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REGISTRATION NO. 33-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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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 No. 38-
The American Road
Dearborn, Michigan 48121
(313) 322-3000
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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
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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
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<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
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<S> <C> <C> <C> <C>
Asset Backed Securities . . . . . . . $1,000,000.00 100% $1,000,000.00 $344.83
</TABLE>
(1)Estimated solely for the purpose of calculating the registration fee.
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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.
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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.
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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
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FORD MOTOR CREDIT COMPANY
SERVICER
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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 principal amount of
[Class A-1] % Asset Backed Notes (the "[Class A-1] Notes"), [$
aggregate principal amount of Class A-2 Floating Rate Asset Backed Notes
(the "Class A-2 Notes") and $ aggregate 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 principal amount 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 in the motor vehicles
(continued on following page)
PROSPECTIVE INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE
INFORMATION SET FORTH IN "RISK FACTORS" ON PAGE S-18 HEREIN.
THE NOTES REPRESENT OBLIGATIONS OF, AND 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 REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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UNDERWRITING PROCEEDS TO
PRICE TO PUBLIC (1) DISCOUNT THE SELLER (1)(2)
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<S> <C> <C> <C>
Per [Class A-1] Note . . . . . . . . . % % %
[Per Class A-2 Note . . . . . . . . . . % % %]
[Per Class A-3 Note . . . . . . . . . . % % %]
[Per Certificate . . . . . . . . . . . % % %]
Total . . . . . . . . . . . . . . . . . $ $ $
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(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 on or about the Closing
Date.
The date of this Prospectus Supplement is , 199 .
<PAGE> 4
(continued from previous page)
financed thereby, including certain monies due or received thereunder on or
after the related Cutoff Date (as defined herein), transferred to the Trust by
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.
[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, [except
that 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 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] [Each class of] Notes and the Certificates will be payable in full
on the applicable final scheduled [Payment Date or] Distribution Date as set
forth herein. However, payment in full of [the] [a class of] Notes or of the
Certificates could occur earlier 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. To the extent any statements in
this Prospectus Supplement conflict with statements in the Prospectus, the
statements in this Prospectus Supplement shall control.
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,
monthly 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. Ford Credit Auto Receivables Two
L.P., 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.
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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.
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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 principal amount of $
; (2) Class A-2 Floating Rate Asset Backed Notes (the "Class A-2 Notes") in the
aggregate principal amount of $ ; and (3) Class A-3 % Asset Backed Notes (the
"Class A-3 Notes") in the aggregate 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. The Noteholders will not 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.
The Certificates will be available for purchase in book entry form only in minimum denominations
of $1,000 and integral multiples thereof. The Certificate-
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holders will not 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 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 includes (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 received on or after the related Cutoff Date;
(iii) such amounts as from time to time may be held in one or more separate trust
accounts established and maintained by the Servicer and the Seller pursuant to the Sale and
Servicing Agreement, as described herein, including the Reserve Account[, the Yield
Supplement Account] [and the Pre-Funding Account]; (iv) security interests in the Financed
Vehicles and any accessions thereto; (v) any Dealer Recourse; (vi) the rights to proceeds
from claims on certain physical damage, credit life and disability insurance policies
covering the Financed Vehicles or the Obligors, as the case may be; (vii) any property
that shall have secured a Receivable and that shall have been acquired by the Trust; (viii)
the rights of the Seller under the Purchase Agreement [and the Yield Supplement Agreement];
(ix) certain rebates of premiums and other amounts relating to certain insurance policies
and other items financed under the Receivables; [(x) the Interest Rate Cap;] [(xi) the
Interest Rate Swap;] and (xii) 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 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 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
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(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) 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:
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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 .
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 15th 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 . . . . . . . . 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] 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.
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 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 withdr
awn from the Payahead Account but excluding amounts deposited into the Payahead Account),
(b) the principal portion of all
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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 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] Receivables
as of the [Initial] Cutoff Date [plus (ii) the aggregate principal balances
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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 balance, 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 balance of [the] [such class of] Notes or the initial
Certificate Balance, as the case may be, and the denominator of which is the sum of the
initial principal balance 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 (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. The Trust's
obligation to pay the Note Prepayment Premium shall be limited to funds which are received
from the Seller under the Sale and Servicing Agreement as liquidated damages for the failure
to deliver Subsequent Receivables having an aggregate principal amount equal to the
Pre-Funded Amount. No other assets of the Trust will be available for the purpose of
making such payment.]]
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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 15th 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 15th 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. Interest will be
calculated on the basis of a 360-day year consisting of twelve 30-day months. 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.
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 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 Certificate-
holders' 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 amount, 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.
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[F. MANDATORY REPURCHASE
FROM PRE-FUNDING ACCOUNT . . The Certificates will be prepaid, in part, pro rata on the basis of their initial principal
amounts, 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 amount 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 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
Determination 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. The Trust's obligation to pay the Certificate Prepayment Premium will be limited to
funds which are received from the Seller under the Sale and Servicing Agreement as liquidated
damages for the failure to deliver Subsequent Receivables having an aggregate principal
amount equal to the Pre-Funded Amount. 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 "The
Transfer and Servicing Agreements--Interest Rate Cap." Payments received by the Indenture
Trustee pursuant to the Interest Rate Cap will be deposited in the Collection Account.]
[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
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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 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 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 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 "The Transfer and
Servicing Agreements--Interest Rate Swap."]
[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
a Servicer Default under the Sale and Servicing Agreement, (c) the occurrence of
certain events of insolvency with respect to the Seller 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 Certificateholders and Noteholders 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 Eligible Investments having a value at least equal to % of the [Initial Poo
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 Eligible Investments
having a value approximately equal to % of the
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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 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 balance of the
Securities (after giving effect to distributions made on the prior
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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 balance 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 balance 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 balance 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 annual percentage rate ("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
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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 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 related Subsequent Receivables, assuming that payments on such
Receivables are made as scheduled and no prepayments are made. The aggregate 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 revocable power 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.
[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 ex-
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cess of such guaranteed return. See "Description of the Transfer and Servicing Agreements--
Guaranteed Rate Agreement."]
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 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 were 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.
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 Securities. Such prepayments, to the extent allocable to
principal, will be included in the Noteholders' Principal Payment Amount or
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.
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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. See "Certain Federal Income Tax Consequences" and
"Certain State Tax Consequences with respect to Trusts for which a Partnership Election is
Made" in the Prospectus 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 Code.
The Certificates may not be acquired by an employee benefit plan subject to ERISA or Section
4975 of the Internal Revenue Code of 1986, as amended (the "Code"), or by an individual
retirement account. Any investor considering the purchase of Certificates should be aware
that such purchase and subsequent holding 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
Rule 2a-7 under the Investment Company Act of 1940, as amended.]
RATINGS 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.
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[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.
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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
amount 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
certified independent 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-18
<PAGE> 21
not to exceed their outstanding balance, with any remaining amount used to
redeem the Class A-2 Notes]. It is anticipated that the principal amount 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 or Receivables generated under certain special financing
programs. 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 duty 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.
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. [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 Reserve Account will be available on each Distribution Date to cover
shortfalls in
S-19
<PAGE> 22
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 to make payments on the Notes and the Certificates.
DEFICIENCIES FROM SALE UPON INSOLVENCY OR DISSOLUTION OF SELLER OR FORD CREDIT
AUTO RECEIVABLES TWO, INC.
If an Insolvency Event or a dissolution occurs with respect to the
Seller or Ford Credit Auto Receivables Two, Inc., the general partner of the
Seller, while the Notes are outstanding, the Indenture Trustee is required to
promptly sell, dispose of or otherwise liquidate the Receivables in a
commercially reasonable manner on commercially reasonable terms, unless (i) the
holders of each class of Notes representing a majority of the aggregate unpaid
principal amount of each such class, (ii) the Certificateholders (other than
the Seller) holding a majority of the aggregate principal balance of the
Certificates, and (iii) the holders (other than the Seller) of certain
interests, if any, in the Reserve Account disapprove of such sale and in
connection therewith, the Indenture Trustee (x) appoints an entity 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 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 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 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. [Moreover, 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.]
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 were 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
S-20
<PAGE> 23
and the Certificates will be affected by the application of the Noteholders'
Accelerated Principal to pay the principal of the Notes. 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 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 [and to fund the deposit of the Pre-Funded Amount].
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.
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>
<S> <C>
[Class A-1] Notes . . . . . . . . . . . . . $
</TABLE>
S-21
<PAGE> 24
<TABLE>
<S> <C>
[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
requirement that each Receivable was originated on or after _____ __, 1995. 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 Securityholders 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 certain specified amounts.
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.]
[The Initial Receivables will represent approximately % of the
aggregate initial principal balance 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.]
Ford Credit does not maintain records adequate to provide quantitative
data regarding its prepayment experience on its portfolio of U.S. retail
installment sale contracts covering new and used vehicles. However, Ford
Credit (i) believes that the actual rate of prepayments will result in a
substantially shorter weighted average life than
S-22
<PAGE> 25
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 Scheduled Payments as of the [Initial] Cutoff Date, assuming
no prepayments on the [Initial] Receivables are made after the
[Initial] Cutoff Date.
S-23
<PAGE> 26
GEOGRAPHIC DISTRIBUTION OF THE [INITIAL] RECEIVABLES POOL
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-24
<PAGE> 27
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(1)
---------- ----------- ------- ----------
<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. Approximately % of the aggregate principal balance of
the [Initial] Receivables represent financing of vehicles manufactured or
distributed by Ford.
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-25
<PAGE> 28
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>
[Nine] Months Ended
[September 30,] Year Ended December 31,
------------------- -----------------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Average Number of Contracts
Outstanding During the
Period . . . . . . . . . . . . 3,418,133 3,433,517 3,430,145 3,398,797 3,388,214 3,398,048 3,616,862
Average Daily Delinquencies as a
Percent of Average Contracts
Outstanding
31-60 Days(2) . . . . . . 2.15% 2.01% 2.03% 2.02% 2.35% 2.72% 2.71%
61-90 Days(2) . . . . . . 0.17% 0.15% 0.15% 0.15% 0.20% 0.29% 0.31%
Over 90 Days(3) . . . . . 0.03% 0.03% 0.03% 0.03% 0.04% 0.07% 0.08%
- ----------------
</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-26
<PAGE> 29
CREDIT LOSS AND REPOSSESSION EXPERIENCE(1)
<TABLE>
<CAPTION>
[Nine] Months Ended
[September 30,] Year Ended December 31,
-------------------- ---------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Average Portfolio Out-
standing During the
Period (Millions) . . . $35,045.1 $33,457.2 $33,703.3 $31,204.9 $29,505.1 $28,977.1 $30,789.7
Percent of Average
Receivables Outstanding
During the Period
without Recourse to
Dealer . . . . . . . . 99.0% 98.5% 98.6% 97.7% 96.4% 94.4% 92.2%
Repossessions as a Per-
cent of Average
Number of Contracts
Outstanding . . . . . 2.26%(2) 2.11%(2) 2.15% 2.27% 2.74% 3.27% 3.17%
Net Losses as a Percent
of Gross Liquida-
tions(3) . . . . . . 1.23% 0.95% 1.06% 1.16% 1.52% 2.29% 2.40%
Net Losses as a Percent
of Average Portfolio
Outstanding(3) . . . 0.71%(2) 0.55%(2) 0.62% 0.69% 0.90% 1.29% 1.31%
- -------------------
</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.
The reduction in credit losses from 1990 to 1994 primarily has been
due to actions taken by Ford Credit to improve purchase and collection
practices, as well as higher vehicle resale values. The actions taken by Ford
Credit include establishment of a risk-based pricing policy, improved training,
retention of experienced collection personnel, faster direct customer contact
on problem accounts, and implementation of new risk rating guides. Ford
Credit's retail loss experience also depends upon the availability of recourse
from dealers, the number of repossessions, the amount outstanding at the time
of repossession, and the resale value of repossessed vehicles. [The increase
in credit losses during the first nine months of 1995 primarily has been the
result of a slowing economy and higher losses per unit due to a weaker used
vehicle market.] 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 such [class of] Notes indicating the remaining outstanding
principal balance of 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 balance of such [class of] Notes. The "Certificate Pool Factor" for
the Certificates will be a seven-digit decimal which the Servicer
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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
balance 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 of the aggregate outstanding
principal balance 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.
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.
DESCRIPTION OF THE NOTES
GENERAL
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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. Where particular provisions or terms used in the
Indenture are referred to, the actual provisions (including definitions of
terms) are incorporated by reference as part of such summary. The following
summary supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Notes of any given
series and the related Indenture set forth 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 balance[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.] 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.]
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,
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<PAGE> 32
repurchased by the Seller or liquidated by the Servicer, each with respect to
the preceding 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 certain eligible investments [pursuant to a
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 balance of the [Class A-1] Notes
until such principal balance is reduced to zero[, then second, to the principal
balance of the Class A-2 Notes until such principal balance is reduced to zero
and then third, to the principal balance of the Class A-3 Notes until such
principal balance is reduced to zero]. The principal balance 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 balance 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 balance 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 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.
[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 balance 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.
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[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. The
Trust's obligation to pay the Note Prepayment Premium shall be limited to
funds which are received from the Seller under the Sale and Servicing Agreement
as liquidated damages for the failure to deliver Subsequent Receivables having
an aggregate principal amount equal to the Pre-Funded Amount. 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
Agreements--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
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, and to the extent inconsistent therewith
replaces, the description of the general terms and provisions of the
Certificates of any given series and the related Trust Agreement set forth in
the 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
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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. 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, 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 amount 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.
[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. The Trust's
obligation to pay the Certificate Prepayment Premium shall be limited to funds
which are received from the Seller under the Sale and Servicing Agreement as
liquidated damages for the failure to deliver Subsequent Receivables having an
aggregate principal amount equal to the Pre-Funded Amount. 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
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<PAGE> 35
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, and to the extent inconsistent therewith
replaces, 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 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 [the sum of (a)] % of the aggregate principal balances of
such Subsequent Receivables [and (b) the Holdback Amount (described under
"--Reserve Account" below] 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 the applicable Holdback Amount, if any,
will have been deposited in the Holdback Subaccount]; 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
certified independent
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<PAGE> 36
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.
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 Payaheads) and the interest portion of all
payments collected with respect to Simple Interest Receivables, plus that
portion of Payaheads allocable to principal (less an amount equal to Payaheads,
if any, that have been returned to the related Obligors during such Collection
Period); (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]; (v) the Purchase Amount of each Receivable that
was
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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; [and] (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
Principal shall be determined on the related Determination Date based on the
methodology described under "Description of the Notes--Payments of Principal"
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];
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(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).
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, 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 balance 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 balance 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 balance of the [Class A-3] Notes is reduced to zero, the
percentage equivalent of a fraction, the numerator of which is the outstanding
principal balance of the Notes on the Distribu-
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<PAGE> 39
tion 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 balance 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.
"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 balance 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 balance 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 balance 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 balance 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).
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<PAGE> 40
"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 balance 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 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 balance 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 Certificate-holders' 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])] will be paid in the following
order of priority:
(i) to the [applicable] Noteholders, accrued and unpaid
interest on the outstanding principal balance 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 [Class A-1] Noteholders in reduction of principal
until the principal balance of the [Class A-1] Notes has been reduced
to zero[;
(iii) to the Class A-2 Noteholders in reduction of principal
until the principal balance of the Class A-2 Notes has been reduced to
zero; and
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<PAGE> 41
(iv) to the Class A-3 Noteholders in reduction of principal
until the principal balance 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
would otherwise be payable to the Seller on each Subsequent Transfer Date]
(such deposit[s], collectively, the "Reserve Initial Deposit"). The initial
deposit by the Seller on the Closing Date will also include the amount
specified in clause (b) of the following paragraph.
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 balance 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
balance 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 balance 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 balance 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
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<PAGE> 42
Transfer Date, have a weighted average APR of less than %. 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.]
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 balance of the Securities, any funds remaining on deposit in the
Reserve Account, subject to certain limitations, will be paid to the Seller.
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<PAGE> 43
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 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 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 Eligible
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
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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.
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 $ .
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 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 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. 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
Interest Rates [and the Certificate Rate] and will be entitled to receive any
Investment Earnings in excess of such guaranteed return.]
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 ,
S-42
<PAGE> 45
the Investment Provider 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 INVESTMENT PROVIDER. THE SELLER MAKES NO REPRESENTATIONS AS TO THE
ACCURACY OR COMPLETENESS OF SUCH INFORMATION.]
ERISA CONSIDERATIONS
THE NOTES
The Notes may, in general, be purchased by or on behalf of (i) an
employee benefit plan (as defined in Section 3(3) of ERISA), (ii) a plan
described in Section 4975(e)(1) of the Internal Revenue Code of 1986, as
amended (the "Code"), including individual retirement accounts and Keogh Plans,
(iii) any entity whose underlying assets include plan assets by reason of a
plan's investment in such entity (each, a "Plan"). However, the acquisition or
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 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. 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 (excluding, for this purpose, 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 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 Notes without 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 principal amount of Notes set forth opposite its name
below:
<TABLE>
<CAPTION>
PRINCIPAL [PRINCIPAL [PRINCIPAL
AMOUNT OF AMOUNT OF AMOUNT OF
[CLASS A-1] CLASS A-2 CLASS A-3
NOTE UNDERWRITERS NOTES NOTES] NOTES]
<S> <C> <C> <C>
. . . . . . . . . . . . . . . . . . . . . . . . . . $ $[ ] $[ ]
. . . . . . . . . . . . . . . . . . . . . . . . . . [ ] [ ]
. . . . . . . . . . . . . . . . . . . . . . . . . . [ ] [ ]
[ ] [ ]
Total . . . . . . . . . . . . . . . . . . . . . . . . . $ $[ ] $[ ]
</TABLE>
S-43
<PAGE> 46
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 principal amount of Certificates set forth opposite its name
below:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
CERTIFICATE UNDERWRITERS CERTIFICATES
<S> <C>
. . . . . . . . . . . . . . . . . . . . . . . . . . $
. . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . $
</TABLE>
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-44
<PAGE> 47
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Ford
Credit Auto Owner Trust % [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> 48
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 and elect
I-2
<PAGE> 49
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., 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.
I-3
<PAGE> 50
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> 51
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>
Accrued Certificate Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-37
Accrued Note Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-36
[Additional Yield Supplement Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-14]
APR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-13
Available Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-34
Available Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-34
Available Principal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-35
Available Reserve Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-40
Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
[Cap Notional Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-41]
[Cap Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-41]
Cede . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
Certificate Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-37
Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-9
Certificateholders' Distribution Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-37
Certificateholders' Interest Carryover Shortfall . . . . . . . . . . . . . . . . . . . . . . . . S-37
Certificateholders' Monthly Accrued Interest . . . . . . . . . . . . . . . . . . . . . . . . . . S-37
Certificateholders' Monthly Principal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-38
Certificateholders' Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-38
Certificateholders' Principal Carryover Shortfall . . . . . . . . . . . . . . . . . . . . . . . . S-38
Certificateholders' Principal Distribution Amount . . . . . . . . . . . . . . . . . . . . . . . . S-38
[Certificate Interest Reserve Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-40]
Certificate Pool Factor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-27
[Certificate Prepayment Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-10, S-32]
[Certificate Prepayment Premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-10]
Certificate Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-9
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1, S-3
Certificate Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-44
Certificate Underwriting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-44
[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-7]
[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-16, S-43
Collection Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-14
Collection Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
Cutoff Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-22
Determination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-7, S-30
Distribution Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2, S-9
[Distribution Payment Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2, S-6]
</TABLE>
<PAGE> 52
<TABLE>
<S> <C>
DTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-16
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
Final Scheduled Distribution Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-9
Final Scheduled Maturity Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-5
Ford . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-19
Ford Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
[Funding Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-11]
[Guaranteed Rate Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-42]
Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
[Index Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-29]
[Initial] Cutoff Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-4
Initial Pool Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-7
[Initial] Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-4
Interest Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6, S-29
[Interest Rate Cap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-41]
[Interest Rate Cap Provider . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-10, S-42]
[Interest Rate Swap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-10, S-42]
[Investment Provider . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-14, S-42]
Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Liquidated Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-34
Liquidation Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-34
[Mandatory Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-8, S-30]
[Mandatory Repurchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-10, S-32]
[Maximum Initial Yield Supplement Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-14, S-41]
[Maximum Subsequent Yield Supplement Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . S-14, S-41]
[Maximum Yield Supplement Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-14, S-41]
Michigan Tax Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-16
[Net Trust Swap Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-11, S-42]
[Net Trust Swap Receipt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-11, S-42]
Noteholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
Noteholders' Accelerated Principal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-7, S-30
Noteholders' Interest Carryover Shortfall . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-36
Noteholders' Monthly Accrued Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-36
Noteholders' Monthly Principal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-36
Noteholders' Payment Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-36
Noteholders' Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-36
Noteholders' Principal Carryover Shortfall . . . . . . . . . . . . . . . . . . . . . . . . . . . S-37
Noteholders' Principal Payment Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6, S-37
Note Interest Rate[s] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
Note Pool Factor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-27
[Note Prepayment Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-8, S-31]
[Note Prepayment Premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-8]
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1, S-3
Note Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-43
Note Underwriting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-43
Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-43
Plan Investor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-43
Pool Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-5
</TABLE>
<PAGE> 53
<TABLE>
<S> <C>
[Pool/Pre-Funding Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-5]
[Pre-Funded Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-4]
[Pre-Funded Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-8]
[Pre-Funding Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2, S-11]
Prospectus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-5
Rating Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-21
Realized Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-5
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1
Receivables Pool . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-22
Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-31
Regular Principal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6, S-29
[Required Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-13]
Reserve Initial Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-12, S-39
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-15
Special Tax Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-16
Specified Reserve Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-12, S-39
[Subsequent Cutoff Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-5]
[Subsequent Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2, S-4]
[Subsequent Transfer Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-5]
Supplemental Servicing Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-34
[Swap Counterparty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-11, S-42]
[Swap Notional Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-42]
Transfer and Servicing Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-33
Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1, S-3
Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-44
[Yield Supplement Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-13]
[Yield Supplement Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-14]
[Yield Supplement Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-14, S-41]
[Yield Supplement Deposit Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-41]
[Yield Supplement Initial Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-13]
</TABLE>
<PAGE> 54
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-18
The Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-21
The Receivables Pool . . . . . . . . . . . . . . . . . . . . . . S-22
Pool Factors . . . . . . . . . . . . . . . . . . . . . . . . . . S-27
Maturity and Prepayment Considerations . . . . . . . . . . . . . S-28
Description of the Notes . . . . . . . . . . . . . . . . . . . . S-28
Description of the Certificates . . . . . . . . . . . . . . . . . S-31
Description of the Transfer and Servicing Agreements . . . . . . S-32
ERISA Considerations . . . . . . . . . . . . . . . . . . . . . . S-43
Underwriting . . . . . . . . . . . . . . . . . . . . . . . . . . S-43
Legal Opinions . . . . . . . . . . . . . . . . . . . . . . . . . S-44
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
The Trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
The Receivables Pools . . . . . . . . . . . . . . . . . . . . . . . 17
Maturity and Prepayment Considerations . . . . . . . . . . . . . . 19
Pool Factors and Trading Information . . . . . . . . . . . . . . . 20
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . 21
The Seller and the General Partner . . . . . . . . . . . . . . . . 21
The Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Description of the Notes . . . . . . . . . . . . . . . . . . . . . 23
Description of the Certificates . . . . . . . . . . . . . . . . . . 27
Certain Information Regarding the Securities . . . . . . . . . . . 29
Description of the Transfer and Servicing Agreements . . . . . . . 39
Certain Legal Aspects of the Receivables . . . . . . . . . . . . . 51
Certain Federal Income Tax Consequences . . . . . . . . . . . . . . 54
Certain State Tax Consequences with respect to Trusts for
Which a Partnership Election Is Made . . . . . . . . . . . . . 65
ERISA Considerations . . . . . . . . . . . . . . . . . . . . . . . 66
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . 70
Legal Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . 71
</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 199 -
Auto Owner Trust
$
% Asset Backed
Notes[, Class A-1]
[$
Floating Rate Asset Backed
Notes, Class A-2]
[$
% Asset Backed
Notes, Class A-3]
$
% Asset Backed
Certificates
Ford Credit Auto
Receivables Two L.P.
Seller
Ford Motor Credit Company
Servicer
PROSPECTUS
SUPPLEMENT
<PAGE> 55
The information contained hereing 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 propsectus 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 principal amount of % Asset Backed Certificates, Class A (the
"Class A Certificates") and $ aggregate principal amount of % Asset
Backed Certificates, Class B (the "Class B Certificates" and, together with
the ClassA 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.
[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.
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 PROS-
PECTUS SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION 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 on or about the Closing Date.
The date of this Prospectus Supplement is , 199 .
<PAGE> 56
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. To the extent any statements in this
Prospectus Supplement conflict with statements in the Prospectus, the
statements in this Prospectus Supplement shall control.
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, monthly 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. Ford Credit Auto Receivables Two L.P., 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> 57
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.
<TABLE>
<S> <C>
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
principal amount 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 balance of % Asset Backed Certificates,
Class A (the "Class A Certificates") and $ aggregate 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 Trust assets will include the Receivables, [all monies due thereunder on or
after , 199 with respect to the Precomputed Receivables] [and all monies received
thereunder on or after , 199 with respect to the Simple Interest Receivables] (each
such date, a "Cutoff Date"), security interests in the vehicles financed thereby ("Financed
Vehicles"), certain bank accounts and the proceeds thereof, any proceeds from claims on
certain insurance policies, and certain rights under the Agreement.
The [Class A] Certificates will be available for purchase in book entry form only in minimum
denominations of $1,000 and integral multiples thereof. The [Class A] Certificateholders
will not 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
</TABLE>
S-3
<PAGE> 58
<TABLE>
<S> <C>
(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.]
THE TRUST PROPERTY . . . . . The property of the Trust includes (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 received on or after the related Cutoff
Date; (iii) such amounts as from time to time may be held in one or more separate trust
accounts established and maintained by the Servicer and the Seller pursuant to the Agreement,
as described herein, [including the Yield Supplement Account] [and the Pre-Funding Account];
(iv) security interests in the Financed Vehicles and any accessions thereto; (v) any Dealer
Recourse; (vi) the rights to proceeds from claims on certain physical damage, credit life and
disability insurance policies covering the Financed Vehicles or the Obligors, as the case may
be; (vii) any property that shall have secured a Receivable and that shall have been acquired
by the Trust; (viii) the rights of the Seller under the Purchase Agreement and the Yield
Supplement Agreement; (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 . . . . . . . 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 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
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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.]
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
Receivables at the end of the preceding aggregate principal balance of the 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 dayon 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").
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[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 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
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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 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 payment 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 amount of
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[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] Certificateholders if the aggregate principal amount 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 described 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. The
Trust's obligation to pay the Certificate Prepayment Premium shall be limited to funds which are
received from the Seller under the Agreement as liquidated damages for the failure to deliver
Subsequent Receivables having an aggregate principal amount equal to the Pre-Funded Amount. No
other assets of the Seller or 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
amounts.]
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.
SUBORDINATION SPREAD
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ACCOUNT . . . . . . . . . . . The Subordination Spread Account will be created with an initial deposit by the Seller of cash
or Eligible 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 Eligible 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 any
Distribution Date on which the aggregate balance of the Class A
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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 annual percentage rate ("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 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 related Subsequent Receivables,
assuming that payments on such Receivables are made as scheduled and no prepayments are made.
The aggregate 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 revocable power to instruct the
Trustee to withdraw funds on
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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 reinvestment proceeds on any payments
received in respect of the Receivables].
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 [respective] Final Scheduled Distribution Date[s]. 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. 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" and "Certain State Tax Consequences with
respect to Trusts for which a Partnership Election is Made" in the Prospectus for
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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 described under "ERISA Considerations" herein and in the
Prospectus with respect to the Underwriters' Exemption.
[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 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 qualified
professional asset managers. Any benefit plan fiduciary considering a purchase of
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.
RATINGS 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 agen- cies [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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RISK FACTORS
LIMITED LIQUIDITY
There is currently no secondary market for the Class A Certificates
[or the Class B Certificates]. The Underwriters currently intend to make a
market in the Class A Certificates [and the Class B 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 [or the Class B
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
amount 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 certified independent 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
amount 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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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 or Receivables
generated under certain special pricing programs. 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 duty trucks. The level of retail sales of automobiles
and light duty 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 duty 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.
S-14
<PAGE> 69
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
[respective] Final Scheduled Distribution Date[s]. 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
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.
S-15
<PAGE> 70
Each [Class A] Certificate represents a fractional undivided ownership
interest in the Trust. The Trust property includes retail installment sale
contracts between Dealers and Obligors, and [all payments due thereunder on or
after the related Cutoff Date with respect to the Precomputed Receivables] [and
all payments received thereunder on or after the related Cutoff Date with
respect to the Simple Interest Receivables]. The Trust property also includes
(i) such amounts as from time to time may be held in one or more trust accounts
established and maintained by the Servicer pursuant to the Agreement, as
described herein, [including the Yield Supplement Account] [and the Pre-Funding
Account]; (ii) security interests in the Financed Vehicles and any accessions
thereto; (iii) any Dealer Recourse; (iv) the rights to proceeds with respect
to the Receivables from claims on physical damage, credit life and disability
insurance policies covering the Financed Vehicles or the Obligors, as the case
may be; (v) any property that shall have secured a Receivable and that shall
have been acquired by the Trustee; (vi) the rights of the Seller under the
Purchase Agreement [and the Yield Supplement Agreement]; (vii) certain rebates
of premiums and other amounts relating to certain insurance policies and other
items financed under the Receivables; and (viii) 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
requirement that each Receivable was originated on or after , 1995. 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 certain specified
amounts. 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.]
[The Initial Receivables will represent approximately % of the
aggregate initial principal balance 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 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.]
Ford Credit does not maintain records adequate to provide quantitative
data regarding its prepayment experience on its portfolio of U.S. retail
installment sale contracts covering new and used vehicles. However, Ford
S-16
<PAGE> 71
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 Scheduled Payments as of the [Initial] Cutoff Date, assuming
no prepayments on the [Initial] Receivables are made after the
[Initial] Cutoff Date.
S-17
<PAGE> 72
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.
[(3) Alabama and Pennsylvania were excluded for administrative reasons.]
S-18
<PAGE> 73
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 Receivables represent vehicles financed at used
vehicle rates. Approximately % of the aggregate principal balance of the
[Initial] Receivables represent financing of vehicles manufactured or
distributed by Ford.
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> 74
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>
[Nine] Months Ended
[September 30,] Year Ended December 31,
------------------- -----------------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Average Number of Contracts Out-
standing During the Period . . 3,418,133 3,433,517 3,430,145 3,398,797 3,388,214 3,398,048 3,616,862
Average Daily Delinquencies as a
Percent of Average Contracts
Outstanding
31-60 Days(2) . . . . . . 2.15% 2.01% 2.03% 2.02% 2.35% 2.72% 2.71%
61-90 Days(2) . . . . . . 0.17% 0.15% 0.15% 0.15% 0.20% 0.29% 0.31%
Over 90 Days(3) . . . . . 0.03% 0.03% 0.03% 0.03% 0.04% 0.07% 0.08%
</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> 75
CREDIT LOSS AND REPOSSESSION EXPERIENCE(1)
<TABLE>
<CAPTION>
[Nine] Months Ended
[September 30,] Year Ended December 31,
1995 1994 1994 1993 1992 1991 1990
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Average Portfolio Outstanding
During the Period (Millions) . $35,045.1 $33,457.2 $33,703.3 $31,204.9 $29,505.1 $28,977.1 $30,789.7
Percent of Average Receivables
Outstanding During the Period
without Recourse to Dealer . . 99.0% 98.5% 98.6% 97.7% 96.4% 94.4% 92.2%
Repossessions as a Percent of
Average Number of Contracts
Outstanding . . . . . . . . . 2.26%(2) 2.11%(2) 2.15% 2.27% 2.74% 3.27% 3.17%
Net Losses as a Percent of Gross
Liquidations(3) . . . . . . . 1.23% 0.95% 1.06% 1.16% 1.52% 2.29% 2.40%
Net Losses as a Percent of Av-
erage Portfolio Outstanding(3)
0.71%(2) 0.55%(2) 0.62% 0.69% 0.90% 1.29% 1.31%
- -------------------
</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.
The reduction in credit losses from 1990 to 1994 primarily has
been due to actions taken by Ford Credit to improve purchase and collection
practices, as well as higher vehicle resale values. The actions taken by Ford
Credit include establishment of a risk- based pricing policy, improved
training, retention of experienced collection personnel, faster direct customer
contact on problem accounts, and implementation of new risk rating guides.
Ford Credit's retail loss experience also depends upon the availability of
recourse from dealers, the number of repossessions, the amount outstanding at
the time of repossession, and the resale value of repossessed vehicles. [The
increase in credit losses during the first nine months of 1995 primarily has
been the result of a slowing economy and higher losses per unit due to a weaker
used vehicle market.] 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
S-21
<PAGE> 76
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.
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. 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, and to the extent
inconsistent therewith replaces, 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.]
S-22
<PAGE> 77
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 Principal Balance.]
[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. The Trust's obligation to
pay the Certificate Prepayment Premium shall be limited to funds that are
received from the Seller under the Agreement as liquidated damages for the
failure to deliver Subsequent Receivables having an aggregate principal amount
equal to the Pre-Funded Amount. 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
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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
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" 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 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 certified independent 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
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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
On or about the tenth 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 Certificate Account. On the Distribution Date, the Trustee shall cause
collections made during the Collection Period which constitute Payaheads to be
transferred from the Certificate Distribution 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
Agreements--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 Advances made by the
Servicer, of principal due on the 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
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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 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 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.]
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:
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(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
(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 amount 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.
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[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 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
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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 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 Eligible 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 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
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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 Eligible
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.
[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."]]
ERISA CONSIDERATIONS
[THE CLASS A CERTIFICATES]
The Class A Certificates may, in general, be purchased by or on behalf
of (i) an employee benefit plan (as defined in Section 3(3) of ERISA), (ii) a
plan described in Section 4975(e)(1) of the Internal Revenue Code of 1986, as
amended (the "Code"), including individual retirement accounts and Keogh Plans,
(iii) any entity 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 exemption issued by the United
States Department of Labor to each of , , and (Prohibited
Transaction Exemption , , and , respectively) (collectively, 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, 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. 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 amount
of the Class A Certificates [and Class B Certificates] set forth opposite its
name below:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
CLASS A
UNDERWRITERS CERTIFICATES
------------ ------------
<S> <C>
. . . . . . . . . . . . . $
</TABLE>
S-30
<PAGE> 85
<TABLE>
<S> <C>
. . . . . . . . . .
-----------------------
Total . . . . . . . . . . $
-----------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
CLASS B
[UNDERWRITERS CERTIFICATES]
------------ -----------------------
<S> <C>
. . . . . . . . . .$
. . . . . . . . . .
-----------------------
Total . . . . . . . . . .$
-----------------------
</TABLE>
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-31
<PAGE> 86
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Ford
Credit Auto Grantor Trust % 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> 87
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> 88
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> 89
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> 90
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-10
Available Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-25
Available Principal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-25
Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-5
Ford Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Cede . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
Certificate Pool Factor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-21]
[Certificate Prepayment Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-8, S-23]
[Certificate Prepayment Premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-8
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-6
[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-7, S-27
Class B Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
Class B Certificate Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
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-4, S-22
[Class B Principal Carryover Shortfall . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-28]
Class B Principal Distributable Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-27
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-4
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-30
Collection Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-10
Collection Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
Cutoff Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3, S-16
Determination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-25
Distribution Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1, S-5
DTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-12
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
Final Scheduled Distribution Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1
</TABLE>
<PAGE> 91
<TABLE>
<S> <C>
Final Scheduled Maturity Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-5
Financed Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Ford . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-14
Ford Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
[Funding Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-8]
[Initial] Cutoff Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-4
Initial Pool Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-7
[Initial] Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-4
Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
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]
Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-30
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
Rating Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-15
Realized Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-5
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1
Receivables Pool . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-16
Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-5
[Required Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-10]
Subordination Initial Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-9
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
[Subsequent Cutoff Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-4]
[Subsequent Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1, S-4]
[Subsequent Transfer Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-5]
Supplemental Servicing Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-24
Total Available Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-25
Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1, S-3
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-30
Underwriters' Exemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-30
Underwriting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-30
[Yield Supplement Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-10]
[Yield Supplement Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-10]
[Yield Supplement Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-10, S-29]
[Yield Supplement Initial Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-10]
[Yield Supplement Deposit Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-29]
</TABLE>
<PAGE> 92
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 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
ERISA Considerations . . . . . . . . . . . . . . . . . . . . . . S-30
Underwriting . . . . . . . . . . . . . . . . . . . . . . . . . . S-30
Legal Opinions . . . . . . . . . . . . . . . . . . . . . . . . . S-31
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
The Trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
The Receivables Pools . . . . . . . . . . . . . . . . . . . . . . . 17
Maturity and Prepayment Considerations . . . . . . . . . . . . . . 19
Pool Factors and Trading Information . . . . . . . . . . . . . . . 20
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . 21
The Seller and the General Partner . . . . . . . . . . . . . . . . 21
The Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Description of the Notes . . . . . . . . . . . . . . . . . . . . . 23
Description of the Certificates . . . . . . . . . . . . . . . . . . 27
Certain Information Regarding the Securities . . . . . . . . . . . 29
Description of the Transfer and Servicing Agreements . . . . . . . 39
Certain Legal Aspects of the Receivables . . . . . . . . . . . . . 51
Certain Federal Income Tax Consequences . . . . . . . . . . . . . . 54
Certain State Tax Consequences with respect to Trusts for
Which a Partnership Election Is Made . . . . . . . . . . . . . 65
ERISA Considerations . . . . . . . . . . . . . . . . . . . . . . . 66
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . 70
Legal Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . 71
</TABLE>
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 199 -
Auto Grantor Trust
$
% 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> 93
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 and 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, 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.
Except as otherwise provided 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
<PAGE> 94
distributions in respect of principal with disproportionate, nominal or no
interest 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 12 HEREIN.
______________________
EXCEPT AS OTHERWISE SPECIFIED IN THE RELATED PROSPECTUS SUPPLEMENT,
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> 95
AVAILABLE INFORMATION
Ford Credit Auto Receivables Two L.P., 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. 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 documents). 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> 96
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 "In-
denture"). The related Prospectus
Supplement will specify which class or
classes, if any, of Notes of the related
series are being offered thereby.
Unless otherwise specified in the related
Prospectus Supplement, Notes will be
available for purchase in denominations of
$1,000 and integral multiples thereof and
will be available in book-entry form only.
Noteholders will be able to receive
Definitive Notes only in the limited
circumstances described herein or in the
related Prospectus Supplement. See "Certain
Information Regarding the
Securities--Definitive Securities."
Unless otherwise specified in the related
Prospectus Supplement, each class of Notes
will have a stated principal amount and
will 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 Note
Interest Rate for each class of Notes, or
the method for determining such Note
Interest Rate.
4
<PAGE> 97
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.
Unless otherwise specified in the related
Prospectus Supplement, Certificates will be
available for purchase in a minimum
denomination of $1,000 and integral
multiples thereof and will be available in
book-entry form only. Certificateholders
will be able to receive Definitive
Certificates only in the limited
circumstances described herein or in the
related Prospectus Supplement. See "Certain
Information Regarding the
Securities--Definitive Securities."
Unless otherwise specified in the related
Prospectus Supplement, each class of
Certificates will have a stated Certificate
Balance specified in the related Prospectus
Supplement (the "Certificate Balance") and
will 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
5
<PAGE> 98
Supplement will specify the Certificate
Rate for each class of Certificates or the
method for determining the Certificate
Rate.
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
6
<PAGE> 99
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, any Yield
Supplement Account, 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. Unless otherwise specified 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 will be 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, over-collateralization,
letters of credit, credit or liquidity
facilities, surety bonds, guaranteed
investment contracts, swaps or other
interest rate protection agreements,
repurchase obligations, yield supplement
agreements, other agreements with respect
to third party payments or other support,
cash deposits or other arrangements. 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 . . . . . . . Unless otherwise specified in the related
Prospectus Supplement, a Reserve Account
will be created for each 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
7
<PAGE> 100
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 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
Account 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, and the length of a Funding
Period, shall be limited as described in
the related Prospectus Supplement.
YIELD SUPPLEMENT ACCOUNT;
YIELD SUPPLEMENT AGREEMENT . If so specified in the related Prospectus
Supplement, Ford Credit will establish a
yield supplement account with the related
Indenture Trustee or applicable Trustee for
the benefit of the holders of the related
Securities (as such term is defined in the
related Prospectus Supplement, the "Yield
Supplement Account"). Each Yield
Supplement Account will be designed solely
to hold funds to be applied by the
Indenture Trustee or applicable Trustee, as
the case may be, to provide payments to the
Securityholders in respect of Receivables
the annual percentage rate ("APR") of which
is less than the Required Rate (as such
term is defined in the related Prospectus
Supplement, the "Required Rate").
Unless otherwise specified in the related
Prospectus Supplement, each Yield
Supplement Account will be created with an
initial deposit by Ford Credit (the "Yield
Supplement Initial Deposit") in an amount
equal to the net present value (discounted
at a per annum rate specified in the
related Sale and Servicing Agreement or
Pooling and Servicing Agreement) of the
aggregate amount by which 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 each Receivable,
assuming that payments on such Receivables
are made as scheduled and no prepayments
are made, at the Required Rate exceeds
interest on such principal balances at the
APR of each such Receivable (the "Yield
Supplement Amount" and, with respect to the
Initial Receivables, the "Maximum Initial
Yield Supplement Amount").
If a Yield Supplement Account and a
Pre-Funding Account are established with
respect to any Trust, Ford Credit, the
Seller and the related Indenture Trustee or
applicable Trustee, as the case may be,
will enter into a Yield Supplement
Agreement (as amended and supplemented from
time to time, a "Yield
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Supplement Agreement") pursuant to which,
on each Subsequent Transfer Date, Ford
Credit will deposit into the Yield
Supplement Account an amount (the
"Additional Yield Supplement Amount") equal
to the net present value (discounted at a
per annum rate specified in the related
Sale and Servicing Agreement or Pooling and
Servicing Agreement) of the aggregate Yield
Supplement Amounts, if any, in respect of
Subsequent Receivables for the periods
commencing with the related Subsequent
Cutoff Date and ending with the scheduled
maturities of the related Subsequent
Receivables, 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--Credit and Cash Flow
Enhancement--Yield Supplement Account;
Yield Supplement Agreement."
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.
Unless otherwise specified 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, 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.
Unless otherwise provided 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.
Unless otherwise provided in the related
Prospectus Supplement, 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
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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 APR or amount of a
scheduled payment of such Receivable or
fails to maintain a perfected security
interest in the related Financed Vehicle.
Unless otherwise specified 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 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. Unless otherwise specified
in the related Prospectus Supplement, 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
with respect to the Initial Receivables or
after the applicable Subsequent Transfer
Date with respect to the Subsequent
Receivables.
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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.
Unless otherwise specified in the related
Prospectus Supplement, 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 and, except as otherwise
provided in such Prospectus Supplement,
upon the issuance of the related series of
Securities (a) Special Tax Counsel to such
Trust will 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 will 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 and except as otherwise
provided in such Prospectus Supplement,
upon the issuance of the related series of
Certificates (a) Special Tax Counsel to
such Trust will 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 will 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"
and "Certain State Tax Consequences with
respect to Trusts for which a Partnership
Election is Made" for additional
information concerning the application of
federal and Michigan tax laws,
respectively.
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 of any series
or Certificates issued by any trust 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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<PAGE> 104
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. Unless otherwise specified in the
related Prospectus Supplement, 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
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Insolvency Law without the unanimous affirmative vote of all of the General
Partner's 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. 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. See "The Seller."
DEFICIENCIES FROM SALE UPON INSOLVENCY OR DISSOLUTION OF SELLER OR GENERAL
PARTNER
Unless otherwise specified in the related Prospectus Supplement, 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, the Indenture Trustee or Trustee
for such Trust is required to promptly sell, dispose of or otherwise liquidate
the related Receivables in a commercially reasonable manner on commercially
reasonable terms, unless (i) holders of each class of Notes of such series
representing a majority of the aggregate unpaid principal amount of each such
class, (ii) holders of each class of the Certificates (other than the Seller)
of such series representing a majority of the aggregate unpaid principal amount
of each such class, (iii) holders, if any, of interests in the Reserve Account
(other than the Seller) with respect to such Trust having interests with a
value in excess of 50% of all interests in the Reserve Account held by such
persons and (iv) holders, if any, of Final Payment Securities of such series
representing a majority of the aggregate unpaid principal amount of all such
Final Payment Securities, 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 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."
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.
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<PAGE> 106
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" herein. 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, unless otherwise specified in the related Prospectus
Supplement, 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.
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
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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." Unless otherwise
specified in the related Prospectus Supplement, 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 Servicer
Default 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.
SERVICER DEFAULT
Unless otherwise provided in the related Prospectus Supplement with
respect to a series of Securities that includes Notes, in the event a Servicer
Default occurs, the Indenture Trustee or the Noteholders with respect to such
series, as described under "Description of the Transfer and Servicing
Agreements--Rights upon Servicer Default," 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 a Servicer Default occurs. In
addition, the Noteholders of such series have the ability, with certain
specified exceptions, to waive defaults by the Servicer, including defaults
that could materially adversely affect the Certificateholders of such series.
See "Description of the Transfer and Servicing Agreements--Waiver of Past
Defaults."
BOOK-ENTRY REGISTRATION
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Unless otherwise 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 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 and 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 and 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) such amounts as from
time to time may be held in separate trust accounts established and maintained
pursuant to the related Sale and Servicing Agreement or Pooling and Servicing
Agreement and the proceeds of such accounts, as described herein and in the
related Prospectus Supplement; (ii) security interests in the Financed Vehicles
and any accessions thereto; (iii) any Dealer Recourse; (iv) the rights to
proceeds from claims on certain physical damage, credit life and disability
insurance policies covering the Financed Vehicles or the Obligors, as the case
may be; (v) any property that shall have secured a Receivable and that shall
have been acquired by the applicable Trust; (vi) the rights of the Seller under
the related Purchase Agreement and Yield the Supplement Agreement, if any;
(vii) certain rebates of premiums and other amounts relating to certain
insurance policies and other items financed under the Receivables; and (viii)
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. Unless otherwise specified in the related Prospectus
Supplement, any Yield Supplement Account will be part of the property of each
Trust that is not a grantor trust but will not be part of the property of each
Trust
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that is a grantor 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.
THE RECEIVABLES POOLS
GENERAL
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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.
Generally, Ford Credit does not finance more than 100% of the manufacturers
suggested retail value of a new vehicle or more than 100% of published prices
for used vehicles. However, under limited circumstances which Ford Credit
determines to be appropriate, it will advance more than 100% of these values.
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, unless otherwise provided in the related Prospectus Supplement,
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 Securityholders of any series were or will be used in selecting the related
Receivables.
"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.
"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
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in accordance with certain conditions. With respect to Final Payment
Receivables, unless otherwise 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.
Unless otherwise provided in the related Prospectus Supplement, 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.
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
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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.
Unless otherwise specified in the related Prospectus Supplement, 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 balance
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 balance 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
balance of the applicable class of Notes, or the reduction of the Certificate
Balance of the applicable class of Certificates, as the case may be, 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.
A Noteholder's portion of the aggregate outstanding principal balance 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 related class of Certificates is the product of (i) the original
denomination of such Certificateholder's Certificate and (ii) the applicable
Certificate Pool Factor.
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Unless otherwise provided in the related Prospectus Supplement 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
Unless otherwise provided in the related Prospectus Supplement, 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
and (ii) to make the initial deposit into the Reserve Account, if any. Unless
otherwise specified in the related Prospectus Supplement, 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 ,
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
consoli- dated 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 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
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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 Certificates (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.
THE SERVICER
Ford Credit was incorporated in Delaware in 1959 and is a wholly owned
subsidiary of Ford.
Ford Credit provides wholesale financing and capital loans to
franchised Ford vehicle dealers and other dealers associated with such dealers
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 U.S. 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 Corporation, a wholly owned subsidiary of Ford Hold- ings, Inc.
("Ford Holdings"). Ford Credit also manages the insurance businesses of The
American Road Insurance Company, a wholly owned subsidiary of Ford Holdings.
Ford Credit also is a significant equity participant in Ford Holdings whose
primary activities are consumer and commercial financing operations, insurance
underwriting and equipment leasing.
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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.
Unless otherwise specified in the related Prospectus Supplement, each
class of Notes will initially be represented by one or more Notes, in each case
registered in the name of the nominee of DTC (together with any successor
depository selected by the Trust, the "Depository") except as set forth below.
Unless otherwise specified in the related Prospectus Supplement, the Notes will
be available for purchase in denominations of $1,000 and integral multiples
thereof 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. Unless otherwise provided in
the related Prospectus Supplement, payments of interest on the Notes of such
series will be made prior to payments of principal thereon. The dates for
payments of interest and principal on the Notes of such series will be the same
as the Distribution Dates for the Certificates of such series, unless otherwise
specified in the related Prospectus Supplement. 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 Securities" and "--Floating Rate Securities." One
or more classes of Notes of a series may be redeemable in whole or 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."
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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.
Unless otherwise 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,
with the consent of the holders of a majority of the outstanding Notes of the
related series, execute a supplemental indenture to add provisions to, change
in any manner or eliminate any provisions of, the related Indenture, or modify
(except as provided below) in any manner the rights of the related Noteholders.
Unless otherwise specified in the related Prospectus Supplement 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 specified
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 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 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.
Unless otherwise provided in the applicable Prospectus Supplement, the
Trust and the applicable Indenture Trustee may also enter into supplemental
indentures, without obtaining the consent of the Noteholders of the related
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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 such action will not materially and adversely affect the interest
of any such Noteholder.
Events of Default; Rights upon Event of Default. With respect to the
Notes of a given series, unless otherwise specified in the related Prospectus
Supplement, "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 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; (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 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; or (v) certain events of bankruptcy, insolvency,
receivership or liquidation of the applicable Trust. 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, unless otherwise specified in the
related Prospectus Supplement, 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. Unless otherwise specified in
the related Prospectus Supplement, 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. Unless otherwise specified in the related
Prospectus Supplement, 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 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. Any sale of the related Receivables, other
than a sale resulting from the occurrence of an Insolvency Event or a
dissolution with respect to the Seller or the General Partner, is subject to a
requirement that an opinion of counsel be delivered to the effect that such
sale will not cause the applicable Trust to be classified as an association (or
publicly traded partnership) taxable as a corporation for federal income tax
purposes.
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
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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.
Unless otherwise specified in the related Prospectus Supplement, no
holder of a Note of any series will have the right to institute any proceeding
with respect to the related Indenture, unless (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 such term is defined in the related
Prospectus Supplement, the "Rating Agencies") as a result of such merger or
consolidation and (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.
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 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,
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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.
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. Unless otherwise specified in the related
Prospectus Supplement 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 balance 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.
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
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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.
Unless otherwise specified in the related Prospectus Supplement and
except for the Certificates, if any, of a given series retained by the Seller,
each class of Certificates will initially be represented by one or more
Certificates registered in the name of the Depository, except as set forth
below. Unless otherwise specified in the related Prospectus Supplement and
except for the Certificates, if any, of a given series retained by the Seller,
the Certificates will be available for purchase in minimum denominations of
$1,000 and integral multiples thereof 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 that are
not retained by the Seller. 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. 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." Unless otherwise provided in the related Prospectus Supplement,
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.
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
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Unless otherwise specified in the related Prospectus Supplement 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. Unless otherwise set
forth 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. 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 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.
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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. Unless otherwise specified in the
applicable Prospectus Supplement, all percentages resulting from any
calculation of the rate of interest on a Floating Rate Security will be
rounded, if necessary, to the nearest 1/100,000 of 1% (.0000001), with five
one-millionths of a percentage point rounded upward.
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.
Unless otherwise specified 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.
Unless otherwise specified 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 defined below) on such Commercial Paper Rate Determination
Date of the rate for commercial paper have 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)
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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 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.
Unless otherwise specified 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 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.
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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.
Unless otherwise specified 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.
Unless otherwise specified 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 ("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.
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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.
INDEXED SECURITIES
To the extent so specified in any Prospectus Supplement, any class of
Securities of a given series may consist of Securities ("Indexed Securities")
in which the principal amount payable at the final scheduled Distribution Date
for such class (the "Indexed Principal Amount") is determined by reference to a
measure (the "Index") which will be related to (i) the difference in the rate
of exchange between United States dollars and a currency or composite currency
(the "Indexed Currency") specified in the applicable Prospectus Supplement
(such Indexed Securities, "Currency Indexed Securities"); (ii) the difference
in the price of a specified commodity (the "Indexed Commodity") on specified
dates (such Indexed Securities, "Commodity Indexed Securities"); or (iii) the
difference in the level of a specified stock index (the "Stock Index"), which
may be based on U.S. or foreign stocks, on specified dates (such Indexed
Securities, "Stock Indexed Securities"); or (iv) such other objective price or
economic measures as are described in the applicable Prospectus Supplement.
The manner of determining the Indexed Principal Amount of an Indexed Security
and historical and other information concerning the Indexed Currency, the
Indexed Commodity, the Stock Index or other price or economic measures used in
such determination will be set forth in the applicable Prospectus Supplement,
together with information concerning federal income tax consequences to the
holders of such Indexed Securities.
If the determination of the Indexed Principal Amount of an Indexed
Security is based on an Index calculated or announced by a third party and such
third party either suspends the calculation or announcement of such Index or
changes the basis upon which such Index is calculated (other than changes
consistent with policies in effect at
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the time such Indexed Security was issued and permitted changes described in
the applicable Prospectus Supplement), then such Index shall be calculated for
purposes of such Indexed Security by an independent calculation agent named in
the applicable Prospectus Supplement on the same basis, and subject to the same
conditions and controls, as applied to the original third party. If for any
reason such Index cannot be calculated on the same basis and subject to the
same conditions and controls as applied to the original third party, then the
Indexed Principal Amount of such Indexed Security shall be calculated in the
manner set forth in the applicable Prospectus Supplement. Any determination of
such independent calculation agent shall in the absence of manifest error be
binding on all parties.
Unless otherwise specified in the applicable Prospectus Supplement,
interest on an Indexed Security will be payable based on the amount designated
in the applicable Prospectus Supplement as the "Face Amount" of such Indexed
Security. The applicable Prospectus Supplement will describe whether the
principal amount of the related Indexed Security, if any, that would be payable
upon redemption or repayment prior to the applicable final scheduled
Distribution Date will be the Face Amount of such Indexed Security, the Indexed
Principal Amount of such Indexed Security at the time of redemption or
repayment or another amount described in such Prospectus Supplement.
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) or 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 Section 17A 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
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
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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, 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,
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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 now 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.
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."
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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
Unless otherwise specified in the related Prospectus Supplement, the
Notes, if any, and the Certificates of a given series will be issued in fully
registered, certificated form ("Definitive Notes" and "Definitive
Certificates," respectively, and collectively referred to 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 or
Trustee, as applicable, determines that DTC is no longer willing or able to
discharge properly its responsibilities as depository with respect to such
Securities and such Administrator or Trustee is unable to locate a qualified
successor (and if it is an Administrator that has made such determination, such
Administrator so notifies the Applicable Trustee in writing), (ii) the
Administrator or Trustee, as applicable, at its option, elects to terminate the
book-entry system through DTC or (iii) after the occurrence of an Event of
Default or a Servicer Default 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. 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 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
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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) 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 balance 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 Note Interest Rate or Certificate Rate for the next
period for any class of Notes or Certificates of such series with
variable or adjustable rates;
(viii) the amount of the Administrative Fee paid to the
Administrator in respect of the related Collection Period;
(ix) the amount of the aggregate Realized Losses, if any, for
such Collection Period;
(x) 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;
(xi) the aggregate Purchase Amounts for Receivables, if any,
that were repurchased in such Collection Period;
(xii) the balance of the Reserve Account (if any) on such
date, after giving effect to changes therein on such date;
(xiii) the balance of the Yield Supplement Account (if any)
on such date, after giving effect to changes therein on such date;
(xiv) the amount of Advances on such date;
(xv) for each such date during the Funding Period (if any),
the remaining Pre-Funded Amount; and
(xvi) 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
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Subsequent Receivables and is being passed through as payments of
principal on the Securities of such series.
Each amount set forth pursuant to subclauses (i), (ii), (iii), (vi)
and (x) with respect to the Notes or the Certificates of any series will be
expressed as a dollar amount per $1,000 of the initial principal balance of
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
(exclusive of any amount allocable to the premium for physical, damage
insurance forceplaced by Ford Credit, unless otherwise specified in the related
Prospectus Supplement), 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 relating 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. Unless otherwise provided in the related Prospectus Supplement,
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 and, to the extent specified in the related
Prospectus Supplement, to the deposit of the Pre-Funded Amount into the
Pre-Funding Account. 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").
Unless otherwise specified 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 will be the aggregate principal balance thereof.
If so specified in the related Prospectus Supplement, all or a portion of the
Receivables may be purchased by the Trust from the Seller and by the Seller
from Ford Credit for a purchase price which is less than the aggregate
principal balance thereof. If any Receivables are purchased for a purchase
price less than their respective principal
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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.
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.
Unless otherwise provided in the related Prospectus Supplement, 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
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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 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 prepayments 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 Servicer Default 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
Eligible Investments. "Eligible Investments" are generally limited to
investments acceptable to the Rating Agencies rating such Securities as being
consistent with the rating of such Securities and may include motor vehicle
retail sale contracts. Except as described below or in the related Prospectus
Supplement, Eligible Investments are 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. Except as
otherwise specified in the related Prospectus Supplement, 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 on each Distribution Date and shall be treated as
collections of interest on the related Receivables.
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 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
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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 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 holding 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 Servicer
Default 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.
For purposes of each Sale and Servicing Agreement or Pooling and
Servicing Agreement, collections on a Precomputed 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 Precomputed
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
Unless otherwise 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
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
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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.
Unless otherwise 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, the Servicer shall advance the amount
of such interest, unless otherwise provided in the related Prospectus
Supplement. The Servicer will not be entitled to recoup any such advance.
SERVICING COMPENSATION AND EXPENSES
Unless otherwise specified in the Prospectus Supplement with respect
to any Trust, 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.
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DISTRIBUTIONS
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 interest 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 first to
interest based on the weighted average APR and Pool Balance of the Receivables
as of the first day of the related Collection Period, plus an amount related to
the investment earnings on amounts contained in the Pre-Funding Account, if
any, maintained with the Indenture Trustee or the Trustee, as applicable, in
accordance with the Sale and Servicing Agreement, and then any remaining amount
in the Collection Account shall be allocated to principal. 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,
over-collateralization, letters of credit, credit or liquidity facilities,
surety bonds, guaranteed investment contracts, swaps or other interest rate
protection agreements, repurchase obligations, yield supplement agreements,
other agreements with respect to third party payments or other support, cash
deposits or 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. Unless
otherwise specified in the related Prospectus Supplement, the credit
enhancement for a class or series of Securities will not provide protection
against all risks of loss and will not guarantee repayment of the entire
principal balance and interest thereon. If losses occur which exceed the
amount covered by any credit
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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 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.
Unless otherwise provided in the related Prospectus Supplement, 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. Unless otherwise 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 Account 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.
Yield Supplement Account; Yield Supplement Agreement. 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 an account, as specified in the related Prospectus
Supplement (the "Yield Supplement Account"), which will be maintained with the
same entity at which the related Collection Account is maintained and, unless
otherwise specified in the related Prospectus Supplement, will be created with
an initial deposit by Ford Credit of the Yield Supplement Initial Deposit.
Each Yield Supplement Account will be designed solely to hold funds to be
applied by the Indenture Trustee or applicable Trustee to provide payments to
Securityholders in respect of Receivables the APR of which is less than the
Required Rate.
On each Distribution Date, the related Indenture Trustee or applicable
Trustee, as the case may be, will transfer to the related Collection Account
from monies on deposit in the Yield Supplement Account an amount equal to the
Yield Supplement Deposit Amount (as such term is defined in the related
Prospectus Supplement, the "Yield Supplement Deposit Amount") in respect of the
Receivables for such Distribution Date. Unless otherwise specified in the
related Prospectus Supplement, 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 released to the Seller. Monies on deposit in the Yield Supplement
Account may be invested in Eligible Investments under the circumstances and in
the manner described in the related Sale and Servicing Agreement or Pooling and
Servicing Agreement, as applicable. Except as otherwise specified in the
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related Prospectus Supplement, Investment Earnings on investment of funds in a
Yield Supplement Account will be deposited into such Yield Supplement Account.
Unless otherwise specified in the related Prospectus Supplement, any monies
remaining on deposit in a Yield Supplement Account upon the termination of the
related Trust pursuant to its terms shall be released to the Seller.
If a Yield Supplement Account is established with respect to any Trust
as to which a Pre-Funding Account has been established, Ford Credit, the Seller
and the related Indenture Trustee or applicable Trustee, will enter into a
Yield Supplement Agreement pursuant to which, on each Subsequent Transfer Date,
Ford Credit will deposit into the Yield Supplement Account the Additional Yield
Supplement Amount in respect of the related Subsequent Receivables. Each Yield
Supplement Agreement will affect only Receivables having APRs less than the
related Required Rate.
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 Certificate 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."
EVIDENCE AS TO COMPLIANCE
Each Sale and Servicing Agreement and Pooling and Servicing Agreement
will provide that a firm of independent public accountants will furnish to the
related Trust and Indenture Trustee or Trustee, as applicable, annually a
statement as to compliance 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 Servicer Defaults 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.
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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 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.
SERVICER DEFAULT
Except as otherwise provided in the related Prospectus Supplement,
"Servicer Default" under each Sale and Servicing Agreement and Pooling and
Servicing Agreement will consist of (i) any failure by the Servicer 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 after discovery by an officer of the Servicer; (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; and (iii) the occurrence of an Insolvency Event with
respect to the Servicer or the Seller. "Insolvency Event" means, with respect
to any Person, any of the following events or actions: certain
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events of insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings with respect to such Person and certain
actions by such Person indicating its insolvency, reorganization pursuant to
bankruptcy proceedings or inability to pay its obligations.
RIGHTS UPON SERVICER DEFAULT
In the case of any Trust that has issued Notes, unless otherwise
provided in the related Prospectus Supplement, as long as a Servicer Default
under a Sale and Servicing Agreement remains unremedied, the related Indenture
Trustee or holders of Notes of the related series evidencing not less than 25%
of 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, unless otherwise provided in the related Prospectus
Supplement, as long as a Servicer Default 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 25% of the principal amount 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 Servicer Default
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.
WAIVER OF PAST DEFAULTS
With respect to each Trust that has issued Notes, unless otherwise
provided in the related Prospectus Supplement, the holders of Notes evidencing
at least a majority in principal amount of the then outstanding Notes of the
related series (or the holders of the Certificates of such series evidencing
not less than a majority of the outstanding Certificate Balance, in the case of
any Servicer Default which does not adversely affect the related Indenture
Trustee or such Noteholders) may, on behalf of all such Noteholders and
Certificateholders, waive any default by the Servicer in the performance of its
obligations under the related Sale and Servicing Agreement and its
consequences, except a Servicer Default in making any required deposits to 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 principal amount of such
Certificates then outstanding may, on behalf of all such Certificateholders,
waive any default by the Servicer in the performance of its obligations under
the related Sale and Servicing Agreement or Pooling and Servicing Agreement,
except a Servicer Default in making 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
Unless otherwise provided in the related Prospectus Supplement, 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
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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. Unless otherwise specified in the
related Prospectus Supplement, 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 at least
a majority in principal amount of then outstanding Notes, if any, of the
related series and the holders of the Certificates of such series evidencing at
least a majority of the principal amount 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 (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.
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) holders of each class of
Notes, if any, with respect to such Trust representing a majority of the
aggregate unpaid principal amount of each such class, (ii) holders of each
class of the Certificates (other than the Seller) with respect to such Trust
representing a majority of the aggregate unpaid principal amount of each such
class (not including the principal amount of such Certificates held by the
Seller), (iii) holders of interests in the Reserve Account (other than the
Seller) with respect to such Trust having interests with a value in excess of
50% of all interests in the Reserve Account held by such persons and (iv)
holders, if any, of certificates representing a majority of the aggregate
unpaid principal amount 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"), 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 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
and holders of Final Payment Securities; 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) of such Trust and the delivery to
such Trustee by each such Certificateholder
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(including the Seller) 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.
Unless otherwise provided in the related Prospectus Supplement, 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
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related Indenture. Unless otherwise specified in the related Prospectus
Supplement 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 Servicer.
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 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. Unless otherwise specified in the
related Prospectus Supplement, 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.
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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.
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 accor-
dance 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,
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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 consume transactions and require contract
disclosures in addition to those required under federal law. The requirements
impose specific statutory liabilities upon creditors who fail to comply with
their provisions. In some cases, this liability could affect an assignee's
ability to enforce consumer finance contracts 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
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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 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. Unless otherwise provided in the
related Prospectus Supplement, the Servicer will not consent to a sale or
transfer and will 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. 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
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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.
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 an election is made to treat the Trust 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 a
partnership election will be made or the Trust will be treated as a grantor
trust.
TRUSTS FOR WHICH A PARTNERSHIP ELECTION IS MADE
TAX CHARACTERIZATION OF THE TRUST AS A PARTNERSHIP
Special Tax Counsel will deliver its opinion that a Trust for which a
partnership election is made 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 will 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 its income on the
Receivables, possibly reduced by its interest expense on the Notes. Any such
corporate income tax could materially reduce 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. Unless otherwise specified in
the related Prospectus Supplement, the Seller will agree, and the Noteholders
will agree by their purchase of Notes of a series, to treat such Notes as debt
for federal income tax purposes. Special Tax Counsel will, except as otherwise
provided in the related Prospectus Supplement, advise the Trust that the Notes
will be classified as debt for federal income tax purposes. The discussion
below assumes this characterization of the Notes is correct.
OID, Indexed Securities, etc. The discussion below assumes that all
payments on the Notes of each series are denominated in U.S. dollars, and that
the Notes are not Indexed Securities or Strip Notes. Moreover, the discussion
assumes that the interest formula for the Notes meets the requirements for
"qualified stated interest" under Treasury regulations (the "OID regulations")
relating to original issue discount ("OID"), and that any OID on the Notes
(i.e., any excess of the principal amount of the Notes over their issue price)
does not exceed a de
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minimis amount (i.e., 1/4% of their principal amount multiplied by the number
of full years of their weighted average life), all within the meaning of the
OID regulations. If these conditions are not satisfied with respect to any
given series of Notes, additional tax considerations with respect to such Notes
will be disclosed in the applicable Prospectus Supplement.
Interest Income on the Notes. Based on the above assumptions, except
as discussed in the following paragraph, the Notes will not be considered
issued with OID. The stated interest thereon will be taxable to a Noteholder
as ordinary interest income when received or accrued in accordance with such
Noteholder's method of tax accounting. Under the OID regulations, a holder of
a Note issued with a de minimis amount of OID must include such OID in income
as principal payments are made on the Note in proportion to such payments. A
purchaser who buys a Note for more or less than its principal amount will
generally be subject, respectively, to the premium amortization or market
discount rules of the Code.
Short-Term Obligations. 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 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
generally may be used only to offset capital gains.
Foreign Holders. Interest payments made (or accrued) to a Noteholder
who is a nonresident alien, foreign corporation or other non-United States
person (a "foreign person") generally will be considered "portfolio interest,"
and generally will not be subject to United States federal income tax and
withholding tax, if the interest is not effectively connected with the conduct
of a trade or business within the United States by the foreign person and the
foreign person (i) is not actually or constructively a "10 percent shareholder"
of the Trust or the Seller (including a holder of 10% of the outstanding
Certificates) or a "controlled foreign corporation" with respect to which the
Trust or the Seller is a "related person" within the meaning of the Code and
(ii) provides the Indenture Trustee or other person who is otherwise required
to withhold U.S. tax with respect to the Notes with an appropriate statement
(on Form W-8 or a similar form), signed under penalties of perjury, certifying
that the beneficial owner of the Note is a foreign person and providing the
foreign person's name and address. If a Note is held through a securities
clearing organization or certain other financial institutions, the organization
or institution may provide the relevant signed statement to the withholding
agent; in that case, however, the signed statement must be accompanied by a
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Form W-8 or substitute form provided by the foreign person that owns the Note.
If such interest does not qualify for the treatment set forth above, it will be
subject to United States federal income and withholding tax at a rate of 30
percent, unless reduced or eliminated pursuant to an applicable tax treaty.
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.
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, depending upon the characteristics of the applicable Trust, 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. Unless otherwise specified
in the related Prospectus Supplement, the Seller and the Servicer will agree,
and the Certificateholders of each Trust will agree by their purchase of
Certificates, to treat each 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 of the
Trust (including the Seller), and the Notes being debt of the partnership.
However, the proper characterization of the arrangement involving a Trust, the
Certificates evidencing interests in that Trust, 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 are possible. For example,
because the Certificates of beneficial interest in a Trust generally will have
certain features characteristic of debt, the Certificates issued by a
particular Trust might be considered debt of the Seller or such 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.
Indexed Securities, etc. The following discussion assumes that all
payments on the Certificates are denominated in U.S. dollars, none of the
Certificates are Indexed Securities or Strip Certificates, and that a series
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of Securities includes a single class of Certificates. If these conditions are
not satisfied with respect to any given series of Certificates, additional
federal income tax considerations with respect to such Certificates will be
disclosed in the applicable Prospectus Supplement.
Partnership Taxation. Assuming that a 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
that 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. A 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.
Unless otherwise specified in the related Prospectus Supplement, under each
Trust Agreement, the Certificateholders of such Trust 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. Unless otherwise specified in the related Prospectus
Supplement, each 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 applicable 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
amount 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.
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 of a Trust. Moreover,
under the foregoing method of allocation, Certificateholders may be allocated
income greater than the amount of interest accruing on a series of Certificates
based on the applicable Certificate Rate even though the related Trust might
not have sufficient cash to make current cash distributions of such amount or
Certificateholders may have no right to cash equal to 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 a Trust but Certificateholders
of that 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.
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 a Trust Agreement of yield on the Certificates as a
guaranteed payment could adversely affect taxpayers, such as RICs and REITs,
that expect to earn "interest" income.
Except as set forth below, losses and deductions generally will not be
allocated to the Certificateholders of a Trust except to the extent the
Certificateholders of that Trust are reasonably expected to bear the economic
burden of such losses or deductions. Any such losses could be characterized as
capital losses, and the Certificateholder generally would only be able to
deduct such losses against capital gain income. Accordingly, a
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Certificateholder's taxable income from a Trust could exceed the cash it
receives from the Trust. Although this method of allocation 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.
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."
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 a Trust (including fees paid to the Servicer) and might
result in such holder having net 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 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. Unless otherwise specified in the related
Prospectus Supplement, 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 a Trust acquires the Receivables at a market discount or premium,
such 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, a 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. Unless
otherwise specified in the related Prospectus Supplement, no Trust will comply
with certain technical requirements that might apply when such a constructive
termination occurs. As a result, any Trust may be subject to certain tax
penalties and may incur additional expenses if it is required to comply with
those requirements. Furthermore, a 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 a 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 applicable Trust or termination of the Certificateholder's interest in the
applicable Trust if the Trust only distributes money to the Certificateholder
and the amount distributed is less than the Certificateholder's adjusted basis
in the
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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 of a series 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 applicable 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 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 amount 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 a Trust's assets will not be adjusted to reflect that
higher (or lower) basis unless such 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, unless otherwise
specified in the related Prospectus Supplement, no Trust will 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
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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 Seller will be designated as the "tax matters partner" in the
related Trust Agreement and, as such, will be responsible for representing the
Certificateholders in any dispute with the IRS. The Code provides for
administrative examination of a partnership as if the partnership were a
separate and distinct taxpayer. Generally, the statute of limitations for
partnership items does not expire before three years after the date on which
the partnership information return is filed. Any adverse determination
following an audit of the return of the Trust by the appropriate taxing
authorities could result in an adjustment of the returns of the
Certificateholders, and, under certain circumstances, a Certificateholder may
be precluded from separately litigating a proposed adjustment to the items of
the Trust. An adjustment could also result in an audit of a
Certificateholder's returns and adjustments of items not related to the income
and losses of the Trust.
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 procedure 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 have satisfied the Seller and the Trustee
of the applicable 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.
TRUSTS TREATED AS GRANTOR TRUSTS
TAX CHARACTERIZATION OF THE TRUST AS A GRANTOR TRUST
If a partnership election is not made, Special Tax Counsel will
deliver its opinion that the Trust will not be classified as an association
taxable as a corporation and that such Trust will be classified as a grantor
trust under subpart E, Part I of subchapter J of the Code. In this case,
owners of Certificates (referred to herein as "Grantor Trust
Certificateholders"), subject to the discussion of stripped coupons below under
"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 a Trust that is treated as a grantor trust are referred to herein as
"Grantor Trust Certificates."
TAX CONSEQUENCES TO HOLDERS OF OFFERED CERTIFICATES
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Income on the Receivables. If the Receivables are not characterized
as "stripped bonds" or otherwise recharacterized, each Grantor Trust
Certificateholder will be required to report on its federal income tax return
its pro rata share of the entire income of the Trust indicated in the related
Prospectus Supplement for the period during which it owns a Grantor Trust
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 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 a
Grantor Trust Certificateholder that is allocable to principal on the
Receivables will represent a recovery of capital, which will reduce the tax
basis of such Grantor Trust Certificateholder's undivided interest in the
Receivables. In computing its federal income tax liability, a Grantor Trust
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 a Grantor Trust 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 Grantor Trust Certificateholders who are individuals, otherwise allowable
itemized deductions will be reduced, but not more than 80%, by an amount equal
to 3% of the Grantor Trust Certificateholder's adjusted gross income in excess
of 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 holders of
Grantor Trust Certificates offered by the related Prospectus Supplement the
amount of income or deductions attributable to the Supplemental Servicing Fee,
such a Grantor Trust 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
Grantor Trust Certificateholders. See "Characterization of Fees" below.
To the extent that the purchase price of a Grantor Trust Certificate
allocated to a Grantor Trust 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 Grantor Trust Certificate, such interest in the
Receivable will have been acquired at a premium or discount, as the case may
be. In determining whether a Grantor Trust Certificateholder has purchased its
interest in the Receivables (or any Receivable) at a discount, a portion of the
purchase price for a Grantor Trust Certificate may be allocated to accrued
interest on each Receivable and to amounts held in the Collection Account
pending distribution to Certificateholders at the time of purchase as though
such accrued interest and collections on the Receivables were separate assets
purchased by the Grantor Trust Certificateholder, thus reducing the portion of
the purchase price allocable to a Grantor Trust 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
Grantor Trust Certificateholders on the assumption that the holders of the
Grantor Trust Certificates offered pursuant to the related Prospectus ("Offered
Grantor Trust Certificates") own an interest (equal to the percentage indicated
in the related Prospectus Supplement) 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 Service 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 the certain Receivables
(each such payment,
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a "stripped coupon"). As a result, such Receivables would be treated as
"stripped bonds" within the meaning of the Code.
To the extent that the Receivables are characterized as "stripped
bonds," the income and deductions of the Trust allocable to holders of Offered
Grantor Trust Certificates will not include the portion of the interest on the
Receivables treated as having been retained by the Seller (or other holder of
non-Offered Grantor Trust Certificates) and the Trust's deductions will be
limited to reasonable servicing and other fees. In addition, a holder of
Offered Grantor Trust Certificates 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 amount of the Receivable.
If the OID on a Receivable, which may differ for each Receivable,
based on the Purchase Price paid by a holder of an Offered Grantor Trust
Certificate, 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 a
holder of an Offered Grantor Trust Certificate 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
holder of non-Offered Grantor Trust Certificates) 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 holders of
Offered Grantor Trust Certificates 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 78s 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.
Holders of Offered Grantor Trust Certificates 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 78s Receivables provide that, upon a prepayment in full,
the amount payable by the Obligor will be determined under the Rule of 78s.
Prospective investors should consult their tax advisors as to whether they may
be required or permitted to use the Rule of 78s method to account for interest
on the Rule of 78s Receivables. A holder of Offered Grantor Trust Certificates
will be furnished information for federal income tax purposes enabling him to
report interest on the Receivables under the Rule of 78s method of accounting
only upon written request to the Trustee, and payment of the actual costs of
producing the same.
If a Rule of 78s 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 a holder of Offered Grantor Trust
Certificates who had reported income with respect to such Rule of 78s
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.
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Market Discount. If the Receivables are not treated as "stripped
bonds," the interest of a holder of Offered Grantor Trust Certificates 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 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 Grantor Trust 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
Grantor Trust Certificate must be deferred. The ordinary income treatment on
dispositions and deferral of interest deductions described in the preceding
sentence will not apply if a holder of an Offered Grantor Trust Certificate
elects to include market discount in income currently as it accrues for each
taxable year during which it holds the Offered Grantor Trust 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
Grantor Trust 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 holders of Offered Grantor Trust Certificates are urged to consult
their tax advisors as to whether market discount will result from the
acquisition of Offered Grantor Trust 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 a holder of an Offered
Grantor Trust Certificate as an offset to interest income (with a corresponding
reduction in such holder's basis) under a constant yield method over the 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 Grantor Trust 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 a Class A Certificate or a Receivable. If an Offered Grantor
Trust 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 holder of the Offered Grantor Trust Certificate in the Receivables and any
other assets held by the Trust. A holder of an Offered Grantor Trust
Certificate's adjusted basis will equal such holder's cost for the Offered
Grantor Trust 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 payments previously received on the Receivables.
Any gain or loss will be capital gain or loss if the Offered Grantor Trust
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
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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 Class A Certificate Owners. Interest attributable to
Receivables which is received by a foreign holder of an Offered Grantor Trust
Certificate 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 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 Grantor Trust
Certificates and proceeds from the sale of the Offered Grantor Trust
Certificates will not be subject to a "backup" withholding tax of 31% unless,
in general, a holder of an Offered Grantor Trust Certificate fails to comply
with certain reporting procedures and is not an exempt recipient under
applicable provisions of the Code.
CERTAIN STATE TAX CONSEQUENCES WITH RESPECT TO
TRUSTS FOR WHICH A PARTNERSHIP ELECTION IS MADE
The activities to be undertaken by the Servicer in servicing and
collecting the Receivables will take place in Michigan. 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 relates only to
Trusts for which a partnership election is made, and 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.
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 for which a
partnership election is made and the Notes, Certificates and related terms,
parties and documents applicable to such Trust.
TAX CONSEQUENCES WITH RESPECT TO THE NOTES
It is expected that the General Counsel of the Seller ("Michigan Tax
Counsel") will advise each such Trust that issues Notes 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.
TAX CONSEQUENCES WITH RESPECT TO THE CERTIFICATES ISSUED BY A TRUST TREATED AS
A PARTNERSHIP
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If the arrangement created by the Trust Agreement is treated as a
partnership (not taxable as a corporation) for federal income tax purposes,
Michigan Tax Counsel will deliver his opinion that the same treatment should
also apply for Michigan tax purposes. In such case, the resulting constructive
partnership should not be treated as doing business in Michigan but rather
should be viewed as a passive holder of investments and, as a result, should
not be subject to the Michigan Single Business Tax (which, if applicable, could
possibly 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.
Under current law, Certificateholders that are nonresidents of
Michigan and are not otherwise subject to Michigan income tax should not be
subject to Michigan income tax on the income from the constructive partnership.
In any event, classification of the arrangement as a "partnership" would not
cause a Certificateholder not otherwise subject to taxation in Michigan to pay
Michigan 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 should not be subject to the
Michigan Single Business Tax (which, if applicable, could 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
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
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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. Under a regulation (the "Plan Assets
Regulation") issued by the United States Department of Labor ("DOL"), the
assets of the Trust would be treated as plan assets of a Plan for purposes of
ERISA and the Code only if the Plan acquires an "Equity Interest" in the Trust
and none of the exceptions contained in the Plan Assets Regulation (discussed
below) 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.
SENIOR CERTIFICATES ISSUED BY TRUSTS THAT DO NOT ISSUE NOTES
Unless otherwise specified in the related Prospectus Supplement, 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 "Underwriter's Exemption"). The Underwriter's
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 Underwriter's Exemption. The
receivables covered by the Underwriter's Exemption include motor vehicle
installment obligations such as the Receivables. The Underwriter's 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
Underwriter's Exemption will apply to the acquisition and holding of the Senior
Certificates by a Plan and that all conditions of the Underwriter's Exemption
other than those within the control of the investors have been or will be met.
The Underwriter's 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;
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(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
(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 Underwriter's Exemption are
satisfied, the Underwriter's 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 Underwriter's Exemption
are also satisfied, the Underwriter's 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 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
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of such person. The Seller expects such specific conditions to be satisfied
with respect to the issuance of the Senior Certificates.
The Underwriter's 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
Agreement is a pooling and servicing agreement as defined in the Underwriter's
Exemption. All transactions relating to the servicing, management and
operations of the Trust will be carried out in accordance with the 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 Underwriter's Exemption and other relevant issues.
SUBORDINATED CERTIFICATES ISSUED BY TRUSTS THAT DO NOT ISSUE NOTES
Unless otherwise specified in the related Prospectus Supplement, 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 Underwriter's 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; 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 NOTES
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, PTCE 95-60, PTCE 91-38 and PTCE 84-14, as
described above.
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THE CERTIFICATES
Because the Certificates issued by a Trust that issues Notes will 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 Department of Labor
Regulation 29 C.F.R. Section 2510.3-101), or (v) a person investing "plan
assets" of any such plan (excluding, for purposes of this clause (v), 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
such 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 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.
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Each Trust may, from time to time, invest the funds in its Trust
Accounts in Eligible 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 the 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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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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Additional Yield Supplement Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Administration Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Administration Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Administrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Advance(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9, 43
Applicable Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
APR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Base Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Basic Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Book-Entry Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Book-Entry Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Book-Entry Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Calculation Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Calculation Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30, 31, 32, 33
Ford Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
CD Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
CD Rate Determination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
CD Rate Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Cede . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Cedel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Cedel Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Certificate Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Certificate Distribution Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Certificate Pool Factor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Certificate Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16, 35
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11, 55
Collection Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Collection Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Commercial Paper Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30, 31
Commercial Paper Rate Determination Date . . . . . . . . . . . . . . . . . . . . . . . . . 30
Commercial Paper Rate Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Commodity Indexed Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Composite Quotations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Currency Indexed Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Cutoff Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Dealer Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Dealer Recourse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Dealers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 16
Definitive Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Definitive Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Definitive Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
</TABLE>
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<TABLE>
<S> <C>
Depositaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Depository . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Determination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Disqualified Persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Distribution Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
DOL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
DTC's Nominee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16, 34
Eligible Deposit Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Eligible Institution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Eligible Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Equity Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Euroclear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Euroclear Operator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Euroclear Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Euroclear System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Excluded Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Face Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Federal Funds Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Federal Funds Rate Determination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Federal Funds Rate Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Final Payment Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Final Payment Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Final Scheduled Maturity Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Financed Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Fixed Rate Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Floating Rate Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
foreign person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Ford . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Ford Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Ford Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
FTC Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Funding Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Grantor Trust Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Grantor Trust Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
H.15(519) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Indenture Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Index Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Indexed Commodity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Indexed Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Indexed Principal Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Indexed Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Indirect Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Initial Cutoff Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Initial Pool Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Initial Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Insolvency Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
</TABLE>
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<TABLE>
<S> <C>
Insolvency Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Interest Reset Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Interest Reset Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Investment Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
LIBOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
LIBOR Determination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
LIBOR Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
London Banking Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Maximum Initial Yield Supplement Amount . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Maximum Subsequent Yield Supplement Amount . . . . . . . . . . . . . . . . . . . . . . . . 9
Maximum Yield Supplement Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Michigan Tax Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Money Market Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Note Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Note Payment Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Note Pool Factor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Noteholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16, 35
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Obligors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Offered Grantor Trust Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
OID . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
OID regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23, 34
Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Payahead Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Payahead Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Payaheads . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Plan Assets Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Plan Investor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Pool Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Pooling and Servicing Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Pre-Funded Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Pre-Funding Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 5
Precomputed Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Precomputed Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Prospectus Supplement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PTCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 39
Purchase Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Rating Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 6
Receivables Pool . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Required Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Reserve Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Restricted Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Reuters Screen LIBO Page . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Rule of 78's Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
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<TABLE>
<S> <C>
Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Sale and Servicing Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Securityholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 4
Senior Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 4
Servicer Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Servicer Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Servicing Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Servicing Fee Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Short-Term Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Simple Interest Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Simple Interest Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Special Tax Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Spread . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Spread Multiplier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Stock Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Stock Indexed Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Strip Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Strip Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
stripped coupon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Subsequent Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 7
Subsequent Transfer Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Supplemental Servicing Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Terms and Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Transfer and Servicing Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Treasury bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Treasury Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32, 33
Treasury Rate Determination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Treasury Rate Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 4
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Trust Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
UCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Underwriter's Exemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Underwriting Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
United States person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Yield Supplement Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8, 45
Yield Supplement Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Yield Supplement Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Yield Supplement Deposit Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Yield Supplement Initial Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
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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 . . . . . . . . . . . . . . . . . . . . . . . $______
Rating agency fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $______
Printing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $______
Legal fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $______
Accountants' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $______
Fees and expenses of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . $______
Fees and expenses of applicable Trustee . . . . . . . . . . . . . . . . . . . . . $______
Miscellaneous expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $______
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
======
</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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<PAGE> 169
(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> 170
(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:
II-3
<PAGE> 171
(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.
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<PAGE> 172
(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
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.
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<PAGE> 173
(a) EXHIBITS:
<TABLE>
<S> <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 - Form of 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 among 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 tax matters.*
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).*
24.1 - Powers of Attorney.
25.1 - Ford of T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of [Indenture Trustee].*
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.*
</TABLE>
- --------------------------
* To be filed by amendment
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.
(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.
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<PAGE> 174
(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.
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<PAGE> 175
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
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 28th
day of February, 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
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 February 28, 1996
- ------------------------------------- Board of Directors
(Kenneth J. Coates) and Director (princi-
pal executive officer)
TERRENCE F. MARRS * Director and Vice February 28, 1996
- -------------------------------------- President-Controller
(Terrence F. Marrs) (principal accounting
officer)
JOHN P. BURKHARD * Director and Vice February 28, 1996
- ---------------------------------------- President and
(John P. Burkhard) Treasurer (princi-
pal financial officer)
</TABLE>
* By /s/ R. P. CONRAD
--------------------------------
(R. P. Conrad, Attorney in Fact)
II-8
<PAGE> 176
EXHIBIT INDEX
<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 - Form of 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 among 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 tax matters.*
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).*
24.1 - Powers of Attorney.
25.1 - Form of T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of [Indenture
Trustee].*
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.*
</TABLE>
- ---------------------------
* To be filed by amendment
II-9
<PAGE> 1
Exhibit 3.1
Certificate of Limited Partnership
of
Ford Credit Auto Receivables Two L.P.
1. The name of this Limited Partnership is Ford Credit Auto
Receivables Two L.P.
2. The registered office of this Limited Partnership in the
State of Delaware is located at the Corporation Trust Center, 1209 Orange
Street, in the City of Wilmington, County of New Castle. The name of its
registered agent at such address is The Corporation Trust Company.
3. The name of the General Partner is Ford Credit Auto
Receivables Two, Inc. Ford Credit Auto Receivables Two, Inc. is located at The
American Road, Dearborn, Michigan 48121.
The undersigned, the General Partner named above, hereby
certifies that the facts stated above are true as of this 23rd day of February,
1996.
FORD CREDIT AUTO
RECEIVABLES TWO, INC.,
General Partner
By: \s\ Hurley D. Smith
-----------------------
Name: Hurley D. Smith
Title: Secretary
<PAGE> 1
EXHIBIT 3.3
CERTIFICATE OF INCORPORATION
OF
FORD CREDIT AUTO RECEIVABLES TWO, INC.
ARTICLE ONE
The name of the corporation is Ford Credit Auto Receivables Two, Inc.
ARTICLE TWO
The address of the corporation's registered office in the State of
Delaware is the Corporation Trust Center, 1209 Orange Street, Wilmington, New
Castle County, Delaware 19801. The name of its registered agent at such
address is The Corporation Trust Company.
ARTICLE THREE
The nature of the business or purposes to be conducted or promoted by
the corporation is to engage in the following activities:
(a) to acquire from time to time all right, title and interest in
and to receivables or leases arising out of or relating to the sale or lease of
new or used motor vehicles and farm or industrial equipment, including
automobiles, light and heavy duty trucks, tractors and recreational vehicles,
monies due thereunder, security interests in the motor vehicles or equipment
financed thereby, proceeds from claims on insurance policies related thereto,
and related rights (collectively, "Receivables");
(b) to acquire, own, hold, service, sell, assign, pledge and
otherwise deal with the Receivables, collateral securing the Receivables,
related insurance policies, agreements with motor vehicle or equipment dealers
or lessors or other originators or servicers of Receivables and any proceeds or
further rights associated with any of the foregoing;
(c) to transfer Receivables to trusts (the "Trusts") pursuant to
one or more pooling and servicing agreements, transfer and servicing agreements
or other agreements (the "Transfer and Servicing Agreements") to be entered
into by and among, among others, the corporation, the trustees named therein
(the "Trustees") and any entity acting as servicer of the Receivables;
<PAGE> 2
(d) to authorize, sell and deliver any class of certificates or
other securities issued by the Trusts under the related Transfer and Servicing
Agreements;
(e) to acquire from Ford Motor Credit Company or Ford Credit Auto
Receivables Corporation or any affiliate thereof certificates issued by one or
more trusts to which Ford Motor Credit Company or Ford Credit Auto Receivables
Corporation or any affiliate thereof transferred Receivables;
(f) to issue, sell, authorize and deliver one or more series and
classes of bonds, notes or other evidences of indebtedness secured or
collateralized by one or more pools of Receivables or by certificates of any
class issued by one or more Trusts or by certificates of any class issued by a
trust established by Ford Motor Credit Company or Ford Credit Auto Receivables
Corporation or any affiliate thereof (collectively, the "Notes"), provided that
the corporation shall have no liability under any Notes except to the extent of
the one or more pools of Receivables or the certificates securing or
collateralizing such Notes;
(g) to hold and enjoy all of the rights and privileges of any
certificates issued by the Trusts to the corporation under the related Transfer
and Servicing Agreements and to hold and enjoy all of the rights and privileges
of any class of any series of Notes, including any class of Notes or
certificates which may be subordinate to any other class of Notes or
certificates, respectively;
(h) to perform its obligations under the Transfer and Servicing
Agreements and any indenture or other agreement (each, an "Indenture") pursuant
to which any Notes are issued;
(i) to enter into one or more limited partnership agreements or
other agreements (the "Limited Partnership Agreements") pursuant to which one
or more limited partnerships (the "Limited Partnerships") will engage in
activities similar to those set forth in paragraphs (a) through (h) of this
Article Third;
(j) to act as a general partner or a limited partner of such
Limited Partnership(s) and to perform its obligations as general partner
or limited partner under the Limited Partnership Agreements; and
(k) to engage in any activity and to exercise any powers permitted
to corporations under the laws of the State of Delaware that are related or
incidental to the foregoing and necessary, convenient or advisable to
accomplish the foregoing.
2
<PAGE> 3
ARTICLE FOUR
(a) Notwithstanding any other provision of this
Certificate of Incorporation and any provision of law that otherwise so
empowers the corporation, the corporation shall not, without the prior written
consent of the Trustee(s) under the Transfer and Servicing Agreements (or any
supplement thereto) and any trustee under any Indenture (or any supplement
thereto) and each nationally recognized rating agency which has been requested
by the corporation to rate any issue of certificates issued pursuant to any
agreement or any series or class of Notes and which is then rating such
certificates or Notes, do any of the following:
(i) engage in any business or activity other than those
set forth in Article Third;
(ii) incur any indebtedness, or assume or guaranty any
indebtedness of any other entity, other than (A) indebtedness incurred
in connection with Notes and (B) any indebtedness to Ford Motor Credit
Company or Ford Credit Auto Receivables Corporation or any affiliate
thereof incurred in connection with the acquisition of receivables or
certificates, which indebtedness shall be subordinatedto all other
obligations of the Corporation;
(iii) dissolve or liquidate, in whole or in part; consolidate
or merge with or into any other entity or convey or transfer its
properties and assets substantially as an entirety to any
entity, unless:
(A) the entity (if other than the corporation)
formed or surviving the consolidation or merger of which acquires the
properties and assets of the corporation is organized and existing
under the laws of the State of Delaware, expressly assumes the due and
punctual payment of, and all obligations of the corporation, including
those obligations of the corporation under any Transfer and Servicing
Agreement and Indenture, and has a Certificate of Incorporation
containing provisions identical to the provision of Article Third,
this Article Fourth and Article Fifteen; and
(B) immediately after giving effect to the
transaction, no default or event of default has occurred and is
continuing under any indebtedness of the corporation or any agreements
relating to such indebtedness; or
(iv) without the affirmative vote of 100% of the
members of the Board of Directors of the corporation, institute
proceedings to be adjudicated bankrupt or
3
<PAGE> 4
insolvent, or consent to the institution of bankruptcy or insolvency
proceedings against it, or file a petition seeking or consent to
reorganization or relief under any applicable federal or state law
relating to bankruptcy, or consent to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator (or other similar
official) of the corporation or a substantial part of its property, or
make any assignment for the benefit of creditors, or admit in writing
its inability to pay its debts generally as they become due, or take
corporate action in furtherance of any such action;
(v) without the affirmative vote of 100% of the
members of the Board of Directors of the corporation, take any of the
actions described in the preceding clause (iv) with respect to a
Limited Partnership of which it is a general partner or cause such
Limited Partnership to take any such action with respect to
itself.
(b) At all times during the existence of a Rating Event, the
Board of Directors shall include at least two individuals who are Independent
Directors. Notwithstanding anything to the contrary contained herein or in the
corporation's By-Laws, upon the occurrence of a Rating Event the authorized
number of directors established by the Board of Directors shall be increased by
the excess, if any, of two over the number of directors who are then
Independent Directors. Any such vacancies shall be filled promptly with
individuals who are Independent Directors. A "Rating Event" shall be deemed to
have occurred upon the earlier to occur of (i) the downgrading of Ford Motor
Credit Company's short-term unsecured debt to or below (A) A-2 by Standard &
Poor's Corporation ("S&P") or (B) P2 by Moody's Investors Service, Inc.
("Moody's") or (ii) the downgrading of Ford Motor Credit Company's senior
long-term debt to or below (A) A- by S&P or (B) A3 by Moody's, and shall be
deemed to exist only for so long as (x) Ford Motor Credit Company's short-term
unsecured debt is rated at or below (A) A-2 by S&P or (B) P2 by Moody's or (y)
Ford Motor Credit Company's senior long-term debt is rated at or below (A) A-
by S&P or (B) A3 by Moody's. An "Independent Director" shall be an individual
who is not at such time and shall not have been at any time during the
preceding five years (i) a director, officer or employee of Ford Motor Credit
Company or any of its subsidiaries or affiliates, or of a major creditor
thereof, or (ii) the beneficial owner at the time of such individual's
appointment as an Independent Director or at such time thereafter while serving
as an Independent Director, of more than 1,000 shares in the aggregate of all
classes of common stock of Ford Motor Company, or if greater, such number of
such shares the value of which constitutes more than 10% of such individual's
net worth. The term "major creditor" shall mean a financial institution to
which Ford Motor Credit Company has outstanding indebtedness for borrowed money
in a sum sufficiently large as would reasonably be expected to influence the
judgment of the proposed Independent
4
<PAGE> 5
Director adversely to the interests of the corporation when its interests are
adverse to those of Ford Motor Credit Company.
ARTICLE FIVE
(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
5
<PAGE> 6
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 be 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 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 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
6
<PAGE> 7
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 directors, officers and
employees of the corporation.
7
<PAGE> 8
ARTICLE SIX
The total number of shares of stock which the corporation has
authority to issue is 1,000 shares of Common Stock, with a par value of $1.00
per share.
ARTICLE SEVEN
The name and mailing address of the sole incor-
porator are as follows:
NAME MAILING ADDRESS
Katherine M. Kjolhede The American Road
Dearborn, Michigan 48121
ARTICLE EIGHT
The corporation is to have perpetual existence.
ARTICLE NINE
In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors of the corporation is expressly authorized to
make, alter or repeal the By-Laws of the corporation.
ARTICLE TEN
Meeting of stockholders may be held within or without the State of
Delaware, as the By-Laws of the corporation may provide. The books of the
corporation may be kept outside the State of Delaware at such place or places
as may be designated from time to time by the Board of Directors or in the
By-laws of the corporation. Election of directors need not be by written
ballot unless the By-Laws of the corporation so provide.
ARTICLE ELEVEN
If the By-Laws so provide, the stockholders and the directors may
hold their meetings, and the corporation may have one or more offices outside
the State of Delaware. The books of the corporation (subject to the provisions
of the laws of the State of Delaware) may be kept outside of the State of
Delaware at such places as from time to time may be designated by the Board of
Directors.
8
<PAGE> 9
ARTICLE TWELVE
No contract, transaction or act of the corporation shall be affected
or invalidated by the fact that any of the directors of the corporation are in
any wise interested in or connected with any other party to such contract,
transaction or act or are themselves parties to such contract, transaction or
act, provided that such interest shall be fully disclosed or otherwise known to
the Board of Directors, or a majority thereof, at a meeting of the Board at
which such contract, transaction or act is authorized, ratified or confirmed;
and any such director may be counted in determining the existence of a quorum
at any such meeting and may vote the rest in connection with such
authorization, ratification or confirmation with like force and effect as if he
were not so interested or connected or was not a party to such contract,
transaction or act.
ARTICLE THIRTEEN
The Board of Directors in its discretion may submit for approval,
ratification or confirmation by the stockholders at any meeting thereof any
contract, transaction or act of the Board or of any officer, agent or employee
of the corporation, and any such contract, transaction or act which shall have
been so approved, ratified or confirmed by the holders of Common Stock shall be
as valid and binding upon the corporation and upon the stockholders thereof as
though it had been approved and ratified by each and every stockholder of the
corporation.
ARTICLE FOURTEEN
Every asserted right of action by or on behalf of the corporation or
by or on behalf of any stockholder against any past, present or future member
of the Board of Directors, or any committee thereof, or any officer or employee
of the corporation or any subsidiary thereof, arising out of or in connection
with any bonus, supplemental compensation, stock investment, stock option or
other plan or plans for the benefit of any employee, irrespective of the place
where such right of action may arise or be asserted and irrespective of the
place of residence of any such director, member, officer or employee, shall
cease and be barred upon the expiration of three years from the later of the
following dates: (a) the date of any alleged act or omission in respect of
which such right of action may be asserted to have arisen, or (b) the date upon
which the corporation shall have made generally available to its stockholders
information with respect to, as the case may be, the aggregate amount credited
for a fiscal year to a bonus or supplemental compensation reserve, or the
aggregate amount of awards in a fiscal year of bonuses or supplemental
compensation, or the aggregate amount of stock optioned or made available for
purchase during a fiscal year, or the aggregate
9
<PAGE> 10
amount expended by the corporation during a fiscal year in connection with any
other plan for the benefit of such employees, to all or any part of which such
asserted right of action may relate; and every asserted right of action by or
on behalf of any employee, past, present or future or any spouse, child, or
legal representative thereof, against this corporation or any subsidiary
thereof arising out of or in connection with any such plan irrespective of the
place where such asserted right of action may arise or be asserted, shall cease
and be barred by the expiration of three years from the date of the alleged act
or omission in respect of which such right of action shall be asserted to have
arisen.
ARTICLE FIFTEEN
Without the prior written consent of each Trustee under any Transfer
and Servicing Agreement (and any supplements thereto), each trustee under any
Indenture (and any supplements thereto) and each nationally recognized rating
agency which has been requested by the corporation to rate any issue of
certificates issued pursuant to any Agreement or any series or class of Notes
and which is then rating such certificates or Notes, the corporation shall not
amend, alter, change or repeal Article Third, Article Fourth, this Article
Fifteen or Article Sixteen. Subject to the foregoing limitation, the
corporation reserves the right to amend, alter, change or repeal any provision
contained in this Certificate of Incorporation, in the manner now or hereafter
prescribed by the law of the State of Delaware, and all rights of the
stockholders herein are granted subject to this reservation.
ARTICLE SIXTEEN
(a) The corporation's assets will not be commingled with those of
any direct or ultimate parent of the corporation or with or those of any other
entity or person.
(b) The corporation will maintain separate corporate records and
books of account from those of any direct or ultimate parent of the corporation
and from those of any other entity or person.
(c) The corporation will conduct its business from an office
separate from any direct or ultimate parent of the corporation and separate
from any other entity or person.
10
<PAGE> 11
ARTICLE SEVENTEEN
The corporation expressly elects not to be governed by Section 203 of
the General Corporation Law of the State of Delaware.
I, the undersigned, being the incorporator named above, in order to
form a corporation pursuant to the General Corporation Law of the State of
Delaware, do make this certificate, hereby declaring and certifying that this
is my act and deed and that the facts herein stated are true, and accordingly
have hereunto set my hand this 21st day of February, 1996.
Katherine M. Kjolhede
11
<PAGE> 1
EXHIBIT 3.4
FORD CREDIT AUTO RECEIVABLES TWO, INC.
BY-LAWS
<PAGE> 2
FORD CREDIT AUTO RECEIVABLES TWO, INC.
BY-LAWS
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C> <C>
ARTICLE I Offices 1
-------
ARTICLE II Stockholders 1
------------
Section 1. Place of Meetings 1
Section 2. Annual Meeting 1
Section 3. Special Meetings 2
Section 4. Notice of Meetings 2
Section 5. Quorum and Plurality
Requirements 2
Section 6. Organization 3
Section 7. Proxies and Voting 3
Section 8. Stock Lists 3
Section 9. Ratification 4
Section 10. Consent in Lieu of Meeting 4
ARTICLE III Board of Directors 4
------------------
Section 1. Number, Term of Office,
and Eligibility 4
Section 2. Meetings 5
Section 3. Notice of Meetings 5
Section 4. Quorum and Organization
of Meetings 6
Section 5. Powers 6
Section 6. Reliance upon Book,
Reports and Records 9
Section 7. Compensation of Directors 9
ARTICLE IV Committees 9
----------
Section 1. Committees of the Board
of Directors 9
Section 2. Rules and Procedures 9
ARTICLE V General Counsel 10
---------------
ARTICLE VI Officers 10
--------
Section 1. Officers 10
Section 2. The Chairman of the Board
of Directors 10
Section 3. The President 11
Section 4. Vice Presidents 11
Section 5. Treasurer and Assistant
Treasurer 11
Section 6. Secretary and Assistant
Secretary 12
Section 7. Controller 12
Section 8. Salaries 13
</TABLE>
<PAGE> 3
- 2 -
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE VII Resignations, Removals and Vacancies 13
------------------------------------
Section 1. Resignations 13
Section 2. Removals 14
Section 3. Vacancies 14
ARTICLE VIII Capital Stock-Dividends-Seal 14
----------------------------
Section 1. Certificates of Shares 14
Section 2. Addresses of Stockholders 15
Section 3. Lost, Destroyed or
Stolen Certificates 15
Section 4. Transfers of Stock 15
Section 5. Closing of Transfer Books 15
Section 6. Registered Stockholders 16
Section 7. Regulations 16
Section 8. Corporate Seal 17
ARTICLE IX Contracts, Checks, Drafts, Bank Accounts, Etc. 17
----------------------------------------------
Section 1. Execution of Contracts 17
Section 2. Indebtedness 17
Section 3. Checks, Drafts, Etc. 18
Section 4. Deposits 18
ARTICLE X Fiscal Year 18
-----------
ARTICLE XI Miscellaneous 19
-------------
Section 1. Notice and Waivers Thereof 19
Section 2. Voting upon Stocks 19
ARTICLE XII Amendments 20
----------
</TABLE>
<PAGE> 4
FORD CREDIT AUTO RECEIVABLES TWO, INC.
A DELAWARE CORPORATION
BY-LAWS
ARTICLE I
OFFICES
The principal office of the Company shall be in the City of Wilmington,
County of New Castle, State of Delaware. The Company may also have an office
in the City of Dearborn, State of Michigan, and at such other places as the
Board of Directors may from time to time determine or as the business of the
Company may require. The books and records of the Company may be kept (except
as otherwise provided by law) at the office of the Company in the City of
Dearborn, State of Michigan, outside of the State of Delaware, or at such other
places as from time to time may be determined by the Board of Directors.
ARTICLE II
STOCKHOLDERS
SECTION 1. Place of Meetings.
All meetings of the stockholders for the election of directors shall be
held at the office of the Company in the City of Dearborn, State of Michigan.
Any meeting of the stockholders for any other purpose may be held at such
place, within or without the State of Delaware, and at such time as shall be
stated in the notice or waiver of notice thereof.
SECTION 2. Annual Meeting.
The annual meeting of stockholders for the election of directors shall be
held at eleven o'clock in the forenoon, Eastern Standard Time, on the fourth
Monday of February in each and every year, if not a legal holiday, and if a
legal holiday then on the next day not a legal holiday, and at such meeting the
stockholders shall elect by ballot a Board of Directors and may transact such
other business as may come before the meeting. The stockholders entitled to
vote at the annual meeting of stockholders shall be the stockholders of record
at the close of business on the fourth Monday of January in each and every
year, if not a legal holiday, and if a legal holiday then on the next day not a
legal holiday, provided, however, that prior to such record date, the Board of
Directors may designate, pursuant to Section 5 of Article VIII, another day as
the record date in lieu thereof.
_______________
Art. First
Art. Second, Secs. 1 & 2
<PAGE> 5
SECTION 3. Special Meetings.
Special meetings of the stockholders for any purpose or purposes, unless
otherwise provided by law, may be called by the Chairman of the Board of
Directors, the President or by a majority of the Board of Directors, and shall
be called by the Chairman of the Board of Directors, the President or the
Secretary whenever the holders of record of a majority of the Common Stock
outstanding shall file with the Secretary a written application for such
meeting. Such application shall state the purpose or purposes of the proposed
meeting.
SECTION 4. Notice of Meetings.
Except as otherwise provided by law, at least ten (10) days' notice of
stockholders' meetings stating the time and place and the purposes thereof
shall be given by the Chairman of the Board of Directors, the President or the
Secretary to each stockholder of record having voting power in respect of the
business to be transacted thereat.
SECTION 5. Quorum and Plurality Requirements.
At any meeting of the stockholders, the holders of a majority of the Common
Stock issued and outstanding, present in person or represented by proxy, shall
constitute a quorum for the transaction of business except as otherwise
provided by statute or by the Certificate of Incorporation. If, however, such
quorum shall not be present or represented at any meeting of the stockholders,
the holders of the Common Stock present in person or represented by proxy,
shall have power to adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented any business may be transacted which might have been transacted at
the meeting as originally notified.
When a quorum is present at any meeting, the vote of the holders of a
majority of the Common Stock present in person or represented by proxy shall
decide any question brought before such meeting, unless the question is one
upon which by express provision of the statutes or of the Certificate of
Incorporation a different vote is required in which case such express provision
shall govern and control the decision of such question.
SECTION 6. Organization.
The Chairman of the Board of Directors, or in his absence, the President
shall call to order meetings of the stockholders and shall act as chairman of
such meetings. The Board of Directors or the stockholders may appoint any
stockholder or any director or officer of the Company to act as chairman of any
meeting in the absence of the Chairman of the Board and the President.
__________________
Art. Second, Secs.
3, 4, 5 & 6
<PAGE> 6
3
The Secretary of the Company shall act as secretary of all meetings of the
stockholders, but in the absence of the Secretary the presiding officer may
appoint any other person to act as secretary of any meeting.
SECTION 7. Proxies and Voting.
Each holder of Common Stock shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of Common Stock held
by such stockholder, but no proxy shall be voted on after three years from its
date, unless the proxy provides for a longer period, and, except where the
transfer books of the Company have been closed or a date has been fixed as a
record date for the determination of its stockholders entitled to vote, no
share of stock shall be voted on at any election for directors which has been
transferred on the books of the Company within twenty days next preceding such
election of directors.
SECTION 8. Stock Lists.
A complete list of stockholders entitled to vote at any meeting of
stockholders shall be prepared, in alphabetical order, by the Secretary and
shall be open to the examination of any stockholder, at the place where the
meeting is to be held, for at least ten days before the meeting and during the
whole time of the meeting.
SECTION 9. Ratification.
Any transaction questioned in any stockholders' derivative suit, or any
other suit to enforce alleged rights of the Company or any of its stockholders,
on the ground of lack of authority, defective or irregular execution, adverse
interest of any director, officer or stockholder, non-disclosure,
miscomputation or the application of improper principles or practices of
accounting may be approved, ratified and confirmed before or after judgment by
the Board of Directors or by the holders of Common Stock, and, if so approved,
ratified or confirmed, shall have the same force and effect as if the
questioned transaction had been originally duly authorized, and said approval,
ratification or confirmation shall be binding upon the Company and all of its
stockholders and shall constitute a bar to any claim or execution of any
judgment in respect of such questioned transaction.
SECTION 10. Consent in Lieu of Meeting.
Whenever the vote of stockholders at a meeting thereof is required or
permitted to be taken in connection with any corporate action by any provisions
of the statutes or of the Certificate of Incorporation, the meeting and vote of
stockholders may be dispensed with, if all the stockholders who would have been
entitled to vote upon the action if such meeting were held, shall consent in
writing to such corporate action being taken.
_______________
Art. Second, Secs. 7,
8, 9 & 10
<PAGE> 7
4
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. Number, Term of Office, and Eligibility.
Except as provided by the laws of the State of Delaware or by the
Certificate of Incorporation, the business and the property of the Company
shall be managed and controlled by a Board of not less than three nor more than
twenty directors, the exact number to be fixed from time to time by resolution
of the Board of Directors or of the stockholders, each director to be elected
annually by ballot by the holders of Common Stock at the annual meeting of the
stockholders, to serve until his successor shall have been elected and shall
have qualified, except as provided in this Section. No person may be elected
or re-elected a director of the Company if at the time of his election or
re-election he shall have attained the age of seventy years, and the term of
any director of the Company who shall attain the age of seventy years while
serving as a director of the Company shall terminate as of the time of the
first annual meeting of the stockholders following such director's seventieth
birthday.
SECTION 2. Meetings.
The directors may hold their meetings outside of the State of Delaware, at
the office of the Company in the City of Dearborn, State of Michigan, or at
such other place as from time to time they may determine.
The annual meeting of the Board of Directors, for the election of executive
officers and the transaction of such other business as may come before the
meeting, shall be held at the same place as, and immediately following, the
annual meeting of the stockholders, and no notice thereof shall be required to
be given to the directors.
Regular meetings of the Board of Directors may be held at such time and
place as shall from time to time be determined by the Board.
Special Meetings of the Board of Directors shall be held whenever called by
direction of the Chairman of the Board of Directors, the President or by
one-third of the directors then in office.
SECTION 3. Notice of Meetings.
The Secretary shall give notice of the time and place of holding of
meetings of the Board of Directors (excepting the annual meeting of directors)
by mailing such notice at least two days before the meeting, or by sending a
radiogram, cablegram or telegram containing such notice at least one day before
the meeting to each director, or by delivering such notice at least one day
before the meeting to each director in person, or by delivering, in the case of
a director who is an officer or
_______________
Art. Third, Secs. 1, 2 & 3
<PAGE> 8
5
employee of the Company or of Ford Motor Company, or of any subsidiary of
either, such notice at least one day before the meeting to the office of such
director at such company. Unless otherwise stated in the notice thereof any
and all business may be transacted at any meeting.
SECTION 4. Quorum and Organization of Meetings.
A third of the total number of members of the Board of Directors as
constituted from time to time, but in no event less than two, shall constitute
a quorum for the transaction of business; but if at any meeting of the Board of
Directors there shall be less than a quorum present, a majority of those
present may adjourn the meeting from time to time, and the meeting may be held
as adjourned without further notice or waiver. Except as otherwise provided by
law or by the Certificate of Incorporation or by these By-Laws, a majority of
the directors present at any duly constituted meeting may decide any question
brought before such meeting. Meetings shall be presided over by the Chairman
of the Board of Directors, or in his absence, by the President or by such other
person as may have been designated by the Board of Directors, or in the absence
of any such person and the President, by such other person as may be selected
by the members present.
SECTION 5. Powers.
In addition to the powers and authorities by these By-Laws expressly
conferred upon them, the Board of Directors shall have and may exercise all
such powers of the Company and do all such lawful acts and things that are not
by statute or by the Certificate of Incorporation or by these By-Laws directed
or required to be exercised or done by the stockholders, subject however, to
any limitations on the business or purposes of the Company set forth in the
Certificate of Incorporation. Without prejudice to or limitation of such
general powers and any other powers conferred by statute, or by the Certificate
of Incorporation or by these By-Laws, it is hereby declared that the Board of
Directors shall have the following powers, that is to say:
(1) To determine, subject to the requirements of the Certificate of
Incorporation or of law, what, if any, dividends shall be declared and paid
to the stockholders out of net profits, current or accumulated, or out of
surplus or assets of the Company available for dividends.
(2) To fix, and from time to time to vary, the amount of working
capital of the Company, and to set aside from time to time out of net
profits, current or accumulated, or surplus of the Company such amount or
amounts as they in their discretion may deem necessary and proper as, or as
a safeguard to the maintenance of, working capital, as a reserve for
contingencies, as a reserve for repairs, maintenance, or rehabilitation, or
as a reserve for revaluation of profits of the Company, for the
equalization of dividends or for such other proper purpose as may in the
opinion of the directors be in the best interests of the Company; and in
their sole discretion
_______________________
Art. Third, Secs. 4 & 5
<PAGE> 9
6
to abolish or modify any such provision for working capital or any such
reserve, and to credit the amount thereof to net profits, current or
accumulated, or to the surplus of the Company.
(3) To purchase, or otherwise acquire for the Company, any business,
property, rights or privileges which the Company may at the time be
authorized to acquire, at such price or consideration and generally on such
terms and conditions as they think fit; and at their discretion to pay
therefor either wholly or partly in money, stock, bonds, debentures or
other securities of the Company.
(4) To create, make and issue mortgages, bonds, deeds of trust,
trust agreements or negotiable or transferable instruments or securities,
secured by mortgage or otherwise, which the Company may at the time be
authorized to create, make and issue, and to do every other act and thing
necessary to effect the same.
(5) To appoint any person or corporation to accept and hold in trust
for the Company any property belonging to the Company, or in which it is
interested, or for any other purpose, and to execute such deeds and do all
things requisite in relation to any such trust.
(6) To delegate any of the powers of the Board in the course of the
business of the Company to any officer, employee or agent, and to appoint
any person the agent of the Company, with such powers (including the power
to subdelegate) and upon such terms as the Board may think fit.
(7) To remove any officer of the Company with or without cause, and
from time to time to devolve the powers and duties of any officer upon any
other person for the time being.
(8) To confer upon any officer of the Company the power to appoint,
remove and suspend subordinate officers, agents and employees.
(9) To determine who shall be authorized on the Company's behalf,
either generally or specifically, to make and sign bills, notes,
acceptances, endorsements, checks, releases, receipts, contracts,
conveyances, and all other written instruments executed on behalf of the
Company.
(10) To make and change regulations, not inconsistent with these
By-Laws, for the management of the Company's business and affairs.
_______________
Art. Third, Sec. 5
<PAGE> 10
7
(11) To adopt and, unless otherwise provided therein, to amend and
repeal, from time to time, a bonus or supplemental compensation plan for
employees (including employees who are officers or directors) of the
Company or any subsidiary. Power to construe, interpret, administer,
modify or suspend such plan shall be vested in the Board of Directors or a
committee thereof.
(12) To adopt a retirement plan, or plans, for the purpose of making
retirement payments to employees (including employees who are officers or
directors) of the Company or of any subsidiary thereof; to adopt a group
insurance plan, or plans, for the purpose of enabling employees (including
employees who are officers or directors) of the Company or of any
subsidiary thereof to acquire insurance protection; and to adopt or elect
to participate in a profit-sharing, thrift, savings or similar plan, or
plans, for employees (including employees who are officers or directors) of
the Company or of any subsidiary thereof; provided, however, that any plan
adopted pursuant to the provisions of this subsection shall, unless
otherwise provided therein, be subject to amendment or revocation by the
Board of Directors.
SECTION 6. Reliance upon Books, Reports and Records.
Each director, each member of any committee designated by the Board of
Directors and each officer, in the performance of his duties, shall be fully
protected in relying in good faith upon the books of account or reports made to
the Company by any of its officials, or by an independent certified public
accountant, or by an appraiser selected with reasonable care by the Board of
Directors or by any such committee, or in relying in good faith upon other
records of the Company.
SECTION 7. Compensation of Directors.
Directors, as such, may receive, pursuant to resolution of the Board of
Directors, fixed fees and other compensation for their services as directors,
including, without limitation, services as members of committees of the
directors; provided, however, that nothing herein contained shall be construed
to preclude any director from serving the Company in any other capacity and
receiving compensation therefor.
_______________
Art. Third, Secs.
5, 6 & 7
<PAGE> 11
8
ARTICLE IV
COMMITTEES
SECTION 1. Committees of the Board of Directors.
The Board of Directors may from time to time establish standing
committees or special committees of the Board of Directors, each of which shall
have such powers and functions as may be delegated to it by the Board of
Directors. The Board of Directors may abolish any committee established by or
pursuant to this Section 1 as it may deem advisable. Each such committee shall
consist of two or more directors, the exact number being determined from time
to time by the Board of Directors. Designations of the chairman and members
of each such committee and, if desired, alternates for members, shall be made
by the Board of Directors.
SECTION 2. Rules and Procedures.
Each committee may fix its own rules and procedures and shall meet at
such times and places as may be provided by such rules, by resolution of the
committee, or by call of the chairman. Notice of meeting of each committee,
other than of regular meetings provided for by its rules or resolutions, shall
be given to committee members. The presence of one-third of its members, but
not less than two, shall constitute a quorum of any committee, and all
questions shall be decided by a majority vote of the members present at the
meeting. All action taken at each committee meeting shall be recorded in
minutes of the meeting.
ARTICLE V
GENERAL COUNSEL
The Company may have a General Counsel who shall be appointed by the
Board of Directors and who shall have general supervision of all matters of a
legal nature concerning the Company.
ARTICLE VI
OFFICERS
SECTION 1. Officers.
The officers of the Company shall be a Chairman of the Board of
Directors, a President, one or more Executive Vice Presidents, one or more Vice
Presidents, a Treasurer, a Controller, and a Secretary, each of whom shall be
elected by the Board of Directors or the stockholders to hold office until his
successor shall have been chosen and shall have qualified. The Board of
Directors or the stockholders may elect or appoint one or more Assistant
Treasurers, one or more Assistant
___________________
Art. Fourth, Secs. 1&2
Art. Fifth
Art. Sixth, Sec. 1
<PAGE> 12
9
Secretaries, and such other officers as may be deemed necessary or desirable,
each of whom shall have such authority, shall perform such duties and shall
hold office for such term as may be prescribed by the Board of Directors or the
stockholders from time to time.
SECTION 2. The Chairman of the Board of Directors.
The Chairman of the Board of Directors shall be the chief executive
officer of the Company and, subject to the provisions of these By-Laws and to
the direction of the Board of Directors, shall have the general management and
control of the affairs and business of the Company, shall perform all other
duties and enjoy all other powers commonly incident to his office or delegated
to him by the Board of Directors, or which are or may at any time be authorized
or required by law.
SECTION 3. The President.
The President, subject to the provisions of these By-Laws and to the
direction of the Board of Directors and of the Chairman of the Board of
Directors, shall have such powers and shall perform such duties as from time to
time may be delegated to him by the Board of Directors, or by the Chairman of
the Board of Directors, or which are or may at any time be authorized or
required by law. In the absence or disability of the Chairman of the Board of
Directors, or in the event of, and during the period of, a vacancy in that
office, he shall be the chief executive officer of the Company and shall
exercise the powers and perform the duties of the Chairman of the Board of
Directors.
SECTION 4. Vice Presidents.
Each of the Executive Vice Presidents and each of the other Vice
Presidents shall have such powers, and perform such duties, as may be delegated
to him by the Board of Directors or by the Chairman of the Board of Directors
or the President.
In the absence or disability of the Chairman of the Board of Directors
and the President, any Vice President designated by the Chairman of the Board
of Directors, or by the President if the Chairman of the Board of Directors
shall have failed to make such designation, shall exercise the powers of the
Chairman of the Board of Directors and the President.
SECTION 5. Treasurer and Assistant Treasurer.
The Treasurer, subject to the direction of the Board of Directors, shall
have the care and custody of the corporate funds and securities. When
necessary or proper he shall endorse on behalf of the Company, for collection,
checks, notes and other obligations, and shall deposit all funds and securities
of the Company in such banks or other depositors as
_______________
Art. Sixth, Secs.
1, 2, 3, 4 & 5
<PAGE> 13
10
May be designated by the Board of Directors, or by such directors, officers, or
employees as may be authorized by the Board of Directors so to designate. He
shall perform all acts incident to the office of Treasurer, subject to the
control of the Board of Directors. He may be required to give a bond for the
faithful discharge of his duties, in such sum and upon such conditions as the
Board of Directors may require.
At the request of the Treasurer, any Assistant Treasurer in the case of
the absence or inability to act of the Treasurer, temporarily may act in his
place. In the case of the death of the Treasurer, or in the case of his
absence or inability to act without having designated an Assistant Treasurer to
act temporarily in his place, the Assistant Treasurer so to perform the duties
of the Treasurer shall be designated by the Chairman of the Board of Directors
or the President.
SECTION 6. Secretary and Assistant Secretary.
The Secretary shall keep the minutes of the meetings of the stockholders
and of the Board of Directors, and, when required, the minutes of the meetings
of the committees, and shall be responsible for the custody of all such
minutes. Subject to the direction of the Board of Directors, the Secretary
shall have custody of the stock ledgers and documents of the Company. He shall
have custody of the corporate seal and shall affix and attest such seal to any
instrument whose execution under seal shall have been duly authorized. He
shall give notice of meetings and, subject to the direction of the Board of
Directors, shall perform all other duties and enjoy all other powers commonly
incident to his office.
At the request of the Secretary, any Assistant Secretary, in the case of
the absence or inability to act of the Secretary, temporarily may act in his
place. In the case of the death of the Secretary, or in the case of his
absence or inability to act without having designated an Assistant Secretary to
act temporarily in his place, the Assistant Secretary so to perform the duties
of the Secretary shall be designated by the Chairman of the Board of Directors
or the President.
SECTION 7. Controller.
The Controller, subject to the direction of the Board of Directors shall
provide and maintain financial and accounting controls over the business and
affairs of the Company. He shall maintain, among others, adequate records of
the assets, liabilities, and financial transactions of the Company, and shall
direct the preparation of financial statements, reports, and analyses. He
shall perform such other duties and exercise such other powers as are incident
to the office of Controller, subject to the control of the Board of Directors.
_________________
Art. Sixth, Secs.
Secs. 5, 6 & 7
<PAGE> 14
11
SECTION 8. Salaries.
Salaries of officers, agents or employees shall be fixed from time to
time by the Board of Directors or by such committee or committees, or person or
persons, if any, to whom such power shall have been delegated by the Board of
Directors. Any employment contract, whether with an officer, agent or
employee, if expressly approved or specifically authorized by the Board of
Directors, may fix a term of employment thereunder; and such contract, if so
approved or authorized, shall be valid and binding upon the Company in
accordance with the terms thereof, provided that this provision shall not limit
or restrict in any way the right of the Company at any time to remove from
office, discharge or terminate the employment of any such officer, agent or
employee prior to the expiration of the term of employment under any such
contract, except that the Company shall not thereby be relieved of any
continuing liability for salary or other compensation provided for in such
contract.
ARTICLE VII
RESIGNATIONS, REMOVALS AND VACANCIES
SECTION 1. Resignations.
Any director, officer or agent of the Company, or any member of any
committee may resign at any time by giving written notice to the Board of
Directors, to the Chairman of the Board of Directors or to the Secretary of the
Company. Any such resignation shall take effect at the time specified therein,
or if the time be not specified therein, then upon receipt thereof. The
acceptance of such resignation shall not be necessary to make it effective.
SECTION 2. Removals.
At any meeting thereof called for the purpose, the holders of a majority
of the Common Stock may remove from office or terminate the employment of any
director, officer or agent with or without cause; and the Board of Directors,
by vote of not less than a majority of the entire Board at any meeting thereof
called for the purpose, may, at any time, remove from office or terminate the
employment of any officer, agent or member of any committee.
SECTION 3. Vacancies.
Subject to the last sentence of Section 1 of Article III, any vacancy in
the office of any director, officer or agent through death, resignation,
removal, disqualification, increase in the number of directors or other cause
may be filled by the Board of Directors (in the
__________________
Art. Sixth, Sec. 8
Art. Seventh, Secs.
1, 2 & 3
<PAGE> 15
12
case of vacancies in the Board, by the affirmative vote of a majority of the
directors then in office, even though less than a quorum remains) or by the
stockholders, and the person so elected shall hold office until his successor
shall have been elected and shall have qualified.
ARTICLE VIII
CAPITAL STOCK - DIVIDENDS - SEAL
SECTION 1. Certificate of Shares.
The certificates for shares of the capital stock of the Company shall be
in such form, not inconsistent with the Certificate of Incorporation, as shall
be approved by the Board of Directors. The certificates shall be signed by the
Chairman of the Board of Directors, the President or a Vice President, and also
by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant
Secretary. Where any stock certificate is signed (1) by a transfer agent or an
assistant transfer agent, or (2) by a transfer clerk acting on behalf of the
Company and a registrar, any such officer's signature may be a facsimile.
All certificates shall bear the name of the person owning the shares
represented thereby, shall state the number of shares represented by such
certificate and the date of issue; and such information shall be entered in the
Company's original stock ledger.
SECTION 2. Addresses of Stockholders.
It shall be the duty of every stockholder to notify the Company of his
post office address and of any change therein. The latest address furnished by
each stockholder shall be entered on the original stock ledger of the Company
and latest address appearing on such original stock ledger shall be deemed
conclusively to be the post office address and the last-known post office
address of such stockholder. If any stockholder shall fail to notify the
Company of his post office address, it shall be sufficient to send corporate
notices to such stockholder at the address, if any, understood by the Secretary
to be his post office address, or in the absence of such address, to such
stockholder, at the General Post Office in the City of Wilmington, State of
Delaware.
SECTION 3. Lost, Destroyed or Stolen Certificate.
Any person claiming a stock certificate in lieu of one lost, destroyed
or stolen, shall give the Company an affidavit as to his ownership of the
certificate and of the facts which go to prove that it has been lost, destroyed
or stolen. If required by the Board of Directors, he shall also give the
Company a bond, in such form as may be approved by the Board of Directors,
sufficient to indemnify the Company against any claim that may be made against
it on account of the alleged loss of the certificate or the issuance of a new
certificate.
_____________________
Art. Eighth, Secs. 1,
2 & 3
<PAGE> 16
13
SECTION 4. Transfers of Stock.
Upon surrender to the Company or the transfer agent of the Company of a
certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment, or authority to transfer, it shall be the duty of the
Company to issue a new certificate to the person entitled thereto, cancel the
old certificate and record the transaction upon its books.
SECTION 5. Closing of Transfer Books.
The Board of Directors shall have the power to close the stock transfer
books of the Company for a period not exceeding fifty (50) days preceding the
date of any meeting of stockholders or the date for payment of any dividend or
the date for allotment of rights or the date when any change or conversion or
exchange of stock shall go into effect, or for a period not exceeding fifty
(50) days in connection with obtaining the consent of the stockholders for any
purpose; provided, however, that in lieu of closing the stock transfer books as
aforesaid, the Board of Directors may fix in advance a date not exceeding fifty
(50) days preceding the date of any meeting of stockholders, or the date for
payment of any dividend, or the date for the allotment of rights, or the date
when any change or conversion or exchange of stock shall go into effect, or the
date in connection with obtaining such consent, as a record date for the
determination of the stockholders entitled to notice of and to vote at any such
meeting and any adjournment thereof, or entitled to payment of any such
dividend or to any such allotment of rights or to exercise the rights in
respect of any such change, or conversion or exchange of stock, or to give
consent; and in any such case, such stockholders, and only such stockholders,
as shall be stockholders of record on the date so fixed, shall be entitled to
such notice of and to vote at such meeting and any adjournment thereof or to
receive payment of such dividend or to receive such allotment of rights or to
exercise such right or to give such consent, as the case may be,
notwithstanding any transfer of any stock on the books of the Company after
such record date.
SECTION 6. Registered Stockholders.
The Company shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends, and
to vote as such owner, and to hold liable for calls and assessments a person
registered on its books as the owner of shares, and shall not be bound to
recognize any equitable or other claim to or interest in such share or shares
on the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of Delaware.
___________________
Art. Eighth, Secs. 4,
5 & 6
<PAGE> 17
14
SECTION 7. Regulations.
The Board of Directors shall have power and authority to make all such
rules and regulations not inconsistent with any of the provisions of the
Certificate of Incorporation as it may deem expedient, concerning the issue,
transfer, and registration of certificates for shares of the stock of the
Company.
SECTION 8. Corporate Seal.
The corporate seal shall have inscribed thereon the name of the Company,
the year of its organization, and the words "Corporate Seal" and "Delaware."
If and when so authorized by the Board of Directors, a duplicate of the seal
may be kept and used by the Secretary or Treasurer or by any Assistant
Secretary or Assistant Treasurer.
ARTICLE IX
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
SECTION 1. Execution of Contracts.
Except as otherwise provided by law or in the By-Laws, all contracts or
other instruments, authorized by the Board of Directors either generally or
particularly, may be executed and delivered in the name of and on behalf of the
Company by the Chairman of the Board of Directors, the President or any Vice
President and the Secretary or an Assistant Secretary. The Board of Directors,
however, may authorize any other officer or officers, agent or agents, in the
name of and on behalf of the Company, to enter into any contract or to execute
and deliver any instrument, and such authority may be general or confined to
particular instances. Unless authorized by the Board of Directors or expressly
authorized by the By-Laws, no officer, employee or agent shall have any power
or authority to bind the Company by any contract or engagement or to pledge its
credit or to render it pecuniarily liable for any purpose or to any amount.
SECTION 2. Indebtedness.
No borrowings shall be contracted on behalf of the Company and no
negotiable paper in evidence thereof shall be issued in its name unless
authorized by resolution of the Board of Directors. When authorized by the
Board of Directors so to do, any officer or agent of the Company thereunto
authorized may effect loans and advances at any time for the Company from any
bank, trust company or other institution, or from any firm, corporation or
individual, and for such loans and advances may make, execute and deliver
promissory notes, bonds, or other certificates or evidences of indebtedness of
the
_____________________
Art. Eighth, Secs. 7&8
Art. Ninth, Secs. 1&2
<PAGE> 18
15
Company and, when authorized so to do, may pledge, hypothecate or transfer any
securities or other property of the Company as security for any such loans or
advances. Such authority may be general or confined to particular instances.
SECTION 3. Checks, Drafts, Etc.
All checks, drafts, and other orders for the payment of moneys out of
the funds of the Company shall be signed on behalf of the Company in such
manner as shall from time to time be determined by resolution of the Board of
Directors.
SECTION 4. Deposits.
All funds of the Company not otherwise employed shall be deposited from
time to time to the credit of the Company in such banks, trust companies or
other depositaries as the Board of Directors may select or as may be selected
by any officer or officers, agent or agents of the Company to whom such power
from time to time may be delegated by the Board; and, for the purpose of such
deposit, the Chairman of the Board of Directors, the President, any Vice
President, the Treasurer, the Secretary or any other officer or agent or
employee of the Company to whom such power may be delegated by the Board or by
any person designated by the Board to delegate such authority may endorse,
assign and deliver checks, drafts and other orders for the payment of moneys
which are payable to the order of the Company.
ARTICLE X
FISCAL YEAR
The fiscal year of the Company shall begin the first day of January in
each year.
ARTICLE XI
MISCELLANEOUS
SECTION 1. Notices and Waivers Thereof.
Whenever any notice whatever is required by these By-Laws or by the
Certificate of Incorporation, or by any of the laws of the State of Delaware to
be given to any stockholder, director or officer, such notice, except as
otherwise provided by the laws of the State of Delaware, may be given
personally or be given by telegram, cable, or radiogram, addressed to such
stockholder at the address set forth as provided in Section 2 of Article VIII,
or to such director or officer at his Company location, if any, or at such
address as appears on the books of the Company, or the notice may be given in
writing by ______________________
Art. Ninth, Secs. 3&4
Art. Tenth
Art. Eleventh, Sec. 1
<PAGE> 19
16
depositing the same in a post office, or in a regularly maintained letter box,
in a postpaid, sealed wrapper addressed to such stockholder at the address set
forth in Section 2 of Article VIII, or to such director or officer at his
Company location, if any, or such address as appears on the books of the
Company, or, in the case of a director or officer who is an officer or employee
of the Company or of Ford Motor Company, or of any subsidiary of either, the
notice may be given in writing by delivering the same to the office of such
director or officer at such company. Any notice given by telegram, cable, or
radiogram shall be deemed to have been given when it shall have been delivered
for transmission; any notice given by mail shall be deemed to have been given
when it shall have been mailed; and any notice given by delivery to such office
of a director or officer shall be deemed to have been given when it shall have
been so delivered. A waiver of any such notice in writing, signed or dispatched
by the person entitled to such notice or by his duly authorized attorney,
whether before or after the time stated therein, shall be deemed the equivalent
thereof and the presence at any meeting of any person entitled to notice
thereof shall be deemed a waiver of such notice as to such person.
SECTION 2. Voting upon Stocks.
The Board of Directors (whose authorization in this connection shall be
necessary in all cases) may from time to time appoint an attorney or attorneys
or agent or agents of the Company, or may at any time or from time to time
authorize the Chairman of the Board of Directors, the President, any Vice
President, the Treasurer or the Secretary to appoint an attorney or attorneys
or agent or agents of the Company, in the name and on behalf of the Company, to
cast the votes which the Company may be entitled to cast as a stockholder or
otherwise in any other corporation or association, any of the stock or
securities of which may be held by the Company, at meetings of the holders of
the stock or other securities of such other corporation or association, or to
consent in writing to any action by any such other corporation or association,
and the Board of Directors or any aforesaid officer so authorized may instruct
the person or persons so appointed as to the manner of casting such votes or
giving such consent, and the Board of Directors or any aforesaid officer so
authorized may from time to time authorize the execution and delivery, on
behalf of the Company and under its corporate seal, or otherwise, of such
written proxies, consents, waivers or other instruments as may be deemed
necessary or proper in the premises.
_______________________
Art. Eleventh, Sec. 1&2
<PAGE> 20
17
ARTICLE XII
AMENDMENTS
The Board of Directors shall have power to make, alter, amend or repeal
the By-Laws of the Company by vote of not less than a majority of the entire
Board at any meeting of the Board, and the holders of Common Stock shall have
power to make, alter, amend or repeal the By-Laws at any regular or special
meeting, if the substance of such amendment be contained in the notice of such
meeting of the Board, or of such meeting of stockholders, as the case may be.
_______________
Art. Twelfth
<PAGE> 1
Exhibit 24.1
FORD CREDIT AUTO RECEIVABLES TWO, INC.
Certificate of Secretary
The undersigned, Hurley D. Smith, Secretary of FORD CREDIT
AUTO RECEIVABLES TWO, INC., a Delaware corporation (the "Company"), DOES HEREBY
CERTIFY that the resolutions attached as Exhibit 1 to this Certificate were
duly adopted by the Board of Directors on February 22, 1996 pursuant to the
unanimous written consent of the Board of Directors, and such resolutions have
not been amended, modified, rescinded or revoked and are in full force and
effect on the date hereof.
WITNESS my hand and the seal of the Company this 28th day of
February, 1996.
/s/ HURLEY D. SMITH
------------------------------
(Hurley D. Smith, Secretary)
(Corporate Seal)
<PAGE> 2
Exhibit 1
Sale of Receivables Pursuant to Public
Offerings of Receivables Securities
RESOLVED, That the Company is hereby authorized to issue and
sell, during any calendar year commencing with calendar year 1996, in (i) one
or more public offerings required to be registered with the Securities and
Exchange Commission (the "Commission") pursuant to applicable provisions of the
Securities Act of 1933, as amended (the "Act"), or (ii) in one or more private
placements or offshore offerings exempt from registration under the Act,
certificates or securities ("Receivables Securities") relating to or
representing an interest in receivables and assets relating thereto
("Receivables") or in certificates of any class issued by a trust established
by Ford Motor Credit Company or Ford Credit Auto Receivables Corporation or any
affiliate thereof acquired by the Company, in an aggregate principal amount not
to exceed the aggregate principal amount authorized for registration under the
Act pursuant to the next succeeding resolution, upon such terms and conditions
as may be fixed by any two of the Chairman of the Board of Directors, the
President, the Executive Vice President-Finance and the Treasurer and that any
two of the Chairman of the Board of Directors, the President, the Executive
Vice President-Finance and the Treasurer be and hereby are authorized to
determine the terms and conditions of the Receivables Securities.
RESOLVED, That the Company is hereby authorized to register
with the Commission pursuant to the provisions of the Act Receivables
Securities in principal amounts not to exceed in the aggregate $8,000,000,000
during any calendar year.
RESOLVED, That the preparation of one or more Registration
Statements on such form or forms as may be appropriate covering the Receivables
Securities, including prospectuses, exhibits and other documents, to be filed
with the Commission, for the purpose of registering the offer and sale of the
Receivables Securities under the Act, be and it hereby is in all respects
approved; that the directors and appropriate officers of the Company, and each
of them, be and hereby are authorized to sign and execute in their own behalf,
or in the name and on behalf of the Company, or both, as the case may be, any
such Registration Statement, with such changes, if any, therein, including
amendments to the prospectus and the addition or amendment of exhibits and
other documents relating thereto or required by law or regulation in connection
therewith, all in such form as such directors and officers may deem necessary,
appropriate or desirable, as conclusively evidenced by their execution thereof,
and that the appropriate officers of the Company, and each of them, be and
hereby are authorized to cause any such Registration Statement, so executed, to
be filed with the Commission; and, prior to the effective date of any such
Registration Statement, the appropriate officers of the Company are directed to
use their best efforts to furnish each director and each officer signing such
Registration Statement with a copy of such Registration Statement, and if,
prior to the effective date of any such Registration Statement, material
changes therein or material additions thereto are proposed to be made, the
appropriate officers of the Company are directed to use their best efforts to
furnish each director, and each officer signing any such Registration
Statement, with a copy of such Registration Statement and each amendment
thereto as filed with the Commission, or a description of such changes or
additions, or a combination thereof, in as complete and final form as
practicable and in sufficient time to permit each director and each such
officer so desiring to object to any part of any such Registration Statement
before it becomes effective.
RESOLVED, That the directors and appropriate officers of the
Company, and each of them, be and hereby are authorized to sign and execute on
their own behalf, or in the name and on behalf of the Company, or both, as the
case may be, any and all amendments (including post-effective amendments) to
any
<PAGE> 3
such Registration Statement, including amendments to the prospectus and the
addition or amendment of exhibits and other documents relating thereto or
required by law or regulation in connection therewith, all in such form, with
such changes, if any, therein, as such directors and officers may deem
necessary, appropriate or desirable, as conclusively evidenced by their
execution thereof, and that the appropriate officers of the Company, and each
of them, be and hereby are authorized to cause such amendment or amendments, so
executed, to be filed with the Commission; and if, prior to the effective date
of each such post-effective amendment, material changes or material additions
are proposed to be made in or to any such Registration Statement or any
amendment thereto in the form in which it most recently became effective, the
appropriate officers of the Company are directed to use their best efforts to
furnish each director, and each officer signing such post-effective amendment,
with a copy of such post-effective amendment or a description of all material
changes or additions therein, or a combination thereof, in as complete and
final form as practicable and in sufficient time to permit each director and
each such officer so desiring to object to any part of such post-effective
amendment before it becomes effective.
RESOLVED, That each officer and director who may be required
to sign and execute any such Registration Statement or any amendment thereto or
document in connection therewith (whether on behalf of the Company, or as an
officer or director of the Company, or otherwise), be and hereby is authorized
to execute a power of attorney appointing W. E. Odom, K. C. Merrill, K. J.
Coates, J. D. Bringard, H. D. Smith, W. O. Staehlin, R. P. Conrad, and R. A.
Atkins, and each of them, severally, as true and lawful attorney or attorneys
to sign in his name, place and stead in any such capacity any such Registration
Statement and any and all amendments (including post-effective amendments)
thereto and documents in connection therewith, and to file the same with the
Commission, each of said attorneys to have power to act with or without the
other, and to have full power and authority to do and perform, in the name and
on behalf of each of said officers and directors who shall have executed such a
power of attorney, every act whatsoever which such attorneys, or any of them,
may deem necessary, appropriate or desirable to be done in connection therewith
as fully and to all intents and purposes as such officers or directors might or
could do in person.
RESOLVED, That any officer of the Company be and hereby is
authorized in the name and on behalf of the Company to take any and all action
which such persons, or any of them, may deem necessary, appropriate or
desirable in order to obtain a permit, register or qualify the Receivables
Securities for issuance and sale or to request an exemption from registration
of such securities or to register or obtain a license for the Company as a
dealer or broker under the securities laws of such of the states of the United
States of America as such persons, or any of them, may deem necessary,
appropriate or desirable, and in connection with such registrations, permits,
licenses, qualifications and exemptions to execute, acknowledge, verify,
deliver, file and publish all such applications, reports, resolutions,
irrevocable consents to service of process, powers of attorney and other papers
and instruments as may be required under such laws, and to take any and all
further action which such persons, or any of them, may deem necessary,
appropriate or desirable in order to maintain such registrations in effect for
as long as such persons, or any of them, may deem to be in the best interests
of the Company.
RESOLVED, That the Company hereby designates any licensed
California broker-dealer designated by any officer of the Company its
attorney-in-fact for the purpose of executing and filing one or more
applications and amendments thereto on behalf of the Company, under applicable
provisions of the California Corporate Securities Law of 1968, for the
registration or qualification of part or all of the Receivables Securities of
the Company for offering and sale in the State of California.
2
<PAGE> 4
BE IT RESOLVED THAT RICHARD D. LATHAM, Securities
Commissioner, State Securities Board, of the State of Texas, and his successor
in office, is made, constituted and appointed the true and lawful
attorney-in-fact for and in the State of Texas for this Company, upon whom all
process of law against this Company in any action at law or legal proceeding
growing out of the Texas Securities Act may be served, subject to and in
accordance with all the provisions of the laws of the State of Texas and all
amendments thereto, and this Company agrees that any and all lawful process
against it may be served upon its said attorney-in-fact, RICHARD D. LATHAM, or
his successor in office, shall be deemed valid personal service upon this
Company and shall be of the same force and validity as if served upon this
Company; and that all process served upon the said Securities Commissioner
shall be and have the same effect as if this Company were organized and created
under the laws of the State of Texas and had been lawfully served with process
therein; and
BE IT FURTHER RESOLVED, That the Company by and through its
President or any Vice President and Secretary or any Assistant Secretary
execute a Power of Attorney to the said RICHARD D. LATHAM, Securities
Commissioner of the State of Texas, and his successor in office, incorporating
the provisions of this resolution therein.
RESOLVED, That any and all in haec verba resolutions which may
be required by the Blue Sky or securities laws of any state in which the
Company intends to offer to sell the Receivables Securities be, and they hereby
are, adopted; that the proper officers of the Company be, and they hereby are,
authorized to certify that such resolutions were duly adopted at this meeting;
and that the Secretary of the Company shall cause a copy of each resolution so
certified to be attached to the minutes of this meeting.
RESOLVED, That the Company is hereby authorized to enter into
one or more Trust Agreements, Indentures, Pooling and Servicing Agreements or
other agreements and supplements and amendments thereto, each with a bank,
trust company or other person, or company or entity as trustee, providing for
the establishment of one or more trusts ("Trusts") and the issuance by the
Trusts of the Receivables Securities, and that any officer of the Company be
and hereby is authorized, in the name and on behalf of the Company, (i) to
select such trustee or trustees and (ii) to execute, acknowledge and deliver
each such Trust Agreement, Indenture, Pooling and Servicing Agreement or other
agreement in the name and on behalf of the Company, containing such terms and
provisions as the officer or officers executing such agreements may deem
necessary, appropriate or desirable, as conclusively evidenced by his or their
execution thereof.
RESOLVED, That any officer of the Company be and hereby is
authorized, in the name and on behalf of the Company and under its corporate
seal (which may be a facsimile of such seal), to execute (by manual or
facsimile signature) Receivables Securities (and, in addition, Receivables
Securities to replace any of the Receivables Securities which are lost, stolen,
mutilated or destroyed and Receivables Securities required for exchange,
substitution or transfer, all as provided in the respective Trust Agreements,
Indentures, Pooling and Servicing Agreements or other agreements) in fully
registered form in substantially the forms of Receivables Securities to be set
forth in the respective Trust Agreements, Indentures, Pooling and Servicing
Agreements or other agreements with such changes therein and additions thereto
as the officer or officers executing the Receivables Securities may deem
necessary, appropriate or desirable, as conclusively evidenced by his or their
execution thereof.
RESOLVED, That the Company is hereby authorized to enter into
one or more Sale and Servicing Agreements or other agreements, each with a
bank, trust company or other person, or company or entity as trustee and any
entity acting as servicer of the Receivables or the certificates issued by a
trust established by Ford Motor Credit Company or Ford Credit Auto Receivables
Corporation or any affiliate
3
<PAGE> 5
thereof, providing for the transfer of the Receivables or the certificates to
the Trusts and for the servicing of the Receivables or the certificates, and
that any officer of the Company be and hereby is authorized, in the name and on
behalf of the Company, to (i) to select such servicer or servicers and (ii) to
execute, acknowledge and deliver each such Sale and Servicing Agreement or
other agreement in the name and on behalf of the Company, containing such terms
and provisions as the officer or officers executing such agreements may deem
necessary, appropriate or desirable, as conclusively evidenced by his or their
execution thereof.
RESOLVED, That the Company is hereby authorized to enter into
one or more Administration Agreements or other agreements, each with a bank,
trust company or other person, or company or entity as trustee and any entity
acting as administrator, providing for the performance by the administrator of
certain administrative services relating to the Receivables Securities, and
that any officer of the Company be and hereby is authorized, in the name and on
behalf of the Company, (i) to select such administrator or administrators and
(ii) to execute, acknowledge and deliver each such Administration Agreement or
other agreement in the name and on behalf of the Company, containing such terms
and provisions as the officer or officers executing such agreements may deem
necessary, appropriate or desirable, as conclusively evidenced by his or their
execution thereof.
RESOLVED, That any officer of the Company be and hereby is
authorized to appoint one or more paying agents, registrars, transfer agents,
and other agents and functionaries, and to execute and deliver, in the name and
on behalf of the Company, any agreement, instrument or document relating to any
such appointment, for the purpose of implementing and giving effect to the
provisions of the Trust Agreements, Indentures, Pooling and Servicing
Agreements, Sale and Servicing Agreements, Administration Agreements or other
agreements and the Receivables Securities, respectively, in the forms in which
they shall be executed and delivered pursuant to the foregoing resolutions;
provided, however, that the Company may at any time elect to act in such
capacity itself.
RESOLVED, That the Company is hereby authorized to enter into
one or more Clearing Agreements or other agreements, each with a bank,
financial institution or other company or entity, providing for the settlement
and clearance of the Receivable Securities through the facilities of one or
more domestic or foreign clearing corporations, and that any officer of the
Company be and hereby is authorized, in the name and on behalf of the Company,
(i) to select such clearing corporation or clearing corporations and (ii) to
execute, acknowledge and deliver each such Clearing Agreement or other
agreement in the name and on behalf of the Company, containing such terms and
provisions as the officer or officers executing such agreements may deem
necessary, appropriate or desirable, as conclusively evidenced by his or their
execution thereof.
RESOLVED, That the Company is hereby authorized to enter into
one or more Limited Partnership Agreements or other agreements, each with any
firm, institution, partnership or other person, including Ford Motor Credit
Company, providing for the formation of one or more limited partnerships
("Limited Partnerships") which will engage in activities similar to those the
Company is authorized to engage in pursuant to these resolutions, and that any
officer of the Company be and hereby is authorized, in the name and on behalf
of the Company, to execute, acknowledge and deliver each such Limited
Partnership Agreement or other agreement in the name and on behalf of the
Company, containing such terms and provisions as the officer or officers
executing such agreements may deem necessary, appropriate or desirable, as
conclusively evidenced by his or their execution thereof; and
BE IT FURTHER RESOLVED, That the Company is hereby authorized
to act as a general partner or a limited partner under the Limited Partnership
Agreements or other agreements, and, subject to
4
<PAGE> 6
the terms and conditions of the Limited Partnership Agreements, to take any
action on behalf of the Limited Partnerships that the Company would be
authorized to take on behalf of itself pursuant to these resolutions.
RESOLVED, That the Company is hereby authorized to enter into
one or more underwriting agreements, sales agency agreements or like agreements
(the "Underwriting Agreements") with any firm, institution or partnership
acting on behalf of themselves or itself and the several underwriters,
providing for the sale of the Receivables Securities and that, when such
Underwriting Agreements, or any of them, have been completed to set forth the
prices at and terms and conditions upon which the Receivables Securities are to
be sold and the compensation to be received by the underwriters, such matters
first having been presented to and approved by any two of the Chairman of the
Board of Directors, the President, the Executive Vice President-Finance and the
Treasurer, any officer of the Company be and hereby is authorized to execute
and deliver, in the name and on behalf of the Company, the respective
Underwriting Agreements, with the inclusion of such underwriters and contain-
ing such other terms and provisions as the officer or officers executing the
same may deem necessary, appropriate or desirable, as conclusively evidenced by
his or their execution thereof.
RESOLVED, That the Company is hereby authorized to enter into
one or more Purchase Agreements or other agreements with any firm, institution,
partnership or other person, including Ford Motor Credit Company, securities
brokers and dealers, relating to the sale and distribution of Receivables or of
Receivables Securities and that, when such Purchase Agreements, or any of them,
have been completed to set forth the terms and conditions upon which the
Receivables or Receivables Securities are to be sold and the purchase prices to
be paid by such purchasers, such matters first having been presented to and
approved by any two of the Chairman of the Board of Directors, the President,
the Executive Vice President-Finance and the Treasurer, any officer of the
Company be and hereby is authorized to execute and deliver, in the name and on
behalf of the Company, the respective Purchase Agreements, containing such
other terms and provisions as the officer or officers executing the same may
deem necessary, appropriate or desirable, as conclusively evidenced by his or
their execution thereof.
RESOLVED, That the appropriate officers of the Company, and
each of them, be and hereby are authorized and empowered, in the name and on
behalf of the Company, to take any action (including, without limitation, the
payment of expenses), and to execute (by manual or facsimile signature) and
deliver any and all letters, documents or other writings, that such officer or
officers may deem necessary, appropriate or desirable in order to enable the
Company fully to issue and sell the Receivables Securities and exercise its
rights and to perform its obligations under the Trust Agreements, Indentures,
Pooling and Servicing Agreements, Sale and Servicing Agreements, Administration
Agreements, Clearing Agreements, Limited Partnership Agreements, Underwriting
Agreements, Purchase Agreements and other agreements, or otherwise carry out
the purposes and intents of each and all of the foregoing resolutions.
5
<PAGE> 7
POWER OF ATTORNEY WITH RESPECT TO REGISTRATION STATEMENTS OF
FORD CREDIT AUTO RECEIVABLES TWO, INC.
COVERING SECURITIES BACKED BY COMPANY RECEIVABLES
KNOW ALL MEN BY THESE PRESENTS that the undersigned, an
officer or director of FORD CREDIT AUTO RECEIVABLES TWO, INC., does hereby
constitute and appoint W. E. Odom, Edsel B. Ford II, K. J. Coates, J. D.
Bringard, H. D. Smith, W. O. Staehlin, R. P. Conrad and S. P. Thomas, and each
of them, severally, his true and lawful attorney and agent at any time and from
time to time to do any and all acts and things and execute in his name (whether
on behalf of FORD CREDIT AUTO RECEIVABLES TWO, INC., or as an officer or
director of FORD CREDIT AUTO RECEIVABLES TWO, INC. or by attesting the seal of
FORD CREDIT AUTO RECEIVABLES TWO, INC. or otherwise) any and all instruments
which said attorney and agent may deem necessary or advisable in order to
enable FORD CREDIT AUTO RECEIVABLES TWO, INC. to comply with the Securities Act
of 1933, as amended, and any requirements of the Securities and Exchange
Commission in respect thereof, in connection with a Registration Statement or
Registration Statements and any and all amendments (including post-effective
amendments) to the Registration Statement or Registration Statements relating
to the issuance and sale of any of the above-captioned securities of FORD
CREDIT AUTO RECEIVABLES TWO, INC. authorized by the unanimous written consent
of the Board of Directors of FORD CREDIT AUTO RECEIVABLES TWO, INC. on February
22, 1996, including specifically, but without limitation thereto, power and
authority to sign his name (whether on behalf of FORD CREDIT AUTO RECEIVABLES
TWO, INC. or as an officer or director of FORD CREDIT AUTO RECEIVABLES TWO,
INC. or by attesting the seal of FORD CREDIT AUTO RECEIVABLES TWO, INC. or
otherwise) to such Registration Statement or Registration Statements and to
such amendments (including post-effective amendments) to the Registration
Statement or Registration Statements to be filed with the Securities and
Exchange Commission, or any of the exhibits, financial statements or schedules
or the Prospectuses, filed therewith, and to file the same with the Securities
and Exchange Commission; and each of the undersigned does hereby ratify and
confirm all that said attorneys and agents, and each of them shall do or cause
to be done by virtue hereof. Any one of said attorneys and agents shall have,
and may exercise, all the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has signed his name hereto as of the 28th
day of February, 1996.
/s/ [KENNETH J. COATES]
----------------------
([Kenneth J. Coates])
/s/ [JOHN P. BURKHARD] /s/ [TERRENCE F. MARRS]
--------------------- --------------------------
([John P. Burkhard]) ([Terrence F. Marrs])
6
