at the office of the Indenture Trustee's agent appointed for such purposes located in The City of New York. The Issuer shall pay interest on overdue installments of interest at the Class A-2 Rate to the extent lawful. As provided in the Indenture and subject to the limitations set forth therein and on the face hereof, the transfer of this Note may be registered on the Note Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuer pursuant to the Indenture, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney duly authorized in writing, with such signature guaranteed by an "eligible guarantor institution" meeting the requirements of the Note Registrar, which requirements include membership or participation in the Securities Transfer Agent's Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended, and thereupon one or more new Notes of authorized denominations and in the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be charged for any registration of transfer or exchange of this Note, but the transferor may be required to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any such registration of transfer or exchange subject to certain exceptions set forth in the Indenture. Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a Note Owner, a beneficial interest in a Note, covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Seller, the Servicer, the Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any owner of a beneficial interest in the Issuer, including the Seller or (iii) any partner, owner, beneficiary, agent, officer, director or employee of the Seller, the Servicer, Indenture Trustee or the Owner Trustee in its individual capacity, any holder of a beneficial interest in the Issuer, the Seller, the Servicer, the Owner Trustee or the Indenture Trustee or of any successor or assign of the Indenture Trustee or the Owner Trustee in its individual capacity, except as any such Person may have expressly agreed and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity. Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a Note Owner, a beneficial interest in a Note, covenants and agrees by accepting the benefits of the Indenture that such Noteholder or Note Owner will not at any time institute against the Issuer, or join in any institution against the Issuer of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Notes, the Indenture or the other Basic Documents. 78 The Issuer has entered into the Indenture and this Note is issued with the intention that, for purposes of federal and state income tax, franchise tax and any other tax measured in whole or in part by income, the Notes will qualify as indebtedness secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each Note Owner by acceptance of a beneficial interest in a Note), agrees to treat the Notes for such purposes as indebtedness. This Note, or any interest therein, may not be transferred to an "employee benefit plan" within the meaning of Section 3(3) of ERISA that is subject to ERISA, a "plan" described in Section 4975(e)(1) of the Code, any entity that is deemed to hold "plan assets" of any of the foregoing by reason of an employee benefit plan's or other plan's investment in such entity, or any governmental plan subject to applicable law that is substantially similar to the fiduciary responsibility provisions of ERISA or Section 4975 of the Code, unless such transferee represents, warrants and covenants that its purchase and holding of this note is and will be eligible for, and satisfies and will satisfy all the requirements of, Department of Labor prohibited transaction class exemption ("PTE") 90-1; PTE 96-23; PTE 95-60; PTE 91-38; PTE 84-14 or another applicable prohibited transaction exemption (or in the case of a governmental plan, will not violate any applicable law that is substantially similar to ERISA or Section 4975 of the Code). By its acquisition of this Note in book-entry form or any interest therein, each transferee will be deemed to have represented, warranted and covenanted that it satisfies the foregoing requirements and the Indenture Trustee may relay conclusively on the same for purposes hereof. Prior to the due presentment for registration of transfer of this Note, the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture Trustee may treat the Person in whose name this Note (as of the day of determination or as of such other date as may be specified in the Indenture) is registered as the owner hereof for all purposes, whether or not this Note be overdue, and none of the Issuer, the Indenture Trustee or any such agent shall be affected by notice to the contrary. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Holders of the Notes under the Indenture at any time by the Issuer with the consent of the Holders of Notes or the Controlling Class of Notes, as applicable, representing a majority of the Outstanding Amount of all Notes at the time Outstanding. The Indenture also contains provisions permitting Holders of Notes representing specified percentages of the Outstanding Amount of the Controlling Class of Notes, on behalf of the Holders of all the Notes, to waive compliance by the Issuer with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note (or any one or more Predecessor Notes) shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. The Indenture also permits the Indenture Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of Holders of the Notes issued thereunder. The term "Issuer" as used in this Note includes any successor to the Issuer under the Indenture. 79 The Notes are issuable only in registered form in denominations as provided in the Indenture, subject to certain limitations therein set forth. This Note and the Indenture shall be construed in accordance with the laws of the State of New York, without reference to its conflict of law provisions, and the obligations, rights and remedies of the parties hereunder and thereunder shall be determined in accordance with such laws. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Note at the times, place and rate, and in the coin or currency herein prescribed. Anything herein to the contrary notwithstanding, except as expressly provided in the Basic Documents, none of Wilmington Trust Company in its individual capacity, The Chase Manhattan Bank in its individual capacity, any owner of a beneficial interest in the Issuer, the Seller, the Servicer, or any of their respective partners, beneficiaries, agents, officers, directors, employees or successors or assigns shall be personally liable for, nor shall recourse be had to any of them for, the payment of principal of or interest on this Note or performance of, or omission to perform, any of the covenants, obligations or indemnifications contained in the Indenture. The Holder of this Note by its acceptance hereof agrees that, except as expressly provided in the Basic Documents, in the case of an Event of Default under the Indenture, the Holder shall have no claim against any of the foregoing for any deficiency, loss or claim therefrom; provided, however, that nothing contained herein shall be taken to prevent recourse to, and enforcement against, the assets of the Issuer for any and all liabilities, obligations and undertakings contained in the Indenture or in this Note. 80 ASSIGNMENT Social Security or taxpayer I.D. or other identifying number of assignee: _______________________________________ FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto: ________________________________________________________________________________ (name and address of assignee) the within Note and all rights thereunder, and hereby irrevocably constitutes and appoints ____________________________________________, attorney, to transfer said Note on the books kept for registration thereof, with full power of substitution in the premises. Dated: */ Signature Guaranteed: */ - ---------- */ NOTICE: The signature to this assignment must correspond with the name of the registered owner as it appears on the face of the within Note in every particular, without alteration, enlargement or any change whatsoever. Such signature must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Note Registrar, which requirements include membership or participation in STAMP or such other "signature guarantee program" as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. 81 EXHIBIT A-3 [FORM OF CLASS A-3 NOTE] UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. 82 REGISTERED $____________(3) No. R-________ CUSIP NO. _________ BMW VEHICLE OWNER TRUST 2001-A [*]% ASSET BACKED NOTE, CLASS A-3 BMW VEHICLE OWNER TRUST 2001-A, a business trust organized and existing under the laws of the State of Delaware (herein referred to as the "Issuer"), for value received, hereby promises to pay to ____________________, or registered assigns, the principal sum of __________ DOLLARS, payable on each Payment Date in an amount equal to the result obtained by multiplying (i) a fraction the numerator of which is $ [INSERT INITIAL PRINCIPAL AMOUNT OF NOTE] and the denominator of which is $_____ by (ii) the aggregate amount, if any, payable from the Note Distribution Account in respect of principal on the Class A-3 Notes pursuant to Section 3.01 of the Indenture dated as of April [ ], 2001 (the "Indenture"), between the Issuer and The Chase Manhattan Bank, a New York banking corporation, as Indenture Trustee (the "Indenture Trustee"); provided, however, that the entire unpaid principal amount of this Note shall be due and payable on [*] (the "Class A-3 Final Scheduled Payment Date"). No payments of principal of the Class A-3 Notes shall be made until the Class A-1 Notes and the Class A-2 Notes have been paid in full. Capitalized terms used but not defined herein are defined in the Indenture, which also contains rules as to construction that shall be applicable herein. The Issuer will pay interest on this Note at the rate per annum set forth above, on each Payment Date until the principal of this Note is paid or made available for payment, on the principal amount of this Note outstanding on the preceding Payment Date (after giving effect to all payments of principal made on the preceding Payment Date), subject to certain limitations contained in Section 3.01 of the Indenture. Interest on this Note will accrue for each Payment Date from and including the [ ]th day of the month preceding the month of such Payment Date (in the case of the first Payment Date, from the Closing Date) to but excluding the [ ]th day of the month of such Payment Date. Interest will be computed on the basis of a 360-day year of twelve 30-day months. Such principal of and interest on this Note shall be paid in the manner specified on the reverse hereof. The principal of and interest on this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments made by the Issuer with respect to this Note shall be applied first to interest due and payable on this Note as provided above and then to the unpaid principal of this Note. Reference is made to the further provisions of this Note set forth on the reverse hereof, which shall have the same effect as though fully set forth on the face of this Note. - ---------- (3) Denominations of $1,000 and integral multiples of $1,000 in excess thereof. 83 Unless the certificate of authentication hereon has been executed by the Indenture Trustee whose name appears below by manual signature, this Note shall not be entitled to any benefit under the Indenture, or be valid or obligatory for any purpose. 84 IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually or in facsimile, by its Authorized Officer, as of the date set forth below. Date: BMW VEHICLE OWNER TRUST 2001-A By: WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Owner Trustee under the Trust Agreement, By: _________________________________ Authorized Signatory TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Notes designated above and referred to in the within-mentioned Indenture. Date: [THE CHASE MANHATTAN BANK], not in its individual capacity but solely as Indenture Trustee, By: _________________________________ Authorized Signatory 85 REVERSE OF CLASS A-3 NOTE This Note is one of a duly authorized issue of Notes of the Issuer, designated as its [*]% Asset Backed Notes, Class A-3 (herein called the "Class A-3 Notes"), all issued under the Indenture, to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights and obligations thereunder of the Issuer, the Indenture Trustee and the Holders of the Notes. The Class A-3 Notes are subject to all terms of the Indenture. The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes (collectively, the "Class A Notes" and together with the Class B Notes, the "Notes") are and will be secured by the collateral pledged as security therefor as provided in the Indenture. Principal of the Class A-3 Notes will be payable on each Payment Date in an amount described on the face hereof only after the Class A-1 Notes and the Class A-2 Notes are paid in full and have no Principal Balance. "Payment Date" means the [ ]th day of each month, or, if any such date is not a Business Day, the next succeeding Business Day, commencing [ ], 2001. As described above, the entire unpaid principal amount of this Note shall be due and payable on the Class A-3 Final Scheduled Payment Date. Notwithstanding the foregoing, if an Event of Default occurs, the Indenture Trustee or the Holders of Notes representing not less than a majority of the Outstanding Amount of the Controlling Class of Notes have declared the Notes to be immediately due and payable in the manner provided in Section 5.02 of the Indenture. All principal payments on the Class A-3 Notes shall be made pro rata to the Class A-3 Noteholders entitled thereto. Payments of interest on this Note due and payable on each Payment Date, together with the installment of principal, if any, to the extent not in full payment of this Note, shall be made by check mailed to the Person whose name appears as the Registered Holder of this Note (or one or more Predecessor Notes) on the Note Register as of the close of business on each Record Date, except that with respect to Notes registered on the Record Date in the name of the nominee of the Clearing Agency (initially, such nominee to be Cede & Co.), payments will be made by wire transfer in immediately available funds to the account designated by such nominee. Such checks shall be mailed to the Person entitled thereto at the address of such Person as it appears on the Note Register as of the applicable Record Date without requiring that this Note be submitted for notation of payment. Any reduction in the principal amount of this Note (or any one or more Predecessor Notes) effected by any payments made on any Payment Date shall be binding upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. If funds are expected to be available, as provided in the Indenture, for payment in full of the then remaining unpaid principal amount of this Note on a Payment Date, then the Indenture Trustee, in the name of and on behalf of the Issuer, will notify the Person who was the Registered Holder hereof as of the Record Date preceding such Payment Date by notice mailed or transmitted by facsimile prior to such Payment Date, and the amount then due and payable shall be payable only upon presentation and surrender of this Note at the Indenture Trustee's principal Corporate Trust 86 Office or at the office of the Indenture Trustee's agent appointed for such purposes located in The City of New York. The Issuer shall pay interest on overdue installments of interest at the Class A-3 Rate to the extent lawful. As provided in the Indenture and subject to the limitations set forth therein and on the face hereof, the transfer of this Note may be registered on the Note Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuer pursuant to the Indenture, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney duly authorized in writing, with such signature guaranteed by an "eligible guarantor institution" meeting the requirements of the Note Registrar, which requirements include membership or participation in the Securities Transfer Agent's Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended, and thereupon one or more new Notes of authorized denominations and in the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be charged for any registration of transfer or exchange of this Note, but the transferor may be required to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any such registration of transfer or exchange subject to certain exceptions set forth in the Indenture. Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a Note Owner, a beneficial interest in a Note, covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Seller, the Servicer, the Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any owner of a beneficial interest in the Issuer, including the Seller or (iii) any partner, owner, beneficiary, agent, officer, director or employee of the Seller, the Servicer, Indenture Trustee or the Owner Trustee in its individual capacity, any holder of a beneficial interest in the Issuer, the Seller, the Servicer, the Owner Trustee or the Indenture Trustee or of any successor or assign of the Indenture Trustee or the Owner Trustee in its individual capacity, except as any such Person may have expressly agreed and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity. Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a Note Owner, a beneficial interest in a Note, covenants and agrees by accepting the benefits of the Indenture that such Noteholder or Note Owner will not at any time institute against the Issuer, or join in any institution against the Issuer of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Notes, the Indenture or the other Basic Documents. 87 The Issuer has entered into the Indenture and this Note is issued with the intention that, for purposes of federal and state income tax, franchise tax and any other tax measured in whole or in part by income, the Notes will qualify as indebtedness secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each Note Owner by acceptance of a beneficial interest in a Note), agrees to treat the Notes for such purposes as indebtedness. This Note, or any interest therein, may not be transferred to an "employee benefit plan" within the meaning of Section 3(3) of ERISA that is subject to ERISA, a "plan" described in Section 4975(e)(1) of the Code, any entity that is deemed to hold "plan assets" of any of the foregoing by reason of an employee benefit plan's or other plan's investment in such entity, or any governmental plan subject to applicable law that is substantially similar to the fiduciary responsibility provisions of ERISA or Section 4975 of the Code, unless such transferee represents, warrants and covenants that its purchase and holding of this note is and will be eligible for, and satisfies and will satisfy all the requirements of, Department of Labor prohibited transaction class exemption ("PTE") 90-1; PTE 96-23; PTE 95-60; PTE 91-38; PTE 84-14 or another applicable prohibited transaction exemption (or in the case of a governmental plan, will not violate any applicable law that is substantially similar to ERISA or Section 4975 of the Code). By its acquisition of this Note in book-entry form or any interest therein, each transferee will be deemed to have represented, warranted and covenanted that it satisfies the foregoing requirements and the Indenture Trustee may relay conclusively on the same for purposes hereof. Prior to the due presentment for registration of transfer of this Note, the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture Trustee may treat the Person in whose name this Note (as of the day of determination or as of such other date as may be specified in the Indenture) is registered as the owner hereof for all purposes, whether or not this Note be overdue, and none of the Issuer, the Indenture Trustee or any such agent shall be affected by notice to the contrary. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Holders of the Notes under the Indenture at any time by the Issuer with the consent of the Holders of Notes or the Controlling Class of Notes, as applicable, representing a majority of the Outstanding Amount of all Notes at the time Outstanding. The Indenture also contains provisions permitting Holders of Notes representing specified percentages of the Outstanding Amount of the Controlling Class of Notes, on behalf of the Holders of all the Notes, to waive compliance by the Issuer with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note (or any one or more Predecessor Notes) shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. The Indenture also permits the Indenture Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of Holders of the Notes issued thereunder. The term "Issuer" as used in this Note includes any successor to the Issuer under the Indenture. 88 The Notes are issuable only in registered form in denominations as provided in the Indenture, subject to certain limitations therein set forth. This Note and the Indenture shall be construed in accordance with the laws of the State of New York, without reference to its conflict of law provisions, and the obligations, rights and remedies of the parties hereunder and thereunder shall be determined in accordance with such laws. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Note at the times, place and rate, and in the coin or currency herein prescribed. Anything herein to the contrary notwithstanding, except as expressly provided in the Basic Documents, none of Wilmington Trust Company in its individual capacity, The Chase Manhattan Bank in its individual capacity, any owner of a beneficial interest in the Issuer, the Seller, the Servicer, or any of their respective partners, beneficiaries, agents, officers, directors, employees or successors or assigns shall be personally liable for, nor shall recourse be had to any of them for, the payment of principal of or interest on this Note or performance of, or omission to perform, any of the covenants, obligations or indemnifications contained in the Indenture. The Holder of this Note by its acceptance hereof agrees that, except as expressly provided in the Basic Documents, in the case of an Event of Default under the Indenture, the Holder shall have no claim against any of the foregoing for any deficiency, loss or claim therefrom; provided, however, that nothing contained herein shall be taken to prevent recourse to, and enforcement against, the assets of the Issuer for any and all liabilities, obligations and undertakings contained in the Indenture or in this Note. 89 ASSIGNMENT Social Security or taxpayer I.D. or other identifying number of assignee: _______________________________________ FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto: ________________________________________________________________________________ (name and address of assignee) the within Note and all rights thereunder, and hereby irrevocably constitutes and appoints ____________________________________________, attorney, to transfer said Note on the books kept for registration thereof, with full power of substitution in the premises. Dated: */ Signature Guaranteed: */ - ---------- */ NOTICE: The signature to this assignment must correspond with the name of the registered owner as it appears on the face of the within Note in every particular, without alteration, enlargement or any change whatsoever. Such signature must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Note Registrar, which requirements include membership or participation in STAMP or such other "signature guarantee program" as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. 90 EXHIBIT A-4 [FORM OF CLASS A-4 NOTE] UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. 91 REGISTERED $_________(4) No. R-________ CUSIP NO. _________ BMW VEHICLE OWNER TRUST 2001-A [*]% ASSET BACKED NOTE, CLASS A-4 BMW VEHICLE OWNER TRUST 2001-A, a business trust organized and existing under the laws of the State of Delaware (herein referred to as the "Issuer"), for value received, hereby promises to pay to ____________________, or registered assigns, the principal sum of __________ DOLLARS, payable on each Payment Date in an amount equal to the result obtained by multiplying (i) a fraction the numerator of which is $ [INSERT INITIAL PRINCIPAL AMOUNT OF NOTE] and the denominator of which is $_____ by (ii) the aggregate amount, if any, payable from the Note Distribution Account in respect of principal on the Class A-4 Notes pursuant to Section 3.01 of the Indenture dated as of April [ ], 2001 (the "Indenture"), between the Issuer and The Chase Manhattan Bank, a New York banking corporation, as Indenture Trustee (the "Indenture Trustee"); provided, however, that the entire unpaid principal amount of this Note shall be due and payable on the earlier of [*] (the "Class A-4 Final Scheduled Payment Date") and the Redemption Date, if any, pursuant to Section 10.01 of the Indenture. No payments of principal of the Class A-4 Notes shall be made until the Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes have been paid in full. Capitalized terms used but not defined herein are defined in the Indenture, which also contains rules as to construction that shall be applicable herein. The Issuer will pay interest on this Note at the rate per annum set forth above, on each Payment Date until the principal of this Note is paid or made available for payment, on the principal amount of this Note outstanding on the preceding Payment Date (after giving effect to all payments of principal made on the preceding Payment Date), subject to certain limitations contained in Section 3.01 of the Indenture. Interest on this Note will accrue for each Payment Date from and including the [ ]th day of the month preceding the month of such Payment Date (in the case of the first Payment Date, from the Closing Date) to but excluding the [ ]th day of the month of such Payment Date. Interest will be computed on the basis of a 360-day year of twelve 30-day months. Such principal of and interest on this Note shall be paid in the manner specified on the reverse hereof. The principal of and interest on this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments made by the Issuer with respect to this Note shall be applied first to interest due and payable on this Note as provided above and then to the unpaid principal of this Note. Reference is made to the further provisions of this Note set forth on the reverse hereof, which shall have the same effect as though fully set forth on the face of this Note. - ---------- (4) Denominations of $1,000 and integral multiples of $1,000 in excess thereof. 92 Unless the certificate of authentication hereon has been executed by the Indenture Trustee whose name appears below by manual signature, this Note shall not be entitled to any benefit under the Indenture, or be valid or obligatory for any purpose. 93 IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually or in facsimile, by its Authorized Officer, as of the date set forth below. Date: BMW VEHICLE OWNER TRUST 2001-A By: WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Owner Trustee under the Trust Agreement, By: _________________________________ Authorized Signatory TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Notes designated above and referred to in the within-mentioned Indenture. Date: THE CHASE MANHATTAN BANK, not in its individual capacity but solely as Indenture Trustee, By: _________________________________ Authorized Signatory 94 REVERSE OF CLASS A-4 NOTE This Note is one of a duly authorized issue of Notes of the Issuer, designated as its [o]% Asset Backed Notes, Class A-4 (herein called the "Class A-4 Notes"), all issued under the Indenture, to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights and obligations thereunder of the Issuer, the Indenture Trustee and the Holders of the Notes. The Class A-4 Notes are subject to all terms of the Indenture. The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes (collectively, the "Class A Notes" and together with the Class B Notes, the "Notes") are and will be secured by the collateral pledged as security therefor as provided in the Indenture. Principal of the Class A-4 Notes will be payable on each Payment Date in an amount described on the face hereof only after the Class A-1 Notes and the Class A-2 Notes and the Class A-3 Notes are paid in full and have no Principal Balance. "Payment Date" means the [ ]th day of each month, or, if any such date is not a Business Day, the next succeeding Business Day, commencing [ ], 2001. As described above, the entire unpaid principal amount of this Note shall be due and payable on the Class A-4 Final Scheduled Payment Date. Notwithstanding the foregoing, if an Event of Default occurs, the Indenture Trustee or the Holders of Notes representing not less than a majority of the Outstanding Amount of the Controlling Class of Notes have declared the Notes to be immediately due and payable in the manner provided in Section 5.02 of the Indenture. All principal payments on the Class A-4 Notes shall be made pro rata to the Class A-4 Noteholders entitled thereto. Payments of interest on this Note due and payable on each Payment Date, together with the installment of principal, if any, to the extent not in full payment of this Note, shall be made by check mailed to the Person whose name appears as the Registered Holder of this Note (or one or more Predecessor Notes) on the Note Register as of the close of business on each Record Date, except that with respect to Notes registered on the Record Date in the name of the nominee of the Clearing Agency (initially, such nominee to be Cede & Co.), payments will be made by wire transfer in immediately available funds to the account designated by such nominee. Such checks shall be mailed to the Person entitled thereto at the address of such Person as it appears on the Note Register as of the applicable Record Date without requiring that this Note be submitted for notation of payment. Any reduction in the principal amount of this Note (or any one or more Predecessor Notes) effected by any payments made on any Payment Date shall be binding upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. If funds are expected to be available, as provided in the Indenture, for payment in full of the then remaining unpaid principal amount of this Note on a Payment Date, then the Indenture Trustee, in the name of and on behalf of the Issuer, will notify the Person who was the Registered Holder hereof as of the Record Date preceding such Payment Date by notice mailed or transmitted by facsimile prior to such Payment Date, and the amount then due and payable shall be payable only upon presentation and surrender of this Note at the Indenture Trustee's principal Corporate Trust 95 Office or at the office of the Indenture Trustee's agent appointed for such purposes located in The City of New York. The Issuer shall pay interest on overdue installments of interest at the Class A-4 Rate to the extent lawful. As provided in the Indenture and subject to the limitations set forth therein and on the face hereof, the transfer of this Note may be registered on the Note Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuer pursuant to the Indenture, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney duly authorized in writing, with such signature guaranteed by an "eligible guarantor institution" meeting the requirements of the Note Registrar, which requirements include membership or participation in the Securities Transfer Agent's Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended, and thereupon one or more new Notes of authorized denominations and in the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be charged for any registration of transfer or exchange of this Note, but the transferor may be required to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any such registration of transfer or exchange subject to certain exceptions set forth in the Indenture. Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a Note Owner, a beneficial interest in a Note, covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Seller, the Servicer, the Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any owner of a beneficial interest in the Issuer, including the Seller or (iii) any partner, owner, beneficiary, agent, officer, director or employee of the Seller, the Servicer, Indenture Trustee or the Owner Trustee in its individual capacity, any holder of a beneficial interest in the Issuer, the Seller, the Servicer, the Owner Trustee or the Indenture Trustee or of any successor or assign of the Indenture Trustee or the Owner Trustee in its individual capacity, except as any such Person may have expressly agreed and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity. Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a Note Owner, a beneficial interest in a Note, covenants and agrees by accepting the benefits of the Indenture that such Noteholder or Note Owner will not at any time institute against the Issuer, or join in any institution against the Issuer of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Notes, the Indenture or the other Basic Documents. 96 The Issuer has entered into the Indenture and this Note is issued with the intention that, for purposes of federal and state income tax, franchise tax and any other tax measured in whole or in part by income, the Notes will qualify as indebtedness secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each Note Owner by acceptance of a beneficial interest in a Note), agrees to treat the Notes for such purposes as indebtedness. This Note, or any interest therein, may not be transferred to an "employee benefit plan" within the meaning of Section 3(3) of ERISA that is subject to ERISA, a "plan" described in Section 4975(e)(1) of the Code, any entity that is deemed to hold "plan assets" of any of the foregoing by reason of an employee benefit plan's or other plan's investment in such entity, or any governmental plan subject to applicable law that is substantially similar to the fiduciary responsibility provisions of ERISA or Section 4975 of the Code, unless such transferee represents, warrants and covenants that its purchase and holding of this note is and will be eligible for, and satisfies and will satisfy all the requirements of, Department of Labor prohibited transaction class exemption ("PTE") 90-1; PTE 96-23; PTE 95-60; PTE 91-38; PTE 84-14 or another applicable prohibited transaction exemption (or in the case of a governmental plan, will not violate any applicable law that is substantially similar to ERISA or Section 4975 of the Code). By its acquisition of this Note in book-entry form or any interest therein, each transferee will be deemed to have represented, warranted and covenanted that it satisfies the foregoing requirements and the Indenture Trustee may relay conclusively on the same for purposes hereof. Prior to the due presentment for registration of transfer of this Note, the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture Trustee may treat the Person in whose name this Note (as of the day of determination or as of such other date as may be specified in the Indenture) is registered as the owner hereof for all purposes, whether or not this Note be overdue, and none of the Issuer, the Indenture Trustee or any such agent shall be affected by notice to the contrary. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Holders of the Notes under the Indenture at any time by the Issuer with the consent of the Holders of Notes or the Controlling Class of Notes, as applicable, representing a majority of the Outstanding Amount of all Notes at the time Outstanding. The Indenture also contains provisions permitting Holders of Notes representing specified percentages of the Outstanding Amount of the Controlling Class of Notes, on behalf of the Holders of all the Notes, to waive compliance by the Issuer with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note (or any one or more Predecessor Notes) shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. The Indenture also permits the Indenture Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of Holders of the Notes issued thereunder. The term "Issuer" as used in this Note includes any successor to the Issuer under the Indenture. 97 The Notes are issuable only in registered form in denominations as provided in the Indenture, subject to certain limitations therein set forth. This Note and the Indenture shall be construed in accordance with the laws of the State of New York, without reference to its conflict of law provisions, and the obligations, rights and remedies of the parties hereunder and thereunder shall be determined in accordance with such laws. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Note at the times, place and rate, and in the coin or currency herein prescribed. Anything herein to the contrary notwithstanding, except as expressly provided in the Basic Documents, none of Wilmington Trust Company in its individual capacity, The Chase Manhattan Bank in its individual capacity, any owner of a beneficial interest in the Issuer, the Seller, the Servicer, or any of their respective partners, beneficiaries, agents, officers, directors, employees or successors or assigns shall be personally liable for, nor shall recourse be had to any of them for, the payment of principal of or interest on this Note or performance of, or omission to perform, any of the covenants, obligations or indemnifications contained in the Indenture. The Holder of this Note by its acceptance hereof agrees that, except as expressly provided in the Basic Documents, in the case of an Event of Default under the Indenture, the Holder shall have no claim against any of the foregoing for any deficiency, loss or claim therefrom; provided, however, that nothing contained herein shall be taken to prevent recourse to, and enforcement against, the assets of the Issuer for any and all liabilities, obligations and undertakings contained in the Indenture or in this Note. 98 ASSIGNMENT Social Security or taxpayer I.D. or other identifying number of assignee: _______________________________________ FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto: ________________________________________________________________________________ (name and address of assignee) the within Note and all rights thereunder, and hereby irrevocably constitutes and appoints ____________________________________________, attorney, to transfer said Note on the books kept for registration thereof, with full power of substitution in the premises. Dated: */ Signature Guaranteed: */ - ---------- */ NOTICE: The signature to this assignment must correspond with the name of the registered owner as it appears on the face of the within Note in every particular, without alteration, enlargement or any change whatsoever. Such signature must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Note Registrar, which requirements include membership or participation in STAMP or such other "signature guarantee program" as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. 99 EXHIBIT A-5 [FORM OF CLASS B NOTE] UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. 100 REGISTERED $_________(5) No. R-________ CUSIP NO. _________ BMW VEHICLE OWNER TRUST 2001-A [o]% ASSET BACKED NOTE, CLASS B BMW VEHICLE OWNER TRUST 2001-A, a business trust organized and existing under the laws of the State of Delaware (herein referred to as the "Issuer"), for value received, hereby promises to pay to ____________________, or registered assigns, the principal sum of __________ DOLLARS, payable on each Payment Date in an amount equal to the result obtained by multiplying (i) a fraction the numerator of which is $ [INSERT INITIAL PRINCIPAL AMOUNT OF NOTE] and the denominator of which is $_____ by (ii) the aggregate amount, if any, payable from the Note Distribution Account in respect of principal on the Class B Notes pursuant to Section 3.01 of the Indenture dated as of April [ ], 2001 (the "Indenture"), between the Issuer and The Chase Manhattan Bank, a New York banking corporation, as Indenture Trustee (the "Indenture Trustee"); provided, however, that the entire unpaid principal amount of this Note shall be due and payable on the earlier of [o] (the "Class B Final Scheduled Payment Date") and the Redemption Date, if any, pursuant to Section 10.01 of the Indenture. No payments of principal of the Class B Notes shall be made until the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and Class A-4 Notes have been paid in full. Capitalized terms used but not defined herein are defined in the Indenture, which also contains rules as to construction that shall be applicable herein. The Issuer will pay interest on this Note at the rate per annum set forth above, on each Payment Date until the principal of this Note is paid or made available for payment, on the principal amount of this Note outstanding on the preceding Payment Date (after giving effect to all payments of principal made on the preceding Payment Date), subject to certain limitations contained in Section 3.01 of the Indenture. Interest on this Note will accrue for each Payment Date from and including the [ ]th day of the month preceding the month of such Payment Date (in the case of the first Payment Date, from the Closing Date) to but excluding the [ ]th day of the month of such Payment Date. Interest will be computed on the basis of a 360-day year of twelve 30-day months. Such principal of and interest on this Note shall be paid in the manner specified on the reverse hereof. The principal of and interest on this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments made by the Issuer with respect to this Note shall be applied first to interest due and payable on this Note as provided above and then to the unpaid principal of this Note. Reference is made to the further provisions of this Note set forth on the reverse hereof, which shall have the same effect as though fully set forth on the face of this Note. - ---------- (5) Denominations of $1,000 and integral multiples of $1,000 in excess thereof. 101 Unless the certificate of authentication hereon has been executed by the Indenture Trustee whose name appears below by manual signature, this Note shall not be entitled to any benefit under the Indenture, or be valid or obligatory for any purpose. 102 IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually or in facsimile, by its Authorized Officer, as of the date set forth below. Date: BMW VEHICLE OWNER TRUST 2001-A By: WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Owner Trustee under the Trust Agreement, By: _________________________________ Authorized Signatory TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Notes designated above and referred to in the within-mentioned Indenture. Date: THE CHASE MANHATTAN BANK, not in its individual capacity but solely as Indenture Trustee, By: _________________________________ Authorized Signatory 103 REVERSE OF CLASS B NOTE This Note is one of a duly authorized issue of Notes of the Issuer, designated as its [o]% Asset Backed Notes, Class B (herein called the "Class B Notes"), all issued under the Indenture, to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights and obligations thereunder of the Issuer, the Indenture Trustee and the Holders of the Notes. The Class B Notes are subject to all terms of the Indenture. The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes (collectively, the "Class A Notes") and the Class B Notes (the "Class B Notes" and together with the Class A Notes, the "Notes") are and will be secured by the collateral pledged as security therefor as provided in the Indenture. The Class B Notes are subordinated in right of payment to the Class A Notes, to the extent provided in the Indenture. Principal of the Class B Notes will be payable on each Payment Date in an amount described on the face hereof only after the Class A Notes are paid in full and have no Principal Balance. "Payment Date" means the [ ]th day of each month, or, if any such date is not a Business Day, the next succeeding Business Day, commencing [ ], 2001. As described above, the entire unpaid principal amount of this Note shall be due and payable on the earlier of the Class B Final Scheduled Payment Date and the Redemption Date, if any, pursuant to Section 10.01 of the Indenture. Notwithstanding the foregoing, if an Event of Default occurs, the Indenture Trustee or the Holders of Notes representing not less than a majority of the Outstanding Amount of the Controlling Class of Notes have declared the Notes to be immediately due and payable in the manner provided in Section 5.02 of the Indenture. All principal payments on the Class B Notes shall be made pro rata to the Class B Noteholders entitled thereto. Payments of interest on this Note due and payable on each Payment Date, together with the installment of principal, if any, to the extent not in full payment of this Note, shall be made by check mailed to the Person whose name appears as the Registered Holder of this Note (or one or more Predecessor Notes) on the Note Register as of the close of business on each Record Date, except that with respect to Notes registered on the Record Date in the name of the nominee of the Clearing Agency (initially, such nominee to be Cede & Co.), payments will be made by wire transfer in immediately available funds to the account designated by such nominee. Such checks shall be mailed to the Person entitled thereto at the address of such Person as it appears on the Note Register as of the applicable Record Date without requiring that this Note be submitted for notation of payment. Any reduction in the principal amount of this Note (or any one or more Predecessor Notes) effected by any payments made on any Payment Date shall be binding upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. If funds are expected to be available, as provided in the Indenture, for payment in full of the then remaining unpaid principal amount of this Note on a Payment Date, then the Indenture Trustee, in the name of and on behalf of the Issuer, will notify the Person who was the Registered Holder hereof as of the Record Date preceding such Payment Date by notice mailed or transmitted by facsimile prior to such Payment Date, and the amount then due and payable shall be payable only upon presentation and surrender of this Note at the Indenture Trustee's principal Corporate Trust 104 Office or at the office of the Indenture Trustee's agent appointed for such purposes located in The City of New York. The Issuer shall pay interest on overdue installments of interest at the Class B Rate to the extent lawful. As provided in the Indenture and subject to the limitations set forth therein and on the face hereof, the transfer of this Note may be registered on the Note Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuer pursuant to the Indenture, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney duly authorized in writing, with such signature guaranteed by an "eligible guarantor institution" meeting the requirements of the Note Registrar, which requirements include membership or participation in the Securities Transfer Agent's Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended, and thereupon one or more new Notes of authorized denominations and in the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be charged for any registration of transfer or exchange of this Note, but the transferor may be required to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any such registration of transfer or exchange subject to certain exceptions set forth in the Indenture. Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a Note Owner, a beneficial interest in a Note, covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Seller, the Servicer, the Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any owner of a beneficial interest in the Issuer, including the Seller or (iii) any partner, owner, beneficiary, agent, officer, director or employee of the Seller, the Servicer, Indenture Trustee or the Owner Trustee in its individual capacity, any holder of a beneficial interest in the Issuer, the Seller, the Servicer, the Owner Trustee or the Indenture Trustee or of any successor or assign of the Indenture Trustee or the Owner Trustee in its individual capacity, except as any such Person may have expressly agreed and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity. Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a Note Owner, a beneficial interest in a Note, covenants and agrees by accepting the benefits of the Indenture that such Noteholder or Note Owner will not at any time institute against the Issuer, or join in any institution against the Issuer of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Notes, the Indenture or the other Basic Documents. 105 The Issuer has entered into the Indenture and this Note is issued with the intention that, for purposes of federal and state income tax, franchise tax and any other tax measured in whole or in part by income, the Notes will qualify as indebtedness secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each Note Owner by acceptance of a beneficial interest in a Note), agrees to treat the Notes for such purposes as indebtedness. This Note, or any interest therein, may not be transferred to an "employee benefit plan" within the meaning of Section 3(3) of ERISA that is subject to ERISA, a "plan" described in Section 4975(e)(1) of the Code, any entity that is deemed to hold "plan assets" of any of the foregoing by reason of an employee benefit plan's or other plan's investment in such entity, or any governmental plan subject to applicable law that is substantially similar to the fiduciary responsibility provisions of ERISA or Section 4975 of the Code, unless such transferee represents, warrants and covenants that its purchase and holding of this note is and will be eligible for, and satisfies and will satisfy all the requirements of, Department of Labor prohibited transaction class exemption ("PTE") 90-1; PTE 96-23; PTE 95-60; PTE 91-38; PTE 84-14 or another applicable prohibited transaction exemption (or in the case of a governmental plan, will not violate any applicable law that is substantially similar to ERISA or Section 4975 of the Code). By its acquisition of this Note in book-entry form or any interest therein, each transferee will be deemed to have represented, warranted and covenanted that it satisfies the foregoing requirements and the Indenture Trustee may relay conclusively on the same for purposes hereof. Prior to the due presentment for registration of transfer of this Note, the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture Trustee may treat the Person in whose name this Note (as of the day of determination or as of such other date as may be specified in the Indenture) is registered as the owner hereof for all purposes, whether or not this Note be overdue, and none of the Issuer, the Indenture Trustee or any such agent shall be affected by notice to the contrary. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Holders of the Notes under the Indenture at any time by the Issuer with the consent of the Holders of Notes or the Controlling Class of Notes, as applicable, representing a majority of the Outstanding Amount of all Notes at the time Outstanding. The Indenture also contains provisions permitting Holders of Notes representing specified percentages of the Outstanding Amount of the Controlling Class of Notes, on behalf of the Holders of all the Notes, to waive compliance by the Issuer with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note (or any one or more Predecessor Notes) shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. The Indenture also permits the Indenture Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of Holders of the Notes issued thereunder. The term "Issuer" as used in this Note includes any successor to the Issuer under the Indenture. 106 The Notes are issuable only in registered form in denominations as provided in the Indenture, subject to certain limitations therein set forth. This Note and the Indenture shall be construed in accordance with the laws of the State of New York, without reference to its conflict of law provisions, and the obligations, rights and remedies of the parties hereunder and thereunder shall be determined in accordance with such laws. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Note at the times, place and rate, and in the coin or currency herein prescribed. Anything herein to the contrary notwithstanding, except as expressly provided in the Basic Documents, none of Wilmington Trust Company in its individual capacity, The Chase Manhattan Bank in its individual capacity, any owner of a beneficial interest in the Issuer, the Seller, the Servicer, or any of their respective partners, beneficiaries, agents, officers, directors, employees or successors or assigns shall be personally liable for, nor shall recourse be had to any of them for, the payment of principal of or interest on this Note or performance of, or omission to perform, any of the covenants, obligations or indemnifications contained in the Indenture. The Holder of this Note by its acceptance hereof agrees that, except as expressly provided in the Basic Documents, in the case of an Event of Default under the Indenture, the Holder shall have no claim against any of the foregoing for any deficiency, loss or claim therefrom; provided, however, that nothing contained herein shall be taken to prevent recourse to, and enforcement against, the assets of the Issuer for any and all liabilities, obligations and undertakings contained in the Indenture or in this Note. 107 ASSIGNMENT Social Security or taxpayer I.D. or other identifying number of assignee: _______________________________________ FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto: ________________________________________________________________________________ (name and address of assignee) the within Note and all rights thereunder, and hereby irrevocably constitutes and appoints ____________________________________________, attorney, to transfer said Note on the books kept for registration thereof, with full power of substitution in the premises. Dated: */ Signature Guaranteed: */ - ---------- */ NOTICE: The signature to this assignment must correspond with the name of the registered owner as it appears on the face of the within Note in every particular, without alteration, enlargement or any change whatsoever. Such signature must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Note Registrar, which requirements include membership or participation in STAMP or such other "signature guarantee program" as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. 108 EXHIBIT B FORM OF NOTE DEPOSITORY AGREEMENT [See tab 10] 109 EX-5.1 7 a4_30ex5-1.txt Exhibit 5.1 ----------- May 3, 2001 BMW FS Securities LLC Registration Statement on Form S-3 BMW FS Securities LLC 300 Chestnut Ridge Road Woodcliff Lake, NJ 07677 Re: Amendment No. 2 to Registration Statement (Nos. 333-56802, ---------------------------------------------------------- 333-56802-01 and 333-56802-02) ------------------------------ We have acted as counsel to BMW FS Securities LLC, a Delaware limited liability company (the "Company"), in connection with the preparation and filing with the Securities and Exchange Commission of the Company's Registration Statement on Form S-3 (No. 333-56802), (together with the exhibits and any and all amendments thereto, the "Registration Statement"), under the Securities Act of 1933, as amended (the "Securities Act"), relating to the registration by the Company of asset-backed notes (the "Notes"). As described in the Registration Statement, the Notes will be issued in five classes with each class being issued by BMW Vehicle Owner Trust 2001-A (the "Trust") pursuant to an indenture between the Trust, as issuer, and The Chase Manhattan Bank, as indenture trustee (the "Indenture Trustee"), dated as of May 1, 2001 (the "Indenture"). In so acting, we have examined originals or copies, certified or otherwise identified to our satisfaction, of the Registration Statement, the Indenture, and such limited liability company records, agreements, documents and other instruments, and such certificates or comparable documents of public officials and of officers and representatives of the Company, and have made such inquiries of such officers and representatives, as we have deemed relevant and necessary as a basis for the opinion hereinafter set forth. In such examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of documents submitted to us as certified or photostatic copies and the authenticity of the originals of such latter documents. As to all questions of fact material to this opinion that have not been independently established, we have relied upon certificates or comparable documents of officers and representatives of the Company. The opinion set forth below is also based on the assumptions that (i) the Registration Statement, as finally amended (including any necessary post-effective amendments), has become effective under the Securities Act, (ii) the amount, price, interest rate and other principal terms of the Notes have been or will be duly approved by the Managing Member (or the authorized designees) of the Company, (iii) the related Indenture has been duly authorized, executed and delivered by the parties thereto substantially in the form filed as an exhibit to the Registration Statement, and (iv) the Notes have been duly executed by the Indenture Trustee and authenticated by the Indenture Trustee in accordance with the Indenture and sold and delivered by the Trust against payment therefor. Based on the foregoing, and subject to the qualifications stated herein, we are of the opinion that the Notes will be legally issued, fully paid and nonassessable and the Notes will be the binding obligation of the Trust subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors rights and remedies generally, the subject to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity). The opinions herein are limited to the laws of the State of New York, the limited liability company laws of the State of Delaware and the federal laws of the United States, and we express no opinion as to the effect on the matters covered by this opinion of the laws of any other jurisdiction. We hereby consent to the use of this opinion as an exhibit to the Registration Statement. We further consent to the reference to our firm's name under the caption "Legal Opinions" in the prospectus and the forms of prospectus supplements which are a part of the Registration Statement. Very truly yours, /s/ Weil, Gotshal & Manges LLP 2 EX-8.1 8 a4_30ex8-1.txt EXHIBIT 8.1 ----------- May 3, 2001 BMW FS Securities LLC 300 Chestnut Ridge Road Woodcliff Lake, New Jersey 07677 Re: BMW Vehicle Owner Trust Asset Backed Certificates and ----------------------------------------------------- Notes ----- Ladies and Gentlemen: We have acted as counsel to BMW FS Securities LLC, a Delaware limited liability company (the "Company"), in connection with the preparation and filing with the Securities and Exchange Commission of the Company's Registration Statement (Registration No. 333-56802) on Form S-3 on March 9, 2001, as amended to the date hereof (together with the exhibits thereto, the "Registration Statement"), relating to the registration by the Company of Trust Certificates and Trust Notes (collectively, the "Securities"). As described in the Registration Statement, the Securities will be issued in series (and may be issued in classes within any given series), with each series being issued by a trust (each, a "Trust") to be formed by the Company pursuant to a Trust Agreement (each, a "Trust Agreement") between the Company, a trustee to be determined and such other parties to be determined. In so acting, we have examined originals or copies, certified or otherwise identified to our satisfaction, of the Registration Statement, including the Prospectus which is a part thereof (the "Prospectus"), a draft of the Trust Agreement, a draft of an Indenture, and such corporate records, agreements, documents and other instruments (the aforementioned documents together, the "Documents"), and have made such inquiries of such officers and representatives of the Company and the Trust and such other persons, as we have deemed relevant and necessary as a basis for the opinion hereinafter set forth. In such examination, we have assumed the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified or photostatic copies, the authenticity of the originals of such latter documents, the genuineness of all signatures, and the correctness of all representations made therein. (The terms of the Documents are incorporated herein by reference.) We have further assumed that the final executed Documents will be substantially the same as those which we have reviewed and that there are no agreements or understandings between or among the BMW FS Securities LLC May 3, 2001 Page 2 parties to the Documents with respect to the transactions contemplated therein other than those contained in the Documents. Based on the foregoing, subject to the next succeeding paragraph, and assuming full compliance with all the terms of the Documents, we confirm the opinion included in the Prospectus under the caption "Material Income Tax Consequences," insofar as such statements constitute matters of law or legal conclusions and except to the extent qualified therein. The foregoing opinion is based on the facts as set forth in the Registration Statement and on current provisions of the Internal Revenue Code of 1986, as amended, the Treasury Regulations promulgated thereunder, published pronouncements of the Internal Revenue Service, and case law, any of which may be changed at any time with retroactive effect. Further, you should be aware that opinions of counsel are not binding on the Internal Revenue Service or the courts. We express no opinion either as to any matters not specifically covered by the foregoing opinion or as to the effect on the matters covered by this opinion of the laws of any other jurisdictions. Additionally, we undertake no obligation to update this opinion in the event there is either a change in the legal authorities, in the facts, including the taking of any action by any party to any of the transactions described in the Documents pursuant to an opinion of counsel as required by any of the Documents relating to such transactions, or in the Documents on which this opinion is based, or an inaccuracy in any of the representations or warranties upon which we have relied in rendering this opinion. We consent to the references in the Prospectus under the caption "Material Income Tax Consequences" to our firm and to the use of this opinion as an exhibit to the Registration Statement. Very truly yours, /s/ Weil, Gotshal & Manges LLP EX-10.1 9 s3aex10-1.txt =============================================================================== AMENDED AND RESTATED TRUST AGREEMENT between BMW FS SECURITIES LLC as Depositor, and WILMINGTON TRUST COMPANY, as Owner Trustee Dated as of April __, 2001 ================================================================================ TABLE OF CONTENTS PAGE ARTICLE I DEFINITIONS.....................................................1 Section 1.01. Capitalized Terms.........................................1 Section 1.02. Other Definitional Provisions.............................3 ARTICLE II ORGANIZATION....................................................4 Section 2.01. Name......................................................4 Section 2.02. Office....................................................4 Section 2.03. Purposes and Powers.......................................4 Section 2.04. Appointment of Owner Trustee..............................5 Section 2.05. Initial Capital Contribution of Trust Estate..............5 Section 2.06. Declaration of Trust......................................5 Section 2.07. [Reserved]................................................6 Section 2.08. Title to Trust Property...................................6 Section 2.09. Situs of Trust............................................6 Section 2.10. Representations, Warranties and Covenants of the Depositor.................................................6 Section 2.11. Federal Income Tax Allocations............................7 ARTICLE III TRUST CERTIFICATES AND TRANSFER OF INTERESTS....................7 Section 3.01. Initial Ownership.........................................8 Section 3.02. The Trust Certificates....................................8 Section 3.03. Execution, Authentication and Delivery of Trust Certificates..............................................8 Section 3.04. Registration of Transfer and Exchange of Trust Certificates..............................................8 Section 3.05. Mutilated, Destroyed, Lost or Stolen Trust Certificates..............................................9 Section 3.06. Persons Deemed Owners.....................................9 Section 3.07. Access to List of Certificateholders' Names and Addresses................................................10 Section 3.08. Maintenance of Office or Agency..........................10 Section 3.09. Appointment of Paying Agent..............................10 Section 3.10. Form of Trust Certificates...............................11 Section 3.11. Transfer Restrictions....................................11 Section 3.12. Legending of Trust Certificates..........................14 ARTICLE IV ACTIONS BY OWNER TRUSTEE.......................................15 Section 4.01. Prior Notice with Respect to Certain Matters.............15 i TABLE OF CONTENTS (continued) Page Section 4.02. Action by Certificateholders with Respect to Certain Matters..........................................17 Section 4.03. Action by Certificateholders with Respect to Bankruptcy...............................................18 Section 4.04. Restrictions on Certificateholders' Power................18 Section 4.05. Majority Control.........................................18 ARTICLE V APPLICATION OF TRUST FUNDS; CERTAIN DUTIES.....................18 Section 5.01. Establishment of Trust Account...........................18 Section 5.02. Application of Trust Funds...............................19 Section 5.03. Method of Payment........................................20 Section 5.04. Accounting and Reports to Certificateholders, the Internal Revenue Service and Others......................20 Section 5.05. Signature on Returns; Tax Matters Partner................20 ARTICLE VI AUTHORITY AND DUTIES OF OWNER TRUSTEE..........................21 Section 6.01. General Authority........................................21 Section 6.02. General Duties...........................................21 Section 6.03. Action upon Instruction..................................21 Section 6.04. No Duties Except as Specified in this Agreement or in Instructions.......................................22 Section 6.05. No Action Except Under Specified Documents or Instructions.............................................23 Section 6.06. Restrictions.............................................23 ARTICLE VII CONCERNING THE OWNER TRUSTEE...................................23 Section 7.01. Acceptance of Trusts and Duties..........................23 Section 7.02. Furnishing of Documents..................................24 Section 7.03. Representations and Warranties...........................24 Section 7.04. Reliance; Advice of Counsel..............................25 Section 7.05. Not Acting in Individual Capacity........................26 Section 7.06. Owner Trustee Not Liable for Trust Certificates or for Receivables.......................................26 Section 7.07. Owner Trustee May Own Trust Certificates and Notes.......26 Section 7.08. Doing Business in Other Jurisdictions....................26 ii TABLE OF CONTENTS (continued) Page Section 7.09. Paying Agent; Authenticating Agent.......................27 ARTICLE VIII COMPENSATION OF OWNER TRUSTEE..................................27 Section 8.01. Owner Trustee's Fees and Expenses........................27 Section 8.02. Indemnification..........................................27 Section 8.03. Payments to the Owner Trustee............................28 ARTICLE IX TERMINATION OF TRUST AGREEMENT.................................28 Section 9.01. Termination of Trust Agreement...........................28 ARTICLE X SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES.........29 Section 10.01. Eligibility Requirements for Owner Trustee...............29 Section 10.02. Resignation or Removal of Owner Trustee..................29 Section 10.03. Successor Owner Trustee..................................30 Section 10.04. Merger or Consolidation of Owner Trustee.................31 Section 10.05. Appointment of Co-Trustee or Separate Trustee............31 ARTICLE XI MISCELLANEOUS..................................................32 Section 11.01. Supplements and Amendments...............................32 Section 11.02. No Legal Title to Trust Estate in Certificateholders.....34 Section 11.03. Limitations on Rights of Others..........................34 Section 11.04. Notices..................................................34 Section 11.05. Severability.............................................34 Section 11.06. Separate Counterparts....................................35 Section 11.07. Successors and Assigns...................................35 Section 11.08. Covenants of the Depositor...............................35 Section 11.09. No Petition..............................................35 Section 11.10. No Recourse..............................................35 Section 11.11. Headings.................................................36 Section 11.12. GOVERNING LAW............................................36 Exhibit A Form of Certificate of Trust....................................A-1 Exhibit B Assignment......................................................B-1 Exhibit C Form of Transferee Certificate..................................D-1 iii TABLE OF CONTENTS (continued) Page Exhibit D Form of Certificate of Trust of BMW Vehicle Owner Trust 2001-A..............................................E-1 iv This AMENDED AND RESTATED TRUST AGREEMENT, dated as of April __, 2001, is between BMW FS SECURITIES LLC, a Delaware limited liability company, as depositor (the "Depositor"), and WILMINGTON TRUST COMPANY, a Delaware banking corporation, as owner trustee (the "Owner Trustee"). NOW, THEREFORE, the Depositor and the Owner Trustee hereby agree as follows: ARTICLE 1 DEFINITIONS Section 1.01. Capitalized Terms. For all purposes of this Agreement, the following terms shall have the meanings set forth below: "Administration Agreement" shall mean the Owner Trust Administration Agreement dated as of April __, 2001, among the Trust, BMW Financial Services NA, LLC, as Owner Trust Administrator and The Chase Manhattan Bank, as Indenture Trustee. "Administrator" shall mean BMW Financial Services NA, LLC. "Agreement" shall mean this Trust Agreement, as the same may be amended and supplemented from time to time. "Benefit Plan" shall have the meaning assigned to such term in Section 3.11. "Business Trust Statute" shall mean Chapter 38 of Title 12 of the Delaware Code, 12 Del. Code ss. 3801 et seq., as the same may be amended from time to time. "Certificate Distribution Account" shall have the meaning assigned to such term in Section 5.01. "Certificate of Trust" shall mean the Certificate of Trust substantially in the form of Exhibit D filed for the Trust pursuant to Section 3810(a) of the Business Trust Statute. "Certificate Percentage Interest" shall mean with respect to any Trust Certificate, the percentage interest of ownership in the Trust represented thereby as set forth on the face thereof. "Certificate Register" and "Certificate Registrar" shall mean the register mentioned in and the registrar appointed pursuant to Section 3.04. "Certificateholder" or "Holder" shall mean a Person in whose name a Trust Certificate is registered. "Code" shall mean the Internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated thereunder. "Corporate Trust Office" shall mean, with respect to the Owner Trustee, the principal corporate trust office of the Owner Trustee located at Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration, or at such other address in the State of Delaware as the Owner Trustee may designate by notice to the Certificateholders and the Depositor, or the principal corporate trust office of any successor Owner Trustee at the address (which shall be in the State of Delaware) designated by such successor Owner Trustee by notice to the Certificateholders and the Depositor. "Definitive Trust Certificates" shall have the meaning set forth in Section 3.10. "Depositor" shall mean BMW FS Securities LLC, and its successors, in its capacity as depositor hereunder. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Expenses" shall have the meaning assigned to such term in Section 8.02. "Indemnified Parties" shall have the meaning assigned to such term in Section 8.02. "Indenture" shall mean the Indenture, dated as of _____ __, 2001 between the Trust and The Chase Manhattan Bank, as Indenture Trustee. "Indenture Trustee" shall mean The Chase Manhattan Bank, a New York banking corporation. "Owner Trustee" shall mean Wilmington Trust Company, a Delaware banking corporation, not in its individual capacity but solely as owner trustee under this Agreement, and any successor Owner Trustee hereunder. "Paying Agent" shall mean any paying agent or co paying agent appointed pursuant to Section 3.09 and shall initially be The Chase Manhattan Bank. "Person" shall mean any individual, corporation, estate, partnership, limited liability company, joint venture, association, joint stock company, trust or business trust (including any beneficiary thereof), unincorporated organization or government or any agency or political subdivision thereof. "Record Date" shall mean, with respect to a Payment Date, the close of business on the day immediately preceding such Payment Date. 2 "Sale and Servicing Agreement" shall mean the Sale and Servicing Agreement dated as of _____ __, 2001, among the Depositor, BMW Financial Services NA, LLC, as Seller, Servicer, Custodian and Administrator, the Trust and the Indenture Trustee, as the same may be amended or supplemented from time to time. "Secretary of State" shall mean the Secretary of State of the State of Delaware. "Securities Act" means the Securities Act of 1933, as amended. "Treasury Regulations" shall mean regulations, including proposed or temporary Regulations, promulgated under the Code. References herein to specific provisions of proposed or temporary regulations shall include analogous provisions of final Treasury Regulations or other successor Treasury Regulations. "Trust" shall mean the trust established by this Agreement. "Trust Certificate" shall mean a certificate evidencing the beneficial interest of a Certificateholder in the Trust, substantially in the form attached hereto as Exhibit A. "Trust Estate" shall mean all right, title and interest of the Trust in and to the property and rights assigned to the Trust pursuant to Article II of the Sale and Servicing Agreement, all funds on deposit from time to time in the Trust Accounts and the Certificate Distribution Account, and all other property of the Trust from time to time, including any rights of the Owner Trustee and the Trust pursuant to the Sale and Servicing Agreement and the Administration Agreement. Section 1.02. Other Definitional Provisions. (a) Capitalized terms used and not otherwise defined herein have the meanings assigned to them in the Sale and Servicing Agreement or, if not defined therein, in the Indenture. (b) All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. (c) As used in this Agreement and in any certificate or other document made or delivered pursuant hereto or thereto, accounting terms not defined in this Agreement or in any such certificate or other document, and accounting terms partly defined in this Agreement or in any such certificate or other document to the extent not defined, shall have the respective meanings given to them under generally accepted accounting principles. To the extent that the definitions of accounting terms in this Agreement or in any such certificate or other document are inconsistent with the meanings of such terms under generally accepted accounting principles, the definitions contained in this Agreement or in any such certificate or other document shall control. 3 (d) The words "hereof," "herein," "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement; Section and Exhibit references contained in this Agreement are references to Sections and Exhibits in or to this Agreement unless otherwise specified; "or" includes "and/or"; and the term "including" shall mean "including without limitation". (e) The definitions contained in this Agreement are applicable to the singular and plural forms of such terms and to the masculine, feminine and neuter genders of such terms. (f) Any agreement, instrument or statute defined or referred to herein or in any instrument or certificate delivered in connection herewith means such agreement, instrument or statute as from time to time amended, modified or supplemented and includes (in the case of agreements or instruments) references to all attachments thereto and instruments incorporated therein; references to a Person are also to its permitted successors and assigns. ARTICLE II ORGANIZATION Section 2.01. Name. The Trust created hereby shall be known as "BMW Vehicle Owner Trust 2001-A," in which name the Owner Trustee may conduct the business of the Trust, make and execute contracts and other instruments on behalf of the Trust and sue and be sued. Section 2.02. Office. The office of the Trust shall be in care of the Owner Trustee at the Corporate Trust Office or at such other address in Delaware as the Owner Trustee may designate by written notice to the Certificateholders and the Depositor. Section 2.03. Purposes and Powers. The purpose of the Trust is to engage in the following activities and the Trust shall have the power and authority: (a) to issue the Notes pursuant to the Indenture and the Trust Certificates pursuant to this Agreement and to sell, transfer and exchange the Notes and the Trust Certificates and to pay interest on and principal on the Notes and distributions on the Trust Certificates, all in accordance with the Basic Documents; (b) with the proceeds of the sale of the Notes and the Trust Certificates, to purchase the Initial Receivables, to fund the Pre-Funding Account, the Capitalized Interest Account and the Reserve Account, to pay the organizational, start-up and transactional expenses of the Trust and to pay the balance of such proceeds to the Depositor pursuant to the Sale and Servicing Agreement; 4 (c) to assign, grant, transfer, pledge, mortgage and convey the Trust Estate pursuant to the Indenture and to hold, manage and distribute to the Certificateholders pursuant to the terms of this Agreement and the Sale and Servicing Agreement any portion of the Trust Estate released from the Lien of, and remitted to the Trust pursuant to, the Indenture; (d) to enter into and perform its obligations under the Basic Documents to which it is to be a party; (e) to engage in those activities, including entering into agreements, that are necessary, suitable or convenient to accomplish the foregoing or are incidental thereto or connected therewith; and (f) subject to compliance with the Basic Documents, to engage in such other activities as may be required in connection with conservation of the Trust Estate and the making of distributions to the Certificateholders and the Noteholders. The Trust is hereby authorized to engage in the foregoing activities. The Trust shall not engage in any activity other than in connection with the foregoing or other than as required or authorized by the terms of this Agreement or the Basic Documents. Section 2.04. Appointment of Owner Trustee. The Depositor hereby appoints the Owner Trustee as trustee of the Trust effective as of the date hereof, to have all the rights, powers and duties set forth herein. Section 2.05. Initial Capital Contribution of Trust Estate. The Depositor hereby sells, assigns, transfers, conveys and sets over to the Owner Trustee, as of the date hereof, the sum of $1.00. The Owner Trustee hereby acknowledges receipt in trust from the Depositor, as of the date hereof, of the foregoing contribution, which shall constitute the initial Trust Estate and shall be deposited in the Certificate Distribution Account. The Depositor shall pay organizational expenses of the Trust as they may arise or shall, upon the request of the Owner Trustee, promptly reimburse the Owner Trustee for any such expenses paid by the Owner Trustee. Section 2.06. Declaration of Trust. The Owner Trustee hereby declares that it will hold the Trust Estate in trust upon and subject to the conditions set forth herein for the use and benefit of the Certificateholders, subject to the obligations of the Trust under the Basic Documents. It is the intention of the parties hereto that the Trust constitute a business trust under the Business Trust Statute and that this Agreement constitute the governing instrument of such business trust. It is the intention of the parties hereto that, for income and franchise tax purposes, until the Trust Certificates are held by other than the Depositor, the Trust will be disregarded as an entity separate from the Depositor and the Notes will be characterized as debt. At such time that the Trust Certificates are held by more than one Person, it is the intention of the parties hereto that, for income and franchise tax purposes, the Trust shall be treated as a partnership, with the assets of the partnership being the Receivables and other assets held by the Trust, the partners of the 5 partnership being the Certificateholders, and the Notes being debt of the partnership. The Depositor and the Certificateholders by acceptance of a Trust Certificate agree to such treatment and agree to take no action inconsistent with such treatment. The parties agree that, unless otherwise required by appropriate tax authorities, until the Trust Certificates are held by more than one Person the Trust will not file or cause to be filed annual or other necessary returns, reports and other forms consistent with the characterization of the Trust as an entity separate from its owner. Effective as of the date hereof, the Owner Trustee shall have all rights, powers and duties set forth herein and in the Business Trust Statute with respect to accomplishing the purposes of the Trust. Section 2.07. [Reserved]. Section 2.08. Title to Trust Property. Subject to the Indenture, legal title to all the Trust Estate shall be vested at all times in the Trust as a separate legal entity except where applicable law in any jurisdiction requires title to any part of the Trust Estate to be vested in a trustee or trustees, in which case title shall be deemed to be vested in the Owner Trustee, a co-trustee or a separate trustee, as the case may be. Section 2.09. Situs of Trust. The Trust will be located and administered in the State of Delaware. All bank accounts maintained by the Owner Trustee on behalf of the Trust shall be located in the State of Delaware or the State of New York. The Trust shall not have any employees; provided, however, that nothing herein shall restrict or prohibit the Owner Trustee from having employees within or without the State of Delaware. Payments will be received by the Trust only in Delaware or New York, and payments will be made by the Trust only from Delaware or New York. The only office of the Trust will be at the Corporate Trust Office in the State of Delaware. Section 2.10. Representations, Warranties and Covenants of the Depositor. The Depositor hereby represents and warrants to the Owner Trustee that: (a) The Depositor is duly organized and validly existing as a limited liability company in good standing under the laws of the State of Delaware, with power and authority to own its properties and to conduct its business as such properties are currently owned and such business is presently conducted. (b) The Depositor is duly qualified to do business as a foreign limited liability company in good standing and has obtained all necessary licenses and approvals in all jurisdictions in which the ownership or lease of its property or the conduct of its business shall require such qualifications. (c) The Depositor has the power and authority to execute and deliver this Agreement and to carry out its terms; the Depositor has full power and authority to sell and assign the property to be sold and assigned to and deposited with the Trust and the Depositor has duly authorized such sale and assignment and deposit to the Trust by all necessary corporate action; and the execution, delivery and performance of 6 this Agreement have been duly authorized by the Depositor by all necessary corporate action. (d) The Depositor has duly executed and delivered this Agreement, and this Agreement constitutes a legal, valid and binding obligation of the Depositor, enforceable against the Depositor, in accordance with its terms. (e) The consummation of the transactions contemplated by this Agreement and the fulfillment of the terms hereof do not conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time) a default under, the certificate of formation or limited liability company agreement of the Depositor, or any indenture, agreement or other instrument to which the Depositor is a party or by which it is bound; nor result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any such indenture, agreement or other instrument (other than pursuant to the Basic Documents); nor violate any law or, to the best of the Depositor's knowledge, any order, rule or regulation applicable to the Depositor of any court or of any federal or state regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Depositor or its properties. (f) There are no proceedings or investigations pending or threatened before any court, regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Depositor or its properties (i) asserting the invalidity of this Agreement, (ii) seeking to prevent the consummation of any of the transactions contemplated by this Agreement or (iii) seeking any determination or ruling that might materially and adversely affect the performance by the Depositor of its obligations under, or the validity or enforceability of, this Agreement. (g) The representations and warranties of the Depositor in Section 3.02 of the Sale and Servicing Agreement are true and correct. Section 2.11. Federal Income Tax Allocations. If the Trust Certificates are held by more than one Person, for federal income tax purposes each item of income, gain, loss, credit and deduction shall be allocated to the Certificateholders as of the first Record Date following the end of such month in proportion to their Certificate Percentage Interests on such Record Date. The Depositor is authorized to modify the allocations in this paragraph if necessary or appropriate, in its sole discretion, for the allocations to fairly reflect the economic income, gain or loss to the Certificateholders or otherwise required by the Code. Notwithstanding anything provided in this Section 2.11, if the Trust Certificates are held solely by the Depositor, the application of this Section 2.11 shall be disregarded. 7 ARTICLE III TRUST CERTIFICATES AND TRANSFER OF INTERESTS Section 3.01. Initial Ownership. Upon the formation of the Trust by the contribution by the Depositor pursuant to Section 2.05 and until the issuance of the Trust Certificates, the Depositor shall be the sole beneficiary of the Trust. Section 3.02. The Trust Certificates. The Trust Certificates shall be executed on behalf of the Trust by manual or facsimile signature of an authorized officer of the Owner Trustee. Trust Certificates bearing the manual or facsimile signatures of individuals who were, at the time when such signatures shall have been affixed, authorized to sign on behalf of the Trust, shall be validly issued and entitled to the benefit of this Agreement and shall be valid and binding obligations of the Trust, notwithstanding that such individuals or any of them shall have ceased to be so authorized prior to the authentication and delivery of such Trust Certificates or did not hold such offices at the date of authentication and delivery of such Trust Certificates. If a transfer of the Trust Certificates is permitted pursuant to Section 3.11, a transferee of a Trust Certificate shall become a Certificateholder and shall be entitled to the rights and subject to the obligations of a Certificateholder hereunder upon such transferee's acceptance of a Trust Certificate duly registered in such transferee's name pursuant to Section 3.04. Section 3.03. Execution, Authentication and Delivery of Trust Certificates. On the Closing Date, the Owner Trustee shall cause the Trust Certificates in an aggregate Certificate Percentage Interest equal to 100% to be executed on behalf of the Trust, authenticated and delivered to or upon the written order of the Depositor, signed by the Owner Trustee on behalf of the Trust, without further action by the Depositor, in authorized denominations. No Trust Certificate shall entitle its Holder to any benefit under this Agreement or be valid for any purpose unless there shall appear on such Trust Certificate a certificate of authentication substantially in the form set forth in Exhibit A, executed by the Owner Trustee or The Chase Manhattan Bank, as the Owner Trustee's authenticating agent, by manual signature; such authentication shall constitute conclusive evidence that such Trust Certificate shall have been duly authenticated and delivered hereunder. All Trust Certificates shall be dated the date of their authentication. Section 3.04. Registration of Transfer and Exchange of Trust Certificates. The Certificate Registrar shall keep or cause to be kept, at the office or agency maintained pursuant to Section 3.08, a Certificate Register in which, subject to such reasonable regulations as it may prescribe, the Owner Trustee shall provide for the registration of Trust Certificates and of transfers and exchanges of Trust Certificates as herein provided. Wilmington Trust Company shall be the initial Certificate Registrar. Upon surrender for registration of transfer of any Trust Certificate at the office or agency maintained pursuant to Section 3.08, the Owner Trustee shall execute, authenticate and deliver (or shall cause The Chase Manhattan Bank as its authenticating agent to authenticate and deliver), in the name of the designated transferee or transferees, one or more new Trust Certificates in authorized denominations of a like aggregate amount dated the date of authentication by the Owner Trustee or any authenticating 8 agent. At the option of a Certificateholder, Trust Certificates may be exchanged for other Trust Certificates of authorized denominations of a like aggregate amount upon surrender of the Trust Certificates to be exchanged at the office or agency maintained pursuant to Section 3.08. Every Trust Certificate presented or surrendered for registration of transfer or exchange shall be accompanied by a written instrument of transfer in form satisfactory to the Owner Trustee and the Certificate Registrar duly executed by the related Certificateholder or such Certificateholder's attorney duly authorized in writing. Each Trust Certificate surrendered for registration of transfer or exchange shall be cancelled and subsequently disposed of by the Owner Trustee in accordance with its customary practice. No service charge shall be made for any registration of transfer or exchange of Trust Certificates, but the Owner Trustee or the Certificate Registrar may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of Trust Certificates. The preceding provisions of this Section notwithstanding, the Owner Trustee shall not make, and the Certificate Registrar shall not register transfers or exchanges of, Trust Certificates for a period of 15 days preceding the due date for any payment with respect to the Trust Certificates. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the transfer of the Trust Certificates. Section 3.05. Mutilated, Destroyed, Lost or Stolen Trust Certificates. If (a) any mutilated Trust Certificate shall be surrendered to the Certificate Registrar, or if the Certificate Registrar shall receive evidence to its satisfaction of the destruction, loss or theft of any Trust Certificate and (b) there shall be delivered to the Certificate Registrar and the Owner Trustee such security or indemnity as may be required by them to save each of them harmless, then in the absence of notice that such Trust Certificate has been acquired by a bona fide purchaser, the Owner Trustee on behalf of the Trust shall execute and the Owner Trustee or The Chase Manhattan Bank, as the Owner Trustee's authenticating agent, shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Trust Certificate, a new Trust Certificate of like tenor and denomination. In connection with the issuance of any new Trust Certificate under this Section, the Owner Trustee or the Certificate Registrar may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. Any duplicate Trust Certificate issued pursuant to this Section shall constitute conclusive evidence of ownership in the Trust, as if originally issued, whether or not the lost, stolen or destroyed Trust Certificate shall be found at any time. Section 3.06. Persons Deemed Owners. Prior to due presentation of a Trust Certificate for registration of transfer, the Owner Trustee, the Certificate Registrar or any Paying Agent may treat the Person in whose name any Trust Certificate is registered in 9 the Certificate Register as the owner of such Trust Certificate for the purpose of receiving distributions pursuant to Section 5.02 and for all other purposes whatsoever, and none of the Owner Trustee, the Certificate Registrar or any Paying Agent shall be bound by any notice to the contrary. Section 3.07. Access to List of Certificateholders' Names and Addresses. The Owner Trustee shall furnish or cause to be furnished to the Servicer, the Paying Agent and the Depositor, within 15 days after receipt by the Owner Trustee of a written request therefor from the Servicer, the Paying Agent or the Depositor, a list, in such form as the Servicer or the Depositor may reasonably require, of the names and addresses of the Certificateholders as of the most recent Record Date. The Certificate Registrar shall also furnish to the Owner Trustee and the Paying Agent a copy of such list at any time there is a change therein. If (i) three or more Certificateholders or (ii) one or more Holders of Trust Certificates evidencing not less than 50% of the Certificate Percentage Interests apply in writing to the Owner Trustee, and such application states that the applicants desire to communicate with other Certificateholders with respect to their rights under this Agreement or under the Trust Certificates and such application is accompanied by a copy of the communication that such applicants propose to transmit, then the Owner Trustee shall, within five Business Days after the receipt of such application, afford such applicants access during normal business hours to the current list of Certificateholders. Each Certificateholder, by receiving and holding a Trust Certificate, shall be deemed to have agreed not to hold any of the Depositor, the Certificate Registrar or the Owner Trustee accountable by reason of the disclosure of its name and address, regardless of the source from which such information was derived. The Certificate Registrar shall upon the request of the Owner Trustee provide such list, or access to such list, of Certificateholders as contemplated by this Section 3.07. Section 3.08. Maintenance of Office or Agency. The Owner Trustee shall designate in the Borough of Manhattan, the City of New York, an office or offices or agency or agencies where Trust Certificates may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Owner Trustee in respect of the Trust Certificates and the Basic Documents may be served. The Owner Trustee initially designates The Chase Manhattan Bank as its office for such purposes. The Owner Trustee shall give prompt written notice to the Depositor and the Certificateholders of any change in the location of the Certificate Register or any such office or agency. Section 3.09. Appointment of Paying Agent. The Paying Agent shall make distributions to Certificateholders from the Certificate Distribution Account pursuant to Section 5.02 and shall report the amounts of such distributions to the Owner Trustee. Any Paying Agent shall have the revocable power to withdraw funds from the Certificate Distribution Account for the purpose of making the distributions referred to above. The Owner Trustee may revoke such power and remove the Paying Agent if the Owner Trustee determines in its sole discretion that the Paying Agent shall have failed to perform its obligations under this Agreement in any material respect; provided, however, the Owner Trustee shall have no duty to monitor or oversee the compliance by the Paying 10 Agent of its obligations under this Agreement or any other Basic Document. The Paying Agent initially shall be The Chase Manhattan Bank, and any co-paying agent chosen by Wilmington Trust Company. The Chase Manhattan Bank shall be permitted to resign as Paying Agent upon 30 days' written notice to the Owner Trustee. In the event that The Chase Manhattan Bank shall no longer be the Paying Agent, the Depositor, with the consent of the Owner Trustee, shall appoint a successor to act as Paying Agent (which shall be a bank or trust company). The Owner Trustee shall cause such successor Paying Agent or any additional Paying Agent appointed hereunder to execute and deliver to the Owner Trustee an instrument in which such successor Paying Agent or additional Paying Agent shall agree with the Owner Trustee that, as Paying Agent, such successor Paying Agent or additional Paying Agent will hold all sums, if any, held by it for payment to the Certificateholders in trust for the benefit of the Certificateholders entitled thereto until such sums shall be paid to such Certificateholders. The Paying Agent shall return all unclaimed funds to the Owner Trustee and upon removal of a Paying Agent such Paying Agent shall also return all funds in its possession to the Owner Trustee. The provisions of Sections 7.01, 7.03, 7.04 and 8.01 shall apply to the Owner Trustee also in its role as Paying Agent, for so long as the Owner Trustee shall act as Paying Agent and, to the extent applicable, to any other paying agent appointed hereunder. Any reference in this Agreement to the Paying Agent shall include any co-paying agent unless the context requires otherwise. Section 3.10. Form of Trust Certificates. The Trust Certificates, upon original issuance, will be issued in the form of a typewritten Trust Certificate or Trust Certificates representing definitive, fully registered Trust Certificates (the "Definitive Trust Certificates") and shall be registered in the name of BMW FS Securities LLC as the initial registered owner thereof. The Owner Trustee shall execute and authenticate, or cause to be authenticated, the Definitive Trust Certificates in accordance with the instructions of the Depositor. The Depositor hereby orders the Owner Trustee to execute and authenticate, or cause to be authenticated, the Definitive Trust Certificates. Neither the Certificate Registrar nor the Owner Trustee shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such instructions. Upon the issuance of the Trust Certificates, the Owner Trustee and each Paying Agent shall recognize the Holders of the Trust Certificates as Certificateholders. The Trust Certificates shall be printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Owner Trustee, as evidenced by its execution thereof. Section 3.11. Transfer Restrictions. (a) No Trust Certificate may be resold, assigned or transferred (including by pledge or hypothecation) unless such resale, assignment or transfer is (i) pursuant to an effective registration statement under the Securities Act and any applicable state securities or "Blue Sky" laws, (ii) pursuant to Rule 144A promulgated under the Securities Act ("Rule 144A") or (iii) pursuant to another exemption from the registration requirements of the Securities Act and subject to the receipt by the Owner Trustee and the Depositor of (A) a certification by the prospective transferee of the facts surrounding such transfer, which certification shall be 11 in form and substance satisfactory to the Owner Trustee and the Depositor and (B) if requested by the Owner Trustee, an opinion of counsel (which will not be at the expense of the Owner Trustee), satisfactory to the Depositor and the Owner Trustee, to the effect that the transfer is in compliance with the Securities Act, and, in each case, in compliance with any applicable securities or "Blue Sky" laws of any state of the United States. In addition, each transferee shall provide to the Owner Trustee its tax identification number, address, nominee name (if applicable) and wire transfer instructions. Prior to any resale, assignment or transfer of the Trust Certificates described in clause (ii) above, each prospective purchaser of the Trust Certificates shall have acknowledged, represented and agreed as follows: (1) (1) It is a "qualified institutional buyer" as defined in Rule 144A ("QIB") and is acquiring the Trust Certificates for its own institutional account (and not for the account of others) or as a fiduciary or agent for others (which others also are QIBs). (2) (2) It acknowledges that the Trust Certificates have not been and will not be registered under the Securities Act or the securities laws of any jurisdiction. (3) (3) It is familiar with Rule 144A and is aware that the sale is being made in reliance on Rule 144A and it is not acquiring the Trust Certificates with a view to, or for resale in connection with, a distribution that would constitute a public offering within the meaning of the Securities Act or a violation of the Securities Act, and that, if in the future it decides to resell, assign, pledge or otherwise transfer any Trust Certificates, such Trust Certificates may be resold, assigned, pledged or transferred only (i) to the Depositor or any Affiliate thereof, (ii) so long as such Trust Certificate is eligible for resale pursuant to Rule 144A, to a person whom it reasonably believes after due inquiry is a QIB acting for its own account (and not for the account of others) or as a fiduciary or agent for others (which others also are QIBs) to whom notice is given that the resale, pledge, assignment or transfer is being made in reliance on Rule 144A, (iii) pursuant to an effective registration statement under the Securities Act or (iv) in a sale, pledge or other transfer made in a transaction otherwise exempt from the registration requirements of the Securities Act, in which case (A) the Owner Trustee shall require that both the prospective transferor and the prospective transferee certify to the Owner Trustee and the Depositor in writing the facts surrounding such transfer, which certification shall be in form and substance satisfactory to the Owner Trustee and the Depositor and (B) the Owner Trustee shall require a written opinion of counsel (which will not be at the expense of the Depositor or the Owner Trustee) satisfactory to the Depositor and the Owner Trustee to the effect that such transfer will not violate the Securities Act, in each case in accordance with any applicable securities or "Blue Sky" laws of any state of the United States. 12 (4) It is aware that it (or any account for which it is purchasing) may be required to bear the economic risk of an investment in the Trust Certificates for an indefinite period, and it (or such account) is able to bear such risk for an indefinite period. (5) It understands that the Trust Certificates will bear legends substantially as set forth in Section 3.12. (6) If it is acquiring any Trust Certificates for the account of one or more qualified institutional buyers, it represents that it has sole investment discretion with respect to each such account and that it has full power to make the foregoing acknowledgements, representations and agreements on behalf of each such account. (7) It has neither acquired nor will it transfer any Trust Certificate it purchases (or any interest therein) or cause any such Trust Certificate (or any interest therein) to be marketed on or through an "established securities market" within the meaning of Section 7704(b)(1) of the Code, including, without limitation, an over-the-counter-market or an interdealer quotation system that regularly disseminates firm buy or sell quotations. (8) It either (A) is not, and will not become, a partnership, Subchapter S corporation or grantor trust for U.S. federal income tax purposes or (B) is such an entity, but none of the direct or indirect beneficial owners of any of the interests in such transferee have allowed or caused, or will allow or cause, 50% or more (or such other percentage as the Deposition may establish prior to the time of such proposed transfer) of the value of such interests to be attributable to such transferee's ownership of Trust Certificates. (9) It understands that no subsequent transfer of the Trust Certificates is permitted unless (A) such transfer is of a Trust Certificate with a Certificate Percentage Interest of at least ___%, (B) it causes its proposed transferee to provide to the Trust and the Depositor a letter substantially in the form of Exhibit C hereto, or such other written statement as the Depositor shall prescribe and (C) the Trust consents in writing to the proposed transfer, which consent shall be granted unless the Depositor determines that such transfer would create a risk that the Trust would be classified for federal or any applicable state tax purposes as an association (or a publicly traded partnership) taxable as a corporation; provided, however, that any attempted transfer that would either cause the number of registered holders of Trust Certificates in the aggregate to exceed 100 shall be a void transfer. 13 (10) It understands that the Opinion of Counsel to the Trust that the Trust is not a publicly traded partnership taxable as a corporation is dependent in part on the accuracy of the representations in paragraphs (7), (8) and (9) above. (11) It acknowledges that the Owner Trustee, the Depositor, and their Affiliates, and others will rely upon the truth and accuracy of the foregoing acknowledgments, representations and agreements. Each transferee of the Trust Certificates shall be required to execute or to have executed a representation letter substantially in the form of Exhibit C, or may deliver such other representations (or an opinion of counsel) as may be approved by the Owner Trustee and the Depositor, to the effect that such transfer may be made pursuant to an exemption from registration under the Securities Act and any applicable state securities or "Blue Sky" laws. In addition, such prospective purchaser shall be responsible for providing additional information or certification, as shall be reasonably requested by the Owner Trustee or the Depositor, to support the truth and accuracy of the foregoing acknowledgments, representations and agreements, it being understood that such additional information is not intended to create additional restrictions on the transfer of the Trust Certificates. Neither the Depositor, the Trust nor the Owner Trustee shall be obligated to register the Trust Certificates under the Securities Act or any state securities or "Blue Sky" laws. In determining compliance with the transfer restrictions contained in this Section 3.11, the Owner Trustee may rely upon a written opinion of counsel (which may include in-house counsel of the transferor), the cost of obtaining which shall be an expense of the Holder of the Certificate to be transferred. (b) The Trust Certificates may not be acquired by or for the account of (i) an "employee benefit plan" (as defined in Section 3(3) of ERISA) that is subject to the provisions of Title I of ERISA, (ii) a "plan" described in Section 4975(e)(1) of the Code or (iii) any entity whose underlying assets include plan assets by reason of a plan's investment in the entity (each, a "Benefit Plan"). By accepting and holding a Trust Certificate, the Holder thereof shall be deemed to have represented and warranted that it is not a Benefit Plan. Section 3.12. Legending of Trust Certificates. Each Trust Certificate shall bear a legend in substantially the following form, unless the Depositor determines otherwise in accordance with applicable law: THIS TRUST CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR ANY OTHER APPLICABLE SECURITIES OR "BLUE SKY" LAWS OF ANY STATE OR OTHER JURISDICTION, AND MAY NOT BE RESOLD, ASSIGNED, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE REGISTRATION REQUIREMENTS OF THE 14 SECURITIES ACT OR ANY OTHER APPLICABLE SECURITIES OR "BLUE SKY" LAWS, PURSUANT TO AN EXEMPTION THEREFROM OR IN A TRANSACTION NOT SUBJECT THERETO. IT AGREES, ON ITS OWN BEHALF AND ON BEHALF OF ANY ACCOUNTS FOR WHICH IT IS ACTING AS AGENT, THAT SUCH TRUST CERTIFICATE MAY BE RESOLD, ASSIGNED, PLEDGED OR TRANSFERRED ONLY (A) SO LONG AS THE TRUST CERTIFICATE IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO SUCH PERSON WHOM THE TRANSFEROR REASONABLY BELIEVES AFTER DUE INQUIRY IS A QIB ACTING FOR ITS OWN ACCOUNT (AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY OR AGENT FOR OTHERS (WHICH OTHERS ALSO ARE QIBS) TO WHOM NOTICE IS GIVEN THAT THE RESALE, ASSIGNMENT, PLEDGE OR TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (C) SUCH RESALE, ASSIGNMENT, PLEDGE OR OTHER TRANSFER IS MADE IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND OTHER SECURITIES OR "BLUE SKY" LAWS, IN SUCH CASE THE OWNER TRUSTEE SHALL REQUIRE (I) THAT THE PROSPECTIVE TRANSFEREE CERTIFY TO THE OWNER TRUSTEE AND THE DEPOSITOR IN WRITING THE FACTS SURROUNDING SUCH TRANSFER, WHICH CERTIFICATION SHALL BE IN FORM AND SUBSTANCE SATISFACTORY TO THE OWNER TRUSTEE AND (II) IF REQUESTED BY THE OWNER TRUSTEE, A WRITTEN OPINION OF COUNSEL (WHICH SHALL NOT BE AT THE EXPENSE OF THE OWNER TRUSTEE OR THE DEPOSITOR) SATISFACTORY TO THE OWNER TRUSTEE AND THE DEPOSITOR, TO THE EFFECT THAT SUCH TRANSFER WILL NOT VIOLATE THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES OR "BLUE SKY" LAWS OF ANY STATE OR JURISDICTION. ANY ATTEMPTED TRANSFER IN CONTRAVENTION OF THE IMMEDIATELY PRECEDING RESTRICTIONS WILL BE VOID AB INITIO AND THE PURPORTED TRANSFEROR WILL CONTINUE TO BE TREATED AS THE OWNER OF THE TRUST CERTIFICATE FOR ALL PURPOSES. NO TRUST CERTIFICATE OR INTEREST THEREIN MAY BE ACQUIRED BY OR FOR THE ACCOUNT OF (I) AN "EMPLOYEE BENEFIT PLAN" (AS DEFINED IN SECTION 3(3) OF ERISA) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A "PLAN" DESCRIBED IN SECTION 4975(E)(1) OF THE CODE OR (III) ANY ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF A PLAN'S INVESTMENT IN THE ENTITY (EACH, A "BENEFIT PLAN"). BY ACCEPTING AND HOLDING A TRUST CERTIFICATE, THE HOLDER THEREOF SHALL BE DEEMED TO HAVE REPRESENTED AND WARRANTED THAT IT IS NOT A BENEFIT PLAN. 15 ARTICLE IV ACTIONS BY OWNER TRUSTEE Section 4.01. Prior Notice with Respect to Certain Matters. With respect to the following matters, the Owner Trustee shall not take action unless at least 30 days before the taking of such action, the Owner Trustee shall have notified the Certificateholders of record as of the preceding Record Date in writing of the proposed action and such Certificateholders shall not have notified the Owner Trustee in writing prior to the 30th day after such notice is given that such Certificateholders have withheld consent or provided alternative direction: (a) the initiation of any claim or lawsuit by the Trust (except claims or lawsuits brought in connection with the collection of the Receivables) and the compromise of any action, claim or lawsuit brought by or against the Trust (except with respect to the aforementioned claims or lawsuits for collection of the Receivables); (b) the election by the Trust to file an amendment to the Certificate of Trust (unless such amendment is required to be filed under the Business Trust Statute); (c) the amendment of the Indenture by a supplemental indenture or any other change to this Agreement or any Basic Document in circumstances where the consent of any Noteholder is required; (d) the amendment of the Indenture by a supplemental indenture or any other change to this Agreement or any Basic Document in circumstances where the consent of any Noteholder is not required and such amendment would materially adversely affect the interests of the Certificateholders; (e) the amendment, change or modification of the Administration Agreement, except to cure any ambiguity or to amend or supplement any provision in a manner or add any provision that would not materially adversely affect the interests of the Certificateholders; (f) the appointment pursuant to the Indenture of a successor Note Registrar, Paying Agent or Indenture Trustee or pursuant to this Agreement of a successor Certificate Registrar, or the consent to the assignment by the Note Registrar, Paying Agent or Indenture Trustee or Certificate Registrar of its obligations under the Indenture or this Agreement, as applicable; (g) the consent to the calling or waiver of any default of any Basic Document; (h) the consent to the assignment by the Indenture Trustee or Servicer of their respective obligations under any Basic Document, unless permitted in the Basic Documents; 16 (i) except as provided in Article IX hereof, dissolve, terminate or liquidate the Trust in whole or in part; (j) merge or consolidate the Trust with or into any other entity, or convey or transfer all or substantially all of the Trust's assets to any other entity; (k) cause the Trust to incur, assume or guaranty any indebtedness other than as set forth in this Agreement or the Basic Documents; (l) do any act that conflicts with any other Basic Document; (m) do any act that would make it impossible to carry on the ordinary business of the Trust as described in Section 2.03 hereof; (n) confess a judgment against the Trust; (o) possess Trust assets, or assign the Trust's right to property, for other than a Trust purpose; (p) cause the Trust to lend any funds to any entity, unless permitted in the Basic Documents; or (q) change the Trust's purpose and powers from those set forth in this Trust Agreement. In addition, the Trust shall not commingle its assets with those of any other entity. The Trust shall maintain its financial and accounting books and records separate from those of any other entity. Except as expressly set forth herein, the Trust shall not pay the indebtedness, operating expenses and liabilities of any other entity. The Trust shall maintain appropriate minutes or other records of all appropriate actions and shall maintain its office separate from the offices of the Depositor and the Servicer. The Owner Trustee shall not have the power, except upon the direction of the Certificateholders and to the extent otherwise consistent with the Basic Documents, to (i) remove or replace the Servicer or the Indenture Trustee, (ii) institute proceedings to have the Trust declared or adjudicated a bankruptcy or insolvent, (iii) consent to the institution of bankruptcy or insolvency proceedings against the Trust, (iv) file a petition or consent to a petition seeking reorganization or relief on behalf of the Trust under any applicable federal or state law relating to bankruptcy, (v) consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or any similar official) of the Trust or a substantial portion of the property of the Trust, (vi) make any assignment for the benefit of the Trust's creditors, (vii) cause the Trust to admit the writing its inability to pay its debts generally as they become due, (viii) take any action, or cause the Trust to take any action, in furtherance of any of the foregoing (any of the above, a "Bankruptcy Action"). So long as the Indenture remains in effect, no Certificateholder shall have the power to 17 take, and shall not take, any Bankruptcy Action with respect to the Trust or direct the Owner Trust to take any Bankruptcy Action with respect to the Trust. Section 4.02. Action by Certificateholders with Respect to Certain Matters. The Owner Trustee shall not have the power, except upon the written direction of the Certificateholders, to (a) remove the Administrator under the Administration Agreement pursuant to Section 8 thereof, (b) appoint a successor Administrator pursuant to Section 8 of the Administration Agreement, (c) remove the Servicer under the Sale and Servicing Agreement pursuant to Section 8.02 thereof, (d) amend the Sale and Servicing Agreement pursuant to Section 10.01(b) of such document, or (e) except as expressly provided in the Basic Documents, sell the Receivables after the termination of the Indenture. The Owner Trustee shall take the actions referred to in the preceding sentence only upon written instructions signed by the Certificateholders. Section 4.03. Action by Certificateholders with Respect to Bankruptcy. The Owner Trustee shall not have the power to commence a voluntary proceeding in bankruptcy relating to the Trust without the unanimous prior approval of all Certificateholders and the delivery to the Owner Trustee by each such Certificateholder of a certification certifying that such Certificateholder reasonably believes that the Trust is insolvent. Section 4.04. Restrictions on Certificateholders' Power. The Certificateholders shall not direct the Owner Trustee to take or to refrain from taking any action if such action or inaction would be contrary to any obligation of the Trust or the Owner Trustee under this Agreement or any of the Basic Documents or would be contrary to Section 2.03; nor shall the Owner Trustee be obligated to follow any such direction, if given. Section 4.05. Majority Control. Except as expressly provided herein, any action that may be taken by the Certificateholders under this Agreement may be taken by the Holders of Trust Certificates evidencing not less than a majority of the Certificate Percentage Interests. Except as expressly provided herein, any written notice of the Certificateholders delivered pursuant to this Agreement shall be effective if signed by Holders of Trust Certificates evidencing not less than a majority of the Certificate Percentage Interests at the time of the delivery of such notice. ARTICLE V APPLICATION OF TRUST FUNDS; CERTAIN DUTIES Section 5.01. Establishment of Trust Account. The Owner Trustee, for the benefit of the Certificateholders, shall cause the Paying Agent to establish and maintain in the name of the Trust an Eligible Deposit Account (the "Certificate Distribution Account"), bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Certificateholders. The title of the Certificate Distribution 18 Account shall be "BMW Vehicle Owner Trust 2001-A: Certificate Distribution Account for the benefit of the Certificateholders". (12) The Trust shall possess all right, title and interest in all funds on deposit from time to time in the Certificate Distribution Account and in all proceeds thereof. Except as otherwise expressly provided herein, the Certificate Distribution Account shall be under the sole dominion and control of the Owner Trustee for the benefit of the Certificateholders. If, at any time, the Certificate Distribution Account ceases to be an Eligible Deposit Account, the Paying Agent shall within 10 Business Days (or such longer period, not to exceed 30 calendar days, as to which each Rating Agency may consent) establish a new Certificate Distribution Account, as applicable, as an Eligible Deposit Account and shall transfer any cash or any investments to such new Certificate Distribution Account. Section 5.02. Application of Trust Funds. (a) On each Payment Date, the Owner Trustee shall cause the Paying Agent to distribute to Certificateholders all amounts deposited in the Certificate Distribution Account pursuant to Section 5.06 of the Sale and Servicing Agreement with respect to such Payment Date based upon each Certificateholder's Certificate Percentage Interest. (b) On each Payment Date, the Owner Trustee shall cause the Paying Agent to send to each Certificateholder the statement or statements provided to the Owner Trustee by the Servicer pursuant to Section 5.08 of the Sale and Servicing Agreement with respect to such Payment Date. (c) In the event that any withholding tax is imposed on the Trust's payment (or allocations of income) to a Certificateholder, such tax shall reduce the amount otherwise distributable to such Certificateholder in accordance with this Section. The Owner Trustee or Paying Agent is hereby authorized and directed to retain from amounts otherwise distributable to the Certificateholders sufficient funds for the payment of any tax that is legally owed by the Trust (but such authorization shall not prevent the Owner Trustee or the Paying Agent from contesting any such tax in appropriate proceedings and withholding payment of such tax, if permitted by law, pending the outcome of such proceedings). The amount of any withholding tax imposed with respect to a Certificateholder shall be treated as cash distributed to such Certificateholder at the time it is withheld by the Trust and remitted to the appropriate taxing authority. If there is a possibility that withholding tax is payable with respect to a distribution (such as a distribution to a non-U.S. Certificateholder, the Owner Trustee or the Paying Agent may in its sole discretion withhold such amounts in accordance with this paragraph. Any Holder of a Trust Certificate that is organized under the laws of a jurisdiction outside the United States shall, on or prior to the date such Holder becomes a Holder, (a) so notify the Owner Trustee and the Paying Agent, (b) (i) provide the Owner Trustee and the Paying Agent with the necessary forms to claim an exemption from United States 19 withholding tax or a reduction in the rate thereof or (ii) notify the Owner Trustee or the Paying Agent, as applicable, that it is not entitled to such an exemption or reduction. Any such Holder agrees by its acceptance of a Trust Certificate, on an ongoing basis, to provide like certification for each taxable year and to notify the Owner Trustee and the Paying Agent should subsequent circumstances arise affecting the information provided the Owner Trustee or the Paying Agent in clauses (a) and (b) above. The Owner Trustee and the Paying Agent shall be fully protected in relying upon, and each Holder by its acceptance of a Trust Certificate hereunder agrees to indemnify and hold the Owner Trustee and the Paying Agent harmless against all claims or liability of any kind arising in connection with or related to the Owner Trustee's and the Paying Agent's reliance upon any documents, forms or information provided by any Holder to the Owner Trustee and the Paying Agent. Section 5.03. Method of Payment. Subject to Section 9.01(c), distributions required to be made to Certificateholders on any Payment Date shall be made to each Certificateholder of record on the preceding Record Date either by wire transfer, in immediately available funds, to the account of such Certificateholder at a bank or other entity having appropriate facilities therefor, if (a) such Certificateholder shall have provided to the Certificate Registrar and the Paying Agent appropriate written instructions at least five Business Days prior to such Payment Date and (b) such Certificateholder is the Depositor, or an Affiliate thereof, or, if not, by check mailed to such Certificateholder at the address of such Certificateholder appearing in the Certificate Register. Section 5.04. Accounting and Reports to Certificateholders, the Internal Revenue Service and Others. At such time as there is more than one Certificateholder (for tax purposes) the Owner Trustee shall (a) unless otherwise required under the Code, maintain (or cause to be maintained) the books of the Trust on a calendar year basis and the accrual method of accounting, (b) deliver (or cause to delivered) to each Certificateholder, as may be required by the Code and applicable Treasury Regulations, such information as may be required (including Schedule K-1) to enable each Certificateholder to prepare its federal and state income tax returns, (c) file (or cause to be filed) such tax returns relating to the Trust (including a partnership information return, IRS Form 1065), and make such elections as from time to time may be required or appropriate under any applicable state or federal statute or any rule or regulation thereunder so as to maintain the Trust's characterization either a disregarded entity or as a partnership for federal income tax purposes (as appropriate), (d) cause such tax returns to be signed in the manner required by law and (e) collect or cause to be collected any withholding tax as described in and in accordance with Section 5.02(c) with respect to income or distributions to Certificateholders. The parties to this Agreement agree and acknowledge that the Administrator shall perform the duties and obligations of the Owner Trustee under this Section 5.05 in accordance with the Administration Agreement. Section 5.05. Signature on Returns; Tax Matters Partner. 20 (a) The Owner Trustee shall sign on behalf of the Trust the tax returns of the Trust, if any, unless applicable law requires a Certificateholder to sign such documents. (b) BMW Financial Services NA, LLC shall be designated the "tax matters partner" of the Trust pursuant to Section 6231(a)(7)(A) of the Code and applicable Treasury Regulations. ARTICLE VI AUTHORITY AND DUTIES OF OWNER TRUSTEE Section 6.01. General Authority. The Owner Trustee is authorized and directed to execute and deliver the Basic Documents to which the Trust is to be a party and each certificate or other document attached as an exhibit to or contemplated by the Basic Documents to which the Trust is to be a party, in each case, in such form as the Depositor shall approve, as evidenced conclusively by the Owner Trustee's execution thereof. In addition to the foregoing, the Owner Trustee is authorized, but shall not be obligated, to take all actions required of the Trust pursuant to the Basic Documents. The Owner Trustee is further authorized from time to time to take such action as the Administrator recommends with respect to the Basic Documents. Section 6.02. General Duties. It shall be the duty of the Owner Trustee: (a) to discharge (or cause to be discharged) all of its responsibilities pursuant to the terms of this Agreement and the Basic Documents to which the Trust is a party and to administer the Trust in the interest of the Certificateholders, subject to the Basic Documents and in accordance with the provisions of this Agreement; provided, however, that notwithstanding the foregoing, the Owner Trustee shall be deemed to have discharged its duties and responsibilities hereunder and under the Basic Documents to the extent the Administrator has agreed in the Administration Agreement to perform any act or to discharge any duty of the Owner Trustee hereunder or under any Basic Document, and the Owner Trustee shall not be held liable for the default or failure of the Administrator to carry out its obligations under the Administration Agreement; and (b) to cooperate with the Administrator in carrying out the Administrator's obligation to qualify and preserve the Trust's qualification to do business in each jurisdiction, if any, in which such qualification is or shall be necessary to protect the validity and enforceability of the Indenture, the Notes, the Receivables and any other instrument and agreement included in the Trust Estate; provided that the Owner Trustee may rely on advice of counsel with respect to such obligation. Section 6.03. Action upon Instruction. 21 (a) Subject to Article IV and in accordance with the terms of the Basic Documents, the Certificateholders may by written instruction direct the Owner Trustee in the management of the Trust. Such direction may be exercised at any time by written instruction of the Certificateholders pursuant to Article IV. (b) The Owner Trustee shall not be required to take any action hereunder or under any Basic Document if the Owner Trustee shall have reasonably determined, or shall have been advised by counsel, that such action is likely to result in liability on the part of the Owner Trustee or is contrary to the terms hereof or of any Basic Document or is otherwise contrary to law. (c) Whenever the Owner Trustee is unable to decide between alternative courses of action permitted or required by the terms of this Agreement or under any Basic Document, the Owner Trustee shall promptly give notice (in such form as shall be appropriate under the circumstances) to the Certificateholders of record as of the preceding Record Date requesting instruction as to the course of action to be adopted, and to the extent the Owner Trustee acts in good faith in accordance with any written instruction of such Certificateholders received, the Owner Trustee shall not be liable on account of such action to any Person. If the Owner Trustee shall not have received appropriate instruction within 10 days of such notice (or within such shorter period of time as reasonably may be specified in such notice or may be necessary under the circumstances) it may, but shall be under no duty to, take or refrain from taking such action not inconsistent with this Agreement or the Basic Documents, as it shall deem to be in the best interests of the Certificateholders, and shall have no liability to any Person for such action or inaction. (d) In the event that the Owner Trustee is unsure as to the application of any provision of this Agreement or any Basic Document or any such provision is ambiguous as to its application, or is, or appears to be, in conflict with any other applicable provision, or in the event that this Agreement permits any determination by the Owner Trustee or is silent or is incomplete as to the course of action that the Owner Trustee is required to take with respect to a particular set of facts, the Owner Trustee may give notice (in such form as shall be appropriate under the circumstances) to the Certificateholders of record as of the preceding Record Date requesting instruction and, to the extent that the Owner Trustee acts or refrains from acting in good faith in accordance with any such instruction received, the Owner Trustee shall not be liable, on account of such action or inaction, to any Person. If the Owner Trustee shall not have received appropriate instruction within 10 days of such notice (or within such shorter period of time as reasonably may be specified in such notice or may be necessary under the circumstances) it may, but shall be under no duty to, take or refrain from taking such action not inconsistent with this Agreement or the Basic Documents, as it shall deem to be in the best interests of the Certificateholders, and shall have no liability to any Person for such action or inaction. Section 6.04. No Duties Except as Specified in this Agreement or in Instructions. The Owner Trustee shall not have any duty or obligation to manage, make any payment 22 with respect to, register, record, sell, dispose of, or otherwise deal with the Trust Estate, or to otherwise take or refrain from taking any action under, or in connection with, any document contemplated hereby to which the Owner Trustee or the Trust is a party, except as expressly provided by the terms of this Agreement or in any document or written instruction received by the Owner Trustee pursuant to Section 6.04; and no implied duties or obligations shall be read into this Agreement or any Basic Document against the Owner Trustee. The Owner Trustee shall have no responsibility for filing any financing or continuation statement in any public office at any time or to otherwise perfect or maintain the perfection of any security interest or Lien granted to it hereunder or to prepare or file any Securities and Exchange Commission filing for the Trust or to record this Agreement or any Basic Document. The Owner Trustee nevertheless agrees that it will, at its own cost and expense, promptly take all action as may be necessary to discharge any Liens on any part of the Trust Estate that result from actions by, or claims against, the Owner Trustee in its individual capacity that are not related to the ownership or the administration of the Trust Estate. Section 6.05. No Action Except Under Specified Documents or Instructions. The Owner Trustee shall not manage, control, use, sell, dispose of or otherwise deal with any part of the Trust Estate except (i) in accordance with the powers granted to and the authority conferred upon the Owner Trustee pursuant to this Agreement, (ii) in accordance with the Basic Documents and (iii) in accordance with any document or instruction delivered to the Owner Trustee pursuant to Section 6.03. Section 6.06. Restrictions. The Owner Trustee shall not take any action to that, to the actual knowledge, (a) is inconsistent with the purposes of the Trust set forth in Section 2.03 or (b) would result in the Trust's becoming taxable as a corporation for federal income tax purposes. The Certificateholders shall not direct the Owner Trustee to take action that would violate the provisions of this Section. ARTICLE VII CONCERNING THE OWNER TRUSTEE Section 7.01. Acceptance of Trusts and Duties. The Owner Trustee accepts the trusts hereby created and agrees to perform its duties hereunder with respect to such trusts, but only upon the terms of this Agreement. The Owner Trustee also agrees to disburse all moneys actually received by it constituting part of the Trust Estate upon the terms of the Basic Documents and this Agreement. The Owner Trustee shall not be answerable or accountable hereunder or under any Basic Document under any circumstances, except (i) for its own willful misconduct or gross negligence or (ii) in the case of the inaccuracy of any representation or warranty contained in Section 7.03 expressly made by the Owner Trustee. In particular, but not by way of limitation (and subject to the exceptions set forth in the preceding sentence): (a) The Owner Trustee shall not be liable for any error of judgment made by a Trust Officer of the Owner Trustee; 23 (b) The Owner Trustee shall not be liable with respect to any action taken or omitted to be taken by it in accordance with the instructions of the Administrator or any Certificateholder; (c) No provision of this Agreement or any Basic Document shall require the Owner Trustee to expend or risk funds or otherwise incur any financial liability in the performance of any of its rights or powers hereunder or under any Basic Document if the Owner Trustee shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured or provided to it; (d) Under no circumstances shall the Owner Trustee be liable for indebtedness evidenced by or arising under any of the Basic Documents, including the principal of and interest on the Notes; (e) The Owner Trustee shall not be responsible for or in respect of the validity or sufficiency of this Agreement or for the due execution hereof by the Depositor or for the form, character, genuineness, sufficiency, value or validity of any of the Trust Estate, or for or in respect of the validity or sufficiency of the Basic Documents, other than the certificate of authentication on the Trust Certificates, and the Owner Trustee shall in no event assume or incur any liability, duty or obligation to any Noteholder or to any Certificateholder, other than as expressly provided for herein or expressly agreed to in the other Basic Documents; (f) The Owner Trustee shall not be responsible for monitoring the performance of, and shall not be liable for the default or misconduct of the Administrator, the Depositor, the Servicer, the Indenture Trustee or any other Person under any of the Basic Documents or otherwise, and the Owner Trustee shall have no obligation or liability to perform the obligations of the Trust under this Agreement or the Basic Documents that are required to be performed by the Administrator under the Administration Agreement, the Indenture Trustee under the Indenture or the Depositor or the Servicer under the Sale and Servicing Agreement; and (g) The Owner Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Agreement, or to institute, conduct or defend any litigation under this Agreement or otherwise or in relation to this Agreement or any Basic Document, at the request, order or direction of any of the Certificateholders, unless such Certificateholders have offered to the Owner Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities that may be incurred by the Owner Trustee therein or thereby. The right of the Owner Trustee to perform any discretionary act enumerated in this Agreement or in any Basic Document shall not be construed as a duty, and the Owner Trustee shall not be answerable for other than its gross negligence or willful misconduct in the performance of any such act. Section 7.02. Furnishing of Documents. The Owner Trustee shall furnish to the Certificateholders, promptly upon receipt of a written request therefor, duplicates or 24 copies of all reports, notices, requests, demands, certificates, financial statements and any other instruments furnished to the Owner Trustee under the Basic Documents. Section 7.03. Representations and Warranties. The Owner Trustee hereby represents and warrants to the Depositor, for the benefit of the Certificateholders, that: (a) It is a banking corporation duly organized and validly existing in good standing under the laws of the State of Delaware. It has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement. (b) It has taken all corporate action necessary to authorize the execution and delivery by it of this Agreement, and this Agreement will be executed and delivered by one of its officers who is duly authorized to execute and deliver this Agreement on its behalf. (c) Neither the execution or the delivery by it of this Agreement, nor the consummation by it of the transactions contemplated hereby, nor compliance by it with any of the terms or provisions hereof will contravene any federal or Delaware law, governmental rule or regulation governing the banking or trust powers of the Owner Trustee or any judgment or order binding on it, or constitute any default under its charter documents or bylaws or any indenture, mortgage, contract, agreement or instrument to which it is a party or by which any of its properties may be bound. (d) It is a corporation satisfying the provisions of Section 3807(a) of the Business Trust Statute; authorized to exercise corporate trust powers; having a combined capital and surplus of at least $50,000,000 and subject to supervision or examination by federal or state authorities; and having (or having a parent that has) time deposits that are rated at least A-1 by Standard & Poor's and P-1 by Moody's or who is otherwise acceptable to each Rating Agency. Section 7.04. Reliance; Advice of Counsel. (a) The Owner Trustee shall incur no liability to anyone in acting upon any signature, instrument, notice, resolution, request, consent, order, certificate, report, opinion, bond, or other document or paper believed by it to be genuine and believed by it to be signed by the proper party or parties. The Owner Trustee may accept a certified copy of a resolution of the board of directors or other governing body of any corporate party as conclusive evidence that such resolution has been duly adopted by such body and that the same is in full force and effect. As to any fact or matter the method of determination of which is not specifically prescribed herein, the Owner Trustee may for all purposes hereof rely on a certificate, signed by the president or any vice president or by the treasurer or other authorized officers of the relevant party, as to such fact or matter, and such certificate shall constitute full protection to the Owner Trustee for any action taken or omitted to be taken by it in good faith in reliance thereon. 25 (b) In the exercise or administration of the trusts hereunder and in the performance of its duties and obligations under this Agreement or the Basic Documents, the Owner Trustee (i) may act directly or through its agents or attorneys pursuant to agreements entered into with any of them, and the Owner Trustee shall not be liable for the conduct or misconduct of such agents or attorneys if such agents or attorneys shall have been selected by the Owner Trustee with reasonable care, and (ii) may consult with counsel, accountants and other skilled Persons to be selected with reasonable care and employed by it. The Owner Trustee shall not be liable for anything done, suffered or omitted reasonably and in good faith by it in accordance with the opinion or advice of any such counsel, accountants or other such Persons. Section 7.05. Not Acting in Individual Capacity. Except as provided in this Article VII, in accepting the trusts hereby created, Wilmington Trust Company acts solely as Owner Trustee hereunder and not in its individual capacity, and all Persons having any claim against the Owner Trustee by reason of the transactions contemplated by this Agreement or any Basic Document shall look only to the Trust Estate for payment or satisfaction thereof. Section 7.06. Owner Trustee Not Liable for Trust Certificates or for Receivables. The recitals contained herein and in the Trust Certificates (other than the signature and countersignature of the Owner Trustee on the Trust Certificates) shall be taken as the statements of the Depositor, and the Owner Trustee assumes no responsibility for the correctness thereof. Except as set forth in Section 7.03, the Owner Trustee makes no representations as to the validity or sufficiency of this Agreement, of any Basic Document or of the Trust Certificates (other than the signature and countersignature of the Owner Trustee on the Trust Certificates) or the Notes, or of any Receivable or related documents. The Owner Trustee shall at no time have any responsibility or liability for or with respect to the legality, validity and enforceability of any Receivable or the perfection and priority of any security interest created by any Receivable in any Financed Vehicle or the maintenance of any such perfection and priority, or for or with respect to the sufficiency of the Trust Estate or its ability to generate the payments to be distributed to the Certificateholders under this Agreement or the Noteholders under the Indenture, including, without limitation: the existence, condition and ownership of any Financed Vehicle; the existence and enforceability of any insurance thereon; the existence and contents of any Receivable on any computer or other record thereof; the validity of the assignment of any Receivable to the Trust or of any intervening assignment; the completeness of any Receivable; the performance or enforcement of any Receivable; the compliance by the Depositor or the Servicer with any warranty or representation made under any Basic Document or in any related document or the accuracy of any such warranty or representation, or any action of the Administrator, the Indenture Trustee or the Servicer or any subservicer taken in the name of the Owner Trustee. Section 7.07. Owner Trustee May Own Trust Certificates and Notes. The Owner Trustee in its individual or any other capacity may become the owner or pledgee of Trust Certificates or Notes and may deal with the Depositor, the Administrator, the 26 Indenture Trustee and the Servicer in banking transactions with the same rights as it would have if it were not Owner Trustee. Section 7.08. Doing Business in Other Jurisdictions. Notwithstanding anything contained herein to the contrary, neither Wilmington Trust Company nor the Owner Trustee shall be required to take any action in any jurisdiction other than in the State of Delaware if the taking of such action will (i) require the consent or approval or authorization or order of, or the giving of notice to, or the registration with, or the taking of any other action in required by, any state or other governmental authority or agency of any jurisdiction other than the State of Delaware; (ii) result in any fee, tax or other governmental charge under the laws of any jurisdiction or any political subdivisions thereof in existence on the date hereof other than the State of Delaware becoming payable by Wilmington Trust Company or the Owner Trustee; or (iii) subject Wilmington Trust Company or the Owner Trustee to personal jurisdiction in any jurisdiction other than the State of Delaware for causes of action arising from acts unrelated to the consummation of the transactions by Wilmington Trust Company or the Owner Trustee, as the case may be, contemplated hereby. The Owner Trustee shall be entitled to obtain advice of counsel (which advice shall be an expense of the Administrator under Section 8.01 of this Agreement) to determine whether any action required to be taken pursuant to the Agreement results in the consequences described in clauses (i), (ii) and (iii) of the preceding sentence. In the event that said counsel advises the Owner Trustee that such action will result in such consequences, the Owner Trustee will appoint an additional trustee pursuant to Section 10.05 hereof to proceed with such action. Section 7.09. Paying Agent; Authenticating Agent. The rights and protections afforded to the Owner Trustee pursuant to Article VII and Sections 8.02, 10.02, and 10.03 shall also be afforded to the Paying Agent, authenticating agent and Certificate Registrar. ARTICLE VIII COMPENSATION OF OWNER TRUSTEE Section 8.01. Owner Trustee's Fees and Expenses. The Administrator shall pay to the Owner Trustee as compensation for its services hereunder such fees as have been separately agreed upon before the date hereof between the Servicer and the Owner Trustee, and the Administrator shall reimburse the Owner Trustee for its other reasonable expenses hereunder, including the reasonable compensation, expenses and disbursements of such agents, representatives, experts and counsel as the Owner Trustee may employ in connection with the exercise and performance of its rights and its duties hereunder and under the Basic Documents. Section 8.02. Indemnification. The Administrator shall be liable as primary obligor for, and shall indemnify the Owner Trustee and its successors, assigns, agents and servants (collectively, the "Indemnified Parties") from and against, any and all liabilities, obligations, losses, damages, taxes, claims, actions and suits, and any and all reasonable 27 costs, expenses and disbursements (including reasonable legal fees and expenses) of any kind and nature whatsoever (collectively, "Expenses") which may at any time be imposed on, incurred by, or asserted against the Owner Trustee or any Indemnified Party in any way relating to or arising out of this Agreement, the Basic Documents, the Trust Estate, the administration of the Trust Estate or the action or inaction of the Owner Trustee hereunder, except only that the Administrator shall not be liable for or required to indemnify an Indemnified Party from and against Expenses arising or resulting from any of the matters described in the third sentence of Section 7.01. The indemnities contained in this Section shall survive the resignation or termination of the Owner Trustee or the termination of this Agreement. In any event of any claim, action or proceeding for which indemnity will be sought pursuant to this Section, the Indemnified Party's choice of legal counsel shall be subject to the approval of the Administrator, which approval shall not be unreasonably withheld. Section 8.03. Payments to the Owner Trustee. Any amounts paid pursuant to this Article VIII shall be payable solely in the priority set forth in Section 5.06(b) of the Sale and Servicing Agreement and shall be deemed not to be a part of the Trust Estate immediately after such payment. ARTICLE IX TERMINATION OF TRUST AGREEMENT Section 9.01. Termination of Trust Agreement. (a) This Agreement (other than Section 5.05 and Article VIII) and the Trust shall terminate and be of no further force or effect upon the final distribution by the Owner Trustee of all moneys or other property or proceeds of the Trust Estate in accordance with the terms of the Indenture, the Sale and Servicing Agreement and Article V. The bankruptcy, liquidation, dissolution, death or incapacity of any Certificateholder shall not (i) operate to terminate this Agreement or the Trust, (ii) entitle such Certificateholder's legal representatives or heirs to claim an accounting or to take any action or proceeding in any court for a partition or winding up of all or any part of the Trust or Trust Estate or (iii) otherwise affect the rights, obligations and liabilities of the parties hereto. (b) Except as provided in Section 9.01(a), neither the Depositor nor any Certificateholder shall be entitled to revoke or terminate the Trust. (c) Notice of any termination of the Trust, specifying the Payment Date upon which Certificateholders shall surrender their Trust Certificates to the Paying Agent for payment of the final distribution and cancellation, shall be given by the Owner Trustee by letter to the Certificateholders mailed within five Business Days of receipt of notice of such termination from the Servicer given pursuant to Section 9.01 of the Sale and Servicing Agreement, stating (i) the Payment Date upon or with respect to which final payment of the Trust Certificates shall be made upon presentation and surrender of 28 the Trust Certificates at the office of the Paying Agent therein designated, (ii) the amount of any such final payment and (iii) that the Record Date otherwise applicable to such Payment Date is not applicable, payments being made only upon presentation and surrender of the Trust Certificates at the office of the Paying Agent therein specified. The Owner Trustee shall give such notice to the Certificate Registrar (if other than the Owner Trustee) and the Paying Agent at the time such notice is given to the Certificateholders. Upon presentation and surrender of the Trust Certificates, the Paying Agent shall cause to be distributed to the Certificateholders amounts distributable on such Payment Date pursuant to Section 5.02. In the event that all of the Certificateholders shall not surrender their Trust Certificates for cancellation within six months after the date specified in the above mentioned written notice, the Owner Trustee shall give a second written notice to the remaining Certificateholders to surrender their Trust Certificates for cancellation and receive the final distribution with respect thereto. If within one year after the second notice all the Trust Certificates shall not have been surrendered for cancellation, the Owner Trustee may take appropriate steps, or may appoint an agent to take appropriate steps, to contact the remaining Certificateholders concerning surrender of their Trust Certificates, and the cost thereof shall be paid out of the funds and other assets that shall remain subject to this Agreement. Any funds remaining in the Trust after exhaustion of such remedies shall be distributed by the Owner Trustee to the holder of the residual interest in the Trust, subject to applicable escheat laws. (d) Upon the winding up of the Trust and the written instructions of the Depositor, the Owner Trustee shall cause the Certificate of Trust to be cancelled by filing a certificate of cancellation with the Secretary of State in accordance with the provisions of Section 3810 of the Business Trust Statute. Thereupon the Trust and this Agreement (other than Article VIII) shall terminate. ARTICLE X SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES Section 10.01. Eligibility Requirements for Owner Trustee. The Owner Trustee shall at all times be a corporation satisfying the provisions of Section 3807(a) of the Business Trust Statute; authorized to exercise corporate trust powers; having a combined capital and surplus of at least $50,000,000 and subject to supervision or examination by federal or state authorities; and having (or having a parent that has) time deposits that are rated at least A-1 by Standard & Poor's and P-1 by Moody's, or which is otherwise acceptable to each Rating Agency. If such corporation shall publish reports of condition at least annually pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purpose of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Owner Trustee shall cease to be eligible in accordance with the provisions of this Section, the 29 Owner Trustee shall resign immediately in the manner and with the effect specified in Section 10.02. Section 10.02. Resignation or Removal of Owner Trustee. The Owner Trustee may at any time resign and be discharged from the trusts hereby created by giving written notice thereof to the Administrator, the Indenture Trustee and the Rating Agencies. Upon receiving such notice of resignation, the Administrator shall promptly appoint a successor Owner Trustee by written instrument, in duplicate, one copy of which instrument shall be delivered to the resigning Owner Trustee and one copy to the successor Owner Trustee. If no successor Owner Trustee shall have been so appointed and have accepted appointment within 30 days after the giving of such notice of resignation, the resigning Owner Trustee may petition any court of competent jurisdiction for the appointment of a successor Owner Trustee. If at any time the Owner Trustee shall cease to be eligible in accordance with the provisions of Section 10.01 and shall fail to resign after written request therefor by the Administrator, or if at any time the Owner Trustee shall be legally unable to act, or shall be adjudged bankrupt or insolvent, or a receiver of the Owner Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Owner Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then the Administrator may remove the Owner Trustee. If the Administrator shall remove the Owner Trustee under the authority of the immediately preceding sentence, the Administrator shall promptly appoint a successor Owner Trustee by written instrument, in duplicate, one copy of which instrument shall be delivered to the outgoing Owner Trustee so removed and one copy to the successor Owner Trustee, and shall pay all fees owed to the outgoing Owner Trustee. Any resignation or removal of the Owner Trustee and appointment of a successor Owner Trustee pursuant to any of the provisions of this Section shall not become effective until acceptance of appointment by the successor Owner Trustee pursuant to Section 10.03 and payment of all fees and expenses owed to the outgoing Owner Trustee. The Administrator shall provide notice of such resignation or removal of the Owner Trustee to each Rating Agency. Section 10.03. Successor Owner Trustee. Any successor Owner Trustee appointed pursuant to Section 10.01 or 10.02 shall execute, acknowledge and deliver to the Administrator and to its predecessor Owner Trustee an instrument accepting such appointment under this Agreement, and thereupon the resignation or removal of the predecessor Owner Trustee shall become effective, and such successor Owner Trustee, without any further act, deed or conveyance, shall become fully vested with all the rights, powers, duties and obligations of its predecessor under this Agreement, with like effect as if originally named as Owner Trustee. The predecessor Owner Trustee shall, upon payment of its fees and expenses, deliver to the successor Owner Trustee all documents and statements and monies held by it under this Agreement; and the Administrator and the predecessor Owner Trustee shall execute and deliver such instruments and do such 30 other things as may reasonably be required for fully and certainly vesting and confirming in the successor Owner Trustee all such rights, powers, duties and obligations. No successor Owner Trustee shall accept appointment as provided in this Section unless at the time of such acceptance such successor Owner Trustee shall be eligible pursuant to Section 10.01. Upon acceptance of appointment by a successor Owner Trustee pursuant to this Section, the Administrator shall mail notice thereof to all Certificateholders, the Servicer, the Indenture Trustee, the Noteholders and the Rating Agencies. If the Administrator shall fail to mail such notice within 10 days after acceptance of such appointment by the successor Owner Trustee, the successor Owner Trustee shall cause such notice to be mailed at the expense of the Administrator. Any successor Owner Trustee appointed pursuant to this Section 10.03 shall promptly file an amendment to the Certificate of Trust with the Secretary of State identifying the name and principal place of business of such successor Owner Trustee in the State of Delaware. Section 10.04. Merger or Consolidation of Owner Trustee. Any Person into which the Owner Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Owner Trustee shall be a party, or any Person succeeding to all or substantially all of the corporate trust business of the Owner Trustee, shall be the successor of the Owner Trustee hereunder, without the execution or filing of any instrument or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding; provided, that such Person shall be eligible pursuant to Section 10.01; and provided further, that the Owner Trustee shall mail notice of such merger or consolidation to each Rating Agency; and provided further, that such successor Owner Trustee shall file an amendment to the Certificate of Trust as described in Section 10.03. Section 10.05. Appointment of Co-Trustee or Separate Trustee. Notwithstanding any other provisions of this Agreement, at any time, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Trust Estate or any Financed Vehicle may at the time be located, the Administrator and the Owner Trustee acting jointly shall have the power and shall execute and deliver all instruments to appoint one or more Persons approved by the Administrator and Owner Trustee to act as co-trustee, jointly with the Owner Trustee, or as separate trustee or separate trustees, of all or any part of the Trust Estate, and to vest in such Person, in such capacity, such title to the Trust Estate or any part thereof and, subject to the other provisions of this Section, such powers, duties, obligations, rights and trusts as the Administrator and the Owner Trustee may consider necessary or desirable. If the Administrator shall not have joined in such appointment within 15 days after the receipt by it of a request so to do, the Owner Trustee alone shall have the power to make such appointment. No co-trustee or separate trustee under this Agreement shall be required to meet the terms of eligibility as a successor 31 Owner Trustee pursuant to Section 10.01 and no notice of the appointment of any co-trustee or separate trustee shall be required pursuant to Section 10.03. Each separate trustee and co-trustee shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions: (a) All rights, powers, duties and obligations conferred or imposed upon the Owner Trustee shall be conferred upon and exercised or performed by the Owner Trustee and such separate trustee or co-trustee jointly (it being understood that such separate trustee or co-trustee is not authorized to act separately without the Owner Trustee joining in such act), except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed, the Owner Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Trust Estate or any portion thereof in any such jurisdiction) shall be exercised and performed singly by such separate trustee or co-trustee, but solely at the direction of the Owner Trustee; (b) No trustee under this Agreement shall be personally liable by reason of any act or omission of any other trustee under this Agreement; and (c) The Administrator and the Owner Trustee acting jointly may at any time accept the resignation of or remove any separate trustee or co-trustee. Any notice, request or other writing given to the Owner Trustee shall be deemed to have been given to each of the then separate trustees and co-trustees, as effectively as if given to each of them. Every instrument appointing any separate trustee or co-trustee shall refer to this Agreement and the conditions of this Article. Each separate trustee and co-trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Owner Trustee or separately, as may be provided therein, subject to all the provisions of this Agreement, specifically including every provision of this Agreement relating to the conduct of, affecting the liability of, or affording protection to, the Owner Trustee. Each such instrument shall be filed with the Owner Trustee and a copy thereof given to the Administrator. Any separate trustee or co-trustee may at any time appoint the Owner Trustee as its agent or attorney-in-fact with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect of this Agreement on its behalf and in its name. If any separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Owner Trustee, to the extent permitted by law, without the appointment of a new or successor co-trustee or separate trustee. 32 ARTICLE XI MISCELLANEOUS Section 11.01. Supplements and Amendments. This Agreement may be amended by the Depositor and the Owner Trustee, with prior written notice to each Rating Agency, without the consent of any of the Noteholders or the Certificateholders, to cure any ambiguity, to correct or supplement any provisions in this Agreement or for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions in this Agreement or of modifying in any manner the rights of the Noteholders or the Certificateholders; provided, however, that such action shall not, as evidenced by the satisfaction of the Rating Agency Condition with respect to such amendment, adversely affect in any material respect the interests of any Noteholder or Certificateholder; provided, further, that such amendment shall not be deemed to adversely affect in any material respect the interest of any Noteholder or Certificateholder if the person requesting such amendment obtains a letter from the Rating Agencies stating that the amendment would not result in the downgrading withdrawal of the ratings then assigned to the Notes and Trust Certificates. This Agreement may also be amended from time to time by the Depositor and the Owner Trustee, with prior written notice to each Rating Agency, with the consent of the Holders (as defined in the Indenture) of the Controlling Class of Notes evidencing not less than a majority of the Outstanding Amount of the Notes and the consent of the Holders of Trust Certificates evidencing not less than a majority of the Certificate Percentage Interests, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or of modifying in any manner the rights of the Noteholders or the Certificateholders; provided, however, that no such amendment shall (a) increase or reduce in any manner the amount of, or accelerate or delay the timing of, collections of payments on Receivables or distributions that shall be required to be made for the benefit of the Noteholders or the Certificateholders or (b) reduce the aforesaid percentage of the Outstanding Amount of the Notes and the Certificate Percentage Interest required to consent to any such amendment, without the consent of the Holders of all then-outstanding Notes and Trust Certificates. Promptly after the execution of any such amendment or consent, the Owner Trustee shall furnish written notification of the substance of such amendment or consent to each Certificateholder, the Indenture Trustee and each Rating Agency. It shall not be necessary for the consent of Certificateholders or Noteholders pursuant to this Section to approve the particular form of any proposed amendment or consent, but it shall be sufficient if such consent shall approve the substance thereof. The manner of obtaining such consents (and any other consents of Certificateholders provided for in this Agreement or in any other Basic Document) and of evidencing the authorization of the execution thereof by Certificateholders shall be subject to such reasonable requirements as the Owner Trustee may prescribe. Promptly after the execution of any amendment to the Certificate of Trust, the Owner Trustee shall cause the filing of such amendment with the Secretary of State. 33 Prior to the execution of any amendment to this Agreement or the Certificate of Trust, the Owner Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by this Agreement. The Owner Trustee may, but shall not be obligated to, enter into any such amendment that affects the Owner Trustee's own rights, duties or immunities under this Agreement or otherwise. In connection with the execution of any amendment to this Trust Agreement or any amendment of any other agreement to which the Trust is a party, the Owner Trustee shall be entitled to receive and conclusively rely upon an Opinion of Counsel to the effect that such amendment is authorized or permitted by the Basic Documents and that all conditions precedent in the Basic Documents for the execution and delivery thereof by the Trust or the Owner Trustee, as the case may be, have been satisfied. Section 11.02. No Legal Title to Trust Estate in Certificateholders. Neither the Depositor nor the Certificateholders shall have legal title to any part of the Trust Estate. The Certificateholders shall be entitled to receive distributions with respect to their undivided ownership interest therein only in accordance with Articles V and IX. No transfer, by operation of law or otherwise, of any right, title or interest of the Certificateholders to and in their ownership interest in the Trust Estate shall operate to terminate this Agreement or the trusts hereunder or entitle any transferee to an accounting or to the transfer to it of legal title to any part of the Trust Estate. Section 11.03. Limitations on Rights of Others. The provisions of this Agreement are solely for the benefit of the Owner Trustee, the Depositor, the Certificateholders, the Administrator and, to the extent expressly provided herein, the Indenture Trustee and the Noteholders, and nothing in this Agreement, whether express or implied, shall be construed to give to any other Person any legal or equitable right, remedy or claim in the Trust Estate or under or in respect of this Agreement or any covenants, conditions or provisions contained herein. Section 11.04. Notices. (a) Unless otherwise expressly specified or permitted by the terms hereof, all notices shall be in writing and shall be deemed given upon receipt by the intended recipient or three Business Days after mailing if mailed by certified mail, postage prepaid (except that notice to the Owner Trustee shall be deemed given only upon actual receipt by the Owner Trustee), if to the Owner Trustee, addressed to the Corporate Trust Office; if to the Depositor, addressed to 300 Chestnut Ridge Road, Woodcliff Lake, NJ 07677; or, as to each party, at such other address as shall be designated by such party in a written notice to each other party. A copy of any such notice shall also be mailed to the Servicer, addressed to the attention of Vice President Risk & Finance, 300 Chestnut Ridge Road, Woodcliff Lake, NJ 07677. (b) Any notice required or permitted to be given to a Certificateholder shall be given by first class mail, postage prepaid, at the address of such 34 Certificateholder as shown in the Certificate Register. Any notice so mailed within the time prescribed in this Agreement shall be conclusively presumed to have been duly given, whether or not such Certificateholder receives such notice. Section 11.05. Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 11.06. Separate Counterparts. This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. Section 11.07. Successors and Assigns. All covenants and agreements contained herein shall be binding upon, and inure to the benefit of, each of the Depositor and its permitted assignees, the Owner Trustee and its successors and each Certificateholder and its successors and permitted assigns, all as herein provided. Any request, notice, direction, consent, waiver or other instrument or action by a Certificateholder shall bind the successors and assigns of such Certificateholder. Section 11.08. Covenants of the Depositor. The Depositor will not at any time institute against the Trust any bankruptcy proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Trust Certificates, the Notes, this Agreement or any of the other Basic Documents. Section 11.09. No Petition. The Owner Trustee, by entering into this Agreement, each Certificateholder, by accepting a Trust Certificate, and the Indenture Trustee and each Noteholder, by accepting the benefits of this Agreement, hereby covenant and agree that they will not at any time institute against the Depositor or the Trust or join in any institution against the Depositor or the Trust of, any bankruptcy proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Trust Certificates, the Notes, this Agreement or any of the Basic Documents. Section 11.10. No Recourse. (a) Each Certificateholder by accepting a Trust Certificate acknowledges that such Trust Certificate represents a beneficial interest in the Trust only and does not represent an interest in or an obligation of the Depositor, the Servicer, the Administrator, the Owner Trustee, the Indenture Trustee or any Affiliate thereof and no recourse may be had against such parties or their assets, except as may be expressly set forth or contemplated in this Agreement, the Trust Certificates or the Basic Documents. (b) In furtherance of and not in derogation of the foregoing, to the extent the Depositor enters into other securitization transactions, each Certificateholder, by 35 accepting a Trust Certificate, acknowledges and agrees that it shall have no right, title or interest in or to any assets or interests therein of the Depositor (other than the Trust Estate and Reserve Account relating to this transaction) conveyed or purported to be conveyed by the Depositor to another securitization trust or other Person or Persons in connection therewith (whether by way of a sale, capital contribution or by virtue of the granting of a lien) ("Other Assets"). To the extent that, notwithstanding the agreements and provisions contained herein, a Certificateholder either (i) asserts an interest or claim to, or benefit from, Other Assets, whether asserted against or through the Depositor or any other Person owned by the Depositor, or (ii) is deemed to have any such interest, claim or benefit in or from Other Assets, whether by operation of law, legal process, pursuant to applicable provisions of insolvency laws or otherwise (including by virtue of Section 1111(b) of the Federal Bankruptcy Code or any successor provision having similar effect under the Bankruptcy Code), and whether deemed asserted against or through the Depositor or any other Person owned by the Depositor, then each Certificateholder, by accepting a Trust Certificate, further acknowledges and agrees that any such interest, claim or benefit in or from Other Assets is and shall be expressly subordinated to the indefeasible payment in full of all obligations and liabilities of the Depositor which, under the terms of the relevant documents relating to the securitization of such Other Assets, are entitled to be paid from, entitled to the benefits of, or otherwise secured by such Other Assets (whether or not any such entitlement or security interest is legally perfected or otherwise entitled to priority of distribution or application under applicable law, including insolvency laws, and whether asserted against Depositor or any other Person owned by the Depositor), including the payment of post-petition interest on such other obligations and liabilities. This subordination agreement shall be deemed a subordination agreement within the meaning of Section 510(a) of the Bankruptcy Code. Each Certificateholder, by acceptance of a Trust Certificate, further acknowledges and agrees that no adequate remedy at law exists for a breach of this paragraph and the terms of this paragraph may be enforced by an action for specific performance. The provisions of this paragraph shall be for the third party benefit of those entitled to rely thereon and shall survive the termination of the Trust Agreement. Section 11.11. Headings. The headings of the various Articles and Sections herein are for convenience of reference only and shall not define or limit any of the terms or provisions hereof. Section 11.12. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. 36 IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to be duly executed by their respective officers hereunto duly authorized, as of the day and year first above written. BMW FS SECURITIES LLC, as Depositor By: ------------------------------------- Name: Title: By: ------------------------------------- Name: Title: WILMINGTON TRUST COMPANY, as Owner Trustee By: ------------------------------------- Name: Title: 37 EXHIBIT A FORM OF TRUST CERTIFICATE BMW VEHICLE OWNER TRUST 2001-A ASSET BACKED TRUST CERTIFICATE (This Trust Certificate does not represent an interest in or obligation of BMW FS Securities LLC or any of its Affiliates, except to the extent described below.) (This Trust Certificate is subordinate to the Notes, as set forth in the Sale and Servicing Agreement) THIS TRUST CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR ANY OTHER APPLICABLE SECURITIES OR "BLUE SKY" LAWS OF ANY STATE OR OTHER JURISDICTION, AND MAY NOT BE RESOLD, ASSIGNED, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR ANY OTHER APPLICABLE SECURITIES OR "BLUE SKY" LAWS, PURSUANT TO AN EXEMPTION THEREFROM OR IN A TRANSACTION NOT SUBJECT THERETO. IT AGREES, ON ITS OWN BEHALF AND ON BEHALF OF ANY ACCOUNTS FOR WHICH IT IS ACTING AS AGENT, THAT SUCH TRUST CERTIFICATE MAY BE RESOLD, ASSIGNED, PLEDED OR TRANSFERRED ONLY (A) SO LONG AS THE CERTIFICATE IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, SUCH TO A PERSON WHOM THE TRANSFEROR REASONABLY BELIEVES AFTER DUE INQUIRY IS A QIB ACTING FOR ITS OWN ACCOUNT (AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY OR AGENT FOR OTHERS (WHICH OTHERS ALSO ARE QIBS) TO WHOM NOTICE IS GIVEN THAT THE RESALE, ASSIGNMENT, PLEDGE OR TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (C) SUCH RESALE, ASSIGNMENT, PLEDGE OR OTHER TRANSFER IS MADE IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND OTHER SECURITIES OR "BLUE SKY" LAWS, IN WHICH CASE THE OWNER TRUSTEE SHALL REQUIRE (I) THAT AND THE PROSPECTIVE TRANSFEREE CERTIFY TO THE OWNER TRUSTEE AND THE DEPOSITOR IN WRITING THE FACTS SURROUNDING SUCH TRANSFER, WHICH CERTIFICATION SHALL BE IN FORM AND SUBSTANCE SATISFACTORY TO THE OWNER TRUSTEE AND (II) IF REQUESTED BY THE OWNER TRUSTEE, A WRITTEN OPINION OF COUNSEL (WHICH SHALL NOT BE AT THE EXPENSE OF THE OWNER TRUSTEE) SATISFACTORY TO THE OWNER TRUSTEE AND THE DEPOSITOR, TO THE EFFECT THAT SUCH TRANSFER WILL NOT A-1 VIOLATE THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES OR "BLUE SKY" LAWS OF ANY STATE OR JURISDICTION. ANY ATTEMPTED TRANSFER IN CONTRAVENTION OF THE IMMEDIATELY PRECEDING RESTRICTIONS WILL BE VOID AB INITIO AND THE PURPORTED TRANSFEROR WILL CONTINUE TO BE TREATED AS THE OWNER OF THE TRUST CERTIFICATE FOR ALL PURPOSES. NO TRUST CERTIFICATE OR INTEREST THEREIN MAY BE ACQUIRED BY OR FOR THE ACCOUNT OF (I) AN "EMPLOYEE BENEFIT PLAN" (AS DEFINED IN SECTION 3(3) OF ERISA) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A "PLAN" DESCRIBED IN SECTION 4975(E)(1) OF THE CODE OR (III) ANY ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF A PLAN'S INVESTMENT IN THE ENTITY (EACH, A "BENEFIT PLAN"). BY ACCEPTING AND HOLDING A TRUST CERTIFICATE, THE HOLDER THEREOF SHALL BE DEEMED TO HAVE REPRESENTED AND WARRANTED THAT IT IS NOT A BENEFIT PLAN. THIS CERTIFIES THAT BMW FS SECURITIES LLC is the registered owner of a 100% Certificate Percentage Interest that is nonassessable, fully-paid, beneficial ownership interest in certain distributions of BMW Vehicle Owner Trust 2001-A (the "Trust") formed by BMW FS Securities LLC, a Delaware limited liability company (the "Depositor"). The Trust was created pursuant to an Amended and Restated Trust Agreement dated as of April __, 2001 (the "Trust Agreement"), between the Depositor and Wilmington Trust Company, as owner trustee (the "Owner Trustee"), a summary of certain of the pertinent provisions of which is set forth below. To the extent not otherwise defined herein, the capitalized terms used herein have the meanings assigned to them in the Sale and Servicing Agreement among the Trust, the Depositor, as Seller, BMW Financial Services, NA, LLC, as Seller, Servicer, Administrator and Custodian (the "Servicer"), the Depositor and The Chase Manhattan Bank , as Indenture Trustee ("Indenture Trustee"), dated as of April [ ], 2001, as the same may be amended or supplemented from time to time. This Certificate is one of the duly authorized Trust Certificates designated as BMW Vehicle Owner Trust 2001-A Asset Backed Trust Certificates (herein called the "Trust Certificates"). Also issued under the Indenture dated as of April [ ], 2001, between the Trust, as issuer and Indenture Trustee, are five classes of Notes designated as Class A-1 Asset Backed Notes (the "Class A-1 Notes"), ___% Class A-2 Asset Backed Notes (the "Class A-2 Notes"), ___% Class A-3 Asset Backed Notes (the "Class A-3 Notes"), ___% Class A-4 Asset backed Notes (the "Class A-4 Notes" and, together with the Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes, the "Class A Notes"), and ___% Class B Asset Backed Notes (the "Class B Notes" and, together with the Class A Notes, the "Notes"). This Trust Certificate is issued under and is subject to the terms, provisions and conditions of the Trust Agreement, to which Trust Agreement the holder A-2 of this Trust Certificate by virtue of the acceptance hereof assents and by which such holder is bound. Under the Trust Agreement, there will be distributed on the 25th day of each month (or, if such 25th day is not a Business Day, the next Business Day), commencing on April __, 2001, to the Person in whose name this Trust Certificate is registered at the close of business on the last day of the preceding month, such Certificateholder's Certificate Percentage Interest in the amount to be distributed to Certificateholders on such date. The holder of this Trust Certificate acknowledges and agrees that its rights to receive distributions in respect of this Trust Certificate are subordinated to the rights of the Noteholders as described in the Sale and Servicing Agreement, the Indenture and the Trust Agreement, as applicable. It is the intent of the Depositor, the Servicer and the Certificateholders that, for purposes of federal income, state and local income and franchise tax, until the Trust Certificates are held by other than the Depositor, the Trust will be disregarded as an entity separate from its owner. At such time that the Trust Certificates are held by more than one person, it is the intent of the Seller, the Servicer and the Certificateholders that, for purposes of federal income, state and local income and franchise tax, the Trust will be treated as a partnership, the assets of which are the assets held by the Trust, and the Certificateholders will be treated as partners in that partnership. The Seller and the other Certificateholders, by acceptance of a Trust Certificate, agree to treat, and to take no action inconsistent with the treatment of, the Trust Certificates as such for tax purposes. Each Certificateholder, by its acceptance of a Trust Certificate, covenants and agrees that such Certificateholder will not at any time institute against the Depositor, or join in or encourage any institution against the Depositor of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Trust Certificates, the Notes, the Trust Agreement or any of the Basic Documents. Each Certificateholder by accepting a Trust Certificate acknowledges that such Certificateholder's Trust Certificates represent beneficial interests in the Trust only and do not represent interests in or obligations of Depositor, the Servicer, Administrator, Seller, Owner Trustee, Indenture Trustee or any Affiliate thereof and no recourse may be had against such parties or their assets, except as expressly set forth or contemplated in the Trust Agreement, the Trust Certificates or the Basic Documents. In furtherance of and not in derogation of the foregoing, to the extent the Depositor enters into other securitization transactions, each Certificateholder, by accepting a Trust Certificate, acknowledges and agrees that it shall have no right, title or interest in or to any assets or interests therein of the Depositor (other than the Trust Estate A-3 and Reserve Account relating to this transaction) conveyed or purported to be conveyed by the Depositor to another securitization trust or other Person or Persons in connection therewith (whether by way of a sale, capital contribution or by virtue of the granting of a lien) ("Other Assets"). To the extent that, notwithstanding the agreements and provisions contained herein, a Certificateholder either (i) asserts an interest or claim to, or benefit from, Other Assets, whether asserted against or through the Depositor or any other Person owned by the Depositor, or (ii) is deemed to have any such interest, claim or benefit in or from Other Assets, whether by operation of law, legal process, pursuant to applicable provisions of insolvency laws or otherwise (including by virtue of Section 1111(b) of the Federal Bankruptcy Code or any successor provision having similar effect under the Bankruptcy Code), and whether deemed asserted against or through the Depositor or any other Person owned by the Depositor, then each Certificateholder, by accepting a Trust Certificate, further acknowledges and agrees that any such interest, claim or benefit in or from Other Assets is and shall be expressly subordinated to the indefeasible payment in full of all obligations and liabilities of the Depositor which, under the terms of the relevant documents relating to the securitization of such Other Assets, are entitled to be paid from, entitled to the benefits of, or otherwise secured by such Other Assets (whether or not any such entitlement or security interest is legally perfected or otherwise entitled to priority of distribution or application under applicable law, including insolvency laws, and whether asserted against Depositor or any other Person owned by the Depositor), including the payment of post-petition interest on such other obligations and liabilities. This subordination agreement shall be deemed a subordination agreement within the meaning of Section 510(a) of the Bankruptcy Code. Each Certificateholder, by acceptance of a Trust Certificate, further acknowledges and agrees that no adequate remedy at law exists for a breach of this paragraph and the terms of this paragraph may be enforced by an action for specific performance. The provisions of this paragraph shall be for the third party benefit of those entitled to rely thereon and shall survive the termination of the Trust Agreement. The Trust Certificates may not be acquired by or for the account of (i) an "employee benefit plan" (as defined in Section 3(3) of ERISA) that is subject to the provisions of Title I of ERISA, (ii) a "plan" described in Section 4975(e)(1) of the Code or (iii) any entity whose underlying assets include plan assets by reason of a plan's investment in the entity (each, a "Benefit Plan"). By accepting and holding a Trust Certificate, the Holder thereof shall be deemed to have represented and warranted that it is not a Benefit Plan. Unless the certificate of authentication hereon shall have been executed by an authorized officer of Owner Trustee, by manual signature, this Trust Certificate shall not entitle the holder hereof to any benefit under the Trust Agreement or the Sale and Servicing Agreement or be valid for any purpose. THIS TRUST CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND A-4 THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. IN WITNESS WHEREOF, Owner Trustee, on behalf of the Trust and not in its individual capacity, has caused this Trust Certificate to be duly executed. BMW VEHICLE OWNER TRUST 2001-A By: WILMINGTON TRUST COMPANY, not in its individual capacity, but solely as Owner Trustee Dated:____________ By:________________________________ Authorized Signatory WILMINGTON TRUST COMPANY, not in its individual capacity, but solely as Owner Trustee By:_____________________ Authenticating Agent By:_____________________ Authorized Signatory OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Trust Certificates referred to in the within-mentioned Trust Agreement. WILMINGTON TRUST COMPANY, as owner trustee By:________________________________ Name: Title: A-5 EXHIBIT B ASSIGNMENT FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE - -------------------------------------------------------------------------------- (Please print or type name and address, including postal zip code, of assignee) the within Trust Certificate, and all rights thereunder, and hereby irrevocably constitutes and appoints ____________, attorney, to transfer said Trust Certificate on the books of the Certificate Registrar, with full power of substitution in the premises. Dated: */ ---------------------------------- Signature Guaranteed: */ ---------------------------------- - ---------- */ NOTICE: The signature to this assignment must correspond with the name of the registered owner as it appears on the face of the within Trust Certificate in every particular, without alteration, enlargement or any change whatever. Such signature must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Certificate Registrar, which requirements include membership or participation in STAMP or such other "signature guarantee program" as may be determined by the Certificate Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. B-1 EXHIBIT C FORM OF TRANSFEREE CERTIFICATE [Date] BMW Vehicle Owner Trust 2001-A, as Issuer c/o Wilmington Trust Company, as Owner Trustee Wilmington Trust Company, as Owner Trustee Ladies and Gentlemen: In connection with our proposed purchase of the $____ Asset Backed Trust Certificates (the "Trust Certificates") of BMW Vehicle Owner Trust 2001-A (the "Issuer"), a trust formed by BMW FS Securities, LLC (the "Depositor" or "Seller"), we confirm that: a. We are a "qualified institutional buyer" as defined in Rule 144A ("QIB") and are acquiring the Trust Certificate for its own institutional account (and not for the account of others) or as a fiduciary or agent for others (which others also are QIBs);We are a "qualified institutional buyer" as defined in Rule 144A ("QIB") and are acquiring the Trust Certificate for its own institutional account (and not for the account of others) or as a fiduciary or agent for others (which others also are QIBs); b. We acknowledge that the Trust Certificates have not been and will not be registered under the Securities Act or the securities laws of any jurisdiction; c. We are familiar with Rule 144A and are aware that the sale is being made in reliance on Rule 144A and we are not acquiring the Trust Certificates with a view to, or for resale in connection with, a distribution that would constitute a public offering within the meaning of the Securities Act or a violation of the Securities Act, and that, if in the future we decide to resell, assign, pledge or otherwise transfer any Trust Certificates, such Trust Certificates may be resold, assigned, pledged or transferred only (i) to the Depositor or any Affiliate thereof, (ii) so long as such Trust Certificate is eligible for resale pursuant to Rule 144A, to a person whom we reasonably believe after due inquiry is a QIB acting for its own account (and not for the account of others) or as a fiduciary or agent for others (which others also are QIBs) to whom notice is given that the resale, pledge, assignment or transfer is being made in reliance on Rule 144A, (iii) pursuant to an effective registration statement under the Securities Act or (iv) in a sale, C-1 pledge or other transfer made in a transaction otherwise exempt from the registration requirements of the Securities Act, in which case (A) the Owner Trustee will require that both the prospective transferor and the prospective transferee certify to the Owner Trustee and the Depositor in writing the facts surrounding such transfer, which certification shall be in form and substance satisfactory to the Owner Trustee and the Depositor and (B) the Owner Trustee will require a written opinion of counsel (which will not be at the expense of the Depositor or the Owner Trustee) satisfactory to the Depositor and the Owner Trustee to the effect that such transfer will not violate the Securities Act, in each case in accordance with any applicable securities or "Blue Sky" laws of any state of the United States; d. We have neither acquired nor will we transfer any Trust Certificate we purchase (or any interest therein) or cause any such Trust Certificate (or any interest therein) to be marketed on or through an "established securities market" within the meaning of Section 7704(b)(1) of the Code, including, without limitation, an over-the-counter-market or an interdealer quotation system that regularly disseminates firm buy or sell quotations. e. We either (A) are not, and will not become, a partnership, Subchapter S corporation or grantor trust for U.S. federal income tax purposes or (B) are such an entity, but none of the direct or indirect beneficial owners of any of the interests in such transferee have allowed or caused, or will allow or cause, 50% or more (or such other percentage as the Deposition may establish prior to the time of such proposed transfer) of the value of such interests to be attributable to such transferee's ownership of Trust Certificates. f. We understand that no subsequent transfer of the Trust Certificates is permitted unless (A) such transfer is of a Trust Certificate with a Certificate Percentage Interest of at least ___%, (B) we cause the proposed transferee to provide to the Trust and the Depositor a letter substantially in the form of Exhibit C to the Trust Agreement, as applicable, or such other written statement as the Depositor shall prescribe and (C) the Trust consents in writing to the proposed transfer, which consent shall be granted unless the Depositor determines that such transfer would create a risk that the Trust would be classified for federal or any applicable state tax purposes as an association (or a publicly traded partnership) taxable as a corporation; provided, however, that any attempted transfer that would either cause the number of registered holders of Trust Certificates in the aggregate to exceed 100 shall be a void transfer. g. We understand that the Opinion of Counsel to the Trust that the Trust is not a publicly traded partnership taxable as a corporation is dependent in part on the accuracy of the representations in paragraphs (d), (e) and (f) above. h. No Trust Certificate will be acquired or held by or for the account of (i) an employee benefit plan (as defined in Section 3(3) of ERISA) that is subject to the provisions of Title I of ERISA, (ii) a plan described in Section 4975(e)(1) of the Code or (iii) any entity whose underlying assets include plan assets by reason of a plan's C-2 investment in the entity. Each Person who acquires any Trust Certificate or interest therein will certify that the foregoing conditions are satisfied. i. We are aware that we (or any account for which we are purchasing) may be required to bear the economic risk of an investment in the Trust Certificates for an indefinite period, and we (or such account) are able to bear such risk for an indefinite period. j. We understand that the Trust Certificates will bear legends substantially as set forth in Section 3.12 of the Trust Agreement; k. If we are acquiring any Trust Certificates for the account of one or more qualified institutional buyers, we represent that we have sole investment direction with respect to each such account and that we have full power to make the foregoing acknowledgments, representations and agreements on behalf of each such account; and l. We acknowledge that the Owner Trustee, the Depositor, and their Affiliates, and others will rely upon the truth and accuracy of the foregoing acknowledgments, representations and agreements. You are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Very truly yours, By:____________________________ Name: Title: C-3 EXHIBIT D FORM OF CERTIFICATE OF TRUST OF BMW VEHICLE OWNER TRUST 2001-A This CERTIFICATE OF TRUST of BMW VEHICLE OWNER TRUST 2001-A (the "Trust"), dated April ___, 2001, is being duly executed and filed by [Wilmington Trust Company], a Delaware banking corporation, as trustee, to form a business trust under the Delaware Business Trust Act (12 Del. Code, ss. 3801 et seq.). 1. Name. The name of the business trust formed hereby is BMW VEHICLE OWNER TRUST 2001-A. 2. Delaware Trustee. The name and business address of the trustee of the Trust in the State of Delaware is [Wilmington Trust Company, Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001], Attention: Corporate Trust Administration. 3. Effective Date. This Certificate of Trust shall be effective upon filing with the Secretary of State. IN WITNESS WHEREOF, the undersigned, being the sole trustee of the Trust, has executed this Certificate of Trust as of the date first above written. WILMINGTON TRUST COMPANY, as trustee By: -------------------------------- Name: Title: D-1 EX-10.2 10 s3aex10-2.txt SALE AND SERVICING AGREEMENT among BMW VEHICLE OWNER TRUST 2001-A, Issuer, BMW FS SECURITIES LLC, Depositor, BMW FINANCIAL SERVICES NA, LLC, Seller, Servicer, Administrator and Custodian, and THE CHASE MANHATTAN BANK, Indenture Trustee Dated as of April [ ], 2001 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS....................................................1 Section 1.01. Definitions...............................................1 Section 1.02. Other Definitional Provisions............................17 ARTICLE II CONVEYANCE OF RECEIVABLES.....................................18 Section 2.01. Conveyance of Receivables................................18 ARTICLE III THE RECEIVABLES...............................................20 Section 3.01. Representations and Warranties of the Seller.............20 Section 3.02. Representations and Warranties of the Depositor..........21 Section 3.03. Repurchase Upon Breach...................................21 Section 3.04. Custody of Receivable Files..............................21 Section 3.05. Duties of Servicer as Custodian..........................22 Section 3.06. Instructions; Authority to Act...........................22 Section 3.07. Custodian's Indemnification..............................22 Section 3.08. Effective Period and Termination.........................23 ARTICLE IV ADMINISTRATION AND SERVICING OF RECEIVABLES...................23 Section 4.01. Duties of Servicer.......................................23 Section 4.02. Collection of Receivable Payments; Modifications of Receivables...........................................24 Section 4.03. Realization upon Receivables.............................25 Section 4.04. Physical Damage Insurance................................25 Section 4.05. Maintenance of Security Interests in Financed Vehicles...25 Section 4.06. Covenants of Servicer....................................26 Section 4.07. Purchase of Receivables Upon Breach......................26 Section 4.08. Servicing Fee............................................27 Section 4.09. Servicer's Certificate...................................27 Section 4.10. Annual Statement as to Compliance; Notice of Servicer Termination Event...............................27 Section 4.11. Annual Independent Accountants' Report...................27 Section 4.12. Access to Certain Documentation and Information Regarding Receivables....................................28 Section 4.13. Term of Servicer.........................................28 i TABLE OF CONTENTS (continued) Page Section 4.14. Access to Information Regarding Trust and Basic Documents................................................28 ARTICLE V DISTRIBUTIONS; STATEMENTS TO SECURITYHOLDERS..................28 Section 5.01. Establishment of Accounts................................28 Section 5.02. Collections..............................................31 Section 5.03. Application of Collections...............................31 Section 5.04. Purchase Amounts.........................................31 Section 5.05. Reserved.................................................32 Section 5.06. Distributions............................................32 Section 5.07. Reserve Account..........................................33 Section 5.08. Statements to Securityholders............................34 Section 5.09. Pre-Funding Account......................................35 Section 5.10. Capitalized Interest Account.............................36 Section 5.11. Advances by the Servicer.................................36 ARTICLE VI THE DEPOSITOR.................................................36 Section 6.01. Representations of Depositor.............................36 Section 6.02. Corporate Existence......................................38 Section 6.03. Liability of Depositor; Indemnities......................38 Section 6.04. Merger or Consolidation of, or Assumption of the Obligations of, Depositor................................38 Section 6.05. Limitation on Liability of Depositor and Others..........39 Section 6.06. Depositor May Own Securities.............................39 Section 6.07. Depositor to Provide Copies of Relevant Securities Filings..................................................39 Section 6.08. Amendment of Depositor's Organizational Documents........39 ARTICLE VII THE SERVICER..................................................39 Section 7.01. Representations of Servicer..............................39 Section 7.02. Indemnities of Servicer..................................41 Section 7.03. Merger or Consolidation of, or Assumption of the Obligations of, Servicer.................................42 Section 7.04. Limitation on Liability of Servicer and Others...........42 ii TABLE OF CONTENTS (continued) Page Section 7.05. Appointment of Subservicer...............................43 Section 7.06. Servicer Not to Resign...................................43 Section 7.07. Servicer May Own Securities..............................43 ARTICLE VIII DEFAULT.......................................................44 Section 8.01. Servicer Termination Events..............................44 Section 8.02. Consequences of a Servicer Termination Event.............44 Section 8.03. Appointment of Successor Servicer........................45 Section 8.04. Notification to Securityholders..........................46 Section 8.05. Waiver of Past Defaults..................................46 ARTICLE IX TERMINATION...................................................46 Section 9.01. Optional Purchase of All Receivables.....................46 ARTICLE X MISCELLANEOUS.................................................47 Section 10.01. Amendment................................................47 Section 10.02. Protection of Title to Trust.............................48 Section 10.03. Notices..................................................49 Section 10.04. Assignment by the Depositor or the Servicer..............50 Section 10.05. Limitations on Rights of Others..........................50 Section 10.06. Severability.............................................50 Section 10.07. Counterparts.............................................50 Section 10.08. Headings.................................................50 Section 10.09. GOVERNING LAW............................................50 Section 10.10. Assignment by Issuer.....................................51 Section 10.11. Nonpetition Covenants....................................51 Section 10.12. Limitation of Liability of Owner Trustee and Indenture Trustee........................................51 Section 10.13. Depositor Payment Obligation.............................51 iii This SALE AND SERVICING AGREEMENT (this "Agreement"), dated as of April [ ], 2001, among BMW VEHICLE OWNER TRUST 2001-A, a Delaware business trust (the "Issuer"), BMW FS SECURITIES LLC, a Delaware limited liability company (the "Depositor"), BMW FINANCIAL SERVICES NA, LLC, a Delaware limited liability company, as a seller (in such capacity, the "Seller"), as servicer (in such capacity, the "Servicer"), as administrator (in such capacity, the "Administrator") and as custodian (in such capacity, the "Custodian"), and THE CHASE MANHATTAN BANK, a New York banking corporation, as indenture trustee (the "Indenture Trustee"). WHEREAS, the Issuer desires to purchase a portfolio of receivables arising in connection with automobile retail installment sale contracts generated by BMW Financial Services NA, LLC in the ordinary course of its business and sold by BMW Financial Services NA, LLC to the Depositor; WHEREAS, the Depositor is willing to sell such receivables to the Issuer; and WHEREAS, BMW Financial Services NA, LLC is willing to service such receivables. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows: ARTICLE I DEFINITIONS Section 1.01. Definitions. Whenever used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the following meanings: "Addition Notice" means, with respect to any transfer of Subsequent Receivables to the Trust pursuant to Section 2.01, notice of the Depositor's election to transfer Subsequent Receivables to the Trust, such notice to designate the Subsequent Transfer Date and the (1) Principal Balance of the Subsequent Receivables and (2) the Reserve Account Subsequent Deposit Amount to be transferred on the Subsequent Transfer Date. "Advance" means, as to any Payment Date, the aggregate of all scheduled payments of interest which were due during the related Collection Period that remained unpaid at the end of such Collection Period and were not collected during such Collection Period, exclusive of any such scheduled payment which the Servicer has determined would be a Nonrecoverable Advance if an advance in respect of such scheduled payment were made. "Advance Reimbursement Amount" means any amount received or deemed to be received by the Servicer pursuant to Section 5.12 in reimbursement of an Advance made out of its own funds. "Agreement" means this Sale and Servicing Agreement, as the same may be amended or supplemented from time to time. "Amount Financed" means with respect to a Receivable, the amount advanced under the Receivable toward the purchase price of the Financed Vehicle and any related costs, exclusive of any amount allocable to the premium of force-placed physical damage insurance covering the Financed Vehicle. "Annual Percentage Rate" or "APR" of a Receivable means the annual rate of finance charges stated in the related Contract. "Available Interest" means, with respect to any Payment Date, the sum of the following amounts, without duplication, allocable to interest received or allocated by the Servicer on or in respect of the Receivables during the related Collection Period: (a) that portion of all collections on Receivables allocable to interest (including the amount, if any, of Advances for that Collection Period, but excluding the amount, if any, of reimbursements of Advance previously made to the Servicer), (b) the Purchase Amount of each Receivable that became a Purchased Receivable during such Collection Period to the extent attributable to accrued interest on such Receivable, (c) Recoveries for such Collection Period, (d) Investment Earnings for the related Payment Date, (e) Liquidation Proceeds for such Collection Period to the extent allocable to interest, (f) Net Investment Losses required to be deposited by the Servicer and (g) the Capitalized Interest Distribution Amount; provided, however, that in calculating the Available Interest the following will be excluded: all payments and proceeds (including Liquidation Proceeds) of any Purchased Receivables the Purchase Amount of which has been included in the Available Interest in a prior Collection Period. "Available Amounts" means, with respect to any Payment Date, the sum of Available Principal and Available Interest. "Available Amounts Shortfall" shall have the meaning set forth in Section 5.06(b). "Available Principal" means, with respect to any Payment Date, the sum of the following amounts, without duplication, with respect to the related Collection Period: (a) the portion of all collections on Receivables allocable to principal, (b) net Liquidation Proceeds for such Collection Period to the extent allocable to principal, (c) that portion allocable to principal of the Purchase Amount of all Receivables that became Purchased Receivables during or in respect of such Collection Period, and (d) on the Payment Date immediately following the end of the Funding Period, the remaining Pre-Funded Amount not used to acquire Subsequent Receivables. "Basic Documents" means the Trust Agreement, the Indenture, this Agreement, the Receivables Purchase Agreement, the Administration Agreement, and the Note Depository Agreement and other documents and certificates delivered in connection therewith. "BMW Capital" means BMW US Capital Corp., a Delaware corporation. 2 "BMW FS" means BMW Financial Services NA, LLC, a Delaware limited liability company. "Business Day" means any day other than a Saturday, a Sunday or a day on which a national banking association or a commercial banking institution in the State of New Jersey, the State of Delaware or the State of New York are authorized or obligated by law or executive order to remain closed. "Capitalized Interest Account" means the account designated as such, established and maintained pursuant to Section 5.01(c)(iii). "Capitalized Interest Account Required Amount" shall mean the product of (A) the product of (i) [ ]% times 30/360 (or [ ]/360 in the case of the initial Payment Date) and (ii) the amount in the Pre-Funding Account and (B) the number of months remaining in the Funding Period plus one month. "Capitalized Interest Distribution Amount" shall mean for each Determination Date and related Payment Date during the Funding Period, the amount equal to (A) the product of (i) 1/12, (ii) the Weighted Average Security Rate less [2.5]% and (iii) the amount on deposit in the Pre-Funding Account as of the first day of the related Collection Period. "Capitalized Interest Initial Deposit" shall mean $[ ]. "Certificate" means a certificate evidencing the beneficial interest of a Certificateholder in the Trust. "Certificate Distribution Account" has the meaning assigned to such term in the Trust Agreement. "Certificate Final Scheduled Payment Date" means the Payment Date in [ ]. "Certificateholders" has the meaning assigned to such term in the Trust Agreement. "Class" means any one of the classes of Notes. "Class A-1 Final Scheduled Payment Date" means the Payment Date in [ ]. "Class A-1 Note Balance" means, as of any date of determination, the Initial Class A-1 Note Balance less all amounts distributed to Class A-1 Noteholders on or prior to such date and allocable to principal. "Class A-1 Noteholder" means the Person in whose name a Class A-1 Note is registered in the Note Register. 3 "Class A-1 Notes" means the [ ]% Asset Backed Notes, Class A-1, substantially in the form of Exhibit A-1 to the Indenture. "Class A-1 Rate" means [ ]% per annum. "Class A-2 Final Scheduled Payment Date" means the Payment Date in [ ]. "Class A-2 Noteholder" means the Person in whose name a Class A-2 Note is registered in the Note Register. "Class A-2 Notes" means the [ ]% Asset Backed Notes, Class A-2, substantially in the form of Exhibit A-2 to the Indenture. "Class A-2 Rate" means [ ]% per annum. "Class A-3 Final Scheduled Payment Date" means the Payment Date in [ ]. "Class A-3 Noteholder" means the Person in whose name a Class A-3 Note is registered in the Note Register. "Class A-3 Notes" means the [ ]% Asset Backed Notes, Class A-3, substantially in the form of Exhibit A-3 to the Indenture. "Class A-3 Rate" means [ ]% per annum. "Class A-4 Final Scheduled Payment Date" means the Payment Date in [ ]. "Class A-4 Noteholder" means the Person in whose name a Class A-4 Note is registered in the Note Register. "Class A-4 Notes" means the [ ]% Asset Backed Notes, Class A-4, substantially in the form of Exhibit A-4 to the Indenture. "Class A-4 Rate" means [ ]% per annum. "Class B Final Scheduled Payment Date" means the Payment Date in [ ]. "Class B Noteholder" means the Person in whose name a Class B Note is registered in the Note Register. "Class B Notes" means the [ ]% Asset Backed Notes, Class B, substantially in the form of Exhibit A-5 to the Indenture. "Class B Rate" means [ ]% per annum. "Closing Date" means April [ ], 2001. 4 "Collateral" has the meaning specified in the Granting Clause of the Indenture. "Collection Account" means the account designated as such, established and maintained pursuant to Section 5.01(a). "Collection Period" means with respect to any Payment Date, the calendar month preceding such Payment Date. Any amount stated as of the last day of a Collection Period or as of the first day of a Collection Period shall give effect to the following calculations as determined as of the close of business on such last day: (i) all applications of collections and (ii) all distributions to be made on the following Payment Date. "Commission" means the Securities and Exchange Commission. "Contract" means a motor vehicle retail installment sale contract. "Controlling Class" means with respect to any Notes Outstanding, the Class A Notes (voting together as a single class) so long as the Class A Notes are Outstanding, and thereafter the Class B Notes so long as any Class B Notes are outstanding (excluding Notes held by the Depositor, the Servicer or their Affiliates). "Conveyed Assets" shall have the meaning set forth in Section 2.01. "Corporate Trust Administration Department" shall have the meaning set forth in the Trust Agreement. "Corporate Trust Office" shall have the meaning set forth in the Indenture. "Custodian" means BMW FS, in its capacity as custodian of the Receivables. "Cutoff Date" means the Initial Cutoff Date or the Subsequent Cutoff Date, as the context may require. "Dealer" means the dealer who sold a Financed Vehicle and who originated the related Receivable and assigned it to BMW FS pursuant to a Dealer Agreement. "Dealer Agreement" means an agreement between BMW FS and a Dealer pursuant to which such Dealer sells Contracts to BMW FS, substantially in the form of Exhibit D hereto. "Delinquent Receivable" means a Receivable with respect to which more than 20% of any Scheduled Payment is more than 29 days delinquent as of the last day of the related Collection Period, excluding Receivables with respect to which the related Financed Vehicle has been repossessed and Liquidated Receivables. "Delivery" when used with respect to Trust Account Property means: (a) with respect to bankers' acceptances, commercial paper, negotiable certificates of deposit and other obligations that constitute "instruments" within the 5 meaning of Section 9-105(1)(i) of the UCC and are susceptible of physical delivery, transfer thereof to the Indenture Trustee by physical delivery to the Indenture Trustee endorsed to, or registered in the name of, the Indenture Trustee or endorsed in blank, and, with respect to a certificated security (as defined in Section 8-102 of the UCC) transfer thereof (i) by delivery of such certificated security endorsed to, or registered in the name of, the Indenture Trustee or (ii) by delivery thereof to a "clearing corporation" (as defined in Section 8-102 of the UCC) and the making by such clearing corporation of appropriate entries on its books reducing the appropriate securities account of the transferor and increasing the appropriate securities account of the Indenture Trustee by the amount of such certificated security and the identification by the clearing corporation of the certificated securities for the sole and exclusive account of the Indenture Trustee (all of the foregoing, "Physical Property"), and, in any event, any such Physical Property in registered form shall be in the name of the Indenture Trustee or its nominee; and such additional or alternative procedures as may hereafter become appropriate to effect the complete transfer of ownership of any such Trust Account Property to the Indenture Trustee or its nominee or custodian, consistent with changes in applicable law or regulations or the interpretation thereof; (b) with respect to any security issued by the U.S. Treasury, the Federal Home Loan Mortgage Corporation or by the Federal National Mortgage Association that is a book-entry security held through the Federal Reserve System pursuant to federal book-entry regulations, the following procedures, all in accordance with applicable law, including applicable federal regulations and Articles 8 and 9 of the UCC: book-entry registration of such Trust Account Property to an appropriate book-entry account maintained with a Federal Reserve Bank by a securities intermediary that is also a "depository" pursuant to applicable federal regulations; the making by such securities intermediary of entries in its books and records crediting such Trust Account Property to the Indenture Trustee's security account at the securities intermediary and identifying such book-entry security held through the Federal Reserve System pursuant to federal book-entry regulations as belonging to the Indenture Trustee; and such additional or alternative procedures as may hereafter become appropriate to effect complete transfer of ownership of any such Trust Account Property to the Indenture Trustee, consistent with changes in applicable law or regulations or the interpretation thereof; (c) with respect to any item of Trust Account Property that is an uncertificated security under Article 8 of the UCC and that is not governed by clause (b) above, registration on the books and records of the issuer thereof in the name of the Indenture Trustee or its nominee or custodian who either (i) becomes the registered owner on behalf of the Indenture Trustee or (ii) having previously become the registered owner, acknowledges that it holds for the Indenture Trustee; and (d) with respect to any item of Trust Account Property that is a security entitlement causing the securities intermediary to indicate on its books and records that such security entitlement has been credited to a securities account of the Indenture Trustee. "Depositor" means BMW FS Securities LLC and its successors in interest. 6 "Determination Date" means, with respect to each Payment Date, the earlier of (i) the eighteenth calendar day of the month in which such Payment Date occurs (or if such eighteenth day is not a Business Day, the next succeeding Business Day) and (ii) the fifth Business Day preceding such Payment Date. "Eligible Deposit Account" means either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution organized under the laws of the United States of America or any State, having corporate trust powers and acting as trustee for funds deposited in such account, so long as any of the securities of such depository institution shall have a credit rating from each Rating Agency in one of its generic rating categories that signifies investment grade. "Eligible Institution" means (a) the corporate trust department of the Indenture Trustee or the Owner Trustee or (b) a depository institution organized under the laws of the United States of America or any State, that (i) has either (A) a long-term unsecured debt rating of at least "AA-" by Standard & Poor's and acceptable to Moody's or (B) a short-term unsecured debt rating or certificate of deposit rating of at least "A-1+" by Standard & Poor's and acceptable to Moody's and (ii) the deposits of which are insured by the FDIC. "Eligible Investments" means securities, negotiable instruments or security entitlements that evidence: (a) direct obligations of, and obligations fully guaranteed as to the full and timely payment by, the United States of America; (b) demand deposits, time deposits or certificates of deposit of any depository institution or trust company incorporated under the laws of the United States of America or any State (or any domestic branch of a foreign bank) and subject to supervision and examination by federal or state banking or depository institution authorities; provided, however, that at the time of the investment or contractual commitment to invest therein, the commercial paper or other short-term unsecured debt obligations (other than such obligations the rating of which is based on the credit of a Person other than such depository institution or trust company) thereof shall have a credit rating from each Rating Agency in the highest investment category granted thereby; (c) commercial paper having, at the time of the investment or contractual commitment to invest therein, a rating from each Rating Agency in the highest investment category granted thereby; (d) investments in money market funds having a rating from each Rating Agency in the highest investment category granted thereby (including funds for which the Indenture Trustee or the Owner Trustee or any of their respective Affiliates is investment manager or advisor); (e) bankers' acceptances issued by any depository institution or trust company referred to in clause (b) above; 7 (f) repurchase obligations with respect to any security that is a direct obligation of, or fully guaranteed by, the United States of America or any agency or instrumentality thereof the obligations of which are backed by the full faith and credit of the United States of America, in either case entered into with a depository institution or trust company (acting as principal) described in clause; and (g) any other investment with respect to which the Issuer, the Indenture Trustee or the Servicer has received written notification from each Rating Agency that the acquisition of such investment will satisfy the Rating Agency Condition. "Eligible Servicer" means BMW FS or any other Person that at the time of its appointment as Servicer (i) is servicing a portfolio of motor vehicle retail installment sale contracts or motor vehicle installment loans, (ii) is legally qualified and has the capacity to service the Receivables, (iii) has demonstrated the ability professionally and competently to service a portfolio of motor vehicle retail installment sale contracts or motor vehicle installment loans similar to the Receivables with reasonable skill and care and (iv) has a minimum net worth of $50,000,000. "Exchange Act" means the Securities and Exchange Act of 1934, as amended. "FDIC" means the Federal Deposit Insurance Corporation, and its successors. "Financed Vehicle" means a new or used automobile, sport utility vehicle or motorcycle, together with all accessions thereto, securing an Obligor's indebtedness under the related Contract. "First Priority Principal Distribution Amount" means, with respect to any Payment Date, an amount equal to the excess, if any of (a) the aggregate outstanding principal amount of the Class A Notes as of the preceding Payment Date (after giving effect to any principal payments made on the Class A Notes on such preceding Payment Date) over (b) the Pool Balance at the end of the Collection Period preceding such Payment Date plus amounts on deposit in the Pre-Funding Accounts less the Yield Supplement Overcollateralization Amount for such Payment Date; provided however, that the First Priority Principal Distribution Amount shall not exceed the sum of the aggregate outstanding principal amount of all of the Notes on such Payment Date (after giving effect to any principal payments made on the Notes on such preceding Payment Date); and provided further, that the First Priority Principal Distribution Amount on and after the Final Scheduled Payment Date of a class of Class A Notes shall not be less than the amount that is necessary to reduce the outstanding principal amount of such class of Class A Notes and all earlier maturing classes of Class A Notes to zero. "Funding Period" means the period beginning on and including the Closing Date and ending on and including the first to occur of (a) the Determination Date on which the amount on deposit in the Pre-Funding Account (after giving effect to any transfers therefrom in connection with the transfer of Subsequent Receivables to the Issuer on such Determination Date) is less than or equal to $100,000, (b) the date of occurrence of a 8 Servicer Termination Event or an Event of Default under the Indenture, or (c) the last day of the Collection Period in [ ] 2001. "Indenture" means the Indenture, dated as of April [ ], 2001, between the Issuer and the Indenture Trustee. "Indenture Trustee" means the Person acting as Indenture Trustee under the Indenture, its successors in interest and any successor trustee under the Indenture. "Initial Class A-1 Note Balance" means $[ ]. "Initial Class A-2 Note Balance" means $[ ]. "Initial Class A-3 Note Balance" means $[ ]. "Initial Class A-4 Note Balance" means $[ ]. "Initial Class B Note Balance" means $[ ]. "Initial Cutoff Date" means the close of business on [ ], 2001. "Initial Pool Balance" means an amount equal to the aggregate Principal Balance of the Initial Receivables as of the Initial Cutoff Date. "Initial Receivable" means any Contract listed on Schedule A (which Schedule may be in the form of microfiche). "Insolvency Event" means, with respect to a specified Person, (a) the filing of a decree or order for relief by a court having jurisdiction in the premises in respect of such Person or any substantial part of its property in an involuntary case under any applicable federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such Person or for any substantial part of its property, or ordering the winding-up or liquidation of such Person's affairs, and such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (b) the commencement by such Person of a voluntary case under any applicable federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or the consent by such Person to the entry of an order for relief in an involuntary case under any such law, or the consent by such Person to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such Person or for any substantial part of its property, or the making by such Person of any general assignment for the benefit of creditors, or the failure by such Person generally to pay its debts as such debts become due, or the taking of action by such Person in furtherance of any of the foregoing. "Interest Distribution Account" means the account designated as such, established and maintained pursuant to Section 5.01(b). 9 "Interest Period" means (a) with respect to the Class A-1 Notes, the period from and including the most recent Payment Date on which interest has been paid (or, in the case of the first Payment Date, the Closing Date) to but excluding the next succeeding Payment Date and (b) with respect to the Class A-2, Class A-3, Class A-4 Notes and Class B Notes, the period from and including the 25th day of the calendar month (or, in the case of the first Payment Date, from and including the Closing Date) to but excluding the 25th day of the next calendar month. "Investment Earnings" means, with respect to any Payment Date, the investment earnings (net of losses and investment expenses) on amounts on deposit in a Trust Account (other than the Collection Account) to be applied on such Payment Date pursuant to Section 5.01(d). "Issuer" means BMW Vehicle Owner Trust 2001-A. "Lien" means a security interest, lien, charge, pledge, equity or encumbrance of any kind, other than tax liens, mechanics' liens and any liens that attach to the respective Receivable by operation of law as a result of any act or omission by the related Obligor. "Liquidated Receivable" means a Receivable with respect to which the earliest of the following shall have occurred: (i) the related Financed Vehicle has been repossessed and liquidated, (ii) the related Financed Vehicle has been repossessed in excess of 90 days and has not yet been liquidated, (iii) the Servicer has determined in accordance with its credit policies that all amounts that it expects to receive with respect to the Receivable have been received or (iv) the end of the Collection Period in which the Receivable becomes 150 days or more past due. "Liquidation Proceeds" means, with respect to any Receivable that becomes a Liquidated Receivable, the moneys collected in respect thereof, from whatever source, during or after the Collection Period in which such Receivable became a Liquidated Receivable, including liquidation of the related Financed Vehicle, net of the sum of any out-of-pocket expenses of the Servicer reasonably allocated to such liquidation and any amounts required by law to be remitted to the Obligor on such Liquidated Receivable. "Minimum Required Rating" means, with respect to BMW Capital, a short-term unsecured debt rating of the commercial paper of BMW Capital (which commercial paper is guaranteed by Bayerische Motoren Werke Aktiengesellschaff) equal to or greater than "Prime-1" by Moody's and "A-1" by Standard & Poor's. "Moody's" means Moody's Investors Service, Inc., and its successors. "Net Investment Losses" means, with respect to a Trust Account and any Collection Period, the amount, if any, by which the aggregate of all losses and expenses incurred during such period in connection with the investment of funds in Eligible Investments in accordance with Section 5.01(d) exceeds the aggregate of all interest and other income realized during such period on such funds. 10 "Nonrecoverable Advance" means any advance made or proposed to be made pursuant to Section 5.12, which the Servicer believes, in its good faith judgment, is not, or if made would not be, ultimately recoverable from Liquidation Proceeds or otherwise. In determining whether an advance is or will be nonrecoverable, the Servicer need not take into account that it might receive any amounts in a deficiency judgment. "Note Balance" means, as of any date of determination, an amount equal to the sum of (i) the Initial Class A-1 Note Balance, (ii) the Initial Class A-2 Note Balance, (iii) the Initial Class A-3 Note Balance, (iv) the Initial Class A-4 Note Balance and (v) the Initial Class B Note Balance, less all amounts distributed to Noteholders on or prior to such date and allocable to principal. "Note Distribution Account" means the account designated as such, established and maintained pursuant to Section 5.01(b). "Note Pool Factor" means, with respect to each Class of Notes as of the close of business on the last day of a Collection Period, a seven-digit decimal figure equal to the Outstanding Amount of such Class of Notes (after giving effect to any reductions thereof to be made on the immediately following Payment Date) divided by the original Outstanding Amount of such Class of Notes. The Note Pool Factor will be 1.0000000 as of the Closing Date; thereafter, the Note Pool Factor will decline to reflect reductions in the Outstanding Amount of such Class of Notes. "Noteholders" shall mean the Class A-1 Noteholders, the Class A-2 Noteholders, the Class A-3 Noteholders, the Class A-4 Noteholders or the Class B Noteholders. "Obligor" on a Receivable means the purchaser or co-purchasers of the related Financed Vehicle, and any other Person obligated to make payments thereunder. "Officers' Certificate" means a certificate signed by (a) the chairman of the board, any vice president, the controller or any assistant controller and (b) the president, a treasurer, assistant treasurer, secretary or assistant secretary of the Depositor or the Servicer, as appropriate. "Opinion of Counsel" means one or more written opinions of counsel, who may be an employee of or counsel to the Depositor or the Servicer, which counsel shall be acceptable to the Indenture Trustee, the Owner Trustee or the Rating Agencies, as applicable, and which shall be addressed to the Owner Trustee and the Indenture Trustee and which shall be at the expense of the person required to provide such an Opinion of Counsel. "Outstanding Amount" means, as of any date of determination, the aggregate principal amount of a Class of Notes outstanding as of such date of determination. "Outstanding Amount Advanced" means, as to any Payment Date, the aggregate of all Advances remitted by the Servicer out of its own funds pursuant to Section 5.12, less the aggregate of all related Advance Reimbursement Amounts actually received prior to such Payment Date. 11 "Owner Trustee" means Wilmington Trust Company, acting not in its individual capacity but solely as owner trustee under the Trust Agreement. "Payment Date" means, with respect to each Collection Period, the twenty-fifth day of the following month or, if such day is not a Business Day, the immediately following Business Day, commencing on April [ ], 2001. "Physical Property" has the meaning assigned to such term in the definition of "Delivery" above. "Pool Balance" means, with respect to any Payment Date, an amount equal to the aggregate Principal Balance of the Receivables at the end of the related Collection Period, after giving effect to all payments of principal received from Obligors and Purchase Amounts to be remitted by the Servicer for the related Collection Period, and after reduction to zero of the aggregate outstanding Principal Balance of all Receivables that became Liquidated Receivables during such Collection Period. "Pre-Funded Amount" means the amount on deposit in the Pre-Funding Account, which shall initially be $[ ]. "Pre-Funded Percentage" means, with respect to a Class of Notes, the ratio (expressed as a percentage), the numerator of which is the Outstanding Amount of such Class of Notes as of the preceding Payment Date and the denominator of which is the Note Balance as of the preceding Payment Date. "Pre-Funding Account" means the account designated as such, established and maintained pursuant to Section 5.01(c)(ii). "Principal Balance" means, with respect to any Receivable and a Determination Date, the Amount Financed minus an amount equal to, as of the close of business on the last day of the related Collection Period, that portion of all amounts received on or prior to such day with respect to such Receivable and allocable to principal using the Simple Interest Method. "Principal Distribution Account" means the account designated as such, established and maintained pursuant to Section 5.01(b). "Principal Distribution Amount" means, with respect to any Payment Date, the sum of the First Priority Principal Distribution Amount and the Regular Principal Distribution Amount with respect to such Payment Date. "Purchase Amount" means, with respect to any Receivable that became a Purchased Receivable, the unpaid principal balance owed by the Obligor thereon plus unpaid interest on such amount at the applicable APR to the last day of the month of repurchase. "Purchased Receivable" means a Receivable purchased as of the close of business on the last day of a Collection Period by or on behalf of the Servicer pursuant to 12 Section 4.07 or by or on behalf of the Seller pursuant to Section 3.03 and the Receivables Purchase Agreement. "Rating Agency" means Moody's or Standard & Poor's, as the context may require. If none of Moody's, Standard & Poor's or a successor thereto remains in existence, "Rating Agency" shall mean any nationally recognized statistical rating organization or other comparable Person designated by the Depositor. "Rating Agency Condition" means, with respect to any action, that each Rating Agency shall have been given 10 days' (or such shorter period as shall be acceptable to each Rating Agency) prior notice thereof and that each Rating Agency shall not have notified the Issuer or the Indenture Trustee in writing that such action will result in a reduction, withdrawal or down-grade of the then-current rating of each class of Notes. "Realized Losses" means, with respect to any Receivable that becomes a Liquidated Receivable, the excess of the Principal Balance thereof over the portion of related Liquidation Proceeds allocable to principal. "Receivable Files" means the following documents with respect to each Financed Vehicle: (i) the fully executed original of each Receivable (together with any agreements modifying each such Receivable, including any deferment agreement); (ii) the original credit application, or an electronic copy thereof; (iii) the original certificate of title or such other documents that the Servicer or the Seller shall keep on file in accordance with its customary procedures evidencing the security interest of the Seller in the related Financed Vehicle; and (iv) any and all other documents that the Servicer shall have kept on file in accordance with its customary procedures relating to a Receivable, an Obligor or a Financed Vehicle. "Receivables" means the Initial Receivables and the Subsequent Receivables. "Receivables Purchase Agreement" means the Receivables Purchase Agreement dated as of April [ ], 2001, between BMW FS, as the seller, and the Depositor. "Record Date" means, as to any Payment Date, the day immediately preceding such Payment Date. "Recoveries" means, with respect to any Receivable that becomes a Liquidated Receivable, monies collected in respect thereof, from whatever source, during any Collection Period following the Collection Period in which such Receivable became a 13 Liquidated Receivable, net of the sum of any amounts expended by the Servicer for the account of the Obligor and any amounts required by law to be remitted to the Obligor. "Regular Principal Distribution Amount" means, with respect to any Payment Date, an amount not less than zero equal to the excess, if any, of (a) an amount equal to the aggregate outstanding principal amount of all the Notes as of the preceding Payment Date (after giving effect to any principal payments made on the Notes on such preceding Payment Date) or the Closing Date, as the case may be, minus the Pool Balance at the end of the Collection Period preceding such Payment Date plus amounts on deposit in the Pre-Funding Account less the Yield Supplement Overcollateralization Amount with respect to such Payment Date, over (b) the First Priority Principal Distribution Amount, if any, with respect to such Payment Date; provided however, that the Regular Principal Distribution Amount shall not exceed the sum of the aggregate outstanding principal amount of all of the Notes on such Payment Date (after giving effect to any principal payments made on the Notes on such preceding Payment Date in respect of the First Priority Principal Distribution Amount, if any). "Remaining Pre-Funded Amount" means the Pre-Funded Amount on deposit in the Pre-Funding Account at the end of the Funding Period after the application thereof to the purchase of any Subsequent Receivables. "Required Payment" means, with respect to each Payment Date, the amount required to be distributed to the Securityholders pursuant to Section 5.06(b)(i), (ii), (iii), (iv) and (v). "Reserve Account" means the account designated as such, established by the Issuer and maintained by the Indenture Trustee pursuant to Section 5.01(c)(i). "Reserve Account Initial Deposit" means $[ ]. "Reserve Account Required Amount" means [(a) on the Closing Date, the Reserve Account Initial Deposit and (b) with respect to any Payment Date, an amount equal to [ ]% of the sum of the Pool Balance as of the end of the related Collection Period; provided, however, that in no event shall the Reserve Account Required Amount be less than the lesser of (a) $[ ] and (b) the aggregate principal amount of the Securities on such Payment Date (after giving effect to distributions on such date).] "Reserve Account Withdrawal Amount" means, with respect to each Payment Date, the lesser of (x) the excess of (i) the amounts due under Section 5.06(b)(i) through (v) over (ii) Available Amounts for such Payment Date and (y) and the amount on deposit in the Reserve Account for such Payment Date. "Responsible Officer" means the chairman of the board, the president, any executive vice president, any vice president, the treasurer, any assistant treasurer, the secretary, or any assistant secretary of the Servicer. Responsible Officer of the Owner Trustee shall be as defined in the Indenture. 14 "Scheduled Payment" means, with respect to each Receivable, the scheduled monthly payment amount set forth in the related Contract and required to be paid by the Obligor during each Collection Period. "Securities" means the Notes and the Certificates. "Securities Intermediary" means The Chase Manhattan Bank, in its capacity as the securities intermediary in the Securities Account Control Agreement dated as of [ ], 2001. "Securityholders" means the Noteholders and/or the Certificateholders, as the context may require. "Seller" means BMW FS and its successor in interest, as the seller of the Receivables to the Depositor pursuant to the Receivables Purchase Agreement. "Servicer" means BMW FS, as the servicer of the Receivables, and each successor to BMW FS (in the same capacity) pursuant to Section 7.03 or 8.03. "Servicer Termination Event" shall have the meaning set forth in Section 8.01. "Servicer's Certificate" means an Officers' Certificate of the Servicer delivered pursuant to Section 4.09, substantially in the form of Exhibit C. "Servicing Fee" means an amount equal to the sum of (i) the product of the Servicing Fee Rate and the Pool Balance as of the first day of the related Collection Period, and (ii) any late fees, prepayment charges, extension fees and other administrative fees or similar charges collected on the Receivables. "Servicing Fee Rate" means 1.00% per annum. "Simple Interest Method" means the method of allocating the monthly payments received with respect to a Receivable to interest in an amount equal to the product of (i) the applicable APR, (ii) the period of time (expressed as a fraction of a year, based on the actual number of days in the calendar month and 365 days in the calendar year) elapsed since the preceding payment was made under such Receivable and (iii) the outstanding principal amount of such Receivable, and allocating the remainder of each such monthly payment to principal. "Standard & Poor's" means Standard & Poor's Ratings Group, a division of The McGraw-Hill Companies, Inc., and its successors. "Subsequent Closing Date" shall have the meaning assigned to such term in the Subsequent Purchase Agreement. "Subsequent Cutoff Date" means the date as of which Subsequent Receivables are conveyed to the Trust pursuant to Section 2.01. 15 "Subsequent Purchase Agreement" shall have the meaning assigned to such term in the Receivables Purchase Agreement. "Subsequent Receivables" means the Contracts transferred to the Issuer pursuant to Section 2.01, which shall be listed on Schedule A to the Subsequent Transfer Agreement. "Subsequent Transfer Agreement" shall have the meaning assigned hereto in Section 2.01(b). "Subsequent Transfer Date" means the date designated by the Depositor during the Funding Period on which Subsequent Receivables are to be transferred to the Issuer in accordance with Section 2.01 and pursuant to the Subsequent Transfer Agreement. "Trust" means the Issuer. "Trust Fees and Expenses" will mean all accrued and unpaid Trustees' fees and any amounts due to the Trustees for reimbursement of expenses or in respect of indemnification and other administrative fees of the Trust. "Trust Account Property" means the Trust Accounts, all amounts and investments held from time to time in any Trust Account (whether in the form of deposit accounts, Physical Property, book-entry securities, uncertificated securities or otherwise) and all proceeds of the foregoing. "Trust Accounts" shall mean the Collection Account, the Note Distribution Account, the Capitalized Interest Account, the Pre-Funding Account and the Reserve Account. "Trust Agreement" means the Amended and Restated Trust Agreement, dated as of April [ ], 2001, between the Depositor and the Owner Trustee. "Trust Officer" means, in the case of the Indenture Trustee, any Officer within the Global Trust Service Department of the Indenture Trustee, including any Assistant Vice President, Assistant Treasurer, Assistant Secretary or any other officer of the Indenture Trustee customarily performing functions similar to those performed by any of the above designated officers and also, with respect to a particular matter, any other officer to whom such matter is referred because of such officer's knowledge of and familiarity with the particular subject, in each case having direct responsibility for the administration of the Basic Documents and, with respect to the Owner Trustee, any officer in the Corporate Trust Administration Department of the Owner Trustee with direct responsibility for the administration of the Trust Agreement and the other Basic Documents on behalf of the Owner Trustee. "UCC" means the Uniform Commercial Code, as in effect in the relevant jurisdiction. 16 "Weighted Average Security Rate" means the percentage equivalent of a fraction, the numerator of which is the sum of (1) the product of the Class A-1 Rate times the Initial Class A-1 Note Balance, (2) the product of the Class A-2 Rate times the Initial Class A-2 Note Balance, (3) the product of the Class A-3 Rate times the Initial Class A-3 Note Balance, (4) the product of the Class A-4 Rate times the Initial Class A-4 Note Balance and (5) the product of the Class B Rate times the Initial Class B Note Balance, and the denominator of which is the sum of the Initial Class A-1 Note Balance, the Initial Class A-2 Note Balance, the Initial Class A-3 Note Balance, the Initial Class A-4 Note Balance and the Initial Class B Note Balance. "Yield Supplement Overcollateralization Amount" means, with respect to any Payment Date, the dollar amount set forth next to such Payment Date on Schedule D hereto. Section 1.02. Other Definitional Provisions. (a) Capitalized terms used herein that are not otherwise defined shall have the meanings ascribed thereto in the Indenture or, if not defined therein, in the Trust Agreement. (b) All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. (c) As used in this Agreement and in any certificate or other document made or delivered pursuant hereto or thereto, accounting terms not defined in this Agreement or in any such certificate or other document, and accounting terms partly defined in this Agreement or in any such certificate or other document to the extent not defined, shall have the respective meanings given to them under generally accepted accounting principles. To the extent that the definitions of accounting terms in this Agreement or in any such certificate or other document are inconsistent with the meanings of such terms under generally accepted accounting principles, the definitions contained in this Agreement or in any such certificate or other document shall control. (d) The words "hereof," "herein," "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement; Article, Section, Schedule and Exhibit references contained in this Agreement are references to Articles, Sections, Schedules and Exhibits in or to this Agreement unless otherwise specified; "or" shall include "and/or"; and the term "including" shall mean "including without limitation". (e) The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such terms. (f) Any agreement, instrument or statute defined or referred to herein or in any instrument or certificate delivered in connection herewith means such agreement, instrument or statute as from time to time amended, modified or supplemented and 17 includes (in the case of agreements or instruments) references to all attachments thereto and instruments incorporated therein; references to a Person are also to its permitted successors and assigns. ARTICLE II CONVEYANCE OF RECEIVABLES Section 2.01. Conveyance of Receivables. (a) In consideration of the Issuer's delivery to or upon the order of the Depositor of the Notes and the Certificates, the Depositor does hereby sell, transfer, assign, set over and otherwise convey to the Issuer, without recourse (subject to the obligations of the Depositor set forth herein), all right, title and interest of the Depositor in and to: (i) the Initial Receivables and all moneys received thereon after the Initial Cutoff Date and the Subsequent Receivables listed on Schedule A to the Subsequent Transfer Agreement and all moneys received therefrom on or after the Subsequent Cutoff Date; (ii) the security interests in the Financed Vehicles and any accessions thereto granted by Obligors pursuant to the Receivables and any other interest of the Depositor in such Financed Vehicles; (iii) any Liquidation Proceeds and any other proceeds with respect to the Receivables from claims on any physical damage, credit life or disability insurance policies covering the Financed Vehicles or the related Obligors, including any vendor's single interest or other collateral protection insurance policy; (iv) any property that shall have secured a Receivable and shall have been acquired by or on behalf of the Depositor, the Servicer or the Trust; (v) all documents and other items contained in the Receivable Files; (vi) all of the Depositor's rights (but not its obligations) under the Receivables Purchase Agreement and the Subsequent Purchase Agreement; (vii) all right, title and interest in all funds on deposit from time to time in the Trust Accounts and the Certificate Distribution Account and in all investments therein and proceeds thereof (including all Investment Earnings thereon); and (viii) the proceeds of any and all of the foregoing (collectively, with the assets listed in clauses (i) through (vii) above, the "Conveyed Assets"). 18 It is the intention of the Depositor that the transfer and assignment contemplated by this Agreement shall constitute a sale of the Receivables and other related property from the Depositor to the Trust and the beneficial interest in and title to the Receivables and the related property shall not be part of the Depositor's estate in the event of the filing of a bankruptcy petition by or against the Depositor under any bankruptcy law. In the event that, notwithstanding the intent of the Depositor, the transfer and assignment contemplated hereby is held not to be a sale, this Agreement shall constitute a grant of a security interest in all accounts, money, chattel paper, securities, instruments, documents, deposit accounts, certificates of deposit, letters of credit, advices of credit, banker's acceptances, uncertificated securities, general intangibles, contract rights, goods and other property consisting of, arising from or relating to such Conveyed Assets, for the benefit of the Securityholders as security for the Depositor's obligations hereunder. (b) The Depositor shall transfer to the Issuer the Subsequent Receivables and the other property and rights related thereto described in paragraph (a) above only upon the satisfaction of each of the following conditions and satisfaction by the Seller of the conditions in Section 2.03 of the Receivables Purchase Agreement on or prior to the Subsequent Transfer Date: (i) the Depositor shall have delivered to the Owner Trustee and the Indenture Trustee (A) a written transfer agreement in substantially the form of Exhibit E hereto, which shall have been duly executed by each of the parties thereto (the "Subsequent Transfer Agreement"), which shall include supplements to Schedule A hereto listing the Subsequent Receivables and (B) an Addition Notice; (ii) on the Subsequent Transfer Date, (A) the Depositor was not insolvent and will not become insolvent as a result of the transfer of the related Subsequent Receivables on the Subsequent Transfer Date, (B) the Depositor did not intend to incur or believe that it would incur debts that would be beyond the Depositor's ability to pay as such debts matured, (C) such transfer was not made with actual intent to hinder, delay or defraud any Person and (D) the assets of the Depositor did not constitute unreasonably small capital to carry out its business as conducted; (iii) the Funding Period shall not have terminated; (iv) each of the representations and warranties made by the Depositor pursuant to Section 3.02 with respect to the related Subsequent Receivables shall be true and correct as of the Subsequent Transfer Date; (v) the addition of any of the related Subsequent Receivables will not result in a material adverse tax consequence to the Trust, the Noteholders or the Certificateholders; (vi) the Depositor shall have delivered to each Rating Agency, the Issuer and the Indenture Trustee, an Opinion of Counsel with respect to the 19 transfer of the related Subsequent Receivables substantially in the form of, or confirming, the Opinion of Counsel delivered to each Rating Agency on the Closing Date and any other opinions reasonably required by the Rating Agencies; (vii) the Rating Agency Condition shall be satisfied with respect to the transfer of the Subsequent Receivables to the Trust; and (viii) the Depositor shall have delivered to the Indenture Trustee and the Owner Trustee an Officers' Certificate confirming the satisfaction of each condition precedent on its part to be performed specified in this paragraph. (c) The Depositor covenants to transfer to the Issuer during the Funding Period pursuant to, and subject to the conditions set forth in, paragraph (b) above, all Subsequent Receivables transferred by BMW FS to the Depositor pursuant to Section 2.03 of the Receivables Purchase Agreement. ARTICLE III THE RECEIVABLES Section 3.01. Representations and Warranties of the Seller. (a) The Seller has made each of the representations and warranties set forth in Exhibit A hereto under the Receivables Purchase Agreement and has consented to the assignment by the Depositor to the Issuer of the Depositor's rights with respect thereto. Such representations and warranties speak as of the execution and delivery of this Agreement and as of the Closing Date in the case of the Initial Receivables and as of the Subsequent Transfer Date in the case of the Subsequent Receivables, but shall survive the sale, transfer and assignment of the Receivables to the Issuer and the pledge of such Receivables to the Indenture Trustee. Pursuant to Section 2.01 of this Agreement, the Depositor has sold, assigned, transferred and conveyed to the Issuer, as part of the assets of the Issuer, its rights under the Receivables Purchase Agreement, including the representations and warranties of the Seller therein as set forth in Exhibit A, upon which representations and warranties the Issuer relies in accepting the Receivables and delivering the Securities, together with all rights of the Depositor with respect to any breach thereof, including the right to require the Seller to repurchase Receivables in accordance with the Receivables Purchase Agreement. It is understood and agreed that the representations and warranties referred to in this Section shall survive the sale and delivery of the Receivables to the Issuer or the Custodian. (b) The Seller hereby agrees that the Issuer shall have the right to enforce any and all rights under the Receivables Purchase Agreement assigned to the Issuer herein, including the right to cause the Seller to repurchase any Receivable with respect to which it is in breach of any of its representations and warranties set forth in Exhibit A, directly against the Seller as though the Issuer were a party to the Receivables Purchase Agreement, and the Issuer shall not be obligated to exercise any such rights indirectly through the Depositor. 20 Section 3.02. Representations and Warranties of the Depositor. The Depositor makes the following representations and warranties, on which the Issuer relies in accepting the Receivables and delivering the Securities. Such representations and warranties speak as of the execution and delivery of this Agreement and as of the Closing Date in the case of the Initial Receivables and as of the Subsequent Transfer Date in the case of the Subsequent Receivables, but shall survive the sale, transfer and assignment of the Receivables by the Depositor to the Issuer and the pledge thereof to the Indenture Trustee pursuant to the Indenture: (a) Title. The Depositor shall convey to the Issuer all right, title and interest of the Depositor in and to the Receivables. (b) All Filings Made. The Depositor has caused all filings (including UCC filings) to be made in New York and Delaware with respect to the sale of the Receivables to the Issuer and the pledge contemplated in the Basic Agreements to the Indenture Trustee. (c) Liens. The Depositor has not taken any actions to create, incur or suffer to exist any Lien on or restriction on transferability of any Receivable except for the Lien of the Indenture and the restrictions on transferability imposed by this Agreement. Section 3.03. Repurchase Upon Breach. Each of the Depositor, the Owner Trustee, the Indenture Trustee, the Seller and the Servicer shall inform the other parties to this Agreement promptly, in writing, upon the discovery by it of any breach of the Seller's representations and warranties made pursuant to Section 3.01 of this Agreement or Section 3.02 of the Receivables Purchase Agreement, without regard to any limitation set forth in such representation or warranty concerning the knowledge of the Seller as to the facts stated therein. Unless any such breach shall have been cured by the last day of the first Collection Period following the discovery or notice thereof, the Seller shall be obligated and, if necessary, the Issuer shall enforce the obligations of the Seller under the Receivables Purchase Agreement, to purchase as of such last day any Receivable materially and adversely affected by any such breach. In consideration of the repurchase of any such Receivable, the repurchasing Seller shall remit the Purchase Amount to the Collection Account and notify in writing the Indenture Trustee of such deposit, in the manner specified in Section 5.04. The sole remedy of the Issuer, the Indenture Trustee, the Noteholders, or the Certificateholders with respect to the unpaid balance plus accrued interest on any Receivable as to which a breach of a representation or warranty has occurred pursuant to Section 3.01 of this Agreement or Section 3.02 of the Receivables Purchase Agreement or the agreement contained in this Section shall be to require the Seller to purchase such Receivable pursuant to this Section or to repurchase such Receivable pursuant to the Receivables Purchase Agreement. Section 3.04. Custody of Receivable Files. To assure uniform quality in servicing the Receivables and to reduce administrative costs, the Issuer hereby revocably appoints the Servicer, and the Servicer hereby accepts such appointment, to act for the benefit of the Issuer and the Indenture Trustee as custodian of the Receivable Files, which are hereby constructively delivered by the Issuer to the Indenture Trustee. 21 Section 3.05. Duties of Servicer as Custodian. (a) Safekeeping. The Servicer shall hold the Receivable Files as custodian for the benefit of the Issuer and the Indenture Trustee, and shall maintain such accurate and complete accounts, records and computer systems pertaining to each Receivable File as shall enable the Issuer to comply with this Agreement. In performing its duties as custodian, the Servicer shall act with reasonable care, using that degree of skill and attention that the Servicer exercises with respect to the receivable files relating to all comparable automotive and motorcycle receivables that the Servicer services for itself or others. The Servicer shall conduct, or cause to be conducted, periodic reviews of the Receivable Files held by it under this Agreement in a manner consistent with its reviews of other receivables serviced for its own account and of the related accounts, records and computer systems, in such a manner as shall enable the Issuer or the Indenture Trustee to verify the accuracy of the Servicer's record keeping. The Servicer shall promptly report to the Issuer and the Indenture Trustee any material failure on its part to hold the Receivable Files and maintain its accounts, records and computer systems as herein provided and shall promptly take appropriate action to remedy any such material failure. Nothing herein shall be deemed to require an initial review or any periodic review by the Issuer or the Indenture Trustee of the Receivable Files. (b) Maintenance of and Access to Records. The Servicer shall maintain each Receivable File at one of its offices specified in Schedule B to this Agreement or at such other office as shall be specified to the Issuer and the Indenture Trustee by written notice not later than 30 days after any change in location. The Servicer shall make available to the Issuer and the Indenture Trustee or their duly authorized representatives, attorneys or auditors a list of locations of the Receivable Files and the related accounts, records and computer systems maintained by the Servicer at such times during normal business hours as the Issuer shall reasonably instruct, which does not unreasonably interfere with the Servicer's normal operations or customer or employee relations. Section 3.06. Instructions; Authority to Act. The Servicer shall be deemed to have received proper instructions with respect to the Receivable Files upon its receipt of written instructions signed by a Trust Officer of the Indenture Trustee or, if the Notes have been paid in full, of the Owner Trustee. Section 3.07. Custodian's Indemnification. The Servicer, as custodian, shall indemnify the Trust, the Owner Trustee and the Indenture Trustee and each of their officers, directors, employees and agents for any and all liabilities, obligations, losses, compensatory damages, payments, costs, or expenses of any kind whatsoever that may be imposed on, incurred by or asserted against the Trust, the Owner Trustee or the Indenture Trustee or any of their officers, directors, employees or agents as the result of any improper act or omission in any way relating to the maintenance and custody by the Servicer as custodian of the Receivable Files; provided, however, that the Servicer shall not be liable to the Owner Trustee, the Indenture Trustee or any such officer, director, employee or agent of the Owner Trustee or the Indenture Trustee for any portion of any such amount resulting from the willful misfeasance, bad faith or negligence of the Owner 22 Trustee or the Indenture Trustee, as the case may be, or any such officer, director, employee or agent of the Owner Trustee or the Indenture Trustee, as the case may be. Indemnification under this Section shall survive the resignation or removal of the Servicer or the termination of this Agreement with respect to acts or omissions of such Servicer preceding such resignation or removal and shall include reasonable fees and expenses of counsel and expenses of litigation, each of which is duly documented. If the Servicer shall have made any indemnity payments pursuant to this Section and the Person to or on behalf of whom such payments are made thereafter collects any of such amounts from others, such Person shall promptly repay such amounts to the Servicer, without interest. Section 3.08. Effective Period and Termination. The Servicer's appointment as custodian shall become effective as of the Initial Cutoff Date and shall continue in full force and effect unless and until terminated pursuant to this Section 3.08. If BMW FS or any successor Servicer shall resign as Servicer in accordance with the provisions of this Agreement or if all of the rights and obligations of BMW FS or any successor Servicer shall have been terminated under Section 8.02, the appointment of such Servicer as custodian may be terminated by the Issuer or by the Holders of Notes evidencing not less than 50% of the Outstanding Amount of the Controlling Class of Notes (or, if no Notes are then Outstanding, the Certificateholders representing not less than 50% of the Certificate Percentage Interests, or by the Owner Trustee) in the same manner as the Indenture Trustee or such Securityholders may terminate the rights and obligations of the Servicer under Section 8.02. As soon as practicable after any termination of such appointment (but in no event more than ten (10) Business Days after any such termination of appointment), the Servicer shall deliver the Receivable Files to the Indenture Trustee or the Indenture Trustee's agent at such place or places as the Indenture Trustee may reasonably designate. Notwithstanding the termination of BMW FS as custodian, the Indenture Trustee and the Owner Trustee agree that, upon any such termination and for so long as BMW FS remains the Servicer hereunder, the Indenture Trustee or the Owner Trustee, as the case may be, shall provide, or cause its agent to provide, access to the Receivable Files to the Servicer for the purpose of enabling the Servicer to perform its obligations under this Agreement with respect to the servicing of the Receivables. ARTICLE IV ADMINISTRATION AND SERVICING OF RECEIVABLES Section 4.01. Duties of Servicer. The Servicer, for the benefit of the Issuer and the Indenture Trustee, shall manage, service, administer and make collections on the Receivables and perform the other actions required by the Servicer under this Agreement. The Servicer shall service the Receivables in accordance with its customary and usual procedures. The Servicer's duties shall include the collection and posting of all payments, responding to inquiries of Obligors, investigating delinquencies, sending payment coupons to Obligors, reporting any required tax information to Obligors, monitoring the Collateral, accounting for collections, furnishing monthly and annual 23 statements to the Owner Trustee, and the Indenture Trustee with respect to distributions and performing the other duties specified herein. The Servicer also shall administer and enforce all rights of the holder of the Receivables under the Receivables and the Dealer Agreements. To the extent consistent with the standards, policies and procedures otherwise required hereby, the Servicer shall follow its customary standards, policies and procedures and shall have full power and authority, acting alone, to do any and all things in connection with the managing, servicing, administration and collection of the Receivables that it may deem necessary or desirable. Without limiting the generality of the foregoing, the Servicer is hereby authorized and empowered to execute and deliver, on behalf of itself, the Issuer, the Owner Trustee, the Indenture Trustee, the Certificateholders and the Noteholders, or any of them, any and all instruments of satisfaction or cancellation, or of partial or full release or discharge, and all other comparable instruments with respect to the Receivables and with respect to the Financed Vehicles; provided, however, that, notwithstanding the foregoing, the Servicer shall not, except pursuant to an order from a court of competent jurisdiction, release an Obligor from payment of any unpaid amount due under any Receivable, reduce the related APR or waive the right to collect the unpaid balance of any Receivable from an Obligor. The Servicer is hereby authorized to commence, in its own name or in the name of the Issuer, the Indenture Trustee, the Owner Trustee, the Certificateholders or the Noteholders, a legal proceeding to enforce a Receivable pursuant to Section 4.03 or to commence or participate in any other legal proceeding (including a bankruptcy proceeding) relating to or involving a Receivable, an Obligor or a Financed Vehicle or self help as permitted by applicable law. If the Servicer commences or participates in any such legal proceeding in its own name, the Indenture Trustee or the Issuer shall thereupon be deemed to have automatically assigned the applicable Receivable to the Servicer solely for purposes of commencing or participating in such proceeding as a party or claimant, and the Servicer is authorized and empowered by the Indenture Trustee or the Issuer to execute and deliver in the Indenture Trustee's or the Issuer's name any notices, demands, claims, complaints, responses, affidavits or other documents or instruments in connection with any such proceeding. If in any enforcement suit or legal proceeding it shall be held that the Servicer may not enforce a Receivable on the ground that it shall not be a real party in interest or a holder entitled to enforce such Receivable, the Owner Trustee shall, at the Servicer's expense and direction, take steps to enforce such Receivable, including bringing suit in its name or the name of the Issuer, the Indenture Trustee, the Certificateholders or the Noteholders. The Owner Trustee and the Indenture Trustee shall upon the written request of the Servicer furnish the Servicer with any powers of attorney and other documents reasonably necessary or appropriate to enable the Servicer to carry out its servicing and administrative duties hereunder. Section 4.02. Collection of Receivable Payments; Modifications of Receivables. (a) Consistent with the standards, policies and procedures required by this Agreement, the Servicer shall make reasonable efforts to collect all payments called for under the terms and provisions of the Receivables as and when the same shall become due, and shall follow such collection procedures as it follows with respect to all comparable motor vehicle receivables that it services for itself and otherwise act with respect to the Receivables in such a manner as will, in the reasonable judgment of the 24 Servicer, maximize the amount to be received by the Trust with respect thereto. The Servicer is authorized in its discretion to waive any prepayment charge, late payment charge or any other similar fees that may be collected in the ordinary course of servicing any Receivable. (b) The Servicer may grant payment extensions only to the extent permissible in its Collection and Servicing Guidelines as in effect from time to time; provided, that no such extension shall extend the final payment date on any Receivable beyond the last day of the Collection Period ending six months prior to the Certificate Final Scheduled Payment Date. (c) Upon any extension not in accordance with this Section, the Servicer shall be required to purchase the related Receivable in accordance with Section 4.07. Section 4.03. Realization upon Receivables. Consistent with its customary procedures, the Servicer shall use its best efforts to repossess or otherwise convert the ownership of and liquidate any Financed Vehicle securing a Receivable with respect to which the Servicer shall have determined that eventual payment in full is unlikely and with respect to which the Servicer determines that such repossession or other action to be in the best interest of the Trust. Section 4.04. Physical Damage Insurance. The Servicer shall, in accordance with its customary servicing procedures, require each Obligor to obtain and maintain physical loss damage insurance covering the related Financed Vehicle as of the execution of the related Receivable. Section 4.05. Maintenance of Security Interests in Financed Vehicles. (a) The Servicer shall, in accordance with its customary servicing procedures, take such steps as are reasonably necessary to maintain perfection of the security interest created by each Receivable in the related Financed Vehicle. The Servicer is hereby authorized to take such steps as are necessary to re-perfect such security interest in the event of the relocation of a Financed Vehicle, or for any other reason. In the event that the assignment of a Receivable to the Issuer is insufficient, without a notation on the related Financed Vehicle's certificate of title, or without fulfilling any additional administrative requirements under the laws of the State in which such Financed Vehicle is located, to perfect a security interest in the related Financed Vehicle in favor of the Issuer, the Servicer hereby agrees that the designation of BMW FS as the secured party on the certificate of title is in its capacity as agent of the Issuer. (b) The Depositor, the Owner Trustee, the Indenture Trustee and the Servicer hereby agree that, upon the occurrence of a Servicer Termination Event, the Indenture Trustee may take or cause to be taken such actions as may, in the opinion of counsel to the Indenture Trustee, be necessary to perfect or re-perfect the security interests in the Financed Vehicles in the name of the Issuer, including by amending the title documents of the Financed Vehicles. The Servicer hereby agrees to pay all expenses related to such perfection or reperfection and to take all action necessary therefor. 25 Section 4.06. Covenants of Servicer. By its execution and delivery of this Agreement, the Servicer hereby covenants as follows (upon which covenants the Issuer, the Indenture Trustee and the Owner Trustee rely in accepting the Receivables and delivering the applicable Securities): (a) Liens in Force. No Financed Vehicle securing a Receivable shall be released in whole or in part from the security interest granted by such Receivable, except upon payment in full of such Receivable or as otherwise contemplated herein; (b) No Impairment. The Servicer shall do nothing to impair the rights of the Trust in the property of the Trust; (c) No Amendments. The Servicer shall not extend or otherwise amend the terms of any Receivable, except in accordance with Section 4.02; and (d) Restrictions on Liens. The Servicer shall not (A) create, incur or suffer to exist, or agree to create, incur or suffer to exist, or consent to or permit in the future (upon the occurrence of a contingency or otherwise) the creation, incurrence or existence of any Lien on or restriction on transferability of any Receivable except for the Lien of the Indenture and the restrictions on transferability imposed by this Agreement or (B) other than as contemplated herein, sign or file any UCC financing statements in any jurisdiction that names BMW FS or the Depositor as a debtor, and any Person other than the Depositor, the Indenture Trustee or the Issuer as a secured party or sign any security agreement authorizing any secured party thereunder to file any such financing statement, in each case with respect to the Receivables or the related property. Section 4.07. Purchase of Receivables Upon Breach. Upon discovery by any of the Servicer, the Seller, the Depositor, the Owner Trustee or the Indenture Trustee of a breach of any of the covenants set forth in Sections 4.02(b), 4.05(a) or 4.06, the party discovering such breach shall give prompt written notice to the other; provided, however, that the failure to give any such notice shall not affect any obligation of the Servicer under this Section 4.07. On or before the last day of the first Collection Period following its discovery or receipt of notice of the breach of any covenant set forth in Sections 4.02(b), 4.05(a) or 4.06 that materially and adversely affects the interests of the Issuer, the Indenture Trustee, the Owner Trustee, the Certificateholders or the Noteholders in any Receivable, the Servicer shall, unless such breach shall have been cured in all material respects by such date, purchase from the Issuer the Receivable affected by such breach. In consideration of the purchase of any such Receivable, the Servicer shall remit the related Purchase Amount into the Collection Account, with written notice to the Indenture Trustee of such deposit, in the manner specified in Section 5.04. Subject to Section 7.02, it is understood and agreed that the obligation of the Servicer to purchase any Receivable with respect to which such a breach has occurred and is continuing shall, if such obligation is fulfilled, constitute the sole remedy against the Servicer for such breach available to the Issuer, the Owner Trustee, the Indenture Trustee, the Certificateholders or the Noteholders. 26 Section 4.08. Servicing Fee. The Servicing Fee shall be payable to the Servicer on each Payment Date. That part of the Servicing Fee based on the Servicing Fee Rate shall be calculated on the basis of a 360-day year comprised of twelve 30-day months. The Servicer shall be required to pay all expenses incurred by it in connection with its activities under this Agreement (including taxes imposed on the Servicer and expenses incurred in connection with distributions and reports made by the Servicer to the Owner Trustee and the Indenture Trustee). Section 4.09. Servicer's Certificate. Not later than 10:00 a.m. (New York City time) on each Determination Date, the Servicer shall deliver to the Owner Trustee, the Indenture Trustee and the Depositor, with a copy to each Rating Agency and JPMorgan, a Servicer's Certificate containing all information necessary to make the distributions to be made on the related Payment Date pursuant to Section 5.06 for the related Collection Period and any other information the Indenture Trustee may reasonably request. Such Servicer's Certificate shall be certified by a Responsible Officer of the Servicer that the information provided is complete and no defaults have occurred. Receivables to be purchased by the Servicer or to be repurchased by the Seller and each Receivable that became a Liquidated Receivable shall be identified by the Servicer by account number with respect to such Receivable (as specified in the applicable Schedule of Receivables). Section 4.10. Annual Statement as to Compliance; Notice of Servicer Termination Event. (a) The Servicer shall deliver to the Owner Trustee, the Indenture Trustee and each Rating Agency, within 120 days after the end of the Servicer's fiscal year, an Officer's Certificate signed by a Responsible Officer of the Servicer, stating that (i) a review of the activities of the Servicer during the preceding 12-month period (or such shorter period in the case of the first such Officer's Certificate) and of the performance of its obligations under this Agreement has been made under such officer's supervision and (ii) to such officer's knowledge, based on such review, the Servicer has fulfilled all its obligations under this Agreement throughout such period or, if there has been a default in the fulfillment of any such obligation, specifying each such default known to such officer and the nature and status thereof. (b) The Servicer shall deliver to the Owner Trustee, the Indenture Trustee and each Rating Agency, promptly after having obtained knowledge thereof, but in no event later than two Business Days thereafter, written notice in an Officer's Certificate of any event that is a Servicer Termination Event under Section 8.01. Section 4.11. Annual Independent Accountants' Report. The Servicer shall cause a firm of independent certified public accountants, which may also render other services to the Servicer or its Affiliates, to deliver to the Owner Trustee, the Indenture Trustee and each Rating Agency, within 120 days after the end of each fiscal year, a report addressed to the Board of Directors of the Servicer, the Owner Trustee and the Indenture Trustee, to the effect that (i) the firm is independent of the Depositor and the Servicer within the meaning of the Code of Professional Ethics of the American Institute of Certified Public Accountants; (ii) a review in accordance with agreed-upon procedures 27 was made of the Servicer's Certificates relating to such fiscal year, including the delinquency, default and loss statistics required to be specified therein and, except as disclosed in the accountants' report, no exceptions or errors in the Servicer's Certificates were found; and (iii) a review in accordance with agreed-upon procedures was made of the Servicer's compliance with its servicing obligations in this Agreement, including without limitation the obligations of the Servicer set forth in Section 4.02(b) hereof, and, except as disclosed in the accountants' report, no exceptions to such compliance were found. Section 4.12. Access to Certain Documentation and Information Regarding Receivables. The Servicer shall provide to representatives of the Owner Trustee, the Indenture Trustee, the Certificateholders and the Noteholders reasonable access to the documentation regarding the Receivables and the related Trust property. Access shall be afforded without charge, but only upon reasonable request, which does not unreasonably interfere with the Servicer's normal business operations or employee or customer relations, and during the normal business hours at the offices of the Servicer. Nothing in this Section shall affect the obligation of the Servicer to observe any applicable law prohibiting disclosure of information regarding the Obligors and the failure of the Servicer to provide access to information as a result of such obligation shall not constitute a breach of this Section. Section 4.13. Term of Servicer. The Servicer hereby covenants and agrees to act as Servicer under, and for the term of, this Agreement. Section 4.14. Access to Information Regarding Trust and Basic Documents. The Servicer shall furnish to the Owner Trustee from time to time such information regarding the Trust or the Basic Documents as the Owner Trustee shall reasonably request. The Indenture Trustee shall furnish to the Owner Trustee annually a copy of the Note Register. The Servicer shall furnish to the Owner Trustee copies of all documents and reports required to be provided by the Servicer pursuant to this Article IV of the Sale and Servicing Agreement. ARTICLE V DISTRIBUTIONS; STATEMENTS TO SECURITYHOLDERS Section 5.01. Establishment of Accounts. (a) The Servicer, for the benefit of the Noteholders and the Certificateholders, shall establish and maintain in the name of the Indenture Trustee an Eligible Deposit Account (the "Collection Account"), bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Noteholders and the Certificateholders. (b) The Issuer, for the benefit of the Noteholders, shall cause the Indenture Trustee to establish with and maintain in the name of the Indenture Trustee an Eligible Deposit Account (the "Note Distribution Account"), bearing a designation clearly 28 indicating that the funds deposited therein are held for the benefit of the Noteholders. The Issuer shall also cause to be established two administrative subaccounts within the Note Distribution Account at the Eligible Institution then maintaining the Note Distribution Account, which subaccounts shall be designated the "Interest Distribution Account" and the "Principal Distribution Account", respectively. The Interest Distribution Account and the Principal Distribution Account are established and maintained solely for administrative purposes. (c) The Issuer, for the benefit of the Noteholders and the Certificateholders, shall cause the Indenture Trustee to establish with and maintain in the name of the Indenture Trustee: (i) an Eligible Deposit Account (the "Reserve Account"), bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Noteholders and the Certificateholders. (ii) an Eligible Deposit Account (the "Pre-Funding Account"), bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Noteholders and the Certificateholders. (iii) an Eligible Deposit Account (the "Capitalized Interest Account"), bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Noteholders and the Certificateholders. (d) Funds on deposit in the Collection Account, the Capitalized Interest Account, the Pre-Funding Account and the Reserve Account shall be invested by the Indenture Trustee in Eligible Investments selected in writing by the Servicer; provided, however, that if the Servicer fails to select any Eligible Investment, the Indenture Trustee shall invest such funds in an Eligible Investment described in clause (d) of the definition of "Eligible Investment" herein. All such Eligible Investments shall be held by the Indenture Trustee for the benefit of the Noteholders and/or the Certificateholders, as applicable; provided, that such amount shall be calculated on the Determination Date and on each Payment Date all interest and other investment income (net of Net Investment Losses) on funds on deposit in the Collection Account for the related Collection Period shall be paid to the Servicer as part of the servicing compensation or to the Indenture Trustee as compensation. Other than as permitted in writing by the Rating Agencies, funds on deposit in the Trust Accounts shall be invested in Eligible Investments that will mature not later than the Business Day immediately preceding the next Payment Date. Funds deposited in a Trust Account on a day that immediately precedes a Payment Date upon the maturity of any Eligible Investments are not required to be invested overnight. (e) In the event that there are Net Investment Losses in Eligible Investments chosen by the Servicer, the Servicer shall deposit into the Collection Account, no later than one (1) Business Day prior to the Payment Date, the amount of the Net Investment Losses. The Indenture Trustee shall not be held liable in any way for any Net Investment Losses, except for losses attributable to the Indenture Trustee's failure to make payments 29 on such Eligible Investments issued by the Indenture Trustee, in its commercial capacity as principal obligor and not as Indenture Trustee, in accordance with their terms. (f) (i) The Indenture Trustee shall possess all right, title and interest in all funds and investment property on deposit from time to time in or credited to the Trust Accounts and in all proceeds thereof (including all income thereon) and all such funds, investment property, proceeds and income shall be part of the Trust Estate, except as otherwise set forth herein. The Trust Accounts shall be under the sole dominion and control of the Indenture Trustee for the benefit of the Noteholders and the Certificateholders, as applicable. If, at any time, any Trust Account ceases to be an Eligible Deposit Account, the Indenture Trustee (or the Servicer on its behalf) shall within 10 Business Days (or such longer period, not to exceed 30 calendar days, as to which each Rating Agency may consent) establish a new Trust Account as an Eligible Deposit Account and shall transfer any cash and/or any investments from the account that is no longer an Eligible Deposit Account to the Trust Account. (ii) With respect to the Trust Account Property, the Indenture Trustee agrees, by its acceptance hereof, that: A. any Trust Account Property that is held in deposit accounts shall be held solely in the Eligible Deposit Accounts, subject to the last sentence of Section 5.01(f)(i); and each such Eligible Deposit Account shall be subject to the exclusive custody and control of the Indenture Trustee, and the Indenture Trustee shall have sole signature authority with respect thereto; B. any Trust Account Property that constitutes Physical Property shall be delivered to the Indenture Trustee in accordance with paragraph (a) of the definition of "Delivery" and shall be held, pending maturity or disposition, solely by the Indenture Trustee or a securities intermediary (as such term is defined in Section 8-102 of the UCC) acting solely for the Indenture Trustee; C. any Trust Account Property that is a book-entry security held through the Federal Reserve System pursuant to federal book-entry regulations shall be delivered in accordance with paragraph (b) of the definition of "Delivery" and shall be maintained by the Indenture Trustee, pending maturity or disposition, through continued book-entry registration of such Trust Account Property as described in such paragraph; D. any Trust Account Property that is an "uncertificated security" under Article 8 of the UCC and that is not governed by clause (C) above shall be delivered to the Indenture Trustee in accordance with paragraph (c) of the definition of "Delivery" and shall be maintained by the Indenture Trustee, pending maturity or disposition, through continued registration of the Indenture Trustee's (or its nominee's) ownership of such security; and E. any Trust Account Property that is a security entitlement shall be delivered in accordance with paragraph (d) of the definition herein of "Delivery" and 30 shall be held pending maturity or disposition by the Indenture Trustee or a securities intermediary acting solely for the Indenture Trustee. (iii) The Servicer shall have the power, revocable by the Indenture Trustee or by the Owner Trustee with the consent of the Indenture Trustee, following a Servicer Termination Event to instruct the Indenture Trustee to make withdrawals and payments from the Trust Accounts and the Certificate Distribution Account for the purpose of withdrawing any amounts deposited in error into such accounts. Section 5.02. Collections. The Servicer shall remit to the Collection Account all payments by or on behalf of the Obligors with respect to the Receivables (other than Purchased Receivables), all Liquidation Proceeds and any subsequent Recoveries on the Business Day prior to the Payment Date for so long as BMW Capital has the Minimum Required Rating. So long as BMW Capital has the Minimum Required Rating, the Servicer will remit all such amounts described in the preceding sentence within two (2) Business Days of receipt to an account established and maintained by BMW Capital. If BMW Capital no longer has the Minimum Required Rating, the Servicer shall remit to the Collection Account all payments by or on behalf of the Obligors with respect to the Receivables (other than Purchased Receivables), all Liquidation Proceeds and any subsequent Recoveries within two Business Days of receipt thereof. Notwithstanding anything herein to the contrary, so long as BMW FS is the Servicer, BMW FS may withhold from the deposit into the Collection Account any amounts indicated on the related Servicer's Certificate as being due and payable to the Seller or BMW Receivables and pay such amounts directly to the Sellers or BMW Receivables, as applicable. For purposes of this Article V, the phrase "payments by or on behalf of Obligors" shall mean payments made with respect to the Receivables by Persons other than the Servicer or the Seller. Section 5.03. Application of Collections. All payments received from or on behalf of an Obligor during each Collection Period with respect to each Receivable (other than a Purchased Receivable), shall be applied to interest and principal in accordance with the Simple Interest Method. Section 5.04. Purchase Amounts. If BMW Capital has the Minimum Required Rating, the Servicer and the Seller shall deposit or cause to be deposited in the Collection Account the Purchase Amount as described in the first sentence of Section 5.02. So long as BMW Capital has the Minimum Required Rating, the Servicer will deposit the Purchase Amount into an account established and maintained by BMW Capital, such deposit being made within two (2) Business Days of the event giving rise to such Purchase Amounts. If BMW Capital no longer has the Minimum Required Rating, the Servicer or the Seller shall deposit or cause to be deposited in the Collection Account, on or prior to each Determination Date, the aggregate Purchase Amount with respect to Purchased Receivables and the Servicer shall deposit therein all amounts to be paid under Section 4.07 and Section 9.01. 31 Section 5.05. Reserved. Section 5.06. Distributions. (a) On each Determination Date, the Servicer shall calculate all amounts required to be deposited pursuant to this Section and deliver a Servicer's Certificate pursuant to Section 4.09. (b) On each Payment Date, the Servicer shall instruct the Indenture Trustee in writing (based on the information contained in the Servicer's Certificate delivered on the related Determination Date pursuant to Section 4.09) to make the following deposits and distributions from Available Amounts on deposit in the Collection Account, and in the event of a shortfall in meeting the payments described in clauses (i) through (v) below (an "Available Amounts Shortfall") from amounts withdrawn from the Reserve Account, in the following order and priority: (i) to the Servicer, the Servicing Fee (and any accrued and unpaid Servicing Fees from prior Collection Periods), and non-recoverable Advances; (ii) to the Interest Distribution Account, (a) the aggregate amount of interest accrued for the related Interest Period on each of the Class A Notes at their respective interest rates on the principal outstanding as of the previous Payment Date after giving effect to all payments of principal to the Class A Noteholders on the preceding Payment Date; and (b) the excess, if any, of the amount of interest payable to the Class A Noteholders on those prior Payment Dates, plus interest on any such shortfall at the related Interest Rate (as defined in the Indenture) to the extent permitted by law; (iii) to the Principal Distribution Account, the First Priority Principal Distribution Amount, if any; (iv) to the Interest Distribution Account, (a) the aggregate amount of interest accrued for the related Interest Period on each of the Class B Notes at the interest rate on such notes on the principal outstanding as of the previous Payment Date after giving effect to all payments of principal to the Class B Noteholders on the preceding Payment Date and (b) the excess, if any, of the amount of interest payable to the Class B Noteholders on prior Payment Dates over the amounts actually paid to the Class B Noteholders on those prior Payment Dates, plus interest on any such shortfall to the extent permitted by law; (v) to the Principal Distribution Account, the Regular Principal Distribution Amount; (vi) to the Reserve Account, the amount, if any, necessary to cause the amount on deposit in the Reserve Account to equal the Reserve Account Required Amount; 32 (vii) to the Indenture Trustee and the Owner Trustee, any accrued and unpaid Trust Fees and Expenses, in each case to the extent such fees and expenses have not been previously paid by the Servicer; provided that, until the Notes have been paid in full, the annual amount paid to the Trustees out of Available Amounts described in this clause (vii) shall not exceed [$10,000;] and (viii) any Available Amounts remaining, if any, to the Certificate Distribution Account. Notwithstanding that the Notes have been paid in full, the Indenture Trustee shall continue to maintain the Collection Account hereunder until the Certificate Percentage Interest is reduced to zero. Section 5.07. Reserve Account. (a) On or prior to the Closing Date, the Issuer shall cause to have deposited an amount equal to the Reserve Account Initial Deposit into the Reserve Account from the net proceeds of the sale of the Securities. Deposits shall also be made on each Subsequent Transfer Date as provided in Section 5.09 hereof. The Reserve Account shall be an asset of the Issuer. (b) In the event that the Servicer's Certificate states that there is an Available Amounts Shortfall, then the Indenture Trustee shall withdraw the Reserve Account Withdrawal Amount from the Reserve Account and deposit such Reserve Account Withdrawal Amount into the Collection Account no later than 12:00 noon, New York City time, on the Business Day prior to the related Payment Date. (c) In the event that the amount on deposit in the Reserve Account (after giving effect to all deposits thereto and withdrawals therefrom on such Business Day prior to a Payment Date) is greater than the Reserve Account Required Amount on any Payment Date, the Indenture Trustee shall release and distribute all such amounts on such Payment Date to the Certificateholders. Upon any such distribution to the Certificateholders, the Noteholders shall have no further rights in, or claims to, such amounts. (d) In the event that, on any Payment Date, the amount on deposit in the Reserve Account shall be less than the Reserve Account Required Amount, the Available Amounts remaining after the payment of the amounts set forth in Section 5.06(b)(i) through (v), up to an amount equal to such shortfall, shall be deposited by the Indenture Trustee to the Reserve Account on such Payment Date. (e) Subject to Section 9.01, amounts will continue to be applied pursuant to Section 5.06 following payment in full of the Outstanding Amount of the Notes until the Pool Balance is reduced to zero. Following the payment in full of the aggregate Outstanding Amount of the Notes and of all other amounts owing or to be distributed hereunder or under the Indenture or the Trust Agreement to Noteholders and the termination of the Trust, any amount then allocated to the Reserve Account shall be paid to the Certificateholders. 33 Section 5.08. Statements to Securityholders. On each Determination Date, the Servicer shall provide to the Indenture Trustee (with a copy to each Rating Agency, JPMorgan and each Paying Agent (if any)) for the Indenture Trustee to forward to each Noteholder of record as of the most recent Record Date and to the Owner Trustee (with a copy to each Paying Agent (if any)) for the Owner Trustee to forward to each Certificateholder of record as of the most recent Record Date a statement substantially in the form of Exhibit B setting forth at least the following information as to the Securities to the extent applicable: (a) the amount of collections received with respect to the Receivables during the related Collection Period and allocable to principal allocable to each Class of Notes on such Payment Date; (b) the amount of collections received with respect to the Receivables during the related Collection Period and allocable to interest allocable to each Class of Notes on such Payment Date; (c) the Outstanding Amount of each Class of Notes, the Note Pool Factor for each such Class as of the close of business on the preceding Payment Date, after giving effect to payments allocated to principal reported under clause (a) above; (d) the amount of the Servicing Fee paid to the Servicer and the amount of any fees payable to the Owner Trustee, the Custodian or the Indenture Trustee with respect to the related Collection Period; (e) the aggregate amounts of Realized Losses, if any, with respect to the related Collection Period; (f) the Pool Balance as of the close of business on the last day of the related Collection Period, after giving effect to payments allocated to principal reported under clause (a) above; (g) the balance of the Reserve Account on the related Determination Date after giving effect to deposits and withdrawals to be made on such Payment Date, if any; (h) the amount of any deposit to the Reserve Account and the amount and application of any funds withdrawn from the Reserve Account with respect to such Payment Date; (i) the aggregate principal balance of all Receivables that became Liquidated Receivables or Purchased Receivables during the related Collection Period; (j) the aggregate principal balance and number of Receivables that are 30 to 59 days, 60 to 89 days or 90 days or more delinquent as of the last day of the related Collection Period; (k) any Available Amounts Shortfall after giving effect to payments on such Payment Date, and any change in such amounts from the preceding statement; 34 (l) the aggregate Purchase Amounts for Receivables, if any, that were or are to be purchased during or with respect to such Collection Period; (m) the aggregate Principal Balance and number of all Receivables with respect to which the related Financed Vehicle was repossessed; (n) the aggregate Principal Balance and number of Receivables with respect to which the Servicer granted a deferment; (o) for each such date during the Funding Period, the remaining amount in the Pre-Funding Account and the Capitalized Interest Account; (p) the Pre-Funded Amount remaining following the end of the Funding Period that was not used to fund the purchase of Subsequent Receivables and is being passed through as payments on the Notes; and (q) the Yield Supplement Overcollateralization Amount for the next Payment Date. Each amount set forth on the Payment Date statement under clauses (a), (b) or (k) above shall be expressed as a dollar amount per $1,000 of original principal balance of a Note. Section 5.09. Pre-Funding Account. (a) On the Closing Date, the Issuer shall cause the Indenture Trustee to deposit in the Pre-Funding Account the Pre-Funded Amount from the net proceeds of the sale of the Notes. On the Subsequent Transfer Date, upon satisfaction of the conditions set forth in Section 2.01(b) with respect to such transfer, the Servicer shall instruct the Indenture Trustee in writing to withdraw from the Pre-Funding Account an amount equal to (i) the Principal Balance of the Subsequent Receivables transferred to the Issuer on such Subsequent Transfer Date less the Reserve Account Subsequent Deposit Amount for such Subsequent Transfer Date, to distribute such amount to or upon the order of the Depositor and (ii) the Reserve Account Subsequent Deposit Amount for such Subsequent Transfer Date and, on behalf of the Issuer, to deposit such amount in the Reserve Account. (b) If the Pre-Funded Amount has not been reduced to zero on the last day of the Funding Period after giving effect to any reductions in the Pre-Funded Amount on such date pursuant to paragraph (a) above, the Servicer shall instruct the Indenture Trustee in writing to withdraw from the Pre-Funding Account on the Mandatory Redemption Date (i) if the Pre-Funded Amount is equal to or less than $100,000, the Pre-Funded Amount and deposit such amount in the Note Distribution Account to be applied to reduce the Outstanding Amount of the earliest maturing class of Class A Notes and (ii) if the Pre-Funded Amount is greater than $100,000, amounts equal to the product of the Pre-Funded Percentage for each Class of Notes and the Pre-Funded Amount and deposit such amounts in the Note Distribution Account to be applied in reduction of the 35 Outstanding Amount of each Class of Notes. The Pre-Funding Account will be an asset of the Issuer. Section 5.10. Capitalized Interest Account. (a) On the Closing Date, the Issuer shall cause the Indenture Trustee to deposit in the Capitalized Interest Account the Capitalized Interest Initial Deposit from the net proceeds of the sale of the Notes. (b) No later than 12:00 noon, New York City time, on the Business Day prior to each Payment Date during the Funding Period, the Indenture Trustee shall withdraw, based on the information contained in the Servicer's Certificate delivered pursuant to Section 4.09, from the Capitalized Interest Account an amount equal to the Capitalized Interest Distribution Amount and deposit such amount into the Collection Account. (c) On each Payment Date, after the withdrawal, if any, pursuant to clause (b), any amounts remaining on deposit in the Capitalized Interest Account in excess of the Capitalized Interest Account Required Amount shall be paid to the Certificateholders. (d) At the end of the Funding Period, any amounts remaining in the Capitalized Interest Account shall be paid to the Certificateholders. The Capitalized Interest Account will be an asset of the Issuer. Section 5.11. Advances by the Servicer. (a) By the close of business on the day required by Section 5.02 hereof, the Servicer shall deposit into the Collection Account, out of its own funds, the related Advance. (b) On each Payment Date, the Servicer shall reimburse itself for the Outstanding Amount Advanced to the extent of actual collections of late scheduled payments. (c) If the Servicer determines that any advance made pursuant to Section 5.11 has become a Nonrecoverable Advance and at the time of such determination there exists an Outstanding Amount Advanced, then the Servicer shall reimburse itself out of funds in the Collection Account for the amount of such Nonrecoverable Advance, but only to the extent of such Outstanding Amount Advanced. ARTICLE VI THE DEPOSITOR Section 6.01. Representations of Depositor. The Depositor makes the following representations to the Issuer, the Servicer, the Indenture Trustee and the Seller and on which the Issuer relies in accepting the Receivables and delivering the Securities. Such representations speak as of the execution and delivery of this Agreement and as of the Closing Date in the case of the Initial Receivables and as of the Subsequent Transfer Date 36 in the case of the Subsequent Receivables, and shall survive the sale, transfer and assignment of the Receivables by the Depositor to the Issuer and the pledge thereof to the Indenture Trustee pursuant to the Indenture. (a) Organization and Good Standing. The Depositor is duly organized and validly existing as a limited liability company in good standing under the laws of the State of Delaware, with the corporate power and authority to own its properties and to conduct its business as such properties are currently owned and such business is presently conducted. (b) Due Qualification. The Depositor is duly qualified to do business as a foreign limited liability company in good standing, and has obtained all necessary licenses and approvals in all jurisdictions where the failure to do so would materially and adversely affect the Depositor's ability to transfer the Receivables to the Trust pursuant to this Agreement or the validity or enforceability of the Receivables. (c) Power and Authority. The Depositor has the corporate power and authority to execute and deliver this Agreement and the other Basic Documents to which it is a party and to carry out their respective terms; the Depositor has full power and authority to sell and assign the property to be sold and assigned to and deposited with the Issuer, and the Depositor shall have duly authorized such sale and assignment to the Issuer by all necessary corporate action; and the execution, delivery and performance of this Agreement and the other Basic Documents to which the Depositor is a party have been, and in the case of the Subsequent Transfer Agreement, will be, duly authorized by the Depositor by all necessary corporate action. (d) Binding Obligation. This Agreement and the other Basic Documents to which the Depositor is a party, when duly executed and delivered by the other parties hereto and thereto, shall constitute legal, valid and binding obligations of the Depositor, enforceable against the Depositor in accordance with their respective terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization or similar laws now or hereafter in effect relating to or affecting creditors' rights generally and to general principles of equity (whether applied in a proceeding at law or in equity). (e) No Violation. The consummation of the transactions contemplated by this Agreement and the other Basic Documents and the fulfillment of the terms of this Agreement and the other Basic Documents shall not conflict with, result in any breach of any of the terms or provisions of or constitute (with or without notice or lapse of time, or both) a default under, the limited liability company agreement of the Depositor, or any indenture, agreement, mortgage, deed of trust or other instrument to which the Depositor is a party or by which it is bound; or result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any such indenture, agreement, mortgage, deed of trust or other instrument, other than this Agreement and the other Basic Documents; or violate any law, order, rule or regulation applicable to the Depositor of any court or federal or state regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Depositor. 37 (f) No Proceedings. There are no proceedings or investigations pending or, to the Depositor's knowledge, threatened, against the Depositor before any court, regulatory body, administrative agency or other tribunal or governmental instrumentality having jurisdiction over the Depositor or its properties: (i) asserting the invalidity of this Agreement or any other Basic Document; (ii) seeking to prevent the issuance of the Notes or the Certificates or the consummation of any of the transactions contemplated by this Agreement or any other Basic Document; (iii) seeking any determination or ruling that might materially and adversely affect the performance by the Depositor of its obligations under, or the validity or enforceability of, this Agreement or any other Basic Document; or (iv) seeking to adversely affect the federal income tax or other federal, state or local tax attributes of the Trust, the Notes or the Certificates. (g) No Consents. The Depositor is not required to obtain the consent of any other party or any consent, license, approval, registration, authorization, or declaration of or with any governmental authority, bureau or agency in connection with the execution, delivery, performance, validity or enforceability of this Agreement or any other Basic Document to which it is a party that has not already been obtained. Section 6.02. Corporate Existence. During the term of this Agreement, the Depositor will keep in full force and effect its existence, rights and franchises as a limited liability company under the laws of the jurisdiction of its formation and will obtain and preserve its qualification to do business in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Agreement, the Basic Documents and each other instrument or agreement necessary or appropriate to the proper administration of this Agreement and the transactions contemplated hereby. In addition, all transactions and dealings between the Depositor and its Affiliates will be conducted on an arm's-length basis. Section 6.03. Liability of Depositor; Indemnities. The Depositor shall be liable in accordance herewith only to the extent of the obligations specifically undertaken by the Depositor under this Agreement (which shall not include distributions on account of the Notes or the Certificates). Section 6.04. Merger or Consolidation of, or Assumption of the Obligations of, Depositor. Any Person with which the Depositor shall merge or consolidate or which the Depositor shall permit to become the successor to the Depositor's business shall execute an agreement of assumption of every obligation of the Depositor under this Agreement and the other Basic Documents. Whether or not such assumption agreement is executed, such successor Person shall be the successor to the Depositor under this Agreement without the execution or filing of any document or any further act on the part of any of the parties to this Agreement. The Depositor shall provide prompt notice of any merger, consolidation or succession pursuant to this Section 6.04 to the Owner Trustee, the Indenture Trustee, the Servicer, the Securityholders and the Rating Agencies. Notwithstanding the foregoing, the Depositor shall not merge or consolidate with any other Person or permit any other Person to become a successor to the Depositor's business unless (w) immediately after giving effect to such transaction, no representation or warranty made pursuant to Section 3.02 or 6.01 shall have been breached (for purposes 38 hereof, such representations and warranties shall speak as of the date of the consummation of such transaction), (x) the Depositor shall have delivered to the Owner Trustee, the Indenture Trustee and the Servicer an Officer's Certificate and an Opinion of Counsel each stating that such consolidation, merger or succession and such agreement of assumption comply with this Section 6.04 and that all conditions precedent provided for in this Agreement relating to such transaction have been complied with, (y) the Rating Agency Condition shall have been satisfied and (z) the Depositor shall have delivered to the Owner Trustee, the Indenture Trustee and the Servicer an Opinion of Counsel stating that, in the opinion of such counsel, either (A) all financing statements and continuation statements and amendments thereto have been executed and filed that are necessary to preserve and protect the interest of the Trust in the Receivables and reciting the details of such filings or (B) no such action is necessary to preserve and protect such interest. Section 6.05. Limitation on Liability of Depositor and Others. The Depositor and any director, officer, employee or agent of the Depositor may rely in good faith on the advice of counsel or on any document of any kind, prima facie properly executed and submitted by any Person respecting any matters arising hereunder. The Depositor shall be under no obligation to appear in, prosecute or defend any legal action that shall not be incidental to its obligations under this Agreement and that in its opinion may involve it in any expense or liability. Section 6.06. Depositor May Own Securities. The Depositor and any Affiliate thereof may in its individual or any other capacity become the owner or pledgee of Securities with the same rights as it would have if it were not the Depositor or an Affiliate thereof, except as expressly provided herein or in any Basic Document. Section 6.07. Depositor to Provide Copies of Relevant Securities Filings. The Depositor shall provide or cause to be provided to the Servicer a copy of any document filed by the Depositor subsequent to the date hereof with the Securities and Exchange Commission pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934 that relate specifically to the Trust, the Notes or the Certificates. Section 6.08. Amendment of Depositor's Organizational Documents. The Depositor shall not amend its organizational documents except in accordance with the provisions thereof. ARTICLE VII THE SERVICER Section 7.01. Representations of Servicer. The Servicer makes the following representations upon which the Issuer is deemed to have relied in acquiring the Receivables. Such representations speak as of the execution and delivery of this Agreement and as of the Closing Date in the case of the Initial Receivables and as of the Subsequent Transfer Date in the case of the Subsequent Receivables, and shall survive the sale of the Receivables to the Issuer and the pledge thereof to the Indenture Trustee pursuant to the Indenture. 39 (a) Organization and Good Standing. The Servicer is a limited liability company duly organized and validly existing under the laws of the State of Delaware. The Servicer is duly authorized to own its properties and transact its business and is in good standing in each jurisdiction in which the character of the business transacted by it or any properties owned or leased by it requires such authorization and in which the failure to be so authorized would have a material adverse effect on the business, properties, assets, or condition (financial or other) of the Servicer and its subsidiaries, considered as one enterprise. The Servicer has, and at all relevant times had, the power, authority and legal right to acquire, own, and service the Receivables. (b) Licenses and Approvals. The Servicer has obtained all necessary licenses and approvals, in all jurisdictions where the failure to do so would materially and adversely affect the Servicer's ability to acquire, own and service the Receivables. (c) Power and Authority. The Servicer has the power and authority to execute and deliver this Agreement and the other Basic Documents to which it is a party and to carry out their respective terms; and the execution, delivery and performance of this Agreement and the other Basic Documents to which it is a party have been duly authorized by the Servicer by all necessary action. (d) Binding Obligation. This Agreement and the other Basic Documents to which it is a party constitute legal, valid and binding obligations of the Servicer, enforceable against the Servicer in accordance with their respective terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights generally and to general principles of equity whether applied in a proceeding in equity or at law. (e) No Violation. The consummation of the transactions contemplated by this Agreement and the other Basic Documents to which it is a party and the fulfillment of their respective terms shall not conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time or both) a default under, the limited liability company agreement of the Servicer, or any indenture, agreement, mortgage, deed of trust or other instrument to which the Servicer is a party or by which it is bound; or result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any such indenture, agreement, mortgage, deed of trust or other instrument, other than this Agreement and the other Basic Documents, or violate any law, order, rule or regulation applicable to the Servicer of any court or federal or state regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Servicer or any of its properties. (f) No Proceedings. There are no proceedings or investigations pending or, to the Servicer's knowledge, threatened, against the Servicer before any court, regulatory body, administrative agency or other tribunal or governmental instrumentality having jurisdiction over the Servicer or its properties: (i) asserting the invalidity of this Agreement or any of the other Basic Documents; (ii) seeking to prevent the issuance of the Securities or the consummation of any of the transactions contemplated by this Agreement or any of the other Basic Documents; (iii) seeking any determination or ruling 40 that might materially and adversely affect the performance by the Servicer of its obligations under, or the validity or enforceability of, this Agreement or any of the other Basic Documents; or (iv) seeking to adversely affect the federal income tax or other federal, state or local tax attributes of the Securities. Section 7.02. Indemnities of Servicer. The Servicer shall be liable in accordance herewith only to the extent of the obligations specifically undertaken by the Servicer and the representations made by the Servicer under this Agreement: (a) The Servicer shall indemnify, defend and hold harmless the Issuer, the Owner Trustee, the Indenture Trustee, the Securityholders and the Depositor and any of the officers, directors, employees and agents of the Issuer, the Owner Trustee and the Indenture Trustee from and against any and all costs, expenses, losses, damages, claims and liabilities arising out of or resulting from the use, ownership or operation by the Servicer or any Affiliate thereof of a Financed Vehicle, excluding any losses incurred in connection with the sale of any repossessed Financed Vehicles in a commercially reasonable manner and in compliance with the terms of this Agreement. (b) The Servicer shall indemnify, defend and hold harmless the Issuer, the Owner Trustee, the Indenture Trustee, the Depositor, and their respective officers, directors, agents and employees, and the Securityholders, from and against any taxes that may at any time be asserted against any of such parties with respect to the transactions contemplated in this Agreement, including any sales, gross receipts, tangible or intangible personal property, privilege or license taxes (but not including any federal or other income taxes, including franchise taxes), and any reasonable costs and expenses in defending against the same. (c) The Servicer shall indemnify, defend and hold harmless the Issuer, the Owner Trustee, the Indenture Trustee, the Depositor, the Securityholders and any of the officers, directors, employees or agents of the Issuer, the Owner Trustee, the Depositor and the Indenture Trustee from and against any and all costs, expenses, losses, claims, damages and liabilities to the extent that such cost, expense, loss, claim, damage or liability arose out of, or was imposed upon any such Person through, the gross negligence, willful misfeasance or bad faith of the Servicer in the performance of its duties under this Agreement or by reason of reckless disregard of its obligations and duties under this Agreement. For purposes of this Section, in the event of the termination of the rights and obligations of BMW FS (or any successor thereto pursuant to Section 7.03) as Servicer pursuant to Section 8.02, or the resignation by such Servicer pursuant to this Agreement, such Servicer shall be deemed to be the Servicer pending appointment of a successor Servicer (other than the Indenture Trustee) pursuant to Section 8.03. Indemnification under this Section shall survive the resignation or removal of the Servicer or the termination of this Agreement with respect to acts of the Servicer prior thereto, and shall include reasonable fees and expenses of counsel and reasonable expenses of litigation. If the Servicer shall have made any indemnity payments pursuant 41 to this Section and the Person to or on behalf of whom such payments are made thereafter collects any of such amounts from others, such Person shall promptly repay such amounts to the Servicer, without interest. Section 7.03. Merger or Consolidation of, or Assumption of the Obligations of, Servicer. Any Person (i) into which the Servicer may be merged or consolidated, (ii) resulting from any merger or consolidation to which the Servicer shall be a party, (iii) that acquires by conveyance, transfer or lease substantially all of the assets of the Servicer or (iv) succeeding to the business of the Servicer, which Person shall execute an agreement of assumption to perform every obligation of the Servicer under this Agreement, shall be the successor to the Servicer under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties to this Agreement. The Servicer shall provide notice of any merger, consolidation or succession pursuant to this Section 7.03 to the Owner Trustee, the Indenture Trustee and each Rating Agency. Notwithstanding the foregoing, the Servicer shall not merge or consolidate with any other Person or permit any other Person to become a successor to the Servicer's business unless (i) immediately after giving effect to such transaction, no representation or warranty made pursuant to Section 7.01 shall have been breached (for purposes hereof, such representations and warranties shall speak as of the date of the consummation of such transaction) and no event that, after notice or lapse of time or both, would become a Servicer Termination Event shall have occurred, (ii) the Servicer shall have delivered to the Owner Trustee and the Indenture Trustee an Officer's Certificate and an Opinion of Counsel each stating that such consolidation, merger or succession and such agreement of assumption comply with this Section 7.03 and that all conditions precedent provided for in this Agreement relating to such transaction have been complied with and (iii) the Servicer shall have delivered to the Owner Trustee and the Indenture Trustee an Opinion of Counsel stating that either (A) all financing statements and continuation statements and amendments thereto have been executed and filed that are necessary to preserve and protect the interest of the Trust and the Indenture Trustee, respectively, in the assets of the Trust and reciting the details of such filings or (B) no such action shall be necessary to preserve and protect such interest. The Servicer shall be permitted to transfer and assign its duties and obligations under this Agreement to an affiliate that has succeeded to substantially all of the assets and liabilities of the Servicer in connection with a reorganization of the Servicer; provided that the resulting entity represents and warrants that it is not less credit-worthy than the Servicer immediately prior to such reorganization. Section 7.04. Limitation on Liability of Servicer and Others. (a) Neither the Servicer nor any of its directors, officers, employees or agents shall be under any liability to the Issuer, the Depositor, the Indenture Trustee, the Owner Trustee, the Noteholders or the Certificateholders, except as provided in this Agreement, for any action taken or for refraining from the taking of any action pursuant to this Agreement; provided, however, that this provision shall not protect the Servicer or any such Person against any liability that would otherwise be imposed by reason of a breach of this Agreement or willful misfeasance, bad faith or negligence in the performance of duties. The Servicer and any director, officer, employee or agent of the Servicer may 42 conclusively rely in good faith on the written advice of counsel or on any document of any kind prima facie properly executed and submitted by any Person respecting any matters arising under this Agreement. (b) The parties expressly acknowledge and consent to the Indenture Trustee simultaneously acting in the capacity of successor Servicer and Indenture Trustee. The Indenture Trustee may, in such capacities, discharge its separate functions fully, without hindrance or regard to conflict of interest principles, duty of loyalty principles or other breach of fiduciary duties to the extent that any such conflict or breach arises from the performance by the Indenture Trustee of express duties set forth in this Agreement in any of such capacities. Section 7.05. Appointment of Subservicer. The Servicer may at any time appoint a subservicer to perform all or any portion of its obligations as Servicer hereunder; provided however, that the Servicer shall remain obligated and be liable to the Owner Trustee, the Indenture Trustee and the Securityholders for the servicing and administering of the Receivables in accordance with the provisions hereof without diminution of such obligation and liability by virtue of the appointment of such subservicer and to the same extent and under the same terms and conditions as if the Servicer alone were servicing and administering the Receivables. The fees and expenses of any subservicer shall be as agreed between the Servicer and such subservicer from time to time, and none of the Owner Trustee, the Indenture Trustee, the Issuer or the Securityholders shall have any responsibility therefor. Section 7.06. Servicer Not to Resign. (a) Subject to the provisions of Section 7.03, the Servicer shall not resign from the obligations and duties imposed on it by this Agreement as Servicer except upon a determination that the performance of its duties under this Agreement shall no longer be permissible under applicable law. (b) Notice of any determination that the performance by the Servicer of its duties hereunder is no longer permitted under applicable law shall be communicated to the Owner Trustee and the Indenture Trustee at the earliest practicable time (and, if such communication is not in writing, shall be confirmed in writing at the earliest practicable time) and any such determination shall be evidenced by an Opinion of Counsel to such effect delivered by the Servicer to the Owner Trustee and the Indenture Trustee concurrently with or promptly after such notice. No resignation of the Servicer shall become effective until a successor Servicer acceptable to the Indenture Trustee has assumed the responsibilities and obligations of the resigning Servicer in accordance with Section 8.03. If no Servicer has been appointed within 30 days of resignation or removal, or the date upon which any regulatory authority requires such resignation, the Indenture Trustee may petition any court of competent jurisdiction for such appointment. Section 7.07. Servicer May Own Securities. The Servicer, and any Affiliate of the Servicer, may, in its individual or any other capacity, become the owner or pledgee of Securities with the same rights as it would have if it were not the Servicer or an Affiliate 43 thereof, except as expressly provided herein or in any Basic Document. Except as set forth herein or in the other Basic Documents, Securities so owned by or pledged to Servicer or any such Affiliate shall have an equal and proportionate benefit under the provisions of this Agreement and the other Basic Documents, without preference, priority, or distinction as among all of the Securities of the same class. ARTICLE VIII DEFAULT Section 8.01. Servicer Termination Events. For purposes of this Agreement, the occurrence and continuance of any of the following shall constitute a "Servicer Termination Event": (a) any failure by the Servicer to deposit into the Collection Account any proceeds or payment required to be so delivered under the terms of this Agreement that continues unremedied for a period of five Business Days after written notice is received by the Servicer or after discovery of such failure by a Responsible Officer of the Servicer; (b) failure by the Servicer to deliver to the Owner Trustee, the Indenture Trustee and the Seller the Servicer's Certificate by the applicable Determination Date, or to observe any covenant or agreement set forth in Section 4.06 or in Section 7.01, which failure (i) materially and adversely affects the rights of the Securityholders and (ii) continues unremedied for a period of five Business Days after knowledge thereof by the Servicer or after the date on which written notice of such failure requiring the same to be remedied shall have been given to the Servicer by any of the Owner Trustee, the Indenture Trustee or Noteholders evidencing not less than 50% of the Outstanding Amounts of the Controlling Class of Notes; (c) failure on the part of the Servicer duly to observe or perform any other covenants or agreements of the Servicer set forth in this Agreement, which failure (i) materially and adversely affects the rights of the Securityholders and (ii) continues unremedied for a period of 60 days after discovery of such failure by a Responsible Officer of the Servicer or after the date on which written notice of such failure requiring the same to be remedied shall have been given to the Servicer by any of the Owner Trustee, the Indenture Trustee or Noteholders evidencing not less than 50% of the Outstanding Amounts of the Controlling Class of Notes; or (d) the occurrence of an Insolvency Event with respect to the Servicer. Section 8.02. Consequences of a Servicer Termination Event. If a Servicer Termination Event shall occur, the Indenture Trustee may, and at the direction of Noteholders evidencing 50% of the Outstanding Amount of the Controlling Class of Notes shall, terminate all of the rights and obligations of the Servicer under this Agreement by notice in writing to the Servicer. On or after the receipt by the Servicer of such written notice, all authority, power, obligations and responsibilities of the Servicer 44 under this Agreement automatically shall pass to, be vested in and become obligations and responsibilities of the successor Servicer appointed by the Controlling Class; provided, however, that such successor Servicer shall have no liability with respect to any obligation that was required to be performed by the terminated Servicer prior to the date that such successor Servicer becomes the Servicer or any claim of a third party based on any alleged action or inaction of the terminated Servicer. The successor Servicer is authorized and empowered by this Agreement to execute and deliver, on behalf of the terminated Servicer, as attorney-in-fact or otherwise, any and all documents and other instruments and to do or accomplish all other acts or things necessary or appropriate to effect the purposes of such notice of termination, whether to complete the transfer and endorsement of the Receivables and related documents to show the Indenture Trustee (or the Owner Trustee if the Notes have been paid in full) as lienholder or secured party on the related certificates of title of the Financed Vehicles or otherwise. The terminated Servicer agrees to cooperate with the successor Servicer in effecting the termination of the responsibilities and rights of the terminated Servicer under this Agreement, including the transfer to the successor Servicer for administration by it of all money and property held by the Servicer with respect to the Receivables and other records relating to the Receivables, including any portion of the Receivables File held by the Servicer and a computer tape in readable form as of the most recent Business Day containing all information necessary to enable the successor Servicer to service the Receivables. The terminated Servicer shall also provide the successor Servicer access to Servicer personnel and computer records in order to facilitate the orderly and efficient transfer of servicing duties. Section 8.03. Appointment of Successor Servicer. (a) On and after the time the Servicer receives a notice of termination pursuant to Section 8.02 or upon the resignation of the Servicer pursuant to Section 7.06, the Indenture Trustee shall be the successor in all respects to the Servicer in its capacity as Servicer under this Agreement and shall be subject to all the rights, responsibilities, restrictions, duties, liabilities and termination provisions relating to the Servicer under this Agreement, except as otherwise stated herein. The Depositor, the Owner Trustee, the Indenture Trustee and such successor Servicer shall take such action, consistent with this Agreement, as shall be necessary to effectuate any such succession. If a successor Servicer is acting as Servicer hereunder, it shall be subject to termination under Section 8.02 upon the occurrence of any Servicer Termination Event after its appointment as successor Servicer. (b) On and after the time the Servicer receives a notice of termination pursuant to Section 8.02 or upon the resignation of the Servicer pursuant to Section 7.06, or if the Indenture Trustee is legally unable or unwilling to act as Servicer, the Controlling Class may exercise at any time its right to appoint a successor to the Servicer, and shall have no liability to the Owner Trustee, the Indenture Trustee, the Servicer, the Depositor, any Noteholders, any Certificateholders or any other Person if it does so. Notwithstanding the above, if the Indenture Trustee shall be legally unable or unwilling to act as Servicer, the Indenture Trustee, the Owner Trustee or Noteholders evidencing 50% of the Outstanding Amount of the Controlling Class of Notes may petition a court of 45 competent jurisdiction to appoint any Eligible Servicer as the successor to the Servicer. Pending appointment pursuant to the preceding sentence, the Indenture Trustee shall act as successor Servicer unless it is legally unable to do so, in which event the outgoing Servicer shall continue to act as Servicer until a successor has been appointed and accepted such appointment. (c) Upon appointment, the successor Servicer shall be the successor in all respects to the predecessor Servicer and shall be subject to all the responsibilities, duties and liabilities arising thereafter relating thereto placed on the predecessor Servicer, and shall be entitled to the Servicing Fee and all the rights granted to the predecessor Servicer by the terms and provisions of this Agreement. Section 8.04. Notification to Securityholders. Upon any termination of, or appointment of a successor to, the Servicer pursuant to this Article VIII, the Owner Trustee shall give prompt written notice thereof to the Certificateholders, and the Indenture Trustee shall give prompt written notice thereof to the Noteholders and each Rating Agency. Section 8.05. Waiver of Past Defaults. Noteholders evidencing not less than a majority of the Outstanding Amount of the Controlling Class of Notes may, on behalf of all Securityholders, waive in writing any default by the Servicer in the performance of its obligations hereunder and its consequences, except a default in making any required deposits to or payments from any of the Trust Accounts in accordance with this Agreement. Upon any such waiver of a past default, such default shall cease to exist, and any Servicer Termination Event arising therefrom shall be deemed to have been remedied for every purpose of this Agreement. No such waiver shall extend to any subsequent or other default or impair any right consequent thereto. ARTICLE IX TERMINATION Section 9.01. Optional Purchase of All Receivables. (a) On each Determination Date as of which the Pool Balance is equal to or less than 10% of the sum of the Initial Pool Balance and the amount on deposit in the Pre-Funding Account on the Closing Date, the Servicer shall have the option to purchase the Receivables. To exercise such option, the Servicer shall deposit to the Collection Account pursuant to Section 5.04 an amount equal to the aggregate Purchase Amount for the Receivables (including Liquidated Receivables) and shall succeed to all interests in and to the Receivables. The exercise of such option shall effect a retirement, in whole but not in part, of all outstanding Notes. (b) As described in Article IX of the Trust Agreement, notice of any termination of the Trust shall be given by the Servicer to the Owner Trustee and the Indenture Trustee as soon as practicable after the Servicer has received notice thereof. 46 (c) Following the satisfaction and discharge of the Indenture and the payment in full of the principal of and interest on the Notes, the Certificateholders will succeed to the rights of the Noteholders hereunder and the Owner Trustee will succeed to the rights of, and assume the obligations to make payments to Certificateholders of, the Indenture Trustee pursuant to this Agreement. ARTICLE X MISCELLANEOUS Section 10.01. Amendment. (a) This Agreement may be amended by the Depositor, the Servicer, the Indenture Trustee and the Issuer, without the consent of any of the Noteholders or the Certificateholders, to cure any ambiguity, to correct or supplement any provisions in this Agreement or for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions in this Agreement or of modifying in any manner the rights of the Noteholders or the Certificateholders; provided, however, that such action shall not, as evidenced by an Opinion of Counsel delivered to the Owner Trustee and the Indenture Trustee, adversely affect in any material respect the interests of any Noteholder or Certificateholder; provided further, that such action shall not be deemed to adversely affect in any material respect the interests of any Noteholder or Certificateholder and no Opinion of Counsel to that effect shall be required if the person requesting the amendment obtains a letter from the Rating Agencies stating that the amendment would not result in the downgrading or withdrawal of the ratings then assigned to the Notes and the Certificates. (b) This Agreement may also be amended from time to time by the Depositor, the Servicer and the Issuer, with the prior written consent of the Indenture Trustee, Noteholders holding not less than a majority of the Outstanding Amount of the Controlling Class of Notes and the Holders (as defined in the Trust Agreement) of outstanding Certificates evidencing not less than a majority of the outstanding Certificate Percentage Interests, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or of modifying in any manner the rights of the Securityholders; provided, however, that no such amendment shall (i) increase or reduce in any manner the amount of, or accelerate or delay the timing of, collections of payments on Receivables or distributions that shall be required to be made for the benefit of the Securityholders or (ii) reduce the aforesaid percentage of the Outstanding Amount of the Notes or Controlling Class and the Certificate Percentage Interests, the Securityholders of which are required to consent to any such amendment, without the consent of the Noteholders holding all Outstanding Notes and Certificateholders holding all outstanding Certificates. Promptly after the execution of any amendment or consent, the Administrator shall furnish written notification of the substance of such amendment or consent to each Securityholder, the Indenture Trustee and each Rating Agency. 47 It shall not be necessary for the consent of Securityholders pursuant to this Section to approve the particular form of any proposed amendment or consent, but it shall be sufficient if such consent shall approve the substance thereof. Prior to the execution of any amendment to this Agreement, the Owner Trustee, on behalf of the Issuer, and the Indenture Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by this Agreement and the Opinion of Counsel referred to in Section 10.02(i). The Owner Trustee, on behalf of the Issuer, and the Indenture Trustee may, but shall not be obligated to, enter into any such amendment that affects the Owner Trustee's or the Indenture Trustee's, as applicable, own rights, duties or immunities under this Agreement or otherwise. Section 10.02. Protection of Title to Trust. (a) The Servicer shall execute and file such financing statements and cause to be executed and filed such continuation statements, all in such a manner and in such places as may be required by law fully to preserve, maintain and protect the interest of the Issuer and the Indenture Trustee in the Receivables and the proceeds thereof. The Servicer shall deliver or cause to be delivered to the Owner Trustee and the Indenture Trustee file-stamped copies of, or filing receipts for, any document filed as provided above as soon as available following such filing. (b) Neither the Depositor nor the Servicer shall change its name, identity or corporate structure in any manner that would, could or might make any financing statement or continuation statement filed in accordance with paragraph (a) above seriously misleading within the meaning of ss. 9-402(7) of the UCC, unless it shall have given the Owner Trustee and the Indenture Trustee at least five days' prior written notice thereof and shall have promptly filed appropriate amendments to all previously filed financing statements or continuation statements. (c) Each of the Depositor and the Servicer shall have an obligation to give the Owner Trustee and the Indenture Trustee at least five Business Days' prior written notice of any relocation of its principal executive office if, as a result of such relocation, the applicable provisions of the UCC would require the filing of any amendment of any previously filed financing or continuation statement or of any new financing statement, and shall promptly file any such amendment or new financing statement. The Servicer shall at all times maintain each office from which it shall service Receivables, and its principal executive office, within the United States of America. (d) The Servicer shall maintain accounts and records as to each Receivable accurately and in sufficient detail to permit (i) a person adequately trained in the use of the Servicer's data system to know at any time the status of each such Receivable, including payments and recoveries made and payments owing (and the nature of each) and (ii) reconciliation between payments or recoveries on or with respect to each such Receivable and the amounts from time to time deposited in the Collection Account in respect of each such Receivable. 48 (e) The Servicer shall maintain its computer systems so that, from and after the time of sale under this Agreement of the Receivables, the Servicer's master computer records (including any backup archives) that refer to a Receivable shall be coded to reflect that such Receivable is part of the portfolio of Receivables that is the subject of this Agreement and is held by the Indenture Trustee for BMW Vehicle Owner Trust 2001-A. Indication of such Receivable's inclusion in the portfolio shall be deleted from or modified on the Servicer's computer systems when, and only when, the related Receivable shall have been paid in full or repurchased. (f) If at any time the Depositor or the Servicer shall propose to sell, grant a security interest in or otherwise transfer any interest in motor vehicle receivables to any prospective purchaser, lender or other transferee, the Servicer shall give to such prospective purchaser, lender or other transferee computer tapes, records or printouts (including any restored from backup archives) that, if they shall refer in any manner whatsoever to any Receivable, shall indicate clearly that such Receivable has been sold and is owned by the Issuer and has been pledged to the Indenture Trustee. (g) The Servicer shall permit the Indenture Trustee and its agents upon reasonable notice and at any time during normal business hours, which does not unreasonably interfere with the Servicer's normal operations or customer or employee relations, to inspect, audit and make copies of and abstracts from the Servicer's records regarding any Receivable. (h) Upon request, the Servicer shall furnish to the Owner Trustee or the Indenture Trustee, within fifteen Business Days, a list of all Receivables (by contract number and name of Obligor) then held as part of the Trust, together with a reconciliation of such list to the Schedule of Receivables and to each of the Servicer's Certificates furnished prior to such request indicating removal of Receivables from the Trust. (i) The Servicer shall deliver to the Owner Trustee and the Indenture Trustee: promptly after the execution and delivery of this Agreement and each amendment hereto and in connection with the transfer of Subsequent Receivables from the Depositor to the Trust, an Opinion of Counsel stating that, in the opinion of such counsel, either (i) all financing statements and continuation statements have been executed and filed that are necessary to fully preserve and protect the interest of the Trust and the Indenture Trustee in the Receivables, and reciting the details of such filings or referring to prior Opinions of Counsel in which such details are given, or (ii) no such action shall be necessary to preserve and protect such interest. Each Opinion of Counsel referred to in clause (i) or (ii) above shall specify any action necessary (as of the date of such opinion) to be taken in the following year to preserve and protect such interest. Section 10.03. Notices. All demands, notices, communications and instructions upon or to the Depositor, the Servicer, the Issuer, the Owner Trustee, the Indenture Trustee or any Rating Agency under this Agreement shall be in writing, personally delivered, faxed and followed by first class mail, or mailed by certified mail, return 49 receipt requested, and shall be deemed to have been duly given upon receipt (a) in the case of the Depositor, 300 Chestnut Ridge Road, Woodcliff Lake, New Jersey 07677, Attention: Vice President Finance and Risk; (b) in the case of the Servicer, Administrator and Custodian, to BMW FS, 300 Chestnut Ridge Road, Woodcliff Lake, New Jersey 07677, Attention: Vice President Finance and Risk, (c) in the case of the Indenture Trustee, to 450 West 33rd Street, 14th Floor, New York, New York 10001, Attention: Capital Markets Fiduciary Services, Attention: BMW Vehicle Owner Trust 2001-A; (d) in the case of the Issuer or the Owner Trustee, at the Corporate Trust Administration Department (as defined in the Trust Agreement); (e) in the case of Moody's, to 99 Church Street, New York, New York 10007, Attention: ABS Monitoring Department, and (g) in the case of Standard & Poor's, to 55 Water Street (40th Floor), New York, New York 10041, Attention: Asset Backed Surveillance Department; or, as to each of the foregoing, at such other address as shall be designated by written notice to the other parties. Section 10.04. Assignment by the Depositor or the Servicer. Notwithstanding anything to the contrary contained herein, except as provided in Sections 6.04 and 7.03 herein and as provided in the provisions of this Agreement concerning the resignation of the Servicer, this Agreement may not be assigned by the Depositor or the Servicer. Section 10.05. Limitations on Rights of Others. The provisions of this Agreement are solely for the benefit of the Depositor, the Servicer, the Seller, the Issuer, the Owner Trustee, the Certificateholders, the Indenture Trustee and the Noteholders, and nothing in this Agreement, whether express or implied, shall be construed to give to any other Person any legal or equitable right, remedy or claim in the Trust Estate or under or in respect of this Agreement or any covenants, conditions or provisions contained herein. Section 10.06. Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 10.07. Counterparts. This Agreement may be executed by the parties hereto in any number of counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute but one and the same instrument. Section 10.08. Headings. The headings of the various Articles and Sections herein are for convenience of reference only and shall not define or limit any of the terms or provisions hereof. Section 10.09. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. 50 Section 10.10. Assignment by Issuer. The Depositor hereby acknowledges and consents to any mortgage, pledge, assignment and grant of a security interest by the Issuer to the Indenture Trustee pursuant to the Indenture for the benefit of the Noteholders of all right, title and interest of the Issuer in, to and under the Receivables or the assignment of any or all of the Issuer's rights and obligations hereunder to the Indenture Trustee. Section 10.11. Nonpetition Covenants. Notwithstanding any prior termination of this Agreement, the parties hereto shall not, prior to the date that is one year and one day after the termination of this Agreement with respect to the Issuer or the Depositor, acquiesce, petition or otherwise invoke or cause the Issuer or the Depositor to invoke the process of any court or government authority for the purpose of commencing or sustaining a case against the Issuer or the Depositor under any federal or state bankruptcy, insolvency or similar law, or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Issuer or the Depositor or any substantial part of its property, or ordering the winding up or liquidation of the affairs of the Issuer or the Depositor. Section 10.12. Limitation of Liability of Owner Trustee and Indenture Trustee. (a) Notwithstanding anything contained herein to the contrary, this Agreement has been countersigned by Wilmington Trust Company not in its individual capacity but solely in its capacity as Owner Trustee of the Issuer and in no event shall Wilmington Trust Company in its individual capacity or, except as expressly provided in the Trust Agreement, as Owner Trustee of the Issuer have any liability for the representations, warranties, covenants, agreements or other obligations of the Issuer hereunder or in any of the certificates, notices or agreements delivered pursuant hereto, as to all of which recourse shall be had solely to the assets of the Issuer in accordance with the priorities set forth herein. For all purposes of this Agreement, in the performance of its duties or obligations hereunder or in the performance of any duties or obligations of the Issuer hereunder, the Owner Trustee shall be subject to, and entitled to the benefits of, the terms and provisions of Articles VI, VII and VIII of the Trust Agreement. (b) Notwithstanding anything contained herein to the contrary, this Agreement has been accepted by The Chase Manhattan Bank, not in its individual capacity but solely as Indenture Trustee, and in no event shall The Chase Manhattan Bank have any liability for the representations, warranties, covenants, agreements or other obligations of the Issuer hereunder or in any of the certificates, notices or agreements delivered pursuant hereto, as to all of which recourse shall be had solely to the assets of the Issuer in accordance with the priorities set forth herein. Section 10.13. Depositor Payment Obligation. The Depositor shall be responsible for the payment of all fees and expenses of the Trust, the Owner Trustee and the Indenture Trustee paid by any of them in connection with any of their obligations under the Basic Documents to obtain or maintain or monitor the renewal of any required license of the Trust under the Pennsylvania Motor Vehicle Sales Finance Act. 51 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective officers as of the day and year first above written. BMW VEHICLE OWNER TRUST 2001-A By: WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Owner Trustee By: ___________________________________ Name: Title: BMW FS SECURITIES LLC By: ___________________________________ Name: Title: By: ___________________________________ Name: Title: BMW FINANCIAL SERVICES NA, LLC. By: ___________________________________ Name: Title: By: ___________________________________ Name: Title: THE CHASE MANHATTAN BANK By: ___________________________________ Name: Title: 52 SCHEDULE A Schedule of Receivables [To be Delivered to the Indenture Trustee at Closing] SCHEDULE B Location of Receivable Files BMW Financial Services NA, LLC 5515 Park Center Circle Dublin, Ohio 43017 EXHIBIT A Representations and Warranties of the Seller Under Section 3.02 of the Receivables Purchase Agreement [See tab 4] A-1 EXHIBIT B Form of Payment Date Statement to Securityholders BMW Financial Services NA, LLC. BMW Vehicle Owner Trust 2001-A Payment Date Statement to Securityholders Principal Distribution Amount - -------------------------------------------------------------------------------- Class A-1 Notes: ($ per $1,000 original principal balance) Class A-2 Notes: ($ per $1,000 original principal balance) Class A-3 Notes: ($ per $1,000 original principal balance) Class A-4 Notes: ($ per $1,000 original principal balance) Class B Notes: ($ per $1,000 original principal balance) Available Interest Class A-1 Notes: ($ per $1,000 original principal balance) Class A-2 Notes: ($ per $1,000 original principal balance) Class A-3 Notes: ($ per $1,000 original principal balance) Class A-4 Notes: ($ per $1,000 original principal balance) Class B Notes ($ per $1,000 original principal balance) Available Amounts Shortfall Reserve Account Withdrawal Shortfall Note Balance: Class A-1 Notes: Class A-2 Notes: Class A-3 Notes: Class A-4 Notes: Class B Notes: Note Pool Factor: Class A-1 Notes: Class A-2 Notes: Class A-3 Notes: Class A-4 Notes: Class B Notes: Servicing Fee Owner Trustee Fee Indenture Trustee Fee Pool Balance B-1 Realized Losses Liquidated Receivables or Purchased Receivables Purchase Amounts Reserve Account Balance Amount Deposited to Reserve Account Principal Balance of Receivables that were delinquent: 30 to 59 days 60 to 89 days 90 days or more Amount Withdrawn from Reserve Account Pre-Funding Account Balance Capitalized Interest Account Balance Mandatory Redemption Amount Class A-1 Notes Class A-2 Notes Class A-3 Notes Class A-4 Notes Class B Notes B-2 EXHIBIT C Form of Servicer's Certificate [Available from Servicer] C-1 EXHIBIT D FORM OF DEALER AGREEMENT D-1 EXHIBIT E Form of Subsequent Transfer Agreement SUBSEQUENT TRANSFER AGREEMENT SUBSEQUENT TRANSFER AGREEMENT (the "Agreement") dated as of ________, by and among BMW FS Securities LLC, a Delaware limited liability company ("the Depositor"), BMW Vehicle Owner Trust 2001-A, a Delaware business trust (the "Trust"), BMW Financial Services NA, LLC, a Delaware limited liability company ("BMW FS"), and The Chase Manhattan Bank, a New York banking corporation, as indenture trustee under the Indenture (the "Indenture Trustee"). Reference is hereby made to the Sale and Servicing Agreement (the "Sale and Servicing Agreement") dated as of April [ ], 2001, among the Depositor, The Chase Manhattan Bank, the Trust and BMW FS, and the Receivables Purchase Agreement (the "Purchase Agreement") dated as of April [ ], 2001, between BMW FS and the Depositor. WHEREAS, the Depositor wishes to sell the Subsequent Receivables set forth in Schedule A hereto to the Trust, and the Trust wishes to purchase such Subsequent Receivables and to pledge such Subsequent Receivables to the Indenture Trustee, all in accordance with the provisions of the Sale and Servicing Agreement and the Indenture; NOW, THEREFORE, BMW FS, the Depositor, the Trust and the Indenture Trustee hereby agree as follows: Section 1.01. Definitions. Capitalized terms used herein and not otherwise defined herein shall the meanings ascribed to them in the Sale and Servicing Agreement. Section 1.02. Subsequent Receivables. Schedule A attached hereto sets forth the Subsequent Receivables being transferred hereby by the Depositor to the Trust having an aggregate principal balance of $_________ as of _______ (the "Subsequent Cutoff Date"). Section 1.03. Transfer of Subsequent Receivables to the Trust. Pursuant to and upon the representations, warranties and agreements on the part of BMW FS and the Depositor in the Subsequent Purchase Agreement and the Sale and Servicing Agreement and the Receivables Purchase Agreement and in consideration of the purchase price of $_________, the Depositor does hereby sell, assign, transfer and otherwise convey unto the Trust, without recourse (except as expressly provided in the Sale and Servicing Agreement), all right, title and interest of the Depositor in and to: (1) the Subsequent Receivables and all moneys received thereon on or after the Subsequent Cutoff Date listed on Schedule A to this Agreement; (2) the security interests in the Financed Vehicles and any accessions thereto granted by Obligors pursuant to the Subsequent Receivables and any other interest of the Depositor in such Financed Vehicles; (3) any Liquidation Proceeds and any other proceeds with respect to the Subsequent Receivables from claims on any physical damage, credit life or disability insurance policies covering the Financed Vehicles or the related Obligors, including any vendor's single interest or E-1 other collateral protection insurance policy; (4) any property that shall have secured a Subsequent Receivable and shall have been acquired by or on behalf of the Depositor, the Servicer or the Trust; (5) all documents and other items contained in the Receivable Files; (6) all of the Depositor's rights (but not its obligations) under the Subsequent Purchase Agreement; (7) all right, title and interest in all funds on deposit from time to time in the Trust Accounts, the Certificate Interest Reserve Account and the Certificate Distribution Account and in all investments therein and proceeds thereof (including all Investment Earnings thereon); (8) any proceeds from any Subsequent Receivable repurchased by a Dealer pursuant to a Dealer Agreement; and (9) the proceeds of any and all of the foregoing. The foregoing sale does not constitute and is not intended to result in any assumption by the Trust of any obligation of either the Depositor or BMW FS to the Obligors, insurers or any other person in connection with the Subsequent Receivables, Receivable Files, any insurance policies or any agreement or instrument relating to any of them. Section 1.04. Withdrawal from the Pre-Funding Account. Pursuant to Section ____ of the Sale and Servicing Agreement, the Indenture Trustee is hereby directed to (i) withdraw $________ from the Pre-Funding Account representing the Principal Balance of the Subsequent Receivables transferred to the Issuer on such Subsequent Transfer Date less the Reserve Account Subsequent Deposit Amount for such Subsequent Transfer Date and distribute such amount to or upon the order of the Depositor and (ii) withdraw $_________ from the Pre-Funding Account representing the Reserve Account Subsequent Deposit Amount for such Subsequent Transfer Date and, on behalf of the Depositor, to deposit such amount in the Reserve Account. Section 1.05. Representations of BMW FS. (a) BMW FS hereby consents to the assignment by the Depositor to the Trust of the Depositor's rights with respect to the representations and warranties made by BMW FS in the Purchase Agreement and the Subsequent Purchase Agreement with regard to the Subsequent Receivables and BMW FS. Such representations and warranties speak as of the execution and delivery of this Agreement, but shall survive the delivery of the Subsequent Receivables to the Indenture Trustee or the Custodian. Pursuant to this Agreement, the Depositor has sold, assigned, transferred and conveyed to the Trust its rights under the Purchase Agreement, including its rights with respect to the representations and warranties of BMW FS, upon which the Trust relies in accepting the Subsequent Receivables. (b) BMW FS hereby agrees that the Issuer on behalf of the Trust shall have the right to enforce any and all rights under the Purchase Agreement and the Subsequent Purchase Agreement assigned herein to such party, including the right to cause BMW FS to repurchase any Subsequent Receivable with respect to which it is in breach of any of its representations and warranties, directly against BMW FS as though the Issuer or the Trust was a party to the Purchase Agreement and the Subsequent Purchase Agreement, and the Issuer shall not be obligated to exercise any such rights indirectly through the Depositor. E-2 Section 1.06. Representations of the Depositor. The Depositor represents and warrants to the Trust that the representations and warranties of the Depositor in the Sale and Servicing Agreement with respect to the Subsequent Receivables and the Depositor are true and correct as of the date of this Agreement and hereby certifies that: (a) the minimum APR for the Subsequent Receivables is [8.00%;] (b) after the inclusion of the Subsequent Receivables, the weighted average number of months since the initial installment due date for the Receivables is at least [9] months; (c) after the inclusion of the Subsequent Receivable, at least 50% of the aggregate principal balance of the Receivables is secured by Financed Vehicles which were new at the date of origination; and (d) All other conditions precedent set forth in Section 2.01(b) of the Sale and Servicing Agreement relating to the conveyance of Subsequent Receivables to the Trust have been satisfied. Section 1.07. Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 1.08. Separate Counterparts. This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. Section 1.09. Headings. The headings of the various Sections herein are for convenience of reference only and shall not define or limit any of the terms or provisions hereof. Section 1.10. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. Section 1.11. Limitation of Liabilities. It is expressly understood and agreed by the parties hereto that (a) this Subsequent Transfer Agreement is executed and delivered by Wilmington Trust Company, not individually or personally but solely as Owner Trustee of BMW Vehicle Owner Trust 2001-A, in the exercise of the powers and authority conferred and vested in it, (b) each of the representations, undertakings and agreements herein made on the part of the Issuer is made and intended not as personal representations, undertakings and agreements by Wilmington Trust Company but is made and intended for the purpose for binding only the Issuer, (c) nothing herein contained E-3 shall be construed as creating any liability on Wilmington Trust Company, individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the parties hereto and by any Person claiming by, through or under the parties hereto and (d) under no circumstances shall Wilmington Trust Company be personally liable for the payment of any indebtedness or expenses of the Issuer or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Issuer under this Subsequent Trust Agreement or any other related documents. Section 1.12. Ratification of Agreement. As supplemented by this Agreement, the Sale and Servicing Agreement is in all respects ratified and confirmed and the Sale and Servicing Agreement as so supplemented by this Agreement shall be read, taken and construed as one and the same instrument. E-4 IN WITNESS WHEREOF, the parties hereto have caused this Subsequent Transfer Agreement to be duly executed by their respective officers as of the day and year first above written. BMW VEHICLE OWNER TRUST 2001-A By: WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Owner Trustee By:_________________________________ Name: Title: BMW FINANCIAL SERVICES NA, LLC By:_________________________________ Name: Title: By:_________________________________ Name: Title: THE CHASE MANHATTAN BANK, as Indenture Trustee By:_________________________________ Name: Title: E-5 EX-10.3 11 a4_30ex10-3.txt EXHIBIT 10.3 ------------ ================================================================================ OWNER TRUST ADMINISTRATION AGREEMENT among BMW VEHICLE OWNER TRUST 2001-A, BMW FINANCIAL SERVICES NA, LLC, as Owner Trust Administrator, and THE CHASE MANHATTAN BANK, as Indenture Trustee Dated as of April __, 2001 TABLE OF CONTENTS Page Section 1.1.Duties of the Owner Trust Administrator with Respect to the Depository Agreement and the Indenture........................................................2 Section 1.2............................................................................Additional Duties. 6 Section 1.3......................................................................Non-Ministerial Matters. 8 Section 2........................................................................................Records. 8 Section 3...................................................................................Compensation. 8 Section 4...........................................Additional Information To Be Furnished to the Issuer. 9 Section 5..................................................Independence of the Owner Trust Administrator. 9 Section 6...............................................................................No Joint Venture. 9 Section 7..................................................Other Activities of Owner Trust Administrator. 9 Section 8........................Term of Agreement; Resignation and Removal of Owner Trust Administrator. 9 Section 9................................................Action upon Termination, Resignation or Removal. 11 Section 10.......................................................................................Notices. 11 Section 11....................................................................................Amendments. 12 Section 12........................................................................Successors and Assigns. 13 Section 13.................................................................................GOVERNING LAW. 13 Section 14......................................................................................Headings. 13 Section 15..................................................................................Counterparts. 13 Section 16..................................................................................Severability. 13 Section 17................................Not Applicable to The Chase Manhattan Bank in Other Capacities. 13 Section 18................................Limitation of Liability of Owner Trustee and Indenture Trustee. 14 Section 19.......................................................................Third-Party Beneficiary. 14 Section 20.........................................................................Nonpetition Covenants. 14 Section 21........................................................Liability of Owner Trust Administrator. 15
This OWNER TRUST ADMINISTRATION AGREEMENT dated as of April __, 2001 among BMW VEHICLE OWNER TRUST 2001-A, a Delaware business trust (the "Issuer"), BMW FINANCIAL SERVICES NA, LLC, a Delaware corporation, as administrator (the "Owner Trust Administrator") and THE CHASE MANHATTAN BANK, a New York banking corporation, not in its individual capacity but solely as Indenture Trustee (the "Indenture Trustee"), W I T N E S S E T H : WHEREAS, the Issuer was formed pursuant to the Amended and Restated Trust Agreement dated as of April __, 2001 (as amended and supplemented from time to time, the "Trust Agreement"), between BMW FS Securities LLC, as depositor (the "Depositor"), and Wilmington Trust Company, not in its individual capacity but solely as owner trustee (the "Owner Trustee"), and is issuing % Asset Backed Notes, Class A-1, % Asset Backed Notes, Class A-2, % Asset Backed Notes, Class A-3 and % Asset Backed Notes, Class A-4 (collectively, the "Class A Notes") and % Asset Backed Notes, Class B (the "Class B Notes" and, collectively with the Class A Notes, the "Notes") pursuant to the Indenture dated as of April , 2001 (as amended and supplemented from time to time, the "Indenture"), between the Issuer and the Indenture Trustee, and is issuing asset backed certificates (the "Trust Certificates" and, collectively with the Notes, the "Securities") pursuant to the Trust Agreement (capitalized terms used and not otherwise defined herein shall have the meanings assigned to such terms in the Indenture or the Trust Agreement, as applicable); WHEREAS, the Issuer has entered into certain agreements in connection with the issuance of the Securities and of certain beneficial ownership interests in the Issuer, including (i) a Sale and Servicing Agreement dated as of April __, 2001 (as amended and supplemented from time to time, the "Sale and Servicing Agreement"), among BMW FINANCIAL SERVICES NA, LLC, as seller (in such capacity, the "Seller"), servicer (in such capacity the "Servicer"), administrator and custodian, the Depositor, the Issuer and the Indenture Trustee, (ii) a Letter of Representations dated April __, 2001 (as amended and supplemented from time to time, the "Depository Agreement"), among the Issuer, the Indenture Trustee, the Owner Trust Administrator and The Depository Trust Company ("DTC") relating to the Notes and (iii) the Indenture (the Sale and Servicing Agreement, the Depository Agreement, the Indenture and the Trust Agreement being referred to hereinafter collectively as the "Related Agreements"); WHEREAS, pursuant to the Related Agreements, the Issuer and Owner Trustee are required to perform certain duties in connection with (a) the Notes and the collateral therefor pledged pursuant to the Indenture (the "Collateral") and (b) the beneficial ownership interests in the Issuer (the registered holders of such interests being referred to herein as the "Owners"); WHEREAS, the Issuer and the Owner Trustee desire to have the Owner Trust Administrator perform certain of the duties of the Issuer and the Owner Trustee referred to in the preceding clause and to provide such additional services consistent with the terms of this Agreement and the Related Agreements as the Issuer and the Owner Trustee may from time to time request; and WHEREAS, the Owner Trust Administrator has the capacity to provide the services required hereby and is willing to perform such services for the Issuer and the Owner Trustee on the terms set forth herein; NOW, THEREFORE, in consideration of the mutual covenants contained herein, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows: Section 1.1. Duties of the Owner Trust Administrator with Respect to the Depository Agreement and the Indenture. The Owner Trust Administrator agrees to perform all its duties as Owner Trust Administrator and all the duties of the Issuer and the Owner Trustee under the Depository Agreement. In addition, the Owner Trust Administrator shall consult with the Owner Trustee regarding the duties of the Issuer or the Owner Trustee under the Indenture and the Depository Agreement. The Owner Trust Administrator shall monitor the performance of the Issuer and shall advise the Owner Trustee when action is necessary to comply with the Issuer's or the Owner Trustee's duties under the Indenture and the Depository Agreement. The Owner Trust Administrator shall prepare for execution by the Issuer, or shall cause the preparation by other appropriate persons of, all such documents, reports, filings, instruments, certificates and opinions that it shall be the duty of the Issuer or the Owner Trustee to prepare, file or deliver pursuant to the Indenture and the Depository Agreement. In furtherance of the foregoing, the Owner Trust Administrator shall take all appropriate action that is the duty of the Issuer or the Owner Trustee to take pursuant to the Indenture including, without limitation, such of the foregoing as are required with respect to the following matters under the Indenture (parenthetical section references are to sections of the Indenture): (A) the duty to cause the Note Register to be kept and to give the Indenture Trustee notice of any appointment of a new Note Registrar and the location, or change in location, of the Note Register (Section 2.04); (B) the notification of Noteholders of the final principal payment on their Notes (Section 2.08(b)); (C) reserved; (D) the preparation of or obtaining of the documents and instruments required for authentication of the Notes and delivery of the same to the Indenture Trustee (Section 2.02); 2 (E) the preparation, obtaining or filing of the instruments, opinions and certificates and other documents required for the release of collateral (Section 4.04); (F) the maintenance of an office in the Borough of Manhattan, City of New York, for registration of transfer or exchange of Notes (Section 3.02); (G) the duty to cause newly appointed Paying Agents, if any, to deliver to the Indenture Trustee the instrument specified in the Indenture regarding funds held in trust (Section 3.03); (H) the direction to the Indenture Trustee to deposit moneys with Paying Agents, if any, other than the Indenture Trustee (Section 3.03); (I) the obtaining and preservation of the Issuer's qualification to do business in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of the Indenture, the Notes, the Collateral and each other instrument and agreement included in the Trust Estate (Section 3.04); (J) the preparation of all supplements and amendments to the Indenture and all financing statements, continuation statements, instruments of further assurance and other instruments and the taking of such other action as is necessary or advisable to protect the Trust Estate (Section 3.05); (K) the delivery of the Opinion of Counsel on the Closing Date and the annual delivery of Opinions of Counsel as to the Trust Estate, and the annual delivery of the Officer's Certificate and certain other statements as to compliance with the Indenture (Sections 3.06 and 3.09); (L) the identification to the Indenture Trustee in an Officer's Certificate of a Person with whom the Issuer has contracted to perform its duties under the Indenture (Section 3.07(b)); (M) the delivery of written notice to the Indenture Trustee and the Rating Agencies of a Servicer Default under the Sale and Servicing Agreement and, if such Servicer Default arises from the failure of the Servicer to perform any of its duties under the Sale and Servicing Agreement with respect to the Receivables, the taking of all reasonable steps available to remedy such failure (Section 3.07(d)); (N) the duty to cause the Servicer to comply with Sections 4.09, 4.10, 4.11 and Article IX of the Sale and Servicing Agreement (Section 3.14); (O) the preparation and obtaining of documents and instruments required for the release of the Issuer from its obligations under the Indenture (Section 3.10(b)); 3 (P) the delivery of written notice to the Indenture Trustee and the Rating Agencies of each Event of Default under the Indenture and each default by the Servicer or the Seller under the Sale and Servicing Agreement and by the Seller or the Company under the Receivables Purchase Agreement (Section 3.19); (Q) the monitoring of the Issuer's obligations as to the satisfaction and discharge of the Indenture and the preparation of an Officer's Certificate and the obtaining of the Opinion of Counsel and the Independent Certificate relating thereto (Section 4.01); (R) the compliance with any written directive of the Indenture Trustee with respect to the sale of the Trust Estate in a commercially reasonable manner if an Event of Default shall have occurred and be continuing (Section 5.04); (S) the preparation and delivery of notice to Noteholders of the removal of the Indenture Trustee and the appointment of a successor Indenture Trustee (Section 6.08); (T) the preparation of any written instruments required to confirm more fully the authority of any co-trustee or separate trustee and any written instruments necessary in connection with the resignation or removal of any co-trustee or separate trustee (Sections 6.08 and 6.10); (U) the furnishing to the Indenture Trustee with the names and addresses of Noteholders during any period when the Indenture Trustee is not the Note Registrar (Section 7.01); (V) provide reasonable and appropriate assistance to the Depositor or its designees (including The Chase Manhattan Bank), as applicable, with the preparation and filing with the Commission, any applicable state agencies and the Indenture Trustee of documents required to be filed on a periodic basis with, and summaries thereof as may be required by rules and regulations prescribed by, the Commission and any applicable state agencies and the transmission of such summaries, as necessary, to the Noteholders (Section 7.03); (W) the opening of one or more accounts in the Issuer's name, the preparation and delivery of Issuer Orders, Officer's Certificates and Opinions of Counsel and all other actions necessary with respect to investment and reinvestment of funds in the Trust Accounts (Sections 8.02 and 8.03); (X) the preparation of an Issuer Request and Officer's Certificate and the obtaining of an Opinion of Counsel and Independent Certificates, if necessary, for the release of the Trust Estate (Sections 8.04 and 8.05); (Y) the preparation of Issuer Orders and the obtaining of Opinions of Counsel with respect to the execution of supplemental indentures and 4 the mailing to the Noteholders of notices with respect to such supplemental indentures (Sections 9.01, 9.02 and 9.03); (Z) the execution and delivery of new Notes conforming to any supplemental indenture (Section 9.05); (AA) the duty to notify Noteholders of redemption of the Notes or to cause the Indenture Trustee to provide such notification (Section 10.02); (BB) the preparation and delivery of all Officer's Certificates, Opinions of Counsel and Independent Certificates with respect to any requests by the Issuer to the Indenture Trustee to take any action under the Indenture (Section 11.01(a)); (CC) the preparation and delivery of Officer's Certificates and the obtaining of Independent Certificates, if necessary, for the release of property from the lien of the Indenture (Section 11.01(b)); (DD) the notification of the Rating Agencies, upon the failure of the Indenture Trustee to give such notification, of the information required pursuant to Section 11.04 of the Indenture (Section 11.04); (EE) the preparation and delivery to Noteholders and the Indenture Trustee of any agreements with respect to alternate payment and notice provisions (Section 11.06); (FF) the recording of the Indenture, if applicable (Section 11.14); (GG) the preparation of Definitive Notes in accordance with the instructions of the Clearing Agency (Section 2.12); (HH) the direction to Paying Agents to pay to the Indenture Trustee all sums held in trust by such Paying Agents (Section 3.03); and (II) provide the Indenture Trustee with the information necessary to deliver to each Noteholder such information as may be reasonably required to enable such Holder to prepare its United States federal and state and local income or franchise tax returns (Section 6.06). The Owner Trust Administrator will: (A) pay the Indenture Trustee (and any separate trustee or co-trustee appointed pursuant to Section 6.10 of the Indenture (a "Separate Trustee")) from time to time reasonable compensation for all services rendered by the Indenture Trustee or Separate Trustee, as the case may be, under the Indenture (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); 5 (B) except as otherwise expressly provided in the Indenture, reimburse the Indenture Trustee or any Separate Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Indenture Trustee or Separate Trustee, as the case may be, in accordance with any provision of the Indenture (including the reasonable compensation, expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; (C) indemnify the Indenture Trustee and any Separate Trustee and their respective agents for, and hold them harmless against, any losses, liability or expense incurred without negligence or bad faith on their part, arising out of or in connection with the acceptance or administration of the transactions contemplated by the Indenture and the other Basic Documents, including the reasonable costs and expenses of defending themselves against any claim or liability in connection with the exercise or performance of any of their powers or duties under the Indenture; and (D) indemnify the Owner Trustee and its agents, successors, assigns and servants in accordance with Section 8.02 of the Trust Agreement to the extent that amounts thereunder have not been paid pursuant to Section 5.06 of the Sale and Servicing Agreement. Section 1.2. Additional Duties. (i) In addition to the duties of the Owner Trust Administrator set forth above, the Owner Trust Administrator shall perform such calculations and shall prepare or shall cause the preparation by other appropriate persons of, and shall execute on behalf of the Issuer or the Owner Trustee, all such documents, reports, filings, instruments, certificates and opinions that it shall be the duty of the Issuer or the Owner Trustee to prepare, file or deliver pursuant to the Related Agreements or Section 5.04(a), (b), (c) or (d) of the Trust Agreement, and at the request of the Owner Trustee shall take all appropriate action that it is the duty of the Issuer or the Owner Trustee to take pursuant to the Related Agreements. In furtherance thereof, the Owner Trustee shall, on behalf of itself and of the Issuer, execute and deliver to the Owner Trust Administrator and to each successor Owner Trust Administrator appointed pursuant to the terms hereof, one or more powers of attorney substantially in the form of Exhibit A hereto, appointing the Owner Trust Administrator the attorney-in-fact of the Owner Trustee and the Issuer for the purpose of executing on behalf of the Owner Trustee and the Issuer all such documents, reports, filings, instruments, certificates and opinions. Subject to Section 5 of this Agreement, and in accordance with the directions of the Owner Trustee, the Owner Trust Administrator shall administer, perform or supervise the performance of such other activities in connection with the Collateral (including the Related Agreements) as are not covered by any of the foregoing provisions and as are expressly requested by the Owner Trustee and are reasonably within the capability of the Owner Trust Administrator. Such responsibilities shall include providing to the Depositor and the Indenture Trustee (i) the monthly servicing report in an appropriate electronic form and (ii) [Pennsylvania and Maryland] renewal notice or form received by the Owner 6 Trust Administrator and shall exclude the actual filing of any reports pursuant to the Securities Exchange Act of 1934. (ii) Notwithstanding anything in this Agreement or the Related Agreements to the contrary, the Owner Trust Administrator shall be responsible for promptly notifying the Owner Trustee in the event that any withholding tax is imposed on the Trust's payments (or allocations of income) to an Owner as contemplated in Section 5.02(c) of the Trust Agreement. Any such notice shall specify the amount of any withholding tax required to be withheld by the Owner Trustee pursuant to such provision. (iii) Notwithstanding anything in this Agreement or the Related Agreements to the contrary, the Owner Trust Administrator shall be responsible for performance of the duties of the Owner Trustee set forth in Section 5.04(a), (b), (c) and (d), the penultimate sentence of Section 5.04 and Section 5.05(a) of the Trust Agreement with respect to, among other things, accounting and reports to Owners; provided, however, that the Owner Trustee shall retain responsibility for the distribution of the Schedule K-1s (as prepared by the Administrator) necessary to enable each Owner to prepare its federal and state income tax returns. (iv) The Owner Trust Administrator shall satisfy its obligations with respect to clauses (ii) and (iii) above by retaining, at the expense of the Trust payable by the Owner Trust Administrator, a firm of independent public accountants (the "Accountants") acceptable to the Owner Trustee, which shall perform the obligations of the Owner Trust Administrator thereunder. In connection with paragraph (ii) above, the Accountants will provide prior to ___________, 2001 a letter in form and substance satisfactory to the Owner Trustee as to whether any tax withholding is then required and, if required, the procedures to be followed with respect thereto to comply with the requirements of the Code. The Accountants shall be required to update the letter in each instance that any additional tax withholding is subsequently required or any previously required tax withholding shall no longer be required. (v) The Owner Trust Administrator shall perform the duties of the Owner Trust Administrator including, without limitation, those specified in Sections 8.01, 8.02 and 10.02 of the Trust Agreement required to be performed in connection with the fees, expenses and indemnification and the resignation or removal of the Owner Trustee, and any other duties expressly required to be performed by the Owner Trust Administrator under the Trust Agreement. (vi) In carrying out the foregoing duties or any of its other obligations under this Agreement, the Owner Trust Administrator may enter into transactions or otherwise deal with any of its affiliates; provided, however, that the terms of any such transactions or dealings shall be in accordance with any directions received from the Issuer and shall be, in the Owner Trust Administrator's opinion, no less favorable to the Issuer than would be available from unaffiliated parties. 7 Section 1.3. Non-Ministerial Matters. With respect to matters that in the reasonable judgment of the Owner Trust Administrator are non-ministerial, the Owner Trust Administrator shall not take any action unless within a reasonable time before the taking of such action, the Owner Trust Administrator shall have notified the Owner Trustee of the proposed action and the Owner Trustee shall have withheld consent or provided an alternative direction. Unless explicitly provided under this Owner Trust Administration Agreement, for the purpose of the preceding sentence, "non-ministerial matters" shall include, without limitation: (A) the amendment of or any supplement to the Indenture; (B) the initiation of any claim or lawsuit by the Issuer and the compromise of any action, claim or lawsuit brought by or against the Issuer (other than in connection with the collection of the Receivables or Eligible Investment Receivables); (C) the amendment, change or modification of the Related Agreements; (D) the appointment of successor Note Registrars, successor Paying Agents and successor Indenture Trustees pursuant to the Indenture or the appointment of successor Owner Trust Administrators or Successor Servicers, or the consent to the assignment by the Note Registrar, Paying Agent or Indenture Trustee of its obligations under the Indenture; and (E) the removal of the Indenture Trustee. Notwithstanding anything to the contrary in this Agreement, the Owner Trust Administrator shall not be obligated to, and shall not, (x) make any payments to the Noteholders under the Related Agreements, (y) sell the Trust Estate pursuant to Section 5.04 of the Indenture or (z) take any other action that the Issuer directs the Owner Trust Administrator not to take on its behalf. Section 2. Records. The Owner Trust Administrator shall maintain appropriate books of account and records relating to services performed hereunder, which books of account and records shall be accessible for inspection by the Issuer at any time during normal business hours. Section 3. Compensation. As compensation for the performance of the Owner Trust Administrator's obligations under this Agreement and as reimbursement for its expenses related thereto, the Owner Trust Administrator shall be paid by the Servicer as set forth in Schedule D to the Sale and Servicing Agreement. 8 Section 4. Additional Information To Be Furnished to the Issuer. The Owner Trust Administrator shall furnish to the Issuer from time to time such additional information regarding the Collateral as the Issuer shall reasonably request. Section 5. Independence of the Owner Trust Administrator. For all purposes of this Agreement, the Owner Trust Administrator shall be an independent contractor and shall not be subject to the supervision of the Issuer or the Owner Trustee with respect to the manner in which it accomplishes the performance of its obligations hereunder. Unless expressly authorized by the Issuer, the Owner Trust Administrator shall have no authority to act for or represent the Issuer or the Owner Trustee in any way and shall not otherwise be deemed an agent of the Issuer or the Owner Trustee. Section 6. No Joint Venture. Nothing contained in this Agreement (i) shall constitute the Owner Trust Administrator and either of the Issuer or the Owner Trustee as members of any partnership, joint venture, association, syndicate, unincorporated business or other separate entity, (ii) shall be construed to impose any liability as such on any of them or (iii) shall be deemed to confer on any of them any express, implied or apparent authority to incur any obligation or liability on behalf of the others. Section 7. Other Activities of Owner Trust Administrator. Nothing herein shall prevent the Owner Trust Administrator or its Affiliates from engaging in other businesses or, in its sole discretion, from acting in a similar capacity as an administrator for any other person or entity even though such person or entity may engage in business activities similar to those of the Issuer, the Owner Trustee or the Indenture Trustee. The Owner Trust Administrator and its affiliates may generally engage in any kind of business with any person party to a Related Agreement, any of its affiliates and any person who may do business with or own securities of any such person or any of its affiliates, without any duty to account therefor to the Issuer, the Owner Trustee or the Indenture Trustee. Section 8. Term of Agreement; Resignation and Removal of Owner Trust Administrator. a. This Agreement shall continue in force until the dissolution of the Issuer, upon which event this Agreement shall automatically terminate. b. Subject to Sections 8(e) and (f), the Owner Trust Administrator may resign its duties hereunder by providing the Issuer with at least 60 days' prior written notice. c. Subject to Sections 8(e) and (f), the Issuer may remove the Owner Trust Administrator without cause by providing the Owner Trust Administrator with at least 60 days' prior written notice. 9 d. Subject to Sections 8(e) and (f), at the sole option of the Issuer, the Owner Trust Administrator may be removed immediately upon written notice of termination from the Issuer to the Owner Trust Administrator if any of the following events shall occur: (i) the Owner Trust Administrator shall default in the performance of any of its duties under this Agreement and, after notice of such default, shall not cure such default within ten Business Days (or, if such default cannot be cured in such time, shall not give within ten days such assurance of cure as shall be reasonably satisfactory to the Issuer); (ii) a court having jurisdiction in the premises shall enter a decree or order for relief, and such decree or order shall not have been vacated within 60 days, in respect of the Owner Trust Administrator in any involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect or appoint a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for the Owner Trust Administrator or any substantial part of its property or order the winding-up or liquidation of its affairs; or (iii)the Owner Trust Administrator shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such law, shall consent to the appointment of a receiver, liquidator, assignee, trustee, custodian, sequestrator or similar official for the Owner Trust Administrator or any substantial part of its property, shall consent to the taking of possession by any such official of any substantial part of its property, shall make any general assignment for the benefit of creditors or shall fail generally to pay its debts as they become due. The Owner Trust Administrator agrees that if any of the events specified in clauses (ii) or (iii) of this Section shall occur, it shall give written notice thereof to the Issuer and the Indenture Trustee within seven days after the happening of such event. e. No resignation or removal of the Owner Trust Administrator pursuant to this Section shall be effective until (i) a successor Owner Trust Administrator shall have been appointed by the Issuer and (ii) such successor Owner Trust Administrator shall have agreed in writing to be bound by the terms of this Agreement in the same manner as the Owner Trust Administrator is bound hereunder and (iii) the Owner Trustee and the Indenture Trustee consent to the successor Owner Trust Administrator. f. The appointment of any successor Owner Trust Administrator shall be effective only after receipt of written confirmation from each Rating Agency that the proposed appointment will not result in the qualification, downgrading or withdrawal of any rating assigned to the Notes by such Rating Agency. 10 g. A successor Owner Trust Administrator shall execute, acknowledge and deliver a written acceptance of its appointment hereunder to the resigning Owner Trust Administrator and to the Issuer. Thereupon the resignation or removal of the resigning Owner Trust Administrator shall become effective, and the successor Owner Trust Administrator shall have all the rights, powers and duties of the Owner Trust Administrator under this Agreement. The successor Owner Trust Administrator shall mail a notice of its succession to the Noteholders and the Certificateholders. The resigning Owner Trust Administrator shall promptly transfer or cause to be transferred all property and any related agreements, documents and statements held by it as Owner Trust Administrator to the successor Owner Trust Administrator and the resigning Owner Trust Administrator shall execute and deliver such instruments and do other things as may reasonably be required for fully and certainly vesting in the successor Owner Trust Administrator all rights, power, duties and obligations hereunder. h. In no event shall a resigning Owner Trust Administrator be liable for the acts or omissions of any successor Owner Trust Administrator hereunder. i. In the exercise or administration of its duties hereunder and under the Related Documents, the Owner Trust Administrator may act directly or through its agents or attorneys pursuant to agreements entered into with any of them, and the Owner Trust Administrator shall not be liable for the conduct or misconduct of such agents or attorneys if such agents or attorneys shall have been selected by the Owner Trust Administrator with due care. Section 9. Action upon Termination, Resignation or Removal. Promptly upon the effective date of termination of this Agreement pursuant to Section 8(a) or the resignation or removal of the Owner Trust Administrator pursuant to Section 8(b) or (c), respectively, the Owner Trust Administrator shall be entitled to be paid all fees and reimbursable expenses accruing to it to the date of such termination, resignation or removal. The Owner Trust Administrator shall forthwith upon such termination pursuant to Section 8(a) deliver to the Issuer all property and documents of or relating to the Collateral then in the custody of the Owner Trust Administrator. In the event of the resignation or removal of the Owner Trust Administrator pursuant to Section 8(b) or (c), respectively, the Owner Trust Administrator shall cooperate with the Issuer and take all reasonable steps requested to assist the Issuer in making an orderly transfer of the duties of the Owner Trust Administrator. Section 10. Notices. Any notice, report or other communication given hereunder shall be in writing and addressed as follows: (i) if to the Issuer or the Owner Trustee, to: BMW Vehicle Owner Trust 2001-A In care of Wilmington Trust Company Rodney Square North 11 1100 North Market Street Wilmington, Delaware 19890-0001 Attention: Corporate Trust Administration (ii) if to the Owner Trust Administrator, to: BMW Financial Services NA, LLC 300 Chestnut Ridge Road Woodcliff Lake, New Jersey 07677 Attention: Vice President of Finance and Risk (iii) if to the Indenture Trustee, to: The Chase Manhattan Bank 450 West 33rd Street, 14th Floor New York, New York 10001 Attention: Capital Markets Fiduciary Services, BMW Vehicle Owner Trust 2001-A or to such other address as any party shall have provided to the other parties in writing. Any notice required to be in writing hereunder shall be deemed given if such notice is mailed by certified mail, postage prepaid, or hand-delivered to the address of such party as provided above. Section 11. Amendments. This Agreement may be amended from time to time by a written amendment duly executed and delivered by the Issuer, the Owner Trust Administrator and the Indenture Trustee, with the written consent of the Owner Trustee, without the consent of the Noteholders and the Certificateholders, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or of modifying in any manner the rights of the Noteholders or Certificateholders; provided that such amendment will not materially and adversely affect the interest of any Noteholder or Certificateholder. This Agreement may also be amended by the Issuer, the Owner Trust Administrator and the Indenture Trustee with the written consent of the Owner Trustee and the holders of Notes evidencing at least a majority of the Outstanding Amount of the Controlling Class and the holders of Trust Certificates evidencing at least a majority of the Certificate Percentage Interests for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or of modifying in any manner the rights of Noteholders or the Certificateholders; provided, however, that no such amendment may (i) increase or reduce in any manner the amount of, or accelerate or delay the timing of, collections of payments on Receivables or distributions that are required to be made for the benefit of the Noteholders or Certificateholders or (ii) reduce the aforesaid percentage of the holders of Notes and Trust Certificates which are required to consent to any such amendment, without the consent of the holders of all the outstanding Notes and Trust Certificates. Notwithstanding the foregoing, the Owner Trust Administrator 12 may not amend this Agreement without the permission of the Seller, which permission shall not be unreasonably withheld. Section 12. Successors and Assigns. This Agreement may not be assigned by the Owner Trust Administrator unless such assignment is previously consented to in writing by the Issuer and the Owner Trustee and subject to the satisfaction of the Rating Agency Condition in respect thereof. An assignment with such consent and satisfaction, if accepted by the assignee, shall bind the assignee hereunder in the same manner as the Owner Trust Administrator is bound hereunder. Notwithstanding the foregoing, this Agreement may be assigned by the Owner Trust Administrator without the consent of the Issuer or the Owner Trustee to a corporation or other organization that is a successor (by merger, consolidation or purchase of assets) to the Owner Trust Administrator; provided that such successor organization executes and delivers to the Issuer, the Owner Trustee and the Indenture Trustee an agreement in which such corporation or other organization agrees to be bound hereunder by the terms of said assignment in the same manner as the Owner Trust Administrator is bound hereunder and represents that it has the financial ability to satisfy its indemnification obligations hereunder. Notwithstanding the foregoing, the Owner Trust Administrator can transfer its obligations to any affiliate that succeeds to substantially all of the assets and liabilities of the Owner Trust Administrator and who has represented and warranted that it is not less creditworthy of the Owner Trust Administrator. Subject to the foregoing, this Agreement shall bind any successors or assigns of the parties hereto. Section 13. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. Section 14. Headings. The section headings hereof have been inserted for convenience of reference only and shall not be construed to affect the meaning, construction or effect of this Agreement. Section 15. Counterparts. This Agreement may be executed in counterparts, each of which when so executed shall be an original, but all of which together shall constitute but one and the same agreement. Section 16. Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 17. Not Applicable to The Chase Manhattan Bank in Other Capacities. Nothing in this Agreement shall affect any obligation The Chase Manhattan Bank may have in any other capacity. 13 Section 18. Limitation of Liability of Owner Trustee and Indenture Trustee. a. Notwithstanding anything contained herein to the contrary, this instrument has been countersigned by the Owner Trustee solely in its capacity as Owner Trustee and in no event shall the Owner Trustee in its individual capacity or any beneficial owner of the Issuer have any liability for the representations, warranties, covenants, agreements or other obligations of the Issuer hereunder, as to all of which recourse shall be had solely to the assets of the Issuer. For all purposes of this Agreement, in the performance of any duties or obligations of the Issuer hereunder, the Owner Trustee shall be subject to, and entitled to the benefits of, the terms and provisions of Articles VI, VII and VIII of the Trust Agreement. b. Notwithstanding anything contained herein to the contrary, this Agreement has been countersigned by the Indenture Trustee solely as Indenture Trustee and in no event shall the Indenture Trustee have any liability for the representations, warranties, covenants, agreements or other obligations of the Issuer hereunder or in any of the certificates, notices or agreements delivered pursuant hereto, as to all of which recourse shall be had solely to the assets of the Issuer. c. No recourse under any obligation, covenant or agreement of the Issuer contained in this Agreement shall be had against any agent of the Issuer (including the Owner Trust Administrator and the Owner Trustee) as such by the enforcement of any assessment or by any legal or equitable proceeding, by virtue of any statute or otherwise; it being expressly agreed and understood that this Agreement is solely an obligation of the Issuer as a Delaware business trust, and that no personal liability whatever shall attach to or be incurred by any agent of the Issuer (including the Owner Trust Administrator and the Owner Trustee), as such, under or by reason of any of the obligations, covenants or agreements of the Issuer contained in this Agreement, or implied therefrom, and that any and all personal liability for breaches by the Issuer of any such obligations, covenants or agreements, either at common law or at equity, or by statute or constitution, of every such agent is hereby expressly waived as a condition of and in consideration for the execution of this Agreement. Section 19. Third-Party Beneficiary. The Seller, the Depositor and the Owner Trustee are third-party beneficiaries to this Agreement and are entitled to the rights and benefits hereunder and may enforce the provisions hereof as if each were a party hereto. Section 20. Nonpetition Covenants. Notwithstanding any prior termination of this Agreement, the Owner Trust Administrator and the Indenture Trustee shall not, prior to the date which is one year and one day after the termination of this Agreement with respect to the Issuer, acquiesce, petition or otherwise invoke or cause the Issuer to invoke the process of any court of government authority for the purpose of commencing or sustaining a case against the Issuer under any Federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Issuer or any substantial part of its property, or ordering the winding up or liquidation of the affairs of the Issuer. 14 Section 21. Liability of Owner Trust Administrator. Notwithstanding any provision of this Agreement, the Owner Trust Administrator shall not have any obligations under this Agreement other than those specifically set forth herein, and no implied obligations of the Owner Trust Administrator shall be read into this Agreement. Neither the Owner Trust Administrator nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken in good faith by it or them under or in connection with this Agreement, except for its or their own gross negligence or willful misconduct and in no event shall the Owner Trust Administrator be liable under or in connection with this Agreement for indirect, special or consequential losses or damages of any kind, including lost profits, even if advised of the possibility thereof and regardless of the form of action by which such losses or damages may be claimed. Without limiting the foregoing, the Owner Trust Administrator may (a) consult with legal counsel (including counsel for the Issuer), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts and (b) shall incur no liability under or in respect if this Agreement by acting upon any notice (including notice by telephone), consent, certificate or other instrument or writing (which may be by facsimile) believed by it to be genuine and signed or sent by the proper party or parties. 15 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered as of the day and year first above written. BMW VEHICLE OWNER TRUST 2001-A By: WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Owner Trustee By: ----------------------------------------------- Name: Title: THE CHASE MANHATTAN BANK, not in its individual capacity but solely as Indenture Trustee By: ----------------------------------------------- Name: Title: BMW FINANCIAL SERVICES NA, LLC, as Owner Trust Administrator By: ----------------------------------------------- Name: Title: By: ----------------------------------------------- Name: Title: 16 EXHIBIT A POWER OF ATTORNEY STATE OF NEW YORK } } COUNTY OF NEW YORK } KNOW ALL MEN BY THESE PRESENTS, that Wilmington Trust Company, a Delaware banking corporation, not in its individual capacity but solely as owner trustee (the "Owner Trustee") for BMW Vehicle Owner Trust 2001-A (the "Trust"), does hereby make, constitute and appoint BMW Financial Services, LLC, as administrator (the "Owner Trust Administrator") under the Owner Trust Administration Agreement dated April __, 2001 (the "Owner Trust Administration Agreement"), among the Trust, the Owner Trust Administrator, the Owner Trustee, and The Chase Manhattan Bank, as Indenture Trustee, as the same may be amended from time to time, and its agents and attorneys, as Attorneys-in-Fact to execute on behalf of the Owner Trustee or the Trust all such documents, reports, filings, instruments, certificates and opinions as it should be the duty of the Owner Trustee or the Trust to prepare, file or deliver pursuant to the Basic Documents, or pursuant to Section 5.04(a), (b), (c) or (d) of the Trust Agreement, including, without limitation, to appear for and represent the Owner Trustee and the Trust in connection with the preparation, filing and audit of federal, state and local tax returns pertaining to the Trust, and with full power to perform any and all acts associated with such returns and audits that the Owner Trustee could perform, including without limitation, the right to distribute and receive confidential information, defend and assert positions in response to audits, initiate and defend litigation, and to execute waivers of restrictions on assessments of deficiencies, consents to the extension of any statutory or regulatory time limit, and settlements. All powers of attorney for this purpose heretofore filed or executed by the Owner Trustee are hereby revoked. Capitalized terms that are used and not otherwise defined herein shall have the meanings ascribed thereto in the Owner Trust Administration Agreement. EXECUTED this ____ day of ____________, 200_. WILMINGTON TRUST COMPANY not in its individual capacity but solely as Owner Trustee Name: Title: STATE OF ____________ } } COUNTY OF __________ } Before me, the undersigned authority, on this day personally appeared _______________________, known to me to be the person whose name is subscribed to the foregoing instrument, and acknowledged to me that s/he signed the same for the purposes and considerations therein expressed. Sworn to before me this ___ day of _______, 200_. Notary Public - State of _________________ EX-10.4 12 s3aex10-4.txt EXHIBIT 10.4 ------------ RECEIVABLES PURCHASE AGREEMENT between BMW FINANCIAL SERVICES NA, LLC, as Seller, and BMW FS SECURITIES LLC, as Depositor Dated as of April [ ], 2001
TABLE OF CONTENTS Page Article I CERTAIN DEFINITIONS...............................................................1 Article II CONVEYANCE OF RECEIVALBES.........................................................3 SECTION 2.01. Conveyance of Initial Receivables......................................3 SECTION 2.02. The Closing............................................................4 SECTION 2.03. Conveyance of the Subsequent Receivables...............................4 Article III REPRESENTATIONS AND WARRANTIES....................................................7 SECTION 3.01. Representations and Warranties of the Depositor........................7 SECTION 3.02. Representations and Warranties of the Seller...........................8 Article IV CONDITIONS.......................................................................20 SECTION 4.01. Conditions to Obligation of the Depositor.............................20 SECTION 4.02. Conditions to Obligation of the Seller................................21 Article V COVENANTS OF THE SELLER..........................................................22 SECTION 5.01. Protection of Right, Title and Interest...............................22 SECTION 5.02. Other Liens or Interests..............................................23 SECTION 5.03. Costs and Expenses....................................................23 SECTION 5.04. Hold Harmless.........................................................23 Article VI MISCELLANEOUS PROVISIONS.........................................................24 SECTION 6.01. Obligations of Seller.................................................24 SECTION 6.02. Repurchase Events.....................................................24 SECTION 6.03. Depositor Assignment of Repurchased Receivables.......................24 SECTION 6.04. Transfer to the Issuer................................................24 SECTION 6.05. Amendment.............................................................24 SECTION 6.06. Waivers...............................................................25 SECTION 6.07. Notices...............................................................25 SECTION 6.08. Costs and Expenses....................................................25 SECTION 6.09. Representations of the Seller and the Depositor.......................26 SECTION 6.10. Confidential Information..............................................26 SECTION 6.11. Headings and Cross-References.........................................26 SECTION 6.12. GOVERNING LAW.........................................................26 SECTION 6.13. Counterparts..........................................................26 SECTION 6.14. Third Party Beneficiary...............................................26 SECTION 6.15. No Proceedings........................................................26
Exhibits Exhibit A Matters Addressed in Opinion of Seller's Counsel Exhibit B Subsequent Purchase Agreement Schedule I Schedule of Receivables Schedule II Location of Receivable Files Schedule III Receivable File Schedule i RECEIVABLES PURCHASE AGREEMENT dated as of April [ ], 2001, between BMW FINANCIAL SERVICES NA. LLC, a Delaware limited liability company (the "Seller") and BMW FS SECURITIES LLC, a Delaware limited liability company, as depositor (the "Depositor"). RECITALS WHEREAS, in the regular course of its business, BMW FS has purchased certain motor vehicle retail installment sale contracts secured by new and used automobiles, sport utility vehicles and motorcycles from certain motor vehicle dealers; WHEREAS, the Seller and the Depositor wish to set forth the terms pursuant to which such contracts are to be sold by the Seller to the Depositor; and WHEREAS, the Depositor intends, concurrently with its purchase hereunder, to convey all of its right, title and interest in and to all of such contracts to BMW Vehicle Owner Trust 2001-A (the "Issuer") pursuant to a Sale and Servicing Agreement dated as of April [ ], 2001 (the "Sale and Servicing Agreement"), by and among the Issuer, the Depositor, the Seller, Servicer, Administrator and Custodian, and The Chase Manhattan Bank, as Indenture Trustee, and the Issuer intends to pledge all of its right, title and interest in and to such contracts to the Indenture Trustee pursuant to the Indenture dated as of April [ ], 2001 (the "Indenture"), by and between the Issuer and the Indenture Trustee. NOW, THEREFORE, in consideration of the foregoing, other good and valuable consideration and the mutual terms and covenants contained herein, the parties hereto agree as follows: ARTICLE I CERTAIN DEFINITIONS Terms not defined in this Agreement shall have the meanings assigned thereto in the Sale and Servicing Agreement or the Indenture. As used in this Agreement, the following terms shall, unless the context otherwise requires, have the following meanings (such meanings to be equally applicable to the singular and plural forms of the terms defined): "Agreement" shall mean this Receivables Purchase Agreement, as the same may be amended and supplemented from time to time. "BMW FS" shall mean BMW Financial Services NA, LLC. "Conveyed Assets" shall have the meaning set forth in Section 2.01. "Depositor" shall mean BMW FS Securities LLC, a Delaware limited liability company, its successors and assigns. "Indenture" shall have the meaning set forth in the recitals. "Initial Receivable" shall mean any Contract listed on Schedule I hereto (which Schedule may be in the form of microfiche). "Lien Certificate" means with respect to a Financed Vehicle, an original certificate of title, certificate of lien or other notification issued by the Registrar of Titles of the applicable State to a secured party which indicates that the lien of the secured party on the Financed Vehicle is recorded on the original certificate of title. In any jurisdiction in which the original certificate of title is required to be given to the Obligor, the term "Lien Certificate" shall mean only a certificate or notification issued to a secured party. "Prospectus" shall have the meaning set forth in the Underwriting Agreement. "Prospectus Supplement" means the Prospectus Supplement dated April [ ], 2001 relating to the BMW Vehicle Owner Trust 2001-A in the form attached hereto as Exhibit C. "Receivable" shall mean the Initial Receivables and the Subsequent Receivables. "Registrar of Titles" means with respect to any State, the governmental agency or body responsible for the registration of, and the issuance of certificates of title relating to, motor vehicles and liens thereon. "Registration Statement" means Registration Statement No. 333-56802 filed by the Depositor with the Securities and Exchange Commission in the form in which it became effective on April [ ], 2001. "Repurchase Event" shall have the meaning specified in Section 6.02. "Sale and Servicing Agreement" shall have the meaning set forth in the recitals. "Schedule of Receivables" shall mean the list of Receivables annexed hereto as Schedule I (which Schedule may be in the form of microfiche). "Seller" shall mean BMW FS, and its successor and assigns. "Subsequent Purchase Agreement" shall mean a duly executed written purchase agreement entered into during the Funding Period, substantially in the form of Exhibit B hereto. "Subsequent Receivable" shall mean any of the Contracts sold to the Depositor during the Funding Period, listed on Schedule A to the related Subsequent Purchase Agreement. "Subsequent Transfer Date" shall mean the date designated by the Seller during the Funding Period on which Subsequent Receivables are to be transferred 2 to the Depositor in accordance with Section 2.03 hereof and pursuant to the Subsequent Purchase Agreement. "Transfer Date" shall mean the Closing Date, in the case of the Initial Receivables, and the Subsequent Transfer Date, in the case of the Subsequent Receivables. "Underwriters" means each of JPMorgan, [ ] and [ ]. "Underwriting Agreement" means the Underwriting Agreement dated April [ ], 2001 relating to BMW Vehicle Owner Trust 2001-A among BMW FS, the Depositor and JPMorgan, as representative of the Underwriters. ARTICLE II CONVEYANCE OF RECEIVALBES SECTION 2.01. Conveyance of Initial Receivables. --------------------------------- (a) In consideration of the Depositor's delivery to or upon the order of the Seller on the Closing Date of $[ ] (the "Purchase Price"), the Seller does hereby sell, transfer, assign, set over and otherwise convey to the Depositor, without recourse (subject to the obligations of the Seller herein) all right, title, and interest of the Seller in and to: (i) the Initial Receivables and all moneys received thereon after [ ], 2001; (ii) the security interests in the Financed Vehicles and any accessions thereto granted by Obligors pursuant to the Initial Receivables and any other interest of the Seller in such Financed Vehicles; (iii) any Liquidation Proceeds and any other proceeds with respect to the Initial Receivables from claims on any physical damage, credit life or disability insurance policies covering Financed Vehicles or Obligors, including any vendor's single interest or other collateral protection insurance policy; (iv) any property that shall have secured an Initial Receivable and that shall have been acquired by or on behalf of the Seller; (v) all documents and other items contained in the Receivable Files; (vi) all proceeds from any Initial Receivable repurchased by a Dealer pursuant to a Dealer Agreement; and 3 (vii) the proceeds of any and all of the foregoing (collectively, with the assets listed in clauses (i) through (vi) above, the "Conveyed Assets"). (b) The Seller and the Depositor intend that the transfer of assets by the Seller to the Depositor pursuant to this Agreement be a sale of the ownership interest in such assets to the Depositor, rather than the mere granting of a security interest to secure a borrowing. In the event, however, that such transfer is deemed not to be a sale but to be of a mere security interest to secure a borrowing, the Seller shall be deemed to have hereby granted to the Depositor a security interest in all accounts, money, chattel paper, securities, instruments, documents, deposit accounts, certificates of deposit, letters of credit, advices of credit, banker's acceptances, uncertificated securities, general intangibles, contract rights, goods and other property consisting of, arising from or relating to such Conveyed Assets, which security interest shall be perfected and of first priority, and this Agreement shall constitute a security agreement under applicable law. Pursuant to the Sale and Servicing Agreement and Section 6.04 hereof, the Depositor may sell, transfer and assign to the Issuer (i) all or any portion of the assets assigned to the Depositor hereunder, (ii) all or any portion of the Depositor's rights against the Seller under this Agreement and (iii) all proceeds thereof. Such assignment may be made by the Depositor with or without an assignment by the Depositor of its rights under this Agreement, and without further notice to or acknowledgement from the Seller. The Seller waives, to the extent permitted under applicable law, all claims, causes of action and remedies, whether legal or equitable (including any right of setoff), against the Depositor or any assignee of the Depositor relating to such action by the Depositor in connection with the transactions contemplated by the Sale and Servicing Agreement. SECTION 2.02. The Closing. The sale and purchase of the Initial Receivables shall take place at a closing at the offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue New York, New York 10153 on the Closing Date, simultaneously with the closing under (a) the Sale and Servicing Agreement, (b) the Indenture and (c) the Trust Agreement. SECTION 2.03. Conveyance of the Subsequent Receivables. ---------------------------------------- (a) Subject to and upon the terms and conditions set forth in paragraph (b) below and in the Subsequent Purchase Agreement, BMW FS hereby agrees to sell, transfer, assign, set over and otherwise convey to Depositor, without recourse, (subject to the obligations of BMW FS set forth herein) in consideration of Depositor's payment on the Subsequent Transfer Date of the purchase price therefor (as set forth in the Subsequent Purchase Agreement), and Depositor hereby agrees to purchase, all right, title and interest of BMW FS in and to (i) the related Subsequent Receivables set forth on Schedule A to the Subsequent Purchase Agreement and all monies due thereon on or after the Subsequent Cutoff Date; (ii) the security interests in the Financed Vehicles and any accessions thereto granted by Obligors pursuant to the Subsequent Receivables and any other interest of BMW FS in such Financed Vehicles; (iii) any Liquidation Proceeds and any other proceeds with respect to the Subsequent Receivables from claims on any physical damage, credit life or disability insurance policies covering Financed Vehicles or Obligors, including any 4 vendor's single interest or other collateral protection insurance policy; (iv) any property that shall have secured a Subsequent Receivable and shall have been acquired by or on behalf of BMW FS; (v) all documents and other items contained in the Receivables Files; (vi) all proceeds from any Subsequent Receivable repurchased by a Dealer pursuant to a Dealer Agreement; and (vii) the proceeds of any and all of the foregoing. BMW FS agrees, subject to the terms and conditions herein applicable to transfers of Subsequent Receivables, and subject to the execution of the Subsequent Purchase Agreement by the parties thereto, sell to the Depositor during the Funding Period Subsequent Receivables having an aggregate principal balance approximately equal to the Pre-Funded Amount. (b) BMW FS shall transfer to Depositor, and the Depositor shall purchase, the related Subsequent Receivables and related assets on any Subsequent Transfer Date only if each of the following conditions precedent are satisfied on or prior to the Subsequent Transfer Date: (i) BMW FS shall have provided the Depositor, the Indenture Trustee, the Owner Trustee and the Rating Agencies with an Addition Notice not later than 5 Business Days prior to the Subsequent Transfer Date and shall have provided any information reasonably requested by any of the foregoing with respect to the related Subsequent Receivables; (ii) BMW FS shall have delivered to the Depositor, the Owner Trustee and the Indenture Trustee a Subsequent Purchase Agreement, which shall include supplements to Schedule I hereto listing the Subsequent Receivables; (iii) BMW FS shall have provided to the Depositor for deposit into the Collection Account on or prior to the Subsequent Transfer Date, with respect to each related Subsequent Receivable, the collections with respect thereto received on or after the Subsequent Cutoff Date unless BMW FS is the Servicer and meets the requirements for monthly deposits of Section 5.02 of the Sale and Servicing Agreement, in which case such collections shall be deposited in accordance with such Section; (iv) on the Subsequent Transfer Date, (A) BMW FS was not insolvent and will not become insolvent as a result of the transfer of the related Subsequent Receivables on the Subsequent Transfer Date, (B) BMW FS did not intend to incur or believe that it would incur debts that would be beyond such Seller's ability to pay as such debts matured, (C) such transfer was not made with actual intent to hinder, delay or defraud any Person and (D) the assets of such Seller did not constitute unreasonably small capital to carry out its business as conducted; (v) the Funding Period shall not have terminated; 5 (vi) each of the representations and warranties made by BMW FS pursuant to Section 3.02(b) and (c) with respect to the related Subsequent Receivables shall be true and correct as of the Subsequent Transfer Date, and BMW FS shall have performed all obligations to be performed by it hereunder on or prior to the Subsequent Transfer Date; (vii) each Subsequent Receivable shall have a Scheduled Payment due during the Collection Period for the month immediately following the month in which the Subsequent Transfer Date occurs, provided, however, that with respect to Subsequent Receivables relating to motorcycles those Subsequent Receivables shall have a Scheduled Payment due during one of the first 3 Collection Periods after the Subsequent Transfer Date occurs; (viii) the addition of any of the related Subsequent Receivables will not result in a material adverse tax consequence to the Trust, the Noteholders or the Certificateholders; (ix) BMW FS shall have delivered to the Indenture Trustee, the Owner Trustee and each Rating Agency a statement listing the aggregate Principal Balance of the related Subsequent Receivables to be transferred and any other information reasonably requested by any of the foregoing with respect to such Subsequent Receivables; (x) BMW FS shall have delivered to (A) the Trust, each Rating Agency, the Depositor and the Indenture Trustee, an Opinion of Counsel with respect to the transfer of the related Subsequent Receivables substantially in the form of, or confirming, the Opinion of Counsel delivered to each Rating Agency and the Depositor on the Closing Date and any other opinions reasonably required by the Depositor or the Rating Agencies and (B) the Owner Trustee, the Depositor and the Indenture Trustee, the Opinion of Counsel required by Section 10.02(i)(A) of the Sale and Servicing Agreement; (xi) the Rating Agency Condition shall be satisfied with respect to the transfer of the Subsequent Receivables to the Trust; and (xii) BMW FS shall have delivered to the Indenture Trustee, the Depositor and the Owner Trustee an Officers' Certificate confirming the satisfaction of each condition precedent specified in this paragraph. BMW FS covenants that in the event that any of the foregoing conditions shall not have been satisfied with respect to any related Subsequent Receivable as of the date required as specified above, BMW FS will immediately repurchase or cause to be repurchased the related Subsequent Receivable at a price equal to the Purchase Amount thereof, in the manner specified in Section 6.02. 6 ARTICLE III REPRESENTATIONS AND WARRANTIES SECTION 3.01. Representations and Warranties of the Depositor. The Depositor hereby represents and warrants as follows to the Seller and the Indenture Trustee as of the date hereof and the Transfer Date: (a) Organization and Good Standing. The Depositor is duly organized and validly existing as a limited liability company in good standing under the laws of the State of Delaware, with the corporate power and authority to own its properties and to conduct its business as such properties are currently owned and such business is currently conducted. (b) Due Qualification. The Depositor is duly qualified to do business as a foreign corporation in good standing, and has obtained all necessary licenses and approvals in all jurisdictions, including a license pursuant to the Pennsylvania Motor Vehicle Sales Finance Act [applied for], where the failure to do so would materially and adversely affect the Depositor's ability to acquire the Receivables or the validity or enforceability of the Receivables. (c) Power and Authority. The Depositor has the corporate power and authority to execute and deliver this Agreement and the other Basic Documents to which it is a party and to carry out their respective terms; the Depositor has full power and authority to sell and assign the property to be sold and assigned to and deposited with the Issuer, and the Depositor shall have duly authorized such sale and assignment to the Issuer by all necessary corporate action; and the execution, delivery and performance of this Agreement and the other Basic Documents to which the Depositor is a party have been duly authorized by the Depositor by all necessary corporate action. (d) Binding Obligation. This Agreement and the other Basic Documents to which the Depositor is a party, when duly executed and delivered by the other parties hereto and thereto shall constitute legal, valid and binding obligations of the Depositor, enforceable against the Depositor in accordance with their respective terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization or similar laws now or hereafter in effect relating to or affecting creditors' rights generally and to general principals or equity (whether applied in a proceeding at law or in equity). (e) No Violation. The consummation of the transactions contemplated by this Agreement and the fulfillment of the terms hereof do not conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time or both) a default under, the limited liability company agreement of the Depositor, or any indenture, agreement or other instrument to which the Depositor is a party or by which it is bound, or violate any law, rules or regulation applicable to the Depositor of 7 any court or federal or state regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Depositor. (f) No Proceedings. There are no proceedings or investigations pending or, to the Depositor's knowledge, threatened against the Depositor before any court, regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Depositor or its properties (i) asserting the invalidity of this Agreement or any other Basic Document to which the Depositor is a party, (ii) seeking to prevent the consummation of any of the transactions contemplated by this Agreement or any other Basic Document to which the Depositor is a party or (iii) seeking any determination or ruling that might materially and adversely affect the performance by the Depositor of its obligations under, or the validity or enforceability of, this Agreement or any other Basic Document to which the Depositor is a party. (g) No Consents. The Depositor is not required to obtain the consent of any other party or any consent, license, approval, registration, authorization, or declaration of or with any governmental authority, bureau or agency in connection with the execution, delivery, performance, validity, or enforceability of this Agreement or any other Basic Document to which it is a party that has not already been obtained. (h) The Depositor meets the requirements for use of Form S-3 under the Securities Act of 1933, as amended (the "Act"), and has filed with the Securities and Exchange Commission (the "Commission") the Registration Statement on such Form, including a related preliminary base prospectus and a preliminary prospectus supplement, for the registration under the Act of the offering and sale of the Securities. (i) On the date of this Agreement, the Registration Statement will comply in all material respects with the applicable requirements of the Act, and the respective rules and regulations of the Commission thereunder (the "Rules and Regulations"). (j) On the date of this Agreement, the Depositor is not aware of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the institution or threat of any proceeding for that purpose. SECTION 3.02. Representations and Warranties of the Seller. -------------------------------------------- (a) The Seller hereby represents and warrants as follows to the Depositor and the Indenture Trustee as of the date hereof and as of the Transfer Date: (i) Organization and Good Standing. The Seller has been duly organized and is validly existing as a limited liability company under the laws of the State of Delaware, with the corporate power and authority to own its properties and to conduct its business as such properties are currently owned and such business is currently conducted. 8 (ii) Due Qualification. The Seller is duly authorized to transact business as a foreign corporation in good standing, and has obtained all necessary licenses and approvals, in all jurisdictions in which the ownership or lease of property or the conduct of its business shall require such qualifications and in which the failure to be so authorized would have a material adverse effect on the business, properties, assets, or condition (financial or other) of the Seller and its subsidiaries, considered as one enterprise. (iii) Power and Authority. The Seller has the power and authority to make, execute, deliver and perform this Agreement and all of the transactions contemplated under this Agreement and the other Basic Documents to which the Seller is a party, and has taken all necessary action to authorize the execution, delivery and performance of this Agreement and the other Basic Documents to which the Seller is a party. When executed and delivered, this Agreement and the other Basic Documents to which the Seller is a party will constitute legal, valid and binding obligations of the Seller enforceable in accordance with their respective terms, except as enforcement of such terms may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally and by the availability of equitable remedies and except as enforcement of such terms may be limited by receivership, conservatorship and supervisory powers of bank regulatory agencies generally. (iv) No Violation. The execution, delivery and performance by the Seller of this Agreement and the other Basic Documents to which the Seller is a party will not violate any provision of any existing state, federal or, to the best knowledge of the Seller, local law or regulation or any order or decree of any court applicable to the Seller or any provision of the limited liability company agreement of the Seller, or constitute a breach of any mortgage, indenture, contract or other agreement to which the Seller is a party or by which the Seller may be bound or result in the creation or imposition of any lien upon any of the Seller's properties pursuant to any such mortgage, indenture, contract or other agreement (other than this Agreement). (v) No Proceedings. There are no proceedings or investigations pending or, to the Seller's knowledge, threatened against the Seller before any court, regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Seller or its properties (i) asserting the invalidity of this Agreement or any other Basic Document to which the Seller is a party, (ii) seeking to prevent the consummation of any of the transactions contemplated by this Agreement or any other Basic Document to which the Seller is a party or (iii) seeking any determination or ruling that might materially and adversely affect the performance by the Seller of its obligations under, or the validity or enforceability of, this Agreement or any other Basic Document to which the Seller is a party. 9 (vi) Chief Executive Office. The chief executive office of the Seller is 300 Chestnut Ridge Road, Woodcliff Lake, New Jersey 07677. (vii) No Consents. The Seller is not required to obtain the consent of any other party or any consent, license, approval, registration, authorization, or declaration of or with any governmental authority, bureau or agency in connection with the execution, delivery, performance, validity, or enforceability of this Agreement or any other Basic Document to which it is a party that has not already been obtained. (viii) No Notice. The Seller represents and warrants that it acquired title to the Receivables in good faith, without notice of any adverse claim. (ix) Bulk Transfer. The Seller represents and warrants that the transfer, assignment and conveyance of the Receivables by the Seller pursuant to this Agreement is not subject to the bulk transfer laws or any similar statutory provisions in effect in any applicable jurisdiction. (x) Seller Information. No certificate of an officer, statement or document furnished in writing or report delivered pursuant to the terms hereof by the Seller contains any untrue statement of a material fact or omits to state any material fact necessary to make the certificate, statement, document or report not misleading. (xi) Ordinary Course. The transactions contemplated by this Agreement and the other Basic Documents to which the Seller is a party are in the ordinary course of the Seller's business. (xii) Solvency. The Seller is not insolvent, nor will the Seller be made insolvent by the transfer of the Receivables, nor does the Seller anticipate any pending insolvency. (xiii) Legal Compliance. The Seller is not in violation of, and the execution and delivery of this Agreement and the other Basic Documents to which the Seller is a party by it and its performance and compliance with the terms of this Agreement and the other Basic Documents to which the Seller is a party will not constitute a violation with respect to, any order or decree of any court or any order or regulation of any federal, state, municipal or governmental agency having jurisdiction, which violation would materially and adversely affect the Seller's condition (financial or otherwise) or operations or any of the Seller's properties or materially and adversely affect the performance of any of its duties under the Basic Documents. (xiv) Creditors. The Seller did not sell the Receivables to the Depositor with any intent to hinder, delay or defraud any of their creditors. 10 (b) The Seller makes the following representations and warranties with respect to the Receivables, on which the Depositor relies in accepting the Receivables and in transferring the Receivables to the Issuer under the Sale and Servicing Agreement, and on which the Issuer relies in pledging the same to the Indenture Trustee. Such representations and warranties speak as of the execution and delivery of this Agreement and as of the Transfer Date, but shall survive the sale, transfer and assignment of the Receivables to the Depositor, the subsequent sale, transfer and assignment of the Receivables by the Depositor to the Issuer pursuant to the Sale and Servicing Agreement and the pledge of the Receivables by the Issuer to the Indenture Trustee pursuant to the Indenture. (i) Characteristics of Receivables. Each Receivable (A) was originated in the United States of America by a Dealer located in the United States of America for the retail sale of a Financed Vehicle in the ordinary course of such Dealer's business in accordance with the Seller's credit policies as of the date of origination or acquisition of the related Receivable, is payable in United States dollars, has been fully and properly executed by the parties thereto, has been purchased by the Seller from such Dealer under an existing Dealer Agreement and has been validly assigned by such Dealer to the Seller, (B) has created or shall create a valid, subsisting and enforceable first priority perfected security interest in favor of the Seller in the Financed Vehicle, which security interest is assignable by the Seller to the Depositor, and by the Depositor to the Issuer, (C) contains customary and enforceable provisions such that the rights and remedies of the holder thereof are adequate for realization against the collateral of the benefits of the security, (D) provides for fixed level monthly payments (provided that the payment in the last month of the term of the Receivable may be different from the level scheduled payments) that fully amortize the Amount Financed by maturity and yield interest at the APR and (E) amortizes using the simple interest method. (ii) Compliance with Law. Each Receivable and the sale of the related Financed Vehicle complied at the time it was originated or made, and at the time of execution of this Agreement complies, in all material respects with all requirements of applicable federal, state and, to the best knowledge of the Seller, local laws, rulings and regulations thereunder, including usury laws, the Federal Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Federal Trade Commission Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations "B" and "Z," the Soldiers' and Sailors' Civil Relief Act of 1940, and state adaptations of the National Consumer Act and of the Uniform Consumer Credit Code, and other consumer credit laws and equal credit opportunity and disclosure laws applicable to such Receivable. (iii) Binding Obligation. Each Receivable represents the genuine, legal, valid and binding payment obligation of the Obligor thereon, enforceable by the holder thereof in accordance with its terms, except (A) as enforceability thereof may be limited by 11 bankruptcy, insolvency, reorganization or similar laws affecting the enforcement of creditors' rights generally and by equitable limitations on the availability of specific remedies, regardless of whether such enforceability is considered in a proceeding in equity or at law and (B) as such Receivable may be modified by the application after the Transfer Date of the Soldiers' and Sailors' Civil Relief Act of 1940, as amended. (iv) No Government Obligor. No Receivable is due from the United States of America or any State or any agency, department, subdivision or instrumentality thereof. (v) Obligor Bankruptcy. To the best of the Seller's knowledge, at the Cutoff Date with respect to the Initial Receivables and at the Subsequent Cutoff Date with respect to the Subsequent Receivables, no Obligor is or has been, since the origination of the related Receivable, the subject of a bankruptcy proceeding. (vi) Schedule of Receivables. With respect to the Initial Receivables, the information set forth in Schedule I to this Agreement is true and correct in all material respects as of the close of business on the Initial Cutoff Date and with respect to the Subsequent Receivables, the information set forth in Schedule A to the Subsequent Purchase Agreement is true and correct in all material respects as of the close of business on the Subsequent Cutoff Date. (vii) Marking Records. By the applicable Transfer Date, the Seller will have caused its computer and accounting records relating to each Receivable to be marked to show that the Receivables have been sold to the Depositor by the Seller and transferred and assigned by the Depositor to the Issuer in accordance with the terms of the Sale and Servicing Agreement and the Subsequent Transfer Agreement and pledged by the Issuer to the Indenture Trustee in accordance with the terms of the Indenture. (viii) Computer Tape. The computer tape regarding the Initial Receivables made available by the Seller to the Depositor is complete and accurate in all material respects as of the Cutoff Date and the computer tape regarding the Subsequent Receivables to be made available by the Seller to the Depositor is complete and accurate in all material respects as of the related Subsequent Transfer Date. (ix) No Adverse Selection. No selection procedures (other than those specified herein) believed by the Seller to be adverse to the Noteholders or the Certificateholders were utilized in selecting the Receivables. (x) Chattel Paper. Each Receivable constitutes chattel paper within the meaning of the UCC as in effect in the State of origination. 12 (xi) One Original. There is only one original executed copy of each Receivable. (xii) Receivables in Force. No Receivable has been satisfied, subordinated or rescinded, nor has any Financed Vehicle been released from the Lien of the related Receivable in whole or in part. None of the terms of any Receivable has been waived, altered or modified in any respect since its origination, except by instruments or documents identified in the related Receivable File. No Receivable has been modified as a result of the application of the Soldiers' and Sailors' Civil Relief Act of 1940, as amended. (xiii) Lawful Assignment. No Receivable has been originated in, or is subject to the laws of, any jurisdiction the laws of which would make unlawful, void or voidable the sale, transfer and assignment of such Receivable under this Agreement, the Subsequent Purchase Agreement, the Subsequent Transfer Agreement or the Sale and Servicing Agreement, as applicable, or the pledge of such Receivable under the Indenture. (xiv) Title. It is the intention of the Seller that the transfers and assignments herein contemplated constitute sales of the Receivables from the Seller to the Depositor and that the beneficial interest in and title to the Receivables not be part of the debtor's estate in the event of the appointment of a receiver or conservator for a Seller under any receivership, bankruptcy law, insolvency or banking law. Immediately prior to the Closing Date, no Receivable has been sold, transferred, assigned or pledged by the Seller to any Person other than to the Depositor or pursuant to this Agreement (or the Subsequent Purchase Agreement or by the Depositor to any other Person other than to the Issuer pursuant to the Sale and Servicing Agreement or the Subsequent Transfer Agreement). Immediately prior to the transfers and assignments herein contemplated, the Seller has good and marketable title to each Receivable free and clear of all Liens, and, immediately upon the transfer thereof, the Depositor shall have good and marketable title to each Receivable, free and clear of all Liens and, immediately upon the transfer thereof from the Depositor to the Issuer pursuant to the Sale and Servicing Agreement, the Issuer shall have good and marketable title to each Receivable, free and clear of all Liens and, immediately upon the pledge thereof from the Issuer to the Indenture Trustee pursuant to the Indenture, the Indenture Trustee shall have a first priority perfected security interest in each Receivable. (xv) Security Interest in Financed Vehicle. Immediately prior to its sale, assignment and transfer to the Depositor pursuant to this Agreement or the Subsequent Purchase Agreement, each Receivable is secured by a first priority perfected security interest in the related Financed Vehicle in favor of BMW FS as secured party, or all necessary and appropriate actions have been commenced that will result in the valid perfection of a first priority security interest in such Financed Vehicle in favor of the BMW FS as secured party. The Lien Certificate 13 for each Financed Vehicle shows, or if a new or replacement Lien Certificate is being applied for with respect to such Financed Vehicle such Lien Certificate shall be received within 120 days of the Closing Date and shall show, BMW FS or its predecessor in interest named as the original secured party under each Receivable as the holder of a first priority security interest in such Financed Vehicle. With respect to each Receivable for which the Lien Certificate has not yet been returned from the Registrar of Titles, BMW FS has received written evidence that such Lien Certificate showing BMW FS as first lienholder has been applied for. Each Dealer's security interest in any Receivable originated by such Dealer has been validly assigned by the Dealer to BMW FS. BMW FS' security interest has been validly assigned to the Depositor pursuant to this Agreement or the Subsequent Purchase Agreement. BMW FS has the legal right to repossess or recover by legal process the Financed Vehicle in its name. (xvi) All Filings Made. All filings (including UCC filings) required to be made in any jurisdiction to give the Issuer a first perfected ownership interest in the Receivables and the Indenture Trustee a first priority perfected security interest in the Receivables have been made or will be made on the Closing Date. (xvii) No Defenses. No Receivable is subject to any right of rescission, setoff, counterclaim, dispute or defense, including the defense of usury, whether arising out of transactions concerning the Receivable or otherwise, and the operation of any terms of the Receivable or the exercise by the Seller or the Obligor of any right under the Receivable will not render the Receivable unenforceable in whole or in part, and no such right of rescission, setoff, counterclaim, dispute or defense, including the defense of usury, has been asserted with respect thereto. (xviii) No Default. There has been no default, breach, violation or event permitting acceleration under the terms of any Receivable (other than payment delinquencies of not more than 30 days) as of the Cutoff Date, and no condition exists or event has occurred and is continuing that with notice, the lapse of time or both would constitute a default, breach, violation or event permitting acceleration under the terms of any Receivable, and there has been no waiver of any of the foregoing. On or prior to the applicable Transfer Date, no Financed Vehicle has been repossessed. (xix) Insurance. The Seller, in accordance with its customary procedures, has determined that the Obligor has obtained physical damage insurance covering each Financed Vehicle and, under the terms of the related Receivable, the Obligor is required to maintain such insurance. (xx) Final Scheduled Maturity Date. No Receivable has a final scheduled payment date later than six months prior to the Class B Final Scheduled Payment Date. 14 (xxi) Certain Characteristics of the Receivables. As of the applicable Cutoff Date, (A) each Receivable had an original maturity of not less than [ ] or more than [ ] months and (B) no Receivable was more than 30 days past due. (xxii) No Foreign Obligor. All of the Receivables are due from Obligors with billing addresses within the United States of America, its territories and possessions. (xxiii) No Extensions. The number or timing of scheduled payments has not been changed on any Receivable on or before the Closing Date or the Subsequent Transfer Date, as applicable, except as reflected on the computer tape delivered in connection with the sale of the Receivables. (xxiv) Scheduled Payments. Each Initial Receivable had a first scheduled payment due on or prior to 45 calendar days after the origination date thereof, provided, however, that with respect to Subsequent Receivables relating to motorcycles the first Scheduled Payment shall have been due on or prior to 90 calendar days after the origination date thereof. Each Obligor has been instructed to make all scheduled payments to BMW FS. To the best knowledge of the Seller, each Obligor has paid the entire down payment called for by the contract. (xxv) Reserved. (xxvi) Receivable Files Complete. There exists a Receivable File pertaining to each Receivable and such Receivable File contains, without limitation, (A) a fully executed original of the Receivable, (B) the original Lien Certificate or application therefor together with such other documents that the Seller shall keep on file in accordance with its customary procedures evidencing the security interest of the Seller in the related Financed Vehicle, and (C) any and all other documents that the Servicer shall have kept on file in accordance with its customary procedures relating to a Receivable, an Obligor or a Financed Vehicle. Each of such documents that is required to be signed by the Obligor has been signed by the Obligor in the appropriate spaces. All blanks on any form described in clauses (A), (B) and (C) above have been properly filled in and each form has otherwise been correctly prepared in all material respects. Notwithstanding the above, the complete Receivable File for each Receivable, (x) shall fulfill the documentation requirements of the Seller's credit policies as in effect on the date of origination of such Receivable and (y) is in possession of the Servicer and Custodian, as applicable, on the Transfer Date. The blanket power of attorney granted to the Indenture Trustee and the original Lien Certificate are the only documents necessary to permit the Indenture Trustee to submit the Lien Certificate for each Financed Vehicle for retitling in the name of the Indenture Trustee as secured party in the event such retitling were required or otherwise permitted under the Basic Documents. 15 (xxvii) Receivables Not Assumable. No Receivable is assumable by another person in a manner which would release the Obligor thereof from such Obligor's obligations to the Seller with respect to such Receivable. (xxviii) Tax Liens. To the best of the Seller's knowledge, there is no Lien against any Financed Vehicle for delinquent taxes. (xxix) No Impairment. The Seller has not done anything to convey any right to any person that would result in such person having a right to payments due under a Receivable or otherwise to impair the rights of the Depositor in any Receivable or the proceeds thereof. (xxx) Servicing. Each Receivable has been serviced in conformity with all applicable laws, rules and regulation and in conformity with the Seller's policies and procedures which are consistent with customary, prudent industry standards. (xxxi) No Corporate Obligor. Other than with respect to no more than [2.5%] of the Initial Receivables, all of the Receivables are due from Obligors who are natural persons. (xxxii) No Liens. No Liens or claims have been filed for work, labor, or materials relating to a Financed Vehicle that are prior to, or equal or coordinate with, the security interest in the Financed Vehicle granted by the related Receivable. (xxxiii) APR. No Initial Receivable has an APR of less than 0% and the weighted average coupon on the pool of Initial Receivables is at least [ ]%. (xxxiv) Remaining Term. Each Receivable has a remaining term of at least one month and no more than [ ] months. (xxxv) Seasoning. The weighted average number of months since the initial installment due date for the Initial Receivables is at least [ ] months. (xxxvi) Remaining Balance. Each Initial Receivable has a remaining balance of at least $[ ] and not greater than $[ ]. (xxxvii) New Vehicles. At least [ ]% of the aggregate principal balance of the Initial Receivables is secured by Financed Vehicles which were new at the date of origination. (xxxviii) No Repossessions. No Financed Vehicle has been repossessed prior to the applicable Transfer Date. 16 (xxxix) Initial Payment. The Obligor with respect to each Receivable has made at least one scheduled payment. (xl) No Proceedings. As of the Cutoff Date, there are no proceedings pending, or to the best of the Seller's knowledge, threatened, wherein the Obligor or any governmental agency has alleged that any Receivable is illegal or unenforceable. (xli) Each Dealer from whom the Seller purchases Receivables directly has entered into a Dealer Agreement with the Seller providing for the sale of Receivables from time to time by such Dealer to the Seller. Each Dealer Agreement is substantially in the form attached to the Sale and Servicing Agreement as Exhibit D, except for immaterial modifications or deviations from the Dealer Agreement. Such modifications and deviations from the Dealer Agreement will not have a material adverse effect on the Noteholders. (xlii) BMW FS has duly fulfilled all obligations to be fulfilled on its part under or in connection with the origination, acquisition and assignment of the Receivables. (xliii) No Consent. To the best of the Seller's knowledge, no notice to or consent from any Obligor is necessary to effect the acquisition of the Receivables by the Depositor or the Trust or the pledge of the Receivables by the Trust to the Indenture Trustee. (xliv) No Transfer Taxes. The sale, transfer, assignment and conveyance of the Receivables by the Seller pursuant to this Agreement and the Subsequent Purchase Agreement is not subject to and will not result in any tax, fee or governmental charge payable by the Seller, the Issuer or the Indenture Trustee to any federal, state or local government ("Transfer Taxes") other than Transfer Taxes which have or will be paid by the Seller as due. In the event the Issuer or the Indenture Trustee receives actual notice of any Transfer Taxes arising out of the transfer, assignment and conveyance of the Receivables, on written demand by the Issuer or the Indenture Trustee, or upon the Seller's otherwise being given notice thereof by the Issuer or the Indenture Trustee, the Seller shall pay, and otherwise indemnify and hold the Issuer and the Indenture Trustee harmless, on an after-tax basis, from and against any and all such Transfer Taxes (it being understood that the Noteholders, the Indenture Trustee and the Issuer shall have no obligation to pay such Transfer Taxes). (xlv) Reserved. (xlvi) Aggregate Balance. The aggregate principal balance of the Initial Receivables as of the Initial Cutoff Date is equal to $[ ]. 17 (xlvii) Geographic Distribution. No more than [ ]% of the aggregate principal balance of the Receivables as of the Cutoff Date is attributable to Receivables with Obligors having a billing address in any single State other than [ ], [ ], [ ] and [ ], which represent no more than [ ]%, [ ]%, [ ]% and [ ]%, respectively. (xlviii) No Advances. No advances have been made to Obligors in order to meet any representation and warranties herein set forth; provided, however, that Receivables may have had up to four extensions prior to the Cutoff Date, subject to the following: (A) each such extension was made in conformity with the Extension Policy and (B) each extended Receivable satisfies in all material respects all applicable requirements under BMW FS' credit and collection policies as of the date of its origination. (xlix) Amount Financed. At the time each Receivable was acquired from the Dealer, the Amount Financed was fully disbursed. There is no requirement for future advances of principal thereunder, and all fees and expenses in connection with the origination of such Receivable have been paid. (l) The computer tape from which the selection of the Initial Receivables being acquired on the Closing Date was made available to the accountants that are providing a comfort letter to the Depositor, the Underwriters and the Noteholders in connection with the numerical information regarding the Receivables and the Notes contained in the Prospectus Supplement and such information in the Prospectus Supplement with respect to the Receivables and the Notes was complete and accurate as of its date and includes a description of the same Receivables that are described in Schedule I to this Agreement. (li) Reserved. (lii) In connection with the purchase of each Receivable, the Seller required the related Dealer to furnish evidence that the related Financed Vehicle was covered by a physical damage insurance policy (i) in an amount at least equal to the lesser of (a) the actual cash value of the related Financed Vehicle or (b) the unpaid principal balance owing on such Receivable, (ii) naming the Seller as a loss payee and (iii) insuring against loss and damage due to fire, theft, transportation, collision and other risks generally covered by comprehensive and collision coverage. (liii) The Dealer that sold each Receivable to BMW FS has entered into the Dealer Agreement and such Dealer Agreement, together with the assignment and related documentation signed by the Dealer, constitutes the entire agreement between BMW FS and the related Dealer with respect to the sale of such Receivable to BMW FS. Each such Dealer Agreement is in full force and effect and is the legal, valid and binding obligation of such Dealer, there have been no material defaults by BMW FS under such Dealer Agreement; BMW FS has fully performed all 18 of its obligations under such Dealer Agreement; BMW FS has not made any statements or representations to such Dealer (whether written or oral) inconsistent with any term of such Dealer Agreement; the purchase price (as specified in the applicable Dealer Agreement) for such Receivable has been paid in full, other than any dealer reserve, by BMW FS; and any payment owed to such Dealer by BMW FS is a corporate obligation of BMW FS. (liv) Each Receivable requires the Obligor to maintain the related Financed Vehicle in good and workable order and to obtain and maintain physical damage insurance on the related Financed Vehicle subject thereto and to name the Seller as a loss payee. (lv) No Receivable constitutes a "consumer lease" under either (a) the UCC as in effect in the jurisdiction whose law governs the Receivable or (b) the Consumer Leasing Act, 15 USC 1667. (c) BMW FS makes the following additional representations and warranties with respect to the Subsequent Receivables and the pool of Receivables as of the Subsequent Transfer Date, on which the Depositor relies in accepting such Receivables and in transferring such Receivables to the Issuer under the Sale and Servicing Agreement, and on which the Issuer relies in pledging the same to the Indenture Trustee. Such representations and warranties shall survive the sale, transfer and assignment of the Subsequent Receivables to the Depositor, the subsequent sale, transfer and assignment of the Subsequent Receivables by the Depositor to the Issuer pursuant to the Sale and Servicing Agreement and the pledge of the Subsequent Receivables by the Issuer to the Indenture Trustee pursuant to the Indenture. (i) Seasoning. After the inclusion of the Subsequent Receivables, the weighted average number of months since the initial installment due date for the Receivables is at least [ ] months; (ii) APR. The minimum APR for the Subsequent Receivables is [ ]%. (iii) New Vehicles. After the inclusion of the Subsequent Receivables, at least [ ]% of the aggregate principal balance of the Receivables is secured by Financed Vehicles which were new at the date of origination. ARTICLE IV CONDITIONS SECTION 4.01. Conditions to Obligation of the Depositor. The obligation of the Depositor to purchase the Receivables is subject to the satisfaction of the following conditions: 19 (a) Representations and Warranties True. The representations and warranties of the Seller hereunder shall be true and correct on the Transfer Date with the same effect as if then made, and the Seller shall have performed all obligations to be performed by it hereunder on or prior to the Transfer Date. (b) Computer Files Marked. The Seller shall, at its own expense, on or prior to the Transfer Date, indicate in its computer files that the Receivables have been sold to the Depositor pursuant to this Agreement and deliver to the Depositor the Schedule of Receivables, certified by the Seller's President, Vice President or Treasurer to be true, correct and complete. (c) Documents To Be Delivered by the Seller on the Transfer Date: (i) Reserved. (ii) Evidence of UCC Filing. On or prior to the Closing Date, the Seller shall record and file, at its own expense, a UCC-1 financing statement in New Jersey in which required by applicable law, executed by the Seller, as seller or debtor, and naming the Depositor, as secured party, describing the Receivables and the other assets assigned to the Depositor pursuant to Section 2.01 or 2.03 hereof, as applicable, meeting the requirements of the laws of each such jurisdiction and in such manner as is necessary to perfect the sale, transfer, assignment and conveyance of the Receivables and such other assets to the Depositor. The Seller shall deliver to the Depositor a file-stamped copy or other evidence satisfactory to the Depositor of such filing on or prior to the Transfer Date. (iii) Opinions of Seller's Counsel. On or prior to the Closing Date, the Depositor shall have received the opinions of counsel to the Seller, in form and substance satisfactory to the Depositor, as to the matters set forth in Exhibit A hereto and such other matters as the Depositor has heretofore requested or may reasonably request. (iv) Other Documents. Such other documents as the Depositor may reasonably request. (d) Other Transactions. The transactions contemplated by the Sale and Servicing Agreement, the Indenture and the Trust Agreement to be consummated on the Transfer Date shall be consummated on such date. SECTION 4.02. Conditions to Obligation of the Seller. The obligation of the Seller to sell the Receivables to the Depositor is subject to the satisfaction of the following conditions: (a) Representations and Warranties True. The representations and warranties of the Depositor hereunder shall be true and correct on the Transfer Date with the same effect as if then made, and the Depositor shall have 20 performed all obligations to be performed by it hereunder on or prior to the Transfer Date. (b) Receivables Purchase Price. On the Transfer Date, the Depositor shall have delivered to the Seller the purchase price specified in Section 2.01 hereof in the case of the Initial Receivables, or specified in the Subsequent Purchase Agreement in the case of the Subsequent Receivables. (c) Opinion of Counsel. The Depositor shall have furnished to the Seller an Opinion of Counsel, dated the Closing Date, to the effect that: (i) the Depositor has been duly incorporated and is validly existing as a limited liability company in good standing under the laws of the State of Delaware, with full corporate power and authority to own its properties and conduct its business as described in the Prospectus; (ii) each of this Agreement, the Sale and Servicing Agreement and the Trust Agreement has been duly authorized, executed and delivered by the Depositor and constitutes a legal, valid and binding obligation of the Depositor, enforceable against the Depositor in accordance with its terms except as limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, receivership, conservatorship or similar laws relating to or affecting creditors' rights generally or the rights of creditors, or of the FDIC as insurer, regulator, conservator or receiver, of banks the accounts of which are insured by the FDIC in particular and except that such counsel need express no opinion as to the availability of equitable remedies or the enforceability of rights of indemnification for violations of federal securities laws; (iii) no consent, approval, authorization or order of, or filing with, any court or governmental agency or body is required for the consummation by the Depositor of the transactions contemplated herein or in this Agreement, the Sale and Servicing Agreement, the Trust Agreement or the Indenture (collectively, the "Basic Documents"), except such as may be required under the blue sky or securities laws of any jurisdiction in connection with the purchase and sale of the Notes by the Underwriters, the filing of the UCC-1 financing statements relating to the conveyance of the Receivables and the other Trust Property by the Seller to the Depositor and of the Receivables and the other Trust Property by the Depositor to the Trust and by the Trust to the Indenture Trustee for the benefit of the Noteholders and the filing of the UCC-1 financing statements relating to the security interests in the Eligible Investments included in the Reserve Account, and such other approvals (which shall be specified in such opinion) as have been obtained and such filings as have been made or are in the process of being made; (iv) none of the issue and sale of the Notes and Certificates, the execution and delivery of this Agreement, the Sale and Servicing Agreement or the Trust Agreement, the consummation of any other of the 21 transactions herein or therein contemplated or the fulfillment of the terms hereof or thereof will conflict with, result in a breach or violation of, or constitute a default under, the limited liability company agreement of the Depositor or the terms of any indenture or other agreement or instrument known to such counsel and to which the Depositor is a party or by which it is bound, or any judgment, order or decree known to such counsel to be applicable to the Depositor of any court, regulatory body, administrative agency, governmental body, or arbitrator having jurisdiction over the Depositor; and (v) the Registration Statement, and each amendment thereto, as of its effective date (other than any financial, numerical or statistical information contained or incorporated by reference therein, as to which such counsel need express no opinion) complied as to form in all material respects with the requirements of the Act and the Rules and Regulations. (d) Other Transactions. The transactions contemplated by the Sale and Servicing Agreement, the Indenture and the Trust Agreement to be consummated on the Transfer Date shall be consummated on such date. ARTICLE V COVENANTS OF THE SELLER The Seller agrees with the Depositor and the Indenture Trustee as follows: SECTION 5.01. Protection of Right, Title and Interest. --------------------------------------- (a) Filings. The Seller shall cause at its own expense all financing statements and continuation statements and any other necessary documents covering the right, title and interest of the Seller, the Depositor, the Trust and the Indenture Trustee, respectively, in and to the Receivables and the other property included in the Trust Estate to be promptly filed and at all times to be kept recorded, registered and filed, all in such manner and in such places as may be required by law fully to preserve and protect the right, title and interest of the Depositor hereunder, the Trust under the Sale and Servicing Agreement and the Indenture Trustee under the Indenture in and to the Receivables and the other property included in the Trust Estate. The Seller shall deliver to the Depositor and the Indenture Trustee file stamped copies of, or filing receipts for, any document recorded, registered or filed as provided above, as soon as available following such recordation, registration or filing. The Depositor shall cooperate fully with the Seller in connection with the obligations set forth above and will execute any and all documents reasonably required to fulfill the intent of this paragraph. (b) Name Change. If the Seller makes any change in its name, identity or corporate structure that would make any financing statement or continuation statement filed in accordance with paragraph (a) above seriously misleading within the applicable provisions of the UCC or any title statute, the 22 Seller shall give the Depositor, the Indenture Trustee and the Owner Trustee written notice thereof at least 45 days prior to such change and shall promptly file such financing statements or amendments as may be necessary to continue the perfection of the Depositor's interest in the property conveyed pursuant to Section 2.01. SECTION 5.02. Other Liens or Interests. Except for the conveyances hereunder and pursuant to the Basic Documents, the Seller shall not sell, pledge, assign or transfer to any Person, or grant, create, incur, assume, or suffer to exist any Lien on, or any interest in, to or under the Receivables, and the Seller shall defend the right, title and interest of the Depositor, the Trust and the Indenture Trustee in, to and under the Receivables against all claims of third parties claiming through or under the Seller. SECTION 5.03. Costs and Expenses. BMW FS agrees to pay all reasonable costs and disbursements in connection with the perfection, as against all third parties, of the Depositor's, the Issuer's and the Indenture Trustee's right, title and interest in and to the Receivables and the other property included in the Trust Estate. SECTION 5.04. Hold Harmless. BMW FS shall protect, defend, indemnify and hold the Depositor, the Issuer, the Underwriters and their respective assigns and their employees, officers and directors harmless from and against all losses, liabilities, claims and damages of every kind and character, including any legal or other expenses reasonably incurred, as incurred, resulting from or relating to or arising out of (i) the inaccuracy, nonfulfillment or breach of any representation, warranty, covenant or agreement made by the Seller in this Agreement, (ii) any legal action, including, without limitation, any counterclaim, that has either been settled by the litigants or has proceeded to judgment by a court of competent jurisdiction, in either case to the extent it is based upon alleged facts that, if true, would constitute a breach of any representation, warranty, covenant or agreement made by the Seller in this Agreement, or (iii) any failure of a Receivable to be originated in compliance with all applicable requirements of law. These indemnity obligations shall be in addition to any obligation that the Seller may otherwise have. ARTICLE VI MISCELLANEOUS PROVISIONS SECTION 6.01. Obligations of Seller. The obligations of the Seller under this Agreement shall not be affected by reason of any invalidity, illegality or irregularity of any Receivable. SECTION 6.02. Repurchase Events. The Seller hereby covenants and agrees with the Depositor for the benefit of the Depositor, the Indenture Trustee, the Issuer, the Owner Trustee, the Certificateholders and the Noteholders that the occurrence of a breach of any of the Seller's representations and warranties contained in Section 3.02(b) that materially and adversely affects the interests of the Issuer, the Indenture Trustee, the Owner Trustee, the Certificateholders 23 or the Noteholders in any Receivable, without regard to any limitation set forth in such representation or warranty concerning the knowledge of the Seller as to the facts stated therein, shall constitute an event obligating the Seller to repurchase the Receivables to which such failure or breach is applicable (each, a "Repurchase Event"), at the Purchase Amount, from the Depositor or from the Issuer, as applicable, unless any such failure or breach shall have been cured by the last day of the first Collection Period following the discovery or notice thereof by or to the Seller or the Servicer. SECTION 6.03. Depositor Assignment of Repurchased Receivables. With respect to all Receivables repurchased by the Seller pursuant to this Agreement, the Depositor shall assign, without recourse, representation or warranty, to the repurchasing Seller all of the Depositor's right, title and interest in and to such Receivables and all security and documents relating thereto. SECTION 6.04. Transfer to the Issuer. The Seller acknowledges and agrees that (1) the Depositor will, pursuant to the Sale and Servicing Agreement, transfer and assign the Receivables and assign its rights under this Agreement with respect thereto to the Issuer and, pursuant to the Indenture, the Issuer will pledge the Receivables to the Indenture Trustee, and (2) the representations and warranties contained in this Agreement and the rights of the Depositor under this Agreement, including under Section 6.02, are intended to benefit the Issuer and the Noteholders. The Seller hereby consents to such transfers and assignments and agrees that enforcement of a right or remedy hereunder by the Indenture Trustee, the Owner Trustee or the Issuer shall have the same force and effect as if the right or remedy had been enforced or executed by the Depositor. SECTION 6.05. Amendment. This Agreement may be amended from time to time, with prior written notice to the Rating Agencies, but without the consent of the Noteholders or the Certificateholders, by a written amendment duly executed and delivered by the Seller and the Depositor, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or of modifying in any manner the rights of Noteholders or Certificateholders; provided that such amendment shall not, as evidenced by an Opinion of Counsel, materially and adversely affect the interest of any Noteholder or Certificateholder; provided further, that such action shall not be deemed to adversely affect in any material respect the interests of any Noteholder or Certificateholder and no Opinion of Counsel to that effect shall be required if the person requesting the amendment obtains a letter from the Rating Agencies stating that the amendment would not result in the downgrading or withdrawal of the ratings of then assigned to the Notes. This Agreement may also be amended by the Seller and the Depositor, with prior written notice to the Rating Agencies and the prior written consent of Holders of Notes evidencing at least a majority of the Outstanding Amount of the Controlling Class of Notes and the Holders (as defined in the Trust Agreement) of outstanding Certificates evidencing not less than a majority of the outstanding Certificate Percentage Interests, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or of modifying in any manner the rights of the Noteholders or the Certificateholders; provided, 24 however, that no such amendment may (i) increase or reduce in any manner the amount of, or accelerate or delay the timing of, collections of payments on Receivables or distributions that are required to be made for the benefit of Noteholders or Certificateholders or (ii) reduce the aforesaid percentage of the Notes or the Certificates that is required to consent to any such amendment, without the consent of the Holders of all the outstanding Notes and Certificates. SECTION 6.06. Waivers. No failure or delay on the part of the Depositor, the Issuer or the Indenture Trustee in exercising any power, right or remedy under this Agreement or the Bill of Sale shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or remedy preclude any other or further exercise thereof or the exercise of any other power, right or remedy. SECTION 6.07. Notices. All demands, notices and communications under this Agreement shall be in writing, personally delivered, faxed and followed by first class mail, or mailed by certified mail, return receipt requested, and shall be deemed to have been duly given upon receipt (a) in the case of the Depositor, to 300 Chestnut Ridge Road, Woodcliff Lake, New Jersey 07677, Attention: Vice President of Finance and Risk; (b) in the case of the Servicer, Administrator and Custodian, to 300 Chestnut Ridge Road, Woodcliff Lake, New Jersey 07677, Attention: Vice President of Finance and Risk, (c) in the case of the Seller, 300 Chestnut Ridge Road, Woodcliff Lake, New Jersey 07677, Attention: Vice President of Finance and Risk; (d) in the case of the Issuer or the Owner Trustee, at the Corporate Trust Administration Department (as defined in the Trust Agreement); (e) in the case of Moody's, to 99 Church Street, New York, New York 10007, Attention: ABS Monitoring Department, and (g) in the case of Standard & Poor's, to 55 Water Street (40th Floor), New York, New York 10041, Attention: Asset Backed Surveillance Department; or, as to each of the foregoing, at such other address as shall be designated by written notice to the other parties. SECTION 6.08. Costs and Expenses. The Seller shall pay all expenses incident to the performance of their obligations under this Agreement and the Seller agrees to pay all reasonable out-of-pocket costs and expenses of the Depositor, in connection with the perfection as against third parties of the Depositor's, the Issuer's and the Indenture Trustee's right, title and interest in and to the Receivables and the enforcement of any obligation of the Seller hereunder. SECTION 6.09. Representations of the Seller and the Depositor. The respective agreements, representations, warranties and other statements by the Seller and the Depositor set forth in or made pursuant to this Agreement shall remain in full force and effect and will survive the closing under Section 2.02 and the transfers and assignments referred to in Section 6.04. SECTION 6.10. Confidential Information. The Depositor agrees that it will neither use nor disclose to any person the names and addresses of the Obligors, except in connection with the enforcement of the Depositor's rights hereunder, under the Receivables, under the Sale and Servicing Agreement or any 25 other Basic Document, or as required by any of the foregoing or by law. SECTION 6.11. Headings and Cross-References. The various headings in this Agreement are included for convenience only and shall not affect the meaning or interpretation of any provision of this Agreement. References in this Agreement to section names or numbers are to such Sections of this Agreement. SECTION 6.12. GOVERNING LAW. THIS AGREEMENT AND THE ASSIGNMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER OR THEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. SECTION 6.13. Counterparts. This Agreement may be executed in counter-parts, each of which shall be an original, but all of which together shall constitute one and the same instrument. SECTION 6.14. Third Party Beneficiary. The Indenture Trustee is an express third party beneficiary of this Agreement and shall be entitled to enforce the provisions of this Agreement as if it were a party hereto. SECTION 6.15. No Proceedings. So long as this Agreement is in effect, and for one year plus one day following its termination, each of the Seller and the Depositor agree that it will not file any involuntary petition or otherwise institute any bankruptcy, reorganization arrangement, insolvency or liquidation proceeding or other proceedings under any federal or state bankruptcy law or similar law against the Trust. 26 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective duly authorized officers as of the date and year first above written. BMW FINANCIAL SERVICES NA, LLC By:_________________________________ Name: Title: By:_________________________________ Name: Title: BMW FS SECURITIES LLC By:_________________________________ Name: Title: By:_________________________________ Name: Title: 27 EXHIBIT A MATTERS ADDRESSED IN OPINION OF SELLER'S COUNSEL 28 EXHIBIT B SUBSEQUENT PURCHASE AGREEMENT SUBSEQUENT PURCHASE AGREEMENT (the "Agreement") dated as of _________, between BMW FS Securities LLC, a Delaware limited liability company (the "Depositor") and BMW Financial Services NA, LLC ("BMW FS"). Reference is hereby made to the Receivables Purchase Agreement (the "Purchase Agreement") dated as of April [ ], 2001, between BMW FS and the Depositor. WHEREAS, BMW FS wishes to sell the Contracts listed on Schedule A hereto having, as of ________ (the "Subsequent Cutoff Date"), an aggregate outstanding principal balance of $___________ (the "Subsequent Receivables") to the Depositor, and the Depositor wishes to purchase such Subsequent Receivables for the purchase price of $____________; NOW, THEREFORE, BMW FS and THE DEPOSITOR hereby agree as follows: Section 1.01. Definitions. Capitalized terms used herein and not otherwise defined herein shall the meanings ascribed to them in the Purchase Agreement. Section 1.02. Subsequent Receivables. Schedule A attached hereto constitutes the Subsequent Receivables to be sold to the Depositor. Section 1.03. Transfer of Subsequent Contracts to the Depositor. Pursuant to and upon the representations, warranties and agreements on the part of BMW FS in the Purchase Agreement and herein and in consideration of payment of the purchase price above stated, BMW FS does hereby sell, assign, transfer and otherwise convey unto the Depositor, without recourse (except as expressly provided in the Purchase Agreement), all of its right, title and interest in and to (1) the Subsequent Receivables and all monies received thereon on or after the Subsequent Cutoff Date; (2) the security interests in the Financed Vehicles and any accessions thereto granted by Obligors pursuant to the Subsequent Receivables and any of its other interest in such Financed Vehicles; (3) any Liquidation Proceeds and any other proceeds with respect to the Subsequent Receivables from claims on any physical damage, credit life or disability insurance policies covering Financed Vehicles or Obligors, including any vendor's single interest or other collateral protection insurance policy; (4) any property that shall have secured a Subsequent Receivable and shall have been acquired by or on behalf of BMW FS; (5) all documents and other items contained in the Receivables Files; (6) all proceeds from any Subsequent Receivable repurchased by a Dealer pursuant to a Dealer Agreement; and (7) the proceeds of any and all of the foregoing. The foregoing sale does not constitute and is not intended to result in any assumption by the Depositor of any obligation of BMW FS to the Obligors, insurers or any other person in connection with the Subsequent Receivables, Receivable Files, any insurance policies or any agreement or instrument relating to any of them. It is the intention of BMW FS and the Depositor that the transfer contemplated by this Agreement shall 29 constitute a sale of the Subsequent Receivables from BMW FS to the Depositor, conveying good title thereto free and clear of any Liens, and that the Subsequent Receivables shall not be a part of BMW FS' estate in the event of the filing of a bankruptcy petition by or against BMW FS under any bankruptcy or similar law. Section 1.04. Representations of BMW FS. BMW FS hereby represents and warrants to the Depositor and the Indenture Trustee that its representations and warranties set forth in Section 3.02 of the Purchase Agreement with respect to itself and the Subsequent Receivables, are true and correct as of the date of this Agreement and that all conditions precedent set forth in Section 2.03(b) of the Purchase Agreement have been satisfied. Section 1.05. Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 1.06. Counterparts. This Agreement may be executed in counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument. Section 1.07. Headings. The headings of the various Sections herein are for convenience of reference only and shall not define or limit any of the terms or provisions hereof. Section 1.08. GOVERNING LAW. THIS AGREEMENT SHALL BE CON-STRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. Section 1.09. Third Party Beneficiaries. The Indenture Trustee is an express third party beneficiary of this Agreement and shall be entitled to enforce the provisions of this Agreement as if each were a party hereto. Section 1.10. Ratification of Agreement. As supplemented by this Agreement, the Purchase Agreement is in all respects ratified and confirmed and the Purchase Agreement as so supplemented by this Agreement shall be read, taken and construed as one and the same instrument. 30 IN WITNESS WHEREOF, the undersigned have caused this Subsequent Purchase Agreement to be duly executed as of the date first above written. BMW FS SECURITIES LLC By:_________________________________ Name: Title: By:________________________________ Name: Title: BMW FINANCIAL SERVICES NA, LLC By:________________________________ Name: Title: By:________________________________ Name: Title: 31 SCHEDULE A TO SUBSEQUENT PURCHASE AGREEMENT Schedule of Subsequent Receivables ---------------------------------- 32 EXHIBIT C PROSPECTUS SUPPLEMENT 33 SCHEDULE I Schedule of Receivables ----------------------- [To be delivered to the Indenture Trustee at Closing] 34 SCHEDULE II Location of Receivable Files ---------------------------- BMW Financial Services NA, LLC 5515 Park Center Circle Dublin, Ohio 43017 35 SCHEDULE III Receivable File Schedule ------------------------ 1. All documents obtained or created in connection with the credit investigation. 2. All Obligor records including without limitation (i) file copy of Receivable; (ii) copy Dealer assignment (if applicable) and any intervening assignments; (iii) warranty copy (if applicable); (iv) credit life insurance policy (if applicable); (v) proof of auto insurance or obligor agreement to provide such insurance; (vi) title application; (vii) contract verification sheet; and (viii) original application or electronic copy thereof. 3. Original document envelope together with all documents maintained therein. 4. Any and all other documents that the Servicer shall keep on file in accordance with its customary procedures relating to a Receivable, an Obligor or a Financed Vehicle. 36 EX-25.1 13 s3aex25-1.txt EXHIBIT 25.1 ------------ SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 ------------------------- FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE ------------------------------------------- CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________ ---------------------------------------- THE CHASE MANHATTAN BANK (Exact name of trustee as specified in its charter) New York 13-4994650 (State of incorporation (I.R.S. employer if not a national bank) identification No.) 270 Park Avenue New York, New York 10017 (Address of principal executive offices) (Zip Code) William H. McDavid General Counsel 270 Park Avenue New York, New York 10017 Tel: (212) 270-2611 --------------------------------------------------------- (Name, address and telephone number of agent for service) BMW Vehicle Owner Trust 2001-A (Exact name of obligor as specified in its charter) Delaware Applied For (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification No.) C/O the Wilmington Trust Company, as Owner Trustee, Rodney Square North, 1100 North Market Street, Wilmington, DE 19890-0001 (Address of principal executive offices) (Zip Code) ----------------------------------------------------- ____% Asset Backed Notes, Class A-1 - A-4 and Class B (Title of the indenture securities) ----------------------------------------------------- GENERAL Item 1. General Information. Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. New York State Banking Department, State House, Albany, New York 12110. Board of Governors of the Federal Reserve System, Washington, D.C., 20551 Federal Reserve Bank of New York, District No. 2, 33 Liberty Street, New York, N.Y. Federal Deposit Insurance Corporation, Washington, D.C., 20429. (b) Whether it is authorized to exercise corporate trust powers. Yes. Item 2. Affiliations with the Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. None. 2 Item 16. List of Exhibits List below all exhibits filed as a part of this Statement of Eligibility. 1. A copy of the Articles of Association of the Trustee as now in effect, including the Organization Certificate and the Certificates of Amendment dated February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982, February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1 filed in connection with Registration Statement No. 333-06249, which is incorporated by reference). 2. A copy of the Certificate of Authority of the Trustee to Commence Business (see Exhibit 2 to Form T-1 filed in connection with Registration Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in connection with the merger of Chemical Bank and The Chase Manhattan Bank (National Association), Chemical Bank, the surviving corporation, was renamed The Chase Manhattan Bank). 3. None, authorization to exercise corporate trust powers being contained in the documents identified above as Exhibits 1 and 2. 4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to Form T-1 filed in connection with Registration Statement No. 333-06249, which is incorporated by reference). 5. Not applicable. 6. The consent of the Trustee required by Section 321(b) of the Act (see Exhibit 6 to Form T-1 filed in connection with Registration Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in connection with the merger of Chemical Bank and The Chase Manhattan Bank (National Association), Chemical Bank, the surviving corporation, was renamed The Chase Manhattan Bank). 7. A copy of the latest report of condition of the Trustee, published pursuant to law or the requirements of its supervising or examining authority. 8. Not applicable. 9. Not applicable. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939 the Trustee, The Chase Manhattan Bank, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of New York and State of New York, on the 1st day of May 2001. THE CHASE MANHATTAN BANK By /s/ Patricia M.F. Russo ---------------------------------------------- Patricia M.F. Russo Vice President 3 Item 16. List of Exhibits List below all exhibits filed as a part of this Statement of Eligibility. 1. A copy of the Articles of Association of the Trustee as now in effect, including the Organization Certificate and the Certificates of Amendment dated February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982, February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1 filed in connection with Registration Statement No. 333-06249, which is incorporated by reference). 2. A copy of the Certificate of Authority of the Trustee to Commence Business (see Exhibit 2 to Form T-1 filed in connection with Registration Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in connection with the merger of Chemical Bank and The Chase Manhattan Bank (National Association), Chemical Bank, the surviving corporation, was renamed The Chase Manhattan Bank). 3. None, authorization to exercise corporate trust powers being contained in the documents identified above as Exhibits 1 and 2. 4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to Form T-1 filed in connection with Registration Statement No. 333-06249, which is incorporated by reference). 5. Not applicable. 6. The consent of the Trustee required by Section 321(b) of the Act (see Exhibit 6 to Form T-1 filed in connection with Registration Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in connection with the merger of Chemical Bank and The Chase Manhattan Bank (National Association), Chemical Bank, the surviving corporation, was renamed The Chase Manhattan Bank). 7. A copy of the latest report of condition of the Trustee, published pursuant to law or the requirements of its supervising or examining authority. 8. Not applicable. 9. Not applicable. 4 SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939 the Trustee, The Chase Manhattan Bank, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of New York and State of New York, on the 1st day of May 2001. THE CHASE MANHATTAN BANK By /s/ Patricia M.F. Russo ---------------------------------------------- Patricia M.F. Russo Vice President Exhibit 7 to Form T-1 Bank Call Notice RESERVE DISTRICT NO. 2 CONSOLIDATED REPORT OF CONDITION OF The Chase Manhattan Bank of 270 Park Avenue, New York, New York 10017 and Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business June 30, 2000, in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act. Dollar Amounts ASSETS in Millions Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin ....................................... $ 15,412 Interest-bearing balances ............................... 4,593 Securities: .................................................. Held to maturity securities .................................. 613 Available for sale securities ................................ 57,372 Federal funds sold and securities purchased under agreements to resell .................................... 29,490 Loans and lease financing receivables: Loans and leases, net of unearned income ................ $142,368 Less: Allowance for loan and lease losses ............... 2,227 Less: Allocated transfer risk reserve ................... 0 -------- Loans and leases, net of unearned income, allowance, and reserve .................................. 140,141 Trading Assets ............................................... 48,079 Premises and fixed assets (including capitalized leases) ................................................. 3,447 Other real estate owned....................................... 27 Investments in unconsolidated subsidiaries and associated companies .................................... 259 Customers' liability to this bank on acceptances outstanding ............................................. 676 Intangible assets ............................................ 3,994 Other assets ................................................. 16,373 -------- TOTAL ASSETS ................................................. $320,476 5 LIABILITIES Deposits In domestic offices .................................. $103,433 Noninterest-bearing .................................. $ 42,054 Interest-bearing ..................................... 61,379 In foreign offices, Edge and Agreement subsidiaries and IBF's ............................... 92,486 Noninterest-bearing ....................................... $ 5,683 Interest-bearing ..................................... 86,803 Federal funds purchased and securities sold under agree- ments to repurchase ....................................... 49,016 Demand notes issued to the U.S. Treasury .................. 750 Trading liabilities ....................................... 32,878 Other borrowed money (includes mortgage indebtedness and obligations under capitalized leases): With a remaining maturity of one year or less ........ 4,298 With a remaining maturity of more than one year through three years ........................... 0 With a remaining maturity of more than three years . 97 Bank's liability on acceptances executed and outstanding .. 676 Subordinated notes and debentures ......................... 5,430 Other liabilities ......................................... 12,129 TOTAL LIABILITIES ......................................... 301,193 EQUITY CAPITAL Perpetual preferred stock and related surplus ........... 0 Common stock ............................................ 1,211 Surplus (exclude all surplus related to preferred stock) 11,066 Undivided profits and capital reserves .................. 8,165 Net unrealized holding gains (losses) on available-for-sale securities ........................ (1,175) Accumulated net gains (losses) on cash flow hedges ...... 0 Cumulative foreign currency translation adjustments ..... 16 TOTAL EQUITY CAPITAL .................................... 19,283 --------- TOTAL LIABILITIES AND EQUITY CAPITAL .................... $ 320,476 ========= I, Joseph L. Sclafani, E.V.P. & Controller of the above-named bank, do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and is true to the best of my knowledge and belief. JOSEPH L. SCLAFANI We, the undersigned directors, attest to the correctness of the Report of Condition (including the supporting schedules) for this report date and declare that it has been examined by us, and to the best of our knowledge and belief has been prepared in conformance with the in- structions issued by the appropriate Federal regulatory authority and is true and correct. WILLIAM B. HARRISON, JR. ) JOHN R. STAFFORD )DIRECTORS M. ANTHONY BURNS ) 6 -----END PRIVACY-ENHANCED MESSAGE-----