<PAGE> 1
REGISTRATION NO. 333-1245
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
______________
FORD CREDIT AUTO RECEIVABLES TWO L.P.
(Originator of the Trusts described herein)
(Exact Name of Registrant as Specified in Its Charter)
A Delaware Limited Partnership
IRS Employer Number applied for
The American Road
Dearborn, Michigan 48121
(313) 322-3000
_____________
J. D. BRINGARD, ESQ.
Ford Motor Credit Company
The American Road
Dearborn, Michigan 48121
(313) 594-7742
(Name and Address of Agent for Service)
Copy to:
SUSAN M. CURTIS, ESQ.
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
(212) 735-3000
____________
Approximate date of commencement of proposed sale to the public: From
time to time after the effective date of this Registration Statement as
determined by market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Proposed Proposed
Maximum Maximum
Title of Securities Amount to be Aggregate Price Aggregate Amount of
to be Registered Registered Per Unit (1) Offering Price (1) Registration Fee(2)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Asset Backed Securities $5,000,000,000.00 100% $5,000,000,000.00 $1,724,137.93
- -----------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) 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 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE> 2
INTRODUCTORY NOTE
This Registration Statement contains (i) a form of Prospectus
relating to the offering of series of Asset Backed Notes and/or
Asset Backed Certificates by various Ford Credit Auto Trusts created
from time to time by Ford Credit Auto Receivables Two L.P. and (ii)
two forms of Prospectus Supplement relating to the offering by Ford
Credit Auto Trust 199 - of the particular series of Asset Backed
Certificates or of Asset Backed Notes and Asset Backed Certificates
described therein. Each form of Prospectus Supplement relates only
to the securities described therein and is a form which may be
used, among others, by Ford Credit Auto Receivables Two L.P. to
offer Asset Backed Notes and/or Asset Backed Certificates under this
Registration Statement.
<PAGE> 3
The information contained herein is subject to completion or amendment.
A registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus supplement and the accompanying prospectus shall
not constitute an offer to sell or the solicitation of an offer to buy nor
shall there be any sale of these securities in any State in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED _____ __, 1996
PROSPECTUS SUPPLEMENT
(To Prospectus dated , 1996)
$
FORD CREDIT AUTO OWNER TRUST 199 -
$ % [CLASS A-1] ASSET BACKED NOTES
[$ FLOATING RATE CLASS A-2 ASSET BACKED NOTES]
[$ % CLASS A-3 ASSET BACKED NOTES]
[$ % ASSET BACKED CERTIFICATES]
[Ford Logo]
FORD CREDIT AUTO RECEIVABLES TWO L.P.
SELLER
FORD MOTOR CREDIT COMPANY
SERVICER
The Ford Credit Auto Owner Trust 199 - (the "Trust") will be governed
by an Amended and Restated Trust Agreement, to be dated as of , 199 ,
between Ford Credit Auto Receivables Two L.P. (the "Seller") and ,
as Owner Trustee. The Trust will issue $ aggregate initial
principal amount of [Class A-1] % Asset Backed Notes (the "[Class A-1]
Notes")[, $ aggregate initial principal amount of Class A-2 Floating
Rate Asset Backed Notes (the "Class A-2 Notes") and $ aggregate
initial principal amount of Class A-3 % Asset Backed Notes (the "Class
A-3 Notes" and, together with the Class A-1 Notes and the Class A-2 Notes,
the "Notes")] pursuant to an Indenture to be dated as of , 199 ,
between the Trust and , as Indenture Trustee. The Trust will also
issue $ aggregate initial principal balance of % Asset Backed
Certificates (the "Certificates" and, together with the Notes, the
"Securities"). The assets of the Trust will include a pool of motor
vehicle retail installment sale contracts (the "Receivables") secured by
security interests
(continued on following page)
PROSPECTIVE INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE INFORMATION
SET FORTH IN "RISK FACTORS" ON PAGE S-19 HEREIN AND ON PAGE 11 OF THE
ACCOMPANYING PROSPECTUS.
THE NOTES REPRESENT OBLIGATIONS OF, AND THE CERTIFICATES REPRESENT BENE-
FICIAL INTERESTS IN, THE TRUST ONLY AND DO NOT REPRESENT OBLIGATIONS
OF OR INTERESTS IN, AND ARE NOT GUARANTEED OR INSURED BY, FORD
CREDIT AUTO RECEIVABLES TWO L.P., FORD CREDIT AUTO RECEIVA-
BLES TWO, INC., FORD MOTOR CREDIT COMPANY, FORD MOTOR
COMPANY OR ANY OF THEIR RESPECTIVE AFFILIATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY REPRE-
SENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
==========================================================================
PRICE TO PUBLIC (1) UNDERWRITING PROCEEDS TO
DISCOUNT THE SELLER (1)(2)
<S> <C> <C> <C>
Per [Class A-1] Note . . . . . % % %
[Per Class A-2 Note . . . . . % % %]
[Per Class A-3 Note . . . . . % % %]
[Per Certificate . . . . . . . % % %]
Total . . . . . . . . . . . . $ $ $
==========================================================================
</TABLE>
(1) Plus accrued interest, if any, from , 199 .
(2) Before deducting expenses, estimated to be $ .
The Notes and the Certificates are offered by the Underwriters when,
as and if issued and accepted by the Underwriters and subject to their
right to reject orders in whole or in part. It is expected that delivery
of the Notes and the Certificates will be made in book-entry form only
through the Same Day Funds Settlement System of The Depository Trust
Company, or through Cedel Bank, societe anonyme or the Euroclear System,
on or about the Closing Date.
The date of this Prospectus Supplement is , 199 .
<PAGE> 4
(continued from previous page)
in the motor vehicles financed thereby, including certain monies due
or received thereunder on or after the related Cutoff Date (as
defined herein), which will be purchased by the Trust from the
Seller on or prior to the Closing Date, [monies on deposit in a
trust account (the "Pre-Funding Account") to be established with the
Indenture Trustee] and certain other property, as more fully
described herein. See "Summary--The Trust Property" herein.
[Additional motor vehicle retail installment sale contracts (the
"Subsequent Receivables") will be purchased by the Trust from the
Seller from time to time on or before , 199 , from funds on
deposit in the Pre-Funding Account.] The Notes will be secured by
the assets of the Trust pursuant to the Indenture.
Interest on [the] [all classes of] Notes [other than the Class
A-2 Notes] will accrue at the fixed per annum interest rates
specified above. [The Class A-2 Notes will accrue interest at a
rate of % per annum for the period from the Closing Date through
199 . Thereafter, the Class A-2 Notes will accrue interest at
a per annum rate equal to LIBOR plus %.] Interest on the Notes
will generally be payable [quarterly] on the day of each [month]
[ , , and ] (each, a "[Distribution] [Payment]
Date"), commencing , 199 . Principal of the Notes will be
payable on each [Distribution] [Payment] Date to the extent
described herein[; however, no principal will be paid on the Class
A-2 Notes until the Class A-1 Notes have been paid in full and no
principal will be paid on the Class A-3 Notes until the Class A-2
Notes have been paid in full].
The Certificates will represent [fractional undivided]
interests in the Trust. Interest, to the extent of the Certificate
Rate specified above, will be distributed to the Certificateholders
on [each Distribution Date] [the day of each month (each, a
"Distribution Date"), commencing , 199 ]. Principal,
to the extent described herein, will be distributed to the
Certificateholders on each Distribution Date commencing with the
later of (i) the Distribution Date next succeeding the Distribution
Date on which the [Class A-1] Notes are paid in full and (ii) the
, 199 Distribution Date. Distributions of principal and interest on
the Certificates will be subordinated in priority to payments due on
the Notes [to the extent] [as] described herein. In addition, upon
the occurrence and during the continuation of an Event of Default
which has resulted in an acceleration of the Notes or following an
Insolvency Event or a dissolution with respect to the Seller or Ford
Credit Auto Receivables Two, Inc., the general partner of the Seller
(the "General Partner"), distributions of any amounts on the
Certificates will be subordinated in priority of payment to payment
in full of principal of the Notes. [Moreover, upon any downgrading
or withdrawal by any Rating Agency of its rating of any class of
Notes, no distributions of principal on the Certificates will be
made until all the Notes have been paid in full, unless such rating
has been restored.]
[The] [Class A-1] Notes will be payable in full on the
[Payment] [Distribution] Date[, the Class A-2 Notes will be payable
in full on the [Payment] [Distribution] Date and the Class
A-3 Notes will be payable in full on the [Payment]
[Distribution] Date. The final scheduled Distribution Date with
respect to the Certificates will be the Distribution Date.
However, payment in full of [the] [a class of] Notes or of the
Certificates could occur earlier or later than such dates as
described herein. In addition, the [Class A-3] Notes will be
subject to redemption in whole, but not in part, and the
Certificates will be subject to prepayment in whole, but not in
part, on any Distribution Date on which the Servicer exercises its
option to purchase the Receivables. The Servicer may purchase the
Receivables when the aggregate principal balance of the Receivables
shall have declined to 10% or less of the initial aggregate
principal balance of the Receivables purchased by the Trust. [One
or more classes of the Notes will be subject to partial mandatory
redemption and the Certificates may be subject to partial mandatory
prepayment, at a premium described herein, in the event that funds
remain in the Pre-Funding Account at the end of the Funding Period
(as defined herein).]
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE
INFORMATION ABOUT THE OFFERING OF THE NOTES AND THE CERTIFICATES.
ADDITIONAL INFORMATION IS CONTAINED IN THE PROSPECTUS AND
PROSPECTIVE INVESTORS ARE URGED TO READ BOTH THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF THE NOTES OR THE
CERTIFICATES MAY NOT BE CONSUMMATED UNLESS THE PURCHASER HAS
RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY
OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE
MARKET PRICES OF THE NOTES AND THE CERTIFICATES AT LEVELS ABOVE
THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
REPORTS TO SECURITYHOLDERS
Unless and until Definitive Notes or Definitive Certificates
are issued, periodic and annual unaudited reports containing
information concerning the Receivables will be prepared by the
Servicer and sent on behalf of the Trust only to Cede & Co.
("Cede"), as nominee of The Depository Trust Company ("DTC") and
registered holder of the Notes and the Certificates. See "Certain
Information Regarding the Securities--Book-Entry Registration" and
"--Reports to Securityholders" in the accompanying Prospectus (the
"Prospectus"). Such reports will not constitute financial
statements prepared in accordance with generally accepted
accounting principles. The Seller, as originator of the Trust, will
file with the Securities and Exchange Commission (the "Commission")
such periodic reports as are required under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations of the Commission thereunder.
S-2
<PAGE> 5
SUMMARY
The following summary is qualified in its entirety by reference
to the detailed information appearing elsewhere herein and in the
Prospectus. Certain capitalized terms used herein are defined
elsewhere in this Prospectus Supplement on the pages indicated in
the "Index of Terms" or, to the extent not defined herein, have the
meanings assigned to such terms in the Prospectus.
ISSUER .................. Ford Credit Auto Owner Trust 199 -
(the "Trust" or the "Issuer"), a Delaware
business trust established pursuant to a
trust agreement (as amended and restated
on the Closing Date and as amended and
supplemented thereafter, the "Trust
Agreement") dated as of , 199 ,
among the Seller and the Owner Trustee.
SELLER .................. Ford Credit Auto Receivables Two L.P., a
Delaware limited partnership (the
"Seller").
SERVICER ................ Ford Motor Credit Company, a Delaware
corporation (the "Servicer" or "Ford
Credit").
INDENTURE TRUSTEE ....... , as trustee under the Indenture (the
"Indenture Trustee").
OWNER TRUSTEE ........... , as trustee under the Trust Agreement
(the "Owner Trustee").
THE NOTES ............... The Trust will issue [ %] Asset Backed
Notes (the "Notes") pursuant to an Indenture
to be dated as of , 199 (as amended
and supplemented from time to time, the
"Indenture"), between the Issuer and the
Indenture Trustee[, as follows: (1) Class A-1
% Asset-Backed Notes (the "Class A-1 Notes") in
the aggregate initial principal amount of
$ ; (2) Class A-2 Floating Rate Asset
Backed Notes (the "Class A-2 Notes") in the
aggregate initial principal amount of $
; and (3) Class A-3 % Asset Backed Notes (the
"Class A-3 Notes") in the aggregate initial
principal amount of $ ].
The Notes will be
secured by the assets of the Trust
pursuant to the Indenture.
The Notes will be available for purchase in
book entry form only in minimum
denominations of $1,000 and integral multiples
thereof. No person acquiring a beneficial
ownership interest in Notes (a "Note Owner")
will be entitled to receive Definitive Notes
except in the limited circumstances described
herein. See "Certain Information Regarding the
Securities--Definitive Securities" in the
Prospectus.
THE CERTIFICATES ........ The Trust will issue % Asset-Backed
Certificates (the "Certificates" and,
together with the Notes, the "Securities") with
an aggregate initial Certificate Balance of
$ . The Certificates will represent
[fractional undivided] interests in the Trust
and will be issued pursuant to the Trust
Agreement.
S-3
<PAGE> 6
The Certificates will be available for purchase
in book entry form only in minimum
denominations of $1,000 and integral multiples
thereof. No person acquiring a beneficial
ownership interest in Certificates (a
"Certificate Owner") will be entitled to
receive Definitive Certificates, except in the
limited circumstances described herein. See
"Certain Information Regarding the
Securities--Definitive Securities" in the
Prospectus. [Purchasers of Certificates and
their assignees must represent that they are
United States persons, and each must provide a
certification of non-foreign status under
penalties of perjury.]
The rights of the Certificateholders to receive
distributions with respect to the Certificates
will be subordinated to the rights of the
Noteholders to receive principal and interest on
the Notes [to the extent] [as] described herein.
THE TRUST PROPERTY........... The property of the Trust will include (i) the
Receivables; (ii) with respect to Precomputed
Receivables, all monies due thereunder on or
after the related Cutoff Date and with respect
to Simple Interest Receivables, all monies due
or received thereunder on or after the related
Cutoff Date; (iii) security interests in the
Financed Vehicles and any accessions thereto;
(iv) the rights to proceeds from claims on
certain physical damage, credit life, credit
disability or other insurance policies, if any,
covering the Financed Vehicles or the Obligors;
(v) any Dealer Recourse; (vi) the Seller's
rights to certain documents and instruments
relating to the Receivables; (vii) such amounts
as from time to time may be held in one or more
accounts maintained pursuant to the Sale and
Servicing Agreement, as described herein,
including the Reserve Account[, the Yield
Supplement Account] [and the Pre-Funding
Account]; (viii) certain rights under the Sale
and Servicing Agreement [and the Yield
Supplement Agreement]; (ix) certain rights under
the Purchase Agreement, including the right of
the Seller to cause Ford Credit to repurchase
Receivables from the Seller; (x) certain
payments and proceeds with respect to the
Receivables held by the Servicer; (xi) certain
rebates of premiums and other amounts relating
to certain insurance policies and other items
financed under the Receivables; [(xii) the
Interest Rate Cap;] [(xiii) the Interest Rate
Swap;] [(xiv) the Guaranteed Rate Agreement;]
and (xv) any and all proceeds of the foregoing.
The rights and benefits with respect to such
property will be assigned by the Seller and the
Owner Trustee to the Indenture Trustee for the
benefit of the Securityholders. The property of
the Trust does not include the Payahead Account.
THE RECEIVABLES ............. On , 199 (the "Closing Date"), the Trust will
purchase Receivables (the "[Initial]
Receivables") having an aggregate principal
balance of approximately $ as of
, 199 (the "[Initial] Cutoff Date") from the
Seller pursuant to a Sale and Servicing
Agreement to be dated as of , 199 (as amended
and supplemented from time to time, the "Sale
and Servicing Agreement"), among the Trust, the
Seller and the Servicer. As of the [Initial]
Cutoff Date, the weighted average annual
percentage rate ("APR") of the [Initial]
Receivables was approximately %, the weighted
average remaining maturity of the [Initial]
Receivables was approximately months and the
S-4
<PAGE> 7
weighted average original maturity of the
[Initial] Receivables was approximately
months.
[On and following the Closing Date, pursuant to
the Sale and Servicing Agreement, the Seller
will be obligated, subject only to the
availability thereof, to sell, and the Trust
will be obligated to purchase, subject to the
satisfaction of certain conditions set forth
therein, additional Receivables (the "Subsequent
Receivables") from time to time during the
Funding Period having an aggregate principal
balance equal to approximately $ (such amount
being equal to an amount on deposit in the
Pre-Funding Account (the "Pre-Funded Amount") on
the Closing Date). The Seller will designate as
a cutoff date (each a "Subsequent Cutoff Date")
each date as of which payments in respect of
particular Subsequent Receivables are conveyed
to the Trust. It is expected that certain of
the Subsequent Receivables arising between the
Initial Cutoff Date and the Closing Date will be
conveyed to the Trust on the Closing Date and
that other Subsequent Receivables will be
conveyed to the Trust as frequently as daily
thereafter on dates specified by the Seller
(each date on which Subsequent Receivables are
conveyed to the Trust being referred to as a
"Subsequent Transfer Date") occurring during the
Funding Period. See "Description of the
Transfer and Servicing Agreements--Sale and
Assignment of Receivables; Subsequent
Receivables" herein.] [Coincident with each
such transfer of Subsequent Receivables, the
Yield Supplement Agreement will require Ford
Credit to deposit into the Yield Supplement
Account an amount equal to the Additional Yield
Supplement Amount, if any, in respect of such
Subsequent Receivables. See "Description of the
Transfer and Servicing Agreements--Yield
Supplement Account; Yield Supplement Agreement"
herein.]
The [Initial] Receivables [and the Subsequent
Receivables] will be purchased by the Seller
from Ford Credit pursuant to a Purchase
Agreement between the Seller and Ford Credit (as
amended and supplemented from time to time, the
"Purchase Agreement"). The [Initial]
Receivables have been selected[, and the
Subsequent Receivables will be selected,] from
the contracts owned by Ford Credit based on the
criteria specified in the Sale and Servicing
Agreement and described herein and in the
Prospectus. No [Initial] Receivable has[, and
no Subsequent Receivable will have,] a scheduled
maturity later than (the "Final
Scheduled Maturity Date").
[Subsequent Receivables may be originated by Ford
Credit at a later date using credit criteria
different from those which were applied to the
Initial Receivables and may be of a different
credit quality and seasoning. In addition,
following the transfer of Subsequent Receivables
to the Trust, the characteristics of the entire
pool of Receivables included in the Trust may
vary significantly from those of the Initial
Receivables. See "Risk Factors--The Subsequent
Receivables and the Pre-Funding Account" and
"The Receivables Pool" herein.]
The "Pool[/Pre-Funding] Balance" at any time [will
represent] [is the sum of (i)] the aggregate
principal balance of the Receivables at the end
of the preceding Collection Period, after giving
effect to all payments (other than Payaheads)
S-5
<PAGE> 8
received from Obligors, Liquidation Proceeds,
Advances and Purchase Amounts to be remitted by
the Servicer or the Seller, as the case may be,
all for such Collection Period and all Realized
Losses during such Collection Period [(such
amount, the "Pool Balance") and (ii) the amount
on deposit in the Pre-Funding Account (excluding
any Investment Earnings)]. "Realized Losses"
means the excess of the principal balance of any
Liquidated Receivable over Liquidation Proceeds
to the extent allocable to principal.
TERMS OF THE NOTES....... The principal terms of the Notes will be as
described below:
A. [DISTRIBUTION]
[PAYMENT] DATES....... Payments of interest and principal on the Notes
will be made [quarterly] on the day of each
[month] [ , , and ] or, if
any such day is not a Business Day, on the next
succeeding Business Day (each, a "[Distribution]
[Payment] Date"), commencing , 199 . [Under
certain limited circumstances, such payments
will be made monthly rather than quarterly.]
Payments will be made to holders of record of
the Notes (the "Noteholders") as of the day
immediately preceding such [Distribution]
[Payment] Date or, if Definitive Notes are
issued, as of the day of the preceding month
[(a "Record Date")]. A "Business Day" is a day
other than a Saturday, a Sunday or a day on
which banking institutions or trust companies in
The City of New York are authorized by law,
regulation or executive order to be closed.
B. NOTE INTEREST RATES.. The [Class A-1] Notes will bear interest at the
rate of % per annum (the ["Note Interest
Rate"] ["Class A-1 Rate"]) [and the Class A-3
Notes will bear interest at the rate of % per
annum (the "Class A-3 Rate"). The rate of
interest with respect to the Class A-2 Notes
(the "Class A-2 Rate" and, together with the
Class A-1 Rate and the Class A-3 Rate, the "Note
Interest Rates") will be % per annum for the
period from the Closing Date to but excluding
the first [Distribution] [Payment] Date, and
will be equal to LIBOR for the applicable
Interest Reset Period plus % for each
[Distribution] [Payment] Date thereafter[;
provided that the Class A-2 Rate shall not
exceed % per annum]].
C. INTEREST ............ On each [Distribution] [Payment] Date, the
Indenture Trustee will distribute pro
rata to Noteholders [of each class of Notes]
accrued interest at the [applicable] Note
Interest Rate generally to the extent of funds
available following payment of the Servicing
Fee from the Available Funds and the Reserve
Account. Interest on the outstanding principal
amount of the Notes [of each class] will accrue
at the [applicable] Note Interest Rate from and
including the Closing Date (in the case of the
first [Distribution] [Payment] Date) or from
and including the most recent [Distribution]
[Payment] Date on which interest has been paid
to but excluding the following [Distribution]
[Payment] Date (each an "Interest Period").
[Interest on the Class A-1 Notes will be
calculated on the basis of actual days elapsed
and a 365- or 366-day year, as applicable.]
Interest on the [[Class A-1 Notes and the]
Class A-3] Notes will be calculated on the
basis of a 360-day year of twelve 30-day
months. [Interest on the Class A-2 Notes will
be calculated on the basis of actual days
elapsed and a 360-day year.] See "Description
of the Notes--Payments of Interest" herein.
S-6
<PAGE> 9
D. PRINCIPAL........... Principal of the Notes will be payable
[quarterly] on each [Distribution]
[Payment] Date in an amount equal to [the sum
of] the Noteholders' Principal Payment Amount
for [each of] the [three] calendar month[s]
([the] [each, a] "Collection Period") preceding
such [Distribution] [Payment] Date (in the case
of the first [Distribution] [Payment] Date,
including the period from , 199 to
and including , 199 ) to the extent
of funds available therefor. The
"Noteholders' Principal Payment Amount" [with
respect to a Collection Period] will generally
be the sum of (i) the Noteholders' Percentage
of the Regular Principal (such "Regular
Principal" being the sum of (a) all scheduled
payments of principal and the principal portion
of all prepayments in full (and certain partial
prepayments) collected with respect to
Precomputed Receivables (including amounts
withdrawn from the Payahead Account but
excluding amounts deposited into the Payahead
Account), (b) the principal portion of all
payments collected with respect to Simple
Interest Receivables, and (c) the principal
balance of each Receivable purchased by the
Servicer, repurchased by the Seller or
liquidated by the Servicer, each with respect
to [the preceding] [such] Collection Period)
plus (ii) % of the portion, if any, of the
Available Funds for such Collection Period that
remains after payment of (a) the Servicing Fee,
(b) the interest [due] [accrued] on the Notes,
(c) the portion of the Regular Principal
allocated to the Noteholders pursuant to clause
(i), (d) the interest due on the Certificates,
(e) the portion of the Regular Principal
distributed to the Certificateholders as
described below under "Description of the
Certificates--Distributions of Principal
Payments" herein, and (f) the amount, if any,
required to be deposited in the Reserve
Account on [such] [the related] Distribution
Date [plus the excess of the amount on deposit
in the Reserve Account on such Distribution
Date (after giving effect to all deposits or
withdrawals therefrom on such Distribution
Date) over the Specified Reserve Balance] (such
percentage of the remaining portion of
Available Funds [plus such excess], the
"Noteholders' Accelerated Principal"). [Or,
state other method for determining the amount
of principal to be paid on the Notes.]
On the Business Day immediately preceding each
Distribution Date (a "Determination Date") the
Indenture Trustee will determine the amount in
the Collection Account allocable to interest and
the amount allocable to principal on the basis
described under "Description of the Transfer and
Servicing Agreements--Distributions--Allocation
of Collections on Receivables" in the
Prospectus, and payments to Securityholders on
the following Distribution Date will be based on
such allocation.
Payments of principal on the Notes will be made on
each [Distribution] [Payment] Date in the
amounts and subject to the priorities described
in "Description of the Notes--Payments of
Principal" herein.
The outstanding principal amount of the [Class
A-1] Notes, to the extent not previously paid,
will be payable on (the "[Class A-1]
Final Scheduled [Distribution] [Payment]
Date")[, the outstanding principal amount of the
Class A-2 Notes, to the extent not previously
paid, will be payable on (the "Class A-2 Final
Scheduled [Distribution] [Payment] Date") and
the
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<PAGE> 10
outstanding principal amount of the Class
A-3 Notes, to the extent not previously
paid, will be payable on
(the "Class A-3 Final Scheduled
[Distribution] [Payment] Date")].
E. OPTIONAL REDEMPTION ... The [Class A-3] Notes will be
redeemed in whole, but not in part, on any
Distribution Date [after all the other
classes of Notes have been paid in full]
on which the Servicer exercises its option
to purchase the Receivables, which can
occur after the Pool Balance declines to
10% or less of the Initial Pool Balance,
at a redemption price equal to the unpaid
principal amount of the [Class A-3] Notes
plus accrued and unpaid interest thereon.
See "Description of the Notes--Optional
Redemption" herein. The "Initial Pool
Balance" will equal [the sum of (i)] the
aggregate principal balance of the
[Initial] Receiv ables as of the [Initial]
Cutoff Date [plus (ii) the aggregate
principal balances of all Subsequent
Receivables added to the Trust on or prior
to such date as of their respective
Subsequent Cutoff Dates].
[F. MANDATORY REDEMPTION
FROM PRE-FUNDING ACCOUNT ... [The] [A class or classes of] Notes then
outstanding will be redeemed in part on the
Distribution Date on or immediately following
the last day of the Funding Period in the event
that amounts remain on deposit in the
Pre-Funding Account after giving effect to the
purchase of all Receivables, including any such
purchase on such date (a "Mandatory
Redemption"). If the amount on deposit in the
Pre-Funding Account on such date is equal to $
or less, then such amount will be used to redeem
the [Class A-1] Notes [up to an amount not to
exceed their outstanding amount, with any
remaining amount used to redeem the Class A-2
Notes]. Otherwise the amount on deposit in the
Pre-Funding Account on such date will be used to
redeem [each class of] the Notes and the
Certificates. The aggregate principal amount of
[each class of] the Notes to be redeemed will be
an amount equal to [the Notes'] [such class']
Pre-Funded Percentage of the amount then on
deposit in the Pre-Funding Account. The
"Pre-Funded Percentage" with respect to [the] [a
class of] Notes or the Certificates is the
percentage derived from the fraction, the
numerator of which is the initial principal
amount of [the] [such class of] Notes or the
initial Certificate Balance, as the case may be,
and the denomina tor of which is the sum of the
initial principal amount of the Notes and the
initial Certificate Balance.]
[A limited recourse mandatory prepayment premium
(the "Note Prepayment Premium") will be payable
by the Trust to the Noteholders pursuant to a
Mandatory Redemption if the amount on deposit in
the Pre-Funding Account exceeds $ . The Note
Prepayment Premium [for each class of Notes] will
equal the excess, if any, discounted as described
below, of (i) the amount of interest that would
accrue on [the Notes'] [such class'] portion of
any remaining Pre-Funded Amount (the "Note
Prepayment Amount") at the Note Interest Rate
borne by [the] [such class of] Notes during the
period commencing on and including the
Distribution Date on which such Note prepayment
amount is required to be distributed to
Noteholders [of such class] to but excluding
[,in the case of the Class A-1 Notes,
in the case of the Class A-2 Notes and
, in the case of the Class A-3 Notes],
over
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<PAGE> 11
(ii) the amount of interest that would have
accrued on such Note Prepayment Amount over the
same period at a per annum rate of interest
equal to the bond equivalent yield to maturity
on the Determination Date preceding such
Distribution Date on the [, in the case of
the Class A-1 Notes, the , in the case
of the Class A-2 Notes, and the , in
the case of the Class A-3 Notes]. Such excess
shall be discounted to present value to such
Distribution Date at the applicable yield
described in clause (ii) above. Pursuant to the
Sale and Servicing Agreement, the Seller will be
obligated to pay the sum of the Note Prepayment
Premium [for each class of Notes] and the
Certificate Prepayment Premium to the Trust as
liquidated damages for the failure to deliver
Subsequent Receivables having an aggregate
principal balance equal to the Pre-Funded
Amount. The Trust's obligation to pay the Note
Prepayment Premium [for each class of Notes] and
the Certificate Prepayment Premium will be
limited to funds received from the Seller
pursuant to the preceding sentence. In the
event that such funds are insufficient to pay
the Note Prepayment Premium [for each class of
Notes] and the Certificate Prepayment Premium in
full, Noteholders [of each class of Notes] will
receive their ratable share (based upon the
aggregate Note Prepayment Premium [for such
class]) of the aggregate amount available to be
distributed in respect of the Note Prepayment
Premium and the Certificate Prepayment Premium.
No other assets of the Trust will be available
for the purpose of making such payment.]]
TERMS OF THE CERTIFICATES... The principal terms of the Certificates will be as
described below:
A. DISTRIBUTION DATES..... Distributions with respect to the Certificates
will be made on [each Distribution Date] [the
day of each month or, if any such day is not
a Business Day, on the next succeeding Business
Day (each, a "Distribution Date")], commencing
, 199 . Distributions will be made to
holders of record of the Certificates (the
"Certificateholders," and, together with the
Noteholders, the "Securityholders") as of the
[related Record Date (which will be the day
of the month if Definitive Certificates are
issued)] [as of the day immediately preceding
such Distribution Date or, if Definitive
Certificates are issued, as of the day
of the preceding month].
B. CERTIFICATE RATE...... % per annum (the "Certificate Rate").
C. INTEREST........... On each Distribution Date, the Owner Trustee will
distribute pro rata to Certificateholders
accrued interest at the Certificate Rate on the
outstanding Certificate Balance generally to the
extent of funds available following payment of
the Servicing Fee and distributions in respect
of the Notes from the Available Funds and the
Reserve Account; provided, however, that upon
the occurrence and during the continuation of an
Event of Default which has resulted in an
acceleration of the Notes or following an
Insolvency Event or a dissolution with respect
to the Seller or the General Partner,
distributions of any amounts on the Certificates
will be subordinated in priority of payment to
payment in full of principal of the Notes.
Interest in respect of a Distribution Date will
accrue from and including the Closing Date (in
the case of the first Distribution Date) or from
and including the most recent
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<PAGE> 12
Distribution Date on which interest has been
paid to but excluding the following Distribution
Date. Interest will be calculated on the basis
of a 360-day year consisting of twelve 30-day
months.
D. PRINCIPAL ............ On each Distribution Date commencing on the later
of (i) the 199 Distribution Date and (ii)
the Distribution Date next succeeding the
Distribution Date on which the [Class A-1] Notes
are paid in full, principal of the Certificates
will be payable in an amount generally equal to
the Certificateholders' Principal Distribution
Amount for the Collection Period preceding such
Distribution Date, to the extent of funds
available therefor following payment of the
Servicing Fee and payments of interest and
principal in respect of the Notes and the
distribution of interest in respect of the
Certificates; provided, however, that upon the
occurrence and during the continuation of an
Event of Default which has resulted in an
acceleration of the Notes or following an
Insolvency Event or a dissolution with respect
to the Seller or the General Partner,
distributions of any amounts on the Certificates
will be subordinated in priority of payment to
payment in full of principal of the Notes[; and
provided further that upon any reduction or
withdrawal by any Rating Agency of its rating of
[the] [any class of] Notes, no distributions of
principal on the Certificates will be made
until all the Notes have been paid in full or
until such rating has been restored]. The
Certificateholders' Principal Distribution
Amount will be based on the Certificateholders'
Percentage of the Regular Principal, and will be
calculated by the Servicer in the manner
described under "Description of the Transfer and
Servicing Agreements--Distributions" herein.
The outstanding principal balance, if any, of
the Certificates will be payable in full on
, 199 (the "Final Scheduled Distribution
Date").
E. OPTIONAL PREPAYMENT .. If the Servicer exercises its option to purchase
the Receivables, which can occur after the Pool
Balance declines to 10% or less of the Initial
Pool Balance, the Certificateholders will
receive an amount in respect of the Certificates
equal to the Certificate Balance together with
accrued interest at the Certificate Rate, and
the Certificates will be retired. See
"Description of the Certificates--Optional
Prepayment" herein.
[F. MANDATORY REPURCHASE
FROM PRE-FUNDING ACCOUNT ... The Certificates will be prepaid, in part, pro rata
on the basis of their initial principal
balances, on the Distribution Date on or
immediately following the last day of the
Funding Period in the event that the amount on
deposit in the Pre-Funding Account after giving
effect to the purchase of all Receivables,
including any such purchase on such date exceeds
$ (a "Mandatory Repurchase"). The
aggregate principal balance of Certificates to
be prepaid will be an amount equal to the
Certificates' Pre-Funded Percentage of the
amount then on deposit in the Pre-Funding
Account.
[A limited recourse mandatory prepayment premium
(the "Certificate Prepayment Premium") will be
payable by the Trust to the Certificateholders
at the time of any prepayment of the
Certificates pursuant to a Mandatory Repurchase.
The Certificate Prepayment Premium will equal
the excess, if any, discounted as described
below, of (i) the amount of interest that would
accrue
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<PAGE> 13
on the Certificates' portion of any remaining
Pre-Funded Amount (the "Certificate Prepayment
Amount") at the Certificate Rate during the
period commencing on and including the
Distribution Date on which such Certificate
Prepayment Amount is required to be distributed
to Certificateholders to but excluding
, over (ii) the amount of interest that would
have accrued on such Certificate Prepayment
Amount over the same period at a per annum rate
of interest equal to the bond equivalent yield
to maturity on the Determi nation Date preceding
such Distribution Date on the . Such
excess will be discounted to present value to
such Distribution Date at the yield described in
clause (ii) above. Pursuant to the Sale and
Servicing Agreement, the Seller will be
obligated to pay the sum of the Note Prepayment
Premium [for each class of Notes] and the
Certificate Prepayment Premium to the Trust as
liquidated damages for the failure to deliver
Subsequent Receivables having an aggregate
principal balance equal to the Pre-Funded
Amount. The Trust's obligation to pay the Note
Prepayment Premium [for each class of Notes] and
the Certificate Prepayment Premium will be
limited to funds received from the Seller
pursuant to the preceding sentence. In the
event that such funds are insufficient to pay
the Note Prepayment Premium [for each class of
Notes] and the Certificate Prepayment Premium in
full, Certificateholders will receive their
ratable share (based upon the aggregate
Certificate Prepayment Premium) of the aggregate
amount available to be distributed in respect of
the Note Prepayment Premium and the Certificate
Prepayment Premium. No other assets of the
Trust will be available for the purpose of
making such payment.]]
[INTEREST RATE CAP ....... On the Closing Date, the Seller will enter into an
Interest Rate Cap in respect of the Class A-2
Notes with (the "Interest Rate Cap
Provider"). Pursuant to the Interest Rate Cap,
the Interest Rate Cap Provider will make a
payment to the Trust on each [Distribution]
[Payment] Date on which [the Class A-2 Rate]
[LIBOR] for the preceding [Distribution]
[Payment] Date exceeds the Cap Rate in an amount
equal to the product of (i) the difference
between [such Class A-2 Rate] [LIBOR] and the
Cap Rate, (ii) the Cap Notional Amount and (iii)
the actual number of days from and including the
preceding [Distribution] [Payment] Date to but
excluding such [Distribution] [Payment] Date
divided by 360. The Cap Notional Amount on any
[Distribution] [Payment] Date will equal at
least the principal amount of the Class A-2
Notes as of the close of the preceding
[Distribution] [Payment] Date. See "Description
of the Transfer and Servicing
Agreements--Interest Rate Cap" herein. Payments
received by the Indenture Trustee pursuant to
the Interest Rate Cap will be deposited in the
Collection Account for the benefit of all
Securityholders.]
[INTEREST RATE SWAP....... On the Closing Date, the Indenture Trustee, on
behalf of the Trust, will enter into one or more
Interest Rate Swap Agreements (collectively, the
"Interest Rate Swap") with (the "Swap
Counterparty"). Pursuant to the Interest Rate
Swap, the Swap Counterparty will pay to the
Trust, on each [Distribution] [Payment] Date,
interest at a per annum rate equal to [the Class
A-2 Rate] [LIBOR] on the Swap Notional Amount.
The Swap Notional Amount on any [Distribution]
[Payment] Date will equal the principal amount
of the
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<PAGE> 14
Class A-2 Notes as of the close of the preceding
[Distribution] [Payment] Date. In exchange for
such payments, the Trust will pay to the Swap
Counterparty, on each [Distribution] [Payment]
Date, interest at a per annum rate equal to [the
lesser of] [ %] [and] [the Prime Rate less
%], on the outstanding principal amount
of the Class A-2 Notes as of the close of the
preceding [Distribution] [Payment] Date [, which
rate will be reset [on various dates in] each
[month] [Interest Period]]. With respect to
each [Distribution] [Payment] Date, any
difference between the [monthly] [quarterly]
payment by the Swap Counterparty to the Trust
and the [monthly] [quarterly] payment by the
Trust to the Swap Counterparty will be referred
to herein as the "Net Trust Swap Receipt," if
such difference is a positive number, and the
"Net Trust Swap Payment," if such difference is
a negative number. Net Trust Swap Receipts, if
any, will be deposited in the Collection Account
for the benefit of all Securityholders and Net
Trust Swap Payments, if any, will be paid from
the Collection Account in the same manner and
priority as accrued and unpaid interest on the
Notes on each [Distribution] [Payment] Date. See
"Description of the Transfer and Servicing
Agreements--Interest Rate Swap" herein.]
[PRE-FUNDING ACCOUNT ..... During the period (the "Funding Period") from and
including the Closing Date until the earliest
of (a) the Determination Date on which the
amount on deposit in the Pre-Funding Account is
equal to $ or less, (b) the occurrence
of an Event of Default under the Indenture or an
Event of Servicing Termination under the Sale
and Servicing Agreement, (c) the occurrence of
certain events of insolvency or dissolution with
respect to the Seller, the General Partner or
the Servicer and (d) the Determination Date with
respect to the , 199 Distribution
Date, the Pre-Funded Amount will be maintained
as an account in the name of the Indenture
Trustee (the "Pre-Funding Account"). The
Pre-Funded Amount will initially equal
approximately $ , and, during the
Funding Period, will be reduced by the amount
thereof used to purchase Subsequent Receivables
in accordance with the Sale and Servicing
Agreement and the amount thereof deposited in
the Reserve Account in connection with the
purchase of such Subsequent Receivables. The
Seller expects that the Pre-Funded Amount will
be reduced to $ or less by the
Distribution Date. Any Pre-Funded Amount
remaining at the end of the Funding Period will
be payable to the Noteholders and
Certificateholders as described above.]
RESERVE ACCOUNT ....... The Reserve Account will be created with an initial
deposit by the Seller on the Closing Date of
cash or Permitted Investments having a value at
least equal to % of the [Initial Pool Balance]
[Pool Balance as of the Initial Cutoff Date]
[plus an amount attributable to the difference
between the anticipated investment earnings on
the Pre-Funded Amount and the weighted average
interest expense on the portion of the Notes and
Certificates represented by the Pre-Funded
Amount]. [On each Subsequent Transfer Date,
cash or Permitted Investments having a value
approximately equal to % of the aggregate
principal balance of the Subsequent Receivables
conveyed to the Trust on such Subsequent
Transfer Date will be withdrawn from the
Pre-Funding Account from amounts otherwise
distributable to the Seller in
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<PAGE> 15
connection with the sale of Subsequent
Receivables and deposited in the Reserve
Account.] The amount initially deposited in the
Reserve Account by the Seller [together with the
aggregate amount transferred from the
Pre-Funding Account to the Reserve Account on
each Subsequent Transfer Date] is referred to as
the "Reserve Initial Deposit." The Reserve
Account will be maintained as an account in the
name of the Indenture Trustee for the benefit of
Securityholders.
Funds will be withdrawn from the Reserve Account
up to the Available Reserve Amount to the extent
that the Available Funds with respect to any
Collection Period remaining after the Servicing
Fee is paid is less than the Noteholders'
Payment Amount and will be deposited in the Note
Payment Account for distribution to the
Noteholders on the related [Distribution]
[Payment] Date. In addition, funds will be
withdrawn from the Reserve Account up to the
Available Reserve Amount (as reduced by any
withdrawal pursuant to the preceding sentence)
to the extent that the Available Funds remaining
after payment of the Servicing Fee and the
deposit of the Noteholders' Payment Amount in
the Note Payment Account is less than the
Certificateholders' Distribution Amount and will
be deposited in the Certificate Distribution
Account for distribution to the
Certificateholders. [If funds applied in
accordance with the preceding sentence are
insufficient to distribute the interest due on
the Certificates, subject to certain
limitations, funds will be withdrawn from the
Reserve Account and applied to distribute
interest on the Certificates to the extent of
the Certificate Interest Reserve Amount.]
On each Distribution Date, the Reserve Account
will be reinstated up to the Specified Reserve
Balance to the extent, if any, of the Available
Funds remaining after payment of the Servicing
Fee, the deposit of the Noteholders' Payment
Amount into the Note Payment Account and the
deposit of the Certificateholders' Distribution
Amount into the Certificate Distribution
Account.
Certain amounts in the Reserve Account on any
Distribution Date (after giving effect to
all distributions to be made on such
Distribution Date) in excess of the
Specified Reserve Balance for such
Distribution Date will be released to the
Seller (except to the extent described
under "Description of the Transfer and
Servicing Agreements--Reserve Account"
herein). Subject to reduction as
described below, the "Specified Reserve
Balance" with respect to any Distribution
Date generally will be equal to the sum of
(i) % of the [Initial Pool Balance]
[Pool Balance as of the Initial Cutoff
Date] [, plus an amount related to the
difference between anticipated investment
earnings on the remaining Pre-Funded
Amount and the weighted average interest
expense on the portion of the Notes and
Certificates represented by the remaining
Pre-Funded Amount] and (ii) % of the
Pool Balance on the first day of the
related Collection Period. [However, so
long as on any Distribution Date (except
the first Distribution Date) the sum of
(x) the outstanding principal amount of
the Securities (after giving effect to
distributions made on the prior
Distribution Date) and (y) the aggregate
amount of Payaheads that have been
collected but not yet applied as payments
under the related Receivables as of the
first day of the related Collection Period
is less than or equal to [the sum
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<PAGE> 16
of] % of [(a)] the Pool Balance on the
first day of the related Collection Period [and
(b) the Pre-Funded Amount on such date], then
the portion of the Specified Reserve Balance set
forth in clause (i) above will be reduced to %
of the [Initial Pool Balance] [Pool Balance as
of the Initial Cutoff Date].] [In addition, so
long as on any Distribution Date (except the
first Distribution Date) the sum of (x) the
outstanding principal amount of the Securities
(after giving effect to distributions made on
the prior Distribution Date) and (y) the
aggregate amount of Payaheads that have been
collected but not yet applied as payments under
the related Receivables as of the first day of
the related Collection Period is less than or
equal to [the sum of] % of [(a)] the Pool
Balance on the first day of the related
Collection Period [and (b) the Pre-Funded Amount
on such day], then such portion of the Specified
Reserve Balance set forth in clause (i) above
will be reduced to % of the [Initial Pool
Balance] [Pool Balance as of the Initial Cutoff
Date].] [With respect to the portion of the
Specified Reserve Balance set forth in clause
(ii) above, so long as on any Distribution Date
(except the first Distribution Date) the sum of
(x) the outstanding principal amount of the
Securities (after giving effect to distributions
made on the prior Distribution Date) and (y) the
aggregate amount of Payaheads that have been
collected but not yet applied as payments under
the related Receivables as of the first day of
the related Collection Period is less than or
equal to [the sum of] % of [(a)] the Pool
Balance on the first day of the related
Collection Period [and (b) the Pre-Funded Amount
on such day], then such portion will be reduced
to an amount equal to the product of (I) the
Pool Balance on the first day of the related
Collection Period and (II) the percentage (which
shall not be greater than % or less than
zero) equal to (X) the percentage derived from
the fraction, the numerator of which is the
outstanding principal amount of the Securities
(after giving effect to distributions made on
the prior Distribution Date) and the denominator
of which is such Pool Balance less (Y) %.]
[The Specified Reserve Balance is further
subject to adjustment in certain circumstances
described herein.]
[YIELD SUPPLEMENT ACCOUNT;
YIELD SUPPLEMENT AGREEMENT Ford Credit will establish a yield supplement
account with the Indenture Trustee for the
benefit of the Securityholders (the "Yield
Supplement Account"). The Yield Supplement
Account is designed solely to hold funds to be
applied to provide payments to the
Securityholders in respect of Receivables the
APR of which is less than the sum of (i) the
weighted average of the Note Interest Rates and
Certificate Rate and (ii) the Servicing Fee Rate
(the "Required Rate"). The Yield Supplement
Account will be created with an initial deposit
by Ford Credit (the "Yield Supplement Initial
Deposit") in an amount (which amount may be
discounted at a rate to be specified in the Sale
and Servicing Agreement) equal to the aggregate
amount by which (i) interest on the principal
balance of each [Initial] Receivable for the
period commencing on the [Initial] Cutoff Date
and ending with the scheduled maturity of such
Receivable, assuming that payments on such
Receivables are made as scheduled and no
prepayments are made, at a rate equal to the
Required Rate, exceeds (ii) interest on such
principal balances at the APR of such
Receivable
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<PAGE> 17
(the "Yield Supplement Amount" and, with respect
to all of the [Initial] Receivables, the "Maximum
[Initial] Yield Supplement Amount").
[Ford Credit, the Seller and the Indenture Trustee
will enter into a Yield Supplement Agreement (as
amended and supplemented from time to time, the
"Yield Supplement Agreement") pursuant to which, on
each Subsequent Transfer Date, Ford Credit will
deposit an amount (which amount may be discounted
at a rate to be specified in the Sale and Servicing
Agreement), if any, into the Yield Supplement
Account (the "Additional Yield Supplement Amount")
equal to the aggregate Yield Supplement Amounts in
respect of the related Subsequent Receivables for
the period commencing with the related Subsequent
Cutoff Date and ending with the scheduled maturity
of each such Subsequent Receivable, assuming that
payments on such Receivables are made as scheduled
and no prepayments are made. The aggregate of the
Additional Yield Supplement Amounts in respect of
the Subsequent Receivables is referred to herein as
the "Maximum Subsequent Yield Supplement Amount"
and, together with the Maximum Initial Yield
Supplement Amount, the "Maximum Yield Supplement
Amount." See "Description of the Transfer and
Servicing Agreements--Yield Supplement Account;
Yield Supplement Agreement" herein.]]
COLLECTION ACCOUNT . . . Except under certain conditions described herein,
the Servicer will be required to remit collections
received with respect to the Receivables not later
than the [ ] Business Day after receipt to one or
more accounts in the name of the Indenture Trustee
(the "Collection Account"). Pursuant to the Sale
and Servicing Agreement, the Servicer will have the
power, revocable at the discretion of the Indenture
Trustee or at the discretion of the Owner Trustee
with the consent of the Indenture Trustee, to
instruct the Indenture Trustee to withdraw funds on
deposit in the Collection Account and to apply such
funds on each Distribution Date to the following
(in the priority indicated): (i) the Servicing Fee
for the prior Collection Period and any overdue
Servicing Fees to the Servicer, (ii) the Accrued
Note Interest and the Noteholders' Principal Payment
Amount into the Note Payment Account, (iii) the
Accrued Certificate Interest and, commencing on the
later of (a) the 199 Distribution Date and
(b) the Distribution Date next succeeding the
Distribution Date on which the [Class A-1] Notes are
paid in full, the Certificateholders' Principal
Distribution Amount into the Certificate
Distribution Account and (iv) the remaining balance,
if any, to the Reserve Account; provided, however,
that on each Distribution Date following the
occurrence of an Event of Default which has resulted
in acceleration of the Notes or following an
Insolvency Event with respect to the Seller or the
General Partner, the principal amount of the Notes
must be paid in full prior to the distribution of any
amounts on the Certificates.
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<PAGE> 18
[GUARANTEED RATE AGREEMENT Amounts on deposit in the [Collection] [Note
Payment] Account will be invested from the date
of deposit to the related [Distribution] [Payment]
Date by the Indenture Trustee at the direction of
(the "Investment Provider") in certain eligible
investments pursuant to a Guaranteed Rate
Agreement, which provides that the Investment
Provider will guarantee a rate of return on such
amounts equal to the weighted average of the Note
Interest Rates [and the Certificate Rate] and will
be entitled to receive any Investment Earnings in
excess of such guaranteed return. See "Description
of the Transfer and Servicing Agreements--
Guaranteed Rate Agreement" herein.]
SERVICER FEE . . . . . . The Servicer will receive each month a fee for
servicing the Receivables equal to (a) the
product of one-twelfth of 1.00% (the "Servicing Fee
Rate") and the Pool Balance outstanding at the
beginning of the previous month, plus (b) any late,
prepayment, and other administrative fees and
expenses collected during such month [plus (c)
reinvestment proceeds on any payments received in
respect of the Receivables].
MATURITY AND PREPAYMENT
CONSIDERATIONS . . . . . . The [Class A-2 Notes, the Class A-3 Notes and the]
Certificates will not receive any principal
payments until the [Class A-1] Notes have been paid
in full[, and the Class A-3 Notes will not receive
any principal payments until the Class A-2 Notes
have been paid in full]. In addition, no principal
payments on the Certificates will be made until the
later of (i) the 199 Distribution Date
and (ii) the Distribution Date next
succeeding the Distribution Date on which the
[Class A-1] Notes are paid in full. As the rate of
payment of principal of [the] [each class of] Notes
and the Certificates depends on the rate of payment
(including prepayments) of the principal balance of
the Receivables, final payment of [the] [any class
of] Notes and the final distribution in respect of
the Certificates could occur significantly earlier
than the respective [Final Scheduled Distribution
Dates] [final scheduled Payment Dates or
Distribution Date]. In addition, the rate of
payment of principal of [the] [each Class of] Notes
and the Certificates will be affected by the
application of the Noteholders' Accelerated
Principal to pay the principal of the Notes.
Reinvestment risk associated with early payment of
the Notes and the Certificates will be borne
exclusively by the Noteholders and the
Certificateholders, respectively.
It is expected that final payment of [the] [each
class of] Notes and the final distribution in
respect of the Certificates will occur on or prior
to the respective [Final Scheduled Distribution
Dates] [final scheduled Payment Dates or
Distribution Date]. However, if sufficient funds
are not available to pay [the] [any class of] Notes
or the Certificates in full on or prior to the
respective [Final Scheduled Distribution Dates]
[final scheduled Payment Dates or Distribution
Date], final payment of [the] [such class of] Notes
and the final distribution in respect of the
Certificates could occur later than such dates.
All of the Receivables are prepayable at any time.
Prepayments that do not constitute Payaheads will
shorten the weighted average remaining term of the
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<PAGE> 19
Receivables and the weighted average life of
the Securities. Such prepay ments, to the extent
allocable to principal, will be included in the
Noteholders' Principal Payment Amount or the
Certificateholders' Principal Distribution Amount
and will be payable to the Securityholders as set
forth in the priority of distributions herein. See
"Description of the Transfer and Servicing
Agreements--Distributions" herein.
CLEARANCE AND SETTLEMENT.. Securityholders may elect to hold their Notes or
Certificates through any of DTC (in the United
States) or Cedel or Euroclear (in Europe).
Transfers within DTC, Cedel or Euroclear, as the
case may be, will be in accordance with the usual
rules and operation procedures of the relevant
system. Cross-market transfers between persons
holding directly or indirectly through DTC, on the
one hand, and counterparties holding directly or
indirectly through Cedel or Euroclear, on the
other, will be effected in DTC through the relevant
Depositaries of Cedel or Euroclear. See "Certain
Information Regarding the Securities--Book-Entry
Registration" in the Prospectus.
TAX STATUS . . . . . . . . In the opinion of ("Special Tax Counsel"), for
federal income tax purposes, the Notes will be
characterized as debt, and the Trust will not be
characterized as an association (or publicly traded
partnership) taxable as a corporation. In the
opinion of ("Michigan Tax Counsel"), the same
characterization will apply for Michigan income and
Single Business Tax purposes. Each Noteholder, by
the acceptance of a Note, will agree to treat the
Notes as indebtedness, and each Certificateholder,
by the acceptance of a Certificate, will agree to
treat the Trust as a partnership in which the
Certificateholders are partners for federal income
and Michigan income and Single Business Tax
purposes. Alternative characterizations of the
Trust and the Certificates are possible, but would
not result in materially adverse tax consequences
to Certificateholders. Certificateholders may be
allocated income equal to the amount of interest
accruing on the Certificates at the Certificate
Rate even though the Trust may not have sufficient
cash to make current cash distributions of such
amount. See "Certain Federal Income Tax
Consequences" herein and in the Prospectus and
"Certain State Tax Consequences" herein for
additional information concerning the application
of federal income and Michigan tax laws,
respectively, to the Trust and the Securities.
ERISA CONSIDERATIONS . . . Subject to the considerations discussed under
"ERISA Considerations" herein and in the
Prospectus, the Notes may, in general, be purchased
by or on behalf of employee benefit plans subject
to the Employee Retirement Income Security Act of
1974, as amended ("ERISA"). Any employee benefit
plan fiduciary considering a purchase of Notes
should, among other things, consult with legal
counsel regarding the availability of a statutory
or administrative exemption from the prohibited
transaction rules of ERISA and the Internal Revenue
Code of 1986, as amended (the "Code").
The Certificates may not be acquired by an employee
benefit plan subject to the fiduciary
responsibility provisions of ERISA or Section 4975
of the Code, or by an individual retirement
account. Any investor considering the purchase of
Certificates should be aware that such purchase and
subsequent holding
S-17
<PAGE> 20
could, under certain circumstances, be deemed to
involve an indirect prohibited transaction if a
plan with respect to which the investor is a
"party in interest" or "disqualified person"
purchases the Certificates without the benefit
of an exemption from the prohibited transaction
rules. See "ERISA Considerations" herein and in
the Prospectus.
[LEGAL INVESTMENT.......... The [Class A-1] Notes will be eligible securities
for purchase by money market funds under
paragraph (a)(5) of Rule 2a-7 under the
Investment Company Act of 1940, as amended.]
RATING[S] OF THE NOTES..... It is a condition to the issuance of the [Class
A-1,] [Class A-2] [and Class A-3] Notes that
they be rated in the highest investment rating
category by at least two nationally recognized
rating agencies. [However, the rating agencies
do not evaluate, and the rating does not
address, the likelihood that the Note Prepayment
Premium will be paid.] There can be no assurance
that a rating will not be lowered or withdrawn
by a rating agency if circumstances so warrant.
RATING OF THE CERTIFICATES.. It is condition of the issuance of the
Certificates that they be rated [at least] "
" or its equivalent by at least two nationally
recognized rating agencies. [However, the
rating agencies do not evaluate, and the rating
does not address, the likelihood that the
Certificate Prepayment Premium will be paid.]
There can be no assurance that a rating will not
be lowered or withdrawn by a rating agency if
circumstances so warrant.
S-18
<PAGE> 21
RISK FACTORS
LIMITED LIQUIDITY
There is currently no secondary market for the Securities. Each Underwriter
currently intends to make a market in the Securities for which it is an
Underwriter, but it is under no obligation to do so. There can be no assurance
that a secondary market will develop or, if a secondary market does develop,
that it will provide the Securityholders with liquidity of investment or that it
will continue for the life of the Securities.
[THE SUBSEQUENT RECEIVABLES AND THE PRE-FUNDING ACCOUNT
On the Closing Date, the Seller will transfer to the Trust the
approximately $ of Initial Receivables and the approximately $
Pre-Funded Amount on deposit in the Pre-Funding Account. If the principal
balance of eligible Receivables originated by Ford Credit during the Funding
Period is less than the Pre-Funded Amount, the Seller will have insufficient
Receivables to sell to the Trust on the Subsequent Transfer Dates, thereby
resulting in a prepayment of principal to the Noteholders and the
Certificateholders as described in the following paragraph. See "--Trust's
Relationship to Ford and Ford Credit" below. In addition, any conveyance of
Subsequent Receivables is subject to the satisfaction, on or before the related
Subsequent Transfer Date, of the following conditions precedent, among others:
(i) each such Subsequent Receivable must satisfy the eligibility criteria
specified in the Sale and Servicing Agreement; (ii) the Seller will not select
such Subsequent Receivables in a manner that it believes is adverse to the
interests of the Noteholders or the Certificateholders; (iii) as of the related
Subsequent Cutoff Date, the Receivables in the Trust at that time, including the
Subsequent Receivables to be conveyed by the Seller as of such Subsequent Cutoff
Date, will satisfy the parameters described under "The Receivables Pool" herein
and under "The Receivables Pools" in the Prospectus; (iv) the applicable Reserve
Initial Deposit for such Subsequent Transfer Date shall have been made; and (v)
the Seller shall have executed and delivered to the Trust (with a copy to the
Indenture Trustee) a written assignment conveying such Subsequent Receivables to
the Trust (including a schedule identifying such Subsequent Receivables).
Moreover, any such conveyance of Subsequent Receivables made during any given
Collection Period will also be subject to the satisfaction, on or about the
fifteenth day of the month following such Collection Period, of the following
conditions subsequent, among others: (a) the Seller will deliver certain
opinions of counsel to the Owner Trustee, Indenture Trustee and the Rating
Agencies with respect to the validity of the conveyance of all such Subsequent
Receivables conveyed during such Collection Period; (b) the Trust and the
Indenture Trustee shall have received written confirmation from a firm of
independent certified public accountants that, as of the end of the preceding
Collection Period, the Receivables in the Trust at that time, including the
Subsequent Receivables conveyed by the Seller during such Collection Period,
satisfied the parameters described under "The Receivables Pool" herein and under
"The Receivables Pools" in the Prospectus; and (c) the Rating Agencies shall
have each notified the Seller in writing that, following the addition of all
such Subsequent Receivables, [each class of] the Notes and the Certificates will
be rated in the same rating category as they were rated by the Rating Agencies
on the Closing Date. The Seller will immediately repurchase any Subsequent
Receivable, at a price equal to the Purchase Amount thereof, upon the failure of
the Seller to satisfy any of the foregoing conditions subsequent with respect
thereto. Such confirmation of the ratings of the Notes and the Certificates may
depend on factors other than the characteristics of the Subsequent Receivables,
including the delinquency, repossession and net loss experience on the
automobile and light truck receivables in the portfolio serviced by Ford Credit.
To the extent that amounts on deposit in the Pre-Funding Account have not
been fully applied to the conveyance of Subsequent Receivables to the Trust by
the end of the Funding Period and such amount exceeds $ , the
Noteholders and the Certificateholders will receive, on the Distribution Date on
or immediately following the last day of the Funding Period, a prepayment of
principal in an amount equal to the applicable Pre-Funded Percentage, in respect
of [a class of] the Notes or the Certificates, of the Pre-Funded Amount
remaining in the Pre-Funding Account following the purchase of any Subsequent
Receivables on such Distribution Date. Otherwise such remaining Pre-Funded
Amount will be paid as principal of the [Class A-1] Notes [up to an amount
S-19
<PAGE> 22
not to exceed their outstanding principal amount, with any remaining amount used
to redeem the Class A-2 Notes]. It is anticipated that the principal balance of
Subsequent Receivables sold to the Trust will not be exactly equal to the amount
on deposit in the Pre-Funding Account and that therefore there will be at least
a nominal amount of principal prepaid to the [Class A-1] Noteholders.
Each Subsequent Receivable must satisfy the eligibility criteria specified
in the Sale and Servicing Agreement and any additional criteria specified by the
Rating Agencies at the time of its addition. However, Subsequent Receivables
may have been originated by Ford Credit at a later date using credit criteria
different from those which were applied to the Initial Receivables and may be of
a different credit quality and seasoning. In addition, an increasing percentage
of the Subsequent Receivables may be Final Payment Receivables. Therefore,
following the transfer of Subsequent Receivables to the Trust, the
characteristics of the entire Receivables Pool included in the Trust may vary
significantly from those of the Initial Receivables. See "The Receivables Pool"
herein and "The Receivables Pools" in the Prospectus. The ability of Ford
Credit to generate Subsequent Receivables is largely dependent upon the level of
retail sales of automobiles and light trucks. The level of retail sales of
automobiles and light trucks may change as a result of a variety of social and
economic factors. Economic factors include interest rates, unemployment
levels, the rate of inflation and consumer perceptions of economic conditions
generally. However, the Seller is unable to determine and has no basis to
predict whether or to what extent economic or social factors will affect the
level of vehicle sales.]
[TRUST'S RELATIONSHIP TO FORD AND FORD CREDIT
Neither the Seller nor Ford Credit is obligated to make any payments in
respect of the Notes, the Certificates or the Receivables. However, the ability
of the Seller to convey Subsequent Receivables on Subsequent Transfer Dates is
completely dependent upon the generation of additional receivables by Ford
Credit. The ability of Ford Credit to generate receivables is, in turn,
dependent to a large extent on the sales of automobiles and light trucks
manufactured or distributed by Ford Motor Company and its consolidated
subsidiaries ("Ford"). If, during the Funding Period, Ford were temporarily or
permanently no longer manufacturing or distributing vehicles, the rate of sales
of automobiles and light trucks manufactured by Ford would decrease, adversely
affecting the ability of the Seller to sell Subsequent Receivables to the Trust.
The use of incentive programs (e.g., manufacturers' rebate programs) also may
affect retail sales. There can be no assurance, therefore, that Ford Credit
will continue to generate receivables at the same rate as in prior years. In
addition, if Ford Credit were to cease acting as Servicer, delays in processing
payments on the Receivables and information in respect thereof could occur and
result in delays in payments to the Securityholders.
Ford and Ford Credit are subject to the informational requirements of the
Exchange Act and in accordance therewith file reports and other information with
the Commission. For further information regarding Ford and Ford Credit,
reference is made to such reports and other information which are available as
described under "Available Information" in the Prospectus.]
LIMITED ASSETS
The Trust will not have, nor is it permitted or expected to have, any
significant assets or sources of funds other than the Receivables[, the
Pre-Funding Account] [, the Yield Supplement Account] and the Reserve Account
[and the payments, if any, received pursuant to the [Interest Rate Cap,] [the
Interest Rate Swap] [and the] [Guaranteed Rate Agreement]]. Holders of the
Notes and the Certificates must rely for repayment upon payments on the
Receivables and, if and to the extent available, amounts on deposit in the
[Pre-Funding Account][, the Yield Supplement Account] [and the] Reserve Account
[and the payments, if any, received pursuant to the [Interest Rate Cap,] [the
Interest Rate Swap] [and the] [Guaranteed Rate Agreement]]. [The Pre-Funding
Account will be available only during the Funding Period and is designed solely
to cover obligations of the Trust relating to a portion of its funds not
invested in Receivables and is not designed to cover losses on the Receivables.]
[The Yield Supplement Account is designed solely to hold funds to be applied to
provide payments to the Securityholders in
S-20
<PAGE> 23
respect of Receivables the APR of which is less than the Required Rate.] Funds
in the Reserve Account will be available on each Distribution Date to cover
shortfalls in distributions of interest and principal on the Notes and the
Certificates. However, amounts to be deposited in the [Pre-Funding Account[,
the Yield Supplement Account] and the] Reserve Account are limited in amount.
If the [Pre-Funding Account[, the Yield Supplement Account] and the] Reserve
Account is [are] exhausted, the Trust will depend solely on current
distributions on the Receivables [and the payments, if any, received pursuant to
the [Interest Rate Cap,] [the Interest Rate Swap] [and the] [Guaranteed Rate
Agreement]] to make payments on the Notes and the Certificates. [Payments under
[the Interest Rate Cap,] [the Interest Rate Swap] [and the Guaranteed Rate
Agreement] will be received only under certain circumstances. See "Description
of the Transfer and Servicing Agreements[--Interest Rate Cap,"] ["--Interest
Rate Swap"] [and "--Guaranteed Rate Agreement" herein.]]
DEFICIENCIES FROM SALE UPON INSOLVENCY OR DISSOLUTION OF SELLER OR GENERAL
PARTNER
If an Insolvency Event or a dissolution occurs with respect to the Seller
or the General Partner while the Notes are outstanding, the Indenture Trustee is
required to promptly sell, dispose of or otherwise liquidate the Receivables
[and [the Interest Rate Cap,] [the Interest Rate Swap] [and the Guaranteed Rate
Agreement]] in a commercially reasonable manner on commercially reasonable
terms, unless (i) the Noteholders (other than the Seller, the Servicer or their
affiliates) of each class of Notes representing not less than a majority of the
aggregate unpaid principal amount of such class of the Notes and the right to
receive interest thereon, (ii) the Certificateholders (other than the Seller)
of Certificates representing not less than a majority of the aggregate
Certificate Balance and the right to receive interest thereon, and (iii) not
less than a majority of the holders (other than the Seller, the Servicer or
their affiliates) of certain interests, if any, in the Reserve Account
disapprove of such sale and in connection therewith, the Indenture Trustee (x)
appoints an entity acceptable to Ford Credit to acquire an interest in such
Trust and to act as a substitute "general partner" for federal income tax
purposes and (y) an opinion of counsel as to certain tax matters is delivered.
The proceeds from any such sale, disposition or liquidation of the Receivables
will be treated as collections on the Receivables and deposited in the
Collection Account. The proceeds from the liquidation of the Receivables [and
[the Interest Rate Cap,] [the Interest Rate Swap] [and the Guaranteed Rate
Agreement]] and any amounts on deposit in the Reserve Account, [the Pre-Funding
Account,] [the Yield Supplement Account,] the Note Payment Account and the
Certificate Distribution Account will be distributed first to Noteholders and
then to Certificateholders in the priority set forth in the Indenture. If such
proceeds and amounts are not sufficient to pay all the Notes in full, the amount
of principal returned to Noteholders will be reduced, no such proceeds or
amounts will be distributed to the Certificateholders, and the Noteholders and
Certificateholders will incur a loss on their investment. If such proceeds and
amounts are sufficient to pay all the Notes in full but are not sufficient to
pay both the Notes and Certificates in full, the amount of principal returned to
Certificateholders will be reduced, and the Certificateholders will incur a loss
on their investment. See "Description of the Transfer and Servicing
Agreements--Insolvency Event or Dissolution" in the Prospectus.
SUBORDINATION
Distributions of interest and principal on the Certificates will be
subordinated in priority of payment to interest and principal due on the Notes.
Consequently, the Certificateholders will not receive any distributions with
respect to a Collection Period until the full amount of interest on and
principal of the Notes on such Distribution Date has been deposited in the Note
Payment Account. The Certificateholders will not receive any distributions of
principal until after the later to occur of (i) the Distribution Date next
succeeding the Distribution Date on which the [Class A-1] Notes were paid in
full and (ii) the Distribution Date. However, upon the occurrence and
during the continuation of an Event of Default which has resulted in an
acceleration of the Notes or following an Insolvency Event or a dissolution with
respect to the Seller or the General Partner, distributions of any amounts on
the Certificates will be subordinated in priority of payment to payment in full
of principal of principal of the Notes. [In addition, upon any reduction or
withdrawal by any Rating Agency of its rating of [the] [any class of] Notes (see
"--Ratings of the Securities" below), the Certificateholders will not receive
any distributions of principal until after all the Notes have been paid in full
or until such rating has been restored].
S-21
<PAGE> 24
If an Event of Default occurs, the Indenture Trustee or the holders of a
majority of the aggregate principal amount of all the Notes may declare the
principal of the Notes to be immediately due and payable, and the Indenture
Trustee may institute or be required to institute proceedings to collect amounts
due or exercise its remedies as a secured party (including foreclosure or sale
of the Receivables). In the event of a sale of Receivables by the Indenture
Trustee following an Event of Default or following an Insolvency Event or a
dissolution with respect to the Seller or the General Partner, there is no
assurance that the proceeds of such sale will be equal to or greater than the
aggregate outstanding principal amount of the Notes and the Certificate
Balance plus accrued interest. Because neither interest nor principal is
distributed to Certificateholders upon sale of the Receivables following an
Event of Default and acceleration of the Notes under the Indenture or following
an Insolvency Event or a dissolution with respect to the Seller or the General
Partner until all the Notes have been paid in full, the interests of Noteholders
and the Certificateholders may conflict, and the exercise by the Indenture
Trustee of its right to sell the Receivables or exercise other remedies under
the Indenture and applicable law may cause the Certificateholders to suffer a
loss of all or part of their investment. See "Description of the Notes--The
Indenture--Events of Default; Rights upon Event of Default" and "Description of
the Transfer and Servicing Agreements--Insolvency Event or Dissolution" in the
Prospectus.
In general, the Seller may, and in certain circumstances the
Certificateholders may, direct the Owner Trustee in the administration of the
Trust. However, because the Trust has pledged the property of the Trust to the
Indenture Trustee to secure the payment of the Notes, including in such pledge
certain rights of the Trust under the Sale and Servicing Agreement, the
Indenture Trustee and not the Seller or the Certificateholders has the power to
direct the Trust to take certain actions in connection with the administration
of the property of the Trust until the Notes have been paid in full and the
lien of the Indenture has been released. In addition, the Seller and
Certificateholders are not allowed to direct the Owner Trustee to take any
action which conflicts with the provisions of any of the Basic Documents. The
Indenture specifically prohibits the Owner Trustee from taking any action which
would impair the Indenture Trustee's security interest in the Trust and requires
the Owner Trustee to obtain the consent of the Indenture Trustee or the holders
of a majority of the aggregate principal amount of the Notes before modifying,
amending, supplementing, waiving or terminating any Basic Document or any
provision of any Basic Document. Therefore, until the Notes have been paid in
full, the ability to direct the Trust with respect to certain actions permitted
to be taken by it under the Basic Documents rests with the Indenture Trustee and
the Noteholders instead of the Seller or the Certificateholders.
If an Event of Servicing Termination were to occur, the holders of a
majority of the outstanding principal amount of the Notes, or the Indenture
Trustee acting on behalf of the Noteholders, and not the Seller or the
Certificateholders, would have the right to terminate the Servicer as the
servicer of the Receivables without consideration of the effect such termination
would have on Certificateholders. In addition, the holders of not less than a
majority of the outstanding principal amount of the Notes would have the right
to waive certain Events of Servicing Termination, without consideration of the
effect such waiver would have on Certificateholders. After all the Notes have
been paid in full and the lien of the Indenture has been released, upon the
occurrence of an Event of Servicing Termination, the holders of a majority of
the outstanding Certificate Balance, or the Owner Trustee acting on behalf of
the Certificateholders, may terminate the Servicer. See "Description of the
Transfer and Servicing Agreements--Events of Servicing Termination" and
"--Rights upon Event of Servicing Termination" in the Prospectus.
MATURITY AND PREPAYMENT CONSIDERATIONS
The [Class A-2 Notes, the Class A-3 Notes and the] Certificates will not
receive any principal payments until the [Class A-1] Notes have been paid in
full[, and the Class A-3 Notes will not receive any principal payments until the
Class A-2 Notes have been paid in full]. In addition, no principal payments on
the Certificates will be made until the later of (i) the 199
Distribution Date and (ii) the Distribution Date next succeeding the
Distribution Date on which the [Class A-1] Notes are paid in full. As the rate
of payment of principal of [the] [each class of] Notes and the Certificates
depends on the rate of payment (including prepayments) of the principal balance
of the Receivables, final payment of [the] [any class of] Notes and the final
distribution in respect of the
S-22
<PAGE> 25
Certificates could occur significantly earlier than
the respective [Final Scheduled Distribution Dates] [final scheduled
Payment Dates or Distribution Date]. In addition, the rate of
payment of principal of [the] [each Class of] Notes and the
Certificates will be affected by the application of the Noteholders'
Accelerated Principal to pay the principal of the Notes. It is
expected that final payment of [the] [each class of] Notes and the
final distribution in respect of the Certificates will occur on or
prior to the respective [Final Scheduled Distribution Dates] [final
scheduled Payment Dates or Distribution Date]. However, if
sufficient funds are not available to pay [the] [any class of] Notes
or the Certificates in full on or prior to the respective [Final
Scheduled Distribution Dates] [final scheduled Payment Dates or
Distribution Date], final payment of [the] [such class of] Notes and
the final distribution in respect of the Certificates could occur
later than such dates. See "Maturity and Prepayment Considerations"
herein and in the Prospectus.
RATINGS OF THE SECURITIES
It is a condition to the issuance of [each class of] the Notes
and of the Certificates that [each class of] the Notes be rated in
the highest rating category, and the Certificates be rated [at
least] " " or its equivalent, by at least two nationally
recognized rating agencies (the "Rating Agencies"). A rating is not
a recommendation to purchase, hold or sell Securities, inasmuch as
such rating does not comment as to market price or suitability for a
particular investor. The ratings of the Securities address the
likelihood of the payment of principal and interest on the
Securities pursuant to their terms. [However, the Rating Agencies
do not evaluate, and the ratings of the Securities do not address,
the likelihood that the Note Prepayment Premium or the Certificate
Prepayment Premium will be paid.] There can be no assurance that a
rating will remain for any given period of time or that a rating
will not be lowered or withdrawn entirely by a Rating Agency if in
its judgment circumstances in the future so warrant.
THE TRUST
GENERAL
The Issuer, Ford Credit Auto Owner Trust 199 - , is a business
trust formed under the laws of the State of Delaware pursuant to the
Trust Agreement for the transactions described in this Prospectus
Supplement. After its formation, the Trust will not engage in any
activity other than (i) acquiring, holding and managing the
Receivables and the other assets of the Trust and proceeds
therefrom, (ii) issuing the Notes and the Certificates, (iii)
making payments on the Notes and the Certificates and (iv) engaging
in other activities that are necessary, suitable or convenient to
accomplish the foregoing or are incidental thereto or connected
therewith.
The Trust will initially be capitalized with the Notes and the
Certificates. Certificates with an original principal balance of $
will be retained by the Seller and the remaining
Certificates will be sold to third party investors that are expected
to be unaffiliated with the Seller, the Servicer or their affiliates
or the Trust. The proceeds from the issuance of the Notes and the
Certificates will be used by the Trust to purchase the [Initial]
Receivables from the Seller pursuant to the Sale and Servicing
Agreement [, to fund the deposit of the Pre-Funded Amount] and to
fund the initial deposit into the Reserve Account.
If the protection provided to the investment of the
Securityholders by the [Yield Supplement Account and the] Reserve
Account is insufficient, the Trust would have to look principally to
the Obligors on the Receivables, the proceeds from the repossession
and sale of Financed Vehicles which secure defaulted Receivables and
the proceeds from any recourse against Dealers with respect to the
Receivables [and from the Pre-Funding Account]. In such event,
certain factors, such as the Trust's not having perfected security
interests in the Financed Vehicles in all states, may affect the
Servicer's ability to repossess and sell the collateral securing the
Receivables, and thus may reduce the proceeds to be distributed to
the Securityholders. See "Description of the Transfer and
Servicing Agreements--Distributions" [, "--Yield Supplement
Account; Yield Supplement Agreement"] and "--Reserve Account" herein
and "Certain Legal Aspects of the Receivables" in the Prospectus.
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<PAGE> 26
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 such date:
<TABLE>
<CAPTION>
<S> <C>
[Class A-1] Notes .............. $
[Class A-2 Notes] .............. [ ]
[Class A-3 Notes] .............. [ ]
Certificates ...................
----------------
Total .......................... $
================
</TABLE>
THE OWNER TRUSTEE
is the Owner Trustee under the Trust Agreement. is a
Delaware and its principal offices are located at
, Delaware. The Seller and its affiliates may maintain normal
commercial banking relations with the Owner Trustee and its
affiliates.
THE RECEIVABLES POOL
The pool of Receivables (the "Receivables Pool") will include
the [Initial] Receivables purchased as of the [Initial] Cutoff Date
[and will include any Subsequent Receivables purchased as of the
applicable Subsequent Cutoff Date (the Initial Cutoff Date or any
Subsequent Cutoff Date being individually referred to herein as a
"Cutoff Date")].
The [Initial] Receivables were purchased[, and the Subsequent
Receivables were or will be purchased,] by Ford Credit from Dealers
in the ordinary course of business in accordance with Ford Credit's
underwriting standards, and were [or will be] selected from Ford
Credit's portfolio for inclusion in the Receivables Pool by several
criteria, some of which are set forth in the Prospectus under "The
Receivables Pools," as well as the following: each Receivable (i)
provides for level monthly payments which provide interest at the
APR and fully amortize the amount financed over an original term no
greater than months, (ii) is not more than days past due as
of the [applicable] Cutoff Date and has never been extended and
(iii) was originated on or after . As of the [applicable]
Cutoff Date, no Obligor on any Receivable was [or will have been]
noted in the related records of the Servicer as being the subject of
a bankruptcy proceeding. No selection procedures believed by the
Seller to be adverse to the Noteholders or the Certificateholders
were [or will be used] in selecting the Receivables.
[The obligation of the Trust to purchase the Subsequent
Receivables on a Subsequent Transfer Date will be subject to the
Receivables in the Trust, including the Subsequent Receivables to be
conveyed to the Trust on such Subsequent Transfer Date, meeting the
following criteria: (i) not more than % of the principal balances
of the Receivables in the Trust will represent vehicles financed at
Ford Credit's used vehicle rates; and (ii) the weighted average APR
of the Receivables in the Trust will not be less than %, unless
the Seller increases the Reserve Initial Deposit by the amounts, if
any, specified by the Rating Agencies to maintain the ratings of the
Notes and the Certificates. In addition, such obligation will be
subject to the Receivables, including the Subsequent Receivables to
be transferred to the Trust on such Subsequent Transfer Date, having
a weighted average remaining term not greater than months.
Such criteria will be based on the characteristics of the Initial
Receivables on the Initial Cutoff Date and any Subsequent
Receivables on the related Subsequent Cutoff Dates.]
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<PAGE> 27
[The Initial Receivables will represent approximately % of
the aggregate initial principal amount of the Securities. However,
except for the criteria described in the preceding paragraphs and
the criteria, if any, specified by the Rating Agencies to maintain
the ratings of the Notes and the Certificates, there will be no
required characteristics of the Subsequent Receivables. Therefore,
following the transfer of Subsequent Receivables to the Trust, the
aggregate characteristics of the entire Receivables Pool, including
the composition of the Receivables, the distribution by APR and the
geographic distribution described in the following tables, may vary
significantly from those of the Initial Receivables.]
Neither Ford Credit nor any of its affiliates maintains records
adequate to provide quantitative data regarding its prepayment
experience on its portfolio of U.S. retail installment sale
contracts for either new or used vehicles. However, Ford Credit (i)
believes that the actual rate of prepayments will result in a
substantially shorter weighted average life than the scheduled
weighted average life and (ii) estimates that the actual weighted
average life of its portfolio of U.S. retail installment contracts
for new and used automobiles and light trucks ranges between 60% and
70% of their scheduled weighted average life. See "Maturity and
Prepayment Considerations" herein and in the Prospectus.
The composition, geographical distribution, and distribution by
annual percentage rate of the [Initial] Receivables as of the
[Initial] Cutoff Date are set forth in the following tables.
COMPOSITION OF THE [INITIAL] RECEIVABLES POOL
AS OF THE [INITIAL] CUTOFF DATE
<TABLE>
<S> <C>
Aggregate Principal Balance ......... $
Number of Receivables
Average Principal Balance ........... $
(Range) .......................... $ to $
Average Original Amount Financed .... $
(Range) .......................... $ to $
Weighted Average APR ................ %
(Range) .......................... % to %
Weighted Average Original Term ...... months
(Range) .......................... to months
Weighted Average Remaining Term ..... months
(Range) .......................... to months
Scheduled Weighted Average Life(1) .. months
</TABLE>
(1) Based on payments due on or after the [Initial] Cutoff
Date, assuming that no prepayments on the [Initial] Receivables
are made after the [Initial] Cutoff Date and that all payments
on Simple Interest Receivables are received on their respective
due dates.
S-25
<PAGE> 28
GEOGRAPHIC DISTRIBUTION OF THE [INITIAL] RECEIVABLES POOL
AS OF THE [INITIAL] CUTOFF DATE
<TABLE>
<CAPTION>
PERCENTAGE
OF
AGGREGATE
PRINCIPAL
STATE(1) BALANCE(2)
-------------------- ---------------
<S> <C>
Alabama[(3)] ....... %
Alaska..............
Arizona.............
Arkansas............
California..........
Colorado............
Connecticut.........
Delaware............
District of Columbia
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[(3)]...
Rhode Island........
South Carolina......
South Dakota........
Tennessee...........
Texas...............
Utah................
Vermont.............
Washington..........
West Virginia.......
Wisconsin...........
Wyoming ............
</TABLE>
(1) Based on the billing addresses of the Obligors on the
[Initial] Receivables as of the [Initial] Cutoff Date.
(2) Percentages may not add to 100.00% due to rounding.
States showing 0.0% each represent less than 0.05%.
[(3) Alabama and Pennsylvania were excluded for administrative
reasons.]
S-26
<PAGE> 29
DISTRIBUTION BY APR OF THE [INITIAL] RECEIVABLES POOL
AS OF THE [INITIAL] CUTOFF DATE
<TABLE>
<CAPTION>
PERCENTAGE OF
AGGREGATE AGGREGATE
NUMBER OF PRINCIPAL PRINCIPAL
APR RANGE RECEIVABLES BALANCE BALANCE(L)
-------------------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C>
0.00% to 1.00% $ %
1.01 to 2.00
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
16.01 to 17.00
17.01 to 18.00
18.01 to 19.00
19.01 to 20.00
Totals $ 100.00%
=========== ========= ============
</TABLE>
(1) Percentages may not add to 100.00% due to rounding.
Approximately % of the aggregate principal balance of the [Initial]
Receivables, constituting % of the number of [Initial] Receivables, as of the
[Initial] Cutoff Date, represent vehicles financed at new vehicle rates, and the
remainder of the [Initial] Receivables represent vehicles financed at used
vehicle rates.
By aggregate principal balance, approximately % of the [Initial]
Receivables constitute Precomputed Receivables, % of the [Initial]
Receivables constitute Simple Interest Receivables and % constitute Final
Payment Receivables. In addition, % of the [Initial] Receivables that are
Precomputed Receivables and % that are Simple Interest Receivables constitute
Final Payment Receivables. See "The Receivables Pools" in the Prospectus for a
further description of the characteristics of Precomputed Receivables, Simple
Interest Receivables and Final Payment Receivables.
Based on principal balance, less than % of the [Initial] Receivables
provide recourse to the Dealer which originated the Receivable. See "The
Receivables Pools" in the Prospectus for a further description of such recourse
provisions.
WEIGHTED AVERAGE LIFE OF THE SECURITIES
Prepayments on automotive receivables can be measured relative to a
prepayment standard or model. The model used in this Prospectus Supplement, the
Absolute Prepayment Model ("ABS"), represents an assumed rate
S-27
<PAGE> 30
of prepayment each month relative to the original number of receivables in a
pool of receivables. ABS further assumes that all the receivables are the same
size and amortize at the same rate and that each receivable in each month of its
life will either be paid as scheduled or be prepaid in full. For example, in a
pool of receivables originally containing 10,000 receivables, a 1% ABS rate
means that 100 receivables prepay each month. ABS does not purport to be an
historical description of prepayment experience or a prediction of the
anticipated rate of prepayment of any pool of receivables, including the
Receivables.
As the rate of payment of principal of each class of Notes and the
Certificates 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 final distribution in respect of the Certificates could occur significantly
earlier than the respective [Final Scheduled Distribution Dates] [final
scheduled Payment Dates or Distribution Date]. Reinvestment risk associated
with early payment of the Notes and the Certificates will be borne exclusively
by the Noteholders and the Certificateholders, respectively.
The table captioned "Percent of Initial Note Principal Amount or Initial
Certificate Balance at Various ABS Percentages" (the "ABS Table") has been
prepared on the basis of the characteristics of the [Initial] Receivables [and
certain assumed characteristics with respect to the Subsequent Receivables].
The ABS Table assumes that (i) the Receivables prepay in full at the specified
constant percentage of ABS monthly, with no defaults, losses or repurchases,
(ii) each scheduled monthly payment on the Receivables is made on the last day
of each month and each month has 30 days, (iii) payments on the Notes [are made
on each Payment Date] and distributions on the Certificates are made on each
Distribution Date (and each such date is assumed to be the day of [the month
in which such Payment Date or Distribution Date occurs] [each applicable
month]), (iv) the balance in the Reserve Account on each [Payment Date and]
Distribution Date is equal to the Specified Reserve Balance, and (v) the Seller
exercises its option to purchase the Receivables on the first Distribution Date
on which it is permitted to do so, as described herein. [State assumed
characteristics with respect to the Subsequent Receivables.] [And/or, state
other assumptions on which the ABS Table is based.] The pools have an assumed
cutoff date of , 199 . The ABS Table indicates 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 percent
of the initial Certificate Balance that is projected to be outstanding after
each of the [Payment Dates or] Distribution Dates shown at various constant ABS
percentages.
The ABS Table also assumes that the [Initial] Receivables have been
aggregated into hypothetical pools with all of the [Initial] Receivables
within each such pool having the following characteristics and that the level
scheduled monthly payment for each of the pools (which is based on its
aggregate principal balance, APR, original term to maturity and remaining term
to maturity as of the [Initial] Cutoff Date) will be such that each pool will be
fully amortized by the end of its remaining term to maturity. [State assumed
characteristics with respect to hypothetical pools of Subsequent Receivables.]
<TABLE>
<CAPTION>
ORIGINAL TERM REMAINING TERM
AGGREGATE TO MATURITY TO MATURITY
POOL PRINCIPAL BALANCE APR (IN MONTHS) (IN MONTHS)
- ---- ----------------- --- ------------- --------------
<S> <C> <C> <C> <C>
1 ...... $ %
2 ......
3 ......
4 ......
--------------
==============
</TABLE>
The actual characteristics and performance of the Receivables will differ
from the assumptions used in constructing the ABS Table. The assumptions used
are hypothetical and have been provided only to give a general
S-28
<PAGE> 31
sense of how the principal cash flows might behave under varying prepayment
scenarios. For example, it is very unlikely that the Receivables will prepay at
a constant level of ABS until maturity or that all of the Receivables will
prepay at the same level of ABS. Moreover, the diverse terms of Receivables
within 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 such
assumptions and the actual characteristics and performance of the Receivables,
or actual prepayment experience, will affect the percentages of initial balances
outstanding over time and the weighted average lives of each class of Notes and
the Certificates.
S-29
<PAGE> 32
PERCENT OF INITIAL NOTE PRINCIPAL AMOUNT OR
INITIAL CERTIFICATE BALANCE AT VARIOUS ABS PERCENTAGES
<TABLE>
<CAPTION>
CLASS A-1 NOTES CLASS A-2 NOTES CLASS A-3 NOTES
[PAYMENT] ---------------------------------- ---------------------------------- ----------------------------------
[DISTRIBUTION] 0.5% 1.0% 1.5% 1.8% 0.5% 1.0% 1.5% 1.8% 0.5% 1.0% 1.5% 1.8%
DATE
---------------------------------- ---------------------------------- ----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
06/15/96...... 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000
07/15/96......
08/15/96......
09/15/96......
10/15/96......
11/15/96......
12/15/96......
01/15/97......
02/15/97......
03/15/97......
04/15/97......
05/15/97......
06/15/97......
07/15/97......
08/15/97......
09/15/97......
10/15/97......
11/15/97......
12/15/97......
01/15/98......
02/15/98......
03/15/98......
04/15/98......
05/15/98......
06/15/98......
07/15/98......
08/15/98......
09/15/98......
10/15/98......
11/15/98......
12/15/98......
01/15/99......
02/15/99......
03/15/99......
04/15/99......
05/15/99......
06/15/99......
07/15/99......
Weighted Average
Life (years)(1)
</TABLE>
(1) The weighted average life of a Class A-1 Note, Class A-2 Note, or Class
A-3 Note is determined by (i) multiplying the amount of each principal
payment on a Note by the number of years from the date of the issuance of
the Note to the related [Payment] [Distribution] Date, (ii) adding the
results and (iii) dividing the sum by the related initial principal amount
of the Note.
THE ABS TABLE HAS BEEN PREPARED BASED ON THE ASSUMPTIONS DESCRIBED ABOVE
(INCLUDING THE ASSUMPTIONS REGARDING THE CHARACTERISTICS AND PERFORMANCE OF THE
RECEIVABLES WHICH WILL DIFFER FROM THE ACTUAL CHARACTERISTICS AND PERFORMANCE
THEREOF) AND SHOULD BE READ IN CONJUNCTION THEREWITH.
S-30
<PAGE> 33
PERCENT OF INITIAL NOTE PRINCIPAL AMOUNT OR
INITIAL CERTIFICATE BALANCE AT VARIOUS ABS PERCENTAGES
<TABLE>
<CAPTION>
CERTIFICATES
----------------------------------
DISTRIBUTION 0.5% 1.0% 1.5% 1.8%
DATE
----------------------------------
<S> <C> <C> <C> <C>
06/15/96...... 100.000 100.000 100.000 100.000
07/15/96......
08/15/96......
09/15/96......
10/15/96......
11/15/96......
12/15/96......
01/15/97......
02/15/97......
03/15/97......
04/15/97......
05/15/97......
06/15/97......
07/15/97......
08/15/97......
09/15/97......
10/15/97......
11/15/97......
12/15/97......
01/15/98......
02/15/98......
03/15/98......
04/15/98......
05/15/98......
06/15/98......
07/15/98......
08/15/98......
09/15/98......
10/15/98......
11/15/98......
12/15/98......
01/15/99......
02/15/99......
03/15/99......
04/15/99......
05/15/99......
06/15/99......
07/15/99......
Weighted Average
Life (years)(1)
</TABLE>
(1) The weighted average life of a Certificate is determined by (i)
multiplying the amount of each distribution in respect of the Certificate
Balance of a Certificate by the number of years from the date of the
issuance of the Certificate to the related Distribution Date, (ii) adding
the results and (iii) dividing the sum by the original Certificate Balance
of the Certificate.
THE ABS TABLE HAS BEEN PREPARED BASED ON THE ASSUMPTIONS DESCRIBED ABOVE
(INCLUDING THE ASSUMPTIONS REGARDING THE CHARACTERISTICS AND PERFORMANCE OF THE
RECEIVABLES WHICH WILL DIFFER FROM THE ACTUAL CHARACTERISTICS AND PERFORMANCE
THEREOF) AND SHOULD BE READ IN CONJUNCTION THEREWITH.
S-31
<PAGE> 34
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
Set forth below is certain information concerning Ford Credit's experience
with respect to its portfolio of U.S. retail installment sale contracts for new
and used automobiles and light trucks (including previously sold contracts which
Ford Credit continues to service, but not including retail installment sale
contracts purchased by Ford Credit under certain special financing programs).
[Ford Credit began originating Final Payment Receivables in 19 .] There is no
assurance that the behavior of the Receivables will be comparable to Ford
Credit's experience shown in the following tables or that the trend in losses
and delinquencies will continue into the future.
DELINQUENCY EXPERIENCE(1)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
---------------------------- ----------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Average Number of
Contracts
Outstanding During
the Period............... 3,549,204 3,409,392 3,438,699 3,430,145 3,398,797 3,388,214 3,398,048
Average Daily
Delinquencies as a
Percent of Average
Contracts
Outstanding
31-60 Days(2).......... 2.46% 2.18% 2.21% 2.03% 2.02% 2.35% 2.72%
61-90 Days(2).......... 0.24% 0.17% 0.17% 0.15% 0.15% 0.20% 0.29%
Over 90 Days(3)........ 0.05% 0.03% 0.04% 0.03% 0.03% 0.04% 0.07%
</TABLE>
- ------------
(1) The information in the table includes U.S. retail installment sale
contracts for new and used automobiles and light trucks and includes
previously sold contracts which Ford Credit continues to service; it does
not include retail installment sale contracts purchased by Ford Credit
under certain special financing programs.
(2) Delinquencies represent the daily average number of contracts delinquent.
(3) Delinquencies represent the average monthly end-of-period number of
contracts delinquent.
S-32
<PAGE> 35
CREDIT LOSS AND REPOSSESSION EXPERIENCE(1)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
---------------------- --------------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Average Portfolio
Outstanding During
the Period
(Millions) $38,679.8 $34,382.5 $35,698.6 $33,703.3 $31,204.9 $29,505.1 $28,977.1
Percent of Average
Receivables
Outstanding During
the Period without
Recourse to Dealer 99.3% 98.9% 99.1% 98.6% 97.7% 96.4% 94.4%
Repossessions as a
Percent of Average
Number of Contracts
Outstanding 2.78%(2) 2.29%(2) 2.38% 2.15% 2.27% 2.74% 3.27%
Net Losses as a
Percent of Gross
Liquidations(3) 1.86% 1.19% 1.43% 1.06% 1.16% 1.52% 2.29%
Net Losses as a
Percent of Average
Portfolio
Outstanding(3) 1.09%(2) 0.69%(2) 0.82% 0.62% 0.69% 0.90% 1.29%
</TABLE>
(1) Except as indicated, all amounts and percentages are based
on the gross amount scheduled to be paid on each contract
including unearned finance and other charges. The information
in the table includes U.S. retail installment sale contracts for
new and used automobiles and light trucks and includes
previously sold contracts which Ford Credit continues to
service; it does not include retail installment sale contracts
purchased by Ford Credit under certain special financing
programs.
(2) Annualized rate.
(3) "Net Losses" are equal to the aggregate balance of all
contracts which are determined to be uncollectible in the period
less any recoveries on contracts charged-off in the period or
any prior periods. Effective January 1, 1993 net losses include
expenses associated with outside collection agencies. Other
expenses associated with collection, repossession, and
disposition of the vehicle continue to be excluded. These
other expenses are not material to the data presented.
As shown above, credit losses have increased since the beginning
of 1995 reversing a general trend of improvement that had begun in
1989. The increase reflects an increase in losses per repossession
and an increase in repossession rates. See "Description of the
Transfer and Servicing Agreements--Servicing Procedures" in the
Prospectus.
POOL FACTORS
The "Note Pool Factor" for [the] [each class of] Notes will be a
seven-digit decimal which the Servicer will compute prior to each
distribution with respect to [the] [such class of] Notes indicating
the remaining outstanding principal amount of [the] [such class
of] Notes, as of the applicable [Distribution] [Payment] Date (after
giving effect to payments to be made on such [Distribution] [Payment]
Date), as a fraction of the initial outstanding principal amount of
[the] [such class of] Notes. The "Certificate Pool Factor" for the
Certificates will be a seven-digit decimal which the Servicer will
compute prior to each distribution with respect to the Certificates
indicating the remaining Certificate Balance, as of the applicable
Distribution Date (after giving effect to distributions to be made on
such Distribution Date), as a fraction of the initial Certificate
Balance. [The] [Each] Note Pool Factor and the 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, as the case may be, as a result of scheduled payments,
prepayments and liquidations of the Receivables [(and also as a
result of a prepayment arising from application of the Pre-Funding
Account)]. [[The] [Each] Note Pool Factor and the Certificate Pool
Factor will not change as a result of the addition of Subsequent
Receivables.] A Noteholder's portion
S-33
<PAGE> 36
of the aggregate outstanding principal amount of the [related class
of] Notes is the product of (i) the original denomination of such
Noteholder's Note and (ii) the [applicable] Note Pool Factor. A
Certificateholder's portion of the aggregate outstanding Certificate
Balance for the Certificates is the product of (a) the original
denomination of such Certificateholder's Certificate and (b) the
Certificate Pool Factor.
MATURITY AND PREPAYMENT CONSIDERATIONS
Information regarding certain maturity and prepayment
considerations with respect to the Securities is set forth under
"Maturity and Prepayment Considerations" in the Prospectus. In
addition, the [Class A-2 Notes, the Class A-3 Notes and the]
Certificates will not receive any principal payments until the [Class
A-1] Notes have been paid in full[, and the Class A-3 Notes will not
receive any principal payments until the Class A-2 Notes have been
paid in full]. In addition, no principal payments on the
Certificates will be made until the later of (i) the 199
Distribution Date and (ii) the Distribution Date next
succeeding the Distribution Date on which the [Class A-1] Notes are
paid in full. See "Description of the Notes--Payments of Principal"
and "Description of the Certificates--Distributions of Principal
Payments" herein. As the rate of payment of principal of [the] [each
class of] Notes and the Certificates depends on the rate of payment
(including prepayments) of the principal balance of the Receivables,
final payment of [the] [any class of] Notes and the final
distribution in respect of the Certificates could occur
significantly earlier than the respective [Final Scheduled
Distribution Dates] [final scheduled Payment Dates or Distribution
Date]. In addition, the rate of payment of principal of [the] [each
Class of] Notes and the Certificates will be affected by the
application of the Noteholders' Accelerated Principal to pay
principal of the Notes.
It is expected that final payment of [the] [each class of] Notes
and the final distribution in respect of the Certificates will occur
on or prior to the respective [Final Scheduled Distribution Dates]
[final scheduled Payment Dates or Distribution Date]. Failure to
make final payment of [the] [any class of] Notes on or prior to the
respective Final Scheduled [Payment] [Distribution] Dates would
constitute an Event of Default under the Indenture. See "Description
of the Notes--The Indenture--Events of Default; Rights upon Event of
Default" in the Prospectus. In addition, the Sale and Servicing
Agreement requires that any remaining Certificate Balance be paid in
full on the Final Scheduled Distribution Date. However, no
assurance can be given that sufficient funds will be available to pay
[the] [each class of] Notes and the Certificates in full on or prior
to the respective [Final Scheduled Distribution Dates] [final
scheduled Payment Dates or Distribution Date]. If sufficient funds
are not available, final payment of [the] [any class of] Notes and
the final distribution in respect of the Certificates could occur
later than such dates.
The rate of prepayments of the Receivables may be influenced by
a variety of economic, social and other factors, and under certain
circumstances relating to breaches of representations, warranties or
covenants, the Seller and/or the Servicer will be obligated to
repurchase Receivables from the Trust. See "The Receivables Pool"
herein and "Description of the Transfer and Servicing
Agreements--Sale and Assignment of Receivables" in the Prospectus. A
higher than anticipated rate of prepayments will reduce the aggregate
principal balance of the Receivables more quickly than expected and
thereby reduce anticipated aggregate interest payments on the
Securities. Any reinvestment risks resulting from a faster or slower
incidence of prepayment of Receivables will be borne entirely by the
Noteholders and the Certificateholders as set forth in the priority
of distributions herein. Such reinvestment risks include the risk
that interest rates may be lower at the time such holders received
payments from the Trust than interest rates would otherwise have been
had such prepayments not been made or had such prepayments been made
at a different time.
Holders of Securities should consider, in the case of Securities
purchased at a discount, the risk that a slower than anticipated rate
of principal payments on the Receivables could result in an actual
yield that is less than the anticipated yield and, in the case of
Securities purchased at a premium, the risk that a faster than
anticipated rate of principal payments on the Receivables could
result in an actual yield that is less than the anticipated yield.
S-34
<PAGE> 37
DESCRIPTION OF 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 Indenture will be filed with the Commission
following the issuance of the Securities. The following summary
describes certain 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, which are hereby incorporated by reference. The
following summary supplements the description of the general terms
and provisions of the Notes of any given series and the related
Indenture set forth under the headings "Description of the Notes" and
"Certain Information Regarding the Securities" in the Prospectus, to
which description reference is hereby made. , a ,
will be the Indenture Trustee under the Indenture.
PAYMENTS OF INTEREST
[The] [Each class of] Notes [other than the Class A-2 Notes]
will constitute Fixed Rate Securities, as such term is defined under
"Certain Information Regarding the Securities--Fixed Rate Securities"
in the Prospectus. [The Class A-2 Notes will constitute Floating
Rate Securities which are LIBOR Securities, as such terms are defined
under "Certain Information Regarding the Securities--Floating Rate
Securities" in the Prospectus.] Interest on the principal amount[s]
of the [classes of the] Notes will accrue at the [respective] per
annum Note Interest Rate[s] and will be payable to the Noteholders
[monthly] [quarterly] on each [Distribution] [Payment] Date
commencing , 199 . [However, if on any two consecutive
Distribution Dates any amount is withdrawn from the Reserve Account
to cover shortfalls on the Notes or the Certificates, then each
following Distribution Date will constitute a Payment Date, until the
quarterly Payment Date following the first Distribution Date on which
(i) no amount is withdrawn from the Reserve Account to cover
shortfalls and (ii) the amount on deposit in the Reserve Account is
equal to the Specified Reserve Balance.] [However, if the commercial
paper rating or certificate of deposit rating of the Investment
Provider is at any time reduced below A-1+ or P1 by the applicable
Rating Agency and the Servicer is unable to obtain a Replacement
Guaranteed Rate Agreement or a pledge of securities or otherwise
satisfy the applicable Rating Agency within 60 days of receiving
notice of such decline, then each following Distribution Date will
constitute a Payment Date. See "Description of the Transfer and
Servicing Agreements--Guaranteed Rate Agreement" herein.] Interest
will accrue from and including the Closing Date (in the case of the
first [Distribution] [Payment] Date), or from the most recent
[Distribution] [Payment] Date on which interest has been paid to but
excluding the following [Distribution] [Payment] Date (each an
"Interest Period"). [Interest on the Class A-1 Notes will be
calculated on the basis of actual days elapsed and a 365- or 366-day
year, as applicable.] Interest on the [[Class A-1 Notes and] Class
A-3] Notes will be calculated on the basis of a 360-day year of
twelve 30-day months. [Interest on the Class A-2 Notes will be
calculated on the basis of actual days elapsed and a 360-day year.]
Interest accrued as of any [Distribution] [Payment] Date but not paid
on such [Distribution] [Payment] Date will be due on the next
[Distribution] [Payment] Date, together with interest on such amount
at the [applicable] Note Interest Rate [plus 2.00%] (to the extent
lawful). [With respect to the Class A-2 Rate, the "Index Maturity"
for LIBOR will be [one] [three] month[s] [(in the case of quarterly
Payment Dates) and one month (in the case of monthly Payment Dates)]
and the "Interest Reset Period" for such calculation will be the
Interest Period. See "Certain Information Regarding the
Securities--Floating Rate Securities" in the Prospectus.] Interest
payments on the Notes will generally be derived from the Available
Funds remaining after the payment of the Servicing Fee and from the
Reserve Account. See "Description of the Transfer and Servicing
Agreements--Distributions" and "--Reserve Account" herein. [Interest
payments to all classes of Noteholders will have the same priority.
Under certain circumstances, the amount available for interest
payments could be less than the amount of interest payable on the
Notes on any [Distribution] [Payment] Date, in which case each class
of Noteholders will receive their ratable share (based upon the
aggregate amount of interest due to such class of Noteholders) of the
aggregate amount available to be distributed in respect of interest
on the Notes.]
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PAYMENTS OF PRINCIPAL
Principal payments will be made [quarterly] to the Noteholders
on each [Distribution] [Payment] Date in an amount generally equal to
the sum [, for each of the three Collection Periods preceding such
Payment Date,] of (i) the Noteholders' Percentage of the amount (such
amount, the "Regular Principal") equal to the sum of (a) all
scheduled payments of principal and the principal portion of all
prepayments in full (and certain partial prepayments) collected with
respect to Precomputed Receivables (including amounts withdrawn from
the Payahead Account but excluding amounts deposited into the
Payahead Account), (b) the principal portion of all payments
collected with respect to Simple Interest Receivables, and (c) the
principal balance of each Receivable purchased by the Servicer,
repurchased by the Seller or liquidated by the Servicer, each with
respect to [the preceding] [such] Collection Period, plus (ii) %
of the portion, if any, of the Available Funds for such Collection
Period that remains after payment of (a) the Servicing Fee, (b) the
Accrued Note Interest, (c) the portion of the Regular Principal
allocated to the Noteholders pursuant to clause (i), (d) the Accrued
Certificate Interest, (e) the portion of the Regular Principal
distributed to Certificateholders as described under "Description of
the Certificates--Distributions of Principal Payments" herein, and
(f) the amount, if any, required to be deposited in the Reserve
Account on [such] [the related] Distribution Date [plus the excess of
the amount on deposit in the Reserve Account on such Distribution
Date (after giving effect to all deposits or withdrawals therefrom on
such Distribution Date) over the Specified Reserve Balance)] (such
percentage of the remaining portion of Available Funds [plus such
excess], the "Noteholders' Accelerated Principal"). [Principal]
[Amounts deposited in the Note Payment Account on each Distribution
Date in respect of principal] payments on the Notes generally will
be derived from the Available Funds and the amount, if any, in the
Reserve Account up to the Available Reserve Amount remaining after
the payment of the Servicing Fee and the Accrued Note Interest and,
in the case of the Noteholders' Accelerated Principal, the
Certificateholders' Distribution Amount and the amount, if any,
required to be deposited into the Reserve Account. See "Description
of the Transfer and Servicing Agreements--Distributions" and
"--Reserve Account" herein.
On the Business Day immediately preceding each Distribution Date
(a "Determination Date") the Indenture Trustee will determine the
amount in the Collection Account allocable to interest and the amount
allocable to principal on the basis described under "Description of
the Transfer and Servicing Agreements--Distributions" in the
Prospectus, and payments to Securityholders on the following
Distribution Date will be based on such allocation.
[On each Distribution Date, the Indenture Trustee will deposit
into the Note Payment Account amounts set aside for the payment of
principal and interest on the Notes on the related Payment Date, as
described under "Description of the Transfer and Servicing
Agreements--Distributions" herein. Such amounts will be invested
from the date of deposit to the related Payment Date by the Indenture
Trustee in [Permitted Investments] [certain eligible investments
pursuant to the Guaranteed Rate Agreement]. [See "Description of the
Transfer and Servicing Agreements--Guaranteed Rate Agreement"
herein.]]
Principal payments on the Notes will be applied on each
[Distribution] [Payment] Date [, first,] to the principal amount of
the [Class A-1] Notes until such principal amount is reduced to
zero[, then second, to the principal amount of the Class A-2 Notes
until such principal amount is reduced to zero and then third, to the
principal amount of the Class A-3 Notes until such principal amount
is reduced to zero]. The principal amount of the [Class A-1] Notes,
to the extent not previously paid, will be due on the [Class A-1]
Final Scheduled [Distribution] [Payment] Date[, the principal amount
of the Class A-2 Notes, to the extent not previously paid, will be
due on the Class A-2 Final Scheduled [Distribution] [Payment] Date,
and the principal amount of the Class A-3 Notes, to the extent not
previously paid, will be due on the Class A-3 Final Scheduled
[Distribution] [Payment] Date]. The actual date on which the
aggregate outstanding principal amount of [the] [any class of] Notes
is paid may be earlier or later than the [respective] Final
Scheduled [Distribution] [Payment] Date[s] set forth above based on a
variety of factors, including those described under "Maturity and
Prepayment Considerations" herein and in the Prospectus.
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<PAGE> 39
[MANDATORY REDEMPTION
[The] [A class or classes of] Notes will be redeemed in part on
the Distribution Date on or immediately following the last day of the
Funding Period in the event that amounts remain on deposit in the
Pre-Funding Account after giving effect to the purchase of all
Subsequent Receivables, including any such purchase on such date (a
"Mandatory Redemption"). If the amount on deposit in the Pre-Funding
Account is less than or equal to $ , then such amount will
be used to redeem the [Class A-1] Notes [up to an amount not to
exceed their outstanding principal amount and then to redeem the
Class A-2 Notes]. Otherwise the amount on deposit in the Pre-Funding
Account on such date will be used to redeem [each class of] the Notes
and the Certificates, and the aggregate principal amount of [each
class of] the Notes to be redeemed will be an amount equal to [the
Notes'] [such class'] Pre-Funded Percentage of the amount then on
deposit in the Pre-Funding Account.
[The Note Prepayment Premium will be payable by the Trust to the
Noteholders pursuant to a Mandatory Redemption if the amount on
deposit in the Pre-Funding Account exceeds $ . The Note
Prepayment Premium [for each class of Notes] will equal the excess,
if any, discounted as described below, of (i) the amount of interest
that would accrue on [the Notes'] [such class'] Pre-Funded Percentage
of any remaining Pre-Funded Amount (the "Note Prepayment Amount") at
the Note Interest Rate borne by [the] [such class of] Notes during
the period commencing on and including the Distribution Date on which
such Note Prepayment Amount is required to be distributed to the
Noteholders [of such class] to but excluding [, in the case
of the Class A-1 Notes, , in the case of the Class A-2
Notes and , in the case of the Class A-3 Notes], over (ii)
the amount of interest that would have accrued on such Note
Prepayment Amount over the same period at a per annum rate of
interest equal to the bond equivalent yield to maturity on the
Determination Date preceding such Distribution Date on the
[, in the case of the Class A-1 Notes, the , in the case of
the Class A-2 Notes and the , in the case of the Class A-3
Notes]. Such excess shall be discounted to present value to such
Distribution Date at the applicable yield described in clause (ii)
above. Pursuant to the Sale and Servicing Agreement, the Seller will
be obligated to pay the sum of the Note Prepayment Premium [for each
class of Notes] and the Certificate Prepayment Premium to the Trust
as liquidated damages for the failure to deliver Subsequent
Receivables having an aggregate principal balance equal to the
Pre-Funded Amount. The Trust's obligation to pay the Note Prepayment
Premium [for each class of Notes] and the Certificate Prepayment
Premium will be limited to funds received from the Seller pursuant to
the preceding sentence. In the event that such funds are
insufficient to pay the Note Prepayment Premium [for each class of
Notes] and the Certificate Prepayment Premium in full, Noteholders
[of each class of Notes] will receive their ratable share (based
upon the aggregate Note Prepayment Premium [for such class]) of the
aggregate amount available to be distributed in respect of the Note
Prepayment Premium and the Certificate Prepayment Premium. No other
assets of the Seller or the Trust will be available for the purpose
of making such payment.]]
OPTIONAL REDEMPTION
The [Class A-3] Notes will be redeemed in whole, but not in
part, on any Distribution Date [after all the other classes of Notes
have been paid in full] on which the Servicer exercises its option to
purchase the Receivables. The Servicer may purchase the Receivables
when the Pool Balance shall have declined to 10% or less of the
Initial Pool Balance, as described in the Prospectus under
"Description of the Transfer and Servicing Agree ments--Termination."
The redemption price will be equal to the unpaid principal amount of
the [Class A-3] Notes plus accrued and unpaid interest thereon (the
"Redemption Price").
DESCRIPTION OF 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 Trust Agreement will be filed
with the Commission
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<PAGE> 40
following the issuance of the Securities. The following summary
describes certain terms of the Certificates and the Trust Agreement. The
summary does not purport to be complete and is subject to, and qualified
in its entirety by reference to, all the provisions of the Certificates
and the Trust Agreement. The following summary supplements the
description of the general terms and provisions of the Certificates of any
given series and the related Trust Agreement set forth under the headings
"Description of the Certificates," "Certain Information Regarding the
Securities" and "Description of the Transfer and Servicing Agreements" in
the Prospectus, to which description reference is hereby made.
DISTRIBUTIONS OF INTEREST INCOME
On each Distribution Date, commencing , 199 , the
Certificateholders will be entitled to distributions in an amount
equal to the amount of interest that would accrue on the Certificate
Balance at the Certificate Rate. The Certificates will constitute
Fixed Rate Securities, as such term is defined under "Certain
Information Regarding the Securities--Fixed Rate Securities" in the
Prospectus. Interest in respect of a Distribution Date will accrue
from and including the Closing Date (in the case of the first
Distribution Date) or from and including the most recent Distribution
Date on which interest has been paid to but excluding the following
Distribution Date, and will be calculated on the basis of a 360-day
year of twelve 30-day months. Interest distributions due for any
Distribution Date but not distributed on such Distribution Date will
be due on the next Distribution Date increased by an amount equal to
interest on such amount at the Certificate Rate (to the extent
lawful). Interest distributions with respect to the Certificates
will generally be funded from the portion of the Available Funds and
the funds in the Reserve Account remaining after the distribution of
the Servicing Fee and the Noteholders' Payment Amount. Following the
occurrence of an Event of Default resulting in an acceleration of
the Notes or following an Insolvency Event or a dissolution with
respect to the Seller or the General Partner, the Noteholders will be
entitled to be paid in full before any distributions may be made on
the Certificates. See "Description of the Transfer and Servicing
Agreements--Distributions" and "--Reserve Account" herein.
DISTRIBUTIONS OF PRINCIPAL PAYMENTS
Certificateholders will be entitled to distributions on each
Distribution Date, commencing with the later of (i) the
Distribution Date and (ii) the Distribution Date next
succeeding the Distribution Date on which the [Class A-1] Notes are
paid in full, in an amount generally equal to the Certificateholders'
Percentage of the Regular Principal. Distributions with respect to
principal payments will generally be funded from the portion of the
Available Funds and funds in the Reserve Account remaining after the
distribution of the Servicing Fee, the Noteholders' Payment Amount
and the Accrued Certificate Interest. See "Description of the
Transfer and Servicing Agreements--Distributions" and "--Reserve
Account" herein. However, following the occurrence of an Event of
Default resulting in an acceleration of the Notes or following an
Insolvency Event or a dissolution with respect to the Seller or the
General Partner, the Noteholders will be entitled to be paid in full
before any distributions may be made on the Certificates. [In
addition, upon any reduction or withdrawal by any Rating Agency of
its rating of [any class of] the Notes, then, with respect to each
Distribution Date thereafter, the Certificateholders will not receive
any distributions of principal until all the Notes have been paid in
full or such rating has been restored. There can be no assurance
that a rating will remain for a given period of time or that a rating
will not be lowered or withdrawn entirely by a Rating Agency if in
its judgment circumstances in the future so warrant.]
[MANDATORY REPURCHASE
Cash distributions to Certificateholders will be made, on a pro
rata basis, on the Distribution Date on or immediately following the
last day of the Funding Period in the event that the amount on
deposit in the Pre-Funding Account after giving effect to the
purchase of all Subsequent Receivables, including any such purchase
on such date, exceeds $ (a "Mandatory Repurchase"). The
aggregate principal balance of the Certificates to be repurchased
will be an amount equal to the Certificates' Pre-Funded Percentage of
the amount then on deposit in the Pre-Funding Account.
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<PAGE> 41
[The Certificate Prepayment Premium will be payable by the Trust
to the Certificateholders at the time of any prepayment of the
Certificates pursuant to a Mandatory Repurchase. The Certificate
Prepayment Premium for the Certificates will equal the excess, if
any, discounted as described below, of (i) the amount of interest
that would accrue on the Certificates' share of any remaining
Pre-Funded Amount (the "Certificate Prepayment Amount") at the
Certificate Rate during the period commencing on and including the
Distribution Date on which such Certificate Prepayment Amount is
required to be distributed to Certificateholders to but excluding
, over (ii) the amount of interest that would have accrued on
such Certificate Prepayment Amount over the same period at a per
annum rate of interest equal to the bond equivalent yield to maturity
on the Determination Date preceding such Distribution Date on the
. Such excess shall be discounted to present value to such
Distribution Date at the yield described in clause (ii) above.
Pursuant to the Sale and Servicing Agreement, the Seller will be
obligated to pay the sum of the Note Prepayment Premium [for each
class of Notes] and the Certificate Prepayment Premium to the Trust
as liquidated damages for the failure to deliver Subsequent
Receivables having an aggregate principal balance equal to the
Pre-Funded Amount. The Trust's obligation to pay the Note Prepayment
Premium [for each class of Notes] and the Certificate Prepayment
Premium will be limited to funds received from the Seller pursuant to
the preceding sentence. In the event that such funds are
insufficient to pay the Note Prepayment Premium [for each class of
Notes] and the Certificate Prepayment Premium in full,
Certificateholders will receive their ratable share (based upon the
aggregate Certificate Prepayment Premium) of the aggregate amount
available to be distributed in respect of the Note Prepayment Premium
and the Certificate Prepayment Premium. No other assets of the Trust
will be available for the purpose of making such payment.]]
OPTIONAL PREPAYMENT
If the Servicer exercises its option to purchase the Receivables
when the Pool Balance declines to 10% or less of the Initial Pool
Balance, Certificateholders will receive an amount in respect of the
Certificates equal to the outstanding Certificate Balance together
with accrued interest at the Certificate Rate, which distribution
shall effect the early retirement of the Certificates. See
"Description of the Transfer and Servicing Agreements--Termination"
in the Prospectus.
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of the Sale and
Servicing Agreement, the Administration Agreement and the Trust
Agreement (collectively, the "Transfer and Servicing Agreements").
Forms of the Transfer and Servicing Agreements have been filed as
exhibits to the Registration Statement. A copy of the Transfer and
Servicing Agreements will be filed with the Commission following the
issuance of the Securities. 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 Transfer and Servicing
Agreements. The following summary supplements the description of the
general terms and provisions of the Transfer and Servicing Agreements
set forth under the headings "Description of the Transfer and
Servicing Agreements" in the Prospectus, to which description
reference is hereby made.
[SALE AND ASSIGNMENT OF RECEIVABLES; SUBSEQUENT RECEIVABLES
Certain information with respect to the conveyance of the
Initial Receivables from the Seller to the Trust on the 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" in the Prospectus. In addition, during
the Funding Period, pursuant to the Sale and Servicing Agreement, the
Seller will be obligated to sell to the Trust Subsequent Receivables
having an aggregate principal balance equal to approximately $
(such amount being equal to the initial Pre-Funded Amount) to the
extent that such Subsequent Receivables are available.
During the Funding Period on each Subsequent Transfer Date,
subject to the conditions described below, the Seller will sell and
assign to the Trust, without recourse, the Seller's entire interest
in the Subsequent Receivables designated by the Seller as of the
related Subsequent Cutoff Date and identified in a schedule attached
to a subsequent
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<PAGE> 42
transfer assignment relating to such Subsequent Receivables executed on
such date by the Seller. It is expected that on the Closing Date, subject
to the conditions described below, certain of the Subsequent Receivables
designated by the Seller and arising between the Initial Cutoff Dates and
the Closing Date will be conveyed to the Trust. Upon the conveyance of
Subsequent Receivables to the Trust on a Subsequent Transfer Date, (i) the
Pool Balance will increase in an amount equal to the aggregate principal
balances of the Subsequent Receivables, (ii) an amount equal to EEE% of
the aggregate principal balances of such Subsequent Receivables will be
withdrawn from the Pre-Funding Account and will be deposited in the
Reserve Account and (iii) an amount equal to the excess of the aggregate
principal balances of such Subsequent Receivables over the amount
described in clause (ii) will be withdrawn from the Pre-Funding Account
and paid to the Seller.] [Coincident with each such transfer of
Subsequent Receivables, the Yield Supplement Agreement will require Ford
Credit to deposit into the Yield Supplement Account an amount equal to the
Additional Yield Supplement Amount, if any, in respect of such Subsequent
Receivables. See "--Yield Supplement Account; Yield Supplement Agreement"
herein.]
[Any conveyance of Subsequent Receivables is subject to the
satisfaction, on or before the related Subsequent Transfer Date, of
the following conditions precedent, among others: (i) each such
Subsequent Receivable must satisfy the eligibility criteria specified
in the Sale and Servicing Agreement; (ii) the Seller will not have
selected such Subsequent Receivables in a manner that it believes is
adverse to the interests of the Noteholders or the
Certificateholders; (iii) as of the related Subsequent Cutoff Date,
the Receivables, including any Subsequent Receivables conveyed by the
Seller as of such Subsequent Cutoff Date, satisfy the criteria
described under "The Receivables Pool" herein and "The Receivables
Pools" in the Prospectus; (iv) the applicable Reserve Initial Deposit
for such Subsequent Transfer Date shall have been made; and (v) the
Seller shall have executed and delivered to the Trust (with a copy to
the Indenture Trustee) a written assignment conveying such Subsequent
Receivables to the Trust (including a schedule identifying such
Subsequent Receivables). Moreover, any such conveyance of Subsequent
Receivables made during any given Collection Period will also be
subject to the satisfaction, on or before the fifteenth day of the
month following the end of such Collection Period, of the following
conditions subsequent, among others: (i) the Seller will have
delivered certain opinions of counsel to the Owner Trustee, the
Indenture Trustee and the Rating Agencies with respect to the
validity of the conveyance of all such Subsequent Receivables
conveyed during such Collection Period; (ii) the Trust and the
Indenture Trustee shall have received written confirmation from a
firm of independent certified public accountants that, as of the end
of the preceding Collection Period, the Receivables in the Trust at
that time, including the Subsequent Receivables conveyed by the
Seller during each Collection Period, satisfied the parameters
described under "The Receivables Pool" herein and under "The
Receivables Pools" in the Prospectus; and (iii) each of the Rating
Agencies shall have notified the Seller in writing that, following
the addition of all such Subsequent Receivables, each class of the
Notes and the Certificates will be rated by the Rating Agencies in
the same rating category as they were rated by the Rating Agencies on
the Closing Date. The Seller will immediately repurchase any
Subsequent Receivable, at a price equal to the Purchase Amount
thereof, upon the failure of the Seller to satisfy any of the
foregoing conditions subsequent with respect thereto.]
[Subsequent Receivables may have been originated by Ford Credit
at a later date using credit criteria different from those which were
applied to the Initial Receivables. See "Risk Factors--The
Subsequent Receivables and the Pre-Funding Account" and "The
Receivables Pool" herein.]]
ACCOUNTS
In addition to the Accounts referred to under "Description of
the Transfer and Servicing Agreements--Accounts" in the Prospectus,
the Servicer will also establish and will maintain with the Indenture
Trustee [the Pre-Funding Account] [the Yield Supplement Account]
[and] the Reserve Account, in the name of the Indenture Trustee on
behalf of the Noteholders and the Certificateholders. The Servicer
will also establish and will maintain with the Indenture Trustee the
Payahead Account, in the name of the Indenture Trustee. The Payahead
Account will not be included in the property of the Trust.
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<PAGE> 43
SERVICING COMPENSATION AND EXPENSES
The Servicing Fee Rate with respect to the Servicing Fee for the
Servicer will be 1.00% per annum of the Pool Balance as of the first
day of the related Collection Period. The Servicing Fee (together
with any portion of the Servicing Fee that remains unpaid from prior
Distribution Dates) will be paid on each Distribution Date solely to
the extent of the Available Interest. The Servicer is also entitled
to receive a supplemental servicing fee (the "Supplemental Servicing
Fee") for each Collection Period equal to any late, prepayment, and
other administrative fees and expenses collected during the
Collection Period[, plus any interest earned during the Collection
Period on deposits made with respect to the Receivables]. See
"Description of the Transfer and Servicing Agreements--Servicing
Compensation and Expenses" in the Prospectus.
DISTRIBUTIONS
Deposits to Collection Account. On or before each Distribution
Date, the Servicer will cause all collections and other amounts
constituting the Available Funds to be deposited into the Collection
Account. The "Available Funds" for a Distribution Date shall be the
sum of the Available Interest and the Available Principal.
The "Available Interest" for a Distribution Date will generally
be the sum of the following amounts with respect to the preceding
Collection Period: (i) all scheduled payments of interest and the
interest portion of all prepayments in full (and certain partial
prepayments) collected with respect to Precomputed Receivables
(including amounts withdrawn from the Payahead Account but excluding
amounts deposited into the Payahead Account) and the interest portion
of all payments collected with respect to Simple Interest
Receivables; (ii) all proceeds of the liquidation of defaulted
Receivables ("Liquidated Receivables"), net of expenses incurred by
the Servicer in connection with such liquidation and any amounts
required by law to be remitted to the Obligor on such Liquidated
Receivables ("Liquidation Proceeds"), to the extent attributable to
interest due thereon in accordance with the Servicer's customary
servicing procedures, and all recoveries in respect of Liquidated
Receivables which were written off in prior Collection Periods;
(iii) all Advances made by the Servicer of interest due on the
Receivables; [(iv) all advances, if any, of interest made by the
Servicer in respect of Receivables which were prepaid in full]; [and]
(v) the Purchase Amount of each Receivable that was repurchased by
the Seller or purchased by the Servicer under an obligation which
arose during the related Collection Period, to the extent
attributable to accrued interest thereon[; (vi) Investment Earnings
for such Distribution Date][; (vii) the Yield Supplement Deposit
Amount for such Distribution Date] [(viii) the payments, if any,
received under the Interest Rate Cap for such Distribution Date;]
[and (ix) the Net Trust Swap Receipt, if any, for such Distribution
Date]. The Available Interest shall be determined on the related
Determination Date based on the methodology described under
"Description of the Notes--Payments of Principal" herein and
"Description of the Transfer and Servicing
Agreements--Distributions--Allocations of Collections on Receivables"
in the Prospectus.
The "Available Principal" for a Distribution Date will generally
be the sum of the following amounts with respect to the preceding
Collection Period: (i) all scheduled payments of principal and the
principal portion of all prepayments in full (and certain partial
prepayments) collected with respect to Precomputed Receivables
(including amounts withdrawn from the Payahead Account but excluding
amounts deposited into the Payahead Account) and the principal
portion of all payments collected with respect to Simple Interest
Receivables; (ii) all Liquidation Proceeds attributable to the
principal amount of Receivables which became Liquidated Receivables
during such Collection Period in accordance with the Servicer's
customary servicing procedures; (iii) all Precomputed Advances made
by the Servicer of principal due on the Precomputed Receivables; (iv)
to the extent attributable to principal, the Purchase Amount received
with respect to each Receivable repurchased by the Seller or
purchased by the Servicer under an obligation which arose during the
related Collection Period; (v) partial prepayments of any refunded
item included in the principal balance of a Receivable, such as
extended warranty protection plan costs, or physical damage, credit
life, disability insurance premiums, or any partial prepayment which
causes a reduction in the Obligor's periodic payment to an amount
below the scheduled payment as of the Cutoff Date; and (vi) on the
Final Scheduled Distribution Date, any amounts advanced by the
Servicer with respect to principal on the Receivables. The Available
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<PAGE> 44
Principal shall be determined on the related Determination Date based
on the methodology described under "Description of the
Notes--Payments of Principal" herein and "Description of the Transfer
and Servicing Agreements--Distributions--Allocations of Collections
on Receivables" in the Prospectus.
The Available Interest and the Available Principal on any
Distribution Date shall exclude the following: (i) amounts received
on Precomputed Receivables to the extent that the Servicer has
previously made an unreimbursed Precomputed Advance; (ii)
Liquidation Proceeds with respect to a particular Precomputed
Receivable to the extent of any unreimbursed Precomputed Advances
thereon; (iii) all payments and proceeds (including Liquidation
Proceeds) of any Receivables the Purchase Amount of which has been
included in the Available Funds in a prior Collection Period; (iv)
amounts received in respect of interest on Simple Interest
Receivables during the preceding Collection Period in excess of the
amount of interest that would have been due during the Collection
Period on Simple Interest Receivables at their respective APRs
(assuming that a payment is received on each Simple Interest
Receivable on the due date thereof); [and] (v) Liquidation Proceeds
with respect to a Simple Interest Receivable attributable to accrued
and unpaid interest thereon (but not including interest for the then
current Collection Period) but only to the extent of any unreimbursed
Simple Interest Advances[; and (vi) amounts released from the
Pre-Funding Account.]
Monthly Withdrawals from Collection Account. On each
Distribution Date, the Servicer will allocate amounts on deposit in
the Collection Account as described under "Description of the
Transfer and Servicing Agreements--Distributions--Allocation of
Collections on Receivables" in the Prospectus and will instruct the
Indenture Trustee to make the following deposits and distributions,
to the extent of the amount then on deposit in the Collection
Account, in the following order of priority:
(i) to the Servicer, from the Available Interest (as so
allocated), the Servicing Fee and all unpaid Servicing Fees from
prior Collection Periods;
(ii) to the Note Payment Account, from the Available Funds
remaining after the application of clause (i), the Accrued Note
Interest [and the Net Trust Swap Payment, if any];
(iii) to the Note Payment Account, from the Available
Funds remaining after the application of clauses (i) and (ii),
the Noteholders' Principal Payment Amount;
(iv) to the Certificate Distribution Account, from the
Available Funds remaining after the application of clauses (i)
through (iii), the Accrued Certificate Interest;
(v) to the Certificate Distribution Account, from the
Available Funds remaining after the application of clauses (i)
through (iv), the Certificateholders' Principal Distribution
Amount; and
(vi) to the Reserve Account, the Available Funds remaining
after the application of clauses (i) through (v).
Notwithstanding the foregoing, following the occurrence and
during the continuation of an Event of Default which has resulted in
an acceleration of the Notes or following an Insolvency Event with
respect to the Seller or the General Partner, the Available Funds
remaining after the application of clauses (i) and (ii) above will be
deposited in the Note Payment Account to the extent necessary to
reduce the principal amount of all the Notes to zero, and the
Certificateholders will not receive any distributions until the
principal amount and accrued interest on the Notes has been paid in
full.
On each Determination Date (other than the first Determination
Date), the Servicer will provide the Indenture Trustee with certain
information with respect to the Collection Period related to the
prior Distribution Date, including the amount of aggregate
collections on the Receivables, the aggregate amount of Receivables
which were written off,
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<PAGE> 45
the aggregate Advances to be made by the Servicer and the aggregate
Purchase Amount of Receivables to be repurchased by the Seller or to be
purchased by the Servicer.
For purposes hereof, the following terms shall have the
following meanings:
"Accrued Note Interest" means, with respect to any Distribution
Date, the sum of the Noteholders' Monthly Accrued Interest for such
Distribution Date and the Noteholders' Interest Carryover Shortfall
for such Distribution Date.
"Noteholders' Interest Carryover Shortfall" means, with respect
to any Distribution Date, the excess of the Noteholders' Monthly
Accrued Interest for the preceding Distribution Date and any
outstanding Noteholders' Interest Carryover Shortfall on such
preceding Distribution Date, over the amount in respect of interest
that is actually deposited in the Note Payment Account on such
preceding Distribution Date, plus interest on the amount of interest
due but not paid to Noteholders on the preceding [Distribution]
[Payment] Date, to the extent permitted by law, at the [respective]
Note Interest Rate[s] borne by [each class of] the Notes for the
[related Interest Period] [period from and including the prior
Distribution Date to but excluding such Distribution Date] [plus
2.00% per annum].
"Noteholders' Monthly Accrued Interest" means, with respect to
any Distribution Date, interest accrued for the [related Interest
Period] [period from and including the Closing Date (in the case of
the first Distribution Date) or from and including the prior
Distribution Date to but excluding such Distribution Date] on [the]
[each class of] Notes at the [respective] Note Interest Rate [for
such class] on the outstanding principal amount of the Notes [of such
class] on the immediately preceding [Distribution] [Payment] Date
after giving effect to all payments of principal to the Noteholders
[of such class] on or prior to such [Distribution] [Payment] Date
(or, in the case of the first [Distribution] [Payment] Date, on the
Closing Date).
"Noteholders' Monthly Principal" means, with respect to any
Distribution Date, the sum of (i) the Noteholders' Percentage of the
Regular Principal and (ii) the Noteholders' Accelerated Principal.
[Or, state other formula for determining the Noteholders' Monthly
Principal.]
"Noteholders' Payment Amount" means, with respect to any
Distribution Date, the sum of the Noteholders' Principal Payment
Amount and the Accrued Note Interest.
"Noteholders' Percentage" means (i) 100% for each Distribution
Date to and including the later to occur of (x) the Distribution Date
next succeeding the Distribution Date on which the principal amount
of the [Class A-1] Notes is reduced to zero [and (y) the 199
Distribution Date], (ii) for each Distribution Date thereafter to and
including the Distribution Date on which the principal amount of the
[Class A-3] Notes is reduced to zero, the percentage equivalent of a
fraction, the numerator of which is the outstanding principal amount
of the Notes on the Distribution Date immediately preceding the
Distribution Date for which the Noteholders' Percentage is being
calculated (after giving effect to all distributions made on such
immediately preceding Distribution Date) and the denominator of which
is the Pool[/Pre-Funding] Balance on the last day of the Collection
Period second preceding the Distribution Date for which the
Noteholders' Percentage is being calculated, [unless the Reserve
Account balance is less than [ % of] the Specified Reserve
Balance, then the Noteholders' Percentage shall be %,] and (iii)
zero for each Distribution Date thereafter [; provided, however, upon
any reduction or withdrawal by any Rating Agency of its rating of
[the] [any class of] Notes, then, with respect to each Distribution
Date thereafter until the principal amount of all the Notes is paid
in full or such rating is restored, the Noteholders' Percentage shall
mean 100%]. [Or, state other methods for determining the
Noteholders' Percentage.]
"Noteholders' Principal Carryover Shortfall" means, as of the
close of any Distribution Date, the excess of the Noteholders'
Monthly Principal and any outstanding Noteholders' Principal
Carryover Shortfall from the preceding Distribution Date over the
amount in respect of principal that is actually deposited in the Note
Payment Account.
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<PAGE> 46
"Noteholders' Principal Payment Amount" means, with respect to
any Distribution Date, the sum of the Noteholders' Monthly Principal
for such Distribution Date and the Noteholders' Principal Carryover
Shortfall as of the close of the preceding Distribution Date;
provided, however, that the Noteholders' Principal Payment Amount
shall not exceed the outstanding principal amount of the Notes; and
provided, further, that (i) the Noteholders' Principal Payment Amount
on the [Class A-1] Final Scheduled [Distribution] [Payment] Date
shall not be less than the amount that is necessary (after giving
effect to other amounts [on deposit and] to be deposited in the Note
Payment Account on such Distribution Date and allocable to principal)
to reduce the outstanding principal amount of the [Class A-1] Notes
to zero[; (ii) the Noteholders' Principal Payment Amount on the Class
A-2 Final Scheduled [Distribution] [Payment] Date shall not be less
than the amount that is necessary (after giving effect to other
amounts [on deposit and] to be deposited in the Note Payment Account
on such Distribution Date and allocable to principal) to reduce the
outstanding principal amount of the Class A-2 Notes to zero; and
(iii) on the Class A-3 Final Scheduled [Distribution] [Payment] Date
the Noteholders' Principal Payment Amount shall not be less than the
amount that is necessary (after giving effect to other amounts [on
deposit and] to be deposited in the Note Payment Account on such
Distribution Date and allocable to principal) to reduce the
outstanding principal amount of the Class A-3 Notes to zero].
"Accrued Certificate Interest" means, with respect to any
Distribution Date, the sum of the Certificateholders' Monthly Accrued
Interest for such Distribution Date and the Certificateholders'
Interest Carryover Shortfall for such Distribution Date.
"Certificate Balance" equals, initially, $ and,
thereafter, equals the initial Certificate Balance, reduced by all
amounts allocable to principal previously distributed to
Certificateholders.
"Certificateholders' Distribution Amount" means, with respect to
any Distribution Date, the sum of the Certificateholders' Principal
Distribution Amount and the Accrued Certificate Interest.
"Certificateholders' Interest Carryover Shortfall" means, with
respect to any Distribution Date, the excess of the
Certificateholders' Monthly Accrued Interest for the preceding
Distribution Date and any outstanding Certificateholders' Interest
Carryover Shortfall on such preceding Distribution Date, over the
amount in respect of interest that is actually deposited in the
Certificate Distribution Account on such preceding Distribution Date,
plus interest on such excess, to the extent permitted by law, at the
Certificate Rate for the related Interest Period.
"Certificateholders' Monthly Accrued Interest" means, with
respect to any Distribution Date, 30 days of interest (or, in the
case of the first Distribution Date, interest accrued from and
including the Closing Date to but excluding such Distribution Date)
at the Certificate Rate on the Certificate Balance on the immediately
preceding Distribution Date, after giving effect to all payments
allocable to the reduction of the Certificate Balance made on or
prior to such Distribution Date (or, in the case of the first
Distribution Date, on the Closing Date).
"Certificateholders' Monthly Principal" means, with respect to
any Distribution Date, the Certificateholders' Percentage of the
Regular Principal. [Or, state other method for determining the
Certificateholders' Monthly Principal.]
"Certificateholders' Percentage" means (i) for each Distribution
Date to and including the later to occur of (x) the Distribution Date
next succeeding the Distribution Date on which the principal amount
of [all classes of] the [Class A-1] Notes is reduced to zero [and (y)
the 199 Distribution Date], zero, and (ii) for each
Distribution Date thereafter to and including the Distribution Date
on which the Certificate Balance is reduced to zero, the percentage
equivalent of a fraction, the numerator of which is the outstanding
Certificate Balance on the Distribution Date immediately preceding
the Distribution Date for which the Certificateholders' Percentage is
being calculated (after giving effect to all distributions made on
such immediately preceding Distribution Date) and the denominator of
which is the Pool[/Pre-Funding] Balance on the last day of the
Collection Period second preceding the Distribution Date for which
the Certificateholders' Percentage is being calculated, [unless the
Reserve Account balance is less than [ % of] the Specified Reserve
Balance, then the Certificateholders' Percentage shall be %] [;
provided, however, upon
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<PAGE> 47
any reduction or withdrawal by any Rating Agency of its rating of [the]
[any class of] Notes, then, with respect to each Distribution Date
thereafter until the principal amount of all the Notes is paid in full or
such rating is restored, the Certificateholders' Percentage shall mean
zero]. [Or, state other methods for determining the Certificateholders'
Percentage.]
"Certificateholders' Principal Carryover Shortfall" means, as of
the close of any Distribution Date, the excess of the
Certificateholders' Monthly Principal and any outstanding
Certificateholders' Principal Carryover Shortfall from the preceding
Distribution Date, over the amount in respect of principal that is
actually deposited in the Certificate Distribution Account.
"Certificateholders' Principal Distribution Amount" means, with
respect to any Distribution Date, the sum of the Certificateholders'
Monthly Principal for such Distribution Date and the
Certificateholders' Principal Carryover Shortfall as of the close of
the preceding Distribution Date; provided, however, that the
Certificateholders' Principal Distribution Amount shall not exceed
the Certificate Balance. In addition, on the Final Scheduled
Distribution Date, the principal required to be distributed to
Certificateholders will include the lesser of (a) (i) any scheduled
payments of principal due and remaining unpaid on each Precomputed
Receivable and (ii) any principal due and remaining unpaid on each
Simple Interest Receivable, in each case, in the Trust as of the
Final Scheduled Maturity Date or (b) the portion of the amount
required to be advanced under clause (a) above that is necessary
(after giving effect to the other amounts to be deposited in the
Certificate Distribution Account on such Distribution Date and
allocable to principal) to reduce the Certificate Balance to zero,
and, in the case of clauses (a) and (b), remaining after any
required distribution in respect of the Notes.
On each [Distribution] [Payment] Date, all amounts on deposit in
the Note Payment Account [(other than [any] Investment Earnings [in
excess of the weighted average of the Note Interest Rates] [and the
Certificate Rate])] will be paid in the following order of priority:
(i) to the [applicable] Noteholders, accrued and unpaid
interest on the outstanding principal amount of the [applicable
class of] Notes at the [applicable] Note Interest Rate [and to
the Swap Counterparty, the Net Trust Swap Payment, if any, for
such [Distribution] [Payment] Date, on a pro rata basis with the
amount[s] payable to the Noteholders pursuant to this clause
(i)]; [and]
(ii) to the Noteholders [of the Class A-1 Notes] in
reduction of principal until the principal amount of the [Class
A-1] Notes has been reduced to zero[;
(iii) to the Noteholders of the Class A-2 Notes in
reduction of principal until the principal amount of the Class
A-2 Notes has been reduced to zero; and
(iv) to the Noteholders of the Class A-3 Notes in
reduction of principal until the principal amount of the Class
A-3 Notes has been reduced to zero].
On each Distribution Date, all amounts on deposit in the
Certificate Distribution Account will be distributed to the
Certificateholders.
RESERVE ACCOUNT
The rights of the Certificateholders to receive distributions
with respect to the Receivables generally will be subordinated to the
rights of the Noteholders in the event of defaults and delinquencies
on the Receivables as provided in the Sale and Servicing Agreement.
The protection afforded to the Noteholders through subordination will
be effected both by the preferential right of the Noteholders to
receive current distributions with respect to the Receivables and by
the establishment of the Reserve Account. The Reserve Account will
be created with a deposit initially by the Seller on the Closing
Date [and thereafter with deposits from funds in the Pre-Funding
Account that
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<PAGE> 48
would otherwise be payable to the Seller on each Subsequent Transfer
Date] (such deposit[s, collectively], the "Reserve Initial Deposit").
Subject to reduction as hereafter described, the "Specified
Reserve Balance" with respect to any Distribution Date means the sum
of (i) [the sum of (a)] % of the [Initial Pool Balance] [Pool
Balance as of the Initial Cutoff Date] [, plus (b) an amount related
to the difference between anticipated investment earnings on the
remaining Pre-Funded Amount and the weighted average interest expense
on the portion of the Notes and Certificates represented by the
remaining Pre-Funded Amount] and (ii) % of the Pool Balance on the
first day of the related Collection Period. [However, so long as on
any Distribution Date (except the first Distribution Date) the sum of
(x) the outstanding principal amount of the Securities (after giving
effect to distributions made on the prior Distribution Date) and (y)
the aggregate amount of Payaheads that have been collected but not
yet applied as payments under the related Receivables as of the first
day of the related Collection Period is less than or equal to [the
sum of] % of (a) the Pool Balance on the first day of the related
Collection Period [and (b) the Pre-Funded Amount on such date], then
the portion of the Specified Reserve Balance set forth in clause (i)
above will be reduced to % of the [Initial Pool Balance] [Pool
Balance as of the Initial Cutoff Date].] [In addition, so long as on
any Distribution Date (except the first Distribution Date) the sum of
(x) the outstanding principal amount of the Securities (after giving
effect to distributions made on the prior Distribution Date) and (y)
the aggregate amount of Payaheads that have been collected but not
yet applied as payments under the related Receivables as of the first
day of the related Collection Period is less than or equal to [the
sum of] % of [(a)] the Pool Balance on the first day of the
related Collection Period [and (b) the Pre-Funded Amount on such
day], then such portion of the Specified Reserve Balance set forth in
clause (i) above will be reduced to % of the [Initial Pool
Balance] [Pool Balance as of the Initial Cutoff Date].] [With
respect to the portion of the Specified Reserve Balance set forth in
clause (ii) above, so long as on any Distribution Date (except the
first Distribution Date) the sum of (x) the outstanding principal
amount of the Securities (after giving effect to distributions made
on the prior Distribution Date) and (y) the aggregate amount of
Payaheads that have been collected but not yet applied as payments
under the related Receivables as of the first day of the related
Collection Period is less than or equal to [the sum of] % of [(a)]
the Pool Balance on the first day of the related Collection Period
[and (b) the Pre-Funded Amount on such day], then such portion will
be reduced to an amount equal to the product of (I) the Pool Balance
on the first day of the related Collection Period and (II) the
percentage (which shall not be greater than % or less than zero)
equal to (X) the percentage derived from the fraction, the numerator
of which is the outstanding principal amount of the Securities (after
giving effect to distributions made on the prior Distribution Date)
and the denominator of which is such Pool Balance less (Y) %.]
The portion of the Specified Reserve Balance specified in clause (ii)
above may be invested in motor vehicle sale contracts originated by
Ford Credit and secured by motor vehicles financed thereby that are
not included in the Pool Balance. [The Specified Reserve Balance is
further subject to adjustment in certain circumstances described
herein.]
[The Specified Reserve Balance would also be increased to the
extent that the Receivables in the Trust on a Subsequent Transfer
Date, including the Subsequent Receivables to be conveyed to the
Trust on such Subsequent Transfer Date, have a weighted average APR
of less than EEE%. See "The Receivables Pool" herein. In addition,
subject to certain limitations, the Seller has the option to increase
the Specified Reserve Balance in connection with the addition of
Subsequent Receivables.]
If the amount on deposit in the Reserve Account on any
Distribution Date (after giving effect to all deposits or withdrawals
therefrom on such Distribution Date) is greater than the Specified
Reserve Balance for such Distribution Date, except as described below
and subject to certain limitations, the Servicer will instruct the
Indenture Trustee to [distribute such excess to the Seller] [apply
such excess as Noteholders' Accelerated Principal]. Upon any
distribution to the Seller of amounts from the Reserve Account,
neither the Noteholders nor the Certificateholders will have any
rights in, or claims to, such amounts. [Subsequent to any reduction
or withdrawal by any Rating Agency of its rating of [the] [any class
of] Notes, unless such rating has been restored, any such excess
released from the Reserve Account on a Distribution Date will be
deposited in the Note Payment Account for payment to Noteholders as
an accelerated payment of principal on [such Distribution] [the
related Payment] Date.] [Or, state other methods for determining the
Specified Reserve Balance and applying such excess amounts.]
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<PAGE> 49
Amounts held from time to time in the Reserve Account will
continue to be held for the benefit of Noteholders and
Certificateholders. On each Distribution Date, funds will be
withdrawn from the Reserve Account up to the Available Reserve Amount
to the extent that the [part of the] Available Funds (after the
payment of the Servicing Fee) with respect to any Collection Period
is less than the Noteholders' Payment Amount and will be deposited
in the Note Payment Account. In addition, funds will be withdrawn
from the Reserve Account up to the Available Reserve Amount (as
reduced by any withdrawal pursuant to the preceding sentence) to the
extent that the Available Funds remaining after the payment of the
Servicing Fee and the deposit of the Noteholders' Payment Amount in
the Note Payment Account is less than the Certificateholders'
Distribution Amount and will be deposited in the Certificate
Distribution Account. [If funds applied in accordance with the
preceding sentence are insufficient to distribute interest due on the
Certificates, subject to certain limitations, funds will be withdrawn
from the Reserve Account and applied to distribute interest due on
the Certificates to the extent of the Certificate Interest Reserve
Amount.] On each Distribution Date, the Reserve Account will be
reinstated up to the Specified Reserve Balance to the extent, if any,
of the Available Funds remaining after payment of the Servicing Fee,
the deposit of the Noteholders' Payment Amount into the Note Payment
Account and the deposit of the Certificateholders' Distribution
Amount into the Certificate Distribution Account.
"Available Reserve Amount" means, with respect to any
Distribution Date, the amount of funds on deposit in the Reserve
Account on such Distribution Date [(other than Investment Earnings)]
[ less the Certificate Interest Reserve Amount with respect to such
Distribution Date, in each case,] before giving effect to any
reduction thereto on such Distribution Date.
["Certificate Interest Reserve Amount" means the lesser of (i) $
less the amount of any application of the Certificate Interest
Reserve Amount to pay interest on the Certificates on any prior
Distribution Date and (ii) % of the Certificate Balance on such
Distribution Date (before giving effect to any reduction thereof on
such Distribution Date)[; provided, however, that the Certificate
Interest Reserve Amount shall be zero subsequent to any reduction by
any Rating Agency to less than " " or its equivalent, or withdrawal
by any Rating Agency, of its rating of [the] [any class of] Notes,
unless such rating has been restored].]
If on any Distribution Date the entire Noteholders' Payment
Amount for such Distribution Date (after giving effect to any amounts
withdrawn from the Reserve Account) is not deposited in the Note
Payment Account, the Certificateholders generally will not receive
any distributions.
After the payment in full, or the provision for such payment, of
(i) all accrued and unpaid interest on the Securities and (ii) the
outstanding principal amount of the Securities, any funds remaining
on deposit in the Reserve Account, subject to certain limitations,
will be paid to the Seller.
The Reserve Account is intended to enhance the likelihood of
receipt by the Noteholders and the Certificateholders of the full
amount of principal and interest due them and to decrease the
likelihood that the Noteholders and the Certificateholders will
experience losses. In addition, the subordination of the
Certificates to the Notes is intended to enhance further the
likelihood of receipt by Noteholders of the full amount of principal
and interest due them and to decrease the likelihood that the
Noteholders will experience losses. However, in certain
circumstances, the Reserve Account could be depleted. If the amount
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 or Certificateholders could
incur losses or a shortfall in the amounts distributed to the
Noteholders or the Certificateholders could result, which could, in
turn, increase the average life of the Notes or the Certificates.
[YIELD SUPPLEMENT ACCOUNT; YIELD SUPPLEMENT AGREEMENT
The Yield Supplement Account will be created with an initial
deposit by Ford Credit of the Yield Supplement Initial Deposit. The
Yield Supplement Initial Deposit will equal an amount (which amount
may be discounted at a rate to be specified in the Sale and Servicing
Agreement) equal to the aggregate amount by which (i) interest on the
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<PAGE> 50
principal balance of each [Initial] Receivable for the period
commencing on the [Initial] Cutoff Date and ending with the scheduled
maturity of such Receivable, assuming that payments on such
Receivables are made as scheduled and no prepayments are made, at a
rate equal to the Required Rate, exceeds (ii) interest on such
principal balances at the APR of such Receivable (the "Yield
Supplement Amount" and, with respect to all of the [Initial]
Receivables, the "Maximum [Initial] Yield Supplement Amount").
On each Distribution Date, the Indenture Trustee will transfer
to the Collection Account from monies on deposit in the Yield
Supplement Account an amount equal to the Yield Supplement Deposit
Amount in respect of the Receivables for such Distribution Date.
The "Yield Supplement Deposit Amount" with respect to a Distribution
Date is the aggregate Yield Supplement Amount, if any, in respect of
the Receivables for the related Collection Period. Amounts on
deposit on any Distribution Date in the Yield Supplement Account in
excess of the Maximum Yield Supplement Amount, after giving effect
to all distributions to be made on such Distribution Date, will be
paid to the Seller. Monies on deposit in the Yield Supplement
Account may be invested in Permitted Investments under the
circumstances and in the manner described in the Sale and Servicing
Agreement. Any monies remaining on deposit in the Yield Supplement
Account upon the termination of the Trust will be paid to the Seller.
[Pursuant to the Yield Supplement Agreement, on each Subsequent
Transfer Date, Ford Credit will deposit into the Yield Supplement
Account an amount equal to the Additional Yield Supplement Amount.
The aggregate of the Additional Yield Supplement Amounts in respect
of Subsequent Receivables, if any, is referred to herein as the
"Maximum Subsequent Yield Supplement Amount" and, together with the
Maximum Initial Yield Supplement Amount, the "Maximum Yield
Supplement Amount."]]
[INTEREST RATE CAP
With respect to the Class A-2 Notes, the Seller will enter into
an Interest Rate Cap, dated as of the Closing Date (the "Interest
Rate Cap") with the Interest Rate Cap Provider. The notional amount
of the Interest Rate Cap on any [Distribution] [Payment] Date (the
"Cap Notional Amount") will be at least equal to the outstanding
principal amount of the Class A-2 Notes as of the close of the
preceding [Distribution] [Payment] Date. Pursuant to the Interest
Rate Cap, on each [Distribution] [Payment] Date on which [the Class
A-2 Rate] [LIBOR] for the preceding [Distribution] [Payment] Date
exceeds % (the "Cap Rate"), the Interest Rate Cap Provider will
make a payment to the Indenture Trustee, on behalf of the Trust, in
an amount equal to the product of (i) the difference between [such
Class A-2 Rate] [LIBOR] and the Cap Rate, (ii) the Cap Notional
Amount and (iii) the actual number of days from and including the
preceding [Distribution] [Payment] Date to but excluding such
[Distribution] [Payment] Date divided by 360. The Interest Rate Cap
will terminate on the Class A-2 Scheduled Final [Distribution]
[Payment] Date. Payments received by the Indenture Trustee pursuant
to the Interest Rate Cap will be deposited in the Collection Account
for the benefit of all Securityholders.
The payment obligations of the Interest Rate Cap Provider under
the Interest Rate Cap constitute general unsecured obligations of the
Interest Rate Cap Provider. No assurance can be given that the Trust
will receive the payments due to be received under the Interest Rate
Cap when due. A failure by the Interest Rate Cap Provider to make
such payments or to make such payments on a timely basis would reduce
amounts available for distributions to Securityholders, and in such
event Securityholders could incur a loss on their investment. With
respect to each Collection Period, any shortfall between amounts due
from the Interest Rate Cap Provider under the Interest Rate Cap and
amounts actually received from the Interest Rate Cap Provider during
such Collection Period will be reported in the statement delivered to
Securityholders on the following [Payment Date or] Distribution Date.
See "Certain Information Regarding the Securities--Reports to
Securityholders" in the Prospectus.
The Interest Rate Cap will be provided by (the "Interest
Rate Cap Provider"). The Interest Rate Cap Provider was incorporated
in . The Interest Rate Cap Provider is engaged in the business
of . As of , 199 , the Interest Rate Cap Provider had
total consolidated assets of $ , total consolidated liabilities
of $ and total consolidated stockholders' equity of $ .
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<PAGE> 51
THE INFORMATION SET FORTH IN THE PRECEDING PARAGRAPH HAS BEEN
PROVIDED BY THE INTEREST RATE CAP PROVIDER. THE SELLER MAKES NO
REPRESENTATIONS AS TO THE ACCURACY OR COMPLETENESS OF SUCH
INFORMATION.]
[INTEREST RATE SWAP
With respect to the Class A-2 Notes, the Indenture Trustee, on
behalf of the Trust, will enter into one or more Interest Rate Swap
Agreements, dated as of the Closing Date (collectively, the "Interest
Rate Swap") with the Swap Counterparty. The notional amount of the
Interest Rate Swap on any [Distribution] [Payment] Date (the "Swap
Notional Amount") will equal the outstanding principal amount of the
Class A-2 Notes as of the close of the preceding [Distribution]
[Payment] Date. Pursuant to the terms of the Interest Rate Swap, the
Swap Counterparty will pay to the Trust, on each [Distribution]
[Payment] Date, interest at a per annum rate equal to [the Class A-2
Rate] [LIBOR] on the Swap Notional Amount. In exchange for such
payments, the Trust will pay to the Swap Counterparty, on each
[Distribution] [Payment] Date, interest at a per annum rate equal to
[the lesser of] [ %] [and] [the Prime Rate less %], on the Swap
Notional Amount[, which rate will be reset [on various dates in] each
[month] [Interest Period]]. With respect to each [Distribution]
[Payment] Date, any difference between the [monthly] [quarterly]
payment by the Swap Counterparty to the Trust and the [monthly]
[quarterly] payment by the Trust to the Swap Counterparty will be
referred to herein as the "Net Trust Swap Receipt," if such
difference is a positive number, and the "Net Trust Swap Payment," if
such difference is a negative number. Net Trust Swap Receipts, if
any, will be deposited in the Collection Account for the benefit of
all Securityholders and Net Trust Swap Payments, if any, will be paid
from the Collection Account in the same manner and priority as
accrued and unpaid interest on the Notes on each [Distribution]
[Payment] Date.
The payment obligations of the Swap Counterparty under the
Interest Rate Swap constitute general unsecured obligations of the
Swap Counterparty. No assurance can be given that the Trust will
receive the payments due to be received under the Interest Rate Swap
when due. A failure by the Swap Counterparty to make such payments
or to make such payments on a timely basis would reduce amounts
available for distributions to Securityholders, and in such event
Securityholders could incur a loss on their investment. With respect
to each Collection Period, any shortfall between amounts due from the
Swap Counterparty under the Interest Rate Swap and amounts actually
received from the Swap Counterparty during such Collection Period
will be reported in the statement delivered to Securityholders on the
following [Payment Date or] Distribution Date. See "Certain
Information Regarding the Securities--Reports to Securityholders" in
the Prospectus.
The Interest Rate Swap will be provided by (the "Swap
Counterparty"). The Swap Counterparty was incorporated in .
The Swap Counterparty is engaged in the business of . As of
, 199 , the Swap Counterparty had total consolidated assets of $
, total consolidated liabilities of $ and total
consolidated stockholders' equity of $ .
THE INFORMATION SET FORTH IN THE PRECEDING PARAGRAPH HAS BEEN
PROVIDED BY THE SWAP COUNTERPARTY. THE SELLER MAKES NO
REPRESENTATIONS AS TO THE ACCURACY OR COMPLETENESS OF SUCH
INFORMATION.]
[GUARANTEED RATE AGREEMENT
The Seller will enter into an Guaranteed Rate Agreement, dated
as of the Closing Date (the "Guaranteed Rate Agreement") with the
Investment Provider. Pursuant to the Guaranteed Rate Agreement,
amounts on deposit in the [Collection] [Note Payment] Account will be
invested from the date of deposit to the related [Distribution]
[Payment] Date by the Indenture Trustee at the direction of the
Investment Provider in certain eligible investments (which are
substantially similar to Permitted Investments). Amounts invested
pursuant to the Guaranteed Rate Agreement will continue to be held in
the name of the Indenture Trustee for the benefit of Securityholders
and will remain assets of the Trust for purposes of bankruptcy, tax
and other applicable laws. The Guaranteed Rate Agreement provides
that the Investment Provider will guarantee a rate of return on such
amounts equal to the weighted average of the Note
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<PAGE> 52
Interest Rates [and the Certificate Rate] and will be entitled to
receive any Investment Earnings in excess of such guaranteed return.
If the commercial paper rating or certificate of deposit rating
of the Investment Provider is at any time reduced below A-1+ or P1 by
the applicable Rating Agency, within 60 days of receiving notice of
such decline, the Servicer will either (i) with the prior written
assurance of each Rating Agency that such action will not result in a
reduction of the rating of any of the Notes or the Certificates,
cause the Investment Provider to pledge securities, in a manner
conferring on the Indenture Trustee a perfected first lien in such
securities, securing the Investment Provider's performance of its
obligations under the Guaranteed Rate Agreement, (ii) direct the
Indenture Trustee to terminate the Guaranteed Rate Agreement and to
obtain a Replacement Guaranteed Rate Agreement or (iii) establish any
other arrangement satisfactory to each Rating Agency such that such
Rating Agency will not reduce the rating of any of the Notes or the
Certificates. A "Replacement Guaranteed Rate Agreement" means an
agreement (i) which is substantially similar to the original
Guaranteed Rate Agreement, (ii) the obligor of which is an
insurance company, trust company, commercial bank or other entity
which has a commercial paper or certificate of deposit rating of no
less than A-1+ or P1 by the applicable Rating Agency and (iii) which
provides for either the payment of interest on funds invested
pursuant thereto at a rate per annum at least equal to the weighted
average of the Note Interest Rates [and the Certificate Rate]. If
the Servicer is unable to obtain a Replacement Guaranteed Rate
Agreement or a pledge of securities or otherwise satisfy the
applicable Rating Agency within such 60-day period, then each
following Distribution Date will constitute a Payment Date and
distributions in respect of the Notes and the Certificates will be
made monthly. See "Description of the Notes--Payments of Interest"
herein.
The payment obligations of the Investment Provider under the
Guaranteed Rate Agreement constitute general unsecured obligations of
the Investment Provider. No assurance can be given that the Trust
will receive the payments due to be received under the Guaranteed
Rate Agreement when due. A failure by the Investment Provider to
make such payments or to make such payments on a timely basis would
reduce amounts available for distributions to Securityholders, and
in such event Securityholders could incur a loss on their investment.
With respect to each Collection Period, any shortfall between
amounts due from the Investment Provider under the Guaranteed Rate
Agreement and amounts actually received from the Investment Provider
during such Collection Period will be reported in the statement
delivered to Securityholders on the following [Payment Date or]
Distribution Date. See "Certain Information Regarding the
Securities--Reports to Securityholders" in the Prospectus.
The Guaranteed Rate Agreement will be provided by (the
"Investment Provider"). The Investment Provider was incorporated in
. The Investment Provider is engaged in the business of
. As of , 199 , the Investment Provider had total
consolidated assets of $ , total consolidated liabilities of $
and total consolidated stockholders' equity of $ . The
Investment Provider is currently rated / .
THE INFORMATION SET FORTH IN THE PRECEDING PARAGRAPH HAS BEEN
PROVIDED BY THE INVESTMENT PROVIDER. THE SELLER MAKES NO
REPRESENTATIONS AS TO THE ACCURACY OR COMPLETENESS OF SUCH
INFORMATION.]
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of certain federal income tax
consequences of the purchase, ownership and disposition of the Notes
and the Certificates. The summary does not purport to deal with
federal income tax consequences applicable to all categories of
holders, 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 or dealers in securities. Moreover, there are
no cases or Internal Revenue Service ("IRS") rulings on similar
transactions involving both debt instruments 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 discussion below. Prospective investors are urged to consult
their own tax advisors in determining the federal, state, local,
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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 thereunder and judicial or ruling authority,
all of which are subject to change, which change may be retroactive.
The Trust will be provided with an opinion of Special Tax Counsel
regarding certain federal income tax matters discussed below. An
opinion of Special Tax Counsel, however, is not binding on the IRS or
the courts. No ruling on any of the issues discussed below will be
sought from the IRS.
SCOPE OF THE TAX OPINIONS
It is expected that Special Tax Counsel, will, upon issuance of
the Notes and Certificates deliver its opinion that the Trust will
not be classified as an association (or publicly traded partnership)
taxable as a corporation for federal income tax purposes. Further,
with respect to the Notes, Special Tax Counsel will advise the Trust
that the Notes will be classified as debt for federal income tax
purposes.
In addition, Special Tax Counsel has prepared or reviewed the
statements under the heading "Summary--Tax Status" as they relate
to federal income tax matters and under the heading "Certain Federal
Income Tax Consequences" herein and in the Prospectus and is of the
opinion that such statements are correct in all material respects.
Such statements are intended as an explanatory discussion of the
possible effects of the classification of the Trust as a partnership
for federal income tax purposes on investors generally and of related
tax matters affecting investors generally, but do not purport to
furnish information in the level of detail or with the attention to
the investor's specific tax circumstances that would be provided by
an investor's own tax adviser. Accordingly, each investor is advised
to consult its own tax advisers with regard to the tax consequences
to it of investing in the Notes and the Certificates.
TAX CHARACTERIZATION OF THE TRUST
As set forth above, it is expected that Special Tax Counsel
will deliver its opinion that the Trust will not be classified as 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 Trust Agreement and related
documents will be complied with, and on counsel's conclusions that
(1) the Trust does not have certain characteristics necessary for a
business trust to be classified as an association taxable as a
corporation and (2) either the nature of the income of the Trust will
exempt it from the provisions of the Code requiring certain publicly
traded partnerships to be taxed as corporations or the Trust will
otherwise qualify for an exemption from the rules governing publicly
traded partnerships.
If the 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 of
its income on the Receivables, possibly reduced by its interest
expense on the Notes. Any such corporate income tax could materially
reduce the amount of cash available to make payments on the Notes and
distributions on the Certificates, and Certificateholders could be
liable for any such tax that is unpaid by the Trust.
TAX CONSEQUENCES TO HOLDERS OF THE NOTES
Treatment of the Notes as Indebtedness. The Noteholders will
agree by their purchase of the Notes, to treat the Notes as debt for
federal income tax purposes. The discussion below assumes that this
characterization of the Notes is correct.
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Original Issue Discount. A Note will be treated as issued with
original issue discount ("OID") if the excess of the Note's "stated
redemption price at maturity" over the issue price equals or exceeds
a de minimis amount equal to 1/4 of 1 percent of the Note's stated
redemption price at maturity multiplied by the number of complete
years (based on the anticipated weighted average life of a Note) to
its maturity.
In general, OID, if any, will equal the difference between the
stated redemption price at maturity of a Note and its issue price. A
holder of a Note must include such OID in gross income as ordinary
interest income as it accrues under a method taking into account an
economic accrual of the discount. In general, OID must be included
in income in advance of the receipt of the cash representing that
income. The amount of OID on a Note will be considered to be zero
if it is less than a de minimis amount determined as described above.
However, the amount of any de minimis OID must be included in
income as principal payments are received on a Note, in the
proportion that each such payment bears to the original principal
amount of the Note. The issue price of a Note will generally be the
initial offering price at which a substantial amount of the Notes are
sold. The Trust intends to treat the issue price as including, in
addition, the amount paid by the Noteholder for accrued interest that
relates to a period prior to the Closing Date. Under applicable
Treasury regulations governing the accrual of OID (the "OID
Regulations"), the stated redemption price at maturity is the sum of
all payments on the Note other than any "qualified stated interest"
payments. Qualified stated interest is defined as any one of a
series of payments equal to the product of the outstanding principal
amount of the Note and a single fixed rate or certain variable rates
of interest that is unconditionally payable at least annually.
The holder of a Note issued with OID must include in gross
income, for all days during its taxable year on which it holds such
Note, the sum of the "daily portions" of such OID. Such daily
portions are computed by allocating to each day during a taxable year
a pro rata portion of the OID that accrued during the relevant
accrual period(s). In the case of an obligation the principal on
which is subject to prepayment as a result of prepayments on the
underlying collateral (a "Prepayable Obligation"), such as the Notes,
OID is computed by taking into account the anticipated rate of
prepayments assumed in pricing the debt instrument (the "Prepayment
Assumption"). The Prepayment Assumption that will be used in
determining the rate of accrual of OID, premium and market
discount, if any, is ___% ABS. The amount of OID that will accrue
during an accrual period (generally the period between interest
payments or compounding dates) is the excess (if any) of the sum of
(a) the present value of all payments remaining to be made on the
Note as of the close of the accrual period and (b) the payments
during the accrual period of amounts included in the stated
redemption price of the Note, over the "adjusted issue price" of the
Note at the beginning of the accrual period. An "accrual period" is
the period over which OID accrues, and may be of any length, provided
that each accrual period is no longer than one year and each
scheduled payment of interest or principal occurs on either the last
day or the first day of an accrual period. The Issuer intends to
report OID on the basis of an accrual period that corresponds to the
interval between [Payment] [Distribution] Dates. The adjusted issue
price of a Note is the sum of its issue price plus prior accruals of
OID, reduced by the total payments made with respect to such Note in
all prior periods, other than qualified stated interest payments.
The present value of the remaining payments is determined on the
basis of three factors: (i)Ethe original yield to maturity of the
Note (determined on the basis of compounding at the end of each
accrual period and properly adjusted for the length of the accrual
period), (ii)Eevents which have occurred before the end of the
accrual period and (iii)Ethe assumption that the remaining payments
will be made in accordance with the original Prepayment Assumption.
The effect of this method is to increase the portions of OID
required to be included in income by a Noteholder to take into
account prepayments on the Receivables at a rate that exceeds the
Prepayment Assumption, and to decrease (but not below zero for any
period) the portions of OID required to be included in income by a
Noteholder to take into account prepayments with respect to the
Receivables at a rate that is slower than the Prepayment Assumption.
Although OID will be reported to Noteholders based on the Prepayment
Assumption, no representation is made to Noteholders that the
Receivables will be prepaid at that rate or at any other rate.
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A holder of a Note that acquires the Note for an amount that
exceeds its stated redemption price will not include any OID in gross
income. A subsequent holder of a Note which acquires the Notes for
an amount that is less than its stated redemption price will be
required to include OID in gross income, but such a holder who
purchases such Note for an amount that exceeds its adjusted issue
price will be entitled (as will an initial holder who pays more than
a Note's issue price) to reduce the amount of OID included in income
in each period by the amount of OID multiplied by a fraction, the
numerator of which is the excess of (w) the purchaser's adjusted
basis in the Note immediately after purchase thereof over (x)Ethe
adjusted issue price of the Note, and the denominator of which is the
excess of (y)Eall amounts remaining to be paid on the Note after the
purchase date, other than qualified stated interest, over (z)Ethe
adjusted issue price of the Note.
Total Accrual Election. As an alternative to separately
accruing stated interest, OID, de minimis OID, market discount, de
minimis market discount, unstated interest, premium, and acquisition
premium, a holder of a Note may elect to include all income that
accrues on the Note using the constant yield method. If a Noteholder
makes this election, income on a Note will be calculated as though
(i)Ethe issue price of the Note were equal to the Noteholder's
adjusted basis in the Note immediately after its acquisition by the
Noteholder; (ii)Ethe Note were issued on the Noteholder's
acquisition date; and (iii)Enone of the interest payments on the Note
were "qualified stated interest." A Noteholder may make such an
election for a Note that has premium or market discount,
respectively, only if the Noteholder makes, or has previously made,
an election to amortize bond premium or to include market discount in
income currently. See "--Market Discount" and "--Amortizable Bond
Premium" below.
Market Discount. The Notes, whether or not issued with OID ,
will be subject to the "market discount rules" of section 1276 of the
Code. In general, these rules provide that if the Note Owner
acquires a Note at a market discount (that is, a discount from its
stated redemption price at maturity or, if the Notes were issued with
OID, its original issue price plus any accrued OID that exceeds a de
minimis amount specified in the Code) and thereafter (a) recognizes
gain upon a disposition, or (b) receives payments of principal, the
lesser of (i) such gain or principal payment or (ii)Ethe accrued
market discount will be taxed as ordinary interest income.
Generally, the accrued market discount will be the total market
discount on the Note multiplied by a fraction, the numerator of which
is the number of days the Note Owner held the Note and the
denominator of which is the number of days from the date the Note
Owner acquired the Note until its maturity date. The Note Owner may
elect, however, to determine accrued market discount under the
constant yield method.
Limitations imposed by the Code which are intended to match
deductions with the taxation of income may defer deductions for
interest on indebtedness incurred or continued, or short-sale
expenses incurred, to purchase or carry a Note with accrued market
discount. A Note Owner may elect to include market discount in gross
income as it accrues and, if the Note Owner makes such an election,
is exempt from this rule. Any such election will apply to all debt
instruments acquired by the taxpayer on or after the first day of the
first taxable year to which such election applies. The adjusted
basis of a Note subject to such election will be increased to reflect
market discount included in gross income, thereby reducing any gain
or increasing any loss on a sale or taxable disposition.
Amortizable Bond Premium. In general, if a Note Owner purchases
a Note at a premium (that is, an amount in excess of the amount
payable upon the maturity thereof), such Note Owner will be
considered to have purchased such Note with "amortizable bond
premium" equal to the amount of such excess. Such Note Owner may
elect to amortize such bond premium as an offset to interest income
and not as a separate deduction item as it accrues under a constant
yield method over the remaining term of the Note. Such Note Owner's
tax basis in the Note will be reduced by the amount of the amortized
bond premium. Any such election shall apply to all debt instruments
(other than instruments the interest on which is excludible from
gross income) held by the Note Owner at the beginning of the first
taxable year for which the election applies or thereafter acquired
and is irrevocable without the consent of the IRS. Bond premium on
a Note held by a Note Owner who does not elect to amortize the
premium will decrease the gain or increase the loss otherwise
recognized on the disposition of the Note.
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Short-Term Notes. Under the Code, special rules apply to
Notes that have a maturity of one year or less from their date of
original issuance ("Short-Term Notes"). Such Notes are treated as
issued with "acquisition discount" which is calculated and included
in income under principles similar to those governing OID except that
acquisition discount is equal to the excess of all payments of
principal and interest on the Short-Term Notes over their issue
price. In general, an individual or other cash basis holder of a
short-term obligation is not required to accrue acquisition discount
for federal income tax purposes unless it elects to do so. Accrual
basis Noteholders and certain other Noteholders, including banks,
regulated investment companies, dealers in securities and cash basis
Noteholders who so elect, are required to accrue acquisition discount
on Short-Term Notes on either a straight-line basis or under a
constant yield method (based on daily compounding), at the election
of the Noteholder. In the case of a Noteholder not required and not
electing to include acquisition discount in income currently, any
gain realized on the sale or retirement of the Short-Term Notes will
be ordinary income to the extent of the acquisition discount accrued
on a straight-line basis (unless an election is made to accrue the
acquisition discount under the constant yield method) through the
date of sale or retirement. Noteholders who are not required and do
not elect to accrue acquisition discount on Short-Term Notes will be
required to defer deductions for interest on borrowings allocable to
short-term obligations in an amount not exceeding the deferred income
until the deferred income is realized.
Sale or Other Disposition. If a Noteholder sells a Note, the
holder will recognize gain or loss in an amount equal to the
difference between the amount realized on the sale and the holder's
adjusted tax basis in the Note. The adjusted tax basis of a Note to
a particular Noteholder generally will equal the holder's cost for
the Note, increased by any market discount, acquisition discount, OID
and gain previously included by such Noteholder in income with
respect to the Note and decreased by any bond premium previously
amortized and principal payments previously received by such
Noteholder with respect to such Note. Any such gain or loss will be
capital gain or loss if the Note was held as a capital asset, except
for gain representing accrued interest, accrued market discount or
OID that has not previously accrued, in each case to the extent not
previously included in income. Capital losses incurred on sale or
disposition of a Note generally may be used only to offset capital
gains.
Non-U.S. Note Owners. In general, a non-U.S. Note Owner will
not be subject to United States federal income tax on interest
(including OID) on a beneficial interest in a Note unless (i) the
non-U.S. Note Owner actually or constructively owns 10 percent or
more of the total combined voting power of all classes of stock of
the Seller (or affiliate of the Seller) entitled to vote (or of a
profits or capital interest of the Trust), (ii) the non-U.S. Note
Owner is a controlled foreign corporation that is related to the
Seller (or the Trust) through stock ownership, (iii) the non-U.S.
Note Owner is a bank receiving interest described in Code Section
881(c)(3)(A), (iv) such interest is contingent interest described in
Code Section 871(h)(4), or (v) the non-U.S. Note Owner bears certain
relationships to any Certificate Owner. To qualify for the exemption
from taxation, the Note Owner must comply with applicable
certification requirements.
Any capital gain realized on the sale, redemption, retirement or
other taxable disposition of a Note by a foreign person will be
exempt from United States federal income tax and withholding tax,
provided that (i) such gain is not effectively connected with the
conduct of a trade or business in the United States by the foreign
person and (ii) in the case of an individual foreign person, the
foreign person is not present in the United States for 183 days or
more in the taxable year.
Backup Withholding. Each holder of a Note (other than an exempt
holder such as 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 containing the holder's name, address, correct taxpayer
identification number and a statement that the holder is not subject
to backup withholding. Should a nonexempt Noteholder fail to provide
the required certification, the Trust will be required to withhold 31
percent of the amount otherwise payable to the holder, and remit the
withheld amount to the IRS as a credit against the holder's federal
income tax liability.
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Possible Alternative Treatments of the Notes. If, contrary to
the opinion of Special 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, the Trust might be treated as a publicly traded
partnership that would not be taxable as a corporation because it
would meet certain qualifying income tests. Nonetheless, treatment
of the Notes as equity interests in such a publicly traded
partnership could have adverse tax consequences to certain holders.
For example, income to certain tax-exempt entities (including pension
funds) would be "unrelated business taxable income," income to
foreign holders generally would be subject to U.S. federal tax and
U.S. federal tax return filing and withholding requirements, and
individual holders might be subject to certain limitations on their
ability to deduct their share of Trust expenses.
TAX CONSEQUENCES TO HOLDERS OF OFFERED CERTIFICATES
Treatment of the Trust as a Partnership. The Seller and the
Servicer will agree, and the Certificateholders will agree by their
purchase of Certificates, to treat the Trust as a partnership for
purposes of federal and state income tax, franchise tax and any other
tax measured in whole or in part by income, with the assets of the
partnership being the assets held by the Trust, the partners of the
partnership being the Certificateholders (including the Seller), and
the Notes being debt of the partnership. However, the proper
characterization of the arrangement involving the Trust, the
Certificates, the Notes, the Seller and the Servicer is not clear
because there is no authority on transactions closely comparable to
those contemplated herein.
A variety of alternative characterizations of the Certificates
are possible. For example, because the Certificates generally will
have certain features characteristic of debt, the Certificates might
be considered debt of the Seller or the Trust. Any such
characterization would not result in materially adverse tax
consequences to Certificateholders 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.
Partnership Taxation. Assuming that the Trust is classified as
a partnership, the Trust will not be subject to federal income tax,
but each Certificateholder will be required to take into account
separately such holder's allocated share of income, gains, losses,
deductions and credits of the Trust. The Trust's income will consist
primarily of interest accrued on the Receivables (including
appropriate adjustments for market discount (as discussed below), and
any OID and bond premium), investment income from investments of
collections held between Distribution Dates, any gain upon, or with
respect to, collection or disposition of the Receivables and any
income earned on any notional principal contracts. The Trust's
deductions will consist primarily of interest accruing on the Notes,
servicing and other fees and losses or deductions upon, or with
respect to, collection or the disposition of the Receivables.
The tax items of a partnership are allocable to the partners in
accordance with the Code, Treasury regulations and the partnership
agreement. In the Trust Agreement, the Certificateholders 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 Certificateholder
as ordinary income, but may well not be treated as interest income.
The Trust Agreement will provide that, to the extent that such
treatment is not respected, the Certificateholders will be allocated
ordinary gross income of the Trust for each interest period equal to
the sum of (i) the amount of interest that accrues on the
Certificates for such interest period based on the Certificate Rate;
(ii) an amount equivalent to interest that accrues during such
interest period on amounts previously due on the Certificates but not
yet distributed; and (iii) any Trust income attributable to discount
on the Receivables that corresponds to any excess of the principal
balance of the Certificates over their initial issue price. All
remaining taxable income of the Trust generally will be allocated to
the Seller, as "general partner" of the Trust.
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Except as set forth below, losses and deductions generally will
not be allocated to the Certificateholders except to the extent the
Certificateholders are reasonably expected to bear the economic
burden of such losses or deductions. Any such losses could be
characterized as capital losses, and the Certificateholders
generally would only be able to deduct such losses against capital
gain income. Accordingly, a Certificateholder's taxable income from
the Trust could exceed the cash it receives from the Trust.
Although the allocation of gross income to Certificateholders
described above is intended to comply with applicable Treasury
regulations and other authorities, no assurance can be given that the
IRS would not instead require that Certificateholders be allocated a
distributive share of partnership net income or loss. Moreover, if
losses or deductions were allocated to Certificateholders, such
losses or deductions would, to the extent that funds were available
therefor, later be reimbursed through allocations of ordinary income.
It is believed that allocating partnership income on the
foregoing basis should comport with the partners' economic interests
in the partnership, although no assurance can be given that the IRS
would not require a greater amount of income to be allocated to
Certificateholders. Moreover, under the foregoing method of
allocation, Certificateholders may be allocated income equal to the
amount of interest accruing on the Certificates based on the
Certificate Rate even though the Trust might not have sufficient cash
to make current cash distributions of such amount. Thus, cash basis
Certificateholders will in effect be required to report income from
the Certificates on the accrual basis and Certificateholders may
become liable for taxes on Trust income even if they have not
received cash from the Trust to pay such taxes. In addition, because
tax allocation and tax reporting will be done on a uniform basis for
all Certificateholders of the Trust but Certificateholders of the
Trust may be purchasing Certificates at different times and at
different prices, Certificateholders may be required to report on
their tax returns taxable income that is greater or less than the
amount reported to them by the Trust.
Certificateholders will be required to report items of income,
loss and deduction allocated to them by the Trust in the taxable year
in which or with which the taxable year of the Trust to which such
allocations relate ends. The Code prescribes certain 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 Certificateholders possessing
a 5 percent or greater interest in the equity or the profits of the
Trust share a taxable year that is other than the calendar year, the
Trust would be required to use that year as its taxable year.
All of the taxable income allocated to a Certificateholder that
is a pension, profit sharing or employee benefit plan or other
tax-exempt entity (including an individual retirement account) will
constitute "unrelated business taxable income" generally taxable to
such a holder under the Code. The characterization under the Trust
Agreement of yield on the Certificates as a guaranteed payment could
adversely affect taxpayers, such as regulated investment companies
and real estate investment trusts, that expect to earn "interest"
income.
Limitations on Losses. Under the "passive activity" rules of
the Code, any loss allocated to a Certificateholder who is a natural
person, estate, trust, closely held "C" corporation or personal
service corporation would be a passive activity loss while, for
purposes of those rules, income allocated to such a Certificateholder
would be "portfolio income."
In addition a taxpayer that is an individual, trust or estate
may generally deduct miscellaneous itemized deductions (which do not
include interest expense) only to the extent they exceed two percent
of the individual's adjusted gross income. Those limitations would
apply to an individual Certificateholder's share of expenses of the
Trust (including fees paid to the Servicer) and might result in such
holder having taxable income that exceeds the amount of cash
actually distributed to such holder over the life of the Trust.
The Trust intends to make all tax calculations relating to
income and allocations to Certificateholders on an aggregate basis.
If the IRS were to require that such calculations be made separately
for each Receivable, the Trust
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might be required to incur additional expense but it is believed that
there would not be a material adverse effect on Certificateholders.
Discount and Premium. It is believed that the Receivables were
not issued with OID or imputed interest, and, therefore, the Trust
should not have OID or imputed interest 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 Trust acquires the Receivables at a market discount or
premium, the Trust will elect to include any such discount in income
currently as it accrues over the life of the Receivables or to offset
any such premium against interest income on the Receivables. As
indicated above, a portion of such market discount income or premium
deduction may be allocated to Certificateholders.
Section 708 Termination. Under Section 708 of the Code, the
Trust will be deemed to terminate for federal income tax purposes if
50% or more of the capital and profits interests in the Trust are
sold or exchanged within a 12-month period. If such a termination
occurs, the Trust will be considered to distribute its assets to the
partners, who would then be treated as recontributing those assets to
the Trust, as a new partnership. The Trust will not comply with
certain technical requirements that might apply when such a
constructive termination occurs. As a result, the Trust may be
subject to certain tax penalties and may incur additional expenses if
it is required to comply with those requirements. Furthermore, the
Trust might not be able to comply due to lack of data.
Distributions to Certificateholders. Certificateholders
generally will not recognize gain or loss with respect to
distributions from the Trust. A Certificateholder will, however,
recognize gain to the extent any money distributed exceeds the
Certificateholder's adjusted basis in the Certificates (as described
below under "--Disposition of Certificates") immediately before
distribution, and a Certificateholder will recognize loss upon
termination of the Trust or termination of the Certificateholder's
interest in the Trust if the Trust only distributes money to the
Certificateholder and the amount distributed is less than the
Certificateholder's adjusted basis in the Certificates. Any such
gain or loss would be long-term capital gain or loss if the holding
period of the Certificates were more than one year, assuming that the
Certificates are held as capital assets.
Disposition of Certificates. Generally, capital gain or loss
will be recognized on a sale of Certificates in an amount equal to
the difference between the amount realized and the seller's tax basis
in the Certificates sold. A Certificateholder's tax basis in a
Certificate will generally equal the holder's cost increased by the
holder's share of Trust income (includible in income) and decreased
by any distributions received with respect to such Certificate. In
addition, both the tax basis in the Certificates and the amount
realized on a sale of a Certificate would include the holder's share
of the Notes and other liabilities of the Trust. A holder acquiring
Certificates at different prices may be required to maintain a single
aggregate adjusted tax basis in such Certificates, and, upon sale or
other disposition of some of the Certificates, allocate a portion of
such aggregate tax basis to the Certificates sold (rather than
maintaining a separate tax basis in each Certificate for purposes of
computing gain or loss on a sale of that Certificate).
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 federal income tax reporting
requirements. The Trust does not expect to have any other assets
that would give rise to such special reporting requirements. Thus,
to avoid those special reporting requirements, the Trust will elect
to include market discount in income as it accrues.
If a Certificateholder is required to recognize an aggregate
amount of income (not including income attributable to disallowed
miscellaneous itemized deductions described above) over the life of
the Certificates that
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exceeds the aggregate cash distributions with respect thereto, such
excess will generally give rise to a capital loss upon the retirement of
the Certificates.
Allocations Between Transferors and Transferees. In general,
the Trust's taxable income and losses will be determined monthly and
the tax items for a particular calendar month will be apportioned
among the Certificateholders in proportion to the principal balance
of Certificates owned by them as of the close of the last day of such
month. As a result, a holder purchasing Certificates may be
allocated tax items (which will affect its tax liability and tax
basis) attributable to periods before the actual transaction.
The use of such a monthly convention may not be permitted by
existing Treasury regulations. If a monthly convention is not
allowed (or only applies to transfers of less than all of the
partner's interest), taxable income or losses of the Trust might be
reallocated among the Certificateholders. The Seller is authorized
to revise the Trust's method of allocation between transferors and
transferees to conform to a method permitted by future Treasury
regulations.
Section 754 Election. In the event that a Certificateholder
sells its Certificates at a profit (loss), the purchasing
Certificateholder will have a higher (lower) basis in the
Certificates than the selling Certificateholder had. The tax basis
of the Trust's assets 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
Trust will not make such election. As a result, Certificateholders
might be allocated a greater or lesser amount of Trust income than
would be appropriate based on their own purchase price for
Certificates.
Administrative Matters. The Owner Trustee is required to keep
or have kept complete and accurate books of the Trust. Such books
will be maintained for financial reporting and federal income tax
purposes on an accrual basis and the fiscal year of the Trust will be
the calendar year. The Trustee will file a partnership information
return (Form 1065) with the IRS for each taxable year of the Trust
and will report each Certificateholder's allocable share of items of
Trust income and expense to holders and the IRS on Schedule K-1. The
Trust will provide the Schedule K-1 information to nominees that
fail to provide the Trust with the information statement described
below and such nominees will be required to forward such information
to the beneficial owners of the Certificates. Generally, holders
must file federal income tax returns that are consistent with the
information return filed by the Trust or be subject to penalties
unless the holder notifies the IRS of all such inconsistencies.
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 certain
information on the nominee, the beneficial owners and the
Certificates so held. Such information includes (i) the name,
address and federal taxpayer identification number of the nominee and
(ii) as to each beneficial owner (x) the name, address and federal
taxpayer identification number of such person, (y) whether such
person is a United States person, a tax-exempt entity or a foreign
government, an international organization, or any wholly owned agency
or instrumentality of either of the foregoing, and (z) certain
information on Certificates that were held, bought or sold on behalf
of such 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 such information statement to the Trust. The 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 Code provides for administrative examination of a
partnership as if the partnership were a separate taxpayer. Under
these audit procedures, the tax treatment of items of Trust income,
gain, loss, deduction and credit would be determined at the Trust
level in a unified proceeding, rather than in separate proceedings
with each Certificateholder. Generally, the statute of limitations
for Trust items does not expire before three years after the date
S-58
<PAGE> 61
on which the partnership information return is filed. The Seller
will be designated the "tax matters partner" for the Trust and, as
such, is designated to receive notice on behalf of, and to provide
notice to those Certificateholders not receiving notice from, the
IRS, and to represent the Certificateholders in any dispute with the
IRS. Any adverse deter mination following an audit of the return of
the Trust by the appropriate taxing authorities could result in an
adjustment of the returns of the Certificateholders, and while the
Certificateholders may participate in any adjudicative process that
is undergone at the Trust level in arriving at such a determination,
such Certificateholders will be precluded from separately
litigating a proposed adjustment to the items of the Trust. As the
tax matters partner, the Seller may enter into a binding settlement
on behalf of all Certificateholders with a less than a 1 percent
interest in the Partnership (except for any group of such
Certificateholders with an aggregate interest of 5 percent or more in
Trust profits that elects to form a notice group or
Certificateholders who otherwise notify the IRS that the Seller is
not authorized to settle on their behalf). In the absence of a
proceeding at the Trust level, a Certificateholder under certain
circumstances may pursue a claim for credit or refund on his own
behalf by filing a request for administrative adjustment of a Trust
item. Each Certificateholder is advised to consult its own tax
advisor with respect to the impact of these procedures on its
particular case.
Backup Withholding. Distributions made on the Certificates and
proceeds from the sale of the Certificates will not be subject to a
"backup" withholding tax of 31% unless, in general, the
Certificateholder fails to comply with certain identification
procedures and is not an exempt recipient under applicable provisions
of the Code.
TAX CONSEQUENCES TO NON-U.S. CERTIFICATEHOLDERS
The Certificates may not be purchased by persons other than U.S.
persons and non-U.S. persons who will satisfy the Seller and the
Trustee of the Trust that such non-U.S. person will be taxed with
respect to its ownership of Certificates as if it were a U.S. person.
However, in the case of such a non-U.S. person, the Trust will
withhold U.S. income tax at the highest marginal rate.
CERTAIN STATE TAX CONSEQUENCES
The State of Michigan imposes a state individual income tax and
a Single Business Tax which is based partially upon the net income of
corporations, partnerships and other entities doing business in the State
of Michigan. This discussion is based upon present provisions of Michigan
statutes and the regulations promulgated thereunder, and applicable
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 Michigan Department of Treasury.
Because of the variation in each state's and locality's tax laws
based in whole or in part upon income, it is impossible to predict
tax consequences to holders of Notes and Certificates in all of the
state and local taxing jurisdictions in which they may be subject to
tax. Noteholders and Certificateholders are urged to consult their
own tax advisors with respect to state and local tax consequences
arising out of the purchase, ownership and disposition of Notes and
Certificates.
TAX CONSEQUENCES WITH RESPECT TO THE NOTES
It is expected that Michigan Tax Counsel will deliver his
opinion that, assuming the Notes will be treated as debt for federal
income tax purposes, the Notes will be treated as debt for Michigan
income and Single Business Tax purposes. Accordingly, Noteholders
not otherwise subject to taxation in Michigan should not become
subject to taxation in Michigan solely because of a holder's
ownership of Notes. However, a Noteholder already subject to
Michigan's income tax or Single Business Tax could be required to pay
additional Michigan tax as a result of the holder's ownership or
disposition of Notes.
S-59
<PAGE> 62
TAX CONSEQUENCES WITH RESPECT TO THE CERTIFICATES
If the arrangement created by the Trust Agreement is treated as
a partnership (not taxable as a corporation) for federal income tax
purposes, it is expected that Michigan Tax Counsel will deliver his
opinion that the same treatment should also apply for Michigan tax
purposes. In such case, the partnership should have no Michigan
Single Business Tax liability (which could otherwise result in
reduced distributions to Certificateholders). The Certificateholders
also should not be subject to the Michigan Single Business Tax on
income received through the partnership.
Individual Certificateholders that are nonresidents of
Michigan and are not otherwise subject to Michigan taxes may be
subject to Michigan Individual Income Tax on the income from the
partnership. Michigan law is not clear with respect to this issue.
Other states, with similar laws, do take the position that individual
partners are subject to personal income tax on income from a
partnership when a partnership is doing business in their state. A
Certificateholder not otherwise subject to taxation in Michigan
would not be subject to Michigan Individual Income Tax on income
beyond that derived from the Certificates.
If the Certificates are instead treated as ownership interests
in an association taxable as a corporation or a "publicly traded
partnership" taxable as a corporation, then the hypothetical entity
would be subject to the Michigan Single Business Tax (which would
result in reduced distributions to Certificateholders). A
Certificateholder not otherwise subject to tax in Michigan would not
become subject to Michigan tax as a result of its mere ownership of
such an interest.
THE FEDERAL AND STATE TAX DISCUSSIONS SET FORTH ABOVE ARE
INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE
DEPENDING UPON A NOTEHOLDER'S OR CERTIFICATEHOLDER'S PARTICULAR TAX
SITUATION. PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR TAX ADVISORS
WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE,
OWNERSHIP AND DISPOSITION OF NOTES AND CERTIFICATES, INCLUDING THE
TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND
THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
THE NOTES
The Notes may, in general, be purchased by or on behalf of (i)
"employee benefit plans" (as defined in Section 3(3) of ERISA), (ii)
"plans" described in Section 4975(e)(1) of the Code, including
individual retirement accounts and Keogh Plans, or (iii) entities
whose underlying assets include plan assets by reason of a plan's
investment in such entity (each, a "Plan"). However, the acquisition
and holding of Notes by or on behalf of a Plan could be considered to
give rise to a prohibited transaction under ERISA and the Code if the
Trust, the Owner Trustee, the Indenture Trustee, any holder of the
Certificates or any of their respective affiliates, is or becomes a
"party in interest" or a "disqualified person" (as defined in ERISA
and the Code, respectively) with respect to such Plan. In such case,
certain exemptions from the prohibited transaction rules could be
applicable to such acquisition and holding by a Plan depending on the
type and circumstances of the Plan fiduciary making the decision to
acquire a Note. For additional information regarding treatment of
the Notes under ERISA, see "ERISA Considerations" in the Prospectus.
THE CERTIFICATES
The Certificates may not be acquired by a Plan or a person
investing "plan assets" of a Plan (including without limitation, for
this purpose, any insurance company general account, but excluding
any entity registered under the Investment Company Act of 1940, as
amended) (each, a "Plan Investor"). In addition, investors other than
Plan Investors should be aware that a prohibited transaction under
ERISA and the Code could be deemed to occur if any
S-60
<PAGE> 63
holder of the Certificates or any of their respective affiliates, is
or becomes a party in interest or a disqualified person with respect to
any Plan that acquires and holds the Notes without such Plan being covered
by one or more exemptions from the prohibited transaction rules. For
additional information regarding treatment of the Certificates under
ERISA, see "ERISA Considerations" in the Prospectus.
UNDERWRITING
Subject to the terms and conditions set forth in an Underwriting
Agreement (the "Note Underwriting Agreement"), the Seller has agreed
to cause the Trust to sell to each of the Note Underwriters named
below (collectively, the "Note Underwriters"), and each of the Note
Underwriters has severally agreed to purchase, the initial principal
amount of Notes set forth opposite its name below:
<TABLE>
<CAPTION>
NOTE UNDERWRITERS PRINCIPAL [PRINCIPAL [PRINCIPAL
AMOUNT OF AMOUNT OF AMOUNT OF
[CLASS A-1] CLASS A-2 CLASS A-3
NOTES NOTES] NOTES]
<S> <C> <C> <C>
.................. $ $[ ] $[ ]
.................. [ ] [ ]
.................. [ ] [ ]
.................. [ ] [ ]
Total............. $ $[ ] $[ ]
</TABLE>
The Seller has been advised by the Note Underwriters that they
propose initially to offer the Notes to the public at the prices set
forth herein, and to certain dealers at such prices less the initial
concession not in excess of % per [Class A-1] Note[, % per
Class A-2 Note and % per Class A-3 Note]. The Note Underwriters
may allow, and such dealers may reallow, a concession not in excess
of % per [Class A-1] Note[, % per Class A-2 Note and % per
Class A-3 Note] to certain other dealers. After the initial public
offering of the Notes, the public offering price and such concessions
may be changed.
Subject to the terms and conditions set forth in an Underwriting
Agreement (the "Certificate Underwriting Agreement"), the Seller has
agreed to cause the Trust to sell to each of the Certificate
Underwriters named below (the "Certificate Underwriters" and,
together with the Note Underwriters, the "Underwriters"), and each of
the Certificate Underwriters has severally agreed to purchase, the
initial Certificate Balance of Certificates set forth opposite its
name below:
<TABLE>
<CAPTION>
CERTIFICATE
BALANCE OF
CERTIFICATE UNDERWRITERS CERTIFICATES
<S> <C>
...................... $
......................
Total................. $
</TABLE>
S-61
<PAGE> 64
The Seller has been advised by the Certificate Underwriters that
they propose initially to offer the Certificates to the public at the
price set forth herein, and to certain dealers at such price less the
initial concession not in excess of % per Certificate. The
Certificate Underwriters may allow, and such dealers may reallow, a
concession not in excess of % per Certificate to certain other
dealers. After the initial public offering of the Certificates, the
public offering price and such concessions may be changed.
LEGAL OPINIONS
In addition to the legal opinions described in the Prospectus,
certain legal matters relating to the Notes and the Certificates will
be passed upon for the Underwriters and certain federal income tax
and other matters will be passed upon for the Trust by [ ]
[ may from time to time render legal services to
Ford and its affiliates.]
S-62
<PAGE> 65
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered
Ford Credit Auto Owner Trust 199 - % [Class A-1] Asset Backed
Notes[, Floating Rate Class A-2 Asset Backed Notes and % Class A-3
Asset Backed Notes] (collectively, [the "Global Notes") and % Asset
Backed Certificates (the "Global Certificates" and together with the
Global Notes,] the "Global Securities") will be available only in
book-entry form. Investors in the Global Securities may hold such
Global Securities through any of The Depository Trust Company
("DTC"), Cedel Bank, societe anonyme ("Cedel") or the Euroclear
System ("Euroclear"). The Global Securities will be tradeable 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 Cedel 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., seven calendar day settlement).
Secondary market trading between investors holding Global
Securities through DTC will be conducted according to the rules and
procedures applicable to U.S. corporate debt obligations.
Secondary cross-market trading between Cedel or Euroclear and
DTC Participants holding Global Securities will be effected on a
delivery-against-payment basis through the respective Depositaries of
Cedel and Euroclear (in such capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will
be subject to U.S. withholding taxes unless such holders meet certain
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, Cedel and Euroclear will hold
positions on behalf of their participants through their respective
Depositaries, which in turn will hold such positions in accounts as
DTC Participants.
Investors electing to hold their Global Securities through DTC
will follow the settlement practices applicable to U.S. corporate
debt obligations. 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 Cedel
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 the 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.
<PAGE> 66
Trading between DTC Participants. Secondary market trading
between DTC Participants will be settled using the procedures
applicable to U.S. corporate debt obligations in same-day funds.
Trading between Cedel and/or Euroclear Participants. Secondary
market trading between Cedel Participants or Euroclear Participants
will be settled using the procedures applicable to conventional
eurobonds in same-day funds.
Trading between DTC seller and Cedel or Euroclear purchaser.
When Global Securities are to be transferred from the account of a
DTC Participant to the account of a Cedel Participant or a Euroclear
Participant, the purchaser will send instructions to Cedel or
Euroclear through a Cedel Participant or Euroclear Participant at
least one business day prior to settlement. Cedel 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. 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 Cedel Participant's or Euroclear
Participant's account. The securities credit will appear the next
day (European time) and the cash debit 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 Cedel or Euroclear cash debit will be
valued instead as of the actual settlement date.
Cedel 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 Cedel or Euroclear. Under this approach, they may take on
credit exposure to Cedel or Euroclear until the Global Securities are
credited to their accounts one day later.
As an alternative, if Cedel or Euroclear has extended a line of
credit to them, Cedel 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, Cedel
Participants or Euroclear Participants purchasing Global Securities
would incur overdraft charges for one day, assuming they cleared the
overdraft when the Global Securities were 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 such overdraft charges, although this
result will depend on each Cedel 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 Depositary for the benefit of
Cedel Participants or Euroclear Participants. The sale proceeds will
be available to the DTC seller on the settlement date. Thus, to the
DTC Participant a cross-market transaction will settle no differently
than a trade between two DTC Participants.
Trading between Cedel or Euroclear seller and DTC purchaser.
Due to time zone differences in their favor, Cedel 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 Cedel or
Euroclear through a Cedel Participant or Euroclear Participant at
least one business day prior to settlement. In these cases, Cedel or
Euroclear will instruct the respective Depositary, as appropriate, to
deliver the bonds to the DTC Participant's account 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. The payment will then be reflected in the account
of the Cedel Participant or Euroclear Participant the following day,
and receipt of the cash proceeds in the Cedel 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 Cedel Participant or Euroclear Participant
have a line of credit with its respective clearing system
I-2
<PAGE> 67
and elect to be in debit in anticipation of receipt of the sale proceeds in its
account, the back-valuation will extinguish any overdraft the intended value
date (i.e., the trade fails), receipt of the cash proceeds in the Cedel
Participant's or Euroclear Participant's account would instead be valued as of
the actual settlement date.
Finally, day traders that use Cedel or Euroclear and that purchase Global
Securities from DTC Participants for delivery to Cedel 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:
(a) borrowing through Cedel or Euroclear for one day
(until the purchase side of the day trade is reflected in their
Cedel or Euroclear accounts) in accordance with the clearing
system's customary procedures;
(b) 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 Cedel or Euroclear account in order to settle the sale
side of the trade; or
(c) 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 Cedel Participant or Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
[Global Notes]
A beneficial owner of Global [Securities] [Notes] holding securities
through Cedel 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 original issue discount) on registered debt
issued by U.S. Persons, unless (i) 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 such beneficial owner and the
U.S. entity required to withhold tax complies with applicable certification
requirements and (ii) such beneficial owner takes one of the following steps to
obtain an exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of Global
[Securities] [Notes] that are non-U.S. Persons can obtain a complete exemption
from the withholding tax by filing a signed Form W-8 (Certificate of Foreign
Status). If the information shown on Form W-8 changes, a new Form W-8 must be
filed within 30 days of such change.
Exemption for non-U.S. Persons with effectively connected income (Form
4224). 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, can obtain an exemption from the
withholding tax by filing Form 4224 (Exemption from Withholding of Tax 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 1001). Non-U.S. Persons that are beneficial owners of Global [Securities]
[Notes] residing in a country that has a tax treaty with the United States can
obtain an exemption or reduced tax rate (depending on the treaty terms) by
filing Form 1001 (Ownership, Exemption or Reduced Rate Certificate). If the
treaty provides only for a reduced rate, withholding tax will be imposed at that
rate unless the filer alternatively files Form W-8. Form 1001 may be filed by
the beneficial owner of Global [Securities] [Notes] or his agent.
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<PAGE> 68
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] [Note] or in the case of a Form 1001 or a Form 4224 filer, his
agent, 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). Form W-8 and Form 1001 are effective for three
calendar years and Form 4224 is effective for one calendar year.
[Global Certificates
The Global Certificates may not be purchased by persons other than U.S.
Persons and non-U.S. Persons who will have satisfied the Seller and the Owner
Trustee that such non-U.S. Person will be taxed with respect to its beneficial
ownership of Global Certificates as if it were a U.S. Person.]
The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of the
United States or any political subdivision thereof or (iii) an estate or trust
the income of which is includible in gross income for United States tax
purposes, regardless of its source. This summary does not deal with all aspects
of U.S. federal income tax withholding that may be relevant to foreign holders
of the Global [Securities] [Notes]. Investors are advised to consult their own
tax advisers for specific tax advice concerning their holding and disposing of
the Global Securities.
I-4
<PAGE> 69
INDEX OF TERMS
Set forth below is a list of the defined terms used in this
Prospectus Supplement and defined herein and the pages on which the
definitions of such terms may be found herein. Certain defined terms
used in this Prospectus Supplement are defined in the Prospectus.
See "Index of Terms" in the Prospectus.
<TABLE>
<S> <C>
ABS ........................................................ S-27
ABS Table .................................................. S-28
Accrued Certificate Interest ............................... S-44
Accrued Note Interest ...................................... S-43
[Additional Yield Supplement Amount ........................ S-15]
APR ........................................................ S-4
Available Funds ............................................ S-41
Available Interest ......................................... S-41
Available Principal ........................................ S-41
Available Reserve Amount ................................... S-47
Business Day ............................................... S-6
[Cap Notional Amount ....................................... S-48]
[Cap Rate .................................................. S-48]
Cede ....................................................... S-2
Cedel ...................................................... I-1
Certificate Balance ........................................ S-44
Certificateholders ......................................... S-9
Certificateholders' Distribution Amount .................... S-44
Certificateholders' Interest Carryover Shortfall ........... S-44
Certificateholders' Monthly Accrued Interest ............... S-44
Certificateholders' Monthly Principal ...................... S-44
Certificateholders' Percentage ............................. S-44
Certificateholders' Principal Carryover Shortfall .......... S-45
Certificateholders' Principal Distribution Amount .......... S-45
[Certificate Interest Reserve Amount ....................... S-47]
Certificate Owner .......................................... S-4
Certificate Pool Factor .................................... S-33
[Certificate Prepayment Amount.............................. S-11, S-39]
[Certificate Prepayment Premium ............................ S-10]
Certificate Rate ........................................... S-9
Certificates ............................................... S-1, S-3
Certificate Underwriters ................................... S-61
Certificate Underwriting Agreement ......................... S-61
[Class A-1] Final Scheduled [Distribution] [Payment] Date .. S-7
[Class A-1] Notes .......................................... S-1, S-3
[Class A-1 Rate ............................................ S-6]
[Class A-2 Final Scheduled [Distribution] [Payment] Date ... S-8]
[Class A-2 Notes ........................................... S-1, S-3]
[Class A-2 Rate ............................................ S-6]
[Class A-3 Final Scheduled [Distribution] [Payment] Date ... S-7]
[Class A-3 Notes ........................................... S-1, S-3]
[Class A-3 Rate ............................................ S-6]
Closing Date ............................................... S-4
Code ....................................................... S-17, S-51
Collection Account ......................................... S-15
Collection Period .......................................... S-7
</TABLE>
<PAGE> 70
<TABLE>
<S> <C>
Commission ................................................. S-2
Cutoff Date ................................................ S-24
Determination Date ......................................... S-7, S-36
Distribution Date .......................................... S-2, S-9
DTC ........................................................ S-2, I-1
ERISA ...................................................... S-17
Euroclear .................................................. I-1
Exchange Act ............................................... S-2
Final Scheduled Distribution Date .......................... S-10
Final Scheduled Maturity Date .............................. S-5
Ford ....................................................... S-20
Ford Credit ................................................ S-3
[Funding Period ............................................ S-12]
General Partner ............................................ S-2
[Global Certificates ....................................... I-1]
[Global Notes .............................................. I-1]
Global Securities .......................................... I-1
[Guaranteed Rate Agreement ................................. S-49]
Indenture .................................................. S-3
Indenture Trustee .......................................... S-3
[Index Maturity ............................................ S-35]
[Initial] Cutoff Date ...................................... S-4
Initial Pool Balance ....................................... S-8
[Initial] Receivables ...................................... S-4
Interest Period ............................................ S-6, S-35
[Interest Rate Cap ......................................... S-48]
[Interest Rate Cap Provider ................................ S-11, S-48]
[Interest Rate Swap......................................... S-11, S-49]
[Interest Reset Period...................................... S-35]
[Investment Provider........................................ S-16, S-50]
IRS ........................................................ S-50
Issuer ..................................................... S-3
Liquidated Receivables ..................................... S-41
Liquidation Proceeds ....................................... S-41
[Mandatory Redemption ...................................... S-8, S-37]
[Mandatory Repurchase ...................................... S-10, S-38]
[Maximum Initial Yield Supplement Amount ................... S-15, S-48]
[Maximum Subsequent Yield Supplement Amount ................ S-15, S-48]
[Maximum Yield Supplement Amount ........................... S-15, S-48]
Michigan Tax Counsel ....................................... S-17
Net Losses ................................................. S-33
[Net Trust Swap Payment .................................... S-12, S-49]
[Net Trust Swap Receipt .................................... S-12, S-49]
Noteholders ................................................ S-6
Noteholders' Accelerated Principal ......................... S-7, S-36
Noteholders' Interest Carryover Shortfall .................. S-43
Noteholders' Monthly Accrued Interest ...................... S-43
Noteholders' Monthly Principal ............................. S-43
Noteholders' Payment Amount ................................ S-43
Noteholders' Percentage .................................... S-43
Noteholders' Principal Carryover Shortfall ................. S-43
Noteholders' Principal Payment Amount ...................... S-7, S-44
</TABLE>
<PAGE> 71
<TABLE>
<S> <C>
Note Interest Rate[s] .............................. S-6
Note Owner ......................................... S-3
Note Pool Factor ................................... S-33
[Note Prepayment Amount ............................ S-8, S-37]
[Note Prepayment Premium ........................... S-8]
Notes .............................................. S-1, S-3
Note Underwriters .................................. S-61
Note Underwriting Agreement ........................ S-61
OID ................................................ S-51
OID Regulations .................................... S-52
Owner Trustee ...................................... S-3
[Payment Date ...................................... S-2, S-6]
Plan ............................................... S-60
Plan Investor ...................................... S-60
Pool Balance ....................................... S-6
[Pool/Pre-Funding Balance .......................... S-5]
[Pre-Funded Amount ................................. S-5]
[Pre-Funded Percentage ............................. S-8]
[Pre-Funding Account ............................... S-2, S-12]
Prepayable Obligation .............................. S-52
Prepayment Assumption .............................. S-52
Prospectus ......................................... S-2
Purchase Agreement ................................. S-6
Rating Agencies .................................... S-23
Realized Losses .................................... S-5
Receivables ........................................ S-1
Receivables Pool ................................... S-24
Record Date ........................................ S-6
Redemption Price ................................... S-37
Regular Principal .................................. S-7, S-36
Replacement Guaranteed Rate Agreement .............. S-50
[Required Rate ..................................... S-14]
Reserve Initial Deposit ............................ S-45
Sale and Servicing Agreement ....................... S-4
Securities ......................................... S-1, S-3
Securityholders .................................... S-9
Seller ............................................. S-1, S-3
Servicer ........................................... S-3
Servicing Fee Rate ................................. S-16
Short-Term Notes ................................... S-53
Special Tax Counsel ................................ S-17
Specified Reserve Balance .......................... S-13, S-46
[Subsequent Cutoff Date ............................ S-5]
[Subsequent Receivables ............................ S-2, S-5]
[Subsequent Transfer Date .......................... S-5]
Supplemental Servicing Fee ......................... S-41
[Swap Counterparty ................................. S-11, S-49]
[Swap Notional Amount .............................. S-49]
Transfer and Servicing Agreements .................. S-39
Trust .............................................. S-1, S-3
Trust Agreement .................................... S-3
Underwriters ....................................... S-61
</TABLE>
<PAGE> 72
<TABLE>
<S> <C>
U.S. Person .......................................... I-4
[Yield Supplement Account ............................ S-14]
[Yield Supplement Agreement .......................... S-15]
[Yield Supplement Amount ............................. S-15, S-48]
[Yield Supplement Deposit Amount ..................... S-48]
[Yield Supplement Initial Deposit .................... S-14]
</TABLE>
<PAGE> 73
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON. THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES
OFFERED HEREBY, NOR AN OFFER OF THE SECURITIES IN ANY STATE OR JURISDICTION IN
WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFER WOULD BE UNLAWFUL. THE DELIVERY OF
THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT
INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
____________________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
PROSPECTUS SUPPLEMENT
<S> <C>
Reports to Securityholders........................................... S-2
Summary.............................................................. S-3
Risk Factors......................................................... S-19
The Trust............................................................ S-23
The Receivables Pool................................................. S-24
Pool Factors......................................................... S-33
Maturity and Prepayment Considerations............................... S-34
Description of the Notes ............................................ S-35
Description of the Certificates...................................... S-37
Description of the Transfer and Servicing
Agreements........................................................... S-39
Certain Federal Income Tax Consequences.............................. S-50
Certain State Tax Consequences....................................... S-59
ERISA Considerations................................................. S-60
Underwriting......................................................... S-61
Legal Opinions....................................................... S-62
Annex I--Global Clearance, Settlement and Tax
Documentation Procedures......................................... I-1
Index of Terms
PROSPECTUS
Available Information................................................ 3
Incorporation of Certain Documents by Reference...................... 3
Summary.............................................................. 4
Risk Factors......................................................... 11
The Trusts........................................................... 15
The Receivables Pools................................................ 17
Maturity and Prepayment Considerations............................... 19
Pool Factors and Trading Information................................. 19
Use of Proceeds...................................................... 20
The Seller and the General Partner................................... 20
The Servicer......................................................... 21
Description of the Notes............................................. 22
Description of the Certificates...................................... 27
Certain Information Regarding the Securities......................... 28
Description of the Transfer and Servicing Agreements................. 38
Certain Legal Aspects of the Receivables............................. 49
Certain Federal Income Tax Consequences.............................. 53
ERISA Considerations................................................. 54
Plan of Distribution................................................. 58
Legal Opinions....................................................... 59
Index of Terms....................................................... 60
</TABLE>
UNTIL , 1996 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT), ALL
DEALERS EFFECTING TRANSACTIONS IN THE NOTES OR THE CERTIFICATES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS
SUPPLEMENT AND A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS
TO DELIVER A PROSPECTUS SUPPLEMENT AND A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
$
Ford Credit
Auto Owner Trust
199 -
$
% [ Class A-1]
Asset Backed Notes
[$
Floating Rate Class A-2
Asset Backed Notes]
[$
% Class A-3
Asset Backed Notes]
$
% Asset Backed Certificates
Ford Credit Auto
Receivables Two L.P.
Seller
Ford Motor Credit Company
Servicer
PROSPECTUS
SUPPLEMENT
<PAGE> 74
The information contained herein is subject to completion or amendment.
A registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus supplement and the accompanying prospectus shall
not constitute an offer to sell or the solicitation of an offer to buy nor
shall there be any sale of these securities in any State in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED _____ __, 1996
PROSPECTUS SUPPLEMENT
(To Prospectus dated , 1996)
$
FORD CREDIT AUTO GRANTOR TRUST 199 -
$ % ASSET BACKED CERTIFICATES, CLASS A
[$ % ASSET BACKED CERTIFICATES, CLASS B]
[Ford Logo]
FORD CREDIT AUTO RECEIVABLES TWO L.P.
SELLER
FORD MOTOR CREDIT COMPANY
SERVICER
The Ford Credit Auto Grantor Trust 199 - (the "Trust") will be formed
pursuant to a Pooling and Servicing Agreement, to be dated as of
, 199 , among Ford Credit Auto Receivables Two L.P. (the "Seller"), Ford
Motor Credit Company (the "Servicer") and , as Trustee, and will
issue $ aggregate initial principal balance of % Asset Backed
Certificates, Class A (the "Class A Certificates") and $
aggregate initial principal balance of % Asset Backed Certificates,
Class B (the "Class B Certificates" and, together with the Class A
Certificates, the "Certificates"). [Only the Class A Certificates are
being offered hereby.] The Class A Certificates will evidence in the
aggregate an undivided ownership interest of approximately % in the
Trust. The Class B Certificates[, which initially will be retained by the
Seller,] will evidence in the aggregate an undivided ownership interest of
approximately % in the Trust. The rights of the Class B
Certificateholders to receive distributions with respect to the
Receivables are subordinated to the rights of the Class A
Certificateholders to the extent described herein. The Trust property
will include a pool of motor vehicle retail installment sale contracts
(the "Receivables") secured by security interests in the motor vehicles
financed thereby, including certain monies due or received thereunder on
or after , 199 , and certain other property, as more fully
described herein. See "Summary--The Trust Property" herein. [The Trustee
also will hold monies on deposit in a trust account (the "Pre-Funding
Account"). Additional motor vehicle retail installment sale contracts
(the "Subsequent Receivables") will be purchased by the Trust from the
Seller from time to time on or before , 199 out of funds on
deposit in the Pre-Funding Account.]
Principal and interest to the extent of the [applicable] Certificate
Rate generally will be distributed on the day of each month (the
"Distribution Date"), commencing , 199 . The final scheduled
Distribution Date on the [Class A] Certificates will be , 199
(the "Final Scheduled Distribution Date").
PROSPECTIVE INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE INFORMATION
SET FORTH IN "RISK FACTORS" ON PAGE S-13 HEREIN AND ON PAGE 11 OF THE
ACCOMPANYING PROSPECTUS.
THE CERTIFICATES REPRESENT BENEFICIAL INTERESTS IN THE TRUST ONLY AND
DO NOT REPRESENT OBLIGATIONS OF OR INTERESTS IN, AND ARE NOT GUARANTEED OR
INSURED BY, FORD CREDIT AUTO RECEIVABLES TWO L.P., FORD CREDIT AUTO
RECEIVABLES TWO, INC., FORD MOTOR CREDIT COMPANY, FORD
MOTOR COMPANY OR ANY OF THEIR RESPECTIVE AFFILIATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY REPRE-
SENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO PUBLIC (1) DISCOUNT THE SELLER (1)(2)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Class A Certificate........ % % %
[Per Class B Certificate....... % % %
Total.......................... $ $ $]
</TABLE>
(1) Plus accrued interest, if any, from , 199 .
(2) Before deducting expenses, estimated to be $ .
The [Class A] Certificates are offered by the Underwriters when, as
and if issued and accepted by the Underwriters and subject to their right
to reject orders in whole or in part. It is expected that delivery of the
[Class A] Certificates will be made in book-entry form only through the
Same Day Funds Settlement System of The Depository Trust Company, or
through Cedel Bank, societe anonyme or the Euroclear System, on or about
the Closing Date.
The date of this Prospectus Supplement is , 199 .
<PAGE> 75
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE
INFORMATION ABOUT THE OFFERING OF THE [CLASS A] CERTIFICATES.
ADDITIONAL INFORMATION IS CONTAINED IN THE PROSPECTUS AND
PROSPECTIVE INVESTORS ARE URGED TO READ BOTH THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF THE [CLASS A]
CERTIFICATES MAY NOT BE CONSUMMATED UNLESS THE PURCHASER HAS
RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY
OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE
MARKET PRICES OF THE [CLASS A] CERTIFICATES AT LEVELS ABOVE THOSE
WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING,
IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates are issued,
periodic and annual unaudited reports containing information
concerning the Receivables will be prepared by the Servicer and sent
on behalf of the Trust only to Cede & Co. ("Cede"), as nominee of
The Depository Trust Company ("DTC") and registered holder of the
[Class A] Certificates. See "Certain Information Regarding the
Securities--Book-Entry Registration" and "--Reports to
Securityholders" in the accompanying Prospectus (the "Prospectus").
Such reports will not constitute financial statements prepared in
accordance with generally accepted accounting principles. The
Seller, as originator of the Trust, will file with the Securities
and Exchange Commission (the "Commission") such periodic reports as
are required under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and the rules and regulations of the
Commission thereunder.
S-2
<PAGE> 76
SUMMARY
The following summary is qualified in its entirety by reference
to the detailed information appearing elsewhere herein and in the
Prospectus. Certain capitalized terms used herein are defined
elsewhere in this Prospectus Supplement on the pages indicated in
the "Index of Terms" or, to the extent not defined herein, have the
meanings assigned to such terms in the Prospectus.
ISSUER .................. Ford Credit Auto Grantor Trust 199 - (the
"Trust" or the "Issuer"), a trust to
be formed by the Seller and the
Trustee pursuant to the Agreement.
SELLER .................. Ford Credit Auto Receivables Two L.P., a Delaware
limited partnership (the "Seller").
SERVICER ................ Ford Motor Credit Company, a Delaware corporation
(the "Servicer" or "Ford Credit").
TRUSTEE ................. , as trustee under the Agreement (the "Trustee").
THE CERTIFICATES ...... The Trust will issue Asset Backed Certificates
(the "Certificates") in an aggregate initial
balance of $ . The Certificates
represent fractional undivided interests in the
Trust and will be issued pursuant to a Pooling
and Servicing Agreement to be dated as of , 199
(as amended and supplemented from time to time,
the "Agreement"), among the Seller, the Servicer
and the Trustee.
The Certificates will consist of $ aggregate
initial balance of % Asset Backed
Certificates, Class A (the "Class A
Certificates") and $ aggregate initial
balance of % Asset Backed Certificates,
Class B (the "Class B Certificates"). [Only
the Class A Certificates are being offered
hereby.] Each Certificate will represent a
fractional undivided ownership interest in
the Trust.
The [Class A] Certificates will be available for
purchase in book entry form only in minimum
denominations of $1,000 and integral multiples
thereof. No person acquiring a beneficial
ownership interest in [Class A] Certificates (a
"Certificate Owner") will be entitled to receive
Definitive Certificates, except in the limited
circumstances described herein. See "Certain
Information Regarding the Securities--Definitive
Securities" in the Prospectus.
The Class A Certificates will evidence in the
aggregate an undivided ownership interest (the
"Class A Percentage") of approximately % in
the Trust (initially representing $
) and the Class B Certificates will evidence in
the aggregate an undivided ownership interest
(the "Class B Percentage") of approximately
% in the Trust (initially representing $
). The Class B Certificates are subordinated to
the Class A Certificates to the extent described
herein. [The Class B Certificates are not being
offered hereby and initially will be retained by
the Seller.]
S-3
<PAGE> 77
THE TRUST PROPERTY ..... The property of the Trust will include (i) the
Receivables; (ii) with respect to Precomputed
Receivables, all monies due thereunder on or
after the related Cutoff Date and with respect
to Simple Interest Receivables, all monies due
or received thereunder on or after the related
Cutoff Date; (iii) security interests in the
Financed Vehicles and any accessions thereto;
(iv) the rights to proceeds from claims on
certain physical damage, credit life, credit
disability or other insurance policies, if any,
covering the Financed Vehicles or the Obligors;
(v) any Dealer Recourse; (vi) the Seller's
rights to certain documents and instruments
relating to the Receivables; (vii) such amounts
as from time to time may be held in one or more
accounts maintained pursuant to the Agreement,
as described herein[, including the Yield
Supplement Account] [and the Pre-Funding
Account]; (viii) certain rights under the
Agreement [and the Yield Supplement Agreement];
(ix) certain rights under the Purchase
Agreement, including the right of the Seller to
cause Ford Credit to repurchase Receivables from
the Seller; (x) certain payments and proceeds
with respect to the Receivables held by the
Servicer; (xi) certain rebates of premiums and
other amounts relating to certain insurance
policies and other items financed under the
Receivables; and (xii) any and all proceeds of
the foregoing. The property of the Trust does
not include the Payahead Account and the
Subordination Spread Account.
THE RECEIVABLES ........ On , 199 (the "Closing Date"), the Trust will
purchase Receivables (the "[Initial]
Receivables") having an aggregate principal
balance of approximately $ as of
, 199 (the "[Initial] Cutoff Date"), from
the Seller pursuant to the Agreement. As of the
[Initial] Cutoff Date, the weighted average
annual percentage rate ("APR") of the [Initial]
Receivables was approximately %, the
weighted average remaining maturity of the
[Initial] Receivables was approximately months
and the weighted average original maturity of
the [Initial] Receivables was approximately
months.
[On and following the Closing Date, pursuant to
the Agreement, the Seller will be obligated,
subject only to the availability thereof, to
sell, and the Trust will be obligated to
purchase, subject to the satisfaction of certain
conditions set forth therein, additional
Receivables (the "Subsequent Receivables") from
time to time during the Funding Period having an
aggregate principal balance equal to
approximately $ (such amount being equal to
an amount on deposit in the Pre-Funding Account
(the "Pre-Funded Amount") on the Closing Date).
The Seller will designate as a Cutoff Date (each
a "Subsequent Cutoff Date") the date as of which
particular Subsequent Receivables are conveyed
to the Trust. It is expected that certain of
the Subsequent Receivables arising between the
Initial Cutoff Date and the Closing Date will be
conveyed to the Trust on the Closing Date and
that other Subsequent Receivables will be
conveyed to the Trust as frequently as daily
thereafter on dates specified by the Seller
(each date on which Subsequent Receivables are
conveyed to the Trust being referred to as a
"Subsequent Transfer Date") occurring during the
Funding Period. See "Description of the
Certificates--Sale and Assignment of
Receivables; Subsequent Receivables" herein.]
S-4
<PAGE> 78
The [Initial] Receivables [and the Subsequent
Receivables] will be purchased by the Seller
from Ford Credit pursuant to a Purchase
Agreement between the Seller and Ford Credit (as
amended and supplemented from time to time, the
"Purchase Agreement"). The [Initial]
Receivables have been selected[, and the
Subsequent Receivables will be selected,] from
the contracts owned by Ford Credit based on the
criteria specified in the Agreement and
described herein and in the Prospectus. No
Initial Receivable has[, and no Subsequent
Receivable will have,] a scheduled maturity
later than (the "Final Scheduled Maturity
Date").
[Subsequent Receivables may be originated by Ford
Credit at a later date using credit criteria
different from those which were applied to the
Initial Receivables and may be of a different
credit quality and seasoning. In addition,
following the transfer of Subsequent Receivables
to the Trust, the characteristics of the entire
pool of Receivables included in the Trust may
vary significantly from those of the Initial
Receivables. See "Risk Factors--The Subsequent
Receivables and the Pre-Funding Account" and
"The Receivables Pool" herein.]
The "Pool[/Pre-Funding] Balance" at any time [will
represent] [is the sum of (i)] the aggregate
principal balance of the Receivables at the end
of the preceding Collection Period, after giving
effect to all payments (other than Payaheads)
received from Obligors, Liquidation Proceeds,
Advances and Purchase Amounts to be remitted by
the Servicer or the Seller, as the case may be,
all for such Collection Period and all Realized
Losses during such Collection Period [(such
amount, the "Pool Balance") and (ii) the amount
on deposit in the Pre-Funding Account (excluding
any Investment Earnings)]. "Realized Losses"
means the excess of the principal balance of any
Liquidated Receivable over Liquidation Proceeds
to the extent allocable to principal.
DISTRIBUTION DATES .......... Distributions with respect to the Certificates
will be made on the day of each month
or, if any such day is not a Business Day, on
the next succeeding Business Day (each, a
"Distribution Date") commencing ,
199 . Distributions will be made to holders of
the [Class A] Certificates (the "[Class A]
Certificateholders") of record as of the day
immediately preceding such Distribution Date
or, if Definitive Certificates are issued, as of
the day of the preceding month (a "Record
Date"). A "Business Day" is a day that in The
City of New York or in the city in which the
corporate trust office of the Trustee is
located is neither a legal holiday nor a day on
which banking institutions are authorized by
law, regulation or executive order to be
closed.
[CLASS A] CERTIFICATE RATE .. % per annum (the "[Class A] Certificate
Rate").
[CLASS B CERTIFICATE RATE ... % per annum (the "Class B Certificate
Rate").]
[CLASS A] INTEREST .......... On each Distribution Date, the Trustee shall pass
through and distribute pro rata to the [Class A
Certificateholders] [holders of record of Class
A Certificates (the "Class A
Certificateholders")] interest at one-twelfth of
the [Class A] Certificate Rate, calculated on
the basis of a 360-day year consisting of
twelve
S-5
<PAGE> 79
30-day months, on the Class A Certificate
Balance as of the last day of the preceding
calendar month to the extent of funds available,
after giving effect to amounts required to pay
the Servicing Fee for the prior Collection
Period and any overdue Servicing Fees to the
Servicer, from (i) the Class A Percentage of the
Available Interest, (ii) the Subordination
Spread Account, and (iii) the Class B Percentage
of the Total Available Amount. The "Class A
Certificate Balance" shall equal, initially, the
Class A Percentage of the Pool[/Pre-Funding]
Balance as of the [Initial] Cutoff Date and
thereafter shall equal the initial Class A
Certificate Balance reduced by all principal
distributions on the Class A Certificates.
[CLASS A] PRINCIPAL ........ On each Distribution Date, the Trustee shall pass
through and distribute pro rata to [Class A]
Certificateholders principal to the extent of
funds available from (i) the Class A Percentage
of the Available Principal, (ii) the
Subordination Spread Account, and (iii) the Class
B Percentage of the Total Available Amount. Such
principal shall consist of the Class A Percentage
of: (a) the principal portion of all scheduled
payments due with respect to Precomputed
Receivables during the preceding Collection
Period (including amounts withdrawn from the
Payahead Account but excluding amounts deposited
into the Payahead Account); (b) the principal
portion of all prepayments in full received with
respect to Precomputed Receivables during the
preceding Collection Period (and certain partial
prepayments) (including amounts withdrawn from
the Payahead Account but excluding amounts
deposited into the Payahead Account); (c) the
principal portion of all payments received with
respect to Simple Interest Receivables during the
preceding Collection Period; (d) the principal
balance of each Receivable that was purchased by
the Servicer or repurchased by the Seller, in
each case, under an obligation that arose during
the preceding Collection Period; and (e) the
principal balance of each Receivable liquidated
by the Servicer, during the preceding Collection
Period. A "Collection Period" with respect to a
Distribution Date will be the calendar month
preceding the month in which such Distribution
Date occurs, or, in the case of the initial
Distribution Date, the period from the [Initial]
Cutoff Date through the last day of the calendar
month preceding the month in which the initial
Distribution Date occurs.
[CLASS B INTEREST .......... On each Distribution Date, the Trustee shall pass
through and distribute pro rata to the holders of
record of Class B Certificates (the "Class B
Certificateholders") interest at one-twelfth of
the Class B Certificate Rate, calculated on the
basis of a 360-day year consisting of twelve
30-day months, on the Class B Certificate Balance
as of the last day of the preceding calendar
month to the extent of funds available, after
giving effect to (A) any amounts required to be
distributed to the Class A Certificateholders
pursuant to the subordination of the rights of
the Class B Certificateholders, and (B) amounts
required to pay the Servicing Fee for the prior
Collection Period and any overdue Servicing Fees
to the Servicer, from (i) the Class B Percentage
of the Available Interest and (ii) the
Subordination Spread Account. The "Class B
Certificate Balance" shall equal, initially, the
Class B Percentage of the Pool[/Pre-Funding]
Balance as of the [Initial] Cutoff Date and
thereafter shall
S-6
<PAGE> 80
equal the initial Class B Certificate Balance
reduced by all principal distributions on the
Class B Certificates.
CLASS B PRINCIPAL .......... On each Distribution Date, the Trustee shall
pass through and distribute pro rata to
Class B Certificateholders principal to
the extent of funds available, after
giving effect to (A) any amounts required
to be distributed to the Class A
Certificateholders pursuant to the
subordination of the rights of the Class B
Certificateholders, (B) amounts required
to pay the Servicing Fee for the prior
Collection Period and any overdue
Servicing Fees to the Servicer, and (C)
the interest due to the Class B
Certificateholders, from (i) the Class B
Percentage of the Available Principal and
(ii) the Subordination Spread Account.
Such principal shall consist of the Class
B Percentage of: (a) the principal
portion of all scheduled payments due with
respect to Precomputed Receivables during
the preceding Collection Period (including
amounts withdrawn from the Payahead
Account but excluding amounts deposited
into the Payahead Account); (b) the
principal portion of all prepayments in
full received with respect to Precomputed
Receivables during the preceding
Collection Period (and certain partial
prepayments) (including amounts withdrawn
from the Payahead Account but excluding
amounts deposited into the Payahead
Account); (c) the principal portion of all
payments received with respect to Simple
Interest Receivables during the preceding
Collection Period; (d) the principal
balance of each Receivable that was
purchased by the Servicer or repurchased
by the Seller, in each case, under an
obligation that arose during the preceding
Collection Period; and (e) the principal
balance of each Receivable liquidated by
the Servicer, during the preceding
Collection Period.]
OPTIONAL PREPAYMENT ........ If the Servicer exercises its option to
purchase the Receivables, which can occur
after the Pool Balance declines to 10% or less
of the Initial Pool Balance, the Class A
Certificateholders will receive an amount equal
to the Class A Certificate Balance together with
accrued interest at the [Class A] Certificate
Rate, [the Class B Certificateholders will
receive and amount equal to the Class B
Certificate Balance together with accrued
interest at the Class B Certificate Rate] and
the [Class A] Certificates will be retired. The
"Initial Pool Balance" will equal [the sum of
(i)] the Pool Balance as of the [Initial] Cutoff
Date [plus (ii) the aggregate principal balances
of all Subsequent Receivables added to the Trust
as of their respective Subsequent Cutoff Dates].
See "Description of the Certificates--Optional
Prepayment" herein.
[MANDATORY REPURCHASE FROM
PRE-FUNDING ACCOUNT ........ The [Class A] Certificates will be prepaid, in
part, on the Distribution Date on or immediately
following the last day of the Funding Period in
the event that any amount remains on deposit in
the Pre-Funding Account after giving effect to
the purchase of all Subsequent Receivables,
including any such purchase on such date (a
"Mandatory Repurchase"). The aggregate principal
balance of [Class A] Certificates to be prepaid
will be an amount equal to the amount then on
deposit in the Pre-Funding Account.
[A limited recourse mandatory prepayment
premium (the "Certificate Prepayment
Premium") will be payable by the Trust to the
[Class A] Certificate
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holders if the aggregate principal balance of
[Class A] Certificates to be prepaid pursuant to
a Mandatory Repurchase exceeds $ . The
Certificate Prepayment Premium will equal the
excess, if any, discounted as de scribed below,
of (i) the amount of interest that would accrue
on the remaining Pre-Funded Amount (the
"Certificate Prepayment Amount") at the related
Certificate Rate during the period commencing on
and including the Distribution Date on which such
Certificate Prepayment Amount is required to be
distributed to Certificateholders to but
excluding , over (ii) the amount of
interest that would have accrued on such
Certificate Prepayment Amount over the same
period at a per annum rate of interest equal to
the bond equivalent yield to maturity on the
Determination Date preceding such Distribution
Date on the , in the case of a Class A
Certificate, and on the , in the case of a
Class B Certificate. Such excess shall be
discounted to present value to such Distribution
Date at the applicable yield described in clause
(ii) above. Pursuant to the Agreement, the Seller
will be obligated to pay the Certificate
Prepayment Premium to the Trust as liquidated
damages for the failure to deliver Subsequent
Receivables having an aggregate principal balance
equal to the Pre-Funded Amount. The Trust's
obligation to pay the Certificate Prepayment
Premium will be limited to funds received from
the Seller pursuant to the preceding sentence.
In the event that such funds are insufficient to
pay the aggregate Certificate Prepayment Premium
in full, [Class A] Certificateholders [of each
class of Certificates] will receive their ratable
share [(based upon the Certificate Prepayment
Premium for each class of Certificates)] of the
aggregate amount available to be distributed in
respect of the Certificate Prepayment Premium. No
other assets of the Trust will be available for
the purpose of making such payment.]]
[PRE-FUNDING ACCOUNT ....... During the period (the "Funding Period") from and
including the Closing Date until the earliest
of (i) the date on which (a) the amount on
deposit in the Pre-Funding Account is less than
$ , (b) an Event of Default occurs
under the Agreement or (c) certain events of
insolvency occur with respect to the Seller or
the Servicer or (ii) the close of business on the
Distribution Date, the Pre-Funded Amount
will be maintained as an account in the name of
the Trustee (the "Pre-Funding Account"). The
Pre-Funded Amount will initially equal
approximately $ , and, during the
Funding Period, will be reduced by the amount
thereof used to purchase Subsequent Receivables
in accordance with the Agreement and the amount
thereof deposited in the Subordination Spread
Account in connection with the purchase of such
Subsequent Receivables. The Seller expects that
the Pre-Funded Amount will be reduced to less
than $ by the Distribution Date.
Any Pre-Funded Amount remaining at the end of the
Funding Period will be payable to the
Certificateholders pro rata in proportion to
their initial principal balances.]
SUBORDINATION .............. The rights of the Class B Certificateholders to
receive distributions to which they would
otherwise be entitled with respect to the
Receivables are subordinated to the rights of
the Class A Certificateholders, as described
more fully herein.
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<PAGE> 82
SUBORDINATION SPREAD
ACCOUNT .................... An account (the "Subordination Spread
Account") will be created with an initial
deposit by the Seller of cash or Permitted
Investments maturing on or prior to the
initial Distribution Date and having a
value of [$ (the "Subordination
Initial Deposit").] [at least $
plus an amount attributable to the
difference between the anticipated
investment earnings on the Pre-Funded
Amount and the weighted average interest
expense on the portion of the
Certificates represented by the Pre-Funded
Amount. On each Subsequent Transfer Date,
cash or Permitted Investments having a
value approximately equal to % of the
aggregate principal balance of the
Subsequent Receivables conveyed to the
Trust on such Subsequent Transfer Date
will be withdrawn from the Pre-Funding
Account from amounts otherwise
distributable to the Seller in connection
with the sale of Subsequent Receivables
and deposited in the Subordination Spread
Account. The amount initially deposited
in the Subordination Spread Account by the
Seller together with the aggregate amount
transferred from the Pre-Funding Account
to the Subordination Spread Account on
each Subsequent Transfer Date is referred
to as the "Subordination Initial
Deposit."] The Subordination Initial
Deposit will be augmented by the deposit
in the Subordination Spread Account of
amounts otherwise distributable to Class B
Certificateholders until the amount in the
Subordination Spread Account reaches an
amount equal to the Specified
Subordination Spread Account Balance.
Thereafter, amounts otherwise
distributable to the Class B
Certificateholders will be deposited in
the Subordination Spread Account to the
extent necessary to maintain the amount in
the Subordination Spread Account at an
amount equal to the Specified
Subordination Spread Account Balance.
Amounts in the Subordination Spread
Account on any Distribution Date (after
giving effect to all distributions made on
such Distribution Date) in excess of the
Specified Subordination Spread Account
Balance for such Distribution Date
generally will be released to the Class B
Certificateholders. The "Specified
Subordination Spread Account Balance" with
respect to any Distribution Date will be
equal to $ , except that in the event
that on any Distribution Date (i) the
annualized average for the preceding three
Collection Periods (or such shorter number
of Collection Periods as have elapsed
since the Cutoff Date) of the ratios of
net losses (i.e., the balances of all
Receivables which are determined to be
uncollectible in the Collection Period,
less any Liquidation Proceeds) to the Pool
Balance as of the first day of each such
Collection Period exceeds % or (ii) the
average for the preceding three Collection
Periods (or such shorter number of
Collection Periods as have elapsed since
the Cutoff Date) of the ratios of the
number of Financed Vehicles that have
been repossessed but not yet sold or are
delinquent 60 days or more to the
outstanding number of Receivables exceeds
%, then the Specified Subordination
Spread Account Balance for such
Distribution Date shall be an amount equal
to the percentage of the Pool Balance as
of the first day of such Collection Period
determined by deducting from eleven
percent the following fraction, expressed
as a percentage: (x) 1 minus (y) a
fraction, the numerator of which is the
Class A Certificate Balance and the
denominator of which is the Pool Balance
both as of the first day of such
Collection Period, but in no event shall
the Specified Subordination Spread Account
Balance be more than $ , or less than
$ . On
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<PAGE> 83
any Distribution Date on which the aggregate
balance of the Class A Certificates is $
or less after giving effect to distributions on
such Distribution Date, the Specified
Subordination Spread Account Balance shall be
the greater of the balance described above or
$ . The Subordination Spread Account will
be maintained with , as agent for the Class A
Certificateholders as a segregated trust
account, and will not be part of the Trust.
[YIELD SUPPLEMENT ACCOUNT;
YIELD SUPPLEMENT
AGREEMENT .................. Ford Credit will establish a yield supplement
account with the Trustee for the benefit of the
Certificateholders (the "Yield Supplement
Account"). The Yield Supplement Account is
designed solely to hold funds to be applied by
the Trustee to provide payments to the
Certificateholders in respect of Receivables the
APR of which is less than the sum of (i) the
weighted average of the Class A Certificate Rate
and the Class B Certificate Rate and (ii) the
Servicing Fee Rate (the "Required Rate"). The
Yield Supplement Account will be created with an
initial deposit by Ford Credit (the "Yield
Supplement Initial Deposit") in an amount (which
amount may be discounted at a rate to be
specified in the Agreement) equal to the
aggregate amount by which (i) interest on the
principal balance of each [Initial] Receivable
for the period commencing on the [Initial]
Cutoff Date and ending with the scheduled
maturity of such Receivable, assuming that
payments on such Receivables are made as
scheduled and no prepayments are made, at a rate
equal to the Required Rate, exceeds (ii)
interest on such principal balances at the APR
of such Receivable (the "Yield Supplement
Amount" [and, with respect to all of the
[Initial] Receivables, the "Maximum [Initial]
Yield Supplement Amount")].
[Ford Credit, the Seller and the Trustee will
enter into a Yield Supplement Agreement (as
amended and supplemented from time to time, the
"Yield Supplement Agreement") pursuant to which,
on each Subsequent Transfer Date, Ford Credit
will deposit an amount (which amount may be
discounted at a rate to be specified in the
Agreement), if any, into the Yield Supplement
Account (the "Additional Yield Supplement
Amount") equal to the aggregate Yield Supplement
Amounts in respect of the related Subsequent
Receivables for the period commencing with the
related Subsequent Cutoff Date and ending with
the scheduled maturity of each such Subsequent
Receivable, assuming that payments on such
Receivables are made as scheduled and no
prepayments are made. The aggregate of the
Additional Yield Supplement Amounts in respect
of the Subsequent Receivables is referred to
herein as the "Maximum Subsequent Yield
Supplement Amount" and, together with the
Maximum Initial Yield Supplement Amount, the
"Maximum Yield Supplement Amount."] See
"Description of the Certificates--Yield
Supplement Account; Yield Supplement Agreement"
herein.]
COLLECTION ACCOUNT ......... Except under certain conditions described herein,
the Servicer will be required to remit
collections received with respect to the
Receivables not later than the [ ] Business
Day after receipt to one or more accounts in the
name of the Trustee (the "Collection Account").
Pursuant to the Agreement, the Servicer will
have the power, revocable at the discretion of
the Trustee, to instruct the
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<PAGE> 84
Trustee to withdraw funds on deposit in the
Collection Account and to apply such funds on
each Distribution Date to the following (in the
priority indicated): (i) the Servicing Fee for
the prior Collection Period and any overdue
Servicing Fees to the Servicer, (ii) the Class A
Distributable Amount to the Class A
Certificateholders, (iii) the Class B
Distributable Amount to the Class B
Certificateholders, and (iv) the remaining
balance, if any, to the Subordination Spread
Account.
SERVICER FEE ............... The Servicer will receive each
month a fee for servicing the Receivables
equal to (a) the product of one-twelfth of
1.00% (the "Servicing Fee Rate") and the
Pool Balance outstanding at the beginning
of the previous month, plus (b) any late,
prepayment, and other administrative fees
and expenses collected during such month
[plus (c) reinvestment proceeds on any
payments received in respect of the
Receivables].
MATURITY AND PREPAYMENT
CONSIDERATIONS ............. As the rate of payment of principal of the
Certificates depends on the rate of payment
(including prepayments) of the principal balance
of the Receivables, the final distribution in
respect of the Certificates could occur
significantly earlier than the Final Scheduled
Distribution Date. It is expected that the
final distribution in respect of the
Certificates will occur on or prior to the Final
Scheduled Distribution Date. However, if
sufficient funds are not available to reduce the
aggregate Certifi cate Balance of either class
of Certificates to zero on or prior to the Final
Scheduled Distribution Date, the final
distribution in respect of such class of
Certificates could occur later than such date.
All of the
Receivables are prepayable at any time.
Prepayments that do not constitute
Payaheads will shorten the weighted
average remaining term of the Receivables
and the weighted average life of the
Certificates. Such prepayments, to the
extent allocable to principal, will be
included in the Available Principal and
will be distributable to the
Certificateholders as set forth in the
priority of distributions herein. See
"Description of the Certificates--
Distributions" herein.
CLEARANCE AND SETTLEMENT [Class A]
Certificateholders may elect to hold their
[Class A] Certificates through any of DTC
(in the United States) or Cedel or
Euroclear (in Europe). Transfers within
DTC, Cedel or Euroclear, as the case may
be, will be in accordance with the usual
rules and operation procedures of the
relevant system. Cross-market transfers
between persons holding directly or
indirectly through DTC, on the one hand,
and counterparties holding directly or
indirectly through Cedel or Euroclear, on
the other, will be effected in DTC
through the relevant Depositaries of Cedel
or Euroclear. See "Certain Information
Regarding the Securities--Book-Entry
Registration" in the Prospectus.
TAX STATUS .................. In the opinion of ("Special Tax Counsel"), the
Trust will be treated as a grantor trust for
federal income tax purposes and will not be
subject to federal income tax. In the opinion
of ("Michigan Tax Counsel"), the same
treatment will apply for Michigan income and
Single Business Tax purposes.
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<PAGE> 85
Certificate Owners will report their pro rata
share of all income earned on the Receivables
(other than amounts, if any, treated as
"stripped coupons") and, subject to certain
limitations in the case of Certificate Owners
who are individuals, trusts, or estates, may
deduct their pro rata share of reasonable
servicing and other fees paid or incurred by the
Trust. See "Certain Federal Income Tax
Consequences" herein and in the Prospectus and
"Certain State Tax Consequences" herein for
additional information concerning the
application of federal income and Michigan tax
laws, respectively, to the Trust and the
Certificates.
ERISA CONSIDERATIONS ....... The Class A Certificates may, in general,
be purchased by employee benefit plans
that are subject to the Employee
Retirement Income Security Act of 1974, as
amended ("ERISA"), upon satisfaction of
certain conditions de scribed under "ERISA
Considerations" herein and in the
Prospectus with respect to the
Underwriters' Exemption. [However, as set
forth in "ERISA Considerations" in the
Prospectus, certain special considerations
may apply with respect to the Pre-Funding
Account.]
[The Underwriters' Exemption does not apply to
the Class B Certificates, which may be
purchased by employee benefit plans subject to
ERISA only if some other statutory or
administrative exemption from the prohibited
transaction rules of ERISA and the Internal
Revenue Code of 1986, as amended (the "Code")
applies to such purchases. These exemptions may
apply with respect to, inter alia, purchases by
certain insurance company general accounts,
insurance company pooled separate accounts, and
bank collective investment funds, and on behalf
of employee benefit plans by certain "in house"
asset managers and qualified professional asset
managers.]
Any benefit plan fiduciary considering a
purchase of [Class A] Certificates should,
among other things, consult with legal counsel
in determining whether all required conditions
with respect to the various exemptions have been
satisfied. See "ERISA Considerations" herein
and in the Prospectus.
RATING[S] OF THE
CERTIFICATES ............... It is a condition to the issuance of the
Class A Certificates that they be rated in the
highest investment rating category by at least
two nationally recognized rating agencies[, and
it is a condition to the issuance of the Class B
Certificates that they be rated by at least two
nationally recognized rating agencies [at least]
" " or its equivalent]. [However, the rating
agencies do not evaluate, and the ratings do not
address, the likelihood that the Certificate
Prepayment Premium will be paid.] There can be
no assurance that a rating will not be lowered
or withdrawn by a rating agency if circumstances
so warrant.
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<PAGE> 86
RISK FACTORS
LIMITED LIQUIDITY
There is currently no secondary market for the [Class A]
Certificates. The Underwriters currently intend to make a market in
the [Class A] Certificates, but they are under no obligation to do
so. There can be no assurance that a secondary market will develop
or, if a secondary market does develop, that it will provide the
[Class A] Certificateholders with liquidity of investment or that it
will continue for the life of the [Class A] Certificates.
[THE SUBSEQUENT RECEIVABLES AND THE PRE-FUNDING ACCOUNT
On the Closing Date, the Seller will transfer to the Trust the
approximately $ of Initial Receivables and the
approximately $ Pre-Funded Amount on deposit in the
Pre-Funding Account. If the principal balance of eligible
Receivables originated by Ford Credit during the Funding Period is
less than the Pre-Funded Amount, the Seller will have insufficient
Receivables to sell to the Trust on the Subsequent Transfer Dates,
thereby resulting in a prepayment of principal to the
Certificateholders as described in the following paragraph. See
"--Trust's Relationship to Ford and Ford Credit" below. In
addition, any conveyance of Subsequent Receivables is subject to the
satisfaction, on or before the related Subsequent Transfer Date, of
the following conditions precedent, among others: (i) each such
Subsequent Receivable must satisfy the eligibility criteria
specified in the Agreement; (ii) the Seller will not select such
Subsequent Receivables in a manner that it believes is adverse to
the interests of the Certificateholders; (iii) as of the related
Subsequent Cutoff Date, the Receivables in the Trust at that time,
including the Subsequent Receivables to be conveyed by the Seller as
of such Subsequent Cutoff Date, will satisfy the parameters
described under "The Receivables Pool" herein and under "The
Receivables Pools" in the Prospectus; (iv) the applicable
Subordination Initial Deposit for such Subsequent Transfer Date
shall have been made; and (v) the Seller shall have executed and
delivered to the Trustee a written assignment conveying such
Subsequent Receivables to the Trustee (including a schedule
identifying such Subsequent Receivables). Moreover, any such
conveyance of Subsequent Receivables made during any given
Collection Period will also be subject to the satisfaction, on or
about the fifteenth day of the month following the end of such
Collection Period, of the following conditions subsequent, among
others: (a) the Seller will deliver certain opinions of counsel to
the Trustee and the Rating Agencies with respect to the validity of
the conveyance of all such Subsequent Receivables conveyed during
such Collection Period; (b) the Trustee shall have received written
confirmation from a firm of independent certified public accountants
that, as of the end of the preceding Collection Period, the
Receivables in the Trust at that time, including the Subsequent
Receivables conveyed by the Seller during such Collection Period,
satisfied the parameters described under "The Receivables Pool"
herein and under "The Receivables Pools" in the Prospectus; and (c)
the Rating Agencies shall have each notified the Seller in writing
that, following the addition of all such Subsequent Receivables, the
Certificates will be rated by the Rating Agencies in the same
respective rating categories in which they were rated on the Closing
Date. The Seller will immediately repurchase any Subsequent
Receivable, at a price equal to the Purchase Amount thereof, upon
the failure of the Seller to satisfy any of the foregoing conditions
subsequent with respect thereto. Such confirmation of the ratings
of the Certificates may depend on factors other than the
characteristics of the Subsequent Receivables, including the
delinquency, repossession and net loss experience on the automobile
and light truck receivables in the portfolio serviced by Ford
Credit.
To the extent that amounts on deposit in the Pre-Funding
Account have not been fully applied to the conveyance of Subsequent
Receivables to the Trust by the end of the Funding Period, the
Certificateholders will receive, on the Distribution Date on or
immediately following the last day of the Funding Period, a
prepayment of principal in an amount equal to the Pre-Funded Amount
remaining in the Pre-Funding Account following the purchase of any
Subsequent Receivables on such Distribution Date. It is anticipated
that the principal balance of Subsequent Receivables sold to the
Trust will not be exactly equal to the amount on deposit in the
Pre-Funding Account and that therefore there will be at least a
nominal amount of principal prepaid to the Certificateholders.
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<PAGE> 87
Each Subsequent Receivable must satisfy the eligibility
criteria specified in the Agreement and any additional criteria
specified by the Rating Agencies at the time of its addition.
However, Subsequent Receivables may have been originated by Ford
Credit at a later date using credit criteria different from those
which were applied to the Initial Receivables and may be of a
different credit quality and seasoning. In addition, an increasing
percentage of the Subsequent Receivables may be Final Payment
Receivables. Therefore, following the transfer of Subsequent
Receivables to the Trust, the characteristics of the entire
Receivables Pool included in the Trust may vary significantly from
those of the Initial Receivables. See "The Receivables Pool" herein
and "The Receivables Pools" in the Prospectus. The ability of Ford
Credit to generate Subsequent Receivables is largely dependent upon
the level of retail sales of automobiles and light trucks. The
level of retail sales of automobiles and light trucks may change as
a result of a variety of social and economic factors. Economic
factors include interest rates, unemployment levels, the rate of
inflation and consumer perceptions of economic conditions generally.
However, the Seller is unable to determine and has no basis to
predict whether or to what extent economic or social factors will
affect the level of vehicle sales.]
[TRUST'S RELATIONSHIP TO FORD AND FORD CREDIT
Neither the Seller nor Ford Credit is obligated to make any
payments in respect of the Certificates or the Receivables.
However, the ability of the Seller to convey Subsequent Receivables
on Subsequent Transfer Dates is completely dependent upon the
generation of additional receivables by Ford Credit. The ability of
Ford Credit to generate receivables is, in turn, dependent to a
large extent on the sales of automobiles and light trucks
manufactured or distributed by Ford Motor Company and its
consolidated subsidiaries ("Ford"). If, during the Funding Period,
Ford were temporarily or permanently no longer manufacturing or
distributing vehicles, the rate of sales of automobiles and light
trucks manufactured by Ford would decrease, adversely affecting the
ability of the Seller to sell Subsequent Receivables to the Trust.
The use of incentive programs (e.g., manufacturers' rebate programs)
also may affect retail sales. There can be no assurance, therefore,
that Ford Credit will continue to generate receivables at the same
rate as in prior years. In addition, if Ford Credit were to cease
acting as Servicer, delays in processing payments on the Receivables
and information in respect thereof could occur and result in delays
in payments to the Certificateholders.
Ford and Ford Credit are subject to the informational
requirements of the Exchange Act and in accordance therewith file
reports and other information with the Commission. For further
information regarding Ford and Ford Credit, reference is made to
such reports and other information which are available as described
under "Available Information" in the Prospectus.]
LIMITED ASSETS
The Trust will not have, nor is it permitted or expected to
have, any significant assets or sources of funds other than the
Receivables[, the Pre-Funding Account] [, the Yield Supplement
Account] and the Subordination Spread Account. Holders of the
Certificates must rely for repayment upon payments on the
Receivables and, if and to the extent available, amounts on deposit
in the [Pre-Funding Account[, the Yield Supplement Account] and the]
Subordination Spread Account. [The Pre-Funding Account will be
available only during the Funding Period and is designed solely to
cover obligations of the Trust relating to a portion of its funds
not invested in Receivables and is not designed to cover losses on
the Receivables.] [The Yield Supplement Account is designed solely
to hold funds to be applied to provide payments to the
Securityholders in respect of Receivables the APR of which is less
than the Required Rate.] Funds in the Subordination Spread Account
will be available on each Distribution Date to cover shortfalls in
distributions of interest and principal on the Certificates.
However, amounts to be deposited in the [Pre-Funding Account[, the
Yield Supplement Account] and the] Subordination Spread Account are
limited in amount. If the [Pre-Funding Account[, the Yield
Supplement Account] and the] Subordination Spread Account is [are]
exhausted, the Trust will depend solely on current distributions on
the Receivables to make distributions on the Certificates.
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<PAGE> 88
SUBORDINATION OF THE CLASS B CERTIFICATES
Distributions of interest and principal on the Class B
Certificates will be subordinated in priority of payment to interest
and principal due on the Class A Certificates. No distributions
with respect to a Collection Period will be made on the Class B
Certificates until the full amount of interest on and principal of
the Class A Certificates on the related Distribution Date has been
distributed to the Class A Certificateholders. Any amounts released
from the Subordination Spread Account to the Seller will not be
available to the Certificateholders.
MATURITY AND PREPAYMENT CONSIDERATIONS
As the rate of payment of principal of [each class of] the
Certificates depends on the rate of payment (including prepayments)
of the principal balance of the Receivables, the final distribution
in respect of [each class of] the Certificates could occur
significantly earlier than the Final Scheduled Distribution Date.
It is expected that the final distribution in respect of the
Certificates will occur on or prior to the Final Scheduled
Distribution Date. However, if sufficient funds are not available
to reduce the aggregate Certificate Balance of either class of
Certificates to zero on or prior to the Final Scheduled Distribution
Date, the final distribution in respect of such class of
Certificates could occur later than such date. See "Maturity and
Prepayment Considerations" herein and in the Prospectus.
RATINGS
It is a condition to the issuance of the [Class A] Certificates
that the Class A Certificates be rated in the highest rating
category [and the Class B Certificates be rated [at least] " " or
its equivalent] by at least two nationally recognized rating
agencies (the "Rating Agencies"). A rating is not a recommendation
to purchase, hold or sell Certificates, inasmuch as such rating does
not comment as to market price or suitability for a particular
investor. The ratings of the Certificates address the likelihood of
the payment of principal and interest on the Certificates pursuant
to their terms. [However, the Rating Agencies do not evaluate, and
the ratings of the Certificates do not address, the likelihood that
the Certificate Prepayment Premium will be paid.] There can be no
assurance that a rating will remain for any given period of time or
that a rating will not be lowered or withdrawn entirely by a Rating
Agency if in its judgment circumstances in the future so warrant.
THE TRUST
GENERAL
The Seller will establish the Trust by selling and assigning
the Trust property, as described below, to the Trustee in exchange
for the Certificates. The Servicer will service the Receivables
pursuant to the Agreement and will be compensated for acting as the
Servicer. See "Description of the Certificates--Servicing
Compensation and Expenses" herein. To facilitate servicing and to
minimize administrative burden and expense the Servicer will retain
physical possession of the Receivables held by the Trust and
documents relating thereto as custodian for the Trust. Due to the
administrative burden and expense, the certificates of title to the
Financed Vehicles will not be amended to reflect the assignment of
the security interest in the Financed Vehicles to the Trust. In the
absence of such amendment, the Trust may not have a perfected
security interest in the Financed Vehicles in all states. See
"Certain Legal Aspects of the Receivables" in the Prospectus.
If the protection provided to the [Class A] Certificateholders
by the [Yield Supplement Account and the] Subordination Spread
Account and[, in the case of the Class A Certificateholders,] the
subordination of the Class B Certificates is insufficient, the Trust
would have to look to the Obligors on the Receivables, the proceeds
from the repossession and sale of Financed Vehicles which secure
defaulted Receivables and the proceeds from any recourse against
Dealers with respect to the Receivables [and from the Pre-Funding
Account]. In such event, certain factors, such as the Trust's not
having perfected security interests in the Financed Vehicles in all
states, may affect
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<PAGE> 89
the Servicer's ability to repossess and sell the collateral securing
the Receivables, and thus may reduce the proceeds to be distributed to the
Certificateholders. See "Description of the Certificates--Distributions"
[, "--Yield Supplement Account; Yield Supplement Agreement"] and "
--Subordination of the Class B Certificates; Subordination Spread Account"
herein and "Certain Legal Aspects of the Receivables" in the Prospectus.
Each [Class A] Certificate represents a fractional undivided
ownership interest in the Trust. The Trust property will include
retail installment sale contracts between Dealers and Obligors, all
payments due thereunder on or after the related Cutoff Date with
respect to the Precomputed Receivables and all payments due or
received thereunder on or after the related Cutoff Date with respect
to the Simple Interest Receivables. The Trust property will also
include (i) security interests in the Financed Vehicles and any
accessions thereto; (ii) the rights to proceeds from claims on
certain physical damage, credit life, credit disability or other
insurance policies, if any, covering the Financed Vehicles or the
Obligors; (iii) any Dealer Recourse; (iv) the Seller's rights to
certain documents and instruments relating to the Receivables; (v)
such amounts as from time to time may be held in one or more
accounts maintained pursuant to the Agreement, as described herein[,
including the Yield Supplement Account] [and the Pre-Funding
Account]; (vi) certain rights under the Agreement [and the Yield
Supplement Agreement]; (vii) certain rights under the Purchase
Agreement, including the right of the Seller to cause Ford Credit to
repurchase Receiv ables from the Seller; (viii) certain payments and
proceeds with respect to the Receivables held by the Servicer; (ix)
certain rebates of premiums and other amounts relating to certain
insurance policies and other items financed under the Receivables;
and (x) any and all proceeds of the foregoing. The property of the
Trust does not include the Payahead Account and the Subordination
Spread Account.
THE RECEIVABLES POOL
The pool of Receivables (the "Receivables Pool") will include
the [Initial] Receivables purchased as of the [Initial] Cutoff Date
[and will include any Subsequent Receivables purchased as of any
Subsequent Cutoff Date (the Initial Cutoff Date or any Subsequent
Cutoff Date being individually referred to herein as a "Cutoff
Date")].
The [Initial] Receivables were purchased[, and the Subsequent
Receivables were or will be purchased,] by Ford Credit from Dealers
in the ordinary course of business in accordance with Ford Credit's
underwriting standards, and were [or will be] selected from Ford
Credit's portfolio for inclusion in the Receivables Pool by several
criteria, some of which are set forth in the Prospectus under "The
Receivables Pools," as well as the following: each Receivable (i)
provides for level monthly payments which provide interest at the
APR and fully amortize the amount financed over an original term no
greater than months, (ii) is not more than days past due as
of the [applicable] Cutoff Date and has never been extended and
(iii) was originated on or after . As of the [applicable]
Cutoff Date, no Obligor on any Receivable was [or will have been]
noted in the related records of the Servicer as being the subject of
a bankruptcy proceeding. No selection procedures believed by the
Seller to be adverse to the Certificateholders were [or will be]
used in selecting the Receivables.
[The obligation of the Trust to purchase the Subsequent
Receivables on a Subsequent Transfer Date will be subject to the
Receivables in the Trust, including the Subsequent Receivables to be
conveyed to the Trust on such Subsequent Transfer Date, meeting the
following criteria: (i) not more than % of the principal balances
of the Receivables in the Trust will represent vehicles financed at
Ford Credit's used vehicle rates; and (ii) the weighted average APR
of the Receivables in the Trust will not be less than %, unless
the Seller increases the Subordination Initial Deposit by the
amounts, if any, specified by the Rating Agencies to maintain the
ratings of the Certificates. In addition, such obligation will be
subject to the Receivables, including the Subsequent Receivables to
be transferred to the Trust on such Subsequent Transfer Date, having
a weighted average remaining term not greater than months.
Such criteria will be based on the characteristics of the Initial
Receivables on the Initial Cutoff Date and any Subsequent
Receivables on the related Subsequent Cutoff Dates.]
S-16
<PAGE> 90
[The Initial Receivables will represent approximately % of
the aggregate initial principal balance of the Certificates.
However, except for the criteria described in the preceding
paragraphs and the criteria, if any, specified by the Rating
Agencies to maintain the ratings of the Certificates, there will be
no required characteristics of the Subsequent Receivables.
Therefore, following the transfer of Subsequent Receivables to the
Trust, the aggregate characteristics of the entire Receivables Pool,
including the composition of the Receivables, the distribution by
APR and the geographic distribution described in the following
tables, may vary significantly from those of the Initial
Receivables.]
Neither Ford Credit nor any of its affiliates maintains records
adequate to provide quantitative data regarding its prepayment
experience on its portfolio of U.S. retail installment sale
contracts for either new or used vehicles. However, Ford Credit (i)
believes that the actual rate of prepayments will result in a
substantially shorter weighted average life than the scheduled
weighted average life and (ii) estimates that the actual weighted
average life of its portfolio of U.S. retail installment contracts
for new and used automobiles and light trucks ranges between 60% and
70% of their scheduled weighted average life. See "Maturity and
Prepayment Considerations" herein and in the Prospectus.
The composition, geographical distribution, and distribution by
annual percentage rate of the [Initial] Receivables as of the
[Initial] Cutoff Date are set forth in the following tables.
COMPOSITION OF THE [INITIAL] RECEIVABLES
AS OF THE [INITIAL] CUTOFF DATE
<TABLE>
<S> <C>
Aggregate Principal Balance ......... $
Number of Receivables
Average Principal Balance ........... $
(Range) .......................... $ to $
Average Original Amount Financed .... $
(Range) .......................... $ to $
Weighted Average APR ................ %
(Range) .......................... % to %
Weighted Average Original Term ...... months
(Range) .......................... to months
Weighted Average Remaining Term ..... months
(Range) .......................... to months
Scheduled Weighted Average Life(1) .. months
</TABLE>
____________
(1) Based on payments due on or after the [Initial] Cutoff
Date, assuming that no prepayments on the [Initial] Receivables
are made after the [Initial] Cutoff Date and that all payments
on Simple Interest Receivables are received on their respective
due dates.
S-17
<PAGE> 91
GEOGRAPHIC DISTRIBUTION OF THE [INITIAL] RECEIVABLES
AS OF THE [INITIAL] CUTOFF DATE
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
OF OF
AGGREGATE AGGREGATE
PRINCIPAL PRINCIPAL
STATE(1) BALANCE(2) STATE(1) BALANCE(2)
---------------------- --------------- --------------------- ----------
<S> <C> <C> <C>
Alabama[(3)] ......... % Montana............. %
Alaska................ Nebraska............
Arizona............... Nevada..............
Arkansas.............. New Hampshire.......
California............ New Jersey..........
Colorado.............. New Mexico..........
Connecticut........... New York............
Delaware.............. North Carolina......
District of Columbia.. North Dakota........
Florida............... Ohio................
Georgia............... Oklahoma............
Hawaii................ Oregon..............
Idaho................. Pennsylvania[(3)]...
Illinois.............. Rhode Island........
Indiana............... South Carolina......
Iowa.................. South Dakota........
Kansas................ Tennessee...........
Kentucky.............. Texas...............
Louisiana............. Utah................
Maine................. Vermont.............
Maryland.............. Washington..........
Massachusetts......... West Virginia.......
Michigan.............. Wisconsin...........
Minnesota............. Wyoming ............
Mississippi...........
Missouri..............
</TABLE>
- ------------
(1) Based on the billing addresses of the Obligors on the
[Initial] Receivables as of the [Initial] Cutoff Date.
(2) Percentages may not add to 100.00% due to rounding.
States showing 0.0% each represent less than 0.05%.
[(3) Alabama and Pennsylvania were excluded for administrative
reasons.]
S-18
<PAGE> 92
DISTRIBUTION BY APR OF THE [INITIAL] RECEIVABLES
AS OF THE [INITIAL] CUTOFF DATE
<TABLE>
<CAPTION>
PERCENTAGE OF
AGGREGATE AGGREGATE
NUMBER OF PRINCIPAL PRINCIPAL
APR RANGE RECEIVABLES BALANCE BALANCE(L)
-------------------- ----------- --------- -------------
<S> <C> <C> <C>
0.00%to 1.00% $ %
1.01 to 2.00
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
16.01 to 17.00
17.01 to 18.00
18.01 to 19.00
19.01 to 20.00
Totals $ 100.00%
=========== ========= =============
</TABLE>
(1) Percentages may not add to 100.00% due to rounding.
Approximately % of the aggregate principal balance of the
[Initial] Receivables, constituting % of the number of [Initial]
Receivables, as of the [Initial] Cutoff Date, represent vehicles
financed at new vehicle rates, and the remainder of the [Initial]
Receivables represent vehicles financed at used vehicle rates.
By aggregate principal balance, approximately % of the
[Initial] Receivables constitute Precomputed Receivables, % of
the [Initial] Receivables constitute Simple Interest Receivables and
% constitute Final Payment Receivables. In addition, % of the
[Initial] Receivables that are Precomputed Receivables and % that
are Simple Interest Receivables constitute Final Payment
Receivables. See "The Receivables Pools" in the Prospectus for a
further description of the characteristics of Precomputed
Receivables, Simple Interest Receivables and Final Payment
Receivables.
Based on principal balance, less than % of the [Initial]
Receivables provide recourse to the Dealer which originated the
Receivable. See "The Receivables Pools" in the Prospectus for a
further description of such recourse provisions.
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
S-19
<PAGE> 93
Set forth below is certain information concerning Ford Credit's
experience with respect to its portfolio of U.S. retail installment
sale contracts for new and used automobiles and light trucks
(including previously sold contracts which Ford Credit continues to
service, but not including retail installment sale contracts
purchased by Ford Credit under certain special financing programs).
[Ford Credit began originating Final Payment Receivables in 19 .]
There is no assurance that the behavior of the Receivables will be
comparable to Ford Credit's experience shown in the following tables
or that the trend in losses and delinquencies will continue into the
future.
DELINQUENCY EXPERIENCE(1)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
---------------------- ----------------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
--------- --------- --------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Average Number of
Contracts
Outstanding During
the Period.............. 3,549,204 3,409,392 3,438,699 3,430,145 3,398,797 3,388,214 3,398,048
Average Daily
Delinquencies as a
Percent of Average
Contracts
Outstanding
31-60 Days(2)......... 2.46% 2.18% 2.21% 2.03% 2.02% 2.35% 2.72%
61-90 Days(2)......... 0.24% 0.17% 0.17% 0.15% 0.15% 0.20% 0.29%
Over 90 Days(3)....... 0.05% 0.03% 0.04% 0.03% 0.03% 0.04% 0.07%
</TABLE>
- --------------
(1) The information in the table includes U.S. retail
installment sale contracts for new and used automobiles and
light trucks and includes previously sold contracts which Ford
Credit continues to service; it does not include retail
installment sale contracts purchased by Ford Credit under
certain special financing programs.
(2) Delinquencies represent the daily average number of
contracts delinquent.
(3) Delinquencies represent the average monthly end-of-period
number of contracts delinquent.
S-20
<PAGE> 94
CREDIT LOSS AND REPOSSESSION EXPERIENCE(1)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------------- ----------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Average Portfolio
Outstanding During
the Period
(Millions) ............... $38,679.8 $34,382.5 $35,698.6 $33,703.3 $31,204.9 $29,505.1 $28,977.1
Percent of Average
Receivables
Outstanding During
the Period without
Recourse to Dealer........ 99.3% 98.9% 99.1% 98.6% 97.7% 96.4% 94.4%
Repossessions as a
Percent of Average
Number of Contracts
Outstanding............... 2.78%(2) 2.29%(2) 2.38% 2.15% 2.27% 2.74% 3.27%
Net Losses as a
Percent of Gross
Liquidations(3)........... 1.86% 1.19% 1.43% 1.06% 1.16% 1.52% 2.29%
Net Losses as a
Percent of Average
Portfolio
Outstanding(3)............ 1.09%(2) 0.69%(2) 0.82% 0.62% 0.69% 0.90% 1.29%
</TABLE>
___________
(1) Except as indicated, all amounts and percentages are based
on the gross amount scheduled to be paid on each contract
including unearned finance and other charges. The information
in the table includes U.S. retail installment sale contracts for
new and used automobiles and light trucks and includes
previously sold contracts which Ford Credit continues to
service; it does not include retail installment sale contracts
purchased by Ford Credit under certain special financing
programs.
(2) Annualized rate.
(3) "Net Losses" are equal to the aggregate balance of all
contracts which are determined to be uncollectible in the period
less any recoveries on contracts charged-off in the period or
any prior periods. Effective January 1, 1993 net losses include
expenses associated with outside collection agencies. Other
expenses associated with collection, repossession, and
disposition of the vehicle continue to be excluded. These
other expenses are not material to the data presented.
As shown above, credit losses have increased since the beginning
of 1995 reversing a general trend of improvement that had begun in
1989. The increase reflects an increase in losses per repossession
and an increase in repossession rates. See "Description of the
Transfer and Servicing Agreements--Servicing Procedures" in the
Prospectus.
POOL FACTORS
The "Certificate Pool Factor" for [the Class A] [each class of]
Certificates will be a seven-digit decimal which the Servicer will
compute prior to each distribution with respect to such [class of]
Certificates indicating the remaining Certificate Balance of such
[class of] Certificates, as of the applicable Distribution Date
(after giving effect to distributions to be made on such Distribution
Date), as a fraction of the initial Certificate Balance of such
[class of] Certificates. [The] [Each] Certificate Pool Factor will
initially be 1.0000000 and thereafter will decline to reflect
reductions of the Certificate Balance of the [Class A] [applicable
class of] Certificates as a result of scheduled payments, prepayments
and liquidations of the Receivables [(and also as a result of a
prepayment arising from application of the Pre-Funding Account)].
[[The] [Each] Certificate Pool Factor will not change as a result of
the addition of Subsequent Receivables.] A Certificateholder's
portion of the aggregate outstanding Certificate Balance for the
[Class A] [related class of] Certificates is the product of (a) the
original denomination of such Certificateholder's Certificate and (b)
the [applicable] Certificate Pool Factor.
S-21
<PAGE> 95
MATURITY AND PREPAYMENT CONSIDERATIONS
Information regarding certain maturity and prepayment
considerations with respect to the Certificates is set forth under
"Maturity and Prepayment Considerations" in the Prospectus. As the
rate of payment of principal of [the] [each class of] Certificates
depends on the rate of payment (including prepayments and
liquidations due to default) of the principal balance of the
Receivables, the final distribution in respect of the Certificates
could occur significantly earlier than the Final Scheduled
Distribution Date. It is expected that the final distribution in
respect of the Certificates will occur on or prior to the Final
Scheduled Distribution Date. However, if sufficient funds are not
available to reduce the aggregate Certificate Balance of either class
of Certificates to zero on or prior to the Final Scheduled
Distribution Date, the final distribution in respect of such class of
Certificates could occur later than such date.
The rate of prepayments of the Receivables may be influenced by
a variety of economic, social and other factors, and under certain
circumstances relating to breaches of representations, warranties or
covenants, the Seller and/or the Servicer will be obligated to
repurchase Receivables from the Trust. See "The Receivables Pool"
herein and "Description of the Transfer and Servicing
Agreements--Sale and Assignment of Receivables" in the Prospectus. A
higher than anticipated rate of prepayments will reduce the aggregate
principal balance of the Receivables more quickly than expected and
thereby reduce anticipated aggregate distributions of interest on the
Certificates. Any reinvestment risks resulting from a faster or
slower incidence of prepayment of Receivables will be borne entirely
by the Certificateholders as set forth in the priority of
distributions herein. Such reinvestment risks include the risk that
interest rates may be lower at the time such holders received
payments from the Trust than interest rates would otherwise have been
had such prepayments not been made or had such prepayments been made
at a different time.
Holders of Certificates should consider, in the case of
Certificates purchased at a discount, the risk that a slower than
anticipated rate of principal payments on the Receivables could
result in an actual yield that is less than the anticipated yield
and, in the case of Certificates purchased at a premium, the risk
that a faster than anticipated rate of principal payments on the
Receivables could result in an actual yield that is less than the
anticipated yield.
DESCRIPTION OF THE CERTIFICATES
The [Class A] Certificates will be issued pursuant to the terms
of the Agreement, a form of which has been filed as an exhibit to the
Registration Statement. A copy of the Agreement will be filed with
the Commission following the issuance of the [Class A] Certificates.
The following summary describes certain terms of the [Class A]
Certificates and the 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 [Class A] Certificates and
the Agreement. The following summary supplements the description of
the general terms and provisions of the [Class A] Certificates of any
given series and the related Agreement set forth in the Prospectus,
to which description reference is hereby made.
GENERAL
The Certificates will evidence interests in the Trust created
pursuant to the Agreement. The Class A Certificates will evidence in
the aggregate an undivided ownership interest (the "Class A
Percentage") of approximately % in the Trust and the Class B
Certificates will evidence in the aggregate an undivided ownership
interest (the "Class B Percentage") of approximately % in the
Trust. [The Class B Certificates, which are not being offered
hereby, initially will be retained by the Seller.]
In general, it is intended that Class A Certificateholders
receive, on each Distribution Date, the Class A Percentage of the
Available Principal plus interest at the [Class A] Certificate Rate
on the Class A Certificate Balance. [Subject to the prior rights of
the Class A Certificateholders, it is intended that the Class B
Certificateholders receive, on each Distribution Date, the Class B
Percentage of the Available Principal plus interest at the Class B
Certificate Rate on the Class B Certificate Balance.]
S-22
<PAGE> 96
[MANDATORY REPURCHASE
Cash distributions to Certificateholders will be made, on a pro
rata basis, on the Distribution Date on or immediately following the
last day of the Funding Period in the event that the amount on
deposit in the Pre-Funding Account after giving effect to the
purchase of all Subsequent Receivables, including any such purchase
on such date, exceeds $ (a "Mandatory Repurchase").
[The Certificate Prepayment Premium will be payable by the Trust
to the Certificateholders pursuant to a Mandatory Repurchase if the
amount on deposit in the Pre-Funding Account exceeds $ . The
Certificate Prepayment Premium will equal the excess, if any,
discounted as described below, of (i) the amount of interest that
would accrue on the remaining Pre-Funded Amount (the "Certificate
Prepayment Amount") at the Class A Certificate Rate or Class B
Certificate Rate, as applicable, during the period commencing on and
including the Distribution Date on which such Certificate Prepayment
Amount is required to be distributed to Certificateholders to but
excluding over (ii) the amount of interest that would
have accrued on such Certificate Prepayment Amount over the same
period at a per annum rate of interest equal to the bond equivalent
yield to maturity on the Determination Date preceding such
Distribution Date on the , in the case of a Class A
Certificate, and on the , in the case of a Class B
Certificate. Such excess shall be discounted to present value to
such Distribution Date at the applicable yield described in clause
(ii) above. Pursuant to the Agreement, the Seller will be obligated
to pay the Certificate Prepayment Premium to the Trust as liquidated
damages for the failure to deliver Subsequent Receivables having an
aggregate principal balance equal to the Pre-Funded Amount. The
Trust's obligation to pay the Certificate Prepayment Premium will be
limited to funds received from the Seller pursuant to the preceding
sentence. In the event that such funds are insufficient to pay the
aggregate Certificate Prepayment Premium in full, [Class A]
Certificateholders [of each class of Certificates] will receive their
ratable share [(based upon the Certificate Prepayment Premium for
each class of Certificates)] of the aggregate amount available to be
distributed in respect of the Certificate Prepayment Premium. No
other assets of the Trust will be available for the purpose of making
such payment.]]
OPTIONAL PREPAYMENT
If the Servicer exercises its option to purchase the Receivables
when the Pool Balance declines to 10% or less of the Initial Pool
Balance, the Class A Certificateholders will receive an amount in
respect of the Class A Certificates equal to the outstanding Class A
Certificate Balance together with accrued interest at the [Class A]
Certificate Rate, [the Class B Certificateholders will receive an
amount in respect of the Class B Certificates equal to the
outstanding Class B Certificate Balance together with accrued
interest at the Class B Certificate Rate,] which distributions shall
effect early retirement of the Certificates. See "Description of the
Transfer and Servicing Agreements--Termination" in the Prospectus.
[SALE AND ASSIGNMENT OF RECEIVABLES; SUBSEQUENT RECEIVABLES
Certain information with respect to the conveyance of the
Initial Receivables from the Seller to the Trust on the Closing Date
pursuant to the Agreement is set forth under "Description of the
Transfer and Servicing Agreements--Sale and Assignment of
Receivables" in the Prospectus. In addition, during the Funding
Period, pursuant to the Agreement, the Seller will be obligated to
sell to the Trust Subsequent Receivables having an aggregate
principal balance equal to approximately $ (such amount
being equal to the initial Pre-Funded Amount) to the extent that such
Subsequent Receivables are available.
During the Funding Period on each Subsequent Transfer Date,
subject to the conditions described below, the Seller will sell and
assign to the Trust, without recourse, the Seller's entire interest
in the Subsequent Receivables designated by the Seller as of the
related Subsequent Cutoff Date and identified in a schedule attached
to a subsequent transfer assignment relating to such Subsequent
Receivables executed on such date by the Seller. It is expected that
on the Closing Date, subject to the conditions described below,
certain of the Subsequent Receivables designated by the Seller and
arising between the Initial Cutoff Date and the Closing Date will be
conveyed to the Trust. Upon the conveyance of Subsequent Receivables
to the Trust on a Subsequent Transfer Date, (i) the Pool Balance will
increase
S-23
<PAGE> 97
in an amount equal to the aggregate principal balance of the
Subsequent Receivables, (ii) an amount equal to % of the aggregate
principal balance of such Subsequent Receivables will be withdrawn
from the Pre-Funding Account and will be deposited in the
Subordination Spread Account and (iii) an amount equal to the excess
of the aggregate principal balance of such Subsequent Receivables
over the amount described in clause (ii) will be withdrawn from the
Pre-Funding Account and paid to the Seller. [Coincident with each
such transfer of Subsequent Receivables, the Yield Supplement
Agreement will require Ford Credit to deposit into the Yield
Supplement Account an amount equal to the Additional Yield Supplement
Amount, if any, in respect of such Subsequent Receivables. See
"--Yield Supplement Account; Yield Supplement Agreement" below.]
[Any conveyance of Subsequent Receivables is subject to the
satisfaction, on or before the related Subsequent Transfer Date, of
the following conditions precedent, among others: (i) each such
Subsequent Receivable must satisfy the eligibility criteria specified
in the Agreement; (ii) the Seller will not have selected such
Subsequent Receivables in a manner that it believes is adverse to the
interests of the Certificateholders; (iii) as of the related
Subsequent Cutoff Date, the Receivables, including any Subsequent
Receivables conveyed by the Seller as of such Subsequent Cutoff Date,
satisfy the criteria described under "The Receivables Pool" herein
and "The Receivables Pools" in the Prospectus; (iv) the applicable
Subordination Initial Deposit for such Subsequent Transfer Date shall
have been made; and (v) the Seller shall have executed and delivered
to the Trustee a written assignment conveying such Subsequent
Receivables to the Trust (including a schedule identifying such
Subsequent Receivables). Moreover, any such conveyance of Subsequent
Receivables made during any Collection Period will also be subject to
the satisfaction, on or about the fifteenth day of the month
following the end of such Collection Period, of the following
conditions subsequent, among others: (i) the Seller will have
delivered certain opinions of counsel to the Trustee and the Rating
Agencies with respect to the validity of the conveyance of all such
Subsequent Receivables conveyed during such Collection Period; (ii)
the Trustee shall have received written confirmation from a firm of
independent certified public accountants that, as of each applicable
Subsequent Cutoff Date, the Receivables in the Trust at that time,
including the Subsequent Receivables conveyed by the Seller as of
such Subsequent Cutoff Date, satisfied the parameters described under
"The Receivables Pool" herein and under "The Receivables Pools" in
the Prospectus; and (iii) the Rating Agencies shall have each
notified the Seller in writing that, following the addition of all
such Subsequent Receivables, the [Class A] Certificates are rated in
the same rating categories in which they were rated at the Closing
Date. The Seller will immediately repurchase any Subsequent
Receivable, at a price equal to the Purchase Amount thereof, upon the
failure of the Seller to satisfy any of the foregoing conditions
subsequent with respect thereto.
[Subsequent Receivables may have been originated by Ford Credit
at a later date using credit criteria different from those which were
applied to the Initial Receivables. See "Risk Factors--The
Subsequent Receivables and the Pre-Funding Account" and "The
Receivables Pool" herein.]]
ACCOUNTS
In addition to the Accounts referred to under "Description of
the Transfer and Servicing Agreements--Accounts" in the Prospectus,
the Servicer will also establish and will maintain with the Trustee
[the Pre-Funding Account] [the Yield Supplement Account] [and] the
Subordination Spread Account, in the name of the Trustee on behalf of
the Certificateholders, and the Payahead Account, in the name of the
Trustee on behalf of the Obligors. The Subordination Spread Account
and the Payahead Account will not be part of the Trust.
SERVICING COMPENSATION AND EXPENSES
The Servicing Fee Rate with respect to the Servicing Fee for the
Servicer will be 1.00% per annum of the Pool Balance as of the first
day of the Collection Period (after giving effect to distributions to
be made on the following Distribution Date). The Servicing Fee
(together with any portion of the Servicing Fee that remains unpaid
from prior Distribution Dates) will be paid on each Distribution Date
solely to the extent of the Available Interest. The Servicer is also
entitled to receive a supplemental servicing fee (the "Supplemental
Servicing Fee") for each Collection Period equal to any late,
prepayment, and other administrative fees and expenses collected
during the Collection Period[, plus any interest earned during the
Collection Period on deposits made with respect to the
S-24
<PAGE> 98
Receivables]. See "Description of the Transfer and Servicing
Agreements--Servicing Compensation and Expenses" in the Prospectus.
DISTRIBUTIONS
On or about the calendar day of each month (the
"Determination Date"), the Servicer will inform the Trustee of the
amount of aggregate collections on the Receivables; the aggregate
Advances to be made by the Servicer, the aggregate Purchase Amount of
Receivables to be purchased by the Seller or the Servicer, all with
respect to the preceding Collection Period.
On each Distribution Date, the Servicer, or the Trustee, as the
case may be, shall transfer the portion of Payaheads constituting all
or a portion of scheduled payments for that Collection Period or,
which together with that month's payment by an Obligor constitute
prepayments in full on the Receivables to the Collection Account. On
the Distribution Date, the Trustee shall cause collections made
during the Collection Period which constitute Payaheads to be
transferred from the Collection Account to the Servicer, or to the
Payahead Account if required.
The Servicer shall determine prior to each Distribution Date the
Total Available Amount, the Available Interest, the Available
Principal, the Class A Distributable Amount and the Class B
Distributable Amount and, based on the Total Available Amount and the
other distributions to be made on such Distribution Date, as
described below, determine the amount to be distributed to
Certificateholders of each class.
Determination of Available Amounts. The "Total Available
Amount" for a Distribution Date (being the funds available for
distribution to Certificateholders of each Class with respect to such
Distribution Date in accordance with the priorities described below)
shall be the sum of the Available Interest and the Available
Principal.
The "Available Interest" for a Distribution Date shall be the
sum of the following amounts with respect to the preceding Collection
Period: (i) all scheduled payments of interest and the interest
portion of all prepayments in full (and certain partial prepayments)
collected with respect to Precomputed Receivables (including amounts
withdrawn from the Payahead Account but excluding amounts deposited
into the Payahead Account) and the interest portion of all payments
collected with respect to Simple Interest Receivables; (ii) all
proceeds of the liquidation of defaulted Receivables ("Liquidated
Receivables"), net of expenses incurred by the Servicer, received in
connection with such liquidation and any amounts required by law to
be remitted to the Obligor on such Liquidated Receivable
("Liquidation Proceeds") to the extent attributable to interest due
thereon in accordance with the Servicer's customary servicing
procedures; (iii) all Advances made by the Servicer of interest due
on Receivables; [(iv) all advances, if any, of interest made by the
Servicer in respect of Receivables which were prepaid in full;] [and]
(v) the Purchase Amount of each Receivable that was purchased by the
Seller or Servicer under an obligation which arose during the related
Collection Period, to the extent attributable to accrued interest
thereon[; and (vi) the Yield Supplement Deposit Amount for such
Distribution Date]. The Available Interest shall be determined on
the related Determination Date based on the methodology described
under "Description of the Transfer and Servicing Agree
ments--Distributions--Allocations of Collections on Receivables" in
the Prospectus.
The "Available Principal" for a Distribution Date shall be the
sum of the following amounts with respect to the preceding Collection
Period: (i) all scheduled payments of principal and the principal
portion of all prepayments in full (and certain partial prepayments)
collected with respect to Precomputed Receivables (including amounts
withdrawn from the Payahead Account but excluding amounts deposited
into the Payahead Account) and the principal portion of all payments
collected with respect to Simple Interest Receivables; (ii) all
Liquidation Proceeds attributable to principal in accordance with
the Servicer's customary servicing procedures; (iii) all Precomputed
Advances made by the Servicer of principal due on the Precomputed
Receivables; (iv) to the extent attributable to principal, the
Purchase Amount received with respect to each Receivable purchased by
the Seller or the Servicer under an obligation which arose during
such Collection Period; and (v) partial prepayments of any refunded
item included in the principal balance of a Receivable, such as
extended warranty protection plan costs, or physical damage, credit
life, disability
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insurance premiums, or any partial prepayment which causes a reduction in the
Obligor's periodic payment to an amount below the scheduled payment as of the
Cutoff Date. The Available Principal shall be determined on the related
Determination Date based on the methodology described under "Description of the
Transfer and Servicing Agreements--Distributions--Allocations of Collections on
Receivables" in the Prospectus.
The Available Interest and the Available Principal on any Distribution Date
shall exclude the following: (i) amounts received on Precomputed Receivables to
the extent that the Servicer has previously made an unreimbursed Precomputed
Advance; (ii) Liquidation Proceeds with respect to a particular Precomputed
Receivable to the extent of any unreimbursed Precomputed Advances thereon; (iii)
all payments and proceeds (including Liquidation Proceeds) of any Receivables
the Purchase Amount of which has been included in the Total Available Amount in
a prior Collection Period; (iv) amounts received in respect of interest on
Simple Interest Receivables during the preceding Collection Period in excess of
the amount of interest that would have been due during the Collection Period on
Simple Interest Receivables at their respective APRs (assuming that a payment is
received on each Simple Interest Receivable on the due date thereof); [and] (v)
Liquidation Proceeds with respect to a Simple Interest Receivable attributable
to accrued and unpaid interest thereon (but not including interest for the then
current Collection Period) but only to the extent of any unreimbursed Simple
Interest Advances[; and (vi) amounts released from the Pre-Funding Account.]
Calculation of Distributable Amounts. The "Class A Distributable Amount"
with respect to a Distribution Date shall be an amount equal to the sum of:
(i) the "Class A Principal Distributable Amount," consisting of the
Class A Percentage of:
(a) the principal portion of all scheduled payments due with
respect to Precomputed Receivables during the preceding Collection
Period;
(b) the principal portion of all prepayments in full received
during the preceding Collection Period (and certain partial
prepayments) (except to the extent included in (a) above);
(c) the principal portion of all payments received with respect
to Simple Interest Receivables during the preceding Collection Period;
(d) the principal balance of each Receivable that was purchased
by the Seller or the Servicer under an obligation that arose during
the preceding Collection Period (except to the extent included in (a)
through (c) above); and
(e) the principal balance of each Receivable liquidated by the
Servicer during the preceding Collection Period; plus
(ii) the "Class A Interest Distributable Amount," consisting of
thirty (30) days' interest at the [Class A] Certificate Rate on the Class A
Certificate Balance as of the last day of the preceding Collection Period.
The "Class A Certificate Balance" shall equal, initially, the Class A
Percentage of the Pool[/Pre-Funding] Balance as of the Cutoff Date and,
thereafter shall equal the initial Class A Certificate Balance, reduced by all
amounts previously distributed to Class A Certificateholders and allocable to
principal.
The "Class B Distributable Amount" with respect to a Distribution Date
shall be an amount equal to the sum of:
(i) the "Class B Principal Distributable Amount," consisting of
the Class B Percentage of the amounts set forth under (i) (a) through
(i) (e) above with respect to the Class A Principal Distributable Amount;
plus
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(ii) the "Class B Interest Distributable Amount," consisting of
thirty (30) days' interest at the Class B Certificate Rate on the Class B
Certificate Balance as of the last day of the preceding Collection Period
[plus the excess, for each Receivable having an APR greater than the sum of
the weighted average of the Class A Certificate Rate and the Class B
Certificate Rate and the Servicing Fee Rate, of the interest portion of the
scheduled payment over the portion of such interest equal to interest at
the sum of the weighted average of the Class A Certificate Rate and the
Class B Certificate Rate and the Servicing Fee Rate].
The "Class B Certificate Balance" shall equal, initially, the Class B
Percentage of the Pool Balance as of the [Initial] Cutoff Date and, thereafter
shall equal the initial Class B Certificate Balance, reduced by all amounts
previously distributed to Class B Certificateholders (or deposited in the
Subordination Spread Account not including the Subordination Initial Deposit)
and allocable to principal and by the Class A Principal Carryover Shortfall and
the Class B Principal Carryover Shortfall.
Calculation of Amounts to be Distributed. Prior to each Distribution Date,
the Servicer will calculate the amounts to be distributed to the
Certificateholders.
The holders of the Class A Certificates will receive on any Distribution
Date, to the extent of available funds, an amount equal to the sum of the Class
A Distributable Amount and any outstanding Class A Interest Carryover Shortfall
and Class A Principal Carryover Shortfall (as defined below). On each
Distribution Date on which the sum of the Class A Interest Distributable Amount
and any outstanding Class A Interest Carryover Shortfall (plus interest on such
Class A Interest Carryover Shortfall at the Class A Certificate Rate from such
preceding Distribution Date to the current Distribution Date, to the extent
permitted by law) exceeds the Class A Percentage of the Available Interest
(after payment of the Servicing Fee including any unpaid Servicing Fees with
respect to prior Collection Periods) on such Distribution Date, the Class A
Certificateholders shall be entitled to receive such shortfall first, from the
Class B Percentage of the Available Interest (after payment of the Servicing Fee
including any unpaid Servicing Fees with respect to prior Collection Periods);
second, if such amounts are insufficient, from amounts available in the
Subordination Spread Account; and third, if such amounts are insufficient, from
the Class B Percentage of the Available Principal; provided, however, that if
the Servicer shall fail to make an advance of interest in respect of a
Receivable prepaid in full, the portion of such shortfall attributable thereto
shall be paid only from amounts available in the Subordination Spread Account.
The "Class A Interest Carryover Shortfall" as of the close of any Distribution
Date means the excess of the Class A Interest Distributable Amount for such
Distribution Date plus any outstanding Class A Interest Carryover Shortfall from
the preceding Distribution Date, plus interest on such outstanding Class A
Interest Carryover Shortfall, to the extent permitted by law, at the Class A
Certificate Rate from such preceding Distribution Date through the current
Distribution Date, over the amount of interest that the holders of the Class A
Certificates actually received on such current Distribution Date.
On each Distribution Date on which the sum of the Class A Principal
Distributable Amount and any outstanding Class A Principal Carryover Shortfall
from the preceding Distribution Date exceeds the Class A Percentage of the
Available Principal on such Distribution Date, the Class A Certificateholders
shall be entitled to receive such shortfall first, from the Class B Percentage
of the Available Principal; second, if such amounts are insufficient, from
amounts available in the Subordination Spread Account; and third, if such
amounts are insufficient, from the Class B Percentage of the Available Interest.
The "Class A Principal Carryover Shortfall" as of the close of any Distribution
Date means the excess of the Class A Principal Distributable Amount plus any
outstanding Class A Principal Carryover Shortfall from the preceding
Distribution Date over the amount of principal that the holders of the Class A
Certificates actually received on such current Distribution Date.
[The holders of the Class B Certificates will receive on any Distribution
Date, to the extent of available funds, an amount equal to the sum of the Class
B Distributable Amount and any outstanding Class B Interest Carryover Shortfall
and Class B Principal Carryover Shortfall (as defined below). On each
Distribution Date on which the sum of the Class B Interest Distributable Amount
and any outstanding Class B Interest Carryover Shortfall (plus interest on such
Class B Interest Carryover Shortfall at the Class B Certificate Rate from such
preceding
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<PAGE> 101
Distribution Date to the current Distribution Date, to the extent permitted by
law) exceeds the Class B Percentage of the Available Interest (after giving
effect to (A) any amounts required to be distributed to the holders of Class A
Certificates pursuant to the subordination of the rights of the holders of Class
B Certificates, and (B) amounts required to pay the Servicing Fee (including any
unpaid Servicing Fees with respect to prior Collection Periods) payable to the
Servicer) on such Distribution Date, the Class B Certificateholders shall be
entitled to receive such shortfall from amounts available in the Subordination
Spread Account. The "Class B Interest Carryover Shortfall" as of the close of
any Distribution Date means the excess of the Class B Interest Distributable
Amount for such Distribution Date plus any outstanding Class B Interest
Carryover Shortfall from the preceding Distribution Date, plus interest on such
outstanding Class B Interest Carryover Shortfall, to the extent permitted by
law, at the Class B Certificate Rate from such preceding Distribution Date
through the current Distribution Date, over the amount of interest that the
holders of the Class B Certificates actually received on such current
Distribution Date.
On each Distribution Date on which the sum of the Class B Principal
Distributable Amount and any outstanding Class B Principal Carryover Shortfall
from the preceding Distribution Date exceeds the Class B Percentage of the
Available Principal (after giving effect to (A) any amounts required to be
distributed to the holders of Class A Certificates pursuant to the subordination
of the rights of the holders of Class B Certificates, (B) amounts required to
pay the Servicing Fee (including any unpaid Servicing Fees with respect to prior
Collection Periods) payable to the Servicer and (C) the interest due to the
Class B Certificateholders) on such Distribution Date, the Class B
Certificateholders shall be entitled to receive such shortfall from amounts
available in the Subordination Spread Account. The "Class B Principal Carryover
Shortfall" as of the close of any Distribution Date means the excess of the
Class B Principal Distributable Amount plus any outstanding Class B Principal
Carryover Shortfall from the preceding Distribution Date over the amount of
principal that the holders of the Class B Certificates actually received on such
current Distribution Date.]
[The holders of the Class B Certificates are entitled to receive on any
Distribution Date an amount equal to the sum of the Class B Interest
Distributable Amount, the Class B Principal Distributable Amount (and any
shortfalls from prior Distribution Dates in payments to the Class B
Certificateholders), after giving effect to (A) any amounts required to be
distributed to the holders of Class A Certificates pursuant to the subordination
of the rights of the holders of Class B Certificates, and (B) amounts required
to pay the Servicing Fee (including any unpaid Servicing Fees with respect to
prior Collection Periods) payable to the Servicer on such Distribution Date.]
SUBORDINATION OF THE CLASS B CERTIFICATES; SUBORDINATION SPREAD ACCOUNT
The rights of the Class B Certificateholders to receive distributions with
respect to the Receivables will be subordinated to the rights of the Class A
Certificateholders in the event of defaults and delinquencies on the Receivables
as provided in the Agreement. The protection afforded to the Class A
Certificateholders will be effected both by the preferential right of the Class
A Certificateholders to receive current distributions with respect to the
Receivables and by the establishment of the Subordination Spread Account. The
Subordination Spread Account will be created with an initial deposit by the
Seller of the Subordination Initial Deposit and will be augmented by deposit
therein of amounts otherwise distributable to Class B Certificateholders until
the amount in the Subordination Spread Account reaches an amount equal to the
Specified Subordination Spread Account Balance. Thereafter, amounts otherwise
distributable to the Class B Certificateholders or the Servicer will be
deposited in the Subordination Spread Account to the extent necessary to
maintain the amount in the Subordination Spread Account at the Specified
Subordination Spread Account Balance.
The Subordination Spread Account will not be a part of or otherwise
includible in the Trust and will be a segregated trust account held by as
agent for the [Class A] Certificateholders (the "[Class A] Agent"). On each
Distribution Date, (i) if the amounts on deposit in the Subordination Spread
Account are less than the Specified Subordination Spread Account Balance, the
Trustee will, after payment of any amounts required to be distributed to holders
of the Class A Certificates and the payment of the Servicing Fee due with
respect to the related Collection Period (including any unpaid Servicing Fees
with respect to prior Collection Periods), withdraw from the Collection Account
and deposit in the Subordination Spread Account the amount remaining in the
Collection Account that would
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<PAGE> 102
otherwise be distributed to the holders of the Class B Certificates, or such
lesser portion thereof as is sufficient to restore the amount in the
Subordination Spread Account to such Specified Subordination Spread Account
Balance and (ii) if the amount on deposit in the Subordination Spread Account on
such Distribution Date (after giving effect to all deposits or withdrawals
therefrom on such Distribution Date) is greater than the Specified Subordination
Spread Account Balance for such Distribution Date, the [Class A] Agent will
release and distribute any such excess to the [Servicer] [holders of the Class
B Certificates]. Upon any such distribution, the [Class A] Certificateholders
will have no rights in, or claims to, such amounts.
Amounts held from time to time in the Subordination Spread Account will
continue to be held for the benefit of holders of the Class A Certificates,
holders of the Class B Certificates and the Seller, as their respective
interests may appear. Funds in the Subordination Spread Account shall be
invested as provided in the Agreement in Permitted Investments. The [Servicer]
[holders of the Class B Certificates] shall be entitled to receive all
investment earnings on amounts in the Subordination Spread Account. Investment
income on amounts in the Subordination Spread Account will not be available for
distribution to the holders of the [Class A] Certificates or otherwise subject
to any claims or rights of the holders of the [Class A] Certificates.
The time necessary for the Subordination Spread Account to reach and
maintain the Specified Subordination Spread Account Balance at any time after
the date of issuance of the Certificates will be affected by the delinquency,
credit loss and repossession and prepayment experience of the Receivables and,
therefore, cannot be accurately predicted.
If on any Distribution Date the holders of the Class A Certificates do not
receive the sum of the Class A Distributable Amount, the Class A Interest
Carryover Shortfall and the Class A Principal Carryover Shortfall for such
Distribution Date (after giving effect to any amounts withdrawn from the
Subordination Spread Account and the Class B Distributable Amount and applied to
such deficiency, as described above), the holders of the Class B Certificates
will not receive any portion of the Total Available Amount.
The subordination of the Class B Certificates and the Subordination Spread
Account described above are intended to enhance the likelihood of receipt by
Class A Certificateholders of the full amount of principal and interest on the
Receivables due them and to decrease the likelihood that the Class A
Certificateholders will experience losses. However, in certain circumstances,
the Subordination Spread Account could be depleted and shortfalls could result.
[YIELD SUPPLEMENT ACCOUNT; YIELD SUPPLEMENT AGREEMENT
The Yield Supplement Account will be created with an initial deposit by
Ford Credit of the Yield Supplement Initial Deposit. The Yield Supplement
Initial Deposit will equal an amount (which amount may be discounted at a rate
to be specified in the Agreement) equal to the aggregate amount by which (i)
interest on the principal balance of each [Initial] Receivable for the period
commencing on the [Initial] Cutoff Date and ending with the scheduled maturity
of such Receivable, assuming that payments on such Receivables are made as
scheduled and no prepayments are made) at a rate equal to the Required Rate,
exceeds (ii) interest on such principal balances at the APR of such Receivable
(the "Yield Supplement Amount" [and, with respect to all of the [Initial]
Receivables, the "Maximum [Initial] Yield Supplement Amount"]).
On each Distribution Date, the Trustee will transfer to the Collection
Account from monies on deposit in the Yield Supplement Account an amount equal
to the Yield Supplement Deposit Amount in respect of the Receivables for such
Distribution Date. The "Yield Supplement Deposit Amount" with respect to a
Distribution Date is the aggregate Yield Supplement Amount, if any, in respect
of the Receivables for the related Collection Period. Amounts on deposit on any
Distribution Date in the Yield Supplement Account in excess of the Maximum Yield
Supplement Amount, after giving effect to all distributions to be made on such
Distribution Date, will be paid to the Seller. Monies on deposit in the Yield
Supplement Account may be invested in Permitted Investments under the
circumstances and in the manner described in the Agreement. Any monies
remaining on deposit in the Yield Supplement Account upon the termination of the
Trust will be paid to the Seller.
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[Pursuant to the Yield Supplement Agreement, on each Subsequent Transfer
Date, Ford Credit will deposit into the Yield Supplement Account an amount equal
to the Additional Yield Supplement Amount. The aggregate of the Additional Yield
Supplement Amounts in respect of Subsequent Receivables, if any, is referred to
herein as the "Maximum Subsequent Yield Supplement Amount" and, together with
the Maximum Initial Yield Supplement Amount, the "Maximum Yield Supplement
Amount."]]
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of certain federal income tax
consequences of the purchase, ownership and disposition of the Certificates.
The summary does not purport to deal with federal income tax consequences
applicable to all categories of holders, some of which may be subject to special
rules. For example, it does not discuss the tax treatment of Certificateholders
that are insurance companies, regulated investment companies or dealers in
securities. Moreover, there are no cases or Internal Revenue Service ("IRS")
rulings on similar transactions involving interests issued by a trust with
terms similar to those of the Offered Certificates (as defined below). As a
result, the IRS may disagree with all or a part of the discussion below.
Prospective investors are urged to 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 Certificates.
The following summary is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the Treasury regulations
promulgated thereunder and judicial or ruling authority, all of which are
subject to change, which change may be retroactive. The Trust will be provided
with an opinion of Special Tax Counsel regarding certain federal income tax
matters discussed below. An opinion of Special Tax Counsel, however, is not
binding on the IRS or the courts. No ruling on any of the issues discussed
below will be sought from the IRS.
SCOPE OF THE TAX OPINIONS
It is expected that Special Tax Counsel will, upon issuance of the Offered
Certificates, deliver its opinion that the Trust will be classified as a
grantor trust under subpart E, Part I of subchapter J of the Code and will not
be classified as an association (or publicly traded partnership) taxable as a
corporation for federal income tax purposes.
In addition, Special Tax Counsel has prepared or reviewed the statements
herein and in the Prospectus under the heading "Summary--Tax Status" as they
relate to federal income tax matters and under the heading "Certain Federal
Income Tax Consequences," and is of the opinion that such statements are correct
in all material respects. Such statements are intended as an explanatory
discussion of the possible effects of the classification of the Trust as a
grantor trust for federal income tax purposes on investors generally and of
related tax matters affecting investors generally, but do not purport to furnish
information in the level of detail or with the attention to the investor's
specific tax circumstances that would be provided by an investor's own tax
adviser. Accordingly, each investor is advised to consult its own tax advisers
with regard to the tax consequences to it of investing in the Certificates.
TAX CHARACTERIZATION OF THE TRUST AS A GRANTOR TRUST
As set forth above, it is expected that Special Tax Counsel will
deliver its opinion that the Trust will be classified as a grantor trust under
subpart E, Part I of subchapter J of the Code and will not be classified as an
association taxable as a corporation. Owners of Certificates (referred to herein
as "Offered Certificateholders"), subject to the discussion of stripped coupons
below under "--Tax Consequences to Holders of Offered
Certificates--Characterization of Fees," will be treated for federal income tax
purposes as owners of a portion of the Trust's assets as described below. The
Certificates issued by the Trust and offered pursuant to this Prospectus
Supplement and the Prospectus are referred to herein as "Offered Certificates."
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TAX CONSEQUENCES TO HOLDERS OF OFFERED CERTIFICATES
Income on the Receivables. If the Receivables are not characterized as
"stripped bonds" or otherwise recharacterized, each Offered Certificateholder
will be required to report on its federal income tax return its pro rata share
of the entire income of the Trust for the period during which it owns an Offered
Certificate, including interest or finance charges earned on the Receivables,
and any gain or loss upon collection or disposition of the Receivables. Because
the Receivables, when originally issued by the Obligors to the Dealers from whom
Ford Credit acquired the Receivables, are believed to have had adequate stated
interest, the original issue discount ("OID") and imputed interest rules should
not apply to the Receivables except to the extent that a Receivable is treated
as a "stripped bond," as discussed below. The portion of each monthly payment
to an Offered Certificateholder that is allocable to principal on the
Receivables will represent a recovery of capital, which will reduce the tax
basis of such Offered Certificateholder's undivided interest in the Receivables.
In computing its federal income tax liability, an Offered Certificateholder will
be entitled to deduct, consistent with its method of accounting, its pro rata
share of reasonable servicing fees, and other fees paid or incurred by the Trust
as provided in Section 162 or 212 of the Code. If an Offered Certificateholder
is an individual, estate or trust the deduction for his pro rata share of such
fees will be allowed only to the extent that all of his miscellaneous itemized
deductions, including his share of such fees, exceed 2% of his adjusted gross
income. In addition, in the case of Offered Certificateholders who are
individuals, otherwise allowable itemized deductions will be reduced, but not
more than 80%, by an amount equal to 3% of the Offered Certificateholder's
adjusted gross income in excess of a statutorily defined threshold ($117,950 in
the case of a married couple filing jointly for taxable years beginning in 1996,
which amount will be adjusted for inflation). Because the Servicer will not
report to Offered Certificateholders the amount of income or deductions
attributable to the Supplemental Servicing Fee, such an Offered
Certificateholder may effectively underreport his net taxable income. To the
extent that the Receivables are characterized as "stripped bonds," as discussed
below, the portion of interest treated as retained by the Seller or the Servicer
would not be included in the income of Offered Certificateholders. See
"--Characterization of Fees" below.
To the extent that the purchase price of an Offered Certificate allocated
to an Offered Certificateholder's undivided interest in a Receivable is greater
than or less than the portion of the principal balance of the Receivable
allocable to the Offered Certificate, such interest in the Receivable will have
been acquired at a premium or discount, as the case may be. In determining
whether an Offered Certificateholder has purchased its interest in the
Receivables (or any Receivable) at a discount, a portion of the purchase price
for an Offered Certificate may be allocated to accrued interest on each
Receivable and to amounts held in the Collection Account pending distribution to
Certif icateholders at the time of purchase as though such accrued interest and
collections on the Receivables were separate assets purchased by the Offered
Certificateholder, thus reducing the portion of the purchase price allocable to
an Offered Certificateholder's undivided interest in each Receivable (the
"Purchase Price") and increasing the potential discount on the Receivables.
Characterization of Fees. The Servicer intends to report income to Offered
Certificateholders on the assumption that the Offered Certificateholders own an
interest (equal to the applicable Class Percentage) in all of the principal and
interest derived from the Receivables. However, to the extent that the amounts
paid to the Servicer or the Seller exceed reasonable fees for services rendered,
by reason of the extent to which either the weighted average APR of the
Receivables, or the individual stated APRs of some of the Receivables, exceed
the Certificate Rate, such amounts will be treated as an interest in the
Receivables retained by the Seller or the Servicer. There are no authoritative
pronouncements for federal income tax purposes as to either the maximum amount
of compensation that may be considered reasonable for servicing Receivables or
performing other services in the context of transactions involving receivables
such as the Receivables, although the IRS has issued such guidelines in the
context of mortgage loans. To the extent that amounts paid to the Servicer or
the Seller exceed reasonable compensation for services provided, they would be
viewed as having retained for federal income tax purposes an ownership interest
in a portion of each interest payment with respect to certain Receivables (each
such payment, a "stripped coupon"). As a result, such Receivables would be
treated as "stripped bonds" within the meaning of the Code.
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To the extent that the Receivables are characterized as "stripped bonds,"
the income and deductions of the Trust allocable to Offered Certificateholders
will not include the portion of the interest on the Receivables treated as
having been retained by the Seller (or other Offered Certificateholder) and the
Trust's deductions will be limited to reasonable servicing and other fees. In
addition, an Offered Certificateholder will not be subject to the market
discount rules discussed below with respect to the stripped Receivables, but
instead will be subject to the OID rules. However, if the price at which such a
Certificateholder were deemed to have acquired a stripped Receivable is less
than the remaining principal balance of such Receivable by an amount which is
less than a statutorily defined de minimis amount, such Receivable would not be
treated as having OID. In general, the amount of OID on a Receivable treated as
a "stripped bond" will be de minimis if it is less than 1/4 of one percent for
each remaining full year of weighted average life of the Receivable (probably
based on a prepayment assumption) remaining after the purchase date until the
final maturity of the Receivable. If the amount of OID is de minimis under this
rule, the actual amount of OID on such a Receivable would be includible in
income proportionately as principal payments are received on the Receivable in
the proportion that the amount of the principal payment made bears to the total
principal balance of the Receivable.
If the OID on a Receivable, which may differ for each Receivable, based on
the Purchase Price paid by an Offered Certificateholder, is not treated as being
de minimis, such a Certificateholder will be required to include any OID on a
Receivable in income as it accrues, regardless of when cash payments are
received, using a method reflecting a constant yield to maturity on the
Receivable. It is possible that the IRS could require use of a prepayment
assumption in computing the yield of a stripped Receivable. If a stripped
Receivable is deemed to be acquired by an Offered Certificateholder at a greater
than de minimis OID, such treatment would accelerate the accrual of income by
such holder. Prospective investors are advised to consult their own tax advisors
regarding the extent to which a portion of the amounts paid to the Servicer (or
other Offered Certificateholder) could be characterized other than as
compensation for services rendered for federal income tax purposes and the
calculation of OID on the Receivables.
It is also possible that any fees deemed to be excessive could be
characterized as deferred purchase price payable to the Seller by Offered
Certificateholders in exchange for the Receivables. The likely effect of such
recharacterization would be to accelerate realization of taxable income by such
a holder.
Rule of 78's Receivables. The annual statement regularly furnished to
Certificateholders for federal income tax purposes will include information
based on the actuarial method of accounting for interest and principal on the
Receivables, and the amount of the fees paid to the Servicer and others.
Offered Certificateholders should generally be permitted to account for interest
on the Receivables using the actuarial method (the method used to compute the
Certificate Pool Factor and the Certificate Rate). However, the Rule of 78's
Receivables provide that, upon a prepayment in full, the amount payable by the
Obligor will be determined under the Rule of 78's. Prospective investors
should consult their tax advisors as to whether they may be required or
permitted to use the Rule of 78's method to account for interest on the Rule
of 78's Receivables. An Offered Certificateholder will be furnished
information for federal income tax purposes enabling him to report interest on
the Receivables under the Rule of 78's method of accounting only upon written
request to the Trustee, and payment of the actual costs of producing the same.
If a Rule of 78's Receivable is prepaid, any amount received by the Trust
upon prepayment in excess of the account balance using the actuarial method
would constitute income to an Offered Certificateholder who had reported income
with respect to such Rule of 78's Receivable on the actuarial method, and an
amount equal to such excess would be paid to the Servicer as part of its
Supplemental Servicing Fee and be deductible to the extent described above.
Market Discount. If the Receivables are not treated as "stripped bonds,"
the interest of an Offered Certificateholder in each Receivable whose Purchase
Price is less than the original issue price (plus OID, if any, previously
includible in the income of any holder) of the Receivable will be treated as
having been purchased at a "market
S-32
<PAGE> 106
discount." The market discount on a Receivable will be considered to be zero if
it is less than a statutorily defined de minimis amount.
In general, under the market discount provisions of the Code, principal
payments received by the Trust, and all or a portion of the gain recognized upon
a sale or other disposition of a Receivable or upon the sale or other
disposition of an Offered Certificate by a holder thereof, will be taxable as
ordinary income to the extent of accrued market discount, and a portion of the
interest deductions attributable to indebtedness treated as incurred or
continued to purchase or carry a Receivable or an Offered Certificate must be
deferred. The ordinary income treatment on dispositions and deferral of
interest deductions described in the preceding sentence will not apply if an
Offered Certificateholder elects to include market discount in income currently
as it accrues for each taxable year during which it holds the Offered
Certificate. Market discount will accrue in the manner to be provided in
Treasury regulations, but the Conference Report accompanying the Tax Reform Act
of 1986 states that, until such regulations are issued, it is intended that
taxpayers may elect to accrue market discount either (i) under a constant yield
(economic accrual) method or (ii) at the election of the taxpayer, in the
proportion that the stated interest paid on the obligation for the current
period bears to total remaining interest on the obligation. As described above,
if the Offered Certificates are characterized as "stripped bonds," any discount
would be treated as OID, the amount and timing of which should be comparable to
the amount and timing of market discount if an election is made to include
market discount in income currently on the constant yield method. See
"--Characterization of Fees" above. Due to the complexity of the market
discount rules, the Offered Certificateholders are urged to consult their tax
advisors as to whether market discount will result from the acquisition of
Offered Certificates, and as to the tax treatment of any such discount.
Premium. In the event that a Receivable is treated as purchased at a
premium (i.e., the Purchase Price exceeds the sum of principal payments to be
made thereon), such premium will be amortizable by an Offered Certificateholder
as an offset to interest income (with a corresponding reduction in such holder's
basis) under a constant yield method over the remaining term of the Receivable
if an election under Section 171 of the Code is made (or previously in effect in
accordance with the provisions of the Tax Reform Act of 1986) with respect to
the Offered Certificates. Any such election will also apply to debt
instruments held by the taxpayer during the year in which the election is made
and all debt instruments acquired thereafter.
Sale of an Offered Certificate or a Receivable. If an Offered Certificate
is sold, gain or loss will be recognized equal to the difference between the
amount realized on the sale and the adjusted basis of the Offered
Certificateholder in the Receivables and any other assets held by the Trust. An
Offered Certificateholder's adjusted basis will equal such holder's cost for the
Offered Certificate, increased by any discount previously included in income,
and decreased by any deduction previously allowed for accrued premium and by the
amount of principal pay ments previously received on the Receivables. Any gain
or loss will be capital gain or loss if the Offered Certificate was held as a
capital asset, except that gain will be treated in whole or in part as ordinary
interest income to the extent of the seller's interest in accrued market
discount not previously taken into income on Receivables having a fixed maturity
date of more than one year from the date of origination.
Under proposed Treasury regulations, the grant of an extension of the
maturity of a Receivable to the Obligor thereon could be treated as an exchange
if it changes the yield on the Receivable by more than a de minimis amount,
potentially resulting in taxable gain or loss to Certificateholders. Reports to
Certificateholders will not include information sufficient to calculate any such
gain or loss and accordingly, in the event that an extension were to result in a
deemed exchange, a Certificateholder could underreport its taxable income. No
assurance can be given as to whether the proposed regulations will be adopted as
final regulations in their present form or whether, if adopted, they will apply
to the Receivables.
Foreign Offered Certificateholders. Interest attributable to Receivables
which is received by a foreign Offered Certificateholder will generally not be
subject to the 30% withholding tax imposed with respect to payments of interest,
provided that such foreign holder is not engaged in a trade or business in the
United States and that such foreign holder fulfills certain certification
requirements. Under such requirements, the holder must certify, under
S-33
<PAGE> 107
penalties of perjury, that it is not a "United States person" and provide its
name and address. For this purpose, "United States person" means a citizen or
resident of the U.S., a corporation, partnership, or other entity created or
organized in or under the laws of the U.S. or any political subdivision thereof,
or an estate or trust the income of which is includible in gross income for U.S.
federal income tax purposes, regardless of its source.
Backup Withholding. Payments made on the Offered Certificates and proceeds
from the sale of the Offered Certificates will not be subject to a "backup"
withholding tax of 31% unless, in general, an Offered Certificateholder fails to
comply with certain reporting procedures and is not an exempt recipient under
applicable provisions of the Code.
CERTAIN STATE TAX CONSEQUENCES
The State of Michigan imposes an Individual Income Tax and a Single
Business Tax which is based partially upon the net income of corporations,
partnerships and other entities doing business in the State of Michigan. This
discussion is based upon present provisions of Michigan statutes and the
regulations promulgated thereunder, and applicable 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 Michigan
Department of Treasury.
Because of the variation in each state's and locality's tax laws based in
whole or in part upon income, it is impossible to predict tax consequences to
holders of Certificates in all of the state and local taxing jurisdictions in
which they may be subject to tax. Certificateholders are urged to consult their
own tax advisors with respect to state and local tax consequences arising out of
the purchase, ownership and disposition of the Certificates.
TAX CONSEQUENCES WITH RESPECT TO THE OFFERED CERTIFICATES
If the arrangement created by the Trust Agreement is a grantor trust for
federal income tax purposes, it is expected that Michigan Tax Counsel will
deliver his opinion that the same treatment will also apply for Michigan
Individual Income Tax and Single Business Tax purposes and that the Trust will
not be subject to such taxes. Rather, a corporate Offered Certificateholder
whose commercial domicile is in Michigan, as well as an individual Offered
Certificateholder who is a resident of Michigan, should be subject to Michigan
Single Business Tax and the Individual Income Tax, respectively, on income
received through the Trust. On the other hand, a corporate Offered
Certificateholder whose commercial domicile is not in Michigan, and an
individual Offered Certificateholder who is not a resident of Michigan, should
not be subject to such taxes on income received through the Trust.
If the Offered Certificates are instead treated as ownership interests in
an association taxable as a corporation or a "publicly traded partnership"
taxable as a corporation, then the hypothetical entity should be viewed as a
passive holder of investments and should not be subject to the Michigan Single
Business Tax (which, if applicable, could result in reduced distributions to
Certificateholders). The hypothetical entity, however, may be subject to
Michigan Intangibles Tax on income from loans secured by Michigan property. The
Michigan Intangibles Tax, however, has been repealed effective January 1, 1998.
In any event, an Offered Certificateholder not otherwise subject to tax in
Michigan would not become subject to Michigan tax as a result of its mere
ownership of such an interest.
THE FEDERAL AND STATE TAX DISCUSSIONS SET FORTH ABOVE ARE INCLUDED FOR
GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A
CERTIFICATEHOLDER'S PARTICULAR TAX SITUATION. PROSPECTIVE PURCHASERS SHOULD
CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF CERTIFICATES, INCLUDING THE TAX
CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE
EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
S-34
<PAGE> 108
ERISA CONSIDERATIONS
[THE CLASS A CERTIFICATES]
The Class A Certificates may, in general, be purchased by or on behalf of
(i) "employee benefit plans" (as defined in Section 3(3) of ERISA), (ii) "plans"
described in Section 4975(e)(1) of the Code, including individual retirement
accounts and Keogh Plans, or (iii) entities whose underlying assets include plan
assets by reason of a plan's investment in such entity (each, a "Plan"),
provided that certain conditions are met with respect to an individual
administrative exemption issued by the United States Department of Labor to
, , (the "Underwriters' Exemption"). The Seller believes that the
Underwriters' Exemption will apply to the acquisition and holding of the Class A
Certificates by a Plan and that all conditions of the Underwriters' Exemption
other than those within the control of the investors have been or will be met.
Any Plan fiduciary considering whether to purchase a Class A Certificate on
behalf of a Plan should consult with its counsel regarding the applicability of
the Underwriters' Exemption and other relevant issues. For additional
information regarding treatment of the Class A Certificates under ERISA,
[including certain special considerations that apply with respect to the
Pre-Funding Account,] see "ERISA Considerations" in the Prospectus.
[THE CLASS B CERTIFICATES
Because the Class B Certificates are subordinated to the Class A
Certificates in certain respects, the Underwriters' Exemption will not apply to
the purchase of Class B Certificates by or on behalf of a Plan. However, other
prohibited transaction exemptions may be applicable. These exemptions may apply
with respect to, inter alia, purchases by certain insurance company general
accounts, insurance company pooled separate accounts and bank collective
investment funds, and on behalf of employee benefit plans by certain "in house"
asset managers and qualified professional asset managers. Any Plan fiduciary
considering whether to purchase a Class B Certificate on behalf of a Plan should
consult with its counsel regarding the applicability of one or more of such
exemptions to such purchase. For additional information regarding treatment of
the Class B Certificates under ERISA, see "ERISA Considerations" in the
Prospectus.]
UNDERWRITING
Subject to the terms and conditions set forth in an Underwriting Agreement
(the "Underwriting Agreement"), the Seller has agreed to cause the Trust to sell
to each of the Underwriters named below (the "Underwriters"), and each of the
Underwriters has severally agreed to purchase, the principal balance of the
Class A Certificates [and Class B Certificates] set forth opposite its name
below:
<TABLE>
<CAPTION>
PRINCIPAL
BALANCE OF
CLASS A
UNDERWRITERS CERTIFICATES
- ------------ ------------
<S> <C>
........................................ $
........................................ ___________
Total ........................................ $___________
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
BALANCE OF
CLASS B
[UNDERWRITERS CERTIFICATES
- ------------- ------------
<S> <C>
........................................ $
........................................ ___________
Total ........................................ $___________
</TABLE>
S-35
<PAGE> 109
Total......... $]
====================
The Seller has been advised by the Underwriters that they propose initially
to offer the Class A Certificates to the public at the prices set forth herein,
and to certain dealers at such price less the initial concession not in excess
of % per Class A Certificate. The Underwriters may allow, and such dealers
may reallow, a concession not in excess of % per Class A Certificate to
certain other dealers. After the initial public offering of the Class A
Certificates, the public offering prices and such concessions may be changed.
[The Seller has been advised by the Underwriters that they propose
initially to offer the Class B Certificates to the public at the prices set
forth herein, and to certain dealers at such price less the initial concession
not in excess of % per Class B Certificate. The Underwriters may allow, and
such dealers may reallow, a concession not in excess of % per Class B
Certificate to certain other dealers. After the initial public offering of the
Class B Certificates, the public offering prices and such concessions may be
changed.]
LEGAL OPINIONS
In addition to the legal opinions described in the Prospectus, certain
legal matters relating to the Certificates will be passed upon for the
Underwriters and certain federal income tax and other matters will be passed
upon for the Trust by [ ]. [ may from time to time render legal
services to Ford and its affiliates.]
S-36
<PAGE> 110
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Ford Credit
Auto Grantor Trust 199 - % Asset Backed Certificates, Class A [and % Asset
Backed Certificates, Class B] ([collectively,] the "Global Securities") will be
available only in book-entry form. Investors in the Global Securities may hold
such Global Securities through any of The Depository Trust Company ("DTC"),
Cedel Bank, societe anonyme ("Cedel") or the Euroclear System ("Euroclear").
The Global Securities will be tradeable 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 Cedel 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., seven calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations.
Secondary cross-market trading between Cedel or Euroclear and DTC
Participants holding Global Securities will be effected on a
delivery-against-payment basis through the respective Depositaries of Cedel and
Euroclear (in such capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain 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, Cedel and Euroclear will
hold positions on behalf of their participants through their respective
Depositaries, which in turn will hold such positions in accounts as DTC
Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable to U.S. corporate debt obligations.
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 Cedel 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 the
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.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to U.S. corporate
debt obligations in same-day funds.
<PAGE> 111
Trading between Cedel and/or Euroclear Participants. Secondary market
trading between Cedel Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
Trading between DTC seller and Cedel or Euroclear purchaser. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a Cedel Participant or a Euroclear Participant, the purchaser will
send instructions to Cedel or Euroclear through a Cedel Participant or Euroclear
Participant at least one business day prior to settlement. Cedel 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. 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 Cedel Participant's or Euroclear
Participant's account. The securities credit will appear the next day (European
time) and the cash debit 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 Cedel or Euroclear cash debit
will be valued instead as of the actual settlement date.
Cedel 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 Cedel or Euroclear. Under this approach,
they may take on credit exposure to Cedel or Euroclear until the Global
Securities are credited to their accounts one day later.
As an alternative, if Cedel or Euroclear has extended a line of credit to
them, Cedel 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, Cedel Participants or Euroclear Participants purchasing Global
Securities would incur overdraft charges for one day, assuming they cleared the
overdraft when the Global Securities were 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 such overdraft
charges, although this result will depend on each Cedel 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 Depositary for the benefit of Cedel Participants or Euroclear
Participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC Participant a cross-market transaction will
settle no differently than a trade between two DTC Participants.
Trading between Cedel or Euroclear seller and DTC purchaser. Due to time
zone differences in their favor, Cedel 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 Cedel or Euroclear through a Cedel Participant or Euroclear Participant at
least one business day prior to settlement. In these cases, Cedel or Euroclear
will instruct the respective Depositary, as appropriate, to deliver the bonds to
the DTC Participant's account 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. The payment will then be reflected in the
account of the Cedel Participant or Euroclear Participant the following day, and
receipt of the cash proceeds in the Cedel 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 Cedel
Participant or Euroclear Participant have a line of credit with its respective
clearing system and elect to be in debit in anticipation of receipt of the sale
proceeds in its account, the back-valuation will extinguish any overdraft
charges incurred over that one-day period. If settlement is not completed on
the intended value date (i.e.,
I-2
<PAGE> 112
the trade fails), receipt of the cash proceeds in the Cedel Participant's or
Euroclear Participant's account would instead be valued as of the actual
settlement date.
Finally, day traders that use Cedel or Euroclear and that purchase Global
Securities from DTC Participants for delivery to Cedel 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:
(a) borrowing through Cedel or Euroclear for one day
(until the purchase side of the day trade is reflected in their
Cedel or Euroclear accounts) in accordance with the clearing
system's customary procedures;
(b) 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 Cedel or Euroclear account in order to settle the sale
side of the trade; or
(c) 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 Cedel Participant or Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through Cedel 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 original issue discount) on registered debt issued by U.S.
Persons, unless (i) 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 such beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements and
(ii) such beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of Global
Securities that are non-U.S. Persons can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (Certificate of Foreign Status). If
the information shown on Form W-8 changes, a new Form W-8 must be filed within
30 days of such change.
Exemption for non-U.S. Persons with effectively connected income (Form
4224). 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, can obtain an exemption from the
withholding tax by filing Form 4224 (Exemption from Withholding of Tax 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 1001). Non-U.S. Persons that are beneficial owners of Global Securities
residing in a country that has a tax treaty with the United States can obtain an
exemption or reduced tax rate (depending on the treaty terms) by filing Form
1001 (Ownership, Exemption or Reduced Rate Certificate). If the treaty provides
only for a reduced rate, withholding tax will be imposed at that rate unless the
filer alternatively files Form W-8. Form 1001 may be filed by the beneficial
owner of Global Securities or his agent.
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).
I-3
<PAGE> 113
U.S. Federal Income Tax Reporting Procedure. The beneficial owner of a
Global Security or in the case of a Form 1001 or a Form 4224 filer, his agent,
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). Form W-8 and Form 1001 are effective for three calendar
years and Form 4224 is effective for one calendar year.
The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of the
United States or any political subdivision thereof or (iii) an estate or trust
the income of which is includible in gross income for United States tax
purposes, regardless of its source. This summary does not deal with all aspects
of U.S. federal income tax withholding that may be relevant to foreign holders
of the Global Securities. Investors are advised to consult their own tax
advisers for specific tax advice concerning their holding and disposing of the
Global Securities.
I-4
<PAGE> 114
INDEX OF TERMS
Set forth below is a list of the defined terms used in this
Prospectus Supplement and defined herein and the pages on which the
definitions of such terms may be found herein. Certain defined terms
used in this Prospectus Supplement are defined in the Prospectus.
See "Index of Terms" in the Prospectus.
<TABLE>
<S> <C>
[Additional Yield Supplement Amount ........ S-10]
Agreement .................................. S-3
[APR ....................................... S-4]
Available Interest ......................... S-25
Available Principal ........................ S-25
Business Day ............................... S-5
Cede ....................................... S-2
Cedel ...................................... I-1
Certificate Owner .......................... S-3
Certificate Pool Factor .................... S-21
[Certificate Prepayment Amount ............. S-8, S-23]
[Certificate Prepayment Premium ............ S-7
[Certificateholders ........................ S-5]
Certificates ............................... S-1, S-3
[Class A] Agent ............................ S-28
Class A Certificate Balance ................ S-6, S-26
Class A Certificateholders ................. S-5
[Class A] Certificate Rate ................. S-5
Class A Certificates ....................... S-1, S-3
Class A Distributable Amount ............... S-26
Class A Interest Carryover Shortfall ....... S-27
Class A Interest Distributable Amount ...... S-26
Class A Percentage ......................... S-3, S-22
Class A Principal Carryover Shortfall ...... S-27
Class A Principal Distributable Amount ..... S-26
Class B Certificate Balance ................ S-6, S-27
Class B Certificateholders ................. S-6
Class B Certificate Rate ................... S-5
Class B Certificates ....................... S-1, S-3
Class B Distributable Amount ............... S-26
[Class B Interest Carryover Shortfall ...... S-28]
Class B Interest Distributable Amount ...... S-27
Class B Percentage ......................... S-3, S-22
[Class B Principal Carryover Shortfall ..... S-28]
Class B Principal Distributable Amount ..... S-26
Closing Date ............................... S-4
Code........................................ [S-12,] S-30
Collection Account.......................... S-10
Collection Period .......................... S-6
Commission ................................. S-2
Cutoff Date ................................ S-4, S-16
Determination Date ......................... S-25
Distribution Date .......................... S-1, S-5
DTC ........................................ S-2, I-1
ERISA ...................................... S-12
Euroclear .................................. I-1
</TABLE>
<PAGE> 115
<TABLE>
<S> <C>
Exchange Act .................................... S-2
Final Scheduled Distribution Date ............... S-1
Final Scheduled Maturity Date ................... S-5
[Ford ........................................... S-14]
Ford Credit ..................................... S-3
[Funding Period ................................. S-8]
Global Securities ............................... I-1
[Initial] Cutoff Date ........................... S-4
Initial Pool Balance ............................ S-7
[Initial] Receivables ........................... S-4
Issuer .......................................... S-3
IRS ............................................. S-30
Liquidated Receivables .......................... S-25
Liquidation Proceeds ............................ S-25
[Mandatory Repurchase ........................... S-7, S-23]
[Maximum Initial Yield Supplement Amount......... S-10, S-29]
[Maximum Subsequent Yield Supplement Amount...... S-10, S-30]
[Maximum Yield Supplement Amount................. S-10, S-30]
Michigan Tax Counsel ............................ S-11
Net Losses ...................................... S-21
Offered Certificateholders ...................... S-30
Offered Certificates ............................ S-30
OID ............................................. S-31
Plan ............................................ S-35
Pool Balance .................................... S-5
[Pool/Pre-Funding Balance ....................... S-5]
[Pre-Funded Amount .............................. S-4]
[Pre-Funding Account ............................ S-1, S-8]
Prospectus ...................................... S-2
Purchase Agreement .............................. S-5
Purchase Price .................................. S-31
Rating Agencies ................................. S-15
Realized Losses ................................. S-5
Receivables ..................................... S-1
Receivables Pool ................................ S-16
Record Date ..................................... S-5
[Required Rate .................................. S-10]
Seller .......................................... S-1, S-3
Servicer ........................................ S-1, S-3
Servicing Fee Rate .............................. S-11
Special Tax Counsel ............................. S-11
Specified Subordination Spread Account Balance .. S-9
Subordination Initial Deposit ................... S-9
Subordination Spread Account .................... S-9
[Subsequent Cutoff Date ......................... S-4]
[Subsequent Receivables ......................... S-1, S-4]
[Subsequent Transfer Date ....................... S-4]
Supplemental Servicing Fee ...................... S-24
Total Available Amount .......................... S-25
Trust ........................................... S-1, S-3
Trustee ......................................... S-3
Underwriters .................................... S-35
</TABLE>
<PAGE> 116
<TABLE>
<S> <C>
Underwriters' Exemption ...................... S-35
Underwriting Agreement ....................... S-35
United States Person ......................... S-33
[Yield Supplement Account .................... S-10]
[Yield Supplement Agreement .................. S-10]
[Yield Supplement Amount...................... S-10, S-29]
[Yield Supplement Deposit Amount ............. S-29]
[Yield Supplement Initial Deposit ............ S-10]
</TABLE>
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<PAGE> 117
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUP PLEMENT OR THE PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
SECURITIES OFFERED HEREBY, NOR AN OFFER OF THE SECURITIES IN ANY STATE OR
JURISDICTION IN WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFER WOULD BE UNLAWFUL.
THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS AT ANY TIME DOES
NOT IMPLY THAT INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
____________________
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUPPLEMENT
Reports to Certificateholders...................................... S-2
Summary............................................................ S-3
Risk Factors....................................................... S-13
The Trust.......................................................... S-15
The Receivables Pool............................................... S-16
Pool Factors....................................................... S-21
Maturity and Prepayment Considerations............................. S-22
Description of the Certificates.................................... S-22
Certain Federal Income Tax Consequences............................ S-30
Certain State Tax Consequences..................................... S-34
ERISA Considerations............................................... S-35
Underwriting....................................................... S-35
Legal Opinions..................................................... S-36
Annex I--Global Clearance, Settlement and Tax
Documentation Procedures......................................... I-1
Index of Terms
PROSPECTUS
Available Information .................................... 3
Incorporation of Certain Documents by
Reference........................................................ 3
Summary............................................................ 4
Risk Factors....................................................... 11
The Trusts......................................................... 15
The Receivables Pools.............................................. 17
Maturity and Prepayment Considerations............................. 19
Pool Factors and Trading Information............................... 19
Use of Proceeds.................................................... 20
The Seller and the General Partner................................. 20
The Servicer....................................................... 21
Description of the Notes........................................... 22
Description of the Certificates.................................... 27
Certain Information Regarding the Securities....................... 28
Description of the Transfer and Servicing
Agreements....................................................... 38
Certain Legal Aspects of the Receivables........................... 49
Certain Federal Income Tax Consequences............................ 53
ERISA Considerations............................................... 54
Plan of Distribution............................................... 58
Legal Opinions..................................................... 59
Index of Terms..................................................... 60
UNTIL , 1996 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT),
ALL DEALERS EFFECTING TRANSACTIONS IN THE CERTIFICATES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS
SUPPLEMENT AND A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS SUPPLEMENT AND A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
$
Ford Credit
Auto Grantor Trust
199 -
$
% Asset Backed
Certificates, Class A
[$
% Asset Backed
Notes, Class B]
Ford Credit Auto
Receivables Two L.P.
Seller
Ford Motor Credit Company
Servicer
PROSPECTUS
SUPPLEMENT
<PAGE> 118
The information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED _____ __, 1996
PROSPECTUS
FORD CREDIT AUTO TRUSTS
ASSET BACKED NOTES
ASSET BACKED CERTIFICATES
[Ford Logo]
FORD CREDIT AUTO RECEIVABLES TWO L.P.
SELLER
______________________
FORD MOTOR CREDIT COMPANY
SERVICER
______________________
The Asset Backed Notes (the "Notes") and the Asset Backed Certificates
(the "Certificates" and, together with the Notes, the "Securities") described
herein may be sold from time to time in one or more series, in amounts, at
prices and on terms to be determined at the time of sale and to be set forth in
a supplement to this Prospectus (a "Prospectus Supplement"). Each series of
Securities, which may include one or more classes of Notes and/or one or more
classes of Certificates, will be issued by a trust to be formed with respect to
such series (each, a "Trust"). Each Trust will be formed pursuant to either a
Trust Agreement to be entered into between Ford Credit Auto Receivables Two
L.P., as Seller (the "Seller"), and the Trustee specified in the related
Prospectus Supplement (the "Trustee") or a Pooling and Servicing Agreement to
be entered into among the Trustee, the Seller and Ford Motor Credit Company, as
Servicer (the "Servicer"). If a series of Securities includes Notes, such Notes
of a series will be issued and secured pursuant to an Indenture between the
Trust and the Indenture Trustee specified in the related Prospectus Supplement
(the "Indenture Trustee") and will represent indebtedness of the related Trust.
The Certificates of a series will represent fractional undivided interests in
the related Trust. The related Prospectus Supplement will specify which class
or classes of Notes, if any, and which class or classes of Certificates, if
any, of the related series are being offered thereby. The property of each
Trust will include a pool of motor vehicle retail installment sale contracts
secured by new or used automobiles and light trucks (the "Receivables"),
certain monies due or received thereunder on or after the applicable Cutoff
Date set forth in the related Prospectus Supplement, security interests in the
vehicles financed thereby and certain other property, all as described herein
and in the related Prospectus Supplement. In addition, if so specified in the
related Prospectus Supplement, the property of the Trust will include monies on
deposit in a trust account (the "Pre-Funding Account") to be established with
the Indenture Trustee or the applicable Trustee, as the case may be, which will
be used to purchase additional motor vehicle retail installment sale contracts
(the "Subsequent Receivables") from the Seller from time to time during the
Funding Period specified in the related Prospectus Supplement.
Each class of Securities of any series will represent the right to receive
a specified amount of payments of principal and interest on the related
Receivables, at the rates, on the dates and in the manner described herein and
in the related Prospectus Supplement. If a series includes multiple classes of
Securities, the rights of one or more classes of Securities to receive payments
may be senior or subordinate to the rights of one or more of the other classes
of such series. Distributions on Certificates of a series may be subordinated
in priority to payments due on any related Notes to the extent described herein
and in the related Prospectus Supplement. A series may include one or more
classes of Notes and/or Certificates which differ as to the timing and priority
of payment, interest rate or amount of distributions in respect of principal or
interest or both. A series may include one or more classes of Notes or
Certificates entitled to distributions in respect of principal with
disproportionate, nominal or no interest
<PAGE> 119
distributions, or to interest distributions, with disproportionate, nominal or
no distributions in respect of principal. The rate of payment in respect of
principal of any class of Notes and distributions in respect of the Certificate
Balance of the Certificates of any class will depend on the priority of payment
of such class and the rate and timing of payments (including prepayments,
defaults, liquidations and repurchases of Receivables) on the related
Receivables. A rate of payment lower or higher than that anticipated may affect
the weighted average life of each class of Securities in the manner described
herein and in the related Prospectus Supplement.
PROSPECTIVE INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE INFORMATION
SET FORTH IN "RISK FACTORS" ON PAGE 11 HEREIN.
______________________
ANY NOTES OF A SERIES REPRESENT OBLIGATIONS OF, AND THE CERTIFICATES OF A
SERIES REPRESENT BENEFICIAL INTERESTS IN, THE RELATED TRUST ONLY AND DO NOT
REPRESENT OBLIGATIONS OF OR INTERESTS IN, AND ARE NOT GUARANTEED OR INSURED BY,
FORD CREDIT AUTO RECEIVABLES TWO L.P., FORD CREDIT AUTO RECEIVABLES TWO, INC.,
FORD MOTOR CREDIT COMPANY, FORD MOTOR COMPANY OR ANY OF THEIR RESPECTIVE
AFFILIATES.
______________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Retain this Prospectus for future reference. This Prospectus may not be
used to consummate sales of Securities offered hereby unless accompanied by a
Prospectus Supplement.
______________________
The date of this Prospectus is _____ __, 1996.
2
<PAGE> 120
AVAILABLE INFORMATION
The Seller, as originator of each Trust, has filed with the Securities and
Exchange Commission (the "Commission") a Registration Statement (together with
all amendments and exhibits thereto, referred to herein as the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the Notes and the Certificates offered pursuant to this
Prospectus. The Seller intends to establish a Trust and to cause it to issue a
series of Securities as soon as practicable after the Registration Statement
becomes effective. For further information, reference is made to the
Registration Statement which may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549; and at the Commission's regional offices at
Northwestern Atrium Center, 500 West Madison Street, 14th Floor, Chicago,
Illinois 60661 and Seven World Trade Center, New York, New York 10048. Copies
of the Registration Statement may be obtained from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by each Trust pursuant to Section 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934, as amended, subsequent to the
date of this Prospectus and prior to the termination of the offering of the
Securities shall be deemed to be incorporated by reference in this Prospectus.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Seller will provide without charge to each person, including any
beneficial owner of Securities, to whom a copy of this Prospectus is delivered,
on the written or oral request of any such person, a copy of any or all of the
documents incorporated herein or in any related Prospectus Supplement by
reference, except the exhibits to such documents (unless such exhibits are
specifically incorporated by reference in such docu ments). Requests for such
copies should be directed to Ford Credit Auto Receivables Two L.P., c/o
Secretary, Ford Credit Auto Receivables Two, Inc., The American Road, Dearborn,
Michigan 48121 (Telephone: (313) 322-1989).
3
<PAGE> 121
SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and by reference to
the information with respect to the Securities of any series contained in the
related Prospectus Supplement to be prepared and delivered in connection with
the offering of such Securities. Certain capitalized terms used in this summary
are defined elsewhere in this Prospectus on the pages indicated in the "Index
of Terms."
ISSUER ...................... With respect to each series of Securities, the
Trust to be formed pursuant to either a Trust
Agreement (as amended and supplemented from time
to time, a "Trust Agreement") between the Seller
and the Trustee for such Trust (the "Trust" or
the "Issuer") or a Pooling and Servicing
Agreement (as amended and supplemented from
time to time, the "Pooling and Servicing
Agreement") among the Trustee, the Seller and
Ford Motor Credit Company, as Servicer.
SELLER...................... Ford Credit Auto Receivables Two L.P., a
Delaware limited partnership (the "Seller").
SERVICER.................... Ford Motor Credit Company, a Delaware
corporation (the "Servicer" or "Ford Credit").
TRUSTEE..................... With respect to each series of Securities, the
Trustee specified in the related Prospectus
Supplement.
INDENTURE TRUSTEE........... With respect to any applicable series
of Securities, the Indenture Trustee specified in
the related Prospectus Supplement.
THE NOTES................... A series of Securities may include one or more
classes of Notes, which will be issued pursuant to
an Indenture between the Trust and the Indenture
Trustee (as amended and supplemented from time to
time, an "Indenture"). The related Prospectus
Supplement will specify which class or classes, if
any, of Notes of the related series are being
offered thereby.
Notes will be available for purchase in the
denominations specified in the related
Prospectus Supplement and will be available in
book-entry form only. No person acquiring a
beneficial ownership interest in Notes (a
"Note Owner") will be entitled to receive
Definitive Notes, except in the limited
circumstances described herein or in the related
Prospectus Supplement. See "Certain Information
Regarding the Securities--Definitive
Securities."
Each class of Notes may have a stated principal
amount and may bear interest at a specified rate
or rates (with respect to each class of Notes,
the "Note Interest Rate"). Each class of Notes
may have a different Note Interest Rate, which
may be a fixed, variable or adjustable Note
Interest Rate, or any combination of the
foregoing. The related Prospectus Supplement
will specify the stated principal amount and the
Note Interest Rate for each class of Notes or
the method for determining such Note Interest
Rate.
4
<PAGE> 122
With respect to a series that includes two or more
classes of Notes, each class may differ as to
the timing and priority of payments, seniority,
allocations of losses, Note Interest Rate or
amount of payments of principal or interest, or
payments of principal or interest in respect of
any such class or classes may or may not be made
upon the occurrence of specified events or on
the basis of collections from designated
portions of the Receivables Pool. In addition,
a series may include one or more classes of
Notes ("Strip Notes") entitled to (i) principal
payments with disproportionate, nominal or no
interest payments or (ii) interest payments with
disproportionate, nominal or no principal
payments.
If the Servicer exercises its option to purchase
the Receivables of a Trust (or, if not, and if
and to the extent provided in the related
Prospectus Supplement, if satisfactory bids for
the purchase of such Receivables are received),
in the manner and on the respective terms and
conditions described under "Description of the
Transfer and Servicing Agreements--Termination,"
the outstanding Notes will be redeemed as set
forth in the related Prospectus Supplement.
In addition, if the related Prospectus Supplement
provides that the property of a Trust will
include a Pre-Funding Account (as such term is
defined in the related Prospectus Supplement,
the "Pre-Funding Account"), one or more classes
of the outstanding Notes will be subject to
partial redemption on or immediately following
the end of the Funding Period (as such term is
defined in the related Prospectus Supplement,
the "Funding Period") in an amount and manner
specified in the related Prospectus Supplement.
In the event of such partial redemption, the
Noteholders may be entitled to receive a
prepayment premium from the Trust, in the amount
and to the extent provided in the related
Prospectus Supplement.
THE CERTIFICATES.......... A series of Securities will include one or more
classes of Certificates and may or may not
include any Notes. The related Prospectus
Supplement will specify which class or classes,
if any, of the Certificates are being offered
thereby.
Certificates will be available for purchase in the
denominations specified in the related
Prospectus Supplement and may be available in
book-entry form. If Certificates are issued in
book-entry form, no person acquiring a
beneficial ownership interest in Certificates (a
"Certificate Owner") will be entitled to receive
Definitive Certificates, except in the limited
circumstances described herein or in the related
Prospectus Supplement. See "Certain Information
Regarding the Securities--Definitive
Securities."
Each class of Certificates may have a stated
Certificate Balance (with respect to each class
of Certificates, the "Certificate Balance") and
may accrue interest on such Certificate Balance
at a specified rate (with respect to each class
of Certificates, the "Certificate Rate"). Each
class of Certificates may have a different
Certificate Rate, which may be a fixed, variable
or adjustable Certificate Rate, or any
combination of the foregoing. The related
Prospectus Supplement will specify the
Certificate Balance and the Certificate Rate for
each class of Certificates or the method for
determining the Certificate Rate.
5
<PAGE> 123
With respect to a series that includes two or more
classes of Certificates, each class may differ
as to timing and priority of distributions,
seniority, allocations of losses, Certificate
Rate or amount of distributions in respect of
principal or interest, or distributions in
respect of principal or interest in respect of
any such class or classes may or may not be made
upon the occurrence of specified events or on
the basis of collections from designated
portions of the Receivables Pool. In addition, a
series may include one or more classes of
Certificates ("Strip Certificates") entitled to
(i) distributions in respect of principal with
disproportionate, nominal or no interest
distributions or (ii) interest distributions
with disproportionate, nominal or no
distributions in respect of principal.
If a series of Securities includes classes of
Notes, distributions in respect of the
Certificates may be subordinated in priority of
payment to payments on the Notes to the extent
specified in the related Prospectus Supplement.
If the Servicer exercises its option to purchase
the Receivables of a Trust (or, if not, and if
and to the extent provided in the related
Prospectus Supplement, satisfactory bids for
the purchase of such Receivables are received),
in the manner and on the respective terms and
conditions described under "Description of the
Transfer and Servicing Agreements--Termination,"
Certificateholders will receive as a prepayment
an amount in respect of the Certificates as
specified in the related Prospectus Supplement.
In addition, if the related Prospectus Supplement
provides that the property of a Trust will
include a Pre-Funding Account,
Certificateholders may receive a partial
prepayment of principal on or immediately
following the end of the Funding Period in an
amount and manner specified in the related
Prospectus Supplement. In the event of such
partial prepayment, the Certificateholders may
be entitled to receive a prepayment premium from
the Trust, in the amount and to the extent
provided in the related Prospectus Supplement.
THE TRUST PROPERTY.......... The property of each Trust will include a pool of
motor vehicle retail installment sale contracts
secured by new or used automobiles or light
trucks (the "Receivables"), including rights to
receive certain payments made with respect to
such Receivables, security interests in the
vehicles financed thereby (the "Financed
Vehicles"), certain accounts and the proceeds
thereof and any proceeds from claims on certain
related insurance policies. On the Closing Date
specified in the related Prospectus Supplement
with respect to a Trust (the "Closing Date"),
the Seller will sell or transfer Receivables
(the "Initial Receivables") having an aggregate
principal balance specified in the related
Prospectus Supplement as of the date specified
therein (the "Initial Cutoff Date") to such
Trust pursuant to either a Sale and Servicing
Agreement among the Seller, the Servicer and the
Trust (as amended and supplemented from time to
time, a "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 among the
Seller, the Servicer and the Trustee. The
property of each Trust will also include amounts
on deposit in certain trust accounts, including
the related Collection Account, any Pre-Funding
Account,
6
<PAGE> 124
any Yield Supplement Account (as defined in the
related Prospectus Supplement), any Reserve
Account and any other account identified in the
applicable Prospectus Supplement.
To the extent provided in the related Prospectus
Supplement, the Seller will be obligated
(subject only to the availability thereof) to
sell, and the related Trust will be obligated to
purchase (subject to the satisfaction of certain
conditions described in the applicable Sale and
Servicing Agreement or Pooling and Servicing
Agreement), additional Receivables (the
"Subsequent Receivables") from time to time (as
frequently as daily) during the Funding Period
specified in the related Prospectus Supplement
having an aggregate principal balance
approximately equal to the amount on deposit in
the Pre-Funding Account (the "Pre-Funded
Amount") on the Closing Date.
The Receivables arise or will arise from loans
originated by motor vehicle dealers (the
"Dealers") and purchased by Ford Credit pursuant
to agreements with the Dealers for subsequent
sale to the Seller. The Receivables for any
given Receivables Pool will be purchased by the
Seller from Ford Credit pursuant to a Purchase
Agreement between the Seller and Ford Credit (as
amended and supplemented from time to time, a
"Purchase Agreement") and will be selected from
the contracts owned by Ford Credit based on the
criteria specified in the Sale and Servicing
Agreement or Pooling and Servicing Agreement, as
applicable, and described herein and in the
related Prospectus Supplement. The purchase
price for the Receivables purchased by the Trust
from the Seller and by the Seller from Ford
Credit may be more or less than the aggregate
principal balance thereof.
CREDIT AND CASH FLOW
ENHANCEMENT............... If and to the extent specified in the related
Prospectus Supplement, credit enhancement with
respect to a Trust or any class or classes of
Securities may include any one or more of the
following: subordination of one or more other
classes of Securities, a Reserve Account,
overcollateralization, letters of credit, credit
or liquidity facilities, surety bonds,
guaranteed investment contracts, guaranteed rate
agreements, 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.
Any form of credit enhancement may have certain
limitations and exclusions from coverage
thereunder, which will be described in the
related Prospectus Supplement.
RESERVE ACCOUNT............. If so specified in the related Prospectus
Supplement, a Reserve Account will be created
for the related Trust with an initial deposit by
the Seller of cash or certain investments having
a value equal to the amount specified in the
related Prospectus Supplement. To the extent
specified in the related Prospectus Supplement,
funds in the Reserve Account will thereafter be
supplemented by the deposit of amounts remaining
on any Distribution Date after making all other
distributions required on such date and any
amounts deposited from time to time from the
Pre-Funding Account in connection with a
purchase of Subsequent Receivables. Amounts in
the Reserve Account will be available
7
<PAGE> 125
to cover shortfalls in amounts due to the
holders of those classes of Securities specified
in the related Prospectus Supplement in the
manner and under the circumstances specified
therein. The related Prospectus Supplement will
also specify to whom and the manner and
circumstances under which amounts on deposit in
the Reserve Account (after giving effect to all
other required distributions to be made by the
applicable Trust) in excess of the Specified
Reserve Balance (as defined in the related
Prospectus Supplement) will be distributed.
PRE-FUNDING ACCOUNT......... If so specified in the related Prospectus
Supplement, the property of each Trust may
include monies on deposit in a Pre-Funding
Account, which monies will be used to purchase
Subsequent Receivables from the Seller from time
to time during the Funding Period specified in
the related Prospectus Supplement. The amount
that may be initially deposited into a
Pre-Funding Account may be up to 100% of the net
proceeds from the sale of the Securities issued
by a Trust and the length of the Funding Period
may be up to one year. The amount that may be
initially deposited into a Pre-Funding Account,
and the length of a Funding Period, will be
specified in the related Prospectus Supplement.
TRANSFER AND SERVICING
AGREEMENTS................. With respect to each Trust, the Seller will sell
the related Receivables to such Trust pursuant
to a Sale and Servicing Agreement or a Pooling
and Servicing Agreement. The rights and
benefits of any Trust under a Sale and Servicing
Agreement will be assigned to the Indenture
Trustee as collateral for the Notes of the
related series. The Servicer will agree with
such Trust to be responsible for servicing,
managing, maintaining custody of and making
collections on the Receivables. Ford Credit
will undertake certain administrative duties
under an Administration Agreement with respect
to any Trust that has issued Notes.
To the extent provided in the related Prospectus
Supplement, the Servicer will advance scheduled
payments under each Precomputed Receivable which
shall not have been timely made (a "Precomputed
Advance"), to the extent that the Servicer, in
its sole discretion, expects to recoup the
Precomputed Advance from subsequent payments on
or with respect to such Receivable. With
respect to Simple Interest Receivables, to the
extent provided in the related Prospectus
Supplement, the Servicer shall advance any
interest shortfall (a "Simple Interest Advance"
and, together with a Precomputed Advance, an
"Advance"). The Servicer shall be entitled to
reimbursement of Advances from subsequent
payments on or with respect to the Receivables
to the extent described herein and in the
related Prospectus Supplement.
The Seller will be obligated to repurchase any
Receivable if the interest of the applicable
Trust in such Receivable is materially adversely
affected by a breach of any representation or
warranty made by the Seller with respect to the
Receivable, if the breach has not been cured
following the discovery by or notice to the
Seller of the breach.
8
<PAGE> 126
The Servicer will be obligated to purchase or
make Advances with respect to any Receivable if,
among other things, it extends the date for
final payment by the Obligor of such Receivable
beyond the applicable Final Scheduled Maturity
Date (as defined in the related Prospectus
Supplement, the "Final Scheduled Maturity
Date"), changes the annual percentage rate
("APR") or the total amount or number of
scheduled payments of such Receivable or fails
to maintain a perfected security interest in the
related Financed Vehicle.
To the extent provided in the related Prospectus
Supplement, the Servicer will be entitled to
receive a fee for servicing the Receivables of
each Trust equal to a specified percentage of
the aggregate principal balance of the related
Receivables Pool, as set forth in the related
Prospectus Supplement, plus certain late fees,
prepayment charges and other administrative fees
or similar charges, plus reinvestment proceeds
on any payments received in respect of the
Receivables. See "Description of the Transfer
and Servicing Agreements--Servicing Compensation
and Expenses" herein and "Description of the
Transfer and Servicing Agreements--Servicing
Compensation and Expenses" or "Description of
the Certificates--Servicing Compensation and
Expenses" in the related Prospectus Supplement.
CERTAIN LEGAL ASPECTS
OF THE RECEIVABLES;
REPURCHASE OBLIGATIONS..... In connection with the sale of Receivables to a
Trust, security interests in the Financed
Vehicles securing such Receivables will be
assigned by the Seller to such Trust. Due to
administrative burden and expense, the
certificates of title to the Financed Vehicles
will not be amended to reflect the assignment to
such Trust. In the absence of such an
amendment, such Trust may not have a perfected
security interest in the Financed Vehicles
securing the Receivables in some states. The
Seller will be obligated to repurchase any
Receivable sold to a Trust as to which a first
perfected security interest in the name of the
Seller in the Financed Vehicle securing such
Receivable shall not exist as of the date such
Receivable is purchased by such Trust, if such
breach shall materially adversely affect the
interest of such Trust in such Receivable and if
such failure or breach shall not have been cured
by the last day of the second (or, if the Seller
elects, the first) month following the discovery
by or notice to the Seller of such breach. If
such Trust does not have a perfected security
interest in a Financed Vehicle, its ability to
realize on such Financed Vehicle in the event of
a default may be adversely affected. To the
extent the security interest is perfected, such
Trust will have a prior claim over subsequent
purchasers of such Financed Vehicles and holders
of subsequently perfected security interests.
However, as against subsequent purchasers who
were to obtain physical possession of the
Receivables without knowledge of their
assignment to the Trust or holders of liens for
repairs of Financed Vehicles or for taxes unpaid
by an Obligor under a Receivable, or because of
fraud or negligence, such Trust could lose the
priority of its security interest or its
security interest in Financed Vehicles. Neither
the Seller nor the Servicer will have any
obligation to repurchase a Receivable as to
which any of the aforementioned occurrences
result in a Trust's losing the priority of its
security interest or its security interest in
such Financed Vehicle after the Closing Date
9
<PAGE> 127
with respect to an Initial Receivable or after
the applicable Subsequent Transfer Date with
respect to a Subsequent Receivable.
Federal and state consumer protection laws impose
requirements upon creditors in connection with
extensions of credit and collections of retail
installment loans, and certain of these laws
make an assignee of such a loan liable to the
obligor thereon for any violation by the lender.
The Seller will be obligated to repurchase any
Receivable which fails to comply with such
requirements.
TAX STATUS.................. Unless the Prospectus Supplement specifies that
the related Trust will be treated as a grantor
trust, upon the issuance of the related series
of Securities (a) Special Tax Counsel to such
Trust expects to deliver an opinion to the
effect that, for federal income tax purposes:
(i) any Notes of such series will be
characterized as debt and (ii) such Trust will
not be characterized as an association (or a
publicly traded partnership) taxable as a
corporation and (b) Michigan Tax Counsel to such
Trust expects to deliver an opinion to the
effect that the same characterizations would
apply for Michigan income and Single Business
Tax purposes as for federal income tax purposes.
In respect of any such series, each Noteholder,
if any, by the acceptance of a Note of such
series, will agree to treat such Note as
indebtedness, and each Certificateholder, by the
acceptance of a Certificate of such series, will
agree to treat such Trust as a partnership in
which such Certificateholder is a partner for
federal income and Michigan income and Single
Business Tax purposes. Alternative
characterizations of such Trust and such
Certificates are possible, but would not result
in materially adverse tax consequences to
Certificateholders.
If the Prospectus Supplement specifies that the
related Trust will be treated as a grantor
trust, upon the issuance of the related series
of Certificates (a) Special Tax Counsel to such
Trust expects to deliver an opinion to the
effect that such Trust will be treated as a
grantor trust for federal income tax purposes
and will not be subject to federal income tax
and (b) Michigan Tax Counsel to such Trust
expects to deliver an opinion to the effect that
the same treatment would apply for Michigan
income and Single Business Tax purposes as for
federal income tax purposes.
See "Certain Federal Income Tax Consequences"
herein and in the related Prospectus Supplement
and "Certain State Tax Consequences" in the
related Prospectus Supplement. Special Tax
Counsel and Michigan Tax Counsel will each be
identified by name in the related Prospectus
Supplement.
ERISA CONSIDERATIONS ........ A fiduciary of any employee benefit plan or other
retirement arrangement subject to the Employee
Retirement Income Security Act of 1974, as
amended ("ERISA"), or Section 4975 of the
Internal Revenue Code of 1986, as amended (the
"Code"), should carefully review with its legal
advisors whether the purchase or holding of
Notes or Certificates of any series could give
rise to a transaction prohibited or not
otherwise permissible under ERISA or Section
4975 of the Code. See "ERISA Considerations"
herein and in the related Prospectus Supplement.
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RISK FACTORS
CERTAIN LEGAL ASPECTS--THE RECEIVABLES
Pursuant to each Sale and Servicing Agreement or Pooling and Servicing
Agreement, the Servicer will service and administer the Receivables held by
each Trust and, as custodian on behalf of such Trust, will maintain possession
of the retail installment sale contracts and any other documents relating to
such Receivables. To assure uniform quality in servicing both the Receivables
and the Servicer's own portfolio of receivables, as well as to facilitate
servicing and save administrative costs, the installment sale contracts and
other documents relating thereto will not be physically segregated from other
similar documents that are in the Servicer's possession or otherwise stamped
or marked to reflect the transfer to a given Trust so long as Ford Credit is
servicing the related Receivables. However, Uniform Commercial Code financing
statements reflecting the sale and assignment of such Receivables by Ford
Credit to the Seller and by the Seller to such Trust will be filed, and the
Servicer's accounting records and computer systems will be marked to reflect
such sale and assignment. Because such Receivables will remain in the
Servicer's possession and will not be stamped or otherwise marked to reflect
the assignment to such Trust, if a subsequent purchaser were to obtain physical
possession of such Receivables without knowledge of the assignment, the Trust's
interest in the Receivables could be defeated.
In most states, assignments such as those under the Purchase Agreement and
the Sale and Servicing Agreement or Pooling and Servicing Agreement, as
applicable, relating to each Trust, together with a perfected security interest
in the chattel paper are an effective conveyance of a security interest in the
vehicles subject to the chattel paper without amendment of any lien noted on a
vehicle's certificate of title, and the assignee succeeds thereby to the
assignor's rights as secured party. In the absence of fraud or forgery by the
vehicle owner or the Servicer or administrative error by state or local
agencies, the notation of Ford Credit's lien on the certificates of title will
be sufficient to protect such Trust against the rights of subsequent purchasers
of a Financed Vehicle or subsequent lenders who take a security interest in a
Financed Vehicle. If there are any Financed Vehicles as to which Ford Credit
failed to obtain a perfected security interest, its security interest would be
subordinate to, among others, subsequent purchasers of the Financed Vehicles
and holders of perfected security interests. Such a failure would constitute a
breach of Ford Credit's warranties under the related Purchase Agreement and of
the Seller's warranties under the related Sale and Servicing Agreement or
Pooling and Servicing Agreement, as applicable, and would create an obligation
of Ford Credit under such Purchase Agreement and of the Seller under such Sale
and Servicing Agreement or Pooling and Servicing Agreement to purchase the
related Receivable unless the breach is cured. See "Description of the
Transfer and Servicing Agreements--Sale and Assignment of Receivables." By not
identifying the Trust as the secured party on the certificate of title, the
Trust's interest in the chattel paper may not have the benefit of the security
interest in the Financed Vehicle in all states or such security interest could
be defeated through fraud or negligence. The Seller will assign its rights
under each Purchase Agreement to the related Trust. See "Certain Legal Aspects
of the Receivables--Security Interests in Vehicles."
CERTAIN LEGAL ASPECTS--BANKRUPTCY CONSIDERATIONS
The Seller has taken steps in structuring the transactions contemplated
herein and in the related Prospectus Supplement that are intended to ensure
that the voluntary or involuntary application for relief by Ford Credit under
the United States Bankruptcy Code or similar applicable state laws ("Insolvency
Laws") will not result in consolidation of the assets and liabilities of either
of the Seller or Ford Credit Auto Receivables Two, Inc., the general partner of
the Seller (the "General Partner"), with those of Ford Credit. These steps
include the creation of the Seller as a separate, limited-purpose limited
partnership pursuant to a limited partnership agreement containing certain
limitations (including restrictions on the nature of the Seller's business and
a restriction on the Seller's ability to commence a voluntary case or
proceeding under any Insolvency Law without the consent of the General
Partner). The General Partner's Certificate of Incorporation contains similar
limitations, including a restriction on the General Partner's ability to
commence a voluntary case or proceeding with respect to itself or the Seller
under any Insolvency Law without the unanimous affirmative vote of all of the
General Partner's directors. However, there
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can be no assurance that the activities of the Seller or the General Partner
would not result in a court concluding that the assets and liabilities of such
entity should be consolidated with those of Ford Credit in a proceeding under
any Insolvency Law. See "The Seller and the General Partner."
It is intended by Ford Credit and the Seller that each transfer of
Receivables by Ford Credit to the Seller under a Purchase Agreement constitute
a "true sale" of such Receivables to the Seller. If the transfer constitutes
such a "true sale," the Receivables and the proceeds thereof would not be part
of Ford Credit's bankruptcy estate under Section 541 of the United States
Bankruptcy Code should Ford Credit become the subject of a bankruptcy case
subsequent to the transfer of the Receivables to the Seller.
In Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d 948 (10th Cir. 1993),
cert. denied 114 S. Ct. 554 (1993), the United States Court of Appeals for
the 10th Circuit suggested that even where a transfer of accounts from a seller
to a buyer constitutes a "true sale," the accounts would nevertheless
constitute property of the seller's bankruptcy estate in a bankruptcy of the
seller. If Ford Credit or the Seller were to become subject to a bankruptcy
proceeding and a court were to follow the Octagon court's reasoning,
Securityholders might experience delays in payment or possibly losses on their
investment in the Securities. Counsel to the Seller has advised the Seller
that the reasoning of the Octagon case appears to be inconsistent with other
precedent. In addition, the Permanent Editorial Board of the UCC has issued an
official commentary (PEB Commentary No. 14) which characterizes the Octagon
court's interpretation of Article 9 of the UCC as erroneous. Such commentary
states that nothing in Article 9 is intended to prevent the transfer of
ownership of accounts or chattel paper. However, such commentary is not
legally binding on any court. See "The Seller and the General Partner."
DEFICIENCIES FROM SALE UPON INSOLVENCY OR DISSOLUTION OF SELLER OR GENERAL
PARTNER
With respect to each Trust that is not a grantor trust, if an Insolvency
Event or a dissolution occurs with respect to the Seller or the General Partner
while the Notes of the related series are outstanding, if so specified in the
related Prospectus Supplement the Indenture Trustee or Trustee for such Trust
will be required to promptly sell, dispose of or otherwise liquidate the
related Receivables in a commercially reasonable manner on commercially
reasonable terms, unless the related Trustee shall have received written
instructions from (i) the Noteholders (other than the Seller, the Servicer or
their affiliates) of each class of Notes of such series representing not less
than a majority of the aggregate unpaid principal amount of such class of
Notes and the right to receive interest thereon, (ii) the Certificateholders
(other than the Seller) of Certificates of such series representing not less
than a majority of the aggregate Certificate Balance of all such Certificates
and the right to receive interest thereon, (iii) not less than a majority of
the holders (other than the Seller, the Servicer or their affiliates) of
certain interests, if any, in the Reserve Account with respect to such Trust,
(iv) not less than a majority of the holders (other than the Seller, the
Servicer or their affiliates) of Final Payment Securities, if any, of such
series and the right to receive interest thereon and (v) any other person
specified in the related Prospectus Supplement, to the effect that each such
party disapproves of the liquidation of such Receivables and termination of
such Trust and in connection therewith, the related Trustee (x) appoints an
entity acceptable to Ford Credit to acquire an interest in such Trust and to
act as a substitute "general partner" for federal income tax purposes and (y)
obtains an opinion of counsel as to certain tax matters. The proceeds from any
such sale, disposition or liquidation of Receivables will be treated as
collections on the Receivables and deposited in the Collection Account of such
Trust. If the proceeds from the liquidation of the Receivables and any amounts
on deposit in the Reserve Account, the Note Payment Account, if any, and the
Certificate Distribution Account with respect to any such Trust and any amounts
available from any credit enhancement are not sufficient to pay any Notes and
the Certificates of the related series in full, the amount of principal
returned to any Noteholders or the Certificateholders will be reduced and such
Noteholders and Certificateholders will incur a loss. See "Description of the
Transfer and Servicing Agreements--Insolvency Event or Dissolution."
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TRUST'S RELATIONSHIP TO THE SELLER, THE GENERAL PARTNER, FORD CREDIT, FORD AND
THEIR AFFILIATES
None of the Seller, the General Partner, Ford Credit or Ford Motor Company
("Ford") or their affiliates is generally obligated to make any payments in
respect of any Notes, the Certificates or the Receivables of a given Trust.
However, in connection with the sale of Receivables by the Seller to a
given Trust, the Seller will make representations and warranties with respect
to the characteristics of such Receivables and, in certain circumstances, the
Seller may be required to repurchase Receivables with respect to which such
representations and warranties have been breached. See "Description of the
Transfer and Servicing Agreements--Sale and Assignment of Receivables." In
addition, under certain circumstances, the Servicer may be required to purchase
Receivables. See "Description of the Transfer and Servicing
Agreements--Servicing Procedures." Moreover, if Ford Credit were to cease
acting as Servicer, delays in processing payments on the Receivables and
information in respect thereof could occur and result in delays in payments to
the Securityholders.
The related Prospectus Supplement may set forth certain additional
information regarding the Seller, the General Partner, Ford Credit and Ford.
In addition, Ford Credit and Ford are subject to the information requirements
of the Exchange Act and in accordance therewith file reports and other
information with the Commission. For further information regarding Ford Credit
and Ford, reference is made to such reports and other information, which are
available as described under "Available Information."
SUBORDINATION; LIMITED ASSETS
To the extent specified in the related Prospectus Supplement,
distributions of interest and principal on one or more classes of Certificates
of a series may be subordinated in priority of payment to interest and
principal due on the Notes, if any, of such series or one or more other classes
of Certificates of such series. Moreover, each Trust will not have, nor is it
permitted or expected to have, any significant assets or sources of funds other
than the Receivables and, to the extent provided in the related Prospectus
Supplement, a Pre-Funding Account, a Yield Supplement Account, a Reserve
Account and any other credit or cash flow enhancement. The Notes of any series
will represent obligations solely of, and the Certificates of any series will
represent interests solely in, the related Trust and neither the Notes nor the
Certificates of any series will be insured or guaranteed by the Seller, the
Servicer, the applicable Trustee, any Indenture Trustee or any other person or
entity. Consequently, holders of the Securities of any series must rely for
repayment upon payments on the related Receivables and, if and to the extent
available, amounts on deposit in the Pre-Funding Account (if any), the Yield
Supplement Account (if any), the Reserve Account (if any) and any other credit
or cash flow enhancement, all as specified in the related Prospectus
Supplement. Amounts to be deposited in any such Reserve Account with respect
to any Trust will be limited in amount, and the amount required to be on
deposit in such Reserve Account will be reduced as the Pool Balance is reduced.
In addition, funds in any such Reserve Account will be available on each
Distribution Date to cover shortfalls in distributions of interest and
principal on the related Securities. If any such Reserve Account is depleted,
the related Trust will depend solely on current payments on its Receivables to
make payments on the related Securities.
If so directed by the holders of the requisite percentage of outstanding
Notes of a series, following an acceleration of the Notes upon an Event of
Default the applicable Indenture Trustee may sell the related Receivables in
certain limited circumstances as specified in the related Indenture. See
"Description of the Notes--The Indenture--Events of Default; Rights upon Event
of Default." However, there is no assurance that the market value of such
Receivables will at any time be equal to or greater than the aggregate
principal amount of such outstanding Notes. Therefore, upon an Event of
Default with respect to the Notes of any series, there can be no assurance that
sufficient funds will be available to repay the related Noteholders in full.
In addition, the amount of principal required to be paid to Noteholders of such
series under the related Indenture will generally be limited to amounts
available to be deposited in the applicable Note Payment Account. Therefore,
the failure to pay principal on a class
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of Notes generally will not result in the occurrence of an Event of Default
until the final scheduled Distribution Date for such class of Notes.
MATURITY AND PREPAYMENT CONSIDERATIONS
All the Receivables are prepayable at any time. (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) and liquidations due to default, as well as receipts of proceeds from
physical damage, credit life and disability insurance policies and certain
other Receivables repurchased for administrative reasons.) The rate of
prepayments on the Receivables may be influenced by a variety of economic,
social and other factors, including the fact that an Obligor generally may not
sell or transfer the Financed Vehicle securing a Receivable without the
consent of the Seller. The rate of prepayment on the Receivables may also be
influenced by the structure of the loan. In addition, under certain
circumstances, the Seller will be obligated to repurchase Receivables pursuant
to a Sale and Servicing Agreement or Pooling and Servicing Agreement as a
result of breaches of representations and warranties and, under certain
circumstances, the Servicer will be obligated to purchase Receivables pursuant
to such Sale and Servicing Agreement or Pooling and Servicing Agreement as a
result of breaches of certain covenants. See "Description of the Transfer and
Servicing Agreements--Sale and Assignment of Receivables." Consistent with its
normal servicing practices and procedures, the Servicer may, in its discretion
and on a case-by-case basis, arrange with Obligors to extend or modify the
terms of the related Receivables. Some of such arrangements (including any
extension beyond the Final Scheduled Maturity Date set forth in the related
Prospectus Supplement) will cause the Servicer to be obligated to repurchase
such Receivables, as described above. Any reinvestment risks resulting from a
faster or slower incidence of prepayment of Receivables held by a given Trust
will be borne entirely by the Securityholders of the related series of
Securities. See also "Description of the Transfer and Servicing
Agreements--Termination" regarding the Servicer's option to purchase the
Receivables of a given Receivables Pool and "--Insolvency Event or Dissolution"
regarding the sale of the Receivables owned by a Trust that is not a grantor
trust if an Insolvency Event or a dissolution with respect to the Seller or the
General Partner occurs.
RISK OF COMMINGLING
With respect to each Trust, the Servicer will deposit all payments on the
related Receivables received from Obligors and all proceeds of the related
Receivables collected during each Collection Period into the related Collection
Account not later than the business day after receipt. However, so long as
Ford Credit is the servicer and provided that (i) there exists no Event of
Servicing Termination and (ii) each other condition to making monthly deposits
as may be required by the related Sale and Servicing Agreement or Pooling and
Servicing Agreement is satisfied, the Servicer may retain such amounts until
the applicable Distribution Date. The Servicer or the Seller, as the case may
be, will remit the aggregate Purchase Amount of any Receivables to be purchased
from a Trust to the related Collection Account on the applicable Distribution
Date. 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. If the Servicer were unable to remit such
funds, the applicable Securityholders might incur a loss. To the extent set
forth in the related 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 Purchase
Amount with respect to Receivables purchased by the Servicer.
EVENT OF SERVICING TERMINATION
With respect to a series of Securities that includes Notes, in the event
an Event of Servicing Termination occurs, the Indenture Trustee or the
Noteholders with respect to such series, as described under "Description of the
Transfer and Servicing Agreements--Rights upon Event of Servicing Termination,"
may remove the Servicer without the consent of the Trustee or any of the
Certificateholders with respect to such series. The Trustee or the
Certificateholders with respect to such series will not have the ability to
remove the Servicer if an Event of
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Servicing Termination occurs. In addition, the Noteholders of such series
have the ability, with certain specified exceptions, to waive Events of
Servicing Termination, including Events of Servicing Termination that could
materially adversely affect the Certificateholders of such series. See
"Description of the Transfer and Servicing Agreements--Waiver of Past Events of
Servicing Termination."
BOOK-ENTRY REGISTRATION
If so specified in the related Prospectus Supplement, each class of
Securities of a given series will be initially represented by one or more
certificates registered in the name of Cede & Co. ("Cede"), or any other
nominee for The Depository Trust Company ("DTC") set forth in the related
Prospectus Supplement (Cede, or such other nominee, "DTC's Nominee"), and will
not be registered in the names of the holders of the Securities of such series
or their nominees. Because of this, unless and until Definitive Securities for
such series are issued, holders of such Securities will not be recognized by
the Trustee or any Indenture Trustee as "Certificateholders," "Noteholders" or
"Securityholders," as the case may be (as such terms are used herein or in the
related Pooling and Servicing Agreement or the related Indenture and Trust
Agreement, as applicable). Hence, until Definitive Securities are issued,
holders of such Securities will be able to exercise the rights of
Securityholders only indirectly through DTC and its participating
organizations. See "Certain Information Regarding the Securities--Book-Entry
Registration" and "--Definitive Securities."
THE TRUSTS
With respect to each series of Securities, the Seller will establish a
separate Trust pursuant to the respective Trust Agreement or Pooling and
Servicing Agreement, as applicable, for the transactions described herein and
in the related Prospectus Supplement. The property of each Trust will include
a pool (a "Receivables Pool") of motor vehicle retail installment sale
contracts (and, with respect to Final Payment Receivables (as defined below),
if any, the right to certain payments on retail installment sale contracts)
between dealers (the "Dealers") and purchasers (the "Obligors") of new and used
automobiles or light trucks and all payments due thereunder on or after the
applicable Cutoff Date (as such term is defined in the related Prospectus
Supplement, a "Cutoff Date") in the case of Precomputed Receivables and all
payments received thereunder on or after the applicable Cutoff Date in the case
of Simple Interest Receivables. The Receivables of each Receivables Pool were
or will be originated by the Dealers in accordance with Ford Credit's
requirements and purchased by Ford Credit pursuant to agreements with Dealers
("Dealer Agreements") for subsequent sale to the Seller. Pursuant to the
Dealer Agreements, the Dealers are obligated to repurchase from Ford Credit
Receivables which do not meet certain representations made by the Dealers, as
well as those covered by recourse plans ("Dealer Recourse"). The Receivables
of each Receivables Pool will continue to be serviced by the Servicer and
evidence indirect financing made available by the Seller to the Obligors.
On the applicable Closing Date, after the issuance of the Certificates and
any Notes of a given series, the Seller will sell the Initial Receivables of
the applicable Receivables Pool to the Trust to the extent, if any, specified
in the related Prospectus Supplement. To the extent so provided in the related
Prospectus Supplement, Subsequent Receivables will be conveyed to the Trust as
frequently as daily during the Funding Period. Any Subsequent Receivables so
conveyed will also be assets of the applicable Trust, subject to the prior
rights of the related Indenture Trustee and the Noteholders, if any, therein.
The property of each Trust will also include (i) security interests in the
Financed Vehicles and any accessions thereto; (ii) the rights to proceeds from
claims on certain physical damage, credit life, credit disability or other
insurance policies, if any, covering the Financed Vehicles or the Obligors;
(iii) any Dealer Recourse; (iv) the Seller's rights to certain documents and
instruments relating to the Receivables; (v) such amounts as from time to time
may be held in one or more accounts maintained pursuant to the related Sale and
Servicing Agreement or Pooling and Servicing Agreement, as described herein and
in the related Prospectus Supplement; (vi) certain rights under the related
Sale and Servicing Agreement or Pooling and Servicing Agreement, as applicable;
(vii) certain rights under the related Purchase Agreement and yield supplement
agreement, if any;
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(viii) certain payments and proceeds with respect to the Receivables held by
the Servicer; (ix) certain rebates of premiums and other amounts relating to
certain insurance policies and other items financed under the Receivables; and
(x) any and all proceeds of the foregoing; provided that, with respect to any
series of Notes, the relevant rights and benefits with respect to such property
will be assigned by the Seller and the applicable Trustee to the related
Indenture Trustee for the benefit of the related Securityholders. Any Yield
Supplement Account will be maintained with the related Indenture Trustee or
applicable Trustee, as the case may be, for the benefit of the related
Securityholders. If so specified in the related Prospectus Supplement, a Yield
Supplement Account may not be part of the property of the related Trust. To
the extent specified in the related Prospectus Supplement, a Pre-Funding
Account, a Reserve Account or other form of credit enhancement may be a part of
the property of any given Trust or may be held by the Trustee or an Indenture
Trustee for the benefit of holders of the related Securities. Additionally,
pursuant to contracts between the Servicer and the Dealers, the Dealers have an
obligation after origination to repurchase Receivables as to which Dealers have
made certain misrepresentations.
The Servicer will continue to service the Receivables held by each Trust
and will receive fees for such services. See "Description of the Transfer and
Servicing Agreements--Servicing Compensation and Expenses" herein and in the
related Prospectus Supplement. To facilitate servicing and to minimize
administrative burden and expense the Servicer will retain physical possession
of the Receivables held by each Trust and documents relating thereto as
custodian for each such Trust. Due to the administrative burden and expense,
the certificates of title to the Financed Vehicles will not be amended to
reflect the assignment of the security interest in the Financed Vehicles to
each Trust. In the absence of such amendment, any Trust may not have a
perfected security interest in the Financed Vehicles in all states. See
"Certain Legal Aspects of the Receivables--Security Interests in Vehicles."
Neither the Trustee nor any Indenture Trustee will be responsible for the
legality, validity, or enforceability of any security interest in any Financed
Vehicle. See "Certain Legal Aspects of the Receivables" and "Description of
the Transfer and Servicing Agreements--Sale and Assignment of Receivables."
If the protection provided to any Noteholders of a given series by the
subordination of the related Certificates and by the Reserve Account, if any,
or other credit enhancement for such series or the protection provided to
Certificateholders by any such Reserve Account or other credit enhancement is
insufficient, such Noteholders or Certificateholders, as the case may be, would
have to look principally to the Obligors on the related Receivables, the
proceeds from the repossession and sale of Financed Vehicles which secure
defaulted Receivables and the proceeds from any recourse against Dealers with
respect to such Receivables. In such event, certain factors, such as the
applicable Trust's not having perfected security interests in the Financed
Vehicles in all states, may affect the Servicer's ability to repossess and sell
the collateral securing the Receivables, and thus may reduce the proceeds to be
distributed to the holders of the Securities of such series. See "Description
of the Transfer and Servicing Agreements--Distributions," "--Credit and Cash
Flow Enhancement" and "Certain Legal Aspects of the Receivables."
The principal offices of each Trust and the related Trustee will be
specified in the applicable Prospectus Supplement.
THE TRUSTEE
The Trustee for each Trust will be specified in the related Prospectus
Supplement. The Trustee's liability in connection with the issuance and sale
of the related Securities is limited solely to the express obligations of such
Trustee set forth in the related Trust Agreement and the Sale and Servicing
Agreement or the related Pooling and Servicing Agreement, as applicable. A
Trustee may resign at any time, in which event the Servicer, or its successor,
will be obligated to appoint a successor trustee. The Administrator in respect
of a Trust that is not a grantor trust and the Servicer in respect of a Trust
that is a grantor trust may also remove the Trustee if the Trustee ceases to be
eligible to continue as Trustee under the related Trust Agreement or Pooling
and Servicing Agreement, as applicable, or if the Trustee becomes insolvent.
In such circumstances, the Administrator will be obligated to appoint a
successor trustee. Any resignation or removal of a Trustee and appointment of
a successor trustee will not become effective until acceptance of the
appointment by the successor trustee.
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THE RECEIVABLES POOLS
GENERAL
The Receivables in each Receivables Pool have been or will be purchased by
Ford Credit in the ordinary course of business in accordance with Ford Credit's
underwriting standards, which emphasize the Obligor's ability to pay and
creditworthiness, as well as the asset value of the Financed Vehicle. Ford
Credit generally does not finance more than 100% of the purchase price of a
vehicle plus related amounts financed in connection therewith, if any (such as
taxes, insurance, etc.), which amount generally is less than or equal to the
manufacturer's suggested retail price ("MSRP") of a new vehicle or published
prices for used vehicles. New vehicles generally can be purchased at a
discount from MSRP.
The Receivables to be held by each Trust will be selected from the
Seller's portfolio for inclusion in a Receivables Pool by several criteria,
including that each Receivable (i) is secured by a new or used vehicle, (ii)
was originated in the United States, (iii) provides for level monthly payments
(except for the last payment, which may be minimally different from the level
payments or which, in the case of Final Payment Receivables, may be a larger
final scheduled payment) that fully amortize the amount financed over its
original term to maturity, (iv) is a Precomputed Receivable or a Simple
Interest Receivable (either of which may be a Final Payment Receivable) and (v)
satisfies the other criteria, if any, set forth in the related Prospectus
Supplement. No selection procedures believed by the Seller to be adverse to
the Noteholders or the Certificateholders of any series were or will be used in
selecting the related Receivables. All terms of the retail installment sale
contracts constituting such Receivables which are material to investors are
described herein and in the related Prospectus Supplement.
"Precomputed Receivables" consist of either (i) monthly actuarial
receivables ("Actuarial Receivables") or (ii) receivables that provide for
allocation of payments according to the "Rule of 78's" ("Rule of 78's
Receivables"). An Actuarial Receivable provides for amortization of the loan
over a series of fixed level payment monthly installments. Each monthly
installment, including the monthly installment representing the final payment
on the Receivable, consists of an amount of interest equal to 1/12 of the APR
of the loan multiplied by the unpaid principal balance of the loan, and an
amount of principal equal to the remainder of the monthly installment. A Rule
of 78's Receivable provides for the payment by the obligor of a specified total
amount of payments, payable in equal monthly installments on each due date,
which total represents the principal amount financed and add-on interest in an
amount calculated on the stated APR for the term of the receivable. The rate
at which such amount of add-on interest is earned and, correspondingly, the
amount of each fixed monthly installment allocated to reduction of the
outstanding principal are calculated in accordance with the "Rule of 78's."
"Simple Interest Receivables" are receivables that provide for the
amortization of the amount financed under each receivable over a series of
fixed level payment monthly installments. However, unlike the monthly
installment under an Actuarial Receivable, each monthly installment consists of
an amount of interest which is calculated on the basis of the outstanding
principal balance of the receivable multiplied by the stated APR and further
multiplied by the period elapsed (as a fraction of a calendar year) since the
preceding payment of interest was made. As payments are received under a
Simple Interest Receivable, the amount received is applied first to interest
accrued to the date of payment and the balance is applied to reduce the unpaid
principal balance. Accordingly, if an obligor pays a fixed monthly installment
before its scheduled due date, the portion of the payment allocable to interest
for the period since the preceding payment was made will be less than it would
have been had the payment been made as scheduled, and the portion of the
payment applied to reduce the unpaid principal balance will be correspondingly
greater. Conversely, if an obligor pays a fixed monthly installment after its
scheduled due date, the portion of the payment allocable to interest for the
period since the preceding payment was made will be greater than it would have
been had the payment been made as scheduled, and the portion of the payment
applied to reduce the unpaid principal balance will be correspondingly less.
In either case, the obligor pays a fixed monthly installment until the final
scheduled payment date, at which time the amount of the final installment is
increased or decreased as necessary to repay the then outstanding principal
balance.
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"Final Payment Receivables" are monthly payment receivables secured by new
or used automobiles or light trucks with a final scheduled payment which is
greater than the scheduled monthly payments. A Final Payment Receivable
provides for amortization of the loan over a series of fixed level payment
monthly installments like an Actuarial Receivable or a Simple Interest
Receivable, but also requires a final scheduled payment due after payment of
such monthly installments which may be satisfied by (i) payment in full in cash
of such amount, (ii) transfer of the vehicle to Ford Credit provided certain
conditions are satisfied or (iii) refinancing the final scheduled payment in
accordance with certain conditions. With respect to Final Payment Receivables,
if so provided in the related Prospectus Supplement, only the principal and
interest payments due prior to the final scheduled payment and not the final
scheduled payment will be included in such Trust; the final scheduled payment
will be retained by the Seller. However, in the case of a Trust that is not a
grantor trust, the Seller will have the option to transfer the final scheduled
payments with respect to the related Final Payment Receivables retained by the
Seller to such Trust and to cause such Trust to issue certificates representing
interests in such final scheduled payments or indebtedness secured by such
final scheduled payments.
If so specified in the related Prospectus Supplement, some of the
Receivables to be included in a Receivables Pool may provide for recourse to
the Dealer which originated the Receivable. Dealers are generally obligated
under these recourse plans for payment of the unpaid principal balance of a
defaulted contract, unless Ford Credit fails to repossess the vehicle and
deliver it to the Dealer within 90 days after default. The Dealer's obligation
generally terminates after the first 24 monthly payments are made under the
related contract.
In the event of the prepayment in full (voluntarily or by acceleration) of
a Rule of 78's Receivable, under the terms of the contract, a "refund" or
"rebate" will be made to the obligor of the portion of the total amount of
payments then due and payable under the contract allocable to "unearned" add-on
interest, calculated in accordance with a method equivalent to the Rule of
78's. If an Actuarial Receivable is prepaid in full, with minor variations
based upon state law, the Actuarial Receivable requires that the rebate be
calculated on the basis of a constant interest rate. If a Simple Interest
Receivable is prepaid, rather than receive a rebate, the obligor is required to
pay interest only to the date of prepayment. The amount of a rebate under a
Rule of 78's Receivable generally will be less than the amount of a rebate on
an Actuarial Receivable and generally will be less than the remaining scheduled
payments of interest that would have been due under a Simple Interest
Receivable for which all payments were made on schedule.
Each Trust will account for the Rule of 78's Receivables as if such
Receivables were Actuarial Receivables. Amounts received upon prepayment in
full of a Rule of 78's Receivable in excess of the then outstanding principal
balance of such Receivable and accrued interest thereon (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 paid to the
Servicer as additional servicing compensation.
Information with respect to 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 such Receivables Pool consisting of Precomputed Receivables and of
Simple Interest Receivables, the portion of such Receivables Pool secured by
new vehicles and by used vehicles and the portion of such Receivables Pool
consisting of Receivables that provide for recourse to the related Dealer.
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
Certain information concerning Ford Credit's experience with respect to
its portfolio of U.S. retail installment sale contracts for new and used
automobiles and light trucks (including previously sold contracts which Ford
Credit continues to service, but not including retail installment sale
contracts purchased by Ford Credit under certain special financing programs)
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 such information.
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MATURITY AND PREPAYMENT CONSIDERATIONS
The weighted average life of the Notes, if any, and the Certificates 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 certain
other Receivables repurchased by the Seller or the Servicer for administrative
reasons.) All of the Receivables are prepayable at any time without penalty to
the Obligor. The rate of prepayment of automotive receivables is influenced by
a variety of economic, social and other factors, including the fact that an
Obligor generally may not sell or transfer the Financed Vehicle securing a
Receivable without the consent of the Seller. The rate of prepayment on the
Receivables may also be influenced by the structure of the loan. In addition,
under certain circumstances, the Seller 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
representations and warranties and the Servicer will be obligated to purchase
Receivables from such Trust pursuant to such Sale and Servicing Agreement or
Pooling and Servicing Agreement as a result of breaches of certain covenants.
Consistent with its normal servicing practices and procedures, the Servicer
may, in its discretion and on a case-by-case basis, arrange with Obligors to
extend or modify the terms of the related Receivables. Some of such
arrangements (including any extension beyond the Final Scheduled Maturity Date
set forth in the related Prospectus Supplement) will cause the Servicer to be
obligated to repurchase such Receivables, as described above. See "Description
of the Transfer and Servicing Agreements--Sale and Assignment of Receivables"
and "--Servicing Procedures." See also "Description of the Transfer and
Servicing Agreements--Termination" regarding the Servicer's option to purchase
the Receivables from a given Trust and "--Insolvency Event or Dissolution"
regarding the sale of the Receivables owned by a Trust that is not a grantor
trust if an Insolvency Event or a dissolution with respect to the Seller or the
General Partner occurs.
In light of the above considerations, there can be no assurance as to the
amount of principal payments to be made on the Notes, if any, or the
Certificates of a given series on each Distribution Date, as applicable, since
such amount will depend, in part, on the amount of principal collected on the
related Receivables Pool during the applicable Collection Period. Any
reinvestment risks resulting from a faster or slower incidence of prepayment of
Receivables will be borne entirely by the Noteholders, if any, and the
Certificateholders of a given series. The related Prospectus Supplement may
set forth certain additional information with respect to 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 distribution with respect
to such class of Notes indicating the remaining outstanding principal amount of
such class of Notes, as of the applicable Distribution Date (after giving
effect to payments to be made on such Distribution Date), as a fraction of the
initial outstanding principal amount of such 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 distribution with respect to such class
of Certificates indicating the remaining Certificate Balance of such class of
Certificates, as of the applicable Distribution Date (after giving effect to
distributions to be made on such Distribution Date), as a fraction of the
initial Certificate Balance of such class of Certificates. 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, as a
result of scheduled payments, prepayments and liquidations of the Receivables
(and also as a result of a prepayment arising from application of the
Pre-Funding Account, if any). The Note Pool Factor and the Certificate Pool
Factor will not change as a result of the addition of Subsequent Receivables,
if any. A Noteholder's portion of the aggregate outstanding principal amount
of the related class of Notes is the product of (i) the original denomination
of such Noteholder's Note and (ii) the
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applicable Note Pool Factor. A Certificateholder's portion of the aggregate
outstanding Certificate Balance for the related class of Certificates is the
product of (i) the original denomination of such Certificateholder's
Certificate and (ii) the applicable Certificate Pool Factor.
With respect to each Trust, the Noteholders, if any, and the
Certificateholders will receive reports on or about each Distribution Date
concerning payments received on the Receivables during the Collection Period
immediately preceding such Distribution Date, the Pool Balance (as such term is
defined in the related Prospectus Supplement, the "Pool Balance"), each
Certificate Pool Factor or Note Pool Factor, as applicable, and various other
items of information. In addition, Securityholders of record during any
calendar year will be furnished information for tax reporting purposes not
later than the latest date permitted by law. See "Certain Information
Regarding the Securities--Reports to Securityholders."
USE OF PROCEEDS
The net proceeds from the sale of the Securities of a given series will be
applied by the applicable Trust (i) to the purchase of the Receivables from the
Seller, (ii) to the deposit of the Pre-Funded Amount into the Pre-Funding
Account, if any, and (iii) to make the initial deposit into the Reserve
Account, if any. The Seller will use that portion of such net proceeds paid to
it with respect to any such Trust to purchase the related Receivables from Ford
Credit.
THE SELLER AND THE GENERAL PARTNER
The Seller was organized as a Delaware limited partnership on February 23,
1996. The general partner of the Seller is Ford Credit Auto Receivables Two,
Inc., a Delaware corporation and a wholly owned, limited-purpose subsidiary of
Ford Credit. The limited partnership interests in the Seller are owned by Ford
Credit. The Seller was organized for limited purposes, which include
purchasing receivables from Ford Credit and transferring such receivables to
third parties and any activities incidental to and necessary or convenient for
the accomplishment of such purposes. The principal executive offices of the
Seller are located at The American Road, Dearborn, Michigan 48121. The
telephone number of such offices is (313) 322-3000. The General Partner is
located at The American Road, Dearborn, Michigan 48121.
The Seller has taken steps in structuring the transactions contemplated
herein and in the related Prospectus Supplement that are intended to ensure
that the voluntary or involuntary application for relief by Ford Credit under
any Insolvency Law will not result in consolidation of the assets and
liabilities of either of the Seller or the General Partner with those of Ford
Credit. These steps include the creation of the Seller as a separate,
limited-purpose limited partnership pursuant to a limited partnership agreement
containing certain limitations (including restrictions on the nature of the
Seller's business and a restriction on the Seller's ability to commence a
voluntary case or proceeding under any Insolvency Law without the consent of
the General Partner). In addition, the General Partner is a separate,
limited-purpose corporation whose Certificate of Incorporation contains certain
limitations (including restrictions on the nature of the General Partner's
business and a restriction on the General Partner's ability to commence a
voluntary case or proceeding with respect to itself or the Seller under any
Insolvency Law without the unanimous affirmative vote of all of its directors).
Such Certificate of Incorporation includes a provision that, under certain
circumstances relating to the credit ratings of Ford Credit, requires the
General Partner to have two directors who qualify under the Certificate of
Incorporation as "Independent Directors." However, there can be no assurance
that the activities of the Seller or the General Partner would not result in a
court concluding that the assets and liabilities of such entity should be
consolidated with those of Ford Credit in a proceeding under any Insolvency
Law.
The Seller has received the advice of counsel to the effect that, subject
to certain facts, assumptions and qualifications, it would not be a proper
exercise by a court of its equitable discretion to disregard the separate
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existence of each of the Seller and the General Partner and to require the
consolidation of the assets and liabilities of either such entity with the
assets and liabilities of Ford Credit in the event of the application of the
federal bankruptcy laws to Ford Credit. Among other things, it is assumed by
counsel that each of the Seller and the General Partner will follow certain
procedures in the conduct of its affairs, including maintaining records and
books of account separate from those of Ford Credit, refraining from
commingling its assets with those of Ford Credit, doing business from an office
separate from that of Ford Credit and refraining from holding itself out as
having agreed to pay, or being liable for, the debts of Ford Credit. Each of
the Seller and the General Partner intends to follow and has represented to
such counsel that it will follow these and other procedures related to
maintaining its separate identity. However, in the event that either the
Seller or the General Partner did not follow these procedures, there can be no
assurance that a court would not conclude that the assets and liabilities of
such entity should be consolidated with those of Ford Credit. If a court were
to reach such a conclusion, or a filing were made under any Insolvency Law by
or against the Seller or the General Partner, or if an attempt were made to
litigate any of the foregoing issues, delays in distributions on the Securities
(and possible reductions in the amount of such distributions which may be
substantial) could occur.
It is intended by Ford Credit and the Seller that each transfer of
Receivables by Ford Credit to the Seller under a Purchase Agreement constitute
a "true sale" of such Receivables to the Seller. If the transfer constitutes
such a "true sale," the Receivables and the proceeds thereof would not be part
of Ford Credit's bankruptcy estate under Section 541 of the United States
Bankruptcy Code should Ford Credit become the subject of a bankruptcy case
subsequent to the transfer of the Receivables to the Seller. The Seller has
received the advice of counsel to the effect that, subject to certain facts,
assumptions and qualifications, in the event Ford Credit were to become the
subject of a voluntary or involuntary case under the United States Bankruptcy
Code subsequent to the transfer of Receivables to the Seller, the transfer of
such Receivables by Ford Credit to the Seller pursuant to the related Purchase
Agreement would be characterized as a "true sale" of such Receivables from Ford
Credit to the Seller and such Receivables and the proceeds thereof would not
form part of Ford Credit's bankruptcy estate pursuant to Section 541 of the
United States Bankruptcy Code.
In Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d 948 (10th Cir. 1993),
cert. denied 114 S. Ct. 554 (1993), the United States Court of Appeals for
the 10th Circuit suggested that even where a transfer of accounts from a seller
to a buyer constitutes a "true sale," the accounts would nevertheless
constitute property of the seller's bankruptcy estate in a bankruptcy of the
seller. If Ford Credit or the Seller were to become subject to a bankruptcy
proceeding and a court were to follow the Octagon court's reasoning,
Securityholders might experience delays in payment or possibly losses on their
investment in the Securities. As part of the advice of counsel described above,
counsel has advised the Seller that the reasoning of the Octagon case appears
to be inconsistent with other precedent. In addition, the Permanent Editorial
Board of the UCC has issued an official commentary (PEB Commentary No. 14)
which characterizes the Octagon court's interpretation of Article 9 of the UCC
as erroneous. Such commentary states that nothing in Article 9 is intended to
prevent the transfer of ownership of accounts or chattel paper. However, such
commentary is not legally binding on any court.
THE SERVICER
Ford Credit was incorporated in Delaware in 1959 and is a wholly owned
indirect subsidiary of Ford.
Ford Credit provides wholesale financing and capital loans to franchised
Ford vehicle dealers and other dealers associated with such franchisees and
purchases retail installment sale contracts and retail leases from them. Ford
Credit also makes loans to vehicle leasing companies, the majority of which are
affiliated with such dealers. In addition, a wholly owned subsidiary of Ford
Credit provides these financing services in the United States and Canada to
other vehicle dealers. Ford Credit also provides retail financing for used
vehicles built by Ford and other manufacturers. In addition to vehicle
financing, Ford Credit makes loans to affiliates of Ford, finances certain
receivables of Ford and its subsidiaries, and offers diversified financing
services which are managed by USL Capital
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Corporation, a wholly owned indirect subsidiary of Ford. Ford Credit's
insurance operations, conducted through its wholly owned subsidiary, The
American Road Insurance Company and its subsidiaries, consist primarily of
underwriting floor plan insurance related to substantially all new vehicle
inventories of dealers financed at wholesale by Ford Credit in the United States
and Canada, credit life and disability insurance in connection with retail
vehicle financing, and insurance related to retail contracts sold by automobile
dealers to cover repairs.
The mailing address of Ford Credit's executive offices is The American
Road, Dearborn, Michigan 48121. The telephone number of such offices is (313)
322-3000.
DESCRIPTION OF THE NOTES
GENERAL
With respect to each Trust that issues Notes, one or more classes of Notes
of the related series will be issued pursuant to the terms of an Indenture, a
form of which has been filed as an exhibit to the Registration Statement of
which this Prospectus forms a part. The following summary does not purport to
be complete and is subject to, and is qualified in its entirety by reference
to, all 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 (together with any
successor depository selected by the Trust, the "Depository") except as set
forth below. The Notes will be available for purchase in the denominations
specified in the related Prospectus Supplement and in book-entry form only.
The Seller has been informed by DTC that DTC's nominee will be Cede, unless
another nominee is specified in the related Prospectus Supplement.
Accordingly, such nominee is expected to be the holder of record of the Notes
of each class. Unless and until Definitive Notes are issued under the limited
circumstances described herein or in the related Prospectus Supplement, no
Noteholder will be entitled to receive a physical certificate representing a
Note. All references herein and in the related Prospectus Supplement to
actions by Noteholders refer to actions taken by DTC upon instructions from its
participating organizations (the "Participants") and all references herein and
in the related Prospectus Supplement to distributions, notices, reports and
statements to Noteholders refer to distributions, 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 with respect
thereto. See "Certain Information Regarding the Securities--Book-Entry
Registration" and "--Definitive Securities."
PRINCIPAL AND INTEREST ON THE NOTES
The timing and priority of payment, seniority, allocations of losses, Note
Interest Rate and amount of or method of determining payments of principal and
interest on each class of Notes of a given series will be described in the
related Prospectus Supplement. The right of holders of any class of Notes to
receive payments of principal and interest may be senior or subordinate to the
rights of holders of any other class or classes of Notes of such series, as
described in the related Prospectus Supplement. Payments of interest on the
Notes of such series may be made prior to payments of principal thereon. The
dates for payments of interest and principal on the Notes of such series may be
different from the Distribution Dates for the Certificates of such series. To
the extent provided in the related Prospectus Supplement, a series may include
one or more classes of Notes designated as money market classes, planned
amortization classes, targeted amortization classes or companion classes, each
as described in the related Prospectus Supplement. To the extent provided in
the related Prospectus Supplement, a series may include one or more classes of
Strip Notes entitled to (i) principal payments with disproportionate, nominal
or no interest payments or (ii) interest payments with disproportionate,
nominal or no principal payments. Each class of Notes may have a different
Note Interest Rate, which may be a fixed, variable or adjustable Note Interest
Rate (and which may be zero for certain classes of Strip Notes), or any
combination of the foregoing. The related Prospectus Supplement will specify
the Note Interest Rate for each class of Notes of a given series or the method
for determining such Note Interest Rate. See also "Certain Information
Regarding the Securities--Fixed Rate Secu rities" and "--Floating Rate
Securities." One or more classes of Notes of a series may be redeemable in
whole or
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in part under the circumstances specified in the related Prospectus Supplement,
including at the end of the Funding Period (if any) or as a result of the
Servicer's exercising its option to purchase the related Receivables Pool.
See "Description of the Transfer and Servicing Agreements--Termination."
To the extent specified in any Prospectus Supplement, one or more classes
of Notes of a given series may have fixed principal payment schedules;
Noteholders of such Notes would be entitled to receive as payments of principal
on any given Distribution Date the applicable amounts set forth on such
schedule with respect to such Notes, in the manner and to the extent set forth
in the related Prospectus Supplement.
If so specified in the related Prospectus Supplement, payments to
Noteholders of all classes within a series in respect of interest will have the
same priority. Under certain circumstances, the amount available for such
payments could be less than the amount of interest payable on the Notes on any
of the dates specified for payments in the related Prospectus Supplement, in
which case each class of Noteholders will receive its ratable share (based upon
the aggregate amount of interest due to such class of Noteholders) of the
aggregate amount available to be distributed in respect of interest on the
Notes of such series. See "Description of the Transfer and Servicing
Agreements--Distributions" and "--Credit and Cash Flow Enhancement."
In the case of a series of Notes which includes two or more classes of
Notes, the sequential order and priority of payment in respect of principal and
interest, and any schedule or formula or other provisions applicable to the
determination thereof, of each such class will be set forth in the related
Prospectus Supplement. Payments in respect of principal and interest of any
class of Notes will be made on a pro rata basis among all the Noteholders of
such class.
THE INDENTURE
Modification of Indenture. With respect to each Trust that has issued
Notes pursuant to an Indenture, the Trust and the Indenture Trustee may,
without the consent of the Noteholders of the related series, execute a
supplemental indenture for the purpose of adding to the covenants of the Trust,
curing any ambiguity, correcting or supplementing any provision which may be
inconsistent with any other provision or making any other provision with
respect to matters arising under the related Indenture which will not be
inconsistent with other provisions of the related Indenture.
With respect to a series of Notes, without the consent of the holder of
each such outstanding Note affected thereby, however, no supplemental indenture
will: (i) change the due date of any installment of principal of or interest on
any such Note or reduce the principal amount thereof, the interest rate thereon
or the redemption price with respect thereto or change any place of payment
where, or the coin or currency in which, any such Note or any interest thereon
is payable; (ii) impair the right to institute suit for the enforcement of
certain provisions of the related Indenture regarding payment; (iii) reduce
the percentage of the aggregate amount of the outstanding Notes of such series,
the consent of the holders of which is required for any such supplemental
indenture or the consent of the holders of which is required for any waiver of
compliance with certain provisions of the related Indenture or of certain
defaults thereunder and their consequences as provided for in such Indenture;
(iv) modify or alter the provisions of the related Indenture regarding the
voting of Notes held by the applicable Trust, any other obligor on such Notes,
the Seller or an affiliate of any of them; (v) reduce the percentage of the
aggregate outstanding amount of such 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 such sale would be insufficient to pay the
principal amount and accrued but unpaid interest on the outstanding Notes and
Certificates of such series; (vi) decrease the percentage of the aggregate
principal amount of such Notes required to amend the sections of the related
Indenture which specify the applicable percentage of aggregate principal amount
of the Notes of such series necessary to amend such Indenture or certain other
related agreements; or (vii) 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 such Notes or, except as otherwise permitted
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or contemplated in such Indenture, terminate the lien of such Indenture on any
such collateral or deprive the holder of any such Note of the security afforded
by the lien of such 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 such
Noteholders; provided that (x) such action will not, (i) as evidenced by an
opinion of counsel, materially adversely affect the interest of any such
Noteholder and (ii) as confirmed by the Rating Agencies (as such term is
defined in the related Prospectus Supplement, the "Rating Agencies") rating the
Notes of the related series, cause the then current rating assigned to any
class of such Notes to be withdrawn or reduced and (y) an opinion of counsel as
to certain tax matters is delivered.
Events of Default; Rights upon Event of Default. With respect to the
Notes of a given series, "Events of Default" under the related Indenture will
consist of: (i) a default for five days or more in the payment of any interest
on any such Note; (ii) a default in the payment of the principal of or any
installment of the principal of any such Note when the same becomes due and
payable; (iii) a default in the observance or performance of any material
covenant or agreement of the applicable Trust made in the related Indenture and
the continuation of any such default for a period of 60 days after notice
thereof is given to such Trust by the applicable Indenture Trustee or to such
Trust and such Indenture Trustee by the holders of at least 25% in principal
amount of such Notes then outstanding; (iv) any representation or warranty made
by such Trust in the related Indenture or in any certificate delivered
pursuant thereto or in connection therewith having been incorrect in a material
respect as of the time made, and such breach not having been cured within 30
days after notice thereof is given to such Trust by the applicable Indenture
Trustee or to such Trust and such Indenture Trustee by the holders of at least
25% in principal amount of such Notes then outstanding; (v) certain events of
bankruptcy, insolvency, receivership or liquidation of the applicable Trust; or
(vi) such other events, if any, set forth in the related Prospectus Supplement.
However, the amount of principal required to be paid to Noteholders of such
series under the related Indenture will generally be limited to amounts
available to be deposited in the applicable Note Payment Account. Therefore,
the failure to pay principal on a class of Notes generally will not result in
the occurrence of an Event of Default until the final scheduled Distribution
Date for such class of 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 such Notes then outstanding may declare the principal of
such Notes to be immediately due and payable. Such declaration may, under
certain circumstances, be rescinded by the holders of a majority in principal
amount of such Notes then outstanding. Any such rescission could be treated,
for federal income tax purposes, as a constructive exchange of such Notes by
the related Noteholders for deemed new Notes upon which gain or loss would be
recognized.
If the Notes of any series have been declared due and payable following an
Event of Default with respect thereto, the related Indenture Trustee may
institute proceedings to collect amounts due or foreclose on Trust property,
exercise remedies as a secured party, sell the related Receivables or elect to
have the applicable Trust maintain possession of such Receivables and continue
to apply collections on such Receivables as if there had been no declaration of
acceleration. However, such Indenture Trustee is prohibited from selling the
related Receivables following an Event of Default, other than 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 such series, unless (i) the holders of all
outstanding Notes of such series consent to such sale, (ii) the proceeds of
such sale are sufficient to pay in full the principal of and the accrued
interest on the outstanding Notes and Certificates of such series at the date
of such sale or (iii) such Indenture Trustee determines that the proceeds of
Receivables would not be sufficient on an ongoing basis to make all payments on
the Notes of such series as such payments would have become due if such
obligations had not been declared due and payable, and such Indenture Trustee
obtains the consent of the holders of 66 2/3% of the aggregate outstanding
amount of the Notes of such series.
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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, such Indenture Trustee will be
under no obligation to exercise any of the rights or powers under such
Indenture at the request or direction of any of the holders of such Notes, if
such Indenture Trustee reasonably believes it will not be adequately
indemnified against the costs, expenses and liabilities which might be incurred
by it in complying with such request. Subject to the provisions for
indemnification and certain limitations contained in the related Indenture, the
holders of a majority in principal amount of the outstanding Notes of a given
series will have the right to direct the time, method and place of conducting
any proceeding or any remedy available to the applicable Indenture Trustee, and
the holders of a majority in principal amount of such Notes then outstanding
may, in certain cases, waive any default with respect thereto, except a default
in the payment of principal or interest or a default in respect of a covenant
or provision of such Indenture that cannot be modified without the waiver or
consent of all the holders of such outstanding Notes. Any such waiver could be
treated, for federal income tax purposes, as a constructive exchange of such
Notes by the related Noteholders for deemed new Notes upon which gain or loss
would be recognized.
No holder of a Note of any series will have the right to institute any
proceeding with respect to the related Indenture, unless (i) such holder
previously has given to the applicable Indenture Trustee written notice of a
continuing Event of Default, (ii) the holders of not less than 25% in principal
amount of the outstanding Notes of such series have made written request to
such Indenture Trustee to institute such proceeding in its own name as
Indenture Trustee, (iii) such holder or holders have offered such Indenture
Trustee reasonable indemnity, (iv) such Indenture Trustee has for 60 days
failed to institute such proceeding and (v) no direction inconsistent with such
written request has been given to such Indenture Trustee during such 60-day
period by the holders of a majority in principal amount of such outstanding
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 such Trust nor any of their respective
owners, beneficiaries, agents, officers, directors, employees, affiliates,
successors or assigns will, in the absence of an express agreement to the
contrary, be personally liable for the payment of the principal of or interest
on the related Notes or for the agreements of such Trust contained in the
applicable Indenture.
Certain Covenants. Each Indenture will provide that the related Trust may
not consolidate with or merge into any other entity, unless (i) the entity
formed by or surviving such consolidation or merger is organized under the laws
of the United States, any state or the District of Columbia, (ii) such entity
expressly assumes such 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 such Trust under the Indenture, (iii) no Event of
Default shall have occurred and be continuing immediately after such merger or
consolidation, (iv) such Trust has been advised that the rating of the Notes or
the Certificates of such series then in effect would not be reduced or
withdrawn by the Rating Agencies as a result of such merger or consolidation,
(v) such Trust has received an opinion of counsel to the effect that such
consolidation or merger would have no material adverse tax consequence to the
Trust or to any related Noteholder or Certificateholder, (vi) any action as is
necessary to maintain the lien and security interest created by the related
Indenture shall have been taken and (vii) such Trust has received an opinion of
counsel and officer's certificate each stating that such consolidation or
merger satisfies all requirements under the related Indenture.
Each Trust will not, among other things, (i) except as expressly permitted
by the applicable Indenture, the applicable Transfer and Servicing Agreements
or certain related documents with respect to such Trust (collectively, the
"Basic Documents"), sell, transfer, exchange or otherwise dispose of any of the
assets of such Trust, (ii) claim any credit on or make any deduction from the
principal and interest payable in respect of the Notes of the related
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series (other than amounts withheld under the Code or applicable state law) or
assert any claim against any present or former holder of such Notes because of
the payment of taxes levied or assessed upon such Trust, (iii) dissolve or
liquidate in whole or in part, (iv) 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 such Notes under such Indenture except
as may be expressly permitted thereby or (v) permit any lien, charge, excise,
claim, security interest, mortgage or other encumbrance to be created on or
extend to or otherwise arise upon or burden the assets of such Trust or any
part thereof, or any interest therein or the proceeds thereof, except as may be
created by the terms of the related Indenture.
No Trust may engage in any activity other than as specified under the
section of the related Prospectus Supplement entitled "The Trust." No Trust
will incur, assume or guarantee any indebtedness other than indebtedness
incurred pursuant to the related Notes and the related Indenture, pursuant to
any Advances made to it by the Servicer or otherwise in accordance with the
Basic Documents.
List of Noteholders. With respect to the Notes of any series, three or
more holders of the Notes of such series or one or more holders of such Notes
evidencing not less than 25% of the aggregate outstanding principal amount of
such Notes may, by written request to the related Indenture Trustee, obtain
access to the list of all Noteholders maintained by such Indenture Trustee for
the purpose of communicating with other Noteholders with respect to their
rights under the related Indenture or under such Notes. Such Indenture Trustee
may elect not to afford the requesting Noteholders access to the list of
Noteholders if it agrees to mail the desired communication or proxy, on behalf
of and at the expense of the requesting Noteholders, to all Noteholders of such
series.
Annual Compliance Statement. Each Trust will be required to file annually
with the related Indenture Trustee a written statement as to the fulfillment of
its obligations under the Indenture.
Indenture Trustee's Annual Report. The Indenture Trustee 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 certain indebtedness owing by
such Trust to the applicable Indenture Trustee in its individual capacity, the
property and funds physically held by such Indenture Trustee as such and any
action taken by it that materially affects the related Notes and that has not
been previously reported.
Satisfaction and Discharge of Indenture. An Indenture will be discharged
with respect to the collateral securing the related Notes upon the delivery to
the related Indenture Trustee for cancellation of all such Notes or, with
certain limitations, upon deposit with such Indenture Trustee of funds
sufficient for the payment in full of all such Notes.
THE INDENTURE TRUSTEE
The Indenture Trustee for a series of Notes will be specified in the
related Prospectus Supplement. The Indenture Trustee for any series may resign
at any time, in which event the Issuer will be obligated to appoint a successor
trustee for such series. The Issuer may also remove any such Indenture Trustee
if such Indenture Trustee ceases to be eligible to continue as such under the
related Indenture or if such Indenture Trustee becomes insolvent. In such
circumstances, the Issuer will be obligated to appoint a successor trustee for
the applicable series of Notes. Any resignation or removal of the Indenture
Trustee and appointment of a successor trustee for any series of Notes does not
become effective until acceptance of the appointment by the successor trustee
for such series.
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DESCRIPTION OF THE CERTIFICATES
GENERAL
With respect to each Trust, one or more classes 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 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 retained by the
Seller, each class of Certificates may initially be represented by one or more
Certificates registered in the name of the Depository, except as set forth
below. Except for the Certificates, if any, of a given series retained by the
Seller, the Certificates will be available for purchase in the denominations
specified in the related Prospectus Supplement and may be available in
book-entry form only. The Seller has been informed by DTC that DTC's nominee
will be Cede, unless another nominee is specified in the related Prospectus
Supplement. Accordingly, such nominee is expected to be the holder of record
of the Certificates of any series issued in book-entry form that are not
retained by the Seller. If the Certificates of a series are issued in
book-entry form, unless and until Definitive Certificates are issued under the
limited circumstances described herein or in the related Prospectus Supplement,
no Certificateholder (other than the Seller) will be entitled to receive a
physical certificate representing a Certificate. If the Certificates of a
series are issued in book-entry form, all references herein and in the related
Prospectus Supplement to actions by Certificateholders refer to actions taken
by DTC upon instructions from the Participants and all references herein and in
the related Prospectus Supplement to distributions, notices, reports and
statements to Certificateholders refer to distributions, notices, reports and
statements 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 thereto. See "Certain Information Regarding the
Securities--Book-Entry Registration" and "--Definitive Securities." Any
Certificates of a given series owned by the Seller or its affiliates will be
entitled to equal and proportionate benefits under the applicable Trust
Agreement, except that such 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 Basic 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 or Dissolution").
DISTRIBUTIONS OF PRINCIPAL AND INTEREST
The timing and priority of distributions, seniority, allocations of
losses, Certificate Rate and amount of or method of determining distributions
with respect to principal and interest of each class of Certificates will be
described in the related Prospectus Supplement. Distributions of interest on
such Certificates will be made on the dates specified in the related Prospectus
Supplement (each, a "Distribution Date") and will be made prior to
distributions with respect to principal of such Certificates. To the extent
provided in the related Prospectus Supplement, a series may include one or
more classes of Strip Certificates entitled to (i) distributions in respect of
principal with disproportionate, nominal or no interest distributions or (ii)
interest distributions with disproportionate, nominal or no distributions in
respect of principal. Each class of Certificates may have a different
Certificate Rate, which may be a fixed, variable or adjustable Certificate Rate
(and which may be zero for certain classes of Strip Certificates) or any
combination of the foregoing. The related Prospectus Supplement will specify
the Certificate Rate for each class of Certificates of a given series or the
method for determining such Certificate Rate. See also "Certain Information
Regarding the Securities--Fixed Rate Securities" and "--Floating Rate
Securities." Distributions in respect of the Certificates of a given series
that includes Notes may be subordinate to payments in respect of the Notes of
such series as more fully described in the related Prospectus Supplement.
Distributions in respect of interest on and principal of any class of
Certificates will be made on a pro rata basis among all the Certificateholders
of such class.
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In the case of a series of Certificates which includes two or more classes
of Certificates, the timing, sequential order, priority of payment or amount of
distributions in respect of interest and principal, and any schedule or formula
or other provisions applicable to the determination thereof, of each such class
shall be as set forth in the related Prospectus Supplement.
LIST OF CERTIFICATEHOLDERS
With respect to the Certificates of any series, three or more holders of
the Certificates of such series or one or more holders of such Certificates
evidencing not less than 25% of the Certificate Balance of such Certificates
may, by written request to the related Trustee, obtain access to the list of
all Certificateholders maintained by such 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 such
Certificates.
CERTAIN INFORMATION REGARDING THE SECURITIES
FIXED RATE SECURITIES
Each class of Securities (other than certain 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 Note Interest Rate or Certificate 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 of
twelve 30-day months or on such other day count basis as is specified in the
applicable Prospectus Supplement. See "Description of the Notes--Principal and
Interest on the Notes" and "Description of the Certificates--Distributions of
Principal and Interest."
FLOATING RATE SECURITIES
Each class of Floating Rate Securities will bear interest for each
applicable Interest Reset Period (as such term is defined in the related
Prospectus Supplement with respect to a class of Floating Rate Securities, the
"Interest Reset 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
related Prospectus Supplement. The "Spread" is the number of basis points (one
basis point equals one one-hundredth of a percentage point) that may be
specified in the applicable Prospectus Supplement as being applicable to such
class, and the "Spread Multiplier" is the percentage that may be specified in
the applicable Prospectus Supplement as being applicable to such class.
The applicable Prospectus Supplement will designate one of the following
Base Rates as applicable to a given Floating Rate Security: (i) the CD Rate (a
"CD Rate Security"), (ii) the Commercial Paper Rate (a "Commercial Paper Rate
Security"), (iii) the Federal Funds Rate (a "Federal Funds Rate Security"),
(iv) LIBOR (a "LIBOR Security"), (v) the Treasury Rate (a "Treasury Rate
Security") or (vi) such other Base Rate as is set forth in such Prospectus
Supplement. The "Index Maturity" for any class of Floating Rate Securities is
the period of maturity of the instrument or obligation from which the Base Rate
is calculated. "H.15(519)" means the publication entitled "Statistical Release
H.15(519), Selected Interest Rates," or any successor publication, published by
the Board of Governors of the Federal Reserve System. "Composite Quotations"
means the daily statistical release entitled "Composite 3:30 p.m. Quotations
for U.S. Government Securities" published by the Federal Reserve Bank of New
York. "Interest Reset Date" will be the first day of the applicable Interest
Reset Period, or such other day as may be specified in the related Prospectus
Supplement with respect to a class of Floating Rate Securities.
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): (i) a maximum limitation, or
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ceiling, on the rate at which interest may accrue during any interest
period and (ii) 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.
Each 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 such class of
Floating Rate Securities issued with respect thereto. The applicable
Prospectus Supplement will set forth the identity of the Calculation Agent for
each such class of Floating Rate Securities of a given series, which may be
either the related Trustee or Indenture Trustee with respect to such 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 of the rate of interest on a Floating Rate Security will be
rounded, if necessary, to the nearest 1/100,000 of 1% (.0000001), with five
one-millionths of a percentage point rounded upward.
CD Rate Securities. Each CD Rate Security will bear interest for each
Interest Reset Period at the interest rate calculated with reference to the CD
Rate and the Spread or Spread Multiplier, if any, specified in such Security
and in the applicable Prospectus Supplement.
The "CD Rate" for each Interest Reset Period shall be the rate as of the
second business day prior to the Interest Reset Date for such Interest Reset
Period (a "CD Rate Determination Date") for negotiable certificates of deposit
having the Index Maturity designated in the applicable Prospectus Supplement as
published in H.15(519) under the heading "CDs (Secondary Market)." In the
event that such rate is not published prior to 3:00 p.m., New York City time,
on the Calculation Date (as defined below) pertaining to such CD Rate
Determination Date, then the "CD Rate" for such Interest Reset Period will be
the rate on such CD Rate Determination Date for negotiable certificates of
deposit of the Index Maturity designated in the applicable Prospectus
Supplement as published in Composite Quotations under the heading "Certificates
of Deposit." If by 3:00 p.m., New York City time, on such Calculation Date
such rate is not yet published in either H.15(519) or Composite Quotations,
then the "CD Rate" for such Interest Reset Period will be calculated by the
Calculation Agent for such CD Rate Security and will be the arithmetic mean of
the secondary market offered rates as of 10:00 a.m., New York City time, on
such CD Rate Determination Date, of three leading nonbank dealers in
negotiable U.S. dollar certificates of deposit in The City of New York selected
by the Calculation Agent for such CD Rate Security for negotiable certificates
of deposit of major United States money center banks of the highest credit
standing (in the market for negotiable certificates of deposit) with a
remaining maturity closest to the Index Maturity designated in the related
Prospectus Supplement in a denomination of $5,000,000; provided, however, that
if the dealers selected as aforesaid by such Calculation Agent are not quoting
offered rates as mentioned in this sentence, the "CD Rate" for such Interest
Reset Period will be the same as the CD Rate for the immediately preceding
Interest Reset Period.
The "Calculation Date" pertaining to any CD Rate Determination Date shall
be the first to occur of (a) the tenth calendar day after such CD Rate
Determination Date or, if such day is not a business day, the next succeeding
business day or (b) the second business day preceding the date any payment is
required to be made for any period following the applicable Interest Reset
Date.
Commercial Paper Rate Securities. Each Commercial Paper Rate Security
will bear interest for each Interest Reset Period at the interest rate
calculated with reference to the Commercial Paper Rate and the Spread or Spread
Multiplier, if any, specified in such security and in the applicable Prospectus
Supplement.
The "Commercial Paper Rate" for each Interest Reset Period will be
determined by the Calculation Agent for such Commercial Paper Rate Security as
of the second business day prior to the Interest Reset Date for such Interest
Reset Period (a "Commercial Paper Rate Determination Date") and shall be the
Money Market Yield (as
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defined below) on such Commercial Paper Rate Determination Date of the rate
for commercial paper of the Index Maturity specified in the applicable
Prospectus Supplement, as such rate shall be published in H.15(519) under the
heading "Commercial Paper." In the event that such rate is not published prior
to 3:00 p.m., New York City time, on the Calculation Date (as defined below)
pertaining to such Commercial Paper Rate Determination Date, then the
"Commercial Paper Rate" for such Interest Reset Period shall be the Money
Market Yield on such Commercial Paper Rate Determination Date of the rate for
commercial paper of the specified Index Maturity as published in Composite
Quotations under the heading "Commercial Paper." If by 3:00 p.m., New York
City time, on such Calculation Date such rate is not yet published in either
H.15(519) or Composite Quotations, then the "Commercial Paper Rate" for such
Interest Reset Period shall be the Money Market Yield of the arithmetic mean of
the offered rates, as of 11:00 a.m., New York City time, on such Commercial
Paper Rate Determination date of three leading dealers of commercial paper in
The City of New York selected by the Calculation Agent for such Commercial
Paper Rate Security for commercial paper of the specified Index Maturity placed
for an industrial issue whose bonds are rated "AA" or the equivalent by a
nationally recognized rating agency; provided, however, that if the dealers
selected as aforesaid by such Calculation Agent are not quoting offered rates
as mentioned in this sentence, the "Commercial Paper Rate" for such Interest
Reset Period will be the same as the Commercial Paper Rate for the immediately
preceding Interest Reset Period.
"Money Market Yield" shall be a yield 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 specified Index Maturity.
The "Calculation Date" pertaining to any Commercial Paper Rate
Determination Date shall be the first to occur of (a) the tenth calendar day
after such Commercial Paper Rate Determination Date or, if such day is not a
business day, the next succeeding business day or (b) the second business day
preceding the date any payment is required to be made for any period following
the applicable Interest Reset Date.
Federal Funds Rate Securities. Each Federal Funds Rate Security will bear
interest for each Interest Reset Period at the interest rate calculated with
reference to the Federal Funds Rate and the Spread or Spread Multiplier, if
any, specified in such Security and in the applicable Prospectus Supplement.
The "Federal Funds Rate" for each Interest Reset Period shall be the
effective rate on the Interest Reset Date for such Interest Reset Period (a
"Federal Funds Rate Determination Date") for Federal Funds as published in
H.15(519) under the heading "Federal Funds (Effective)." In the event that
such rate is not published prior to 3:00 p.m., New York City time, on the
Calculation Date (as defined below) pertaining to such Federal Funds Rate
Determination Date, the "Federal Funds Rate" for such Interest Reset Period
shall be the rate on such Federal Funds Rate Determination Date as published
in Composite Quotations under the heading "Federal Funds/Effective Rate." If
by 3:00 p.m., New York City time, on such Calculation Date such rate is not yet
published in either H.15(519) or Composite Quotations, then the "Federal Funds
Rate" for such Interest Reset Period shall be the rate on such Federal Funds
Rate Determination Date made publicly available by the Federal Reserve Bank of
New York which is equivalent to the rate which appears in H.15(519) under the
heading "Federal Funds (Effective)"; provided, however, that if such rate is
not made publicly available by the Federal Reserve Bank of New York by 3:00
p.m., New York City time, on such Calculation Date, the "Federal Funds Rate"
for such Interest Reset Period will be the same as the Federal Funds Rate in
effect for the immediately preceding Interest Reset Period. In the case of a
Federal Funds Rate Security that resets daily, the interest rate on such
Security for the period from and including a Monday to but excluding the
succeeding Monday will be reset by the Calculation Agent for such Security on
such
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second Monday (or, if not a business day, on the next succeeding business
day) to a rate equal to the average of the Federal Funds Rates in effect with
respect to each such day in such week.
The "Calculation Date" pertaining to any Federal Funds Rate Determination
Date shall be the next succeeding business day.
LIBOR Securities. Each LIBOR Security will bear interest for each
Interest Reset Period at the interest rate calculated with reference to LIBOR
and the Spread or Spread Multiplier, if any, specified in such Security and in
the applicable Prospectus Supplement.
With respect to LIBOR indexed to the offered rates for U.S. dollar
deposits, "LIBOR" for each Interest Reset Period will be determined by the
Calculation Agent for any LIBOR Security as follows:
(i) On the second London Banking Day prior to the Interest Reset
Date for such Interest Reset Period (a "LIBOR Determination Date"), the
Calculation Agent for such LIBOR Security will determine the arithmetic
mean of the offered rates for deposits in U.S. dollars for the period of
the Index Maturity specified in the applicable Prospectus Supplement,
commencing on such Interest Reset Date, which appear on the Reuters
Screen LIBO Page at approximately 11:00 a.m., London time, on such LIBOR
Determination Date. For purposes of calculating LIBOR, "London Banking
Day" means any business day on which dealings in deposits in United
States dollars are transacted in the London interbank market and "Reuters
Screen LIBO Page" means the display designated as page "LIBO" on the
Reuters Monitor Money Rates Service (or such other page as may replace
the LIBO page on that service for the purpose of displaying London
interbank offered rates of major banks). If at least two such offered
rates appear on the Reuters Screen LIBO Page, "LIBOR" for such Interest
Reset Period will be the arithmetic mean of such offered rates as
determined by the Calculation Agent for such LIBOR Security.
(ii) If fewer than two offered rates appear on the Reuters Screen
LIBO Page on such LIBOR Determination Date, the Calculation Agent for
such LIBOR Security will request the principal London offices of each of
four major banks in the London interbank market selected by such
Calculation Agent to provide such Calculation Agent with its offered
quotations for deposits in U.S. dollars for the period of the specified
Index Maturity, commencing on such Interest Reset Date, to prime banks in
the London interbank market at approximately 11:00 a.m., London time, on
such LIBOR Determination Date and in a principal amount equal to an
amount of not less than $1,000,000 that is representative of a single
transaction in such market at such time. If at least two such quotations
are provided, "LIBOR" for such Interest Reset Period will be the
arithmetic mean of such quotations. If fewer than two such quotations
are provided, "LIBOR" for such Interest Reset Period will be the
arithmetic mean of rates quoted by three major banks in The City of New
York selected by the Calculation Agent for such LIBOR Security at
approximately 11:00 a.m., New York City time, on such LIBOR Determination
Date for loans in U.S. dollars to leading European banks, for the period
of the specified Index Maturity, commencing on such Interest Reset Date,
and in a principal amount equal to an amount of not less than $1,000,000
that is representative of a single transaction in such market at such
time; provided, however, that if the banks selected as aforesaid by such
Calculation Agent are not quoting rates as mentioned in this sentence,
"LIBOR" for such Interest Reset Period will be the same as LIBOR for the
immediately preceding Interest Reset Period.
Treasury Rate Securities. Each Treasury Rate Security will bear interest
for each Interest Reset Period at the interest rate calculated with reference
to the Treasury Rate and the Spread or Spread Multiplier, if any, specified in
such Security and in the applicable Prospectus Supplement.
The "Treasury Rate" for each Interest Period will be the rate for the
auction held on the Treasury Rate Determination Date (as defined below) for
such Interest Reset Period of direct obligations of the United States
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("Treasury bills") having the Index Maturity specified in the applicable
Prospectus Supplement, as such rate shall be published in H.15(519) under the
heading "U.S. Government Securities--Treasury bills--auction average
(investment)" or, in the event that such rate is not published prior to 3:00
p.m., New York City time, on the Calculation Date (as defined below) pertaining
to such Treasury Rate Determination Date, the auction average rate (expressed
as a bond equivalent on the basis of a year of 365 or 366 days, as applicable,
and applied on a daily basis) on such Treasury Rate Determination Date as
otherwise announced by the United States Department of the Treasury. In the
event that the results of the auction of Treasury bills having the specified
Index Maturity are not published or reported as provided above by 3:00 p.m.,
New York City time, on such Calculation Date, or if no such auction is held on
such Treasury Rate Determination Date, then the "Treasury Rate" for such
Interest Reset Period shall be calculated by the Calculation Agent for such
Treasury Rate Security and shall be the yield to maturity (expressed as a bond
equivalent on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) of the arithmetic mean of the secondary market bid
rates, as of approximately 3:30 p.m., New York City time, on such Treasury Rate
Determination Date, of three leading primary United States government
securities dealers selected by such Calculation Agent for the issue of Treasury
bills with a remaining maturity closest to the specified Index Maturity;
provided, however, that if the dealers selected as aforesaid by such
Calculation Agent are not quoting bid rates as mentioned in this sentence, then
the "Treasury Rate" for such Interest Reset Period will be the same as the
Treasury Rate for the immediately preceding Interest Reset Period.
The "Treasury Rate Determination Date" for each Interest Reset Period will
be the day of the week in which the Interest Reset Date for such Interest Reset
Period falls on which Treasury bills would normally be 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 such auction may be held on the preceding Friday. If, as
the result of a legal holiday, an auction is so held on the preceding Friday,
such Friday will be the Treasury Rate Determination Date pertaining to the
Interest Reset Period commencing in the next succeeding week. If an auction
date shall fall on any day that would otherwise be an Interest Reset Date for a
Treasury Rate Security, then such Interest Reset Date shall instead be the
business day immediately following such auction date.
The "Calculation Date" pertaining to any Treasury Rate Determination Date
shall be the first to occur of (a) the tenth calendar day after such Treasury
Rate Determination Date or, if such a day is not a business day, the next
succeeding business day or (b) the second business day preceding the date any
payment is required to be made for any period following the applicable Interest
Reset Date.
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BOOK-ENTRY REGISTRATION
The Prospectus Supplement related to a given series will specify whether
the holders of the Notes or Certificates of such series may hold their
respective Securities through DTC (in the United States)Eor Cedel Bank, societe
anonyme ("Cedel") or Euroclear (as defined below) (in Europe) if they are
participants of such systems, or indirectly through organizations that are
participants in such systems ("Book-Entry Notes" or "Book-Entry Certificates,"
respectively, and collectively referred to herein as "Book-Entry Securities").
The Seller has been informed by DTC that DTC's nominee will be Cede,
unless another nominee is specified in the related Prospectus Supplement.
Accordingly, such nominee ("DTC's Nominee") is expected to be the holder of
record of the Securities of any series held through DTC. DTC's Nominee will
hold the global Securities. Cedel and Euroclear will hold omnibus positions on
behalf of the Cedel Participants and the Euroclear Participants, respectively,
through customers' securities accounts in Cedel's and Euroclear's names on the
books of their respective depositaries (collectively, the "Depositaries") which
in turn will hold such positions in customers' securities accounts in the
Depositaries' names on the books of DTC.
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of SectionE17A of the
Exchange Act. DTC was created to hold securities for its participating
organizations ("Participants") and facilitate the clearance and settlement of
securities transactions between Participants through electronic book-entries,
thereby eliminating the need for physical movement of certificates.
Participants include securities brokers and dealers (who may include any of the
underwriters of a series of Securities), banks, trust companies and clearing
corporations and may include certain other organizations. Indirect access to
the DTC system also is available to others such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly (the "Indirect Participants").
Transfers between DTC Participants will occur in accordance with DTC
rules. Transfers between Cedel Participants and Euroclear Participants will
occur in the ordinary way in accordance with their applicable rules and
operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Cedel
Participants or Euroclear Participants, on the other, will be effected in DTC
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in accordance with DTC rules on behalf of the relevant European international
clearing system by its Depositary; however, such cross-market transactions will
require delivery of instructions to the relevant European international
clearing system by the counterparty in such system in accordance with its rules
and procedures and within its established deadlines (European time). The
relevant European international clearing system will, if the transaction meets
its settlement requirements, deliver instructions to its Depositary to take
action to effect final settlement on its behalf by delivering or receiving
securities in DTC, and making or receiving payment in accordance with normal
procedures for same-day funds settlement applicable to DTC. Cedel Participants
and Euroclear Participants may not deliver instructions directly to the
Depositaries.
Because of time-zone differences, credits of securities in Cedel or
Euroclear as a result of a transaction with a DTC Participant will be made
during the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in such
securities settled during such processing will be reported to the relevant
Cedel Participant or Euroclear Participant on such business day. Cash received
by Cedel or Euroclear as a result of sales of securities by or through a Cedel
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
Cedel or Euroclear cash account only as of the business day following
settlement in DTC.
The Securityholders who are not Participants or Indirect Participants but
who desire to purchase, sell or otherwise transfer ownership of, or other
interest in, Securities may do so only through Participants and Indirect
Participants. In addition, Securityholders will receive all distributions of
principal and interest from the Indenture Trustee or the applicable Trustee, as
the case may be (the "Applicable Trustee"), through the Participants who in
turn will receive them from DTC. Under a book-entry format, Securityholders
may experience some delay in their receipt of payments, since such payments
will be forwarded by the Applicable Trustee to DTC's Nominee. DTC will forward
such payments to its Participants which thereafter will forward them to
Indirect Participants or Securityholders. To the extent the related Prospectus
Supplement provides that Book-Entry Securities will be issued, the only
"Noteholder" or "Certificateholder," as applicable, will be DTC's Nominee.
Securityholders will not be recognized by the Applicable Trustee as
"Noteholders" or "Certificateholders," as such terms are used in the Indenture
or Trust Agreement, as applicable, and Securityholders will be permitted to
exercise the rights of Securityholders only indirectly through DTC and its
Participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
Securities among Participants on whose behalf it acts with respect to the
Securities and is required to receive and transmit distributions of principal
and interest on the Securities. Participants and Indirect Participants with
which Securityholders have accounts with respect to their respective Securities
similarly are required to make book-entry transfers and receive and transmit
such payments on behalf of their respective Securityholders. Accordingly,
although Securityholders will not possess their respective Securities, the
Rules provide a mechanism by which Participants will receive payments and will
be able to transfer their interests.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a
Securityholder to pledge Securities to persons or entities that do not
participate in the DTC system, or otherwise take actions with respect to such
Securities, may be limited due to the lack of a physical certificate for such
Securities.
DTC will advise the Administrator in respect of each Trust that it will
take any action permitted to be taken by a Securityholder under the related
Indenture or Trust Agreement, as applicable, only at the direction of one or
more Participants to whose accounts with DTC such Securities are credited. DTC
may take conflicting actions with respect to other undivided interests to the
extent that such actions are taken on behalf of Participants whose holdings
include such undivided interests.
Cedel is incorporated under the laws of Luxembourg as a professional
depository. Cedel holds securities for its participating organizations ("Cedel
Participants") and facilitates the clearance and settlement of securities
transactions between Cedel Participants through electronic book-entry changes
in accounts of Cedel Participants,
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thereby eliminating the need for physical movement of certificates.
Transactions may be settled by Cedel in any of 28 currencies, including United
States dollars. Cedel provides to its Cedel Participants, among other
things, services for safekeeping, administration, clearance and settlement of
internationally traded securities and securities lending and borrowing. Cedel
interfaces with domestic markets in several countries. As a professional
depository, Cedel is subject to regulations by the Luxembourg Monetary
Institute. Cedel Participants are recognized financial institutions around the
world, including underwriters, securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations and may
include any of the underwriters of any series of Securities. Indirect access
to Cedel is also available to others, such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a Cedel
Participant, either directly or indirectly.
The Euroclear System ("Euroclear" or the "Euroclear System") was created
in 1968 to hold securities for its participants ("Euroclear Participants") and
to clear and settle transactions between Euroclear Participants through
simultaneous electronic book-entry delivery against payment, thereby
eliminating the need for physical movement of certificates and the risk from
transfers of securities and cash that are not simultaneous.
The Euroclear System has subsequently been extended to clear and settle
transactions between Euroclear Participants and counterparties both in Cedel
and in many domestic securities markets. Transactions may be settled in any of
32 currencies. In addition to safekeeping (custody) and securities clearance
and settlement, the Euroclear System includes securities lending and borrowing
and money transfer services. The Euroclear System is operated by the Brussels,
Belgium office of Morgan Guaranty Trust Company of New York (the "Euroclear
Operator"), under contract with Euroclear Clearance System, S.C., a Belgian
cooperative corporation that establishes policy on behalf of Euroclear
Participants. The Euroclear Operator is the Belgian branch of a New York
banking corporation which is a member bank of the Federal Reserve System. As
such, it is regulated and examined by the Board of Governors of the Federal
Reserve System and the New York State Banking Department, as well as the
Belgian Banking Commission.
All operations are conducted by the Euroclear Operator and all Euroclear
securities clearance accounts and cash accounts are accounts with the Euroclear
Operator. They 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 all transfers of securities and cash, both within the
Euroclear System, and receipts and withdrawals of securities and cash. All
securities in the Euroclear System are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
Euroclear Participants include banks (including central banks), securities
brokers and dealers and other professional financial intermediaries and may
include any of the underwriters of any series of Securities. 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 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.
Unless and until Definitive Securities are issued under the limited
circumstances described herein or in the related Prospectus Supplement, no
Securityholder will be entitled to receive a physical certificate representing
a Book-Entry Security. All references herein and in the related Prospectus
Supplement to actions by Securityholders shall refer to actions taken by DTC
upon instructions from its Participants, and all references herein and in the
related Prospectus Supplement to distributions, notices, reports and statements
to Securityholders shall refer to distributions, notices, reports and
statements to DTC or its nominee as the registered holder of the Book-Entry
Securities, as the case may be, for distribution to Book-Entry Securityholders
in accordance with DTC's procedures with respect thereto.
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In the event that any of DTC, Cedel or Euroclear should discontinue its
services, the Administrator would seek an alternative depository (if available)
or cause the issuance of Definitive Securities to Securityholders or their
nominees in the manner described under "--Definitive Securities" below.
Except as required by law, none of the Administrator, if any, the
applicable Trustee or the applicable Indenture Trustee, if any, will have any
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests of the Securities of any series held by DTC's
Nominee, or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
DEFINITIVE SECURITIES
With respect to any series of Notes and any series of Certificates issued
in book-entry form, such Notes or Certificates will be issued in fully
registered, certificated form ("Definitive Notes" and "Definitive
Certificates," respectively, and collectively referred to herein as
"Definitive Securities") to Noteholders or Certificateholders or their
respective nominees, rather than to DTC or its nominee, only if (i) the related
Administrator determines that DTC is no longer willing or able to discharge
properly its responsibilities as depository with respect to such Securities and
such Administrator is unable to locate a qualified successor and so notifies
the Applicable Trustee in writing, (ii) the Administrator, at its option,
elects to terminate the book-entry system through DTC or (iii) after the
occurrence of an Event of Default or an Event of Servicing Termination with
respect to such Securities, holders representing at least a majority of the
outstanding principal amount of the Notes or the Certificates, as the case may
be, of such series advise the Applicable Trustee through DTC in writing that
the continuation of a book-entry system through DTC (or a successor thereto)
with respect to such Notes or Certificates is no longer in the best interest of
the holders of such Securities.
Upon the occurrence of any event described in the immediately preceding
paragraph, the Applicable Trustee will be required to notify all applicable
Securityholders of a given series through 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 will reissue such Securities as
Definitive Securities to such Securityholders.
Distributions of principal of, and interest on, such Definitive Securities
will thereafter be made by the Applicable 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 such
Securities in the related Prospectus Supplement. Such distributions will be
made by check mailed to the address of such holder as it appears on the
register maintained by the Applicable Trustee. The final payment on any such
Definitive Security, however, will be made only upon presentation and surrender
of such Definitive Security at the office or agency specified in the notice of
final distribution to the applicable Securityholders.
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.
REPORTS TO SECURITYHOLDERS
With respect to each series of Securities that includes Notes, on or prior
to each Distribution Date, the Servicer will prepare and provide to the related
Indenture Trustee a statement to be delivered to the related Noteholders on
such Distribution Date. With respect to each series of Securities, on or prior
to each Distribution Date, the Servicer will prepare and provide to the related
Trustee a statement to be delivered to the related Certificateholders on such
Distribution Date. With respect to each series of Securities, each such
statement to be delivered to Noteholders will include (to the extent
applicable) the following information (and any other information
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so specified in the related Prospectus Supplement) as to the Notes of such
series with respect to such Distribution Date or the period since the previous
Distribution Date, as applicable, and each such statement to be delivered to
Certificateholders will include (to the extent applicable) the following
information (and any other information so specified in the related Prospectus
Supplement) as to the Certificates of such series with respect to such
Distribution Date or the period since the previous Distribution Date, as
applicable:
(i) the amount of the distribution allocable to principal of each
class of such Notes and to the Certificate Balance of each class of such
Certificates;
(ii) the amount of the distribution allocable to interest on or
with respect to each class of Securities of such series;
(iii) the amount of the distribution allocable to draws from the
Reserve Account (if any), the Yield Supplement Deposit Amount (if any)
(as defined in the related Prospectus Supplement) or payments in respect
of any other credit or cash flow enhancement arrangement;
(iv) the Pool Balance as of the close of business on the last day
of the preceding Collection Period;
(v) the aggregate outstanding principal amount and the Note Pool
Factor for each class of such Notes, and the Certificate Balance and the
Certificate Pool Factor for each class of such Certificates, each after
giving effect to all payments reported under clause (i) above on such
date;
(vi) the amount of the Servicing Fee paid to the Servicer with
respect to the related Collection Period or Collection Periods, as the
case may be;
(vii) the amount of the aggregate Realized Losses (as defined in
the related Prospectus Supplement), if any, for such Collection Period;
(viii) 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 related Prospectus
Supplement), if any, in each case as applicable to each class of
Securities, and the change in such amounts from the preceding statement;
(ix) the aggregate Purchase Amounts for Receivables, if any, that
were repurchased in such Collection Period;
(x) the balance of the Reserve Account (if any) on such date, after
giving effect to changes therein on such date;
(xi) the balance of the Yield Supplement Account (if any) on such
date, after giving effect to changes therein on such date;
(xii) the amount of Advances on such date;
(xiii) for each such date during the Funding Period (if any), the
remaining Pre-Funded Amount;
(xiv) for the first such date that is on or immediately following
the end of the Funding Period (if any), the amount of any remaining
Pre-Funded Amount that has not been used to fund the purchase of
Subsequent Receivables and is being passed through as payments of
principal on the Securities of such series; and
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(xv) the amount of any cumulative shortfall between payments due in
respect of any credit or cash flow enhancement arrangement and payments
received in respect of such credit or cash flow enhancement arrangement,
and the change in any such shortfall from the preceding statement.
Each amount set forth pursuant to subclauses (i), (ii), (vi) and (viii)
with respect to the Notes or the Certificates of any series will be expressed
as a dollar amount per $1,000 of the initial principal amount of such Notes or
the initial Certificate Balance of such Certificates, as applicable.
Within the prescribed period of time for federal income 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 such
calendar year has been a Securityholder with respect to such Trust and received
any payment thereon a statement containing certain information for the purposes
of such Securityholder's preparation of federal income tax returns. See
"Certain Federal Income Tax Consequences."
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of each Sale and Servicing
Agreement or Pooling and Servicing Agreement pursuant to which a Trust will
purchase Receivables from the Seller and the Servicer will agree to service
such Receivables, each Trust Agreement (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 Ford Credit will undertake certain 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. 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
Prior to the time of issuance of the Securities of a given Trust, pursuant
to a related Purchase Agreement (the "Purchase Agreement"), Ford Credit will
sell and assign to the Seller, without recourse, its entire interest in the
Initial Receivables, if any, of the related Receivables Pool, including its
security interests in the related Financed Vehicles. At the time of issuance
of the Securities of such Trust, the Seller will sell and assign to the
applicable Trustee, without recourse, the Seller's entire interest in the
Initial Receivables, including its security interests in the related Financed
Vehicles. Each such Receivable will be identified in a schedule to the
related Sale and Servicing Agreement or Pooling and Servicing Agreement. The
applicable Trustee will not independently verify the existence and
qualification of any Receivables. The Trustee will, concurrently with such
sale and assignment, execute, authenticate, and deliver the related Notes
and/or Certificates to the Seller in exchange for the Receivables. The net
proceeds received by the Seller from the sale of the Certificates and the Notes
of a given series will be applied to the purchase of the related Receivables
from Ford Credit, to the deposit of the Pre-Funded Amount into the Pre-Funding
Account, if any, and to make the initial deposit into the Reserve Account, if
any. The related Prospectus Supplement for a given Trust will specify whether,
and the terms, conditions and manner under which, Subsequent Receivables will
be sold by the Seller to the applicable Trust from time to time during any
Funding Period on each date specified as a transfer date in the related
Prospectus Supplement (each, a "Subsequent Transfer Date").
The purchase price for the Receivables purchased by the Trust from the
Seller and by the Seller from Ford Credit may be more or less than the
aggregate principal balance thereof. If any Receivables are purchased for a
purchase price less than their respective principal balances, a portion of the
collections or proceeds in respect of principal from such Receivables may be
deemed collections or proceeds in respect of interest on such Receivables for
the purposes of allocating distributions on the Securities.
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In each Purchase Agreement, Ford Credit will represent and warrant to the
Seller, and in each Sale and Servicing Agreement or Pooling and Servicing
Agreement the Seller will represent and warrant to the applicable Trust, among
other things, that (i) the information provided with respect to the related
Receivables is correct in all material respects; (ii) the Obligor on each
related Receivable has obtained or agreed to obtain physical damage insurance
in accordance with Ford Credit's normal requirements; (iii) at the date of
issuance of the related Notes and/or Certificates or at the applicable
Subsequent Transfer Date, if any, the related Receivables are free and clear of
all security interests, liens, charges, and encumbrances (such representation
and warranty will be made to the best of its knowledge with respect to
mechanic's liens and the like relating to each Financed Vehicle) and no
setoffs, defenses, or counterclaims against it have been asserted or
threatened; (iv) at the date of issuance of the related Notes and/or
Certificates or at the applicable Subsequent Transfer Date, if any, each of the
related Receivables is or will be secured by a first perfected security
interest in the Financed Vehicle in favor of Ford Credit; and (v) each related
Receivable, at the time it was originated, complied, and at the date of
issuance of the related Notes and/or Certificates or at the applicable
Subsequent Transfer Date, if any, complies in all material respects with
applicable federal and state laws, including consumer credit, truth in lending,
equal credit opportunity, and disclosure laws.
As of the last day of the second (or, if the Seller elects, the first)
month following the discovery by or notice to the Seller of a breach of any
representation or warranty of the Seller which materially and adversely affects
the interests of the related Trust in any Receivable, the Seller, unless it
cures the breach, will purchase such Receivable from such Trust, and Ford
Credit will purchase such Receivable from the Seller, at a price equal to the
amount required to be paid by the related Obligor to prepay such Receivable
(including one month's interest thereon, in the month of payment, at the APR),
after giving effect to the receipt of any moneys collected (from whatever
source) on such Receivable, if any (such price, the "Purchase Amount"). The
purchase obligation will constitute the sole remedy available to the
Certificateholders or the Trustee and any Noteholders or Indenture Trustee in
respect of such Trust for any such uncured breach.
Pursuant to each Sale and Servicing Agreement or Pooling and Servicing
Agreement, the Servicer will service and administer the Receivables held by
each Trust and, as custodian on behalf of such Trust, will maintain possession
as the Trustee's agent of the retail installment sale contracts and any other
documents relating to such Receivables. To assure uniform quality in servicing
both the Receivables and the Servicer's own portfolio of receivables, as well
as to facilitate servicing and save administrative costs, the installment sale
contracts and other documents relating thereto will not be physically
segregated from other similar documents that are in the Servicer's possession
or otherwise stamped or marked to reflect the transfer to a given Trust so long
as Ford Credit is servicing the related Receivables. However, Uniform
Commercial Code financing statements reflecting the sale and assignment of such
Receivables by Ford Credit to the Seller and by the Seller to such Trust will
be filed, and the Servicer's accounting records and computer systems will be
marked to reflect such sale and assignment. Because such Receivables will
remain in the Servicer's possession and will not be stamped or otherwise marked
to reflect the assignment to such Trust, if a subsequent purchaser were to
obtain physical possession of such Receivables without knowledge of the
assignment, the Trust's interest in the Receivables could be defeated. See
"Certain Legal Aspects of the Receivables--Security Interests in Vehicles."
ACCOUNTS
With respect to each Trust that issues Notes, the Servicer will establish
and maintain with the related Indenture Trustee one or more accounts, in the
name of the Indenture Trustee on behalf of the related Noteholders and
Certificateholders, into which all payments made on or with respect to the
related Receivables will be deposited (the "Collection Account"). The Servicer
will establish and maintain with such Indenture Trustee an account, in the name
of such Indenture Trustee on behalf of such Noteholders, into which amounts
released from the Collection Account and any Pre-Funding Account, Reserve
Account or other credit enhancement for payment to such Noteholders will be
deposited and from which all distributions to such Noteholders will be made
(the "Note Payment Account"). The Servicer will establish and maintain with
the related Trustee an account, in the name of such Trustee on behalf of such
Certificateholders, into which amounts released from the Collection Account and
any Pre-Funding Account, Yield Supplement Account, Reserve Account or other
credit or cash flow enhancement for
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distribution to such Certificateholders will be deposited and from which all
distributions to such Certificateholders will be made (the "Certificate
Distribution Account"). With respect to each Trust that does not issue Notes,
the Servicer will also establish and maintain the Collection Account and any
other Trust 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 Trust that issues Notes an additional account (the "Payahead
Account"), in the name of the related Indenture Trustee, into which, to the
extent required by the Sale and Servicing Agreement, early payments by or on
behalf of Obligors on Precomputed Receivables which do not constitute scheduled
payments, full prepayments, nor certain partial prepay ments that result in a
reduction of the Obligor's periodic payment below the scheduled payment as of
the applicable Cutoff Date ("Payaheads") will be deposited until such time as
the payment falls due. Until such time as payments are transferred from the
Payahead Account to the Collection Account, they will not constitute collected
interest or collected principal and will not be available for distribution to
the applicable Noteholders or Certificateholders. The Payahead Account will
initially be maintained with the applicable Indenture Trustee. With respect to
each Trust that does not issue Notes, the Servicer will also establish and
maintain with the related Trustee the Payahead Account in the name of such
Trustee. So long as Ford Credit is the servicer and provided that (i) there
exists no Event of Servicing Termination and (ii) each other condition to
holding Payaheads as may be required by the applicable Sale and Servicing
Agreement or Pooling and Servicing Agreement is satisfied, Payaheads may be
retained by the Servicer until the applicable Distribution Date.
Any other accounts to be established with respect to a Trust, including
any Pre-Funding Account, Yield Supplement Account or Reserve Account, will be
described in the related Prospectus Supplement.
For any series of Securities, funds in the Collection Account, the Note
Payment Account and any Pre-Funding Account, Yield Supplement Account, Reserve
Account and other accounts identified as such in the related Prospectus
Supplement (collectively, the "Trust Accounts") will be invested as provided in
the related Sale and Servicing Agreement or Pooling and Servicing Agreement in
Permitted Investments. "Permitted Investments" means (i) direct obligations
of, and obligations fully guaranteed as to timely payment by, the United States
of America or its agencies; (ii) demand deposits, time deposits, certificates
of deposit or bankers' acceptances of certain depository institutions or trust
companies having the highest rating from the applicable Rating Agency; (iii)
commercial paper having, at the time of the Trust's investment, a rating in the
highest rating category from the applicable Rating Agency; (iv) investments in
money market funds having the highest rating from the applicable Rating Agency;
(v) repurchase obligations with respect to any security that is a direct
obligation of, or fully guaranteed by, the United States of America or its
agencies, in either case entered into with a depository institution or trust
company described in clause (ii) above; and (vi) any other investment (which
may include motor vehicle retail sale contracts) acceptable to the Rating
Agencies rating the Securities of the related Trust as being consistent with
the rating of such Securities. Permitted Investments are generally limited to
obligations or securities that mature on or before the date of the next
distribution for such series. However, to the extent permitted by the Rating
Agencies, funds in any Reserve Account may be invested in securities that will
not mature prior to the date of the next distribution with respect to such
Certificates or Notes and will not be sold to meet any shortfalls. Thus, the
amount of cash in any Reserve Account at any time may be less than the balance
of the Reserve Account. If the amount required to be withdrawn from any
Reserve Account to cover shortfalls in collections on the related Receivables
(as provided in the related Prospectus Supplement) exceeds the amount of cash
in the Reserve Account, a temporary shortfall in the amounts distributed to the
related Noteholders or Certificateholders could result, which could, in turn,
increase the average life of the Notes or the Certificates of such series.
Investment earnings on funds deposited in the Trust Accounts, net of losses and
investment expenses (collectively, "Investment Earnings"), shall be deposited
in the applicable Collection Account or distributed as provided in the related
Prospectus Supplement.
The Trust Accounts will be maintained as Eligible Deposit Accounts.
"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 one of the states thereof or the District of Columbia
(or any domestic branch of a foreign bank), having corporate trust powers
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and acting as trustee for funds deposited in such account, so long as any of
the securities of such depository institution have a credit rating from
each Rating Agency in one of its generic rating categories which signifies
investment grade. "Eligible Institution" means, with respect to a Trust, (a)
the corporate trust department of the related Indenture Trustee or the related
Trustee, as applicable, or (b) a depository institution organized under the
laws of the United States of America or any one of the states thereof or the
District of Columbia (or any domestic branch of a foreign bank), (i) which has
either (A) a long-term unsecured debt rating acceptable to the Rating Agencies
or (B) a short-term unsecured debt rating or certificate of deposit rating
acceptable to the Rating Agencies and (ii) whose deposits are insured by the
Federal Deposit Insurance Corporation.
SERVICING PROCEDURES
The Servicer will make reasonable efforts to collect all payments due with
respect to the Receivables held by each Trust and will continue such collection
procedures as it follows with respect to its own automotive retail installment
sale contracts, in a manner consistent with the related Sale and Servicing
Agreement or Pooling and Servicing Agreement. Consistent with its normal
procedures, the Servicer may, in its discretion, arrange with the Obligor on a
Receivable to defer or modify the payment schedule. Some of such arrangements
may cause the Servicer to purchase the Receivable while others may result in
the Servicer making Advances with respect to the Receivable. If the Servicer
determines that eventual payment in full of a Receivable is unlikely, the
Servicer will follow its normal practices and procedures to realize upon the
Receivable, including the repossession and disposition of the Financed Vehicle
securing the Receivable at a public or private sale, or the taking of any other
action permitted by applicable law.
COLLECTIONS
With respect to each Trust, the Servicer will deposit all payments on the
related Receivables received from Obligors and all proceeds of the related
Receivables collected during each collection period specified in the related
Prospectus Supplement (each, a "Collection Period") into the related Collection
Account not later than the business day after receipt. However, so long as
Ford Credit is the servicer and provided that (i) there exists no Event of
Servicing Termination and (ii) each other condition to making monthly deposits
as may be required by the related Sale and Servicing Agreement or Pooling and
Servicing Agreement is satisfied, the Servicer may retain such amounts until
the applicable Distribution Date. The Servicer or the Seller, as the case may
be, will remit the aggregate Purchase Amount of any Receivables to be purchased
from a Trust to the related Collection Account on the applicable Distribution
Date. 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. To the extent set forth in the related
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 Purchase Amount with respect to
Receivables purchased by the Servicer.
Collections on a Receivable made during a Collection Period which are not
late fees, prepayment charges, or certain other similar fees or charges shall
be applied first to any outstanding Advances made by the Servicer, with respect
to such Receivable and then to the scheduled payment. To the extent that such
collections on a Precomputed Receivable during a Collection Period exceed the
outstanding Precomputed Advances and the scheduled payment on such Precomputed
Receivable, the collections shall be applied to prepay the Precomputed
Receivable in full. If the collections are insufficient to prepay the
Precomputed Receivable in full, they generally shall be treated as Payaheads
until such later Collection Period as such Payaheads may be transferred to the
Collection Account and applied either to the scheduled payment or to prepay the
Precomputed Receivable in full.
ADVANCES
If so provided in the related Prospectus Supplement, to the extent the
collections on a Precomputed Receivable for a Collection Period are less than
the scheduled payment, the amount of Payaheads made on such
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Precomputed Receivable not previously applied (the "Payahead Balance"), if any,
with respect to such Precomputed Receivable shall be applied by the Servicer
to the extent of the shortfall. To, the extent of any remaining shortfall, the
Servicer will make a Precomputed Advance of the deficiency. The Servicer will
be obligated to make a Precomputed Advance in respect of a Precomputed
Receivable only to the extent that the Servicer, in its sole discretion,
expects to recoup the Precomputed Advance from the Obligor, the Purchase
Amount, Liquidation Proceeds or collections from other Receivables in the
related Receivables Pool. The Servicer will deposit Precomputed Advances in
the related Collection Account on the applicable Distribution Date. The
Servicer will be entitled to recoup its Precomputed Advances from subsequent
payments by or on behalf of the Obligor, collections of Liquidation Proceeds
and payment of the Purchase Amount; or, upon the determination that
reimbursement from the preceding sources is unlikely, will be entitled to
recoup its Precomputed Advances from collections from other Receivables in the
related Receivables Pool.
If so provided in the related Prospectus Supplement, on or before the
business day prior to each applicable Distribution Date, the Servicer shall
deposit into the related Collection Account as a Simple Interest Advance an
amount equal to the amount of interest that would have been due on the related
Simple Interest Receivables at their respective APRs for the related Collection
Period (assuming that such Simple Interest Receivables are paid on their
respective due dates) minus the amount of interest actually received on such
Simple Interest Receivables during the related Collection Period. If such
calculation results in a negative number, an amount equal to such 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 (as such term is defined in the related Prospectus
Supplement), the amount of accrued and unpaid interest thereon (but not
including interest for the then current Collection Period) shall be withdrawn
from the Collection Account and paid to the Servicer in reimbursement of
outstanding Simple Interest Advances. No advances of principal will be made
with respect to Simple Interest Receivables. As used herein, "Advances" means
both Precomputed Advances and Simple Interest Advances.
In the event that an Obligor shall prepay a Receivable in full, if the
related contract did not require such Obligor to pay a full month's interest
for the month of prepayment, at the APR, generally the Servicer will advance
the amount of such interest. The Servicer will not be entitled to recoup any
such advance.
SERVICING COMPENSATION AND EXPENSES
The Servicer will be entitled to receive a servicing fee (the "Servicing
Fee") for each Collection Period equal to a specified percentage (the
"Servicing Fee Rate") of the Pool Balance as of the first day of the such
Collection Period. The Servicer also will be entitled to receive a
supplemental servicing fee (the "Supplemental Servicing Fee") for each
Collection Period equal to any late, prepayment, and other administrative fees
and expenses collected during such Collection Period. If so specified in the
related Prospectus Supplement, the Supplemental Servicing Fee will include
Investment Earnings on funds deposited in the Trust Accounts and other accounts
with respect to a Trust. The Servicer will be paid the Servicing Fee and the
Supplemental Servicing Fee for each Collection Period on the applicable
Distribution Date.
The Servicing Fee and the Supplemental Servicing Fee (collectively, the
"Servicer Fee") are intended to compensate the Servicer for performing the
functions of a third party servicer of the Receivables as an agent for their
beneficial owner, including collecting and posting all payments, responding to
inquiries of Obligors on the Receivables, investigating delinquencies, sending
payment coupons to Obligors, reporting federal income tax information to
Obligors, paying costs of collections, and policing the collateral. The
Servicer Fee will also compensate the Servicer for administering the particular
Receivables Pool, including making Advances, accounting for collections,
furnishing monthly and annual statements to the related Trustee and Indenture
Trustee with respect to distributions, and generating federal income tax
information for the Trust. The Servicer Fee also will reimburse the Servicer
for certain taxes, the fees of the related Trustee and Indenture Trustee,
accounting fees, outside auditor fees, data processing costs, and other costs
incurred in connection with administering the applicable Receivables.
DISTRIBUTIONS
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With respect to each series of Securities, beginning on the Distribution
Date specified in the related Prospectus Supplement, distributions of principal
and interest (or, where applicable, of principal or interest only) on each
class of such Securities entitled thereto will be made by the Applicable
Trustee to the Noteholders and the Certificateholders of such series. The
timing, calculation, allocation, order, source, priorities of and requirements
for all payments to each class of Noteholders and all distributions to each
class of Certificateholders of such series will be set forth in the related
Prospectus Supplement.
With respect to each Trust, on each Distribution Date, collections on the
related Receivables will be transferred from the Collection Account to the Note
Payment Account, if any, and the Certificate Distribution Account for
distribution to Noteholders, if any, and Certificateholders to the extent
provided in the related Prospectus Supplement. Credit enhancement, such as a
Reserve Account, will be available to cover any shortfalls in the amount
available for distribution on such date to the extent specified in the related
Prospectus Supplement. As more fully described in the related Prospectus
Supplement, and unless otherwise specified therein, distributions in respect of
principal of a class of Securities of a given series will be subordinate to
distributions in respect of inter est on such class, and distributions in
respect of one or more classes of Certificates of such series may be
subordinate to payments in respect of Notes, if any, of such series or other
classes of Certificates of such series.
Allocation of Collections on Receivables. Distributions of principal on
the Securities of a series may be based on the amount of principal collected or
due, or the amount of Realized Losses incurred, in a Collection Period. On the
Business Day immediately preceding each Distribution Date (a "Determination
Date"), the Indenture Trustee, if any, or, otherwise, the Trustee shall
determine the amount in the Collection Account available for distribution on
the related Distribution Date. Such amount shall be allocated as described
under "--Collections" above and to the interest and principal portion of
scheduled payments on the Receivables in accordance with the Servicer's
customary servicing procedures. Payments to Securityholders shall be made on
each Distribution Date in accordance with such allocations, together with the
statement described under "Certain Information Regarding the
Securities--Reports to Securityholders."
CREDIT AND CASH FLOW ENHANCEMENT
The amounts and types of credit and cash flow enhancement arrangements and
the provider thereof, if applicable, with respect to each class of Securities
of a given series, if any, will be set forth in the related Prospectus
Supplement. If and to the extent provided in the related Prospectus
Supplement, credit and cash flow enhancement may be in the form of
subordination of one or more classes of Securities, Reserve Accounts,
overcollateralization, letters of credit, credit or liquidity facilities,
surety bonds, guaranteed investment contracts, guaranteed rate agreements,
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 such other arrangements as may be
described in the related Prospectus Supplement or any combination of two or
more of the foregoing. If specified in the applicable Prospectus Supplement,
credit or cash flow enhancement for a class of Securities may cover one or more
other classes of Securities of the same series, and credit or cash flow
enhancement for a series of Securities may cover one or more other series of
Securities.
The presence of a Reserve Account and other forms of credit enhancement
for the benefit of any class or series of Securities is intended to enhance the
likelihood of receipt by the Securityholders of such class or series of the
full amount of principal and interest due thereon and to decrease the
likelihood that such Securityholders will experience losses. The credit
enhancement for a class or series of Securities may not provide protection
against all risks of loss and may not guarantee repayment of the entire
principal amount and interest thereon. If losses occur which exceed the amount
covered by any credit enhancement or which are not covered by any credit
enhancement, Securityholders of any class or series will bear their allocable
share of deficiencies, as described in the related Prospectus Supplement. In
addition, if a form of credit enhancement covers more than one series of
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Securities, Securityholders of any such series will be subject to the risk that
such credit enhancement will be exhausted by the claims of Securityholders of
other series.
The Seller may replace the credit enhancement for any class of Securities
with another form of credit enhancement without the consent of Securityholders,
provided the applicable Rating Agencies confirm in writing that substitution
will not result in the reduction or withdrawal of the rating of such class of
Securities or any other class of Securities of the related series.
Reserve Account. If so provided in the related Prospectus Supplement,
pursuant to the related Sale and Servicing Agreement or Pooling and Servicing
Agreement, the Seller will establish for a series or class of Securities an
account, as specified in the related Prospectus Supplement (the "Reserve
Account"), which will be maintained with the related Trustee or Indenture
Trustee, as applicable. If so provided in the related Prospectus Supplement,
the Reserve Account will be funded by an initial deposit by the Seller on the
Closing Date in the amount set forth in the related Prospectus Supplement and,
if the related series has a Funding Period, will also be funded on each
Subsequent Transfer Date to the extent described in the related Prospectus
Supplement. As further described in the related Prospectus Supplement, the
amount on deposit in the Reserve Account will be increased on each Distribution
Date thereafter up to the Specified Reserve Balance (as defined in the related
Prospectus Supplement) by the deposit therein of the amount of collections on
the related Receivables remaining on each such Distribution Date after the
payment of all other required payments and distributions on such date. The
related Prospectus Supplement will describe the circumstances and manner under
which distributions may be made out of the Reserve Account, either to holders
of the Securities covered thereby or to the Seller.
The Seller may at any time, without consent of the Securityholders, sell,
transfer, convey or assign in any manner its rights to and interests in
distributions from the Reserve Account provided that (i) the Rating Agencies
confirm in writing that such action will not result in a reduction or
withdrawal of the rating of any class of Securities, (ii) the Seller provides
to the applicable Trustee and any Indenture Trustee an opinion of counsel from
independent counsel that such action will not cause the related Trust to be
classified as an association (or publicly traded partnership) taxable as a
corporation for federal income tax purposes and (iii) such transferee or
assignee agrees in writing to take positions for federal income tax purposes
consistent with the federal income tax positions agreed to be taken by the
Seller.
NET DEPOSITS
As an administrative convenience and for so long as certain conditions are
satisfied (see "--Collections" above), the Servicer will be permitted to make
the deposit of collections, aggregate Advances and Purchase Amounts for any
Trust for or with respect to the related Collection Period, net of
distributions to the Servicer as reimbursement of Advances or payment of the
Servicer Fee with respect to such Collection Period. Similarly, the Servicer
may cause to be made a single, net transfer from the Collection Account to the
related Payahead Account, if any, or vice versa. The Servicer, however, will
account to the Trustee, any Indenture Trust, the Noteholders, if any, and the
Certificateholders with respect to each Trust as if all deposits,
distributions, and transfers were made individually.
STATEMENTS TO TRUSTEES AND TRUST
Prior to each Distribution Date with respect to each series of Securities,
the Servicer will provide to the applicable Indenture Trustee, if any, and the
applicable Trustee as of the close of business on the last day of the preceding
Collection Period a statement setting forth substantially the same information
as is required to be provided in the periodic reports provided to
Securityholders of such series described under "Certain Information Regarding
the Securities--Reports to Securityholders."
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EVIDENCE AS TO COMPLIANCE
Each Sale and Servicing Agreement and Pooling and Servicing Agreement will
provide that a firm of independent certified public accountants will furnish to
the related Trust and Indenture Trustee or Trustee, as applicable, annually a
statement as to compliance by the Servicer during the preceding twelve months
(or, in the case of the first such certificate, from the applicable Closing
Date) with certain standards relating to the servicing of the applicable
Receivables, the Servicer's accounting records and computer files with respect
thereto and certain other matters.
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 such
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 such certificate, from the Closing Date) or, if there has been a default
in the fulfillment of any such obligation, describing each such default. The
Servicer has agreed to give each Indenture Trustee and each Trustee notice of
certain Events of Servicing Termination under the related Sale and Servicing
Agreement or Pooling and Servicing Agreement, as applicable.
Copies of such 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 Ford Credit may not resign from its obligations and duties as
Servicer thereunder, except upon determination that Ford Credit's performance
of such duties is no longer permissible under applicable law. No such
resignation will become effective until the related Indenture Trustee or
Trustee, as applicable, or a successor servicer has assumed Ford Credit's
servicing obligations and duties under such 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 and 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 such Sale and Servicing Agreement
or Pooling and Servicing Agreement or for errors in judgment; except that
neither the Servicer nor any such person will be protected against any
liability that would otherwise be imposed by reason of willful misfeasance, bad
faith or negligence in the performance of the Servicer's duties thereunder or
by reason of reckless disregard of its obligations and duties thereunder. In
addition, each Sale and Servicing Agreement and Pooling and Servicing Agreement
will provide that the Servicer is under no obligation to appear in, prosecute
or defend any legal action that is not incidental to the Servicer's servicing
responsibilities under such 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 a particular Sale and
Servicing Agreement or Pooling and Servicing Agreement, the rights and duties
of the parties thereto, and the interests of the related Securityholders
thereunder. In such event, the legal expenses and costs of such action and any
liability resulting therefrom will be expenses, costs, and liabilities of the
Servicer, and the Servicer will not be entitled to be reimbursed therefor.
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 the
business of the Servicer or, with respect to its obligations as Servicer, any
corporation 50% or more of the voting stock of which is owned, directly or
indirectly, by Ford, which corporation or other entity in each of the foregoing
cases assumes the
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obligations of the Servicer, will be the successor of the
Servicer under such Sale and Servicing Agreement or Pooling and Servicing
Agreement. For as long as Ford Credit is the Servicer, it may at any time
subcontract substantially all of its duties as servicer under a particular Sale
and Servicing Agreement or Pooling and Servicing Agreement to any corporation
more than 50% of the voting stock of which is owned, directly or indirectly, by
Ford and the Servicer may at any time perform certain specific duties as
servicer through other subcontractors.
EVENTS OF SERVICING TERMINATION
"Events of Servicing Termination" under each Sale and Servicing Agreement
and Pooling and Servicing Agreement will consist of (i) any failure by the
Servicer or the Seller, as the case may be, to deliver to the Applicable
Trustee for distribution to the Securityholders of the related series or for
deposit in any of the Trust Accounts or the Certificate Distribution Account
any required payment, which failure continues unremedied for three business
days after written notice from the Applicable Trustee is received by the
Servicer or the Seller, as the case may be, or after discovery by an officer of
the Servicer or the Seller, as the case may be; (ii) any failure by the
Servicer or the Seller, as the case may be, duly to observe or perform in any
material respect any other covenant or agreement in such Sale and Servicing
Agreement or Pooling and Servicing Agreement, which failure materially and
adversely affects the rights of the Noteholders or the Certificateholders of
the related series and which continues unremedied for 90 days after the giving
of written notice of such failure (A) to the Servicer or the Seller, as the
case may be, by the Applicable Trustee or (B) to the Servicer or the Seller, as
the case may be, and to the Applicable Trustee by holders of Notes or
Certificates of such series, as applicable, evidencing not less than 25% in
principal amount of such outstanding Notes or of such Certificate Balance;
(iii) the occurrence of an Insolvency Event with respect to the Servicer or the
Seller; and (iv) such other events, if any, set forth in the related Prospectus
Supplement. "Insolvency Event" means, with respect to any entity, any of the
following events or actions: certain events of insolvency, readjustment of
debt, marshalling of assets and liabilities or similar proceedings with respect
to such entity and certain actions by such entity indicating its insolvency,
reorganization pursuant to bankruptcy proceedings or inability to pay its
obligations.
RIGHTS UPON EVENT OF SERVICING TERMINATION
In the case of any Trust that has issued Notes, as long as an Event of
Servicing Termination under a Sale and Servicing Agreement remains unremedied,
the related Indenture Trustee or holders of Notes of the related series
evidencing not less than a majority of the principal amount of such Notes then
outstanding may terminate all the rights and obligations of the Servicer under
such Sale and Servicing Agreement, whereupon such Indenture Trustee or a
successor servicer appointed by such Indenture Trustee will succeed to all the
responsibilities, duties and liabilities of the Servicer under such Sale and
Servicing Agreement and will be entitled to similar compensation arrangements.
In the case of any Trust that has not issued Notes, as long as an Event of
Servicing Termination under the related Sale and Servicing Agreement or Pooling
and Servicing Agreement remains unremedied, the related Trustee or holders of
Certificates of the related series evidencing not less than a majority of the
Certificate Balance of such Certificates then outstanding may terminate all the
rights and obligations of the Servicer under such Sale and Servicing Agreement
or Pooling and Servicing Agreement, whereupon such Trustee or a successor
servicer appointed by such Trustee will succeed to all the responsibilities,
duties and liabilities of the Servicer under such Sale and Servicing Agreement
or Pooling 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 Event of Servicing Termination other than
such appointment has occurred, such trustee or official may have the power to
prevent such Indenture Trustee, such Noteholders, such Trustee or such
Certificateholders from effecting a transfer of servicing. In the event that
such 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 with a net worth of at least $100,000,000 and whose regular
business includes the servicing of motor vehicle receivables. Such Indenture
Trustee or Trustee may make such arrangements for compensation to be paid,
which in no event may be greater than the servicing compensation to the
Servicer under such Sale and Servicing Agreement or Pooling and Servicing
Agreement.
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WAIVER OF PAST EVENTS OF SERVICING TERMINATION
With respect to each Trust that has issued Notes, the holders of Notes
evidencing not less than a majority of the principal amount of the then
outstanding Notes of the related series (or the holders of the Certificates of
such series evidencing not less than a majority of the outstanding Certificate
Balance, in the case of any Event of Servicing Termination which does not
adversely affect the related Indenture Trustee or such Noteholders) may, on
behalf of all such Noteholders and Certificateholders, waive any Event of
Servicing Termination under the related Sale and Servicing Agreement and its
consequences, except an Event of Servicing Termination consisting of a failure
to make any required deposits to or payments from any of the Trust Accounts or
to the Certificate Distribution Account in accordance with such Sale and
Servicing Agreement. With respect to each Trust that has not issued Notes,
holders of Certificates of such series evidencing not less than a majority of
the Certificate Balance of such Certificates then outstanding may, on behalf of
all such Certificateholders, waive any Event of Servicing Termination under the
related Sale and Servicing Agreement or Pooling and Servicing Agreement, except
an Event of Servicing Termination consisting of a failure to make any required
deposits to or payments from the Certificate Distribution Account or the
related Trust Accounts in accordance with such Sale and Servicing Agreement or
Pooling and Servicing Agreement. No such waiver will impair such Noteholders'
or Certificateholders' rights with respect to subsequent defaults.
AMENDMENT
Each of the Transfer and Servicing Agreements may be amended by the
parties thereto, without the consent of the related Noteholders or
Certificateholders, for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of such Transfer and Servicing
Agreements or of modifying in any manner the rights of such Noteholders or
Certificateholders; provided that such action will not, in the opinion of
counsel satisfactory to the related Trustee or Indenture Trustee, as
applicable, materially and adversely affect the interest of any such Noteholder
or Certificateholder and provided that an opinion of counsel as to certain tax
matters is delivered if required. The Transfer and Servicing Agreements may
also be amended by the Seller, the Servicer, the related Trustee and any
related Indenture Trustee with the consent of the holders of Notes evidencing
not less than a majority in principal amount of the then outstanding Notes, if
any, of the related series and the holders of the Certificates of such series
evidencing not less than a majority of the Certificate Balance of such
Certificates then outstanding, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of such Transfer
and Servicing Agreements or of modifying in any manner the rights of such
Noteholders or 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 the related Receivables or
distributions that are required to be made for the benefit of such Noteholders
or Certificateholders or change any Note Interest Rate or Certificate Rate or
the amount required to be on deposit in the Reserve Account, if any, or (ii)
reduce the aforesaid percentage of the Notes or Certificates of such series
which are required to consent to any such amendment, without the consent of the
holders of all the outstanding Notes or Certificates, as the case may be, of
such series; and provided that an opinion of counsel as to certain tax matters
is delivered if required.
INSOLVENCY EVENT OR DISSOLUTION
With respect to a Trust that is not a grantor trust, if an Insolvency
Event or a dissolution occurs with respect to the Seller or the General
Partner, the related Receivables of such Trust will be liquidated and the Trust
will be terminated 90 days after the date of such Insolvency Event or
dissolution, unless, before the end of such 90-day period, the related Trustee
shall have received written instructions from (i) the Noteholders (other than
the Seller, the Servicer or their affiliates) of each class of Notes of such
series representing not less than a majority of the aggregate unpaid principal
amount of such class of Notes and the right to receive interest thereon, (ii)
the Certificateholders (other than the Seller) of Certificates of such series
representing not less than a majority of the aggregate Certificate Balance of
all such Certificates and the right to receive interest thereon, (iii) not less
than a majority of the holders (other than the Seller, the Servicer or their
affiliates) of certain interests, if any, in the Reserve Account with respect
to such Trust, (iv) not less than a majority of the holders (other than the
Seller,
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the Servicer or their affiliates) of certificates representing
interests in, or indebtedness secured by, final scheduled payments with respect
to the Final Payment Receivables, if any, initially retained by the Seller and
subsequently added to such Trust (such certificates or indebtedness being
referred to herein as "Final Payment Securities") and the right to receive
interest thereon and (v) any other person specified in the related Prospectus
Supplement, to the effect that each such party disapproves of the liquidation
of such Receivables and termination of such Trust and in connection therewith,
the related Trustee (x) appoints an entity acceptable to Ford Credit to acquire
an interest in such Trust and to act as a substitute "general partner" for
federal income tax purposes and (y) obtains an opinion of counsel that such
Trust will thereafter not be classified as an association taxable as a
corporation for federal income tax and applicable state tax purposes. Promptly
after the occurrence of an Insolvency Event or a dissolution with respect to
the Seller or the General Partner, notice thereof is required to be given to
such Noteholders, Certificateholders, holders of interests in the Reserve
Account, holders of Final Payment Securities and such other person; provided
that any failure to give such required notice will not prevent or delay
termination of such Trust. Upon termination of any Trust, the related Trustee
shall, or shall direct the related Indenture Trustee to, promptly sell the
assets of such Trust (other than the Trust Accounts and the Certificate
Distribution Account) in a commercially reasonable manner and on commercially
reasonable terms. The proceeds from any such sale, disposition or liquidation
of the Receivables of such Trust will be treated as collections on such
Receivables and deposited in the related Collection Account. With respect to
any Trust, if the proceeds from the liquidation of the related Receivables and
any amounts on deposit in the Reserve Account (if any), the Payahead Account
(if any), the Note Payment Account (if any) and the Certificate Distribution
Account are not sufficient to pay the Notes, if any, and the Certificates of
the related series in full, the amount of principal returned to Noteholders and
Certificateholders thereof will be reduced and some or all of such Noteholders
and Certificateholders will incur a loss.
Each Trust Agreement will provide that the applicable 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 Seller, the Servicer or their affiliates) of
such Trust and the delivery to such Trustee by each such Certificateholder
(including the Seller, the Servicer or their affiliates) of a certificate
certifying that such Certificateholder reasonably believes that such 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 such series will succeed to all the rights of the
Noteholders of such series, under the related Sale and Servicing Agreement,
except as otherwise provided therein.
SELLER LIABILITY
Under each Trust Agreement, the Seller will agree to be liable directly to
an injured party for the entire amount of any losses, claims, damages or
liabilities (other than those incurred by a Noteholder or a Certificateholder
in the capacity of an investor with respect to such Trust) arising out of or
based on the arrangement created by such Trust Agreement as though such
arrangement created a partnership under the Delaware Revised Uniform Limited
Partnership Act in which the Seller was a general partner.
TERMINATION
With respect to each Trust, the obligations of the Servicer, the Seller,
the related Trustee and the related Indenture Trustee, if any, pursuant to the
Transfer and Servicing Agreements will terminate upon the earlier of (i) the
maturity or other liquidation of the last related Receivable and the
disposition of any amounts received upon liquidation of any such remaining
Receivables, (ii) the payment to Noteholders, if any, and Certificateholders of
the related series of all amounts required to be paid to them pursuant to the
Transfer and Servicing Agreements and (iii) the occurrence of either event
described below.
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In order to avoid excessive administrative expense, the Servicer will be
permitted at its option to purchase from each Trust, as of the end of any
applicable Collection Period, if the then outstanding Pool Balance with respect
to the Receivables held by such Trust is 10% or less of the Initial Pool
Balance (as defined in the related Prospectus Supplement, the "Initial Pool
Balance"), all remaining related Receivables at a price equal to the aggregate
of the Purchase Amounts thereof as of the end of such Collection Period.
If and to the extent provided in the related Prospectus Supplement with
respect to a Trust, the Applicable Trustee will, within ten days following a
Distribution Date as of which the Pool Balance is equal to or less than the
percentage of the Initial Pool Balance specified in the related Prospectus
Supplement, solicit bids for the purchase of the Receivables remaining in such
Trust, in the manner and subject to the terms and conditions set forth in such
Prospectus Supplement. If the Applicable Trustee receives satisfactory bids as
described in such Prospectus Supplement, then the Receivables remaining in such
Trust will be sold to the highest bidder.
As more fully described in the related Prospectus Supplement, any
outstanding Notes of the related series will be redeemed concurrently with
either of the events specified above and the subsequent distribution to the
related Certificateholders of all amounts required to be distributed to them
pursuant to the applicable Trust Agreement or Pooling and Servicing Agreement
will effect early retirement of the Certificates of such series.
ADMINISTRATION AGREEMENT
Ford Credit, 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 such Administration Agreement, to provide the notices and to
perform other administrative obligations required by the related Indenture.
With respect to any such Trust, as compensation for the performance of the
Administrator's obligations under the applicable Administration Agreement and
as reimbursement for its expenses related thereto, the Administrator will be
entitled to a monthly administration fee in an amount equal to such amount as
may be set forth in the related Prospectus Supplement (the "Administration
Fee"), which fee will be paid by the Seller.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
SECURITY INTERESTS IN VEHICLES
In all states in which the Receivables have been originated, retail
installment sale contracts such as the Receivables evidence the credit sale of
automobiles and light trucks by dealers to obligors; the contracts also
constitute personal property security agreements and include grants of security
interests in the vehicles under the Uniform Commercial Code (the "UCC").
Perfection of security interests in the vehicles is generally governed by the
motor vehicle registration laws of the state in which the vehicle is located.
In most states in which the Receivables have been originated, a security
interest in a vehicle is perfected by notation of the secured party's lien on
the vehicle's certificate of title. Each Receivable prohibits the sale or
transfer of the Financed Vehicle without Ford Credit's consent.
With respect to each Trust, pursuant to the related Purchase Agreement,
Ford Credit will assign its security interests in the Financed Vehicles
securing the related Receivables to the Seller and, pursuant to the related
Sale and Servicing Agreement or Pooling and Servicing Agreement, the Seller
will assign its security interests in the Financed Vehicles securing such
Receivables to the Trust. However, because of the administrative burden and
expense, the Servicer, the Seller and the Trust will not amend any certificate
of title to identify the Trust as the new secured party on the certificates of
title relating to the Financed Vehicles. Also, the Servicer will continue to
hold any certificates of title relating to the Financed Vehicles in its
possession as custodian for the Trust pursuant to the
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related Sale and Servicing Agreement or Pooling and Servicing Agreement.
See "Description of the Transfer and Servicing Agreements--Sale and Assignment
of Receivables."
In most states, assignments such as those under the Purchase Agreement and
the Sale and Servicing Agreement or Pooling and Servicing Agreement, as
applicable, relating to each Trust, together with a perfected security interest
in the chattel paper are an effective conveyance of a security interest in the
vehicles subject to the chattel paper without amendment of any lien noted on a
vehicle's certificate of title, and the assignee succeeds thereby to the
assignor's rights as secured party. In the absence of fraud or forgery by the
vehicle owner or the Servicer or administrative error by state or local
agencies, the notation of Ford Credit's lien on the certificates of title will
be sufficient to protect such Trust against the rights of subsequent purchasers
of a Financed Vehicle or subsequent lenders who take a security interest in a
Financed Vehicle. If there are any Financed Vehicles as to which Ford Credit
failed to obtain a perfected security interest, its security interest would be
subordinate to, among others, subsequent purchasers of the Financed Vehicles
and holders of perfected security interests. Such a failure would constitute a
breach of Ford Credit's warranties under the related Purchase Agreement and of
the Seller's warranties under the related Sale and Servicing Agreement or
Pooling and Servicing Agreement, as applicable, and would create an obligation
of Ford Credit under such Purchase Agreement and of the Seller under such Sale
and Servicing Agreement or Pooling and Servicing Agreement to purchase the
related Receivable unless the breach is cured. See "Description of the
Transfer and Servicing Agreements--Sale and Assignment of Receivables." By not
identifying the Trust as the secured party on the certificate of title, the
Trust's interest in the chattel paper may not have the benefit of the security
interest in the Financed Vehicle in all states or such security interest could
be defeated through fraud or negligence. The Seller will assign its rights
under each Purchase Agreement to the related Trust.
Under the laws of most states, the perfected security interest in a
vehicle would continue for four months after a vehicle is moved to a state
other than the state in which it is initially registered and thereafter until
the vehicle owner re-registers the vehicle in the new state. A majority of
states generally require surrender of a certificate of title to re-register a
vehicle; accordingly, a secured party must surrender possession if it holds the
certificate of title to the vehicle, or, in the case of vehicles registered in
states providing for the notation of a lien on the certificate of title but
not possession by the secured party, the secured party would receive notice of
surrender if the security interest is noted on the certificate of title. Thus,
the secured party would have the opportunity to re-perfect its security
interest in the vehicle in the state of relocation. 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
receivables, Ford Credit takes steps to effect re-perfection upon receipt of
notice of re-registration or information from the obligor as to relocation.
Similarly, when an obligor sells a vehicle, Ford Credit must surrender
possession of the certificate of title or will receive notice as a result of
its lien noted thereon and accordingly will have an opportunity to require
satisfaction of the related Receivable before release of the lien. Under each
Sale and Servicing Agreement or 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.
Under the laws of most states, liens for repairs performed on a motor
vehicle and liens for certain unpaid taxes take priority over even a perfected
security interest in a Financed Vehicle. The Internal Revenue Code of 1986, as
amended, also grants priority to certain federal tax liens over the lien of a
secured party. Federal law and the laws of certain states permit the
confiscation of motor vehicles under certain circumstances if used in unlawful
activities, which may result in the loss of a secured party's perfected
security interest in the confiscated motor vehicle. With respect to each
Trust, Ford Credit will represent to the Seller and the Seller will represent
to the Trust that each security interest in a Financed Vehicle is or will be
prior to all other present liens (other than tax liens and liens that arise by
operation of law) upon and security interests in such Financed Vehicle.
However, liens for repairs or taxes, or the confiscation of a Financed Vehicle,
could arise or occur at any time during the term of a Receivable. No notice
will be given to the applicable Trustee or Certificateholders and any Indenture
Trustee or Noteholders, if any, in the event such a lien arises or confiscation
occurs.
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REPOSSESSION
In the event of default by vehicle purchasers, the holder of the retail
installment sale contract has all the remedies of a secured party under the
UCC, except where specifically limited by other state laws. The UCC remedies
of a secured party include the right to repossession by self-help means, unless
such means would constitute a breach of the peace. Unless a vehicle is
voluntarily surrendered, self-help repossession is the method employed by Ford
Credit in the majority of instances in which a default occurs and is
accomplished simply by retaking possession of the financed vehicle. In cases
where the obligor objects or raises a defense to repossession, or if otherwise
required by applicable state law, a court order must be obtained from the
appropriate state court, and the vehicle must then be repossessed in accordance
with that order.
NOTICE OF SALE; REDEMPTION RIGHTS
In the event of default by the obligor, some jurisdictions require that
the obligor be notified of the default and be given a time period within which
the obligor may cure the default prior to repossession. Generally, this right
of reinstatement may be exercised on a limited number of occasions in any
one-year period.
The UCC and other state laws require the secured party to provide the
obligor with reasonable notice of the date, time, and place of any public sale
and/or the date after which any private sale of the collateral may be held.
The obligor has the right to redeem the collateral prior to actual sale by
paying the secured party the unpaid principal balance of the obligation plus
reasonable expenses for repossessing, holding, and preparing the collateral for
disposition and arranging for this sale, plus, in some jurisdictions,
reasonable attorneys' fees, or, in some states, by payment of delinquent
installments or the unpaid balance. Repossessed vehicles are generally resold
by Ford Credit through automobile auctions which are attended principally by
dealers.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of the repossessed vehicles generally will be
applied to the expenses of resale and repossession and then to the satisfaction
of the indebtedness of the obligor on the receivable. While some states impose
prohibitions or limitations on deficiency judgments if the net proceeds from
resale do not cover the full amount of the indebtedness, a deficiency judgment
can be sought in those states that do not prohibit or limit such judgments.
However, the deficiency judgment would be a personal judgment against the
obligor for the shortfall, and a defaulting obligor can be expected to have
very little capital or sources of income available following repossession.
Therefore, in many cases, it may not be useful to seek a deficiency judgment
or, if one is obtained, it may be settled at a significant discount.
Occasionally, after resale of a vehicle and payment of all expenses and
indebtedness, there is a surplus of funds. In that case, the UCC requires the
lender to remit the surplus to any holder of any lien with respect to the
vehicle or if no such lienholder exists or there are remaining funds, the UCC
requires the lender to remit the surplus to the former obligor.
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
Reporting Act, the Fair Debt Collection Practices Act, the Magnuson-Moss
Warranty Act, the Federal Reserve Board's Regulations B and Z, state
adaptations of the National Consumer Act and of the Uniform Consumer Credit
Code, and state motor vehicle retail installment sales acts, 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. The requirements
impose specific statutory liabilities upon creditors who fail
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to comply with their provisions. In some cases, this liability could affect
an assignee's ability to enforce consumer finance contracts such as 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 state statutes, or the common law in
certain states, has the effect of subjecting a seller (and certain related
lenders and their assignees) in a consumer credit transaction and any assignee
of the seller to all claims and defenses which the obligor in the transaction
could assert against the seller of the goods. Liability under the FTC Rule is
limited to the amounts paid by the obligor under the contract, and the holder
of the contract may also be unable to collect any balance remaining due
thereunder from the obligor.
Most of the Receivables will be subject to the requirements of the FTC
Rule. Accordingly, each Trust, as holder of the related Receivables, will be
subject to any claims or defenses that the purchaser of the Financed Vehicle
may assert against the seller of the Financed Vehicle. Such claims are limited
to a maximum liability equal to the amounts paid by the Obligor on the
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 a seller is not properly licensed or if
an Odometer Disclosure Statement was not provided to the purchaser of the
related financed vehicle, the obligor may be able to assert a defense against
the seller of the vehicle. If an Obligor were successful in asserting any
such claim or defense, such claim or defense would constitute a breach of Ford
Credit's and the Seller's representations and warranties under the related
Purchase Agreement and the related Sale and Servicing Agreement or Pooling and
Servicing Agreement, respectively, and would create an obligation of Ford
Credit and the Seller to repurchase the Receivable unless the breach is cured.
See "Description of the Transfer and Servicing Agreements--Sale and Assignment
of the Receivables."
Courts have imposed general equitable principles on secured parties
pursuing repossession of collateral or 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, obligors 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 consumers.
Ford Credit and the Seller will warrant under each Purchase Agreement and
the applicable Sale and Servicing Agreement or Pooling and Servicing Agreement,
respectively, 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 such claim materially and adversely affects such
Trust's interest in a Receivable, such violation would constitute a breach of
warranty under the related Purchase Agreement and the related Sale and
Servicing Agreement or Pooling and Servicing Agreement and would create an
obligation of Ford Credit and the Seller to repurchase the Receivable unless
the breach is cured. See "Description of the Transfer and Servicing
Agreements--Sale and Assignment of the Receivables."
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a lender to
realize upon collateral or enforce a deficiency judgment. For example, in a
Chapter 13 proceeding under the federal bankruptcy law, a court may prevent a
lender from repossessing a motor vehicle, and, as part of the rehabilitation
plan, reduce the amount of the secured indebtedness to the market value of the
motor vehicle at the time of
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bankruptcy (as determined by the court), leaving the party providing
financing as a general unsecured creditor for the remainder of the
indebtedness. A bankruptcy court may also reduce the monthly payments due
under a contract or change the rate of interest and time of repayment of the
indebtedness.
TRANSFERS OF VEHICLES
The Receivables prohibit the sale or transfer of the vehicle securing a
Receivable without Ford Credit's consent and, except those originated in Ohio
and Wisconsin, permit Ford Credit to accelerate the maturity of the Receivable
upon a sale or transfer without its consent. The Servicer does not intend to
consent to any sale or transfer and intends to require prepayment of the
Receivable. The Servicer may enter into a transfer of equity agreement with
the secondary purchaser for the purpose of effecting the transfer of the
Financed Vehicle.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of certain federal income tax
consequences of the purchase, ownership and disposition of the Notes and the
Certificates of a series. The summary does not purport to deal with federal
income tax consequences applicable to all categories of holders, 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 or dealers in securities. Moreover, there are
no cases or Internal Revenue Service ("IRS") rulings on similar transactions
involving both debt instruments 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 discussion below. Prospective investors
are urged to 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 of any series.
The following summary is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the Treasury regulations
promulgated thereunder and judicial or ruling authority, all of which are
subject to change, which change may be retroactive. Each Trust will be
provided with an opinion of special federal tax counsel to each Trust specified
in the related Prospectus Supplement ("Special Tax Counsel"), regarding
certain federal income tax matters discussed below. An opinion of Special Tax
Counsel, however, is not binding on the IRS or the courts. 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, unless otherwise
specified herein, to each Trust and the Notes, Certificates and related terms,
parties and documents applicable to such Trust.
The federal income tax consequences to Certificateholders will vary
depending on whether the Trust is intended to be treated as a partnership under
the Code or whether the Trust will be treated as a grantor trust. The
Prospectus Supplement for each series of Certificates will specify whether the
Trust is intended to be treated as a partnership or the Trust will be treated
as a grantor trust.
SCOPE OF THE TAX OPINIONS
It is expected that Special Tax Counsel will, upon issuance of a series of
Notes and/or Certificates deliver its opinion that the applicable Trust will
not be classified as an association (or publicly traded partnership) taxable as
a corporation for federal income tax purposes. Further, with respect to each
series of Notes, Special Tax Counsel expects to advise the Trust that the Notes
will be classified as debt for federal income tax purposes.
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In addition, Special Tax Counsel will render its opinion that it has
prepared or reviewed the statements herein and in the related Prospectus
Supplement under the heading "Summary--Tax Status" as they relate to federal
income tax matters and under the heading "Certain Federal Income Tax
Consequences," and is of the opinion that such statements are correct in all
material re spects. Such statements are intended as an explanatory discussion
of the possible effects of the classification of the Trust as a partnership or
a grantor trust, as the case may be, for federal income tax purposes on
investors generally and of related tax matters affecting investors generally,
but do not purport to furnish information in the level of detail or with the
attention to the investor's specific tax circumstances that would be provided
by an investor's own tax adviser. Accordingly, each investor is advised to
consult its own tax advisers with regard to the tax consequences to it of
investing in the Notes and/or Certificates.
ERISA CONSIDERATIONS
ERISA and Section 4975 of the Code impose certain restrictions on (a)
employee benefit plans (as defined in Section 3(3) of ERISA), (b) plans
described in section 4975(e)(1) of the Code, including individual retirement
accounts or Keogh plans, (c) any entities whose underlying assets include plan
assets by reason of a plan's investment in such entities (each of (a), (b) and
(c), a "Plan") and (d) persons who have certain specified relationships to
such Plans ("Parties in Interest" under ERISA and "Disqualified Persons" under
the Code). Moreover, based on the reasoning of the United States Supreme Court
in John Hancock Life Ins. Co. v. Harris Trust and Sav. Bank, 114 S. Ct. 517
(1993), an insurance company's general account may be deemed to include assets
of the Plans investing in the general account (e.g., through the purchase of an
annuity contract), and the insurance company might be treated as a Party in
Interest with respect to a Plan by virtue of such investment. ERISA also
imposes certain duties on persons who are fiduciaries of Plans subject to ERISA
and prohibits certain transactions between a Plan and Parties in Interest or
Disqualified Persons with respect to such Plans. Violation of these rules may
result in the imposition of an excise tax or penalty.
A fiduciary of any Plan should carefully review with its legal and other
advisors whether the purchase or holding of any Securities of a series could
give rise to a transaction prohibited or otherwise impermissible under ERISA or
the Code, and should refer to "ERISA Considerations" in the related Prospectus
Supplement regarding any restrictions on the purchase and/or holding of the
Securities offered thereby.
Certain employee benefit plans, such as 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 the prohibited transaction provisions of ERISA and
Section 4975 of the Code. Accordingly, assets of such plans may, subject to the
provisions of any other applicable federal and state law, be invested in
Securities of any series without regard to the factors described herein and
under "ERISA Considerations" in the related Prospectus Supplement. It should
be noted, however, that any such plan that is qualified and exempt from
taxation under Sections 401(a) and 501(a) of the Code is subject to the
prohibited transaction rules set forth in Section 503 of the Code.
Certain transactions involving a Trust might be deemed to constitute
prohibited transactions under ERISA and the Code if assets of the Trust were
deemed to be assets of a Plan investing in Securities issued by the Trust.
Under a regulation (the "Plan Assets Regulation") issued by the United States
Department of Labor ("DOL"), 29 C.F.R. Section E2510.3-101, the assets of the
Trust would be treated as plan assets of a Plan for purposes of ERISA and the
Code if the Plan acquires an "Equity Interest" in the Trust and none of the
exceptions contained in the Plan Assets Regulation is 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 Certificates will most likely be
deemed Equity Interests for purposes of ERISA. It should be noted, however, as
discussed below, that the purchase of Notes by a Plan may also give rise to
potential prohibited transactions, and all prospective investors should review
the discussion herein with their legal advisors.
CERTIFICATES ISSUED BY TRUSTS THAT ISSUE ONLY CERTIFICATES
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The ERISA considerations that apply with respect to Securities issued by a
Trust differ depending on whether the Trust issuing the Securities (i) issues
both Note and Certificates or (ii) issues only Certificates. The discussion in
this section "--Certificates Issued by Trusts That Issue Only Certificates"
applies only with respect to Certificates issued by a Trust that issues only
Certificates.
Senior Certificates. The following discussion applies only to
nonsubordinated Certificates (referred to herein as "Senior Certificates")
issued by a Trust that does not issue Notes.
If so specified in the related Prospectus Supplement, the DOL will have
issued an individual exemption to one or more of the underwriters of the Senior
Certificates (the "Underwriters' Exemption"). The Underwriters' Exemption
generally exempts from the application of the prohibited transaction provisions
of Section 406 of ERISA and the excise taxes imposed on such prohibited
transactions pursuant to Section 4975(a) and (b) of the Code and Section 502(i)
of ERISA certain transactions relating to the initial purchase, holding and
subsequent resale by Plans of certificates in pass-through trusts that consist
of certain receivables, loans and other obligations that meet the conditions
and requirements set forth in the Underwriters' Exemption. The receivables
covered by the Underwriters' Exemption include motor vehicle installment
obligations such as the Receivables. The Underwriters' Exemption will apply to
the acquisition, holding and resale of the Senior Certificates by a Plan from
the applicable underwriters, provided that specified conditions (certain of
which are described below) are met. The Seller believes that the Underwriters'
Exemption will apply to the acquisition and holding of the Senior Certificates
by a Plan and that all conditions of the Underwriters' Exemption other than
those within the control of the investors have been or will be met.
The Underwriters' Exemption sets forth six general conditions that must be
satisfied for a transaction involving the acquisition of the Senior
Certificates by a Plan to be eligible for the exemptive relief thereunder:
(1) The acquisition of the Senior Certificates by a Plan is on
terms (including the price for the Senior Certificates) that are at
least as favorable to the Plan as they would be in an arm's-length
transaction with an unrelated party;
(2) The rights and interests evidenced by the Senior Certificates
acquired by a Plan are not subordinated to the rights and interests
evidenced by other certificates of the Trust;
(3) The Senior Certificates acquired by the Plan have received a
rating at the time of such acquisition that is in one of the three
highest generic rating categories from any one of four Rating
Agencies;
(4) The Trustee is not an affiliate of any other member of the
"Restricted Group," which consists of the applicable underwriters,
the Seller, the Servicer, the applicable Trustee and any Obligor
with respect to the Receivables included in the Trust constituting
more than 5% of the aggregate unamortized principal balance of the
assets of the Trust as of the date of initial issuance of the Senior
Certificates, and any affiliate of such parties;
(5) The sum of all payments made to and retained by the
applicable underwriters in connection with the distribution or
placement of the Senior Certificates represents not more than
reasonable compensation for underwriting or placing the Senior
Certificates. The sum of all payments made to and retained by the
Seller pursuant to the sale of the Receivables to the Trust
represents not more than the fair market value of such Receivables.
The sum of all payments made to and retained by the Servicer
represents not more than reasonable compensation for the Servicer's
services under the Agreement and reimbursement of the Servicer's
reasonable expenses in connection therewith; and
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(6) The Plan investing in the Senior Certificates must be an
"accredited investor" as defined in Rule 501(a)(1) of Regulation D
of the Commission under the Securities Act.
Because the rights and interests evidenced by the Senior Certificates
acquired by a Plan are not subordinated to the rights and interests evidenced
by other Certificates of the Trust, the second general condition set forth
above is satisfied. It is a condition of the issuance of the Senior
Certificates that they be rated in the highest rating category by at least two
Rating Agencies. A fiduciary of a Plan contemplating purchasing a Senior
Certificate (other than pursuant to the original issuance of the Senior
Certificates) must make its own determination that at the time of such
acquisition, the Senior Certificates continue to satisfy the third general
condition set forth above. The Seller and the Servicer expect that the fourth
general condition set forth above will be satisfied with respect to the Senior
Certificates. A fiduciary of a Plan contemplating purchasing a Senior
Certificate must make its own determination that the first, fifth and sixth
general conditions set forth above will be satisfied with respect to the Senior
Certificates.
In addition, the Trust must satisfy the following requirements:
(a) The corpus of the Trust must consist solely of assets of the
type which have been included in other investment pools;
(b) Certificates evidencing interests in such other investment
pools must have been rated in one of the three highest generic
rating categories of one of the Rating Agencies for at least one
year prior to the Plan's acquisition of Senior Certificates; and
(c) Certificates evidencing interests in such other investments
pools must have been purchased by investors other than Plans for at
least one year prior to any Plan's acquisition of Senior
Certificates.
If the general conditions of the Underwriters' Exemption are satisfied,
the Underwriters' Exemption should provide relief from the restrictions imposed
by Sections 406(a) and 407(a) of ERISA as well as the excise taxes imposed by
Sections 4975(a) and (b) of the Code by reason of Section 4975(c)(1)(A) through
(D) of the Code, in connection with the direct or indirect purchase, exchange,
transfer or holding of the Senior Certificates by a Plan. However, no exemption
is provided from the restrictions of Sections 406(a)(1)(E), 406(a)(2) and 407
of ERISA for the acquisition or holding of a Senior Certificate on behalf of an
"Excluded Plan" by any person who has discretionary authority or renders
investment advice with respect to the assets of such Excluded Plan. For
purposes of the Senior Certificates, an Excluded Plan is a Plan sponsored by
any member of the Restricted Group.
If certain other specific conditions of the Underwriters' Exemption are
also satisfied, the Underwriters' Exemption should provide relief from the
restrictions imposed by Sections 406(b)(1) and (b)(2) of ERISA and the taxes
imposed by Section 4975(a) and (b) of the Code by reason of Section
4975(c)(1)(E) of the Code in connection with the direct or indirect sale,
exchange, transfer or holding of Senior Certificates in the initial issuance of
Senior Certificates between the Seller or applicable underwriters and a Plan
other than an Excluded Plan when the person who has discretionary authority or
renders investment advice with respect to the investment of Plan assets in the
Senior Certificates is (a) an Obligor with respect to 5% or less of the fair
market value of the Receivables or (b) an affiliate of such person. The Seller
expects such specific conditions to be satisfied with respect to the issuance
of the Senior Certificates.
The Underwriters' Exemption also applies to transactions in connection
with the servicing, management and operation of the Trust, provided that, in
addition to the general requirements described above, (a) such transactions are
carried out in accordance with the terms of a binding pooling and servicing
agreement and (b) the pooling and servicing agreement is provided to, or
described in all material respects in the prospectus provided to, investing
Plans before their purchase of Senior Certificates issued by the Trust. The
related Pooling and Servicing Agreement is a pooling and servicing agreement as
defined in the Underwriters' Exemption. All transactions relating
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to the servicing, management and operations of the Trust will be carried out
in accordance with the related Pooling and Servicing Agreement. See
"Description of the Transfer and Servicing Agreements" herein and in the
related Prospectus Supplement.
Any Plan fiduciary considering whether to purchase a Senior Certificate on
behalf of a Plan should consult with its counsel regarding the applicability of
the Underwriters' Exemption and other relevant issues.
Pre-Funding Accounts. The Underwriters' Exemption in its current form
does not apply with respect to Pre-Funding Accounts. However, the DOL has
under consideration a proposal to amend the Underwriters' Exemption to extend
its application to Pre-Funding Accounts. If the Underwriters' Exemption does
not apply to Pre-Funding Accounts, assets held in any Pre-Funding Account
maintained in connection with a Trust that issues only Certificates could be
deemed to be Plan assets, which could give rise to prohibited transaction
liability. Investors considering the purchase of Senior Certificates issued by
a Trust that maintains a Pre-Funding Account should consult with their legal
advisors concerning this issue.
Subordinated Certificates. The following discussion applies only to
subordinated Certificates (referred to herein as "Subordinated Certificates")
issued by a Trust that does not issue Notes.
Because the Subordinated Certificates are subordinated to the Senior
Certificates in certain respects, the Underwriters' Exemption will not apply to
the purchase of Subordinated Certificates by or on behalf of a Plan. However,
other exemptions may be applicable, such as 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
96-23, which exempts certain transactions effected on behalf of a Plan by an
"in house" asset manager; or PTCE 84-14, which exempts certain transactions
effected on behalf of a Plan by a "qualified professional asset manager." It
should be noted, however, that even if the conditions specified in one or more
of these exemptions are met, the scope of relief provided by these exemptions
may not necessarily cover all acts that might be construed as prohibited
transactions.
Any Plan fiduciary considering whether to purchase a Subordinated
Certificate on behalf of a Plan should consult with its counsel regarding the
applicability of one or more of such exemptions to such purchase. Prior to
making an investment in the Subordinated Certificates, a Plan investor must
determine whether, and each fiduciary causing the Subordinated Certificates to
be purchased by, on behalf of or using the assets of a Plan shall be deemed to
have represented that either (i) no part of the funds to be used to purchase
the Subordinated Certificates constitutes assets allocable to any trust that
contains the assets of any Plan or (ii) such purchase is covered by one or more
of the exemptions described above.
SECURITIES ISSUED BY TRUSTS THAT ISSUE BOTH NOTES AND CERTIFICATES
The discussion in this section "--Securities Issued by Trusts That Issue
Both Notes and Certificates" applies only to Securities issued by a Trust that
issues both Notes and Certificates.
The Notes. The Seller believes that the Notes of any series should be
treated as indebtedness without substantial equity features for purposes of the
Plan Assets Regulation. However, without regard to whether the Notes of a
series are treated as an Equity Interest for such purposes, the acquisition or
holding of such Notes by or on behalf of a Plan could be considered to give
rise to a prohibited transaction if the applicable Trust, Trustee, Indenture
Trustee, any holder of the Certificates of such series or any of their
respective affiliates, is or becomes a Party in Interest or a Disqualified
Person with respect to such Plan. In such case, 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 PTCE 90-1, which exempts certain
transactions involving insurance company pooled separate accounts; PTCE 95-60,
which exempts certain transactions
57
<PAGE> 175
involving insurance company general accounts; PTCE 91-38, which exempts certain
transactions involving bank collective investment funds; PTCE 96-23, which
exempts certain transactions effected on behalf of a Plan by an "in house" asset
manager; and PTCE 84-14, which exempts certain transactions effected on behalf
of a Plan by a "qualified professional asset manager." It should be noted,
however, that even if the conditions specified in one or more of these
exemptions are met, the scope of relief provided by these exemptions may not
necessarily cover all acts that might be construed as prohibited transactions.
The Certificates. Because the Certificates issued by a Trust that also
issues Notes will most likely be treated as Equity Interests under the Plan
Assets Regulation, such Certificates may not be acquired by (i) an employee
benefit plan (as defined in Section 3(3) of ERISA) that is subject to Title I
of ERISA, (ii) a plan described in Section 4975(e)(1) of the Code, (iii) a
governmental plan, as defined in Section 3(32) of ERISA, subject to any
federal, state or local law which is, to a material extent, similar to the
provisions of Section 406 of ERISA or Section 4975 of the Code, (iv) an entity
whose underlying assets include plan assets by reason of a plan's investment in
the entity (within the meaning of the Plan Assets Regulation), or (v) a person
investing "plan assets" of any such plan (including without limitation, for
purposes of this clause (v), any insurance company general account, but
excluding any entity registered under the Investment Company Act of 1940, as
amended) (each, a "Plan Investor").
In addition, investors other than Plan Investors should be aware that a
prohibited transaction could be deemed to occur if any holder of the
Certificates or any of their respective affiliates, is or becomes a Party in
Interest or a Disqualified Person with respect to any Plan that purchases and
holds the related Notes without being covered by one or more of the exemptions
described above in "The Notes."
GENERAL INVESTMENT CONSIDERATIONS
Prospective investors who are Plan Investors should consult with their
legal advisors concerning the impact of ERISA and the Code and the potential
consequences of making an investment in any Securities of a series with respect
to such investors' specific circumstances. Moreover, each Plan fiduciary
should take into account, among other considerations, whether the fiduciary has
the authority to make the investment; the composition of the Plan's portfolio
with respect to diversification by type of asset; the Plan's funding
objectives; the tax effects of the investment; and whether under the general
fiduciary standards of investment procedure and diversification an investment
in any Securities of a series is appropriate for the Plan, taking into account
the overall investment policy of the Plan and the composition of the Plan's
investment portfolio.
PLAN OF DISTRIBUTION
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 such series (collectively, the
"Underwriting Agreements"), the Seller will agree to cause the related Trust to
sell to the underwriters named therein and in the related Prospectus
Supplement, and each of such 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 therein and in the related 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 therein, to purchase all the Notes and Certificates, as
the case may be, described therein which are offered hereby and by the related
Prospectus Supplement if any of such Notes and Certificates, as the case may
be, are purchased.
Each Prospectus Supplement will either (i) set forth the price at which
each class of Notes and Certificates, as the case may be, being offered thereby
will be offered to the public and any concessions that may be offered to
certain dealers participating in the offering of such Notes and Certificates or
(ii) specify that the related Notes and
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<PAGE> 176
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 such
sale. After the initial public offering of any such Notes and Certificates,
such public offering prices and such concessions may be changed.
The Seller and Ford Credit will indemnify the underwriters against certain
civil liabilities, including liabilities under the Securities Act, or
contribute to payments the several underwriters may be required to make in
respect thereof.
Each Trust may, from time to time, invest the funds in its Trust Accounts
in Permitted Investments acquired from such underwriters or from the Seller.
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 such
Underwriting Agreement will be conditioned on the closing of the sale of all
other such 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 related Prospectus Supplement.
LEGAL OPINIONS
Certain legal matters relating to the Securities of any series will be
passed upon for the related Trust, the Seller and the Servicer by J.D.
Bringard, Esq., Vice President--General Counsel of the Servicer. Certain
Michigan state tax and other matters will be passed upon for each Trust by
J.D. Bringard, Esq., Vice President--General Counsel of the Servicer. Mr.
Bringard is a full-time employee of Ford Credit and owns and holds options to
purchase shares of Common Stock of Ford.
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<PAGE> 177
INDEX OF TERMS
Set forth below is a list of the defined terms used in this Prospectus and
the pages on which the definitions of such terms may be found herein:
<TABLE>
<S> <C>
Actuarial Receivables ..................... 17
Administration Agreement .................. 49
Administration Fee ........................ 49
Administrator ............................. 49
Advance ................................... 8, 41
Applicable Trustee ........................ 34
APR ....................................... 9
Base Rate ................................. 28
Basic Documents ........................... 25
Book-Entry Certificates ................... 33
Book-Entry Notes .......................... 33
Book-Entry Securities ..................... 33
Calculation Agent ......................... 29
Calculation Date .......................... 29, 30, 31, 32
CD Rate ................................... 29
CD Rate Determination Date ................ 29
CD Rate Security .......................... 28
Cede ...................................... 15
Cedel ..................................... 33
Cedel Participants ........................ 34
Certificate Balance ....................... 5
Certificate Distribution Account .......... 40
Certificate Owner ......................... 5
Certificate Pool Factor ................... 19
Certificate Rate .......................... 5
Certificateholders ........................ 15, 34
Certificates .............................. 1
Closing Date .............................. 6
Code ...................................... 10, 53
Collection Account ........................ 39
Collection Period ......................... 41
Commercial Paper Rate ..................... 29, 30
Commercial Paper Rate Determination Date .. 29
Commercial Paper Rate Security ............ 28
Commission ................................ 3
Composite Quotations ...................... 28
Cutoff Date ............................... 15
Dealer Agreements ......................... 15
Dealer Recourse ........................... 15
Dealers ................................... 7, 15
Definitive Certificates ................... 36
Definitive Notes .......................... 36
Definitive Securities ..................... 36
Depositaries .............................. 33
Depository ................................ 22
</TABLE>
60
<PAGE> 178
<TABLE>
<S> <C>
Determination Date ........................ 43
Disqualified Persons ...................... 54
Distribution Date ......................... 27
DOL ....................................... 54
DTC ....................................... 15
DTC's Nominee ............................. 15, 33
Eligible Deposit Account .................. 40
Eligible Institution ...................... 41
Equity Interest ........................... 54
ERISA ..................................... 10
Euroclear ................................. 35
Euroclear Operator ........................ 35
Euroclear Participants .................... 35
Euroclear System .......................... 35
Events of Default ......................... 24
Events of Servicing Termination ........... 46
Excluded Plan ............................. 56
Federal Funds Rate ........................ 30
Federal Funds Rate Determination Date ..... 30
Federal Funds Rate Security ............... 28
Final Payment Receivables ................. 18
Final Payment Securities .................. 48
Final Scheduled Maturity Date ............. 9
Financed Vehicles ......................... 6
Fixed Rate Securities ..................... 28
Floating Rate Securities. ................. 28
Ford ...................................... 13
Ford Credit ............................... 4
FTC Rule .................................. 52
Funding Period ............................ 5
General Partner ........................... 11
H.15(519) ................................. 28
Indenture ................................. 4
Indenture Trustee. ........................ 1
Index Maturity ............................ 28
Indirect Participants ..................... 33
Initial Cutoff Date ....................... 6
Initial Pool Balance ...................... 49
Initial Receivables ....................... 6
Insolvency Event .......................... 46
Insolvency Laws ........................... 11
Interest Reset Date ....................... 28
Interest Reset Period ..................... 28
Investment Earnings ....................... 40
IRS ....................................... 53
Issuer .................................... 4
</TABLE>
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<PAGE> 179
<TABLE>
<CAPTION>
<S> <C>
LIBOR ..................................... 31
LIBOR Determination Date .................. 31
LIBOR Security ............................ 28
London Banking Day ........................ 31
Money Market Yield ........................ 30
MSRP ...................................... 17
Note Interest Rate ........................ 4
Note Owner ................................ 4
Note Payment Account ...................... 39
Note Pool Factor .......................... 19
Noteholders ............................... 15, 34
Notes ..................................... 1
Obligors .................................. 15
Participants .............................. 22, 33
Parties in Interest ....................... 54
Payahead Account .......................... 40
Payahead Balance .......................... 42
Payaheads ................................. 40
Permitted Investments ..................... 40
Plan ...................................... 54
Plan Assets Regulation .................... 54
Plan Investor ............................. 58
Pool Balance .............................. 20
Pooling and Servicing Agreement ........... 4
Pre-Funded Amount ......................... 7
Pre-Funding Account ....................... 1, 5
Precomputed Advance ....................... 8
Precomputed Receivables ................... 17
Prospectus Supplement ..................... 1
PTCE ...................................... 57
Purchase Agreement ........................ 7, 38
Purchase Amount ........................... 39
Rating Agencies ........................... 24
Receivables ............................... 1, 6
Receivables Pool .......................... 15
Registration Statement .................... 3
Reserve Account ........................... 44
Restricted Group........................... 55
Reuters Screen LIBO Page .................. 31
Rule of 78's Receivables .................. 17
Rules ..................................... 34
Sale and Servicing Agreement .............. 6
Securities ................................ 1
Securities Act ............................ 3
Securityholders ........................... 15
Seller .................................... 1, 4
Senior Certificates ....................... 55
Servicer .................................. 1, 4
Servicer Fee .............................. 42
Servicing Fee ............................. 42
Servicing Fee Rate ........................ 42
Simple Interest Advance ................... 8
</TABLE>
62
<PAGE> 180
<TABLE>
<S> <C>
Simple Interest Receivables ............... 17
Special Tax Counsel. ...................... 53
Spread .................................... 28
Spread Multiplier ......................... 28
Strip Certificates ........................ 6
Strip Notes ............................... 5
Subordinated Certificates ................. 57
Subsequent Receivables .................... 1, 7
Subsequent Transfer Date .................. 38
Supplemental Servicing Fee ................ 42
Terms and Conditions ...................... 35
Transfer and Servicing Agreements ......... 38
Treasury bills ............................ 32
Treasury Rate ............................. 31, 32
Treasury Rate Determination Date .......... 32
Treasury Rate Security .................... 28
Trust ..................................... 1, 4
Trust Accounts ............................ 40
Trust Agreement ........................... 4
Trustee ................................... 1, 4
UCC ....................................... 49
Underwriter's Exemption ................... 55
Underwriting Agreements ................... 58
</TABLE>
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<PAGE> 181
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses in connection with
the offering described in this Registration Statement.
<TABLE>
<S> <C>
Securities and Exchange Commission . . . . . . . . . . . . . . $1,724,138
Rating agency fees . . . . . . . . . . . . . . . . . . . . . . $ 685,000
Printing . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 280,000
Legal fees and expenses . . . . . . . . . . . . . . . . . . . $ 60,000
Accountants' fees . . . . . . . . . . . . . . . . . . . . . . $ 160,000
Fees and expenses of Indenture Trustee . . . . . . . . . . . . $ 40,000
Fees and expenses of applicable Trustee . . . . . . . . . . . $ 70,000
Miscellaneous expenses . . . . . . . . . . . . . . . . . . . . $ 5,862
Total . . . . . . . . . . . . . . . . . . . . . . . . . $3,025,000
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 17-108 of the Delaware Revised Uniform Limited Partnership
Act provides as follows:
Section 17-108. Indemnification.
Subject to such standards and restrictions, if any, as are set forth in
its partnership agreement, a limited partnership may, and shall have the power
to, indemnify and hold harmless any partner or other person from and against
any and all claims and demands whatsoever.
Section 4.2 of the Agreement of Limited Partnership of Ford Credit Auto
Receivables Two L.P. provides as follows:
Section 4.2. Exculpation and Indemnification.
(a) Neither the General Partner nor any director, officer, partner, agent
or legal representative of the General Partner or the Partnership, nor any of
their Affiliates or the respective directors, officers, partners, stockholders,
agents or legal representatives of any of their Affiliates (collectively, the
"Indemnified Parties") shall have any liability (whether direct or indirect, in
contract, tort or otherwise) to any Partner (or its Affiliates) for any losses,
claims, damages, liabilities or expenses, including, without limitation,
judgments, interest on such judgments, fines, charges, costs, amounts paid in
settlement, expenses and attorneys' fees incurred in investigating, preparing
or defending any action, claim, suit, inquiry, proceeding, investigation or any
appeal taken from the foregoing by or before any court or governmental,
administrative or other regulatory agency, body or commission, whether pending
or merely threatened, whether or not any Indemnified Party is or may be a party
thereto, including interest on any of the foregoing (collectively, "Damages"),
arising out of, or in connection with, the management or conduct of the
business and affairs of the Partnership, except for any such Damages to the
extent that they are found by a court of competent jurisdiction to have
resulted from the gross negligence or willful misconduct of the Indemnified
Parties or willful violations of the express provisions hereof by the
Indemnified Parties. The Indemnified Parties may consult with counsel and
accountants with respect to the affairs of the Partnership and shall be fully
protected and justified, to the extent allowed by law, in acting, or failing to
act, if such action or failure to act is in accordance with the advice or
opinion of such counsel or accountants.
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(b) The Partnership will, to the extent permitted by law, indemnify and
hold harmless any and all of the Indemnified Parties for any and all Damages
arising out of or in connection with the management or conduct of the business
and affairs of the Partnership or their activities with respect thereto, except
to the extent that any such Damages are found by a court of competent
jurisdiction to have resulted from the gross negligence or willful misconduct
of the person seeking indemnification (or willful violation of the express
provisions hereof). No Indemnified Party may satisfy any right of indemnity
or reimbursement granted in this Section 4.3(b) or to which it may otherwise be
entitled except out of the assets of the Partnership, and no Partner shall be
personally liable with respect to any such claim for indemnity or
reimbursement.
Section 145 of the General Corporation Law of Delaware provides as
follows:
145. Indemnification of officers, directors, employees and agents; insurance --
(a) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor
by reason of the fact that he is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of
all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met
the applicable standard of conduct set forth in subsections (a) and (b) of this
section. Such determination shall be made (1) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even though
less than a quorum, or (2) if there are no such directors, or if such directors
so direct, by independent legal counsel in a written opinion, or (3) by the
stockholders.
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<PAGE> 183
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending a civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the corporation as authorized in this section. Such expenses (including
attorneys' fees) incurred by other employees and agents may be so paid upon
such terms and conditions, if any, as the board of directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under this section.
(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so
that any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall stand
in the same position under this section with respect to the resulting or
surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee, or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee,
or agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive jurisdiction to
hear and determine all actions for advancement of expenses or indemnification
brought under this section or under any bylaw, agreement, vote of stockholders
or disinterested directors, or otherwise. The Court of Chancery may summarily
determine a corporation's obligation to advance expenses (including attorneys'
fees).
Article Five of the Certificate of Incorporation of Ford Credit Auto
Receivables Two, Inc. provides as follows:
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<PAGE> 184
(a) A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability
(i) for any breach of the director's duty of loyalty to the
corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the Delaware General Corporation Law or
(iv) for any transaction from which the director derived an
improper personal benefit.
If the Delaware General Corporation Law is amended after approval by the
stockholders of this Article FIFTH to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director of the corporation shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law, as so amended.
(b) Any repeal or modification of paragraph (a) of this Article FIFTH by
the stockholders of the corporation shall not adversely affect any right or
protection of a director of the corporation existing at the time of such repeal
or modification.
(c) (i) Each person who was or is made a party or is threatened to be
made a party to or is involved in any action, suit or proceeding, whether
civil, criminal, administrative, investigative or otherwise (hereinafter a
"proceeding"), by reason of the fact that he or she, or a person of whom he or
she is the legal representative, is or was a director, officer or employee of
the corporation or is or was serving at the request of the corporation as a
director, officer or employee of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, whether the basis of such proceeding is alleged action in an
official capacity as a director, officer or employee or in any other capacity
while serving as a director, officer or employee, shall be indemnified and held
harmless by the corporation to the fullest extent authorized by the Delaware
General Corporation Law, as the same exists or may hereafter be amended (but,
in the case of any such amendment, only to the extent that such amendment
permits the corporation to provide broader indemnification rights than said
law permitted the corporation to provide prior to such amendment), against all
expense, liability and loss (including penalties, fines, judgments, attorneys'
fees, amounts paid or to he paid in settlement and excise taxes imposed on
fiduciaries with respect to (i) employee benefit plans, (ii) charitable
organizations or (iii) similar matters) reasonably incurred or suffered by such
person in connection therewith and such indemnification shall continue as to a
person who has ceased to be a director, officer or employee and shall inure to
the benefit of his or her heirs, executors and administrators; provided,
however, that the corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person (other than pursuant to subparagraph (c)(ii) of this Article FIFTH)
only if such proceeding (or part thereof) was authorized by the Board of
Directors of the corporation. The right to indemnification conferred in this
subparagraph (c)(i) of Article FIFTH shall be a contract right and shall
include the right to be paid by the corporation the expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
however, that, if the Delaware General Corporation Law so requires, the payment
of such expenses incurred by a director or officer in his or her capacity as a
director or officer (and not in any other capacity in which service was or is
rendered by such person while a director or officer, including, without
limitation, service to an employee benefit plan) in advance of the final
disposition of a proceeding shall be made only upon delivery to the corporation
of an undertaking, by or on behalf of such director or officer, to repay all
amounts so advanced if it shall ultimately be determined that such director or
officer is not entitled to be indemnified under this subparagraph (c)(i) of
Article FIFTH or otherwise.
(ii) If a claim which the corporation is obligated to pay under
subparagraph (c)(i) of this Article FIFTH is not paid in full by the
corporation within 60 days after a written claim has been received by the
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<PAGE> 185
corporation, the claimant may at any time thereafter bring suit against the
corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than
an action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the corporation) that the claimant has
not met the standards of conduct which make it permissible under the Delaware
General Corporation Law for the corporation to indemnify the claimant for the
amount claimed, but the burden of proving such defense shall be on the
corporation. Neither the failure of the corporation (including its Board of
Directors, independent legal counsel or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the corporation (including its Board of
Directors, independent legal counsel or its stockholders) that the claimant has
not met such applicable standard of conduct, shall be a defense to the action
or create a presumption that the Claimant has not met the applicable standard
of conduct.
(iii) The provisions of this paragraph (c) of Article FIFTH shall
cover claims, actions, suits and proceedings, civil or criminal, whether now
pending or hereafter commenced, and shall be retroactive to cover acts or
omissions or alleged acts or omissions which heretofore have taken place. If
any part of this paragraph (c) of Article FIFTH should be found to be invalid or
ineffective in any proceeding, the validity and effect of the remaining
provisions shall not be affected.
(iv) The right to indemnification and the payment of expenses
incurred in defending a proceeding in advance of its final disposition
conferred in this paragraph (c) of Article FIFTH shall not be exclusive of any
other right which any person may have or hereafter acquire under any statute,
provision of the Certificate of Incorporation, By-Law, agreement, vote of
stockholders or disinterested directors or otherwise.
(v) The corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the corporation
or another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the corporation
would have the power to indemnify such person against such expense, liability
or loss under the Delaware General Corporation Law.
(vi) The corporation may, to the extent authorized from time to
time by the Board of Directors, grant rights to indemnification, and rights to
be paid by the corporation the expenses incurred in defending any proceeding
in advance of its final disposition, to any agent of the corporation to the
fullest extent of the provisions of this paragraph (c) of Article FIFTH with
respect to the indemnification and advancement of expenses of director,
officers and employees of the corporation.
Similar indemnification provisions in Section 5 of Article NINTH of the
Certificate of Incorporation of both Ford Motor Company and Ford Motor Credit
Company are applicable to directors, officers and employees of Ford Credit Auto
Receivables Two, Inc. who serve as such at the request of Ford Motor Company or
Ford Motor Credit Company.
Ford Credit Auto Receivables Two, Inc. is insured for liabilities it may
incur pursuant to Article FIFTH of its Certificate of Incorporation relating to
the indemnification of its directors, officers and employees. In addition,
directors, officers and certain key employees are insured against certain
losses which may arise out of their employment and which are not recoverable
under the indemnification provisions of Ford Credit Auto Receivables Two,
Inc.'s Certificate of Incorporation. The premium for both insurance coverages
is paid by Ford Motor Company.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS.
(A) EXHIBITS:
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<PAGE> 186
<TABLE>
<S> <C> <C>
1.1 - Form of Underwriting Agreement for the Notes.*
1.2 - Form of Underwriting Agreement for the Certificates. *
3.1 - Certificate of Limited Partnership of the Seller.*
3.2 - Limited Partnership Agreement between the General Partner and Ford Credit.*
3.3 - Certificate of Incorporation of the General Partner.*
3.4 - By-Laws of the General Partner.*
4.1 - Form of Indenture between the Trust and the Indenture Trustee (including forms of Notes).*
4.2 - Form of Trust Agreement between the Seller and the Owner Trustee (including forms of Certificates).*
4.3 - Form of Pooling and Servicing Agreement among the Seller, the Servicer and the Trustee (including forms of
Certificates).*
4.4 - Form of Standard Terms and Conditions of Agreement among the Seller, the Servicer and the Trustee.*
5.1 - Opinion of H.D. Smith, Esq., Secretary and Corporate Counsel of Ford Credit Auto Receivables Two, Inc. with respect to
legality.*
8.1 - Opinion of Skadden, Arps, Slate, Meagher & Flom with respect to federal income tax matters.*
8.2 - Form of Opinion of J.D. Bringard, Esq., Vice President--General Counsel of the Servicer with respect to tax matters under
Michigan law.
10.1 - Form of Interest Rate Cap between the Trust and the Interest Rate Cap Provider.*
10.2 - Form of Interest Rate Swap between the Trust and the Swap Counterparty.*
10.3 - Form of Guaranteed Rate Agreement between the Trust and the Investment Provider.*
23.1 - Consent of H.D. Smith Esq., Secretary and Corporate Counsel of Ford Credit Auto Receivables Two, Inc. (included as part
of Exhibit 5.1).*
23.2 - Consent of Skadden, Arps, Slate, Meagher & Flom (included as part of Exhibit 8.1).*
23.3 - Form of Consent of J.D. Bringard, Esq., Vice President--General Counsel of the Servicer (included as part of
Exhibit 8.2).
24.1 - Powers of Attorney.*
25.1 - Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of Chemical Bank.*
99.1 - Form of Sale and Servicing Agreement among the Seller, the Servicer and the Trust.*
99.2 - Form of Administration Agreement among the Trust, the Administrator and the Indenture Trustee.*
99.3 - Form of Purchase Agreement between Ford Credit and the Seller.*
99.4 - Form of Appendix A - Defined Terms.*
</TABLE>
____________________________
* Previously filed
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement; (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) to
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental
change in the information set forth in the registration statement; (iii) to
include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement; provided, however, that (a)(i)
and (a)(ii) will not apply if the information required to be included in a
post-effective amendment thereby is contained in periodic reports filed
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in this registration statement.
II-6
<PAGE> 187
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
(d) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(e) To provide to the underwriters at the closing specified in the
underwriting agreements certificates in such denominations and registered in
such names as required by the underwriters to permit prompt delivery to each
purchaser.
(f) That insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions described under Item 15
above, or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(g) That, for purposes of determining any liability under the Securities
Act of 1933, 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)(i) or (4) or
497(h) under the Securities Act of 1933 shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(h) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-7
<PAGE> 188
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3, and has duly caused this Amendment No. 2
to the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Detroit and the State of Michigan on
the 16th day of May, 1996.
FORD CREDIT AUTO RECEIVABLES TWO L.P.
By FORD CREDIT AUTO RECEIVABLES
TWO, INC.,
General Partner of the Registrant
By KENNETH J. COATES *
------------------------------------
(Kenneth J. Coates, Chairman
of the Board of Directors of
Ford Credit Auto Receivables Two, Inc.)
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed below by the following
directors of FORD CREDIT AUTO RECEIVABLES TWO, INC. in the capacities and on
the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ----------------------------- ---------------------------- ------------------
<S> <C> <C>
KENNETH J. COATES * Chairman of the May 16, 1996
- ----------------------------- Board of Directors
(Kenneth J. Coates) and Director (principal
executive officer)
TERRENCE F. MARRS * Director and May 16, 1996
- ----------------------------- Vice President-Controller
(Terrence F. Marrs) (principal accounting
officer)
JOHN P. BURKHARD * Director and May 16, 1996
- ----------------------------- Vice President and
(John P. Burkhard) Treasurer (principal
financial officer)
* By /s/ R. P. CONRAD
- -----------------------------
(R. P. Conrad, Attorney in Fact)
</TABLE>
II-8
<PAGE> 189
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION PAGE
- --------- ----------- ----
<S> <C> <C>
1.1 - Form of Underwriting Agreement for the Notes.*
1.2 - Form of Underwriting Agreement for the Certificates.*
3.1 - Certificate of Limited Partnership of the Seller.*
3.2 - Limited Partnership Agreement between the Seller and Ford Credit.*
3.3 - Certificate of Incorporation of the General Partner.*
3.4 - By-Laws of the General Partner.*
4.1 - Form of Indenture between the Trust and the Indenture Trustee (including forms of Notes).*
4.2 - Form of Trust Agreement between the Seller and the Owner Trustee (including forms of
Certificates).*
4.3 - Form of Pooling and Servicing Agreement among the Seller, the Servicer and the Trustee
(including forms of Certificates).*
4.4 - Form of Standard Terms and Conditions of Agreement among the Seller, the Servicer
and the Trustee.*
5.1 - Opinion of H.D. Smith, Esq., Secretary and Corporate Counsel of Ford Credit Auto
Receivables Two, Inc. with respect to legality.*
8.1 - Opinion of Skadden, Arps, Slate, Meagher & Flom with respect to federal income tax matters.*
8.2 - Form of Opinion of J.D. Bringard, Esq., Vice President--General Counsel of the Servicer with
respect to tax matters under Michigan law.
10.1 - Form of Interest Rate Cap between the Trust and the Interest Rate Cap Provider.*
10.2 - Form of Interest Rate Swap between the Trust and the Swap Counterparty.*
10.3 - Form of Guaranteed Rate Agreement between the Trust and the Investment Provider.*
23.1 - Consent of H.D. Smith Esq., Secretary and Corporate Counsel of Ford Credit Auto Receivables Two,
Inc. (included as part of Exhibit 5.1).*
23.2 - Consent of Skadden, Arps, Slate, Meagher & Flom (included as part of Exhibit 8.1).*
23.3 - Form of Consent of J.D. Bringard, Esq., Vice President--General Counsel of the Servicer (included as
part of Exhibit 8.2).
24.1 - Powers of Attorney.*
25.1 - Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of Chemical Bank.*
99.1 - Form of Sale and Servicing Agreement among the Seller, the Servicer and the Trust.*
99.2 - Form of Administration Agreement among the Trust, the Administrator and the Indenture
Trustee.*
99.3 - Form of Purchase Agreement between Ford Credit and the Seller.*
99.4 - Form of Appendix A - Defined Terms.*
</TABLE>
___________________________
* Previously filed
II-9
<PAGE> 1
EXHIBIT 8.2
May , 1996
Ford Credit Auto Receivables Two L.P.
The American Road
Dearborn, Michigan 48121
Re: Ford Credit Auto Receivables Two L.P.
Registration Statement on Form S-3 No. 333-1245
-----------------------------------------------
Ladies and Gentlemen:
The undersigned, J. D. Bringard, Vice President--General Counsel of Ford
Motor Credit Company ("Ford Credit") has acted as counsel to Ford Credit Auto
Receivables Two L.P., as Seller (the "Seller") in connection with Registration
Statement on Form S-3 No. 333-1245, as amended (the "Registration Statement"),
filed with the Securities and Exchange Commission under the Securities Act of
1933, as amended, respecting the issuance by various trusts (each, a "Trust")
to be formed pursuant to either an Owner Trust Agreement ("Owner Trust
Agreement") to be entered into among the Seller and the Owner Trustee
designated therein or a Pooling and Servicing Agreement ("Pooling and Servicing
Agreement") to be entered into among the Seller, Ford Credit, and the Trustee
designated therein (the "Trustee") of Asset Backed Securities consisting of
either Notes and/or Certificates. Any Asset Backed Securities consisting of
Notes are to be issued pursuant to a Trust Indenture to be entered into between
the Trust and the Indenture Trustee designated therein and any Asset Backed
Securities consisting of Certificates are to be issued pursuant to either the
Owner Trust Agreement or the Pooling and Servicing Agreement.
I am admitted to the State Bar of Michigan and I express no opinion as to
the laws of any other jurisdiction except the laws of the United States of
America
<PAGE> 2
Ford Credit Auto Receivables Two L.P.
May , 1996
Page 2
and the State of Michigan to the extent specifically referred to
herein.
I hereby confirm that the statements set forth in the Prospectus and the
Prospectus Supplement forming a part of the Registration Statement under the
caption "Summary--Tax Status" as they relate to Michigan state tax matters and
in the Prospectus Supplement under the caption "Certain State Tax Consequences"
accurately describe the material Michigan state tax consequences to holders of
the Certificates and/or the Notes.
I consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to me under the caption "Legal Opinions" in the
Prospectus and Prospectus Supplement included in the Registration Statement.
Very truly yours,
